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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________________________
Form 10-K
________________________________________
(Mark One)
☑
☐
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended
December 31, 2020
Or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from to
Commission file number: 000-22339
________________________________________
RAMBUS INC.
(Exact name of registrant as specified in its charter)
________________________________________
Delaware
(State or other jurisdiction of
incorporation or organization)
4453 North First Street
Suite 100
San Jose , California
(Address of principal executive offices)
94-3112828
(I.R.S. Employer Identification No.)
95134
(Zip Code)
Registrant’s telephone number, including area code:
(408) 462-8000
________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock, $.001 Par Value
Trading Symbol(s)
RMBS
Name of Each Exchange on Which Registered
The NASDAQ Stock Market LLC
(The NASDAQ Global Select Market)
Securities registered pursuant to Section 12(g) of the Act:
None
________________________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☑ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☑
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405
of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an
emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in
Rule 12b-2 of the Exchange Act.
Large accelerated filer
Emerging growth company
☑
☐
Accelerated filer ☐
Non-accelerated filer
☐ Smaller reporting company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section 13(a) of the
Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of
the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.
7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☑
The aggregate market value of the Registrant’s Common Stock held by non-affiliates of the Registrant as of June 30, 2020 was approximately $1.3 billion
based upon the closing price reported for such date on The NASDAQ Global Select Market. For purposes of this disclosure, shares of Common Stock held by
officers and directors of the Registrant and persons that may be deemed to be affiliates under the Act have been excluded. This determination of affiliate status is
not necessarily a conclusive determination for other purposes.
The number of outstanding shares of the Registrant’s Common Stock, $.001 par value, was 111,730,337 as of January 29, 2021.
DOCUMENTS INCORPORATED BY REFERENCE
Certain information is incorporated into Part III of this report by reference to the Proxy Statement for the Registrant’s annual meeting of stockholders to be held
on or about April 29, 2021 to be filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the end of the fiscal
year covered by this Form 10-K.
Table of Contents
TABLE OF CONTENTS
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Note Regarding Forward-Looking Statements
PART I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
PART II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
PART IV
Item 15.
INDEX TO EXHIBITS
SIGNATURES
POWER OF ATTORNEY
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
Exhibits and Financial Statement Schedules
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This Annual Report on Form 10-K (“Annual Report on Form 10-K”) contains forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements include, without limitation, predictions regarding the
following aspects of our future:
NOTE REGARDING FORWARD-LOOKING STATEMENTS
• Success in the markets of our products and services or our customers’ products;
• Sources of competition;
• Research and development costs and improvements in technology;
• Sources, amounts and concentration of revenue, including royalties;
• Success in signing and renewing license agreements;
• Terms of our licenses and amounts owed under license agreements;
• Technology product development;
• Dispositions, acquisitions, mergers or strategic transactions and our related integration efforts;
•
Impairment of goodwill and long-lived assets;
• Pricing policies of our customers;
• Changes in our strategy and business model, including the expansion of our portfolio of inventions, products, software, services and solutions to address
additional markets in memory, chip and security;
• Deterioration of financial health of commercial counterparties and their ability to meet their obligations to us;
• Effects of security breaches or failures in our or our customers’ products and services on our business;
• Engineering, sales and general and administration expenses;
• Contract revenue;
• Operating results;
•
International licenses, operations and expansion;
• Effects of changes in the economy and credit market on our industry and business;
•
Impact of the Novel Coronavirus (“COVID-19”) pandemic on our business operations and financial results;
• Ability to identify, attract, motivate and retain qualified personnel;
• Effects of government regulations on our industry and business;
• Manufacturing, shipping and supply partners and/or sale and distribution channels;
• Growth in our business;
• Methods, estimates and judgments in accounting policies;
• Adoption of new accounting pronouncements;
• Effective tax rates, including as a result of recent U.S. tax legislation;
• Restructurings and plans of termination;
• Realization of deferred tax assets/release of deferred tax valuation allowance;
• Trading price of our common stock;
•
Internal control environment;
• The level and terms of our outstanding debt and the repayment or financing of such debt;
• Protection of intellectual property (“IP”);
• Any changes in laws, agency actions and judicial rulings that may impact the ability to enforce our IP rights;
•
Indemnification and technical support obligations;
• Equity repurchase plans;
•
Issuances of debt or equity securities, which could involve restrictive covenants or be dilutive to our existing stockholders;
• Effects of fluctuations in interest rates and currency exchange rates; and
• Outcome and effect of potential future IP litigation and other significant litigation.
You can identify these and other forward-looking statements by the use of words such as “may,” “future,” “shall,” “should,” “expects,” “plans,” “anticipates,”
“believes,” “estimates,” “predicts,” “intends,” “potential,” “continue,” “projecting” or the negative of such terms, or other comparable terminology. Forward-
looking statements also include the assumptions underlying or relating to any of the foregoing statements.
Actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under
Item 1A, “Risk Factors.” All forward-looking statements included in this document are based on our assessment of information available to us at this time. We
assume no obligation to update any forward-looking statements.
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Rambus is a trademark of Rambus Inc. Other trademarks or copyrights that may be mentioned in this Annual Report on Form 10-K are the property of their
PART I
respective owners.
Item 1.
Business
Overview
Rambus produces products and innovations that address the fundamental challenges of accelerating data. We make industry-leading chips and IP that enable
critical performance improvements for data center and other growing markets. The ongoing shift to the cloud, along with the widespread advancement of artificial
intelligence (“AI”) across the data center, 5G, automotive and Internet of Things (“IoT”), has led to exponential growth in data usage and tremendous demands on
data infrastructure. Creating fast and safe connections, both in and across systems, remains one of the most mission-critical design challenges limiting performance
in advanced hardware for these markets.
As an industry pioneer with over 30 years of advanced semiconductor design experience, Rambus is ideally positioned to address the challenges of moving and
protecting data. We are a leader in high-performance memory subsystems, providing chips, IP and innovations that maximize the performance and security in data-
intensive systems. Whether in the cloud, at the edge or in your hand, real-time and immersive applications depend on data throughput and integrity. Rambus
products and innovations deliver the increased bandwidth, capacity and security required to meet the world’s data needs and drive ever-greater end-user
experiences.
Our strategic objectives are focusing our product portfolio and research around our core strength in semiconductors, optimizing our operational efficiency, and
leveraging our strong cash generation to re-invest for growth. We continue to maximize synergies across our businesses and customer base, leveraging the
significant overlap in our ecosystem of customers, partners and influencers. The Rambus product and technology roadmap, as well as our go-to-market strategy, is
driven by the application-specific requirements of our focus markets.
2020 was an unprecedented year, with the onset of COVID-19 triggering uncertainty in the global marketplace. Despite that turbulence, Rambus demonstrated
great execution and significant product growth. Continued commitment to our customers, careful supply management and the tremendous dedication and agility of
the Rambus team worldwide drove this success.
Annual product revenue increased 56% year-over-year between 2019 and 2020. Driven by continued gains in market share from our memory interface chips,
we recognized record product revenue of $114.0 million in 2020. Silicon IP achieved sustained revenue growth with design-win momentum at tier-1 system on
chip (“SoC”) customers and strong execution from the businesses acquired in 2019. Rambus successfully closed key patent licensing agreements with DRAM and
SoC manufacturers, solidifying our foundation of sustained cash generation.
Memory Interface Chips
Made for high speed, reliability and power efficiency, our DDR memory interface chips for registered, load-reduced and non-volatile dual in-line memory
modules (“RDIMM,” “LRDIMM” and “NVDIMM,” respectively) deliver top-of-the-line performance and capacity to the next wave of enterprise and cloud
servers. Rambus offers DDR5, DDR4 and DDR3 memory interface chips to enable increased memory capacity, while maintaining peak performance for data-
intensive work loads.
We sell our memory interface chips directly and indirectly to memory module manufacturers and OEMs worldwide through multiple channels, including our
direct sales force and distributors. We operate direct sales offices in the United States, Japan, Korea, Taiwan and China, where we employ sales personnel who
serve our direct customers and manage our channel partners.
We operate a fabless business model and use third-party foundries and manufacturing contractors to fabricate, assemble and test our memory interface chips.
We also inspect and test parts in our US-based facilities. This outsourced manufacturing approach allows us to focus our investment and resources on the research,
development, design, sale and marketing of our products. Outsourcing also allows us the flexibility needed to respond to new market opportunities, simplifies our
operations and significantly reduces our capital requirements.
Silicon IP
Rambus’ Silicon IP offers both Interface and Security IP solutions. Our Interface IP solutions feature both high-speed memory and chip-to-chip interconnect
technologies. With the acquisition of Northwest Logic, Inc. (“Northwest Logic”) in August of 2019, Rambus now offers a complementary portfolio of physical
interface (“PHY”) and companion digital controller
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IPs to create a one-stop-shop for SoC designers. These silicon-proven solutions are critical to high-performance data center, networking, AI, Machine Learning
(“ML”) and automotive applications because they enable and optimize the transfer of data between chips and electronic devices.
The Rambus Security IP solutions include crypto cores, hardware roots of trust, high-speed protocol engines and chip provisioning technologies. With the
acquisition of the Secure Silicon IP and Protocols business from Verimatrix in December 2019, Rambus offers one of the industry’s most comprehensive portfolio
of silicon-proven Security IP. With the growing threat environment, hardware-based, embedded security solutions, are mission-critical for protecting data center,
AI, networking, IoT, automotive and government applications.
Architecture Licenses
Rambus patented inventions are foundational to the semiconductor industry and licenses of our portfolio to our customers represent a significant portion of our
revenue. Rambus is committed to continuing to innovate and invent, thereby advancing semiconductor technology. With a broad worldwide portfolio of patents
covering memory architecture, high-speed serial links, and security, we enhance our value and relevance in our target markets and create a platform for investment
in product development.
Our Architecture Licenses enable our customers to use specified portions of our portfolio of patented inventions in the customer’s own digital electronics
products, systems or services. These licenses may also define the specific field of use where our customers may use or employ our inventions in their products.
License agreements are structured with fixed or variable, or a hybrid of fixed and variable royalty payments over certain periods ranging up to ten years. Leading
semiconductor and electronic system companies such as AMD, Broadcom, Cisco, Fujitsu, IBM, Marvell, Mediatek, Micron, Nanya, NVIDIA, Panasonic, Phison,
Qualcomm, Renesas, Samsung, SK hynix, Socionext, STMicroelectronics, Toshiba, Western Digital, Winbond, and Xilinx have licensed our patents for use in
their own products.
Competition
The semiconductor industry is intensely competitive and is characterized by rapid technological change, short product life cycles, cyclical market patterns, price
erosion, increasing foreign and domestic competition and market consolidation. Rambus competes with product offerings from various companies depending upon
the particular Rambus product line. In the market for memory interface chips, we compete with international semiconductor companies including Renesas and
Montage Technology. In the Silicon IP market, Rambus competes with the in-house design teams at our potential customers, as well as with third-party IP
suppliers such as Cadence and Synopsys. Many of our competitors are larger and have better access to financial, technical, sales and marketing resources than we
possess.
To the extent that alternative technologies, which might provide comparable system performance at lower or similar cost to our patented technologies, are
perceived to require the payment of no or lower fees or royalties, or to the extent other factors influence the industry, our customers and prospective customers may
adopt and promote such alternative technologies. Even to the extent we determine that such alternative technologies infringe our patents, there can be no assurance
that we would be able to negotiate agreements that would result in royalties being paid to us without litigation, which could be costly and the results of which
would be uncertain. As in the past, litigation may be required to enforce and protect our IP rights, as well as the substantial investments undertaken to research and
develop our innovations and technologies.
Research and Development
Building upon our foundation of core semiconductor technologies, our research priorities focus on innovation and patent development that enhance the value of
our patent portfolio and differentiate our product offerings in the market. Key to our efforts is continuing to hire and retain world-class inventors, scientists and
engineers to lead the development and deployment of inventions and technology solutions for our intended markets.
To foster our research and development efforts, we assembled a team of highly-skilled inventors, engineers and scientists whose activities are focused on
continually developing new innovations within our chosen technology fields, and thereby securing the IP rights and legal protections for these ground-breaking
inventions. Using this foundation of innovation, our technical teams develop new semiconductor solutions that enable increased performance, greater power
efficiency and increased levels of security, as well as other improvements and benefits. Our solution design and development process is a multi-disciplinary effort
requiring expertise in multiple fields across all of our operational units.
A significant number of our scientists and engineers spend all or a portion of their time on research and development. For the years ended December 31, 2020,
2019 and 2018, research and development expenses were $139.8 million, $156.8 million and $158.3 million, respectively. We expect to continue to invest
substantial funds in research and development activities. In
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addition, because our customer agreements often call for us to provide engineering support, a portion of our total engineering costs are allocated to the cost of
contract and other revenue.
Human Capital Resources
As of December 31, 2020, we had 623 employees, of which approximately 44% were in the United States and 56% in other global regions. Additionally,
approximately 67% of our employees were engineers with the remaining employees in sales, general and administrative positions. None of our employees are
covered by collective bargaining agreements.
Throughout the COVID-19 pandemic, our primary focus has been on the safety and well-being of our employees and their families. Our global pandemic
efforts include instituting a global employee assistance program while leveraging the advice and recommendations of infectious disease experts to establish proper
safety standards. As the pandemic continues, the health and well-being of our workforce remains our top priority while we ensure productivity for those employees
working from home.
We believe that our future success largely depends upon our continued ability to identify, attract, motivate and retain qualified personnel. We provide our
employees with competitive compensation, as well as opportunities for equity ownership and developmental programs that enable continued learning and growth.
We also offer employees benefits such as life and health insurance, paid time off, paid parental leave, and retirement savings plans. We utilize successful recruiting
practices that yield qualified and dedicated employees who are driven to achieve our vision.
We are an equal opportunity employer and are committed to maintaining a diverse and inclusive work environment. Our commitment to diversity and inclusion
helps us attract and retain the best talent, enables employees to realize their full potential and drives high performance through innovation and collaboration.
Because we know that diversity is truly a competitive advantage that helps drive innovation, we strive to maintain a best-in-class work environment that fosters
respect for individuals, their ideas and contributions. We benefit from the innovation that results when people with differing experiences, perspectives and cultures
work together to achieve a common goal.
Intellectual Property
We maintain and support an active program to protect our IP, primarily through the filing of patent applications and the defense of issued patents against
potential infringement. As of December 31, 2020, our technologies are covered by 2,407 U.S. and foreign patents, having expiration dates ranging from 2021 to
2039. Additionally, we have 617 patent applications pending. Some of the patents and pending patent applications are derived from a common parent patent
application or are foreign counterpart patent applications. We believe our patented innovations provide our customers with the legal rights and licenses to use our
inventions to achieve improved performance, greater cost-effectiveness and other technological benefits in their own products and services. We intend to continue
our innovation efforts and allocate significant investment in our IP development programs.
We have a program to file applications for and obtain patents in the United States and in selected foreign countries where we believe filing for such protection
is appropriate and would further our overall business strategy and objectives. In some instances, obtaining appropriate levels of protection may involve prosecuting
continuation and counterpart patent applications based on a common parent application. In addition, we attempt to protect our trade secrets and other proprietary
information through agreements with current and prospective customers, and confidentiality agreements with employees and consultants and other security
measures. We also rely on copyright, trademarks and trade secret laws to protect our IP and other proprietary assets.
Backlog
Our sales of memory interface chips are generally made pursuant to short-term purchase orders. These purchase orders are made without deposits and may be,
and often are, rescheduled, canceled or modified on relatively short notice, without substantial penalty. Therefore, we believe that purchase orders or backlog are
not necessarily a reliable indicator of our future product sales.
Corporate and Available Information
Rambus Inc. was founded in 1990 and reincorporated in Delaware in March 1997. Our principal executive offices are located at 4453 North First Street,
Suite 100, San Jose, California. Our website is www.rambus.com. We have used, and intend to continue to use, our investor relations website as a means of
disclosing material non-public information and for complying with our disclosure obligations under Regulation FD. The inclusion of our website address in this
report does not include or incorporate by reference into this report any information on our website. You can obtain copies of our Forms 10-K, 10-Q, 8-K, and other
filings with the SEC, and all amendments to these filings, free of charge, from our website as soon as reasonably practicable following our filing of any of these
reports with the SEC. In addition, you may read and copy any material we file
5
with the SEC at the SEC’s Public Reference Room at 100 F Street NE, Room 1580, Washington, D.C. 20549. You may obtain information on the operation of the
Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains a website that contains reports, proxy, and information statements, and
other information regarding registrants that file electronically with the SEC at www.sec.gov. Further, the Company’s references to the URLs for these websites are
intended to be inactive textual references only.
Information concerning our revenue, results of operations and revenue by geographic area is set forth in Item 6, “Selected Financial Data,” in Item 7,
“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and in Note 7, “Segments and Major Customers,” of Notes to
Consolidated Financial Statements of this Form 10-K, all of which are incorporated herein by reference. Information concerning identifiable assets and segment
reporting is also set forth in Note 7, “Segments and Major Customers,” of Notes to Consolidated Financial Statements of this Form 10-K. Information on
customers that comprise 10% or more of our consolidated revenue and risks attendant to our foreign operations is set forth below in Item 1A, “Risk Factors.”
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Our Named Executive Officers
Information regarding our named executive officers and their ages and positions as of February 26, 2021, is contained in the table below. Our named executive
officers are appointed by, and serve at the discretion of, our Board of Directors. There is no family relationship between any of our named executive officers.
Name
Luc Seraphin
Age
57
Rahul Mathur
47
Jae Kim
Sean Fan
50
55
Position and Business Experience
Mr. Seraphin is President & Chief Executive Officer. With over 20 years of experience managing global
businesses, Mr. Seraphin brings the overall vision and leadership necessary to drive future growth for the company.
Prior to this role, Mr. Seraphin was the senior vice president and general manager of the Memory and Interface
Division, leading the development of the company’s innovative memory architectures and high-speed serial link
solutions. Mr. Seraphin also served as the senior vice president of Worldwide Sales and Operations where he
oversaw sales, business development, customer support and operations across the various business units within
Rambus.
Mr. Seraphin started his career as a field application engineer at NEC and later joined AT&T Bell Labs, which
became Lucent Technologies and Agere Systems (now Broadcom Inc.). During his 18 years at Agere, Mr. Seraphin
held several senior positions in sales, marketing and general management, culminating in his last position as
executive vice president and general manager of the Wireless Business Unit. Following this, Mr. Seraphin held the
position of general manager of a GPS startup company in Switzerland and was vice president of Worldwide Sales
and Support at Sequans Communications. During his career, Mr. Seraphin has advised and supported companies in
both the product and IP markets.
Mr. Seraphin holds a bachelor’s degree in Mathematics and Physics and a master’s degree in Electrical
Engineering from Ecole Superieure de Chimie, Physique, Electronique, based in Lyon, France where he majored in
Computer Architecture. Mr. Seraphin also holds an MBA from the University of Hartford and has completed the
senior executive program of Columbia University.
Senior Vice President, Finance and Chief Financial Officer. Mr. Mathur joined us in his current position in
October 2016. Prior to joining us, Mr. Mathur served as senior vice president of finance at Cypress Semiconductor
Corp., a provider of embedded memory, microcontroller, and analog semiconductor system solutions, from March
2015 to September 2016, where he was responsible for financial planning and investor relations. From August
2012 to March 2015, Mr. Mathur served as vice president of finance at Spansion, Inc. (later acquired by Cypress
Semiconductor Corp.). Mr. Mathur served as vice president of finance at Picaboo Corporation from January 2012
to August 2012 and vice president of finance at CDNetworks Inc. from January 2011 to December 2011. Prior to
January 2011, Mr. Mathur held senior finance positions at Telesis Technologies, Inc., NetSuite Inc. and KLA
Corporation. Mr. Mathur holds a Bachelor of Arts in applied mathematics from Dartmouth College and an M.B.A.
from the Wharton School of Business at the University of Pennsylvania.
Mr. Kim has served as the senior vice president, general counsel and secretary from February 2013 until
February 2021 and as our vice president, corporate legal since July 2010. Prior to his tenure at Rambus, Mr. Kim
held senior legal positions at Aricent Inc., a privately-held communications technology company and Electronics
for Imaging Inc., a digital printing technology company. Mr. Kim has also had significant experience in private
practice with the law firm of Wilson Sonsini Goodrich & Rosati, P.C., where he advised high technology and
emerging growth companies on mergers and acquisitions, private financings, public offerings, securities
compliance, public company reporting and corporate governance. Mr. Kim began his legal career as an attorney
with the United States Securities and Exchange Commission, Division of Corporation Finance, in Washington,
D.C. Mr. Kim is a member of both the California State Bar and New York State Bar, and received a J.D. from the
American University, Washington College of Law, and his bachelor’s degree from Boston University.
Senior Vice President, Chief Operating Office. Mr. Fan has served as the senior vice president, chief operating
office since August 2019. Prior to Rambus from March 2019 to June 2019 he served as Vice President and General
Manager at Renesas Electronics Corporation, responsible for the datacenter business unit, a premier supplier of
advanced semiconductor solutions. Prior to his role at Renesas, Mr. Fan was Senior Vice President and Corporate
General Manager of the Computing and Communications Group at Integrated Device Technology, Inc. (“IDT”), a
leading supplier of analog mixed-signal products including sensors, connectivity and wireless power, from May
2017 until March 2019 when IDT was acquired by Renesas Electronics Corporation. Mr. Fan joined IDT in 1999
and held various management roles at IDT, including Vice President and General Manager of the Computing and
Communications Division, Vice President and General Manager of the Interface Connectivity Division, Vice
President of China Operations, Vice President and General Manager of the Memory Interface Division, General
Manager of Standard Product Operations, and Senior Director of Silicon Timing Solutions. Prior to joining IDT,
Mr. Fan served in various engineering and management roles with Lucent Microelectronics, Mitel Semiconductor,
and the National Lab of Telecom Research in China.
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Item 1A.
Risk Factors
Because of the following factors, as well as other variables affecting our operating results, past financial performance may not be a reliable indicator of future
performance, and historical trends should not be used to anticipate results or trends in future periods. See also “Note Regarding Forward-Looking Statements” at
the beginning of this report.
Summary Risk Factors
Our business is subject to numerous risks and uncertainties that you should consider before investing in our company, as fully described below. The principal
factors and uncertainties that make investing in our company risky include, among others:
• The success of our business depends on sustaining or growing our licensing revenue and the failure to achieve such revenue would lead to a material decline
in our results of operations.
• Our licensing cycle is lengthy and costly, and our marketing and licensing efforts may be unsuccessful.
• Some of our license agreements may convert to fully paid-up licenses at the expiration of their terms, or upon certain milestones, and we may not receive
royalties after that time.
• Future revenue is difficult to predict for several reasons, and our failure to predict revenue accurately may result in our stock price declining.
• Our revenue is concentrated in a few customers, and if we lose any of these customers through contract terminations or acquisitions, our revenue may
decrease substantially.
• Some of our revenue is subject to the pricing policies of our customers over which we have no control.
• We have traditionally operated in, and may enter other, industries that are highly cyclical and competitive.
• We face risks related to the COVID-19 pandemic, which could significantly disrupt our research and development, operations, sales and financial results.
• Our customers often require our products to undergo a lengthy and expensive qualification process which does not assure product sales. If we are
unsuccessful or delayed in qualifying any of our products with a customer, our business and operating results would suffer.
• We may have to invest more resources in research and development than anticipated, which could increase our operating expenses and negatively impact
our operating results.
• Our business and operations could suffer in the event of security breaches.
• Failures in our products and services or in the products of our customers, including those resulting from security vulnerabilities, defects, bugs or errors,
could harm our business.
• We may fail to meet our publicly announced guidance or other expectations about our business, which would likely cause our stock price to decline.
• Changes in accounting principles and guidance could result in unfavorable accounting charges or effects.
• We have in the past made and may in the future make acquisitions or enter into mergers, strategic investments, sales of assets, divestitures or other
arrangements that may not produce expected operating and financial results.
• A substantial portion of our revenue is derived from sources outside of the United States and this revenue and our business generally are subject to risks
related to international operations that are often beyond our control.
• Weak global economic conditions may adversely affect demand for the products and services of our customers.
•
•
If our counterparties are unable to fulfill their financial and other obligations to us, our business and results of operations may be affected adversely.
If we are unable to attract and retain qualified personnel, our business and operations could suffer.
• We are subject to various government restrictions and regulations, including on the sale of products and services that use encryption technology and those
related to privacy and other consumer protection matters.
• Participation in standards setting organizations may subject us to IP licensing requirements or limitations that could adversely affect our business and
prospects.
• Our operations are subject to risks of natural disasters, acts of war, terrorism, widespread illness or security breach at our domestic and international
locations, any one of which could result in a business stoppage and negatively affect our operating results.
• We do not have extensive experience in manufacturing and marketing products and, as a result, may be unable to sustain and grow a profitable commercial
market for new and existing products.
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• We rely upon the accuracy of our customers’ recordkeeping, and any inaccuracies or payment disputes for amounts owed to us under our licensing
agreements may harm our results of operations.
• We rely on a number of third-party providers for data center hosting facilities, equipment, maintenance and other services, and the loss of, or problems with,
one or more of these providers may impede our growth or cause us to lose customers.
• We rely on third parties for a variety of services, including manufacturing, and these third parties’ failure to perform these services adequately could
materially and adversely affect our business.
• Warranty, service level agreement and product liability claims brought against us could cause us to incur significant costs and adversely affect our operating
results as well as our reputation and relationships with customers.
• Any failure in our delivery of high-quality technical support services may adversely affect our relationships with our customers and our financial results.
• Certain software that we use in certain of our products is licensed from third parties and, for that reason, may not be available to us in the future, which has
the potential to delay product development and production or cause us to incur additional expense, which could materially adversely affect our business,
financial condition, operating results and cash flow.
• Certain software we use is from open source code sources, which, under certain circumstances, may lead to unintended consequences and, therefore, could
materially adversely affect our business, financial condition, operating results and cash flow.
• Our business and operating results could be harmed if we undertake any restructuring activities.
• Problems with our information systems could interfere with our business and could adversely impact our operations.
• We are leveraged financially, which could adversely affect our ability to adjust our business to respond to competitive pressures and to obtain sufficient
funds to satisfy our future research and development needs, to protect and enforce our intellectual property, and to meet other needs.
• Adverse litigation results could affect our business.
• We have in the past, and may in the future, become engaged in litigation stemming from our efforts to protect and enforce our patents and intellectual
property and make other claims, which could adversely affect our intellectual property rights, distract our management and cause substantial expenses and
declines in our revenue and stock price.
• From time to time, we are subject to proceedings by government agencies that may result in adverse determinations against us and could cause our revenue
to decline substantially.
• Litigation or other third-party claims of intellectual property infringement could require us to expend substantial resources and could prevent us from
developing or licensing our technology on a cost-effective basis.
•
If we are unable to protect our inventions successfully through the issuance and enforcement of patents, our operating results could be adversely affected.
• Our inability to protect and own the intellectual property we create would cause our business to suffer.
• Third parties may claim that our products or services infringe on their intellectual property rights, exposing us to litigation that, regardless of merit, may be
costly to defend.
• Any dispute regarding our intellectual property may require us to indemnify certain customers, the cost of which could severely hamper our business
operations and financial condition.
• We have been party to, and may in the future be subject to, lawsuits relating to securities law matters which may result in unfavorable outcomes and
significant judgments, settlements and legal expenses which could cause our business, financial condition and results of operations to suffer.
• The price of our common stock may continue to fluctuate.
• Compliance with changing regulation of corporate governance and public disclosure may result in additional expenses.
• Our certificate of incorporation and bylaws, Delaware law, our outstanding convertible notes and certain other agreements contain provisions that could
discourage transactions resulting in a change in control, which may negatively affect the market price of our common stock.
• Unanticipated changes in our tax rates or in the tax laws and regulations could expose us to additional income tax liabilities which could affect our operating
results and financial condition.
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Risks Associated With Our Business, Industry and Market Conditions
The success of our business depends on sustaining or growing our licensing revenue and the failure to achieve such revenue would lead to a material decline
in our results of operations.
A significant portion of our revenue consists of patent and technology license fees paid for access to our patented technologies, existing technology and other
development and support services we provide to our customers. Our ability to secure and renew the licenses from which our revenues are derived depends on our
customers adopting our technology and using it in the products they sell. Once secured, license revenue may be negatively affected by factors within and outside
our control, including reductions in our customers’ sales prices, sales volumes, our failure to timely complete engineering deliverables, and the actual terms of such
licenses themselves. In addition, our licensing cycle for new licensees as well as for renewals for existing licensees is lengthy, costly and unpredictable. We cannot
provide any assurance that we will be successful in signing new license agreements or renewing existing license agreements on equal or favorable terms or at all. If
we do not achieve our revenue goals, our results of operations could decline.
Our licensing cycle is lengthy and costly, and our marketing and licensing efforts may be unsuccessful.
The process of persuading customers to adopt and license our Chip interface, data Security IP, and other technologies can be lengthy. Even if successful, there
can be no assurance that our technologies will be used in a product that is ultimately brought to market, achieves commercial acceptance or results in significant
royalties to us. We generally incur significant marketing and sales expenses prior to entering into our license agreements, generating a license fee and establishing
a royalty stream from each customer. The length of time it takes to establish a new licensing relationship can take many months or even years. We may incur costs
in any particular period before any associated revenue stream begins, if at all. If our marketing and sales efforts are very lengthy or unsuccessful, then we may face
a material adverse effect on our business and results of operations as a result of failure to obtain or an undue delay in obtaining royalties.
Some of our license agreements may convert to fully paid-up licenses at the expiration of their terms, or upon certain milestones, and we may not receive
royalties after that time.
From time to time, we enter into license agreements that automatically convert to fully paid-up licenses upon expiration or upon reaching certain milestones.
We may not receive further royalties from customers for any licensed technology under those agreements if they convert to fully paid-up licenses because such
customers will be entitled to continue using some, if not all, of the relevant intellectual property (“IP”) or technology under the terms of the license agreements
without further payment, even if relevant patents or technologies are still in effect. If we cannot find another source of royalties to replace the royalties from these
license agreements converting to fully paid-up licenses, our results of operations following such conversion could be adversely affected.
Future revenue is difficult to predict for several reasons, and our failure to predict revenue accurately may result in our stock price declining.
Our lengthy license negotiation cycles could make our future revenue difficult to predict because we may not be successful in entering into or renewing licenses
with our customers on our anticipated timelines. As we commercially launch each of our products, the sales volume of and resulting revenue from such products in
any given period will be difficult to predict.
In addition, while some of our license agreements provide for fixed, quarterly royalty payments, many of our license agreements provide for volume-based
royalties and may also be subject to caps on royalties in a given period. The sales volume and prices of our customers’ products in any given period can be difficult
to predict. In addition, we began applying the new revenue recognition standard (“ASC 606”) during the first quarter of 2018, as required, and we anticipate that
our revenue will vary greatly from quarter to quarter. As a result of the foregoing items, our actual results may differ substantially from analyst estimates or our
forecasts in any given quarter.
Also, a portion of our revenue comes from development and support services provided to our customers. Depending upon the nature of the services, a portion of
the related revenue may be recognized ratably over the support period, or may be recognized according to contract revenue accounting. Contract revenue
accounting may result in deferral of the service fees to the completion of the contract, or may result in the recognition of service fees over the period in which
services are performed on a percentage-of-completion basis.
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Our revenue is concentrated in a few customers, and if we lose any of these customers through contract terminations or acquisitions, our revenue may
decrease substantially.
We have a high degree of revenue concentration. Our top five customers for each reporting period represented approximately 46%, 46% and 49% of our
revenue for the years ended December 31, 2020, 2019 and 2018, respectively. For 2020, revenue from Micron and SK hynix each accounted for 10% or more of
our total revenue. For 2019, revenue from Broadcom and SK hynix each accounted for 10% or more of our total revenue. For 2018, revenue from Broadcom and
NVIDIA each accounted for 10% or more of our total revenue. We expect to continue to experience significant revenue concentration for the foreseeable future.
In addition, our license agreements are complex and some contain terms that require us to provide certain customers with the lowest royalty rate that we provide
to other customers for similar technologies, volumes and schedules. These clauses may limit our ability to effectively price differently among our customers, to
respond quickly to market forces, or otherwise to compete on the basis of price. These clauses may also require us to reduce royalties payable by existing
customers when we enter into or amend agreements with other customers. Any adjustment that reduces royalties from current customers or licensees may have a
material adverse effect on our operating results and financial condition.
We continue to negotiate with customers and prospective customers to enter into license agreements. Any future agreement may trigger our obligation to offer
comparable terms or modifications to agreements with our existing customers, which may be less favorable to us than the existing license terms. We expect
licensing fees will continue to vary based on our success in renewing existing license agreements and adding new customers, as well as the level of variation in our
customers’ reported shipment volumes, sales price and mix, offset in part by the proportion of customer payments that are fixed. In particular, under our license
agreement with Samsung, the license fees payable by Samsung are subject to certain adjustments and conditions, and we therefore cannot provide assurances that
the revenues generated by this license will not decline in the future. In addition, some of our material license agreements may contain rights by the customer to
terminate for convenience, or upon certain other events, such as change of control, material breach, insolvency or bankruptcy proceedings. If we are unsuccessful
in entering into license agreements with new customers or renewing license agreements with existing customers, on favorable terms or at all, or if they are
terminated, our results of operations may decline significantly.
Some of our revenue is subject to the pricing policies of our customers over which we have no control.
We have no control over our customers’ pricing of their products and there can be no assurance that licensed products will be competitively priced or will sell
in significant volumes. Any premium charged by our customers in the price of memory and controller chips or other products over alternatives must be reasonable.
If the benefits of our technology do not match the price premium charged by our customers, the resulting decline in sales of products incorporating our technology
could harm our operating results.
We have traditionally operated in, and may enter other, industries that are highly cyclical and competitive.
Our target customers are companies that develop and market high volume business and consumer products in semiconductors, computing, data centers,
networks, tablets, handheld devices, mobile applications, gaming and graphics, high-definition televisions, cryptography and data security. The electronics industry
is intensely competitive and has been impacted by rapid technological change, short product life cycles, cyclical market patterns, price erosion and increasing
foreign and domestic competition. We are subject to many risks beyond our control that influence whether or not we are successful in winning target customers or
retaining existing customers, including, primarily, competition in a particular industry, market acceptance of such customers’ products and the financial resources
of such customers. In particular, DRAM manufacturers, which such customers make up a significant part of our revenue, are prone to significant business cycles
and have suffered material losses and other adverse effects to their businesses, leading to industry consolidation from time-to-time that may result in loss of
revenues under our existing license agreements or loss of target customers. As a result of ongoing competition in the industries in which we operate and volatility
in various economies around the world, we may achieve a reduced number of licenses or may experience tightening of customers’ operating budgets, difficulty or
inability of our customers to pay our licensing fees, lengthening of the approval process for new licenses and consolidation among our customers. All of these
factors may adversely affect the demand for our technology and may cause us to experience substantial fluctuations in our operating results.
We face competition from semiconductor and digital electronics products and systems companies, and other semiconductor IP companies that provide security
cores that are available to the market. We believe the principal competition for our
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technologies may come from our prospective customers, some of which are evaluating and developing products based on technologies that they contend or may
contend will not require a license from us. Some of our competitors use a system-level design approach similar to ours, including activities such as board and
package design, power and signal integrity analysis, and thermal management. Many of these companies are larger and may have better access to financial,
technical and other resources than we possess.
To the extent that alternative technologies might provide comparable system performance at lower or similar cost to our technologies, or are perceived to
require the payment of no or lower royalties, or to the extent other factors influence the industry, our customers and prospective customers may adopt and promote
such alternative technologies. Even to the extent we determine that such alternative technologies infringe our patents, there can be no assurance that we would be
able to negotiate agreements that would result in royalties being paid to us without litigation, which could be costly and the results of which would be uncertain.
In addition, our expansion into new markets subjects us to additional risks. We may have limited or no experience in new products and markets, and our
customers may not adopt our new offerings. These and other new offerings may present new and difficult challenges, which could negatively affect our operating
results.
We face risks related to the COVID-19 pandemic, which could significantly disrupt our research and development, operations, sales and financial results.
Our business may be adversely impacted by the effects of the COVID-19 pandemic. In addition to global macroeconomic effects, the COVID-19 pandemic and
any other related adverse public health developments may cause disruption to our domestic and international operations and sales activities. Our third-party
manufacturers, suppliers, third-party distributors, sub-contractors and customers have been and will be disrupted by worker absenteeism, quarantines and
restrictions on our employees’ ability to work, office and factory closures, disruptions to ports and other shipping infrastructure, border closures, or other travel or
health-related restrictions. For example, government-mandated shelter-in-place and other restrictions on movement may impact our planned headquarters
relocation, the ability of our employees to perform their jobs, and our ability to develop and design our products in a timely manner or meet required milestones or
customer commitments. Depending on the magnitude of such effects on the operations of our suppliers, third-party distributors, or sub-contractors, our supply
chain and product shipments may be delayed, which could adversely affect our business, operations and customer relationships. In addition, the COVID-19
pandemic or other disease outbreak will in the short-run and may over the longer term adversely affect the economies and financial markets of many countries,
resulting in an economic downturn that may affect demand for our products and impact our operating results. There can be no assurance that any decrease in sales
resulting from the COVID-19 pandemic will be offset by increased sales in subsequent periods. Although the magnitude of the impact of the Novel COVID-19
pandemic on our business and operations remains uncertain, the continued spread of the COVID-19 pandemic or the occurrence of other epidemics and the
imposition of related public health measures and travel and business restrictions could adversely impact our business, financial condition, operating results and
cash flows.
Our customers often require our products to undergo a lengthy and expensive qualification process which does not assure product sales. If we are
unsuccessful or delayed in qualifying any of our products with a customer, our business and operating results would suffer.
Prior to purchasing our products, our customers often require that our products undergo extensive qualification processes, which involve testing of our products
in the customers’ systems, as well as testing for reliability. This qualification process may continue for several months. However, qualification of a product by a
customer does not assure any sales of the product to that customer. Even after successful qualification and sales of a product to a customer, a subsequent revision in
third-party manufacturing processes may require a new qualification process with our customers, which may result in delays and in our holding excess or obsolete
inventory. After our products are qualified, it can take several months or more before the customer commences volume production of components or systems that
incorporate our products. Despite these uncertainties, we devote substantial resources, including design, engineering, sales, marketing and management efforts, to
qualify our products with customers in anticipation of sales. If we are unsuccessful or delayed in qualifying any of our products with a customer, sales of those
products to the customer may be precluded or delayed, which may impede our growth and cause our business to suffer.
We may have to invest more resources in research and development than anticipated, which could increase our operating expenses and negatively impact our
operating results.
If new competitors, technological advances by existing competitors, and/or development of new technologies or other competitive factors require us to invest
significantly greater resources than anticipated in our research and development efforts,
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our operating expenses could increase. If we are required to invest significantly greater resources than anticipated in research and development efforts without an
increase in revenue, our operating results would decline. We expect these expenses to increase in the foreseeable future as our technology development efforts
continue.
Our business and operations could suffer in the event of security breaches.
Attempts by others to gain unauthorized access to our information technology systems are becoming more sophisticated. These attempts, which might be
related to industrial or other espionage, include covertly introducing malware to our computers and networks and impersonating authorized users, among others.
We seek to detect and investigate all security incidents and to prevent their recurrence, but in some cases, we might be unaware of an incident or its magnitude and
effects. While we have not identified any material incidents of unauthorized access to date, the theft, unauthorized use or publication of our IP and/or confidential
business information could harm our competitive position and reputation, reduce the value of our investment in research and development and other strategic
initiatives or otherwise adversely affect our business. To the extent that any future security breach results in inappropriate disclosure of our customers’ confidential
information or any personally-identifiable information of our employees, we may incur liability.
Failures in our products and services or in the products of our customers, including those resulting from security vulnerabilities, defects, bugs or errors, could
harm our business.
Our products and services are highly technical and complex, and among our various businesses our products and services are crucial to providing security and
other critical functions for our customers’ operations. Our products and services have from time to time contained and may in the future contain undetected errors,
bugs, defects or other security vulnerabilities. Some errors in our products and services may only be discovered after a product or service has been deployed and
used by customers, and may in some cases only be detected under certain circumstances or after extended use. In addition, because the techniques used by hackers
to access or sabotage our products and services and other technologies change and evolve frequently and generally are not recognized until launched against a
target, we may be unable to anticipate, detect or prevent these techniques and may not address them in our data security technologies. Any errors, bugs, defects or
security vulnerabilities discovered in our solutions after commercial release could adversely affect our revenue, our customer relationships and the market’s
perception of our products and services. We may not be able to correct any errors, bugs, defects, security flaws or vulnerabilities promptly, or at all. Any breaches,
defects, errors or vulnerabilities in our products and services could result in:
• expenditure of significant financial and research and development resources in efforts to analyze, correct, eliminate or work around breaches, errors, bugs or
defects or to address and eliminate vulnerabilities;
financial liability to customers for breach of certain contract provisions, including indemnification obligations;
loss of existing or potential customers;
•
•
• product shipment restrictions or prohibitions to certain customers;
• delayed or lost revenue;
• delay or failure to attain market acceptance;
• negative publicity, which would harm our reputation; and
•
litigation, regulatory inquiries or investigations that would be costly and harm our reputation.
We may fail to meet our publicly announced guidance or other expectations about our business, which would likely cause our stock price to decline.
We provide guidance regarding our expected financial and business performance including our anticipated future revenues, operating expenses and other
financial and operation metrics. We enhanced our guidance following implementation of Accounting Standards Update (“ASU”) No. 2014-09, Revenue from
Contracts with Customers in Accounting Standards Codification (“ASC”) Topic 606 (“ASC 606”, “the New Revenue Standard”) in the first quarter of 2018.
Correctly identifying the key factors affecting business conditions and predicting future events is an inherently uncertain process. Any guidance that we provide
may not always be accurate, or may vary from actual results, due to our inability to correctly identify and quantify risks and uncertainties to our business and to
quantify their impact on our financial performance. We offer no assurance that such guidance will ultimately be accurate, and investors should treat any such
guidance with appropriate caution. If we fail to meet our guidance or if we find it necessary to revise such guidance, even if such failure or revision is seemingly
insignificant, investors and analysts may lose confidence in us and the market value of our common stock could be materially adversely affected.
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Changes in accounting principles and guidance could result in unfavorable accounting charges or effects.
We prepare our financial statements in accordance with accounting principles generally accepted in the United States and these principles are subject to
interpretation by the SEC and various bodies. A change in these principles or application guidance, or in their interpretations, may have a material effect on our
reported results, as well as our processes and related controls, and may retroactively affect previously reported results. For instance, we adopted ASC 842, the New
Leasing Standard, effective for us on January 1, 2019, using the alternative transition method and recognized a cumulative-effect adjustment to the opening balance
of accumulated deficit on January 1, 2019. We also adopted ASC 606, the New Revenue Standard, effective for us on January 1, 2018, on a modified retrospective
basis, with a cumulative-effect adjustment to the opening balance of accumulated deficit on January 1, 2018. The New Revenue Standard materially impacted the
timing of revenue recognition for our fixed-fee IP licensing arrangements (including certain fixed-fee agreements that license our existing IP portfolio as well as IP
added to our portfolio during the license term) as a majority of such revenue would be recognized at inception of the license term, as opposed to over time as is the
case under prior U.S. GAAP, and we are required to compute and recognize interest income over time for certain licensing arrangements as control over the IP
generally transfers significantly in advance of cash being received from customers. The impact of the adoption of the New Revenue Standard did not have a
material impact on our other revenue streams. We have also enhanced the form and content of some of our guidance metrics that we provide following
implementation of the New Revenue Standard. We expect that any change to current revenue recognition practices may significantly increase volatility in our
quarterly revenue, financial results and trends, and may impact our stock price.
We have in the past made and may in the future make acquisitions or enter into mergers, strategic investments, sales of assets, divestitures or other
arrangements that may not produce expected operating and financial results.
From time to time, we engage in acquisitions, strategic transactions, strategic investments, divestitures and potential discussions with respect thereto. For
example, in 2019, we acquired Northwest Logic and the Secure Silicon IP and Protocols business from Verimatrix, formerly Inside Secure. Many of our
acquisitions or strategic investments entail a high degree of risk, including those involving new areas of technology and such investments may not become liquid
for several years after the date of the investment, if at all. Our acquisitions or strategic investments may not provide the advantages that we anticipated or generate
the financial returns we expect, including if we are unable to close any pending acquisitions. For example, for any pending or completed acquisitions, we may
discover unidentified issues not discovered in due diligence, and we may be subject to regulatory approvals or liabilities that are not covered by indemnification
protection or become subject to litigation. Achieving the anticipated benefits of business acquisitions depends in part upon our ability to integrate the acquired
businesses in an efficient and effective manner. The integration of companies that have previously operated independently may result in significant challenges,
including, among others: retaining key employees; successfully integrating new employees, business systems and technology; retaining customers of the acquired
business; minimizing the diversion of management’s and other employees’ attention from ongoing business matters; coordinating geographically separate
organizations; consolidating research and development operations; and consolidating corporate and administrative infrastructures.
Our strategic investments in new areas of technology may involve significant risks and uncertainties, including distraction of management from current
operations, greater than expected liabilities and expenses, inadequate return of capital, and unidentified issues not discovered in due diligence. These investments
are inherently risky and may not be successful.
In addition, we may record impairment charges related to our acquisitions or strategic investments. Any losses or impairment charges that we incur related to
acquisitions, strategic investments or sales of assets will have a negative impact on our financial results and the market value of our common stock, and we may
continue to incur new or additional losses related to acquisitions or strategic investments.
We may have to incur debt or issue equity securities to pay for any future acquisitions, which debt could involve restrictive covenants or which equity security
issuance could be dilutive to our existing stockholders. We may also use cash to pay for any future acquisitions which will reduce our cash balance.
From time to time, we may also divest certain assets. These divestitures or proposed divestitures may involve the loss of revenue and/or potential customers,
and the market for the associated assets may dictate that we sell such assets for less than what we paid. In addition, in connection with any asset sales or
divestitures, we may be required to provide certain representations, warranties and covenants to buyers. While we would seek to ensure the accuracy of such
representations and warranties and fulfillment of any ongoing obligations, we may not be completely successful and consequently may be subject to claims by a
purchaser of such assets.
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A substantial portion of our revenue is derived from sources outside of the United States and this revenue and our business generally are subject to risks
related to international operations that are often beyond our control.
For the years ended December 31, 2020, 2019 and 2018, revenues received from our international customers constituted approximately 43%, 40% and 44%,
respectively, of our total revenue. We expect that future revenue derived from international sources will continue to represent a significant portion of our total
revenue.
To the extent that customer sales are not denominated in U.S. dollars, any royalties which are based on a percentage of the customers’ sales that we receive as a
result of such sales could be subject to fluctuations in currency exchange rates. In addition, if the effective price of licensed products sold by our foreign customers
were to increase as a result of fluctuations in the exchange rate of the relevant currencies, demand for licensed products could fall, which in turn would reduce our
royalties. We do not use financial instruments to hedge foreign exchange rate risk.
Trade-related government actions, whether implemented by the US government, China or other countries, that impose barriers or restrictions that would impact
our ability to sell or ship products to certain customers may have a negative impact on our financial condition and results of operations. We cannot predict the
actions government entities may take in this context and may be unable to quickly offset or effectively react to government actions that restrict our ability to sell to
certain customers or in certain jurisdictions. Government actions that affect our customers’ ability to sell products or access critical elements of their supply chains
may result in a decreased demand for their products, which may consequently reduce their demand for our products.
We currently have international business operations in the United Kingdom, France and the Netherlands, international design operations in Canada, India and
Finland, and business development operations in China, Japan, Korea, and Taiwan. Our international operations and revenue are subject to a variety of risks which
are beyond our control, including:
• hiring, maintaining and managing a workforce and facilities remotely and under various legal systems, including compliance with local labor and
employment laws;
• non-compliance with our code of conduct or other corporate policies;
• natural disasters, acts of war, terrorism, widespread global pandemics or illness, such as the current Novel Coronavirus (COVID-19), or security breaches;
• export controls, tariffs, import and licensing restrictions and other trade barriers;
• profits, if any, earned abroad being subject to local tax laws and not being repatriated to the United States or, if repatriation is possible, limited in amount;
• adverse tax treatment of revenue from international sources and changes to tax codes, including being subject to foreign tax laws and being liable for paying
withholding, income or other taxes in foreign jurisdictions;
• unanticipated changes in foreign government laws and regulations;
•
•
increased financial accounting and reporting burdens and complexities;
lack of protection of our IP and other contract rights by jurisdictions in which we may do business to the same extent as the laws of the United States;
• potential vulnerability to computer system, internet or other systemic attacks, such as denial of service, viruses or other malware which may be caused by
criminals, terrorists or other sophisticated organizations;
• social, political and economic instability;
• geopolitical issues, including changes in diplomatic and trade relationships, in particular with China; and
• cultural differences in the conduct of business both with customers and in conducting business in our international facilities and international sales offices.
We and our customers are subject to many of the risks described above with respect to companies which are located in different countries. There can be no
assurance that one or more of the risks associated with our international operations will not result in a material adverse effect on our business, financial condition
or results of operations.
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Weak global economic conditions may adversely affect demand for the products and services of our customers.
Our operations and performance depend significantly on worldwide economic conditions. Future uncertainty about global or regional economic and political
conditions poses a risk as consumers and businesses may postpone spending in response to tighter credit, negative financial news and declines in income or asset
values, which could have a material negative effect on the demand for the products of our customers in the foreseeable future. If our customers experience reduced
demand for their products as a result of global or regional economic conditions or otherwise, this could result in reduced royalty revenue and our business and
results of operations could be harmed.
If our counterparties are unable to fulfill their financial and other obligations to us, our business and results of operations may be affected adversely.
Any downturn in economic conditions or other business factors could threaten the financial health of our counterparties, including companies with which we
have entered into licensing and/or settlement agreements, and their ability to fulfill their financial and other obligations to us. Such financial pressures on our
counterparties may eventually lead to bankruptcy proceedings or other attempts to avoid financial obligations that are due to us. Because bankruptcy courts have
the power to modify or cancel contracts of the petitioner which remain subject to future performance and alter or discharge payment obligations related to pre-
petition debts, we may receive less than all of the payments that we would otherwise be entitled to receive from any such counterparty as a result of bankruptcy
proceedings.
If we are unable to attract and retain qualified personnel, our business and operations could suffer.
Our success is dependent upon our ability to identify, attract, compensate, motivate and retain qualified personnel, especially engineers, senior management and
other key personnel. The loss of the services of any key employees could be disruptive to our development efforts, business relationships and strategy, and could
cause our business and operations to suffer.
Recently, we have experienced significant changes in our management team, including in the role of chief executive officer and other senior executives. Our
future success depends in large part upon the continued service and enhancement of our management team and our employees. If there are further changes in
management, such changes could be disruptive and could negatively affect our sales, operations, culture, future recruiting efforts and strategic direction.
Competition for qualified executives is intense and if we are unable to compensate our key talent appropriately and continue expanding our management team, or
successfully integrate new additions to our management team in a manner that enables us to scale our business and operations effectively, our ability to operate
effectively and efficiently could be limited or negatively impacted. In addition, changes in key management positions may temporarily affect our financial
performance and results of operations as new management becomes familiar with our business, processes and strategy. The loss of any of our key personnel, or our
inability to attract, integrate and retain qualified employees, could require us to dedicate significant financial and other resources to such personnel matters, disrupt
our operations and seriously harm our operations and business.
We are subject to various government restrictions and regulations, including on the sale of products and services that use encryption technology and those
related to privacy and other consumer protection matters.
Various countries have adopted controls, license requirements and restrictions on the export, import and use of products or services that contain encryption
technology. In addition, governmental agencies have proposed additional requirements for encryption technology, such as requiring the escrow and governmental
recovery of private encryption keys. Restrictions on the sale or distribution of products or services containing encryption technology may impact our ability to
license data security technologies to the manufacturers and providers of such products and services in certain markets or may require us or our customers to make
changes to the licensed data security technology that is embedded in such products to comply with such restrictions. Government restrictions, or changes to the
products or services our customers to comply with such restrictions, could delay or prevent the acceptance and use of such customers’ products and services. In
addition, the United States and other countries have imposed export controls that prohibit the export of encryption technology to certain countries, entities and
individuals. Our failure to comply with export and use regulations concerning encryption technology could subject us to sanctions and penalties, including fines,
and suspension or revocation of export or import privileges.
We are subject to a variety of laws and regulations in the United States, the European Union and other countries that involve, for example, user privacy, data
protection and security, content and consumer protection. A number of proposals are pending before federal, state, and foreign legislative and regulatory bodies
that could significantly affect our business. For example, in 2016, a new EU data protection regime, the General Data Protection Regulation (“GDPR”) was
adopted, with it
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fully effective on May 25, 2018, and California enacted the California Consumer Privacy Act as of January 1, 2020 (“CCPA”). The GDPR and CCPA may require
us to modify our existing practices with respect to the collection, use, and disclosure of data. In particular, the GDPR provides for significant penalties in the case
of non-compliance of up to €20 million or four percent of worldwide annual revenues, whichever is greater. The GDPR, CCPA and other existing and proposed
laws and regulations can be costly to comply with and can delay or impede the development of new products, result in negative publicity, increase our operating
costs and subject us to claims or other remedies.
In accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act, the SEC established new disclosure and reporting requirements for those
companies that use “conflict” minerals mined from the Democratic Republic of Congo and adjoining countries in their products, whether or not these products are
manufactured by third parties. These requirements could affect the sourcing and availability of minerals that are used in the manufacture of our products. We have
to date incurred costs and expect to incur significant additional costs associated with complying with the disclosure requirements, including for example, due
diligence in regard to the sources of any conflict minerals used in our products, in addition to the cost of remediation and other changes to products, processes, or
sources of supply as a consequence of such verification activities. Additionally, we may face reputational challenges with our customers and other stakeholders if
we are unable to sufficiently verify the origins of all minerals used in our products through the due diligence procedures that we implement. We may also face
challenges with government regulators and our customers and suppliers if we are unable to sufficiently verify that the metals used in our products are conflict free.
Participation in standards setting organizations may subject us to IP licensing requirements or limitations that could adversely affect our business and
prospects.
In the course of our participation in the development of emerging standards for some of our present and future products, we may be obligated to grant to all
other participants a license to our patents that are essential to the practice of those standards on reasonable and non-discriminatory, or RAND, terms. If we fail to
limit to whom we license our patents, or fail to limit the terms of any such licenses, we may be required to license our patents or other IP to others in the future,
which could limit the effectiveness of our patents against competitors.
Our operations are subject to risks of natural disasters, acts of war, terrorism, widespread illness or security breach at our domestic and international
locations, any one of which could result in a business stoppage and negatively affect our operating results.
Our business operations depend on our ability to maintain and protect our facilities, computer systems and personnel, which are primarily located in the San
Francisco Bay Area in the United States, the Netherlands and India. The San Francisco Bay Area is in close proximity to known earthquake fault zones. Our
facilities and transportation for our employees are susceptible to damage from earthquakes and other natural disasters such as fires, floods and similar events.
Should a catastrophe disable our facilities, we do not have readily available alternative facilities from which we could conduct our business, so any resultant work
stoppage could have a negative effect on our operating results. We also rely on our network infrastructure and technology systems for operational support and
business activities which are subject to physical and cyber damage, and also susceptible to other related vulnerabilities common to networks and computer systems.
Acts of terrorism, widespread illness, or global pandemics, including the current Novel Coronavirus (COVID-19) pandemic, war and any event that causes failures
or interruption in our network infrastructure and technology systems could have a negative effect at our international and domestic facilities and could harm our
business, financial condition, and operating results.
We do not have extensive experience in manufacturing and marketing products and, as a result, may be unable to sustain and grow a profitable commercial
market for new and existing products.
We do not have extensive experience in creating, manufacturing and marketing products. Our product offerings may present new and difficult challenges, and
we may be subject to claims if customers of our offerings experience delays, failures, non-performance or other quality issues. In particular, we may experience
difficulties with product design, qualification, manufacturing, marketing or certification that could delay or prevent our development, introduction or marketing
and sales of products. Although we intend to design our products to be fully compliant with applicable industry standards, proprietary enhancements may not in the
future result in full conformance with existing industry standards under all circumstances.
If we fail to introduce products that meet the demand of our customers, penetrate new markets in which we expend significant resources, or our marketing and
sales cycles that we experience are longer than we anticipate, our revenues will be difficult to predict, may decrease over time and our financial condition could
suffer. Additionally, if we concentrate resources
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on a new market that does not prove profitable or sustainable, it could damage our reputation and limit our growth, and our financial condition could decline.
We rely upon the accuracy of our customers’ recordkeeping, and any inaccuracies or payment disputes for amounts owed to us under our licensing
agreements may harm our results of operations.
Many of our license agreements require our customers to document the manufacture and sale of products that incorporate our technology and report this data to
us on a quarterly basis. While licenses with such terms give us the right to audit books and records of our customers to verify this information, audits rarely are
undertaken because they can be expensive, time consuming, and potentially detrimental to our ongoing business relationship with our customers. Therefore, we
typically rely on the accuracy of the reports from customers without independently verifying the information in them. Our failure to audit our customers’ books and
records may result in our receiving more or less royalty revenue than we are entitled to under the terms of our license agreements. If we conduct royalty audits in
the future, such audits may trigger disagreements over contract terms with our customers and such disagreements could hamper customer relations, divert the
efforts and attention of our management from normal operations and impact our business operations and financial condition.
We are subject to increased inventory risks and costs because we build our products based on forecasts provided by customers before receiving purchase orders
for the product.
We rely on a number of third-party providers for data center hosting facilities, equipment, maintenance and other services, and the loss of, or problems with,
one or more of these providers may impede our growth or cause us to lose customers.
We rely on third-party providers to supply data center hosting facilities, equipment, maintenance and other services in order to enable us to provide some of our
services, and have entered into various agreements for such services. The continuous availability of our services depends on the operations of those facilities, on a
variety of network service providers and on third-party vendors. In addition, we depend on our third-party facility providers’ ability to protect these facilities
against damage or interruption from natural disasters, power or telecommunications failures, criminal acts, cyber-attacks and similar events. If there are any lapses
of service or damage to a facility, we could experience lengthy interruptions in our service as well as delays and additional expenses in arranging new facilities and
services. Even with current and planned disaster recovery arrangements, our business could be harmed. Any interruptions or delays in our service, whether as a
result of third-party error, our own error, natural disasters, criminal acts, security breaches or other causes, whether accidental or willful, could harm our
relationships with customers, harm our reputation and cause our revenue to decrease and/or our expenses to increase. Also, in the event of damage or interruption,
our insurance policies may not adequately compensate us for any losses that we may incur. These factors in turn could further reduce our revenue, subject us to
liability and cause us to issue credits or cause us to lose customers, any of which could materially adversely affect our business.
We rely on third parties for a variety of services, including manufacturing, and these third parties’ failure to perform these services adequately could
materially and adversely affect our business.
We rely on third parties for a variety of services, including our manufacturing supply chain partners and third parties within our sales and distribution channels.
Certain of these third parties are, and may be, our sole manufacturer or sole source of certain production materials. If we fail to manage our relationships with these
manufacturers and suppliers effectively, or if they experience delays, disruptions, capacity constraints or quality control problems in their operations, our ability to
ship products to our customers could be impaired and our competitive position and reputation could be harmed. In addition, any adverse change in any of our
manufacturers and suppliers’ financial or business condition could disrupt our ability to supply quality products to our customers. If we are required to change our
manufacturers, we may lose revenue, incur increased costs and damage our end-customer relationships. In addition, qualifying a new manufacturer and
commencing production can be an expensive and lengthy process. If our third-party manufacturers or suppliers are unable to provide us with adequate supplies of
high-quality products for any other reason, we could experience a delay in our order fulfillment, and our business, operating results and financial condition would
be adversely affected. In the event these and other third parties we rely on fail to provide their services adequately, including as a result of errors in their systems or
events beyond their control, or refuse to provide these services on terms acceptable to us or at all, and we are not able to find suitable alternatives, our business may
be materially and adversely affected. In addition, our orders may represent a relatively small percentage of the overall orders received by our manufacturers from
their customers. As a result, fulfilling our orders may not be considered a priority in the event our manufacturers are constrained in their ability to fulfill all of their
customer obligations in a timely manner. If our manufacturers are unable to provide us with adequate supplies of high-quality products, or if we or our
manufacturers are unable to obtain adequate quantities of components, it could cause a delay in our order fulfillment, in which case our business, operating results
and financial condition could be adversely affected.
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Warranty, service level agreement and product liability claims brought against us could cause us to incur significant costs and adversely affect our operating
results as well as our reputation and relationships with customers.
We may from time to time be subject to warranty, service level agreement and product liability claims with regard to product performance and our services. We
could incur material losses as a result of warranty, support, repair or replacement costs in response to customer complaints or in connection with the resolution of
contemplated or actual legal proceedings relating to such claims. In addition to potential losses arising from claims and related legal proceedings, warranty and
product liability claims could affect our reputation and our relationship with customers. We generally attempt to limit the maximum amount of indemnification or
liability that we could be exposed to under our contracts, however, this is not always possible.
Any failure in our delivery of high-quality technical support services may adversely affect our relationships with our customers and our financial results.
Our customers depend on our support organization to resolve technical issues and provide ongoing maintenance relating to our products and services. We may
be unable to respond quickly enough to accommodate short-term increases in customer demand for support services. Increased customer demand for these services,
without corresponding revenues, could increase costs and adversely affect our operating results. In addition, our sales process is highly dependent on our offerings
and business reputation and on positive recommendations from our existing customers. Any failure to maintain high-quality technical support, or a market
perception that we do not maintain high-quality support, could adversely affect our reputation, our ability to sell our solutions to existing and prospective
customers, and our business, operating results and financial position.
Certain software that we use in certain of our products is licensed from third parties and, for that reason, may not be available to us in the future, which has
the potential to delay product development and production or cause us to incur additional expense, which could materially adversely affect our business,
financial condition, operating results and cash flow.
Some of our products and services contain software licensed from third parties. Some of these licenses may not be available to us in the future on terms that are
acceptable to us or allow our products to remain competitive. The loss of these licenses or the inability to maintain any of them on commercially acceptable terms
could delay development of future offerings or the enhancement of existing products and services. We may also choose to pay a premium price for such a license
in certain circumstances where continuity of the licensed product would outweigh the premium cost of the license. The unavailability of these licenses or the
necessity of agreeing to commercially unreasonable terms for such licenses could materially adversely affect our business, financial condition, operating results
and cash flow.
Certain software we use is from open source code sources, which, under certain circumstances, may lead to unintended consequences and, therefore, could
materially adversely affect our business, financial condition, operating results and cash flow.
We use open source software in our services and we intend to continue to use open source software in the future. From time to time, there have been claims
challenging the ownership of open source software against companies that incorporate open source software into their products or alleging that these companies
have violated the terms of an open source license. As a result, we could be subject to lawsuits by parties claiming ownership of what we believe to be open source
software or alleging that we have violated the terms of an open source license. Litigation could be costly for us to defend, have a negative effect on our operating
results and financial condition or require us to devote additional research and development resources to change our solutions. In addition, if we were to combine
our proprietary software solutions with open source software in certain manners, we could, under certain open source licenses, be required to publicly release the
source code of our proprietary software solutions. If we inappropriately use open source software, we may be required to re-engineer our solutions, discontinue the
sale of our solutions, release the source code of our proprietary software to the public at no cost or take other remedial actions. There is a risk that open source
licenses could be construed in a way that could impose unanticipated conditions or restrictions on our ability to commercialize our solutions, which could adversely
affect our business, operating results and financial condition.
Our business and operating results could be harmed if we undertake any restructuring activities.
From time to time, we may undertake restructurings of our business, including discontinuing certain products, services and technologies and planned reductions
in force. There are several factors that could cause restructurings to have adverse effects on our business, financial condition and results of operations. These
include potential disruption of our operations, the
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development of our technology, the deliveries to our customers and other aspects of our business. Loss of sales, service and engineering talent, in particular, could
damage our business. Any restructuring would require substantial management time and attention and may divert management from other important work.
Employee reductions or other restructuring activities also would cause us to incur restructuring and related expenses such as severance expenses. Moreover, we
could encounter delays in executing any restructuring plans, which could cause further disruption and additional unanticipated expense.
Problems with our information systems could interfere with our business and could adversely impact our operations.
We rely on our information systems and those of third parties for fulfilling licensing and contractual obligations, processing customer orders, delivering
products, providing services and support to our customers, billing and tracking our customer orders, performing accounting operations and otherwise running our
business. If our systems fail, our disaster and data recovery planning and capacity may prove insufficient to enable timely recovery of important functions and
business records. Any disruption in our information systems and those of the third parties upon whom we rely could have a significant impact on our business.
Additionally, our information systems may not support new business models and initiatives and significant investments could be required in order to upgrade them.
Delays in adapting our information systems to address new business models and accounting standards could limit the success or result in the failure of such
initiatives and impair the effectiveness of our internal controls. Even if we do not encounter these adverse effects, the implementation of these enhancements may
be much more costly than we anticipated. If we are unable to successfully implement the information systems enhancements as planned, our operating results could
be negatively impacted.
We are leveraged financially, which could adversely affect our ability to adjust our business to respond to competitive pressures and to obtain sufficient funds
to satisfy our future research and development needs, to protect and enforce our intellectual property, and to meet other needs.
We have material indebtedness. In November 2017, we issued $172.5 million aggregate principal amount of our 2023 Notes, the entire amount of which
remains outstanding. The degree to which we are leveraged could have negative consequences, including, but not limited to, the following:
• we may be more vulnerable to economic downturns, less able to withstand competitive pressures and less flexible in responding to changing business and
economic conditions;
• our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions, litigation, general corporate or other purposes
may be limited;
• a substantial portion of our cash flows from operations in the future may be required for the payment of interest and principal when due at maturity in
February 2023; and
• we may be required to make cash payments upon any conversion of the 2023 Notes, which would reduce our cash on hand.
A failure to comply with the covenants and other provisions of our debt instruments could result in events of default under such instruments, which could
permit acceleration of all of our outstanding 2023 Notes. Any required repurchase of the 2023 Notes as a result of a fundamental change or acceleration of the 2023
Notes would reduce our cash on hand such that we would not have those funds available for use in our business.
If we are at any time unable to generate sufficient cash flows from operations to service our indebtedness when payment is due, we may be required to attempt
to renegotiate the terms of the instruments relating to the indebtedness, seek to refinance all or a portion of the indebtedness or obtain additional financing. There
can be no assurance that we will be able to successfully renegotiate such terms, that any such refinancing would be possible or that any additional financing could
be obtained on terms that are favorable or acceptable to us.
Risks Associated with Litigation, Regulation and Our Intellectual Property
Adverse litigation results could affect our business.
We may be subject to legal claims or regulatory matters involving consumer, stockholder, employment, competition, IP and other issues on a global basis.
Litigation can be lengthy, expensive and disruptive to our operations, and results cannot be predicted with certainty. An adverse decision could include monetary
damages or, in cases for which injunctive relief is sought, an injunction prohibiting us from manufacturing or selling one or more of our products or technologies.
If we were to receive an unfavorable ruling on a matter, our business, operating results or financial condition could be materially harmed.
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We have in the past, and may in the future, become engaged in litigation stemming from our efforts to protect and enforce our patents and intellectual property
and make other claims, which could adversely affect our intellectual property rights, distract our management and cause substantial expenses and declines in
our revenue and stock price.
We seek to diligently protect our IP rights and will continue to do so. While we are not currently involved in IP litigation, any future litigation, whether or not
determined in our favor or settled by us, would be expected to be costly, may cause delays applicable to our business (including delays in negotiating licenses with
other actual or potential customers), would be expected to discourage future design partners, would tend to impair adoption of our existing technologies and would
divert the efforts and attention of our management and technical personnel from other business operations. In addition, we may be unsuccessful in any litigation if
we have difficulty obtaining the cooperation of former employees and agents who were involved in our business during the relevant periods related to our litigation
and are now needed to assist in cases or testify on our behalf. Furthermore, any adverse determination or other resolution in litigation could result in our losing
certain rights beyond the rights at issue in a particular case, including, among other things: our being effectively barred from suing others for violating certain or all
of our IP rights; our patents being held invalid or unenforceable or not infringed; our being subjected to significant liabilities; our being required to seek licenses
from third parties; our being prevented from licensing our patented technology; or our being required to renegotiate with current customers on a temporary or
permanent basis.
From time to time, we are subject to proceedings by government agencies that may result in adverse determinations against us and could cause our revenue to
decline substantially.
An adverse resolution by or with a governmental agency could result in severe limitations on our ability to protect and license our IP, and could cause our
revenue to decline substantially. Third parties have and may attempt to use adverse findings by a government agency to limit our ability to enforce or license our
patents in private litigations, to challenge or otherwise act against us with respect to such government agency proceedings.
Further, third parties have sought and may seek review and reconsideration of the patentability of inventions claimed in certain of our patents by the U.S. Patent
and Trademark Office (“USPTO”) and/or the European Patent Office (the “EPO”). Any re-examination or inter parties review proceedings may be initiated by the
USPTO’s Patent Trial and Appeal Board (“PTAB”). The PTAB and the related former Board of Patent Appeals and Interferences have previously issued decisions
in a few cases, finding some challenged claims of Rambus’ patents to be valid, and others to be invalid. Decisions of the PTAB are subject to further USPTO
proceedings and/or appeal to the Court of Appeals for the Federal Circuit. A final adverse decision, not subject to further review and/or appeal, could invalidate
some or all of the challenged patent claims and could also result in additional adverse consequences affecting other related U.S. or European patents, including in
any IP litigation. If a sufficient number of such patents are impaired, our ability to enforce or license our IP would be significantly weakened and could cause our
revenue to decline substantially.
The pendency of any governmental agency acting as described above may impair our ability to enforce or license our patents or collect royalties from existing
or potential customers, as any litigation opponents may attempt to use such proceedings to delay or otherwise impair any pending cases and our existing or
potential customers may await the final outcome of any proceedings before agreeing to new licenses or to paying royalties.
Litigation or other third-party claims of intellectual property infringement could require us to expend substantial resources and could prevent us from
developing or licensing our technology on a cost-effective basis.
Our research and development programs are in highly competitive fields in which numerous third parties have issued patents and patent applications with
claims closely related to the subject matter of our programs. We have also been named in the past, and may in the future be named, as a defendant in lawsuits
claiming that our technology infringes upon the IP rights of third parties. As we develop additional products and technology, we may face claims of infringement
of various patents and other IP rights by third parties. In the event of a third-party claim or a successful infringement action against us, we may be required to pay
substantial damages, to stop developing and licensing our infringing technology, to develop non-infringing technology, and to obtain licenses, which could result in
our paying substantial royalties or our granting of cross licenses to our technologies. We may not be able to obtain licenses from other parties at a reasonable cost,
or at all, which could cause us to expend substantial resources, or result in delays in, or the cancellation of, new products. Moreover, customers and/or suppliers of
our products may seek indemnification for alleged infringement of IP rights. We could be liable for direct and consequential damages and expenses including
attorneys’ fees. A future obligation to indemnify our customers and/or suppliers may harm our business, financial condition and operating results.
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If we are unable to protect our inventions successfully through the issuance and enforcement of patents, our operating results could be adversely affected.
We have an active program to protect our proprietary inventions through the filing of patents. There can be no assurance, however, that:
• any current or future U.S. or foreign patent applications will be approved and not be challenged by third parties;
• our issued patents will protect our IP and not be challenged by third parties;
•
the validity of our patents will be upheld;
• our patents will not be declared unenforceable;
•
the patents of others will not have an adverse effect on our ability to do business;
• Congress or the U.S. courts or foreign countries will not change the nature or scope of rights afforded patents or patent owners or alter in an adverse way the
process for seeking or enforcing patents;
• changes in law will not be implemented, or changes in interpretation of such laws will occur, that will affect our ability to protect and enforce our patents
and other IP;
• new legal theories and strategies utilized by our competitors will not be successful;
• others will not independently develop similar or competing chip interfaces or design around any patents that may be issued to us; or
•
factors such as difficulty in obtaining cooperation from inventors, pre-existing challenges or litigation, or license or other contract issues will not present
additional challenges in securing protection with respect to patents and other IP that we acquire.
If any of the above were to occur, our operating results could be adversely affected.
Furthermore, patent reform legislation, such as the Leahy-Smith America Invents Act, could increase the uncertainties and costs surrounding the prosecution of
any patent applications and the enforcement or defense of our licensed patents. The federal courts, the USPTO, the Federal Trade Commission, and the U.S.
International Trade Commission have also recently taken certain actions and issued rulings that have been viewed as unfavorable to patentees. While we cannot
predict what form any new patent reform laws or regulations may ultimately take, or what impact recent or future reforms may have on our business, any laws or
regulations that restrict or negatively impact our ability to enforce our patent rights against third parties could have a material adverse effect on our business.
In addition, our patents will continue to expire according to their terms, with expected expiration dates ranging from 2021 to 2039. Our failure to continuously
develop or acquire successful innovations and obtain patents on those innovations could significantly harm our business, financial condition, results of operations,
or cash flows.
Our inability to protect and own the intellectual property we create would cause our business to suffer.
We rely primarily on a combination of license, development and nondisclosure agreements, trademark, trade secret and copyright law and contractual
provisions to protect our non-patentable IP rights. If we fail to protect these IP rights, our customers and others may seek to use our technology without the
payment of license fees and royalties, which could weaken our competitive position, reduce our operating results and increase the likelihood of costly litigation.
The growth of our business depends in part on the use of our IP in the products of third-party manufacturers, and our ability to enforce IP rights against them to
obtain appropriate compensation. In addition, effective trade secret protection may be unavailable or limited in certain foreign countries. Although we intend to
protect our rights vigorously, if we fail to do so, our business will suffer.
Effective protection of trademarks, copyrights, domain names, patent rights, and other IP rights is expensive and difficult to maintain, both in terms of
application and maintenance costs, as well as the costs of defending and enforcing those rights. The efforts we have taken to protect our IP rights may not be
sufficient or effective. Our IP rights may be infringed, misappropriated, or challenged, which could result in them being narrowed in scope or declared invalid or
unenforceable. In addition, the laws or practices of certain countries do not protect our proprietary rights to the same extent as do the laws of the United States.
Significant impairments of our IP rights, and limitations on our ability to assert our IP rights against others, could have a material and adverse effect on our
business.
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Third parties may claim that our products or services infringe on their intellectual property rights, exposing us to litigation that, regardless of merit, may be
costly to defend.
Our success and ability to compete are also dependent upon our ability to operate without infringing upon the patent, trademark and other IP rights of others.
Third parties may claim that our current or future products or services infringe upon their IP rights. Any such claim, with or without merit, could be time
consuming, divert management’s attention from our business operations and result in significant expenses. We cannot assure you that we would be successful in
defending against any such claims. In addition, parties making these claims may be able to obtain injunctive or other equitable relief affecting our ability to license
the products that incorporate the challenged IP. As a result of such claims, we may be required to obtain licenses from third parties, develop alternative technology
or redesign our products. We cannot be sure that such licenses would be available on terms acceptable to us, if at all. If a successful claim is made against us and
we are unable to develop or license alternative technology, our business, financial condition, operating results and cash flows could be materially adversely
affected.
Any dispute regarding our intellectual property may require us to indemnify certain customers, the cost of which could severely hamper our business
operations and financial condition.
In any potential dispute involving our patents or other IP, our customers could also become the target of litigation. While we generally do not indemnify our
customers, some of our agreements provide for indemnification, and some require us to provide technical support and information to a customer that is involved in
litigation involving use of our technology. In addition, we may be exposed to indemnification obligations, risks and liabilities that were unknown at the time that
we acquired assets or businesses for our operations. Any of these indemnification and support obligations could result in substantial and material expenses. In
addition to the time and expense required for us to indemnify or supply such support to our customers, a customer’s development, marketing and sales of licensed
semiconductors, mobile communications and data security technologies could be severely disrupted or shut down as a result of litigation, which in turn could
severely hamper our business operations and financial condition as a result of lower or no royalty payments.
We have been party to, and may in the future be subject to, lawsuits relating to securities law matters which may result in unfavorable outcomes and
significant judgments, settlements and legal expenses which could cause our business, financial condition and results of operations to suffer.
We and certain of our current and former officers and directors, as well as our current auditors, were subject from 2006 to 2011 to several stockholder
derivative actions, securities fraud class actions and/or individual lawsuits filed in federal court against us and certain of our current and former officers and
directors. The complaints generally alleged that the defendants violated the federal and state securities laws and stated state law claims for fraud and breach of
fiduciary duty. Although to date these complaints have either been settled or dismissed, the amount of time to resolve any future lawsuits is uncertain, and these
matters could require significant management and financial resources. Unfavorable outcomes and significant judgments, settlements and legal expenses in
litigation related to any future securities law claims could have material adverse impacts on our business, financial condition, results of operations, cash flows and
the trading price of our common stock.
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General Risks Factors
The price of our common stock may continue to fluctuate.
Our common stock is listed on The NASDAQ Global Select Market under the symbol “RMBS.” The trading price of our common stock has at times
experienced price volatility and may continue to fluctuate significantly in response to various factors, some of which are beyond our control. Some of these factors
include:
• any progress, or lack of progress, real or perceived, in the development of products that incorporate our innovations and technology companies’ acceptance
of our products, including the results of our efforts to expand into new target markets;
• our signing or not signing new licenses or renewing existing licenses, and the loss of strategic relationships with any customer;
• announcements of technological innovations or new products by us, our customers or our competitors;
• changes in our strategies, including changes in our licensing focus and/or acquisitions or dispositions of companies or businesses with business models or
target markets different from our core;
• positive or negative reports by securities analysts as to our expected financial results and business developments;
• developments with respect to patents or proprietary rights and other events or factors;
• new litigation and the unpredictability of litigation results or settlements;
•
•
repurchases of our common stock on the open market;
issuance of additional securities by us, including in acquisitions, or large cash payments, including in acquisitions; and
• changes in accounting pronouncements, including the effects of ASC 606 and ASC 842.
In addition, the stock market in general, and prices for companies in our industry in particular, have experienced extreme volatility that often has been unrelated
to the operating performance of such companies. These broad market and industry fluctuations may adversely affect the price of our common stock, regardless of
our operating performance.
We have outstanding senior convertible notes in an aggregate principal amount totaling $172.5 million. Because these notes are convertible into shares of our
common stock, volatility or depressed prices of our common stock could have a similar effect on the trading price of such notes. In addition, the existence of these
notes may encourage short selling in our common stock by market participants because the conversion of the notes could depress the price of our common stock.
Compliance with changing regulation of corporate governance and public disclosure may result in additional expenses.
Changing laws, regulations and standards relating to corporate governance and public disclosure have historically created uncertainty for companies such as
ours. Any new or changed laws, regulations and standards are subject to varying interpretations due to their lack of specificity, and as a result, their application in
practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance
matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.
Our certificate of incorporation and bylaws, Delaware law, our outstanding convertible notes and certain other agreements contain provisions that could
discourage transactions resulting in a change in control, which may negatively affect the market price of our common stock.
Our certificate of incorporation, our bylaws and Delaware law contain provisions that might enable our management to discourage, delay or prevent a change in
control. In addition, these provisions could limit the price that investors would be willing to pay in the future for shares of our common stock. Pursuant to such
provisions:
• our board of directors is authorized, without prior stockholder approval, to create and issue preferred stock, commonly referred to as “blank check” preferred
stock, with rights senior to those of common stock, which means that a stockholder rights plan could be implemented by our board;
• our board of directors is staggered into two classes, only one of which is elected at each annual meeting;
• stockholder action by written consent is prohibited;
• nominations for election to our board of directors and the submission of matters to be acted upon by stockholders at a meeting are subject to advance notice
requirements;
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• certain provisions in our bylaws and certificate of incorporation such as notice to stockholders, the ability to call a stockholder meeting, advance notice
requirements and action of stockholders by written consent may only be amended with the approval of stockholders holding 66 2/3% of our outstanding
voting stock;
• our stockholders have no authority to call special meetings of stockholders; and
• our board of directors is expressly authorized to make, alter or repeal our bylaws.
We are also subject to Section 203 of the Delaware General Corporation Law, which provides, subject to enumerated exceptions, that if a person acquires 15%
or more of our outstanding voting stock, the person is an “interested stockholder” and may not engage in any “business combination” with us for a period of three
years from the time the person acquired 15% or more of our outstanding voting stock.
Certain provisions of our outstanding Notes could make it more difficult or more expensive for a third party to acquire us. Upon the occurrence of certain
transactions constituting a fundamental change, holders of such Notes will have the right, at their option, to require us to repurchase, at a cash repurchase price
equal to 100% of the principal amount plus accrued and unpaid interest on such Notes, all or a portion of their Notes. We may also be required to increase the
conversion rate of such Notes in the event of certain fundamental changes.
Unanticipated changes in our tax rates or in the tax laws and regulations could expose us to additional income tax liabilities which could affect our operating
results and financial condition.
We are subject to income taxes in both the United States and various foreign jurisdictions. Significant judgment is required in determining our worldwide
provision for income taxes and, in the ordinary course of business, there are many transactions and calculations where the ultimate tax determination is uncertain.
Our effective tax rate could be adversely affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of
deferred tax assets and liabilities, changes in tax laws and regulations as well as other factors. Our tax determinations are regularly subject to audit by tax
authorities and developments in those audits could adversely affect our income tax provision, and we are currently undergoing such audits of certain of our tax
returns. Although we believe that our tax estimates are reasonable, the final determination of tax audits or tax disputes may be different from what is reflected in
our historical income tax provisions which could affect our operating results.
Item 1B.
Unresolved Staff Comments
None.
Item 2.
Properties
As of December 31, 2020, we occupied offices in the leased facilities described below:
Number of
Offices
Under Lease
4
Location
United States
San Jose, CA (Corporate Headquarters)
Chapel Hill, NC
Beaverton, OR
Agoura Hills, CA
Bangalore, India
Seoul, Korea
Rotterdam, The Netherlands
Vught, The Netherlands
Toronto, Canada
Espoo, Finland
1
1
1
1
1
1
Primary Use
Executive and administrative offices, research and development, sales and marketing
and service functions
Research and development
Research and development
Research and development
Administrative offices, research and development and service functions
Business development
Research and development
Research and development
Research and development
Research and development
25
Item 3.
Legal Proceedings
We are not currently a party to any material pending legal proceeding; however, from time to time, we may become involved in legal proceedings or be subject
to claims arising in the ordinary course of our business. Although the results of litigation and claims cannot be predicted with certainty, we currently believe that
the final outcome of these ordinary course matters will not have a material adverse effect on our business, operating results, financial position or cash flows.
Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management attention and resources
and other factors.
Item 4.
Mine Safety Disclosures
Not applicable.
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Our Common Stock is listed on The NASDAQ Global Select Market under the symbol “RMBS.” The following table sets forth for the periods indicated the
high and low sales price per share of our common stock as reported on The NASDAQ Global Select Market.
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Year Ended
December 31, 2020
Year Ended
December 31, 2019
High
Low
High
Low
16.98 $
16.50 $
15.61 $
18.54 $
9.01 $
10.36 $
13.08 $
13.48 $
10.93 $
12.24 $
14.29 $
14.83 $
7.55
10.50
11.23
12.45
$
$
$
$
26
Table of Contents
The graph below compares the cumulative 5-year total return of holders of Rambus Inc.’s common stock with the cumulative total returns of the NASDAQ
Composite index and the RDG Semiconductor Composite index. The graph tracks the performance of a $100 investment in our common stock and in each index
(with the reinvestment of all dividends) from December 31, 2015 to December 31, 2020.
Fiscal years ending:
Rambus Inc.
NASDAQ Composite
RDG Semiconductor Composite
Base Period
12/31/15
$100.00
$100.00
$100.00
12/31/16
$118.81
$108.87
$131.64
12/31/17
$122.69
$141.13
$177.48
12/31/18
$66.18
$137.12
$164.63
12/31/19
$118.85
$187.44
$242.61
12/31/20
$150.65
$271.64
$351.91
The stock price performance included in this graph is not necessarily indicative of future stock price performance.
Information regarding our securities authorized for issuance under equity compensation plans will be included in Item 12, “Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder Matters,” of this report on Form 10-K.
As of January 29, 2021, there were 480 holders of record of our common stock. Since many of the shares of our common stock are held by brokers and other
institutions on behalf of stockholders, we are unable to estimate the total number of beneficial stockholders represented by these record holders.
We have never paid or declared any cash dividends on our common stock or other securities.
27
Table of Contents
Share Repurchase Program
On October 29, 2020, our Board approved a new share repurchase program authorizing the repurchase of up to an aggregate of 20.0 million shares (the “2020
Repurchase Program”). Share repurchases under the 2020 Repurchase Program may be made through the open market, established plans or privately negotiated
transactions in accordance with all applicable securities laws, rules, and regulations. There is no expiration date applicable to the 2020 Repurchase Program. The
2020 Repurchase Program replaced the previous program approved by the Board in January 2015 (the “2015 Repurchase Program) and canceled the remaining
shares outstanding as part of the previous authorization. As part of the broader share repurchase program authorized by our Board on October 29, 2020, we entered
into an accelerated share repurchase program with Deutsche Bank AG, London Branch as counterparty, through its agent Deutsche Bank Securities Inc. (“Deutsche
Bank”) on November 11, 2020 (the “2020 ASR Program”). After giving effect to the 2020 ASR Program, detailed in the table below, we had remaining
authorization to repurchase approximately 17.4 million shares.
We record stock repurchases as a reduction to stockholders’ equity. We record a portion of the purchase price of the repurchased shares as an increase to
accumulated deficit when the price of the shares repurchased exceeds the average original proceeds per share received from the issuance of common stock.
Period
October 1, 2020 - December 31, 2020
(1)
Cumulative shares repurchased as of December 31, 2020
Total Number of
Shares Purchased
2,616,089
2,616,089
Average Price Paid
per Share
N/A
(2)
Total Number of
Shares Purchased as
Part of Publicly
Announced Program
2,616,089
2,616,089
Maximum Number of
Shares that May Yet be
Purchased Under the
Program
17,383,911
_________________________________________
(1)
In November 2020, we entered into the 2020 ASR Program with Deutsche Bank to repurchase an aggregate of $50.0 million of our common stock. We made
an upfront payment of $50.0 million pursuant to the accelerated share repurchase program and received an initial delivery of 2.6 million shares which were
retired and recorded as a $40.0 million reduction to stockholders' equity. The remaining $10.0 million of the initial payment was recorded as a reduction to
stockholders’ equity as an unsettled forward contract indexed to our stock. The number of shares to be ultimately purchased by us will be determined based on
the volume-weighted-average price of the common stock during the terms of the transaction, minus an agreed upon discount between the parties. The program
is expected to be completed within six months from the beginning of the program. See Note 15, “Stockholders' Equity,” of Notes to Consolidated Financial
Statements of this Form 10-K for further discussion.
(2)
N/A—The average price paid per share will be determined at the end of the current accelerated share repurchase program.
Unregistered Sales of Equity Securities and Use of Proceeds
Recent Sales of Unregistered Equity Securities
None.
Item 6.
Selected Financial Data
The following selected consolidated financial data as of and for the years ended December 31, 2020, 2019, 2018, 2017 and 2016 was derived from our
consolidated financial statements. The following selected consolidated financial data should be read in conjunction with Item 7, “Management’s Discussion and
Analysis of Financial Condition and Results of Operations,” and Item 8, “Financial Statements and Supplementary Data,” and other financial data included
elsewhere in this report. Our historical results of operations are not necessarily indicative of results of operations to be expected for any future period.
28
(In thousands, except per share amounts)
Total revenue
Net income (loss)
Net income (loss) per share:
Basic
Diluted
Consolidated Balance Sheet Data
Cash, cash equivalents and marketable securities
Total assets
Convertible notes
Stockholders’ equity
2020
(3)
2019
(1)
Years Ended December 31,
2018
(2) (3) (4)
2017
(2) (3)
2016
(5)
242,747 $
(43,609) $
224,027 $
(90,419) $
231,201 $
(157,957) $
393,096 $
(22,862) $
336,597
6,820
(0.39) $
(0.39) $
(0.81) $
(0.81) $
(1.46) $
(1.46) $
(0.21) $
(0.21) $
502,649 $
1,243,876 $
156,031 $
905,113 $
407,664 $
1,338,986 $
148,788 $
970,918 $
277,764 $
1,361,155 $
141,934 $
1,012,112 $
329,376 $
891,072 $
213,898 $
571,584 $
0.06
0.06
172,182
783,496
126,167
552,782
$
$
$
$
$
$
$
$
______________________________________
(1)
The net loss for the year ended December 31, 2019 included $7.4 million of impairment of assets held for sale related to the Company’s Payments and
Ticketing businesses, which was included in operating costs and expenses. Refer to Note 17, “Divestiture,” of Notes to Consolidated Financial Statements of
this Form 10-K for further discussion.
(2)
(3)
(4)
(5)
The net loss for the year ended December 31, 2018 included a $113.7 million impact of an increase in our deferred tax asset valuation allowance. The net loss
for the year ended December 31, 2017 included a $21.5 million impact due to the recording of a deferred tax asset valuation allowance and $20.7 million
related to re-measurement of deferred tax assets as a result of the tax law changes.
Stockholders’ equity includes $50.0 million paid under the accelerated share repurchase programs initiated in November 2020, March 2018 and May 2017.
Reflects the impact from the adoption of ASC 606 in 2018.
The net income for the year ended December 31, 2016 included $18.3 million of impairment of in-process research and development (“IPR&D”) intangible
asset and a reduction of operating expenses due to the change in our contingent consideration liability of $6.8 million.
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934 as described in more detail under “Note Regarding Forward-Looking Statements.” Our forward-looking statements are based on current expectations,
forecasts and assumptions and are subject to risks, uncertainties and changes in condition, significance, value and effect. As a result of the factors described
herein, and in the documents incorporated herein by reference, including, in particular, those factors described under “Risk Factors,” we undertake no obligation
to publicly disclose any revisions to these forward-looking statements to reflect events or circumstances occurring subsequent to filing this report with the
Securities and Exchange Commission.
The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes that are included elsewhere in
this report.
Executive Summary
Highlights from our annual results were as follows:
•
•
•
•
Revenue of $242.7 million;
Operating expenses of $228.8 million;
GAAP diluted net loss per share of $0.39;
Net cash provided by operating activities of $185.5 million
We had record annual product revenue of $114.0 million in 2020, which was primarily driven by our memory interface chips, and was up 56% as compared to
2019. In addition, our cash provided by operating activities for 2020 was up 44% as compared to 2019.
29
Table of Contents
Business Overview
Rambus produces products and innovations that address the fundamental challenges of accelerating data. We make industry-leading chips and IP that enable
critical performance improvements for data center and other growing markets. The ongoing shift to the cloud, along with the widespread advancement of AI across
the data center, 5G, automotive and IoT, has led to exponential growth in data usage and tremendous demands on data infrastructure. Creating fast and safe
connections, both in and across systems, remains one of the most mission-critical design challenges limiting performance in advanced hardware for these markets.
As an industry pioneer with over 30 years of advanced semiconductor design experience, Rambus is ideally positioned to address the challenges of moving and
protecting data. We are a leader in high-performance memory subsystems, providing chips, IP and innovations that maximize the performance and security in data-
intensive systems. Whether in the cloud, at the edge or in your hand, real-time and immersive applications depend on data throughput and integrity. Rambus
products and innovations deliver the increased bandwidth, capacity and security required to meet the world’s data needs and drive ever-greater end-user
experiences.
Our strategic objectives are focusing our product portfolio and research around our core strength in semiconductors, optimizing our operational efficiency, and
leveraging our strong cash generation to re-invest for growth. We continue to maximize synergies across our businesses and customer base, leveraging the
significant overlap in our ecosystem of customers, partners and influencers. The Rambus product and technology roadmap, as well as our go-to-market strategy, is
driven by the application-specific requirements of our focus markets.
Revenue Sources
Our patented inventions are offered to our customers through patent, technology, software and IP core licenses, as well as memory interface chips. Today, a
significant source of revenue is derived from our Architecture Licenses, through which we provide our customers a license to use a certain portion of our broad
worldwide portfolio of patented inventions. Our Architecture Licenses enable our customers to use the licensed portion of our portfolio of patented inventions in
the customer’s own digital electronics products, systems or services. The licenses may also define the specific field of use where our customers may use or employ
our inventions in their products. License agreements are structured with fixed or variable or a hybrid of fixed and variable royalty payments over certain defined
periods ranging for periods of up to ten years. Leading semiconductor and electronic system companies such as AMD, Broadcom, Cisco, Fujitsu, IBM, Marvell,
Mediatek, Micron, Nanya, NVIDIA, Panasonic, Phison, Qualcomm, Renesas, Samsung, SK hynix, Socionext, STMicroelectronics, Toshiba, Western Digital,
Winbond, and Xilinx have licensed our patents. The vast majority of our patents were secured through our internal research and development efforts.
We also offer our customers technology licenses to support the implementation and adoption of our technology in their products or services. Our customers
include leading companies such as IBM, Panasonic, Qualcomm, Samsung, Sony and Toshiba. Our technology license offerings include a range of technologies for
incorporation into our customers’ products and systems. We also offer a range of services as part of our technology licenses which can include know-how and
technology transfer, product design and development, system integration, and other services. These technology license agreements may have both a fixed price
(non-recurring) component and ongoing use fees and in some cases, royalties. Further, under technology licenses, our customers typically receive licenses to our
patents necessary to implement these solutions in their products with specific rights and restrictions to the applicable patents elaborated in their individual contracts
with us.
Revenues from royalties accounted for 33%, 41% and 56% of our consolidated revenue for the years ended December 31, 2020, 2019 and 2018, respectively.
The remainder of our revenue is product revenue, contract and other revenue, which includes our product sales, IP core licenses, software licenses and related
implementation, support and maintenance fees, and engineering services fees. The timing and amounts invoiced to customers can vary significantly depending on
specific contract terms and can therefore have a significant impact on deferred revenue or accounts receivable in any given period. Product revenue accounted for
47%, 33% and 17% of our consolidated revenue for the years ended December 31, 2020, 2019 and 2018, respectively. Contract and other revenue accounted for
20%, 27% and 27% of our consolidated revenue for the years ended December 31, 2020, 2019 and 2018, respectively.
Costs and Expenses
Cost of product revenue for 2020 increased approximately $10.5 million to $37.7 million from $27.2 million as compared to 2019 primarily due to increased
cost of sales associated with our memory interface chips.
30
Table of Contents
Cost of contract and other revenue for 2020 decreased approximately $4.3 million to $5.6 million from $9.9 million as compared to 2019 primarily due to
incurring lower costs as a result of the divestiture of our former Payments and Ticketing businesses in the fourth quarter of 2019.
Research and development expenses continue to play a key role in our efforts to maintain product innovations. Our research and development expenses for
2020 decreased $17.0 million as compared to 2019 primarily due to decreased headcount-related expenses of $11.8 million (which includes the reduction in
headcount due to the divestiture of the Payments and Ticketing businesses in 2019), consulting costs of $5.2 million, travel costs of $1.9 million and stock-based
compensation expense of $1.0 million, offset by increased retention bonus expense related to acquisitions of $2.0 million and prototyping costs of $0.9 million.
Sales, general and administrative expenses for 2020 decreased $15.8 million as compared to 2019 primarily due to decreased headcount-related expenses of
$5.4 million, acquisition and divestiture-related costs of $4.1 million, travel costs of $3.4 million, consulting costs of $2.7 million and depreciation expense of $1.2
million, offset by increased bonus accrual expense of $0.5 million and stock-based compensation expense of $0.3 million.
Impact of the COVID-19 Pandemic
In December 2019, the Novel Coronavirus (COVID-19) was reported in China, in January 2020 the World Health Organization (“WHO”) declared it a Public
Health Emergency of International Concern, and in March 2020 the WHO declared it a pandemic. The COVID-19 pandemic has created significant global
economic uncertainty and may adversely impact the business of our customers, partners and vendors. The extent of the impact of the Novel Coronavirus (COVID-
19) on our operational and financial performance will depend on certain developments, including the duration and spread of the outbreak, impact on our customers
and our sales cycles, and impact on our partners or employees, all of which are uncertain and cannot be predicted. At this point, the extent to which the Novel
Coronavirus (COVID-19) may impact our financial condition or results of operations remains uncertain. Actual results could differ from any estimates and any
such differences could be material to our financial statements. Furthermore, the effect of the Novel Coronavirus (COVID-19) may not be fully reflected in our
results of operations until future periods, if at all.
Trends
There are a number of trends that may have a material impact on us in the future, including but not limited to, the evolution of memory and SerDes technology,
adoption of security solutions, the use and adoption of our inventions or technologies generally, industry consolidation, and global economic conditions with the
resulting impact on sales of consumer electronic systems.
We have a high degree of revenue concentration. Our top five customers for each reporting period represented approximately 46% of our revenue for 2020 as
compared to 46% in 2019 and 49% in 2018. The particular customers which account for revenue concentration have varied from period-to-period as a result of the
addition of new contracts, expiration of existing contracts, renewals of existing contracts, industry consolidation, and the volumes and prices at which the
customers have recently sold to their customers. These variations are expected to continue in the foreseeable future.
Our revenue from companies headquartered outside of the United States accounted for approximately 43% in 2020 as compared to 40% in 2019 and 44% in
2018. We expect that revenue derived from international customers will continue to represent a significant portion of our total revenue in the future. Currently, our
revenue from international customers is denominated in U.S. dollars. For additional information concerning international revenue, refer to Note 7, “Segments and
Major Customers,” of Notes to Consolidated Financial Statements of this Form 10-K.
The royalties we receive from our semiconductor customers are partly a function of the adoption of our technologies by system companies. Many system
companies purchase semiconductors containing our technologies from our customers and do not have a direct contractual relationship with us. Our customers
generally do not provide us with details as to the identity or volume of licensed semiconductors purchased by particular system companies. As a result, we face
difficulty in analyzing the extent to which our future revenue will be dependent upon particular system companies.
As a part of our overall business strategy, from time to time, we evaluate businesses and technologies for potential acquisition that are aligned with our core
business and designed to supplement our growth, including the 2019 acquisitions of Northwest Logic and the Secure Silicon IP and Protocols business from
Verimatrix, formerly Inside Secure. Similarly, we evaluate our current businesses and technologies that are not aligned with our core business for potential
divestiture, such as the sale of our Payments and Ticketing businesses to Visa International Service Association in 2019. We expect to continue to evaluate and
potentially enter into strategic acquisitions or divestitures which may adversely impact our business and operating results.
31
Table of Contents
Results of Operations
The following table sets forth, for the periods indicated, the percentage of total revenue represented by certain items reflected in our consolidated statements of
operations:
Revenue:
Royalties
Product revenue
Contract and other revenue
Total revenue
Cost of revenue:
Cost of product revenue
Cost of contract and other revenue
Amortization of acquired intangible assets
Total cost of revenue
Gross profit
Operating expenses:
Research and development
Sales, general and administrative
Amortization of acquired intangible assets
Restructuring and other charges
Loss on divestiture
Change in fair value of earn-out liability
Total operating expenses
Operating loss
Interest income and other income (expense), net
Interest expense
Interest and other income (expense), net
Loss before income taxes
Provision for income taxes
Net loss
(Dollars in millions)
Total Revenue
Royalties
Product revenue
Contract and other revenue
Total revenue
Royalty revenue
2020
Years Ended December 31,
2019
2018
33.3 %
47.0 %
19.7 %
100.0 %
15.6 %
2.3 %
7.1 %
25.0 %
75.0 %
57.6 %
35.3 %
0.4 %
1.7 %
— %
(0.7)%
94.3 %
(19.3)%
7.2 %
(4.2)%
3.0 %
(16.3)%
1.7 %
(18.0)%
40.5 %
32.6 %
26.9 %
100.0 %
12.1 %
4.4 %
6.4 %
22.9 %
77.1 %
70.0 %
45.3 %
1.2 %
3.9 %
3.3 %
— %
123.7 %
(46.6)%
12.2 %
(4.4)%
7.8 %
(38.8)%
1.5 %
(40.3)%
56.4 %
16.7 %
26.9 %
100.0 %
7.9 %
5.1 %
10.2 %
23.2 %
76.8 %
68.5 %
42.5 %
2.4 %
1.0 %
— %
— %
114.4 %
(37.6)%
14.1 %
(7.0)%
7.1 %
(30.5)%
37.8 %
(68.3)%
Years Ended December 31,
2019
2018
2020
2019 to 2020
Change
2018 to 2019
Change
$
$
81.0 $
114.0
47.7
242.7 $
90.8 $
73.0
60.2
224.0 $
130.5
38.7
62.0
231.2
(10.8)%
56.2 %
(20.7)%
8.4 %
(30.4)%
88.6 %
(2.9)%
(3.1)%
Royalty revenue, which includes patent and technology license royalties, decreased approximately $9.8 million to $81.0 million for the year ended
December 31, 2020 from $90.8 million for 2019. The decrease was due primarily to the timing of renewals and the related structure of architecture license
agreements which include both fixed and variable components.
32
Table of Contents
Royalty revenue decreased approximately $39.7 million to $90.8 million for the year ended December 31, 2019 from $130.5 million for 2018. The decrease
was due primarily to the timing of renewals and the related structure of architecture license agreements which include both fixed and variable components.
We are continuously in negotiations for licenses with prospective customers. We expect patent royalties will continue to vary from period to period based on
our success in adding new customers, renewing or extending existing agreements, as well as the level of variation in our customers’ reported shipment volumes,
sales price and mix, offset in part by the proportion of customer payments that are fixed or hybrid in nature. We also expect that our technology royalties will
continue to vary from period to period based on our customers’ shipment volumes, sales prices, and product mix.
Product revenue
Product revenue consists of revenue from the sale of memory and security products.
Product revenue increased approximately $41.0 million to $114.0 million for the year ended December 31, 2020 from $73.0 million for 2019. The increase was
due to market share gains of our memory interface chips.
Product revenue increased approximately $34.3 million to $73.0 million for the year ended December 31, 2019 from $38.7 million for 2018. The increase was
primarily due to greater market share gains of our memory interface chips.
We believe that product revenue will continue to increase in 2021 as compared to 2020, mainly from the sale of our memory interface chips. Our ability to
continue to grow product revenue is dependent on, among other things, our ability to continue to obtain orders from customers and our ability to meet our
customers’ demands.
Contract and other revenue
Contract and other revenue consists of revenue from technology development projects.
Contract and other revenue decreased approximately $12.5 million to $47.7 million for the year ended December 31, 2020 from $60.2 million for 2019. The
decrease was primarily due to the divestiture of our former Payments and Ticketing businesses resulting in no corresponding revenue in 2020, offset by growth
experienced in our Silicon IP offerings.
Contract and other revenue decreased approximately $1.8 million to $60.2 million for the year ended December 31, 2019 from $62.0 million for 2018. The
decrease was primarily due to lower revenue associated with our Payments and Ticketing businesses, which were divested in the fourth quarter of 2019, offset by
growth experienced in our Silicon IP offerings.
We believe that contract and other revenue will fluctuate over time based on our ongoing technology development contractual requirements, the amount of
work performed, the timing of completing engineering deliverables, and the changes to work required, as well as new technology development contracts booked in
the future.
Cost of product revenue
(Dollars in millions)
Cost of product revenue
Years Ended December 31,
2019
2018
2020
2019 to 2020
Change
2018 to 2019
Change
$
37.7 $
27.2 $
18.3
39.0 %
48.4 %
Cost of product revenue are costs attributable to the sale of memory and security products. Cost of product revenue also included costs attributable to the sale of
lighting products in 2018.
For the year ended December 31, 2020 as compared to 2019, cost of product revenue increased 39.0% primarily due to increased cost of sales associated with
higher sales of memory interface chips.
For the year ended December 31, 2019 as compared to 2018, cost of product revenue increased 48.4% primarily due to increased cost of sales associated with
higher sales of memory products.
In the near term, we expect costs of product revenue to be higher as we expect higher sales of our various products in 2021 as compared to 2020.
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Table of Contents
Cost of contract and other revenue
(Dollars in millions)
Cost of contract and other revenue
Years Ended December 31,
2019
2018
2020
2019 to 2020
Change
2018 to 2019
Change
$
5.6 $
9.9 $
11.7
(43.0)%
(15.4)%
Cost of contract and other revenue reflects the portion of the total engineering costs which are specifically devoted to individual customer development and
support services.
For the year ended December 31, 2020 as compared to 2019, cost of contract and other revenue decreased 43.0% primarily due to the divestiture of our
Payments and Ticketing businesses in the fourth quarter of 2019.
For the year ended December 31, 2019 as compared to 2018, cost of contract and other revenue decreased 15.4% primarily due to lower revenue associated
with our former Payments and Ticketing businesses, which were divested in the fourth quarter of 2019.
In the near term, we expect cost of contract and other revenue to vary from period to period based on varying revenue recognized from contract and other
revenue.
Research and development expenses
(Dollars in millions)
Research and development expenses
Research and development expenses
Stock-based compensation
Total research and development expenses
Years Ended December 31,
2019
2018
2020
2019 to 2020
Change
2018 to 2019
Change
$
$
129.8 $
10.0
139.8 $
145.8 $
11.0
156.8 $
145.7
12.6
158.3
(11.0)%
(9.1)%
(10.8)%
0.0 %
(12.3)%
(1.0)%
Research and development expenses are those expenses incurred for the development of applicable technologies.
For the year ended December 31, 2020 as compared to 2019, total research and development expenses decreased 10.8% primarily due to decreased headcount-
related expenses of $11.8 million (which includes the reduction in headcount due to the divestiture of the Payments and Ticketing businesses in 2019), consulting
costs of $5.2 million, travel costs of $1.9 million and stock-based compensation expense of $1.0 million, offset by increased retention bonus expense related to
acquisitions of $2.0 million and prototyping costs of $0.9 million.
For the year ended December 31, 2019 as compared to 2018, total research and development expenses decreased 1.0% primarily due to decreased headcount-
related expenses of $3.9 million, allocated information technology costs of $1.6 million and stock-based compensation expense of $1.5 million, offset by increased
facilities costs of $2.1 million as discussed below, retention bonus accrual related to acquisitions of $2.0 million and engineering development tool costs of
$1.2 million.
On January 1, 2019, we adopted the New Leasing Standard using the alternative transition method. In accordance with the New Leasing Standard, we were
required to derecognize our previous Sunnyvale and Ohio facilities as imputed facility obligations (as accounted for under the previous leasing guidance) and
recognize these facilities as operating leases. This change resulted in no longer recognizing interest expense associated with these imputed facility lease
obligations, but instead, recognizing lease expense that was included in operating costs and expenses.
In the near term, we expect research and development expenses to be higher as we continue to make investments in the infrastructure and technologies required
to maintain our product innovation in semiconductor, security and other technologies.
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Table of Contents
Sales, general and administrative costs
(Dollars in millions)
Sales, general and administrative costs
Sales, general and administrative costs
Stock-based compensation
Total sales, general and administrative costs
Years Ended December 31,
2019
2018
2020
2019 to 2020
Change
2018 to 2019
Change
$
$
69.9 $
15.7
85.6 $
86.0 $
15.4
101.4 $
89.1
9.1
98.2
(18.7)%
2.0 %
(15.5)%
(3.6)%
68.8 %
3.2 %
Sales, general and administrative expenses include expenses and costs associated with trade shows, public relations, advertising, litigation, general legal,
insurance and other sales, marketing and administrative efforts. Consistent with our business model, our licensing, sales and marketing activities aim to develop or
strengthen relationships with potential new and current customers. In addition, we work with current customers through marketing, sales and technical efforts to
drive adoption of their products that use our innovations and solutions, by system companies. Due to the long business development cycles we face and the semi-
fixed nature of sales, general and administrative expenses in a given period, these expenses generally do not correlate to the level of revenue in that period or in
recent or future periods.
For the year ended December 31, 2020 as compared to 2019, total sales, general and administrative costs decreased 15.5% primarily due to decreased
headcount-related expenses of $5.4 million, acquisition and divestiture-related costs of $4.1 million, travel costs of $3.4 million, consulting costs of $2.7 million
and depreciation expense of $1.2 million, offset by increased bonus accrual expense of $0.5 million and stock-based compensation expense of $0.3 million.
For the year ended December 31, 2019 as compared to 2018, total sales, general and administrative costs increased 3.2% primarily due to increased stock-based
compensation expense of $6.3 million primarily due to the termination of the former chief executive officer at the end of June 2018, acquisition and divestiture
related costs of $5.2 million and facilities costs of $2.6 million (primarily due to the adoption of the New Leasing Standard beginning in 2019 as discussed above),
offset by decreased headcount related expenses of $3.8 million, depreciation expense of $1.8 million, sales and marketing costs of $1.2 million, travel expenses of
$1.2 million, consulting costs of $1.0 million, bonus accrual expense of $1.0 million and recruiting costs of $0.6 million.
In the future, sales, general and administrative expenses will vary from period to period based on the trade shows, advertising, legal, acquisition and other sales,
marketing and administrative activities undertaken, and the change in sales, marketing and administrative headcount in any given period. In the near term, we
expect our sales, general and administrative expenses to remain relatively flat.
Amortization of acquired intangible assets
(Dollars in millions)
Amortization of acquired intangible assets
Amortization of acquired intangible assets included in total cost of
revenue
Amortization of acquired intangible assets included in total operating
expenses
Total amortization of acquired intangible assets
Amortization expense is related to various acquired IP.
Years Ended December 31,
2019
2018
2020
2019 to 2020
Change
2018 to 2019
Change
$
$
17.4 $
14.3 $
1.0
18.4 $
2.7
17.0 $
23.7
5.7
29.4
21.2 %
(61.3)%
7.9 %
(39.6)%
(51.5)%
(41.9)%
For the year ended December 31, 2020 as compared to 2019, total amortization of acquired intangible assets increased 7.9% primarily due to additional
amortization from intangible assets acquired as part of the acquisitions from the second half of 2019, partially offset by certain other intangible assets being fully
amortized.
For the year ended December 31, 2019 as compared to 2018, total amortization of acquired intangible assets decreased 41.9% primarily due to certain
intangible assets being fully amortized.
35
Table of Contents
Restructuring and other charges
(Dollars in millions)
Restructuring and other charges
_____________________________________
* NM — percentage is not meaningful
Years Ended December 31,
2019
2018
2020
2019 to 2020
Change
2018 to 2019
Change
$
4.1 $
8.8 $
2.2
(53.6)%
NM*
In November 2020, we initiated a restructuring program to reduce overall expenses which is expected to improve future profitability by reducing spending on
research and development efforts and sales, general and administrative programs. As a result, we recorded a charge of $3.3 million primarily related to headcount
costs.
During 2019, we initiated a restructuring program to reduce overall expenses. Additionally, we recorded other severance-related charges of $1.4 million.
During 2018, we closed our lighting division and manufacturing operations in Brecksville, Ohio. As a result, we recorded a charge of $2.2 million related to
employee terminations and severance costs, and facility-related costs.
Refer to Note 18, “Restructuring and Other Charges,” of Notes to Consolidated Financial Statements of this Form 10-K for further discussion.
Loss on divestiture
(Dollars in millions)
Loss on divestiture
Years Ended December 31,
2019
2018
2020
2019 to 2020
Change
2018 to 2019
Change
$
— $
7.4 $
—
— %
100.0 %
During 2020 and 2018, we did not record a charge for loss on divestiture.
During 2019, we entered into a share purchase agreement with Visa International Service Association (the “Purchaser”), pursuant to which the Purchaser had
agreed to acquire all of the outstanding shares of our subsidiary, Smart Card Software Limited, which was comprised of our Payments and Ticketing businesses.
The decision to sell these businesses reflected our review of our business to focus on products and offerings that are core to our semiconductor business.
Consequently, we measured these businesses at the lower of their carrying value or fair value less any costs to sell, and subsequently recognized a loss of
approximately $7.4 million during the year ended December 31, 2019.
Refer to Note 17, “Divestiture,” of Notes to Consolidated Financial Statements of this Form 10-K for further discussion.
Change in fair value of earn-out liability
(Dollars in millions)
Change in fair value of earn-out liability
Years Ended December 31,
2019
2020
2018
2019 to 2020
Change
2018 to 2019
Change
$
(1.8) $
— $
—
100.0 %
— %
During 2020, we recorded a full reduction in the fair value of the earn-out liability related to the 2019 asset purchase agreement to acquire the Secure Silicon IP
and Protocols business from Verimatrix, formerly Inside Secure, since the specified performance milestones were not met for calendar year 2020, which resulted in
a gain in our consolidated statements of operations.
Interest and other income (expense), net
(Dollars in millions)
Interest income and other income (expense), net
Interest expense
Interest and other income (expense), net
Years Ended December 31,
2019
2018
2020
2019 to 2020
Change
2018 to 2019
Change
$
$
17.5 $
(10.3)
7.2 $
27.4 $
(9.9)
17.5 $
32.6
(16.3)
16.3
(36.0)%
5.0 %
(59.0)%
(16.1)%
(39.5)%
7.2 %
Interest income and other income (expense), net, primarily consists of interest income of $14.2 million, $20.4 million and $27.2 million for the years ended
December 31, 2020, 2019 and 2018, respectively, due to the significant financing component
36
of licensing agreements. Interest income and other income (expense), net, also includes interest income generated from investments in high quality fixed income
securities and any gains or losses from the re-measurement of our monetary assets or liabilities denominated in foreign currencies.
Interest expense for all periods disclosed primarily consists of interest expense associated with the non-cash interest expense related to the amortization of the
debt discount and issuance costs on the 1.375% convertible senior notes due 2023 (the “2023 Notes”) and the 1.125% convertible senior notes due 2018 (the “2018
Notes”), as well as the coupon interest related to these notes. Interest expense decreased in 2019 as compared to the same period in 2018 primarily due to the 2018
Notes maturing in the third quarter of 2018. We expect our non-cash interest expense to increase steadily as the notes reach maturity. Refer to Note 12,
“Convertible Notes,” of Notes to Consolidated Financial Statements of this Form 10-K for additional details.
Prior to 2019, interest expense also included the interest expense associated with our previous imputed facility lease obligations on the Sunnyvale and Ohio
facilities. For the year ended December 31, 2018, we recognized $4.3 million of interest expense in connection with the imputed financing obligations in our
statements of operations. In accordance with the adoption of ASC 842, the New Leasing Standard, we were required to derecognize our previous Sunnyvale and
Ohio facilities as imputed facility obligations (as accounted for under the previous leasing standard) and recognize these facilities as operating leases. This change
resulted in no longer recognizing interest expense associated with these imputed facility lease obligations, but instead, recognizing lease expense which would be
included in operating costs and expenses.
Provision for income taxes
(Dollars in millions)
Provision for income taxes
Effective tax rate
Years Ended December 31,
2019
2018
2020
2019 to 2020
Change
2018 to 2019
Change
$
4.0
$
3.4
$
87.3
16.9 %
(96.1)%
(10.0)%
(3.9)%
(123.6)%
Our effective tax rate for the year ended December 31, 2020 differed from the U.S. statutory rate primarily due to the expiration of foreign tax credits, partially
offset by the change in the valuation allowance against U.S. deferred tax assets. Our effective tax rate for the year ended December 31, 2019 was different from the
U.S. statutory rate primarily due to the full valuation allowance on the current year tax loss. Our effective tax rate for the year ended December 31, 2018 was
different from the U.S. statutory rate primarily due to the establishment of a full valuation allowance on U.S. federal deferred tax assets.
We recorded a provision for incomes taxes of $4.0 million for the year ended December 31, 2020, which was primarily comprised of taxes on foreign earnings,
the full valuation allowance on U.S. federal deferred tax assets, withholding tax expense, tax expense from the amortization of indefinite-lived intangibles, partially
offset by a partial California deferred tax asset valuation allowance release. For the year ended December 31, 2020, we paid withholding taxes of $19.7 million.
We recorded a provision for incomes taxes of $3.4 million for the year ended December 31, 2019, which was primarily comprised of taxes on foreign earnings, the
full valuation allowance on U.S. federal deferred tax assets, withholding tax expense, and acquisition-related impacts. For the year ended December 31, 2019, we
paid withholding taxes of $17.1 million. We recorded a provision for incomes taxes of $87.3 million for the year ended December 31, 2018, which was primarily
comprised of the full valuation allowance on U.S. federal deferred tax assets. For the year ended December 31, 2018, we paid withholding taxes of $20.4 million.
We periodically evaluate the realizability of our net deferred tax assets based on all available evidence, both positive and negative. During the third quarter of
2018, we assessed the changes in our underlying facts and circumstances and evaluated the realizability of our existing deferred tax assets based on all available
evidence, both positive and negative, and the weight accorded to each, and concluded a full valuation allowance associated with U.S. federal and California
deferred tax assets was appropriate. During 2020, as a result of the enactment of California A.B. 85 and the temporary suspension of California net operating loss
utilization for tax years 2020 through 2022, we released $0.6 million of the valuation allowance on our deferred tax asset for California research and development
tax credits. We continue to maintain a full valuation allowance on the remainder of our California and U.S. federal deferred tax assets as we do not expect to be
able to fully utilize them.
37
Liquidity and Capital Resources
(In millions)
Cash and cash equivalents
Marketable securities
Total cash, cash equivalents, and marketable securities
(In millions)
Net cash provided by operating activities
Net cash used in investing activities
Net cash used in financing activities
Liquidity
December 31,
2020
December 31,
2019
$
$
136.1 $
366.5
502.6 $
102.2
305.5
407.7
2020
Years Ended December 31,
2019
2018
$
$
$
185.5 $
(90.4) $
(61.2) $
128.5 $
(141.5) $
(0.3) $
87.1
(68.0)
(127.7)
We currently anticipate that existing cash, cash equivalents and marketable securities balances and cash flows from operations will be adequate to meet our
cash needs for at least the next 12 months. Additionally, the majority of our cash and cash equivalents is in the United States. Our cash needs for the year ended
December 31, 2020 were funded primarily from cash collected from our customers.
We do not anticipate any liquidity constraints as a result of either the current credit environment or investment fair value fluctuations. Additionally, we have the
intent and ability to hold our debt investments that have unrealized losses in accumulated other comprehensive gain (loss) for a sufficient period of time to allow
for recovery of the principal amounts invested. Further, we have no significant exposure to European sovereign debt. We continually monitor the credit risk in our
portfolio and mitigate our credit risk exposures in accordance with our policies.
As a part of our overall business strategy, from time to time, we evaluate businesses and technologies for potential acquisitions that are aligned with our core
business and designed to supplement our growth.
To provide us with more flexibility in returning capital to our stockholders, on October 29, 2020, our Board approved the 2020 Repurchase Program
authorizing the repurchase of up to an aggregate of 20.0 million shares. Share repurchases under the 2020 Repurchase Program may be made through the open
market, established plans or privately negotiated transactions in accordance with all applicable securities laws, rules, and regulations. There is no expiration date
applicable to the 2020 Repurchase Program. The 2020 Repurchase Program replaced the previous 2015 Repurchase Program approved by our Board in January
2015 and canceled the remaining shares outstanding as part of the previous authorization.
On November 11, 2020, we entered into the 2020 ASR Program with Deutsche Bank. The 2020 ASR Program was part of the broader share repurchase
program previously authorized by our Board on October 29, 2020. Under the 2020 ASR Program, we pre-paid to Deutsche Bank the $50.0 million purchase price
for our common stock and, in turn, we received an initial delivery of approximately 2.6 million shares of our common stock from Deutsche Bank in the fourth
quarter of 2020, which were retired and recorded as a $40.0 million reduction to stockholders’ equity. The remaining $10.0 million of the initial payment was
recorded as a reduction to stockholders’ equity as an unsettled forward contract indexed to our stock.
As of December 31, 2020, there remained an outstanding authorization to repurchase approximately 17.4 million shares of our outstanding common stock under
the 2020 Repurchase Plan. Refer to “Share Repurchase Program” below.
Operating Activities
Cash provided by operating activities of $185.5 million for the year ended December 31, 2020 was primarily attributable to the cash generated from customer
licensing, product sales and engineering services fees. Changes in operating assets and liabilities for the year ended December 31, 2020 primarily included
decreases in unbilled receivables, accounts receivable, prepaids and other current assets, and an increase in accrued salaries and benefits, offset by a decrease in
income taxes payable and an increase in inventories.
Cash provided by operating activities of $128.5 million for the year ended December 31, 2019 was primarily attributable to the cash generated from customer
licensing, technology and software licenses and related implementation, support and maintenance fees, product sales, and engineering services fees. Changes in
operating assets and liabilities for the year ended December 31, 2019 primarily included decreases in accounts receivable, unbilled receivables and deferred
revenue, offset by increases in prepaids and other current assets, inventories and accrued salaries and benefits.
38
Cash provided by operating activities of $87.1 million for the year ended December 31, 2018 was primarily attributable to the cash generated from customer
licensing, technology and software licenses and related implementation, support and maintenance fees, product sales and engineering services fees. Changes in
operating assets and liabilities for the year ended December 31, 2018 primarily included increases in unbilled receivables, accounts receivable and prepaids and
other current assets, offset by decreases in accounts payable and accrued salaries and benefits and other liabilities.
Investing Activities
Cash used in investing activities of $90.4 million for the year ended December 31, 2020 consisted of purchases of available-for-sale marketable securities of
$899.0 million, $29.7 million paid to acquire property, plant and equipment, and $1.1 million paid to settle a net working capital adjustment related to the
divestiture of our Payments and Ticketing businesses, offset by proceeds from the maturities and sale of available-for-sale marketable securities of $817.8 million
and $21.6 million, respectively.
Cash used in investing activities of $141.5 million for the year ended December 31, 2019 primarily consisted of purchases of available-for-sale marketable
securities of $657.4 million, $21.9 million paid for the acquisition of Northwest Logic, net of cash acquired of $0.1 million, $45.0 million paid for the acquisition
of the Secure Silicon IP and Protocols business from Verimatrix, formerly Inside Secure, and $6.5 million paid to acquire property, plant and equipment, offset by
proceeds from the maturities and sale of available-for-sale marketable securities of $507.4 million and $6.8 million, respectively, and net proceeds of $76.0 million
from the divestiture of our Payments and Ticketing businesses.
Cash used in investing activities of $68.0 million for the year ended December 31, 2018 primarily consisted of purchases of available-for-sale marketable
securities of $282.1 million, $10.8 million paid to acquire property, plant and equipment and $3.0 million paid for investment in a privately held company, offset
by proceeds from the maturities of available-for-sale marketable securities of $223.1 million, proceeds from the sale of assets held for sale of $3.8 million and
proceeds from the sale of an equity security of $1.3 million.
Financing Activities
Cash used in financing activities of $61.2 million for the year ended December 31, 2020 was primarily due to an aggregate payment of $50.0 million to
Deutsche Bank as part of the 2020 ASR Program. We also paid $13.2 million under installment payment arrangements to acquire fixed assets, $9.4 million in
payments of taxes on restricted stock units and $0.1 million in fees related to the 2020 ASR Program, offset by $11.5 million in proceeds from the issuance of
common stock under equity incentive plans.
Cash used in financing activities was $0.3 million for the year ended December 31, 2019 and was primarily due to $8.4 million in payments under installment
payment arrangements to acquire fixed assets and $7.0 million in payments of taxes on restricted stock units, offset by $15.1 million proceeds from the issuance of
common stock under equity incentive plans.
Cash used in financing activities was $127.7 million for the year ended December 31, 2018 and was primarily due to the repayment of the remaining aggregate
principal of the 2018 Notes amounting to $81.2 million, which became due in August 2018, an aggregate payment of $50.0 million to Citibank N.A., as part of our
accelerated share repurchase program, and $6.8 million in payments of taxes on restricted stock units, offset by $11.4 million proceeds from the issuance of
common stock under equity incentive plans.
Contractual Obligations
On December 15, 2009, we entered into a lease agreement for approximately 125,000 square feet of office space located at 1050 Enterprise Way in Sunnyvale,
California, which commenced on July 1, 2010 and expired on June 30, 2020. The office space was used for our corporate headquarters, as well as engineering,
sales, marketing and administrative operations and activities.
On July 8, 2019, we entered into a definitive triple net space lease agreement with 237 North First Street Holdings, LLC (the “Landlord”), whereby we leased
office space located at 4453 North First Street in San Jose, California, (the “Lease”). In April 2020, the lease was amended for certain terms (the “Amended
Lease”). The Amended Lease includes approximately 90,000 square feet of office space, which serves as our corporate headquarters and includes engineering,
sales, marketing and administrative functions. The Amended Lease has a term of 128 months from the amended commencement date in April 2020. The starting
rent of the Amended Lease is approximately $3.26 per square foot on a triple net basis. The annual base rent increases each year to certain fixed amounts over the
course of the term as set forth in the Amended Lease and will be $4.38 per square foot in the final year of the Amended Lease term. In addition to the base rent, we
will also pay operating expenses, insurance expenses, real estate taxes, and a management fee under the Amended Lease. The Amended Lease also allows for an
option to expand, wherein we have the right of first refusal to rent additional space in the building. We have a one-time option
39
Table of Contents
to extend the Amended Lease for a period of 60 months and may elect to terminate the Amended Lease, via written notice to the Landlord, in the event the office
space is damaged or destroyed. Total required payments under the Amended Lease are approximately $41 million. Pursuant to the terms of the Amended Lease,
the landlord agreed to reimburse us up to $9.0 million, related to a tenant improvement allowance.
On November 17, 2017, we entered into an Indenture with U.S. Bank, National Association, as trustee, relating to the issuance by us of $172.5 million
aggregate principal amount of the 2023 Notes. Refer to Note 12, “Convertible Notes,” of Notes to Consolidated Financial Statements of this Form 10-K for
additional details.
As of December 31, 2020, our material contractual obligations were as follows:
(In thousands)
Contractual obligations
(1) (2) (3)
(4)
Software licenses
Acquisition retention bonuses
Convertible notes
Interest payments related to convertible notes
(5)
Total
Total
2021
2022
2023
2024
2025
$
$
18,970 $
6,370
172,500
5,936
203,776 $
12,541 $
3,370
—
2,372
18,283 $
6,429 $
3,000
—
2,372
11,801 $
— $
—
172,500
1,192
173,692 $
— $
—
—
—
— $
—
—
—
—
—
______________________________________
(1)
The above table does not reflect possible payments in connection with unrecognized tax benefits of approximately $25.5 million including $23.6 million
recorded as a reduction of long-term deferred tax assets and $1.9 million in long-term income taxes payable, as of December 31, 2020. As noted in Note 19,
“Income Taxes,” of Notes to Consolidated Financial Statements of this Form 10-K, although it is possible that some of the unrecognized tax benefits could be
settled within the next 12 months, we cannot reasonably estimate the outcome at this time.
(2)
(3)
(4)
(5)
For our lease commitments as of December 31, 2020, refer to Note 10, “Leases,” of Notes to Consolidated Financial Statements of this Form 10-K.
Our other contractual obligations as of December 31, 2020 were not material.
We have commitments with various software vendors for agreements generally having terms longer than one year.
In connection with the acquisitions of Northwest Logic in August 2019 and the Secure Silicon IP and Protocols business in December 2019, we are obligated
to pay retention bonuses to certain employees subject to certain eligibility and acceleration provisions including the condition of employment.
Share Repurchase Program
On January 21, 2015, our Board approved a share repurchase program authorizing the repurchase of up to an aggregate of 20.0 million shares (the “2015
Repurchase Program”). Share repurchases under the 2015 Repurchase Program were made through the open market, established plans or privately negotiated
transactions in accordance with all applicable securities laws, rules, and regulations. During the years ended December 31, 2020 and 2019, we did not repurchase
any shares of our common stock under the 2015 Repurchase Program.
On October 29, 2020, our Board approved the 2020 Repurchase Program authorizing the repurchase of up to an aggregate of 20.0 million shares. Share
repurchases under the 2020 Repurchase Program may be made through the open market, established plans or privately negotiated transactions in accordance with
all applicable securities laws, rules, and regulations. There is no expiration date applicable to the 2020 Repurchase Program. The 2020 Repurchase Program
replaced the previous program approved by the Board in January 2015 and canceled the remaining shares outstanding as part of the previous authorization.
On November 11, 2020, we entered into the 2020 ASR Program with Deutsche Bank. The 2020 ASR Program was part of the broader 2020 Repurchase
Program. Under the 2020 ASR Program, we pre-paid to Deutsche Bank the $50.0 million purchase price for our common stock and, in turn, we received an initial
delivery of approximately 2.6 million shares of our common stock from Deutsche Bank in the fourth quarter of 2020, which were retired and recorded as a
$40.0 million reduction to stockholders’ equity. The remaining $10.0 million of the initial payment was recorded as a reduction to stockholders’ equity as an
unsettled forward contract indexed to our stock.
The number of shares to be ultimately purchased by us will be determined based on the volume-weighted-average price of the common stock during the terms
of the transaction, minus an agreed upon discount between the parties. The 2020 ASR
40
Program is expected to be completed within six months from the beginning of the program. There were no other repurchases of our common stock during 2020.
As of December 31, 2020, there remained an outstanding authorization to repurchase approximately 17.4 million shares of our outstanding common stock under
the current share repurchase program.
We record share repurchases as a reduction to stockholders’ equity. We record a portion of the purchase price of the repurchased shares as an increase to
accumulated deficit when the price of the shares repurchased exceeds the average original proceeds per share received from the issuance of common stock. During
the year ended December 31, 2020, the cumulative price of $31.5 million was recorded as an increase to accumulated deficit.
Warrants
In connection with the 2023 Notes, we separately entered into privately negotiated warrant transactions, whereby we sold to the Counterparties warrants (the
“Warrants”) to acquire, collectively, subject to anti-dilution adjustments, approximately 9.1 million shares of our common stock at an initial strike price of
approximately $23.30 per share, which represents a premium of 60% over the last reported sale price of our common stock of $14.56 on November 14, 2017. We
received aggregate proceeds of approximately $23.2 million from the sale of the Warrants to the Counterparties. The Warrants are separate transactions and are not
part of the 2023 Notes or Convertible Note Hedge Transactions. Holders of the 2023 Notes and Convertible Note Hedge Transactions will not have any rights with
respect to the Warrants. Refer to Note 12, “Convertible Notes,” of Notes to Consolidated Financial Statements of this Form 10-K for additional details.
Critical Accounting Policies and Estimates
The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared
in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. On an ongoing
basis, we evaluate our estimates, including those related to revenue recognition, investments, income taxes, litigation and other contingencies. We base our
estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis
for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.
We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial
statements.
Revenue Recognition
Overview
We recognize revenue upon transfer of control of promised goods and services in an amount that reflects the consideration we expect to receive in exchange for
those goods and services. Substantially all of the goods and services are distinct and are accounted for as separate performance obligations.
Where an arrangement includes multiple performance obligations, the transaction price is allocated to these on a relative standalone selling price basis. We have
established standalone selling prices for all of our offerings - specifically, the same pricing methodology is consistently applied to all licensing arrangements; all
services offerings are priced within tightly controlled bands and all contracts that include support and maintenance state a renewal rate or price that is
systematically enforced.
Our revenue consists of royalty, product and contract and other revenue. Royalty revenue consists of patent and technology license royalties. Products primarily
consist of memory interface chips sold directly and indirectly to module manufacturers and OEMs worldwide through multiple channels, including our direct sales
force and distributors. Contract and other revenue consists of software license fees, engineering fees associated with integration of our technology solutions into
our customers’ products and support and maintenance fees.
Royalty Revenue
Our patent and technology licensing arrangements generally range between one year and ten years in duration and generally grant the licensee the right to use
our entire IP portfolio as it evolves over time. These arrangements do not typically grant the licensee the right to terminate for convenience and where such rights
exist, termination is prospective, with no refund of fees already paid by the licensee. There is no interdependency or interrelation between the IP included in the
portfolio licensed upon
41
contract inception and any IP subsequently made available to the licensee, and we would be able to fulfill our promises by transferring the portfolio and the
additional IP use rights independently. However, the numbers of additions to, and removals from the portfolio (for example when a patent expires and renewal is
not granted to us) in any given period have historically been relatively consistent; as such, we do not allocate the transaction price between the rights granted at
contract inception and those subsequently granted over time as a function of these additions.
Patent and technology licensing arrangements result in fixed payments received over time, with guaranteed minimum payments on occasion, variable payments
calculated based on the licensee’s sale or use of the IP, or a mix of fixed and variable payments.
•
•
For fixed-fee arrangements (including arrangements that include minimum guaranteed amounts), we recognize revenue upon control over the underlying
IP use right transferring to the licensee, net of the effect of significant financing components calculated using customer-specific, risk-adjusted lending
rates ranging between 3% and 5%, with the related interest income being recognized over time on an effective rate basis. Where a licensee has the
contractual right to terminate a fixed-fee arrangement for convenience without any substantive penalty payable upon such termination, we only recognize
revenue on contracts in which the parties have present enforceable rights and obligations and that are due and payable.
For variable arrangements, we recognize revenue based on an estimate of the licensee’s sale or usage of the IP during the period of reference, typically
quarterly, with a true-up recorded when we receive the actual royalty report from the licensee.
Product Revenue
Product revenue is recognized upon shipment of product to customers, net of accruals for estimated sales returns and allowances, and to distributors, net of
accruals for price protection and rights of return on products unsold by the distributors. To date, none of these accruals have been significant. We transact with
direct customers primarily pursuant to standard purchase orders for delivery of products and generally allow customers to cancel or change purchase orders within
limited notice periods prior to the scheduled shipment date.
Contract and Other Revenue
Contract and other revenue consists of software license fees and engineering fees associated with integration of our technology solutions into our customers’
related support and maintenance.
An initial software arrangement generally consists of a term-based or perpetual license, significant software customization services and support and
maintenance services that include post-implementation customer support and the right to unspecified software updates and enhancements on a when and if
available basis. We recognize license and customization services revenue based on an over time model, measured using the input method. License and
customization services revenue is reported as part of contract and other revenue. Due to the nature of the work performed in these arrangements, the estimation of
the over time model is complex and involves significant judgment. The key factor reviewed by us to estimate costs to complete each contract is the estimated man-
months necessary to complete the project. We recognize license renewal revenue at the beginning of the renewal period.
Significant Judgments
Historically and with the exception noted below, no significant judgment has generally been required in determining the amount and timing of revenue from our
contracts with customers.
• We have adequate tools and controls in place, and substantial experience and expertise in timely and accurately tracking man-months incurred in
completing customization and other professional services, and quantifying changes in estimates.
Key estimates used in recognizing revenue predominantly consist of the following:
•
For fixed-fee arrangements in which cash is being received over a period exceeding a year, we calculate a customer-specific lending rate using a Daily
Treasury Yield Curve Rate that changes depending on the date on which the licensing arrangement was entered into and the term (in years) of the
arrangement, and take into consideration a licensee-specific risk profile determined based on a review of the licensee’s “Full Company View” Dun &
Bradstreet report obtained on the date the licensing arrangement was signed by the parties, with a risk premium being added to the Daily Treasury Yield
Curve Rate considering the overall business risk, financing strength and risk indicators, as listed.
• We recognize revenue on variable fee licensing arrangements on the basis of estimates.
42
Goodwill
Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in each business
combination. Goodwill is not subject to amortization, but is subject to at least an annual assessment for impairment. We perform our impairment analysis of
goodwill on an annual basis during the fourth quarter of the year unless conditions arise that warrant a more frequent evaluation.
When goodwill is assessed for impairment, we have the option to perform an assessment of qualitative factors of impairment (optional assessment) prior to
necessitating a quantitative impairment test. Should the optional assessment be used for any given year, qualitative factors to consider for a reporting unit include:
cost factors; financial performance; legal, regulatory, contractual, political, business, or other factors; entity specific factors; industry and market considerations;
macroeconomic conditions; and other relevant events and factors affecting the reporting unit. If we determine in the qualitative assessment that it is more likely
than not that the fair value of the reporting unit is less than its carrying value, a quantitative test is then performed. Otherwise, no further testing is required. For a
reporting unit tested using a quantitative approach, we compare the fair value of the reporting unit with the carrying amount of the reporting unit, including
goodwill. The fair value of the reporting unit is estimated using an income approach.
Under the income approach, we measure fair value of the reporting unit based on a projected cash flow method using a discount rate determined by our
management which is commensurate with the risk inherent in its current business model. Our discounted cash flow projections are based on its annual financial
forecasts developed internally by management for use in managing our business. If the fair value of the reporting unit exceeds its carrying value, goodwill is not
impaired and no further testing is required. If the fair value of the reporting unit is less than the carrying value, then the amount of goodwill impairment will be the
amount by which the reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill.
Intangible Assets
Intangible assets are comprised of existing technology, customer contracts and contractual relationships, and other definite-lived and indefinite-lived intangible
assets. Identifiable intangible assets resulting from the acquisitions of entities accounted for using the purchase method of accounting are estimated by management
based on the fair value of assets received. Identifiable definite-lived intangible assets are being amortized over the period of estimated benefit using the straight-
line method and estimated useful lives ranging from six months to ten years.
We amortize definite-lived assets over their estimated useful lives. We evaluate definite-lived and indefinite-lived assets for impairment whenever events or
changes in circumstances indicate the carrying value of an asset may not be recoverable. The carrying value is not recoverable if it exceeds the undiscounted cash
flows resulting from the use of the asset and its eventual disposition. Our estimates of future cash flows attributable to our assets require significant judgment based
on our historical and anticipated results and are subject to many factors. Factors we consider important which could trigger an impairment review include
significant negative industry or economic trends, significant loss of clients, and significant changes in the manner of our use of the acquired assets or the strategy
for our overall business.
When we determine that the carrying value of the assets may not be recoverable based upon the existence of one or more of the above indicators of impairment,
we measure the potential impairment based on a projected discounted cash flow method using a discount rate determined by our management to be commensurate
with the risk inherent in our current business model. An impairment loss is recognized only if the carrying amount of the asset is not recoverable and exceeds its
fair value. Different assumptions and judgments could materially affect the calculation of the fair value of our assets.
Acquired indefinite-lived intangible assets related to our IPR&D are capitalized and subject to impairment testing until completion or abandonment of the
projects. Upon successful completion of each project, we make a separate determination of the useful life of the acquired indefinite-lived intangible assets and the
related amortization is recorded as an expense over the estimated useful life of the specific projects. Indefinite-lived intangible assets are subject to at least an
annual assessment for impairment, applying a fair-value based test. Under the income approach, we measure fair value of the indefinite-lived intangible assets
based on a projected cash flow method using a discount rate determined by our management which is commensurate with the risk inherent in our current business
model. Our discounted cash flow projections are based on our annual financial forecasts developed internally by our management for use in managing our
business. If the fair value of the indefinite-lived intangible assets exceeds its carrying value, the indefinite-lived intangible assets are not impaired and no further
testing is required. If the implied fair value of the indefinite-lived intangible assets is less than the carrying value, the difference is recorded as an impairment loss.
43
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Income Taxes
As part of preparing our consolidated financial statements, we are required to calculate the income tax expense (benefit) which relates to the pretax income or
loss for the period. In addition, we are required to assess the realization of the deferred tax asset or liability to be included on the consolidated balance sheet as of
the reporting dates.
As of December 31, 2020, our consolidated balance sheet included net deferred tax assets, before valuation allowance, of approximately $164.3 million, which
consists of net operating loss carryovers, tax credit carryovers, amortization, employee stock-based compensation expenses, certain liabilities and certain assets. As
of December 31, 2020, we have a valuation allowance of $174.3 million resulting in net deferred tax liabilities of $10.0 million.
We maintain liabilities for uncertain tax positions within our long-term income taxes payable accounts and as a reduction to existing deferred tax assets or other
refundable taxes to the extent tax attributes are available to offset such liabilities. These liabilities involve judgment and estimation and are monitored by us based
on the best information available including changes in tax regulations, the outcome of relevant court cases and other information.
The calculation of our tax liabilities involves uncertainties in the application of complex tax law and regulations in a multitude of jurisdictions. Although
ASC 740, “Income Taxes,” provides further clarification on the accounting for uncertainty in income taxes, significant judgment is required by us. If the ultimate
resolution of tax uncertainties is different from what is currently estimated, it could materially affect income tax expense.
Stock-Based Compensation
We maintain stock plans covering a broad range of potential equity grants including stock options, nonvested equity stock and equity stock units and
performance-based instruments. In addition, we sponsor an Employee Stock Purchase Plan (“ESPP”), whereby eligible employees are entitled to purchase
Common Stock semi-annually, by means of limited payroll deductions, at a 15% discount from the fair market value of the Common Stock as of specific dates.
The accounting guidance for share-based payments requires the measurement and recognition of compensation expense in our statement of operations for all
share-based payment awards made to our employees, directors and consultants including employee stock options, nonvested equity stock and equity stock units,
and employee stock purchase grants. Stock-based compensation expense is measured at grant date, based on the estimated fair value of the award, reduced by an
estimate of the annualized rate of expected forfeitures, and is recognized as expense over the employees’ expected requisite service period, generally using the
straight-line method. In addition, the accounting guidance for share-based payments requires the benefits of tax deductions in excess of recognized compensation
expense to be reported as a financing cash flow. Our forfeiture rate represents the historical rate at which our stock-based awards were surrendered prior to vesting.
The accounting guidance for share-based payments requires forfeitures to be estimated at the time of grant and revised on a cumulative basis, if necessary, in
subsequent periods if actual forfeitures differ from those estimates. Refer to Note 14, “Equity Incentive Plans and Stock-Based Compensation,” of Notes to
Consolidated Financial Statements of this Form 10-K for more information regarding the valuation of stock-based compensation.
Business Combinations
We account for acquisitions of businesses using the purchase method of accounting, which requires us to recognize separately from goodwill the assets
acquired and the liabilities assumed at their acquisition date fair values. While we use our best estimates and assumptions to accurately value assets acquired and
liabilities assumed at the acquisition date as well as contingent consideration, where applicable, the estimates are inherently uncertain and subject to refinement. As
a result, during the measurement period, which may be up to one year from the acquisition date, we may record adjustments to the assets acquired and liabilities
assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or
liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our consolidated statements of operations.
Accounting for business combinations requires us to make significant estimates and assumptions, especially at the acquisition date including our estimates for
intangible assets, contractual obligations assumed and pre-acquisition contingencies where applicable. Although we believe the assumptions and estimates made in
the past have been reasonable and appropriate, they are based in part on historical experience and information obtained from the management of the acquired
companies and are inherently uncertain. Significant estimates and assumptions made by us in estimating the fair value of the existing technologies included
revenue growth rates, operating expense margins, technology obsolescence rates and discount rates. Unanticipated events and circumstances may occur that may
affect the accuracy or validity of such assumptions, estimates or actual results.
44
Recent Accounting Pronouncements
Refer to Note 3, “Recent Accounting Pronouncements,” of Notes to Consolidated Financial Statements of this Form 10-K for a full description of recent
accounting pronouncements including the respective expected dates of adoption.
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
We are exposed to financial market risks, primarily arising from the effect of interest rate fluctuations on our investment portfolio. Interest rate fluctuation may
arise from changes in the market’s view of the quality of the security issuer, the overall economic outlook, and the time to maturity of our portfolio. We mitigate
this risk by investing only in high quality, highly liquid instruments. Securities with original maturities of one year or less must be rated by two of the three
industry standard rating agencies as follows: A1 by Standard & Poor’s, P1 by Moody’s and/or F-1 by Fitch. Securities with original maturities of greater than one
year must be rated by two of the following industry standard rating agencies as follows: AA- by Standard & Poor’s, Aa3 by Moody’s and/or AA- by Fitch. By
corporate investment policy, we limit the amount of exposure to $15.0 million or 10% of the portfolio, whichever is lower, for any single non-U.S. Government
issuer. A single U.S. Agency can represent up to 25% of the portfolio. No more than 20% of the total portfolio may be invested in the securities of an industry
sector, with money market fund investments evaluated separately. Our policy requires that at least 10% of the portfolio be in securities with a maturity of 90 days
or less. We may make investments in U.S. Treasuries, U.S. Agencies, corporate bonds and municipal bonds and notes with maturities up to 36 months. However,
the bias of our investment portfolio is shorter maturities. All investments must be U.S. dollar denominated. Additionally, we have no significant exposure to
European sovereign debt.
We invest our cash equivalents and marketable securities in a variety of U.S. dollar financial instruments such as U.S. Treasuries, U.S. Government Agencies,
commercial paper and corporate notes. Our policy specifically prohibits trading securities for the sole purposes of realizing trading profits. However, we may
liquidate a portion of our portfolio if we experience unforeseen liquidity requirements. In such a case, if the environment has been one of rising interest rates we
may experience a realized loss, similarly, if the environment has been one of declining interest rates we may experience a realized gain. As of December 31, 2020,
we had an investment portfolio of fixed income marketable securities of $441.2 million including cash equivalents. If market interest rates were to increase
immediately and uniformly by 1.0% from the levels as of December 31, 2020, the fair value of the portfolio would decline by approximately $2.3 million. Actual
results may differ materially from this sensitivity analysis.
The fair value of our convertible notes is subject to interest rate risk, market risk and other factors due to the convertible feature. The fair value of the
convertible notes will generally increase as interest rates fall and decrease as interest rates rise. In addition, the fair value of the convertible notes will generally
increase as our common stock price increases and will generally decrease as our common stock price declines in value. The interest and market value changes
affect the fair value of our convertible notes but do not impact our financial position, cash flows or results of operations due to the fixed nature of the debt
obligation.
We invoice the majority of our customers in U.S. dollars. Although the fluctuation of currency exchange rates may impact our customers, and thus indirectly
impact us, we do not attempt to hedge this indirect and speculative risk. Our overseas operations consist primarily of international business operations in the
Netherlands and the United Kingdom, design centers in Canada, India and Finland and small business development offices in Australia, China, Japan, Korea and
Taiwan. We monitor our foreign currency exposure; however, as of December 31, 2020, we believe our foreign currency exposure is not material enough to
warrant foreign currency hedging.
Item 8.
Financial Statements and Supplementary Data
Refer to Item 15, “Exhibits and Financial Statement Schedules,” of this Form 10-K for required financial statements and supplementary data.
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A.
Controls and Procedures
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Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in the reports we file or submit pursuant to the
Securities and Exchange Act of 1934 as amended (“Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the rules
and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to our management, including our Chief
Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Management, with the participation of the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our
disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act as of the end of the period covered by this report. Based on
this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of December 31, 2020, our disclosure controls and procedures
were effective.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f)
under the Exchange Act. Our internal control over financial reporting is the process designed by, or under the supervision of, our Chief Executive Officer and
Chief Financial Officer, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and includes
those policies and procedures that:
(i)
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and dispositions of assets;
(ii)
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that our receipts and expenditures are being made only in accordance with the authorization of our management and
directors; and
(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a
material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with
the policies or procedures may deteriorate.
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an
assessment of the effectiveness of our internal control over financial reporting as of December 31, 2020. In making this assessment, our management used the
criteria set forth in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission
(“COSO”). Based on the results of this assessment, management has concluded that, as of December 31, 2020, our internal control over financial reporting was
effective based on the criteria in Internal Control — Integrated Framework (2013) issued by the COSO.
The effectiveness of our internal control over financial reporting as of December 31, 2020 has been audited by PricewaterhouseCoopers, LLP, an independent
registered public accounting firm, as stated in their report which appears herein.
Changes in Internal Control Over Financial Reporting
There were no changes in internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the last fiscal
quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B.
Other Information
None.
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Item 10.
Directors, Executive Officers and Corporate Governance
PART III
The information responsive to this item is incorporated herein by reference to our Proxy Statement for our 2021 annual meeting of stockholders to be filed with
the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this Annual Report on
Form 10-K. The information under the heading “Our Executive Officers” in Part I, Item 1 of this Annual Report on Form 10-K is also incorporated herein by
reference.
We have a Code of Business Conduct and Ethics for all of our directors, officers and employees. Our Code of Business Conduct and Ethics is available on our
website at https://investor.rambus.com/corporate-governance/committee-composition/code-of-business-conduct-and-ethics/default.aspx. To date, there have been
no waivers under our Code of Business Conduct and Ethics. We will post any amendments or waivers, if and when granted, of our Code of Business Conduct and
Ethics on our website.
Item 11.
Executive Compensation
The information responsive to this item is incorporated herein by reference to our Proxy Statement for our 2021 annual meeting of stockholders to be filed with
the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this Annual Report on
Form 10-K.
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information responsive to this item is incorporated herein by reference to our Proxy Statement for our 2021 annual meeting of stockholders to be filed with
the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this Annual Report on
Form 10-K.
Item 13.
Certain Relationships and Related Transactions, and Director Independence
The information responsive to this item is incorporated herein by reference to our Proxy Statement for our 2021 annual meeting of stockholders to be filed with
the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this Annual Report on
Form 10-K.
Item 14.
Principal Accountant Fees and Services
The information responsive to this item is incorporated herein by reference to our Proxy Statement for our 2021 annual meeting of stockholders to be filed with
the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this Annual Report on
Form 10-K.
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Item 15.
Exhibits and Financial Statement Schedules
(a) (1) Financial Statements
PART IV
The following consolidated financial statements of the Registrant and Report of PricewaterhouseCoopers LLP, Independent Registered Public Accounting
Firm, are included herewith:
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2020 and 2019
Consolidated Statements of Operations for the years ended December 31, 2020, 2019 and 2018
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2020, 2019 and 2018
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2020, 2019 and 2018
Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2019 and 2018
Notes to Consolidated Financial Statements
Consolidated Supplementary Financial Data (unaudited)
(a) (2) Financial Statement Schedule
Page
49
51
52
53
54
55
57
92
All schedules are omitted because they are not applicable or the required information is shown in the Consolidated Financial Statements or the notes thereto.
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Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Rambus Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Rambus Inc. and its subsidiaries (the “Company”) as of December 31, 2020 and 2019, and the
related consolidated statements of operations, of comprehensive income (loss), of stockholders’ equity and of cash flows for each of the three years in the period
ended December 31, 2020, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's
internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of
December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020 in conformity
with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective
internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the
COSO.
Changes in Accounting Principles
As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019 and the manner in which
it accounts for revenues from contracts with customers in 2018.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for
its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting
appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over
financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)
(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable
assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal
control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial
reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we
considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial
reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions
and
49
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dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements
in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with
the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or
required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii)
involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the
consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical
audit matter or on the accounts or disclosures to which it relates.
Revenue Recognition - License and Customization Services Revenue
As described in Note 2 to the consolidated financial statements, the Company recognizes license and customization services revenue based on an over time model,
measured using the input method. License and customization services revenue is reported as part of contract and other revenue which was $19.8 million for the
year ended December 31, 2020. Due to the nature of the work performed in these arrangements, the estimation of the over time model is complex and involves
significant judgment. The key factor reviewed by management to estimate costs to complete each contract is the estimated man-months necessary to complete the
project.
The principal considerations for our determination that performing procedures relating to revenue recognition for license and customization services revenue is a
critical audit matter are the significant judgment by management in determining the estimated man-months necessary to contract completion for each contract,
which in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence related to management’s
estimate of man-months necessary to complete each project.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial
statements. These procedures included testing the effectiveness of controls relating to the Company’s license and customization services revenue recognition
process, including controls over management’s determination of the estimate of total man-months to complete each contract. These procedures also included,
among others, for a sample of contracts, testing management’s process for determining the estimate of total man-months. Evaluating management’s assumption
related to the estimate of man-months involved (i) performing a comparison of the estimated man-months to completed projects of similar size and (ii) evaluating
the timely identification of circumstances which may warrant a modification to a previous cost estimate, including an assessment of total man-months.
/s/ PricewaterhouseCoopers LLP
San Jose, California
February 26, 2021
We have served as the Company’s auditor since 1991.
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Current assets:
Cash and cash equivalents
Marketable securities
Accounts receivable
Unbilled receivables
Inventories
Prepaids and other current assets
Total current assets
Intangible assets, net
Goodwill
Property, plant and equipment, net
Operating lease right-of-use assets
Deferred tax assets
Unbilled receivables, long-term
Other assets
Total assets
Current liabilities:
RAMBUS INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
LIABILITIES & STOCKHOLDERS’ EQUITY
Accounts payable
Accrued salaries and benefits
Deferred revenue
Income taxes payable, short-term
Operating lease liabilities
Other current liabilities
Total current liabilities
Convertible notes, long-term
Long-term operating lease liabilities
Long-term income taxes payable
Deferred tax liabilities
Other long-term liabilities
Total liabilities
Commitments and contingencies (Notes 10, 13 and 20)
Stockholders’ equity:
Convertible preferred stock, $.001 par value:
December 31,
2020
2019
(In thousands, except shares and per share
amounts)
$
$
$
136,146 $
366,503
27,903
135,897
14,466
15,907
696,822
36,487
183,222
57,693
28,708
4,353
232,056
4,535
1,243,876 $
8,993 $
23,326
10,198
20,064
4,724
18,559
85,864
156,031
34,305
41,333
14,336
6,894
338,763
102,176
305,488
44,039
184,366
10,086
18,524
664,679
54,900
183,465
44,714
37,020
4,574
343,703
5,931
1,338,986
9,549
20,291
11,947
19,142
6,357
18,893
86,179
148,788
39,889
60,094
13,846
19,272
368,068
Authorized: 5,000,000 shares; Issued and outstanding: no shares at December 31, 2020 and December 31, 2019
—
—
Common Stock, $.001 par value:
Authorized: 500,000,000 shares; Issued and outstanding: 111,697,994 shares at December 31, 2020 and
112,131,352 shares at December 31, 2019
Additional paid in capital
Accumulated deficit
Accumulated other comprehensive loss
Total stockholders’ equity
Total liabilities and stockholders’ equity
112
1,270,426
(365,344)
(81)
905,113
1,243,876 $
112
1,261,142
(290,244)
(92)
970,918
1,338,986
$
Refer to Notes to Consolidated Financial Statements
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RAMBUS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
2020
Years Ended December 31,
2019
2018
(In thousands, except per share amounts)
Revenue:
Royalties
Product revenue
Contract and other revenue
Total revenue
Cost of revenue:
Cost of product revenue
Cost of contract and other revenue
Amortization of acquired intangible assets
Total cost of revenue
Gross profit
Operating expenses:
Research and development
Sales, general and administrative
Amortization of acquired intangible assets
Restructuring and other charges
Loss on divestiture
Change in fair value of earn-out liability
Total operating expenses
Operating loss
Interest income and other income (expense), net
Interest expense
Interest and other income (expense), net
Loss before income taxes
Provision for income taxes
Net loss
Net loss per share:
Basic
Diluted
Weighted-average shares used in per share calculations:
Basic
Diluted
$
$
$
$
80,985 $
113,996
47,766
242,747
37,749
5,647
17,352
60,748
181,999
139,837
85,619
1,061
4,089
—
(1,800)
228,806
(46,807)
17,516
(10,340)
7,176
(39,631)
3,978
(43,609) $
(0.39) $
(0.39) $
113,254
113,254
90,785 $
72,972
60,270
224,027
27,156
9,905
14,314
51,375
172,652
156,815
101,373
2,743
8,821
7,439
—
277,191
(104,539)
27,375
(9,852)
17,523
(87,016)
3,403
(90,419) $
(0.81) $
(0.81) $
110,948
110,948
130,452
38,690
62,059
231,201
18,299
11,718
23,684
53,701
177,500
158,339
98,254
5,657
2,217
—
—
264,467
(86,967)
32,621
(16,282)
16,339
(70,628)
87,329
(157,957)
(1.46)
(1.46)
108,450
108,450
Refer to Notes to Consolidated Financial Statements
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Table of Contents
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
RAMBUS INC.
Net loss
Other comprehensive income (loss):
Foreign currency translation adjustment
Unrealized gain (loss) on marketable securities, net of tax
Total comprehensive loss
2020
Years Ended December 31,
2019
2018
(In thousands)
(43,609) $
(90,419) $
(157,957)
24
(13)
(43,598) $
10,145
54
(80,220) $
(4,447)
(747)
(163,151)
$
$
Refer to Notes to Consolidated Financial Statements
53
Table of Contents
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
RAMBUS INC.
Common Stock
Shares
Amount
Additional Paid-
in Capital
Accumulated
Deficit
Accumulated Other
Comprehensive Gain
(Loss)
(In thousands)
(636,227) $
(157,957)
—
—
$
(5,097)
—
(4,447)
(747)
Balances at December 31, 2017
Net loss
Foreign currency translation adjustment
Unrealized loss on marketable securities, net of tax
Issuance of common stock upon exercise of options,
equity stock and employee stock purchase plan
Repurchase and retirement of common stock under
repurchase plan
Stock-based compensation
Issuance of common stock in connection with the
maturity of the 2018 Notes related to the settlement
of the in-the-money conversion feature of the 2018
Notes
Cumulative effect adjustment from adoption of ASU
2016-01
Cumulative effect adjustment from the adoption of
ASC 606
Balances at December 31, 2018
Net loss
Foreign currency translation adjustment
Unrealized gain on marketable securities, net of tax
Issuance of common stock upon exercise of options,
equity stock and employee stock purchase plan
Stock-based compensation
Cumulative effect adjustment from the adoption of
ASC 842
Balances at December 31, 2019
Net loss
Foreign currency translation adjustment
Unrealized loss on marketable securities, net of tax
Issuance of common stock upon exercise of options,
equity stock and employee stock purchase plan
Repurchase and retirement of common stock under
repurchase plan
Stock-based compensation
Balances at December 31, 2020
109,764 $
—
—
—
110 $
—
—
—
2,616
(3,786)
—
424
—
—
109,018
—
—
—
3,113
—
—
112,131
—
—
—
2,183
3
(4)
—
—
—
—
109
—
—
—
3
—
—
112
—
—
—
3
1,212,798 $
—
—
—
4,627
(12,573)
21,736
—
—
—
1,226,588
—
—
—
8,078
26,476
—
1,261,142
—
—
—
—
(37,456)
—
—
1,058
626,288
(204,294)
(90,419)
—
—
—
—
4,469
(290,244)
(43,609)
—
—
2,081
—
(2,616)
—
111,698 $
(3)
—
112 $
(18,575)
25,778
1,270,426 $
(31,491)
—
(365,344) $
Refer to Notes to Consolidated Financial Statements
54
Total
571,584
(157,957)
(4,447)
(747)
4,630
(50,033)
21,736
—
1,058
626,288
1,012,112
(90,419)
10,145
54
8,081
26,476
4,469
970,918
(43,609)
24
(13)
2,084
(50,069)
25,778
905,113
—
—
—
—
—
—
(10,291)
—
10,145
54
—
—
—
(92)
—
24
(13)
—
—
—
(81)
$
Table of Contents
RAMBUS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash flows from operating activities:
Net loss
Adjustments to reconcile net loss to net cash provided by operating activities:
Stock-based compensation
Depreciation
Amortization of intangible assets
Non-cash interest expense and amortization of convertible debt issuance costs
Deferred income taxes
Non-cash restructuring
Loss on divestiture
Loss on equity investment
Gain from sale of marketable equity security
Gain from sale of assets held for sale
(Gain) loss from disposal of property, plant and equipment
Change in fair value of earn-out liability
Change in operating assets and liabilities, net of effects of acquisitions and divestiture:
Accounts receivable
Unbilled receivables
Prepaid expenses and other assets
Inventories
Accounts payable
Accrued salaries and benefits and other liabilities
Income taxes payable
Deferred revenue
Operating lease liabilities
Net cash provided by operating activities
Cash flows from investing activities:
Purchases of property, plant and equipment
Acquisition of intangible assets
Purchases of marketable securities
Maturities of marketable securities
Proceeds from sale of marketable securities
Proceeds from divestiture, net of cash disposed
Proceeds from sale of assets held for sale
Proceeds from sale of property and property, plant and equipment
Settlement of working capital adjustment from disposal of business
Proceeds from sale of equity security
Investment in privately-held companies
Acquisition of businesses, net of cash acquired
Net cash used in investing activities
Cash flows from financing activities:
Repayment of 1.125% convertible notes
Proceeds received from issuance of common stock under employee stock plans
Payments under installment payment arrangement
Principal payments against financing lease obligation
Repurchase and retirement of common stock, including prepayment under accelerated share repurchase
program
Payments of taxes on restricted stock units
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at beginning of year
Cash, cash equivalents and restricted cash at end of year
Years Ended December 31,
2019
2018
2020
(In thousands)
$
(43,609) $
(90,419) $
(157,957)
25,778
28,951
18,413
7,243
685
—
—
747
—
—
(77)
(1,800)
16,136
160,116
2,042
(4,380)
(2,176)
3,353
(17,852)
(1,486)
(6,625)
185,459
(29,728)
—
(898,957)
817,834
21,588
—
—
—
(1,131)
—
—
—
(90,394)
—
11,487
(13,201)
—
26,476
23,507
17,058
6,854
(1,816)
—
7,439
696
—
—
157
—
4,994
151,513
4,064
(3,353)
2,934
7,135
(15,925)
(3,497)
(9,282)
128,535
(6,472)
—
(657,433)
507,385
6,758
76,039
—
29
—
—
(1,000)
(66,780)
(141,474)
—
15,104
(8,379)
—
(50,069)
(9,403)
(61,186)
106
33,985
102,518
136,503 $
—
(7,023)
(298)
(497)
(13,734)
116,252
102,518 $
$
21,736
10,745
29,341
9,243
79,954
670
—
67
(291)
(1,266)
395
—
(24,933)
145,164
(4,084)
(1,856)
(2,268)
(3,221)
(14,550)
228
—
87,117
(10,762)
(350)
(282,117)
223,079
—
—
3,754
10
—
1,350
(3,000)
—
(68,036)
(81,207)
11,402
—
(1,080)
(50,033)
(6,766)
(127,684)
(989)
(109,592)
225,844
116,252
Years Ended December 31,
2019
2018
2020
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest
Income taxes, net of refunds
Non-cash investing and financing activities:
Property, plant and equipment received and accrued in accounts payable and other accrued liabilities
Reconciliation of the cash, cash equivalents and restricted cash balances as shown in the consolidated
statement of cash flows:
Cash and cash equivalents
Restricted cash
Cash, cash equivalents and restricted cash
Refer to Notes to Consolidated Financial Statements
55
(In thousands)
$
$
$
$
$
2,372 $
21,312 $
2,372 $
17,835 $
3,044
23,581
20,952 $
29,844 $
8,225
2020
As of December 31,
2019
(In thousands)
2018
136,146 $
357
136,503 $
102,176 $
342
102,518 $
115,924
328
116,252
Table of Contents
RAMBUS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Formation and Business of the Company
Rambus Inc. (the “Company” or “Rambus”) was incorporated in California in March 1990 and reincorporated in Delaware in March 1997. In addition to
licensing, the Company is creating new business opportunities through offering products and services where its goal is to perpetuate strong company operating
performance and long-term stockholder value. The Company generates revenue by licensing its inventions and solutions, selling its semiconductor products and
providing services to market-leading companies.
Rambus produces products and innovations that address the fundamental challenges of accelerating data. The Company makes industry-leading chips and IP
that enable critical performance improvements for data center and other growing markets. The ongoing shift to the cloud, along with the widespread advancement
of artificial intelligence (“AI”) across the data center, 5G, automotive and Internet of Things (“IoT”), has led to an exponential growth in data usage and
tremendous demands on data infrastructure. Creating fast and safe connections, both in and across systems, remains one of the most mission-critical design
challenges limiting performance in advanced hardware for these markets.
2. Summary of Significant Accounting Policies
Financial Statement Presentation
The accompanying consolidated financial statements include the accounts of Rambus and its wholly owned subsidiaries. All intercompany accounts and
transactions have been eliminated in the accompanying consolidated financial statements. Investments in entities with more than 20% ownership by Rambus and in
which Rambus has the ability to significantly influence the operations of the investee (but not control) are accounted for using the equity method and are included
in other assets.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported
amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Reclassifications
Certain prior year balances were reclassified to conform to the current year’s presentation. None of these reclassifications had an impact on reported net income
or cash flows for any of the periods presented.
Revenue Recognition
The Company recognizes revenue upon transfer of control of promised goods and services in an amount that reflects the consideration it expects to receive in
exchange for those goods and services. Substantially all of the goods and services are distinct and are accounted for as separate performance obligations.
Where an arrangement includes multiple performance obligations, the transaction price is allocated to these on a relative standalone selling price basis. The
Company has established standalone selling prices for all of its offerings - specifically, the same pricing methodology is consistently applied to all licensing
arrangements; all services offerings are priced within tightly controlled bands and all contracts that include support and maintenance state a renewal rate or price
that is systematically enforced.
Rambus’ revenue consists of royalty, product and contract and other revenue. Royalty revenue consists of patent and technology license royalties. Products
primarily consist of memory interface chips sold directly and indirectly to module manufacturers and OEMs worldwide through multiple channels, including our
direct sales force and distributors. Contract and other revenue consists of software license fees, engineering fees associated with integration of Rambus’ technology
solutions into its customers’ products and support and maintenance fees.
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Table of Contents
Royalty Revenue
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Rambus’ patent and technology licensing arrangements generally range between one year and ten years in duration and generally grant the licensee the right to
use the Company’s entire intellectual property (“IP”) portfolio as it evolves over time. These arrangements do not typically grant the licensee the right to terminate
for convenience and where such rights exist, termination is prospective, with no refund of fees already paid by the licensee. There is no interdependency or
interrelation between the IP included in the portfolio licensed upon contract inception and any IP subsequently made available to the licensee, and the Company
would be able to fulfill its promises by transferring the portfolio and the additional IP use rights independently. However, the numbers of additions to, and
removals from the portfolio (for example when a patent expires and renewal is not granted to the Company) in any given period have historically been relatively
consistent; as such, the Company does not allocate the transaction price between the rights granted at contract inception and those subsequently granted over time
as a function of these additions.
Patent and technology licensing arrangements result in fixed payments received over time, with guaranteed minimum payments on occasion, variable payments
calculated based on the licensee’s sale or use of the IP, or a mix of fixed and variable payments.
•
•
For fixed-fee arrangements (including arrangements that include minimum guaranteed amounts), the Company recognizes revenue upon control over the
underlying IP use right transferring to the licensee, net of the effect of significant financing components calculated using customer-specific, risk-adjusted
lending rates ranging between 3% and 5%, with the related interest income being recognized over time on an effective rate basis. Where a licensee has the
contractual right to terminate a fixed-fee arrangement for convenience without any substantive penalty payable upon such termination, the Company
applies the guidance in ASU No. 2014-09, Revenue from Contracts with Customers in Accounting Standards Codification (ASC) Topic 606 (“ASC 606”)
to the duration of the contract in which the parties have present enforceable rights and obligations and only recognizes revenue for amounts that are due
and payable.
For variable arrangements, the Company recognizes revenue based on an estimate of the licensee’s sale or usage of the IP during the period of reference,
typically quarterly, with a true-up recorded when the Company receives the actual royalty report from the licensee.
Product Revenue
Product revenue is recognized upon shipment of product to customers, net of accruals for estimated sales returns and allowances, and to distributors, net of
accruals for price protection and rights of return on products unsold by the distributors. To date, none of these accruals have been significant. The Company
transacts with direct customers primarily pursuant to standard purchase orders for delivery of products and generally allows customers to cancel or change
purchase orders within limited notice periods prior to the scheduled shipment date.
Contract and Other Revenue
Contract and other revenue consists of software license fees and engineering fees associated with integration of Rambus’ technology solutions into its
customers’ related support and maintenance.
An initial software arrangement generally consists of a term-based or perpetual license, significant software customization services and support and
maintenance services that include post-implementation customer support and the right to unspecified software updates and enhancements on a when and if
available basis. The Company recognizes license and customization services revenue based on an over time model, measured using the input method. License and
customization services revenue is reported as part of contract and other revenue which was approximately $19.8 million for the year ended December 31, 2020.
Due to the nature of the work performed in these arrangements, the estimation of the over time model is complex and involves significant judgment. The key factor
reviewed by management to estimate costs to complete each contract is the estimated man-months necessary to complete the project. The Company recognizes
license renewal revenue at the beginning of the renewal period.
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Significant Judgments
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Historically and with the exception noted below, no significant judgment has generally been required in determining the amount and timing of revenue from the
Company’s contracts with customers.
•
The Company has adequate tools and controls in place, and substantial experience and expertise in timely and accurately tracking man-months incurred in
completing customization and other professional services, and quantifying changes in estimates.
Key estimates used in recognizing revenue predominantly consist of the following:
•
For fixed-fee arrangements in which cash is being received over a period exceeding a year, the Company calculates a customer-specific lending rate using
a Daily Treasury Yield Curve Rate that changes depending on the date on which the licensing arrangement was entered into and the term (in years) of the
arrangement, and takes into consideration a licensee-specific risk profile determined based on a review of the licensee’s “Full Company View” Dun &
Bradstreet report obtained on the date the licensing arrangement was signed by the parties, with a risk premium being added to the Daily Treasury Yield
Curve Rate considering the overall business risk, financing strength and risk indicators, as listed.
•
The Company recognizes revenue on variable fee licensing arrangements on the basis of estimates.
Contract Balances
Timing of revenue recognition may differ from the timing of invoicing to the Company’s customers. The Company records contract assets when revenue is
recognized prior to invoicing, and a contract liability when revenue is recognized subsequent to invoicing. The contract assets are transferred to receivables when
the billing occurs.
Cost of Revenue
Cost of revenue includes cost of professional services, materials, including cost of wafers processed by third-party foundries, cost associated with packaging
and assembly, test and shipping, cost of personnel, including stock-based compensation, and equipment associated with manufacturing support, logistics and
quality assurance, warranty cost, amortization of existing technology, write-down of inventories, amortization of production mask costs, overhead and an allocated
portion of occupancy costs.
Leases
The Company adopted the New Leasing Standard as of January 1, 2019 using the alternative transition method provided by ASU No. 2018-11 and did not
recast comparative periods. The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which
among other things, allowed the Company to carry forward the historical lease classification. Additionally, the Company elected the practical expedient related to
non-lease components and made the policy election for the short-term leases exemptions. The Company used its incremental borrowing rate to measure the lease
liabilities at the adoption date for its existing operating leases that commenced prior to January 1, 2019, which was based on the remaining lease term and
remaining lease payments for such leases.
The Company leases office space, domestically and internationally, under operating leases. The Company’s leases have remaining lease terms between one
year and ten years. Operating leases are included in operating lease right-of-use (“ROU”) assets, operating lease liabilities, and long-term operating lease liabilities
in the Company’s consolidated balance sheets. The Company does not have any finance leases. The Company determines if an arrangement is a lease, or contains a
lease, at inception. The Company assesses all relevant facts and circumstances in making the determination of the existence of a lease. For leases with terms greater
than 12 months, the Company records the related asset and obligation at the present value of lease payments over the term. The Company uses its incremental
borrowing rate based on the information available at commencement date in determining the present value of lease payments, and uses the implicit rate when
readily determinable. Many of the Company’s leases include rental escalation clauses, renewal options and/or termination options that are factored into the
determination of lease payments when appropriate. Leases with an initial term of 12 months or less are not recorded on the balance sheet, and the Company does
not separate non-lease components from lease components. Operating lease costs are included in research and development and selling, general and administrative
costs on the statement of operations.
Goodwill
Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in each business
combination. Goodwill is not subject to amortization, but is subject to at least an annual assessment
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
for impairment. The Company performs its impairment analysis of goodwill on an annual basis during the fourth quarter of the year unless conditions arise that
warrant a more frequent evaluation.
When goodwill is assessed for impairment, the Company has the option to perform an assessment of qualitative factors of impairment (optional assessment)
prior to necessitating a quantitative impairment test. Should the optional assessment be used for any given year, qualitative factors to consider for a reporting unit
include: cost factors; financial performance; legal, regulatory, contractual, political, business, or other factors; entity specific factors; industry and market
considerations; macroeconomic conditions; and other relevant events and factors affecting the reporting unit. If the Company determines in the qualitative
assessment that it is more likely than not that the fair value of the reporting unit is less than its carrying value, a quantitative test is then performed. Otherwise, no
further testing is required. For a reporting unit tested using a quantitative approach, the Company compares the fair value of the reporting unit with the carrying
amount of the reporting unit, including goodwill. The fair value of the reporting unit is estimated using an income approach.
Under the income approach, the Company measures fair value of the reporting unit based on a projected cash flow method using a discount rate determined by
its management which is commensurate with the risk inherent in its current business model. The Company’s discounted cash flow projections are based on its
annual financial forecasts developed internally by management for use in managing its business. If the fair value of the reporting unit exceeds its carrying value,
goodwill is not impaired and no further testing is required. If the fair value of the reporting unit is less than the carrying value, then the amount of goodwill
impairment will be the amount by which the reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill.
The Company performed its annual goodwill impairment analysis as of December 31, 2020 and determined that there was no impairment of its goodwill. For
the years ended December 31, 2019 and 2018, the Company did not recognize any goodwill impairment charges.
Intangible Assets
Intangible assets are comprised of existing technology, customer contracts and contractual relationships, and other definite-lived and indefinite-lived intangible
assets. Identifiable intangible assets resulting from the acquisitions of entities accounted for using the purchase method of accounting are estimated by management
based on the fair value of assets received. Identifiable definite-lived intangible assets are being amortized over the period of estimated benefit using the straight-
line method and estimated useful lives ranging from six months to ten years.
Acquired indefinite-lived intangible assets related to the Company’s in-process research and development (“IPR&D”) are capitalized and subject to impairment
testing until completion or abandonment of the projects. Upon successful completion of each project, the Company makes a separate determination of the useful
life of the acquired indefinite-lived intangible assets and the related amortization is recorded as an expense over the estimated useful life of the specific projects.
Indefinite-lived intangible assets are subject to at least an annual assessment for impairment, applying a fair-value based test. Under the income approach, the
Company measures fair value of the indefinite-lived intangible assets based on a projected cash flow method using a discount rate determined by its management
which is commensurate with the risk inherent in its current business model. The Company’s discounted cash flow projections are based on its annual financial
forecasts developed internally by management for use in managing its business. If the fair value of the indefinite-lived intangible assets exceeds its carrying value,
the indefinite-lived intangible assets are not impaired and no further testing is required. If the implied fair value of the indefinite-lived intangible assets is less than
the carrying value, the difference is recorded as an impairment loss.
Inventories
Inventories are stated at the lower of cost or net realizable value. Cost is computed using standard cost, which approximates actual cost, on a first-in, first-out
basis. Inventories are reduced for write-downs based on periodic reviews for evidence of slow-moving or obsolete parts. The write-down is based on comparison
between inventory on hand and estimated future sales for each specific product. Once written down, inventory write-downs are not reversed until the inventory is
sold or scrapped. Inventory write-downs are also established when conditions indicate that the net realizable value is less than cost due to physical deterioration,
obsolescence, changes in price level or other causes.
Property, Plant and Equipment
Property, plant and equipment include computer equipment, computer software, machinery, leasehold improvements, and furniture and fixtures. Computer
equipment, computer software, machinery, and furniture and fixtures are stated at cost and generally depreciated on a straight-line basis over an estimated useful
life of three years, three years to five years, two years or
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
seven years, and three years, respectively. Refer to Note 11, “Balance Sheet Details,” for additional details. Leasehold improvements are amortized on a straight-
line basis over the shorter of their estimated useful lives or the initial terms of the leases. Upon disposal, assets and related accumulated depreciation are removed
from the accounts and the related gain or loss is included in the results from operations.
Definite-Lived and Indefinite-Lived Asset Impairment
The Company evaluates definite-lived and indefinite-lived assets (including property, plant and equipment and intangible assets) for impairment whenever
events or changes in circumstances indicate the carrying value of an asset group may not be recoverable. The carrying value is not recoverable if it exceeds the
undiscounted cash flows resulting from the use of the asset group and its eventual disposition. The Company’s estimates of future cash flows attributable to its
asset groups require significant judgment based on its historical and anticipated results and are subject to many factors. Factors that the Company considers
important which could trigger an impairment review include significant negative industry or economic trends, significant loss of clients, and significant changes in
the manner of its use of the acquired assets or the strategy for its overall business.
When the Company determines that the carrying value of the asset groups may not be recoverable based upon the existence of one or more of the above
indicators of impairment, the Company measures the potential impairment based on a projected discounted cash flow method using a discount rate determined by
the Company to be commensurate with the risk inherent in the Company’s current business model. An impairment loss is recognized only if the carrying amount of
the asset group is not recoverable and exceeds its fair value. The impairment charge is recorded to reduce the pre-impairment carrying amount of the assets based
on the relative carrying amount of those assets, though not to reduce the carrying amount of an asset below its fair value. Different assumptions and judgments
could materially affect the calculation of the fair value of the assets. During 2020, 2019 and 2018, the Company did not recognize any impairment of its definite-
lived and indefinite-lived assets.
Income Taxes
Income taxes are accounted for using an asset and liability approach, which requires the recognition of deferred tax assets and liabilities for expected future tax
events that have been recognized differently in Rambus’ consolidated financial statements and tax returns. The measurement of current and deferred tax assets and
liabilities is based on provisions of the enacted tax law and the effects of future changes in tax laws or rates are not anticipated. A valuation allowance is
established when necessary to reduce deferred tax assets to amounts expected to be realized based on available evidence.
In addition, the calculation of the Company’s tax liabilities involves dealing with uncertainties in the application of complex tax regulations. As a result, the
Company reports a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in its tax return. The Company
considers many factors when evaluating and estimating its tax positions and tax benefits, which may require periodic adjustments and which may not accurately
anticipate actual outcomes.
Stock-Based Compensation and Equity Incentive Plans
The Company maintained stock plans covering a broad range of equity grants including stock options, nonvested equity stock and equity stock units and
performance-based instruments. In addition, the Company sponsors an Employee Stock Purchase Plan (“ESPP”), whereby eligible employees are entitled to
purchase Common Stock semi-annually, by means of limited payroll deductions, at a 15% discount from the fair market value of the Common Stock as of specific
dates.
The Company determines compensation expense associated with restricted stock units based on the fair value of its common stock on the date of grant. The
Company determines compensation expense associated with stock options based on the estimated grant-date fair value method using the Black-Scholes Merton
(“BSM”) valuation model. The Company generally recognizes compensation expense using a straight-line amortization method over the respective vesting period
for awards that are ultimately expected to vest. Stock-based compensation expense for 2020, 2019 and 2018 has been reduced for estimated forfeitures. When
estimating forfeitures, the Company considers voluntary termination behaviors as well as trends of actual option forfeitures.
Cash and Cash Equivalents
Cash equivalents are highly liquid investments with original maturity of three months or less at the date of purchase. The Company maintains its cash balances
with high quality financial institutions. Cash equivalents are invested in highly-rated and highly-liquid money market securities and certain U.S. government
sponsored obligations.
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Marketable Securities
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Available-for-sale securities are carried at fair value, based on quoted market prices, with the unrealized gains or losses reported, net of tax, in stockholders’
equity as part of accumulated other comprehensive income (loss). The amortized cost of debt securities is adjusted for amortization of premiums and accretion of
discounts to maturity, both of which are included in interest and other income, net. Realized gains and losses are recorded on the specific identification method and
are included in interest and other income, net. The Company reviews its investments in marketable securities for possible other than temporary impairments on a
regular basis. If any loss on investment is believed to be a credit loss, a charge will be recognized in operations. In evaluating whether a credit loss on a debt
security has occurred, the Company considers the following factors: 1) the Company’s intent to sell the security, 2) if the Company intends to hold the security,
whether or not it is more likely than not that the Company will be required to sell the security before recovery of the security’s amortized cost basis and 3) even if
the Company intends to hold the security, whether or not the Company expects the security to recover the entire amortized cost basis. Due to the high credit quality
and short-term nature of the Company’s investments, there have been no material credit losses recorded to date. The classification of funds between short-term and
long-term is based on whether the securities are available for use in operations or other purposes.
Fair Value of Financial Instruments
The carrying value of cash equivalents, accounts receivable and accounts payable approximate their fair values due to their relatively short maturities as of
December 31, 2020 and 2019. Marketable securities are comprised of available-for-sale securities that are reported at fair value with the related unrealized gains
and losses included in accumulated other comprehensive income (loss), a component of stockholders’ equity, net of tax. Fair value of the marketable securities is
determined based on quoted market prices. The fair value of the Company’s convertible notes fluctuates with interest rates and with the market price of the
common stock, but does not affect the carrying value of the debt on the balance sheet.
Research and Development
Costs incurred in research and development, which include engineering expenses, such as salaries and related benefits, stock-based compensation, depreciation,
professional services and overhead expenses related to the general development of Rambus’ products, are expensed as incurred. Software development costs are
capitalized beginning when a product’s technological feasibility has been established and ending when a product is available for general release to customers.
Rambus has not capitalized any software development costs since the period between establishing technological feasibility and general customer release is
relatively short and as such, these costs have not been material.
Computation of Earnings (Loss) Per Share
Basic earnings (loss) per share is calculated by dividing the net income (loss) by the weighted-average number of common shares outstanding during the period.
Diluted earnings (loss) per share is calculated by dividing the earnings (loss) by the weighted-average number of common shares and potentially dilutive securities
outstanding during the period. Potentially dilutive common shares consist of incremental common shares issuable upon exercise of stock options, employee stock
purchases, restricted stock and restricted stock units, and shares issuable upon the conversion of convertible notes. The dilutive effect of outstanding shares is
reflected in diluted earnings per share by application of the treasury stock method. This method includes consideration of the amounts to be paid by the employees,
the amount of excess tax benefits that would be recognized in equity if the instrument was exercised and the amount of unrecognized stock-based compensation
related to future services. No potential dilutive common shares are included in the computation of any diluted per share amount when a net loss is reported.
Comprehensive Income (Loss)
Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances
from non-owner sources, including foreign currency translation adjustments and unrealized gains and losses on marketable securities. Other comprehensive income
(loss), net of tax, is presented in the consolidated statements of comprehensive income (loss).
Credit Concentration
As of December 31, 2020 and 2019, the Company’s cash, cash equivalents and marketable securities were invested with various financial institutions in the
form of corporate notes, bonds and commercial paper, money market funds, U.S. Treasuries, U.S. Government Agencies, and municipal bonds and notes. The
Company’s exposure to market risk for changes in interest rates relates primarily to its investment portfolio. The Company places its investments with high credit
issuers and, by
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
investment policy, attempts to limit the amount of credit exposure to any one issuer. As stated in the Company’s investment policy, it will ensure the safety and
preservation of the Company’s invested funds by limiting default risk and market risk. The Company has no investments denominated in foreign country
currencies and therefore is not subject to foreign exchange risk from these assets.
The Company mitigates default risk by investing in high credit quality securities and by positioning its portfolio to respond appropriately to a significant
reduction in a credit rating of any investment issuer or guarantor. The portfolio includes only marketable securities with active secondary or resale markets to
enable portfolio liquidity.
The Company’s note hedge transactions, entered into in connection with the 1.375% convertible senior notes due 2023 (the “2023 Notes”), expose the
Company to credit risk to the extent that its counterparties may be unable to meet the terms of the transactions. The Company mitigates this risk by limiting its
counterparties to major financial institutions. Refer to Note 12, “Convertible Notes” for further details.
The Company’s accounts receivable are derived from revenue earned from customers located in the U.S. and internationally. Refer to Note 7, “Segments and
Major Customers” for further details.
The Company’s unbilled receivables are collected from customers located in the U.S. and internationally. Refer to Note 4, “Revenue Recognition” for further
details.
Foreign Currency Translation and Re-Measurement
The Company translates the assets and liabilities of its non-U.S. dollar functional currency subsidiaries into U.S. dollars using exchange rates in effect at the
end of each period. Revenue and expenses for these subsidiaries are translated using rates that approximate those in effect during the period. Gains and losses from
these translations are recognized in foreign currency translation included in Accumulated Other Comprehensive Gain (Loss) in the consolidated statements of
stockholders’ equity. The Company’s subsidiaries that use the U.S. dollar as their functional currency re-measure monetary assets and liabilities at exchange rates
in effect at the end of each period, and inventories, property and non-monetary assets and liabilities at historical rates. Additionally, foreign currency transaction
gains and losses are included in interest income and other (income) expense, net, in the consolidated statements of operations and were not material in the periods
presented. Subsequent to the divestiture of the Company’s Payments and Ticketing businesses in 2019, the U.S. dollar is primarily the functional currency of the
Company’s foreign subsidiaries.
Business Combinations
The Company accounts for acquisitions of businesses using the purchase method of accounting, which requires the Company to recognize separately from
goodwill the assets acquired and the liabilities assumed at their acquisition date fair values. While the Company uses its best estimates and assumptions to
accurately value assets acquired and liabilities assumed at the acquisition date as well as contingent consideration, where applicable, the estimates are inherently
uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, the Company may record
adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final
determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the consolidated statements
of operations.
Accounting for business combinations requires management to make significant estimates and assumptions, especially at the acquisition date including the
Company’s estimates for intangible assets, contractual obligations assumed and pre-acquisition contingencies where applicable. Although, the Company believes
the assumptions and estimates made in the past have been reasonable and appropriate, they are based in part on historical experience and information obtained
from the management of the acquired companies and are inherently uncertain. Significant estimates and assumptions made by management in estimating the fair
value of the existing technologies included revenue growth rates, operating expense margins, technology obsolescence rates and discount rates. Unanticipated
events and circumstances may occur that may affect the accuracy or validity of such assumptions, estimates or actual results.
Litigation
Rambus may be involved in certain legal proceedings. Based upon consultation with outside counsel handling its defense in these matters and an analysis of
potential results, if Rambus believes that a loss arising from such matters is probable and can be reasonably estimated, Rambus records the estimated liability in its
consolidated financial statements. If only a range of estimated losses can be determined, Rambus records an amount within the range that, in its judgment, reflects
the most likely outcome; if none of the estimates within that range is a better estimate than any other amount, Rambus records the low end of
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
the range. Any such accrual would be charged to expense in the appropriate period. Rambus recognizes litigation expenses in the period in which the litigation
services were provided.
3. Recent Accounting Pronouncements
Recent Accounting Pronouncements Adopted
In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2019-12, “Income Taxes
(Topic 740): Simplifying the Accounting for Income Taxes.” The amendments in this ASU remove certain exceptions, clarifies and amends existing guidance. This
ASU is effective for interim and annual reporting periods beginning after December 15, 2020. Early adoption is permitted. Certain disclosures in ASU No. 2019-12
would need to be applied on a retrospective basis, modified retrospective basis, or prospective basis. The Company elected to early adopt this ASU on January 1,
2020. The adoption of this ASU did not have a material impact on the Company's consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements
for Fair Value Measurement.” The amendments in this ASU remove certain disclosures, modify certain disclosures and add additional disclosures. This ASU is
effective for interim and annual reporting periods beginning after December 15, 2019. Certain disclosures in ASU No. 2018-13 would need to be applied on a
retrospective basis and others on a prospective basis. The Company adopted this ASU on January 1, 2020. The adoption of this ASU did not have a material impact
on the Company's consolidated financial statements.
In June 2016, the FASB issued ASU No. 2016-13. The purpose of this ASU is to require a financial asset measured at amortized cost basis to be presented at
the net amount expected to be collected. Credit losses relating to available-for-sale debt securities should be recorded through an allowance for credit losses. In
April 2019, the FASB issued ASU No. 2019-04, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and
Hedging, and Topic 825, Financial Instruments (ASU 2019-04),” which provided certain improvements to various ASUs, including ASU 2016-13. In May 2019,
the FASB issued ASU No. 2019-05, “Financial Instruments-Credit Losses (Topic 326),” which provides an option to irrevocably elect the fair value option for
certain financial assets previously measured at amortized cost basis. In November 2019, the FASB issued ASU No. 2019-10, “Financial Instruments-Credit Losses
(Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842)” which amends certain effective dates. In November 2019, the FASB issued
ASU No. 2019-11, “Financial Instruments-Credit Losses (Topic 326),” which provides additional clarifications. In March 2020, the FASB issued ASU No. 2020-
03, “Codification Improvements to Financial Instruments,” which provides additional clarifications and improvements. These ASUs and the related amendments
are effective for interim and annual reporting periods beginning after December 15, 2019. The Company adopted this ASU on January 1, 2020. The adoption of
this ASU did not have a material impact on the Company's consolidated financial statements.
Recent Accounting Pronouncements Not Yet Adopted
In August 2020, the FASB issued ASU No. 2020-06, “Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging -
Contracts in Entity's Own Equity (Subtopic 815-40).” The amendments in this ASU amend the guidance on convertible instruments and the derivatives scope
exception for contracts in an entity's own equity, including reducing the number of accounting models for convertible debt instruments and convertible preferred
stock. This ASU also amends the related earnings (loss) per share guidance for both subtopics, including the diluted earnings (loss) per share calculation for
instruments that may be settled in cash or shares and for convertible instruments. This ASU is effective for interim and annual reporting periods beginning after
December 15, 2021. Early adoption is permitted but no earlier than fiscal years beginning after December 15, 2020. The amendments in this ASU may be applied
on a modified retrospective basis or a fully retrospective basis. The Company is currently evaluating the impact that the adoption of this guidance will have on its
consolidated financial statements.
In January 2020, the FASB issued ASU No. 2020-01, “Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures
(Topic 323), and Derivatives and Hedging (Topic 815).” The amendments in this ASU clarify the interaction of the accounting for equity securities under
Topic 321 and investments accounted for under the equity method of accounting in Topic 323 and the accounting for certain forward contracts and purchased
options accounted for under Topic 815. This ASU is effective for interim and annual reporting periods beginning after December 15, 2020. Early adoption is
permitted. The amendments in this ASU should be applied on a prospective basis. The Company is currently evaluating the impact that the adoption of this
guidance will have on its consolidated financial statements.
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4. Revenue Recognition
Contract Balances
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The contract assets are primarily related to the Company’s fixed fee IP licensing arrangements and rights to consideration for performance obligations delivered
but not billed as of December 31, 2020.
The Company’s contract balances were as follows:
(In thousands)
Unbilled receivables
Deferred revenue
As of December 31,
2020
2019
$
367,953 $
10,461
528,069
11,947
During the years ended December 31, 2020 and December 31, 2019, the Company recognized $10.3 million and $18.3 million, respectively, of revenue that
was included in the contract balances as of December 31, 2019 and December 31, 2018, respectively.
Remaining Performance Obligations
Revenue allocated to remaining performance obligations represents the transaction price allocated to the performance obligations that are unsatisfied, or
partially unsatisfied, which includes unearned revenue and amounts that will be invoiced and recognized as revenue in future periods. Contracted but unsatisfied
performance obligations were approximately $17.4 million as of December 31, 2020, which the Company primarily expects to recognize over the next 2 years.
5. Earnings (Loss) Per Share
The following table sets forth the computation of basic and diluted income (loss) per share (in thousands, except per share amounts):
Net loss per share:
Numerator:
Net loss
Denominator:
Weighted-average common shares outstanding - basic
Effect of potential dilutive common shares
Weighted-average common shares outstanding - diluted
Basic net loss per share
Diluted net loss per share
For the Years Ended December 31,
2019
2018
2020
$
$
$
(43,609)
$
(90,419)
$
(157,957)
113,254
—
113,254
(0.39)
(0.39)
$
$
110,948
—
110,948
(0.81)
(0.81)
$
$
108,450
—
108,450
(1.46)
(1.46)
For the years ended December 31, 2020, 2019 and 2018, options to purchase approximately 0.3 million, 1.0 million and 1.6 million shares, respectively, were
excluded from the calculation because they were anti-dilutive after considering proceeds from exercise, taxes and related unrecognized stock-based compensation
expense.
For the years ended December 31, 2020, 2019 and 2018, an additional 2.3 million, 2.4 million and 2.4 million shares, respectively, have been excluded from the
weighted-average dilutive shares because there was a net loss for the periods. These shares do not include the Company’s 2023 Notes and the 1.125% convertible
senior notes due 2018 (the “2018 Notes”). The par amount of convertible notes is payable in cash equal to the principal amount of the notes plus any accrued and
unpaid interest and then the “in-the-money” conversion benefit feature at the conversion price above $18.93 and $12.07, respectively, per share is payable in cash,
shares of the Company’s common stock or a combination of both. The Company has the option to pay cash, issue shares of common stock or any combination
thereof for the aggregate amount due upon conversion of the notes. The Company’s intent is to settle the principal amount of the notes in cash upon conversion. As
a result, upon conversion of the notes, only the amounts payable in excess of the principal amounts of the notes are considered in diluted earnings per share under
the treasury stock method. Refer to Note 12, “Convertible Notes” for more details.
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6. Intangible Assets and Goodwill
Goodwill
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following tables present goodwill information for the years ended December 31, 2020 and December 31, 2019:
(In thousands)
Total goodwill
December 31,
2019
Adjustment to
Goodwill
(1)
December 31,
2020
$
183,465 $
(243)
$
183,222
______________________________________
(1)
Working capital adjustments related to the acquisition of Northwest Logic, Inc. (“Northwest Logic”).
(In thousands)
Total goodwill
(In thousands)
Total goodwill
$
Gross Carrying
Amount
As of December 31, 2020
Accumulated
Impairment Losses
$
204,992 $
(21,770) $
Net Carrying Amount
183,222
December 31,
2018
Additions to Goodwill Divestiture of Goodwill Effect of Exchange Rates
459 $
(54,494)$
30,322 $
(2)
(1)
(3)
207,178 $
December 31,
2019
183,465
______________________________________
(1)
In August 2019, the Company acquired Northwest Logic, and in December 2019, the Company acquired the Secure Silicon IP and Protocols business
from Verimatrix (the “Secure Silicon IP and Protocols business”), which resulted in the Company recognizing additional goodwill. Refer to Note 21,
“Acquisitions,” for additional information.
(2)
(3)
Refer to Note 17, “Divestiture,” for additional information.
Effect of exchange rates relates to foreign currency translation adjustments for the period.
(In thousands)
Total goodwill
As of December 31, 2019
Accumulated Impairment
Gross Carrying Amount
205,235 $
$
Losses
Net Carrying Amount
(21,770)$
183,465
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Intangible Assets
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The components of the Company’s intangible assets as of December 31, 2020 and December 31, 2019 were as follows:
(In thousands, except useful life)
Existing technology
Customer contracts and contractual relationships
Non-compete agreements and trademarks
IPR&D
Total intangible assets
(In thousands, except useful life)
Existing technology
Customer contracts and contractual relationships
Non-compete agreements and trademarks
IPR&D
Total intangible assets
Useful Life
3 to 10 years
0.5 to 10 years
3 years
Not applicable
Useful Life
3 to 10 years
0.5 to 10 years
3 years
Not applicable
Gross Carrying
Amount
As of December 31, 2020
Accumulated
Amortization
Net Carrying
Amount
263,789 $
36,293
300
1,600
301,982 $
(230,950) $
(34,245)
(300)
—
(265,495) $
32,839
2,048
—
1,600
36,487
Gross Carrying
Amount
(1) (2)
As of December 31, 2019
Accumulated
Amortization
(1) (2)
Net Carrying
Amount
262,789 $
36,293
300
2,600
301,982 $
(213,354) $
(33,428)
(300)
—
(247,082) $
49,435
2,865
—
2,600
54,900
$
$
$
$
_________________________________________
(1)
In October 2019, the Company disposed of approximately $20.7 million of net intangible assets in connection with the sale of the legal entities comprising the
Company’s Payments and Ticketing businesses. Refer to Note 17, “Divestiture,” for additional information.
(2)
In August 2019, the Company acquired Northwest Logic, and in December 2019, the Company acquired the Secure Silicon IP and Protocols business, which
resulted in the Company recognizing additional intangible assets. Refer to Note 21, “Acquisitions,” for additional information.
Amortization expense for intangible assets for the years ended December 31, 2020, 2019, and 2018 was $18.4 million, $17.1 million, and $29.3 million,
respectively. The estimated future amortization expense of intangible assets as of December 31, 2020 was as follows (in thousands):
Years Ending December 31:
2021
2022
2023
2024
2025
Thereafter
Total amortizable purchased intangible assets
IPR&D
Total intangible assets
7. Segments and Major Customers
Amount
14,611
7,644
6,940
5,492
200
—
34,887
1,600
36,487
$
$
Operating segments are based upon Rambus’ internal organization structure, the manner in which its operations are managed, the criteria used by its Chief
Operating Decision Maker (“CODM”) to evaluate segment performance and availability of separate financial information regularly reviewed for resource
allocation and performance assessment.
The Company has determined its CODM to be the Chief Executive Officer (“CEO”). The CEO reviews financial information presented on a consolidated basis
for purposes of managing the business, allocating resources, making operating
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
decisions and assessing financial performance. On this basis, the Company is organized and operates as a single segment within the semiconductor space. As of
December 31, 2020, the Company has a single operating and reportable segment. Accordingly, no additional disclosure of segment measures of profit or loss or
total assets is applicable for all periods presented.
Accounts receivable from the Company’s major customers representing 10% or more of total accounts receivable at December 31, 2020 and 2019, respectively,
was as follows:
Customer 1
Customer 2
Customer 3
Customer 4
As of December 31,
2020
2019
14 %
13 %
11 %
*
_________________________________________
* Customer accounted for less than 10% of total accounts receivable in the period
Revenue from the Company’s major customers representing 10% or more of total revenue for the years ended December 31, 2020, 2019 and 2018 was as
follows:
Customer A
Customer B
Customer C
Customer D
2020
Years Ended December 31,
2019
2018
15 %
13 %
*
*
10 %
*
14 %
*
Revenue from customers in the geographic regions based on the location of contracting parties was as follows:
*
14 %
*
19 %
*
*
15 %
11 %
(In thousands)
USA
Taiwan
South Korea
Japan
Europe
Canada
Singapore
Asia-Other
Total
2020
Years Ended December 31,
2019
2018
$
$
137,614 $
21,803
3,664
16,862
7,359
1,162
28,034
26,249
242,747 $
134,526 $
24,118
3,583
11,877
10,262
3,554
21,751
14,356
224,027 $
129,567
21,749
13,421
23,222
15,668
4,960
19,140
3,474
231,201
At December 31, 2020, of the $57.7 million of total property, plant and equipment, approximately $53.2 million were located in the United States, $3.3 million
were located in India and $1.2 million were located in other foreign locations. At December 31, 2019, of the $44.7 million of total property, plant and equipment,
approximately $40.3 million were located in the United States, $3.4 million were located in India and $1.0 million were located in other foreign locations.
8. Marketable Securities
Rambus invests its excess cash and cash equivalents primarily in U.S. government-sponsored obligations, commercial paper, corporate notes and bonds, money
market funds and municipal notes and bonds that mature within three years.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
All cash equivalents and marketable securities are classified as available-for-sale. Total cash, cash equivalents and marketable securities are summarized as
follows:
(Dollars in thousands)
Money market funds
U.S. Government bonds and notes
Corporate notes, bonds and commercial paper
Total cash equivalents and marketable securities
Cash
Total cash, cash equivalents and marketable securities
(Dollars in thousands)
Money market funds
U.S. Government bonds and notes
Corporate notes, bonds and commercial paper
Total cash equivalents and marketable securities
Cash
Total cash, cash equivalents and marketable securities
Fair Value
Amortized Cost
As of December 31, 2020
Gross Unrealized
Gains
Gross
Unrealized
Losses
32,815 $
169,880
238,491
441,186
61,463
502,649 $
32,815 $
169,920
238,509
441,244
61,463
502,707 $
—
3
61
64
—
64
$
$
—
(43)
(79)
(122)
—
(122)
Fair Value
Amortized Cost
As of December 31, 2019
Gross Unrealized
Gains
Gross
Unrealized
Losses
10,065 $
39,086
314,391
363,542
44,122
407,664 $
10,065 $
39,087
314,435
363,587
44,122
407,709 $
—
—
19
19
—
19
$
$
—
(1)
(63)
(64)
—
(64)
$
$
$
$
Weighted Rate of
Return
0.01 %
0.12 %
0.21 %
Weighted Rate of
Return
1.48 %
1.49 %
1.81 %
Available-for-sale securities are reported at fair value on the balance sheets and classified as follows:
(In thousands)
Cash equivalents
Short-term marketable securities
Total cash equivalents and marketable securities
Cash
Total cash, cash equivalents and marketable securities
As of December 31,
2020
2019
$
$
74,683
366,503
441,186
61,463
502,649
$
$
58,054
305,488
363,542
44,122
407,664
The Company continues to invest in highly rated quality, highly liquid debt securities. The Company holds all of its marketable securities as available-for-sale,
marks them to market, and regularly reviews its portfolio to ensure adherence to its investment policy and to monitor individual investments for risk analysis,
proper valuation, and unrealized losses that may be other than temporary.
The estimated fair value and gross unrealized losses of cash equivalents and marketable securities classified by the length of time that the securities have been
in a continuous unrealized loss position at December 31, 2020 and 2019 are as follows:
(In thousands)
Less than 12 months
Fair Value
Gross Unrealized Loss
December 31,
2020
December 31,
2019
December 31,
2020
December 31,
2019
U.S. Government bonds and notes
Corporate notes, bonds and commercial paper
Total cash equivalents and marketable securities in a continuous
unrealized loss position
$
$
72,896 $
181,354
14,112 $
250,822
(43) $
(79)
254,250 $
264,934 $
(122) $
(1)
(63)
(64)
The gross unrealized loss at December 31, 2020 and 2019 was not material in relation to the Company’s total available-for-sale portfolio. The gross unrealized
loss can be primarily attributed to a combination of market conditions as well as the demand for and duration of the U.S. government-sponsored obligations and
corporate notes and bonds. The Company reasonably
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
believes that there is no need to sell these investments and that it can recover the amortized cost of these investments. The Company has found no evidence of
impairment due to credit losses in its portfolio. Therefore, these unrealized losses were recorded in other comprehensive income (loss). However, the Company
cannot provide any assurance that its portfolio of cash, cash equivalents and marketable securities will not be impacted by adverse conditions in the financial
markets, which may require the Company in the future to record an impairment charge for credit losses which could adversely impact its financial results.
The contractual maturities of cash equivalents (excluding money market funds which have no maturity) and marketable securities are summarized as follows:
(In thousands)
Due less than one year
Due from one year through three years
Total
December 31,
2020
$
$
334,332
74,039
408,371
Refer to Note 9, “Fair Value of Financial Instruments,” for discussion regarding the fair value of the Company’s cash equivalents and marketable securities.
9. Fair Value of Financial Instruments
The fair value measurement statement defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. When determining fair value, the Company considers the principal or most advantageous market
in which the Company would transact, and the Company considers assumptions that market participants would use when pricing the asset or liability, such as
inherent risk, transfer restrictions, and risk of non-performance.
The Company’s financial instruments are measured and recorded at fair value, except for equity method investments and convertible notes. The Company’s
non-financial assets, such as goodwill, intangible assets, and property, plant and equipment, are measured at fair value when there is an indicator of impairment and
recorded at fair value only when an impairment charge is recognized. The Company’s equity method investments are initially recognized at cost, and the carrying
amount is increased or decreased to recognize the Company’s share of the profit or loss of the investee after the date of acquisition. The Company’s share of the
investee’s profit or loss is recognized in the Company’s consolidated statements of operations. Distributions received from an investee reduce the carrying amount
of the investment.
Fair Value Hierarchy
The fair value measurement statement requires disclosure that establishes a framework for measuring fair value and expands disclosure about fair value
measurements. The statement requires that fair value measurement be classified and disclosed in one of the following three categories:
Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
The Company uses unadjusted quotes to determine fair value. The financial assets in Level 1 include money market funds.
Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or
liability.
The Company uses observable pricing inputs including benchmark yields, reported trades, and broker/dealer quotes. The financial assets in Level 2 include U.S.
government bonds and notes, corporate notes, commercial paper and municipal bonds and notes.
Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no
market activity).
The Company does not have any financial assets in Level 3 as of December 31, 2020 and 2019.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company reviews the pricing inputs by obtaining prices from a different source for the same security on a sample of its portfolio. The Company has not
adjusted the pricing inputs it has obtained. The following table presents the financial instruments that are carried at fair value and summarizes the valuation of its
cash equivalents and marketable securities by the above pricing levels as of December 31, 2020 and 2019:
(In thousands)
Money market funds
U.S. Government bonds and notes
Corporate notes, bonds and commercial paper
Total available-for-sale securities
(In thousands)
Money market funds
U.S. Government bonds and notes
Corporate notes, bonds commercial paper
Total available-for-sale securities
As of December 31, 2020
Quoted Market
Prices in Active
Markets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable Inputs
(Level 3)
32,815 $
—
—
32,815 $
— $
169,880
238,491
408,371 $
—
—
—
—
Total
32,815 $
169,880
238,491
441,186 $
As of December 31, 2019
Quoted Market
Prices in Active
Markets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable Inputs
(Level 3)
10,065 $
—
—
10,065 $
— $
39,086
314,391
353,477 $
—
—
—
—
Total
10,065 $
39,086
314,391
363,542 $
$
$
$
$
The Company monitors its investments for other-than-temporary impairment and records appropriate reductions in carrying value when necessary. The
Company monitors its investments for other-than-temporary losses by considering current factors, including the economic environment, market conditions,
operational performance and other specific factors relating to the business underlying the investment, reductions in carrying values when necessary and the
Company’s ability and intent to hold the investment for a period of time which may be sufficient for anticipated recovery in the market. Any other-than-temporary
loss is reported under “Interest and other income (expense), net” in the consolidated statement of operations. During the years ended December 31, 2020 and 2019,
the Company recorded no other-than-temporary impairment charges on its investments.
During the second half of 2018, the Company made an investment in a non-marketable equity security of a private company. This equity investment is
accounted for under the equity method of accounting, and the Company accounts for its equity method share of the income (loss) on a quarterly basis. As of
December 31, 2020, the Company’s 25.0% ownership percentage amounted to a $2.8 million equity interest in this equity investment. As of December 31, 2019,
the Company’s 25.0% ownership percentage amounted to a $3.6 million equity interest in this equity investment. The Company’s equity interest was included in
other assets on the accompanying consolidated balance sheets. The Company recorded immaterial amounts in its consolidated statements of operations
representing its share of the investee’s loss for the years ended December 31, 2020 and 2019.
During the years ended December 31, 2020 and 2019, there were no transfers of financial instruments between different categories of fair value.
The following table presents the financial instruments that are not carried at fair value but which require fair value disclosure as of December 31, 2020 and
2019:
As of December 31, 2020
As of December 31, 2019
(In thousands)
1.375% Convertible Senior Notes due 2023 (the “2023 Notes”)
$
Face
Value
172,500 $
Carrying Value
156,031 $
Fair
Value
194,709 $
Face
Value
172,500 $
Carrying Value
148,788 $
Fair
Value
174,239
The fair value of the convertible notes at each balance sheet date is determined based on recent quoted market prices for these notes which is a level 2
measurement. As discussed in Note 12, “Convertible Notes,” as of December 31, 2020, the convertible notes are carried at their face value of $172.5 million, less
any unamortized debt discount and unamortized debt
70
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
issuance costs. The carrying value of other financial instruments, including accounts receivable, accounts payable and other liabilities, approximates fair value due
to their short maturities.
Information regarding the Company’s goodwill and long-lived assets balances are disclosed in Note 6, “Intangible Assets and Goodwill.”
10. Leases
On July 8, 2019, the Company entered into a definitive triple net space lease agreement with 237 North First Street Holdings, LLC (the “Landlord”), whereby
the Company leases office space located at 4453 North First Street in San Jose, California, (the “Lease”). In April 2020, the lease was amended for certain terms
(the “Amended Lease”). The Amended Lease includes approximately 90,000 square feet of office space, which serves as the Company’s corporate headquarters
and includes engineering, sales, marketing and administrative functions. The Amended Lease has a term of 128 months from the amended commencement date in
April 2020. The starting rent of the Amended Lease is approximately $3.26 per square foot on a triple net basis. The annual base rent increases each year to certain
fixed amounts over the course of the term as set forth in the Amended Lease and will be $4.38 per square foot in the final year of the Amended Lease term. In
addition to the base rent, the Company will also pay operating expenses, insurance expenses, real estate taxes, and a management fee under the Amended Lease.
The Amended Lease also allows for an option to expand, wherein the Company has the right of first refusal to rent additional space in the building. The Company
has a one-time option to extend the Amended Lease for a period of 60 months and may elect to terminate the Amended Lease, via written notice to the Landlord, in
the event the office space is damaged or destroyed. Total required payments under the Amended Lease are approximately $41 million. Pursuant to the terms of the
Amended Lease, the landlord agreed to reimburse the Company up to $9.0 million, related to a tenant improvement allowance. The lease of the Company’s
Sunnyvale, California, headquarters expired on June 30, 2020.
Refer to Note 13, “Commitments and Contingencies,” for additional information regarding the Company’s leases.
The table below reconciles the undiscounted cash flows for the first five years and total of the remaining years to the operating lease liabilities recorded on the
consolidated balance sheet as of December 31, 2020 (in thousands):
Years ending December 31,
2021
2022
2023
2024
2025
Thereafter
Total minimum lease payments
Less: amount of lease payments representing interest
Present value of future minimum lease payments
Less: current obligations under leases
Long-term lease obligations
Amount
8,616
7,382
4,570
3,925
4,043
21,325
49,861
(10,832)
39,029
(4,724)
34,305
$
$
As of December 31, 2020, the weighted-average remaining lease term for the Company’s operating leases was 8.1 years, and the weighted-average discount
rate used to determine the present value of the Company’s operating leases was 4.2%.
Operating lease costs included in research and development and selling, general and administrative costs on the statement of operations were $9.5 million and
$9.6 million for the years ended December 31, 2020 and 2019, respectively. Rent expense, recorded under accounting guidance in effect prior to January 1, 2019
when the New Leasing Standard became effective for the Company, was approximately $5.2 million for the year ended December 31, 2018.
Cash paid for amounts included in the measurement of operating lease liabilities was $7.2 million for the year ended December 31, 2020.
71
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Table of Contents
11. Balance Sheet Details
Inventories
Inventories consisted of the following:
(In thousands)
Raw materials
Work in process
Finished goods
Total
Property, Plant and Equipment, net
Property, plant and equipment, net is comprised of the following:
(In thousands)
Computer software
Computer equipment
Furniture and fixtures
Leasehold improvements
Machinery
Construction in progress
Property, plant and equipment, gross
Less accumulated depreciation and amortization
Property, plant and equipment, net
As of December 31,
2020
2019
7,945 $
650
5,871
14,466 $
3,997
1,455
4,634
10,086
As of December 31,
2020
2019
49,862 $
32,122
11,100
9,658
10,378
27,250
140,370
(82,677)
57,693 $
50,453
36,761
16,136
10,316
10,446
1,691
125,803
(81,089)
44,714
$
$
$
$
Depreciation expense for the years ended December 31, 2020, 2019 and 2018 was $21.2 million, $15.2 million and $10.7 million, respectively.
Accumulated Other Comprehensive Gain (Loss)
Accumulated other comprehensive gain (loss) is comprised of the following:
(In thousands)
Foreign currency translation adjustments
Unrealized loss on available-for-sale securities, net of tax
Total
12. Convertible Notes
The Company’s convertible notes are shown in the following table:
(In thousands)
2023 Notes
Unamortized discount - 2023 Notes
Unamortized debt issuance costs - 2023 Notes
Total convertible notes
Less current portion
Total long-term convertible notes
72
As of December 31,
2020
2019
129
(210)
(81)
$
$
105
(197)
(92)
As of December 31,
2020
2019
172,500 $
(15,420)
(1,049)
156,031
—
156,031 $
172,500
(22,163)
(1,549)
148,788
—
148,788
$
$
$
$
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1.375% Convertible Senior Notes due 2023. On November 17, 2017, the Company issued $172.5 million aggregate principal amount of 1.375% convertible
senior notes pursuant to an indenture (the “2023 Indenture”), by and between the Company and U.S. Bank National Association, as trustee (the “Trustee”). In
accounting for the 2023 Notes at issuance, the Company separated the 2023 Notes into liability and equity components pursuant to the accounting standards for
convertible debt instruments that may be fully or partially settled in cash upon conversion. As of the date of issuance, the Company determined that the liability
component of the 2023 Notes was $137.3 million and the equity component of the 2023 Notes was $35.2 million. The fair value of the liability component was
estimated using an interest rate for a similar instrument without a conversion feature. The unamortized discount related to the 2023 Notes is being amortized to
interest expense using the effective interest method over approximately five years.
The 2023 Notes bear interest at a rate of 1.375% per year, payable semi-annually on February 1 and August 1 of each year, beginning on August 1, 2018. The
2023 Notes will mature on February 1, 2023, unless earlier repurchased by the Company or converted pursuant to their terms.
The Company incurred transaction costs of approximately $3.3 million related to the issuance of 2023 Notes. In accounting for these costs, the Company
allocated the costs to the liability and equity components in proportion to the allocation of proceeds from the issuance of the 2023 Notes to such components.
Transaction costs allocated to the liability component of $2.6 million are netted against the carrying amount of the liability in the consolidated balance sheet and
are amortized to interest expense using the effective interest method over the term of the 2023 Notes. The transaction costs allocated to the equity component of
$0.7 million were recorded as additional paid-in capital.
The initial conversion rate of the 2023 Notes is 52.8318 shares of the Company’s common stock per $1,000 principal amount of 2023 Notes (which is
equivalent to an initial conversion price of approximately $18.93 per share). The conversion rate will be subject to adjustment upon the occurrence of certain
specified events but will not be adjusted for accrued and unpaid interest. In addition, upon the occurrence of a make-whole fundamental change (as defined in the
2023 Indenture), the Company will, in certain circumstances, increase the conversion rate by a number of additional shares for a holder that elects to convert its
2023 Notes in connection with such make-whole fundamental change.
Prior to the close of business on the business day immediately preceding November 1, 2022, the 2023 Notes will be convertible only under the following
circumstances: (1) during any calendar quarter commencing after March 31, 2018, and only during such calendar quarter, if the last reported sale price of the
common stock for at least 20 trading days (whether or not consecutive) in a period of 30 consecutive trading days ending on the last trading day of the immediately
preceding calendar quarter is more than 130% of the conversion price on each applicable trading day; (2) during the five business day period after any five
consecutive trading day period in which, for each trading day of that period, the trading price per $1,000 principal amount of 2023 Notes for such trading day was
less than 98% of the product of the last reported sale price of the common stock and the conversion rate on each such trading day; (3) upon the occurrence of
specified distributions to holders of our common stock; or (4) upon the occurrence of specified corporate transactions. On or after November 1, 2022, until the
close of business on the second scheduled trading day immediately preceding the maturity date, holders of the 2023 Notes may convert all or a portion of their
2023 Notes regardless of the foregoing conditions. Upon conversion, the Company will pay cash up to the aggregate principal amount of the 2023 Notes to be
converted and pay or deliver, as the case may be, cash, shares of common stock or a combination of cash and shares of common stock, at the Company’s election,
in respect of the remainder, if any, of its conversion obligation in excess of the aggregate principal amount of the 2023 Notes being converted.
The Company may not redeem the 2023 Notes prior to the maturity date and no sinking fund is provided for the 2023 Notes. Upon the occurrence of a
fundamental change (as defined in the 2023 Indenture) prior to the maturity date, holders may require the Company to repurchase all or a portion of the 2023 Notes
for cash at a price equal to 100% of the principal amount of the 2023 Notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the
fundamental change repurchase date.
The 2023 Notes are the Company’s senior unsecured obligations and will rank senior in right of payment to any of the Company’s indebtedness that is
expressly subordinated in right of payment to the notes; equal in right of payment with the Company’s existing and future liabilities that are not so subordinated,
including its “2018 Notes”; effectively junior in right of payment to any of the Company’s secured indebtedness to the extent of the value of the assets securing
such indebtedness; and structurally junior to any existing and future indebtedness and other liabilities (including trade payables, but excluding intercompany
obligations and liabilities) and any preferred stock of subsidiaries of the Company.
The following events are considered “events of default” with respect to the 2023 Notes, which may result in the acceleration of the maturity of the 2023 Notes:
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(1) the Company defaults on the payment when due of any principal of any of the 2023 Notes at maturity or upon exercise of a repurchase right or otherwise;
(2) the Company defaults on the payment of any interest, including additional interest, if any, on any of the 2023 Notes, when the interest becomes due and
payable, and continuance of such default for a period of 30 days;
(3) failure by the Company to comply with its obligation to convert the 2023 Notes in accordance with the 2023 Indenture upon exercise of a holder’s
conversion right;
(4) failure by the Company to give a fundamental change notice or notice of a specified corporate transaction when due with respect to the Notes;
(5) failure by the Company to comply with any of its other agreements contained in the 2023 Notes or the 2023 Indenture for a period of 60 days after written
notice from the Trustee or the holders of at least 25% in aggregate principal amount of the Notes then outstanding has been received;
(6) failure by the Company to pay when due the principal of, or acceleration of, any indebtedness for money borrowed by the Company or any of its Material
Subsidiaries (as defined in the 2023 Indenture) in excess of $40.0 million principal amount, if such indebtedness is not discharged, or such acceleration is not
annulled, for a period of 30 days after written notice to the Company by the Trustee or to the Company and the Trustee by holders of 25% or more in aggregate
principal amount of the 2023 Notes then outstanding in accordance with the 2023 Indenture; and
(7) certain events of bankruptcy, insolvency or reorganization of the Company or any of its Material Subsidiaries (as defined in the Indenture).
If such an event of default, other than an event of default described in clause (7) above with respect to the Company, occurs and is continuing, the Trustee by
written notice to the Company, or the holders of at least 25% in aggregate principal amount of the outstanding Notes by notice to the Company and the Trustee,
may, and the Trustee at the request of such holders shall, declare 100% of the principal of and accrued and unpaid interest, if any, on all the Notes then outstanding
to be due and payable. If an event of default described in clause (7) above occurs, 100% of the principal of and accrued and unpaid interest on the Notes then
outstanding will automatically become due and payable.
Note Hedges and Warrants. On November 14, 2017 and November 16, 2017, in connection with the 2023 Notes, the Company entered into privately
negotiated convertible note hedge transactions (the “Convertible Note Hedge Transactions”) with respect to the Company’s common stock, par value $0.001 per
share (the “Common Stock”), with certain bank counterparties (the “Counterparties”). The Company paid an aggregate amount of approximately $33.5 million to
the Counterparties for the Convertible Note Hedge Transactions. The Convertible Note Hedge Transactions cover, subject to anti-dilution adjustments substantially
similar to those in the 2023 Notes, approximately 9.1 million shares of Common Stock, the same number of shares underlying the 2023 Notes, at a strike price that
corresponds to the initial conversion price of the 2023 Notes, and are exercisable upon conversion of the 2023 Notes. The Convertible Note Hedge Transactions
will expire upon the maturity of the 2023 Notes. The Convertible Note Hedge Transactions are intended to reduce the potential economic dilution upon conversion
of the 2023 Notes. The Convertible Note Hedge Transactions are separate transactions and are not part of the terms of the 2023 Notes. Holders of the 2023 Notes
will not have any rights with respect to the Convertible Note Hedge Transactions.
In addition, concurrently with entering into the Convertible Note Hedge Transactions, the Company separately entered into privately negotiated warrant
transactions, whereby the Company sold to the Counterparties warrants (the “Warrants”) to acquire, collectively, subject to anti-dilution adjustments,
approximately 9.1 million shares of the Common Stock at an initial strike price of approximately $23.30 per share, which represents a premium of 60% over the
last reported sale price of the Common Stock of $14.56 on November 14, 2017. The Company received aggregate proceeds of approximately $23.2 million from
the sale of the Warrants to the Counterparties. The Warrants are separate transactions and are not part of the 2023 Notes or Convertible Note Hedge Transactions.
Holders of the 2023 Notes and Convertible Note Hedge Transactions will not have any rights with respect to the Warrants.
The amounts paid and received for the Convertible Note Hedge Transactions and Warrants have been recorded in additional paid-in capital in the consolidated
balance sheets. The fair value of the Convertible Note Hedge Transactions and Warrants are not re-measured through earnings each reporting period. The amounts
paid for the Convertible Note Hedge Transactions are tax deductible expenses, while the proceeds received from the Warrants are not taxable.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Impact to Earnings per Share. The 2023 Notes will have no impact to diluted earnings per share until the average price of our Common Stock exceeds the
conversion price of $18.93 per share because the principal amount of the 2023 Notes is required to be settled in cash upon conversion. Under the treasury stock
method, in periods the Company reports net income, the Company is required to include the effect of additional shares that may be issued under the 2023 Notes
when the price of the Company’s Common Stock exceeds the conversion price. Under this method, the cumulative dilutive effect of the 2023 Notes would be
approximately 9.1 million shares if the average price of the Company’s Common Stock is $18.93. However, upon conversion, there will be no economic dilution
from the 2023 Notes, as exercise of the Convertible Note Hedge Transactions eliminates any dilution from the 2023 Notes that would have otherwise occurred
when the price of the Company’s Common Stock exceeds the conversion price. The Convertible Note Hedge Transactions are required to be excluded from the
calculation of diluted earnings per share, as they would be anti-dilutive under the treasury stock method.
The warrants will have a dilutive effect when the average share price exceeds the warrant’s strike price of $23.30 per share. However, upon conversion, the
Convertible Note Hedge Transactions would neutralize the dilution from the 2023 Notes so that there would only be dilution from the warrants.
1.125% Convertible Senior Notes due 2018. On August 16, 2013, the Company issued $138.0 million aggregate principal amount of 1.125% convertible senior
notes pursuant to an indenture (the “2018 Indenture”) by and between the Company and U.S. Bank National Association, as the trustee. The 2018 Notes matured
on August 15, 2018 (the “Maturity Date”), subject to earlier repurchase or conversion. In accounting for the 2018 Notes at issuance, the Company separated the
2018 Notes into liability and equity components pursuant to the accounting standards for convertible debt instruments that may be fully or partially settled in cash
upon conversion. As of the date of issuance, the Company determined that the liability component of the 2018 Notes was $107.7 million and the equity component
of the 2018 Notes was $30.3 million. The fair value of the liability component was estimated using an interest rate for a similar instrument without a conversion
feature. The unamortized discount related to the 2018 Notes was amortized to interest expense using the effective interest method over five years through August
2018.
The Company paid cash interest at an annual rate of 1.125% of the principal amount at issuance, semi-annually in arrears on February 15 and August 15 of each
year, commencing on February 15, 2014. The Company incurred transaction costs of approximately $3.6 million related to the issuance of 2018 Notes. In
accounting for these costs, the Company allocated the costs to the liability and equity components in proportion to the allocation of proceeds from the issuance of
the 2018 Notes to such components. Transaction costs allocated to the liability component of $2.8 million were recorded as deferred offering costs and were
amortized to interest expense using the effective interest method over five years (the expected term of the debt). The transaction costs allocated to the equity
component of $0.8 million were recorded as additional paid-in capital. The 2018 Notes were the Company’s general unsecured obligations, ranking equally in right
of payment to all of Rambus’ existing and future senior unsecured indebtedness, including the 2023 Notes, and senior in right of payment to any of the Company’s
future indebtedness that is expressly subordinated to the 2018 Notes.
The 2018 Notes were convertible into shares of the Company’s common stock at an initial conversion rate of 82.8329 shares of common stock per $1,000
principal amount of 2018 Notes, subject to adjustment in certain events. This is equivalent to an initial conversion price of approximately $12.07 per share of
common stock. Holders may have surrendered their 2018 Notes for conversion prior to the close of business day immediately preceding May 15, 2018 only under
the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on December 31, 2013 (and only during such calendar
quarter), if the closing sale price of the common stock for 20 or more trading days (whether or not consecutive) during a period of 30 consecutive trading days
ending on the last trading day of the immediately preceding calendar quarter is more than 130% of the conversion price per share of common stock on the last
trading day of the preceding calendar quarter; (2) during the five business day period after any five consecutive trading day period (the ‘‘measurement period’’) in
which the trading price per $1,000 principal amount of notes for each trading day of the measurement period was less than 98% of the product of the closing sale
price of the Company’s common stock and the conversion rate on each such trading day; (3) upon the occurrence of specified distributions to holders of the
Company’s common stock; or (4) upon the occurrence of specified corporate events. On or after May 15, 2018 until the close of business on the second scheduled
trading day immediately preceding the Maturity Date, holders may have converted their notes at any time, regardless of the foregoing circumstances. If a holder
elected to convert its 2018 Notes in connection with certain fundamental changes, as that term is defined in the 2018 Indenture, that occurred prior to the Maturity
Date, the Company would have, in certain circumstances, increased the conversion rate for 2018 Notes converted in connection with such fundamental changes by
a specified number of shares of common stock.
Upon conversion of the 2018 Notes, the Company would have paid cash up to the aggregate principal amount of the notes to have been converted and paid or
delivered, as the case may be, cash, shares of the Company’s common stock or a combination
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
of cash and shares of the Company’s common stock, at the Company’s election, in respect of the remainder, if any, of the Company’s conversion obligation in
excess of the aggregate principal amount of the notes converted, as specified in the Indenture.
During the third quarter of 2018, the Company paid upon maturity the remaining $81.2 million in aggregate principal amount of the 2018 Notes. Additionally,
the Company delivered 423,873 shares of the Company’s common stock as settlement related to the in-the-money conversion feature of the 2018 Notes at
maturity. The value of the shares delivered was approximately $5.0 million.
As of December 31, 2020, none of the conversion conditions were met related to the 2023 Notes. Therefore, the classification of the entire equity component
for the 2023 Notes in permanent equity is appropriate as of December 31, 2020.
Interest expense related to the notes for the years ended December 31, 2020, 2019 and 2018 was as follows:
(In thousands)
2023 Notes coupon interest at a rate of 1.375%
2023 Notes amortization of discount and debt issuance cost at an additional effective interest
rate of 4.9%
2018 Notes coupon interest at a rate of 1.125%
2018 Notes amortization of discount and debt issuance cost at an additional effective interest
rate of 5.5%
Total interest expense on convertible notes
13. Commitments and Contingencies
2020
Years Ended December 31,
2019
2018
2,372 $
2,372 $
7,243
—
—
9,615 $
6,854
—
—
9,226 $
2,372
6,486
377
2,756
11,991
$
$
On December 15, 2009, the Company entered into a lease agreement for approximately 125,000 square feet of office space located at 1050 Enterprise Way in
Sunnyvale, California, which commenced on July 1, 2010 and expired on June 30, 2020. The office space was used for the Company’s corporate headquarters, as
well as engineering, sales, marketing and administrative operations and activities. Refer to Note 10, “Leases,” for information regarding the Company’s lease
agreement for a new corporate headquarters in San Jose, California.
On November 17, 2017, the Company entered into an Indenture with U.S. Bank National Association, as trustee, relating to the issuance by the Company of
$172.5 million aggregate principal amount of the 2023 Notes. Refer to Note 12, “Convertible Notes,” for additional details.
As of December 31, 2020, the Company’s material contractual obligations were as follows (in thousands):
(4)
(1) (2) (3)
Contractual obligations
Software licenses
Acquisition retention bonuses
Convertible notes
Interest payments related to convertible notes
(5)
Total
Total
2021
2022
2023
2024
2025
$
$
18,970 $
6,370
172,500
5,936
203,776 $
12,541 $
3,370
—
2,372
18,283 $
6,429 $
3,000
—
2,372
11,801 $
— $
—
172,500
1,192
173,692 $
— $
—
—
—
— $
—
—
—
—
—
______________________________________
(1)
The above table does not reflect possible payments in connection with unrecognized tax benefits of approximately $25.5 million including $23.6 million
recorded as a reduction of long-term deferred tax assets and $1.9 million in long-term income taxes payable, as of December 31, 2020. As noted below in
Note 19, “Income Taxes,” although it is possible that some of the unrecognized tax benefits could be settled within the next 12 months, the Company cannot
reasonably estimate the outcome at this time.
(2)
(3)
For the Company’s lease commitments as of December 31, 2020, refer to Note 10, “Leases.”
The Company’s other contractual obligations as of December 31, 2020 were not material.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(4)
(5)
The Company has commitments with various software vendors for agreements generally having terms longer than one year.
In connection with the acquisitions of Northwest Logic in August 2019 and the Secure Silicon IP and Protocols business in December 2019, the Company is
obligated to pay retention bonuses to certain employees subject to certain eligibility and acceleration provisions including the condition of employment.
Indemnifications
From time to time, the Company indemnifies certain customers as a necessary means of doing business. Indemnification covers customers for losses suffered or
incurred by them as a result of any patent, copyright, or other IP infringement or any other claim by any third party arising as result of the applicable agreement
with the Company. The Company generally attempts to limit the maximum amount of indemnification that the Company could be required to make under these
agreements to the amount of fees received by the Company, however, this is not always possible. The fair value of the liability as of December 31, 2020 and 2019
was not material.
14. Equity Incentive Plans and Stock-Based Compensation
Equity Incentive Plans
The Company has three equity incentive plans under which grants are currently outstanding: the 2006 Equity Incentive Plan (the “2006 Plan”), the 2015 Equity
Incentive Plan (the “2015 Plan”) and the 2019 Inducement Equity Incentive Plan (the “2019 Inducement Plan”). On April 23, 2015, the Company’s stockholders
approved the 2015 Plan, which replaced the 2006 Plan. Additionally, in the third quarter of 2019, the Company adopted the 2019 Inducement Plan and, subject to
the adjustment provisions of the 2019 Inducement Plan, reserved 400,000 shares of the Company’s common stock for issuance pursuant to equity awards granted
under the 2019 Inducement Plan. The 2015 Plan and 2019 Inducement Plan were the Company’s only plans for providing stock-based incentive awards to eligible
employees, executive officers, non-employee directors and consultants as of December 31, 2020. Grants under all plans typically have a requisite service period of
60 months or 48 months, have straight-line vesting schedules and expire not more than 10 years from date of grant. No further awards will be made under the 2006
Plan, but the 2006 Plan will continue to govern awards previously granted under it. In addition, any shares subject to stock options or other awards granted under
the 2006 Plan that on or after the effective date of the 2015 Plan are forfeited, cancelled, exchanged or surrendered or terminate under the 2006 Plan will become
available for grant under the 2015 Plan. The Board will periodically review actual share consumption under the 2015 Plan and may make a request for additional
shares as needed.
The 2019 Inducement Plan provides for the grant of equity-based awards, including nonstatutory stock options, restricted stock units, restricted stock, stock
appreciation rights, performance shares and performance units, and its terms are substantially similar to the Company’s 2015 Plan. However, awards under the
2019 Inducement Plan may only be granted to individuals who previously have not been employees or non-employee directors of the Company (or who will
become employed following a bona fide period of non-employment or service with the Company), as an inducement material to the individuals’ entry into
employment with the Company, or, to the extent permitted by Rule 5635(c)(3) of the Nasdaq Listing Rules, in connection with a merger or acquisition.
77
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
A summary of shares available for grant under the Company’s plans is as follows:
Total shares available for grant as of December 31, 2017
Shares Available for Grant
5,051,147
Increase in shares approved for issuance
Stock options granted
Stock options forfeited
Nonvested equity stock and stock units granted
Nonvested equity stock and stock units forfeited
(1) (2)
(1)
Total shares available for grant as of December 31, 2018
(3)
Increase in shares approved for issuance
Stock options granted
Stock options forfeited
Nonvested equity stock and stock units granted
Nonvested equity stock and stock units forfeited
(1) (4)
(1)
Total shares available for grant as of December 31, 2019
(5)
Increase in shares approved for issuance
Stock options granted
Stock options forfeited
Nonvested equity stock and stock units granted
Nonvested equity stock and stock units forfeited
(1) (6)
(1)
Total shares available for grant as of December 31, 2020
5,500,000
(711,479)
877,803
(4,993,802)
4,350,377
10,074,046
400,000
(80,000)
426,960
(7,261,845)
3,267,702
6,826,863
7,800,000
(40,000)
101,816
(3,528,401)
1,252,042
12,412,320
______________________________________
(1)
For purposes of determining the number of shares available for grant under the 2015 Plan against the maximum number of shares authorized, each restricted
stock granted reduces the number of shares available for grant by 1.5 shares and each restricted stock forfeited increases shares available for grant by 1.5
shares.
(2)
(3)
(4)
(5)
(6)
Amount includes 0.5 million shares that had been reserved for potential future issuance related to certain performance unit awards discussed under the section
titled “Nonvested Equity Stock and Stock Units” below.
Shares were reserved under the 2019 Inducement Plan adopted in the third quarter of 2019.
Amount includes 1.0 million shares that have been reserved for potential future issuance related to certain performance unit awards discussed under the section
titled “Nonvested Equity Stock and Stock Units” below.
On April 30, 2020, the Company’s stockholders approved an additional 7,800,000 shares for issuance under the 2015 Plan.
Amount includes 0.5 million shares that have been reserved for potential future issuance related to certain performance unit awards discussed under the section
titled “Nonvested Equity Stock and Stock Units” below.
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Table of Contents
General Stock Option Information
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table summarizes stock option activity under the Company’s equity incentive plans for the years ended December 31, 2020, 2019 and 2018 and
information regarding stock options outstanding, exercisable, and vested and expected to vest as of December 31, 2020:
Options Outstanding
Number of Shares
Weighted-Average
Remaining
Contractual Term
Aggregate
Intrinsic Value
(In thousands, except per share amounts and years)
Outstanding as of December 31, 2017
Options granted
Options exercised
Options forfeited
Outstanding as of December 31, 2018
Options granted
Options exercised
Options forfeited
Outstanding as of December 31, 2019
Options granted
Options exercised
Options forfeited
Outstanding as of December 31, 2020
Vested or expected to vest at December 31, 2020
Options exercisable at December 31, 2020
Employee Stock Purchase Plan
Weighted-
Average Exercise
Price per Share
9.78
12.84
6.70
13.73
10.25
13.25
7.79
13.71
11.37
15.59
10.74
19.41
4,310,361 $
711,479 $
(908,146) $
(877,803) $
3,235,891 $
80,000 $
(1,249,785) $
(426,960) $
1,639,146 $
40,000 $
(613,119) $
(101,816) $
964,211 $
961,925 $
781,102 $
11.08
11.08
10.51
5.04 $
5.03 $
4.31 $
6,151
6,143
5,432
During the years ended December 31, 2020, 2019, and 2018, the Company had one employee stock purchase plan, the 2015 Employee Stock Purchase Plan
(“2015 ESPP”). Employees generally will be eligible to participate in the plan if they are employed by Rambus for more than 20 hours per week and more than
five months in a fiscal year. The 2015 ESPP provides for six-month offering periods, with a new offering period commencing on the first trading day on or after
May 1 and November 1 of each year. Under the plans, employees may purchase stock at the lower of 85% of the beginning of the offering period (the enrollment
date), or the end of each offering period (the purchase date). Employees generally may not purchase more than the number of shares having a value greater than
$25,000 in any calendar year, as measured at the purchase date.
The Company issued 467,065 shares at a weighted-average price of $10.51 per share during the year ended December 31, 2020. The Company issued
629,438 shares at a weighted-average price of $8.53 per share during the year ended December 31, 2019. The Company issued 541,395 shares at a weighted-
average price of $9.99 per share during the year ended December 31, 2018. On April 30, 2020, the Company's stockholders approved an additional 2,000,000
shares to be reserved for issuance under the 2015 ESPP. As of December 31, 2020, 3,198,375 shares under the ESPP remained available for issuance.
Stock-Based Compensation
Stock Options
During the years ended December 31, 2020 and 2019, the number of stock options granted were not material. During the year ended December 31, 2018,
Rambus granted 711,479 stock options with an estimated total grant-date fair value of $3.0 million. During the years ended December 31, 2020, 2019 and 2018,
Rambus recorded stock-based compensation related to stock options of $0.6 million, $1.0 million and $1.7 million, respectively.
As of December 31, 2020, there was $1.1 million of total unrecognized compensation cost, net of expected forfeitures, related to unvested stock-based
compensation arrangements granted under the stock option plans. This cost is expected to be recognized over a weighted-average period of 2.2 years. The total fair
value of options vested for the years ended December 31, 2020, 2019 and 2018 was $3.3 million, $6.7 million and $12.9 million, respectively.
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Employee Stock Purchase Plans
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
During the years ended December 31, 2020, 2019 and 2018, Rambus recorded stock-based compensation related to the ESPP of $1.5 million, $1.5 million and
$1.4 million, respectively. As of December 31, 2020, there was $0.7 million of total unrecognized compensation cost related to stock-based compensation
arrangements granted under the ESPP. That cost is expected to be recognized over four months.
Valuation Assumptions
Rambus estimates the fair value of stock awards using the BSM model. The BSM model determines the fair value of stock-based compensation and is affected
by Rambus’ stock price on the date of the grant as well as assumptions regarding a number of highly complex and subjective variables. These variables include
expected volatility, expected life of the award, expected dividend rate, and expected risk-free rate of return. The assumptions for expected volatility and expected
life are the two assumptions that significantly affect the grant-date fair value. If actual results differ significantly from these estimates, stock-based compensation
expense and Rambus’ results of operations could be materially impacted.
The fair value of stock awards is estimated as of the grant date using the BSM option-pricing model assuming a dividend yield of 0% and the additional
weighted-average assumptions as listed in the table below.
The following table presents the weighted-average assumptions used to estimate the fair value of stock options granted that contain only service conditions in
the periods presented:
Stock Option Plan
Expected stock price volatility
Risk free interest rate
Expected term (in years)
Weighted-average fair value of stock options granted
Employee Stock Purchase Plan
Expected stock price volatility
Risk free interest rate
Expected term (in years)
Weighted-average fair value of purchase rights granted under the purchase plan
Stock Option Plan for Years Ended December 31,
2019
2018
2020
38%
0.2%
5.5
$5.46
33%-36%
1.4%-1.6%
5.1-5.2
$4.36
24%-32%
2.6%-2.8%
5.8
$4.23
Employee Stock Purchase Plan for Years Ended December 31,
2018
2019
2020
37%-46%
0.1%
0.5
$3.46
32%
1.6%-2.4%
0.5
$3.13
27%-34%
2.05%-2.5%
0.5
$2.59
Expected Stock Price Volatility: Given the volume of market activity in its market traded options, Rambus determined that it would use the implied volatility of
its nearest-to-the-money traded options. The Company believes that the use of implied volatility is more reflective of market conditions and a better indicator of
expected volatility than historical volatility. If there is not sufficient volume in its market traded options, the Company will use an equally weighted blend of
historical and implied volatility.
Risk-free Interest Rate: Rambus bases the risk-free interest rate used in the BSM valuation method on implied yield currently available on the U.S. Treasury
zero-coupon issues with an equivalent term. Where the expected terms of Rambus’ stock-based awards do not correspond with the terms for which interest rates
are quoted, Rambus uses an approximation based on rates on the closest term currently available.
Expected Term: The expected term of options granted represents the period of time that options granted are expected to be outstanding. The expected term was
determined based on historical experience of similar awards, giving consideration to the contractual terms of the stock-based awards, vesting schedules and
expectations of future employee behavior. The expected term of ESPP grants is based upon the length of each respective purchase period.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Nonvested Equity Stock and Stock Units
The Company grants nonvested equity stock units to officers, directors and employees. For the years ended December 31, 2020, 2019 and 2018, the Company
granted nonvested equity stock units totaling 2.0 million, 4.2 million and 3.0 million shares, respectively. These awards have a service condition, generally a
service period of four years, except in the case of grants to directors, for which the service period is one year. For the years ended December 31, 2020, 2019 and
2018, the fair value of nonvested equity stock units at the date of grant was approximately $31.0 million, $43.0 million and $38.1 million, respectively. During the
years ended December 31, 2020, 2019 and 2018, the Company granted performance unit awards to certain Company executive officers with vesting subject to the
achievement of certain performance and/or market conditions. The ultimate number of performance units that can be earned can range from 0% to 200% of target
depending on performance relative to target over the applicable period. The shares earned will vest on the third anniversary of the date of grant. The Company’s
shares available for grant has been reduced to reflect the shares that could be earned at the maximum target.
For the years ended December 31, 2020, 2019 and 2018, the Company recorded stock-based compensation expense of approximately $23.7 million,
$23.9 million and $18.6 million, respectively, related to all outstanding nonvested equity stock grants. Unrecognized stock-based compensation related to all
nonvested equity stock grants, net of an estimate of forfeitures, was approximately $34.5 million at December 31, 2020. This cost is expected to be recognized over
a weighted-average period of 2.1 years.
The following table reflects the activity related to nonvested equity stock and stock units for the three years ended December 31, 2020:
Nonvested Equity Stock and Stock Units
Nonvested at December 31, 2017
Granted
Vested
Forfeited
Nonvested at December 31, 2018
Granted
Vested
Forfeited
Nonvested at December 31, 2019
Granted
Vested
Forfeited
Nonvested at December 31, 2020
15. Stockholders’ Equity
Shares
Weighted-Average
Grant-Date Fair
Value
5,861,349 $
2,978,558 $
(1,713,930) $
(2,266,842) $
4,859,135 $
4,233,701 $
(1,896,283) $
(1,907,070) $
5,289,483 $
1,986,117 $
(1,693,659) $
(730,676) $
4,851,265 $
12.68
12.77
12.39
12.97
12.71
10.17
12.40
11.33
11.27
15.60
11.70
11.83
12.82
On January 21, 2015, the Company’s Board approved a share repurchase program authorizing the repurchase of up to an aggregate of 20.0 million shares (the
“2015 Repurchase Program”). Share repurchases under the 2015 Repurchase Program were made through the open market, established plans or privately
negotiated transactions in accordance with all applicable securities laws, rules, and regulations. During the years ended December 31, 2020 and 2019, the Company
did not repurchase any shares of its common stock under the 2015 Repurchase Program.
On October 29, 2020, the Company’s Board approved a new share repurchase program authorizing the repurchase of up to an aggregate of 20.0 million shares
(the “2020 Repurchase Program”). Share repurchases under the 2020 Repurchase Program may be made through the open market, established plans or privately
negotiated transactions in accordance with all applicable securities laws, rules, and regulations. There is no expiration date applicable to the 2020 Repurchase
Program. The 2020 Repurchase Program replaced the previous program approved by the Board in January 2015 and canceled the remaining shares outstanding as
part of the previous authorization.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
On November 11, 2020, the Company entered into an accelerated share repurchase program with Deutsche Bank AG, London Branch as counterparty, through
its agent Deutsche Bank Securities Inc. (“Deutsche Bank”) (the “2020 ASR Program”). The 2020 ASR Program was part of the broader share repurchase program
previously authorized by the Company’s Board on October 29, 2020. Under the 2020 ASR Program, the Company pre-paid to Deutsche Bank the $50.0 million
purchase price for its common stock and, in turn, the Company received an initial delivery of approximately 2.6 million shares of its common stock from Deutsche
Bank in the fourth quarter of 2020, which were retired and recorded as a $40.0 million reduction to stockholders’ equity. The remaining $10.0 million of the initial
payment was recorded as a reduction to stockholders’ equity as an unsettled forward contract indexed to the Company’s stock. The number of shares to be
ultimately purchased by the Company will be determined based on the volume-weighted-average price of the common stock during the terms of the transaction,
minus an agreed upon discount between the parties. The 2020 ASR Program is expected to be completed within six months from the beginning of the program.
There were no other repurchases of the Company’s common stock during 2020.
As of December 31, 2020, there remained an outstanding authorization to repurchase approximately 17.4 million shares of the Company’s outstanding common
stock under the current share repurchase program.
The Company records share repurchases as a reduction to stockholders’ equity. The Company records a portion of the purchase price of the repurchased shares
as an increase to accumulated deficit when the price of the shares repurchased exceeds the average original proceeds per share received from the issuance of
common stock. During the year ended December 31, 2020, the cumulative price of $31.5 million was recorded as an increase to accumulated deficit.
Convertible Note Hedge Transactions
On November 14, 2017 and November 16, 2017, in connection with the 2023 Notes, the Company entered into the Convertible Note Hedge Transactions with
respect to the Common Stock, with the Counterparties. The Company paid an aggregate amount of approximately $33.5 million to the Counterparties for the
Convertible Note Hedge Transactions. The Convertible Note Hedge Transactions cover, subject to anti-dilution adjustments substantially similar to those in the
2023 Notes, approximately 9.1 million shares of Common Stock, the same number of shares underlying the 2023 Notes, at a strike price that corresponds to the
initial conversion price of the 2023 Notes, and are exercisable upon conversion of the 2023 Notes. The Convertible Note Hedge Transactions will expire upon the
maturity of the 2023 Notes.
The Convertible Note Hedge Transactions are expected generally to reduce the potential dilution to the Common Stock upon conversion of the 2023 Notes
and/or offset any cash payments the Company is required to make in excess of the principal amount of the converted 2023 Notes, as the case may be, in the event
that the market price per share of the Common Stock, as measured under the terms of the Convertible Note Hedge Transactions, is greater than the strike price of
the Convertible Note Hedge Transactions.
The Convertible Note Hedge Transactions are separate transactions, entered into by the Company with the Counterparties, and are not part of the terms of the
2023 Notes. Holders of the 2023 Notes will not have any rights with respect to the Convertible Note Hedge Transactions. Refer to Note 12, “Convertible Notes,”
for additional details.
Warrant Transactions
On November 14, 2017 and November 16, 2017, in connection with the 2023 Notes, the Company sold the Warrants to the Counterparties to acquire,
collectively, subject to anti-dilution adjustments, approximately 9.1 million shares of the Common Stock at an initial strike price of approximately $23.30 per
share, which represents a premium of 60% over the last reported sale price of the Common Stock of $14.56 on November 14, 2017. The Company received
aggregate proceeds of approximately $23.2 million from the sale of the Warrants to the Counterparties. The Warrants were sold in private placements to the
Counterparties pursuant to an exemption from the registration requirements of the Securities Act afforded by Section 4(a)(2) of the Securities Act.
If the market price per share of the Common Stock, as measured under the terms of the Warrants, exceeds the strike price of the Warrants, the Warrants could
have a dilutive effect, unless the Company elects, subject to certain conditions, to settle the Warrants in cash.
The Warrants are separate transactions, entered into by the Company with the Counterparties, and are not part of the terms of the 2023 Notes. Holders of the
2023 Notes will not have any rights with respect to the Warrants. Refer to Note 12, “Convertible Notes,” for additional details.
82
16. Benefit Plans
Rambus has a 401(k) Plan (the “401(k) Plan”) qualified under Section 401(k) of the Internal Revenue Code of 1986. Each eligible employee may elect to
contribute up to 60% of the employee’s annual compensation to the 401(k) Plan, up to the Internal Revenue Service limit. Rambus, at the discretion of its Board of
Directors, may match employee contributions to the 401(k) Plan. The Company matches 50% of eligible employee’s contribution, up to the first 6% of an eligible
employee’s qualified earnings. For the years ended December 31, 2020, 2019 and 2018, Rambus made matching contributions totaling approximately $1.8 million,
$2.0 million and $2.1 million, respectively.
17. Divestiture
During the second quarter of 2019, the Company entered into a share purchase agreement with Visa International Service Association (the “Purchaser”),
pursuant to which the Purchaser agreed to acquire all of the outstanding shares of the Company’s subsidiary, Smart Card Software Limited, which comprises the
Company’s Payments and Ticketing businesses, which was part of the Company’s former Rambus Security Division (RSD) segment. The decision to sell these
businesses reflected the Company’s ongoing review of its business to focus on products and offerings that are core to its semiconductor business.
The sale of the legal entities comprising the Company’s Payments and Ticketing businesses was completed in October 2019. The final gross proceeds from the
sale amounted to $82.5 million, which included the selling price of $75.0 million and approximately $7.5 million in net working capital adjustments finalized in
October 2019. The $7.5 million in net working capital adjustments is net of a final working capital adjustment due to the buyer of approximately $1.1 million,
which the Company paid in cash to the buyer during the first quarter of 2020. The final gross proceeds were offset by approximately $3.8 million in transaction
costs for the year ended December 31, 2019.
The Company measured these businesses at the lower of their carrying value or fair value less any costs to sell, and recognized a cumulative impairment of
approximately $7.4 million during the year ended December 31, 2019. In the second quarter of 2019, in order to determine the impairment loss, the
Company performed a relative fair value measurement to allocate goodwill to the business units between the disposed Payments and Ticketing businesses and the
retained business, which includes Cryptography Research Inc., which was part of the former RSD segment. The fair value of the retained business was estimated
by management using a discounted cash flow model. The Company’s cash flow projections for the retained business included significant judgments and
assumptions relating to revenue growth rates, projected operating income and the discount rate.
The operating results of these businesses did not qualify for reporting as discontinued operations. The reported results and financial position of the businesses
did not necessarily reflect the total value of the businesses that the Company realized upon their sale.
18. Restructuring and Other Charges
2020 Restructuring Plan
In November 2020, the Company initiated a restructuring program to reduce overall expenses which is expected to improve future profitability by reducing
spending on research and development efforts and sales, general and administrative programs (the “2020 Restructuring Plan”). In connection with this restructuring
program, the Company initiated a plan of termination resulting in a reduction of approximately 70 employees. During the year ended December 31, 2020, the
Company recorded charges of approximately $3.3 million related primarily to the reduction in workforce. During the year ended December 31, 2020, the Company
paid approximately $0.9 million of the total charges. As of December 31, 2020, the Company’s accrued restructuring balance was approximately $2.4 million. The
2020 Restructuring Plan is expected to be substantially completed in the first half of 2021.
2019 Restructuring Plan
In June 2019, the Company initiated a restructuring program to reduce overall expenses which is expected to improve future profitability by reducing spending
on research and development efforts and sales, general and administrative programs (the “2019 Restructuring Plan”). In connection with this restructuring program,
the Company initiated a plan of termination resulting in a reduction of approximately 80 employees. During the years ended December 31, 2020 and 2019, the
Company recorded charges of approximately $0.8 million and $8.8 million, respectively, related to the reduction in workforce. The 2019 Restructuring Plan was
substantially completed in the second quarter of 2020.
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Table of Contents
2018 Restructuring Plan
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
On January 30, 2018, the Company announced its plans to close its lighting division and manufacturing operations in Brecksville, Ohio, (“the 2018
Restructuring Plan”). The Company believed that such business was not core to its strategy and growth objectives. In connection therewith, the Company
terminated approximately 50 employees, and began the process to exit the facilities in Ohio and sell the related equipment. The Company expected to record
restructuring charges of approximately $2.0 million to $5.0 million related to employee terminations and severance costs and facility related costs. During the year
ended December 31, 2018, the Company recorded a net charge of $2.2 million, primarily related to the reduction in workforce, of which $2.0 million was related to
the lighting division and $0.2 million was related to corporate support functions. The 2018 Restructuring Plan was completed as of December 31, 2019.
The Company concluded that the closure of its lighting division did not meet the criteria for reporting as discontinued operations. Consequently, the lighting
division’s long-lived assets were reclassified as held for sale. As of December 31, 2018, the Company sold all property, plant and equipment from its lighting
division reclassified as held for sale on the consolidated balance sheets of approximately $3.5 million and recognized a gain on the disposal of the held for sale
assets of approximately $1.2 million included in restructuring charges on the consolidated statements of operations.
19. Income Taxes
Income (loss) before taxes consisted of the following:
(In thousands)
Domestic
Foreign
The provision for (benefit from) income taxes was comprised of:
(In thousands)
Federal:
Current
Deferred
State:
Current
Deferred
Foreign:
Current
Deferred
2020
Years Ended December 31,
2019
2018
(43,029) $
3,398
(39,631) $
(81,316) $
(5,700)
(87,016) $
(63,829)
(6,799)
(70,628)
2020
Years Ended December 31,
2019
2018
(456) $
2,018
652
(1,528)
3,097
195
3,978 $
2,932 $
2,016
657
(1,198)
1,708
(2,712)
3,403 $
5,451
82,726
333
522
1,592
(3,295)
87,329
$
$
$
$
84
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The differences between Rambus’ effective tax rate and the U.S. federal statutory regular tax rate were as follows:
U.S. federal statutory rate
State income tax (expense)/benefit
Withholding tax
Foreign rate differential
Research and development credit
Executive compensation
Stock-based compensation
Foreign tax credit
Foreign derived intangible income deduction
Divestiture
Other
Valuation allowance
The components of the net deferred tax assets (liabilities) were as follows:
(In thousands)
Deferred tax assets:
Depreciation and amortization
Lease liabilities
Other timing differences, accruals and reserves
Deferred equity compensation
Net operating loss carryovers
Tax credits
Total gross deferred tax assets
Deferred tax liabilities:
Lease right-of-use assets
Convertible debt
Deferred revenue
Total gross deferred tax liabilities
Total net deferred tax assets
Valuation allowance
Net deferred tax liabilities
(In thousands)
Reported as:
Non-current deferred tax assets
Non-current deferred tax liabilities
Net deferred tax liabilities
2020
Years Ended December 31,
2019
2018
21.0 %
(2.5)
(3.7)
(4.4)
(4.4)
(1.7)
0.6
(85.7)
12.3
(18.8)
0.7
76.6
(10.0)%
21.0 %
0.9
(3.5)
(1.6)
1.2
(1.2)
(2.3)
3.4
4.6
4.8
0.3
(31.5)
(3.9)%
21.0 %
(1.2)
(7.7)
(0.2)
2.2
(0.1)
(2.8)
7.7
14.8
—
0.7
(158.0)
(123.6)%
As of December 31,
2020
2019
13,199 $
8,716
5,347
4,631
15,756
169,063
216,712
(6,392)
(130)
(45,845)
(52,367)
164,345
(174,328)
(9,983) $
13,995
10,734
9,522
4,456
20,900
233,407
293,014
(10,400)
(151)
(94,763)
(105,314)
187,700
(196,972)
(9,272)
As of December 31,
2020
2019
4,353 $
(14,336)
(9,983) $
4,574
(13,846)
(9,272)
$
$
$
$
The Company periodically evaluates the realizability of its net deferred tax assets based on all available evidence, both positive and negative. During the third
quarter of 2018, the Company assessed the changes in its underlying facts and circumstances and evaluated the realizability of its existing deferred tax assets based
on all available evidence, both positive and
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
negative, and the weight accorded to each, and concluded a full valuation allowance associated with U.S. federal and California deferred tax assets was
appropriate. During 2020, as a result of the enactment of California A.B. 85 and the temporary suspension of California net operating loss utilization for tax years
2020 through 2022, the Company released $0.6 million of the valuation allowance on its deferred tax asset for California research and development tax credits. The
Company continues to maintain a full valuation allowance on the remainder of its California and U.S. federal deferred tax assets as it does not expect to be able to
fully utilize them.
The following table presents the tax valuation allowance information for the years ended December 31, 2020, 2019 and 2018:
(In thousands)
Tax Valuation Allowance
Year ended December 31, 2018
Year ended December 31, 2019
Year ended December 31, 2020
Balance at
Beginning of
Period
$
$
$
50,911
173,878
196,972
Charged (Credited)
to Operations
Charged to
Other Account*
Valuation
Allowance Release
Valuation
Allowance Set up
Balance at End
of Period
—
23,094
(22,019)
9,238
—
3
—
—
(628)
113,729 $
— $
— $
173,878
196,972
174,328
______________________________________
* Amounts not charged to operations are charged to other comprehensive income or retained earnings.
As of December 31, 2020, Rambus had California and other state net operating loss carryforwards of $202.2 million and $35.8 million, respectively. As of
December 31, 2020, Rambus had federal research and development tax credit carryforwards of $38.8 million and foreign tax credits of $123.5 million. As of
December 31, 2020, Rambus had California research and development tax credit carryforwards of $30.3 million and California alternative minimum tax credit
carryforwards of $0.2 million. The federal foreign tax credits and research and development credits begin to expire in 2021. Approximately $9.9 million of federal
foreign tax credits will expire in 2021. The California net operating losses begin to expire in 2027. The California research and development credits carry forward
indefinitely.
In the event of a change in ownership, as defined under federal and state tax laws, Rambus’ net operating loss and tax credit carryforwards could be subject to
annual limitations. The annual limitations could result in the expiration of the net operating loss and tax credit carryforwards prior to utilization.
As of December 31, 2020, the Company had $134.0 million of unrecognized tax benefits including $23.6 million recorded as a reduction of long-term deferred
tax assets, $109 million recorded as a reduction of other assets associated with refundable withholding taxes previously withheld from licensees in South Korea
(Korea), and $1.9 million recorded in long-term income taxes payable. As a result of recent court rulings in Korea, the Company has determined that they may be
entitled to refund claims for foreign taxes previously withheld from licensees in Korea. The Company recognizes that there are numerous risks and uncertainties
associated with the ultimate collection of this refund, and has therefore established an offsetting reserve for the entire amount of potentially refundable withholding
taxes previously withheld in Korea. If recognized, $110.9 million would be recorded as an income tax benefit in the consolidated statement of operations. As of
December 31, 2019, the Company had $115.7 million of unrecognized tax benefits including $22.8 million recorded as a reduction of long-term deferred tax assets,
$91 million recorded as a reduction of other assets associated with refundable withholding taxes previously withheld from licensees in South Korea (Korea), and
$1.8 million recorded in long term income taxes payable.
86
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
A reconciliation of the beginning and ending amounts of unrecognized income tax benefits for the years ended December 31, 2020, 2019 and 2018 was as
follows:
(In thousands)
Balance at January 1
Tax positions related to current year:
Additions
Tax positions related to prior years:
Additions
Reductions
Settlements
Balance at December 31
2020
Years Ended December 31,
2019
2018
115,653 $
23,482 $
22,652
18,600
16,485
—
(209)
—
134,044 $
76,158
(472)
—
115,653 $
1,032
115
(317)
—
23,482
$
$
Rambus recognizes interest and penalties related to uncertain tax positions as a component of the income tax provision (benefit). At December 31, 2020 and
2019, an immaterial amount of interest and penalties are included in long-term income taxes payable.
Rambus files income tax returns for the U.S., California, India, and various other state and foreign jurisdictions. The U.S. federal returns are subject to
examination from 2016 and forward. The California returns are subject to examination from 2010 and forward. In addition, any research and development credit
carryforward or net operating loss carryforward generated in prior years and utilized in these or future years may also be subject to examination. The India returns
are subject to examination from fiscal year ending March 2012 and forward. The Company is currently under examination by California for the 2010, 2011 and
2018 tax years. The Company’s India subsidiary is under examination by the Indian tax administration for tax years beginning with 2011, except for 2014, which
was assessed in the Company’s favor. These examinations may result in proposed adjustments to the income taxes as filed during these periods. Management
regularly assesses the likelihood of outcomes resulting from income tax examinations to determine the adequacy of their provision for income taxes and believes
their provision for unrecognized tax benefits is adequate. The estimated potential reduction in the Company’s unrecognized tax benefits in the next 12 months
would not be material.
At December 31, 2020, no other income taxes (state or foreign) have been provided on undistributed earnings of approximately $16.4 million from the
Company’s international subsidiaries since these earnings have been, and under current plans will continue to be, indefinitely reinvested outside the United States.
However, if such earnings were distributed, the Company would incur approximately $1.8 million of foreign withholding taxes and an immaterial amount of U.S.
taxes.
20. Litigation and Asserted Claims
Rambus is not currently a party to any material pending legal proceeding; however, from time to time, Rambus may become involved in legal proceedings or be
subject to claims arising in the ordinary course of its business. Although the results of litigation and claims cannot be predicted with certainty, the Company
currently believes that the final outcome of these ordinary course matters will not have a material adverse effect on our business, operating results, financial
position or cash flows. Regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of
management attention and resources and other factors.
The Company records a contingent liability when it is probable that a loss has been incurred and the amount is reasonably estimable in accordance with
accounting for contingencies.
21. Acquisitions
Northwest Logic, Inc.
On July 26, 2019, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Northwest Logic, a leading supplier of memory,
PCIe, and MIPI digital controllers. On August 23, 2019 (the “Closing Date”), the Company completed its acquisition of Northwest Logic by acquiring all issued
and outstanding shares of Northwest Logic through the merger of a wholly-owned Rambus subsidiary with Northwest Logic. Under the terms of the Merger
Agreement, the Company paid approximately $21.9 million in cash, including certain bonus payments and adjustments for working capital. Of the purchase price,
$3.0 million of the consideration was deposited into an escrow account to fund indemnification
87
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
obligations and other contractual provisions, to be released 24 months after the Closing Date. This acquisition allows the Company to further scale, bringing
together high-speed design expertise with the physical and digital IP families from renowned market leaders to offer comprehensive memory and SerDes IP
solutions for chip designers. The Company integrated Northwest Logic’s offerings and design team into its IP cores technology solutions.
As part of the acquisition, the Company agreed to pay $9.0 million to certain Northwest Logic employees in cash over three years following August 23, 2019
(the “Retention Bonus”), to be paid in three installments of $3.0 million on each of the dates that are 12 months, 24 months and 36 months following the Closing
Date. The Retention Bonus payouts are subject to the condition of continued employment, and therefore treated as compensation and expensed as incurred.
As of December 31, 2019, the Company had incurred approximately $0.7 million in external acquisition costs in connection with the transaction, which were
expensed as incurred.
The fair value of the assets acquired was determined by management primarily by using the multi-period excess earnings method under the income approach.
This method reflects the present value of the projected cash flows that are expected to be generated by the existing technologies less charges representing the
contribution of other assets to those cash flows. The Company performed a valuation of the net assets acquired as of the Closing Date.
The total consideration from the business combination was allocated as of the Closing Date, and reflects adjustments made through the measurement period to
finalize the purchase price accounting, as follows:
(In thousands)
Cash and cash equivalents
Accounts receivable
Prepaid expenses and other current assets
Identified intangible assets
Goodwill
Operating lease right-of-use asset
Other asset
Accounts payable
Operating lease liability
Other current liabilities
Deferred tax liability, net
Total
Total
159
1,679
65
8,800
13,477
178
9
(9)
(178)
(108)
(2,133)
21,939
$
$
The goodwill arising from the acquisition is primarily attributed to synergies related to the combination of new and complementary technologies of the
Company and the assembled workforce of Northwest Logic. This goodwill is not deductible for tax purposes.
The identified intangible assets assumed in the acquisition of Northwest Logic were recognized as follows based upon their estimated fair values as of the
acquisition date:
Existing technology
Customer contracts and contractual relationships
Customer backlog
Total
Secure Silicon IP and Protocols Business from Verimatrix
Total
(in thousands)
8,100
400
300
8,800
$
$
Estimated Weighted-Average
Useful Life
(in years)
5
2
0.5
On September 11, 2019, the Company announced it had signed an asset purchase agreement to acquire the Secure Silicon IP and Protocols business from
Verimatrix, formerly Inside Secure, for $65.0 million in cash. On December 8, 2019 (the “Closing Date”), the Company completed its acquisition of the Secure
Silicon IP and Protocols business. Under the terms of the Asset
88
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Purchase Agreement, as amended, the Company paid approximately $45.0 million in cash at the Closing Date, and may have been required to pay up to an
additional $20.0 million, at that time valued at $1.8 million (the “fair value of the earn-out liability”), subject to certain revenue targets of the transferred business
for the calendar year 2020. Since the specified targets were not met for calendar year 2020, the Company recorded a full reduction in the fair value of the earn-out
liability, which resulted in a gain in the consolidated statements of operations. The addition of the embedded security teams, products and expertise from the
Secure Silicon IP and Protocols business augments the Company’s portfolio of mission-critical embedded security products and expands its offerings for data
center, AI, networking and automotive.
The total adjusted purchase consideration for the acquisition of the Secure Silicon IP and Protocols business was $46.8 million, which consisted of the
following:
(In thousands)
Cash consideration transferred at the Closing Date
Fair value of earn-out liability
Total adjusted purchase price
Total
45,000
1,800
46,800
$
$
As part of the acquisition, the Company agreed to pay $1.0 million to certain employees in cash over two years effective January 1, 2020 (the “Retention
Bonus”), to be paid in arrears in the fourth quarter of 2020 and 2021, respectively. The Retention Bonus payouts are subject to the condition of continued
employment, and therefore treated as compensation and expensed as incurred.
As of December 31, 2019, the Company had incurred approximately $3.1 million in external acquisition costs in connection with the transaction, which were
expensed as incurred.
The fair value of the assets acquired was determined by management primarily by using the multi-period excess earnings method under the income approach.
This method reflects the present value of the projected cash flows that are expected to be generated by the existing technologies less charges representing the
contribution of other assets to those cash flows. The Company performed a valuation of the net assets acquired as of the Closing Date.
The Company performed a valuation of the net assets acquired as of the Closing Date. The total consideration from the acquisition was allocated as follows:
(In thousands)
Prepaid expenses and other current assets
Unbilled receivables
Operating lease right-of-use assets
Identified intangible assets
Goodwill
Deferred revenue
Operating lease liabilities
Other current liabilities
Total
Total
267
6,765
852
23,500
16,845
(310)
(852)
(267)
46,800
$
$
The goodwill arising from the acquisition is primarily attributed to synergies related to the combination of new and complementary technologies of the
Company and the assembled workforce of the Secure Silicon IP and Protocols business. Approximately $15.0 million of the goodwill is deductible for tax
purposes.
89
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The identified intangible assets assumed in the acquisition of the Secure Silicon IP and Protocols business were recognized as follows based upon their
estimated fair values as of the acquisition date:
Existing technology
Customer contracts and contractual relationships
IPR&D
Total
Total
(in thousands)
21,600
900
1,000
23,500
$
$
Estimated Weighted-Average
Useful Life
(in years)
3 to 5 years
5 years
Not applicable
IPR&D consisted of one project, primarily relating to the development of Media Access Control Security frame engines, which was part of the Silicon IP
solutions. During the year ended December 31, 2020, the project was completed and the asset is being amortized over its useful life of five years. During the year
ended December 31, 2020, the amortization for the completed project was not material.
Unaudited Pro Forma Combined Consolidated Financial Information
The following unaudited pro forma financial information presents the combined results of operations for the Company and Northwest Logic as if the acquisition
had occurred on January 1, 2018. The unaudited pro forma financial information has been prepared for comparative purposes only and does not purport to be
indicative of the actual operating results that would have been recorded had the acquisition actually taken place on January 1, 2018, and should not be taken as
indicative of future consolidated operating results. Additionally, the unaudited pro forma financial results do not include any anticipated synergies or other
expected benefits from the acquisition (unaudited, in thousands, except per share amounts):
Revenue
Net loss
Net loss per share - diluted
Years Ended December 31,
2018
2019
$
$
$
231,492 $
(90,688) $
(0.82) $
241,049
(160,742)
(1.48)
Pro forma loss for 2019 was adjusted to exclude $0.7 million of acquisition-related costs incurred in 2019. Consequently, pro forma loss for 2018 was adjusted
to include these costs.
Pro forma financial information on the combined results of operations for the Company and the Secure Silicon IP and Protocols business as if the acquisition
had occurred on January 1, 2018 has not been presented as it was impracticable to prepare full financial statements for the Secure Silicon IP and Protocols
business, given that the Secure Silicon IP and Protocols business had not been managed as a stand-alone business and thus stand-alone financial statements were
not readily available.
Additionally, the revenue recognized from the Northwest Logic and Secure Silicon IP and Protocols business acquisitions was not material to the Company’s
consolidated financial statements during the year ended December 31, 2019, either individually or in the aggregate. Furthermore, the Company does not track
operating results from these businesses separately.
90
Table of Contents
Supplementary Financial Data
(In thousands, except for per share amounts)
Total revenue
Total cost of revenue
Gross profit
Total operating expenses
Operating loss
Net loss
Net loss per share — basic
Net loss per share — diluted
Shares used in per share calculations — basic
Shares used in per share calculations — diluted
Sept. 30,
2020
June 30,
2020
March 31,
2020
Dec. 31, 2019
Sept. 30,
2019
June 30,
2019
March 31,
2019
RAMBUS INC.
CONSOLIDATED SUPPLEMENTARY FINANCIAL DATA
Quarterly Statements of Operations
(Unaudited)
Dec. 31, 2020
$
$
$
$
$
$
61,913 $
13,451 $
48,462 $
59,466 $
(11,004) $
(12,066) $
56,915 $
15,264 $
41,651 $
54,151 $
(12,500) $
(12,779) $
59,930 $
16,148 $
43,782 $
56,246 $
(12,464) $
(10,781) $
63,989 $
15,885 $
48,104 $
58,943 $
(10,839) $
(7,983) $
59,947 $
14,576 $
45,371 $
58,582 $
(13,211) $
(9,532) $
$
$
(0.11) $
(0.11) $
(0.09) $
(0.07) $
(0.09) $
(0.11) $
(0.11) $
(0.09) $
(0.07) $
(0.09) $
112,706
112,706
113,828
113,828
113,572
113,572
112,907
112,907
111,883
111,883
91
57,399 $
12,574 $
44,825 $
67,698 $
(22,873) $
(17,331) $
(0.16)
(0.16)
111,315
111,315
58,297 $
13,027 $
45,270 $
82,316 $
(37,046) $
(36,980) $
(0.33) $
(0.33) $
110,875
110,875
48,384
11,198
37,186
68,595
(31,409)
(26,576)
(0.24)
(0.24)
109,692
109,692
Table of Contents
Exhibit Number
3.1(1)
3.2(2)
3.3(3)
4.1(4)
4.2(5)
4.3(12)
10.1(6)
10.2(7)*
10.3(8)*
10.4(8)*
10.5(8)*
10.6(9)*
10.7(10)*
10.8(10)*
10.9(9)*
10.10(11)
10.11+
10.12+
10.13(13)
10.14(14)
10.15(14)
10.16+
10.17+
10.18+
10.19+
10.20(15)**
10.21(16)**
10.22(17)
10.23(18)
10.24(5)
10.25(5)
10.26(19)
10.27(19)
10.28(20)
10.29(20)
10.30(20)
10.31(20)
INDEX TO EXHIBITS
Description of Document
Amended and Restated Certificate of Incorporation of Registrant filed May 29, 1997.
Certificate of Amendment of Amended and Restated Certificate of Incorporation of Registrant filed June 14, 2000.
Amended and Restated Bylaws of Registrant dated April 25, 2013.
Form of Registrant’s Common Stock Certificate.
Indenture, dated November 17, 2017, between Rambus Inc and U.S. Bank National Association (including form of 1.375% Convertible
Senior Note due 2023).
Description of Securities.
Form of Indemnification Agreement entered into by Registrant with each of its directors and executive officers.
Form of Change of Control Severance Agreement, Agreement entered into by Registrant with each of its named executive officers other
than its chief executive officer.
2006 Equity Incentive Plan, as amended.
Forms of agreements under the 2006 Equity Incentive Plan, as amended.
2006 Employee Stock Purchase Plan, as amended.
2015 Equity Incentive Plan, as amended.
Form of Restricted Stock Unit Agreement (2015 Equity Incentive Plan).
Form of Stock Option Agreement (2015 Equity Incentive Plan).
2015 Employee Stock Purchase Plan, as amended.
Triple Net Space Lease, dated as of December 15, 2009, by and between Registrant and MT SPE, LLC.
Settlement Agreement, dated January 19, 2010, among Registrant, Samsung Electronics Co., Ltd, Samsung Electronics America, Inc.,
Samsung Semiconductor, Inc. and Samsung Austin Semiconductor, L.P.
Semiconductor Patent License Agreement, dated January 19, 2010, between Registrant and Samsung Electronics Co., Ltd.
First Amendment of Lease, dated November 4, 2011, by and between Registrant and MT SPE, LLC.
Employment Agreement between the Company and Luc Seraphin, dated as of October 25, 2018.
Amended and Restated Change of Control Severance Agreement between the Company and Luc Seraphin, dated as of October 25, 2018.
Settlement Agreement, dated June 11, 2013, among Registrant, SK hynix and certain SK hynix affiliates.
Semiconductor Patent License Agreement, dated June 11, 2013, between Registrant and SK hynix.
Settlement Agreement, dated December 9, 2013, between Rambus Inc., Micron Technology, Inc., and certain Micron affiliates.
Semiconductor Patent License Agreement, dated December 9, 2013, between Rambus, Inc. and Micron Technology, Inc.
Amendment to Semiconductor Patent License Agreement, dated December 30, 2013, by and between Rambus Inc. and Samsung
Electronics Co., Ltd.
Amendment 1 to Semiconductor Patent License Agreement, dated June 17, 2015, by and between Rambus Inc. and SK hynix Inc.
Asset Purchase Agreement, dated June 29, 2016, by and between Rambus Inc., Bell ID Singapore Ptd Ltd, Inphi Corporation and Inphi
International Pte. Ltd.
Offer Letter, dated September 9, 2016, by and between Rambus Inc. and Rahul Mathur.
Form of Convertible Note Hedge Confirmation.
Form of Warrant Confirmation.
Share Purchase Agreement by and between Rambus Inc. and VISA International Service Association dated June 20, 2019.
Lease agreement between Rambus Inc. and 237 North First Street Holdings, LLC dated July 8, 2019.
Offer Letter, dated August 9, 2019, by and between Rambus Inc. and Sean Fan.
2019 Inducement Equity Incentive Plan.
Form of Restricted Stock Unit Agreement (2019 Inducement Equity Incentive Plan).
Form of Performance Based Restricted Stock Unit Agreement (2019 Inducement Equity Incentive Plan).
92
Table of Contents
Exhibit Number
10.32(21)
10.33(22)+
10.34(23)
10.35+
21.1
23.1
24.1
31.1
31.2
32.1†
32.2†
101.INS
101.SCH
101.CAL
101.LAB
101.PRE
101.DEF
104
Description of Document
First Amendment to Net Lease Agreement dated April 22, 2020 relating to the New San Jose Headquarters Location between Rambus
Inc. and 237 North First Street Holdings, LLC.
Amendment No. 1 to Semiconductor Patent License Agreement, dated September 2, 2020, between Rambus, Inc. and Micron
Technology, Inc.
Master Confirmation between Deutsche Bank AG, London Branch as counterparty, through its agent Deutsche Bank Securities Inc.
(“Deutsche Bank”) and Rambus Inc., dated November 11, 2020.
Amendment No. 2 dated December 15, 2020, to the Semiconductor Patent License Agreement between Rambus Inc. and Micron
Technology, Inc.
Subsidiaries of Registrant.
Consent of Independent Registered Public Accounting Firm.
Power of Attorney (included in signature page).
Certification of Principal Executive Officer, pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as
amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Principal Financial Officer, pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as
amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Principal Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002.
Certification of Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002.
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded
within the Inline XBRL document.
XBRL Taxonomy Extension Schema Document
XBRL Taxonomy Extension Calculation Linkbase Document
XBRL Taxonomy Extension Label Linkbase Document
XBRL Taxonomy Extension Presentation Linkbase Document
XBRL Taxonomy Extension Definition Linkbase Document
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)
______________________________________
*
**
+
†
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
Management contracts or compensation plans or arrangements in which directors or executive officers are eligible to participate.
Confidential treatment has been granted with respect to certain portions of this exhibit. Omitted portions have been filed separately with the
Securities and Exchange Commission.
Portions of this exhibit have been redacted in compliance with Regulation S-K Item 601(b)(10).
The certifications furnished in Exhibit 32.1 and 32.2 hereto are deemed to accompany this Annual Report on Form 10-K and will not be
deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. Such certifications will not be deemed to be
incorporated by reference into any filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended,
except to the extent that the registrant specifically incorporates it by reference.
Incorporated by reference to the Form 10-K filed on December 15, 1997.
Incorporated by reference to the Form 10-Q filed on May 4, 2001.
Incorporated by reference to the Form 8-K filed on April 30, 2013.
Incorporated by reference to the Form S-1/A (file no. 333-22885) filed on April 24, 1997.
Incorporated by reference to the Form 8-K filed on November 17, 2017.
Incorporated by reference to the Form S-1 (file no. 333-22885) filed on March 6, 1997.
Incorporated by reference to the Form 8-K filed on March 9, 2015.
Incorporated by reference to the Form 8-K filed on April 30, 2014.
Incorporated by reference to the Form 8-K filed on May 6, 2020.
(10)
Incorporated by reference to the Form 10-Q filed on July 23, 2015.
93
Table of Contents
(11)
(12)
(13)
(14)
(15)
(16)
(17)
(18)
(19)
(20)
(21)
(22)
(23)
Incorporated by reference to the Form 10-K filed on February 26, 2010.
Incorporated by reference to the Form 10-K filed on February 26, 2020.
Incorporated by reference to the Form 10-K filed on February 24, 2012.
Incorporated by reference to the Form 8-K filed on October 29, 2018.
Incorporated by reference to the Form 10-K filed on February 21, 2014.
Incorporated by reference to the Form 10-Q filed on July 23, 2015.
Incorporated by reference to the Form 10-Q filed on July 22, 2016.
Incorporated by reference to the Form 8-K filed on September 21, 2016.
Incorporated by reference to the Form 10-Q filed on August 2, 2019.
Incorporated by reference to the Form 8-K filed on August 28, 2019.
Incorporated by reference to the Form 10-Q filed on August 7, 2020.
Incorporated by reference to the Form 10-Q filed on November 6, 2020.
Incorporated by reference to the Form 8-K dated November 12, 2020.
94
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
SIGNATURES
RAMBUS INC.
By:
/s/ RAHUL MATHUR
Rahul Mathur
Senior Vice President, Finance and Chief Financial Officer
Date: February 26, 2021
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Luc Seraphin and Rahul
Mathur as his true and lawful agent, proxy and attorney-in-fact, with full power of substitution and resubstitution, for him and in his name, place and stead, in any
and all capacities, to (i) act on, sign, and file with the Securities and Exchange Commission any and all amendments to this Annual Report on Form 10-K, together
with all schedules and exhibits thereto, (ii) act on, sign, and file such certificates, instruments, agreements and other documents as may be necessary or appropriate
in connection therewith, and (iii) take any and all actions that may be necessary or appropriate to be done, as fully for all intents and purposes as he might or could
do in person, hereby approving, ratifying and confirming all that such agent, proxy and attorney-in-fact or any of his substitutes may lawfully do or cause to be
done by virtue thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
95
Table of Contents
Signature
/s/ LUC SERAPHIN
Luc Seraphin
/s/ RAHUL MATHUR
Rahul Mathur
/s/ KEITH JONES
Keith Jones
/s/ CHARLES KISSNER
Charles Kissner
/s/ EMIKO HIGASHI
Emiko Higashi
/s/ GREGORY LANG
Gregory Lang
/s/ MEERA RAO
Meera Rao
/s/ SANJAY SARAF
Sanjay Saraf
/s/ NECIP SAYINER
Necip Sayiner
/s/ ERIC STANG
Eric Stang
Title
Date
Chief Executive Officer, President and Director (Principal Executive Officer)
February 26, 2021
Senior Vice President, Finance and Chief Financial Officer (Principal Financial
Officer)
February 26, 2021
Vice President, Chief Accounting Officer and Corporate Controller (Principal
Accounting Officer)
February 26, 2021
Chairman of the Board of Directors
February 26, 2021
February 26, 2021
February 26, 2021
February 26, 2021
February 26, 2021
February 26, 2021
February 26, 2021
Director
Director
Director
Director
Director
Director
96
Exhibit 10.11
Conformed Copy
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT IS BOTH NOT
MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY
DISCLOSED. [***] INDICATES THAT INFORMATION HAS BEEN REDACTED.
SETTLEMENT AGREEMENT
THIS SETTLEMENT AGREEMENT (the “Agreement”) is made by and among Rambus Inc., a Delaware corporation
(“Rambus”), on the one hand, and Samsung Electronics Co., Ltd., a corporation organized under the laws of Korea (“Samsung
Electronics”), Samsung Electronics America, Inc., a Delaware corporation, Samsung Semiconductor, Inc., a California corporation
and Samsung Austin Semiconductor, L.P., a Texas limited partnership (collectively, “Samsung,” with Rambus and Samsung each
being a “Party” and together the “Parties”), on the other hand, effective as of January 19, 2010 (the “Effective Date”).
WHEREAS, Samsung and its Subsidiaries (as defined in Article 1) are and will continue to be engaged in the manufacture,
use, sale and/or importation of various products and devices, including but not limited to memory products and memory interface
technologies (collectively, the “Samsung Products”), which utilize diverse and varied technologies;
WHEREAS, Rambus and/or its Subsidiaries have and will continue to have rights under Patents (as defined in Article 1),
including but not limited to the right to license such Patents to third parties (collectively, all such patents are the “Rambus Patents”),
covering diverse and varied technologies;
WHEREAS, the Parties are currently parties to a number of Disputes (as defined in Article 1) relating to the Samsung
Products and the Rambus Patents, including but not limited to disputes as to whether claims of Rambus Patents are infringed by
Samsung Products, and disputes relating to the validity, enforceability and use of certain Rambus Patents, and the Antitrust
Litigation (as defined in Article 1);
WHEREAS, the Parties acknowledge that the Disputes have been costly, not only in terms of the out-of-pocket costs
incurred by each of them, but also in terms of management time and other resources devoted to such efforts;
WHEREAS, the Parties recognize that, without this Agreement, given the diversity of claims of the Rambus Patents, and the
breadth of technologies utilized by the Samsung Products, Rambus could, after the Effective Date, assert that other claims of
Rambus Patents are infringed by Samsung Products, and that such disputes, if they were to occur would involve similar costs and
business disruptions;
WHEREAS, the Parties recognize that litigation of the Disputes, and of other disputes that may arise between them after the
Effective Date, is inherently uncertain, and is subject to certain risks, including but not limited to (a) whether the Rambus Patents,
including Patents which are known to Samsung but which to date have not been asserted against Samsung, are determined to be
valid, enforceable and infringed in various trial and appellate court, Patent and Trademark Office and International Trade
Commission proceedings, and (b) whether Rambus prevails in various other court or regulatory proceedings, such as the Antitrust
Litigation, and that such events are subject to various possible outcomes;
WHEREAS, the Parties desire to eliminate the risks associated with such litigation and to enter into a comprehensive
resolution to compromise, settle and release the Disputes, and to compromise, resolve and avoid other disputes that may arise after
the Effective Date with respect to the Samsung Products and the Rambus Patents;
WHEREAS, as part of the comprehensive resolution of other disputes that may arise after the Effective Date with respect to
the Samsung Products and the Rambus Patents, Rambus and its Subsidiaries desire to grant Samsung and its Subsidiaries a license to
certain of the claims of the Rambus Patents from the Effective Date for a limited term, and to grant Samsung and its Subsidiaries a
fully paid-up license for certain of the Samsung Products to certain of the claims of the Rambus Patents, and Samsung and its
Subsidiaries desire to grant Rambus and its Subsidiaries a license to certain of the claims of the Samsung Patents;
WHEREAS, the Parties acknowledge that in resolving the Disputes, and other disputes that may arise after the Effective
Date, each of them is giving up the possibility of more favorable outcomes in exchange for the promises and covenants it will
receive under this Agreement, and the other agreements contemplated hereby, to ensure that they do not ultimately face less
favorable outcomes and to avoid the costs, delays and disruptions associated with litigation, and that such promises and covenants
represent a package, and are not intended to be severable from each other; in particular, (a) Samsung is receiving a full and final
release of the claims asserted against it in the Disputes, and securing a license to claims of the Rambus Patents in exchange for
making the license and other payments, and entering into the other agreements, described herein, and (b) Rambus is receiving the
Comprehensive Resolution Payments (as defined in Article 1), and the benefit of the other agreements described herein, in exchange
for granting the releases and licenses, and entering into the other agreements, described herein;
WHEREAS, the Parties acknowledge that it is therefore essential that their respective obligations under this Agreement and
the other agreements described herein be certain and not subject to collateral attack, or otherwise subject to change or modification
except on the terms expressly set forth therein; and
WHEREAS, this Agreement is entered into for the purpose of settlement and compromise only;
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NOW, THEREFORE, in consideration of the promises and the mutual covenants herein contained and for other good and
valuable consideration, the adequacy and receipt of which are hereby acknowledged, Rambus and Samsung agree as follows:
Article 1
Definitions
In addition to the terms defined in other parts of this Agreement, the following terms used herein with initial capital letters
shall have the respective meanings specified in this Article 1.
1.1 Agreement. The term “Agreement” has the meaning set forth in the introductory paragraph.
1.2 Antitrust Litigation. The term “Antitrust Litigation” means the matter entitled Rambus Inc. v. Micron Technology Inc.
et al., No. 04-431105 (Supr. Ct. Cal., San Fran. Filed May 5, 2004).
1.3 Comprehensive Resolution Agreements. The term “Comprehensive Resolution Agreements” means this Agreement, the
License Agreement, the Stock Purchase Agreement, and the MOU.
1.4 Comprehensive Resolution Payments. The term “Comprehensive Resolution Payments” means the Initial Payment and
the License Payments.
1.5 Control. The term “Control” (including “Controlled” and other forms) of an entity means (a) beneficial ownership
(whether directly or indirectly through entities or other means) of more than fifty percent (50%) of the outstanding voting securities
of that entity or (b) in the case of an entity that has no outstanding voting securities, having the power (whether directly or indirectly
through entities or other means) presently to designate more than fifty percent (50%) of the directors of a corporation, or in the case
of unincorporated entities, of individuals exercising similar functions. Notwithstanding the foregoing sentence, where Samsung has
fifty percent (50%) of such beneficial ownership or power to designate with respect to any other entity, Samsung shall be deemed to
“Control” such other entity if such other entity is part of the “Samsung Group of Companies” and such entity is lawfully registered
under a corporate name, and lawfully operates and generally and routinely conducts its business under a corporate name, that
includes “Samsung,” provided that, such entity agrees in a writing, delivered to both Parties within thirty (30) days of the Effective
Date (or if later, within thirty (30) days after formation of such entity), to be bound by all applicable terms and conditions of this
Agreement.
1.6 DDR/DDR2 Controller Products. The term “DDR/DDR2 Controller Products” means any controllers capable of
interfacing with and controlling any DDR/DDR2 Products.
1.7 DDR/DDR2 SDRAM Products. The term “DDR/DDR2 SDRAM Products” means double data rate (DDR), double data
rate2 (DDR2), graphics double data rate (GDDR) and graphics
3
double data rate2 (GDDR2) synchronous dynamic random access memory (SDRAM) chips as well as any mobile or low power
versions of any such chips.
1.8 Delaware Litigation. The term “Delaware Litigation” means the matter entitled Samsung Electronics Co., Ltd. et al v.
Rambus Inc., No. 6081113 (Del. Chan. Filed June 23, 2005).
1.9 Disputes. The term “Disputes” means the Patent Litigation, the Antitrust Litigation, the Virginia Litigation, the
Delaware Litigation and the Patent Actions, and any and all disputes related thereto.
1.10 Effective Date. The term “Effective Date” has the meaning set forth in the introductory paragraph.
1.11 Effective Time Period. The term “Effective Time Period” has the meaning set forth in Section 3.1(b).
1.12 Excluded Entity. The term “Excluded Entity” means Micron Technology, Inc., Micron Semiconductor Products, Inc.,
Micron Electronics, Inc., Hynix Semiconductor Inc., Hynix Semiconductor America, Inc., Hynix Semiconductor Manufacturing
America Inc., Hynix Semiconductor U.K. Ltd., Hynix Semiconductor Deutschland GmbH, Nanya Technology Corporation, Nanya
Technology Corporation U.S.A. and NVIDIA Corporation.
1.13 Initial Payment. The term “Initial Payment” has the meaning set forth in Section 2.1.
1.14 License Agreement. The term “License Agreement” has the meaning set forth in Section 3.1.
1.15 License Payments. The term “License Payments” has the meaning set forth in Section 2.3.
1.16 Licensed Product. The term “Licensed Product” has the meaning set forth in the License Agreement.
1.17 MOU. The term “MOU” has the meaning set forth in Section 3.3.
1.18 Other Products. The term “Other Products” means single data rate (SDR), double data rate 3 (DDR3), graphics double
data rate 3 (GDDR3), graphics double data rate 4 (GDDR4) and graphics double data rate 5 (GDDR5) synchronous dynamic random
access memory (SDRAM) chips, as well as single data rate (SDR) synchronous graphics random access memory (SGRAM) chips,
as well as any mobile or low power versions of any such chips and any controllers capable of interfacing with and controlling any of
the foregoing.
1.19 Party. The terms “Party” and “Parties” have the meanings set forth in the introductory paragraph.
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1.20 Patent Actions. The term “Patent Actions” means all United States Patent and Trademark Office reexamination
proceedings, actions or challenges filed, requested or supported by Samsung with respect to any Rambus Patents as of the Effective
Date, including without limitation reexaminations of U.S. Patent numbers 6,038,195, 6,182,184, 6,266,285, 6,314,051, 6,324,120,
6,378,020, 6,426,916, 6,452,863, 6,546,446, 6,584,037, 6,697,295, 6,715,020, and 6,751,696.
1.21 Patent Litigation. The term “Patent Litigation” means the matters entitled Rambus Inc. v. Samsung Electronics Co.,
Ltd., et al., No. C-05-02298 (N.D. Cal. Filed June 6, 2005) and Rambus Inc. v. Hynix Semiconductor Inc., et al., No. C-05-00334
(N.D. Cal. Filed Jan. 25, 2005).
1.22 Patents. The term “Patents” means patents and utility models and applications therefor, including without limitation all
continuations, continuations-in-part and divisionals thereof, in all countries of the world that are owned by the applicable Party.
1.23 Rambus. The term “Rambus” has the meaning set forth in the introductory paragraph.
1.24 Rambus Patents. The term “Rambus Patents” has the meaning set forth in the Recitals.
1.25 Release Date. The term “Release Date” means February 4, 2010.
1.26 Samsung. The term “Samsung” has the meaning set forth in the introductory paragraph.
1.27 Samsung Electronics. The term “Samsung Electronics” has the meaning set forth in the introductory paragraph.
1.28 Samsung Patents. The term “Samsung Patents” means Patents as to which Samsung has rights.
1.29 Samsung Products. The term “Samsung Products” has the meaning set forth in the Recitals.
1.30 Stock Purchase Agreement. The term “Stock Purchase Agreement” has the meaning set forth in Section 3.2.
1.31 Subsidiary. The term “Subsidiary” means any entity Controlled by a Party, but such entity shall be deemed to be a
Subsidiary only so long as such Control exists. For the avoidance of doubt, in the case of Samsung, the term “Subsidiary” shall
include all of the entities described in the last sentence of Section 1.5 so long as the Control described therein exists.
1.32 Third Party. The term “Third Party” means any entity that is not a Party or a Subsidiary of a Party on the Effective
Date.
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1.33 Virginia Litigation. The term “Virginia Litigation” means the matter entitled Samsung Electronics Co., Ltd. v. Rambus
Inc., No. 3:05cv406 (E.D. Va. Filed June 7, 2005).
Article 2
Comprehensive Resolution Payments
2.1 Initial Payment. As a condition to the effectiveness of the releases and covenants not to sue set forth in Article 4 and the
Parties’ obligations under Section 4.8, Samsung Electronics will, on or before January 22, 2010 pay Rambus the sum of One
Hundred Million Dollars (US $100,000,000) and will, on or before the Release Date, pay Rambus the sum of One Hundred Million
Dollars (US $100,000,000) (collectively, the “Initial Payment”).
2.2 Allocation of Initial Payment. The Parties agree to allocate the Initial Payment in accordance with the following, which
they acknowledge represents a reasonable estimated allocation of the Initial Payment to Rambus’s claims under the Disputes:
(a) [***] shall be deemed to be paid in consideration for [***];
(b) [***] shall be deemed to be paid in consideration for [***]; and
(c) [***] shall be deemed to be paid in consideration for [***].
2.3 License Payments. As described more fully in the License Agreement and as an integral part of the overall
consideration received by Rambus in respect of its releases and covenants not to sue under Article 4, and its other obligations under
the Comprehensive Resolution Agreements, over the next five (5) years Samsung Electronics will pay Rambus aggregate license
fees of Five Hundred Million Dollars (US $500,000,000), subject to certain adjustments and conditions as described in the License
Agreement (the “License Payments”). In the event that Samsung fails to pay any License Payment (and fails to cure such failure
within the time period provided for in Section 6.2 of the License Agreement), Samsung will pay to Rambus Five Hundred Million
Dollars (US $500,000,000), less the aggregate License Payments previously paid by Samsung and retained by Rambus, as part of the
overall consideration received by Rambus under the Comprehensive Resolution Agreements, in order for Rambus to receive the full
amount of the overall consideration intended to be received in respect of its releases, covenants not to sue, and other obligations
under the Comprehensive Resolution Agreements. Samsung will apply such amounts to the Quarterly Base Payments due under the
License Agreement.
2.4 No Refunds. Once made, any Comprehensive Resolution Payment shall not be refunded or refundable to Samsung for
any reason except as may be required pursuant to Section 3.3 of the License Agreement. Notwithstanding the foregoing, in case of
clerical error with respect to any payment made under the License Agreement, the Parties agree to remedy any such error through
proper payment adjustments.
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2.5 Currency. All Comprehensive Resolution Payments shall be made in United States dollars.
2.6 Wire Instructions. The Initial Payment shall be made by wire transfer to Rambus as follows:
Rambus Inc. Account: [***]
All other Comprehensive Resolution Payments shall be made in accordance with the terms of the applicable Comprehensive
Resolution Agreement.
2.7 Taxes. If the Korean government imposes any withholding tax on any Comprehensive Resolution Payments, such tax
shall be borne by Rambus. Samsung agrees, at its reasonable discretion, to assist Rambus in its efforts to minimize Rambus’ tax
liability. Samsung shall withhold the amount of any such taxes levied on such payments to Rambus imposed by the Korean
government, shall promptly effect payment of the taxes so withheld to the Korean tax office, and Samsung shall send to Rambus the
official certificate of such payment in a form reasonably sufficient to enable Rambus to support a claim for a foreign tax credit with
respect to any such taxes so withheld.
Article 3
Other Agreements
Concurrent with the execution and delivery of this Agreement, and as an integral part of the overall consideration received by
the Parties in respect of their releases, covenants not to sue, and other obligations under the Comprehensive Resolution Agreements,
the Parties and/or their Subsidiaries shall enter into or deliver the following agreements or documents. For the avoidance of doubt,
the MOU described in Section 3.3 is non-binding to the Parties and, while the existence and execution thereof are an integral part of
the overall consideration, the contents therein represent solely the understanding between the Parties regarding certain business and
technology collaborations, and the failure to enter into any definitive agreement contemplated thereby shall not constitute failure in
the consideration hereunder or under any of the other Comprehensive Resolution Agreements.
3.1 License Agreement. Rambus and Samsung Electronics shall enter into the License Agreement in the form attached
hereto as Exhibit A (the “License Agreement”), pursuant to which Rambus shall grant Samsung licenses under Rambus Applicable
Patent Claims, and Samsung will grant to Rambus licenses under Samsung Applicable Patent Claims, as defined in the License
Agreement, on the terms set forth therein.
(a) The Parties acknowledge that the licenses granted under the License Agreement are in respect of claims under
multiple Rambus Patents and multiple Samsung Patents, respectively, so that the Parties’ rights and obligations under the License
Agreement, are not
7
dependent upon the validity or enforceability of specific Rambus Patents or specific Samsung Patents, or upon any specific use of
such patents permitted under the License Agreement. Specifically, Samsung acknowledges that the License Agreement covers a
broad array of Rambus Patent claims, and agrees to make the full amount of the Comprehensive Resolution Payments regardless of
whether any of the Rambus Patents is determined not to be infringed by any particular Licensed Product or a court or United States,
European, or other patent office determines any Rambus Patent to be invalid or unenforceable in any reexamination, action or other
proceeding.
(b) Each Party acknowledge that its assessment of the value of the Disputes and the License Agreement may depend
on certain events that may occur, or that may not occur, after the Effective Date, that it is aware of and has evaluated and considered
the uncertainties associated with such events, and that it has agreed to the amount of the Comprehensive Resolution Payments to
eliminate such uncertainties so that, for example, Samsung will be protected from the consequences of Rambus prevailing on
infringement and other claims in other proceedings, and Rambus will be protected from the consequences of certain of the Rambus
Patents being held to be invalid, unenforceable, and/or not infringed in other proceedings. It is therefore essential that the Parties’
obligations under the License Agreement, including but not limited to the amount of the License Payments, be certain and not
subject to collateral attack. Accordingly,
(i) Samsung covenants, whether through litigation or otherwise, not to seek to adjust the amount of the
License Payments, or to avoid, defer or modify its obligations under the License Agreement, provided that the foregoing shall not
prevent Samsung from seeking enforcement of the terms and conditions of the License Agreement or taking any action expressly
contemplated in the License Agreement.
(ii) Samsung and its Subsidiaries acknowledge and agree that, for all acts or omissions that occur during the
time period up to and including the [***] anniversary of the Effective Date (the “Effective Time Period”), Rambus or its
Subsidiaries have patent claims that are valid, enforceable and infringed by a substantial portion of the Licensed Product (as defined
under the License Agreement). After the Effective Time Period, Rambus and its Subsidiaries covenant not to rely on such
acknowledgement or agreement in any manner against Samsung or its Subsidiaries or their past, present or future distributors or
customers in negotiations, and further covenant that no evidence of such acknowledgement or agreement may be introduced in any
negotiation by or on behalf of Rambus or its Subsidiaries against Samsung or its Subsidiaries or their past, present or future
distributors or customers. Rambus and its Subsidiaries further covenant, with respect to any acts or omissions occurring after the
Effective Time Period, not to rely on such acknowledgement or agreement in any manner against Samsung or its Subsidiaries or
their past, present or future distributors or customers before any court, government agencies, other regulatory body or arbitrator, and
further covenant that no evidence of such acknowledgement or agreement may be introduced in any motion, hearing, trial or other
proceeding by or on behalf of Rambus or its Subsidiaries against Samsung or its Subsidiaries or their past, present or future
distributors or customers.
8
3.2 Stock Purchase Agreement. Rambus and Samsung Electronics shall enter into the Stock Purchase Agreement in the
form attached hereto as Exhibit B (the “Stock Purchase Agreement”). Concurrent with the execution and delivery of the Stock
Purchase Agreement, Rambus and Samsung Electronics shall complete the equity investment in Rambus in accordance with the
terms thereof.
3.3 Memorandum of Understanding. Samsung Electronics and Rambus shall enter into a Memorandum of Understanding in
the form attached hereto as Exhibit C (the “MOU”).
Article 4
Releases
Effective as of the Release Date but subject to the delivery of the Initial Payment in accordance with Article 2, the execution
and delivery of the License Agreement, the Stock Purchase Agreement and the MOU in accordance with Article 3, and the
completion of the equity investment in Rambus in accordance with the Stock Purchase Agreement (for the avoidance of doubt, none
of the Parties’ releases, covenants not to sue, or other obligations under this Article 4 shall be effective until Samsung has delivered
the full amount of the Initial Payment in accordance with Article 2 and the Parties have complied with their other obligations under
this sentence):
4.1 Release by Rambus. Rambus, on behalf of itself and its Subsidiaries, hereby irrevocably releases, acquits, and forever
discharges Samsung, its Subsidiaries, its and their respective former or current directors, officers, employees, and attorneys from any
claims, counterclaims, defenses, demands, damages, debts, liabilities, accounts, actions and causes of action of any kind arising from
or that could have been raised based upon the facts and circumstances alleged or asserted in any pleading, motion, brief or other
paper filed by Rambus in the Patent Litigation, the Antitrust Litigation, the Delaware Litigation or the Virginia Litigation up until
the Effective Date. To the extent not covered in the preceding sentence, Rambus, on behalf of itself and its Subsidiaries, hereby
further irrevocably releases, acquits, and forever discharges Samsung, its Subsidiaries, and its and their respective former or current
directors, officers, employees, and attorneys from any claims, counterclaims, defenses, demands, damages, debts, liabilities,
accounts, actions and causes of action of any kind (i) for infringement of the Rambus Patents arising from the manufacture, use,
importation, sale and offer for sale of Samsung Products up until the Effective Date to the extent that infringement by such Samsung
Products would have been licensed under the License Agreement if such License Agreement had been in existence at the time of
such infringing activity or (ii) otherwise relating in any way to any act or omission concerning any anticompetitive, tortious or unfair
business practice arising from the manufacture, use, marketing, sale, offer for sale, and/or importation of any Samsung Product up
until the Effective Date.
4.2 Release by Samsung. Samsung, on behalf of itself and its Subsidiaries, hereby irrevocably releases, acquits and forever
discharges Rambus, its Subsidiaries, and its and their respective former or current directors, officers, employees, and attorneys from
any claims, counterclaims, defenses, demands, damages, debts, liabilities, accounts, actions and causes of action of any kind arising
from or that could have been raised based upon the facts and circumstances
9
alleged or asserted in any pleading, motion, brief or other paper filed by Samsung in the Patent Litigation, the Antitrust Litigation,
the Delaware Litigation or the Virginia Litigation up until the Effective Date. To the extent not covered in the preceding sentence,
Samsung, on behalf of itself and its Subsidiaries, hereby further irrevocably releases, acquits, and forever discharges Rambus, its
Subsidiaries, and its and their respective former or current directors, officers, employees, and attorneys from any claims,
counterclaims, defenses, demands, damages, debts, liabilities, accounts, actions and causes of action of any kind (i) for infringement
of any Samsung Patents arising from the manufacture, use, importation, sale and offer for sale of any Rambus product up until the
Effective Date to the extent that infringement by such product would have been licensed under the License Agreement if such
License Agreement had been in existence at the time of such infringing activity. or (ii) otherwise relating in any way to any act or
omission concerning any anticompetitive, tortious or unfair business practice arising from the manufacture, use, marketing, sale,
offer for sale, and/or importation of any Rambus Product up until the Effective Date.
4.3 Additional Release by Samsung. Samsung, on behalf of itself and its Subsidiaries, hereby irrevocably releases, acquits
and forever discharges Rambus from any defenses, claims, counterclaims, demands, damages, debts, liabilities, accounts, actions and
causes of action of any kind and nature that Samsung or its Subsidiaries might raise or assert in an effort avoid, defer or modify its
obligations under the License Agreement, including but not limited to its obligation to make the License Payments, except as
expressly permitted under the License Agreement, including for instance and by way of example, claims or defenses based on the
allegation, or on the finding, determination or judgment in any reexamination, action or other proceeding that one or more of the
patent claims licensed under the License Agreement is invalid, unenforceable or not infringed, that the License Agreement is not
enforceable or should be rescinded or revised, or that Rambus has committed any type of patent misuse.
4.4 Releases Shall Remain Effective. Each of Rambus and Samsung acknowledges that, after entering into this Agreement,
they may discover facts different from, or in addition to, those they now believe to be true with respect to the conduct of the other
Party. Each of Rambus and Samsung intends that the releases and discharges set forth in this Article 4 shall be, and shall remain, in
effect in all respects as written, notwithstanding the discovery of any different or additional facts.
4.5 Waiver of California Civil Code § 1542. In connection with the releases and discharges described in this Article 4, each
of Rambus and Samsung acknowledges that it is aware of the provisions of section 1542 of the Civil Code of the State of California,
and hereby expressly waives and relinquishes all rights and benefits that it has or may have had under that section (or any equivalent
law or rule of any other jurisdiction), which reads as follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT
KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS
OR HER SETTLEMENT WITH THE DEBTOR.
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4.6 Covenants Not to Sue.
(a) Rambus, on behalf of itself and its Subsidiaries, hereby covenants not to assert any claims of infringement of the
Rambus Patents against Samsung, its Subsidiaries, and its and their respective former or current directors, officers, employees,
attorneys, distributors and customers solely arising from the use, importation, sale and offer for sale of Samsung Products up until
the Effective Date to the extent that Samsung, its Subsidiaries, and such former or current directors, officers, employees, attorneys,
distributors or customers would not have been liable for such use, importation, sale and offer for sale of Samsung Products had the
License Agreement been in existence at the time of such infringing activity.
(b) Samsung, on behalf of itself and its Subsidiaries, hereby covenants not to assert any claims of infringement of
the Samsung Patents against Rambus, its Subsidiaries, and its and their respective former or current directors, officers, employees,
attorneys, distributors and customers solely arising from the use, importation, sale or offer for sale of any Rambus product up until
the Effective Date to the extent that Rambus, its Subsidiaries, and such former or current directors, officers, employees, attorneys,
distributors or customers would not have been liable for such use, importation, sale and offer for sale of Rambus products had the
License Agreement been in existence at the time of such infringing activity.
(c) Rambus, on behalf of itself and its Subsidiaries, hereby covenants not to assert against Samsung, its
Subsidiaries, and its and their respective former or current directors, officers, employees, and attorneys any action or other
proceeding based upon any claims, counterclaims, defenses, demands, damages, debts, liabilities, accounts, actions and causes of
action released by Rambus pursuant to clause (ii) of the last sentence of Section 4.1.
(d) Samsung, on behalf of itself and its Subsidiaries, hereby covenants not to assert against Rambus, its
Subsidiaries, and its and their respective former or current directors, officers, employees, and attorneys any action or other
proceeding based upon any claims, counterclaims, defenses, demands, damages, debts, liabilities, accounts, actions and causes of
action released by Samsung pursuant to clause (ii) of the last sentence of Section 4.2.
4.7 Certain Exclusions. For the avoidance of doubt:
(a) The releases and covenants not to sue contained in this Article 4 (other than the releases set forth in Section 4.3)
shall apply solely to activities occurring prior to the Effective Date. In no event shall the releases and covenants not to sue contained
in this Article 4 apply to (i) any Third Party that may acquire or combine with any Party or its Subsidiaries or (ii) any Third
Party, portion of a Third Party, and/or any portion of the assets of business of a Third Party that may be acquired by or combined
with any Party or its Subsidiaries, in each case after the Effective Date.
(b) The releases and covenants not to sue contained in this Article 4 are not intended to and do not extend to any
defendant in either the Patent Litigation or the Antitrust
11
Litigation (or any of their Subsidiaries), unless that defendant is explicitly named as a Party to this Agreement, or to any Excluded
Entity or its Subsidiaries.
4.8 Dismissals and Other Provisions Terminating the Disputes.
(a) On the Effective Date, Samsung and Rambus, through their respective counsel, shall execute or cause to be
executed stipulations for dismissal dismissing with prejudice all of the claims, counterclaims, cross-claims and cross-complaints
asserted against one another (but only as to one another and not to the extent asserted against others) in the Patent Litigation and the
Antitrust Litigation in the forms attached hereto as Exhibits D-1 through D-6. On the Release Date, Samsung and Rambus, through
their respective counsel, shall cause such stipulations for dismissal to be entered, subject to receipt by Rambus of the full amount of
the Initial Payment pursuant to Section 2.1.
(b) Samsung shall, within five (5) business days of the Release Date, file a request to withdraw its Amicus Curiae
Brief in Hynix Semiconductor, Inc., et al. v. Rambus, Inc., United States Court of Appeals for the Federal Circuit Case No. 2009-
1299, -1347.
(c) Both Parties shall, within ten (10) business days following the Release Date, withdraw any pending complaints,
actions, or other proceedings they may have pending against the other Party or its Subsidiaries before any regulatory body anywhere
in the world related to the claims, counterclaims, demands, damages, debts, liabilities, accounts, actions and causes of action released
by this Agreement or that relate in any way to the Rambus Patents or the Samsung Patents. For the avoidance of doubt, this
provision does not require Rambus to withdraw any complaint or other proceeding as against parties other than other than Samsung
or its Subsidiaries, including but not limited to the Patent Litigation and the Antitrust Litigation.
(d) Within ten (10) business days following the Release Date, Samsung shall, to the full extent permitted by
applicable law, withdraw, cease to prosecute or pursue and notify the Patent and Trademark Office that it no longer intends to
participate in, the Patent Actions.
(e) In the event that Rambus sues Samsung, its Subsidiaries, or its or their respective former or current directors,
officers, employees and attorneys for infringement of one or more of the patents asserted by Rambus in the Patent Litigation as a
result of the manufacture (or having manufactured), use, importation, sale or offer for sale of Samsung Products, to the extent that
such Samsung Products are not Licensed Product under the License Agreement, Rambus agrees that it will not contend that the
stipulations for dismissal with prejudice filed in the Patent Litigation pursuant to subparagraph (a) above bar Samsung, its
Subsidiaries, or its or their respective former or current directors, officers, employees and attorneys from raising in its or their
defense in such action involving Samsung Products that are not Licensed Product under the License Agreement that (i) all or any of
such patents are invalid, or that (ii) all or any of such patents are unenforceable by reason of failure to disclose art or other
information to the United States Patent and Trademark Office, to the extent such defense was raised in the Patent Litigation.
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4.9 Costs and Attorneys’ Fees. For all cases, including but not limited to the Patent Litigation and the Antitrust Litigation,
the Parties agree that each will pay its own costs and attorneys’ fees.
4.10 No Admission. Nothing contained in any of the Comprehensive Resolution Agreements, or done or omitted in
connection with any of the Comprehensive Resolution Agreements, is intended as, or shall be construed as, an admission by any
Party of any fault, liability or wrongdoing.
4.11 No Further Actions. As part of the settlement of claims and releases contemplated by this Agreement, during the term
of the License Agreement, and in each case unless and to the extent required by subpoena or judicial or regulatory agency order or
rule:
(a) Samsung covenants not to bring, or aid, assist or participate in, any action challenging or contesting the
assertion, enforcement, validity or enforceability of, or any use or infringement by any Third Party of, the Rambus Patents, including
but not limited to filing, requesting, participating or assisting in any of the Patent Actions; and
(b) Each Party covenants not to support, cooperate with or otherwise assist any entity in any dispute against the
other Party or its Subsidiaries, or any regulatory body in any proceeding involving the other Party or its Subsidiaries, in any matter
related to the claims, counterclaims, defenses, demands, damages, debts, liabilities, accounts, actions and causes of action released
by this Agreement, including but not limited to filing, requesting, participating or assisting in any United States, European, or other
patent office reexamination proceedings, actions, challenges, oppositions or interferences with respect to Patents of the other Party or
its Subsidiaries, and filing amicus curiae briefs in the Patent Litigation, the Antitrust Litigation, or any other Dispute.
Article 5
Warranties
Each Party represents, warrants and covenants, on behalf of itself and its Subsidiaries, to the other Party during the term of
this Agreement:
5.1 Due Organization. Such Party is duly organized, validly existing and in good standing under the laws of its jurisdiction
of formation with the requisite corporate authority to own and use its properties and assets and to carry on its business as currently
conducted.
5.2 Due Authorization; Enforceability. Such Party has the requisite corporate or other authority to enter into, and to grant
the releases and discharges, make the covenants, and consummate the transactions contemplated by, this Agreement, on behalf of
itself and its Subsidiaries, and otherwise to carry out its and its Subsidiaries’ obligations hereunder. The execution, delivery and
performance of this Agreement by such Party and its Subsidiaries has been duly authorized by all necessary action of such Party and
its Subsidiaries, and no other act or proceeding on the part of or on behalf of such Party and its Subsidiaries is necessary to approve
the
13
execution and delivery of this Agreement, the performance by such Party and its Subsidiaries of their obligations hereunder and the
consummation of the transactions contemplated hereby. This Agreement has been duly executed and delivered by such Party and
constitutes a legal, valid and binding obligation of such Party, enforceable against such Party in accordance with its terms, except as
such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and similar laws relating to or affecting
creditors generally, by general equity principles or by limitations on indemnification pursuant to public policy.
5.3 No Conflicts; No Consents. The execution, delivery and performance of this Agreement by such Party and its
Subsidiaries, including but not limited to the granting of the releases and discharges contemplated hereby, will not infringe any law,
regulation, judgment or order applicable to such Party and its Subsidiaries and is not and will not be contrary to the provisions of the
constitutional documents of such Party and its Subsidiaries and will not (with or without notice, lapse of time or both) result in any
breach of the terms of, or constitute a default under, any instrument or agreement to which such Party and its Subsidiaries is a party
or by which it or its property is bound. All consents and approvals of any court, government agencies or other regulatory body
required by such Party and its Subsidiaries for the execution, delivery and performance of the terms of this Agreement have been
obtained and are in full force and effect.
5.4 No Assignment of Claims. Each Party represents and warrants that it has not assigned, transferred or granted to any
Third Party any rights or interests with respect to any claim or cause of action, or any right(s) underlying any claim or cause of
action, it had, has, or may have against the other or its Subsidiaries as of, or prior to, the Effective Date of this Agreement.
Article 6
Notices and other Communications
6.1 Any notice or other communication required or permitted to be made or given to either Party pursuant to this
Agreement shall be sufficiently made or given within three (3) business days of the date of mailing if sent to such Party by overnight
express air courier and by registered First Class mail, postage prepaid, addressed to such Party at the address set forth below, or to
such other address as a Party shall designate by written notice given to the other Party:
In the case of Samsung:
Samsung Electronics Co., Ltd.
Jay Shim
Vice President and General Patent Counsel
San #16 Banwol-Dong
Hwaseong-City, Gyeonggi-Do, Korea 445-701
14
In the case of Rambus:
Rambus Inc.
Thomas R. Lavelle
Senior Vice President and General Counsel
4440 El Camino Real
Los Altos, CA 94022
(with a copy, which shall not constitute notice, to the following:)
Satish Rishi
Chief Financial Officer
Rambus Inc.
4440 El Camino Real
Los Altos, CA 94022
Article 7
Successors and Assigns
7.1 Subject to the limitation in Section 4.7, this Agreement shall be binding upon and inure to the benefit of the Parties
hereto and their respective heirs, successors and assigns, and upon any corporation, limited liability partnership, limited liability
company, or other entity into or with which any Party hereto may merge, combine or consolidate. For the avoidance of doubt, this
provision does not govern the rights or obligations of successors or assigns of the Parties under either the License Agreement, the
Stock Purchase Agreement or the MOU. The releases, dismissals and covenants granted by each Party and its Subsidiaries under this
Agreement (but not any benefits received by such Party or its Subsidiaries under this Agreement) shall run with (i) in the case of
Samsung, the Samsung Patents or (ii) in the case of Rambus, the Rambus Patents, and remain in full force and effect regardless of
any subsequent assignment, sale or other transfer of any such Samsung Patents or Rambus Patents or any rights or interests therein.
Any such assignment, sale, or transfer of rights in contravention of the foregoing shall be null and void ab initio and of no force or
effect.
Article 8
Dispute Resolution
8.1 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of
California, without giving effect to any choice-of-law or conflict-of-law provision or rule (whether of the State of California or any
other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of California.
8.2 English Language. This Agreement is executed in the English language and no translation shall have any legal effect.
15
8.3 Jurisdiction and Venue. Any legal action, suit or proceeding arising under, or relating to, this Agreement, shall be
brought in the United States District Court for the Northern District of California or, if such court shall decline to accept jurisdiction
over a particular matter, in the San Francisco Superior Court, and each Party agrees that any such action, suit or proceeding may be
brought only in such courts. Each Party further waives any objection to the laying of jurisdiction and venue for any such suit, action
or proceeding in such courts.
Article 9
Miscellaneous
9.1 Entire Agreement. This Agreement, together with the License Agreement, the Stock Purchase Agreement, and the
MOU, constitute the entire agreement between the Parties regarding the subject matter hereof, and supersede any and all prior
negotiations, representations, warranties, undertakings or agreements, written or oral, between the Parties regarding such subject
matter.
9.2 Relationship of the Parties. Nothing contained in this Agreement or any other Comprehensive Resolution Agreement
shall be construed as creating any association, partnership, joint venture or the relation of principal and agent between Rambus and
Samsung. Each Party is acting as an independent contractor, and no Party shall have the authority to bind any other Party or its
representatives in any way.
9.3 Headings and Recitals. The headings of the several articles and sections are inserted for convenience of reference only
and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. The recitals to this Agreement are
intended to be a part of and affect the meaning and interpretation of this Agreement.
9.4 Amendment. This Agreement may not be modified or amended except in a writing executed by authorized
representatives of each of the Parties.
9.5 No Assignment. This Agreement is personal to the Parties, and the Agreement and/or any right or obligation hereunder
is not assignable, whether in conjunction with a change in ownership, merger, acquisition, the sale or transfer of all, or substantially
all or any part of either Party’s or any of their respective Subsidiaries’ business or assets or otherwise, voluntarily, by operation of
law, reverse triangular merger or otherwise, without the prior written consent of the other Party, which consent may be withheld at
the sole discretion of such other Party. Each Party understands that, as a condition to such consent, the other Party may require it to
convey, assign or otherwise transfer its rights and obligations under the other Comprehensive Resolution Agreements to the entity
assuming such Party’s rights and obligations under this Agreement. Any such purported or attempted assignment or transfer in
violation of the foregoing shall be deemed a breach of this Agreement and shall be null and void. A Change of Control of either
Party shall be deemed an assignment. For purposes of the foregoing, a Change of Control” means a transaction or a series of related
transactions in which (a) one or more Third Parties who did not previously Control a Party obtain Control of such Party, or (b) the
subject Party merges with or transfers substantially all of its assets to a Third Party where the shareholders of the assigning Party,
immediately before the
16
transaction or series of related transactions, own less than a fifty percent (50%) interest in the acquiring or surviving entity
immediately after the transaction or series of related transactions. Notwithstanding the foregoing, either Party shall be entitled to,
and each Party hereby agrees to, assign this Agreement to a successor to all or substantially all of a Party’s assets in a transaction
entered into solely to change a Party’s place of incorporation.
9.6 Interpretation. Each Party confirms that it and its respective counsel have reviewed, negotiated and adopted this
Agreement as the agreement and understanding of the Parties hereto and the language used in this Agreement shall be deemed to be
the language chosen by the Parties hereto to express their mutual intent. Neither Party shall be considered to be the drafter of this
Agreement or any of its provisions for the purpose of any statute, case law, or rule of interpretation or construction that would, or
might cause, any provision to be construed against such Party.
9.7 Authority. Each Party represents that it is fully authorized to enter into the terms and conditions of, and to execute, this
Agreement.
9.8 No Third Party Beneficiaries. Unless otherwise expressly stated herein, nothing in this Agreement, express or implied,
is intended to confer upon any person other than the Parties hereto or their respective permitted assignees, successors in interest, and
Subsidiaries any rights or remedies under or by reason of this Agreement. The former and current directors, officers, employees, and
attorneys of the Parties and their Subsidiaries are intended beneficiaries of Sections 4.1, 4.2, 4.4, 4.5, 4.6 and 4.7.
9.9 Severability. If any provision of any Comprehensive Resolution Agreement is held to be invalid or unenforceable, the
meaning of such provision shall be construed, to the extent feasible, so as to render the provision enforceable and to effectuate the
intent and purpose of the Parties with respect to such invalid or unenforceable provision, and if no feasible interpretation shall save
such provision, (a) a suitable and equitable provision shall be substituted therefor in order to effectuate, so far as may be valid and
enforceable, the intent and purpose of the Parties with respect to such invalid or unenforceable provision, and (b) the remainder of
such Comprehensive Resolution Agreement shall remain in full force and effect.
9.10 No Waiver. The failure of either Party to enforce, at any time, any of the provisions of this Agreement shall in no way
be construed as a waiver of such provisions, and shall not be deemed in any way to affect the validity of this Agreement or any part
thereof, or the right of either Party to later enforce each and every such provision. No waiver of any breach of this Agreement shall
be held to be a waiver of any other or subsequent breach.
9.11 Counterparts; Facsimile Transmission. This Agreement may be executed in multiple counterparts, each of which shall
constitute an original, but all of which together shall constitute one and the same agreement. Each Party may rely on facsimile or
.pdf signature pages as if such facsimile or .pdf pages were originals.
9.12 Further Actions. Each of the Parties hereto agrees to take and cause its Subsidiaries to take any and all actions
reasonably necessary in order to effectuate the intent, and to carry out the provisions, of this Agreement.
17
9.13 Public Disclosures and Confidentiality. The Parties shall issue a press release with respect to the Comprehensive
Resolution Agreement in a mutually acceptable form. Each Party agrees that, after the issuance of such press release, each Party
shall be entitled to disclose the general nature of this Agreement, but that the terms and conditions of this Agreement, to the extent
not already disclosed pursuant to such press release, shall be treated as confidential information and that neither Party will disclose
such terms or conditions to any Third Party without the prior written consent of the other Party, provided, however, that each Party
may disclose the terms and conditions of this Agreement:
(a) as required by any court or other governmental body;
(b) as otherwise required by law;
(c) as otherwise may be required by applicable securities and other law and regulation, including to legal and
financial advisors in their capacity of advising a party in such matters, so long as the disclosing Party shall seek confidential
treatment of such terms and conditions to the extent reasonably possible;
(d) to legal counsel, accountants, and other professional advisors of the Parties;
(e) in confidence, to banks, investors and other financing sources and their advisors;
(f) in connection with the enforcement of this Agreement or rights under this Agreement;
(g) during the course of litigation so long as the disclosure of such terms and conditions are restricted in the same
manner as is the confidential information of other litigating parties and so long as (A) the restrictions are embodied in a court-
entered protective order limiting disclosure to outside counsel and (B) the disclosing party informs the other party in writing at least
ten (10) business days in advance of the disclosure and discusses the nature and contents of the disclosure, in good faith, with the
other party (for purposes of this provision, the Protective Order entered in the Antitrust Litigation is acceptable, as long as the
disclosure is designated as both “Highly Confidential-BP and Highly Confidential-IP”); or
(h) in confidence, in connection with an actual or prospective merger or acquisition or similar transaction.
In addition, upon execution of this Agreement, or thereafter, Rambus, in its discretion, shall be entitled to file a copy
of this Agreement with the U.S. Securities and Exchange Commission, so long as Rambus seeks confidential treatment of such
agreement to the extent reasonably possible.
18
IN WITNESS WHEREOF, this Agreement has been duly and executed and delivered by the duly authorized officers of the
Parties hereto as of the date first written above.
RAMBUS INC.
By: /s/ Harold Hughes
Name: Harold Hughes
SAMSUNG ELECTRONICS CO., LTD.
By: /s/ Oh-Hyun Kwon
Name: Oh-Hyun Kwon
SAMSUNG ELECTRONICS AMERICA, INC.
By: /s/ Oh-Hyun Kwon for CS Choi
Name: Changsoo Choi
SAMSUNG SEMICONDUCTOR, INC.
By: /s/ Oh-Hyun Kwon for WH Hong
Name: Wanhoon Hong
SAMSUNG AUSTIN SEMICONDUCTOR, L.P.
By: /s/ Oh-Hyun Kwon for WS Han
Name: Woosung Han
The registrant agrees to furnish to the Securities and Exchange Commission upon request a copy of any omitted schedule or exhibit.
19
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT IS BOTH NOT
MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY
DISCLOSED. [***] INDICATES THAT INFORMATION HAS BEEN REDACTED.
Exhibit 10.12
Conformed Copy
Semiconductor Patent License Agreement
Between
Rambus Inc.
and
Samsung Electronics Co., Ltd.
SEMICONDUCTOR PATENT LICENSE AGREEMENT
This SEMICONDUCTOR PATENT LICENSE AGREEMENT (“Agreement”) is made and entered into on this 19 day of January,
2010 (“Effective Date”) by and between Rambus Inc., a corporation duly organized and existing under the laws of Delaware, U.S.A.,
having its principal place of business at 4440 El Camino Real, Los Altos, California 94022, U.S.A., (hereinafter “Rambus”) and
Samsung Electronics Co., Ltd., a Korean corporation having its principal place of business at San # 16, Banwol-Dong, Hwasung-
City, Gyeonggi-Do, Korea, 445-701 (hereinafter “Samsung”).
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WHEREAS, the parties are currently parties to a number of disputes relating to the Samsung products and the Rambus
patents, including but not limited to disputes as to whether claims of Rambus patents are infringed by Samsung products and the
Antitrust Litigation, and recognize that, without this Agreement, given the diversity of claims of the Rambus patents, and the breadth
of technologies utilized by the Samsung products, Rambus could, after the Effective Date, assert that other claims of Rambus patents
are infringed by Samsung products;
WHEREAS, the parties recognize that litigation of such is inherently uncertain, and is subject to certain risks and to various
possible outcomes, some of which would b e more favorable to Rambus, and some of which would be more favorable to Samsung;
WHEREAS, concurrent with the execution and delivery of this Agreement, the parties have entered into a Settlement Agreement
(the “Settlement Agreement”) to eliminate the risks associated with such litigation and to enter into a comprehensive resolution to
compromise, settle and release certain existing disputes between them, and to compromise, resolve and avoid other disputes that may
arise after the Effective Date with respect to the Samsung products and the Rambus patents;
WHEREAS, as part of such comprehensive resolution, the parties have agreed to enter into this Agreement; and
WHEREAS, because this Agreement is part of such comprehensive resolution, the parties acknowledge that it is therefore
essential that their respective obligations under this Agreement be certain and not subject to collateral attack, or otherwise subject to
change or modification except on the terms expressly set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and premises contained herein, and other valuable
consideration, the receipt and sufficiency of which is hereby acknowledged by the parties, the parties agree as follows:
2
1. DEFINITIONS
1.1 “Acquired Business” means a Third Party, the portion of a Third Party, and/or any portion of the assets or business of a Third
Party that Samsung or its Subsidiaries acquire in an Acquisition.
1.2 “Acquisition” means, as to a party, a transaction or a series of related transactions in which such party acquires, through merger
(including reverse triangular merger), acquisition of stock, acquisition of assets or otherwise, a Third Party and/or any portion
of the assets or business of a Third Party.
1.3 “Acquisition Date” means the effective date of any Acquisition completed by Samsung or any of its Subsidiaries as described
under Section 3.3.
1.4 Antitrust Litigation means the matter entitled Rambus Inc. v. Micron Technology Inc. et al., No. 04-431105 (Supr. Ct. Cal., San
Fran. Filed May 5, 2004).
1.5 “Change of Control” means a transaction or a series of related transactions in which (i) one or more Third Parties who did not
previously Control a party obtain Control of such party, or (ii) the subject party merges with or transfers substantially all of
its assets to a Third Party where the shareholders of the assigning party, immediately before the transaction or series of
related transactions, own less than a fifty percent (50%) interest in the acquiring or surviving entity immediately after the
transaction or series of related transactions.
1.6 “Combination Product” means either (a) a Component containing two (2) or more Integrated Circuits at least one of which is a
Licensed Product and where all other Integrated Circuits contained in such Component are each either a Licensed Product or
a Permitted Third Party Product, or (b) solely that portion of a Component consisting of a combination of two (2) or more
Integrated Circuits that are each a Licensed Product (“Eligible Portion”) where such Component also contains an Integrated
Circuit that is neither a Licensed Product nor a Permitted Third Party Product. For clarity, an Eligible Portion may not
contain any Integrated Circuit that is not a Licensed Product.
1.7 “Combination Product License” means the rights and licenses granted under Section 2.1(c).
1.8 “Component” means a product comprised of one or more Integrated Circuits physically connected, stacked, or attached to a
unitary substrate or other Integrated Circuit where all other elements of such product are passive elements intended to
provide physical support, packaging and/or connectivity with respect to such Integrated Circuits. Examples of Components
would include DIMMs, SIMMs and other modules, and cards, multi-chip packages (MCP), system-on-chip, system-in-
package, system-on-insulator, solid state storage devices, and other form factors.
3
1.9 “Control” (including “Controlled” and other forms) of an entity means (a) beneficial ownership (whether directly or indirectly
through entities or other means) of more than fifty percent (50%) of the outstanding voting securities of that entity or (b) in
the case of an entity that has no outstanding voting securities, having the power (whether directly or indirectly through
entities or other means) presently to designate more than fifty percent (50%) of the directors of a corporation, or in the case
of unincorporated entities, of individuals exercising similar functions. Notwithstanding the foregoing sentence, where
Samsung has fifty percent (50%) of such beneficial ownership or power to designate with respect to any other entity,
Samsung shall be deemed to “Control” such other entity if such other entity is part of the “Samsung Group of Companies”
and such entity is lawfully registered under a corporate name, and lawfully operates and generally and routinely conducts its
business under a corporate name, that includes “Samsung,” provided that, such entity agrees in a writing, delivered to both
Parties within thirty (30) days of the Effective Date (or if later, within thirty (30) days after formation of such entity), to be
bound by all applicable terms and conditions of this Agreement.
1.10 “DDR DRAM” means each double data rate DRAM that (a) implements the minimum set of features, parameters, and
protocols defined or recommended in any final JEDEC-published specification for DDR DRAM; and (b) is solely capable of
communicating with any other Integrated Circuit through the protocol defined or recommended in any such JEDEC-
published specification and (c) is not Sold or specified as being capable of operating: (1) at a data transfer rate exceeding
[***]; or (2) with data bit width other than x4, x8 and/or x16.
1.11 “DDR2 DRAM” means each double data rate DRAM that (a) implements the minimum set of features, parameters, and
protocols defined or recommended in any final JEDEC-published specification for DDR2 DRAM; and (b) is solely capable
of communicating with any other Integrated Circuit through the protocol defined or recommended in any such JEDEC-
published specification and (c) is not Sold or specified as being capable of operating: (1) at a data transfer rate exceeding
[***]; or (2) with data bit width other than x4, x8 and/or x16.
1.12 “DDR3 DRAM” means each double data rate DRAM that (a) implements the minimum set of features, parameters, and
protocols defined or recommended in any final JEDEC-published specification for DDR3 DRAM; and (b) is solely capable
of communicating with any other Integrated Circuit through the protocol defined or recommended in any such JEDEC-
published specification and (c) is not Sold or specified as being capable of operating: (1) at a data transfer rate exceeding
[***]; or (2) with data bit width other than x4, x8 and/or x16.
1.13 “DRAM” means a dynamic random access memory Integrated Circuit the primary purpose of which is data storage and
retrieval.
1.14 “DRAM Controller” means any Integrated Circuit having circuitry integrated thereon or contained therein that is capable
through an Interface of transmitting and/or receiving data from a DRAM.
4
1.15 “Effective Date” has the meaning assigned in the first paragraph of this Agreement.
1.16 “Existing Agreement” has the meaning ascribed to such term under Section 3.3(b) below.
1.17 “Expiration Date” means the fifth (5 ) anniversary of the Effective Date.
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1.18 “Foundry Product” means any product that would constitute a Paid-up Product or Term Product but for the fact that such
product does not constitute a Samsung Product.
1.19 “Foundry Product License” means the rights and licenses granted under Section 2.1(d) below.
1.20 “GDDR DRAM” means each graphics double date rate DRAM that (a) implements the minimum set of features, parameters,
and protocols defined or recommended in any final JEDEC-published specification for GDDR DRAM; and (b) is solely
capable of communicating with any other Integrated Circuit through the protocol defined or recommended in any such
JEDEC-published specification and (c) is not Sold or specified as being capable of operating: (1) at a data transfer rate
exceeding [***]; or (2) with data bit width other than x16 and x32.
1.21 “GDDR2 DRAM” means each graphics double date rate DRAM that (a) implements the minimum set of features, parameters,
and protocols defined or recommended in any final JEDEC-published specification for GDDR2 DRAM; and (b) is solely
capable of communicating with any other Integrated Circuit through the protocol defined or recommended in any such
JEDEC-published specification and (c) is not Sold or specified as being capable of operating: (1) at a data transfer rate
exceeding [***]; or (2) with data bit width other than x16 and x32.
1.22 “GDDR3 DRAM” means each graphics double date rate DRAM that (a) implements the minimum set of features, parameters,
and protocols defined or recommended in any final JEDEC-published specification for GDDR3 DRAM; and (b) is solely
capable of communicating with any other Integrated Circuit through the protocol defined or recommended in any such
JEDEC-published specification and (c) is not Sold or specified as being capable of operating: (1) at a data transfer rate
exceeding [***]; or (2) with data bit width other than x16 and x32.
1.23 “GDDR4 DRAM” means each graphics double data rate DRAM that (a) implements the minimum set of features, parameters,
and protocols defined or recommended in any final JEDEC-published specification for GDDR4 DRAM; and (b) is solely
capable of communicating with any other Integrated Circuit through the protocol defined or recommended in any such
JEDEC-published specification and (c) is not Sold or specified as being capable of operating: (1) at a data transfer rate
exceeding [***]; or (2) with data bit width other than x16 and x32.
1.24 “GDDR5 DRAM” means each graphics double data rate DRAM that (a) implements those interface features, parameters, and
protocols in the same manner in all material
5
respects as the DRAM Sold by Samsung or its Subsidiaries on or before the Effective Date as “GDDR5 DRAM” or
implements the minimum set of features, parameters, and protocols defined or recommended in any final JEDEC-published
specification for GDDR5 DRAM; and (b) is solely capable of communicating with any other Integrated Circuit through the
protocol contained in DRAM Sold by Samsung or its Subsidiaries on or before the Effective Date as “GDDR5 DRAM;” and
(c) is not Sold or specified as being capable of operating: (1) at a data transfer rate exceeding [***]; (2) with data bit width
other than x16 and x32.
1.25 “Indirect Infringement” means any form of alleged patent infringement where the accused infringer is not directly infringing
the subject patent right(s), but is in some manner liable for a Third Party’s direct infringement of the subject patent right(s)
by, for example (without limitation), supplying designs, parts or instructions to the Third Party that enable such Third Party
to infringe directly the subject patent right(s). Indirect Infringement includes without limitation contributory infringement
and inducing infringement.
1.26 “Integrated Circuit” means a single, discrete integrated circuit chip, whether in wafer, cingulated die or packaged die form.
1.27 “Interface” means an electrical, optical, RF, mechanical, or software data path that is capable of transmitting and/or receiving
information between two or more (a) Integrated Circuits or (b) portions of an Integrated Circuit, in each case together with
the set of protocols defining the electrical, physical, timing and/or functional characteristics, sequences and/or control
procedures of such data path.
1.28 “JEDEC” means the JEDEC Solid State Technology Association, originally known as the Joint Electron Device Engineering
Council, a non-stock corporation organized and existing under the laws of the Commonwealth of Virginia.
1.29 “Licensed Product” means a Paid-up Product, Term Product, or Combination Product made (including have made), used,
Sold, offered for Sale, and/or imported pursuant to the Paid-up Product License, the Term Product License and Combination
Product License, respectively.
1.30 “Licensed Foundry Product Portion” means that portion of a Foundry Product made, used, Sold, offered for Sale, and/or
imported pursuant to the Foundry Product License.
1.31 “LPDDR DRAM” means each low-power double data rate DRAM that (a) implements the minimum set of features,
parameters, and protocols defined or recommended in any final JEDEC-published specification for LPDDR DRAM; and (b)
is solely capable of communicating with any other Integrated Circuit through the protocol defined or recommended in any
such JEDEC-published specification and (c) is not Sold or specified as being capable of operating: (1) at a data transfer rate
exceeding [***]; or (2) with data bit width other than x8, x16 and/or x32.
6
1.32 “LPDDR2 DRAM” means each low-power double data rate DRAM that (a) implements the minimum set of features,
parameters, and protocols defined or recommended in any final JEDEC-published specification for LPDDR2 DRAM; and (b)
is solely capable of communicating with any other Integrated Circuit through the protocol defined or recommended in any
such JEDEC-published specification and (c) is not Sold or specified as being capable of operating: (1) at a data transfer rate
exceeding [***]; or (2) with data bit width other than x8, x16 and/or x32.
1.33 “Other DRAM” means any DRAM that does not constitute a Paid-up Product.
1.34 “Paid-up Product” means each Samsung Product that is SDR DRAM, DDR DRAM, DDR2 DRAM, DDR3 DRAM, GDDR
DRAM, GDDR2 DRAM, GDDR3 DRAM, GDDR4 DRAM, GDDR5 DRAM, LPDDR DRAM, and LPDDR2 DRAM.
Notwithstanding the foregoing sentence, any product that constitutes a Rambus Leadership Product shall be deemed not to be
a Paid-up Product.
1.35 “Paid-up Product License” means the rights and licenses granted pursuant to Section 2.1(a).
1.36 “Patents” means patents and utility models and applications therefor, including, without limitation, all continuations,
continuations-in-part and divisionals thereof, in all countries of the world that now or hereafter are (i) owned or controlled by
the applicable party hereto and its Subsidiaries and/or (ii) otherwise licensable by the applicable party hereto and its
Subsidiaries, in each case of (i) and (ii) where such party and its Subsidiaries have the right to grant the licenses, sublicenses
or other rights and covenants of the scope granted herein.
1.37 “Permitted Third Party Product” means any Integrated Circuit that is neither a Samsung Product nor a DRAM, SerDes IC,
DRAM Controller, Synchronous Flash Memory or Synchronous Flash Controller.
1.38 “Quarterly Acquisition Adjustment Payment” means each quarterly fixed amount initially payable by Samsung under this
Agreement upon Samsung’s or any of its Subsidiaries’ Acquisition of any Acquisition Products as provided for under Section
3.3.
1.39 “Quarterly Base Payment” means twenty-five million United States Dollars (US$25,000,000).
1.40 “Quarterly Buffer” means, for a subject quarter during this Agreement, the following upper limit (“Ceiling”) and lower limit
(“Floor”) for such quarter.
Ceiling
Floor
Quarter
5 – 8
[***]
[***]
Quarter
9 – 12
[***]
[***]
Quarter
13 – 16
[***]
[***]
Quarter
17 – 20
[***]
[***]
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1.41 “Quarterly DRAM Revenue” means the total amount of revenue Samsung and its Subsidiaries received for Sales of DRAM
during a subject quarter as reported by iSuppli Corporation (“iSuppli”) in its DRAM Market Tracker (or in such alternate
source as may be used as set forth below) for the subject quarter. Upon the earlier of, either iSuppli (or such alternate source)
(1) ceasing to report such information on a quarterly basis, or (2) failing to report such information by the end of the quarter
two (2) quarters after the subject quarter, the parties shall negotiate in good faith to determine an alternate source for
determining the Quarterly DRAM Revenue for the subject quarter, provided that, if the parties fail to reach agreement on
such alternate source within thirty (30) days following the second quarter after the subject quarter for which such Quarterly
DRAM Revenue report was not available, then either party may, as its sole and exclusive remedy to resolve such dispute,
submit such dispute to binding arbitration pursuant to Section 8 and Samsung’s obligation to remit its Quarterly License
Payment pursuant to Section 4.1 for the subject quarter shall be tolled until the earlier of either the final resolution of such
arbitration determining such alternate source or the parties’ agreement on an alternate source.
1.42 “Quarterly License Payment” has the meaning ascribed to such term in Section 4.1.
1.43 “Quarterly Reference DRAM Revenue” means the sum of the Quarterly DRAM Revenue for 2010 divided by four (4).
1.44 “Quarterly DRAM Revenue Ratio” means the ratio of the Quarterly DRAM Revenue and the Quarterly Reference DRAM
Revenue.
1.45 “Rambus Applicable Manufacturing Claims” are defined and determined separately for each specific product. For each such
product, a Rambus Applicable Manufacturing Claim means each process or method claim of a Rambus Patent [***]
infringed when such product is made (or have made).
1.46 “Rambus Applicable Patent Claims” means Rambus Applicable Manufacturing Claims and Rambus Applicable Product
Claims.
1.47 “Rambus Applicable Product Claims” are defined and determined separately for each specific product. For each such product,
a Rambus Applicable Product Claim means each claim of a Rambus Patent [***] infringed by the use, Sale, Offer for Sale, or
import of such product in the form first made (or have made).
1.48 “Rambus Leadership Product” means any product that implements a Rambus Proprietary Specification.
1.49 “Rambus Patents” means Patents of Rambus and its Subsidiaries.
1.50 “Rambus Product Design” means any human or machine readable representation of the design, such as a circuit layout in a
drawing or a register transfer level description (RTL)
8
file, for any product, element or instrumentality, including, but not limited to any Rambus Leadership Product.
1.51 “Rambus Product Design License” means the rights and licenses granted under Section 2.2.
1.52 “Rambus Proprietary Specification” means any Technical Specification that is first designed and developed (as demonstrated
by customary means, including, but not limited to, engineering notebooks) by, or on behalf of, Rambus or any of its
Subsidiaries, over which Rambus and/or any of its Subsidiaries has exclusive control and that neither Rambus nor any of its
Subsidiaries has voluntarily (a) disclosed except under a confidentiality or non-disclosure agreement; or (b) proposed or
disclosed to any standards setting organization. In addition to the foregoing sentence, Rambus Proprietary Specification also
includes any Technical Specification exclusively acquired by Rambus from a Third Party where such Technical Specification
would otherwise meet the definition of a Rambus Proprietary Specification had Rambus, and not the relevant Third Party,
been the original developer and owner of such Technical Specification. Notwithstanding the above, a Technical Specification
independently developed by or on behalf of Samsung, or by a Third Party and acquired by Samsung, shall not be deemed to
be a Rambus Proprietary Specification, even if it describes similar or identical functions. A Technical Specification shall not
be deemed to be independently developed for purposes of the preceding sentence to the extent such Technical Specification,
or any portion thereof, was developed or derived based on information (i) for which Samsung or any of its Subsidiaries, or
any other Third Party, is bound by an obligation of confidentiality or non-use to Rambus; (ii) obtained from any other Third
Party in violation of its obligation of confidentiality or non-use to Rambus; or (iii) obtained by Samsung, any of its
Subsidiaries or any other Third Party based on reverse engineering of any product that implements a Rambus Proprietary
Specification.
1.53 “Samsung Applicable Manufacturing Claims” are defined and determined separately for each specific product. For each such
product, a Samsung Applicable Manufacturing Claim means each process or method claim of a Samsung Patent [***]
infringed when such product is made (or have made).
1.54 “Samsung Applicable Patent Claims” means Samsung Applicable Manufacturing Claims and Samsung Applicable Product
Claims.
1.55 “Samsung Applicable Product Claims” are defined and determined separately for each specific product. For each such
product, a Samsung Applicable Product Claim means each claim of a Samsung Patent [***] infringed by the use, Sale, Offer
for Sale, or import of such product in the form first made (or have made).
1.56 “Samsung Patent” means Patents of Samsung and its Subsidiaries.
9
1.57 “Samsung Product” means, an Integrated Circuit, for which Samsung or any of its Subsidiaries either:
(a) owns the entire design of such Integrated Circuit with no limitations on how it may use such design; and/or
(b) has a license from the party or parties that created or otherwise owns the design of such Integrated Circuit, under which
license Samsung and/or its Subsidiaries (i) can make (and/or have made) such Integrated Circuit; (ii) is free to Sell
such made (or have made) Integrated Circuit without restriction as to whom Samsung and/or its Subsidiaries may Sell
such Integrated Circuit and (iii) is not required or bound to discriminate in price or other terms with respect to such
Integrated Circuit.
1.58 “SDR DRAM” means each single data rate DRAM that (a) implements the minimum set of features, parameters, and
protocols defined or recommended in any final JEDEC-published specification for SDR DRAM; and (b) is solely capable of
communicating with any other Integrated Circuit through the protocol defined or recommended in any such JEDEC-
published specification and (c) is not Sold or specified as being capable of operating: (1) at a data transfer rate exceeding
[***]; or (2) with data bit width other than x4, x8 and/or x16.
1.59 “Second Preceding Quarter” means, with respect to a subject quarter, the quarter that is two (2) quarters earlier than the
subject quarter. For example, the Second Preceding Quarter to the fourth (4 ) quarter of this Agreement would be the second
(2 ) quarter.
nd
th
1.60 “Sell” (including “Sale” and “Sold” and other forms) means to sell, lease, or otherwise transfer or dispose of a product, or if
the product is transferred and used internally by an entity, then such transfer and use shall also be deemed a Sale.
1.61 “SerDes IC” means any Integrated Circuit having circuitry integrated thereon or contained therein that (a) de-serializes data
received by such Integrated Circuit from a different Integrated Circuit and/or (b) serializes data originating on such
Integrated Circuit prior to transmitting such data to a different Integrated Circuit. Notwithstanding the foregoing, any
Integrated Circuit, the primary purpose of which is data storage and/or retrieval shall be deemed not to be a SerDes IC.
1.62 “Settlement Agreement” has the meaning assigned in the recitals to this Agreement.
1.63 “Subsidiary” means with respect to any identified entity (“Identified Entity”), any entity Controlled by such Identified Entity,
but only so long as such Control exists.
1.64 “Synchronous Flash Controller” means any Integrated Circuit having circuitry integrated thereon or contained therein that is
capable through an Interface of transmitting and/or receiving data from a Synchronous Flash Memory.
10
1.65 “Synchronous Flash Memory” means any Integrated Circuit the primary purpose of which is data storage or retrieval that has
a synchronous Interface and memory cells that retain data stored in such memory cells even when it ceases to receive
electrical power.
1.66 “Technical Specification” means a final specification for an optical, RF, electrical, mechanical, or software component that
describes all of the characteristics of such component necessary for such component to operate. As example, the electrical
interface (including timing and signaling parameters and characteristics) for a data bus connecting two (2) Integrated Circuits
would meet the definition of a Technical Specification provided that such interface specified all of the signals necessary for
such data bus to function.
1.67 “Term” means, as the case may be, the (a) term of the Paid-Up License, (b) the term of the Term Product License; (c) term of
the Combination Product License, and/or (d) term of the Foundry Product License in each case of (a), (b), (c) and (d) as
provided for under Section 6.1.
1.68 “Term Product” means each Samsung Product that is a (a) Other DRAM; (b) DRAM Controller; (c) Synchronous Flash
Memory; (d) Synchronous Flash Controller; (e) SerDes IC; and (f) any other Integrated Circuit other than a Paid-up Product.
Notwithstanding the foregoing sentence, any product that constitutes a Rambus Leadership Product shall be deemed not to be
a Term Product.
1.69 “Term Product License” means the rights and licenses granted under Section 2.1(b).
1.70 “Third Party” means with respect to (i) Rambus or any Subsidiary of Rambus, any entity that is not a Subsidiary of Rambus
and (ii) with respect to Samsung or any Subsidiary of Samsung, any entity that is not a Subsidiary of Samsung.
1.71 “Ultimate Parent” means with respect to any identified entity (“Identified Entity”), any entity that Controls such Identified
Entity and where such Controlling entity is not under the Control of any other entity.
2. Grant of Rights
2.1 License to Samsung.
(a) Paid-up Product License. Subject to the terms and conditions of this Agreement, Rambus, on behalf of itself and its
Subsidiaries, hereby grants to Samsung and its Subsidiaries, for each product that falls within the definition of a Paid-up
Product: a non-exclusive, non-transferable, royalty-bearing, worldwide license, without the right to sublicense, solely under
the associated Rambus Applicable Patent Claims for such Paid-up Product, to make (including have made), use, Sell, offer
for Sale, and/or import such Paid-up Product until the expiration or termination of this license pursuant to Section 6.1(a).
11
(b) Term Product License. Subject to the terms and conditions of this Agreement, Rambus, on behalf of itself and its
Subsidiaries, hereby grants to Samsung and its Subsidiaries, for each product that falls within the definition of a Term
Product: a non-exclusive, non-transferable, royalty-bearing, worldwide license, without the right to sublicense, solely under
the associated Rambus Applicable Patent Claims for such Term Product, to make (including have made), use, Sell, offer for
Sale, and/or import such Term Product until the expiration or termination of this license pursuant to Section 6.1(b).
(c) Combination Product License. Subject to the terms and conditions of this Agreement, Rambus, on behalf of itself and
its Subsidiaries, hereby grants to Samsung and its Subsidiaries, for each product that falls within the definition of a
Combination Product: a non-exclusive, non-transferable, royalty-bearing, worldwide license, without the right to sublicense,
solely under the associated Rambus Applicable Patent Claims for such Combination Product, to make (including have made),
use, Sell, offer for Sale, and/or import such Combination Product until the expiration or termination of this license pursuant
to Section 6.1(c). For clarity, the grant of the license to Combination Products pursuant to this Section 2.1(c) does not
supersede or otherwise limit the licenses granted to each Term Product and Paid-up Product under Section 2.1(a) and Section
2.1(b), respectively, that may be contained in any such Combination Product.
(d) Foundry Product License. Except as expressly set forth in Sections 2.1(d)(i) and 2.1(d)(ii) below, all Foundry Products
are expressly excluded from the licenses granted under Sections 2.1(a), 2.1(b) and 2.1(c) of this Agreement.
(i) Manufacturing. Rambus, on behalf of itself and its Subsidiaries, hereby grants to Samsung and its Subsidiaries,
for any product that constitutes a Foundry Product: a non-exclusive, non-transferable, worldwide license,
without the right to sublicense, under the associated Rambus Applicable Manufacturing Claims for such
Foundry Product, to make (but not have made), use, Sell, and offer for Sale any such Foundry Product until
the expiration or termination of this license pursuant to Section 6.1(d). For the avoidance of doubt, except as
expressly set forth in Section 2.1(d)(ii), no license is granted under any Rambus Applicable Product Claims
for any Foundry Products.
(ii) Samsung Supplied Technology. For any portion of a Foundry Product supplied by Samsung and/or its
Subsidiaries (“Samsung Supplied Portion”) for which Samsung or any of its Subsidiaries either (1) owns the
entire design of such Samsung Supplied Portion with no limitations on how it may use such design; and/or (2)
has a license from the Third Party (or Third Parties) that created or otherwise owns the design of such
Samsung Supplied Portion, under which license Samsung and/or its Subsidiaries (i) can make (and/or have
made) such Samsung Supplied Portion; (ii) is free to Sell such made Samsung Supplied Portion without
restriction as to whom Samsung and/or its Subsidiaries may Sell such
12
Samsung Supplied Portion and (iii) is not required or bound to discriminate in price or other terms with
respect to such Samsung Supplied Portion, Rambus, on behalf of itself and its Subsidiaries, hereby grants to
Samsung and its Subsidiaries, a non-exclusive, non-transferable, worldwide license, without the right to
sublicense, under the associated Rambus Applicable Product Claims for such Samsung Supplied Portion, to
use, Sell, offer for Sale, or import any such Samsung Supplied Portion as part of any such Foundry Product
until the expiration of termination of this license pursuant to Section 6.1(d).
2.2 Rambus Product Design License. Subject to the terms and conditions of this Agreement, Samsung, on behalf of itself and its
Subsidiaries, hereby grants to Rambus and its Subsidiaries, for each product that falls within the definition of Rambus
Product Design: a non-exclusive, non-transferable, worldwide license, without the right to sublicense, solely under the
associated Samsung Applicable Patent Claims for such Rambus Product Design, to make (including have made), use, Sell,
offer for Sale, and/or import such Rambus Product Design until the expiration or termination of this license pursuant to
Section 6.1(e). For the avoidance of doubt, this license does not in any way, expressly or impliedly, extend, nor is it intended
to extend, to any devices or products made essentially based on or incorporating such Rambus Product Design or in
combination of such Rambus Product Design.
2.3 Obligations When Transferring Patents. Each party agrees that it shall take all actions necessary to ensure that any Third Party
to whom any Patents are transferred, assigned or exclusively licensed or any right to enforce is granted (including any
successor in interest thereto) is bound in writing to all covenants, licenses and other rights granted hereunder with respect
such transferred, assigned or exclusively licensed Patents, provided further that if Rambus or any of its Subsidiaries transfers
to any Third Party ownership of, or otherwise grants any Third Party the right to enforce, any claim of any Rambus Patent
that is subject to the Covenant to Sue Last provided for under Section 2.4 below, such claim shall, upon such transfer of
ownership or grant of right to enforce, automatically and immediately be deemed to be included in the rights and licenses
granted hereunder with respect to Licensed Products and Licensed Foundry Product Portions notwithstanding the fact that
such claim does not constitute a Rambus Applicable Patent Claim.
2.4 Covenant [***]. For so long as a product constitutes a Licensed Product or Licensed Foundry Product Portion hereunder,
Rambus, on behalf of itself and its Subsidiaries, covenants that [***].
2.5 Full Force and Effect. The parties expressly acknowledge and agree that nothing in this Agreement shall in any way limit or
alter the effect of the first sale or patent exhaustion doctrines under U.S. law, and any equivalent or similar doctrines under
the law of any jurisdiction with respect to Rambus Applicable Patent Claims with respect to any
13
Licensed Product or Licensed Foundry Product Portion based on the Sale of such Licensed Product or Licensed Foundry
Product Portion.
2.6 No Release, No Implied or Other Rights and Licenses.
(a) The rights and licenses granted and covenants made herein apply solely to those products and activities expressly
licensed during the Term. Nothing in this Agreement shall be deemed to, and shall not be construed to, constitute any
release, forbearance, forfeiture or other waiver of any rights of either party or their respective Subsidiaries to enforce
any of their respective intellectual property rights with respect to any activities undertaken by either party, their
respective Subsidiaries and/or any other Third Party to the extent not expressly granted or made hereunder. Nothing
in this Agreement is intended to limit or alter any rights under applicable law relating to patent exhaustion.
(b) Except as expressly provided for under this Agreement, no authorization, release, license, covenant or other right is
granted or made, by implication, estoppel, acquiescence or otherwise under this Agreement, to either party, their
respective Subsidiaries and/or any other Third Party under any patents, utility models, patent or utility model claims,
or other intellectual property rights now or hereafter owned or controlled by either party or their respective
Subsidiaries. Nothing in this Agreement is intended to limit or alter any rights under applicable law relating to patent
exhaustion.
(c) Except as expressly provided for under this Agreement, none of the terms of this Agreement shall be deemed to, and
shall not be construed to, constitute, whether by implication, estoppel, acquiescence or otherwise, (i) an authorization
by either party, their respective Subsidiaries and/or any other Third Party to Sell, offer for Sale and/or import any
product (1) in or for combination with any other element (including, but not limited to any function or feature),
product or instrumentality; or (2) unconditionally for use in or for combination with any other element (including, but
not limited to any function or feature), product or instrumentality; or (ii) a waiver by either party or their respective
Subsidiaries of any liability for infringement based on either party’s, their respective Subsidiaries and/or any other
Third Party’s use, Sale, offer for Sale and/or import of any product in combination with any other element (including,
but not limited to any function or feature), product or instrumentality. Nothing in this Agreement is intended to limit
or alter any rights under applicable law relating to patent exhaustion.
3. Subsidiaries, Former Subsidiaries and Acquisitions
3.1 Subsidiaries. The parties intend that this Agreement shall extend to all of each party’s Subsidiaries. The parties agree that to the
extent they are not already bound, each party shall ensure that all of its Subsidiaries (including without limitation all entities
that
14
become Subsidiaries after the Effective Date (“New Subsidiaries”)) are bound by the terms of this Agreement. Without
limiting the foregoing:
(a) each party shall ensure that each New Subsidiary’s patents, utility models and applications therefor are included within
the definition of the applicable party’s Patents; and
(b) each party shall ensure that each New Subsidiary is bound as applicable, by Section 2.3 and 2.4.
3.2 Former Subsidiaries. All rights and licenses granted and covenants made to any Subsidiary of either party shall immediately
and automatically terminate upon a party ceasing to Control such entity (“Former Subsidiary”). However, if a Subsidiary of a
party that holds any patent or utility model or applications therefor that are subject to the rights and licenses granted or
covenants made hereunder becomes a Former Subsidiary, such rights and licenses granted or covenants made by such Former
Subsidiary (including every successor entity in interest to any such patents or utility models and applications therefor) shall
continue in accordance with the terms of this Agreement after such entity becomes a Former Subsidiary.
3.3 Acquisitions.
(a) Acquired Business [***]. If Samsung or any of its Subsidiaries completes an Acquisition where [***] then Samsung
shall pay Rambus a fixed quarterly payment (in addition to Samsung’s Quarterly License Payments or any other
Quarterly Acquisition Adjustment Payment owed pursuant to Section 3.3(b) in connection with such Acquisition or
any other Acquisition), based on such Acquisition, starting, on a prorated basis, with the first calendar quarter during
which the Acquisition Date occurred, [***]. If iSuppli data as required for the calculations in this Section 3.3(a) is not
available for an Acquired Business or for Samsung, or the most recent version of such data covers a period ending
more than twelve (12) months before the Acquisition Date, the parties shall initially meet within thirty (30) days
following the associated Acquisition Date and negotiate in good faith an alternate source for the information that was
to be provided by iSuppli. If the parties cannot reach agreement on such alternate source within thirty (30) days
following the date required for such initial meeting, either party may, as its sole and exclusive remedy to resolve such
dispute, submit such dispute to binding arbitration pursuant to the terms of Section 3.3(d). For the avoidance of doubt,
any Acquired Business that has revenue attributable from the Sale of Acquisition Products of [***] or less (as
reported by iSuppli for the most recent twelve (12) months preceding the Acquisition Date for which iSuppli has
reported such Sales) shall be licensed without additional payments of any kind.
(b) Acquired Business [***]. If Samsung or any of its Subsidiaries completes an Acquisition where [***], Samsung shall
pay Rambus a fixed quarterly payment (in addition to Samsung’s Quarterly License Payments or any other Quarterly
15
Acquisition Adjustment Payment owed pursuant to Section 3.3(a) in connection with such Acquisition or any other
Acquisition), based on such Acquisition, starting, on a pro-rated basis with the first calendar quarter during which the
Acquisition Date occurred. [***] If the Existing Agreementrequired payments for less than four (4) quarters prior to
the Acquisition Date, the parties shall initially meet within thirty (30) days following the associated Acquisition Date
and negotiate in good faith an alternate method to determine the average quarterly payments from the Existing
Agreement. If the parties cannot reach agreement on such alternate method within thirty (30) days following the date
required for such initial meeting, then either party may, as its sole and exclusive remedy to resolve such dispute,
submit such dispute to binding arbitration pursuant to the terms of Section 3.3(d).
(c) Attributable Revenue. For purposes of the calculations in this Section 3.3, [***].
(d) Dispute Resolution. If the parties fail to resolve any dispute identified in this Section 3.3 as subject to binding
arbitration, then either party may, as its sole and exclusive remedy, submit such dispute to binding arbitration
pursuant to Section 8 and Samsung’s obligation to remit its Quarterly Acquisition Adjustment Payment based on such
disputed Acquisition pursuant to Section 5.1(a)(ii) shall be tolled until the earlier of either the final resolution of such
arbitration or the parties’ resolution of such dispute, and in either case within thirty (30) days after such resolution
Samsung will make all payments necessary to satisfy its payment obligations under this Section 3.3 from the date
such obligations accrued.
3.4 No Release. The releases granted and covenants made under Article IV of the Settlement Agreement shall not apply to any
Acquired Business. None of the rights and licenses granted and covenants made under Section 2 shall apply to any activity of
any Acquired Business unless and until such Acquired Business becomes licensed hereunder in accordance with this Section
3, and in any case, none of the rights and licenses granted and covenants made under Section 2 shall apply to nor in any way
reduce any liability associated with any activity of any Acquired Business that took place prior to the applicable Acquisition
Date, provided that nothing in this Section 3.4 shall have the effect of negating or nullifying any release or license granted in
any Existing Agreement. Notwithstanding anything to the contrary contained in Section 3.3, for any Acquisition for which
Samsung wishes to acquire a release of liability for the Acquired Business for infringement of Rambus’ patents and/or utility
models that took place prior to the applicable Acquisition Date, the parties will negotiate such release in good faith and may
consider the calculations set forth in Section 3.3(a) and/or the total past liability for infringing Rambus’ patents and/or utility
models incurred by such Acquired Business.
16
4. CONSIDERATION
4.1 Quarterly License Payment. Beginning with the first calendar quarter of 2010, Samsung will pay Rambus the following
quarterly payments (each a “Quarterly License Payment”):
(a) First 6 Quarterly License Payments. Each of the first six (6) Quarterly License Payments due hereunder will be in the
amount of the Quarterly Base Payment.
(b) Quarterly License Payment for all remaining Quarters. The amount of each Quarterly License Payment for quarters
seven (7) through twenty (20) will be calculated as follows.
(i) If the Quarterly DRAM Revenue Ratio for the Second Preceding Quarter is [***], then the Quarterly License
Payment for the subject quarter will be equal to the Quarterly Base Payment.
(ii) If the Quarterly DRAM Revenue Ratio for the Second Preceding Quarter is [***], then the Quarterly License
Payment for the subject quarter shall be equal to an amount based on the following calculation.
[***]
(iii) If the Quarterly DRAM Revenue Ratio for the Second Preceding Quarter is [***], then the Quarterly License
Payment for the subject quarter shall be equal to an amount based on the following calculation.
[***]
(iv) Minimum and Maximum Quarterly License Payments. Notwithstanding any adjustment to the Quarterly Base
Payment made pursuant to the terms of this Section 4.1(b), in no event shall any Quarterly License Payment
(i) be less than ten (10) million United States Dollars (US$10,000,000) or (ii) be greater than forty (40)
million United States Dollars (US$40,000,000).
(c) Final Adjustment. If, in Quarter twenty-one (21) of this Agreement, the Quarterly DRAM Revenue Ratio for the Second
Preceding Quarter is [***], then Samsung shall pay Rambus a final, adjustment payment (“Final Adjustment
Payment”) based on the following calculation, provided that, in no event shall the Final Adjustment Payment exceed
[***].
[***]
4.2 Quarterly Acquisition Adjustment Payment. To the extent required pursuant to Section 3.3, Samsung shall pay Rambus a
Quarterly Acquisition Adjustment Payment for each Acquisition occurring during the Term of this Agreement.
17
5. PAYMENTS
5.1 Payments.
(a) Timing of Payments.
(i) Quarterly License Payments and Final Adjustment Payment. Samsung shall pay Rambus each Quarterly License
Payment and the Final Adjustment Payment (if any) within ten (10) United States business days of its receipt
(as determined for notices under Section 9.2) of Rambus’ invoice therefor. Rambus shall invoice Samsung for
each of the twenty (20) Quarterly License Payments and the Final Adjustment Payment (if any) no earlier than
thirty (30) days after the first day of the quarter to which each such Quarterly License Payment or the Final
Adjustment Payment (if any) relates.
(ii) Quarterly Acquisition Adjustment Payments. Samsung shall pay Rambus each Quarterly Acquisition
Adjustment Payment within ten (10) United States business days of its receipt (as determined for notices
under Section 9.2) of Rambus’ invoice therefor. Rambus shall invoice Samsung for each Quarterly
Acquisition Adjustment Payment no earlier than the end of the quarter to which such Quarterly Acquisition
Adjustment Payment relates.
(b) Method of Payment. Samsung’s payments to Rambus of all amounts hereunder shall be made by electronic transfer
either directly to or via the Federal Reserve Bank of San Francisco for credit to the following account or another
designated in writing by Rambus:
Rambus Inc.
[***]
5.2 Currency and Late Payments. All payments to Rambus hereunder shall be in United States Dollars. Late payments hereunder
shall be subject to interest at the 1-year U.S. Government Treasury Constant Maturity Rate, as published by the Federal
Reserve (www.federalreserve.gov) on the date the amount payable was due, plus five percent (5%) (or the maximum interest
rate allowed by applicable law, if lower).The amount of interest shall be calculated from the payment due date to the date of
electronic transfer.
5.3 Taxes. If the Korean government imposes any withholding tax on any amounts paid by Samsung to Rambus hereunder, such
tax shall be borne by Rambus. Samsung agrees, at its reasonable discretion, to assist Rambus in its efforts to minimize
Rambus’ tax liability. Samsung shall withhold the amount of any such taxes levied on such payments to Rambus imposed by
the Korean government, shall promptly effect payment of the taxes so withheld to the Korean tax office, and Samsung shall
send to Rambus the official
18
certificate of such payment in a form reasonably sufficient to enable Rambus to support a claim for a foreign tax credit with
respect to any such taxes so withheld.
5.4 No Escrow. Payment of amounts due under this Agreement to any person, firm or entity, other than Rambus, including without
limitation, any escrow fund or escrow agent, unless agreed by Rambus or ordered by any court or government agency of
competent jurisdiction or arbitration panel, shall constitute a material breach of this Agreement. Any payment once made by
Samsung to Rambus shall not be refunded or refundable to Samsung for any reason except as may be required pursuant to
Section 8. Notwithstanding the foregoing, in case of clerical error with respect to any payment made hereunder, the parties
agree to remedy any such error through proper payment adjustments.
6. Term & Termination
6.1 Term.
(a) Paid-up Product License. The Paid-up Product License shall commence on the Effective Date and shall continue in full
force and effect unless and until terminated in accordance with this Section 6.
(b) Term Product License. The Term Product License shall commence on the Effective Date and shall continue in full force
and effect until the Expiration Date unless earlier terminated in accordance with this Section 6.
(c) Combination Product License. The Combination Product License shall commence on the Effective Date and shall
continue in full force and effect until the Expiration Date unless earlier terminated in accordance with this Section 6.
Notwithstanding the foregoing, the Combination Product License shall continue in full force and effect solely for
combinations consisting solely of two (2) or more Paid-up Products for so long as the Paid-up Product License
remains in full force and effect.
(d) Foundry Product License. The Foundry Product License shall commence on the Effective Date and shall continue in
full force and effect until the Expiration Date unless earlier terminated in accordance with this Section 6.
(e) Rambus Product Design License. The Rambus Product Design License shall commence on the Effective Date and shall
continue in full force and effect until the Expiration Date unless earlier terminated in accordance with this Section 6.
6.2 Material Breach. A party may terminate this Agreement upon notice if the other party hereto (or any of its Subsidiaries)
commits a material breach of Section 1.41 or Section 3.3(d) with respect to the exclusive resolution though arbitration of
disputes regarding alternate sources and/or methods pursuant to Section 8 as provided for in such sections
19
and does not correct such breach within thirty (30) days after receiving written notice complaining thereof. In addition,
Rambus may terminate this Agreement upon notice if Samsung materially breaches its payment obligations under this
Agreement and does not correct such breach within thirty (30) days after receiving written notice complaining thereof.
Failure of Samsung to remit any payment due and payable in accordance with the terms of this Agreement shall constitute a
material breach of this Agreement. For the avoidance of doubt, any payments tolled in accordance with the terms of this
Agreement shall not be due and payable during such tolling period.
6.3 Bankruptcy. Either party may terminate this Agreement effective upon written notice to the other party if the other party
becomes the subject of a voluntary or involuntary petition in bankruptcy or any proceeding relating to insolvency, or
composition for the benefit of creditors, if that petition or proceeding is not dismissed within sixty (60) days after filing.
6.4 Change of Control. In addition to the rights set forth in Sections 6.2 and 6.3 above, if prior to the Expiration Date, Samsung
undergoes a Change of Control, Rambus may terminate this Agreement effective upon written notice thereof to Samsung or
the relevant successor in interest. Notwithstanding the foregoing, if Rambus receives written notice of such Change of
Control from Samsung (or its successor in interest) no later than ten (10) business days after such Change of Control,
Rambus agrees to negotiate in good faith with such successor in interest, for a period of one hundred and eighty (180) days
after receipt of such notice, the application of this Agreement to such successors’ business activities prior to terminating this
Agreement based on such Change of Control. Rambus’ failure to terminate this Agreement after a given Change of Control
by Samsung (or any successor in interest) shall not in any way limit Rambus’ right to exercise these rights for any subsequent
Change of Control. Termination of this Agreement based on a Change of Control shall be deemed to be effective
immediately prior to the effective date of such Change of Control.
6.5 Survival. All payment obligations accruing prior to any termination of this Agreement shall survive any such termination. In
addition, the following Sections shall survive and remain in full force and effect after any termination of this Agreement:
Section 1 (Definitions), Section 2.3 (Obligations When Transferring Patents), Section 2.5 (Full Force and Effect), 2.6 (No
Release, No Implied or Other Rights and Licenses), Section 3.1 (Subsidiaries), 3.2 (Former Subsidiaries), 3.3(d) (Dispute
Resolution), Section 3.4 (No Release), Section 4 (Consideration) and Section 5 (Payments) (in each case with respect to
amounts incurred prior to termination of this Agreement), this Section 6.4 (Survival), Section 7.2 (Confidentiality), Section 8
(Dispute Resolution), and Section 9 (Miscellaneous).
7. Confidentiality
7.1 Press Release. The parties intend to issue a press release as set forth in the Settlement Agreement.
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7.2 Confidentiality. Each party agrees that only after the announcement referenced in Section 7.1 above, each party shall be
entitled to disclose the general nature of this Agreement but that the terms and conditions of this Agreement, to the extent not
already disclosed pursuant to Section 7.1 above, shall be treated as Confidential Information and that neither party will
disclose such terms or conditions to any Third Party without the prior written consent of the other party, provided, however,
that each party may disclose the terms and conditions of this Agreement:
(a) as required by any court or other governmental body;
(b) as otherwise required by law;
(c) as otherwise may be required by applicable securities and other law and regulation, including to legal and financial
advisors in their capacity of advising a party in such matters so long as the disclosing party shall seek confidential
treatment of such terms and conditions to the extent reasonably possible;
(d) to legal counsel, accountants, and other professional advisors of the parties;
(e) in confidence, to banks, investors and other financing sources and their advisors;
(f) in connection with the enforcement of this Agreement or rights under this Agreement;
(g) during the course of litigation so long as the disclosure of such terms and conditions are restricted in the same manner
as is the confidential information of other litigating parties and so long as (A) the restrictions are embodied in a court-
entered protective order limiting disclosure to outside counsel and (B) the disclosing party informs the other party in
writing at least ten (10) business days in advance of the disclosure and discusses the nature and contents of the
disclosure, in good faith, with the other party; or
(h) in confidence, in connection with an actual or prospective merger or acquisition or similar transaction.
Upon execution of this Agreement, or thereafter, Rambus, in its discretion, shall be entitled to file a copy of this Agreement with the
U.S. Securities and Exchange Commission, so long as Rambus seeks confidential treatment of such agreement to the extent
reasonably possible.
8. Dispute Resolution
Any dispute submitted to binding arbitration pursuant to Section 1.41 or Section 3.3 shall take place in Santa Clara County,
California before one arbitrator, and shall be administered by Judicial Arbitration and Mediation Services, Inc. pursuant to its
Streamlined Arbitration Rules and Procedures, except that each party shall submit to the arbitrator and exchange with each
other in advance of the hearing their last, best alternate sources and/or methods, as applicable, and the arbitrator shall be
limited to awarding only
21
one or the other of the two alternate sources and/or methods, as applicable, submitted. Judgment on the award may be entered
in any court having jurisdiction.
9. Miscellaneous
9.1 Disclaimers. Nothing contained in this Agreement shall be construed as:
(a) a warranty or representation by either party as to the validity, enforceability, and/or scope of any intellectual property
rights;
(b) imposing upon either party any obligation to institute any suit or action for infringement of any intellectual property
right, or to defend any suit or action brought by a Third Party which challenges or concerns the validity,
enforceability or scope of any intellectual property rights;
(c) imposing on either party any obligation to file any application or registration with respect to any intellectual property
rights or to secure or maintain in force any intellectual property rights;
(d) imposing on either party any obligation to furnish any technical information or know-how; or
(e) imposing or requiring, whether by implication or otherwise, any support, maintenance or any technology deliverable
obligations on either party’s or their respective Subsidiaries’ part under this Agreement (and neither party nor any of
their respective Subsidiaries are providing any support, maintenance or technology deliverables under this
Agreement).
9.2 Notices. All notices and other communications required or permitted hereunder shall be in writing and shall be mailed by first
class air mail (registered or certified if available), postage prepaid, or otherwise delivered by hand, by messenger or by
telecommunication, addressed to the addresses first set forth above or at such other address furnished with a notice in the
manner set forth herein. Such notices shall be deemed to have been effective when delivered or, if delivery is not
accomplished by reason of some fault or refusal of the addressee, when tendered. All notices shall be in English.
9.3 Governing Law & Venue.
(a) This Agreement shall be governed by and construed in accordance with the laws of the State of California, without
giving effect to any choice-of-law or conflict-of-law provision or rule (whether of the State of California or any other
jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of California.
(b) This Agreement is executed in the English language and no translation shall have any legal effect.
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(c) Except for disputes subject to Section 8, any legal action, suit or proceeding arising under, or relating to, this
Agreement, shall be brought in the United States District Court for the Northern District of California or, if such court
shall decline to accept jurisdiction over a particular matter, in the San Francisco Superior Court, and each Party agrees
that any such action, suit or proceeding may be brought only in such courts. Each Party further waives any objection
to the laying of jurisdiction and venue for any such suit, action or proceeding in such courts.
9.4 No Assignment. This Agreement is personal to the parties, and the Agreement and/or any right or obligation hereunder is not
assignable, whether in conjunction with a change in ownership, merger, acquisition, the sale or transfer of all, or substantially
all or any part of either party’s or any of their respective Subsidiaries business or assets or otherwise, voluntarily, by
operation of law, reverse triangular merger or otherwise, without the prior written consent of the other party, which consent
may be withheld at the sole discretion of such other party. Any such purported or attempted assignment or transfer in
violation of the foregoing shall be deemed a breach of this Agreement and shall be null and void. Subject to the foregoing,
this Agreement shall be binding upon and inure to the benefit of the parties and their permitted successors and assigns.
Notwithstanding the foregoing, either party shall be entitled to, and each party hereby agrees to, assign this Agreement to a
successor to all or substantially all of a party’s assets in a transaction entered into solely to change a party’s place of
incorporation.
9.5 No Rule of Strict Construction. Regardless of which party may have drafted this Agreement or any part thereof, no rule of
strict construction shall be applied against either party. For the avoidance of doubt “includes”, “including”, “included”, and
other variations of such terms shall be deemed to be followed by the phrase “without limitation”.
9.6 Severability. If any provision of this Agreement is held to be invalid or unenforceable, the meaning of such provision shall be
construed, to the extent feasible, so as to render the provision enforceable, and if no feasible interpretation shall save such
provision, (a) a suitable and equitable provision shall be substituted therefore in order to carry out, so far as may be valid and
enforceable, the intent and purpose of such invalid or unenforceable provision, and (b) the remainder of this Agreement shall
remain in full force and effect.
9.7 Entire Agreement. This Agreement and the Settlement Agreement embodies the entire understanding of the parties with respect
to the subject matter hereof, and merges all prior oral or written communications between them, and neither of the parties
shall be bound by any conditions, definitions, warranties, understandings, or representations with respect to the subject matter
hereof other than as expressly provided herein. No oral explanation or oral information by either party hereto shall alter the
meaning or interpretation of this Agreement.
9.8 Modification; Waiver. No modification or amendment to this Agreement, nor any waiver of any rights, will be effective unless
assented to in writing by the party to be charged,
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and the waiver of any breach or default will not constitute a waiver of any other right hereunder or any subsequent breach or
default.
9.9 Counterparts. This Agreement may be executed in two (2) or more counterparts, all of which, taken together, shall be regarded
as one and the same instrument.
9.10 Bankruptcy Code. All rights, licenses, privileges, releases, and immunities granted under this Agreement shall be deemed to
be, for the purposes of Section 365(n) of the U.S. Bankruptcy Code, as amended (the “Bankruptcy Code”), licenses of rights
to “intellectual property” as defined under Section 101(35A) of the Bankruptcy Code. The parties agree that each of the
parties shall retain and may fully exercise all of their respective rights and elections under the Bankruptcy Code. The parties
further agree that, in the event that any proceeding shall be instituted by or against a party seeking to adjudicate it as bankrupt
or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief or composition of
that party or that party’s debts under any law relating to bankruptcy, insolvency, or reorganization or relief of debtors, or
seeking an entry of an order for relief or the appointment of a receiver, trustee or other similar official for that party or any
substantial part of its property or if a party hereto shall take any action to authorize any of the foregoing actions, the other
party shall have the right to retain and enforce their respective rights under this Agreement.
9.11 Non-Controlled Entity. Samsung hereby represents and warrants that on the Effective Date it is not a Subsidiary of any entity
or person.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed by duly authorized officers or representatives
as of the date first above written.
RAMBUS INC. SAMSUNG ELECTRONICS CO., LTD.
By: /s/ Harold Hughes By: /s/ Oh-Hyun Kwon
Name: Harold Hughes Name: Oh-Hyun Kwon
Title: CEO Title: President
Date: January 19, 2010 Date: January 19, 2010
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Exhibit 10.16
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT IS BOTH NOT
MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY
DISCLOSED. [***] INDICATES THAT INFORMATION HAS BEEN REDACTED.
SETTLEMENT AGREEMENT
THIS SETTLEMENT AGREEMENT (the “Agreement”) is made and entered into as of the July 1, 2013 by and among
Rambus Inc., a Delaware corporation (“Rambus”), on the one hand, and SK hynix Inc., a corporation organized under the laws of
Korea (“SK hynix”), SK hynix America Inc., a California corporation (“SK hynix U.S.”), Hynix Semiconductor Manufacturing
America Inc., a California corporation, SK hynix U.K. Ltd., a corporation organized under the laws of the United Kingdom, and SK
hynix Deutschland, GmbH, a corporation organized under the laws of Germany (collectively, “SK hynix,” with Rambus and SK
hynix each being a “Party” and together the “Parties”), on the other hand.
WHEREAS, SK hynix and its Subsidiaries (as defined in Article 1) are and will continue to be engaged in the manufacture,
use, sale and/or importation of various products and devices (“SK hynix Products”) which utilize diverse and varied technologies;
WHEREAS, Rambus and/or its Subsidiaries have and will continue to have rights under Rambus Patents (as defined in
Article 1) covering diverse and varied technologies;
WHEREAS, the Parties are currently parties to a number of Disputes (as defined in Article 1) relating to the SK hynix
Products and the Rambus Patents, including but not limited to disputes as to whether claims of Rambus Patents are infringed by SK
hynix Products, and disputes relating to the validity, enforceability and scope of certain Rambus Patents, the Antitrust Litigation, and
the Other Actions (as defined in Article 1);
WHEREAS, the Parties acknowledge that the Disputes have been costly, not only in terms of the out-of-pocket costs
incurred by each of them, but also in terms of management time and other resources devoted to such efforts;
WHEREAS, the Parties recognize that, without this Agreement, given the diversity of claims of the Rambus Patents, and the
breadth of technologies utilized by the SK hynix Products, Rambus could, after the Effective Date (as defined in Article 1), assert
that other claims of Rambus Patents are infringed by SK hynix Products, and that such disputes, if they were to occur, would involve
similar costs and business disruptions;
WHEREAS, the Parties recognize that litigation of the Disputes, and of other disputes that may arise between them after the
Effective Date, is inherently uncertain, and is subject to certain risks, including but not limited to, (a) whether the Rambus Patents,
including Patents which are known to SK hynix but which to date have not been asserted against SK hynix, are determined to be
valid, enforceable and infringed in various trial and appellate courts, the U.S. Patent and Trademark Office, the European Patent
Office, the International Trade Commission proceedings, and in other proceedings, and (b) whether Rambus prevails in various other
court or regulatory proceedings, such as the Antitrust Litigation, and that such events are subject to various possible outcomes;
1
WHEREAS, the Parties desire to eliminate the risks associated with such litigation and to enter into a comprehensive
resolution to compromise, settle and release the Disputes, and to compromise, resolve and avoid other disputes that may arise after
the Effective Date with respect to the SK hynix Products and the Rambus Patents;
WHEREAS, as part of the comprehensive resolution of other disputes that may arise after the Effective Date with respect to
the SK hynix Products and the Rambus Patents, Rambus and its Subsidiaries desire to grant SK hynix and its Subsidiaries a license
to certain of the claims of the Rambus Patents from the Effective Date and SK hynix and its Subsidiaries desire to grant Rambus and
its Subsidiaries a license to certain of the claims of the SK hynix Patents (as defined in Article 1) from the Effective Date;
WHEREAS, the Parties acknowledge that in resolving the Disputes, and other disputes that may arise after the Effective
Date, each of them is giving up the possibility of more favorable outcomes in exchange for the promises and covenants it will
receive under this Agreement and the License Agreement (as defined in Article 1), to ensure that they do not ultimately face less
favorable outcomes and to avoid the costs, delays and disruptions associated with litigation, and that such promises and covenants
represent a package, and are not intended to be severable from each other; in particular, (a) SK hynix is receiving a full and final
release of the claims asserted against it in the Disputes, and securing a license to claims of the Rambus Patents, in exchange for
making Comprehensive Resolution Payments (as defined in Article 1) and entering into the License Agreement, and (b) Rambus is
receiving the Comprehensive Resolution Payments and the benefit of the License Agreement, in exchange for granting the releases
and licenses, and entering into the License Agreement;
WHEREAS, the Parties acknowledge that it is therefore essential that their respective obligations under this Agreement and
the License Agreement be certain and not subject to collateral attack, or otherwise subject to change or modification except on the
terms expressly set forth therein; and
WHEREAS, this Agreement is entered into for the purpose of settlement and compromise only,
NOW, THEREFORE, in consideration of the promises and the mutual covenants herein contained, and for other good and
valuable consideration, the adequacy and receipt of which are hereby acknowledged, Rambus and SK hynix agree as follows:
Article 1
Definitions
In addition to the terms defined in other parts of this Agreement, the following terms used herein with initial capital letters shall have
the respective meanings specified in this Article 1.
1.1 Acquired Business. The term “Acquired Business” means a Third Party, the portion of a Third Party, and/or any portion of
the assets or business of a Third Party that a Party or its Subsidiaries acquire in an Acquisition.
1.2 Acquisition. The term “Acquisition” means, as to a Party, a transaction or a series of related transactions in which such Party
acquires, through merger (including reverse triangular merger), acquisition of stock, acquisition of assets or otherwise,
2
Control of a Third Party and/or any portion of the assets or business of a Third Party.
1.3 Affiliate. The term “Affiliate” means, for an identified entity, any other entity that (a) is a Subsidiary of such identified
entity; or (b) Controls or is under common Control with such identified entity, but only so long as such Control exists.
1.4 Agreement. The term “Agreement” has the meaning set forth in the introductory paragraph.
1.5 Antitrust Litigation. The term “Antitrust Litigation” means the matter entitled Rambus Inc. v. Micron Technology Inc. et al.,
No. 04-431105 (Supr. Ct. Cal., San Fran. Filed May 5, 2004) and any appeals and remand proceedings therefrom.
1.6 Change of Control. The term “Change of Control” means a transaction or a series of related transactions in which (a) one or
more Third Parties who did not previously Control a Party obtain Control of such Party, or (b) the subject Party merges
with or transfers substantially all of its assets to a Third Party where the shareholders of the assigning Party,
immediately before the transaction or series of related transactions, own less than a fifty percent (50%) interest in the
acquiring or surviving entity immediately after the transaction or series of related transactions.
1.7 Comprehensive Resolution Agreements. The term “Comprehensive Resolution Agreements” means this Agreement and the
License Agreement.
1.8 Comprehensive Resolution Payments. The term “Comprehensive Resolution Payments” means the License Payments.
1.9 Control. The term “Control” (including “Controlled” and other forms) of an entity means (a) beneficial ownership (whether
directly or indirectly through entities or other means) of more than fifty percent (50%) of the outstanding voting
securities of that entity or (b) in the case of an entity that has no outstanding voting securities, having the power
(whether directly or indirectly through entities or other means) presently to designate more than fifty percent (50%) of
the directors of a corporation, or in the case of unincorporated entities, of individuals exercising similar functions.
Notwithstanding the foregoing sentence, where SK hynix has fifty percent (50%) of such beneficial ownership or
power to designate with respect to any other entity, SK hynix shall be deemed to “Control” such other entity if such
other entity is part of the SK Group and such entity is lawfully registered under a corporate name, and lawfully
operates and generally and routinely conducts its business under a corporate name, that includes “SK,” provided that,
such entity agrees in a writing, delivered to both parties within thirty (30) days of the Effective Date (or if later, within
thirty (30) days after formation of such entity), to be bound by all applicable terms and conditions of this Agreement.
1.10 CRI. The term “CRI” means Cryptography Research, Inc., a wholly-owned Subsidiary of Rambus.
3
1.11 Disputes. The term “Disputes” means the Patent Litigation, the German Patent Litigation, the Antitrust Litigation, the
Patent Actions, and the Other Actions, and any and all disputes related thereto.
1.12 Effective Date. The term “Effective Date” means July 1, 2013 except for “Other Actions” the Effective Date shall be June
15, 2013.
1.13 Effective Time Period. The term “Effective Time Period” has the meaning set forth in Section 3.2(b).
Inc.,
Micron Semiconductor Products,
1.14 Excluded Entity. The term “Excluded Entity” means Broadcom Corporation, LSI Corporation, MediaTek Inc., Micron
Technology,
Micron Semiconductor
Inc.,
(Deutschland) GmbH, Micron Technology Italia Srl, Nanya Technology Corporation, Nanya Technology Corporation
U.S.A., NVIDIA Corporation, Samsung Electronics Co., Ltd., Samsung Electronics America, Inc., Samsung
Semiconductor, Inc., Samsung Austin Semiconductor, L.P., STMicroelectronics N.V., STMicroelectronics Inc., and
any other Third Party (including the Affiliates of such Third Party) that is an adverse party to Rambus or its
Subsidiaries in any pending lawsuit, litigation or other similar proceedings.
Micron Electronics,
Inc.,
1.15 German Patent Litigation. The term “German Patent Litigation”means the infringement action based on the German part of
EP 1 022 642 filed by Rambus Inc. against SK hynix Deutschland, GmbH at the District Court Mannheim/Germany
(Court docket 7 O 279/05) on June 2, 2005.
1.16 License Agreement. The term “License Agreement” has the meaning set forth in Article 3.
1.17 License Payments. The term “License Payments” has the meaning set forth in Section 2.1.
1.18 Licensed Product. The term “Licensed Product” has the meaning set forth in the License Agreement.
1.19 Other Actions. The term “Other Actions” means (a) Case T-148/10, SK hynix v Commission, filed on 25 March
2010, Official Journal of the European Union [2010] C 148/41 and (b) Case T-149/10, SK hynix v Commission, filed
on 25 March 2010, Official Journal of the European Union [2010] C 148/42.
1.20 Party. The terms “Party” and “Parties” have the meanings set forth in the introductory paragraph.
1.21 Patent Actions. The term “Patent Actions” means all United States Patent and Trademark Office, all European Patent
Office and all other governmental reexamination proceedings, oppositions, actions or challenges filed, requested or
supported by SK hynix with respect to any Rambus Patents, and any appeals thereof, as of the Effective Date,
including without limitation the reexaminations and/or oppositions of U.S. Patent, European Patent and or other
governmental Patent numbers listed in Schedule 1.
4
1.22 Patent Litigation. The term “Patent Litigation” means the matters entitled SK hynix Inc. et al v. Rambus Inc., No. CV 00-
20905 (N.D.Cal. Filed Aug. 29, 2000) and Rambus Inc. v. SK hynix Inc., et al., No. C-05-00334 (N.D. Cal. Filed Jan.
25, 2005).
1.23 Patents. The term “Patents” means patents, including re-examinations and reissues thereof, and utility models and
applications therefor, including, without limitation, all continuations, continuations-in-part and divisionals thereof, in
all countries of the world that now or hereafter are (a) owned or controlled by the applicable Party hereto and/or one or
more of its Subsidiaries and/or (b) otherwise licensable by the applicable Party hereto and its Subsidiaries, in each case
of (a) and (b) where such Party and/or one or more of its Subsidiaries have the right to grant the licenses, sublicenses
or other rights and covenants of the scope granted in the License Agreement.
1.24 Rambus. The term “Rambus” has the meaning set forth in the introductory paragraph.
1.25 Rambus Patents. The term “Rambus Patents” means Patents owned or controlled or otherwise licenseable, in each case in
accordance with Section 1.23 above, by Rambus or any of its Subsidiaries in each case other than those Patents of CRI
that have effective filing dates that are earlier than June 6, 2011 (the effective date of Rambus’ acquisition of CRI).
1.26 SK hynix. The term “SK hynix” has the meaning set forth in the introductory paragraph.
1.27 SK hynix Patents. The term “SK hynix Patents” means Patents owned or controlled or otherwise licenseable, in each case
in accordance with Section 1.23 above, by SK hynix or any of its Subsidiaries.
1.28 SK hynix U.S. The term “SK hynix U.S.” has the meaning set forth in the introductory paragraph.
1.29 Subsidiary. The term “Subsidiary” means, with respect to any identified entity (“Identified Entity”), any entity Controlled
by such Identified Entity, but only so long as such Control exists.
1.30 Third Party. The term “Third Party” means (a) with respect to Rambus or any Subsidiary of Rambus, any entity that is not a
Subsidiary of Rambus and (b) with respect to SK hynix or any Subsidiary of SK hynix, any entity that is not a
Subsidiary of SK hynix.
Article 2
Comprehensive Resolution Payments
2.1 License Payments. As described more fully in the License Agreement and as an integral part of the overall consideration
received by Rambus in respect of its releases and covenants not to sue under Article 4, and its other obligations under
the Comprehensive Resolution Agreements, over the next five (5) years SK hynix
5
will pay Rambus aggregate license fees of Two Hundred Forty Million dollars (US $240,000,000.00), subject to
certain adjustments and conditions as described in the License Agreement (the “License Payments”). In the event that
SK hynix fails to pay any License Payment (and fails to cure such failure within the time period provided for in
Section 6.2 of the License Agreement), Rambus shall have the option, at its sole discretion, to either:
(a) exercise its option to terminate the License Agreement in accordance with Section 6.2 therein; or,
(b) upon providing written notice to SK hynix, exercise its option to have SK hynix pay to Rambus, within one-
hundred and eighty (180) days of the date of such notice, one-hundred and ten percent (110%) of the Remaining
Balance (where the term “Remaining Balance” means the total amounts other than Quarterly Acquisition
Adjustment Payments remaining unpaid, if any, under the License Agreement or the Substitute Agreement (as
such term is defined in the License Agreement)) as part of the overall consideration received by Rambus under the
Comprehensive Resolution Agreements, in order for Rambus to receive the full amount of the overall
consideration intended to be received in respect of its releases, covenants not to sue, and other obligations under
the Comprehensive Resolution Agreements, in which case (i.e., Rambus’ exercise of the option set forth in this
subsection (b)):
(i) SK hynix will continue to be obligated, to pay any amounts that become due under Section 3.3 of the License
Agreement prior to the Expiration Date of the License Agreement until terminated;
(ii) Rambus and SK hynix agree that it would be impractical and extremely difficult to fix the damages which
Rambus may suffer if SK hynix fails to make the License Payments; and,
(iii) that such amount is a reasonable estimate under the circumstances existing as of the date hereof of the total
net detriment Rambus would suffer in the event SK hynix fails to make such payments. Rambus will apply
such amounts to any subsequent License Payments due under the License Agreement.
2.2 No Refunds. Once made, any Comprehensive Resolution Payment shall not be refunded or refundable to SK hynix for any
reason except as may be required pursuant to Section 8 of the License Agreement. Notwithstanding the foregoing, in
case of clerical error with respect to any payment made under the License Agreement, the Parties agree to remedy any
such error through proper payment adjustments.
2.3 Currency. All Comprehensive Resolution Payments shall be made in United States dollars.
2.4 Wire Instructions. All Comprehensive Resolution Payments shall be made in accordance with the terms of the License
Agreement.
6
2.5 Taxes. If the Korean government imposes any withholding tax on any Comprehensive Resolution Payments, such tax shall
be borne by Rambus. SK hynix agrees, at its reasonable discretion, to assist Rambus in its efforts to minimize Rambus’
tax liability. SK hynix shall withhold the amount of any such taxes levied on such payments to Rambus imposed by the
Korean government, shall effect payment of the taxes so withheld to the Korean tax office when due, and SK hynix
shall send to Rambus the official certificate of such payment in a form reasonably sufficient to enable Rambus to
support a claim for a foreign tax credit with respect to any such taxes so withheld.
Article 3
License Agreement
Concurrent with the execution and delivery of this Agreement, and as an integral part of the overall consideration received by the
Parties in respect of their respective releases, covenants not to sue, and other obligations under this Agreement, Rambus and SK
hynix shall enter into the License Agreement in the form attached hereto as Exhibit A (the “License Agreement”).
3.1 The Parties acknowledge that the licenses granted under the License Agreement are in respect of claims under multiple
Rambus Patents and multiple SK hynix Patents, respectively, so that the Parties’ rights and obligations under the
License Agreement are not dependent upon the validity or enforceability of specific Rambus Patents or specific SK
hynix Patents, or upon any specific use of such patents permitted under the License Agreement. Specifically, SK hynix
acknowledges that the License Agreement covers a broad array of Rambus Patent claims, and agrees to make the full
amount of the Comprehensive Resolution Payments regardless of whether any of the Rambus Patents is determined not
to be infringed by any particular Licensed Product or whether any court, United States, European, or other patent
office, or United States, European, or other governmental agency determines any Rambus Patent to be invalid or
unenforceable in any reexamination, action or other proceeding.
3.2 Each Party acknowledges that its assessment of the value of the Disputes and the License Agreement may depend on certain
events that may occur, or that may not occur, after the Effective Date, that it is aware of and has evaluated and
considered the uncertainties associated with such events, and that it has agreed to the amount of the Comprehensive
Resolution Payments to eliminate such uncertainties so that, for example, SK hynix will be protected from the
consequences of Rambus prevailing on infringement and other claims in other proceedings, including the Antitrust
Litigation, and Rambus will be protected from the consequences of certain of the Rambus Patents being held to be
invalid, unenforceable, and/or not infringed in other proceedings. It is therefore essential that the Parties’ obligations
under the License Agreement, including but not limited to the amount of the License Payments, be certain and not
subject to collateral attack. Accordingly:
(a) SK hynix covenants not to seek, whether through litigation or otherwise, to adjust the amount of the License
Payments, or to avoid, defer or modify its
7
obligations under the License Agreement, provided that the foregoing shall not prevent SK hynix from seeking
enforcement of the terms and conditions of the License Agreement or taking any action expressly contemplated in
the License Agreement.
(b) SK hynix and its Subsidiaries acknowledge and agree that, for all acts or omissions that occur during the time
period up to and including the [***] anniversary of the Effective Date (the “Effective Time Period”), Rambus or
its Subsidiaries have patent claims that are valid, enforceable and infringed by a substantial portion of the
Licensed Products. After the Effective Time Period, Rambus and its Subsidiaries covenant not to rely on such
acknowledgement or agreement in any manner against SK hynix or its Subsidiaries or their past, present or future
distributors or customers in negotiations, and further covenant that no evidence of such acknowledgement or
agreement may be introduced in any negotiation by or on behalf of Rambus or its Subsidiaries against SK hynix
or its Subsidiaries or their past, present or future distributors or customers. Rambus and its Subsidiaries further
covenant, with respect to any acts or omissions occurring after the Effective Time Period, not to rely on such
acknowledgement or agreement in any manner against SK hynix or its Subsidiaries or their past, present or future
distributors or customers before any court, government agencies, other regulatory body or arbitrator, and further
covenant that no evidence of such acknowledgement or agreement may be introduced in any motion, hearing, trial
or other proceeding by or on behalf of Rambus or its Subsidiaries against SK hynix or its Subsidiaries or their
past, present or future distributors or customers.
Article 4
Releases
4.1 Release by Rambus.
(a) Rambus, on behalf of itself and its Subsidiaries, hereby irrevocably releases, acquits, and forever discharges SK
hynix, its Subsidiaries, its and their respective former or current directors, officers, employees, and attorneys from
any claims, counterclaims, defenses, demands, damages, debts, liabilities, accounts, actions and causes of action
of any kind that were alleged or that could have been alleged by Rambus in any Dispute.
(b) To the extent not covered in the preceding paragraph, Rambus, on behalf of itself and its Subsidiaries, hereby
further irrevocably releases, acquits, and forever discharges SK hynix, its Subsidiaries, and its and their respective
former or current directors, officers, employees, and attorneys from any claims, counterclaims, defenses,
demands, damages, debts, liabilities, accounts, actions and causes of action of any kind for infringement of the
Rambus Patents arising from the manufacture, use, importation, exportation, sale and offer for sale of any
products up until the Effective Date, but only to the extent that such activities would have been (i) licensed under
the License
8
Agreement if such License Agreement had been in existence at the time of such activity and/or (ii) subject to the
covenants set forth in Sections 2.4 and/or 2.5 of the License Agreement if such License Agreement had been in
existence at the time of such activity.
4.2 Release by SK hynix.
(a) SK hynix, on behalf of itself and its Subsidiaries, hereby irrevocably releases, acquits and forever discharges
Rambus, its Subsidiaries, and its and their respective former or current directors, officers, employees, and
attorneys from any claims, counterclaims, defenses, demands, damages, debts, liabilities, accounts, actions and
causes of action of any kind that were alleged or that could have been alleged by SK hynix in any Dispute.
(b) To the extent not covered in the preceding paragraph, SK hynix, on behalf of itself and its Subsidiaries, hereby
further irrevocably releases, acquits, and forever discharges Rambus, its Subsidiaries, and its and their respective
former or current directors, officers, employees, and attorneys from any claims, counterclaims, defenses,
demands, damages, debts, liabilities, accounts, actions and causes of action of any kind for infringement of any
SK hynix Patents arising from the manufacture, use, importation, exportation, sale and offer for sale of any
products up until the Effective Date, but only to the extent that such activities would have been licensed under the
License Agreement if such License Agreement had been in existence at the time of such activity.
4.3 Additional Releases.
(a) SK hynix, on behalf of itself and its Subsidiaries, hereby irrevocably releases, acquits and forever discharges
Rambus and its Subsidiaries from any defenses, claims, counterclaims, demands, damages, debts, liabilities,
accounts, actions and causes of action of any kind and nature that SK hynix or its Subsidiaries might raise or
assert in an effort to avoid, defer or modify its obligations under the Comprehensive Resolution Agreements,
including but not limited to its obligation to make the License Payments, except as expressly permitted under the
License Agreement, including for instance and by way of example, claims or defenses based on the allegation, or
on the finding, determination or judgment in any reexamination, action or other proceeding, or any appeal thereof,
that one or more of the patent claims licensed under the License Agreement is invalid, unenforceable or not
infringed, that the License Agreement is not enforceable or should be rescinded or revised, or that Rambus has
committed any type of patent misuse.
(b) Rambus, on behalf of itself and its Subsidiaries, hereby irrevocably releases, acquits and forever discharges SK
hynix and its Subsidiaries from any defenses, claims, counterclaims, demands, damages, debts, liabilities,
accounts, actions and causes of action of any kind and nature that Rambus or its Subsidiaries might or could raise
or assert to avoid, defer or modify its
9
obligations under the [***] Release attached as Exhibit C hereto, that any provision of the [***] Release is invalid
or unenforceable, or that [***] Release should be rescinded or revised. Rambus agrees that it will never, under
any circumstances, bring any lawsuit, action or claim of any nature against SK hynix relating to the [***] Release.
4.4 Releases Shall Remain Effective. Each of Rambus and SK hynix acknowledges that, after entering into this Agreement, they
may discover facts different from, or in addition to, those they now believe to be true with respect to the conduct of the
other Party. Each of Rambus and SK hynix intends that the releases and discharges set forth in this Article 4 and the
[***] Release (attached hereto as Exhibit C hereto) shall be, and shall remain, in effect in all respects as written,
notwithstanding the discovery of any different or additional facts.
4.5 Waiver of California Civil Code § 1542. In connection with the releases and discharges described in this Article 4, each of
Rambus and SK hynix acknowledges that it is aware of the provisions of section 1542 of the Civil Code of the State of
California, and hereby expressly waives and relinquishes all rights and benefits that it has or may have had under that
section (or any equivalent law or rule of any other jurisdiction), which reads as follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING
THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY
AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.
4.6 Covenants Not to Sue.
(a) Rambus, on behalf of itself and its Subsidiaries, hereby covenants not to assert any claims of infringement of the
Rambus Patents against SK hynix’s distributors and customers and SK hynix’s Subsidiaries’ distributors and
customers solely arising from the use, importation, sale and offer for sale of any products up until the Effective
Date to the extent that such distributors or customers would not have been liable for such use, importation,
exportation, sale and offer for sale of such products had the License Agreement been in existence at the time of
such infringing activity.
(b) SK hynix, on behalf of itself and its Subsidiaries, hereby covenants not to assert any claims of infringement of
the SK hynix Patents against Rambus’ distributors and customers and Rambus’ Subsidiaries’ distributors and
customers solely arising from the use, importation, exportation, sale or offer for sale of any products up until the
Effective Date to the extent that such distributors or customers would not have been liable for such use,
importation, exportation, sale and offer for sale of such products had the License Agreement been in existence at
the time of such infringing activity.
10
4.7 Certain Exclusions. For the avoidance of doubt:
(a) The releases and covenants not to sue contained in this Article 4 (other than the releases set forth in Section 4.3)
shall apply solely to (i) the activities occurring prior to the Effective Date of each of the Parties, and (ii) the
activities occurring prior to the Effective Date of each of the Parties’ respective Subsidiaries existing on or prior
to the Effective Date. In no event shall the releases and covenants not to sue contained in this Article 4 apply to
the activities, whether occurring prior to or after the Effective Date, of (1) any Third Party with or into which a
Party merges or combines, whether or not such Party remains the surviving entity, or (2) any Acquired Business,
in each case, after the Effective Date.
(b) Other than as set forth in the [***] Release, the releases and covenants not to sue contained in this Article 4 are
not intended to and do not extend to any defendant in either the Patent Litigation or the Antitrust Litigation (or
any of their Subsidiaries), unless that defendant is explicitly named as a Party to this Agreement, or to any
Excluded Entity.
4.8 Dismissals and Other Provisions Terminating the Disputes.
(a) On the Effective Date, SK hynix and Rambus, through their respective counsel, shall execute or cause to be
executed stipulations for dismissal dismissing with prejudice all of the claims, counterclaims, cross-claims and
cross-complaints asserted against one another (but only as to one another and not to the extent asserted against
other defendants) in the Patent Litigation and the Antitrust Litigation in the forms attached hereto as Exhibits B-1
through B-3 and within five days, SK hynix and Rambus, through their respective counsel, shall cause such
stipulations for dismissal to be entered.
(b) Both Parties shall, within ten (10) business days following the Effective Date, withdraw or discontinue any
formal or informal complaints, requests, petitions, actions, or other proceedings they may have pending against
the other Party or its Subsidiaries before any regulatory body anywhere in the world related to the claims,
counterclaims, demands, damages, debts, liabilities, accounts, actions and causes of action released by this
Agreement or that relate in any way to the Rambus Patents or the SK hynix Patents. For the avoidance of doubt,
this provision (i) requires Rambus to withdraw and discontinue the German Patent Litigation, (ii) requires SK
hynix to withdraw and discontinue the Other Actions, and (iii) does not require Rambus to withdraw any
complaint or other proceeding as against parties other than SK hynix or its Subsidiaries, including but not limited
to the Antitrust Litigation.
(c) Within ten (10) business days following the Effective Date, SK hynix shall, to the full extent permitted by
applicable law, withdraw, cease to prosecute or pursue and notify the U.S. Patent and Trademark Office, the
European Patent Office, and/or other governmental agency, that it no longer intends to participate in, the Patent
Actions.
11
4.9 Costs and Attorneys’ Fees. For all cases, including but not limited to the Patent Litigation, German Patent Litigation, the
Antitrust Litigation and the Other Actions, the Parties agree that each will pay its own costs and attorneys’ fees and
that neither will file requests for, or otherwise seek to recover, its costs or fees.
4.10 No Admission. Nothing contained in any of the Comprehensive Resolution Agreements, or done or omitted in connection
with any of the Comprehensive Resolution Agreements, is intended as, or shall be construed as, an admission by any
Party of any fault, liability or wrongdoing.
4.11 No Further Actions. As part of the settlement of claims and releases contemplated by this Agreement, prior to the
Expiration Date set forth in the License Agreement, and in each case unless and to the extent required by subpoena or
judicial or regulatory agency order or rule:
(a) SK hynix covenants, except to the extent that it is compelled to do otherwise by court order or summons, not to
bring, or aid, assist or participate in, any action challenging or contesting the assertion, enforcement, validity or
enforceability of, or any use or infringement by any Third Party of, the Rambus Patents, including but not limited
to filing, requesting, participating or assisting in any of the Patent Actions, provided that, notwithstanding the
foregoing, SK hynix may assist (e.g., provide prior art and/or non-infringement analyses to) each Third Party to
whom SK hynix has Sold a Licensed Product, during the term of the license associated with such Licensed
Product as set forth in the License Agreement, in its defense of any claim of a Rambus Patent asserted against
such Third Party by Rambus to the extent that SK hynix is obligated to provide such Third Party with such
assistance pursuant to an indemnification provision; and
(b) Each Party covenants not to (i) file or bring a complaint against, or formally or informally request or urge
investigation of, the other Party or any of its Subsidiaries before any regulatory body, or (ii) support, cooperate
with or otherwise assist any entity in any dispute against the other Party or its Subsidiaries, or any regulatory body
in any proceeding involving the other Party or its Subsidiaries, in each case in any matter related to the claims,
counterclaims, defenses, demands, damages, debts, liabilities, accounts, actions and causes of action released by
this Agreement, including but not limited to filing, requesting, participating or assisting in any United States,
European, or other patent office reexamination proceedings, actions, challenges, oppositions or interferences with
respect to Patents of the other Party or its Subsidiaries, and filing amicus curiae briefs in the Patent Litigation, the
Antitrust Litigation, the Other Actions or any other Dispute.
12
Article 5
Warranties
Each Party represents, warrants and covenants, on behalf of itself and its Subsidiaries, to the other Party during the term of this
Agreement:
5.1 Due Incorporation. Such Party is duly incorporated, validly existing and in good standing under the laws of its jurisdiction of
formation with the requisite corporate authority to own and use its properties and assets and to carry on its business as
currently conducted.
5.2 Due Authorization; Enforceability. Such Party has the requisite corporate or other authority to enter into, and to grant the
releases and discharges, make the covenants, and consummate the transactions contemplated by this Agreement, on
behalf of itself and its Subsidiaries, and otherwise to carry out its and its Subsidiaries’ obligations hereunder. The
execution, delivery and performance of this Agreement by such Party and its Subsidiaries have been duly authorized
by all necessary action of such Party and its Subsidiaries, and no other act or proceeding on the part of or on behalf of
such Party and its Subsidiaries is necessary to approve the execution and delivery of this Agreement, the performance
by such Party and its Subsidiaries of their obligations hereunder and the consummation of the transactions
contemplated hereby. This Agreement has been duly executed and delivered by such Party and constitutes a legal,
valid and binding obligation of such Party, enforceable against such Party in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and similar laws relating to or
affecting creditors generally, by general equity principles or by limitations on indemnification pursuant to public
policy.
5.3 No Conflicts; No Consents. The execution, delivery, and performance of this Agreement by such Party and its Subsidiaries,
including but not limited to the granting of the releases and discharges contemplated hereby, will not infringe any law,
regulation, judgment or order applicable to such Party and its Subsidiaries and are not and will not be contrary to the
provisions of the constitutional documents of such Party and its Subsidiaries and will not (with or without notice, lapse
of time or both) result in any breach of the terms of, or constitute a default under, any instrument or agreement to
which such Party and its Subsidiaries is a party or by which it or its property is bound. All consents and approvals of
any court, government agencies or other regulatory body required by such Party and its Subsidiaries for the execution,
delivery and performance of the terms of this Agreement have been obtained and are in full force and effect.
5.4 No Assignment of Claims. Each Party represents and warrants that it has not assigned, transferred or granted to any Third
Party any rights or interests with respect to any claim or cause of action, or any right(s) underlying any claim or cause
of action, it had, has, or may have against the other Party or its Subsidiaries as of, or prior to, the Effective Date of this
Agreement.
13
Article 6
Notices and other Communications
6.1 All notices or other communication required or permitted hereunder shall be in writing and shall be (a) mailed by first class
air mail (registered or certified if available), postage prepaid, or otherwise delivered by hand, by messenger, addressed
to the addresses set forth below, or (b) delivered by facsimile to the facsimile number set forth below. Each Party may
change its address or facsimile number for notices by providing a notice to the other Party in the manner set forth
herein. Such notices shall be deemed to have been effective when delivered or, if delivery is not accomplished by
reason of some fault or refusal of the addressee, when tendered (which tender, in the case of mail, shall be deemed to
have occurred upon posting, and in the case of facsimile, shall be deemed to have occurred upon transmission). All
notices shall be in English.
If to SK hynix:
SK hynix Inc.
Kyunghyun Min
Vice President, Head of IP Group
10F, Daechi Tower, 424, Teheran-ro, Gangnam-gu
Seoul, 135-738, Korea
Fax: 82)-31-645-8171
If to Rambus:
Rambus Inc.
Jae Kim
General Counsel
1050 Enterprise Way, Suite 700
Sunnyvale, CA 94089
(with a copy, which shall not constitute notice, to the following:)
Satish Rishi
Chief Financial Officer
Rambus Inc.
1050 Enterprise Way, Suite 700
Sunnyvale, CA 94089
Telephone: +1-408-462-8000
Facsimile: +1-408-462-8001
Article 7
Successors and Assigns
7.1 Subject to the limitation in Sections 4.7 and 9.5, this Agreement shall be binding upon and inure to the benefit of the Parties
hereto and their respective heirs,
14
successors and assigns, and upon any corporation, limited liability partnership, limited liability company, or other
entity into or with which any Party hereto may merge, combine or consolidate. For the avoidance of doubt, this
provision does not govern the rights or obligations of successors or assigns of the Parties under the License Agreement.
The releases, dismissals and covenants granted by each Party and its Subsidiaries under this Agreement (but not any
benefits received by such Party or its Subsidiaries under this Agreement) shall run with (a) in the case of SK hynix, the
SK hynix Patents or (b) in the case of Rambus, the Rambus Patents, and remain in full force and effect regardless of
any subsequent assignment, sale or other transfer of any such SK hynix Patents or Rambus Patents or any rights or
interests therein. Any such assignment, sale, or transfer of rights in contravention of the foregoing shall be null and
void ab initio and of no force or effect.
Article 8
Dispute Resolution
8.1 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California,
without giving effect to any choice-of-law or conflict-of-law provision or rule (whether of the State of California or
any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of
California.
8.2 English Language. This Agreement is executed in the English language and no translation shall have any legal effect.
8.3 Jurisdiction and Venue. Any legal action, suit or proceeding arising under, or relating to, this Agreement, shall be brought in
the United States District Court for the Northern District of California or, if such court shall decline to accept
jurisdiction over a particular matter, in the Santa Clara County Superior Court, and each Party agrees that any such
action, suit or proceeding may be brought only in such courts. Each Party further waives any objection to the laying of
jurisdiction and venue for any such suit, action or proceeding in such courts.
Article 9
Miscellaneous
9.1 Entire Agreement. This Agreement and the License Agreement, and all Exhibits thereto, constitute the entire agreement
between the Parties regarding the subject matter hereof, and supersede any and all prior negotiations, representations,
warranties, undertakings or agreements, written or oral, between the Parties regarding such subject matter.
9.2 Relationship of the Parties. Nothing contained in this Agreement or the License Agreement shall be construed as creating
any association, partnership, joint venture or the relation of principal and agent between Rambus and SK hynix. Each
Party is acting as an independent contractor, and no Party shall have the authority to bind any other Party or its
representatives in any way.
15
9.3 Headings and Recitals. The headings of the several articles and sections are inserted for convenience of reference only and
are not intended to be a part of or to affect the meaning or interpretation of this Agreement. The recitals to this
Agreement are intended to be a part of and affect the meaning and interpretation of this Agreement.
9.4 Amendment. This Agreement may not be modified or amended except in a writing executed by authorized representatives of
each of the Parties.
9.5 No Assignment. This Agreement is personal to the Parties, and the Agreement and/or any right or obligation hereunder is not
assignable, whether in conjunction with a change in ownership, merger, acquisition, the sale or transfer of all, or
substantially all or any part of either Party’s or any of their respective Subsidiaries’ business or assets or otherwise,
voluntarily, by operation of law, reverse triangular merger or otherwise, without the prior written consent of the other
Party, which consent may be withheld at the sole discretion of such other Party. Each Party understands that, as a
condition to such consent, the other Party may require it to convey, assign or otherwise transfer its rights and
obligations under the other Comprehensive Resolution Agreements to the entity assuming such Party’s rights and
obligations under this Agreement. Any such purported or attempted assignment or transfer in violation of the foregoing
shall be deemed a breach of this Agreement and shall be null and void. A Change of Control of either Party shall be
deemed an assignment, provided that Articles 2, 4, 8, and 9 shall survive any termination of this Agreement arising
from such assignment. Notwithstanding the foregoing, either Party shall be entitled to, and each Party hereby agrees to,
assign this Agreement to a successor to all or substantially all of a Party’s assets in a transaction entered into solely to
change a Party’s place of incorporation.
9.6 Interpretation. Each Party confirms that it and its respective counsel have reviewed, negotiated and adopted this Agreement
as the agreement and understanding of the Parties hereto and the language used in this Agreement shall be deemed to
be the language chosen by the Parties hereto to express their mutual intent. Neither Party shall be considered to be the
drafter of this Agreement or any of its provisions for the purpose of any statute, case law, or rule of interpretation or
construction that would, or might cause, any provision to be construed against such Party.
9.7 Authority. Each Party represents that it is fully authorized to enter into the terms and conditions of, and to execute, this
Agreement.
9.8 No Third Party Beneficiaries. Unless otherwise expressly stated herein or as set forth in the [***] Release, nothing in this
Agreement, express or implied, is intended to confer upon any person other than the Parties hereto or their respective
permitted assignees, successors in interest, and Subsidiaries any rights or remedies under or by reason of this
Agreement. The former and current directors, officers, employees, and attorneys of the Parties and their Subsidiaries
are intended beneficiaries of Sections 4.1, 4.2, 4.3, 4.4, and 4.5.
16
9.9 Severability. If any provision of any Comprehensive Resolution Agreement is held to be invalid or unenforceable, the
meaning of such provision shall be construed, to the extent feasible, so as to render the provision enforceable and to
effectuate the intent and purpose of the Parties with respect to such invalid or unenforceable provision, and if no
feasible interpretation shall save such provision, (a) a suitable and equitable provision shall be substituted therefor in
order to effectuate, so far as may be valid and enforceable, the intent and purpose of the Parties with respect to such
invalid or unenforceable provision, and (b) the remainder of such Comprehensive Resolution Agreement shall remain
in full force and effect.
9.10 No Waiver. The failure of either Party to enforce, at any time, any of the provisions of this Agreement shall in no way be
construed as a waiver of such provisions, and shall not be deemed in any way to affect the validity of this Agreement
or any part thereof, or the right of either Party to later enforce each and every such provision. No waiver of any breach
of this Agreement shall be held to be a waiver of any other or subsequent breach.
9.11 Counterparts; Facsimile Transmission. This Agreement may be executed in multiple counterparts, each of which shall
constitute an original, but all of which together shall constitute one and the same agreement. Each Party may rely on
facsimile or .pdf signature pages as if such facsimile or .pdf pages were originals.
9.12 Further Actions. Each of the Parties hereto agrees to take and cause its Subsidiaries to take any and all actions reasonably
necessary in order to effectuate the intent, and to carry out the provisions, of this Agreement.
9.13 Public Disclosures and Confidentiality. The Parties shall issue a press release with respect to the Comprehensive
Resolution Agreement in a mutually acceptable form. Each Party agrees that, after the issuance of such press release,
each Party shall be entitled to disclose the general nature of this Agreement, but that the terms and conditions of this
Agreement, to the extent not already disclosed pursuant to such press release, shall be treated as confidential
information and that neither Party will disclose such terms or conditions to any Third Party without the prior written
consent of the other Party, provided, however, that each Party may disclose the terms and conditions of this
Agreement:
(a) as required by any court or other governmental body;
(b) as otherwise required by law;
(c) as otherwise may be required by applicable securities and other law and regulation, including to legal and
financial advisors in their capacity of advising a Party in such matters, so long as the disclosing Party shall seek
confidential treatment of such terms and conditions to the extent reasonably possible;
(d) to legal counsel, accountants, and other professional advisors of the Parties;
(e) in confidence, to banks, investors, and other financing sources and their advisors, and to SK Telecom (provided
that at the time of any such disclosure
17
to SK Telecom, SK Telecom owns at least twenty (20) percent of the outstanding voting securities of SK hynix);
(f) in connection with the enforcement of this Agreement or rights under this Agreement;
(g) during the course of litigation so long as the disclosure of such terms and conditions are restricted in the same
manner as is the confidential information of other litigating parties and so long as (i) the restrictions are embodied
in a court-entered protective order limiting disclosure to outside counsel and (ii) the disclosing Party informs the
other Party in writing at least ten (10) business days in advance of the disclosure and discusses the nature and
contents of the disclosure, in good faith, with the other Party (for purposes of this provision, the Protective Order
entered in the Antitrust Litigation is acceptable, as long as the disclosure is designated as both “Highly
Confidential-BP and Highly Confidential-IP”);
(h) in confidence, in connection with an actual or prospective merger or acquisition or similar transaction.
(i) in confidence, to the outside legal counsel of Elpida Memory, Inc. (“Elpida”) in connection with a Rambus’s
obligation(s), if any, under any most favored nation, or similar clause, whereby Rambus is contractually obligated
to disclose and offer terms given to Elpida.
In addition, upon execution of this Agreement, or thereafter, Rambus, in its discretion, shall be entitled to file a copy of this
Agreement with the U.S. Securities and Exchange Commission, so long as Rambus seeks confidential treatment of such
agreement to the extent reasonably possible.
18
IN WITNESS WHEREOF, this Agreement has been duly and executed and delivered by the duly authorized officers of the Parties
hereto as of the date first written above.
RAMBUS INC.
By: /s/ Kevin Donnelly
Name: Kevin Donnelly
SK HYNIX INC.
By: /s/ Kyunghyun Min
Name: Kyunghyun Min
19
SCHEDULE 1
PATENT ACTIONS
EP 1 997 111 B1 (Application No. 07 758 147.8); Appeal Number: T0945/12-3.5.04
EP 1 653 374 B1 (Application No. 05 022 021.9); Appeal Number: T0731/12-3.5.06
EP 2 192 494 B1 (Application No. 10 150 033.8)
EP 1 981 033 B1 (Application No. 08 153 150.1)
Farmwald/Horowitz
EP 0 994 420 B1 (Application No. 99 118 308.8); Appeal Number : T 1643/10-3.5.06
EP 1 022 641 B1 (Application No. 00 100 018.1); Appeal Number: T 1643/10-3.5.06
EP 1 022 642 B1 (Application No. 00 108 822.8); Appeal Number: T 1345/11-3.5.06
EP 1 197 830 B1 (Application No. 02 000 378.6); Appeal Number: T 0724/10-3.5.06
EP 1 640 847 B1 (Application No. 05 026 720.2); Appeal Number: T2347/11-3.5.06
EP 1 816 569 B1 (Application No. 06 125 946.1)
20
EXHIBIT A
LICENSE AGREEMENT
Incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, filed on
July 29, 2013.
21
EXHIBIT B
FORMS OF DISMISSAL
EXHIBIT B1
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA, SAN JOSE DIVISION
SK HYNIX INC., et al.,
CASE NO. CV 00-20905 RMW
Plaintiffs,
STIPULATION AND [PROPOSED] ORDER OF DISMISSAL
vs.
RAMBUS INC.,
Defendant.
Rambus Inc. (“Rambus”) and SK hynix Inc. (f/k/a/ Hynix Semiconductor Inc.), SK hynix America Inc. (f/k/a/ Hynix Semiconductor America Inc.), SK
hynix U.K. Limited (f/k/a Hynix Semiconductor U.K. Ltd.), and SK hynix Deutschland GmbH (f/k/a/ Hynix Semiconductor Deutschland GmbH) (collectively,
“SK hynix”) have settled the disputes between them raised in the above-captioned action on mutually-agreeable terms.
The parties stipulate, in accordance with Federal Rule of Civil Procedure 41, as follows:
1. Rambus hereby dismisses all claims and/or counterclaims brought against SK hynix in this action with prejudice;
2. SK hynix hereby dismisses all claims and/or counterclaims brought against Rambus in this action with prejudice; and
3. Each party shall bear its own attorneys’ fees and costs.
IT IS SO STIPULATED.
22
Dated: June 11, 2013
MUNGER, TOLLES & OLSON LLP
SIDLEY AUSTIN LLP
By:
/s/
GREGORY P. STONE (SBN 078329)
Email: gregory.stone@mto.com
MUNGER, TOLLES & OLSON LLP
355 South Grand Avenue, 35th Floor
Los Angeles, CA 90071
Telephone: (213) 683-9100
Facsimile: (213) 687-3702
Attorneys for RAMBUS INC.
Dated: June 11, 2013
O’MELVENY & MYERS LLP
KILPATRICK TOWNSEND & STOCKTON LLP
IT IS SO ORDERED.
Dated: June , 2013
/s/
By:
KENNETH L. NISSLY (SBN 77589)
Email: knissly@omm.com
O’MELVENY & MYERS LLP
2765 Sand Hill Road
Menlo Park, California 94025
Telephone: (650) 473-2600
Facsimile: (650) 473-2601
Attorneys for SK HYNIX INC., SK HYNIX AMERICA INC., SK HYNIX U.K.
LIMITED, and SK HYNIX DEUTSCHLAND GMBH
ORDER
Hon. Ronald M. Whyte
United States District Judge
23
EXHIBIT B2
(All parties and counsel listed on Signature Page)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA, SAN JOSE DIVISION
RAMBUS INC.,
CASE NO. CV 05-00334 RMW
Plaintiff,
vs.
HYNIX SEMICONDUCTOR INC., et al.,
Defendants.
STIPULATION AND [PROPOSED] ORDER OF DISMISSAL AS
TO SK HYNIX
Rambus Inc. (“Rambus”) and SK hynix Inc. (f/k/a/ Hynix Semiconductor Inc.), SK hynix America Inc. (f/k/a/ Hynix Semiconductor America Inc.), Hynix
Semiconductor Manufacturing America Inc., SK hynix U.K. Limited (f/k/a/ Hynix Semiconductor U.K. Ltd.), and SK hynix Deutschland GmbH (f/k/a/ Hynix
Semiconductor Deutschland GmbH) (collectively, “SK hynix”) have settled the disputes between them raised in the above-captioned action on mutually-agreeable
terms.
The parties stipulate, in accordance with Federal Rule of Civil Procedure 41, as follows:
1. Rambus hereby dismisses all claims and/or counterclaims brought against SK hynix in this action with prejudice;
2. SK hynix hereby dismisses all claims and/or counterclaims brought against Rambus in this action with prejudice; and
3. Each party shall bear its own attorneys’ fees and costs.
IT IS SO STIPULATED.
24
Dated: June 11, 2013
MUNGER, TOLLES & OLSON LLP
SIDLEY AUSTIN LLP
By:
/s/
GREGORY P. STONE (SBN 078329)
Email: gregory.stone@mto.com
MUNGER, TOLLES & OLSON LLP
355 South Grand Avenue, 35th Floor
Los Angeles, CA 90071
Telephone: (213) 683-9100
Facsimile: (213) 687-3702
Attorneys for RAMBUS INC.
Dated: June 11, 2013
O’MELVENY & MYERS LLP
KILPATRICK TOWNSEND & STOCKTON LLP
/s/
By:
KENNETH L. NISSLY (SBN 77589)
Email: knissly@omm.com
O’MELVENY & MYERS LLP
2765 Sand Hill Road
Menlo Park, California 94025
Telephone: (650) 473-2600
Facsimile: (650) 473-2601
Attorneys for SK HYNIX INC., SK HYNIX AMERICA INC., HYNIX
SEMICONDUCTOR MANUFACTURING AMERICA INC., SK HYNIX U.K.
LIMITED, and SK HYNIX DEUTSCHLAND GMBH
ORDER
IT IS SO ORDERED.
Dated: June , 2013
Hon. Ronald M. Whyte
United States District Judge
Filer’s Attestation:
I, Gregory P. Stone, am the ECF User whose identification and password are being used to file this STIPULATION AND [PROPOSED] ORDER OF
DISMISSAL. In compliance with Local Rule 5-1(i), I hereby attest that Kenneth L. Nissly concurs in this filing.
By:
/s/
GREGORY P. STONE (SBN 078329)
25
EXHIBIT B3
Case No. A135150
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT, DIVISION TWO
___________________________
RAMBUS INC.,
Plaintiff and Appellant,
vs.
MICRON TECHNOLOGY, INC., et al.,
Defendants and Respondents.
___________________________
Appeal from the Superior Court of the County of San Francisco
Case No. CGC-04-431105
The Honorable James J. McBride
The Honorable Richard A. Kramer
STIPULATION FOR DISMISSAL OF APPEAL AS TO RESPONDENTS HYNIX SEMICONDUCTOR INC. AND HYNIX SEMICONDUCTOR
AMERICA INC.
___________________________
MUNGER, TOLLES & OLSON LLP
Steven M. Perry (SBN 106154)
Bart H. Williams (SBN 134009)
Sean Eskovitz (SBN 241877)
Fred A. Rowley, Jr. (SBN 192298)
355 South Grand Avenue, 35th Floor
Los Angeles, CA 90071-1560
Telephone: 213-683-9100
Facsimile: 213-687-3702
Attorneys for Plaintiff and Appellant
RAMBUS INC.
STIPULATION FOR DISMISSAL OF APPEAL AS TO RESPONDENTS HYNIX SEMICONDUCTOR INC. AND HYNIX SEMICONDUCTOR
AMERICA INC.
WHEREAS, on April 2, 2012, Plaintiff-Appellant Rambus Inc. (“Rambus”) filed its notice of appeal from the February 15, 2012 judgment entered in this
case by the Superior Court in favor of Defendants-Respondents Hynix Semiconductor Inc., Hynix Semiconductor America Inc., Micron Technology, Inc., and
Micron Semiconductor Products, Inc.;
WHEREAS, the record in this appeal was filed in this Court on July 10, 2012;
26
WHEREAS, Rambus has reached a settlement agreement with Hynix Semiconductor Inc. and Hynix Semiconductor America Inc. regarding the causes of
action brought by Rambus against Hynix Semiconductor Inc. and Hynix Semiconductor America Inc. in this case;
WHEREAS, Rambus has not reached a settlement agreement with the remaining Defendants-Respondents, Micron Technology, Inc. and Micron
Semiconductor Products, Inc., and has not resolved its causes of action against those parties, and therefore intends to continue to litigate with respect to those
parties all factual and legal disputes presented in the appeal;
WHEREAS, pursuant to California Rules of Court, rule 8.244(a)(1), Rambus filed its Notice of Settlement With Respondents Hynix Semiconductor Inc.
and Hynix Semiconductor America Inc. in this Court on ;
NOW THEREFORE, pursuant to California Rules of Court, rule 8.244(a)(3) and rule 8.244(c)(1), the undersigned parties hereby stipulate that the appeal
filed on April 2, 2012 in the
above entitled action should be dismissed solely as to Respondents Hynix Semiconductor Inc. and Hynix Semiconductor America Inc.
Rambus shall not be entitled to recover costs on appeal from Hynix Semiconductor Inc. or Hynix Semiconductor America Inc.; Hynix Semiconductor Inc.
and Hynix Semiconductor America Inc. shall not be entitled to recover costs on appeal from Rambus.
The remaining Defendants-Respondents, Micron Technology, Inc. and Micron Semiconductor Products, Inc., are not parties to this stipulation, and this
stipulation shall be without prejudice to Rambus continuing to litigate its causes of action against Micron Technology, Inc. and Micron Semiconductor
Products, Inc., including litigating with respect to those parties all factual and legal disputes presented in the appeal.
Because the appeal remains pending as to Micron Technology, Inc. and Micron Semiconductor Products, Inc., the remittitur should not issue as to Micron
Technology, Inc. or Micron Semiconductor Products, Inc. until this Court’s decision is final with respect to those parties.
DATED: June , 2013
MUNGER, TOLLES & OLSON LLP
STEVEN M. PERRY
BART H. WILLIAMS
SEAN ESKOVITZ
FRED A. ROWLEY, JR.
By:
STEVEN M. PERRY
Attorneys for Plaintiff and Appellant
RAMBUS INC.
27
DATED: June , 2013
O’MELVENY & MYERS, LLP
CHARLES LIFLAND
By:
CHARLES LIFLAND
Attorneys for Defendants and Respondents
HYNIX SEMICONDUCTOR, INC. and HYNIX SEMICONDUCTOR
AMERICA, INC.
28
EXHIBIT C
[***]
In consideration of all the terms of this Settlement Agreement, and in order to induce SK hynix to enter into this Settlement Agreement, and to permit SK hynix to
fully comply with [***] under that [***] between [***] and their respective successors and assigns [***] relating to the [***] the Parties agree as follows. For
purposes of this provision, [***] means all of [***] including for any [***], if any, and for [***] in the [***] for which the [***] in the [***] could be [***].
(a) Subject to subparagraph (d) below, [***] hereby irrevocably releases, acquits and forever discharges [***] to the extent that any [***] based in
whole or in part on the [***] is ever included in a [***] after exhaustion of all [***], in the [***].
(b) Subject to subparagraph (d) below, this [***] and [***] expressly includes the complete [***] of any [***] of any [***] of any [***], after
exhaustion of all [***] based in whole or in part on the [***], and [***] will take, or refrain from taking, any and all actions necessary such that it does not [***]
against [***] in the [***] after exhaustion of all [***] based in whole or in part on the [***].
(c) [***] has not provided a copy of the [***] or any portion of the [***], to [***] and has not permitted [***] to review the [***] or any portion of
it.
(d) [***] confirms, to its present knowledge and good faith belief, that it is obligated by the [***] to obtain the [***] contained in [***].
(e) [***] agrees that however the [***] may be interpreted, applied or enforced in any future proceedings, the [***] in [***] shall remain fully
effective and enforceable.
(f) It is the express intent of the Parties that, upon execution of this Agreement, under no circumstance shall [***] on or in connection with any
future [***] in the [***], after exhaustion of all [***], based in whole or in part on the [***].
29
Exhibit 10.17
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT IS BOTH NOT
MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY
DISCLOSED. [***] INDICATES THAT INFORMATION HAS BEEN REDACTED.
SEMICONDUCTOR PATENT LICENSE AGREEMENT
This SEMICONDUCTOR PATENT LICENSE AGREEMENT (“Agreement”) is effective as of July 1, 2013 (the “Effective Date”) by and
between Rambus Inc., a corporation duly organized and existing under the laws of Delaware, U.S.A., having its principal place of business at
1050 Enterprise Way, Suite #700, Sunnyvale, California 94089, U.S.A., (hereinafter “Rambus”) and SK hynix Inc., a corporation duly
organized and existing under the laws of Korea., having its principal place of business at 2091, Gyeongchung-daero, Bubal-eub, Icheon-si,
Gyeonggi-do, Korea (hereinafter “SK hynix ”).
WHEREAS, the parties are currently parties to a number of disputes relating to the SK hynix products and the Rambus patents,
including but not limited to disputes as to whether claims of Rambus patents are infringed by SK hynix products and the Antitrust Litigation,
and recognize that, without this Agreement, given the diversity of claims of the Rambus patents, and the breadth of technologies utilized by
the SK hynix products, Rambus could, after the Effective Date, assert other claims of Rambus patents that are infringed by SK hynix
products;
WHEREAS, the parties recognize that litigation of such is inherently uncertain, and is subject to certain risks and to various possible
outcomes, some of which would be more favorable to Rambus, and some of which would be more favorable to SK hynix;
WHEREAS, concurrent with the execution and delivery of this Agreement, the parties have entered into a Settlement Agreement (the
“Settlement Agreement”) to eliminate the risks associated with such litigation and to enter into a comprehensive resolution to compromise,
settle and release certain existing disputes between them, and to compromise, resolve and avoid other disputes that may arise after the
Effective Date with respect to the SK hynix products and the Rambus patents;
WHEREAS, as part of such comprehensive resolution, the parties have agreed to enter into this Agreement; and
WHEREAS, because this Agreement is part of such comprehensive resolution, the parties acknowledge that it is therefore essential that
their respective obligations under this Agreement be certain and not subject to collateral attack, or otherwise subject to change or
modification except on the terms expressly set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and premises contained herein, and other valuable consideration, the
receipt and sufficiency of which is hereby acknowledged by the parties, the parties agree as follows:
1. Definitions
1.1 “Acquired Business” means a Third Party, the portion of a Third Party, and/or any portion of the assets or business of a Third Party
that SK hynix or its Subsidiaries acquire in an Acquisition.
1.2 “Acquisition” means, as to a party, a transaction or a series of related transactions in which such party acquires, through merger
(including reverse triangular merger), acquisition of stock, acquisition of assets or otherwise, Control of a Third Party and/or any
portion of the assets or business of a Third Party.
1.3 “Acquisition Date” means the effective date of any Acquisition completed by SK hynix or any of its Subsidiaries as described under
Section 3.3.
1
1.4 “Antitrust Litigation” means the matter entitled Rambus Inc. v. Micron Technology Inc. et al., No. 04-431105 (Supr. Ct. Cal., San
Fran. Filed May 5, 2004) and any appeals and remand proceedings therefrom.
1.5 “Change of Control” means a transaction or a series of related transactions in which (a) one or more Third Parties who did not
previously Control a party obtain Control of such party, or (b) the subject party merges with or transfers substantially all of its
assets to a Third Party where the shareholders of the assigning party, immediately before the transaction or series of related
transactions, own less than a fifty percent (50%) interest in the acquiring or surviving entity immediately after the transaction or
series of related transactions.
1.6 “Combination Product” means either (a) a Component containing two (2) or more Integrated Circuits at least one of which is either a
Paid-Up Product or a Term Product and where all other Integrated Circuits contained in such Component are each a Paid-Up
Product, a Term Product, or a Permitted Third Party Product, or (b) solely that portion of a Component consisting of a combination
of two (2) or more Integrated Circuits that are each a Paid-Up Product or a Term Product (“Eligible Portion”) where such
Component also contains an Integrated Circuit that is not a Paid-Up Product, a Term Product, or a Permitted Third Party Product.
For clarity, an Eligible Portion may not contain any Integrated Circuit that is neither a Paid-Up Product nor a Term Product.
1.7 “Combination Product License” means the rights and licenses granted under Section 2.1(c).
1.8 “Component” means a product comprised of one or more Integrated Circuits physically connected, stacked, or attached to a unitary
substrate or other Integrated Circuit where all other elements of such product are passive elements intended to provide physical
support, packaging and/or connectivity with respect to such Integrated Circuits. Examples of Components would include DIMMs,
SIMMs and other modules, and cards, multi-chip packages (MCP), system-on-chip, system-in-package, system-on-insulator, solid
state storage devices, and other form factors.
1.9 “Control” (including “Controlled” and other forms) of an entity means (a) beneficial ownership (whether directly or indirectly
through entities or other means) of more than fifty percent (50%) of the outstanding voting securities of that entity or (b) in the case
of an entity that has no outstanding voting securities, having the power (whether directly or indirectly through entities or other
means) presently to designate more than fifty percent (50%) of the directors of a corporation, or in the case of unincorporated
entities, of individuals exercising similar functions. Notwithstanding the foregoing sentence, where SK hynix has fifty percent
(50%) of such beneficial ownership or power to designate with respect to any other entity, SK hynix shall be deemed to “Control”
such other entity if such other entity is part of the SK Group and such entity is lawfully registered under a corporate name, and
lawfully operates and generally and routinely conducts its business under a corporate name, that includes “SK,” provided that, such
entity agrees in a writing, delivered to both parties within thirty (30) days of the Effective Date (or if later, within thirty (30) days
after formation of such entity), to be bound by all applicable terms and conditions of this Agreement.
1.10 “CRI” means Cryptography Research, Inc., a wholly-owned Subsidiary of Rambus.
1.11 “DDR DRAM” means each double data rate DRAM that (a) implements the minimum set of features, parameters, and protocols
defined or recommended in any final JEDEC-published specification for DDR DRAM; and (b) is solely capable of communicating
with any other Integrated Circuit through the protocol defined or recommended in any such JEDEC-published specification; and (c)
is not Sold or specified as being capable of operating: (i) at a data transfer rate exceeding [***]; or (ii) with data bit width other
than x4, x8 and/or x16.
2
1.12 “DDR2 DRAM” means each double data rate DRAM that (a) implements the minimum set of features, parameters, and protocols
defined or recommended in any final JEDEC-published specification for DDR2 DRAM; and (b) is solely capable of
communicating with any other Integrated Circuit through the protocol defined or recommended in any such JEDEC-published
specification; and (c) is not Sold or specified as being capable of operating: (i) at a data transfer rate exceeding [***]; or (ii) with
data bit width other than x4, x8 and/or x16.
1.13 “DDR3 DRAM” means each double data rate DRAM that (a) implements the minimum set of features, parameters, and protocols
defined or recommended in any final JEDEC-published specification for DDR3 DRAM; and (b) is solely capable of
communicating with any other Integrated Circuit through the protocol defined or recommended in any such JEDEC-published
specification; and (c) is not Sold or specified as being capable of operating: (i) at a data transfer rate exceeding [***]; or (ii) with
data bit width other than x4, x8 and/or x16.
1.14 “DRAM” means a dynamic random access memory Integrated Circuit the primary purpose of which is data storage and retrieval.
1.15 “DRAM Controller” means any Integrated Circuit having circuitry integrated thereon or contained therein that is capable through an
Interface of transmitting and/or receiving data from a DRAM.
1.16 “Effective Date” has the meaning ascribed to such term in the first paragraph of this Agreement.
1.17 “Existing Agreement” has the meaning ascribed to such term under Section 3.3(b) below.
1.18 “Expiration Date” means the fifth (5 ) anniversary of the Effective Date.
th
1.19 “Foundry Product” means any product that would constitute a Paid-Up Product or Term Product but for the fact that such product
does not constitute a SK hynix Product.
1.20 “Foundry Product License” means the rights and licenses granted under Section 2.1(d) below.
1.21 “GDDR DRAM” means each graphics double date rate DRAM that (a) implements the minimum set of features, parameters, and
protocols defined or recommended in any final JEDEC-published specification for GDDR DRAM; and (b) is solely capable of
communicating with any other Integrated Circuit through the protocol defined or recommended in any such JEDEC-published
specification; and (c) is not Sold or specified as being capable of operating: (i) at a data transfer rate exceeding [***]; or (ii) with
data bit width other than x16 and x32.
1.22 “GDDR2 DRAM” means each graphics double date rate DRAM that (a) implements the minimum set of features, parameters, and
protocols defined or recommended in any final JEDEC-published specification for GDDR2 DRAM; and (b) is solely capable of
communicating with any other Integrated Circuit through the protocol defined or recommended in any such JEDEC-published
specification; and (c) is not Sold or specified as being capable of operating: (i) at a data transfer rate exceeding [***]; or (ii) with
data bit width other than x16 and x32.
1.23 “GDDR3 DRAM” means each graphics double date rate DRAM that (a) implements the minimum set of features, parameters, and
protocols defined or recommended in any final JEDEC-published specification for GDDR3 DRAM; and (b) is solely capable of
communicating with any other Integrated Circuit through the protocol defined or recommended in any such JEDEC-published
specification; and (c) is not Sold or specified as being capable of operating: (i) at a data transfer rate exceeding [***]; or (ii) with
data bit width other than x16 and x32.
1.24 “GDDR4 DRAM” means each graphics double data rate DRAM that (a) implements the minimum set of features, parameters, and
protocols defined or recommended in any final JEDEC-published specification for GDDR4 DRAM; and (b) is solely capable of
communicating with any other Integrated Circuit through the protocol defined or recommended in any such JEDEC-published
3
specification; and (c) is not Sold or specified as being capable of operating: (i) at a data transfer rate exceeding [***]; or (ii) with
data bit width other than x16 and x32.
1.25 “GDDR5 DRAM” means each graphics double data rate DRAM that (a) implements those interface features, parameters, and
protocols in the same manner in all material respects as the DRAM Sold by SK hynix or its Subsidiaries on or before the Effective
Date as “GDDR5 DRAM” or implements the minimum set of features, parameters, and protocols defined or recommended in any
final JEDEC-published specification for GDDR5 DRAM; and (b) is solely capable of communicating with any other Integrated
Circuit through the protocol contained in such DRAM Sold by SK hynix or its Subsidiaries on or before the Effective Date as
“GDDR5 DRAM”; and (c) is not Sold or specified as being capable of operating: (i) at a data transfer rate exceeding [***]; (ii) with
a data bit width other than x16 and x32.
1.26 “Indirect Infringement” means any form of alleged patent infringement where the accused infringer is not directly infringing the
subject patent right(s), but is in some manner liable for a Third Party’s direct infringement of the subject patent right(s) by, for
example (without limitation), supplying designs, parts or instructions to the Third Party that enable such Third Party to infringe
directly the subject patent right(s). Indirect Infringement includes without limitation contributory infringement and inducing
infringement.
1.27 “Integrated Circuit” means a single, discrete integrated circuit chip, whether in wafer, cingulated die or packaged die form.
1.28 “Interface” means an electrical, optical, RF, mechanical, or software data path that is capable of transmitting and/or receiving
information between two or more (a) Integrated Circuits or (b) portions of an Integrated Circuit, in each case together with the set
of protocols defining the electrical, physical, timing and/or functional characteristics, sequences and/or control procedures of such
data path.
1.29 “JEDEC” means the JEDEC Solid State Technology Association, originally known as the Joint Electron Device Engineering
Council, a non-stock corporation organized and existing under the laws of the Commonwealth of Virginia.
1.30 “Licensed Product” means a Paid-Up Product, Term Product, or Combination Product made (including have made), used, Sold,
offered for Sale, exported and/or imported pursuant to the Paid-Up Product License, the Term Product License and Combination
Product License, respectively.
1.31 “LPDDR DRAM” means each low-power double data rate DRAM that (a) implements the minimum set of features, parameters, and
protocols defined or recommended in any final JEDEC-published specification for LPDDR DRAM; and (b) is solely capable of
communicating with any other Integrated Circuit through the protocol defined or recommended in any such JEDEC-published
specification; and (c) is not Sold or specified as being capable of operating: (i) at a data transfer rate exceeding [***]; or (ii) with
data bit width other than x8, x16 and/or x32.
1.32 “LPDDR2 DRAM” means each low-power double data rate DRAM that (a) implements the minimum set of features, parameters,
and protocols defined or recommended in any final JEDEC-published specification for LPDDR2 DRAM; and (b) is solely capable
of communicating with any other Integrated Circuit through the protocol defined or recommended in any such JEDEC-published
specification; and (c) is not Sold or specified as being capable of operating: (i) at a data transfer rate exceeding [***]; or (ii) with
data bit width other than x8, x16 and/or x32.
1.33 “LPSDR DRAM” means each low-power SDR DRAM, but including each such DRAM with a data bit width of x32.
4
1.34 “Opposition Proceedings” means oppositions filed by SK hynix against the Opposed Rambus Patents, to the extent that they are
pending before the European Patent Office as of the Effective Date.
1.35 “Opposed Rambus Patents” means the following Rambus Patents, each of which is subject to one or more of the Opposition
Proceedings:
EP 1 997 111 B1 (Application No. 07 758 147.8; “MEMORY DEVICE WITH MODE-SELECTABLE PREFETCH AND
CLOCK-TO-CORE TIMING”);
EP 1 653 374 B1 (Application No. 05 022 021.9; “METHOD AND APPARATUS FOR COORDINATING MEMORY
OPERATIONS AMONG DIVERSELY-LOCATED MEMORY COMPONENTS”);
EP 2 192 494 B1 (Application No. 10 150 033.8; “METHOD AND APPARATUS FOR COORDINATING MEMORY
OPERATIONS AMONG DIVERSELY-LOCATED MEMORY COMPONENTS”); and,
EP 1 981 033 B1 (Application No. 08 153 150.1; “APPARATUS AND METHOD FOR PIPELINED MEMORY
OPERATIONS”).
1.36 “Other DRAM” means any DRAM that does not constitute a Paid-Up Product.
1.37 “Paid-Up Product” means each SK hynix Product that is an SDR DRAM, DDR DRAM, DDR2 DRAM, DDR3 DRAM, GDDR
DRAM, GDDR2 DRAM, GDDR3 DRAM, GDDR4 DRAM, GDDR5 DRAM, LPSDR DRAM, LPDDR DRAM, and LPDDR2
DRAM. Notwithstanding the foregoing sentence, any product that constitutes a Rambus Leadership Product shall be deemed not to
be a Paid-Up Product.
1.38 “Paid-Up Product License” means the rights and licenses granted pursuant to Section 2.1(a).
1.39 “Patents” means patents, including re-examinations and reissues thereof, and utility models and applications therefor, including,
without limitation, all continuations, continuations-in-part and divisionals thereof, in all countries of the world that now or hereafter
are (a) owned or controlled by the applicable party hereto and its Subsidiaries and/or (b) otherwise licensable by the applicable
party hereto and its Subsidiaries, in each case of (a) and (b) where such party and its Subsidiaries have the right to grant the
licenses, sublicenses or other rights and covenants of the scope granted herein.
1.40 “Permitted Third Party Product” means any Integrated Circuit that is neither a SK hynix Product nor a DRAM, SerDes IC, DRAM
Controller, Synchronous Flash Memory or Synchronous Flash Controller.
1.41 “Quarterly Acquisition Adjustment Payment” means each quarterly fixed amount initially payable by SK hynix under this
Agreement upon SK hynix’s or any of its Subsidiaries’ Acquisition of any Acquired Business as provided for under Section 3.3.
1.42 “Quarterly License Payment” has the meaning ascribed to such term in Section 4.1.
1.43 “Rambus Applicable Manufacturing Claims” are defined and determined separately for each specific product. For each such product,
a Rambus Applicable Manufacturing Claim means each process or method claim of a Rambus Patent [***] infringed when such
product is made (or have made).
1.44 “Rambus Applicable Patent Claims” means Rambus Applicable Manufacturing Claims and Rambus Applicable Product Claims.
5
1.45 “Rambus Applicable Product Claims” are defined and determined separately for each specific product. For each such product, a
Rambus Applicable Product Claim means:
(a) each claim of each Opposed Rambus Patent that is [***] by the use, Sale, offer for Sale, export, or import of such product in
the form first made (or have made), in each case during the pendency of the Opposition Proceeding associated with such
Opposed Rambus Patent and any and all appeals therefrom; and,
(b) each claim of:
(i) each Opposed Rambus Patent that is [***] by the use, Sale, offer for Sale, export, or import of such product in the form
first made (or have made), in each case following the pendency of the Opposition Proceeding associated with such
Opposed Rambus Patent; and,
(ii) each other Rambus Patent that is [***] by the use, Sale, offer for Sale, export, or import of such product in the form first
made (or have made).
1.46 “Rambus Leadership Product” means any product that implements a Rambus Proprietary Specification.
1.47 “Rambus Patents” means Patents owned or controlled or otherwise licenseable, each in accordance with Section 1.39 above by
Rambus or any of its Subsidiaries, in each case other than those Patents of CRI that have effective filing dates that are earlier than
June 6, 2011 (the effective date of Rambus’ acquisition of CRI).
1.48 “Rambus Product Design” means any human or machine readable representation of the design, such as a circuit layout in a drawing
or a register transfer level description (RTL) file, for any product, element or instrumentality, including, but not limited to any
Rambus Leadership Product.
1.49 “Rambus Product Design License” means the rights and licenses granted under Section 2.2.
1.50 “Rambus Proprietary Specification” means any Technical Specification that is first designed and developed (as demonstrated by
customary means, including, but not limited to, engineering notebooks) by, or on behalf of, Rambus or any of its Subsidiaries, over
which Rambus and/or any of its Subsidiaries has exclusive control and that neither Rambus nor any of its Subsidiaries has
voluntarily (a) disclosed except under a confidentiality or non-disclosure agreement; or (b) proposed or disclosed to any standards
setting organization. In addition to the foregoing sentence, Rambus Proprietary Specification also includes any Technical
Specification exclusively acquired by Rambus from a Third Party where such Technical Specification would otherwise meet the
definition of a Rambus Proprietary Specification had Rambus, and not the relevant Third Party, been the original developer and
owner of such Technical Specification. Notwithstanding the above, a Technical Specification independently developed by or on
behalf of SK hynix, or by a Third Party, shall not be deemed to be a Rambus Proprietary Specification, even if it describes similar
or identical functions. A Technical Specification shall not be deemed to be independently developed for purposes of the preceding
sentence to the extent such Technical Specification, or any portion thereof, was developed or derived based on information (i) for
which SK hynix or any of its Subsidiaries, or any other Third Party, is bound by an obligation of confidentiality or non-use to
Rambus; (ii) obtained from any other Third Party in violation of its obligation of confidentiality or non-use to Rambus; or (iii)
obtained by SK hynix, any of its Subsidiaries or any other Third Party based on reverse engineering of any product that implements
a Rambus Proprietary Specification.
1.51 “SDR DRAM” means each single data rate DRAM that (a) implements the minimum set of features, parameters, and protocols
defined or recommended in any final JEDEC-published specification for SDR DRAM; and (b) is solely capable of communicating
with any other
6
Integrated Circuit through the protocol defined or recommended in any such JEDEC-published specification; and (c) is not Sold or
specified as being capable of operating: (i) at a data transfer rate exceeding [***]; or (ii) with data bit width other than x4, x8 and/or
x16.
1.52 “Sell” (including “Sale” and “Sold” and other forms) means to sell, lease, or otherwise transfer or dispose of a product, or if the
product is transferred and used internally by an entity, then such transfer and use shall also be deemed a Sale.
1.53 “SerDes IC” means any Integrated Circuit having circuitry integrated thereon or contained therein that (a) de-serializes data received
by such Integrated Circuit from a different Integrated Circuit and/or (b) serializes data originating on such Integrated Circuit prior
to transmitting such data to a different Integrated Circuit. Notwithstanding the foregoing, any Integrated Circuit, the primary
purpose of which is data storage and/or retrieval shall be deemed not to be a SerDes IC.
1.54 “Settlement Agreement” has the meaning assigned in the recitals to this Agreement.
1.55 “SK hynix Applicable Manufacturing Claims” are defined and determined separately for each specific product. For each such
product, a SK hynix Applicable Manufacturing Claim means each process or method claim of a SK hynix Patent [***] when such
product is made (or have made).
1.56 “SK hynix Applicable Patent Claims” means SK hynix Applicable Manufacturing Claims and SK hynix Applicable Product Claims.
1.57 “SK hynix Applicable Product Claims” are defined and determined separately for each specific product. For each such product, a SK
hynix Applicable Product Claim means each claim of a SK hynix Patent [***] by the use, Sale, offer for Sale, or import of such
product in the form first made (or have made).
1.58 “SK hynix Patent” means Patents owned or controlled or otherwise licenseable, each in accordance with Section 1.39 above by SK
hynix or any of its Subsidiaries.
1.59 “SK hynix Product” means, an Integrated Circuit, for which SK hynix or any of its Subsidiaries either:
(a) owns the entire design of such Integrated Circuit with no limitations on how it may use such design; and/or,
(b) has a license from the party or parties that created or otherwise owns the design of such Integrated Circuit, under which
license SK hynix and/or its Subsidiaries (i) can make (and/or have made) such Integrated Circuit; (ii) is free to Sell such made
(or have made) Integrated Circuit without restriction as to whom SK hynix and/or its Subsidiaries may Sell such Integrated
Circuit; and (iii) is not required or bound to discriminate in price or other terms with respect to such Integrated Circuit.
1.60 “SK hynix Supplied Portion” has the meaning ascribed to in Section 2.1(d)(ii) below.
1.61 “Subsidiary” means with respect to any identified entity (“Identified Entity”), any entity Controlled by such Identified Entity, but
only so long as such Control exists.
1.62 “Synchronous Flash Controller” means any Integrated Circuit having circuitry integrated thereon or contained therein that is capable
through an Interface of transmitting and/or receiving data from a Synchronous Flash Memory.
1.63 “Synchronous Flash Memory” means any Integrated Circuit the primary purpose of which is data storage or retrieval that has a
synchronous Interface and Flash memory cells that retain data stored in such Flash memory cells even when it ceases to receive
electrical power.
7
1.64 “Technical Specification” means a final specification for an optical, RF, electrical, mechanical, or software component that describes
all of the characteristics of such component necessary for such component to operate. As example, the electrical interface
(including timing and signaling parameters and characteristics) for a data bus connecting two (2) Integrated Circuits would meet the
definition of a Technical Specification provided that such interface specified all of the signals necessary for such data bus to
function.
1.65 “Term” means, as the case may be, the (a) term of the Paid-Up License, (b) the term of the Term Product License; (c) term of the
Combination Product License, and/or (d) term of the Foundry Product License in each case of (a), (b), (c) and (d) as provided for
under Section 6.1.
1.66 “Term Product” means each SK hynix Product that is an (a) Other DRAM; (b) DRAM Controller; (c) Synchronous Flash Memory;
(d) Synchronous Flash Controller; (e) SerDes IC; and (f) any other Integrated Circuit other than a Paid-Up Product.
Notwithstanding the foregoing sentence, any product that constitutes a Rambus Leadership Product shall be deemed not to be a
Term Product.
1.67 “Term Product License” means the rights and licenses granted under Section 2.1(b).
1.68 “Third Party” means (a) with respect to Rambus or any Subsidiary of Rambus, any entity that is not a Subsidiary of Rambus and (b)
with respect to SK hynix or any Subsidiary of SK hynix, any entity that is not a Subsidiary of SK hynix.
2. Grant of Rights
2.1 License to SK hynix.
(a) Paid-Up Product License. Subject to the terms and conditions of this Agreement, Rambus, on behalf of itself and its
Subsidiaries, hereby grants to SK hynix and its Subsidiaries, for each product that falls within the definition of a Paid-Up
Product: a non-exclusive, non-transferable, royalty-bearing, worldwide license, without the right to sublicense, solely under the
associated Rambus Applicable Patent Claims for such Paid-Up Product, to make (including have made), use, Sell, offer for
Sale, export, and/or import such Paid-Up Product until the expiration or termination of this license pursuant to Section 6.1(a).
(b) Term Product License. Subject to the terms and conditions of this Agreement, Rambus, on behalf of itself and its Subsidiaries,
hereby grants to SK hynix and its Subsidiaries, for each product that falls within the definition of a Term Product: a non-
exclusive, non-transferable, royalty-bearing, worldwide license, without the right to sublicense, solely under the associated
Rambus Applicable Patent Claims for such Term Product, to make (including have made), use, Sell, offer for Sale, export,
and/or import such Term Product until the expiration or termination of this license pursuant to Section 6.1(b).
(c) Combination Product License. Subject to the terms and conditions of this Agreement, Rambus, on behalf of itself and its
Subsidiaries, hereby grants to SK hynix and its Subsidiaries, for each product that falls within the definition of a Combination
Product: a non-exclusive, non-transferable, royalty-bearing, worldwide license, without the right to sublicense, solely under the
associated Rambus Applicable Patent Claims for such Combination Product, to make (including have made), use, Sell, offer for
Sale, export, and/or import such Combination Product until the expiration or termination of this license pursuant to Section
6.1(c). For clarity, the grant of the license to Combination Products pursuant to this Section 2.1(c) does not supersede or
otherwise limit the licenses granted to each Term Product and Paid-Up Product under Section 2.1(a) and Section 2.1(b),
respectively, that may be contained in any such Combination Product.
8
(d) Foundry Product License. Except as expressly set forth in Sections 2.1(d)(i) and 2.1(d)(ii) below, all Foundry Products are
expressly excluded from the licenses granted under Sections 2.1(a), 2.1(b) and 2.1(c) of this Agreement.
(i) Manufacturing. Rambus, on behalf of itself and its Subsidiaries, hereby grants to SK hynix and its Subsidiaries, for any
product that constitutes a Foundry Product: a non-exclusive, non-transferable, worldwide license, without the right to
sublicense, under the associated Rambus Applicable Manufacturing Claims for such Foundry Product, to make (but not
have made), use, Sell, offer for Sale, import, and export any such Foundry Product until the expiration or termination of
this license pursuant to Section 6.1(d). For the avoidance of doubt, except as expressly set forth in Section 2.1(d)(ii), no
license is granted under any Rambus Applicable Product Claims for any Foundry Products.
(ii) SK hynix Supplied Technology. For any portion of a Foundry Product supplied by SK hynix and/or its Subsidiaries (“SK
hynix Supplied Portion”) for which SK hynix or any of its Subsidiaries either (A) owns the entire design of such SK hynix
Supplied Portion with no limitations on how it may use such design; and/or (B) has a license from the Third Party (or
Third Parties) that created or otherwise owns the design of such SK hynix Supplied Portion, under which license SK hynix
and/or its Subsidiaries (I) can make (and/or have made) such SK hynix Supplied Portion; (II) is free to Sell such made SK
hynix Supplied Portion without restriction as to whom SK hynix and/or its Subsidiaries may Sell such SK hynix Supplied
Portion and (III) is not required or bound to discriminate in price or other terms with respect to such SK hynix Supplied
Portion, Rambus, on behalf of itself and its Subsidiaries, hereby grants to SK hynix and its Subsidiaries, a non-exclusive,
non-transferable, worldwide license, without the right to sublicense, under the associated Rambus Applicable Product
Claims for such SK hynix Supplied Portion, to use, Sell, offer for Sale, or import any such SK hynix Supplied Portion as
part of any such Foundry Product until the expiration or termination of this license pursuant to Section 6.1(d).
2.2 Rambus Product Design License. Subject to the terms and conditions of this Agreement, SK hynix, on behalf of itself and its
Subsidiaries, hereby grants to Rambus and its Subsidiaries, for each product that falls within the definition of Rambus Product
Design: a non-exclusive, non-transferable, worldwide license, without the right to sublicense, solely under the associated SK hynix
Applicable Patent Claims for such Rambus Product Design, to make (including have made), use, Sell, offer for Sale, and/or import
such Rambus Product Design until the expiration or termination of this license pursuant to Section 6.1(e). For the avoidance of
doubt, this license does not in any way, expressly or impliedly, extend, nor is it intended to extend, to any devices or products made
essentially based on or incorporating such Rambus Product Design or in combination of such Rambus Product Design.
2.3 Obligations When Transferring Patents. Each party agrees that it shall take all actions necessary to ensure that any Third Party to
whom any Patents are transferred, assigned or exclusively licensed or any right to enforce is granted (including any successor in
interest thereto) is bound in writing to all covenants, licenses and other rights granted hereunder with respect such transferred,
assigned or exclusively licensed Patents, provided further that if Rambus or any of its Subsidiaries transfers to any Third Party
ownership of, or otherwise grants any Third Party the right to enforce, any claim of any Rambus Patent that is subject to the
Covenant to Sue Last provided for under Section 2.4 below, such claim shall, upon such transfer of ownership or grant of right to
enforce, automatically and immediately be deemed to be included in the rights and licenses granted hereunder with respect to
Licensed Products and SK hynix Supplied Portions notwithstanding the fact that such claim does not constitute a Rambus
Applicable Patent Claim.
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2.4 Covenant [***]. For so long as a product constitutes a Licensed Product or a SK hynix Supplied Portion hereunder, Rambus, on
behalf of itself and its Subsidiaries, covenants that [***].
2.5 Further Covenant. For so long as a product or portion thereof Sold by SK hynix:
(a) [***];
(b) [***]; or,
(c) [***];
Rambus, on behalf of itself and its Subsidiaries, covenants that [***].
2.6 Full Force and Effect. The parties expressly acknowledge and agree that nothing in this Agreement shall in any way limit or alter the
effect of the first sale or patent exhaustion doctrines under U.S. law, and any equivalent or similar doctrines under the law of any
jurisdiction with respect to Rambus Applicable Patent Claims with respect to any Licensed Product or SK hynix Supplied Portion
based on the Sale of such Licensed Product or SK hynix Supplied Portion.
2.7 No Release, No Implied or Other Rights and Licenses.
(a) The rights and licenses granted and covenants made herein apply solely to those products and activities expressly licensed
during the Term. Nothing in this Agreement shall be deemed to, and shall not be construed to, constitute any release,
forbearance, forfeiture or other waiver of any rights of either party or their respective Subsidiaries to enforce any of their
respective intellectual property rights with respect to any activities undertaken by either party, their respective Subsidiaries
and/or any other Third Party to the extent not expressly granted or made hereunder. Nothing in this Agreement is intended to
limit or alter any rights under applicable law relating to patent exhaustion.
(b) Except as expressly provided for under this Agreement, no authorization, release, license, covenant or other right is granted or
made, by implication, estoppel, acquiescence or otherwise under this Agreement, to either party, their respective Subsidiaries
and/or any other Third Party under any patents, utility models, patent or utility model claims, or other intellectual property
rights now or hereafter owned or controlled by either party or their respective Subsidiaries. Nothing in this Agreement is
intended to limit or alter any rights under applicable law relating to patent exhaustion.
(c) Except as expressly provided for under this Agreement, none of the terms of this Agreement shall be deemed to, and shall not
be construed to, constitute, whether by implication, estoppel, acquiescence or otherwise, (i) an authorization by either party,
their respective Subsidiaries and/or any other Third Party to Sell, offer for Sale and/or import any product (A) in or for
combination with any other element (including, but not limited to any function or feature), product or instrumentality; or (B)
unconditionally for use in or for combination with any other element (including, but not limited to any function or feature),
product or instrumentality; or (ii) a waiver by either party or their respective Subsidiaries of any liability for infringement based
on either party’s, their respective Subsidiaries and/or any other Third Party’s use, Sale, offer for Sale and/or import of any
product in combination with any other element (including, but not limited to any function or feature), product or
instrumentality. Nothing in this Agreement is intended to limit or alter any rights under applicable law relating to patent
exhaustion.
3. Subsidiaries, Former Subsidiaries, and Acquisitions
3.1 Subsidiaries. The parties intend that this Agreement shall extend to all of each party’s Subsidiaries. The parties agree that to the extent
they are not already bound, each party shall ensure that all of its
10
Subsidiaries (including without limitation all entities that become Subsidiaries after the Effective Date (“New Subsidiaries”)) are
bound by the terms of this Agreement. Without limiting the foregoing:
(a) each party shall ensure that each New Subsidiary’s patents, utility models and applications therefor are included within the
definition of the applicable party’s Patents; and
(b) each party shall ensure that each New Subsidiary is bound as applicable, by Sections 2.3, 2.4, and 2.5.
3.2 Former Subsidiaries. All rights and licenses granted and covenants made to any Subsidiary of either party shall immediately and
automatically terminate upon a party ceasing to Control such entity (“Former Subsidiary”). However, if a Subsidiary of a party that
holds any patent or utility model or applications therefor that are subject to the rights and licenses granted or covenants made
hereunder becomes a Former Subsidiary, such rights and licenses granted or covenants made by such Former Subsidiary (including
every successor entity in interest to any such patents or utility models and applications therefor) shall continue in accordance with
the terms of this Agreement after such entity becomes a Former Subsidiary.
3.3 Acquisitions.
(a) Acquired Business [***]. If SK hynix or any of its Subsidiaries completes an Acquisition [***], then SK hynix shall pay
Rambus a fixed quarterly payment (in addition to SK hynix’s Quarterly License Payments or any other Quarterly Acquisition
Adjustment Payments owed under this Section 3.3(a) and/or pursuant to Section 3.3(b) below in connection with such
Acquisition or any other Acquisition) for each calendar quarter remaining in the Term, based on such Acquisition, starting, on
a prorated basis, with the first calendar quarter during which the Acquisition Date occurred, [***]. If iSuppli data as required
for the calculations in this Section 3.3(a) is not available for an Acquired Business or for SK hynix, or the most recent version
of such data covers a period ending more than twelve (12) months before the Acquisition Date, the parties shall initially meet
within thirty (30) days following the associated Acquisition Date and negotiate in good faith an alternate source for the
information that was to be provided by iSuppli. If the parties cannot reach agreement on such alternate source within thirty
(30) days following the date required for such initial meeting, either party may, as its sole and exclusive remedy to resolve
such dispute, submit such dispute to binding arbitration pursuant to the terms of Section 8. For the avoidance of doubt, any
Acquired Business that has revenue attributable from the Sale of Acquisition Products of [***] or less (as reported by iSuppli
for the most recent twelve (12) months preceding the Acquisition Date for which iSuppli has reported such Sales) shall be
licensed without additional payments of any kind.
(b) Acquired Business [***]. If SK hynix or any of its Subsidiaries completes an Acquisition [***], SK hynix shall pay Rambus a
fixed quarterly payment (in addition to SK hynix’s Quarterly License Payments or any other Quarterly Acquisition Adjustment
Payment owed pursuant to Section 3.3(a) above and/or under this Section 3.3(b) in connection with such Acquisition or any
other Acquisition) for each calendar quarter remaining in the Term, based on such Acquisition, starting, on a pro-rated basis
with the first calendar quarter during which the Acquisition Date occurred. [***]. If the Existing Agreement required
payments for less than four (4) quarters prior to the Acquisition Date, the parties shall initially meet within thirty (30) days
following the associated Acquisition Date and negotiate in good faith an alternate method to determine the average quarterly
payments from the Existing Agreement. If the parties cannot reach agreement on such alternate method within thirty (30) days
following the date required for such initial meeting, then either party may, as its sole and
11
exclusive remedy to resolve such dispute, submit such dispute to binding arbitration pursuant to the terms of Section 8.
(c) Attributable Revenue. For purposes of the calculations in this Section 3.3, [***].
(d) Dispute Resolution. If the parties fail to resolve any dispute identified in this Section 3.3 as subject to binding arbitration, then
either party may, as its sole and exclusive remedy, submit such dispute to binding arbitration pursuant to Section 8 and SK
hynix’s obligation to remit its Quarterly Acquisition Adjustment Payment based on such disputed Acquisition pursuant to
Section 5.1(a)(iii) shall be tolled until the earlier of either the final resolution of such arbitration or the parties’ resolution of
such dispute, and in either case within thirty (30) days after such resolution SK hynix will make all payments necessary to
satisfy its payment obligations under this Section 3.3 from the date such obligations accrued.
3.4 No Release. The releases granted and covenants made under Article 4 of the Settlement Agreement shall not apply to any Acquired
Business. None of the rights and licenses granted and covenants made under Section 2 shall apply to any activity of any Acquired
Business unless and until such Acquired Business becomes licensed hereunder in accordance with this Section 3, and in any case,
none of the rights and licenses granted and covenants made under Section 2 shall apply to nor in any way reduce any liability
associated with any activity of any Acquired Business that took place prior to the applicable Acquisition Date, provided that
nothing in this Section 3.4 shall have the effect of negating or nullifying any release or license granted in any Existing Agreement.
Notwithstanding anything to the contrary contained in Section 3.3, for any Acquisition for which SK hynix wishes to acquire a
release of liability for the Acquired Business for infringement of Rambus’ patents and/or utility models that took place prior to the
applicable Acquisition Date, the parties will negotiate such release in good faith and may consider the calculations set forth in
Section 3.3(a) and/or the total past liability for infringing Rambus’ patents and/or utility models incurred by such Acquired
Business.
4. Consideration
4.1 Quarterly License Payment. For each of the first twenty calendar quarters that occur during the Term, beginning with the third
calendar quarter of 2013, SK hynix will pay to Rambus a quarterly license payment of twelve million United States Dollars
(US$12,000,000; each such payment, a “Quarterly License Payment”).
4.2 Quarterly Acquisition Adjustment Payment. To the extent required pursuant to Section 3.3, SK hynix shall pay, for each Acquisition
occurring during the Term, to Rambus a Quarterly Acquisition Adjustment Payment for each of the calendar quarters that occur
between [***].
5. Payments
5.1 Payment Terms.
(a) Timing of Payments.
(i) First Quarterly License Payment. SK hynix shall pay to Rambus the first Quarterly License Payment within ten (10)
United States business days of its receipt (as determined for notices under Section 9.2) of Rambus’ invoice therefor.
Rambus shall invoice SK hynix for such first Quarterly License Payment no earlier than July 1, 2013.
(ii) Subsequent Quarterly License Payments. Starting with the Quarterly License Payment associated with the fourth
calendar quarter of 2013, SK hynix shall pay Rambus each subsequent Quarterly License Payment within ten (10) United
States business days of its receipt (as determined for notices under Section 9.2) of Rambus’ invoice therefor. Rambus
shall invoice SK hynix for each of the nineteen (19) subsequent Quarterly
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License Payments no earlier than thirty (30) days after the first day of the quarter to which each such Quarterly License
Payment relates.
(iii) Quarterly Acquisition Adjustment Payments. SK hynix shall pay Rambus each Quarterly Acquisition Adjustment
Payment within ten (10) United States business days of its receipt (as determined for notices under Section 9.2) of
Rambus’ invoice therefor. Rambus shall invoice SK hynix for each Quarterly Acquisition Adjustment Payment no earlier
than thirty (30) days after the first day of the quarter to which each such Quarterly Acquisition Adjustment Payment
relates, provided that any prorated portion of such payment due in accordance with Section 3.3 above may not be
invoiced by Rambus earlier than thirty (30) days after the first day of the calendar quarter following the respective
Acquisition Date.
(b) Method of Payment. SK hynix’s payments to Rambus of all amounts hereunder shall be made by electronic transfer either
directly to or via the Federal Reserve Bank of San Francisco for credit to the following account or another designated in
writing by Rambus:
Rambus Inc.
[***]
5.2 Currency and Late Payments. All payments to Rambus hereunder shall be in United States Dollars. Late payments hereunder shall be
subject to interest at the 1-year U.S. Government Treasury Constant Maturity Rate, as published by the Federal Reserve
(www.federalreserve.gov) on the date the amount payable was due, plus five percent (5%) (or the maximum interest rate allowed
by applicable law, if lower). The amount of interest shall be calculated from the payment due date to the date of electronic transfer.
5.3 Taxes. If the Korean government imposes any withholding tax on any amounts paid by SK hynix to Rambus hereunder, such tax shall
be borne by Rambus. SK hynix agrees, at its reasonable discretion, to assist Rambus in its efforts to minimize Rambus’ tax liability.
SK hynix shall withhold the amount of any such taxes levied on such payments to Rambus imposed by the Korean government,
shall effect payment of the taxes so withheld to the Korean tax office when due, and SK hynix shall send to Rambus the official
certificate of such payment in a form reasonably sufficient to enable Rambus to support a claim for a foreign tax credit with respect
to any such taxes so withheld.
5.4 No Escrow. Payment of amounts due under this Agreement to any person, firm or entity, other than Rambus, including without
limitation, any escrow fund or escrow agent, unless agreed by Rambus or ordered by any court or government agency of competent
jurisdiction or arbitration panel, shall constitute a material breach of this Agreement by SK hynix. Any payment once made by SK
hynix to Rambus shall not be refunded or refundable to SK hynix for any reason except as may be required pursuant to Section 8.
Notwithstanding the foregoing, in case of clerical error with respect to any payment made hereunder, the parties agree to remedy
any such error through proper payment adjustments.
6. Term & Termination
6.1 Term.
(a) Paid-up Product License. The Paid-Up Product License shall commence on the Effective Date and shall continue in full force
and effect unless and until terminated in accordance with this Section 6.
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(b) Term Product License. The Term Product License shall commence on the Effective Date and shall continue in full force and
effect until the Expiration Date unless earlier terminated in accordance with this Section 6.
(c) Combination Product License. The Combination Product License shall commence on the Effective Date and shall continue in
full force and effect until the Expiration Date unless earlier terminated in accordance with this Section 6. Notwithstanding the
foregoing, the Combination Product License shall continue in full force and effect solely for combinations consisting solely of
two (2) or more Paid-Up Products for so long as the Paid-Up Product License remains in full force and effect.
(d) Foundry Product License. The Foundry Product License shall:
(i) with respect to Foundry Products that are, or contain, products that would constitute Paid-Up Products but for the fact that
such products do not constitute SK hynix Products, commence on the Effective Date and shall continue in full force and
effect unless and until terminated in accordance with this Section 6; and,
(ii) otherwise commence on the Effective Date and shall continue in full force and effect until the Expiration Date unless
earlier terminated in accordance with this Section 6.
(e) Rambus Product Design License. The Rambus Product Design License shall commence on the Effective Date and shall
continue in full force and effect until the Expiration Date unless earlier terminated in accordance with this Section 6.
The parties shall, starting no later than six (6) months prior to the Expiration Date, negotiate in good faith renewal terms, if any, for
the licenses associated with subsections (b)-(e) above.
6.2 Material Breach. A party may terminate this Agreement upon notice if the other party hereto (or any of its Subsidiaries) commits a
material breach of Section 3.3(d) with respect to the exclusive resolution though arbitration of disputes regarding alternate sources
and/or methods pursuant to Section 8 as provided for in such section and does not correct such breach within thirty (30) days after
receiving written notice complaining thereof. In addition, unless it has exercised its option under Section 2.1(b) of the Settlement
Agreement and received timely payment thereunder, Rambus may terminate this Agreement upon notice if SK hynix materially
breaches its payment obligations under this Agreement and does not correct such breach within thirty (30) days after receiving
written notice complaining thereof. Failure of SK hynix to remit any payment due and payable in accordance with the terms of this
Agreement shall constitute a material breach of this Agreement. For the avoidance of doubt, any payments tolled in accordance
with the terms of this Agreement shall not be due and payable during such tolling period.
6.3 Bankruptcy. Either party may terminate this Agreement effective upon written notice to the other party if the other party becomes the
subject of a voluntary or involuntary petition in bankruptcy or any proceeding relating to insolvency, or composition for the benefit
of creditors, if that petition or proceeding is not dismissed within sixty (60) days after filing.
6.4 Change of Control. In addition to the rights set forth in Sections 6.2 and 6.3 above, if prior to the Expiration Date, SK hynix
undergoes a Change of Control, then Rambus may terminate this Agreement effective upon written notice thereof to SK hynix or
the relevant successor in interest.
If Rambus receives written notice of such Change of Control from SK hynix (or its successor in interest) no later than ten (10)
business days after such Change of Control, Rambus agrees to negotiate in good faith with such successor in interest, for a period
of one hundred and eighty (180) days after receipt of such notice, the application of this Agreement to such successor in interest’s
business activities prior to terminating this Agreement based on such Change of Control.
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Rambus’ failure to terminate this Agreement after a given Change of Control by SK hynix (or any successor in interest) shall not in
any way limit Rambus’ right to exercise these rights for any subsequent Change of Control.
Notwithstanding the foregoing, if prior to the Expiration Date or during any renewal term, SK hynix undergoes a Change of Control
pursuant to which another member of the SK Group obtains Control of SK hynix (such member, the “Controlling Member”), then
Rambus shall have no right to terminate this Agreement in accordance with the preceding sentence, but, in the event that such
Controlling Member and/or one or more of its Subsidiaries had revenue from the Sale of Acquisition Products (as defined above)
during the most recent twelve (12) calendar months preceding the date of the Change of Control, then:
(i) SK hynix shall provide written notice of such Change of Control to Rambus;
(ii) this Agreement shall automatically be assigned by SK hynix to such Controlling Member (notwithstanding the provisions
set forth in Section 9.4 below);
(iii) each reference to SK hynix in this Agreement (including those in the definitions) shall, as of the date of such Change of
Control, be deemed to be a reference to such Controlling Member; and,
(iv) such Controlling Member and its Subsidiaries shall be subject to Section 3.3 above as if it (such Controlling Member and
such Subsidiaries, collectively) were an Acquired Business (e.g., a Quarterly Acquisition Adjustment Payment will be
calculated by using the Sale, if any, by such Controlling Member and its Subsidiaries of Acquisition Products during the
twelve (12) calendar months preceding the Acquisition Date).
6.5 Survival. All payment obligations accruing prior to any termination of this Agreement shall survive any such termination. In addition,
the following Sections shall survive and remain in full force and effect after any termination of this Agreement: Section 1
(Definitions), Section 2.3 (Obligations When Transferring Patents), Section 2.6 (Full Force and Effect), 2.7 (No Release, No
Implied or Other Rights and Licenses), Section 3.1 (Subsidiaries), 3.2 (Former Subsidiaries), 3.3(d) (Dispute Resolution), Section
3.4 (No Release), Section 4 (Consideration) and Section 5 (Payments) (in each case with respect to amounts incurred prior to
termination of this Agreement), this Section 6.5 (Survival), Section 7.2 (Confidentiality), Section 8 (Dispute Resolution), and
Section 9 (Miscellaneous).
7. Confidentiality
7.1 Press Release; Additional Obligations. The parties intend to issue a press release as set forth in the Settlement Agreement. The parties
shall perform the obligations set forth in Exhibit A in accordance with the terms and conditions contained therein.
7.2 Confidentiality. Each party agrees that only after the announcement referenced in Section 7.1 above, each party shall be entitled to
disclose the general nature of this Agreement but that the terms and conditions of this Agreement, to the extent not already
disclosed pursuant to Section 7.1 above, shall be treated as Confidential Information and that neither party will disclose such terms
or conditions to any Third Party without the prior written consent of the other party, provided, however, that each party may
disclose the terms and conditions of this Agreement:
(a) as required by any court or other governmental body;
(b) as otherwise required by law;
(c) as otherwise may be required by applicable securities and other law and regulation, including to legal and financial advisors in
their capacity of advising a party in such matters so long as
15
the disclosing party shall seek confidential treatment of such terms and conditions to the extent reasonably possible;
(d) to legal counsel, accountants, and other professional advisors of the parties;
(e) in confidence, to banks, investors and other financing sources and their advisors or to SK Telecom (provided that at the time
of any such disclosure to SK Telecom, SK Telecom owns at least twenty (20) percent of the outstanding voting securities of SK
hynix);
(f) in connection with the enforcement of this Agreement or rights under this Agreement;
(g) during the course of litigation so long as the disclosure of such terms and conditions are restricted in the same manner as is the
confidential information of other litigating parties and so long as (i) the restrictions are embodied in a court-entered protective
order limiting disclosure to outside counsel and (ii) the disclosing party informs the other party in writing at least ten (10)
business days in advance of the disclosure and discusses the nature and contents of the disclosure, in good faith, with the other
party;
(h) in confidence, to a Third Party to whom either party assigns one or more of its Patents, but solely to the extent necessary to
inform such Third Party of the encumbrances contained herein on such Patents;
(i) in confidence, in connection with an actual or prospective merger or acquisition or similar transaction; and,
(j) by Rambus, in confidence, to the outside legal counsel of Elpida Memory, Inc. (“Elpida”) in connection with Rambus’
obligation(s) under any most favored nation, or similar clause, whereby Rambus is contractually obligated to disclose and offer
terms agreed upon herein with SK hynix.
Upon execution of this Agreement, or thereafter, Rambus, in its discretion, shall be entitled to file a copy of this Agreement with the
U.S. Securities and Exchange Commission, so long as Rambus seeks confidential treatment of such agreement to the extent
reasonably possible.
8. Dispute Resolution
Any dispute submitted to binding arbitration pursuant to Section 3.3(d) or as otherwise identified herein as subject to binding
arbitration shall take place in Santa Clara County, California before one arbitrator, and shall be administered by Judicial Arbitration
and Mediation Services, Inc. pursuant to its Streamlined Arbitration Rules and Procedures, except that, if such dispute was submitted
in accordance with Section 3.3(d), each party shall submit to the arbitrator and exchange with each other in advance of the hearing
their last, best alternate sources and/or methods, as applicable, and the arbitrator shall be limited to awarding only one or the other of
the two alternate sources and/or methods, as applicable, submitted. Judgment on such award may be entered in any court having
jurisdiction.
9. Miscellaneous
9.1 Disclaimers. Nothing contained in this Agreement shall be construed as:
(a) a warranty or representation by either party as to the validity, enforceability, and/or scope of any intellectual property rights;
(b) imposing upon either party any obligation to institute any suit or action for infringement of any intellectual property right, or
to defend any suit or action brought by a Third Party which challenges or concerns the validity, enforceability or scope of any
intellectual property rights;
16
(c) imposing on either party any obligation to file any application or registration with respect to any intellectual property rights or
to secure or maintain in force any intellectual property rights;
(d) imposing on either party any obligation to furnish any technical information or know-how; or
(e) imposing or requiring, whether by implication or otherwise, any support, maintenance or any technology deliverable
obligations on either party’s or their respective Subsidiaries’ part under this Agreement (and neither party nor any of their
respective Subsidiaries are providing any support, maintenance or technology deliverables under this Agreement).
9.2 Notices. All notices or other communication required or permitted hereunder shall be in writing and shall be (a) mailed by first class
air mail (registered or certified if available), postage prepaid, or otherwise delivered by hand, by messenger, addressed to the
addresses set forth below, or (b) delivered by facsimile to the facsimile number set forth below. Each Party may change its address
or facsimile number for notices by providing a notice to the other Party in the manner set forth herein. Such notices shall be deemed
to have been effective when delivered or, if delivery is not accomplished by reason of some fault or refusal of the addressee, when
tendered (which tender, in the case of mail, shall be deemed to have occurred upon posting, and in the case of facsimile, shall be
deemed to have occurred upon transmission). All notices shall be in English.
If to SK hynix:
SK hynix Inc.
Kyunghyun Min
Vice President, Head of IP Group
10F, Daechi Tower, 424, Teheran-ro, Gangnam-gu
Seoul, 135-738, Korea
Fax: 82)-31-645-8171
If to Rambus:
Rambus Inc.
Jae Kim
General Counsel
1050 Enterprise Way, Suite 700
Sunnyvale, CA 94089
with a copy, which shall not constitute notice, to the following:
Satish Rishi
Chief Financial Officer
Rambus Inc.
1050 Enterprise Way, Suite 700
Sunnyvale, CA 94089
Telephone: +1-408-462-8000
Facsimile: +1-408-462-8001
9.3 Governing Law & Venue.
(a) This Agreement shall be governed by and construed in accordance with the laws of the State of California, without giving
effect to any choice-of-law or conflict-of-law provision or rule (whether of the State of California or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than the State of California.
17
(b) This Agreement is executed in the English language and no translation shall have any legal effect.
(c) Except for disputes subject to Section 8, any legal action, suit or proceeding arising under, or relating to, this Agreement, shall
be brought in the United States District Court for the Northern District of California or, if such court shall decline to accept
jurisdiction over a particular matter, in the Santa Clara County Superior Court, and each party agrees that any such action, suit
or proceeding may be brought only in such courts. Each party further waives any objection to the laying of jurisdiction and
venue for any such suit, action or proceeding in such courts.
9.4 No Assignment. This Agreement is personal to the parties, and the Agreement and/or any right or obligation hereunder is not
assignable, whether in conjunction with a change in ownership, merger, acquisition, the sale or transfer of all, or substantially all or
any part of either party’s or any of their respective Subsidiaries business or assets or otherwise, voluntarily, by operation of law,
reverse triangular merger or otherwise, without the prior written consent of the other party, which consent may be withheld at the
sole discretion of such other party. Any such purported or attempted assignment or transfer in violation of the foregoing shall be
deemed a breach of this Agreement and shall be null and void. Subject to the foregoing, this Agreement shall be binding upon and
inure to the benefit of the parties and their permitted successors and assigns. Notwithstanding the foregoing, either party shall be
entitled to, and each party hereby agrees to, assign this Agreement to a successor to all or substantially all of a party’s assets in a
transaction entered into solely to change a party’s place of incorporation.
9.5 No Rule of Strict Construction. Regardless of which party may have drafted this Agreement or any part thereof, no rule of strict
construction shall be applied against either party. For the avoidance of doubt “includes”, “including”, “included”, and other
variations of such terms shall be deemed to be followed by the phrase “without limitation”.
9.6 Severability. If any provision of this Agreement is held to be invalid or unenforceable, the meaning of such provision shall be
construed, to the extent feasible, so as to render the provision enforceable, and if no feasible interpretation shall save such
provision, (a) a suitable and equitable provision shall be substituted therefore in order to carry out, so far as may be valid and
enforceable, the intent and purpose of such invalid or unenforceable provision, and (b) the remainder of this Agreement shall
remain in full force and effect.
9.7 Entire Agreement. This Agreement and the Settlement Agreement embody the entire understanding of the parties with respect to the
subject matter hereof, and merges all prior oral or written communications between them, and neither of the parties shall be bound
by any conditions, definitions, warranties, understandings, or representations with respect to the subject matter hereof other than as
expressly provided herein. No oral explanation or oral information by either party hereto shall alter the meaning or interpretation of
this Agreement.
9.8 Modification; Waiver. No modification or amendment to this Agreement, nor any waiver of any rights, will be effective unless
assented to in writing by the party to be charged, and the waiver of any breach or default will not constitute a waiver of any other
right hereunder or any subsequent breach or default.
9.9 Counterparts. This Agreement may be executed in two (2) or more counterparts, all of which, taken together, shall be regarded as one
and the same instrument.
9.10 Bankruptcy Code. All rights, licenses, privileges, releases, and immunities granted under this Agreement shall be deemed to be, for
the purposes of Section 365(n) of the U.S. Bankruptcy Code, as amended (the “Bankruptcy Code”), licenses of rights to
“intellectual property” as defined under
18
Section 101(35A) of the Bankruptcy Code. The parties agree that each of the parties shall retain and may fully exercise all of their
respective rights and elections under the Bankruptcy Code. The parties further agree that, in the event that any proceeding shall be
instituted by or against a party seeking to adjudicate it as bankrupt or insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief or composition of that party or that party’s debts under any law relating to bankruptcy,
insolvency, or reorganization or relief of debtors, or seeking an entry of an order for relief or the appointment of a receiver, trustee
or other similar official for that party or any substantial part of its property or if a party hereto shall take any action to authorize any
of the foregoing actions, the other party shall have the right to retain and enforce their respective rights under this Agreement.
9.11 Non-Controlled Entity. SK hynix hereby represents and warrants that on the Effective Date it is not a Subsidiary of any entity or
person.
9.12 CRI Representation. Rambus represents and warrants that, to the best of its knowledge, SK hynix does not currently infringe or
otherwise need a license under those Patents of CRI that have an effective filing date that are earlier than June 6, 2011.
REMAINDER OF PAGE INTENTIONALLY BLANK; SIGNATURE PAGE FOLLOWS
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed by duly authorized officers or representatives as of
the date first above written.
RAMBUS INC. SK HYNIX INC.
By: /s/ Kevin Donnelly By: /s/ Kyunghyun Min
Name: Kevin Donnelly Name: Kyunghyun Min
Title: SVP Title: VP
Date: June 11, 2013 Date: June 10, 2013
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EXHIBIT A
ADDITIONAL OBLIGATIONS
A “Triggering Agreement” means, for this Exhibit A, an agreement or a series of agreements, in which each agreement in such series of
agreements is fully-executed by the parties within a thirty-day period, entered into between (a) Rambus and/or one or more of its Subsidiaries
and (b) [***] or one of its Subsidiaries pursuant to which Rambus grants [***] and each of its Subsidiaries (collectively, “[***]”) a license,
under the Rambus Patents, to Sell [***], at any time between the Effective Date of this Agreement and the expiration or termination of the
Term Product License contained herein, whether or not such license also covers the Sale of other products and pursuant to which:
(a) in the event that [***] has not, as of the date of the later authorized signature of Rambus or [***] to such agreement or such series
of agreements, [***], the actual average (mean) annual payments due under such agreement or such series of agreements from [***]
(or if such payments are based on a running per unit royalty or percentage of total sales, the projected annual average (mean) amount
that [***] will pay to Rambus) during the first [***] years of such agreement or such series of agreements immediately following the
date of the later authorized signature of Rambus or [***] to such agreement or such series of agreements, irrespective of the term of
such agreement or such series of agreements (such average, the “[***] Only Annual Average Payment”) is less than the multiple of
[***] dollars (USD [***]) and (w/x), where “w” is the total amount of revenue of [***] and each of its Subsidiaries attributable to the
Sale of [***] for the calendar year [***] as reported by iSuppli (USD [***]) and “x” is the total amount of revenue of SK hynix and
each of its Subsidiaries attributable to the Sale of [***] for the calendar year [***] as reported by iSuppli (USD [***]) (such
agreement or such series of agreements, the “[***] Triggering Agreement”; such (w/x) ratio the “[***] Ratio” ([***]%)); or,
(b) in the event that [***] has, as of the date of the later authorized signature of Rambus or [***] to such agreement or such series of
agreements, [***], the actual average (mean) annual payments due under such agreement or such series of agreements from [***] (or
if such payments are based on a running per unit royalty or percentage of total sales, the projected annual average (mean) amount that
[***] will pay to Rambus) during the first [***] years of such agreement or such series of agreements immediately following the date
of the later authorized signature of Rambus or [***] to such agreement or such series of agreements, irrespective of the term of such
agreement or such series of agreements (such average, the “[***] Annual Average Payment”) is less than the multiple of [***] (USD
[***]) and (y/z), where “y” is the total amount of revenue of [***] and each of its Subsidiaries attributable to the Sale of [***] for (i)
a half of calendar year [***] (as determined by halving the total such revenue for such calendar year as reported by Gartner) and (ii)
calendar years [***] through [***] (as reported by iSuppli) (USD [***]) and “z” is the total amount of revenue of SK hynix and each
of its Subsidiaries attributable to the [***] for (i) a half of calendar year [***] (as determined by halving the total such revenue for
such calendar year as reported by Gartner) and (ii) calendar years [***] through [***] (as reported by iSuppli) (USD [***]) (such
agreement or such series of agreements, the “[***] Triggering Agreement”; such (x/z) ratio, the “[***] Ratio” ([***] %)).
If Rambus enters into a Triggering Agreement at any time between the Effective Date of this Agreement and the earlier of the expiration or
the termination of the Term Product License contained herein, Rambus shall, within [***] days after the full execution of the Triggering
Agreement, deliver to SK hynix a draft of an agreement that Rambus believes reasonably and in good faith, includes all terms and conditions
of such Triggering Agreement that are applicable to the Sales of [***] (“Substitute Agreement”), provided that:
(a) the term of such Substitute Agreement shall extend until the expiration date of the Term Product License contained herein; and,
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(b) the Substitute Agreement will contain adjusted quarterly payment obligations as calculated by dividing the [***] Annual Average
Payment by the [***] Ratio (if the Triggering Agreement is a [***] Triggering Agreement) or the [***] Annual Average Payment by
the [***] Ratio (if the Triggering Agreement is a [***] Triggering Agreement).
If the Triggering Agreement contains any [***] agreed to by [***] in connection with the Sale of [***] by [***] during the term of the
Triggering Agreement, and Rambus believes, reasonably and in good faith, that such [***] cannot be fulfilled by SK hynix, Rambus may
provide substitute terms for such [***] [***] for such [***] that Rambus believes, reasonably and in good faith, are [***] in the Triggering
Agreement and/or [***] in the Triggering Agreement.
SK hynix shall have [***] days after receipt of such Substitute Agreement to (i) accept, in writing, such Substitute Agreement and request, in
writing, the signature of the same, in which case the parties shall exchange originally executed signature pages of the Substitute Agreement
within [***] days of such request, or (ii) reject in writing such Substitute Agreement, in which case this Agreement shall remain in full force
and effect in accordance with its terms. Upon SK hynix’s acceptance or rejection of the Substitute Agreement, SK hynix shall no longer have
any right to have its payments restructured (including under most favored customer or similar clauses), even if such restructure provision
exists in the Triggering Agreement on which such Substitute Agreement is based.
Upon the first day of the calendar quarter in which the Substitute Agreement is fully executed, the Substitute Agreement shall become
effective and this Agreement shall automatically and immediately terminate and, except as set forth in Section 6.5, shall be of no further force
or effect, provided that any payments made by SK hynix in accordance with the terms and conditions of this Agreement in such quarter (e.g.,
the scheduled Quarterly License Payment), less any amounts owed or paid by SK hynix in accordance with the terms and conditions of the
Substitute Agreement in such quarter, shall be credited against future amounts due under the Substitute Agreement.
SK hynix agrees that the existence of, and the terms and condition contained in, such Substitute Agreement shall be deemed Rambus
Confidential Information subject to Section 7.2.
[***]
22
Exhibit 10.18
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT IS BOTH NOT
MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY
DISCLOSED. [***] INDICATES THAT INFORMATION HAS BEEN REDACTED.
SETTLEMENT AGREEMENT
THIS SETTLEMENT AGREEMENT (the “Agreement”) is made and entered into as of the 9th day of December, 2013
(the “Effective Date”) by and among Rambus Inc., a Delaware corporation (“Rambus”), on the one hand, and Micron Technology,
Inc., a Delaware corporation, together with its Subsidiaries (as defined in Article 1), Micron Semiconductors Products, Inc., an Idaho
corporation, Micron Semiconductor (Deutschland) GmbH, a corporation organized under the laws of Germany, and Micron
Technology Italia Srl, a corporation organized under the laws of Italy (collectively, “Micron”), on the other hand. Rambus and
Micron may hereinafter be referred to collectively as the “Parties” and individually as a “Party.”
WHEREAS, Micron and its Subsidiaries and Rambus and its Subsidiaries are currently parties to a number of Disputes (as
defined in Article 1) relating to certain products of Micron and certain Rambus Patents (as defined in Article 1), including but not
limited to disputes as to whether claims of such Rambus Patents are infringed by Micron’s products, and disputes relating to the
validity, enforceability and scope of such Rambus Patents, and the Antitrust Litigation (as defined in Article 1);
WHEREAS, the Parties desire to eliminate the risks associated with such litigation and to enter into a comprehensive
resolution to compromise, settle and release the Disputes, and to compromise, resolve and avoid other disputes that may arise after
the Effective Date with respect to Micron's products and the Rambus Patents;
WHEREAS, the Parties acknowledge that in resolving the Disputes, and other disputes that may arise after the Effective
Date, the promises and covenants each will receive under this Agreement and the Patent License Agreement (as defined in Article 1)
represent a package, and are not intended to be severable from each other; in particular (a) Micron is receiving a full and final release
of the claims asserted or that could be or could have been asserted against it in the Disputes and securing a license to certain claims
of the Rambus Patents, in exchange for the Initial Payment and other payments set forth in the Patent License Agreement, and (b)
Rambus is receiving the Initial Payment and other payments set forth in the Patent License Agreement, in exchange for granting
such releases and licenses, as well as other benefits provided for in this Agreement and the Patent License Agreement;
WHEREAS, the Parties acknowledge that it is therefore essential that their respective obligations under this Agreement be
certain and not subject to collateral attack, or otherwise subject to change or modification except on the terms expressly set forth
therein;
WHEREAS, this Agreement is entered into for the purpose of settlement and compromise only,
NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein, and other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged by the Parties, the Parties agree as follows:
Article 1
Definitions
In addition to the terms defined in other parts of this Agreement, the following terms used herein with initial capital letters shall have
the respective meanings specified in this Article 1.
1.1 Affiliate. The term “Affiliate” means, for an identified entity, any other entity that (a) is a Subsidiary of such identified
entity; or (b) Controls or is under common Control of such identified entity, but only so long as such Control exists.
1.2 Agreement. The term “Agreement” has the meaning set forth in the introductory paragraph.
1.3 Antitrust Litigation. The term “Antitrust Litigation” means the matter entitled Rambus Inc. v. Micron Technology Inc. et al.,
No. 04-431105 (Supr. Ct. Cal., San Fran. Filed May 5, 2004) and any appeals therefrom and related proceedings,
including specifically the appeal in Rambus Inc. v Micron Technology, Inc., et al., in the Court of Appeal of the State
of California, First Appellate District, Division Two, Case No. A135150.
1.4 Change of Control. The term “Change of Control” has the meaning set forth in the Patent License Agreement.
1.5 Comprehensive Resolution Agreements. The term “Comprehensive Resolution Agreements” means this Agreement and the
Patent License Agreement.
1.6 Control. The term “Control” has the meaning set forth in the Patent License Agreement.
1.7 Design. The term “Design” has the meaning set forth in the Patent License Agreement.
1.8 Disputes. The term “Disputes” means any and every litigation, lawsuit, or similar proceeding pending between the Parties as
of the Effective Date in any court, governmental body, or agency in any jurisdiction, including the Patent Litigation,
the German Patent Litigation, the Italian Patent Litigation, the Antitrust Litigation, and the Patent Actions, and any and
all disputes related thereto.
1.9 Effective Date. The term “Effective Date” has the meaning set forth in the introductory paragraph.
1.10 Excluded Entity. The term “Excluded Entity” means Broadcom Corporation, LSI Corporation, MediaTek Inc., SK hynix
Inc., SK hynix America Inc., Hynix Semiconductor Manufacturing America Inc., SK hynix U.K. Ltd., SK hynix
Deutschland, GmbH, Nanya Technology Corporation, Nanya Technology Corporation U.S.A., NVIDIA Corporation,
Samsung Electronics Co., Ltd., Samsung Electronics America, Inc., Samsung Semiconductor, Inc., Samsung Austin
Semiconductor, L.P., STMicroelectronics N.V., STMicroelectronics Inc. and any other Third Party (including the
Affiliates of such Third Party) that is an adverse party to Rambus or its Subsidiaries in any lawsuit, litigation or other
similar proceedings pending as of the Effective Date.
1.11 German Patent Litigation. The term "German Patent Litigation" means (a) the infringement action based on the German
part of EP 0 525 068 and based on the German utility model DE 19 17 296.9 filed by Rambus Inc. against Micron
Semiconductor (Germany) GmbH at the District Court Mannheim/Germany (Court docket 7 O 451/00) on
August 31, 2000, which claim has been withdrawn on June 18, 2004 and April 28, 2006, respectively, (b) the
infringement action based on the German part of EP 1 022 642, filed by Rambus Inc. against Micron Semiconductor
(Deutschland) GmbH at the District Court Mannheim/Deutschland (Court docket 7 O 452/01) on August 9, 2001,
which proceedings are stayed (decision dated July 29, 2002), and (c) the infringement suit based on the German part of
EP 1 022 642 filed by Rambus Inc. against Micron Technology at the Administrative Court Karlsruhe/Deutschland
(Court docket 6 K 2021/01), which proceedings have been continued with the District Court Mannheim/Germany
(Court docket 7 O 131/02) and stayed (decision dated July 26, 2002) (the “value in dispute” for such decision has
preliminarily been fixed to EUR 2.500.000 (decision dated March 3, 2003)).
1.12 Initial Payment. The term “Initial Payment” has the meaning set forth in the Patent License Agreement.
1.13 Italian Patent Litigation. The term "Italian Patent Litigation" means the matters entitled (a) Micron Technology Inc. and
Micron Technology Italia Srl v. Rambus Inc., Docket nos. 33560/01 and 61500/09, District Court of Milan (J. Bichi),
and (b) Micron Technology Inc. and Micron Technology Italia Srl v. Rambus Inc., Docket no. 18700/2011, Supreme
Court.
1.14 Licensed Product. The term “Licensed Product” has the meaning set forth in the Patent License Agreement.
1.15 Micron. The term “Micron” has the meaning set forth in the introductory paragraph.
1.16 Micron Patents. The term “Micron Patents” has the meaning set forth in the Patent License Agreement.
1.17 Micron Product. The term “Micron Product” has the meaning set forth in the Patent License Agreement.
1.18 Party. The terms “Party” and “Parties” have the meanings set forth in the introductory paragraph.
1.19 Patent Actions. The term “Patent Actions” means all United States Patent and Trademark Office, all European Patent
Office and all other governmental reexamination proceedings, oppositions, actions or challenges filed, requested or
supported by Micron with respect to any Rambus Patents, and any appeals thereof, as of the Effective Date, including
without limitation all such reexaminations and/or oppositions of U.S. Patent, European Patent and or other
governmental Patent numbers.
1.20 Patent License Agreement. The term “Patent License Agreement” has the meaning set forth in Article 2.
1.21 Patent Litigation. The term “Patent Litigation” means the matters entitled Micron Technology, Inc. v. Rambus Inc., No. 00-
792 (D. Del. Filed Aug. 28, 2000) and Rambus Inc. v. Micron Technology, Inc., et al., No. C-06-00244 (N.D. Cal.
Filed Jan. 13, 2006), and any appeals therefrom and related proceedings, including specifically the appeal in Micron
Technology, Inc. v. Rambus, Inc., Federal Circuit No. 13-1294 (“Delaware Appeal”).
1.22 Patents. The term “Patents” has the meaning set forth in the Patent License Agreement.
1.23 Rambus. The term “Rambus” has the meaning set forth in the introductory paragraph.
1.24 Rambus Patents. The term “Rambus Patents” has the meaning set forth in the Patent License Agreement.
1.25 Rambus Leadership Products. The term “Rambus Leadership Products” has the meaning set forth in the Patent License
Agreement.
1.26 [***]
1.27 Subsidiary. The term “Subsidiary” has the meaning set forth in the Patent License Agreement.
1.28 Third Party. The term “Third Party” means with respect to a specified Party, or any Subsidiary of such specified Party, any
entity that is not the specified Party or an Affiliate or Subsidiary of such specified Party.
Article 2
Patent License Agreement
Concurrent with the execution and delivery of this Agreement, and as an integral part of the overall consideration received by the
Parties in respect of their respective releases, covenants not to sue, and other obligations under this Agreement, Rambus and Micron
shall enter into the Patent License Agreement in the form attached hereto as Exhibit A (the “Patent License Agreement”).
Article 3
Releases
Subject to the delivery of the Initial Payment in accordance with the Patent License Agreement, and the execution and delivery of
the Patent License Agreement in accordance with Article 2 (for the avoidance of doubt, none of the Parties’ releases, covenants not
to sue, or other obligations under this Article 3 shall be effective until Rambus has received the full amount of the Initial Payment in
accordance with the Patent License Agreement and the execution and delivery of the Patent License Agreement in accordance with
Article 2):
3.1 Release by Rambus.
Effective upon Rambus’ receipt of the Initial Payment as set forth in the Patent License Agreement, Rambus, on behalf
of itself and its Subsidiaries, and its and their respective
former and current agents, representatives, directors, officers, employees, predecessors, successors, and attorneys
(collectively, “Rambus Group”) hereby irrevocably releases, acquits, and forever discharges Micron, its Subsidiaries,
its and their respective former and current agents, representatives, directors, officers, employees, predecessors,
successors, and attorneys (collectively, “Micron Group”) from any and all claims, counterclaims, defenses, demands,
damages, debts, liabilities, accounts, actions and causes of action of any kind, [***], including but not limited to (i) any
and all claims of any kind for infringement of the Rambus Patents arising from the manufacture, use, importation,
exportation, sale or offer for sale of any products up until the Effective Date and (ii) any and all claims that were
alleged or could have been alleged by Rambus Group in any Disputes.
3.2 Release by Micron.
Effective upon Rambus’ receipt of the Initial Payment as set forth in the Patent License Agreement, Micron, on behalf
of Micron Group, hereby irrevocably releases, acquits, and forever discharges Rambus Group from any and all claims,
counterclaims, defenses, demands, damages, debts, liabilities, accounts, actions and causes of action of any kind,
known or unknown, suspected or unsuspected, that arise or arose from or relate in any way to any act of Rambus
Group prior to the Effective Date, where such act gives or gave rise to a cause of action that Micron Group had
standing to assert against Rambus Group, or against any other Person as to whom Rambus Group was then obliged by
written agreement to indemnify, including but not limited to (i) any and all claims of any kind for infringement of the
Micron Patents arising from the manufacture, use, importation, exportation, sale or offer for sale of any Design up until
the Effective Date and (ii) any and all claims that were alleged or could have been alleged by Micron Group in any
Disputes.
3.3 Releases Shall Remain Effective. Each of Rambus and Micron acknowledges that, after entering into this Agreement, they
may discover facts different from, or in addition to, those they now believe to be true with respect to the conduct of the
other Party. Each of Rambus and Micron intends that the releases and discharges set forth in this Article 3 shall be, and
shall remain, in effect in all respects as written, notwithstanding the discovery of any different or additional facts.
3.4 Waiver of California Civil Code § 1542. In connection with the releases and discharges described in this Article 3, each of
Rambus and Micron acknowledges that it is aware of the provisions of section 1542 of the Civil Code of the State of
California, and hereby expressly waives and relinquishes all rights and benefits that it has or may have had under that
section (or any equivalent law or rule of any other jurisdiction), which reads as follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING
THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY
AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.
3.5 [***]
Rambus, on behalf of itself and its Subsidiaries, hereby covenants not to assert any claims of infringement of the
Rambus Patents against Micron’s distributors and customers or against Micron’s Subsidiaries’ distributors and
customers solely arising from the use, importation, sale or offer for sale up until the Effective Date of any Micron
Products.
3.6 Certain Exclusions. For the avoidance of doubt:
(a) The releases and covenants not to sue contained in this Article 3 shall apply solely to (i) the activities occurring
prior to the Effective Date of each of the Parties, (ii) the activities occurring prior to the Effective Date of each of
the Parties’ respective Subsidiaries existing on or prior to the Effective Date [***]. In no event shall the releases
and covenants not to sue contained in this Article 3 apply to the activities, whether occurring prior to or after the
Effective Date, of (1) any Third Party with or into which a Party merges or combines, whether or not such Party
remains the surviving entity, or (2) any Third Party and/or portion of the assets of any business of a Third Party
that may be acquired by a Party, through merger (including reverse triangular merger), acquisition of stock,
acquisition of assets or otherwise, in each case, after the Effective Date.
(b) The releases and covenants not to sue contained in this Article 3 are not intended to and do not extend to any
Excluded Entity.
3.7 Dismissals and Other Provisions Terminating the Disputes.
(a) [***], Micron and Rambus, through their respective counsel, shall take all necessary and permissible actions to
obtain dismissal with prejudice of all claims, counterclaims, cross-claims and cross-complaints asserted against
one another and/or one another’s Subsidiaries in the Patent Litigation and the Antitrust Litigation and the
withdrawal or dismissal with prejudice of all appeals therefrom. Such dismissals are final and not appealable.
(b) [***]. Both Parties shall, [***], withdraw or discontinue any formal or informal complaints, requests, petitions,
actions, or other proceedings they may have pending against the other Party or its Subsidiaries before any court or
regulatory body anywhere in the world related to the claims, counterclaims, demands, damages, debts, liabilities,
accounts, actions and causes of action released by this Agreement or that relate in any way to the Rambus Patents
or the Micron Patents. For the avoidance of doubt, this provision (i) requires Micron to withdraw and discontinue
the German Patent Litigation, (ii) requires the Parties, through their respective counsel, to withdraw the Italian
Patent Litigation by executing, delivering and submitting such documents as may be necessary to dismiss those
cases, and (iii) does not require Rambus to withdraw any complaint or other proceeding as against parties other
than Micron or its Subsidiaries.
(c) [***], Micron shall, to the full extent permitted by applicable law, withdraw, cease to prosecute or pursue and
notify the U.S. Patent and Trademark Office, the
European Patent Office, and/or other applicable governmental agency, that it no longer intends to participate in, the
Patent Actions.
(d) The Parties and their counsel shall cooperate in good faith to effect the dismissals and withdrawals required by
Sections 3.7(a), (b), and (c) herein.
3.8 Costs and Attorneys’ Fees. For any and all cases, lawsuits, proceedings, Disputes and Patent Actions, including but not
limited to the Patent Litigation, German Patent Litigation, the Italian Patent Litigation and the Antitrust Litigation, the
Parties agree that each will pay its own costs and attorneys’ fees and that neither will file requests for costs or fees or
otherwise seek to recover its fees and/or costs. Without limiting the foregoing, Micron shall not seek to recover any
costs previously awarded to it in the Antitrust Litigation. Any bills of costs, judgments or other requests previously
filed or awarded in such cases that have not yet been paid including without limitation the judgment for costs awarded
to Micron in the Antitrust Litigation shall be withdrawn or vacated.
3.9 No Admission. Nothing contained in any of the Comprehensive Resolution Agreements, or done or omitted in connection
with any of the Comprehensive Resolution Agreements, is intended as, or shall be construed as, an admission by any
Party of any fault, liability or wrongdoing.
3.10 No Further Actions. During the Initial Term-Product License Period (as defined in the Patent License Agreement) and each
Term-Product License Renewal Period (as defined in the Patent License Agreement) , if any, and as part of the
settlement of claims and releases contemplated by this Agreement, during the term of the Patent License Agreement,
and in each case unless and to the extent required by court order, summons, subpoena or judicial or regulatory agency
order or rule:
(a) Micron covenants not to bring, or aid, assist or participate in, any action or proceeding challenging or contesting
the assertion, enforcement, validity or enforceability of, or any use or infringement by any Third Party of, the
Rambus Patents, including but not limited to filing, requesting, participating or assisting in any of the Patent
Actions, provided that, notwithstanding the foregoing, Micron may assist (e.g., provide prior art and/or non-
infringement analyses to) each Third Party to whom Micron has distributed or sold a Micron Product before the
Effective Date or a Licensed Product during the term of the license associated with such Licensed Product as set
forth in the Patent License Agreement, in its defense of any claim of a Rambus Patent asserted against such Third
Party by Rambus to the extent that Micron is obligated to provide such Third Party with such assistance pursuant
to an indemnification provision;
(b) [***]; and
(c) Each Party covenants not to (i) file or bring a complaint against, or formally or informally request or urge
investigation of, the other Party or any of its Subsidiaries before any regulatory body, or (ii) support, cooperate
with or otherwise assist any Third Party in any dispute against the other Party or any of its Subsidiaries, or any
regulatory body in any proceeding involving the other Party or any of its
Subsidiaries, in each case in any matter related to the claims, counterclaims, defenses, demands, damages, debts,
liabilities, accounts, actions and causes of action released by this Agreement, including but not limited to filing,
requesting, participating or assisting in any United States, European, or other patent office reexamination
proceedings, actions, challenges, oppositions or interferences with respect to Patents of the other Party or any of its
Subsidiaries, and filing amicus curiae briefs in the Patent Litigation, the Antitrust Litigation, or any other Dispute.
Article 4
Warranties
Each Party represents, warrants and covenants, on behalf of itself and its Subsidiaries, to the other Party during the term of this
Agreement:
4.1 Due Incorporation. Such Party is duly incorporated, validly existing and in good standing under the laws of its jurisdiction of
formation with the requisite corporate authority to own and use its properties and assets and to carry on its business as
currently conducted.
4.2 Due Authorization; Enforceability. Such Party has the requisite corporate or other authority to enter into, and to grant the
releases and discharges, make the covenants, and consummate the transactions contemplated by, this Agreement, on
behalf of itself and its Subsidiaries, and otherwise to carry out its and its Subsidiaries’ obligations hereunder. The
execution, delivery and performance of this Agreement by such Party and its Subsidiaries has been duly authorized by
all necessary action of such Party and its Subsidiaries, and no other act or proceeding on the part of or on behalf of
such Party and its Subsidiaries is necessary to approve the execution and delivery of this Agreement, the performance
by such Party and its Subsidiaries of their obligations hereunder and the consummation of the transactions
contemplated hereby. This Agreement has been duly executed and delivered by such Party and constitutes a legal,
valid and binding obligation of such Party, enforceable against such Party in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and similar laws relating to or
affecting creditors generally, by general equity principles or by limitations on indemnification pursuant to public
policy.
4.3 No Conflicts; No Consents. The execution, delivery and performance of this Agreement by such Party and its Subsidiaries,
including but not limited to the granting of the releases and discharges contemplated hereby, will not infringe any law,
regulation, judgment or order applicable to such Party and its Subsidiaries and is not and will not be contrary to the
provisions of the constitutional documents of such Party and its Subsidiaries and will not (with or without notice, lapse
of time or both) result in any breach of the terms of, or constitute a default under, any instrument or agreement to
which such Party and its Subsidiaries is a party or by which it or its property is bound. All consents and approvals of
any court, government agencies or other regulatory body required by such Party and its Subsidiaries for the execution,
delivery and performance of the terms of this Agreement have been obtained and are in full force and effect.
4.4 No Assignment of Claims. Each Party represents and warrants that it has not assigned, transferred or granted to any Third
Party any rights or interests with respect to any claim or cause of action, or any right(s) underlying any claim or cause
of action, it had, has, or may have against the other or its Subsidiaries as of, or prior to, the Effective Date of this
Agreement.
4.5 Micron Electronics, Inc. Micron represents and warrants that Micron Electronics, Inc. is not a Subsidiary of Micron.
Article 5
Notices and other Communications
5.1 All notices or other communication required or permitted hereunder shall be in writing and shall be (a) mailed by first class
air mail (registered or certified if available), postage prepaid, or otherwise delivered by hand, by messenger, addressed
to the addresses set forth below, or (b) delivered by facsimile to the facsimile number set forth below. Each Party may
change its address or facsimile number for notices by providing a notice to the other Party in the manner set forth
herein. Such notices shall be deemed to have been effective when delivered or, if delivery is not accomplished by
reason of some fault or refusal of the addressee, when tendered (which tender, in the case of mail, shall be deemed to
have occurred upon posting, and in the case of facsimile, shall be deemed to have occurred upon transmission). All
notices shall be in English.
If to Micron:
Micron Technology, Inc.
8000 S. Federal Way
Boise, Idaho 83716-9632
Telephone: 208-368-4500
Facsimile: 208-368-4540
Attention: General Counsel
If to Rambus:
Rambus Inc.
1050 Enterprise Way, Suite 700
Sunnyvale, CA 94089
Telephone: 408-462-8000
Facsimile: 408-462-8001
Attention: General Counsel
(with a copy, which shall not constitute notice, to the following:)
Satish Rishi
Chief Financial Officer
Rambus Inc.
4440 El Camino Real
Los Altos, CA 94022
Telephone: 408-462-8000
Facsimile: 408-462-8001
Article 6
Successors and Assigns
6.1 Subject to the limitation in Section 3.6 and 8.5, this Agreement shall be binding upon and inure to the benefit of the Parties
hereto and their respective heirs, successors and assigns, and upon any corporation, limited liability partnership,
limited liability company, or other entity into or with which any Party hereto may merge, combine or consolidate. For
the avoidance of doubt, this provision does not govern the rights or obligations of successors or assigns of the Parties
under the Patent License Agreement. The releases, dismissals and covenants granted by each Party and its Subsidiaries
under this Agreement (but not any benefits received by such Party or its Subsidiaries under this Agreement) shall run
with (a) in the case of Micron, the Micron Patents or (b) in the case of Rambus, the Rambus Patents, and remain in full
force and effect regardless of any subsequent assignment, sale or other transfer of any such Micron Patents or Rambus
Patents or any rights or interests therein. Any such assignment, sale, or transfer of rights in contravention of the
foregoing shall be null and void ab initio and of no force or effect.
Article 7
Dispute Resolution
7.1 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware,
without giving effect to any choice-of-law or conflict-of-law provision or rule (whether of the State of Delaware or any
other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware.
7.2 English Language. This Agreement is executed in the English language and no translation shall have any legal effect.
7.3 Jurisdiction and Venue. Any legal action, suit or proceeding arising under, or relating to, this Agreement, shall be brought in
State or Federal Courts located in the State of Delaware, and each Party agrees that any such action, suit or proceeding
may be brought only in such courts. Each Party further waives any objection to the laying of jurisdiction and venue for
any such suit, action or proceeding in such courts.
Article 8
Miscellaneous
8.1 Entire Agreement. This Agreement and the Patent License Agreement embody the entire understanding of the Parties with
respect to the subject matter hereof, and merges all prior oral or written communications between them, and neither of
the Parties shall be bound by any conditions, definitions, warranties, understandings, or representations with respect to
the subject matter hereof other than as expressly provided herein.
8.2 Relationship of the Parties. Nothing contained in this Agreement or the Patent License Agreement shall be construed as
creating any association, partnership, joint venture or the relation of principal and agent between Rambus and Micron.
Each Party is acting as an independent contractor, and no Party shall have the authority to bind any other Party or its
representatives in any way.
8.3 Headings and Recitals. The headings of the several articles and sections are inserted for convenience of reference only and
are not intended to be a part of or to affect the meaning or interpretation of this Agreement. The recitals to this
Agreement are intended to be a part of and affect the meaning and interpretation of this Agreement.
8.4 Modification; Waiver. No modification or amendment to this Agreement, nor any waiver of any rights, will be effective
unless assented to in writing by the Party to be charged, and the waiver of any breach or default will not constitute a
waiver of any other right hereunder or any subsequent breach or default.
8.5 No Assignment. This Agreement is personal to the Parties, and the Agreement and/or any right or obligation hereunder is not
assignable, whether in conjunction with a change in ownership, merger, acquisition, the sale or transfer of all, or
substantially all or any part of either Party’s or any of their respective Subsidiaries’ business or assets or otherwise,
voluntarily, by operation of law, reverse triangular merger or otherwise, without the prior written consent of the other
Party, which consent may be withheld at the sole discretion of such other Party. Each Party understands that, as a
condition to such consent, the other Party may require it to convey, assign or otherwise transfer its rights and
obligations under the other Comprehensive Resolution Agreements to the entity assuming such Party’s rights and
obligations under this Agreement. Any such purported or attempted assignment or transfer in violation of the foregoing
shall be deemed a breach of this Agreement and shall be null and void. Notwithstanding the foregoing, either Party
shall be entitled to, and each Party hereby agrees to, assign this Agreement to a successor to all or substantially all of a
Party’s assets in a transaction entered into solely to change a Party’s place of incorporation.
8.6 Interpretation. Each Party confirms that it and its respective counsel have reviewed, negotiated and adopted this Agreement
as the agreement and understanding of the Parties hereto and the language used in this Agreement shall be deemed to
be the language chosen by the Parties hereto to express their mutual intent. Regardless of which Party may have
drafted this Agreement or any part thereof, no rule of strict construction shall be applied against either Party. For the
avoidance of doubt “includes”, “including”, “included”, and other variations of such terms shall be deemed to be
followed by the phrase “without limitation”.
8.7 No Third Party Beneficiaries. Unless otherwise expressly stated herein, nothing in this Agreement, express or implied, is
intended to confer upon any person other than the Parties hereto or their respective permitted assignees, successors in
interest, and Subsidiaries any rights or remedies under or by reason of this Agreement. The former and current agents,
representatives, directors, officers, employees, and attorneys of the Parties and their Subsidiaries are intended
beneficiaries of Sections 0, 0, 0, 3.4, and 3.5.
8.8 Severability. If any provision of any Comprehensive Resolution Agreement is held to be invalid or unenforceable, the
meaning of such provision shall be construed, to the extent feasible, so as to render the provision enforceable and to
effectuate the intent and purpose of the Parties with respect to such invalid or unenforceable provision, and if no
feasible interpretation shall save such provision, (a) a suitable and equitable provision shall be substituted therefor in
order to effectuate, so far as may be valid and enforceable, the intent and purpose of the Parties with respect to such
invalid or unenforceable provision, and (b) the remainder of such Comprehensive Resolution Agreement shall remain
in full force and effect.
8.9 Counterparts; Facsimile Transmission. This Agreement may be executed in two (2) or more counterparts, all of which, taken
together, shall be regarded as one and the same instrument. Each Party may rely on facsimile or .pdf signature pages as
if such facsimile or .pdf pages were originals.
8.10 Bankruptcy Code. All rights, licenses, privileges, releases, and immunities granted under this Agreement shall be deemed
to be, for the purposes of Section 365(n) of the U.S. Bankruptcy Code, as amended (the “Bankruptcy Code”), licenses
of rights to “intellectual property” as defined under Section 101(35A) of the Bankruptcy Code. The Parties agree that
each of the Parties shall retain and may fully exercise all of their respective rights and elections under the Bankruptcy
Code. [***].
8.11 Further Actions. Each of the Parties hereto agrees to take and cause its Subsidiaries to take any and all actions reasonably
necessary in order to effectuate the intent, and to carry out the provisions, of this Agreement.
8.12 Public Disclosures and Confidentiality. The Parties shall issue a press release with respect to the Comprehensive
Resolution Agreement in a mutually acceptable form. Each Party agrees that, after the issuance of such press release,
each Party shall be entitled to disclose the general scope and nature of this Agreement, but that the terms and
conditions of this Agreement, to the extent not already disclosed pursuant to such press release, shall be treated as
confidential information and that neither Party will disclose such terms or conditions to any Third Party without the
prior written consent of the other Party, provided, however, that each Party may disclose the terms and conditions of
this Agreement:
(a) as required by any court or other governmental body;
(b) as otherwise required by law;
(c) as otherwise may be required by applicable securities and other law and regulation, including to legal and
financial advisors in their capacity of advising a party in such matters, so long as the disclosing Party shall seek
confidential treatment of such terms and conditions to the extent reasonably possible;
(d) to legal counsel, accountants, and other professional advisors of the Parties;
(e) in confidence, to banks, investors and other financing sources and their advisors;
(f) in connection with the enforcement of this Agreement or rights under this Agreement;
(g) during the course of litigation so long as the disclosure of such terms and conditions are restricted in the same
manner as is the confidential information of other litigating parties and so long as (i) the restrictions are
embodied in a court-entered protective order limiting disclosure to outside counsel and (ii) the disclosing party
informs the other party in writing at least ten (10) business days in advance of the disclosure and discusses the
nature and contents of the disclosure, in good faith, with the other party (for purposes of this provision, the
Protective Order entered in the Antitrust Litigation is acceptable, as long as the disclosure is designated as both
"Highly Confidential-BP and Highly Confidential-IP");
(h) in confidence, in connection with an actual or prospective merger or acquisition or similar transaction; or
(i) in confidence, in connection with a Party’s obligation(s) under any most favored nation, or similar clause,
whereby such Party is contractually obligated to disclose and offer terms given to Third Parties.
In addition, upon execution of this Agreement, or thereafter, Rambus, in its discretion, shall be entitled to file a copy of this
Agreement with the U.S. Securities and Exchange Commission, so long as Rambus seeks confidential treatment of such
agreement to the extent reasonably possible. In addition, [***].
IN WITNESS WHEREOF, this Agreement has been duly and executed and delivered by the duly authorized officers of the Parties
hereto as of the date first written above.
RAMBUS INC.
By:
Name:
/s/ Kevin Donnelly
Kevin Donnelly
MICRON TECHNOLOGY, INC.
By:
Name:
/s/ Brian M. Shirley
Brian M. Shirley
MICRON SEMICONDUCTOR PRODUCTS, INC.
By:
Name:
/s/ Thomas L. Laws Jr.
Thomas L. Laws Jr.
MICRON TECHNOLOGY ITALIA, SRL
/s/ Thomas L. Laws Jr.
By:
Name:
Thomas L. Laws Jr.
MICRON SEMICONDUCTOR (DEUTSCHLAND) GMBH
By:
/s/ Thomas L. Laws Jr.
Name:
Thomas L. Laws Jr.
EXHIBIT A
PATENT LICENSE AGREEMENT
SEMICONDUCTOR PATENT LICENSE AGREEMENT
Incorporated by reference to Exhibit 10.16 to the Annual Report on Form 10-K for the fiscal year ended
December 31, 2013
Exhibit 10.19
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT IS BOTH NOT
MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY
DISCLOSED. [***] INDICATES THAT INFORMATION HAS BEEN REDACTED.
SEMICONDUCTOR PATENT LICENSE AGREEMENT
This SEMICONDUCTOR PATENT LICENSE AGREEMENT (“Agreement”) is effective as of December 1, 2013 (“Effective Date”) by and
between Rambus Inc., a corporation duly organized and existing under the laws of Delaware, U.S.A., having its principal place of business at
1050 Enterprise Way, Suite #700, Sunnyvale, California 94089, U.S.A., (hereinafter “Rambus”) and Micron Technology, Inc., a corporation
duly organized and existing under the laws of Delaware, U.S.A., having its principal place of business at 8000 S. Federal Way, Boise, Idaho
83716, U.S.A., (hereinafter “Micron”). Micron and Rambus shall be referred to herein individually as a Party, and collectively as the Parties.
WHEREAS, Rambus and Micron are currently parties to a number of disputes, including, but not limited to, the Antitrust Litigation and
disputes relating to Rambus Patents;
WHEREAS, the Parties recognize that litigation of such disputes is inherently uncertain, and is subject to certain risks and to various
possible outcomes, some of which may be more favorable to Rambus, and some of which may be more favorable to Micron;
WHEREAS, concurrent with the execution and delivery of this Agreement, the Parties have entered into a Settlement Agreement (the
“Settlement Agreement”) to eliminate the risks associated with such litigation and to enter into a comprehensive resolution to compromise,
settle and release certain existing claims and disputes between them, and to resolve and avoid other disputes that may arise after the Effective
Date;
WHEREAS, as part of such comprehensive resolution, the Parties have agreed to enter into this Agreement; and,
WHEREAS, because this Agreement is part of such comprehensive resolution, the Parties acknowledge that it is essential that their
respective obligations under this Agreement be certain and not subject to collateral attack, or otherwise subject to change or modification
except on the terms expressly set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and premises contained herein, and other valuable consideration, the
receipt and sufficiency of which is hereby acknowledged by the Parties, the Parties, on behalf of themselves and of each of their respective
Subsidiaries, agree as follows:
1. Definitions
1.1 “Acquired Business” means (a) a Third Party, (b) substantially all of the business or assets of a Third Party, (c) any business unit and/or
product line of a Third Party, or (d) substantially all of the business and assets used by a Third Party in connection with a Qualified
Product Line, that either Party or any of its Subsidiaries acquires in an Acquisition.
1.2 “Acquisition” means, as to a Party, a transaction or a series of related transactions in which such Party acquires, through merger
(including reverse triangular merger), acquisition of stock, acquisition of assets or otherwise, (i) the Control of a Third Party, (ii)
ownership of substantially all of the assets or business of a Third Party, (iii) ownership of any business unit and/or product line of a Third
Party, or (iv) ownership of substantially all of the business and assets used by a Third Party in connection with a Qualified Product Line.
1.3 “Acquisition Date” means the closing date of any Acquisition.
1.4 “Acquisition Products” means DRAMs, DRAM Controllers, SerDes ICs, Resistive RAMs, and RAM Flash Memories.
1.5 “Affiliate” means, for an identified entity, any other entity that (a) is a Subsidiary of such identified entity or (b) Controls or is under
common Control with such identified entity, but only for so long as such Control exists.
1.6 “Antitrust Litigation” means the matter entitled Rambus Inc. v. Micron Technology Inc., No. 04-431105 (Sup. Ct. Cal., San Fran. Filed
May 5, 2004).
1.7 “Change of Control” as applied to any specified entity means a transaction or a series of related transactions in which (a) a Third Party or
Related Parties who did not previously Control such entity obtain(s) Control of such entity, or (b) such entity merges with or transfers
substantially all of its assets to a Third Party and the shareholders of such entity immediately before the transaction or series of related
transactions own less than a fifty percent (50%) interest in the acquiring or surviving entity immediately after the transaction or series of
related transactions.
1.8 “Component” means any product comprised of one or more Integrated Circuits physically connected, stacked, or attached to a unitary
substrate, directly, or through supporting material such as silicon interposers, or the like, or other Integrated Circuit where all other
elements of such product operate primarily to provide physical support, packaging and/or connectivity with respect to such Integrated
Circuits. Examples of Components include DIMMs, SIMMs and other modules, and cards, multi-chip packages (MCP), system-on-chip,
system-in-package, system-on-insulator, solid state storage devices, and other form factors.
1.9 “Control” (including “Controlled” and other forms) of an entity means (a) beneficial ownership (whether directly or indirectly through
entities or other means) of more than fifty percent (50%) of the outstanding voting securities of that entity or (b) in the case of an entity
that has no outstanding voting securities, having (whether directly or indirectly) more than fifty percent (50%) of the power to direct the
management and control of such entity.
1.10 “CRI” means Cryptography Research, Inc., a Subsidiary of Rambus.
1.11 “CRI Patents” means Patents of CRI or its Subsidiaries.
1.12 “Custom Memory IC” means each Memory IC that substantially implements the minimum set of features, parameters, and protocols
defined in a Technical Specification developed by Micron for a specific customer, by such specific customer, or jointly by Micron and
such specific customer, in each case where such Memory IC is Sold by Micron or a Subsidiary of Micron as a Micron Product solely to
such customer.
1.13 “DDR DRAM” means each double data rate DRAM that (a) substantially implements the minimum set of features, parameters, and
protocols defined in any Technical Specification published by JEDEC as of the Effective Date, as well as any JEDEC Minor Updates
thereto, for DDR DRAM, (b) contains features enabling communication with any other Integrated Circuit in accordance with substantially
all of the mandatory requirements in such Technical Specification, and (c) is not Sold or specified as being capable of operating (i) at a
data transfer rate exceeding [***] or (ii) with data bit width other than x4, x8, x16, and/or x32.
1.14 “DDR Mobile RAM” means each low-power DDR DRAM.
1.15 “DDR2 DRAM” means each double data rate DRAM that (a) substantially implements the minimum set of features, parameters, and
protocols defined in any Technical Specification published by JEDEC as of the Effective Date, as well as any JEDEC Minor Updates
thereto, for DDR2 DRAM, (b) contains features enabling communication with any other Integrated Circuit in accordance with
substantially all of the mandatory requirements in such Technical Specification, and (c) is not Sold or specified as being
capable of operating (i) at a data transfer rate exceeding [***] or (ii) with data bit width other than x4, x8, x16 and/or x32.
1.16 “DDR2 Mobile RAM” means each low-power DDR2 DRAM.
1.17 “DDR3 DRAM” means each double data rate DRAM that (a) substantially implements the minimum set of features, parameters, and
protocols defined in any Technical Specification published by JEDEC as of the Effective Date, as well as any JEDEC Minor Updates
thereto, for DDR3 DRAM, (b) contains features enabling communication with any other Integrated Circuit in accordance with
substantially all of the mandatory requirements in such Technical Specification, and (c) is not Sold or specified as being capable of
operating (i) at a data transfer rate exceeding [***] or (ii) with data bit width other than x4, x8, x16 and/or x32.
1.18 “DDR4 DRAM” means each double data rate DRAM that (a) substantially implements the minimum set of features, parameters, and
protocols defined in any Technical Specification published by JEDEC as of the Effective Date, as well as any JEDEC Minor Updates
thereto, for DDR4 DRAM, (b) is solely capable of communicating with any other Integrated Circuit in accordance with substantially all of
the mandatory requirements in such Technical Specification, and (c) is not Sold or specified as being capable of operating (i) at a data
transfer rate exceeding [***] or (ii) with data bit width other than x4, x8, x16 and/or x32.
1.19 “Design” means any human or machine readable representation of a design, such as a circuit layout in a drawing or a register transfer
level description (RTL) file, for any product.
1.20 “DRAM” means a random-access Memory IC which requires periodic refresh for the maintenance of the bits stored within its memory
cells at least every ten (10) seconds, and which does not guarantee said bits to be retained within the memory cells when they cease to
receive electrical power. The term “DRAM” shall not include RAM Flash Memory or Resistive RAM.
1.21 “DRAM Controller” means any Integrated Circuit having circuitry integrated thereon or contained therein that is capable through an
Interface of transmitting and/or receiving data from a DRAM.
1.22 “Effective Date” has the meaning assigned in the first paragraph of this Agreement.
1.23 “Elpida” means Elpida Memory, Inc., a Subsidiary of Micron, and also known as Micron Memory Japan, Inc.
1.24 “Elpida Patent License Agreement” means that certain Memory Products Patent License Agreement entered into by and between
Rambus and Elpida as of January 1, 2010, as amended by that certain Amendment No. 1 to Memory Products Patent License Agreement
dated August 12, 2012 and that certain Amendment No. 2 to Memory Products Patent License Agreement dated September 14, 2013.
1.25 “Elpida Technology License Agreement” means that certain Direct Rambus DRAM Semiconductor Technology License Agreement
entered into by and between Rambus and Elpida as of the later of (a) May 26, 2006 or (b) the date upon which Elpida became an Ultimate
Parent Entity (as such term is defined in such agreement) and provided Rambus with written notice thereof in accordance with Section 9.3
of such agreement.
1.26 “Elpida XDR License Agreement” means that certain Yellowstone DRAM Semiconductor Technology License Agreement entered into
by and between Rambus and Elpida effective as of March 18, 2003.
1.27 “Existing Rambus Agreement” has the meaning assigned in Section 5.2(b).
1.28 “Expiration Date” means the seventh (7 ) anniversary of the Effective Date.
th
1.29 “Former Subsidiary” has the meaning assigned to it in Section 4.2.
1.30 “GDDR DRAM” means each graphics double date rate DRAM that (a) substantially implements the minimum set of features,
parameters, and protocols defined in any Technical Specification published by JEDEC as of the Effective Date, as well as any JEDEC
Minor Updates thereto, for GDDR DRAM, (b) contains features enabling communication with any other Integrated Circuit in accordance
with substantially all of the mandatory requirements in such Technical Specification, and (c) is not Sold or specified as being capable of
operating (i) at a data transfer rate exceeding [***] or (ii) with data bit width other than x16 and x32.
1.31 “GDDR2 DRAM” means each graphics double date rate DRAM that (a) substantially implements the minimum set of features,
parameters, and protocols defined in any Technical Specification published by JEDEC as of the Effective Date, as well as any JEDEC
Minor Updates thereto, for GDDR2 DRAM, (b) contains features enabling communication with any other Integrated Circuit in accordance
with substantially all of the mandatory requirements in such Technical Specification, and (c) is not Sold or specified as being capable of
operating (i) at a data transfer rate exceeding [***] or (ii) with data bit width other than x16 and x32.
1.32 “GDDR3 DRAM” means each graphics double date rate DRAM that (a) substantially implements the minimum set of features,
parameters, and protocols defined in any Technical Specification published by JEDEC as of the Effective Date, as well as any JEDEC
Minor Updates thereto, for GDDR3 DRAM, (b) contains features enabling communication with any other Integrated Circuit in accordance
with substantially all of the mandatory requirements in such Technical Specification, and (c) is not Sold or specified as being capable of
operating (i) at a data transfer rate exceeding [***] or (ii) with data bit width other than x16 and x32.
1.33 “GDDR4 DRAM” means each graphics double data rate DRAM that (a) substantially implements the minimum set of features,
parameters, and protocols defined in any Technical Specification published by JEDEC as of the Effective Date, as well as any JEDEC
Minor Updates thereto, for GDDR4 DRAM, (b) is solely capable of communicating with any other Integrated Circuit in accordance with
substantially all of the mandatory requirements in such Technical Specification, and (c) is not Sold or specified as being capable of
operating (i) at a data transfer rate exceeding [***] or (ii) with data bit width other than x16 and x32.
1.34 “GDDR5 DRAM” means each graphics double data rate DRAM that (a) substantially implements those interface features, parameters,
and protocols in the same manner in all material respects as the DRAM Sold by Micron or its Subsidiaries on or before the Effective Date
as “GDDR5 DRAM” or implements the minimum set of features, parameters, and protocols defined in any Technical Specification
published by JEDEC as of the Effective Date, as well as any JEDEC Minor Updates thereto, for GDDR5 DRAM, (b) contains features
enabling communication with any other Integrated Circuit either, prior to the publication of such Technical Specification, through the
protocol contained in such DRAM Sold by Micron or its Subsidiaries on or before the Effective Date as “GDDR5 DRAM” or, after the
publication of such Technical Specification, in accordance with substantially all of the mandatory requirements in such Technical
Specification, and (c) is not Sold or specified as being capable of operating (i) at a data transfer rate exceeding [***] or (ii) with a data bit
width other than x16 and x32.
1.35 “Hybrid Memory Cube 1.X DRAM” means each DRAM that (a) substantially implements the minimum set of features, parameters, and
protocols defined in any Technical Specification published by the Hybrid Memory Cube Consortium as HMC Specification 1.X, (b)
contains features enabling communication with any other Integrated Circuit in accordance with substantially all of the mandatory
requirements in such Technical Specification, and (c) is not Sold or specified as being capable of operating at a data transfer rate
exceeding [***].
1.36 “Hybrid Memory Cube 2.X DRAM” means each DRAM that (a) substantially implements the minimum set of features, parameters, and
protocols defined or recommended in any Technical
Specification published by the Hybrid Memory Cube Consortium as HMC Specification 2.X, (b) contains features enabling
communication with any other Integrated Circuit in accordance with substantially all of the mandatory requirements in such Technical
Specification, and (c) is not Sold or specified as being capable of operating at a data transfer rate exceeding [***].
1.37 “IMFT” means IM Flash Technologies, LLC, a Micron Joint Venture that is jointly owned by Micron and Intel Corporation.
1.38 “Indirect Infringement” means any form of patent infringement where the accused infringer is not directly infringing the subject patent
right(s), but who contributes to or induces the direct infringement of the subject patent right(s) by a Third Party by, for example (without
limitation), and with knowledge of the subject patent right(s) alleged to be infringed, supplying designs, parts or instructions to the Third
Party that enable such Third Party to infringe directly the subject patent right(s).
1.39 “Industry Standards Setting Body” means any industry standards setting organization (e.g., a collection of companies that cooperate,
under contract or applicable law, in the drafting and publication of a Technical Specification that is intended, if implemented, to increase
the compatibility between various products), including, but not limited to, JEDEC and the Hybrid Memory Cube Consortium, that
publishes for industry adoption one or more Technical Specifications that define a minimum set of features, parameters and protocols for
one or more Interfaces for Memory ICs.
1.40 “Initial Paid-Up Product” means each Micron Product that is an SDR DRAM, DDR DRAM, DDR2 DRAM, DDR3 DRAM, GDDR
DRAM, GDDR2 DRAM, GDDR3 DRAM, GDDR4 DRAM, GDDR5 DRAM, LPSDR DRAM, LPDDR DRAM, LPDDR2 DRAM,
LPDDR3 DRAM, RLDRAM, DDR Mobile RAM, DDR2 Mobile RAM, Wide I/O Mobile DRAM, and Hybrid Memory Cube 1.X
DRAM. Notwithstanding the foregoing sentence, any product that constitutes a Rambus Leadership Product shall be deemed not to be an
Initial Paid-Up Product.
1.41 “Initial Paid-Up Product License” means the rights and licenses granted pursuant to Section 2.1(b).
1.42 “Initial Payment” has the meaning assigned to it in Section 5.1(a).
1.43 “Initial Term-Product License Period” means the period of time that starts on the Effective Date and ends on the earlier of (a) the
Expiration Date or (b) the date, if any, on which the Term-Product License is terminated.
1.44 “Initial Term-Product License Renewal Period” has the meaning assigned to it in Section 7.1(d).
1.45 “Inotera” means Inotera Memories, Inc. (華亞科技股份有限公司), a company incorporated under the laws of the Republic of China.
1.46 “Integrated Circuit” means a single, discrete integrated circuit chip, whether in wafer, singulated die or packaged die form. For clarity,
the term “Integrated Circuit” specifically excludes any substrate on which or to which such integrated circuit chip in packaged form may
be physically attached.
1.47 “Interface” means an electrical, optical, RF, mechanical, or software data path that is capable of conveying information between two or
more (a) Integrated Circuits or (b) portions of an Integrated Circuit, in each case together with the set of protocols defining the electrical,
physical, timing and/or functional characteristics, sequences and/or control procedures of such data path.
1.48 “JEDEC” means the JEDEC Solid State Technology Association, originally known as the Joint Electron Device Engineering Council, a
non-stock corporation organized and existing under the laws of the Commonwealth of Virginia. The term “JEDEC” shall include any
Industry Standards Setting Body that displaces or replaces JEDEC as the entity primarily responsible for the publication of Technical
Specifications formerly published by JEDEC with respect to any Memory IC or any other product.
1.49 “JEDEC Minor Update” means a Technical Specification published by JEDEC that (a) updates or revises any Technical Specification
that was published by JEDEC as of the Effective Date, (b) corrects,
clarifies, or enhances such previously published Technical Specification without adding any significant new features or functionality to
such Technical Specification, and (c) in no way reduces interoperability between and among any versions of such Technical Specification
(e.g., JEDEC’s LPDDR3-E Technical Specification is a JEDEC Minor Update to JEDEC’s LPDDR3 Technical Specification.)
1.50 “[***] Acquisition Products” has the meaning assigned to it in Section 5.2(b).
1.51 “Licensed Product” means, individually, a given Term Product, a given Initial Paid-Up Product, or a given Subsequent Paid-Up Product;
“Licensed Products” means, collectively, each Term Product, each Initial Paid-Up Product, and each Subsequent Paid-Up Product.
1.52 “LPDDR DRAM” means each low-power double data rate DRAM that (a) substantially implements the minimum set of features,
parameters, and protocols defined in any Technical Specification published by JEDEC as of the Effective Date, as well as any JEDEC
Minor Updates thereto, for LPDDR DRAM, (b) contains features enabling communication with any other Integrated Circuit in accordance
with substantially all of the mandatory requirements in such Technical Specification, and (c) is not Sold or specified as being capable of
operating (i) at a data transfer rate exceeding [***] or (ii) with data bit width other than x8, x16 and/or x32.
1.53 “LPDDR2 DRAM” means each low-power double data rate DRAM that (a) substantially implements the minimum set of features,
parameters, and protocols defined in any Technical Specification published by JEDEC as of the Effective Date, as well as any JEDEC
Minor Updates thereto, for LPDDR2 DRAM, (b) contains features enabling communication with any other Integrated Circuit in
accordance with substantially all of the mandatory requirements in such Technical Specification, and (c) is not Sold or specified as being
capable of operating (i) at a data transfer rate exceeding [***] or (ii) with data bit width other than x8, x16 and/or x32.
1.54 “LPDDR3 DRAM” means each low-power double data rate DRAM that (a) substantially implements the minimum set of features,
parameters, and protocols defined in any Technical Specification published by JEDEC as of the Effective Date, as well as any JEDEC
Minor Updates thereto, for LPDDR3 DRAM, (b) contains features enabling communication with any other Integrated Circuit in
accordance with substantially all of the mandatory requirements in such Technical Specification, and (c) is not Sold or specified as being
capable of operating (i) at a data transfer rate exceeding [***] or (ii) with data bit width other than x8, x16 and/or x32.
1.55 “LPDDR4 DRAM” means each low-power double data rate DRAM that (a) substantially implements the minimum set of features,
parameters, and protocols defined in any Technical Specification published by JEDEC as of the Effective Date, as well as any JEDEC
Minor Updates thereto, for LPDDR4 DRAM, (b) contains features enabling communication with any other Integrated Circuit in
accordance with substantially all of the mandatory requirements in such Technical Specification, and (c) is not Sold or specified as being
capable of operating (i) at a data transfer rate exceeding [***] or (ii) with data bit width other than x8, x16 and/or x32.
1.56 “LPSDR DRAM” means each low-power SDR DRAM.
1.57 “Memory IC” means any Integrated Circuit that is configured to store bits of data in memory cells within a memory array and that has as
its primary purpose the storage and retrieval of such electronic data. For clarity, a Memory IC shall include any logic functions on such
Integrated Circuit necessary for such storage and retrieval.
1.58 “Memory Module” means a Component that has as its primary purpose the storage and retrieval of electronic data.
1.59 “Micron Applicable Patent Claims” are defined and determined separately for each specific product. For each such product, a Micron
Applicable Patent Claim means each claim of a Micron Patent that, absent a license, is [***] infringed by the making (including having
made), use, Sale, offer for Sale or
importation of such product, in each case, on a stand-alone basis and not in combination with any other circuits, products or components.
1.60 “Micron JV Partner” means any Third Party(ies) with whom Micron or a Micron Subsidiary owns a joint venture entity that is directly or
indirectly at least twenty-five percent (25%) owned by Micron or by a Micron Subsidiary, and whereby such joint venture entity is subject
to one or more joint venture agreements by and among the joint venture entity, Micron, and at least one of the other such Third Party(ies)
setting forth the ongoing governance and operating relationships regarding such joint venture entity.
1.61 “Micron Joint Venture” means any entity owned by Micron or by a Subsidiary of Micron, in combination with one or more Micron JV
Partners.
1.62 “Micron Patents” means Patents of Micron and Patents of its Subsidiaries.
1.63 “Micron Product” means any product Sold by Micron or by a Micron Subsidiary under a Micron Trademark, and for which Micron or
any of its Subsidiaries either:
(a) owns or co-owns the entire design of such product and are free to set the price and other terms with respect to such product and not
subject to limitation on how it may use and exploit such design except for field of use limitations agreed at arms-length with one or
more JV Partners; or,
(b) owns, or co-owns, only a portion of the entire design of such product with no limitations on how it may use and exploit such portion
and where, with respect to the remaining portion(s) of such design, (i) Micron or any of its Subsidiaries has a license from the entity or
entities that own(s) such remaining portion(s) of the design to (A) make (and/or have made) such remaining portion(s) as embodied in
such product and (B) Sell such made (or have made) remaining portion(s) as embodied in such product without restriction as to whom
Micron and/or its Subsidiaries may Sell such remaining portion(s) as embodied in such product and (ii) Micron and/or its Subsidiaries
are free to set the price and other terms with respect to such remaining portion(s) as embodied in such product; or,
(c) has a license from the entity or entities that own(s) the entire design of such product to (i) make (and/or have made) such product and
(ii) Sell such made (or have made) product without restriction as to whom Micron and/or its Subsidiaries may Sell such product and
Micron and/or its Subsidiaries are free to set the price and other terms with respect to such product.
[***]
1.64 “Micron Trademark” means a trademark, trade name, logo or other indicia of origin of Micron or Micron Subsidiaries.
1.65 “Net Sales” means, for a given Quarter and for one or more given products, the gross amount received in such Quarter from Third
Parties by Micron and/or by one or more of its Subsidiaries for the Sale of such products anywhere in the world by Micron and/or its
Subsidiaries, less (a) amounts credited in such Quarter for returns of such products by Third Parties to Micron and (b) insurance, handling,
duty, freight and taxes where such items are separately invoiced to and paid for by a Third Party. Where a product is transferred by Micron
through one or more Subsidiaries for Sale to a Third Party, Net Sales shall be calculated only on the Sale to such Third Party, except as
otherwise provided herein.
1.66 “New Subsidiaries” has the meaning assigned to it in Section 4.1.
1.67 “Patents” means, with respect to an identified entity, patents and utility models and applications therefor, including, without limitation,
all continuations, continuations-in-part and divisionals thereof, in all countries of the world that now or hereafter are (a) owned or
controlled by such entity and/or one or more of its Subsidiaries and/or (b) otherwise licensable by such entity and/or one or more of its
Subsidiaries, in each case of (a) and (b) where such entity and/or one or more of its Subsidiaries have the right to grant the licenses,
sublicenses or other rights and covenants of the scope granted herein.
1.68 “Qualified Product Line” means a portion of a business transferred by a Third Party to a Party in an Acquisition, [***]
1.69 “Quarter” shall mean each successive period of three consecutive calendar months (the first of which begins on the Effective Date).
1.70 “Quarterly Payment” has the meaning ascribed to such term in Section 5.1(b).
1.71 “Quarterly Payment Cap” has the meaning assigned to it in Section 5.1(b).
1.72 “Quarterly Payment Cap Increase” has the meaning assigned to it in Section 5.2(a).
1.73 “RAM Flash Memory” means a Memory IC that (a) stores bits of data in memory cells by storing charges within a transistor, (b) is
capable of retaining, for more than 10 seconds, data stored in such memory cells when they cease to receive electrical power, (c) has an
Interface which is capable of transferring data in a synchronous fashion relative to both the rising and falling edges of a timing signal, such
as a clock or strobe, and (d) has an Interface over which commands, operation codes, and addresses are transferred primarily by one or
more buses that are separate from the data bus.
1.74 “Rambus Applicable Patent Claims” are defined and determined separately for each specific product. For each such product, a Rambus
Applicable Patent Claim means each claim of a Rambus Patent that, absent a license, is [***] infringed by the making (including having
made), use, Sale, offer for Sale or importation of such product, in each case, on a stand-alone basis and not in combination with any other
circuits, products or components.
®
1.75 “Rambus Leadership Product” means (a) any Design of RDRAM , XDR , XDR 2 and/or Mobile XDR , (b) any other Design that
implements a Rambus Proprietary Specification, and (c) any Rambus Proprietary Specification, including, without limitation, the
Technical Specifications for RDRAM , XDR , XDR 2 and/or Mobile XDR . For clarity, the term “Rambus Leadership Product”
specifically excludes any physical embodiment of such Design, including any Integrated Circuit or device.
TM
TM
TM
TM
TM
TM
®
1.76 “Rambus Patents” means Patents of Rambus and its Subsidiaries, in each case other than the CRI Patents.
1.77 “Rambus Proprietary Specification” means any Technical Specification that is first designed and developed (as demonstrated by
customary means, including, but not limited to, engineering notebooks) by, or on behalf of, Rambus or any of its Subsidiaries, over which
Rambus and/or any of its Subsidiaries has exclusive control and that neither Rambus nor any of its Subsidiaries has voluntarily (a)
disclosed except under a confidentiality or non-disclosure agreement or (b) proposed or disclosed to any standards setting organization. In
addition to the foregoing sentence, Rambus Proprietary Specification also includes any Technical Specification exclusively acquired by
Rambus from a Third Party where such Technical Specification would otherwise meet the definition of a Rambus Proprietary
Specification had Rambus, and not the relevant Third Party, been the original developer and owner of such Technical Specification.
Notwithstanding the above, a Technical Specification developed independently of Rambus by or on behalf of Micron, by an Industry
Standards Setting Body, or by one or more Third Parties, shall not be deemed to be a Rambus Proprietary Specification, even if it
describes similar or identical functions. A Technical Specification shall not be deemed to be developed independently of Rambus for
purposes of the preceding sentence to the extent such Technical Specification, or any portion thereof, was developed or derived based on
information (i) which Micron, such Industry Standards Setting Body, or such one or more Third Parties received in confidence from
Rambus and with respect to which Micron, any of its Subsidiaries, such Industry Standards Setting Body, or such one or more Third
Parties, is bound by an obligation of confidentiality or non-use to
Rambus; (ii) obtained from any other Third Party in violation of such Third Party’s obligation of confidentiality or non-use to Rambus; or
(iii) obtained by Micron, any of its Subsidiaries or any other Third Party based on reverse engineering of any product that instantiates a
Rambus Proprietary Specification.
1.78 “Related Parties” means two or more entities (a) who are Affiliates of one another or (b) who, through contract, arrangement or
agreement, are bound or have otherwise agreed to exercise their aggregate beneficial ownership, rights and/or contractual power under any
of the circumstances as described under Section 1.7 with respect to any subject entity in order to Control such subject entity.
1.79 “Released Design” means each Design subject to the releases as provided for under Section 3.2 of the Settlement Agreement.
1.80 “Released Product” means each product subject to the releases as provided for under Section 3.1 of the Settlement Agreement.
1.81 “Resistive RAM” means a Memory IC that is capable of storing bits of data in memory cells by changing the resistance of a storage
element, other than a transistor, and is capable of retaining, for more than 10 seconds, data stored in such memory cells when they cease to
receive electrical power. Resistive RAM shall not include RAM Flash Memory or DRAM.
1.82 “RLDRAM” means each reduced-latency DRAM that is incapable of communicating with any DDR4 DRAM, LPDDR3 DRAM,
LPDDR4 DRAM, Wide I/O 2.X DRAM, Wide I/O Mobile DRAM, Hybrid Memory Cube 1.X DRAM, Hybrid Memory Cube 2.X
DRAM, and/or any other DRAM and that (a) is configured to support a read/write addressing mode that does not distinguish row and
column addresses, (b) is configured to use a simplified command set that omits activate/precharge commands, and (c) is not Sold or
specified as being capable of operating at a data transfer rate exceeding [***].
1.83 “SDR DRAM” means each single data rate DRAM that (a) implements the minimum set of features, parameters, and protocols defined
or recommended in any Technical Specification published by JEDEC as of the Effective Date, as well as any JEDEC Minor Updates
thereto, for SDR DRAM, (b) is solely capable of communicating with any other Integrated Circuit in accordance with substantially all of
the mandatory requirements in such Technical Specification, and (c) is not Sold or specified as being capable of operating (i) at a data
transfer rate exceeding [***] or (ii) with data bit width other than x4, x8, x16 and/or x32.
1.84 “Sell” (including “Sale” and “Sold” and other forms) means to sell, lease, or otherwise transfer or dispose of a product, by a Party to a
Third Party or by a Subsidiary of a Party to a Third Party.
1.85 “SerDes IC” means any Integrated Circuit having circuitry integrated thereon or contained therein that is configured to (a) de-serialize
data received by such Integrated Circuit from a different Integrated Circuit and/or (b) serialize data originating on such Integrated Circuit
prior to transmitting such data to a different Integrated Circuit. Notwithstanding the foregoing, any Memory IC shall be deemed not to be a
SerDes IC.
1.86 “Settlement Agreement” has the meaning assigned in the recitals to this Agreement.
1.87 “Subsequent Paid-Up Product” means:
(a) for the Initial Term-Product License Period, [***]; and,
(b) for each Term-Product License Renewal Period, [***].
Notwithstanding the foregoing, any product that constitutes a Rambus Leadership Product shall be deemed not to be a Subsequent Paid-
Up Product.
1.88 “Subsequent Paid-Up Product License” means the rights and licenses granted pursuant to Section 2.1(c).
1.89 “Subsequent Term-Product License Renewal Period” has the meaning assigned to it in Section 7.1(d).
1.90 “Subsidiary” means, with respect to an identified entity, any entity Controlled by such identified entity, but only for so long as such
Control exists.
1.91 “Technical Specification” means a final specification for an optical, RF, electrical, mechanical or software product that describes
substantially all of the characteristics of such product necessary for such product to operate. As an example, the written description of an
electrical interface (including timing and signaling parameters and characteristics) for a data bus connecting two (2) Integrated Circuits
would meet the definition of a Technical Specification, provided that such interface specified all of the signals necessary for such data bus
to function.
1.92 “Term Product” means each Micron Product that is either an Integrated Circuit (including each Micron Product that is a Memory IC) or
a Component (including each Micron Product that is a Memory Module), but that is neither an Initial Paid-Up Product nor a Subsequent
Paid-Up Product. Notwithstanding the foregoing sentence, any product that constitutes a Rambus Leadership Product shall be deemed not
to be a Term Product.
1.93 “Term-Product License” means the rights and licenses granted under Section 2.1(a).
1.94 “Term-Product License Renewal Period” means, generically, the Initial Term-Product License Renewal Period and each Subsequent
Term-Product License Renewal Period.
1.95 “Third Party” means with respect to a specified Party, or any Subsidiary of such specified Party, any entity that is not the specified Party
or a Subsidiary of such specified Party.
1.96 “Ultimate Parent” means with respect to an identified entity, any entity that Controls such identified entity and where such Controlling
entity is not under the Control of any other entity.
1.97 “[***] Acquisition Products” has the meaning assigned to it in Section 5.2(a)(ii).
1.98 “Wide I/O Mobile DRAM” means each single data rate DRAM that (a) substantially implements the minimum set of features,
parameters, and protocols defined in any Technical Specification published by JEDEC as of the Effective Date, as well as any JEDEC
Minor Updates thereto, for WIDE I/O SINGLE DATA RATE (WIDE I/O SDR), (b) contains features enabling communication with any
other Integrated Circuit in accordance with substantially all of the mandatory requirements in such Technical Specification, and (c) is not
Sold or specified as being capable of operating at a data transfer rate exceeding [***].
1.99 “Wide I/O 2.X DRAM” means each single data rate DRAM that (a) substantially implements the minimum set of features, parameters,
and protocols defined in any Technical Specification published by JEDEC as of the Effective Date, as well as any JEDEC Minor Updates
thereto, for WIDE I/O DOUBLE DATA RATE (WIDE I/O DDR-TBC), (b) contains features enabling communication with any other
Integrated Circuit in accordance with substantially all of the mandatory requirements in such Technical Specification, and (c) is not Sold
or specified as being capable of operating at a data transfer rate exceeding [***].
2. Grant of Rights
2.1 License to Micron.
(a) Term-Product License. Subject to the terms and conditions of this Agreement, Rambus, on behalf of itself and its Subsidiaries,
hereby grants to Micron and, subject to Section 5.2 below, its Subsidiaries, for each product that falls within the definition of a Term
Product, a non-exclusive, non-transferable, worldwide license, without the right to sublicense, solely under the Rambus Applicable
Patent Claims applicable to such Term Product, to make (including have made), use, Sell, offer for Sale, transfer from Micron and its
Subsidiaries to their Affiliates, and import such
Term Product until the expiration or termination of this license pursuant to Section 7.1(a) below, provided that such license:
(i) is expressly conditioned upon Rambus’ receipt of the Initial Payment in accordance with Section 6.2 below or during the cure period
set forth in Section 7.2 below; and,
(ii) shall be renewable in accordance with Section 7.1(d) below.
(b) Initial Paid-Up Product License. Subject to the terms and conditions of this Agreement, Rambus, on behalf of itself and its
Subsidiaries, hereby grants to Micron and, subject to Section 5.2 below, its Subsidiaries, for each product that falls within the definition
of an Initial Paid-Up Product, a non-exclusive, non-transferable, worldwide license, without the right to sublicense, solely under the
Rambus Applicable Patent Claims applicable to such Initial Paid-Up Product, to make (including have made), use, Sell, offer for Sale,
transfer from Micron and its Subsidiaries to their Affiliates, and import such Initial Paid-Up Product until the termination of this license
pursuant to Section 7.1(b) below, provided that such license, is expressly conditioned upon Rambus’ receipt, in accordance with
Section 6.2 below or during the cure period set forth in Section 7.2 below, of (i) the Initial Payment and (ii) each Quarterly Payment
that becomes due on or before the Expiration Date.
(c) Subsequent Paid-Up Product License. Subject to the terms and conditions of this Agreement, Rambus, on behalf of itself and its
Subsidiaries, hereby grants to Micron and, subject to Section 5.2 below, its Subsidiaries, for each product that falls within the definition
of a Subsequent Paid-Up Product, a non-exclusive, non-transferable, worldwide license, without the right to sublicense, solely under
the Rambus Applicable Patent Claims applicable to such Subsequent Paid-Up Product, to make (including have made), use, Sell, offer
for Sale, transfer from Micron and its Subsidiaries to their Affiliates, and import such Subsequent Paid-Up Product until the expiration
or termination of this license pursuant to Section 7.1(c), provided that such license, in its entirety and with respect to such Subsequent
Paid-Up Product, is expressly conditioned upon Rambus’ receipt, in accordance with Section 6.2 below or during the cure period set
forth in Section 7.2 below, of (i) the Initial Payment and (ii) each Quarterly Payment that becomes due on or before the date of the
expiration of the Term-Product License Renewal Period that immediately follows the Qualifying Term-Product License Renewal
Period for such Subsequent Paid-Up Product.
2.2 License to Rambus. Subject to the terms and conditions of this Agreement, Micron, on behalf of itself and its Subsidiaries, hereby grants
to Rambus and its Subsidiaries a non-exclusive, non-transferable, worldwide license, without the right to sublicense, solely under the
associated Micron Applicable Patent Claims to make (including have made), use, Sell, offer for Sale and import Rambus Leadership
Products during the Initial Term-Product License Period and each Term-Product License Renewal Period (if any).
2.3 Obligations When Transferring Patents. Each Party agrees that it shall take all actions reasonably necessary to ensure that any Third Party
to whom any Patents containing one or more claims that are licensed hereunder are transferred, assigned or exclusively licensed or any
right to enforce is granted (including any successor or assignee in interest thereto) is bound in writing to all covenants, licenses and other
rights granted hereunder with respect to such transferred, assigned or exclusively licensed Patents.
2.4 Previously Divested Rambus Patents].
(a) Rambus, on behalf of itself and its Subsidiaries, represents and warrants that Exhibit A sets forth all patents and patent applications
that have been assigned, between [***] and the Effective Date, to one or more Third Parties by Rambus and its Subsidiaries.
(b) Rambus, on behalf of itself and its Subsidiaries, represents and warrants that:
(i) [***]; and,
(ii) such assignment is subject to the following covenant:
(A) [***]; and,
(B) [***]
[***]
2.5 CRI Representation [***]. Rambus represents and warrants that, to the best of its knowledge, Micron does not currently infringe or
otherwise need a license under those Patents of CRI that have an effective filing date earlier than the Effective Date. [***]
2.6 No Implied or Other Rights and Licenses.
(a) The rights and licenses granted herein apply solely to those products and activities expressly provided for under this Agreement.
Nothing in this Agreement shall be deemed to, and shall not be construed to, constitute any release, forbearance, forfeiture or other
waiver of any rights of either Party or their respective Subsidiaries to enforce any of their respective intellectual property rights with
respect to any activities undertaken by the other Party, its Subsidiaries, and/or any other Third Party to the extent not expressly granted
or made hereunder.
(b) Except as expressly provided for under this Agreement, no authorization, release, license, covenant or other right is granted or made,
by implication, estoppel, acquiescence or otherwise under this Agreement, to either Party, its respective Subsidiaries, and/or any other
Third Party under any patents, utility models, patent or utility model claims, or other intellectual property rights now or hereafter
owned or controlled by either Party or their respective Subsidiaries.
(c) Except as expressly provided for under this Agreement, none of the terms of this Agreement shall be deemed to, and shall not be
construed to, constitute, whether by implication, estoppel, acquiescence or otherwise, (i) an authorization by either Party, its
Subsidiaries, and/or any Third Party to Sell, offer for Sale and/or import any product (A) in or for combination with any other element
(including, but not limited to any function or feature), product or instrumentality; or (B) unconditionally for use in or for combination
with any other element (including, but not limited to any function or feature), product or instrumentality or (ii) a waiver by either Party
or its Subsidiaries of any liability for infringement based on the other Party’s, its respective Subsidiaries, and/or any other Third Party’s
making, use, Sale, offer for Sale and/or import of any product in combination with any other element (including, but not limited to, any
function or feature), product or instrumentality.
3. [***] and Covenants
3.1 Rambus [***] and Covenants.
(a) [***]. Provided that and for so long as Micron and its Subsidiaries are not in breach of either this Agreement or the Settlement
Agreement, and subject to Sections 3.4, 3.5, and 3.6 below, Rambus, for itself and on behalf of its Subsidiaries, agrees that [***].
(b) [***]. Provided that and for so long as Micron and its Subsidiaries are not in breach of either this Agreement or the Settlement
Agreement, and subject to Sections 3.4, 3.5, and 3.6 below, Rambus, for itself and on behalf of its Subsidiaries, agrees that, [***].
(c) Covenants [***].
(i) Components. Provided that and for so long as Micron and its Subsidiaries are not in breach of either this Agreement or the
Settlement Agreement and subject to subsection (iii) below and Sections 3.4, 3.5, and 3.6 below, Rambus, on behalf of itself and its
Subsidiaries, covenants, that [***].
(ii) [***]. Provided that and for so long as Micron and its Subsidiaries are not in breach of either this Agreement or the Settlement
Agreement and subject to subsection (iii) below and Sections 3.4, 3.5, and 3.6 below, Rambus, on behalf of itself and its
Subsidiaries, covenants that [***].
(iii) Conditions on Covenants. The foregoing covenants are personal and cannot be assigned, transferred or delegated to any Third
Party (except as otherwise set forth in Section 9.5 below). For the avoidance of doubt, the foregoing covenants are not and shall not
be construed to be (A) an authorization by Rambus for any Third Party, including any Third Party customers of Micron or of any of
its Subsidiaries, [***] (B) a covenant by Rambus that [***].
(d) Benefits Not Transferable. The benefits under Sections 3.1(a), 3.1(b), and 3.1(b) above are personal and cannot be assigned,
transferred, or delegated by Micron to any Third Party.
3.2 Micron [***].
(a) Designs and Released Designs. Provided that Rambus and its Subsidiaries are not in breach of either this Agreement or the
Settlement Agreement, and subject to Sections 3.4, 3.5, and 3.6 below, Micron, for itself and on behalf of its Subsidiaries, agrees that
[***].
(b) Other Rambus Designs. Provided that Rambus and its Subsidiaries are not in breach of either this Agreement or the Settlement
Agreement, and subject to Sections 3.4, 3.5, and 3.6 below, Micron, for itself and on behalf of its Subsidiaries, agrees that, [***].
(c) Benefits Not Transferable. The benefits under Sections 3.2(a) and 3.2(b) above are personal and cannot be assigned, transferred, or
delegated by Rambus to any Third Party.
3.3 No Waiver of Liability. Rambus and Micron each agrees that Sections 3.1 and 3.2 above do not grant, and shall not be construed, argued,
or relied upon as granting (a) any license, covenant [***] or the like under any Patent of the other Party (by implication, estoppel or
otherwise) or (b) any release or waiver with respect to any liability, damages or claims for infringement of any Patent of the other Party.
Furthermore, each Party, on behalf of itself and its Subsidiaries, hereby irrevocably [***], all applicable statutes of limitations shall be
tolled upon the Effective Date and shall remain tolled until the expiration or termination of the Term-Product License. Nothing in this
Section 3.3 shall operate to impact or limit the application of 35 U.S.C. § 287.
3.4 Notice of [***]. Notwithstanding the [***] as described above, either Party shall be free during the Initial Term-Product License Period
and each Term-Product License Renewal Period (if any) to put the other Party on notice or otherwise engage in discussions regarding any
[***].
3.5 Patent [***]. A Party (and its Subsidiaries) is [***].
3.6 [***]. Nothing in this Agreement or in the Settlement Agreement shall preclude either Party, during the Initial Term-Product License
Period and each Term-Product License Renewal Period (if any), [***].
4. Subsidiaries
4.1 Subsidiaries. Subject to the terms and conditions of this Agreement (including Sections 4.3 and 5.2 below), the Parties intend that this
Agreement, and the licenses and benefits granted herein, shall extend to all of each Party’s Subsidiaries. The Parties agree that, to the
extent they are not already bound, each Party shall ensure that all of its Subsidiaries (including, without limitation, all entities that become
Subsidiaries after the Effective Date (“New Subsidiaries”)) are bound by the terms of this Agreement. Without limiting the foregoing:
(a) Each Party shall ensure that the Patents of each New Subsidiary are included within the definition of the applicable Party’s Patents;
and,
(b) Each Party shall ensure that each New Subsidiary is bound as applicable, by this Agreement.
4.2 Former Subsidiaries. All rights and licenses granted and covenants made to any Subsidiary of either Party shall immediately and
automatically terminate upon a Party ceasing to Control such entity (“Former Subsidiary”). However, if a Subsidiary of a Party that holds
any Patent that is subject to the rights, licenses and covenants granted hereunder becomes a Former Subsidiary, such rights, licenses and
covenants granted by such Former Subsidiary (including every successor entity in interest to any such Patents) shall continue in
accordance with the terms of this Agreement after such entity becomes a Former Subsidiary.
4.3 No Release. The releases granted and covenants made under the Settlement Agreement shall not apply to any Acquired Business of
Micron.
4.4 Prior Agreements.
(a) Rambus agrees that the Elpida Technology License Agreement and the Elpida XDR License Agreement are each hereby amended
such that, from and after the Effective Date, Elpida will be licensed (i) to sell Direct Rambus DRAMs and Direct Rambus Multichip
Modules to Micron, as a Semiconductor Company, for resale as an integrated circuit, in the case of Direct Rambus DRAMs, or Direct
Rambus Multichip Module, and (ii) to make, use and sell Yellowstone Rambus DRAMs, alone or incorporated into Yellowstone
Rambus Multichip Modules, Yellowstone Rambus Boards, and Yellowstone Rambus Systems to Micron as a Semiconductor
Company, for resale by Micron to Third Parties, where the meaning of each of the foregoing capitalized terms has the meaning
ascribed to in the Elpida Technology License Agreement or the Elpida XDR License Agreement, as the case may be.
(b) The Elpida Patent License Agreement shall be deemed to have terminated on September 30, 2013 and, for the avoidance of doubt,
Elpida shall be licensed hereunder as a Subsidiary of Micron. Notwithstanding Section 7.6 (Survival) of the Elpida Patent License
Agreement, the following provisions of the Elpida Patent License Agreement are hereby terminated and shall not survive this
termination: Section 5.2 (Quarterly License Payment), Section 6 (Payments), and Section 9.1 (DRAM Revenue).
(c) The Semiconductor Technology License Agreement entered into by and between Rambus and Micron, effective March 24, 1997
shall be deemed to have terminated on the Effective Date, if and to the extent such agreement is still in place and effective as of the
Effective Date.
5. Consideration
5.1 Payments.
(a) Initial and Fixed 28th Quarterly Payments.
(i) Micron shall pay to Rambus five-million five-hundred and thirty-three thousand and three-hundred and thirty-four United States
Dollars (US $5,533,334.00; the “Initial Payment”).
(ii) In lieu of a Quarterly Payment based on Net Sales that occur within the twenty-eighth (28 ) Quarter of the Initial Term-Product
License Period, Micron shall pay to Rambus for such Quarter the fixed amount of four-million four-hundred and sixty-six thousand
and six-hundred and sixty-six United States Dollars (US $4,466,666.00; the “Fixed 28th Quarterly Payment”).
th
(b) Quarterly Payments. Subject to Section 5.3 below, Micron shall pay to Rambus:
(i) an amount equal to six-tenths of a percent (0.6%) of the Net Sales that Micron and each of its Subsidiaries received during the first
twenty-seven (27) Quarters that occur within the Initial Term-Product License Period for the Sale worldwide of (A) DRAMs, (B)
DRAM Controllers, (C) SerDes ICs, (D) Resistive RAMs, and (E) RAM Flash Memories;
(ii) an amount equal to six-tenths of a percent (0.6%) of the Net Sales that Micron and each of its Subsidiaries received during each
Quarter that occurs within the Initial Term-Product License
Renewal Period (if any) for the Sale worldwide of (A) DRAMs, (B) DRAM Controllers, (C) SerDes ICs, (D) Resistive RAMs, and
(E) RAM Flash Memories, in each case of (A) through (E), excluding the Sale of each Initial Paid-Up Product; and,
(iii) an amount equal to six-tenths of a percent (0.6%) of the Net Sales that Micron and each of its Subsidiaries received during each
Quarter that occurs within each Subsequent Term-Product License Renewal Period (if any) for the Sale worldwide of (A) DRAMs,
(B) DRAM Controllers, (C) SerDes ICs, (D) Resistive RAMs, and (E) RAM Flash Memories, in each case of (A) through (E),
excluding the Sale of (I) each Initial Paid-Up Product and (II) each Subsequent Paid-Up Product for which the Qualifying Term-
Product License Renewal Period preceded such Subsequent Term-Product License Renewal Period (each such amount associated
with the Sales for a given Quarter set forth in (i) through (iii), a “Quarterly Payment”);
provided that:
(A) each given Quarterly Payment shall not exceed an amount of ten-million United States Dollars (US $10,000,000), as such ten-
million dollar amount may be increased by one or more Quarterly Payment Cap Increases in accordance with Section 5.2(a) below
(such ten-million dollar amount limit, as it may be increased by one or more Quarterly Payment Cap Increases in accordance with
Section 5.2(a) below, the “Quarterly Payment Cap”); and,
(B) the cumulative amount of any four consecutive Quarterly Payments shall not exceed the greater of (I) forty-million United States
Dollars (US $40,000,000) or (II) the sum of the four Quarterly Payment Caps (as one or more may have been increased by one or
more Quarterly Payment Cap Increases in accordance with Section 5.2(a) below) associated with each Quarter of such four
consecutive Quarterly Payments, provided that if any Quarterly Payment would have, absent the Quarterly Payment Cap, exceeded
the Quarterly Payment Cap, the amount in excess of the Quarterly Payment Cap that would have otherwise been due shall be added
to each subsequent Quarterly Payment that is less than the Quarterly Payment Cap (as if such excess was attributable to Sales that
had occurred in the Quarter associated with such subsequent Quarterly Payment).
5.2 Acquired Businesses.
(a) Acquisition of Business with [***] Products. If (i) Micron or any of its Subsidiaries completes an Acquisition for which:
(A) [***]; and,
(B) [***]; and,
(ii) [***];
[***] For the avoidance of doubt, [***].
(b) Acquisition of Business with [***] Products [***] . If Micron or any of its Subsidiaries completes an Acquisition for which [***],
then:
(i) [***];
(ii) [***]; and,
(iii) [***]
For absence of doubt, [***].
(c) Acquisition Report and Audit Rights. Within thirty (30) days after the end of each Quarter (until all Quarterly Payments payable
hereunder have been reported and paid) in which one or more Acquisition Dates occurred, Micron shall notify Rambus in writing of
such event and Micron’s determination of the associated Quarterly Payment Cap Increase, if any, and provide Rambus with a
written detailed statement (in suitable form) containing all information necessary to calculate such Quarterly Payment Cap Increase.
Each Quarterly Payment Cap Increase will become effective in the Quarter following the Quarter in which the associated Acquisition
Date occurred. If, for any reason, Rambus disagrees with Micron’s determination of the associated Quarterly Payment Cap Increase,
Rambus may conduct an audit pursuant to subsection (e) below. If the Parties cannot reach agreement on the determination of the
associated Quarterly Payment Cap Increase within thirty (30) days following the conclusion of such audit, either Party may, as its sole
and exclusive remedy to resolve such dispute, submit such dispute to binding arbitration pursuant to the terms of Section 9.1. Unless
and until the Parties resolve such disagreement, none of the rights, licenses and covenants granted under Section 2.1 shall apply to any
activity of any such Acquired Business (“Audited Acquired Business”).
(d) [***]
(e) [***]
(f) [***]
5.3 Revenue Attributable [***].
5.4 Rates and Collateral Attack.
(a) Given the worldwide scope of this Agreement, the impracticality of monitoring by Micron of the movement of Licensed Products
through international markets, and that Rambus will be issued new patents and/or utility models continually in various countries
throughout the Initial Term-Product License Period and the Term-Product License Renewal Periods (if any) that will be licensed
hereunder, it is agreed and recognized that paying Quarterly Payments based on the worldwide Sales of certain DRAMs, DRAM
Controllers, SerDes ICs, Resistive RAMs, and RAM Flash Memories at the rates set forth in this Agreement, is fair and reasonable,
representing a balance between the concerns and interests of both Parties and resulting in a convenience for both Parties.
(b) The Parties acknowledge that it is essential that their respective obligations under this Agreement be certain and not subject to
collateral attack. Accordingly, each Party agrees that it will not seek, through litigation or otherwise, to adjust the amount of payments
required under this Agreement, or to avoid, defer or modify their respective obligations hereunder, and that Micron shall make the full
amount of such payments regardless of whether any of the Rambus Patents is determined not to be infringed by any particular Licensed
Product, or whether any court, patent office or other governmental agency determines any Rambus Patent to be invalid or
unenforceable in any reexamination, action or other proceeding, provided that the foregoing shall not prevent the Parties from seeking
enforcement of the terms or conditions of the this Agreement or taking any action expressly contemplated by this Agreement.
6. Reports; Payments; Records and Audits
6.1 Reports. Within thirty (30) days after the end of each Quarter and until all Quarterly Payments payable hereunder have been reported and
paid, Micron shall furnish to Rambus a statement, in a form acceptable to Rambus, that shows:
(a) the total revenue and Net Sales, each in United States Dollars, that Micron and each of its Subsidiaries invoiced or otherwise charged
during such Quarter for the Sale worldwide of DRAMs, DRAM Controllers, SerDes ICs, Resistive RAMs, and RAM Flash Memories
(excluding Initial Paid-Up Products and Subsequent Paid-Up Products to the extent that they are so excluded under Section 5.1(b)
above), provided that if no such revenue and/or Net Sales were invoiced or otherwise charged during such Quarter, that fact shall be
shown on such statement;
(b) an itemized accounting of the number of DRAMs, DRAM Controllers, SerDes ICs, Resistive RAMs, and RAM Flash Memories
(excluding Initial Paid-Up Products and Subsequent Paid-Up Products to the extent that they are so excluded under Section 5.1(b)
above) Sold worldwide during such Quarter by Micron and each of its Subsidiaries; and,
(c) an itemized accounting (by associated customer and associated Technical Specification) of the number of Custom Memory ICs Sold
worldwide during such Quarter by Micron and each of its Subsidiaries and the total revenue and Net Sales, each itemized (by
associated customer and associated Technical Specification) and in United States Dollars, that Micron and each of its Subsidiaries
invoiced or otherwise charged during such Quarter for the Sale worldwide of each such Custom Memory IC (excluding Initial Paid-Up
Products and Subsequent Paid-Up Products to the extent that they are so excluded under Section 5.1(b) above), provided that if no such
revenue and/or Net Sales were invoiced or otherwise charged during such Quarter, that fact shall be shown on such statement;
(d) the associated Quarterly Payment payable thereon (each such itemized statement, a “Quarterly Itemized Sales Report”).
6.2 Payments.
(a) Micron shall, by electronic transfer, pay to Rambus the Initial Payment by the earlier of (i) the tenth (10th) day immediately following
the date of the later signature below or (ii) December 31, 2013. The Initial Payment paid under this Agreement shall not be, in whole or
part, refundable, cancellable or subject to any credit against any amounts, including future Quarterly Payments, that are owed under
this Agreement, provided that, in the case of a material breach of this Agreement by Rambus, Micron may seek monetary
compensation for damages arising from such breach.
(b) Within thirty (30) days after the end of each Quarter, Micron shall pay to Rambus by electronic transfer, as applicable, the Quarterly
Payment or the Fixed 28th Quarterly Payment payable hereunder for such Quarter. No Quarterly Payment, in whole or part, paid under
this Agreement shall be refundable, cancellable or subject to any credit against any amounts, including future Quarterly Payments, that
are owed under this Agreement, provided that, in the case of a material breach of this Agreement by Rambus, Micron may seek
monetary compensation for damages arising from such breach.
(c) Each such electronic transfer shall be made in United States Dollars either directly to or via the Federal Reserve Bank of San Francisco
for credit to the following account or another designated in writing by Rambus:
Rambus Inc.
[***]
6.3 Records and Audits. With respect to the Quarterly Payments set forth herein, Micron shall keep complete and accurate records. These
records shall be retained for a period of at least five (5) years following the date of each corresponding payment, notwithstanding the
termination of this Agreement. Except with respect to Quarters in which Micron’s Quarterly Payment equaled or exceeded the Quarterly
Payment Cap, Rambus, through its designated independent accounting or licensing audit firm, shall have the right, upon thirty (30) days’
prior written notice, to initiate an examination and audit, not more than [***], and during normal business hours, of all such records and
such other records and accounts as may contain, under recognized accounting practices, information bearing upon the amount of Quarterly
Payments payable to Rambus under this Agreement. In addition to the results of any such audit, the auditor shall be permitted to disclose
to Rambus the progress of the audit and may identify to Rambus any materials required, but not furnished, to complete the audit. Micron
shall
provide all reasonable access to such applicable information in both electronic and tangible form. Micron shall promptly make Rambus
whole for any underpayments of the Quarterly Payments that are disclosed by such examination or audit. To the extent that any
underpayments revealed by such audit exceed [***] percent ([***]%) of the total Quarterly Payments due for the period under audit, then
Micron shall also [***].
6.4 Currency and Late Payments. All payments to Rambus hereunder shall be in United States Dollars. Late payments hereunder shall be
subject to interest at the one-year United States Government Treasury Constant Maturity Rate, as published by the Federal Reserve
(www.federalreserve.gov) on the date the amount payable was due, plus five percent (5%) (or the maximum interest rate allowed by
applicable law, if lower).The amount of interest shall be calculated from the payment due date to the date of electronic transfer.
6.5 No Escrow. Payment of amounts due under this Agreement to any person, firm or entity, other than Rambus, including, without
limitation, any escrow fund or escrow agent, unless agreed to by Rambus or ordered by any court or government agency of competent
jurisdiction or arbitration panel, shall constitute a material breach of this Agreement. Any payment once made by Micron to Rambus shall
not be refunded or refundable to Micron for any reason, provided that, in the case of a material breach of this Agreement by Rambus,
Micron may seek monetary compensation for damages arising from such breach.
7. Term and Termination of Licenses and Agreement
7.1 Term and Renewal of Licenses.
(a) Term-Product License. The Term-Product License shall, unless earlier terminated in accordance with Section 7.1(e) below, continue
in full force and effect until:
(i) the Expiration Date if Micron fails to renew the Term-Product License for the Initial Term-Product License Renewal Period in
accordance with Section 7.1(d) below; or,
(ii) the expiration of any Term-Product License Renewal Period (if any) in which Micron fails to further renew the Term-Product
License in accordance with Section 7.1(d) below.
For avoidance of doubt, the Term-Product License shall automatically be rendered null, void, and without effect as if never granted if
Micron breaches this Agreement by failing to pay Rambus the Initial Payment in a timely manner and fails to cure such failure in
accordance with Section 7.2 below.
(b) Initial Paid-Up Product License. The Initial Paid-Up Product License shall, continue in full force and effect unless and until
terminated in accordance with Section 7.1(e). For avoidance of doubt, the Initial Paid-Up Product License shall automatically be
rendered null, void, and without effect as if never granted if Micron breaches this Agreement by failing to pay Rambus (A) the Initial
Payment in a timely manner and (B) each Quarterly Payment that becomes due on or before the Expiration Date in a timely manner and
fails to cure such failure in accordance with Section 7.2 below.
(c) Subsequent Paid-Up Product License. The Subsequent Paid-Up Product License shall, with respect to each given Subsequent Paid-
Up Product qualifying as such under Section 1.87(a), unless earlier terminated in accordance with Section 7.1(e) below, continue in full
force and effect until the date of the expiration of the Initial Term-Product License Period, if Micron fails to renew the Term-Product
License for the Initial Term-Product License Renewal Period in accordance with Section 7.1(d) below, and in perpetuity following the
date of the expiration of the Initial Term-Product License Renewal Period, if Micron renews the Term-Product License for the Initial
Term-Product License Renewal Period in accordance with Section 7.1(d) and Micron has satisfied all of its payment obligations set
forth in this Agreement during such Initial Term-Product License Renewal
Period. The Subsequent Paid-Up Product License shall, with respect to each given Subsequent Paid-Up Product qualifying as such
under Section 1.87(b), unless earlier terminated in accordance with Section 7.1(e), below, continue in full force and effect until:
(i) the date of the expiration of the Qualifying Term-Product License Renewal Period for such Subsequent Paid-Up Product, if Micron
fails to renew the Term-Product License for an immediately following Term-Product License Renewal Period in accordance with
Section 7.1(d) below; or,
(ii) in perpetuity, following the date of the expiration of the Term-Product License Renewal Period immediately following the
Qualifying Term-Product License Renewal Period for such Subsequent Paid-Up Product, if Micron renews the Term-Product
License for such an immediately following Term-Product License Renewal Period in accordance with Section 7.1(d) below.
For avoidance of doubt, the Subsequent Paid-Up Product License for Subsequent Paid-Up Products shall automatically be rendered
null, void, and without effect as if never granted if Micron breaches this Agreement by failing to pay Rambus the Initial Payment in
accordance with Section 6.2 below and fails to cure such failure in accordance with Section 7.2 below, and each Quarterly Payment
that becomes due on or before the date of the expiration of the Initial Term-Product License Renewal Period (if any) in accordance
with Section 6.2 and fails to cure such failure in accordance with Section 7.2 below.
(d) Term-Product License Renewal. Micron shall have the option to:
(i) renew the Term-Product License for a single three-year renewal term upon the expiration of the Initial Term-Product License
Period, in accordance with its terms, on the Expiration Date (such renewal term, the “Initial Term-Product License Renewal
Period”); and,
(ii) upon the expiration of the Initial Term-Product License Renewal Period in accordance with its terms, successively renew the Term-
Product License for additional five-year terms (each such five-year period in which the Term-Product License has been renewed by
Micron in accordance with this subsection (ii), a “Subsequent Term-Product License Renewal Period”),
provided that, in each case of (i) and (ii), Micron delivers to Rambus, no later than ninety (90) days prior to, as applicable, the
Expiration Date, the expiration date of the Initial Term-Product License Renewal Period (if any), or the then-current Subsequent Term-
Product License Renewal Period (if any), a written notice of Micron’s election to exercise such option to renew the Term-Product
License for an additional, as applicable, three-year or five-year term.
(e) Effect of Termination of Agreement.
(i) Upon any termination of this Agreement that occurs between the Effective Date and the Expiration Date (inclusive of both dates),
the Term-Product License, the Initial Paid-Up License, and the Subsequent Paid-Up License for Subsequent Paid-Up Products will
each immediately terminate.
(ii) Upon any termination of this Agreement that occurs during the Initial Term-Product License Renewal Period (if any), the Term-
Product License and the Subsequent Paid-Up License for Subsequent Paid-Up Products will each immediately terminate.
(iii) Upon any termination of this Agreement that occurs during any Subsequent Term-Product License Renewal Period (if any), the
Term-Product License and the Subsequent Paid-Up Product License for any Subsequent Paid-Up Product for which such
Subsequent Term-Product License Renewal Period is the Qualifying Term-Product License Renewal Period will each immediately
terminate.
7.2 Material Breach. Rambus may terminate this Agreement upon notice if Micron materially breaches its payment obligations under this
Agreement and does not correct or cure such breach within ninety (90) days after receiving written notice complaining thereof. Failure of
Micron to pay any payment due and payable in accordance with the terms of this Agreement shall constitute a material breach of this
Agreement. For the avoidance of doubt, any payments tolled in accordance with the terms of this Agreement shall not be due and payable
during such tolling period.
7.3 Bankruptcy. Either Party may terminate this Agreement effective upon written notice to the other Party if the other Party is adjudicated
insolvent or bankrupt at the conclusion of proceedings initiated by a voluntary or involuntary petition in bankruptcy or any proceeding
relating to insolvency, or composition for the benefit of creditors, and such Party undergoes a Change of Control during or following the
pendency of such proceedings.
7.4 [***].
7.5 Change of Control.
(a) In General. [***] in the event of [***] Change of Control, Rambus may, in addition to the rights set forth in Sections 7.2, 7.3, and
7.4 above, terminate this Agreement effective upon written notice thereof to Micron or the relevant successor or assignee in interest.
Notwithstanding the foregoing, if Rambus receives written notice of such Change of Control from Micron (or its successor or assignee
in interest) no later than ten (10) business days after such Change of Control, Rambus agrees to negotiate in good faith with such
successor or assignee in interest, for a period of one hundred and eighty (180) days after receipt of such notice, the application of this
Agreement to such successor’s or assignee’s business activities prior to terminating this Agreement based on such Change of Control.
Rambus’ failure to terminate this Agreement after a given Change of Control by Micron (or any successor or assignee in interest) shall
not in any way limit Rambus’ right to exercise these rights for any subsequent Change of Control. Termination of this Agreement
based on a Change of Control shall be deemed to be effective immediately prior to the effective date of such Change of Control.
(b) [***]
7.6 Survival. All payment obligations accruing prior to any termination of this Agreement shall survive any such termination. In addition, the
following sections shall survive and remain in full force and effect after any termination of this Agreement, but only to extent relevant to
rights, obligations, benefits, or liabilities that had accrued under such sections prior to such termination of this Agreement:
Section 1 (Definitions), Section 2.6 (No Implied or Other Rights and Licenses), Section 3.3 (No Waiver of Liability), Section 4.1
(Subsidiaries), Section 4.2 (Former Subsidiaries), Section 4.3 (No Release), Section 5 (Consideration), Section 6 (Reports; Payments;
Records and Audits), this Section 7.6 (Survival), Section 8.2 (Confidentiality), and Section 9 (Miscellaneous).
8. Confidentiality
8.1 Press Release. The Parties intend to issue a press release as set forth in the Settlement Agreement in the form and as agreed by the Parties.
8.2 Confidentiality. Each Party agrees that only after the announcement referenced in Section 8.1 above, each Party shall be entitled to
disclose the general nature of this Agreement but that the terms and conditions of this Agreement, to the extent not already disclosed
pursuant to Section 8.1 above, shall be treated as Confidential Information and that neither Party will disclose such terms or conditions to
any Third Party without the prior written consent of the other Party, provided, however, that each Party may disclose the terms and
conditions of this Agreement:
(a) as required by any court or other governmental body;
(b) as otherwise required by law;
(c) as otherwise may be required by applicable securities and other law and regulation, including to legal and financial advisors in their
capacity of advising a Party in such matters so long as the disclosing Party shall seek confidential treatment of such terms and
conditions to the extent reasonably possible;
(d) in confidence to legal counsel, accountants, and other professional advisors of the Parties;
(e) in confidence, to banks, investors and other financing sources and their advisors;
(f) during the course of litigation so long as the disclosure of such terms and conditions are restricted in the same manner as is the
confidential information of other litigating entities and so long as (A) the restrictions are embodied in a court-entered protective order
limiting disclosure to outside counsel and (B) the disclosing Party informs the other Party in writing at least ten (10) business days in
advance of the disclosure and discusses the nature and contents of the disclosure, in good faith, with the other Party;
(g) in confidence, to a Third Party to whom either Party assigns one or more of its Patents, but solely to the extent necessary to inform
such Third Party of the encumbrances contained herein on such Patents;
(h) in confidence, in connection with an actual or prospective merger or acquisition or similar transaction,
(i) in confidence, by Rambus to [***]; or,
(j) in confidence, in connection with a Party’s obligation(s) under any most favored nation, or similar clause, whereby such Party is
contractually obligated to disclose and offer terms given to Third Parties.
Upon execution of this Agreement, or thereafter, Rambus, in its discretion, shall be entitled to file a copy of this Agreement with the
United States Securities and Exchange Commission, so long as Rambus seeks confidential treatment of such agreement to the extent
reasonably possible.
9. Miscellaneous
9.1 Dispute Resolution. Any dispute submitted to binding arbitration pursuant to the terms of this Agreement shall take place in New York
City, NY before one arbitrator, and shall be administered by Judicial Arbitration and Mediation Services, Inc. pursuant to its Streamlined
Arbitration Rules and Procedures. Judgment on the award may be entered in any court having jurisdiction.
9.2 Disclaimers. Nothing contained in this Agreement shall be construed as:
(a) a warranty or representation by either Party as to the validity, enforceability, and/or scope of any intellectual property rights;
(b) imposing upon either Party any obligation to institute any suit or action for infringement of any intellectual property right, or to
defend any suit or action brought by a Third Party which challenges or concerns the validity, enforceability or scope of any intellectual
property rights;
(c) imposing on either Party any obligation to file any application or registration with respect to any intellectual property rights or to
secure or maintain in force any intellectual property rights;
(d) imposing on either Party any obligation to furnish any technical information or know-how; or,
(e) imposing or requiring, whether by implication or otherwise, any support, maintenance or any technology deliverable obligations on
either Party’s or their respective Subsidiaries’ part under this Agreement (and neither Party nor any of their respective Subsidiaries are
providing any support, maintenance or technology deliverables under this Agreement).
9.3 Notices. All notices and other communications required or permitted hereunder shall be in writing and shall be (a) mailed by first class air
mail (registered or certified if available), postage prepaid, or otherwise delivered by hand, by messenger, addressed to the addresses set
forth below, or (b) delivered by facsimile to the facsimile number set forth below. Each Party may change its address or facsimile number
for notices by providing a notice to the other Party in the manner set forth herein. Such notices shall be deemed to have been effective
when delivered or, if delivery is not accomplished by reason of some fault or refusal of the addressee, when tendered (which tender, in the
case of mail, shall be deemed to have occurred upon posting, and in the case of facsimile, shall be deemed to have occurred upon
transmission). All notices shall be in English.
If to Rambus:
Rambus Inc.
1050 Enterprise Way, Suite 700
Sunnyvale, California 94089
U.S.A.
Telephone: +1-408-462-8000
Facsimile: +1-408-462-8001
Attention: SVP, Licensing
With copy to: General Counsel
If to Micron:
Micron Technology, Inc.
8000 S. Federal Way
Boise, Idaho 83716-9632
Telephone: 208-368-4500
Facsimile: 208-368-4540
Attention: General Counsel
9.4 Governing Law & Venue.
(a) This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to
any choice-of-law or conflict-of-law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Delaware.
(b) This Agreement is executed in the English language and no translation shall have any legal effect.
(c) Any legal action, suit or proceeding arising under, or relating to, this Agreement, shall be brought in the State or Federal Courts
located in the State of Delaware, and each Party agrees that any such action, suit or proceeding may be brought only in such courts.
Each Party further waives any objection to the laying of jurisdiction and venue for any such suit, action or proceeding in such courts.
9.5 No Assignment. Subject to Section 7.5, this Agreement is personal to the Parties, and the Agreement and/or any right or obligation
hereunder is not transferable, assignable, and/or delegatable whether in conjunction with a change in ownership, merger, acquisition, the
sale or transfer of all, or substantially all or any part of either Party’s or any of their respective Subsidiaries business or assets or otherwise,
voluntarily, by operation of law, reverse triangular merger or otherwise, without the prior written consent of the other Party, which consent
may be withheld at the sole discretion of such other Party. Any such purported or attempted assignment or transfer in violation of the
foregoing shall be deemed a breach of this Agreement and shall be null and void. Subject to the foregoing, this Agreement shall be
binding upon and inure to the benefit of the Parties and their permitted successors and assigns. Notwithstanding the foregoing, either Party
shall be entitled to, and each Party hereby agrees to, assign
this Agreement to a successor to all or substantially all of a Party’s assets in a transaction entered into solely to change a Party’s place of
incorporation.
9.6 No Rule of Strict Construction. Regardless of which Party may have drafted this Agreement or any part thereof, no rule of strict
construction shall be applied against either Party. For the avoidance of doubt “includes”, “including”, “included”, and other variations of
such terms shall be deemed to be followed by the phrase “without limitation”.
9.7 Severability. If any provision of this Agreement is held to be invalid or unenforceable, the meaning of such provision shall be construed,
to the extent feasible, so as to render the provision enforceable, and if no feasible interpretation shall save such provision, (a) a suitable
and equitable provision shall be substituted therefore in order to carry out, so far as may be valid and enforceable, the intent and purpose
of such invalid or unenforceable provision, and (b) the remainder of this Agreement shall remain in full force and effect.
9.8 Entire Agreement. This Agreement and the Settlement Agreement embodies the entire understanding of the Parties with respect to the
subject matter hereof, and merges all prior oral or written communications between them, and neither of the Parties shall be bound by any
conditions, definitions, warranties, understandings, or representations with respect to the subject matter hereof other than as expressly
provided herein. No oral explanation or oral information by either Party hereto shall alter the meaning or interpretation of this Agreement.
9.9 Modification; Waiver. No modification or amendment to this Agreement, nor any waiver of any rights, will be effective unless assented
to in writing by the Party to be charged, and the waiver of any breach or default will not constitute a waiver of any other right hereunder or
any subsequent breach or default.
9.10 Counterparts. This Agreement may be executed in two (2) or more counterparts, all of which, taken together, shall be regarded as one
and the same instrument.
9.11 Bankruptcy Code. All rights, licenses, privileges, releases, and immunities granted under this Agreement shall be deemed to be, for the
purposes of Section 365(n) of the United States Bankruptcy Code, as amended (the “Bankruptcy Code”), licenses of rights to “intellectual
property” as defined under Section 101(35A) of the Bankruptcy Code. The Parties agree that each of the Parties shall retain and may fully
exercise all of their respective rights and elections under the Bankruptcy Code. The Parties further agree that, in the event that any
proceeding shall be instituted by or against a Party seeking to adjudicate it as bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief or composition of that Party or that Party’s debts under any law relating to
bankruptcy, insolvency, or reorganization or relief of debtors, or seeking an entry of an order for relief or the appointment of a receiver,
trustee or other similar official for that Party or any substantial part of its property or if a Party hereto shall take any action to authorize
any of the foregoing actions, the other Party shall have the right to retain and enforce their respective rights under this Agreement.
9.12 Ultimate Parent Entity. Each of Micron and Rambus hereby represents and warrants that on the Effective Date it is an Ultimate Parent.
REMAINDER OF PAGE INTENTIONALLY BLANK; SIGNATURE PAGE FOLLOWS
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be signed by duly authorized officers or representatives as of the
date first above written.
RAMBUS INC.
MICRON TECHNOLOGY, INC.
By:
Name:
Title:
Date:
/s/ Kevin Donnelly
Kevin Donnelly
Senior Vice President
December 9, 2013
By:
Name:
Title:
Date:
/s/ Brian M. Shirley
Brian M. Shirley
Vice President of DRAM Solutions
December 9, 2013
EXHIBIT A
ASSIGNED RAMBUS PATENTS (BETWEEN [***] AND THE EFFECTIVE DATE)
ASSIGNED UNITED STATES PATENTS
[***]
ASSIGNED FOREIGN PATENTS
[***]
Exhibit 10.35
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT IS BOTH NOT
MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY
DISCLOSED. [***] INDICATES THAT INFORMATION HAS BEEN REDACTED.
AMENDMENT NUMBER 2
TO SEMICONDUCTOR PATENT LICENSE AGREEMENT
This Amendment Number 2 (“Amendment 2”) amends that certain Semiconductor Patent License Agreement between
Rambus Inc., and Micron Technology, Inc. effective December 1, 2013, as amended on September 2, 2020 (collectively, the “Patent
License Agreement”), and is effective as of December 1, 2020 (the “Amendment 2 Effective Date”). Rambus, on behalf of itself and
all of its subsidiaries (collectively, “Rambus”) and Micron Technology, Inc., on behalf of itself and all of its subsidiaries
(collectively, “Micron”) (Rambus and Micron together, the “Parties”), and in consideration of the covenants set forth below, and for
other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, hereby agree as follows:
TERMS AND CONDITIONS
1. Capitalized terms in this Amendment 2 shall have the meaning assigned to them in the Patent License Agreement.
2. Section 5.1(b)(B) of the Patent License Agreement is hereby amended to delete the following language in such Section
5.1(b)(B):
[***]
3. Except as set forth in this Amendment No. 2, all other terms and provisions of the Agreement shall remain in full force
and effect in accordance with its terms.
IN WITNESS WHEREOF, the undersigned Parties have executed this Agreement effective as of December 1, 2020.
Micron Technology, Inc.
/s/ JOEL POPPEN
Signature
Joel Poppen
Printed Name
Rambus Inc.
/s/ JAE KIM
Signature
Jae Kim
Printed Name
SVP, Legal Affairs, GC & Corp Secretary
SVP - GC/HR
Title
12/15/2020
Date
Title
12/15/2020
Date
SUBSIDIARIES OF REGISTRANT
Exhibit 21.1
Rambus Canada Inc.
Rambus Controllers, Inc.
Rambus Delaware LLC
Rambus International Ltd.
Rambus K.K. (Japan)
Rambus Ltd. (Grand Cayman Islands, BWI)
Rambus Chip Technologies (India) Private Limited
Rambus Korea, Inc. (Korea)
Rambus France SAS
Rambus Global Inc.
Rambus Information Technology Consulting (Shanghai) Co. Ltd.
Rambus UK Ltd.
Rambus ROTW Holding B.V.
Cryptography Research, Inc.
Mozaik Multimedia, Inc.
Unity Semiconductor Corporation
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-28597, 333-38855, 333-67457, 333-93427, 333-48730,
333-52158, 333-86140, 333-103789, 333-115015, 333-124513, 333-146770, 333-159516, 333-181072, 333-191432, 333-195656, 333-203708, 333-225186, 333-
233533 and 333-238809) of Rambus Inc. of our report dated February 26, 2021 relating to the consolidated financial statements and the effectiveness of internal
control over financial reporting, which appears in this Form 10-K.
Exhibit 23.1
/s/ PricewaterhouseCoopers LLP
San Jose, California
February 26, 2021
Exhibit 31.1
CERTIFICATION PURSUANT TO RULE 13A-14(A) AND RULE 15D-14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Luc Seraphin, certify that:
1.
I have reviewed this Annual Report on Form 10-K of Rambus Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for
the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal
quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely
to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over
financial reporting.
Date:
February 26, 2021
By:
Name:
Title:
/s/ Luc Seraphin
Luc Seraphin
Chief Executive Officer and President
(Principal Executive Officer)
CERTIFICATION PURSUANT TO RULE 13A-14(A) AND RULE 15D-14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 31.2
I, Rahul Mathur, certify that:
1.
I have reviewed this Annual Report on Form 10-K of Rambus Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for
the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal
quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely
to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over
financial reporting.
Date:
February 26, 2021
By:
Name:
Title:
/s/ Rahul Mathur
Rahul Mathur
Senior Vice President, Finance and Chief Financial Officer
(Principal Financial Officer)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
I, Luc Seraphin, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Annual Report of
Rambus Inc. on Form 10-K for the fiscal year ended December 31, 2020, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange
Act of 1934, as amended, and that information contained in such Annual Report on Form 10-K fairly presents in all material respects the financial condition and
results of operations of Rambus Inc.
Date: February 26, 2021
By:
Name:
Title:
/s/ Luc Seraphin
Luc Seraphin
Chief Executive Officer and President
(Principal Executive Officer)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.2
I, Rahul Mathur, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Annual Report of
Rambus Inc. on Form 10-K for the fiscal year ended December 31, 2020, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange
Act of 1934, as amended, and that information contained in such Annual Report on Form 10-K fairly presents in all material respects the financial condition and
results of operations of Rambus Inc.
Date: February 26, 2021
By:
Name:
Title:
/s/ Rahul Mathur
Rahul Mathur
Senior Vice President, Finance and Chief Financial Officer
(Principal Financial Officer)