Rambus Inc.
RAMBUS INC (Form: 10-Q, Received: 07/30/2010 17:27:00)
Table of Contents

 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
(Mark One)
     
þ   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2010
OR
     
o   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   94-3112828
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification No.)
4440 El Camino Real, Los Altos, CA 94022
(Address of principal executive offices) (zip code)
Registrant’s telephone number, including area code: (650) 947-5000
 
     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 þ No o
     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, 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 þ No o
     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
             
Large accelerated filer þ   Accelerated filer o   Non-accelerated filer o   Smaller reporting company o
        (Do not check if a smaller reporting company)    
     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
     The number of shares outstanding of the registrant’s Common Stock, par value $.001 per share, was 112,025,080 as of June 30, 2010.
 
 

 


 

RAMBUS INC.
TABLE OF CONTENTS
         
    PAGE  
    3  
PART I. FINANCIAL INFORMATION
       
Item 1. Financial Statements:
       
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  EX-3.3
  EX-31.1
  EX-31.2
  EX-32.1
  EX-32.2
  EX-101 INSTANCE DOCUMENT
  EX-101 SCHEMA DOCUMENT
  EX-101 CALCULATION LINKBASE DOCUMENT
  EX-101 LABELS LINKBASE DOCUMENT
  EX-101 PRESENTATION LINKBASE DOCUMENT
  EX-101 DEFINITION LINKBASE DOCUMENT

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NOTE REGARDING FORWARD-LOOKING STATEMENTS
     This Quarterly Report on Form 10-Q (“Quarterly Report”) contains forward-looking statements. These forward-looking statements include, without limitation, predictions regarding the following aspects of our future:
    Outcome and effect of current and potential future intellectual property litigation;
 
    Litigation expenses;
 
    Protection of intellectual property;
 
    Amounts owed under licensing agreements;
 
    Terms of our licenses;
 
    Acquisitions, mergers or strategic transactions;
 
    Indemnification and technical support obligations;
 
    Success in the markets of our or our licensees’ products;
 
    Sources of competition;
 
    Operating results;
 
    Research and development costs and improvements in technology;
 
    Sources, amounts and concentration of revenue, including royalties;
 
    Effects of changes in the economy and credit market on our industry and business;
 
    Deterioration of financial health of commercial counterparties and their ability to meet their obligations to us;
 
    Restructuring activities;
 
    Growth in our business;
 
    Product development;
 
    Pricing policies of our licensees;
 
    Success in renewing license agreements;
 
    Engineering, marketing and general and administration expenses;
 
    Contract revenue;
 
    International licenses and operations, including our design facility in Bangalore, India;
 
    Issuances of our securities, which could involve restrictive covenants or be dilutive to our existing stockholders;
 
    Repurchases of our Common Stock pursuant to share repurchase programs;
 
    Effective tax rates;
 
    Realization of deferred tax assets/release of deferred tax valuation allowance;

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    Methods, estimates and judgments in accounting policies;
 
    Adoption of new accounting pronouncements;
 
    Ability to identify, attract, motivate and retain qualified personnel;
 
    Trading price of our Common Stock;
 
    Corporate governance;
 
    Consequences of the lawsuits related to the stock option investigation;
 
    The level and terms of our outstanding debt;
 
    Resolution of the governmental agency matters involving us;
 
    Internal control environment;
 
    Interest and other income, net; and
 
    Likelihood of paying dividends or repurchasing stock.
     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,” 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 INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
                 
    June 30,     December 31,  
    2010     2009  
    (In thousands, except shares  
    and par value)  
ASSETS
               
Current assets:
               
Cash and cash equivalents
  $ 334,536     $ 289,073  
Marketable securities
    263,073       171,120  
Accounts receivable
    244       949  
Prepaids and other current assets
    10,417       8,700  
Deferred taxes
    654       129  
 
           
Total current assets
    608,924       469,971  
Restricted cash
    664       639  
Deferred taxes
    1,558       2,034  
Intangible assets, net
    25,153       21,660  
Property and equipment, net
    39,016       38,966  
Goodwill
    15,554       15,554  
Other assets
    6,512       7,045  
 
           
Total assets
  $ 697,381     $ 555,869  
 
           
 
               
LIABILITIES
               
Current liabilities:
               
Accounts payable
  $ 9,433     $ 8,972  
Accrued salaries and benefits
    18,926       6,435  
Accrued litigation expenses
    3,032       5,147  
Income taxes payable
    896       486  
Other accrued liabilities
    5,994       4,020  
Non-cash obligation for construction in progress
    25,900       25,100  
Convertible notes
          136,032  
 
           
Total current liabilities
    64,181       186,192  
Convertible notes
    116,184       112,012  
Long-term income taxes payable
    2,016       1,994  
Other long-term liabilities
    958       344  
 
           
Total liabilities
    183,339       300,542  
 
           
Commitments and contingencies
               
 
               
Contingently redeemable common stock:
               
Outstanding: 4,788,125 shares at June 30, 2010 and no shares at December 31, 2009
    113,500        
 
           
 
               
STOCKHOLDERS’ EQUITY
               
Convertible preferred stock, $.001 par value:
               
Authorized: 5,000,000 shares
               
Issued and outstanding: no shares at June 30, 2010 and December 31, 2009
           
Common stock, $.001 par value:
               
Authorized: 500,000,000 shares
               
Issued and outstanding: 112,025,080 shares at June 30, 2010 and 105,934,157 shares at December 31, 2009
    107       106  
Additional paid-in capital
    907,481       818,992  
Accumulated deficit
    (506,872 )     (563,858 )
Accumulated other comprehensive income (loss), net
    (174 )     87  
 
           
Total stockholders’ equity
    400,542       255,327  
 
           
Total liabilities, contingently redeemable common stock and stockholders’ equity
  $ 697,381     $ 555,869  
 
           
See Notes to Unaudited Consolidated Financial Statements

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RAMBUS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2010     2009     2010     2009  
            (In thousands, except per share amounts)          
Revenue:
                               
Royalties
  $ 38,192     $ 24,759     $ 198,734     $ 50,928  
Contract revenue
    670       2,224       1,992       3,389  
 
                       
Total revenue
    38,862       26,983       200,726       54,317  
 
                       
Operating costs and expenses:
                               
Cost of revenue*
    1,804       1,438       3,658       3,621  
Research and development*
    22,985       15,713       44,676       33,550  
Marketing, general and administrative*
    29,408       32,563       60,935       69,719  
Costs (recoveries) of restatement and related legal activities
    1,638       (429 )     2,164       (14,068 )
Gain from settlement
    (10,300 )           (106,200 )      
 
                       
Total operating costs and expenses
    45,535       49,285       5,233       92,822  
 
                       
Operating income (loss)
    (6,673 )     (22,302 )     195,493       (38,505 )
Interest income and other income, net
    316       1,173       741       2,613  
Interest expense
    (3,740 )     (2,817 )     (9,756 )     (5,487 )
 
                       
Interest and other expense, net
    (3,424 )     (1,644 )     (9,015 )     (2,874 )
 
                       
Income (loss) before income taxes
    (10,097 )     (23,946 )     186,478       (41,379 )
Provision for income taxes
    2,393       25       48,069       18  
 
                       
Net income (loss)
  $ (12,490 )   $ (23,971 )   $ 138,409     $ (41,397 )
 
                       
Net income (loss) per share:
                               
Basic
  $ (0.11 )   $ (0.23 )   $ 1.22     $ (0.40 )
 
                       
Diluted
  $ (0.11 )   $ (0.23 )   $ 1.18     $ (0.40 )
 
                       
Weighted average shares used in per share calculation
                               
Basic
    113,321       104,675       113,227       104,536  
 
                       
Diluted
    113,321       104,675       117,434       104,536  
 
                       
 
 
* Includes stock-based compensation:
                               
 
Cost of revenue
  $ 29     $ 233     $ 129     $ 623  
Research and development
  $ 2,703     $ 2,214     $ 5,272     $ 4,954  
Marketing, general and administrative
  $ 5,199     $ 5,403     $ 10,364     $ 10,692  
See Notes to Unaudited Consolidated Financial Statements

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RAMBUS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
                 
    Six Months Ended  
    June 30,  
    2010     2009  
    (In thousands)  
Cash flows from operating activities:
               
Net income (loss)
  $ 138,409     $ (41,397 )
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
               
Stock-based compensation
    15,765       16,269  
Depreciation
    4,859       5,439  
Amortization of intangible assets
    2,288       1,526  
Non-cash interest expense and amortization of convertible debt issuance costs
    5,444       5,445  
Deferred tax (benefit) provision
    (49 )     69  
Loss on sale of marketable security
    72        
Impairment of investment
          164  
Change in operating assets and liabilities:
               
Accounts receivable
    705       (47 )
Prepaids and other assets
    (1,852 )     360  
Accounts payable
    (325 )     4,050  
Accrued salaries and benefits and other accrued liabilities
    12,832       (4,234 )
Accrued litigation expenses
    (2,115 )     (5,673 )
Income taxes payable
    432       (233 )
Increase in restricted cash
    (25 )      
 
           
Net cash provided by (used in) operating activities
    176,440       (18,262 )
 
           
Cash flows from investing activities:
               
Acquisition of businesses
    (2,000 )      
Acquisition of intangible assets
    (2,250 )     (1,550 )
Purchases of property and equipment
    (2,543 )     (1,510 )
Purchases of marketable securities
    (830,436 )     (97,008 )
Maturities of marketable securities
    736,632       164,165  
Proceeds from sale of marketable security
    1,518        
 
           
Net cash provided by (used in) investing activities
    (99,079 )     64,097  
 
           
Cash flows from financing activities:
               
Payments under installment payment arrangement
    (1,150 )      
Proceeds received from issuance of contingently redeemable common stock and common stock pursuant to the settlement agreement with Samsung
    192,000        
Repayment of convertible senior notes
    (136,950 )      
Repurchase and retirement of common stock
    (95,285 )      
Proceeds received from issuance of common stock under employee stock plans
    9,487       9,660  
Proceeds from issuance of convertible senior notes
          150,000  
Issuance costs related to the issuance of convertible senior notes
          (3,750 )
 
           
Net cash provided by (used in) financing activities
    (31,898 )     155,910  
 
           
Net increase in cash and cash equivalents
    45,463       201,745  
Cash and cash equivalents at beginning of period
    289,073       116,241  
 
           
Cash and cash equivalents at end of period
  $ 334,536     $ 317,986  
 
           
 
               
Non-cash investing and financing activities:
               
Increase in non-cash obligation for construction in progress
  $ 800     $  
Intangible assets acquired under installment payment arrangement
  $ 731     $  
Fixed assets acquired under installment payment arrangement in a business acquisition
  $ 350     $  
See Notes to Unaudited Consolidated Financial Statements

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RAMBUS INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
     The accompanying unaudited consolidated financial statements include the accounts of Rambus Inc. (“Rambus” or the “Company”) and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in the accompanying unaudited consolidated financial statements. Investments in entities with less than 20% ownership or in which the Company does not have the ability to significantly influence the operations of the investee are being accounted for using the cost method and are included in other assets.
     In the opinion of management, the unaudited consolidated financial statements include all adjustments (consisting only of normal recurring items) necessary to state fairly the financial position and results of operations for each interim period presented. Interim results are not necessarily indicative of results for a full year.
     The unaudited consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) applicable to interim financial information. Certain information and Note disclosures included in the financial statements prepared in accordance with generally accepted accounting principles have been omitted in these interim statements pursuant to such SEC rules and regulations. The information included in this Form 10-Q should be read in conjunction with the consolidated financial statements and notes thereto in Form 10-K for the year ended December 31, 2009.
2. Summary of Significant Accounting Policies
Fair Value of Financial Instruments
     The amounts reported for cash equivalents, marketable securities, accounts receivable, accounts payable, and accrued liabilities are considered to approximate fair value based upon comparable market information available at the respective balance sheet dates. The Company adopted the fair value measurement statement (Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements and Disclosures”), effective January 1, 2008 for financial assets and liabilities measured on a recurring basis. The statement applies to all financial assets and financial liabilities that are being measured and reported on a fair value basis and requires disclosure that establishes a framework for measuring fair value and expands disclosure about fair value measurements. For the discussion regarding the impact of the adoption of the statement on the Company’s marketable securities, see Note 15, “Fair Value of Financial Instruments.” Additionally, the Company has adopted the fair value option for financial assets and financial liabilities, effective January 1, 2008, which permits an entity to choose to measure many financial instruments and certain other items at fair value at specified election dates. The Company has not elected the fair value option for financial instruments not already carried at fair value.
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. The cash equivalent balances are invested in highly-rated and highly-liquid money market securities.
Marketable Securities
     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 expense, net. Realized gains and losses are recorded on the specific identification method and are included in interest income 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

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Company’s investments, there have been no 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.
Non-Marketable Securities
     The Company has an investment in a non-marketable equity security of a private company which is carried at cost. The Company monitors the investments for other-than-temporary impairment and records appropriate reductions in carrying value when necessary. The non-marketable security is classified as other non-current assets in the consolidated balance sheets.
Recent Accounting Pronouncements
     In September 2009, the Emerging Issues Task Force (the “EITF”) reached final consensus under ASU No. 2009-13 on the issue related to revenue arrangements with multiple deliverables. This issue addresses how to determine whether an arrangement involving multiple deliverables contains more than one unit of accounting and how arrangement consideration should be measured and allocated to the separate units of accounting. This issue is effective for the Company’s revenue arrangements entered into or materially modified on or after January 1, 2011. The Company will evaluate the impact of this issue on the Company’s financial statements when reviewing its new or materially modified revenue arrangements with multiple deliverables once this issue becomes effective.
3. Settlement Agreement with Samsung
     On January 19, 2010, the Company, Samsung and certain related entities of Samsung entered into a Settlement Agreement (the “Settlement Agreement”) to release all claims against each other with respect to all outstanding litigation between them and certain other potential claims. Under the Settlement Agreement, Samsung has paid the Company $200.0 million in cash in two installments in the first quarter of 2010, and the parties released all claims against each other with respect to all outstanding litigation between them and certain other potential claims. Pursuant to the Settlement Agreement, the Company and Samsung entered into a Semiconductor Patent License Agreement on January 19, 2010 (the “License Agreement”), under which Samsung licenses from the Company non-exclusive rights to certain Rambus patents and has agreed to pay the Company cash amounts equal to $25.0 million per quarter, commencing in the first quarter of 2010, subject to certain adjustments and conditions, over the next five years, as described in more details below. In addition, as part of the Settlement Agreement, Samsung purchased approximately 9.6 million shares of common stock of Rambus for cash pursuant to the terms of a Stock Purchase Agreement dated January 19, 2010 (the “Stock Purchase Agreement”), as described in more details below. Finally, pursuant to the Settlement Agreement, the Company and Samsung signed a non-binding memorandum of understanding relating to discussions around a new generation of memory technologies. On an aggregate basis, Samsung is expected to make payments to the Company totaling approximately $900.0 million (subject to adjustments per the terms of the License Agreement) from these agreements (collectively, “Samsung Settlement”), of which $450.0 million has been paid through June 30, 2010. The remaining $450.0 million is expected to be paid in successive quarterly payments of approximately $25.0 million (subject to adjustments per the terms of the License Agreement) concluding in the three month period ending December 31, 2014.
     Under the License Agreement, the Company has granted to Samsung and its subsidiaries (i) a paid-up perpetual patent license for certain identified Samsung DRAM products (these Samsung DRAM products generally include all existing DRAM products aside from the Rambus proprietary products) and (ii) a five-year term patent license to all other semiconductor products. Each license is a non-exclusive, non-transferable, royalty-bearing, worldwide patent license, without the right to sublicense, solely under the applicable patent claims of Rambus for such licensed products, to make (including have made), use, sell, offer for sale and/or import such licensed products until the expiration or termination of the license pursuant to the terms of the License Agreement. The License Agreement requires that Samsung pay the Company cash payments over the next five years of (i) a fixed amount of $25.0 million each quarter during 2010 and the first two quarters of 2011, and (ii) thereafter, $25.0 million adjusted up or down based on certain levels of Samsung revenue for DRAM products licensed under the License Agreement for each quarter after 2010 and subject to a minimum of $10.0 million and a maximum of $40.0 million for each quarter. In addition, additional payments or certain adjustments to the payments by Samsung to the Company under the License Agreement may be due for certain acquisitions of businesses or assets by Samsung involving licensed products. The License Agreement and the licenses granted thereunder may be terminated upon a material breach by a party of its obligations under the agreement, a bankruptcy event involving a party or a change of control of Samsung subject to certain conditions.
     Under the Stock Purchase Agreement, on January 19, 2010, Samsung purchased for cash from the Company 9.6 million shares of common stock of the Company (the “Shares”) with certain restrictions and put rights. The number of shares issued was based on a price per share equal to $20.885 (which was the average of the open and close trading price of Rambus common stock on The

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NASDAQ Global Select Market on January 15, 2010, the last trading day prior to the date of the Stock Purchase Agreement). The Shares represent approximately 8.3% of the total outstanding shares of Rambus common stock after giving effect to the issuance thereof. The issuance of the Shares by the Company to Samsung was made through a private transaction. The Stock Purchase Agreement provides Samsung a one-time put right, beginning 18 months after the date of the Stock Purchase Agreement and extending to 19 months after the date of the Stock Purchase Agreement, to elect to put back to the Company up to 4.8 million of the Shares at the original issue price of $20.885 per share (for an aggregate purchase price of up to $100.0 million).
     The Stock Purchase Agreement prohibits the transfer of the Shares by Samsung for 18 months after the date of the Stock Purchase Agreement, subject to certain exceptions. After expiration of the transfer restriction period, the Stock Purchase Agreement provides that Samsung may transfer a limited number of shares on a daily basis, provides Rambus with a right of first offer for proposed transfers above such daily limits, and, if no sale occurs to Rambus under the right of first offer, allows Samsung to transfer the Shares. Under the Stock Purchase Agreement, the Company has also agreed that after the transfer restriction period, Samsung will have certain rights to register the Shares for sale under the securities laws of the United States, subject to customary terms and conditions.
     In addition, until 18 months after the date of the Stock Purchase Agreement, subject to customary exceptions, Samsung is subject to a standstill agreement that prohibits Samsung from, among other things, acquiring additional shares of common stock of the Company, commencing or endorsing any tender offer or exchange offer for shares of common stock of the Company, participating in any solicitation of proxies with respect to voting any shares of common stock of the Company, or announcing or submitting any proposal or offer concerning any extraordinary transaction involving the Company. Samsung is also subject to a voting agreement under the Stock Purchase Agreement that provides that Samsung will vote its Shares in favor of routine proposals (related to election of directors, certain compensation matters, authorized share capital increases and approval of the independent auditors) that are recommended by the Board of Directors of the Company at any stockholder meeting. In all other matters, the voting agreement contained in the Stock Purchase Agreement requires that Samsung vote its Shares in the same proportion as the votes that are cast by all other holders of shares of common stock of the Company. The voting agreement under the Stock Purchase Agreement terminates (i) with respect to Shares that Samsung transfers in accordance with the provisions of the Stock Purchase Agreement, (ii) upon a change of control or bankruptcy event involving the Company or (iii) when Samsung owns less than 3% of the outstanding shares of common stock of the Company.
     The Samsung Settlement is a multiple element arrangement for accounting purposes. For the multiple element arrangement, the Company identified each element of the arrangement and determined when those elements should be recognized. Using the accounting guidance from multiple element revenue arrangements, the Company allocated the consideration to each element using the estimated fair value of the elements. The Company considered several factors in determining the accounting fair value of the elements of the Samsung Settlement which included a third party valuation using an income approach, the Black-Scholes option pricing model and a residual approach (collectively the “Fair Value”). The inputs and assumptions used in this valuation were from a market participant perspective and included projected revenue, royalty rates, estimated discount rates, useful lives and income tax rates, among others. The development of a number of these inputs and assumptions in the model requires a significant amount of management judgment and is based upon a number of factors, including the selection of industry comparables, market growth rates and other relevant factors. Changes in any number of these assumptions may have had a substantial impact on the Fair Value as assigned to each element. These inputs and assumptions represent management’s best estimates at the time of the transaction.
     Based on the estimated Fair Value, the consideration of $900.0 million was allocated to the following elements:
         
    Estimated Fair  
(in millions)   Value  
Settlement Agreement:
       
Antitrust litigation settlement
  $ 85.0  
Settlement of past infringement
    190.0  
License Agreement
    385.0  
Stock Purchase Agreement
    192.0  
Memorandum of understanding (“MOU”)
     
Residual value
    48.0  
 
     
Total
  $ 900.0  
 
     
     The consideration of $900.0 million will be recognized in the Company’s financial statements as follows:

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    $575.0 million as revenue which represented the estimated Fair Value of the settlement of past infringement ($190.0 million) from the resolution of the infringement litigation and the patent license agreement ($385.0 million);
 
    $133.0 million to gain from settlement which represented the Fair Value of the resolution of the antitrust litigation ($85.0 million) and the residual value of other elements ($48.0 million) where specific fair value could not be determined, which included other claims and counter claims released;
 
    $192.0 million related to the Stock Purchase Agreement which included contingently redeemable common stock due to the restrictions and contractual put rights associated with those shares ($113.5 million) and restricted common stock issued to Samsung ($78.5 million).
     During the first quarter of 2010, the Company received cash consideration of $425.0 million from Samsung. The amount allocated to the common stock issued to Samsung was allocated to contingently redeemable common stock ($113.5 million) and stockholders’ equity ($78.5 million). The remaining $233.0 million was allocated between revenue ($137.1 million) and gain from settlement ($95.9 million) based on the remaining elements’ estimated Fair Value.
     During the second quarter of 2010, the Company received cash consideration of $25.0 million from Samsung. The amount was allocated between revenue ($14.7 million) and gain from settlement ($10.3 million) based on the estimated Fair Value for the remaining elements.
     The remaining $450.0 million is expected to be paid in successive quarterly payments of approximately $25.0 million (subject to adjustments per the terms of the License Agreement), concluding in the last quarter of 2014.
     The first half of 2010 and the remaining future cash receipts from the agreements with Samsung are expected to be recognized as follows assuming no adjustments to the payments under the terms of the agreements:
                                                         
    Six months                                              
    Ended June     Remainder                                     Estimated  
    30, 2010     of 2010     2011     2012     2013     2014     Fair Value  
(in millions)                                                        
Revenue
  $ 151.8     $ 29.4     $ 93.8     $ 100.0     $ 100.0     $ 100.0     $ 575.0  
Gain from settlement
    106.2       20.6       6.2                         133.0  
Purchase of Rambus Common Stock
    192.0                                     192.0  
 
                                         
Total
  $ 450.0     $ 50.0     $ 100.0     $ 100.0     $ 100.0     $ 100.0     $ 900.0  
 
                                         
4. Revenue Recognition
Overview
     The Company recognizes revenue when persuasive evidence of an arrangement exists, it has delivered the product or performed the service, the fee is fixed or determinable and collection is reasonably assured. If any of these criteria are not met, the Company defers recognizing the revenue until such time as all criteria are met. Determination of whether or not these criteria have been met may require the Company to make judgments, assumptions and estimates based upon current information and historical experience.
     The Company’s revenue consists of royalty revenue and contract revenue generated from agreements with semiconductor companies, system companies and certain reseller arrangements. Royalty revenue consists of patent license and technology license royalties. Contract revenue consist of fixed license fees, fixed engineering fees and service fees associated with integration of the Company’s technology solutions into its customers’ products. Contract revenue may also include support or maintenance. Reseller arrangements generally provide for the pass-through of a percentage of the fees paid to the reseller by the reseller’s customer for use of the Company’s patent and technology licenses. The Company does not recognize revenue for these arrangements until it has received notice of revenue earned by and paid to the reseller, accompanied by the pass-through payment from the reseller. The Company does not pay commissions to the reseller for these arrangements.
     In addition, the Company may enter into certain settlements of patent infringement disputes. The amount of consideration received upon any settlement (including but not limited to past royalty payments, future royalty payments and punitive damages) is allocated to each element of the settlement based on the estimated fair value of each element. In addition, revenues related to past royalties are recognized upon execution of the agreement by both parties, provided that the amounts are fixed or determinable, there are no significant obligations and collectability is reasonably assured. The Company does not recognize any revenue prior to execution of the agreement since there is no reliable basis on which it can estimate the amounts for royalties related to previous periods or assess

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collectability. Elements that are related to royalty revenue in nature (including but not limited to past royalty payments and future royalty payments) will be recorded as royalty revenue in the consolidated statements of operations. Elements that are not related to royalty revenue in nature (including but not limited to punitive damage and settlement) will be recorded as gain from settlement which is reflected as a separate line item within the operating expenses section in the consolidated statements of operations.
     Many of the Company’s licensees have the right to cancel their licenses. In such arrangements, revenue is only recognized to the extent that is consistent with the cancellation provisions. Cancellation provisions within such contracts generally provide for a prospective cancellation with no refund of fees already remitted by customers for products provided and payment for services rendered prior to the date of cancellation. Unbilled receivables represent enforceable claims and are deemed collectible in connection with the Company’s revenue recognition policy.
Royalty Revenue
     The Company recognizes royalty revenue upon notification by its licensees and when deemed collectible. The terms of the royalty agreements generally either require licensees to give the Company notification and to pay the royalties within 60 days of the end of the quarter during which the sales occur or are based on a fixed royalty that is due within 45 days of the end of the quarter. The Company has two types of royalty revenue: (1) patent license royalties and (2) technology license royalties.
      Patent licenses. The Company licenses its broad portfolio of patented inventions to semiconductor and systems companies who use these inventions in the development and manufacture of their own products. Such licensing agreements may cover the license of part, or all, of the Company‘s patent portfolio. The contractual terms of the agreements generally provide for payments over an extended period of time. For the licensing agreements with fixed royalty payments, the Company generally recognizes revenue from these arrangements as amounts become due. For the licensing agreements with variable royalty payments which can be based on either a percentage of sales or number of units sold, the Company earns royalties at the time that the licensees’ sales occur. The Company’s licensees, however, do not report and pay royalties owed for sales in any given quarter until after the conclusion of that quarter. As the Company is unable to estimate the licensees’ sales in any given quarter to determine the royalties due to the Company, the Company recognizes royalty revenues based on royalties reported by licensees during the quarter and when other revenue recognition criteria are met.
      Technology licenses. The Company develops proprietary and industry-standard chip interface products, such as RDRAM tm and XDR tm that the Company provides to its customers under technology license agreements. These arrangements include royalties, which can be based on either a percentage of sales or number of units sold. The Company earns royalties on such licensed products sold worldwide by its licensees at the time that the licensees’ sales occur. The Company’s licensees, however, do not report and pay royalties owed for sales in any given quarter until after the conclusion of that quarter. As the Company is unable to estimate the licensees’ sales in any given quarter to determine the royalties due to the Company, the Company recognizes royalty revenues based on royalties reported by licensees during the quarter and when other revenue recognition criteria are met.
Contract Revenue
     The Company generally recognizes revenue using percentage of completion for development contracts related to licenses of its interface solutions, such as XDR tm and FlexIO tm that involve significant engineering and integration services. For all license and service agreements accounted for using the percentage-of-completion method, the Company determines progress to completion using input measures based upon contract costs incurred compared to the total costs including the remaining estimated cost to completion. Part of these contract fees may be due upon the achievement of certain milestones, such as provision of certain deliverables by the Company or production of chips by the licensee. The remaining fees may be due on pre-determined dates and include significant up-front fees.
     A provision for estimated losses on fixed price contracts is made, if necessary, in the period in which the loss becomes probable and can be reasonably estimated. If the Company determines that it is necessary to revise the estimates of the total costs required to complete a contract, the total amount of revenue recognized over the life of the contract would not be affected. However, to the extent the new assumptions regarding the total efforts necessary to complete a project are less than the original assumptions, the contract fees would be recognized sooner than originally expected. Conversely, if the newly estimated total efforts necessary to complete a project are longer than the original assumptions, the contract fees will be recognized over a longer period. As of June 30, 2010, the Company has accrued a liability of approximately $0.2 million related to estimated loss contracts.

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     If application of the percentage-of-completion method results in recognizable revenue prior to an invoicing event under a customer contract, the Company will recognize the revenue and record an unbilled receivable. Amounts invoiced to the Company’s customers in excess of recognizable revenue are recorded as deferred revenue. 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 unbilled receivables in any given period.
     The Company also recognizes revenue in accordance with software revenue recognition methods for development contracts related to licenses of its chip interface products that involve non-essential engineering services and post contract support (“PCS”). These software revenue recognition methods apply to all entities that earn revenue on products containing software, where software is not incidental to the product as a whole. Contract fees for the products and services provided under these arrangements are comprised of license fees and engineering service fees which are not essential to the functionality of the product. The Company’s rates for PCS and for engineering services are specific to each development contract and not standardized in terms of rates or length. Because of these characteristics, the Company does not have a sufficient population of contracts from which to derive vendor specific objective evidence for each of the elements.
     Therefore, after the Company delivers the product, if the only undelivered element is PCS, the Company will recognize all revenue ratably over either the contractual PCS period or the period during which PCS is expected to be provided. The Company reviews assumptions regarding the PCS periods on a regular basis. If the Company determines that it is necessary to revise the estimates of the support periods, the total amount of revenue to be recognized over the life of the contract would not be affected.
5. Comprehensive Income (Loss)
     Rambus’ comprehensive income (loss) consists of its net income (loss) plus other comprehensive income (loss) consisting of unrealized gains and losses on marketable securities, net of taxes.
     The components of comprehensive income (loss), net of tax, are as follows:
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
(In thousands)   2010     2009     2010     2009  
Net income (loss)
  $ (12,490 )   $ (23,971 )   $ 138,409     $ (41,397 )
Other comprehensive income (loss):
                               
Unrealized gain (loss) on marketable securities, net of tax
    64       482       (261 )     (55 )
 
                       
Total comprehensive income (loss)
  $ (12,426 )   $ (23,489 )   $ 138,148     $ (41,452 )
 
                       
6. Equity Incentive Plans and Stock-Based Compensation
Stock Option Plans
     As of June 30, 2010, 5,522,821 shares of the 14,900,000 shares approved under the 2006 Plan remain available for grant. The 2006 Plan is now the Company’s only plan for providing stock-based incentive compensation to eligible employees, executive officers, non-employee directors and consultants.
     A summary of shares available for grant under the Company’s plans is as follows:
         
    Shares Available  
    for Grant  
Shares available as of December 31, 2009
    7,462,394  
Stock options granted
    (1,725,323 )
Stock options forfeited
    868,117  
Stock options expired under former plans
    (792,567 )
Nonvested equity stock and stock units granted (1)
    (331,404 )
Nonvested equity stock and stock units forfeited (1)
    41,604  
 
     
Total available for grant as of June 30, 2010
    5,522,821  
 
     
 
(1)   For purposes of determining the number of shares available for grant under the 2006 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.

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General Stock Option Information
     The following table summarizes stock option activity under the 1997, 1999 and 2006 Plans for the six months ended June 30, 2010 and information regarding stock options outstanding, exercisable, and vested and expected to vest as of June 30, 2010.
                                 
    Options Outstanding        
        Weighted    
            Weighted   Average    
            Average   Remaining   Aggregate
    Number of   Exercise Price   Contractual   Intrinsic
    Shares   Per Share   Term   Value
    (Dollars in thousands, except per share amounts)
Outstanding as of December 31, 2009
    14,456,110     $ 20.95                  
Options granted
    1,725,323       22.79                  
Options exercised
    (515,856 )     13.51                  
Options forfeited
    (868,117 )     43.68                  
 
                               
Outstanding as of June 30, 2010
    14,797,460       20.09       5.71     $ 34,428  
 
                               
Vested or expected to vest at June 30, 2010
    14,067,334       20.41       5.67       30,140  
Options exercisable at June 30, 2010
    9,908,957       21.14       4.60       22,151  
     The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value for in-the-money options at June 30, 2010, based on the $17.52 closing stock price of Rambus’ Common Stock on June 30, 2010 on the NASDAQ Global Select Market, which would have been received by the option holders had all option holders exercised their options as of that date. The total number of in-the-money options outstanding and exercisable as of June 30, 2010 was 5,538,076 and 4,083,268, respectively.
Employee Stock Purchase Plans
     Under the 2006 Employee Stock Purchase Plan (“ESPP”), the Company issued 161,293 shares at a price of $13.56 per share during the six months ended June 30, 2010. The Company issued 254,748 shares at a price of $8.06 per share during the six months ended June 30, 2009. As of June 30, 2010, 685,563 shares under the 2006 ESPP remained available for issuance.
Stock-Based Compensation
     For the six months ended June 30, 2010 and 2009, the Company maintained 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, the Company sponsors an 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.
Stock Options
     During the three and six months ended June 30, 2010, Rambus granted 138,350 and 1,725,323 stock options, respectively, with an estimated total grant-date fair value of $2.0 million and $22.9 million, respectively. During the three and six months ended June 30, 2010, Rambus recorded stock-based compensation related to stock options of $6.0 million and $11.7 million, respectively.
     During the three and six months ended June 30, 2009, Rambus granted 33,844 and 1,383,613 stock options, respectively, with an estimated total grant-date fair value of $0.3 million and $8.9 million, respectively. During the three and six months ended June 30, 2009, Rambus recorded stock-based compensation related to stock options of $6.0 million and $12.6 million, respectively.
     As of June 30, 2010, there was $44.9 million of total unrecognized compensation cost, net of expected forfeitures, related to non-vested stock-based compensation arrangements granted under the stock option plans. That cost is expected to be recognized over a weighted-average period of 3.3 years. The total fair value of shares vested as of June 30, 2010 was $158.6 million.
     The total intrinsic value of options exercised was $3.3 million and $5.2 million for the three and six months ended June 30, 2010, respectively. The total intrinsic value of options exercised was $0.9 million and $5.0 million for the three and six months ended June 30, 2009, respectively. Intrinsic value is the total value of exercised shares based on the price of the Company’s common stock at the time of exercise less the cash received from the employees to exercise the options.

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     During the six months ended June 30, 2010, net proceeds from employee stock option exercises totaled approximately $7.0 million.
Employee Stock Purchase Plans
     For the three and six months ended June 30, 2010, the Company recorded compensation expense related to the ESPP of $0.4 million and $0.9 million, respectively. For the three and six months ended June 30, 2009, the Company recorded compensation expense related to the ESPP of $0.5 million and $1.0 million, respectively. As of June 30, 2010, there was $0.6 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.
     There were no tax benefits realized as a result of employee stock option exercises, stock purchase plan purchases, and vesting of equity stock and stock units for the three and six months ended June 30, 2010 and 2009 calculated in accordance with accounting for share-based payments.
Valuation Assumptions
     The fair value of stock awards is estimated as of the grant date using the Black-Scholes-Merton (“BSM”) option-pricing model assuming a dividend yield of 0% and the additional weighted-average assumptions as listed in the following tables:
                                 
    Stock Option Plans
    Three Months Ended   Six Months Ended
    June 30,   June 30,
    2010   2009   2010   2009
Stock Option Plans
                               
Expected stock price volatility
    69 %     94 %     61-69 %     94-96 %
Risk free interest rate
    3.2 %     2.1 %     2.4-3.2 %     1.8-2.1 %
Expected term (in years)
    6.1       5.8       5.9 – 6.1       5.3 – 5.8  
Weighted-average fair value of stock options granted
  $ 14.38     $ 9.18     $ 13.27     $ 6.45  
                                 
    Employee Stock Purchase Plan
    Three Months Ended   Six Months Ended
    June 30,   June 30,
    2010   2009   2010   2009
Employee Stock Purchase Plan
                               
Expected stock price volatility
    54 %     92 %     54 %     92 %
Risk free interest rate
    0.3 %     0.3 %     0.3 %     0.3 %
Expected term (in years)
    0.5       0.5       0.5       0.5  
Weighted-average fair value of purchase rights granted under the purchase plan
  $ 7.46     $ 4.97     $ 7.46     $ 4.97  
Nonvested Equity Stock and Stock Units
     For the three and six months ended June 30, 2010, the Company granted nonvested equity stock units to certain officers and employees totaling 50,000 shares and 220,936 shares under the 2006 Plan, 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. The nonvested equity stock units were valued at the date of grant giving them a fair value of approximately $1.0 million and $4.9 million, respectively. The Company occasionally grants nonvested equity stock units to its employees with vesting subject to the achievement of certain performance conditions. During the three and six months ended June 30, 2010, the achievement of certain performance conditions for certain performance equity stock units was considered probable, and as a result, the Company recognized an immaterial amount of stock-based compensation expense related to these performance stock units.
     For the three and six months ended June 30, 2010, the Company recorded stock-based compensation expense of approximately $1.5 million and $3.1 million, respectively, related to all outstanding unvested equity stock grants. For the three and six months ended June 30, 2009, the Company recorded stock-based compensation expense of approximately $1.4 million and $2.7 million, respectively, related to all outstanding unvested equity stock grants. Unrecognized stock-based compensation related to all nonvested equity stock grants, net of estimated forfeitures, was approximately $10.4 million at June 30, 2010. This is expected to be recognized over a weighted average of 2.2 years.

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     The following table reflects the activity related to nonvested equity stock and stock units for the six months ended June 30, 2010:
                 
            Weighted-
            Average
            Grant-Date
Nonvested Equity Stock and Stock Units   Shares   Fair Value
Nonvested at December 31, 2009
    783,976     $ 16.24  
Granted
    220,936       22.38  
Vested
    (125,977 )     17.24  
Forfeited
    (27,736 )     18.76  
 
               
Nonvested at June 30, 2010
    851,199       17.60  
 
               
7. Marketable Securities
     Rambus invests its excess cash and cash equivalents primarily in U.S. government agency and treasury notes, commercial paper, corporate notes and bonds, money market funds and municipal notes and bonds that mature within three years.
     All cash equivalents and marketable securities are classified as available-for-sale and are summarized as follows:
                                         
    June 30, 2010  
                    Gross     Gross     Weighted  
                    Unrealized     Unrealized     Rate of  
(in thousands)   Fair Value     Amortized Cost     Gains     Losses     Return  
Money Market Funds
  $ 330,211     $ 330,211     $     $       0.01 %
U.S. Government Bonds and Notes
    230,260       230,139       133       (12 )     0.42 %
Corporate Notes, Bonds and Commercial Paper
    32,634       32,647       10       (23 )     0.47 %
Corporate Securities
    179       172       7             0.00 %
 
                               
Total cash equivalents and marketable securities
    593,284       593,169       150       (35 )        
Cash
    4,325       4,325                      
 
                               
Total cash, cash equivalents and marketable securities
  $ 597,609     $ 597,494     $ 150     $ (35 )        
 
                               
                                         
    December 31, 2009  
                    Gross     Gross     Weighted  
                    Unrealized     Unrealized     Rate of  
(in thousands)   Fair Value     Amortized Cost     Gains     Losses     Return  
Money Market Funds
  $ 280,908     $ 280,908     $     $       0.01 %
U.S. Government Bonds and Notes
    138,829       138,521       377       (69 )     1.09 %
Corporate Notes, Bonds and Commercial Paper
    32,291       32,222       70       (1 )     1.89 %
 
                               
Total cash equivalents and marketable securities
    452,028       451,651       447       (70 )        
Cash
    8,165       8,165                      
 
                               
Total cash, cash equivalents and marketable securities
  $ 460,193     $ 459,816     $ 447     $ (70 )        
 
                               
     Available-for-sale securities are reported at fair value on the balance sheets and classified as follows:
                 
    June 30,     December 31,  
    2010     2009  
    (in thousands)  
Cash equivalents
  $ 330,211     $ 280,908  
Short term marketable securities
    263,073       171,120  
 
           
Total cash equivalents and marketable securities
    593,284       452,028  
Cash
    4,325       8,165  
 
           
Total cash, cash equivalents and marketable securities
  $ 597,609     $ 460,193  
 
           
     The Company continues to invest in high quality, highly liquid debt securities that mature within three years. 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. As of June 30, 2010, marketable debt securities with a fair value of $59.2 million, which mature within one year, had insignificant unrealized losses. The Company has no intent to sell, there is no requirement to sell and the Company believes 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

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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 estimated fair value of cash equivalents and marketable securities classified by date of contractual maturity and the associated unrealized gain, net, at June 30, 2010 and December 31, 2009 are as follows:
                                 
    As of     Unrealized Gain, net  
    June 30,     December 31,     June 30,     December 31,  
    2010     2009     2010     2009  
    (in thousands)  
Contractual maturity:
                               
Due within one year
  $ 593,284     $ 419,054     $ 115     $ 250  
Due from one year through three years
          32,974             127  
 
                       
 
  $ 593,284     $ 452,028     $ 115     $ 377  
 
                       
     The unrealized gains, net, were insignificant in relation to the Company’s total available-for-sale portfolio. The unrealized gains, net, can be primarily attributed to a combination of market conditions as well as the demand for and duration of the Company’s U.S. government bonds and notes. See Note 15, “Fair Value of Financial Instruments,” for fair value discussion regarding the Company’s cash equivalents and marketable securities.
8. Commitments and Contingencies
     On December 15, 2009, the Company entered into a definitive triple net space lease agreement with MT SPE, LLC (the “Landlord”) whereby the Company leases approximately 125,000 square feet of office space located at 1050 Enterprise Way in Sunnyvale, California (the “Sunnyvale Lease”). The office space will be used for the Company’s corporate headquarters, as well as engineering, marketing and administrative operations and activities. The Company plans to move to the new premises in the second half of 2010 following completion of leasehold improvements. The Sunnyvale Lease has a term of 120 months from the commencement date. The initial annual base rent is $3.7 million, subject to a full abatement of rent for the first six months of the Sunnyvale Lease term. The annual base rent increases each year to certain fixed amounts over the course of the term as set forth in the Sunnyvale Lease and will be $4.8 million in the tenth year. In addition to the base rent, the Company will also pay operating expenses, insurance expenses, real estate taxes and a management fee. The Company has two options to extend the Sunnyvale Lease for a period of 60 months each and a one-time option to terminate the Sunnyvale Lease after 84 months in exchange for an early termination fee.
     During the first quarter of 2010, the Company began a build-out of this facility and expects to incur approximately $15.3 million in construction costs. Under the terms of the Sunnyvale Lease, the landlord has agreed to reimburse the Company approximately $9.1 million of this amount. Because certain improvements to be constructed by the Company are considered structural in nature and the Company is responsible for any cost overruns, for accounting purposes the Company is treated as the owner of the construction project for the effect of lessee involvement in asset construction. Therefore, the Company has capitalized $25.1 million in property and equipment based on the estimated fair value of the portion of the building that it will occupy with a corresponding liability for construction in progress. The fair value was determined as of December 15, 2009 using level 3 fair value inputs (See Note 15, “Fair Value of Financial Instruments,” for discussion on level 3 inputs) and the cost approach which measures the value of an asset as the cost to reconstruct or replace it with another asset of like utility.
     Upon completion of construction, the Company will apply sale-leaseback accounting. At that time, the Company will determine whether the lease will be treated as a capital or operating lease.
     On March 8, 2010, the Company entered into a lease agreement with Fogg-Brecksville Development Co. (the “Ohio Landlord”) for 24,814 square feet of space consisting of 7,158 square feet of office area and 17,656 square feet of warehouse area, located in Brecksville, Ohio (the “Ohio Lease”). The Company plans to move to the new premises in the third quarter of 2010 following completion of leasehold improvements. The warehouse area will be converted into office space and manufacturing space. The office space will be used for the Lighting and Display Technology (“LDT”) group’s engineering activities while the manufacturing space will be used for the manufacturer of prototypes for the LDT group. The Ohio Lease has a term of 60 months from the commencement date which is the earlier of (i) the date upon which the Company first takes occupancy of the premises once the construction work is completed or (ii) the first day of the month following completion and notification by the lessor to the Company of completion of construction of the building. The initial annual base rent is approximately $136,000. In addition to the base rent, the Company will also pay operating expenses, insurance expenses, real estate taxes and a management fee. The Company has an option to extend the Lease for an additional period of 60 months.

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     During the first quarter of 2010, the Company began a build-out of this facility and expects to incur approximately $1.6 million in construction costs. Because certain improvements to be constructed by the Company are considered structural in nature and the Company is responsible for any cost overruns, for accounting purposes the Company is treated as the owner of the construction project for the effect of lessee involvement in asset construction. Therefore, the Company has capitalized $0.8 million in property and equipment based on the estimated fair value of the portion of the building that it will occupy with a corresponding liability for construction in progress. The fair value was determined as of March 8, 2010 using level 3 fair value inputs and the cost approach which measures the value of an asset as the cost to reconstruct or replace it with another asset of like utility. Upon completion of construction in the third quarter of 2010, the Company will account for the arrangement as a financing arrangement as sale-leaseback accounting cannot be applied. The building will be reflected as an asset on the Company’s balance sheets throughout the term of the lease. The rental payments will be treated as interest expense recorded on a straight-line basis over the term of the lease and the building will be depreciated on a straight-line basis over a period of 15 years.. At the end of the lease term in 2015, the Company has an option to renew the lease for an additional 60 months. Should the Company decide not to renew the lease, the Company would reverse the net book value of the building and the corresponding financing liability and record the difference as a gain.
     On June 29, 2009, the Company entered into an Indenture by and between the Company and U.S. Bank, National Association, as trustee, relating to the issuance by the Company of $150.0 million aggregate principal amount of 5% convertible senior notes due June 15, 2014 (the “2014 Notes”). On July 10, 2009, an additional $22.5 million in aggregate principal amount of 2014 Notes were issued as a result of the underwriters exercising their overallotment option. The aggregate principal amount of the 2014 Notes outstanding as of June 30, 2010 was $172.5 million, offset by unamortized debt discount of $56.3 million in the accompanying consolidated balance sheets. The debt discount is currently being amortized over the remaining 48 months until maturity of the 2014 Notes on June 15, 2014. See Note 16, “Convertible Notes,” for additional details.
     As of June 30, 2010, Rambus’ material contractual obligations are:
                                                         
            Remainder                                
(in thousands)   Total     of 2010     2011     2012     2013     2014     Thereafter  
Contractual obligations (1)
                                                       
Leases (2)
  $ 48,300     $ 4,224     $ 4,905     $ 4,999     $ 4,449     $ 4,580     $ 25,143  
Convertible notes
    172,500                               172,500        
Interest payments related to convertible notes
    34,120       4,313       8,625       8,625       8,625       3,932        
 
                                         
Total
  $ 254,920     $ 8,537     $ 13,530     $ 13,624     $ 13,074     $ 181,012     $ 25,143  
 
                                         
 
(1)   The above table does not reflect possible payments in connection with uncertain tax benefits of approximately $10.6 million, including $8.6 million recorded as a reduction of long-term deferred tax assets and $2.0 million in long-term income taxes payable, as of June 30, 2010. As noted below in Note 10, “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)   Includes both the Sunnyvale Lease and Ohio Lease.
     Rent expense was approximately $1.8 million and $3.6 million for the three and six months ended June 30, 2010, respectively. Rent expense was approximately $1.6 million and $3.2 million for the three and six months ended June 30, 2009, respectively.
     Deferred rent of $0.9 million as of June 30, 2010 was included primarily in other long-term liabilities. Deferred rent of $0.7 million as of December 31, 2009 was included primarily in current liabilities.
Indemnifications
     The Company enters into standard license agreements in the ordinary course of business. Although the Company does not indemnify most of its customers, there are times when an indemnification is a necessary means of doing business. Indemnifications cover customers for losses suffered or incurred by them as a result of any patent, copyright, or other intellectual property infringement claim by any third party with respect to the Company’s products. The maximum amount of indemnification the Company could be required to make under these agreements is generally limited to fees received by the Company.
     Several securities fraud class actions, private lawsuits and shareholder derivative actions were filed in state and federal courts against certain of the Company’s current and former officers and directors related to the stock option granting actions. As permitted under Delaware law, the Company has agreements whereby its officers and directors are indemnified for certain events or occurrences

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while the officer or director is, or was serving, at the Company’s request in such capacity. The term of the indemnification period is for the officer’s or director’s term in such capacity. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited. The Company has a director and officer insurance policy that reduces the Company’s exposure and enables the Company to recover a portion of future amounts to be paid. As a result of these indemnification agreements, the Company continues to make payments on behalf of current and former officers. As of June 30, 2010, the Company had made payments of approximately $13.7 million on their behalf, including $1.6 million in the quarter ended June 30, 2010. These payments were recorded under costs of restatement and related legal activities in the consolidated statements of operations. The Company received approximately $5.3 million from the former officers related to their settlement agreements with the Company in connection with the derivative and class action lawsuits which was comprised of approximately $4.5 million in cash received in the first quarter of 2009 as well as approximately 163,000 shares of the Company’s stock with a value of approximately $0.8 million in the fourth quarter of 2008. Additionally, during the six months ended June 30, 2010, the Company received $0.1 million from insurance settlements related to the defense of the Company, its directors and its officers which were recorded under costs (recoveries) of restatement and related legal activities in the consolidated statements of operations.
9. Stockholders’ Equity
Contingently Redeemable Common Stock
     On January 19, 2010, pursuant to the terms of the Stock Purchase Agreement, Samsung purchased for cash the Shares with certain restrictions and put rights. The issuance of the Shares by the Company to Samsung was made through a private transaction. The Stock Purchase Agreement provides Samsung a one-time put right, beginning 18 months after the date of the Stock Purchase Agreement and extending to 19 months after the date of the Stock Purchase Agreement, to elect to put back to the Company up to 4.8 million of the Shares at the original issue price of $20.885 per share (for an aggregate purchase price of up to $100.0 million). The 4.8 million shares have been recorded, at estimated Fair Value, as contingently redeemable common stock on the consolidated balance sheet as of June 30, 2010.
     The Stock Purchase Agreement prohibits the transfer of the Shares by Samsung for 18 months after the date of the Stock Purchase Agreement, subject to certain exceptions. After expiration of the transfer restriction period, the Stock Purchase Agreement provides that Samsung may transfer a limited number of shares on a daily basis, provides the Company with a right of first offer for proposed transfers above such daily limits, and, if no sale occurs to the Company under the right of first offer, allows Samsung to transfer the Shares. Under the Stock Purchase Agreement, the Company has also agreed that after the transfer restriction period, Samsung will have certain rights to register the Shares for sale under the securities laws of the United States, subject to customary terms and conditions.
     The 9.6 million shares were accounted for as part of a multiple element arrangement where the Fair Value was determined to be $192.0 million as follows:
    $113.5 million related to 4.8 million shares treated as contingently redeemable common stock due to the contractual put rights associated with those shares
 
    $78.5 million related to the remaining 4.8 million shares treated as stockholders’ equity
     See Note 3, “Settlement Agreement with Samsung,” for further discussion.
Share Repurchase Program
     In October 2001, the Company’s Board of Directors (the “Board”) approved a share repurchase program of its Common Stock, principally to reduce the dilutive effect of employee stock options. Under this program, the Board approved the authorization to repurchase up to 19.0 million shares of the Company’s outstanding Common Stock over an undefined period of time. On February 25, 2010, the Board approved a new share repurchase program authorizing the repurchase of up to an additional 12.5 million shares. Share repurchases under the program may be made through open market, established plan or privately negotiated transactions in accordance with all applicable securities laws, rules, and regulations. There is no expiration date applicable to the program. The new share repurchase program replaces the program authorized in October 2001.
     During the three months ended June 30, 2010, the Company repurchased approximately 3.0 million shares of its Common Stock with an aggregate price of approximately $68.8 million. During the six months ended June 30, 2010, the Company repurchased approximately 4.2 million shares of its Common Stock with an aggregate price of approximately $95.3 million. As of June 30, 2010,

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the Company had repurchased a cumulative total of approximately 21.0 million shares of its Common Stock with an aggregate price of approximately $329.0 million since the commencement of the program in 2001. As of June 30, 2010, there remained an outstanding authorization to repurchase approximately 10.5 million shares of the Company’s outstanding Common Stock.
     The Company records stock 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 cost of the shares repurchased exceeds the average original proceeds per share received from the issuance of Common Stock. During the six months ended June 30, 2010, the cumulative price of the shares repurchased exceeded the proceeds received from the issuance of the same number of shares. The excess of $81.4 million was recorded as an increase to accumulated deficit for the six months ended June 30, 2010. During the six months ended June 30, 2009, the Company did not repurchase any Common Stock.
10. Income Taxes
     The effective tax rate for the three and six months ended June 30, 2010 was (23.7)% and 25.8%, respectively, which is lower than the U.S. statutory tax rate applied to the Company’s net loss primarily due to a full valuation allowance on its U.S. net deferred tax assets partially offset by foreign withholding taxes and state alternative minimum taxes. The effective tax rate for the three and six months ended June 30, 2009 was 0.1% for both periods which was lower than the U.S. statutory tax rate applied to the Company’s net loss primarily due to a full valuation allowance on its U.S. net deferred tax assets, foreign income taxes and state income taxes, partially offset by refundable research and development tax credits.
     During the three and six months ended June 30, 2010, the Company paid withholding taxes of $4.1 million and $46.8 million, respectively, to the Korean tax authorities related to the payments received under the Settlement Agreement and License Agreement with Samsung. The Company recorded a provision for income taxes of $2.4 million for the three months ended June 30, 2010, which is primarily comprised of the Korean withholding taxes offset by an alternative minimum tax benefit. The Company recorded a provision for income taxes of $48.1 million for the six months ended June 30, 2010, which is primarily comprised of the Korean withholding taxes and state alternative minimum taxes. As the Company continues to maintain a valuation allowance against its U.S. deferred tax assets, the Company’s tax provision is based primarily on the Korean withholding taxes and state alternative minimum taxes.
     As of June 30, 2010, the Company’s consolidated balance sheet included net deferred tax assets, before valuation allowance, of approximately $97.3 million, which consists of net operating loss carryovers, tax credit carryovers, depreciation and amortization, employee stock-based compensation expenses and certain liabilities, partially reduced by deferred tax liabilities associated with the convertible debt instruments that may be settled in cash upon conversion, including partial cash settlements. As of June 30, 2010, a valuation allowance of $95.1 million has been recorded against the U.S. deferred tax assets. During the six months ended June 30, 2010, the Company reduced its deferred tax assets from $153.1 million to $97.3 million, and reduced its valuation allowance from $150.9 million to $95.1 million. This partial release of the valuation allowance offset the U.S. tax provision for the six months ended June 30, 2010. Management periodically evaluates the realizability of the Company’s net deferred tax assets based on all available evidence, both positive and negative. The realization of net deferred tax assets is solely dependent on the Company’s ability to generate sufficient future taxable income during periods prior to the expiration of tax statutes to fully utilize these assets. The Company intends to maintain the valuation allowance until sufficient positive evidence exists to support reversal of the valuation allowance.
     The Company maintains liabilities for uncertain tax benefits within its non-current income taxes payable accounts. These liabilities involve judgment and estimation and are monitored by management based on the best information available including changes in tax regulations, the outcome of relevant court cases and other information.
     As of June 30, 2010, the Company had $10.6 million of unrecognized tax benefits, including $7.6 million recorded as a reduction of long-term deferred tax assets, which is net of approximately $1.0 million of federal tax benefit, and including $2.0 million in long-term income taxes payable. If recognized, approximately $0.8 million would be recorded as an income tax benefit. No benefit would be recorded for the remaining unrecognized tax benefits as the recognition would require a corresponding increase in the valuation allowance. As of December 31, 2009, the Company had $10.4 million of unrecognized tax benefits, including $7.5 million recorded as a reduction of long-term deferred tax assets, which is net of approximately $0.9 million of federal tax benefits, and including $2.0 million in long-term income taxes payable.
     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.

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     The Company recognizes interest and penalties related to uncertain tax positions as a component of the income tax provision (benefit). At June 30, 2010 and December 31, 2009, an insignificant amount of interest and penalties are included in long-term income taxes payable.
     The Company files U.S. federal income tax returns as well as income tax returns in various states and foreign jurisdictions. The Company is currently under examination by the California Franchise Tax Board for the fiscal year ended March 31, 2003 and the years ended December 31, 2003 and 2004. Although the outcome of any tax audit is uncertain, the Company believes it has adequately provided for any additional taxes that may be required to be paid as a result of such examinations. If the Company determines that no payment will ultimately be required, the reversal of these tax liabilities may result in tax benefits being recognized in the period when that conclusion is reached. However, if an ultimate tax assessment exceeds the recorded tax liability for that item, an additional tax provision may need to be recorded. The impact of such adjustments in the Company’s tax accounts could have a material impact on the consolidated results of operations in future periods.
     The Company is subject to examination by the Internal Revenue Service (“IRS”) for the tax years ended 2006 through 2008. The Company is also subject to examination by the State of California for tax years ended 2005 through 2008. In addition, any R&D credit and net operating loss carryforwards generated in prior years and utilized in these or future years may also be subject to examination by the IRS and the State of California. The Company is also subject to examination in various other jurisdictions for various periods.
11. 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. As discussed in Note 3, “Settlement Agreement with Samsung,” the Company reported approximately 4.8 million shares issued to Samsung as contingently redeemable common stock due to the contractual put rights associated with those shares. As such, the Company uses the two-class method for reporting earnings per share.
     The following table sets forth the computation of basic and diluted income (loss) per share:
                                 
    Three Months Ended June 30,  
    2010     2009  
    (In thousands, except per share amounts)  
    CRCS*     Other CS**     CRCS*     Other CS**  
Basic net loss per share:
                               
Numerator:
                               
Allocation of undistributed earnings
  $ (528 )   $ (11,962 )   $     $ (23,971 )
Denominator:
                               
Weighted-average common shares outstanding
    4,788       108,533             104,675  
 
                       
Basic net loss per share
  $ (0.11 )   $ (0.11 )   $     $ (0.23 )
 
                       
 
                               
Diluted net loss per share:
                               
Numerator:
                               
Allocation of undistributed earnings for basic computation
  $ (528 )   $ (11,962 )   $     $ (23,971 )
Reallocation of undistributed earnings
                       
 
                       
Allocation of undistributed earnings for diluted computation
  $ (528 )   $ (11,962 )   $     $ (23,971 )
 
                       
Denominator:
                               
Number of shares used in basic computation
    4,788       108,533             104,675  
Dilutive potential shares from stock options, ESPP, Convertible notes and nonvested equity stock and stock units
                       
 
                       
Number of shares used in diluted computation
    4,788       108,533             104,675  
 
                       
Diluted net loss per share
  $ (0.11 )   $ (0.11 )   $     $ (0.23 )
 
                       
 
                               

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    Six Months Ended June 30,  
    2010     2009  
    (In thousands, except per share amounts)  
    CRCS*     Other CS**     CRCS*     Other CS**  
Basic net income (loss) per share:
                               
Numerator:
                               
Allocation of undistributed earnings
  $ 5,271     $ 133,138     $     $ (41,397 )
Denominator:
                               
Weighted-average common shares outstanding
    4,312       108,915             104,536  
 
                       
Basic net income (loss) per share
  $ 1.22     $ 1.22     $     $ (0.40 )
 
                       
 
                               
Diluted net income (loss) per share:
                               
Numerator:
                               
Allocation of undistributed earnings for basic computation
  $ 5,271     $ 133,138     $     $ (41,397 )
Reallocation of undistributed earnings
    (189 )     189              
 
                       
Allocation of undistributed earnings for diluted computation
  $ 5,082     $ 133,327     $     $ (41,397 )
 
                       
Denominator:
                               
Number of shares used in basic computation
    4,312       108,915             104,536  
Dilutive potential shares from stock options, ESPP, Convertible notes and nonvested equity stock and stock units
          4,207              
 
                       
Number of shares used in diluted computation
    4,312       113,122             104,536  
 
                       
Diluted net income (loss) per share
  $ 1.18     $ 1.18     $     $ (0.40 )
 
                       
 
*   CRCS — Contingently Redeemable Common Stock
 
**   Other CS — Common Stock other than CRCS
     For the three months ended June 30, 2010 and 2009, options to purchase approximately 6.3 million and 13.5 million shares, respectively, and for the six months ended June 30, 2010 and 2009, options to purchase approximately 6.3 million and 13.8 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 three months ended June 30, 2010 and 2009, an additional 4.1 million and 1.2 million shares, respectively, and for the six months ended June 30, 2009, an additional 0.7 million shares, including nonvested equity stock and stock units, that would be dilutive have been excluded from the weighted average dilutive shares because there were net losses for the periods.
12. Business Segments, Exports and Major Customers
     Rambus has two operating segments: (1) the design, development and licensing of semiconductor technology and (2) lighting and display technology. For reporting purpose, the two operating segments have been combined as the assets and operating results of the lighting and display group did not meet the annual quantitative thresholds for disclosure as of June 30, 2010.
     Three customers accounted for 38%, 17% and 10%, respectively, of revenue in the three months ended June 30, 2010. Five customers accounted for 26%, 15%, 14%, 13% and 12%, respectively, of revenue in the three months ended June 30, 2009. One customer accounted for 76% of revenue in the six months ended June 30, 2010. Five customers accounted for 25%, 15%, 14%, 12% and 12%, respectively, of revenue in the six months ended June 30, 2009. Rambus expects that its revenue concentration will decrease over time as Rambus licenses new customers.
     Rambus licenses its technologies and patents to customers in multiple geographic regions. Revenue from customers in the following geographic regions was recognized as follows:
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
(In thousands)   2010     2009     2010     2009  
Japan
  $ 18,837     $ 22,070     $ 37,873     $ 43,881  
Korea
    14,713       230       151,879       372  
North America
    5,292       4,624       10,777       9,892  
Asia-Pacific
    13       18       58       84  
Europe
    7       41       139       88  
 
                       
 
  $ 38,862     $ 26,983     $ 200,726     $ 54,317  
 
                       

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     At June 30, 2010, of the $39.0 million of total property and equipment, approximately $37.6 million are located in the United States, $1.2 million are located in India and $0.2 million are located in other foreign locations. At December 31, 2009, of the $39.0 million of total property and equipment, approximately $37.1 million are located in the United States, $1.6 million are located in India and $0.3 million were located in other foreign locations.
13. Amortizable Intangible Assets
     The components of the Company’s intangible assets as of June 30, 2010 and December 31, 2009 were as follows:
                         
    As of June 30, 2010  
    Gross Carrying     Accumulated     Net Carrying  
    Amount     Amortization     Amount  
    (In thousands)  
Patents
  $ 18,223     $ (7,846 )   $ 10,377  
Intellectual property
    10,384       (10,384 )      
Customer contracts and contractual relationships
    4,050       (2,950 )     1,100  
Existing technology
    17,550       (3,874 )     13,676  
Non-competition agreement
    100       (100 )      
 
                 
Total intangible assets
  $ 50,307     $ (25,154 )   $ 25,153  
 
                 
                         
    As of December 31, 2009  
    Gross Carrying     Accumulated     Net Carrying  
    Amount     Amortization     Amount  
    (In thousands)  
Patents
  $ 12,441     $ (6,876 )   $ 5,565  
Intellectual property
    10,384       (10,384 )      
Customer contracts and contractual relationships
    4,050       (2,717 )     1,333  
Existing technology
    17,550       (2,788 )     14,762  
Non-competition agreement
    100       (100 )      
 
                 
Total intangible assets
  $ 44,525     $ (22,865 )   $ 21,660  
 
                 
     Amortization expense for intangible assets for the three and six months ended June 30, 2010 was $1.2 million and $2.3 million, respectively. Amortization expense for intangible assets for the three and six months ended June 30, 2009 was $0.7 million and $1.5 million, respectively.
     As part of the Company’s ongoing acquisition activities to broaden its technology portfolio, the Company purchased patents for $3.8 million in two asset acquisitions during the first half of 2010. In addition, during the second quarter of 2010, the Company purchased patents for $2.0 million in a business combination for the same reasons.
     The estimated future amortization expense of intangible assets as of June 30, 2010 was as follows (amounts in thousands):
         
Years Ending December 31:   Amount  
2010 (remaining 6 months)
  $ 2,488  
2011
    4,661  
2012
    4,388  
2013
    4,082  
2014
    3,182  
Thereafter
    6,352  
 
     
 
  $ 25,153  
 
     
14. Litigation and Asserted Claims
   Hynix Litigation
  U.S District Court of the Northern District of California

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     On August 29, 2000, Hynix (formerly Hyundai) and various subsidiaries filed suit against Rambus in the U.S. District Court for the Northern District of California. The complaint, as amended and narrowed through motion practice, asserts claims for fraud, violations of federal antitrust laws and deceptive practices in connection with Rambus’ participation in a standards setting organization called JEDEC, and seeks a declaratory judgment that the Rambus patents-in-suit are unenforceable, invalid and not infringed by Hynix, compensatory and punitive damages, and attorneys’ fees. Rambus denied Hynix’s claims and filed counterclaims for patent infringement against Hynix.
     The case was divided into three phases. In the first phase, Hynix tried its unclean hands defense beginning on October 17, 2005 and concluding on November 1, 2005. In its January 4, 2006 Findings of Fact and Conclusions of Law, the court held that Hynix’s unclean hands defense failed. Among other things, the court found that Rambus did not adopt its document retention policy in bad faith, did not engage in unlawful spoliation of evidence, and that while Rambus disposed of some relevant documents pursuant to its document retention policy, Hynix was not prejudiced by the destruction of Rambus documents. On January 19, 2009, Hynix filed a motion for reconsideration of the court’s unclean hands order and for summary judgment on the ground that the decision by the Delaware court in the pending Micron-Rambus litigation (described below) should be given preclusive effect. In its motion Hynix requested alternatively that the court’s unclean hands order be certified for appeal and that the remainder of the case be stayed. Rambus filed an opposition to Hynix’s motion on January 26, 2009, and a hearing was held on January 30, 2009. On February 3, 2009, the court denied Hynix’s motions and restated its conclusions that Rambus had not anticipated litigation until late 1999 and that Hynix had not demonstrated any prejudice from any alleged destruction of evidence.
     The second phase of the Hynix-Rambus trial — on patent infringement, validity and damages — began on March 15, 2006, and was submitted to the jury on April 13, 2006. On April 24, 2006, the jury returned a verdict in favor of Rambus on all issues and awarded Rambus a total of approximately $307 million in damages, excluding prejudgment interest. Specifically, the jury found that each of the ten selected patent claims was supported by the written description, and was not anticipated or rendered obvious by prior art; therefore, none of the patent claims was invalid. The jury also found that Hynix infringed all eight of the patent claims for which the jury was asked to determine infringement; the court had previously determined on summary judgment that Hynix infringed the other two claims at issue in the trial. On July 14, 2006, the court granted Hynix’s motion for a new trial on the issue of damages unless Rambus agreed to a reduction of the total jury award to approximately $134 million. The court found that the record supported a maximum royalty rate of 1% for SDR SDRAM and 4.25% for DDR SDRAM, which the court applied to the stipulated U.S. sales of infringing Hynix products through December 31, 2005. On July 27, 2006, Rambus elected remittitur of the jury’s award to approximately $134 million. On August 30, 2006, the court awarded Rambus prejudgment interest for the period June 23, 2000 through December 31, 2005. Hynix filed a motion on July 7, 2008 to reduce the amount of remitted damages and any supplemental damages that the court may award, as well as to limit the products that could be affected by any injunction that the court may grant, on the grounds of patent exhaustion. Following a hearing on August 29, 2008, the court denied Hynix’s motion. In separate orders issued December 2, 2008, January 16, 2009, and January 27, 2009, the court denied Hynix’s post-trial motions for judgment as a matter of law and new trial on infringement and validity.
     On June 24, 2008, the court heard oral argument on Rambus’ motion to supplement the damages award and for equitable relief related to Hynix’s infringement of Rambus patents. On February 23, 2009, the court issued an order (1) granting Rambus’ motion for supplemental damages and prejudgment interest for the period after December 31, 2005, at the same rates ordered for the prior period; (2) denying Rambus’ motion for an injunction; and (3) ordering the parties to begin negotiations regarding the terms of a compulsory license regarding Hynix’s continued manufacture, use, and sale of infringing devices.
     The third phase of the Hynix-Rambus trial involved Hynix’s affirmative JEDEC-related antitrust and fraud allegations against Rambus. On April 24, 2007, the court ordered a coordinated trial of certain common JEDEC-related claims alleged by the manufacturer parties (i.e., Hynix, Micron, Nanya and Samsung) and defenses asserted by Rambus in Hynix v Rambus, Case No. C 00-20905 RMW, and three other cases pending before the same court ( Rambus Inc. v. Samsung Electronics Co. Ltd. et al. , Case No. 05-02298 RMW, Rambus Inc. v. Hynix Semiconductor Inc., et al. , Case No. 05-00334, and Rambus Inc. v. Micron Technology, Inc., et al. , Case No. C 06-00244 RMW, each described in further detail below). On December 14, 2007, the court excused Samsung from the coordinated trial based on Samsung’s agreement to certain conditions, including trial of its claims against Rambus by the court within six months following the conclusion of the coordinated trial. The coordinated trial involving Rambus, Hynix, Micron and Nanya began on January 29, 2008, and was submitted to the jury on March 25, 2008. On March 26, 2008, the jury returned a verdict in favor of Rambus and against Hynix, Micron, and Nanya on each of their claims. Specifically, the jury found that Hynix, Micron, and Nanya failed to meet their burden of proving that: (1) Rambus engaged in anticompetitive conduct; (2) Rambus made important representations that it did not have any intellectual property pertaining to the work of JEDEC and intended or reasonably expected that the representations would be heard by or repeated to others including Hynix, Micron or Nanya; (3) Rambus uttered deceptive half-

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truths about its intellectual property coverage or potential coverage of products compliant with synchronous DRAM standards then being considered by JEDEC by disclosing some facts but failing to disclose other important facts; or (4) JEDEC members shared a clearly defined expectation that members would disclose relevant knowledge they had about patent applications or the intent to file patent applications on technology being considered for adoption as a JEDEC standard. Hynix, Micron, and Nanya filed motions for a new trial and for judgment on certain of their equitable claims and defenses. A hearing on those motions was held on May 1, 2008. A further hearing on the equitable claims and defenses was held on May 27, 2008. On July 24, 2008, the court issued an order denying Hynix, Micron, and Nanya’s motions for new trial.
     On March 3, 2009, the court issued an order rejecting Hynix, Micron, and Nanya’s equitable claims and defenses that had been tried during the coordinated trial. The court concluded (among other things) that (1) Rambus did not have an obligation to disclose pending or anticipated patent applications and had sound reasons for not doing so; (2) the evidence supported the jury’s finding that JEDEC members did not share a clearly defined expectation that members would disclose relevant knowledge they had about patent applications or the intent to file patent applications on technology being considered for adoption as a JEDEC standard; (3) the written JEDEC disclosure policies did not clearly require members to disclose information about patent applications and the intent to file patent applications in the future; (4) there was no clearly understood or legally enforceable agreement of JEDEC members to disclose information about patent applications or the intent to seek patents relevant to standards being discussed at JEDEC; (5) during the time Rambus attended JEDEC meetings, Rambus did not have any patent application pending that covered a JEDEC standard, and none of the patents in suit was applied for until well after Rambus resigned from JEDEC; (6) Rambus’s conduct at JEDEC did not constitute an estoppel or waiver of its rights to enforce its patents; (7) Hynix, Micron, and Nanya failed to carry their burden to prove their asserted waiver and estoppel defenses not directly based on Rambus’s conduct at JEDEC; (8) the evidence did not support a finding of any material misrepresentation, half truths or fraudulent concealment by Rambus related to JEDEC upon which Nanya relied; (9) the manufacturers failed to establish that Rambus violated unfair competition law by its conduct before JEDEC; (10) the evidence related to Rambus’s patent prosecution did not establish that Rambus unduly delayed in prosecuting the claims in suit; (11) Rambus did not unreasonably delay bringing its patent infringement claims; and (12) there is no basis for any unclean hands defense or unenforceability claim arising from Rambus’s conduct.
     On March 10, 2009, the court entered final judgment against Hynix in the amount of approximately $397 million as follows: approximately $134 million for infringement through December 31, 2005; approximately $215 million for infringement from January 1, 2006 through January 31, 2009; and approximately $48 million in pre-judgment interest. Post-judgment interest is accruing at the statutory rate. In addition, the judgment orders Hynix to pay Rambus royalties on net sales for U.S. infringement after January 31, 2009 and before April 18, 2010 of 1% for SDR SDRAM and 4.25% for DDR DDR2, DDR3, GDDR, GDDR2 and GDDR3 SDRAM memory devices. On April 9, 2009, Rambus submitted its cost bill in the amount of approximately $0.85 million. On March 24, 2009, Hynix filed a motion under Rule 62 seeking relief from the requirement that it post a supersedeas bond in the full amount of the final judgment in order to stay its execution pending an appeal. Rambus filed a brief opposing Hynix’s motion on April 10, 2009. A hearing on Hynix’s motion was heard on May 8, 2009. On May 14, 2009, the court granted Hynix’s motion in part and ordered that execution of the judgment be stayed on the condition that, within 45 days, Hynix post a supersedeas bond in the amount of $250 million and provide Rambus with documentation establishing a lien in Rambus’s favor on property owned by Hynix in Korea in the amount of the judgment not covered by the supersedeas bond. The court also ordered that Hynix pay the ongoing royalties set forth in the final judgment into an escrow account. Hynix posted the $250 million supersedeas bond on June 26, 2009. Hynix has deposited amounts into the escrow account pursuant to the court’s order regarding ongoing royalties. The escrowed funds will be released only upon agreement of the parties or further court order in accordance with the terms and conditions set forth in the escrow arrangement. On March 8, 2010, the court awarded costs to Rambus in the amount of approximately $0.76 million. That amount plus accrued interest has been deposited by Hynix into the same escrow account into which ongoing royalties have been deposited.
     On April 6, 2009, Hynix filed its notice of appeal. On April 17, 2009, Rambus filed its notice of cross appeal. Hynix filed a motion to dismiss Rambus’ cross-appeal on July 1, 2009, and Rambus filed an opposition to Hynix’s motion on July 15, 2009. On July 23, 2009, Rambus and Hynix filed a joint motion to assign this appeal to the same panel hearing the appeal in the Micron Delaware case (discussed below) and to coordinate oral arguments of the two appeals. On August 17, 2009, the Federal Circuit issued an order 1) granting the joint motion to coordinate oral arguments of the two appeals; and 2) denying Hynix’s motion to dismiss Rambus’s cross-appeal. On August 31, 2009, Hynix filed its opening brief. On December 7, 2009, Rambus filed its answering and opening cross-appeal brief. Hynix’s reply and answering brief was filed February 16, 2010, and Rambus’s reply was filed February 23, 2010. Oral argument was held on April 5, 2010. On June 9, 2010, the Federal Circuit issued an order that it will rehear oral argument in the coordinated appeals on the basis of the parties’ original briefs. Oral argument is scheduled to be reheard on October 6, 2010.
  Micron Litigation

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  U.S District Court in Delaware: Case No. 00-792-SLR
     On August 28, 2000, Micron filed suit against Rambus in the U.S. District Court for Delaware. The suit asserts violations of federal antitrust laws, deceptive trade practices, breach of contract, fraud and negligent misrepresentation in connection with Rambus’ participation in JEDEC. Micron seeks a declaration of monopolization by Rambus, compensatory and punitive damages, attorneys’ fees, a declaratory judgment that eight Rambus patents are invalid and not infringed, and the award to Micron of a royalty-free license to the Rambus patents. Rambus has filed an answer and counterclaims disputing Micron’s claims and asserting infringement by Micron of 12 U.S. patents.
     This case has been divided into three phases in the same general order as in the Hynix 00-20905 action: (1) unclean hands; (2) patent infringement; and (3) antitrust, equitable estoppel, and other JEDEC-related issues. A bench trial on Micron’s unclean hands defense began on November 8, 2007 and concluded on November 15, 2007. The court ordered post-trial briefing on the issue of when Rambus became obligated to preserve documents because it anticipated litigation. A hearing on that issue was held on May 20, 2008. The court ordered further post-trial briefing on the remaining issues from the unclean hands trial, and a hearing on those issues was held on September 19, 2008.
     On January 9, 2009, the court issued an opinion in which it determined that Rambus had engaged in spoliation of evidence by failing to suspend general implementation of a document retention policy after the point at which the court determined that Rambus should have known litigation was reasonably foreseeable. The court issued an accompanying order declaring the 12 patents in suit unenforceable against Micron (the “Delaware Order”). On February 9, 2009, the court stayed all other proceedings pending appeal of the Delaware Order. On February 10, 2009, judgment was entered against Rambus and in favor of Micron on Rambus’ patent infringement claims and Micron’s corresponding claims for declaratory relief. On March 11, 2009, Rambus filed its notice of appeal. Rambus filed its opening brief on July 2, 2009. On July 24, 2009, Rambus filed a motion to assign this appeal to the same panel hearing the appeal in the Hynix case (discussed above) and to coordinate oral arguments of the two appeals. On August 8, 2009, Micron filed an opposition to Rambus’s motion to coordinate. On August 17, 2009, the Federal Circuit issued an order granting Rambus’s motion to coordinate oral arguments of the two appeals. On August 28, 2009, Micron filed its answering brief. On October 14, 2009, Rambus filed its reply brief. Oral argument was held on April 5, 2010. On June 9, 2010, the Federal Circuit issued an order that it will rehear oral argument in the coordinated appeals on the basis of the parties’ original briefs. Oral argument is scheduled to be reheard on October 6, 2010.
  U.S. District Court of the Northern District of California
     On January 13, 2006, Rambus filed suit against Micron in the U.S. District Court for the Northern District of California. Rambus alleges that 14 Rambus patents are infringed by Micron’s DDR2, DDR3, GDDR3, and other advanced memory products. Rambus seeks compensatory and punitive damages, attorneys’ fees, and injunctive relief. Micron has denied Rambus’ allegations and is alleging counterclaims for violations of federal antitrust laws, unfair trade practices, equitable estoppel, fraud and negligent misrepresentation in connection with Rambus’ participation in JEDEC. Micron seeks a declaration of monopolization by Rambus, injunctive relief, compensatory and punitive damages, attorneys’ fees, and a declaratory judgment of invalidity, unenforceability, and noninfringement of the 14 patents in suit.
     As explained above, the court ordered a coordinated trial (without Samsung) of certain common JEDEC-related claims and defenses asserted in Hynix v Rambus , Case No. C 00-20905 RMW, Rambus Inc. v. Samsung Electronics Co. Ltd. et al. , Case No. 05-02298 RMW, Rambus Inc. v. Hynix Semiconductor Inc., et al. , Case No. 05-00334, and Rambus Inc. v. Micron Technology, Inc., et al. , Case No. C 06-00244 RMW. The coordinated trial involving Rambus, Hynix, Micron and Nanya began on January 29, 2008, and was submitted to the jury on March 25, 2008. On March 26, 2008, the jury returned a verdict in favor of Rambus and against Hynix, Micron, and Nanya on each of their claims. Specifically, the jury found that Hynix, Micron, and Nanya failed to meet their burden of proving that: (1) Rambus engaged in anticompetitive conduct; (2) Rambus made important representations that it did not have any intellectual property pertaining to the work of JEDEC and intended or reasonably expected that the representations would be heard by or repeated to others including Hynix, Micron or Nanya; (3) Rambus uttered deceptive half-truths about its intellectual property coverage or potential coverage of products compliant with synchronous DRAM standards then being considered by JEDEC by disclosing some facts but failing to disclose other important facts; or (4) JEDEC members shared a clearly defined expectation that members would disclose relevant knowledge they had about patent applications or the intent to file patent applications on technology being considered for adoption as a JEDEC standard. Hynix, Micron, and Nanya filed motions for a new trial and for judgment on certain of their equitable claims and defenses. A hearing on those motions was held on May 1, 2008. A further hearing on the equitable claims and defenses was held on May 27, 2008. On July 24, 2008, the court issued an order denying Hynix, Micron, and Nanya’s motions for new trial.

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     On March 3, 2009, the court issued an order rejecting Hynix, Micron, and Nanya’s equitable claims and defenses that had been tried during the coordinated trial. The court concluded (among other things) that (1) Rambus did not have an obligation to disclose pending or anticipated patent applications and had sound reasons for not doing so; (2) the evidence supported the jury’s finding that JEDEC members did not share a clearly defined expectation that members would disclose relevant knowledge they had about patent applications or the intent to file patent applications on technology being considered for adoption as a JEDEC standard; (3) the written JEDEC disclosure policies did not clearly require members to disclose information about patent applications and the intent to file patent applications in the future; (4) there was no clearly understood or legally enforceable agreement of JEDEC members to disclose information about patent applications or the intent to seek patents relevant to standards being discussed at JEDEC; (5) during the time Rambus attended JEDEC meetings, Rambus did not have any patent application pending that covered a JEDEC standard, and none of the patents in suit was applied for until well after Rambus resigned from JEDEC; (6) Rambus’s conduct at JEDEC did not constitute an estoppel or waiver of its rights to enforce its patents; (7) Hynix, Micron, and Nanya failed to carry their burden to prove their asserted waiver and estoppel defenses not directly based on Rambus’s conduct at JEDEC; (8) the evidence did not support a finding of any material misrepresentation, half truths or fraudulent concealment by Rambus related to JEDEC upon which Nanya relied; (9) the manufacturers failed to establish that Rambus violated unfair competition law by its conduct before JEDEC; (10) the evidence related to Rambus’s patent prosecution did not establish that Rambus unduly delayed in prosecuting the claims in suit; (11) Rambus did not unreasonably delay bringing its patent infringement claims; and (12) there is no basis for any unclean hands defense or unenforceability claim arising from Rambus’s conduct.
     In these cases (except for the Hynix 00-20905 action), a hearing on claim construction and the parties’ cross-motions for summary judgment on infringement and validity was held on June 4 and 5, 2008. On July 10, 2008, the court issued its claim construction order relating to the Farmwald/Horowitz patents in suit and denied Hynix, Micron, Nanya, and Samsung’s (collectively, the “Manufacturers”) motions for summary judgment of noninfringement and invalidity based on their proposed claim construction. The court issued claim construction orders relating to the Ware patents in suit on July 25 and August 27, 2008, and denied the Manufacturers’ motion for summary judgment of noninfringement of certain claims. On September 4, 2008, at the court’s direction, Rambus elected to proceed to trial on 12 patent claims, each from the Farmwald/Horowitz family. On September 16, 2008, Rambus granted a covenant not to assert any claim of patent infringement against the Manufacturers under the Ware patents in suit (U.S. Patent Nos. 6,493,789 and 6,496,897), and each party’s claims relating to those patents were dismissed with prejudice. On November 21, 2008, the court entered an order clarifying certain aspects of its July 10, 2008, claim construction order. On November 24, 2008, the court granted Rambus’ motion for summary judgment of direct infringement with respect to claim 16 of Rambus’ U.S. Patent No. 6,266,285 by the Manufacturers’ DDR2, DDR3, gDDR2, GDDR3, GDDR4 memory chip products (except for Nanya’s DDR3 memory chip products). In the same order, the court denied the remainder of Rambus’ motion for summary judgment of infringement.
     On January 19, 2009, Micron filed a motion for summary judgment on the ground that the Delaware Order should be given preclusive effect. Rambus filed an opposition to Micron’s motion on January 26, 2009, and a hearing was held on January 30, 2009. On February 3, 2009, the court entered a stay of this action pending resolution of Rambus’ appeal of the Delaware Order. Trial on Rambus’ patent infringement claims is scheduled to begin on May 2, 2011.
  European Patent Infringement Cases
     In 2001, Rambus filed suit against Micron in Mannheim, Germany, for infringement of European patent, EP 1 022 642. That suit has not been active. Two proceedings in Italy remain ongoing relating to Rambus’s claim that Micron is infringing European patent, EP 1 004 956, and Micron’s purported claim resulting from a seizure of evidence in Italy in 2000 carried out by Rambus pursuant to a court order.
  DDR2, DDR3, gDDR2, GDDR3, GDDR4 Litigation (“DDR2”)
  U.S District Court in the Northern District of California
     On January 25, 2005, Rambus filed a patent infringement suit in the U.S. District Court for the Northern District of California court against Hynix, Infineon, Nanya, and Inotera. Infineon and Inotera were subsequently dismissed from this litigation and Samsung was added as a defendant. Rambus alleges that certain of its patents are infringed by certain of the defendants’ SDRAM, DDR, DDR2, DDR3, gDDR2, GDDR3, GDDR4 and other advanced memory products. Hynix, Samsung and Nanya have denied Rambus’ claims and asserted counterclaims against Rambus for, among other things, violations of federal antitrust laws, unfair trade practices, equitable estoppel, and fraud in connection with Rambus’ participation in JEDEC.

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     As explained above, the court ordered a coordinated trial of certain common JEDEC-related claims and defenses asserted in Hynix v Rambus , Case No. C 00-20905 RMW, Rambus Inc. v. Samsung Electronics Co. Ltd. et al. , Case No. 05-02298 RMW, Rambus Inc. v. Hynix Semiconductor Inc., et al. , Case No. 05-00334, and Rambus Inc. v. Micron Technology, Inc., et al. , Case No. C 06-00244 RMW. The court subsequently excused Samsung from the coordinated trial on December 14, 2007, based on Samsung’s agreement to certain conditions, including trial of its claims against Rambus within six months following the conclusion of the coordinated trial. The coordinated trial involving Rambus, Hynix, Micron and Nanya began on January 29, 2008, and was submitted to the jury on March 25, 2008. On March 26, 2008, the jury returned a verdict in favor of Rambus and against Hynix, Micron, and Nanya on each of their claims. Specifically, the jury found that Hynix, Micron, and Nanya failed to meet their burden of proving that: (1) Rambus engaged in anticompetitive conduct; (2) Rambus made important representations that it did not have any intellectual property pertaining to the work of JEDEC and intended or reasonably expected that the representations would be heard by or repeated to others including Hynix, Micron or Nanya; (3) Rambus uttered deceptive half- truths about its intellectual property coverage or potential coverage of products compliant with synchronous DRAM standards then being considered by JEDEC by disclosing some facts but failing to disclose other important facts; or (4) JEDEC members shared a clearly defined expectation that members would disclose relevant knowledge they had about patent applications or the intent to file patent applications on technology being considered for adoption as a JEDEC standard. Hynix, Micron, and Nanya filed motions for a new trial and for judgment on certain of their equitable claims and defenses. A hearing on those motions was held on May 1, 2008. A further hearing on the equitable claims and defenses was held on May 27, 2008. On July 24, 2008, the court issued an order denying Hynix, Micron, and Nanya’s motions for new trial.
     On March 3, 2009, the court issued an order rejecting Hynix, Micron, and Nanya’s equitable claims and defenses that had been tried during the coordinated trial. The court concluded (among other things) that (1) Rambus did not have an obligation to disclose pending or anticipated patent applications and had sound reasons for not doing so; (2) the evidence supported the jury’s finding that JEDEC members did not share a clearly defined expectation that members would disclose relevant knowledge they had about patent applications or the intent to file patent applications on technology being considered for adoption as a JEDEC standard; (3) the written JEDEC disclosure policies did not clearly require members to disclose information about patent applications and the intent to file patent applications in the future; (4) there was no clearly understood or legally enforceable agreement of JEDEC members to disclose information about patent applications or the intent to seek patents relevant to standards being discussed at JEDEC; (5) during the time Rambus attended JEDEC meetings, Rambus did not have any patent application pending that covered a JEDEC standard, and none of the patents in suit was applied for until well after Rambus resigned from JEDEC; (6) Rambus’s conduct at JEDEC did not constitute an estoppel or waiver of its rights to enforce its patents; (7) Hynix, Micron, and Nanya failed to carry their burden to prove their asserted waiver and estoppel defenses not directly based on Rambus’s conduct at JEDEC; (8) the evidence did not support a finding of any material misrepresentation, half truths or fraudulent concealment by Rambus related to JEDEC upon which Nanya relied; (9) the manufacturers failed to establish that Rambus violated unfair competition law by its conduct before JEDEC; (10) the evidence related to Rambus’s patent prosecution did not establish that Rambus unduly delayed in prosecuting the claims in suit; (11) Rambus did not unreasonably delay bringing its patent infringement claims; and (12) there is no basis for any unclean hands defense or unenforceability claim arising from Rambus’s conduct.
     In these cases (except for the Hynix 00-20905 action), a hearing on claim construction and the parties’ cross-motions for summary judgment on infringement and validity was held on June 4 and 5, 2008. On July 10, 2008, the court issued its claim construction order relating to the Farmwald/Horowitz patents in suit and denied the Manufacturers’ motions for summary judgment of noninfringement and invalidity based on their proposed claim construction. The court issued claim construction orders relating to the Ware patents in suit on July 25 and August 27, 2008, and denied the Manufacturers’ motion for summary judgment of noninfringement of certain claims. On September 4, 2008, at the court’s direction, Rambus elected to proceed to trial on 12 patent claims, each from the Farmwald/Horowitz family. On September 16, 2008, Rambus granted a covenant not to assert any claim of patent infringement against the Manufacturers under U.S. Patent Nos. 6,493,789 and 6,496,897, and each party’s claims relating to those patents were dismissed with prejudice. On November 21, 2008, the court entered an order clarifying certain aspects of its July 10, 2008, claim construction order. On November 24, 2008, the court granted Rambus’s motion for summary judgment of direct infringement with respect to claim 16 of Rambus’s U.S. Patent No. 6,266,285 by the Manufacturers’ DDR2, DDR3, gDDR2, GDDR3, GDDR4 memory chip products (except for Nanya’s DDR3 memory chip products). In the same order, the court denied the remainder of Rambus’s motion for summary judgment of infringement.
     On January 19, 2009, Samsung, Nanya, and Hynix filed motions for summary judgment on the ground that the Delaware Order should be given preclusive effect. Rambus filed opposition briefs to these motions on January 26, 2009, and a hearing was held on January 30, 2009. On February 3, 2009, the court entered a stay of this action pending resolution of Rambus’ appeal of the Delaware Order. Trial on Rambus’ patent infringement claims is scheduled to begin on May 2, 2011.

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     On January 19, 2010, Rambus and Samsung entered into a Settlement Agreement pursuant to which the parties released all claims against each other with respect to all outstanding litigation between them and certain other potential claims. The Settlement Agreement is described in further detail in Note 3, “Settlement Agreement with Samsung.” A stipulation and order of dismissal with prejudice of claims between Rambus and Samsung was entered on February 11, 2010.
  European Commission Competition Directorate-General
     On or about April 22, 2003, Rambus was notified by the European Commission Competition Directorate-General (Directorate) (the “European Commission”) that it had received complaints from Infineon and Hynix. Rambus answered the ensuing requests for information prompted by those complaints on June 16, 2003. Rambus obtained a copy of Infineon’s complaint to the European Commission in late July 2003, and on October 8, 2003, at the request of the European Commission, filed its response. The European Commission sent Rambus a further request for information on December 22, 2006, which Rambus answered on January 26, 2007. On August 1, 2007, Rambus received a statement of objections from the European Commission. The statement of objections alleges that through Rambus’ participation in the JEDEC standards setting organization and subsequent conduct, Rambus violated European Union competition law. Rambus filed a response to the statement of objections on October 31, 2007, and a hearing was held on December 4 and 5, 2007.
     On December 9, 2009, the European Commission announced that it has reached a final settlement with Rambus to resolve the pending case. Under the terms of the settlement, the Commission made no finding of liability, and no fine will be assessed against Rambus. Rambus commits to offer licenses with maximum royalty rates for certain memory types and memory controllers on a forward-going basis (the “Commitment”). The Commitment is expressly made without any admission by Rambus of the allegations asserted against it. The Commitment also does not resolve any existing claims of infringement prior to the signing of any license with a prospective licensee, nor does it release or excuse any of the prospective licensees from damages or royalty obligations through the date of signing a license. Rambus offers licenses with maximum royalty rates for five-year worldwide licenses of 1.5% for DDR2, DDR3, GDDR3 and GDDR4 SDRAM memory types. Qualified licensees will enjoy a royalty holiday for SDR and DDR DRAM devices, subject to compliance with the terms of the license. In addition, Rambus offers licenses with maximum royalty rates for five-year worldwide licenses of 1.5% per unit for SDR memory controllers through April 2010, dropping to 1.0% thereafter, and royalty rates of 2.65% per unit for DDR, DDR2, DDR3, GDDR3 and GDDR4 memory controllers through April 2010, then dropping to 2.0%. The Commitment to license at the above rates remains valid for a period of five years from December 9, 2009. All royalty rates are applicable to future shipments only and do not affect liability, if any, for damages or royalties that accrued up to the time of the license grant.
     On March 25, 2010, Hynix filed appeals with the General Court of the European Union purporting to challenge the settlement and the European Commission’s rejection of Hynix’s complaint. No decision has issued to date on Hynix’s appeal.
  Superior Court of California for the County of San Francisco
     On May 5, 2004, Rambus filed a lawsuit against Micron, Hynix, Infineon and Siemens in San Francisco Superior Court (the “San Francisco court”) seeking damages for conspiring to fix prices (California Bus. & Prof. Code §§ 16720 et seq. ), conspiring to monopolize under the Cartwright Act (California Bus. & Prof. Code §§ 16720 et seq. ), intentional interference with prospective economic advantage, and unfair competition (California Bus. & Prof. Code §§ 17200 et seq. ). This lawsuit alleges that there were concerted efforts beginning in the 1990s to deter innovation in the DRAM market and to boycott Rambus and/or deter market acceptance of Rambus’ RDRAM product. Subsequently, Infineon and Siemens were dismissed from this action (as a result of a settlement with Infineon) and three Samsung-related entities were added as defendants.
     On January 19, 2010, Rambus and Samsung entered into a Settlement Agreement pursuant to which the parties released all claims against each other with respect to all outstanding litigation between them and certain other potential claims. The Settlement Agreement is described in further detail in Note 3, “Settlement Agreement with Samsung.” A stipulation of dismissal with prejudice of claims between Rambus and Samsung was filed on February 4, 2010.
     Trial had been scheduled to begin on January 11, 2010. On January 13 and 21, 2010, a hearing was held on Micron’s emergency request for a two-month continuance. At the conclusion of the hearing, the request for continuance was granted. Trial is scheduled to commence on a date to be determined.
  Stock Option Investigation Related Claims

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     On May 30, 2006, the Audit Committee commenced an internal investigation of the timing of past stock option grants and related accounting issues.
     On May 31, 2006, the first of three shareholder derivative actions was filed in the U.S. District Court for the Northern District of California against Rambus (as a nominal defendant) and certain current and former executives and board members. These actions have been consolidated for all purposes under the caption, In re Rambus Inc. Derivative Litigation, Master File No. C-06-3513-JF (N.D. Cal.), and Howard Chu and Gaetano Ruggieri were appointed lead plaintiffs. The consolidated complaint, as amended, alleges violations of certain federal and state securities laws as well as other state law causes of action. The complaint seeks disgorgement and damages in an unspecified amount, unspecified equitable relief, and attorneys’ fees and costs.
     On August 22, 2006, another shareholder derivative action was filed in Delaware Chancery Court against Rambus (as a nominal defendant) and certain current and former executives and board members ( Bell v. Tate et al. , 2366-N (Del. Chancery)). On May 16, 2008, this case was dismissed pursuant to a notice filed by the plaintiff.
     On August 30, 2007, another shareholder derivative action was filed in the U.S. District Court for the Southern District of New York against Rambus (as a nominal defendant) and PricewaterhouseCoopers LLP ( Francl v. PricewaterhouseCoopers LLP et al. , No. 07-Civ. 7650 (GBD)). On November 21, 2007, the New York court granted PricewaterhouseCoopers LLP’s motion to transfer the action to the Northern District of California.
     On October 18, 2006, the Board of Directors formed a Special Litigation Committee (the “SLC”) to evaluate potential claims or other actions arising from the stock option granting activities. The Board of Directors appointed J. Thomas Bentley, Chairman of the Audit Committee, and Abraham Sofaer, a retired federal judge and Chairman of the Legal Affairs Committee, both of whom joined the Rambus Board of Directors in 2005, to comprise the SLC.
     On August 24, 2007, the final written report setting forth the findings of the SLC was filed with the court. As set forth in its report, the SLC determined that all claims should be terminated and dismissed against the named defendants in In re Rambus Inc. Derivative Litigation with the exception of claims against named defendant Ed Larsen, who served as Vice President, Human Resources from September 1996 until December 1999, and then Senior Vice President, Administration until July 2004. The SLC entered into settlement agreements with certain former officers of Rambus. The aggregate value of the settlements to Rambus exceeds $5.3 million in cash as well as substantial additional value to Rambus relating to the relinquishment of claims to over 2.7 million stock options. On October 5, 2007, Rambus filed a motion to terminate in accordance with the SLC’s recommendations. Subsequently, the parties settled In re Rambus Inc. Derivative Litigation and Francl v. PricewaterhouseCoopers LLP et al. , No. 07-Civ. 7650 (GBD). The settlement provided for a payment by Rambus of $2.0 million and dismissal with prejudice of all claims against all defendants, with the exception of claims against Ed Larsen, in these actions. The $2.0 million was accrued for during the quarter ended June 30, 2008 within accrued litigation expenses and paid in January 2009. A final approval hearing was held on January 16, 2009, and an order of final approval was entered on January 20, 2009.
     On July 17, 2006, the first of six class action lawsuits was filed in the U.S. District Court for the Northern District of California against Rambus and certain current and former executives and board members. These lawsuits were consolidated under the caption, In re Rambus Inc. Securities Litigation , C-06-4346-JF (N.D. Cal.). The settlement of this action was preliminarily approved by the court on March 5, 2008. Pursuant to the settlement agreement, Rambus paid $18.3 million into a settlement fund on March 17, 2008. Some alleged class members requested exclusion from the settlement. A final fairness hearing was held on May 14, 2008. That same day the court entered an order granting final approval of the settlement agreement and entered judgment dismissing with prejudice all claims against all defendants in the consolidated class action litigation.
     On March 1, 2007, a pro se lawsuit was filed in the Northern District of California by two alleged Rambus shareholders against Rambus, certain current and former executives and board members, and PricewaterhouseCoopers LLP ( Kelley et al. v. Rambus, Inc. et al. C-07-01238-JF (N.D. Cal.)). This action was consolidated with a substantially identical pro se lawsuit filed by another purported Rambus shareholder against the same parties. The consolidated complaint against Rambus alleges violations of federal and state securities laws, and state law claims for fraud and breach of fiduciary duty. Following several rounds of motions to dismiss, on April 17, 2008, the court dismissed all claims with prejudice except for plaintiffs’ claims under sections 14(a) and 18(a) of the Securities and Exchange Act of 1934 as to which leave to amend was granted. On June 2, 2008, plaintiffs filed an amended complaint containing substantially the same allegations as the prior complaint although limited to claims under sections 14(a) and 18(a) of the Securities and Exchange Act of 1934. Rambus’ motion to dismiss the amended complaint was heard on September 12, 2008. On December 9, 2008, the court granted Rambus’ motion and entered judgment in favor of Rambus. Plaintiffs filed a notice of appeal on December 15, 2008. Plaintiffs’ filed their opening brief on April 13, 2009. Rambus opposed on May 29, 2009, and plaintiffs filed a

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reply brief on June 12, 2009. On June 16, 2010, the United States Court of Appeals for the Ninth Circuit issued a decision affirming the judgment in favor of Rambus.
     On September 11, 2008, the same pro se plaintiffs filed a separate lawsuit in Santa Clara County Superior Court against Rambus, certain current and former executives and board members, and PricewaterhouseCoopers LLP ( Kelley et al. v. Rambus, Inc. et al. , Case No. 1-08-CV-122444). The complaint alleges violations of certain California state securities statues as well as fraud and negligent misrepresentation based on substantially the same underlying factual allegations contained in the pro se lawsuit filed in federal court. On November 24, 2008, Rambus filed a motion to dismiss or, in the alternative, stay this case in light of the first-filed federal action. On January 12, 2009, Rambus filed a demurrer to plaintiffs’ complaint on the ground that it was barred by the doctrine of claim preclusion. A hearing on Rambus’ motions was held on February 27, 2009. The court granted Rambus’s motion to stay the case pending the outcome of the appeal in the federal action and denied the remainder of the motions without prejudice. In light of the appellate court’s decision in the federal action (described above) the stay has been lifted in order to allow the plaintiffs to move for leave to file a second amended complaint and Rambus to file a further demurrer to plaintiffs’ complaint on the ground that it is barred by the doctrine of claim preclusion. Additionally, the Company will only record a contingent liability if it is probable that a loss has been incurred and the amount is reasonably estimable.
     On August 25, 2008, an amended complaint was filed by certain individuals and entities in Santa Clara County Superior Court against Rambus, certain current and former executives and board members, and PricewaterhouseCoopers LLP ( Steele et al. v. Rambus Inc. et al. , Case No. 1-08-CV-113682). The amended complaint alleges violations of certain California state securities statues as well as fraud and negligent misrepresentation. On October 10, 2008, Rambus filed a demurrer to the amended complaint. A hearing was held on January 9, 2009. On January 12, 2009, the court sustained Rambus’ demurrer without prejudice. Plaintiffs filed a second amended complaint on February 13, 2009, containing the same causes of action as the previous complaint. On March 17, 2009, Rambus filed a demurrer to the second amended complaint. A hearing was held on May 22, 2009. On May 26, 2009, the court sustained in part and overruled in part Rambus’s demurrer. On June 5, 2009, Rambus filed an answer denying plaintiffs’ remaining allegations. Discovery is ongoing. Additionally, the Company will only record a contingent liability if it is probable that a loss has been incurred and the amount is reasonably estimable.
  NVIDIA Litigation
  U.S District Court in the Northern District of California
     On July 10, 2008, Rambus filed suit against NVIDIA Corporation (“NVIDIA”) in the U.S. District Court for the Northern District of California alleging that NVIDIA’s products with memory controllers for SDR, DDR, DDRx, GDDR, and GDDRy (where DDRx and GDDRy includes at least DDR2, DDR3 and GDDR3) technologies infringe 17 patents. On September 16, 2008, Rambus granted a covenant not to assert any claim of patent infringement against NVIDIA under U.S. Patent Nos. 6,493,789 and 6,496,897, accordingly 15 patents remain in suit. On December 30, 2008, the court granted NVIDIA’s motion to stay this case as to Rambus’ claims that NVIDIA’s products infringe nine patents that are also the subject of proceedings in front of the International Trade Commission (described below), and denied NVIDIA’s motion to stay the remainder of Rambus’ patent infringement claims. Certain limited discovery is proceeding. A case management conference is scheduled for August 27, 2010.
     On July 11, 2008, one day after Rambus filed suit, NVIDIA filed its own action against Rambus in the U.S. District Court for the Middle District of North Carolina alleging that Rambus committed antitrust violations of the Sherman Act; committed antitrust violations of North Carolina law; and engaged in unfair and deceptive practices in violation of North Carolina law. NVIDIA seeks injunctive relief, damages, and attorneys’ fees and costs. This case has been transferred and consolidated into Rambus’s patent infringement case. Rambus filed a motion to dismiss NVIDIA’s claims prior to transfer of the action to California, and no decision has issued to date.
  International Trade Commission
     On November 6, 2008, Rambus filed a complaint with the U. S. International Trade Commission (the “ITC”) requesting the commencement of an investigation pertaining to NVIDIA products. The complaint seeks an exclusion order barring the importation, sale for importation, or sale after importation of products that infringe nine Rambus patents from the Ware and Barth families of patents. The accused products include NVIDIA products that incorporate DDR, DDR2, DDR3, LPDDR, GDDR, GDDR2, and GDDR3 memory controllers, including graphics processors, and media and communications processors. The complaint names NVIDIA as a proposed respondent, as well as companies whose products incorporate accused NVIDIA products and are imported into the United States. Additional respondents include: Asustek Computer Inc. and Asus Computer International, BFG Technologies,

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Biostar Microtech and Biostar Microtech International Corp., Diablotek Inc., EVGA Corp., G.B.T. Inc. and Giga-Byte Technology Co., Hewlett-Packard, MSI Computer Corp. and Micro-Star International Co., Palit Multimedia Inc. and Palit Microsystems Ltd., Pine Technology Holdings, and Sparkle Computer Co.
     On December 4, 2008, the ITC instituted the investigation. A hearing on claim construction was held on March 24, 2009, and a claim construction order issued on June 22, 2009. On June 5, 2009, Rambus moved to withdraw from the investigation four of the asserted patents and certain claims of a fifth asserted patent in order to simplify the investigation, streamline the final hearing, and conserve Commission resources. A final hearing before the administrative law judge was held October 13-20, 2009, and the parties submitted two rounds of post-hearing briefs.
     On January 22, 2010, the administrative law judge issued a final initial determination holding that the importation of the accused NVIDIA products violates section 337 of the Tariff Act of 1930, as amended, 19 U.S.C. § 1337 because they infringe seventeen claims of three asserted Barth patents. The administrative law judge held that the accused NVIDIA products literally infringe all asserted claims of each asserted Barth and Ware patent, that they infringe three asserted claims under the doctrine of equivalents, that respondents contribute to and induce infringement of all asserted claims, and that the asserted patents are not unenforceable due to unclean hands or equitable estoppel. The administrative law judge held that the asserted Barth patents are not invalid for anticipation or obviousness and are not obvious for double patenting. The administrative law judge further held that, while the accused products infringed eight claims of the two asserted Ware patents and that those patents are not unenforceable due to inequitable conduct, no violation has occurred because the asserted Ware patents are invalid due to anticipation and obviousness. The administrative law judge recommended that the ITC issue (1) a limited exclusion order prohibiting the unlicensed importation of accused products by any respondent; and (2) a cease and desist order prohibiting domestic respondents from engaging in certain activities in the United States with respect to the accused products. On February 12, 2010, the parties’ filed petitions asking the full Commission to review certain aspects of the final initial determination.
     On March 25, 2010, the ITC determined to review certain obviousness findings regarding the Barth patents and certain obviousness and anticipation findings regarding the Ware patents. The parties have submitted briefing on these issues and on the issue of remedy and bonding. On May 24, 2010, the ITC extended the target date for completion of the investigation by two days to May 26, 2010. On May 26, 2010, the ITC requested further briefing on the impact of the license between Rambus and Samsung on the administrative law judge’s findings and conclusions, particularly on the issue of patent exhaustion. On June 7, 2010 and June 15, 2010, the parties filed briefs as requested by the ITC. On June 22, 2010, the ITC requested additional briefing to discuss the relevance and effect with respect to the issue of patent exhaustion of a decision issued on May 27, 2010, by the United States Court of Appeals for the Federal Circuit in a case captioned Fujifilm Corp. v. Benun . On June 25, 2010, the parties filed briefs as requested by the ITC. The final determination from the ITC is due July 26, 2010.
     On July 26, 2010, the ITC issued its final determination affirming the administrative law judge’s initial determination with certain modifications to provide further analysis of issues related to obviousness. The ITC found that respondents failed to demonstrate that Rambus’ patent rights are exhausted with respect to accused products that incorporate Samsung memory. The ITC issued (1) a limited exclusion order prohibiting the unlicensed importation by any respondent of memory controller products and products incorporating a memory controller that infringe one or more of the seventeen claims of three asserted Barth patents; and (2) a cease and desist order prohibiting respondents with commercially significant inventories of infringing products in the United States from importing, selling, marketing, advertising, distributing, offering for sale, transferring (except for exportation), and soliciting U.S. agents or distributors for, memory controller products and products incorporating a memory controller that infringe one or more of the seventeen claims of three asserted Barth patents, in violation of 19 U.S.C. § 1337. The ITC determined that the amount of the bond to permit importation during the sixty-day Presidential review period is 2.65 percent of the entered value of the subject imports. The ITC denied respondents’ request for stay and terminated the investigation.
  Potential Future Litigation
     In addition to the litigation described above, companies continue to adopt Rambus technologies into various products. Rambus has notified many of these companies of their use of Rambus technology and continues to evaluate how to proceed on these matters.
     There can be no assurance that any ongoing or future litigation will be successful. Rambus spends substantial company resources defending its intellectual property in litigation, which may continue for the foreseeable future given the multiple pending litigations. The outcomes of these litigations — as well as any delay in their resolution — could affect Rambus’ ability to license its intellectual property in the future.

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     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.
15. 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 cost method investments and convertible notes. The Company’s non-financial assets, such as goodwill, intangible assets, and property 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.
  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 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 financial assets in Level 3 include a cost investment whose value is determined using inputs that are both unobservable and significant to the fair value measurements.
     The Company tests the pricing inputs by obtaining prices from two different sources 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 our cash equivalents and marketable securities by the above pricing levels as of June 30, 2010 and December 31, 2009:

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    As of June 30, 2010  
            Quoted              
            Market     Significant        
            Prices in     Other     Significant  
            Active     Observable     Unobservable  
            Markets     Inputs     Inputs  
    Total     (Level 1)     (Level 2)     (Level 3)  
    (in thousands)  
Money market funds
  $ 330,211     $ 330,211     $     $  
U.S. government bonds and notes
    230,260             230,260        
Corporate notes, bonds and commercial paper
    32,634             32,634        
Corporate securities
    179       179              
 
                       
Total available-for-sale securities
  $ 593,284     $ 330,390     $ 262,894     $  
 
                       
                                 
    As of December 31, 2009  
            Quoted              
            Market     Significant        
            Prices in     Other     Significant  
            Active     Observable     Unobservable  
            Markets     Inputs     Inputs  
    Total     (Level 1)     (Level 2)     (Level 3)  
    (in thousands)  
Money market funds
  $ 280,908     $ 280,908     $     $  
U.S. government bonds and notes
    138,829             138,829        
Corporate notes, bonds and commercial paper
    32,291             32,291        
 
                       
Total available-for-sale securities
  $ 452,028     $ 280,908     $ 171,120     $  
 
                       
     The Company made an investment of $2.0 million in a non-marketable equity security of a private company during the third quarter of 2009. The Company monitors the investment for other-than-temporary impairment and record appropriate reductions in carrying value when necessary. The Company evaluated the fair value of the investment in the non-marketable security as of June 30, 2010 and determined that there were no events that caused a decrease in its fair value below the carrying cost.
     The following table presents the financial instruments that are measured and carried at cost on a nonrecurring basis as of June 30, 2010 and December 31, 2009:
                                         
    As of June 30, 2010          
            Quoted                     Impairment  
            market     Significant             Charges for  
            prices in     other     Significant     the Three  
            active     observable     unobservable     Months  
    Carrying     markets     inputs     inputs     Ended June  
(in thousands)   Value     (Level 1)     (Level 2)     (Level 3)     30, 2010  
Investment in non-marketable security
  $ 2,000     $     $     $ 2,000     $  
 
                             
                                         
    As of December 31, 2009          
            Quoted                     Impairment  
            market     Significant             Charges for  
            prices in     other     Significant     the Year  
            active     observable     unobservable     Ended  
    Carrying     markets     inputs     inputs     December  
(in thousands)   Value     (Level 1)     (Level 2)     (Level 3)     31, 2009  
Investment in non-marketable security
  $ 2,000     $     $     $ 2,000     $  
 
                             
     The following table presents the financial instruments that are not carried at fair value but which require fair value disclosure as of June 30, 2010 and December 31, 2009:
                                                 
    As of June 30, 2010     As of December 31, 2009  
    Face     Carrying             Face     Carrying        
(in thousands)   Value     Value     Fair Value     Value     Value     Fair Value  
5% Convertible Senior Notes due 2014
  $ 172,500     $ 116,184     $ 199,286     $ 172,500     $ 112,012     $ 261,160  
Zero Coupon Convertible Senior Notes due 2010
                      136,950       136,032       142,599  
 
                                   
Total Convertible notes
  $ 172,500     $ 116,184     $ 199,286     $ 309,450     $ 248,044     $ 403,759  
 
                                   

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     The fair value of the convertible notes at each balance sheet date is determined based on recent quoted market prices for these notes. As discussed in Note 16, “Convertible Notes,” as of June 30, 2010, the convertible notes are carried at face value of $172.5 million less any unamortized debt discount. The carrying value of other financial instruments, including cash, accounts receivable, accounts payable and other payables, approximates fair value due to their short maturities.
     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, net” in the consolidated statement of operations. As of June 30, 2010, the Company has not incurred any impairment loss on its investments. As of December 31, 2009, the Company recorded an impairment loss of $164,000 for one investment.
16. Convertible Notes
     The Company’s convertible notes are shown in the following table.
                 
    As of June 30,     As of December 31,  
(in thousands)   2010     2009  
5% Convertible Senior Notes due 2014
  $ 172,500     $ 172,500  
Zero Coupon Convertible Senior Notes due 2010
          136,950  
 
           
Total principal amount of convertible notes
    172,500       309,450  
Unamortized discount
    (56,316 )     (61,406 )
 
           
Total convertible notes
  $ 116,184     $ 248,044  
Less current portion
          (136,032 )
 
           
Total long-term convertible notes
  $ 116,184     $ 112,012  
 
           
      5% Convertible Senior Notes due 2014. On June 29, 2009, the Company issued $150.0 million aggregate principal amount of 5% convertible senior notes due June 15, 2014. As of the date of issuance, the Company determined that the liability component of the 2014 Notes was approximately $92.4 million and the equity component was approximately $57.6 million. On July 10, 2009, an additional $22.5 million of the 2014 Notes were issued as a result of the underwriters exercising their overallotment option. As of the date of issuance of the $22.5 million 2014 Notes, the Company determined that the liability component was approximately $14.3 million and the equity component was approximately $8.2 million. The unamortized discount related to the 2014 Notes is being amortized to interest expense using the effective interest method over five years through June 2014.
     The Company will pay cash interest at an annual rate of 5% of the principal amount at issuance, payable semi-annually in arrears on June 15 and December 15 of each year, beginning on December 15, 2009. In the second quarter of 2010, the Company made a payment of approximately $4.3 million related to the 2014 Notes. Issuance costs were approximately $5.1 million of which $3.2 million is related to the liability portion, which is being amortized to interest expense over five years (the expected term of the debt), and $1.9 million is related to the equity portion. The 2014 Notes are the Company’s general unsecured obligation, ranking equal in right of payment to all of the Company’s existing and future senior indebtedness, including the 2010 Notes, and are senior in right of payment to any of the Company’s future indebtedness that is expressly subordinated to the 2014 Notes.
     The 2014 Notes are convertible into shares of the Company’s Common Stock at an initial conversion rate of 51.8 shares of Common Stock per $1,000 principal amount of 2014 Notes. This is equivalent to an initial conversion price of approximately $19.31 per share of common stock. Holders may surrender their 2014 Notes for conversion prior to March 15, 2014 only under the following circumstances: (i) during any calendar quarter beginning after the calendar quarter ending September 30, 2009, and only during such calendar quarter, if the closing sale price of the Common Stock for 20 or more trading days in the period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter exceeds 130% of the conversion price in effect on the last trading day of the immediately preceding calendar quarter, (ii) during the five business day period after any 10 consecutive trading day period in which the trading price per $1,000 principal amount of 2014 Notes for each trading day of such 10 consecutive trading day period was less than 98% of the product of the closing sale price of the Common Stock for such trading day and the applicable conversion rate, (iii) upon the occurrence of specified distributions to holders of the Common Stock, (iv) upon a fundamental change of the Company as specified in the Indenture governing the 2014 Notes, or (v) if the Company calls any or all of the 2014 Notes for redemption, at any time prior to the close of business on the business day immediately preceding the redemption date. On and after March 15, 2014, holders may convert their 2014 Notes at any time until the close of business on the third business day prior to the maturity date, regardless of the foregoing circumstances.

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     Upon conversion of the 2014 Notes, the Company will pay (i) cash equal to the lesser of the aggregate principal amount and the conversion value of the 2014 Notes and (ii) shares of the Company’s Common Stock for the remainder, if any, of the Company’s conversion obligation, in each case based on a daily conversion value calculated on a proportionate basis for each trading day in the 20 trading day conversion reference period as further specified in the Indenture.
     The Company may not redeem the 2014 Notes at its option prior to June 15, 2012. At any time on or after June 15, 2012, the Company will have the right, at its option, to redeem the 2014 Notes in whole or in part for cash in an amount equal to 100% of the principal amount of the 2014 Notes to be redeemed, together with accrued and unpaid interest, if any, if the closing sale price of the Common Stock for at least 20 of the 30 consecutive trading days immediately prior to any date the Company gives a notice of redemption is greater than 130% of the conversion price on the date of such notice.
     Upon the occurrence of a fundamental change, holders may require the Company to repurchase some or all of their 2014 Notes for cash at a price equal to 100% of the principal amount of the 2014 Notes being repurchased, plus accrued and unpaid interest, if any. In addition, upon the occurrence of certain fundamental changes, as that term is defined in the Indenture, the Company will, in certain circumstances, increase the conversion rate for 2014 Notes converted in connection with such fundamental changes by a specified number of shares of Common Stock, not to exceed 15.5401 per $1,000 principal amount of the 2014 Notes.
     The following events are considered “Events of Default” under the Indenture which may result in the acceleration of the maturity of the 2014 Notes:
  (1)   default in the payment when due of any principal of any of the 2014 Notes at maturity, upon redemption or upon exercise of a repurchase right or otherwise;
  (2)   default in the payment of any interest, including additional interest, if any, on any of the 2014 Notes, when the interest becomes due and payable, and continuance of such default for a period of 30 days;
  (3)   the Company’s failure to deliver cash or cash and shares of Common Stock (including any additional shares deliverable as a result of a conversion in connection with a make-whole fundamental change) when required to be delivered upon the conversion of any 2014 Note;
  (4)   default in the Company’s obligation to provide notice of the occurrence of a fundamental change when required by the Indenture;
  (5)   the Company’s failure to comply with any of its other agreements in the 2014 Notes or the Indenture (other than those referred to in clauses (1) through (4) above) for 60 days after the Company’s receipt of written notice to the Company of such default from the trustee or to the Company and the trustee of such default from holders of not less than 25% in aggregate principal amount of the 2014 Notes then outstanding;
  (6)   the Company’s failure to pay when due the principal of, or acceleration of, any indebtedness for money borrowed by the Company or any of its subsidiaries in excess of $30,000,000 principal amount, if such indebtedness is not discharged, or such acceleration is not annulled, by the end of a period of ten days after written notice to the Company by the trustee or to the Company and the trustee by the holders of at least 25% in aggregate principal amount of the 2014 Notes then outstanding; and
  (7)   certain events of bankruptcy, insolvency or reorganization relating to the Company or any of its material subsidiaries (as defined in the Indenture).
     If an event of default, other than an event of default in clause (7) above with respect to the Company occurs and is continuing, either the trustee or the holders of at least 25% in aggregate principal amount of the 2014 Notes then outstanding may declare the principal amount of, and accrued and unpaid interest, including additional interest, if any, on the 2014 Notes then outstanding to be immediately due and payable. If an event of default described in clause (7) above occurs with respect to the Company the principal amount of and accrued and unpaid interest, including additional interest, if any, on the 2014 Notes will automatically become immediately due and payable.

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      Zero Coupon Convertible Senior Notes due 2010. On February 1, 2005, the Company issued $300.0 million aggregate principal amount of zero coupon convertible senior notes due February 1, 2010 (the “2010 Notes”) to Credit Suisse First Boston LLC and Deutsche Bank Securities as initial purchasers who then sold the 2010 Notes to institutional investors.
     The 2010 Notes were unsecured senior obligations, ranking equally in right of payment with all of Rambus’ existing and future unsecured senior indebtedness, and senior in right of payment to any future indebtedness that is expressly subordinated to the 2010 Notes.
     The 2010 Notes were convertible at any time prior to the close of business on the maturity date into, in respect of each $1,000 principal of the 2010 Notes:
    cash in an amount equal to the lesser of
  (1)   the principal amount of each note to be converted and
  (2)   the “conversion value,” which is equal to (a) the applicable conversion rate, multiplied by (b) the applicable stock price, as defined.
    if the conversion value is greater than the principal amount of each note, a number of  shares of Rambus Common Stock (the “net shares”) equal to the sum of the daily share amounts, calculated as defined. However, in lieu of delivering net shares, Rambus, at its option, may deliver cash, or a combination of cash and shares of its Common Stock, with a value equal to the net shares amount.
     The initial conversion price was $26.84 per share of Common Stock (which represented an initial conversion rate of 37.2585 shares of Rambus Common Stock per $1,000 principal amount of the 2010 Notes). The initial conversion price was subject to certain adjustments, as specified in the indenture governing the 2010 Notes.
     On February 1, 2010, the Company paid upon maturity the remaining $137.0 million in face value of the 2010 Notes.
     Additional paid-in capital at June 30, 2010 and December 31, 2009 includes $63.9 million related to the equity component of the 2014 Notes.
     As of June 30, 2010, none of the conversion conditions were met related to the 2014 Notes. Therefore, the classification of the entire equity component for the 2014 Notes in permanent equity is appropriate as of June 30, 2010.
     Interest expense related to the notes for the three and six months ended June 30, 2010 and 2009 is as follows:
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2010     2009     2010     2009  
    (In thousands)  
2014 Notes coupon interest at a rate of 5%
  $ 2,156     $ 42     $ 4,312     $ 42  
2014 Notes amortization of discount at an additional effective interest rate of 11.7%
    1,584       53       4,486       53  
2010 Notes amortization of discount at an effective interest rate of 8.4%
          2,722       958       5,392  
 
                       
Total interest expense
  $ 3,740     $ 2,817     $ 9,756     $ 5,487  
 
                       
     During the second quarter of 2010, the Company adjusted its interest expense by approximately $1.0 million due to the incorrect amortization of the non-cash debt discount related to the 2014 Notes. The Company concluded that the correction was not material to the previous or present periods.
17. Acquisitions
     During the second quarter of 2010, as part of the Company’s ongoing acquisition activities to broaden its technology portfolio, the Company acquired two businesses for $2.7 million and purchased patents for $2.3 million. Of the $2.7 million used to acquire the two businesses, the Company paid $2.4 million in cash and will pay the remaining $0.3 million later in 2010. For the acquired businesses,

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$2.0 million and $0.7 million were related to patents and equipment, respectively. The business combinations and patent acquisition were not significant to the financial statements.
     During the first quarter of 2010, the Company purchased patents in an asset acquisition for approximately $1.5 million as part of the Company’s ongoing acquisition activities to broaden its technology portfolio. The patent acquisition was not significant to the financial statements.

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Item 2.   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. These statements relate to our expectations for future events and time periods. All statements other than statements of historical fact are statements that could be deemed to be forward-looking statements, including any statements regarding trends in future revenue or results of operations, gross margin or operating margin, expenses, earnings or losses from operations, synergies or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning developments, performance or industry ranking; any statements regarding future economic conditions or performance; any statements regarding pending investigations, claims or disputes; any statements of expectation or belief; and any statements of assumptions underlying any of the foregoing. Generally, the words “anticipate,” “believes,” “plans,” “expects,” “future,” “intends,” “may,” “should,” “estimates,” “predicts,” “potential,” “continue,” “projects” and similar expressions identify 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.
     Rambus, RDRAM tm , XDR tm , FlexIO tm and FlexPhase tm are trademarks or registered trademarks of Rambus Inc. Other trademarks that may be mentioned in this annual report on Form 10-K are the property of their respective owners.
     Industry terminology, used widely throughout this annual report, has been abbreviated and, as such, these abbreviations are defined below for your convenience:
     
Double Data Rate
  DDR
Dynamic Random Access Memory
  DRAM
Fully Buffered-Dual Inline Memory Module
  FB-DIMM
Gigabits per second
  Gb/s
Graphics Double Data Rate
  GDDR
Input/Output
  I/O
Light Emitting Diodes
  LED
Lighting and Display Technology
  LDT
Liquid Crystal Display
  LCD
Peripheral Component Interconnect
  PCI
Rambus Dynamic Random Access Memory
  RDRAM tm
Single Data Rate
  SDR
Synchronous Dynamic Random Access Memory
  SDRAM
eXtreme Data Rate
  XDR tm
     From time to time we will refer to the abbreviated names of certain entities and, as such, have provided a chart to indicate the full names of those entities for your convenience.
     
Advanced Micro Devices Inc.
  AMD
ARM Holdings plc
  ARM
Elpida Memory, Inc.
  Elpida
Fujitsu Limited
  Fujitsu
General Electric Company
  GE
Global Lighting Technologies, Inc.
  GLT
Hewlett-Packard Company
  Hewlett-Packard
Hynix Semiconductor, Inc.
  Hynix
Infineon Technologies AG
  Infineon
Inotera Memories, Inc.
  Inotera
Intel Corporation
  Intel
International Business Machines Corporation
  IBM
Joint Electronic Device Engineering Councils
  JEDEC
Micron Technologies, Inc.
  Micron
Nanya Technology Corporation
  Nanya
NEC Electronics Corporation
  NEC
NVIDIA Corporation
  NVIDIA

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Optical Internetworking Forum
  OIF
Qimonda AG (formerly Infineon’s DRAM operations)
  Qimonda
Panasonic Corporation
  Panasonic
Peripheral Component Interconnect — Special Interest Group
  PCI-SIG
Renesas Electronics Corporation (formerly NEC Electronics Corporation and Renesas Technology Corporation)
  Renesas
Samsung Electronics Co., Ltd.
  Samsung
Sony Computer Electronics
  Sony
Spansion, Inc.
  Spansion
Texas Instruments Inc.
  Texas Instruments
Toshiba Corporation
  Toshiba

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Business Overview
     We are a premier intellectual property licensing company. Our primary focus is the design, development and licensing chip interface technologies and architectures that are foundational to nearly all digital electronics products. Our chip interface technologies aim to improve the performance, power efficiency, time-to-market and cost-effectiveness of our customers’ semiconductor and system products for computing, gaming and graphics, consumer electronics and mobile applications. The key elements of our strategy are as follows:
      Innovate: Develop and patent our innovative technology to provide fundamental competitive advantage when incorporated into semiconductors and electronic systems.
      Drive Adoption: Communicate the advantages of our patented innovations and technology to the industry and encourage its adoption through demonstrations and incorporation in the products of select customers.
      Monetize: License our patented inventions and technology solutions to customers for use in their semiconductor and system products.
     In December 2009, we added lighting technology to our portfolio of solutions through the acquisition of patented innovations and technology from GLT. This technology is complementary to our chip interface technologies since it is intended to improve the visual capabilities, form factor, power efficiency and cost effectiveness of backlighting of LCD displays in products for computing, gaming and graphics, consumer electronics and mobile applications. Our new technology also has significant potential to enable cost-effective and power-efficient LED-based general lighting products.
     As of June 30, 2010, our chip interface, lighting and other technologies are covered by approximately 1020 U.S. and foreign patents. Additionally, we have approximately 740 patent applications pending. These patents and patent applications cover important inventions in memory and logic chip interfaces, optoelectronics and other technologies. Some of the patents and pending patent applications are derived from a common parent patent application or are foreign counterpart patent applications. 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. In some instances, obtaining appropriate levels of protection may involve prosecuting continuation and counterpart patent applications based on a common parent application. We believe that our patented innovations provide our customers means to achieve higher performance, improved power efficiency, lower risk, and greater cost-effectiveness in their semiconductor and system products.
     Our primary method of providing technology to our customers is through our patented innovations. We license our broad portfolio of patented inventions to semiconductor and system companies who use these inventions in the development and manufacture of their own products. Such licensing agreements may cover the license of part, or all, of our patent portfolio. Patent license agreements are generally royalty bearing.
     We also develop a range of solutions including “leadership” (which are Rambus-proprietary solutions widely licensed to our customers) and industry-standard solutions that we provide to our customers under license for incorporation into their semiconductor and system products. Due to the often complex nature of implementing state-of-the art technology, we offer engineering services to our customers to help them successfully integrate our solutions into their semiconductors and systems. These technology license agreements may have both a fixed price (non-recurring) component and ongoing royalties. Engineering services are generally offered on a fixed price basis. Further, under technology licenses, our customers may 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.
     Royalties represent a substantial majority of our total revenue. We derive the majority of our royalty revenue by licensing our broad portfolio of patents for chip interfaces to our customers. Such licenses may cover part or all of our patent portfolio. Leading semiconductor and system companies such as AMD, Fujitsu, Intel, Panasonic, Renesas, Samsung and Toshiba have licensed our patents for use in their own products.
     We also derive additional revenue by licensing a range of technology solutions including our leadership architectures and industry-standard solutions to customers for use in their semiconductor and system products. Our customers include leading companies such as Elpida, IBM, Panasonic, Samsung, Sony and Toshiba. Due to the complex nature of implementing our technologies, we provide engineering services under certain of these licenses to help our customers successfully integrate our technology solutions into their

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semiconductors and system products. Licensees also may receive, in addition to their technology license agreements, patent licenses as necessary to implement the technology in their products with specific rights and restrictions to the applicable patents elaborated in their individual contracts.
     The remainder of our revenue is contract services revenue which includes license 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 account receivables in any given period.
     We intend to continue making significant expenditures associated with engineering, marketing, general and administration including litigation expenses, and expect that these costs and expenses will continue to be a significant percentage of revenue in future periods. Whether such expenses increase or decrease as a percentage of revenue will be substantially dependent upon the rate at which our revenue or expenses change.
Executive Summary
     During the first quarter of 2010, we signed a significant settlement agreement with Samsung bringing the Company into a profit position for the six month period ended June 30, 2010. See Note 3, “Settlement Agreement with Samsung,” of Notes to Unaudited Consolidated Financial Statements of this Form 10-Q for further discussion. We continue to pursue other revenue opportunities in order to grow our revenue. In December 2009, we added lighting technology through the acquisition of patented innovations and technology from GLT as part of our strategy to expand our patent portfolio and diversify our business. In June 2010, we signed a broad licensing agreement for the use of our patented lighting innovations with GE Lighting, a unit of GE’s Appliances & Lighting business. We also purchased patents and two small businesses as part of our ongoing acquisition activities to broaden our technology portfolio during the second quarter of 2010.
     Research and development continues to play a key role in our efforts to maintain product innovations. Our engineering expenses for the three and six months ended June 30, 2010 increased $7.7 million and $11.1 million, respectively, as compared to the same periods in 2009 primarily due to the increase in headcount from our newly established LDT group in December 2009. As a percentage of revenue, engineering expenses remained relatively flat and decreased for the three and six months ended June 30, 2010, respectively, as compared to the same periods in 2009. The decrease for the six month period was due to higher revenue primarily attributed to the settlement with Samsung. Marketing, general and administrative expenses in aggregate decreased $3.2 million and $8.8 million, respectively, for the three and six months ended June 30, 2010 as compared to the same periods in 2009 primarily due to lower litigation expenses. Our higher revenue combined with the decrease in marketing, general and administrative expenses, has caused marketing, general and administrative expenses to decrease as a percentage of revenue. Additionally, for the three and six months ended June 30, 2010, we incurred costs of restatement and related legal activities of $1.6 million and $2.2 million, respectively, primarily due to litigation expense associated with a private shareholder lawsuit related to the 2006-2007 stock option investigation.
Trends
     There are a number of trends that we expect may or will have a material impact on us in the future, including global economic conditions with the resulting impact on sales, continuing pursuit of litigation against companies that we believe have infringed our patented technologies and shifts in our overall effective tax rate.
     We have a high degree of revenue concentration, with our top five licensees representing approximately 83% and 91% of our revenue for the three and six months ended June 30, 2010, respectively. This compares with the three and six months ended June 30, 2009, in which revenue from our top five licensees accounted for approximately 79% and 78% of our revenue, respectively. As a result of our settlement with Samsung, Samsung is expected to account for a significant portion of our ongoing licensing revenue in 2010. For the three months ended June 30, 2010, revenue from Renesas, Samsung and Toshiba each accounted for 10% or more of our total revenue. For the six months ended June 30, 2010, revenue from Samsung accounted for 10% or more of our total revenue. For the three months ended June 30, 2009, revenue from AMD, Fujitsu, NEC, Sony and Toshiba each accounted for 10% or more of our total revenue. For the six months ended June 30, 2009, revenue from AMD, Fujitsu, NEC, Panasonic and Sony each accounted for 10% or more of our total revenue.
     Many of our licensees have the right to cancel their licenses. The particular licensees which account for revenue concentration have varied from period to period as a result of the addition of new contracts, expiration of existing contracts, industry consolidation and the volumes and prices at which the licensees have recently sold licensed semiconductors to system companies. These variations

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are expected to continue in the foreseeable future, although we expect that our revenue concentration will decrease over time as we license new customers.
     The semiconductor industry is intensely competitive and highly cyclical. Our visibility with respect to future sales is very limited at this time. To the extent that macroeconomic fluctuations negatively affect our principal licensees, the demand for our technology may be significantly and adversely impacted and we may experience substantial period-to-period fluctuations in our operating results. The recent downturn in worldwide economic conditions also threatens the financial health of our commercial counterparties, including companies with whom we have entered into licensing arrangements, settlement agreements or that have been subject to litigation judgments that provide for payments to us, and their ability to fulfill their financial and other obligations to us. Some of our existing patent licensees have fixed royalty payments which are not impacted by the recent economic downturn. Royalty payments from the remaining licensees are related to variable royalty agreements which have been impacted by the recent economic conditions. Current market indicators are mixed, but there are some recent signs of some stabilization. However, there continue to be indications that global demand will not quickly recover and may continue to contract for most, if not all, of 2010. Such lower demand levels may adversely impact our revenue and profitability. See Item 1A, “Risk Factors.”
     The royalties we receive are partly a function of the adoption of our chip interfaces by system companies. Many system companies purchase semiconductors containing our chip interfaces from our licensees and do not have a direct contractual relationship with us. Our licensees 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. System companies face intense competitive pressure in their markets, which are characterized by extreme volatility, frequent new product introductions and rapidly shifting consumer preferences. There can be no assurance as to the unit volumes of licensed semiconductors that will be purchased by these companies in the future or as to the level of royalty-bearing revenue that our licensees will receive from sales to these companies. Additionally, there can be no assurance that a significant number of other system companies will adopt our chip interfaces or that our dependence upon particular system companies will decrease in the future. See Item 1A, “Risk Factors.”
     Our revenue from companies headquartered outside of the United States accounted for approximately 87% and 95% of our total revenue for the three and six months ended June 30, 2010, respectively, as compared to 83% and 82% for the three and six months ended June 30, 2009, respectively. We expect that revenue derived from international licensees will continue to represent a significant portion of our total revenue in the future. To date, all of the revenue from international licensees have been denominated in U.S. dollars. However, to the extent that such licensees’ sales to their customers are not denominated in U.S. dollars, any royalties 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 semiconductors sold by our foreign licensees were to increase as a result of fluctuations in the exchange rate of the relevant currencies, demand for licensed semiconductors could fall, which in turn would reduce our royalties. We do not use financial instruments to hedge foreign exchange rate risk.
     For additional information concerning international revenue, see Note 12, “Business Segments, Exports and Major Customers,” of Notes to Unaudited Consolidated Financial Statements of this Form 10-Q.
     Engineering costs as a percentage of net sales remained relatively flat and decreased for the three and six months ended June 30, 2010, respectively, as compared to the same periods in the prior year. The decrease for the six month period was due to the higher revenue primarily attributed to the settlement with Samsung. In the near term, we expect engineering costs to be higher than in 2009 due primarily to the engineering activities in our newly established LDT group, funding for our 2010 Corporate Incentive Plan (the “2010 CIP”) and the bonus related to the Samsung settlement. In addition, we intend to continue to make investments in the infrastructure and technologies required to maintain our product innovations and leadership position in chip interface technologies and, as a result, expenses are expected to increase.
     Marketing, general and administrative expenses in the aggregate and as a percentage of net sales decreased for the three and six months ended June 30, 2010, respectively, as compared to the same periods in the prior year primarily due to lower litigation expenses as well as higher revenue primarily attributed to the patent license revenue related to the settlement with Samsung. Historically, we have been involved in significant litigation stemming from the unlicensed use of our inventions. Our litigation expenses have been high and difficult to predict and we anticipate future litigation expenses will continue to be significant, volatile and difficult to predict. If we are successful in the litigation and/or related licensing, our revenue could be substantially higher in the future; if we are unsuccessful, our revenue may not grow or may decrease. Furthermore, our success in litigation matters pending before courts and regulatory bodies that relate to our intellectual property rights have impacted and will likely continue to impact our ability and the terms upon which we are able to negotiate new or renegotiate existing licenses for our technology. We will continue to pursue

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litigation against those companies that have infringed our patented technologies, which in turn will continue to increase marketing, general and administrative expenses as litigation expenses will continue to increase until such litigation is resolved.
     As we continue to pursue litigation and invest in research and development projects and if we experience lower revenue from our licensees in the future, our cash from operations will be negatively affected.
Results of Operations
     The following table sets forth, for the periods indicated, the percentage of total revenue represented by certain items reflected in our unaudited consolidated statements of operations:
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2010     2009     2010     2009  
Revenue:
                               
Royalties
    98.3 %     91.8 %     99.0 %     93.8 %
Contract revenue
    1.7 %     8.2 %     1.0 %     6.2 %
 
                       
Total revenue
    100.0 %     100.0 %     100.0 %     100.0 %
 
                       
Operating costs and expenses:
                               
Cost of revenue*
    4.7 %     5.3 %     1.8 %     6.7 %
Research and development*
    59.1 %     58.2 %     22.3 %     61.8 %
Marketing, general and administrative*
    75.7 %     120.7 %     30.3 %     128.3 %
Costs (recoveries) of restatement and related legal activities
    4.2 %     (1.6 )%     1.1 %     (25.9 )%
Gain from settlement
    (26.5 )%     %     (52.9 )%     %
 
                       
Total operating costs and expenses
    117.2 %     182.6 %     2.6 %     170.9 %
 
                       
Operating income (loss)
    (17.2 )%     (82.6 )%     97.4 %     (70.9 )%
 
                       
Interest income and other income, net
    0.8 %     4.3 %     0.4 %     4.8 %
Interest expense
    (9.6 )%     (10.4 )%     (4.9 )%     (10.1 )%
 
                       
Interest and other expense, net
    (8.8 )%     (6.1 )%     (4.5 )%     (5.3 )%
 
                       
Income (loss) before income taxes
    (26.0 )%     (88.7 )%     92.9 %     (76.2 )%
Provision for income taxes
    6.1 %     0.1 %     23.9 %     0.0 %
 
                       
Net income (loss)
    (32.1 )%     (88.8 )%     69.0 %     (76.2 )%
 
                       
 
*   Includes stock-based compensation:
                                 
Cost of revenue
    0.1 %     0.9 %     0.1 %     1.1 %
Research and development
    7.0 %     8.2 %     2.6 %     9.1 %
Marketing, general and administrative
    13.4 %     20.0 %     5.2 %     19.7 %

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    Three Months             Six Months        
    Ended June 30,     Change in     Ended June 30,     Change in  
(Dollars in millions)   2010     2009     Percentage     2010     2009     Percentage  
Total Revenue
                                               
Royalties
  $ 38.2     $ 24.8       54.3 %   $ 198.7     $ 50.9       290.2 %
Contract revenue
    0.7       2.2       (69.9 )%     2.0       3.4       (41.2 )%
 
                                       
Total revenue
  $ 38.9     $ 27.0       44.0 %   $ 200.7     $ 54.3       269.5 %
 
                                       
Royalty Revenue
Patent Licenses
     Our patent royalties increased approximately $13.6 million to $31.9 million for the three months ended June 30, 2010 from $18.3 million for the same period in 2009. Our patent royalties increased approximately $146.7 million to $185.0 million for the six months ended June 30, 2010 from $38.3 million for the same period in 2009. The increase in both periods was primarily due to the patent license revenue related to the settlement with Samsung in the first quarter of 2010. See Note 3, “Settlement Agreement with Samsung,” of Notes to Unaudited Consolidated Financial Statements of this Form 10-Q for further details.
     In March 2010, AMD elected to exercise its right to renew the Rambus-AMD Patent License Agreement through the third quarter of 2015. The license fee during the renewal period will be determined at the end of 2010. The original term of AMD’s agreement runs through the end of September 2010.
     We are in negotiations with some existing licensees regarding renewals, as some of the existing patent license agreements have recently expired or will expire in 2010. In the event that negotiations for patent license renewal with some of these licensees are not signed before the end of the third quarter of 2010, our revenue from patent royalties may be lower than anticipated. We expect patent royalties will continue to vary from period to period based on our success in adding new licensees, as well as the level of variation in our licensees’ reported shipment volumes, sales price and mix, offset in part by the proportion of licensee payments that are fixed.
Technology Licenses
     Royalties from technology licenses decreased approximately $0.2 million to $6.3 million for the three months ended June 30, 2010 from $6.5 million for the same period in 2009. The decrease was primarily due to lower royalties from RDRAM TM controllers in the second quarter of 2010 due to a one-time catch-up royalty payment for the Sony PlayStation ® 2 product in the second quarter of 2009, partially offset by higher royalties reported from increased shipments related to DDR2 technologies and higher royalties from XDR tm DRAM associated with increased shipments of the Sony PlayStation ® 3 product in the second quarter of 2010.
     Royalties from technology licenses increased approximately $1.1 million to $13.7 million for the six months ended June 30, 2010 from $12.6 million for the same period in 2009. The increase was primarily due to higher royalties reported from increased shipments related to DDR2 technologies and higher royalties from XDR tm DRAM associated with increased shipments of the Sony PlayStation ® 3 product, partially offset by lower royalties from RDRAM TM controllers in the first half of 2010 due to a one-time catch-up royalty payment for the Sony PlayStation ® 2 product in the second quarter of 2009.
     In the future, we expect technology royalties will continue to vary from period to period based on our licensees’ shipment volumes, sales prices, and product mix.
Contract Revenue
     Contract revenue decreased approximately $1.5 million to $0.7 million for the three months ended June 30, 2010 from $2.2 million for the same period in 2009. Contract revenue decreased approximately $1.4 million to $2.0 million for the six months ended June 30, 2010 from $3.4 million for the same period in 2009. The decrease in both periods was primarily due to the completion of a $1.1 million industry standard chip interface contract in the second quarter of 2009.
     We believe that contract revenue recognized will continue to fluctuate over time based on our ongoing contractual requirements, the amount of work performed, the timing of completing engineering deliverables, and by changes to work required, as well as new technology development contracts booked in the future.

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Engineering costs:
                                                 
    Three Months Ended             Six Months Ended        
    June 30,     Change in     June 30,     Change in  
(Dollars in millions)   2010     2009     Percentage     2010     2009     Percentage  
Engineering costs
                                               
Cost of revenue
  $ 1.8     $ 1.2       47.4 %   $ 3.5     $ 3.0       17.8 %
Stock-based compensation
    0.0       0.2       (87.7 )%     0.1       0.6       (79.4 )%
 
                                       
Total cost of revenue
    1.8       1.4       25.5 %     3.6       3.6       1.0 %
 
                                       
Research and development
    20.3       13.5       50.3 %     39.4       28.6       37.8 %
Stock-based compensation
    2.7       2.2       22.1 %     5.3       5.0       6.4 %
 
                                       
Total research and development
    23.0       15.7       46.3 %     44.7       33.6       33.2 %
 
                                       
Total engineering costs
  $ 24.8     $ 17.1       44.5 %   $ 48.3     $ 37.2       30.0 %
 
                                       
     Total engineering costs increased 44.5% and 30.0% for the three and six months ended June 30, 2010, respectively, as compared to the same periods in 2009 primarily due to the increase in headcount from our newly established LDT group, funding for our 2010 CIP, the bonus related to the Samsung settlement, increase in patent research related costs and additional amortization expense related to intangible assets acquired from GLT.
     In the near term, we expect engineering costs to be higher than in 2009 due primarily to the engineering activities in our newly established LDT group as well as funding for our 2010 CIP and the bonus related to the Samsung settlement. In addition, we intend to continue to make investments in the infrastructure and technologies required to maintain our product innovation and leadership position in chip interface technologies and, as a result, costs are expected to increase.
Marketing, general and administrative costs:
                                                 
    Three Months Ended             Six Months Ended        
    June 30,     Change in     June 30,     Change in  
(Dollars in millions)   2010     2009     Percentage     2010     2009     Percentage  
Marketing, general and administrative costs
                                               
Marketing, general and administrative costs
  $ 19.0     $ 12.2       56.5 %   $ 38.3     $ 26.0       47.2 %
Litigation expense
    5.2       15.0       (65.3 )%     12.2       33.0       (62.9 )%
Stock-based compensation
    5.2       5.4       (3.8 )%     10.4       10.7       (3.1 )%
 
                                       
Total marketing, general and administrative costs
  $ 29.4     $ 32.6       (9.7 )%   $ 60.9     $ 69.7       (12.6 )%
 
                                       
     Total marketing, general and administrative costs decreased 12.6% and 9.7% for the three and six months ended June 30, 2010 as compared to the same periods in 2009 due primarily to the decreased litigation expenses related to ongoing major cases. Non-litigation related marketing, general and administrative costs increased for the three and six months ended June 30, 2010 primarily due to increased headcount in corporate development commencing in 2009 as a result of our strategic initiatives to identify and acquire additional technology opportunities, funding for our 2010 CIP, the bonus related to the Samsung settlement, increased marketing expenses related to trade shows, increased consulting fees and increased general legal expenses.
     In the future, marketing, general and administrative costs will vary from period to period based on the trade shows, advertising, legal, acquisition and other marketing and administrative activities undertaken, and the change in sales, marketing and administrative headcount in any given period. Litigation expenses are expected to vary from period to period due to the variability of litigation activities.
Gain from settlement:
                                                 
    Three Months Ended             Six Months Ended        
    June 30,     Change in     June 30,     Change in  
(Dollars in millions)   2010     2009     Percentage     2010     2009     Percentage  
Gain from settlement
  $ 10.3     $     NM*   $ 106.2     $     NM*
 
                                       
 
*   NM — percentage is not meaningful as the change is too large

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     The settlement with Samsung is a multiple element arrangement for accounting purposes. For a multiple element arrangement, the Company is required to determine the fair value of the elements. The Company considered several factors in determining the accounting fair value of the elements of the settlement with Samsung which included a third party valuation using an income approach, the Black-Scholes option pricing model and a residual approach (collectively the “Fair Value”). Gain from settlement of $10.3 million and $106.2 million in the three and six months ended June 30, 2010, respectively, represents the Fair Value of the cash consideration allocated to the resolution of the antitrust litigation settlement and the residual value of other elements.
Costs (recoveries) of restatement and related legal activities:
                                                 
    Three Months Ended             Six Months Ended        
    June 30,     Change in     June 30,     Change in  
(Dollars in millions)   2010     2009     Percentage     2010     2009     Percentage  
Costs (recoveries) of restatement and related legal activities
  $ 1.6     $ (0.4 )   NM*   $ 2.2     $ (14.1 )   NM*
 
                                       
 
*   NM — percentage is not meaningful as the change is too large
     Costs (recoveries) of restatement and related legal activities consist primarily of investigation, audit, legal and other professional fees related to the 2006-2007 stock option investigation and the filing of the restated financial statements and related litigation.
     Costs of restatement and related legal activities were $1.6 million for the three months ended June 30, 2010 primarily due to litigation expense associated with a private shareholder lawsuit related to the 2006-2007 stock option investigation. As compared to the same period in 2009, the increase in costs in 2010 was primarily due to the absence of reimbursements of $1.9 million from the insurance carriers in connection with the derivative and class action lawsuits. We recorded the $1.9 million as a recovery of costs of restatement and related legal activities for the three months ended June 30, 2009.
     Costs of restatement and related legal activities were $2.2 million for the six months ended June 30, 2010 primarily due to litigation expense associated with a private shareholder lawsuit related to the 2006-2007 stock option investigation. As compared to the same period in 2009, the increase in costs in 2010 was primarily due to the absence of reimbursements of $11.9 million from the insurance carriers in 2009, and the receipt of $4.5 million from former executives as part of their settlement agreements with us in connection with the derivative and class action lawsuits. The $16.4 million was recorded as a recovery of costs of restatement and related legal activities for the six months ended June 30, 2009. Until all the litigation and related issues are resolved, we anticipate that there could be additional amounts relating to these matters in the future.
Interest and other expense, net:
                                                 
    Three Months             Six Months        
    Ended June 30,     Change in     Ended June 30,     Change in  
(Dollars in millions)   2010     2009     Percentage     2010     2009     Percentage  
Interest income and other income, net
  $ 0.3     $ 1.2       (73.1 )%   $ 0.7     $ 2.6       (71.6 )%
Interest expense
    (3.7 )     (2.8 )     32.8 %     (9.7 )     (5.5 )     77.8 %
 
                                       
Interest and other expense, net
  $ (3.4 )   $ (1.6 )     108.3 %   $ (9.0 )   $ (2.9 )     213.7 %
 
                                       
 
*   NM — percentage is not meaningful as the change is too large
     Interest income and other income, net consists primarily of interest income generated from investments in high quality fixed income securities. The decrease in interest and other income, net, for the three and six months ended June 30, 2010 as compared to the same periods in 2009 was primarily due to lower yields on invested balances.
     Interest expense primarily consists of non-cash interest expense related to the amortization of the debt discount on the 2010 Notes, which were repaid during the first quarter of 2010, and the 2014 Notes as well as the coupon interest related to the 2014 Notes.
     During the second quarter of 2010, the Company adjusted its interest expense by approximately $1.0 million due to the incorrect amortization of the non-cash debt discount related to the 2014 Notes. We concluded that the correction was not material to the

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previous or present periods.
     We expect interest expense to be higher in 2010 as the 2014 Notes were outstanding for only six months in 2009 and increase steadily as the 2014 Notes reach maturity. See Note 16, “Convertible Notes,” of Notes to Unaudited Consolidated Financial Statements of this Form 10-Q.
Provision for income taxes:
                                                 
    Three Months Ended             Six Months Ended        
    June 30,     Change in     June 30,     Change in  
(Dollars in millions)   2010     2009     Percentage     2010     2009     Percentage  
Provision for income taxes
  $ 2.4     $ 0.0     NM   $ 48.1     $ 0.0     NM
 
                                       
Effective tax rate
    (23.7 )%     (0.1 )%             25.8 %     (0.1 )%        
 
*   NM — percentage is not meaningful as the change is too large
     Our effective tax rate for the three months ended June 30, 2010 is lower than the U.S. statutory tax rate applied to our net loss due to a full valuation allowance on our U.S. net deferred tax assets, partially offset by foreign withholding taxes and state alternative minimum taxes. Our effective tax rate for the six months ended June 30, 2010 is lower than the U.S. statutory tax rate applied to our net income due to a full valuation allowance on our U.S. net deferred tax assets, partially offset by foreign withholding taxes and state alternative minimum taxes. During the three and six months ended June 30, 2010, we paid withholding taxes of $4.1 million and $46.8 million, respectively, to the Korean tax authorities related to the payments received under the settlement with Samsung. We recorded a provision for income taxes of $2.4 million and $48.1 million, respectively, for the three and six months ended June 30, 2010, which is primarily comprised of the Korean taxes and state alternative minimum taxes. As we continue to maintain a valuation allowance against our U.S. deferred tax assets, our tax provision is based primarily on the Korean withholding taxes and state alternative minimum taxes.
     Our effective tax rate for the three and six months ended June 30, 2009 is lower than the U.S. statutory tax rate applied to our net loss due to a full valuation allowance on our U.S. net deferred tax assets, foreign income taxes and state income taxes, partially offset by refundable research and development tax credits.
Liquidity and Capital Resources
                 
    As of  
    June 30,     December 31,  
    2010     2009  
    (In millions)  
Cash and cash equivalents
  $ 334.5     $ 289.1  
Marketable securities
    263.1       171.1  
 
           
Total cash, cash equivalents, and marketable securities
  $ 597.6     $ 460.2  
 
           
                 
    Six Months Ended
    June 30,
    2010   2009
    (In millions)
Net cash provided by (used in) operating activities
  $ 176.4     $ (18.3 )
Net cash provided by (used in) investing activities
  $ (99.1 )   $ 64.1  
Net cash provided by (used in) financing activities
  $ (31.9 )   $ 155.9  
Liquidity
     Our management continues to believe that total cash, cash equivalents and marketable securities will continue at adequate levels to finance our operations, projected capital expenditures and commitments for the next twelve months. Cash needs for the first half of 2010 were funded primarily from operating activities due to the settlement with Samsung as well as financing activities due to proceeds from issuance of common stock pursuant to the Stock Purchase Agreement with Samsung and from the issuance of common stock under our equity incentive plans.

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Operating Activities
     Cash provided by operating activities of $176.4 million for the six months ended June 30, 2010 was primarily attributable to the net income, which included revenue and gain related to the settlement with Samsung, adjusted for non-cash items, including stock-based compensation expense, non-cash interest expense and depreciation/amortization expense. Changes in operating assets and liabilities for the six months ended June 30, 2010 primarily included increases in accrued salaries due to the 2010 CIP and the bonus related to the Samsung settlement offset by decreases in accrued litigation.
     Cash used in operating activities of $18.3 million for the six months ended June 30, 2009 was primarily attributable to the net loss adjusted for non-cash items, including stock-based compensation expense, non-cash interest expense and depreciation/amortization expense. Changes in operating assets and liabilities for the six months ended June 30, 2009 primarily included decreases in accrued litigation expenses due to recognition of proceeds of $5.0 million from an insurance company related to the derivative and class action lawsuits offset by increases in accounts payable due to the timing of vendor payments.
Investing Activities
     Cash used in investing activities of approximately $99.1 million for the six months ended June 30, 2010 primarily consisted of purchases of available-for-sale marketable securities of $830.4 million, partially offset by proceeds from the maturities of available-for-sale marketable securities of $736.6 million and proceeds from sale of a marketable security of $1.5 million. In the second quarter of 2010, we purchased patents and businesses for an aggregate amount of $4.3 million. In addition, we paid $2.5 million to acquire property and equipment, primarily leasehold improvements for our new offices as well as computer and machinery equipment.
     Cash provided by investing activities of approximately $64.1 million for the six months ended June 30, 2009 primarily consisted of proceeds from the maturities of available-for-sale marketable securities of $164.2 million, partially offset by purchases of available-for-sale marketable securities of $97.0 million. In addition, we paid $1.6 million to acquire intangible assets and $1.5 million to acquire property and equipment, primarily computer software licenses.
Financing Activities
     Cash used in financing activities was $31.9 million for the six months ended June 30, 2010 due primarily to the payment upon maturity of $137.0 million in face value of the 2010 Notes and stock repurchased with an aggregate price of $95.3 million under our share repurchase program, offset by proceeds received of $192.0 million from the issuance of common stock pursuant to the Stock Purchase Agreement with Samsung and $9.5 million from issuance of common stock under equity incentive plans. We also made payments totaling $1.2 million under installment payment plans to acquire intangible assets and equipment.
     Cash provided by financing activities was $155.9 million for the six months ended June 30, 2009. We received $146.3 million from the issuance of the 2014 Notes during the period. Proceeds received from the issuance of common stock under equity incentive plans totaled approximately $9.7 million.
     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. 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 income for a sufficient period of time to allow for recovery of the principal amounts invested. We continually monitor the credit risk in our portfolio and mitigate our credit risk exposures in accordance with our policies. As described elsewhere in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and this Quarterly Report on Form 10-Q, we are involved in ongoing litigation related to our intellectual property and our past stock option investigation. Any adverse settlements or judgments in any of this litigation could have a material adverse impact on our results of operations, cash balances and cash flows in the period in which such events occur.
Contractual Obligations
     On December 15, 2009, we entered into a definitive triple net space lease agreement with MT SPE, LLC (the “Landlord”) whereby we lease approximately 125,000 square feet of office space located at 1050 Enterprise Way in Sunnyvale, California (the “Sunnyvale Lease”). The office space will be used for our corporate headquarters, as well as engineering, marketing and administrative operations and activities. We plan to move to the new premises in the second half of 2010 following completion of leasehold improvements. The

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Sunnyvale Lease has a term of 120 months from the commencement date. The initial annual base rent is $3.7 million, subject to a full abatement of rent for the first six months of the Sunnyvale Lease term. The annual base rent increases each year to certain fixed amounts over the course of the term as set forth in the Sunnyvale Lease and will be $4.8 million in the tenth year. In addition to the base rent, we will also pay operating expenses, insurance expenses, real estate taxes and a management fee. We have two options to extend the Sunnyvale Lease for a period of 60 months each and a one-time option to terminate the Sunnyvale Lease after 84 months in exchange for an early termination fee.
     During the first quarter of 2010, we began a build-out of this facility and expect to incur approximately $15.3 million in construction costs. Under the terms of the Sunnyvale Lease, the landlord has agreed to reimburse us approximately $9.1 million of this amount. Because certain improvements to be constructed by us are considered structural in nature and we are responsible for any cost overruns, for accounting purposes we are treated as the owner of the construction project for the effect of lessee involvement in asset construction. Therefore, we have capitalized $25.1 million in property and equipment based on the estimated fair value of the portion of the building that we will occupy with a corresponding liability for construction in progress. The fair value was determined as of December 31, 2009 using level 3 fair value inputs (defined as 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)) and the cost approach which measures the value of an asset as the cost to reconstruct or replace it with another asset of like utility.
     Upon completion of construction, we will apply sale-leaseback accounting. At that time, we will determine whether the lease will be treated as a capital or operating lease.
     On March 8, 2010, we entered into a lease agreement with Fogg-Brecksville Development Co. (the “Ohio Landlord”) for 24,814 square feet of space consisting of 7,158 square feet of office area and 17,656 square feet of warehouse area, located in Brecksville, Ohio (the “Ohio Lease”). We plan to move to the new premises in the third quarter of 2010 following completion of leasehold improvements. The warehouse area will be converted into office space and manufacturing space. The office space will be used for the LDT group’s engineering activities while the manufacturing space will be used for the manufacturer of prototypes for the LDT group. The Ohio Lease has a term of 60 months from the commencement date which is the earlier of (i) the date upon which we first take occupancy of the premises once the construction work is completed or (ii) the first day of the month following completion and notification by the lessor to us of completion of construction of the building. The initial annual base rent is approximately $136,000. In addition to the base rent, we will also pay operating expenses, insurance expenses, real estate taxes and a management fee. We have an option to extend the Lease for an additional period of 60 months.
     During the first quarter of 2010, we began a build-out of this facility and expect to incur approximately $1.6 million in construction costs. Because certain improvements to be constructed by us are considered structural in nature and we are responsible for any cost overruns, for accounting purposes we are treated as the owner of the construction project for the effect of lessee involvement in asset construction. Therefore, we have capitalized $0.8 million in property and equipment based on the estimated fair value of the portion of the building that it will occupy with a corresponding liability for construction in progress. The fair value was determined as of March 31, 2010 using level 3 fair value inputs and the cost approach which measures the value of an asset as the cost to reconstruct or replace it with another asset of like utility. Upon completion of construction in the third quarter of 2010, we will account for the arrangement as a financing arrangement as sale-leaseback accounting cannot be applied. The building will be reflected as an asset on our balance sheets throughout the term of the lease. The rental payments will be treated as interest expense recorded on a straight-line basis over the term of the lease and the building will be depreciated on a straight-line basis over a period of 15 years. At the end of the lease term in 2015, we have an option to renew the lease for an additional 60 months. Should we decide not to renew the lease, we would reverse the net book value of the building and the corresponding financing liability and record the difference as a gain.
     On June 29, 2009, we entered into an Indenture with U.S. Bank, National Association, as trustee, relating to the issuance by us of $150.0 million aggregate principal amount of the 2014 Notes. On July 10, 2009, an additional $22.5 million in aggregate principal amount of 2014 Notes were issued as a result of the underwriters exercising their overallotment option. The aggregate principal amount of the 2014 Notes outstanding as of March 31, 2010 was $172.5 million, offset by unamortized debt discount of $56.3 million in the accompanying consolidated balance sheets. The debt discount is currently being amortized over the remaining 48 months until maturity of the 2014 Notes on June 15, 2014. See Note 16, “Convertible Notes,” of Notes to Unaudited Consolidated Financial Statements of this Form 10-Q for additional details.

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     As of June 30, 2010, our material contractual obligations are:
                                                         
            Remainder                                
(in thousands)   Total     of 2010     2011     2012     2013     2014     Thereafter  
Contractual obligations(1)
                                                       
Leases (2)
  $ 48,300     $ 4,224     $ 4,905     $ 4,999     $ 4,449     $ 4,580     $ 25,143  
Convertible notes
    172,500                               172,500        
Interest payments related to convertible notes
    34,120       4,313       8,625       8,625       8,625       3,932        
 
                                         
Total
  $ 254,920     $ 8,537     $ 13,530     $ 13,624     $ 13,074     $ 181,012     $ 25,143  
 
                                         
 
(1)   The above table does not reflect possible payments in connection with uncertain tax benefits of approximately $10.6 million, including $8.6 million recorded as a reduction of long-term deferred tax assets and $2.0 million in long-term income taxes payable, as of June 30, 2010. 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)   Includes both the Sunnyvale Lease and Ohio Lease.
Contingently Redeemable Common Stock
     On January 19, 2010, pursuant to the terms of a Stock Purchase Agreement (the “Stock Purchase Agreement”), Samsung purchased for cash from us 9.6 million shares of our common stock (the “Shares”) with certain restrictions and put rights. The issuance of the Shares by us to Samsung was made through a private transaction. The Stock Purchase Agreement provides Samsung a one-time put right, beginning 18 months after the date of the Stock Purchase Agreement and extending to 19 months after the date of the Stock Purchase Agreement, to elect to put back to us up to 4.8 million of the Shares at the original issue price of $20.885 per share (for an aggregate purchase price of up to $100.0 million). The 4.8 million shares have been recorded, at estimated Fair Value, as contingently redeemable common stock on the consolidated balance sheet as of June 30, 2010.
     The Stock Purchase Agreement prohibits the transfer of the Shares by Samsung for 18 months after the date of the Stock Purchase Agreement, subject to certain exceptions. After expiration of the transfer restriction period, the Stock Purchase Agreement provides that Samsung may transfer a limited number of shares on a daily basis, provides us with a right of first offer for proposed transfers above such daily limits, and, if no sale occurs to us under the right of first offer, allows Samsung to transfer the Shares. Under the Stock Purchase Agreement, we have also agreed that after the transfer restriction period, Samsung will have certain rights to register the Shares for sale under the securities laws of the United States, subject to customary terms and conditions.
     The 9.6 million shares were accounted for as part of a multiple element arrangement where their respective Fair Value was determined to be $192.0 million. The $192.0 million was further allocated as follows:
    $113.5 million related to 4.8 million shares treated as contingently redeemable common stock due to the contractual put rights associated with those shares
 
    $78.5 million related to the remaining 4.8 million shares treated as stockholders’ equity
     See Note 3, “Settlement Agreement with Samsung,” of Notes to Unaudited Consolidated Financial Statements of this Form 10-Q for further discussion.
Share Repurchase Program
     In October 2001, our Board of Directors (the “Board”) approved a share repurchase program of our Common Stock, principally to reduce the dilutive effect of employee stock options. Under this program, the Board approved the authorization to repurchase up to 19.0 million shares of our outstanding Common Stock over an undefined period of time. On February 25, 2010, the Board approved a new share repurchase program authorizing the repurchase of up to an additional 12.5 million shares. Share repurchases under the program may be made through open market, established plan or privately negotiated transactions in accordance with all applicable securities laws, rules, and regulations. There is no expiration date applicable to the program. The new share repurchase program replaces the program authorized in October 2001.

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     During the three months ended June 30, 2010, we repurchased approximately 3.0 million shares of our Common Stock with an aggregate price of approximately $68.8 million. During the six months ended June 30, 2010, we repurchased approximately 4.2 million shares of our Common Stock with an aggregate price of approximately $95.3 million. As of June 30, 2010, we had repurchased a cumulative total of approximately 21.0 million shares of our Common Stock with an aggregate price of approximately $329.0 million since the commencement of the program in 2001. As of June 30, 2010, there remained an outstanding authorization to repurchase approximately 10.5 million shares of our outstanding Common Stock.
     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 cost of the shares repurchased exceeds the average original proceeds per share received from the issuance of Common Stock. During the six months ended June 30, 2010, the cumulative price of the shares repurchased exceeded the proceeds received from the issuance of the same number of shares. The excess of $81.4 million was recorded as an increase to accumulated deficit for the six months ended June 30, 2010. During the six months ended June 30, 2009, we did not repurchase any Common Stock.
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. Our critical accounting estimates include those regarding (1) revenue recognition, (2) litigation and settlements, (3) income taxes, (4) stock-based compensation, (5) marketable securities, (6) non-marketable securities and (7) convertible notes. For a discussion of our critical accounting estimates, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2009.
Revenue Recognition
Overview
     We recognize revenue when persuasive evidence of an arrangement exists, we have delivered the product or performed the service, the fee is fixed or determinable and collection is reasonably assured. If any of these criteria are not met, we defer recognizing the revenue until such time as all criteria are met. Determination of whether or not these criteria have been met may require us to make judgments, assumptions and estimates based upon current information and historical experience.
     Our revenue consists of royalty revenue and contract revenue generated from agreements with semiconductor companies, system companies and certain reseller arrangements. Royalty revenue consists of patent license and technology license royalties. Contract revenue consist of fixed license fees, fixed engineering fees and service fees associated with integration of our technology solutions into our customers’ products. Contract revenue may also include support or maintenance. Reseller arrangements generally provide for the pass-through of a percentage of the fees paid to the reseller by the reseller’s customer for use of our patent and technology licenses. We do not recognize revenue for these arrangements until we have received notice of revenue earned by and paid to the reseller, accompanied by the pass-through payment from the reseller. We do not pay commissions to the reseller for these arrangements.
     In addition, we may enter into certain settlements of patent infringement disputes. The amount of consideration received upon any settlement (including but not limited to past royalty payments, future royalty payments and punitive damages) is allocated to each element of the settlement based on the Fair Value of each element. In addition, revenues related to past royalties are recognized upon execution of the agreement by both parties, provided that the amounts are fixed or determinable, there are no significant obligations and collectability is reasonably assured. We do not recognize any revenues prior to execution of the agreement since there is no reliable basis on which we can estimate the amounts for royalties related to previous periods or assess collectability. Elements that are related to royalty revenue in nature (including but not limited to past royalty payments and future royalty payments) will be recorded as royalty revenue in the consolidated statements of operations. Elements that are not related to royalty revenue in nature (including

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but not limited to punitive damage and settlement) will be recorded as gain from settlement which is reflected as a separate line item within the operating expenses section in the consolidated statements of operations.
     Many of our licensees have the right to cancel their licenses. In such arrangements, revenue is only recognized to the extent that is consistent with the cancellation provisions. Cancellation provisions within such contracts generally provide for a prospective cancellation with no refund of fees already remitted by customers for products provided and payment for services rendered prior to the date of cancellation. Unbilled receivables represent enforceable claims and are deemed collectible in connection with our revenue recognition policy.
Royalty Revenue
     We recognize royalty revenue upon notification by our licensees and when deemed collectible. The terms of the royalty agreements generally either require licensees to give us notification and to pay the royalties within 60 days of the end of the quarter during which the sales occur or are based on a fixed royalty that is due within 45 days of the end of the quarter. We have two types of royalty revenue: (1) patent license royalties and (2) technology license royalties.
      Patent licenses. We license our broad portfolio of patented inventions to semiconductor and systems companies who use these inventions in the development and manufacture of their own products. Such licensing agreements may cover the license of part, or all, of our patent portfolio. The contractual terms of the agreements generally provide for payments over an extended period of time. For the licensing agreements with fixed royalty payments, we generally recognize revenue from these arrangements as amounts become due. For the licensing agreements with variable royalty payments which can be based on either a percentage of sales or number of units sold, we earn royalties at the time that the licensees’ sales occur. Our licensees, however, do not report and pay royalties owed for sales in any given quarter until after the conclusion of that quarter. As we are unable to estimate the licensees’ sales in any given quarter to determine the royalties due to us, we recognize royalty revenues based on royalties reported by licensees during the quarter and when other revenue recognition criteria are met.
      Technology licenses. We develop proprietary and industry-standard chip interface products, such as RDRAM tm and XDR tm that we provide to our customers under technology license agreements. These arrangements include royalties, which can be based on either a percentage of sales or number of units sold. We earn royalties on such licensed products sold worldwide by our licensees at the time that the licensees’ sales occur. Our licensees, however, do not report and pay royalties owed for sales in any given quarter until after the conclusion of that quarter. As we are unable to estimate the licensees’ sales in any given quarter to determine the royalties due to us, we recognize royalty revenues based on royalties reported by licensees during the quarter and when other revenue recognition criteria are met.
Contract Revenue
     We generally recognize revenue using percentage of completion for development contracts related to licenses of our interface solutions, such as XDR tm and FlexIO tm that involve significant engineering and integration services. For all license and service agreements accounted for using the percentage-of-completion method, we determine progress to completion using input measures based upon contract costs incurred. Prior to the first quarter of 2008, we determined progress to completion using labor-hours incurred. The change to input measures better reflects the overall gross margin over the life of the contract. This change did not have a significant impact on our results of operations. We have evaluated use of output measures versus input measures and have determined that our output is not sufficiently uniform with respect to cost, time and effort per unit of output to use output measures as a measure of progress to completion. Part of these contract fees may be due upon the achievement of certain milestones, such as provision of certain deliverables by us or production of chips by the licensee. The remaining fees may be due on pre-determined dates and include significant up-front fees.
     A provision for estimated losses on fixed price contracts is made, if necessary, in the period in which the loss becomes probable and can be reasonably estimated. If we determine that it is necessary to revise the estimates of the total costs required to complete a contract, the total amount of revenue recognized over the life of the contract would not be affected. However, to the extent the new assumptions regarding the total efforts necessary to complete a project are less than the original assumptions, the contract fees would be recognized sooner than originally expected. Conversely, if the newly estimated total efforts necessary to complete a project are longer than the original assumptions, the contract fees will be recognized over a longer period.
     If application of the percentage-of-completion method results in recognizable revenue prior to an invoicing event under a customer contract, we will recognize the revenue and record an unbilled receivable. Amounts invoiced to our customers in excess of

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recognizable revenue are recorded as deferred revenue. 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 unbilled receivables in any given period.
     We also recognize revenue for development contracts related to licenses of our chip interface products that involve non-essential engineering services and post contract support (“PCS”). These SOPs apply to all entities that earn revenue on products containing software, where software is not incidental to the product as a whole. Contract fees for the products and services provided under these arrangements are comprised of license fees and engineering service fees which are not essential to the functionality of the product. Our rates for PCS and for engineering services are specific to each development contract and not standardized in terms of rates or length. Because of these characteristics, we do not have a sufficient population of contracts from which to derive vendor specific objective evidence for each of the elements.
     Therefore, after we deliver the product, if the only undelivered element is PCS, we will recognize all revenue ratably over either the contractual PCS period or the period during which PCS is expected to be provided. We review assumptions regarding the PCS periods on a regular basis. If we determine that it is necessary to revise the estimates of the support periods, the total amount of revenue to be recognized over the life of the contract would not be affected.
Recent Accounting Pronouncements
     See Note 2 “Recent Accounting Pronouncements” of Notes to Unaudited Consolidated Financial Statements of this Form 10-Q for discussion of recent accounting pronouncements including the respective expected dates of adoption.
Item 3.   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 policy, we limit the amount of exposure to $15.0 million or 10% of the portfolio, whichever is lower, for any one 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.
     We invest our cash equivalents and marketable securities in a variety of U.S. dollar financial instruments such as Treasuries, 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 June 30, 2010, we had an investment portfolio of fixed income marketable securities of $593.3 million including cash equivalents. If market interest rates were to increase immediately and uniformly by 1.0% from the levels as of June 30, 2010, the fair value of the portfolio would decline by approximately $1.1 million. Actual results may differ materially from this sensitivity analysis.
     The table below summarizes the book value, fair value, unrealized gains (losses) and related weighted average interest rates for our cash equivalents and marketable securities portfolio as of June 30, 2010 and December 31, 2009:

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    June 30, 2010  
                    Gross     Gross     Weighted  
                    Unrealized     Unrealized     Rate of  
(dollars in thousands)   Fair Value     Amortized Cost     Gains     Losses     Return  
Money Market Funds
  $ 330,211     $ 330,211     $     $       0.01 %
U.S. Government Bonds and Notes
    230,260       230,139       133       (12 )     0.42 %
Corporate Notes, Bonds and Commercial Paper
    32,634       32,647       10       (23 )     0.47 %
Corporate Securities
    179       172       7             0.00 %
 
                               
Total cash equivalents and marketable securities
    593,284       593,169       150       (35 )        
Cash
    4,325       4,325                      
 
                               
Total cash, cash equivalents and marketable securities
  $ 597,609     $ 597,494     $ 150     $ (35 )        
 
                               
                                         
    December 31, 2009  
                    Gross     Gross     Weighted  
                    Unrealized     Unrealized     Rate of  
(dollars in thousands)   Fair Value     Amortized Cost     Gains     Losses     Return  
Money Market Funds
  $ 280,908     $ 280,908     $     $       0.01 %
U.S. Government Bonds and Notes
    138,829       138,521       377       (69 )     1.09 %
Corporate Notes, Bonds and Commercial Paper
    32,291       32,222       70       (1 )     1.89 %
 
                               
Total cash equivalents and marketable securities
    452,028       451,651       447       (70 )        
Cash
    8,165       8,165                      
 
                               
Total cash, cash equivalents and marketable securities
  $ 460,193     $ 459,816     $ 447     $ (70 )        
 
                               
     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 prices increase and decrease as the stock prices fall. 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. Additionally, we do not carry the convertible notes at fair value. We present the fair value of the convertible notes for required disclosure purposes. The following table summarizes certain information related to our 2014 Notes as of June 30, 2010:
                         
            Fair Value Given a   Fair Value Given a
            10%   10%
            Increase in Market   Decrease in Market
(in thousands)   Fair Value   Prices   Prices
5% Convertible Senior Notes due 2014
  $ 199,286     $ 219,215     $ 179,357  
     We invoice 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 one design center in India and small business development offices in Germany, Japan and Taiwan. We monitor our foreign currency exposure; however, as of June 30, 2010, we believe our foreign currency exposure is not material enough to warrant foreign currency hedging.
Item 4.   Controls and Procedures
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 June 30, 2010, our disclosure controls and procedures were effective.
Changes in Internal Control Over Financial Reporting

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     In December 2009, the Company formed the new LDT group, in connection with acquisition of certain technology and a portfolio of advanced lighting and optoelectronics patents from Global Lighting Technologies. As a result, we have begun integrating the processes and systems relating to the new group into our existing system of internal control over financial reporting. Except for the processes, systems and controls relating to the integration of the LDT group, there have not been any changes in the Company’s internal control over financial reporting during the quarter ended June 30, 2010 that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting. All of the other smaller business acquisitions during the year have been integrated into our existing business processes, systems and controls.
PART II—OTHER INFORMATION
Item 1.   Legal Proceedings
     The information required by this item regarding legal proceedings is incorporated by reference to the information set forth in Note 14 “Litigation and Asserted Claims” of Notes to Unaudited Consolidated Financial Statements of this Form 10-Q.
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 “Special Note Regarding Forward-Looking Statements” elsewhere in this report.
Risks Associated With Our Business, Industry and Market Conditions
If market leaders do not adopt our innovations, our results of operations could decline.
     An important part of our strategy is to penetrate our target market segments by working with leaders in those market segments. This strategy is designed to encourage other participants in those segments to follow such leaders in adopting our innovations. If a high profile industry participant adopts our innovations but fails to achieve success with its products or adopts and achieves success with a competing technology, our reputation and sales could be adversely affected. For example, if our commercial relationships with Samsung do not achieve success, our reputation could be adversely affected given the market position of Samsung as a leading memory manufacturer. In addition, some industry participants have adopted, and others may in the future adopt, a strategy of disparaging our memory solutions adopted by their competitors or a strategy of otherwise undermining the market adoption of our solutions.
     We target system companies to adopt our chip interface technologies, particularly those that develop and market high volume business and consumer products, which were traditionally focused on PCs, including PC graphics processors, and video game consoles, and now include HDTVs, cellular and digital phones, PDAs, digital cameras and other consumer electronics that incorporate all varieties of memory and chip interfaces. In particular, our strategy includes gaining acceptance of our technology in high volume consumer applications, including video game consoles, such as the Sony PlayStation ® 3, HDTVs and set top boxes. As we diversify our technologies, such as through the establishment of our LDT group, we will seek out other target markets in and related to computing, gaming and graphics, consumer electronics, mobile and general lighting applications. We are subject to many risks beyond our control that influence whether or not a potential licensee or partner company will adopt our technologies, including, among others:
    competition faced by a company in its particular industry;
 
    the timely introduction and market acceptance of a company’s products;
 
    the engineering, sales and marketing and management capabilities of a company;
 
    technical challenges unrelated to our innovations faced by a company in developing its products;
 
    the financial and other resources of a company;

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    the supply of semiconductors from our memory and chip interface licensees in sufficient quantities and at commercially attractive prices;
 
    the ability to establish the prices at which the chips containing our chip interfaces are made available to system companies; and
 
    the degree to which our licensees promote our innovations to their customers.
     There can be no assurance that consumer products that currently use our technology will continue to do so, nor can there be any assurance that the consumer products that incorporate our technology will be successful in their markets in order to generate expected royalties, nor can there be any assurance that any of our technologies selected for licensing will be implemented in a commercially developed or distributed product. If any of these events occur and market leaders do not successfully adopt our technologies, our strategy may not be successful and, as a result, our results of operations could decline.
We have traditionally operated in an industry that is highly cyclical and in which the number of our potential customers may be in decline as a result of industry consolidation, and we face intense competition in all of our target markets that may cause our results of operations to suffer.
     The semiconductor industry is intensely competitive and has been impacted by price erosion, rapid technological change, short product life cycles, cyclical market patterns and increasing foreign and domestic competition. As the semiconductor industry is highly cyclical, significant economic downturns characterized by diminished demand, erosion of average selling prices, production overcapacity and production capacity constraints could affect the semiconductor industry. We have just experienced such a period of economic downturn. As a result, we may achieve a reduced number of licenses, tightening of customers’ operating budgets, difficulty or inability of our customers to pay our licensing fees, extensions of the approval process for new licenses and consolidation among our customers, all of which may adversely affect the demand for our technology and may cause us to experience substantial period-to-period fluctuations in our operating results.
     Many of our customers operate in industries that have experienced significant declines as a result of the recent economic downturn. In particular, DRAM manufacturers, which make up a majority of our existing and potential licensees, have suffered material losses and other adverse effects to their businesses. These factors may result in industry consolidation as companies seek to reduce costs and improve profitability through business combinations. Consolidation among our existing DRAM and other customers may result in loss of revenues under existing license agreements. Consolidation among companies in the DRAM and other industries within which we license our technology may reduce the number of future licensees for our products and services. In either case, consolidation in the DRAM and other industries in which we operate may negatively impact our short-term and long-term business prospects, licensing revenues and results of operations.
     We face competition from semiconductor and intellectual property companies who provide their own DDR memory chip interface technology and solutions. In addition, most DRAM manufacturers, including our XDR tm licensees, produce versions of DRAM such as SDR, DDRx, GDDRx SDRAM and LPDDRx which compete with XDR tm chips. We believe that our principal competition for memory chip interfaces may come from our licensees and prospective licensees, some of which are evaluating and developing products based on technologies that they contend or may contend will not require a license from us. In addition, our competitors are also taking a system approach similar to ours in seeking to solve the application needs of system companies. Many of these companies are larger and may have better access to financial, technical and other resources than we possess. Wider applications of other developing memory technologies, including FLASH memory, may also pose competition to our licensed memory solutions.
     JEDEC has standardized what it calls extensions of DDR, known as DDR2 and DDR3. Other efforts are underway to create other products including those sometimes referred to as GDDR4 and GDDR5, as well as new ways to integrate products such as system-in-package DRAM. To the extent that these alternatives might provide comparable system performance at lower or similar cost than XDR tm memory chips, or are perceived to require the payment of no or lower royalties, or to the extent other factors influence the industry, our licensees and prospective licensees may adopt and promote 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.
     Our newly established LDT group faces competition from system and subsystem providers of backlighting and general lighting solutions, some of which have substantial resources and operations.
     If for any of these reasons we cannot effectively compete in these primary market segments, our results of operations could suffer.

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If our new LDT group does not succeed, our results of operations may be adversely affected.
     The future success of our new LDT group, formed in connection with the December 2009 acquisition of certain technology and a portfolio of advanced lighting and optoelectronics patents of Global Lighting Technologies, depends on our ability to improve the visual capabilities, form factor, power efficiency and cost-effectiveness of backlighting of LCD displays in products for computing, gaming and graphics, consumer electronics, mobile and general lighting applications. We will need to keep pace with rapid changes in advanced lighting and optoelectronics technology, changing consumer requirements, new product introductions and evolving industry standards, any of which could render our existing technology obsolete if we fail to respond in a timely manner. The extent to which companies in the general lighting industry adopt solid state lighting and license our lighting technologies, and the timing of such adoption and licensing, if it occurs at all, is subject to many factors beyond our control and is not predictable by us. We are subject to many risks beyond our control that influence whether or not a potential licensee or partner company will adopt and license our lighting technologies.
     The development, application and licensing of new backlit lighting technologies is a complex process subject to a number of uncertainties, including the integration of our LDT group into the rest of our company and the small size of the LDT group. Our competitors have significant marketing, workforce, financial and other resources and longer operating history which could make acceptance of our lighting technologies more difficult. If others develop innovative proprietary lighting technology that is superior to ours or if we fail to accurately anticipate technology and market trends, respond on a timely basis with our own new enhancements and technology, and achieve broad market acceptance of these enhancements and technology, our competitive position may be harmed and our operating results may be adversely affected.
In order to grow, 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, our entry into new markets, 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, our operating expenses would increase. For the six months ended June 30, 2010 and 2009, research and development expenses were $44.7 million and $33.6 million, respectively, including stock-compensation of approximately $5.3 million and $5.0 million, respectively. If we are required to invest significantly greater resources than anticipated in research and development efforts without an increase in revenue, especially with respect to our new LDT group and any other new technologies that we pursue outside of our core memory and chip interface technologies, our operating results could decline. Research and development expenses are likely to fluctuate from time to time to the extent we make periodic incremental investments in research and development, including as a result of our investment in new technologies, and these investments may be independent of our level of revenue. In order to grow, which may include entering new markets and/or developing new technologies, we anticipate that we will continue to devote substantial resources to research and development. We expect these expenses to increase in absolute dollars in the foreseeable future due to the increased complexity and the greater number of products under development as well as selectively hiring additional employees.
Our revenue is concentrated in a few customers, and if we lose any of these customers, our revenue may decrease substantially.
     We have a high degree of revenue concentration. As a result of our settlement with Samsung, Samsung is expected to account for a significant portion of our ongoing licensing revenue commencing in 2010. Our top five licensees represented approximately 91% and 78% of our revenues for the six months ended June 30, 2010 and 2009, respectively. For the six months ended June 30, 2010, revenue from Samsung accounted for 10% or more of our total revenue. For the six months ended June 30, 2009, revenue from AMD, Fujitsu, NEC, Panasonic and Sony 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, some of our commercial agreements 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. The particular licensees which account for revenue concentration have varied from period to period as a result of the addition of new contracts, expiration of existing contracts, industry consolidation, the expiration of deferred revenue schedules under existing contracts, and the volumes and prices at which the licensees have recently sold licensed semiconductors to system companies. These variations are expected to continue in the foreseeable future, although we anticipate that revenue will continue to be concentrated in a limited number of licensees.

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     We are in negotiations with licensees and prospective licensees to reach patent license agreements for DRAM devices and DRAM controllers. We expect that patent license royalties will continue to vary from period to period based on our success in renewing existing license agreements and adding new licensees, as well as the level of variation in our licensees’ reported shipment volumes, sales price and mix, offset in part by the proportion of licensee payments that are fixed. A number of our significant license agreements are scheduled to expire throughout 2010, including certain ones that accounted for more than 10% of our revenue in the year ended December 31, 2009. We are currently in discussions with those licensees whose agreements are scheduled to expire in 2010. However, we cannot provide any assurance that we will reach agreement on renewal terms or that the royalty rates we will be entitled to receive under the new agreements will be as favorable to us as our current agreements. If we are unsuccessful in renewing any of these patent license agreements, our results of operations may decline significantly.
Weak global economic conditions may adversely affect demand for our products and services.
     Our operations and performance depend significantly on worldwide economic conditions, and the U.S. and world economies continue to experience weak economic conditions. Uncertainty about global economic 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 licensees in the foreseeable future. Other factors that could influence demand include continuing increases in fuel and energy costs, competitive pressures, including pricing pressures, from companies that have competing products, changes in the credit market, conditions in the residential real estate and mortgage markets, consumer confidence, and other macroeconomic factors affecting consumer spending behavior. If our licensees experience reduced demand for their products as a result of economic conditions or otherwise, 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 could threaten the financial health of our counterparties, including companies with whom we have entered into licensing arrangements, settlement agreements, or that have been subject to litigation judgments that provide for payments to us, and their ability to fulfill their financial and other obligations to us. Economic downturns such as the one we are currently experiencing lead to financial pressures on our counterparties and may eventually lead to bankruptcy proceedings or other attempts to avoid financial obligations that are due to us under licenses, settlement agreements or litigation judgments. 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 a bankruptcy proceedings.
     In 2009, two of our counterparties, Qimonda and Spansion, were subject to insolvency proceedings in their applicable jurisdictions as a result of a downturn in business. Qimonda, which was a party to a settlement and licensing agreement with us, is under the process of being liquidated under its German insolvency proceeding. As part of the process, the administrator for Qimonda’s insolvency informed us that our license agreement was terminated. Under the license agreement, if we entered into licenses with certain other DRAM manufacturers, Qimonda would have been required to make certain additional payments to us up to an aggregate of $100.0 million. Given the status of Qimonda’s liquidation and the notice of termination of the license agreement, we do not believe that even if we satisfied the conditions for additional payments, we will obtain any future payment from Qimonda or the successors to its business. Spansion, which was one of our licensees that owed us an immaterial amount at the time of its insolvency, has now exited its voluntary Chapter 11 reorganization.
     If we are unable to collect all of such payments owed to us, or if other of our counterparties enter into bankruptcy or otherwise seek to renegotiate their financial obligations to us as a result of the deterioration of their financial health, our business and results of operations may be affected adversely.
Our business and operating results may be harmed if we undertake any restructuring activities or if we are unable to manage growth in our business.
     From time to time, we may undertake to restructure our business. There are several factors that could cause a restructuring to have an adverse effect on our business, financial condition and results of operations. These include potential disruption of our operations, the development of our technology, the deliveries to our customers and other aspects of our business. Employee morale and productivity could also suffer and we may lose employees whom we want to keep. 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

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management from other important work. Employee reductions or other restructuring activities also 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.
     Our business historically experienced periods of rapid growth that placed significant demands on our managerial, operational and financial resources. In the event that we return to such a period of growth, whether through internal expansion or acquisitions of other businesses or technologies, we would need to improve and expand our management, operational and financial systems and controls. We also would need to expand, train and manage our employee base. We cannot assure you that in connection with any such growth we will be able to timely and effectively meet demand and maintain the quality standards required by our existing and potential customers and licensees. If we ineffectively manage our growth or we are unsuccessful in recruiting and retaining personnel, our business and operating results will be harmed.
If we cannot respond to rapid technological change in our target markets by developing new innovations in a timely and cost-effective manner, our operating results will suffer.
     We derive most of our revenue from our chip interface technologies that we have patented. We expect that this dependence on our fundamental technology will continue for the foreseeable future. The semiconductor industry is characterized by rapid technological change, with new generations of semiconductors being introduced periodically and with ongoing improvements. The introduction or market acceptance of competing chip interfaces that render our chip interfaces less desirable or obsolete would have a rapid and material adverse effect on our business, results of operations and financial condition. The announcement of new chip interfaces by us could cause licensees or system companies to delay or defer entering into arrangements for the use of our current chip interfaces, which could have a material adverse effect on our business, financial condition and results of operations. We are dependent on the semiconductor industry to develop test solutions that are adequate to test our chip interfaces and to supply such test solutions to our customers and us.
     Our continued success depends on our ability to introduce and patent enhancements and new generations of our chip interface technologies that keep pace with other changes in the semiconductor industry and which achieve rapid market acceptance. We must continually devote significant engineering resources to addressing the ever increasing need for higher speed chip interfaces associated with increases in the speed of microprocessors and other controllers. The technical innovations that are required for us to be successful are inherently complex and require long development cycles, and there can be no assurance that our development efforts will ultimately be successful. In addition, these innovations must be:
    completed before changes in the semiconductor industry render them obsolete;
 
    available when system companies require these innovations; and
 
    sufficiently compelling to cause semiconductor manufacturers to enter into licensing arrangements with us for these new technologies.
     Significant technological innovations generally require a substantial investment before their commercial viability can be determined, and this concept applies to all of our target markets. There can be no assurance that we have accurately estimated the amount of resources required to complete our innovation efforts, or that we will have, or be able to expend, sufficient resources required for the development of our innovations. In addition, there is market risk associated with these products for which we develop technological innovations, and there can be no assurance that unit volumes, and their associated royalties, will occur. If our technology fails to capture or maintain a portion of the high volume target consumer market, our business results could suffer.
Some of our revenue is subject to the pricing policies of our licensees over whom we have no control.
     We have no control over our licensees’ pricing of their products and there can be no assurance that licensee products using or containing our chip interfaces will be competitively priced or will sell in significant volumes. One important requirement for our memory chip interfaces is for any premium charged by our licensees in the price of memory and controller chips over alternatives to be reasonable in comparison to the perceived benefits of the chip interfaces. If the benefits of our technology do not match the price premium charged by our licensees, the resulting decline in sales of products incorporating our technology could harm our operating results.
Our licensing cycle is lengthy and costly and our marketing and licensing efforts may be unsuccessful.

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     The process of persuading customers to adopt and license our chip interface and other technologies can be lengthy and, 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 licensee. The length of time it takes to establish a new licensing relationship can take many months or even years. In addition, our ongoing intellectual property litigation and regulatory actions have and will likely continue to have an impact on our ability to enter into new licenses and renewals of licenses. As such, 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 delay or failure to obtain royalties.
Future revenue is difficult to predict for several reasons, and our failure to predict revenue accurately may cause us to miss analysts’ estimates and result in our stock price declining.
     Our lengthy and costly license negotiation cycle and our ongoing intellectual property litigation make our future revenue difficult to predict because we may not be successful in entering into licenses with our customers on our estimated timelines and we are reliant on the litigation timelines for any results or settlements, such as our January 2010 settlement with Samsung.
     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 licensees’ products in any given period can be difficult to predict. As a result, our actual results may differ substantially from analyst estimates or our forecasts in any given quarter.
     In addition, a portion of our revenue comes from development and support services provided to our licensees. 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 accounting. Contract revenue accounting may result in deferral of the service fees to the completion of the contract, or may be recognized over the period in which services are performed on a percentage-of-completion basis. There can be no assurance that the product development schedule for these projects will not be changed or delayed. All of these factors make it difficult to predict future licensing revenue and may result in our missing previously announced earnings guidance or analysts’ estimates which would likely cause our stock price to decline.
Our quarterly and annual operating results are unpredictable and fluctuate, which may cause our stock price to be volatile and decline.
     Since many of our revenue components fluctuate and are difficult to predict, and our expenses are largely independent of revenue in any particular period, it is difficult for us to accurately forecast revenue and profitability. Factors other than those set forth above, which are beyond our ability to control or assess in advance, that could cause our operating results to fluctuate include:
    semiconductor and system companies’ acceptance of our chip interface products;
 
    the success of high volume consumer applications, such as the Sony PlayStation ® 3;
 
    the dependence of our royalties upon fluctuating sales volumes and prices of licensed chips that include our technology;
 
    the seasonal shipment patterns of systems incorporating our chip interface products;
 
    the loss of any strategic relationships with system companies or licensees;
 
    semiconductor or system companies discontinuing major products incorporating our chip interfaces;
 
    the unpredictability of litigation results or settlements and the timing and amount of any litigation expenses;
 
    changes in our customers’ development schedules and levels of expenditure on research and development;
 
    our licensees terminating or failing to make payments under their current contracts or seeking to modify such contracts, whether voluntarily or as a result of financial difficulties;

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    the results of our efforts to expand into new target markets, such as with our LDT group;
 
    changes in our strategies, including changes in our licensing focus and/or acquisitions of companies with business models or target markets different from our own; and
 
    changes in the economy and credit market and their effects upon demand for our technology and the products of our licensees.
     We believe that royalties will continue to represent a majority of total revenue for the foreseeable future. For the six months ended June 30, 2010 and 2009, royalties accounted for 99% and 94%, respectively, of our total revenue. Royalties are generally recognized in the quarter in which we receive a report from a licensee regarding the sale of licensed chips in the prior quarter; however, royalties are recognized only if collectability is assured. As a result of these uncertainties and effects being outside of our control, royalty revenue is difficult to predict and makes it difficult to develop accurate financial forecasts, which could cause our stock price to become volatile and decline.
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 six months ended June 30, 2010 and 2009, revenue from our sales to international customers constituted approximately 95% and 82% of our total revenue, respectively. As a result of our continued focus on international markets, we expect that future revenue derived from international sources will continue to represent a significant portion of our total revenue.
     To date, all of the revenue from international licensees has been denominated in U.S. dollars. However, to the extent that such licensees’ sales to systems companies are not denominated in U.S. dollars, any royalties which are based as a percentage of the customer’s 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 semiconductors sold by our foreign licensees were to increase as a result of fluctuations in the exchange rate of the relevant currencies, demand for licensed semiconductors could fall, which in turn would reduce our royalties. We do not use financial instruments to hedge foreign exchange rate risk.
     We currently have international operations in India (design), Japan (business development), Taiwan (business development) and Germany (business development). Our international operations and revenue are subject to a variety of risks which are beyond our control, including:
    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;
 
    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;
 
    foreign government regulations and changes in these regulations;
 
    social, political and economic instability;
 
    lack of protection of our intellectual property and other contract rights by jurisdictions in which we may do business to the same extent as the laws of the United States;
 
    changes in diplomatic and trade relationships;
 
    cultural differences in the conduct of business both with licensees and in conducting business in our international facilities and international sales offices;
 
    operating centers outside the United States;
 
    hiring, maintaining and managing a workforce remotely and under various legal systems; and

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    geo-political issues.
     We and our licensees are subject to many of the risks described above with respect to companies which are located in different countries, particularly home video game console, PC and other consumer electronics manufacturers located in Asia and elsewhere. There can be no assurance that one or more of the risks associated with our international operations could not result in a material adverse effect on our business, financial condition or results of operations.
We have in the past and may in the future make acquisitions or enter into mergers, strategic transactions or other arrangements that could cause our business to suffer.
     As part of our strategic initiatives, we have completed, currently are evaluating, and expect to continue to engage in, investments in or acquisitions of companies, products or technologies, and the entry into strategic transactions or other arrangements. These acquisitions, investments, transactions or arrangements are likely to range in size, some of which may be significant. After completing an acquisition, including the December 2009 acquisition of technology and a patent portfolio from Global Lighting Technologies and our smaller business acquisitions during the six month period ending June 30, 2010, we may experience difficulty integrating that company’s or division’s personnel and operations, which could negatively affect our operating results. In addition:
    the key personnel of the acquired entity or business may decide not to work for us or may not perform according to our expectations;
 
    we may experience additional legal, financial and accounting challenges and complexities in areas such as licensing, tax planning, cash management and financial reporting;
 
    our ongoing business may be disrupted or receive insufficient management attention;
 
    we may not be able to recognize the financial benefits we anticipated and/or we may suffer losses, both with respect to our ongoing business and the acquired entity or business;
 
    our increasing international presence resulting from acquisitions may increase our exposure to international currency, tax and political risks; and
 
    our lack of experience in new markets, products or technologies may cause us to fail to recognize the forecasted financial and strategic benefits of the acquisition.
     In connection with our strategic initiatives related to future acquisitions or mergers, strategic transactions or other arrangements, we may incur substantial expenses regardless of whether any transactions occur. Further, the risks described above may be exacerbated as a result of managing multiple acquisitions simultaneously. In addition, we may be required to assume the liabilities of the companies we acquire. By assuming the liabilities, we may incur liabilities such as those related to intellectual property infringement or indemnification of customers of acquired businesses for similar claims, which could materially and adversely affect our business. We may have to incur debt or issue equity securities to pay for any future acquisition, the issuance of which could involve restrictive covenants or be dilutive to our existing stockholders.
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 (or benefit) 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. 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.
Our results of operations could vary as a result of the methods, estimates and judgments we use in applying our accounting policies.

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     The methods, estimates and judgments we use in applying our accounting policies have a significant impact on our results of operations, including the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities, as described elsewhere in this report. On an ongoing basis, we evaluate our estimates, including those related to revenue recognition, such as percentage-of-completion contracts, investments, income taxes, litigation, goodwill and intangibles, and other contingencies. Such methods, estimates, and judgments are, by their nature, subject to substantial risks, uncertainties, and assumptions, and factors may arise over time that lead us to change our methods, estimates, and judgments. In addition, actual results may differ from these estimates under different assumptions or conditions.
     Changes in those methods, estimates, and judgments could significantly affect our results of operations. In particular, the measurement of share-based compensation expense requires us to use valuation methodologies and a number of assumptions, estimates, and conclusions regarding matters such as expected forfeitures, expected volatility of our share price, and the exercise behavior of our employees. Changes in these factors may affect both our reported results (including cost of contract revenue, research and development expenses, marketing, general and administrative expenses and our effective tax rate) and any forward-looking projections we make that incorporate projections of share-based compensation expense. Furthermore, there are no means, under applicable accounting principles, to compare and adjust our reported expense if and when we learn about additional information that may affect the estimates that we previously made, with the exception of changes in expected forfeitures of share-based awards. Factors may arise that lead us to change our estimates and assumptions with respect to future share-based compensation arrangements, resulting in variability in our share-based compensation expense over time.
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, who can enhance our existing technologies and introduce new technologies. Competition for qualified personnel, particularly those with significant industry experience, is intense, in particular in the San Francisco Bay Area where we are headquartered and in the area of Bangalore, India where we have a design center. We are also dependent upon our senior management personnel. The loss of the services of any of our senior management personnel, or key sales personnel in critical markets, or critical members of staff, or of a significant number of our engineers could be disruptive to our development efforts or business relationships and could cause our business and operations to suffer.
Our operations are subject to risks of natural disasters, acts of war, terrorism or widespread illness 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 facility, computer systems and personnel, which are primarily located in the San Francisco Bay Area. The San Francisco Bay Area is in close proximity to known earthquake fault zones. Our facility and transportation for our employees are susceptible to damage from earthquakes and other natural disasters such as fires, floods and similar events. Should an earthquake or other catastrophes, such as fires, floods, power loss, communication failure or similar events disable our facilities, we do not have readily available alternative facilities from which we could conduct our business, which stoppage could have a negative effect on our operating results. Acts of terrorism, widespread illness and war could also have a negative effect at our international and domestic facilities.
Risks Related to Corporate Governance and Capitalization Matters
The price of our common stock may fluctuate significantly, which may make it difficult for holders to resell their shares when desired or at attractive prices.
     Our common stock is listed on The NASDAQ Global Select Market under the symbol “RMBS.” The trading price of our common stock has been subject to wide fluctuations which we expect to continue in the future in response to, among other things, the following:
    new litigation or developments in current litigation, including an unfavorable outcome to us from court proceedings relating to our litigation with Hynix, Micron, Nanya and NVIDIA and reaction to any settlements that we enter into with former litigants, such as Samsung;
 
    any progress, or lack of progress, real or perceived, in the development of products that incorporate our innovations;

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    our signing or not signing new licensees;
 
    announcements of our technological innovations or new products by us, our licensees or our competitors;
 
    positive or negative reports by securities analysts as to our expected financial results;
 
    developments with respect to patents or proprietary rights and other events or factors;
 
    trading activity related to our share repurchase plans; and
 
    issuance of additional securities by us, such as our issuance of approximately 9.6 million shares of common stock to Samsung in connection with our settlement agreement in January 2010.
     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. Because our outstanding senior convertible 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 our notes. In addition, the existence of the 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. Sales of substantial amounts of shares of our common stock in the public market, or the perception that those sales may occur, could cause the market price of our common stock to decline. In addition, lack of positive performance in our stock price may adversely affect our ability to retain key employees.
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, including new Securities and Exchange Commission, regulations and NASDAQ rules, have historically created uncertainty for companies such as ours. Any new or changed laws, regulations and standards are subject to varying interpretations in many cases 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, which could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. Any new investment of resources to comply with evolving laws, regulations and standards, may result in increased general and administrative expenses and a diversion of management time and attention from revenue generating activities to compliance activities. If our efforts to comply with new or changed laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, our reputation may be harmed and our business and operations would suffer.
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.
     In connection with our stock option investigation, we and certain of our current and former officers and directors, as well as our current auditors, were subject 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 allege that the defendants violated the federal and state securities laws and state law claims for fraud and breach of fiduciary duty. While we have settled the derivative and securities fraud class actions, the individual lawsuits continue to be adjudicated. For more information about the historic litigation described above, see Note 14, “Litigation and Asserted Claims,” of Notes to Unaudited Consolidated Financial Statements of this Form 10-Q. The amount of time to resolve these current and any future lawsuits is uncertain, and these matters could require significant management and financial resources which could otherwise be devoted to the operation of our business. Although we have expensed or accrued for certain liabilities that we believe will result from certain of these actions, the actual costs and expenses to defend and satisfy all of these lawsuits and any potential future litigation may exceed our current estimated accruals, possibly significantly. Unfavorable outcomes and significant judgments, settlements and legal expenses in litigation related to our past and 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.
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, and to defend our intellectual property.

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     We have indebtedness. In 2009, we issued $172.5 million aggregate principal amount of our 2014 Notes. The degree to which we are leveraged could have important consequences, including, but not limited to, the following:
    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 will be dedicated to the payment of the principal of our indebtedness as we are required to pay the principal amount of our 2014 Notes in cash upon conversion if specified conditions are met or when due;
 
    if upon any conversion of our 2014 Notes we are required to satisfy our conversion obligation with shares of our common stock or we are required to pay a “make-whole” premium with shares of our common stock, our existing stockholders’ interest in us would be diluted; and
 
    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.
     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 notes. Any required repayment of our notes as a result of a fundamental change or other acceleration would lower our current 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 flow 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.
If securities or industry analysts change their recommendations regarding our stock adversely, our stock price and trading volume could decline.
     The trading market for our common stock is influenced by the research and reports that industry or securities analysts publish about us, our business or our market. If one or more of the analysts who cover us change their recommendation regarding our stock adversely, our stock price would likely decline. If one or more of these analysts ceases coverage of our company or fails to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.
Our restated certificate of incorporation and bylaws,our stockholder rights plan, Delaware law and our outstanding convertible notes contain provisions that could discourage transactions resulting in a change in control, which may negatively affect the market price of our common stock.
     Our restated certificate of incorporation, our bylaws, our stockholder rights plan 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;
 
    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.
     In addition, the provisions in our stockholder rights plan could make it more difficult for a potential acquirer to consummate an acquisition of our company. 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 convertible 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 the 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 the notes, all or a portion of their notes. We may also be required to issue additional shares of our common stock upon conversion of such notes in the event of certain fundamental changes.
Litigation, Regulation and Business Risks Related to our Intellectual Property
We face current and potential adverse determinations in litigation stemming from our efforts to protect and enforce our patents and intellectual property, which could broadly impact our intellectual property rights, distract our management and cause a substantial decline in our revenue and stock price.
     We seek to diligently protect our intellectual property rights. In connection with the extension of our licensing program to SDR SDRAM-compatible and DDR SDRAM-compatible products, we became involved in litigation related to such efforts against different parties in multiple jurisdictions. In each of these cases, we have claimed infringement of certain of our patents, while the manufacturers of such products have generally sought damages and a determination that the patents in suit are invalid, unenforceable, and not infringed. Among other things, the opposing parties have alleged that certain of our patents are unenforceable because we engaged in document spoliation, litigation misconduct and/or acted improperly during our 1991 to 1995 participation in the JEDEC standard setting organization (including allegations of antitrust violations and unfair competition). See Note 14, “Litigation and Asserted Claims,” of Notes to Unaudited Consolidated Financial Statements of this Form 10-Q.
     There can be no assurance that any or all of the opposing parties will not succeed, either at the trial or appellate level, with such claims or counterclaims against us or that they will not in some other way establish broad defenses against our patents, achieve conflicting results, or otherwise avoid or delay paying royalties for the use of our patented technology. Moreover, there is a risk that if one party prevails against us, other parties could use the adverse result to defeat or limit our claims against them; conversely, there can be no assurance that if we prevail against one party, we will succeed against other parties on similar claims, defenses, or counterclaims. In addition, there is the risk that the pending litigations and other circumstances may cause us to accept less than what we now believe to be fair consideration in settlement.
     Any of these matters, whether or not determined in our favor or settled by us, is costly, may cause delays (including delays in negotiating licenses with other actual or potential licensees), will tend to discourage future design partners, will tend to impair adoption of our existing technologies and divert the efforts and attention of our management and technical personnel from other business operations. In addition, we may be unsuccessful in our 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 intellectual property 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 licensees on a temporary or permanent basis. Even if we are successful in our litigation, or any settlement of such litigation, there is no guarantee that the applicable opposing parties will be able to pay any damages awards timely or at all as a result of financial difficulties or otherwise. Delay or any or all of these adverse results could cause a substantial decline in our revenue and stock price.

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An adverse resolution by or with a governmental agency could result in severe limitations on our ability to protect and license our intellectual property, and would cause our revenue to decline substantially.
     From time to time, we are subject to proceedings by government agencies, such as our Federal Trade Commission and European Commission proceedings over the past several years. These proceedings may result in adverse determinations against us or in other outcomes that could limit our ability to enforce or license our intellectual property, and could cause our revenue to decline substantially.
     In addition, 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, such as the attempts by Hynix to appeal our settlement with the European Commission, and to assert claims for monetary damages against us. Although we have successfully defeated certain attempts to do so, there can be no assurance that other third parties will not be successful in the future or that additional claims or actions arising out of adverse findings by a government agency will not be asserted against us.
     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 (“PTO”) and/or the European Patent Office (the “EPO”). Currently, we are subject to several re-examination proceedings, including proceedings initiated by Hynix, Micron and NVIDIA as a defensive action in connection with our litigation against those companies. An adverse decision by the PTO or EPO could invalidate some or all of these patent claims and could also result in additional adverse consequences affecting other related U.S. or European patents, including in our intellectual property litigation. If a sufficient number of such patents are impaired, our ability to enforce or license our intellectual property would be significantly weakened and this 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 licensees, as our litigation opponents may attempt to use such proceedings to delay or otherwise impair any pending cases and our existing or potential licensees may await the final outcome of any proceedings before agreeing to new licenses or pay 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 intellectual property rights of 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. Threatened or ongoing third-party claims or infringement actions may prevent us from pursuing additional development and licensing arrangements for some period. For example, we may discontinue negotiations with certain customers for additional licensing of our patents due to the uncertainty caused by our ongoing litigation on the terms of such licenses or of the terms of such licenses on our litigation. 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 product.
If we are unable to successfully protect our inventions 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 intellectual property and not be challenged by third parties;
 
    the validity of our patents will be upheld;
 
    our patents will not be declared unenforceable;

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    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 patents;
 
    changes in law will not be implemented that will affect our ability to protect and enforce our patents and other intellectual property;
 
    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 intellectual property that we acquire.
     If any of the above were to occur, our operating results could be adversely affected.
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 intellectual property rights. If we fail to protect these intellectual property rights, our licensees 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 large part on the use of our intellectual property in the products of third party manufacturers, and our ability to enforce intellectual property 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.
We rely upon the accuracy of our licensees’ 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 licensees 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 licensees 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 licensees. Therefore, we typically rely on the accuracy of the reports from licensees without independently verifying the information in them. Our failure to audit our licensees’ 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 licensees 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.
Any dispute regarding our intellectual property may require us to indemnify certain licensees, the cost of which could severely hamper our business operations and financial condition.
     In any potential dispute involving our patents or other intellectual property, our licensees could also become the target of litigation. While we generally do not indemnify our licensees, some of our license agreements provide limited indemnities, and some require us to provide technical support and information to a licensee that is involved in litigation involving use of our technology. In addition, we may agree to indemnify others in the future. Any of these indemnification and support obligations could result in substantial expenses. In addition to the time and expense required for us to indemnify or supply such support to our licensees, a licensee’s development, marketing and sales of licensed semiconductors 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.
Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds

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     Purchases of Equity Securities by the Issuer and Affiliated Purchasers
                                         
            Total Number                     Maximum  
            of Shares                     Number of  
            Purchased as                     Shares that  
            Part of                     May Yet be  
            Publicly                     Purchased  
    Total Number     Announced             Average     Under the  
    of Shares     Plans or             Price Paid     Plans or  
Period   Purchased     Programs     Total Paid     per Share     Programs  
Cumulative shares repurchased as of 12/31/2009
    16,810,950       16,810,950     $ 233,756,155     $ 13.90       2,240,913  
Additional authorization
                                    12,500,000  
 
                                     
 
                                    14,740,913  
2/1/2010 - 2/28/2010
    1,233,287       1,233,287     $ 26,472,746     $ 21.47       13,507,626  
4/1/2010 - 4/30/2010
    519,895       519,895     $ 12,715,797     $ 24.46       12,987,731  
5/1/2010 - 5/31/2010
    1,793,068       1,793,068     $ 42,502,150     $ 23.70       11,194,663  
6/1/2010 - 6/30/2010
    686,000       686,000     $ 13,594,241     $ 19.82       10,508,663  
 
                                 
Cumulative shares repurchased as of 6/30/2010
    21,043,200       21,043,200     $ 329,041,090     $ 15.64          
 
                                 
     In October 2001, our Board of Directors (the “Board”) approved a share repurchase program of our Common Stock, principally to reduce the dilutive effect of employee stock options. Under this program, the Board approved the authorization to repurchase up to 19.0 million shares of our outstanding Common Stock over an undefined period of time. On February 25, 2010, the Board approved a new share repurchase program authorizing the repurchase of up to an additional 12.5 million shares. Share repurchases under the program may be made through open market, established plan or privately negotiated transactions in accordance with all applicable securities laws, rules, and regulations. There is no expiration date applicable to the program. The new share repurchase program replaces the program authorized in October 2001.
     During the six months ended June 30, 2010, we repurchased approximately 4.2 million shares of our Common Stock with an aggregate price of approximately $95.3 million. As of June 30, 2010, we had repurchased a cumulative total of approximately 21.0 million shares of our Common Stock with an aggregate price of approximately $329.0 million since the commencement of the program in 2001. As of June 30, 2010, there remained an outstanding authorization to repurchase approximately 10.5 million shares of our outstanding Common Stock.
Item 3.   Defaults Upon Senior Securities
Not Applicable
Item 4.   Reserved
Item 5.   Other Information
Not Applicable
Item 6.   Exhibits
Refer to the Exhibit Index of this quarterly report on Form 10-Q.

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Table of Contents

SIGNATURE
     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
         
  RAMBUS INC.
 
 
Date: July 30, 2010  By:   /s/ Satish Rishi    
    Satish Rishi   
    Senior Vice President, Finance and
Chief Financial Officer 
 
 

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Table of Contents

INDEX TO EXHIBITS
         
Exhibit    
Number   Description of Document
       
 
  3.1 (1)  
Amended and Restated Certificate of Incorporation of Registrant filed May 29, 1997.
       
 
  3.2 (2)  
Certificate of Amendment of Amended and Restated Certificate of Incorporation of Registrant filed June 14, 2000.
       
 
  3.3    
Amended and Restated Bylaws of Registrant dated April 29, 2010.
       
 
  31.1    
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.
       
 
  31.2    
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.
       
 
  32.1    
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.
       
 
  32.2    
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.
 
(1)   Incorporated by reference to the Form 10-K filed on December 15, 1997.
 
(2)   Incorporated by reference to the Form 10-Q filed on May 4, 2001.

72

Exhibit 3.3
AMENDED AND RESTATED
BYLAWS
OF
RAMBUS INC.

 


 

TABLE OF CONTENTS
         
    Page  
ARTICLE I CORPORATE OFFICES
    1  
 
       
1.1 REGISTERED OFFICE
    1  
1.2 OTHER OFFICES
    1  
 
       
ARTICLE II MEETINGS OF STOCKHOLDERS
    1  
 
       
2.1 PLACE OF MEETINGS
    1  
2.2 ANNUAL MEETING
    1  
2.3 SPECIAL MEETING
    1  
2.4 NOTICE OF STOCKHOLDERS’ MEETINGS
    2  
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
    2  
2.6 QUORUM
    2  
2.7 ADJOURNED MEETING; NOTICE
    2  
2.8 CONDUCT OF BUSINESS
    3  
2.9 VOTING
    3  
2.10 WAIVER OF NOTICE
    3  
2.11 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
    3  
2.12 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS
    3  
2.13 PROXIES
    4  
2.14 LIST OF STOCKHOLDERS ENTITLED TO VOTE
    4  
2.15 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS
    5  
2.16 INSPECTORS OF ELECTION
    6  
 
       
ARTICLE III DIRECTORS
    6  
 
       
3.1 POWERS
    6  
3.2 NUMBER OF DIRECTORS
    7  
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS
    7  
3.4 RESIGNATION AND VACANCIES
    7  
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
    8  
3.6 CHAIRPERSON OF THE BOARD
    8  
3.7 REGULAR MEETINGS
    8  
3.8 SPECIAL MEETINGS; NOTICE
    9  
3.9 QUORUM
    9  
3.10 ADJOURNED MEETING; NOTICE
    9  
3.11 WAIVER OF NOTICE
    9  
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
    10  
3.13 FEES AND COMPENSATION OF DIRECTORS
    10  
3.14 APPROVAL OF LOANS TO EMPLOYEES
    10  

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TABLE OF CONTENTS
(Continued)
         
    Page  
3.15 REMOVAL OF DIRECTORS
    10  
 
       
ARTICLE IV COMMITTEES
    11  
 
       
4.1 COMMITTEES OF DIRECTORS
    11  
4.2 COMMITTEE MINUTES
    11  
4.3 MEETINGS AND ACTION OF COMMITTEES
    11  
 
       
ARTICLE V OFFICERS
    12  
 
       
5.1 OFFICERS
    12  
5.2 APPOINTMENT OF OFFICERS
    12  
5.3 SUBORDINATE OFFICERS
    12  
5.4 REMOVAL AND RESIGNATION OF OFFICERS
    12  
5.5 VACANCIES IN OFFICES
    13  
5.6 RESERVED
    13  
5.7 CHIEF EXECUTIVE OFFICER
    13  
5.8 PRESIDENT
    13  
5.9 VICE PRESIDENTS
    13  
5.10 SECRETARY
    13  
5.11 CHIEF FINANCIAL OFFICER
    14  
5.12 ASSISTANT SECRETARY
    14  
5.13 ASSISTANT TREASURER
    14  
5.14 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
    15  
5.15 AUTHORITY AND DUTIES OF OFFICERS
    15  
 
       
ARTICLE VI INDEMNITY
    15  
 
       
6.1 THIRD PARTY ACTIONS
    15  
6.2 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION
    16  
6.3 SUCCESSFUL DEFENSE
    16  
6.4 DETERMINATION OF CONDUCT
    16  
6.5 PAYMENT OF EXPENSES IN ADVANCE
    17  
6.6 INDEMNITY NOT EXCLUSIVE
    17  
6.7 INSURANCE INDEMNIFICATION
    17  
6.8 THE CORPORATION
    17  
6.9 EMPLOYEE BENEFIT PLANS
    17  
6.10 CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES
    18  
 
       
ARTICLE VII RECORDS AND REPORTS
    18  
 
       
7.1 MAINTENANCE AND INSPECTION OF RECORDS
    18  
7.2 INSPECTION BY DIRECTORS
    18  
7.3 ANNUAL STATEMENT TO STOCKHOLDERS
    19  

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TABLE OF CONTENTS
(Continued)
         
    Page  
ARTICLE VIII GENERAL MATTERS
    19  
 
       
8.1 CHECKS
    19  
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS
    19  
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES
    19  
8.4 SPECIAL DESIGNATION ON CERTIFICATES
    20  
8.5 LOST CERTIFICATES
    20  
8.6 CONSTRUCTION; DEFINITIONS
    20  
8.7 DIVIDENDS
    21  
8.8 FISCAL YEAR
    21  
8.9 SEAL
    21  
8.10 TRANSFER OF STOCK
    21  
8.11 STOCK TRANSFER AGREEMENTS
    21  
8.12 REGISTERED STOCKHOLDERS
    21  
 
       
ARTICLE IX AMENDMENTS
    22  

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AMENDED AND RESTATED BYLAWS
OF
RAMBUS INC.
(As Amended and Restated as of April 29, 2010)
ARTICLE I
CORPORATE OFFICES
     1.1 REGISTERED OFFICE
     The registered office of the corporation shall be fixed in the corporation’s certificate of incorporation, as the same may be amended from time to time.
     1.2 OTHER OFFICES
     The board of directors may at any time establish other offices at any place or places where the corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
     2.1 PLACE OF MEETINGS
     Meetings of stockholders shall be held at any place, within or outside the State of Delaware, designated by the board of directors. In the absence of any such designation, stockholders’ meetings shall be held at the corporation’s principal executive office.
     2.2 ANNUAL MEETING
     The annual meeting of stockholders shall be held each year on a date and at a time designated by the board of directors. At the meeting, directors shall be elected and any other proper business may be transacted.
     2.3 SPECIAL MEETING
     A special meeting of the stockholders may be called at any time by a majority of the board of directors of the corporation. No other person or persons are permitted to call a special meeting. No business may be conducted at a special meeting other than the business specified by the board of directors as specified in its notice of calling of the meeting delivered to the corporation as provided

 


 

below by Section 2.4 (notice of stockholders’ meetings) and 2.5 (manner of giving notice; affidavit of notice).
     2.4 NOTICE OF STOCKHOLDERS’ MEETINGS
     All notices of meetings with stockholders shall be in writing and shall be sent or otherwise given in accordance with Section 2.5 (manner of giving notice; affidavit of notice) of these bylaws not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting. The notice shall specify the place, date, and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called.
     2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
     Written notice of any meeting of stockholders, if mailed, is given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder’s address as it appears on the records of the corporation. An affidavit of the secretary or an assistant secretary or of the transfer agent of the corporation that the notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein.
     2.6 QUORUM
     The holders of a majority of the stock issued and outstanding and entitled to vote, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the certificate of incorporation. If, however, such quorum is not present or represented at any meeting of the stockholders, then either (i) the chairperson of the meeting or (ii) the stockholders entitled to vote at the meeting, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present or represented. At such adjourned meeting at which a quorum is present or represented, any business may be transacted that might have been transacted at the meeting as originally noticed.
     2.7 ADJOURNED MEETING; NOTICE
     When a meeting is adjourned to another time or place, unless these bylaws otherwise require, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the corporation may transact any business that might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

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     2.8 CONDUCT OF BUSINESS
     The chairperson of any meeting of stockholders shall determine the order of business and the procedure at the meeting, including such regulation of the manner of voting and the conduct of business.
     2.9 VOTING
     The stockholders entitled to vote at any meeting of stockholders shall be determined in accordance with the provisions of Section 2.12 (record date for stockholder notice; voting; giving consents) of these bylaws, subject to the provisions of Sections 217 (relating to voting rights of fiduciaries, pledgors and joint owners of stock) and 218 (relating to voting trusts and other voting agreements) of the General Corporation Law of Delaware.
     Except as may be otherwise provided in the certificate of incorporation or as may be otherwise required by applicable law, each stockholder shall be entitled to one vote for each share of capital stock held by such stockholder.
     2.10 WAIVER OF NOTICE
     Whenever notice is required to be given under any provision of the General Corporation Law of Delaware or of the certificate of incorporation or these bylaws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time of the event for which notice is to be given, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice unless so required by the certificate of incorporation or these bylaws.
     2.11 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
     The stockholders of the corporation may not take action by written consent without a meeting but must take any such actions at a duly called annual or special meeting.
     2.12 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS
     In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the board of directors may fix, in advance, a record date, which shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action.

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     If the board of directors does not so fix a record date:
          (i) The record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held.
          (ii) The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the board of directors adopts the resolution relating thereto.
     A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided , however , that the board of directors may fix a new record date for the adjourned meeting.
     2.13 PROXIES
     Each stockholder entitled to vote at a meeting of stockholders may authorize another person or persons to act for the stockholder by proxy, authorized by an instrument in writing or by a transmission permitted by law filed in accordance with the procedure established for the meeting, but no such proxy shall be voted or acted upon after three (3) years from its date, unless the proxy provides for a longer period. A proxy shall be deemed signed if the stockholder’s name is placed on the proxy (whether by manual signature, typewriting, electronic transmission or otherwise) by the stockholder or the stockholder’s attorney-in-fact. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Section 212 of the General Corporation Law of Delaware.
     2.14 LIST OF STOCKHOLDERS ENTITLED TO VOTE
     The officer who has charge of the stock ledger of a corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. Such list shall presumptively determine the identity of the stockholders entitled to vote at the meeting and the number of shares held by each of them.

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     2.15 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS
     To be properly brought before an annual meeting or special meeting, nominations for the election of director or other business must be (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the board of directors, (b) otherwise properly brought before the meeting by or at the direction of the board of directors, or (c) otherwise properly brought before the meeting by a stockholder. For such nominations or other business to be considered properly brought before the meeting by a stockholder, such stockholder must have given timely notice and in proper form of his or her intent to bring such business before such meeting. To be timely, such stockholder’s notice must be delivered to or mailed and received by the secretary of the corporation not less than 90 days prior to the meeting; provided , however , that in the event that less than 100 days notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the tenth day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made. To be in proper form, a stockholder’s notice to the secretary shall set forth:
          (i) the name and address of the stockholder who intends to make the nominations, propose the business, and, as the case may be, the name and address of the person or persons to be nominated or the nature of the business to be proposed;
          (ii) a representation that the stockholder is a holder of record of stock of the corporation entitled to vote at such meeting and, if applicable, intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice or introduce the business specified in the notice;
          (iii) if applicable, a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder;
          (iv) such other information regarding each nominee or each matter of business to be proposed by such stockholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission had the nominee been nominated, or intended to be nominated, or the matter been proposed, or intended to be proposed by the board of directors; and
          (v) if applicable, the consent of each nominee to serve as director of the corporation if so elected.
     The chairperson of the meeting may refuse to acknowledge the nomination of any person or the proposal of any business not made in compliance with the foregoing procedure.

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     2.16 INSPECTORS OF ELECTION
     A written proxy may be in the form of a telegram, cablegram, or other means of electronic transmission which sets forth or is submitted with information from which it can be determined that the telegram, cablegram, or other means of electronic transmission was authorized by the person.
     Before any meeting of stockholders, the board of directors shall appoint an inspector or inspectors of election to act at the meeting or its adjournment. The number of inspectors shall be either one (1) or three (3). If any person appointed as inspector fails to appear or fails or refuses to act, then the chairperson of the meeting may, and upon the request of any stockholder or a stockholder’s proxy shall, appoint a person to fill that vacancy.
     Such inspectors shall:
          (i) determine the number of shares outstanding and the voting power of each, the number of shares represented at the meeting, the existence of a quorum, and the authenticity, validity, and effect of proxies;
          (ii) receive votes, ballots or consents;
          (iii) hear and determine all challenges and questions in any way arising in connection with the right to vote;
          (iv) count and tabulate all votes or consents;
          (v) determine when the polls shall close;
          (vi) determine the result; and
          (vii) do any other acts that may be proper to conduct the election or vote with fairness to all stockholders.
     The inspectors of election shall perform their duties impartially, in good faith, to the best of their ability and as expeditiously as is practical. If there are three (3) inspectors of election, the decision, act or certificate of a majority is effective in all respects as the decision, act or certificate of all. Any report or certificate made by the inspectors of election is prima facie evidence of the facts stated therein.
ARTICLE III
DIRECTORS
     3.1 POWERS
     Subject to the provisions of the General Corporation Law of Delaware and any limitations in the certificate of incorporation or these bylaws relating to action required to be approved by the

-6-


 

stockholders or by the outstanding shares, the business and affairs of the corporation shall be managed and all corporate powers shall be exercised by or under the direction of the board of directors.
     3.2 NUMBER OF DIRECTORS
     The exact number of directors shall be determined from time to time by resolution of the board of directors, provided the board of directors shall consist of no more than ten (10) directors. The maximum number of directors constituting the entire board of directors may be changed by an amendment to this bylaw duly adopted by resolution of the board of directors or stockholders in accordance with these bylaws. No reduction of the authorized number of directors shall have the effect of removing any director before that director’s term of office expires.
     3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS
     Except as provided in Section 3.4 (resignation and vacancies) of these bylaws, directors shall be elected at each annual meeting of stockholders to hold office until the next annual meeting. Directors need not be stockholders unless so required by the certificate of incorporation or these bylaws. Each director, including a director elected to fill a vacancy, shall hold office until his or her successor is elected and qualified or until the director’s earlier death, resignation or removal. The certificate of incorporation or these bylaws may prescribe other qualifications for directors.
     If so provided in the certificate of incorporation, the directors of the corporation shall be divided into classes.
     Elections of directors need not be by written ballot.
     3.4 RESIGNATION AND VACANCIES
     Any director may resign at any time upon written notice to the attention of the secretary of the corporation. When one or more directors so resigns and the resignation is effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office as provided in this section in the filling of other vacancies.
     Unless otherwise provided in the certificate of incorporation or these bylaws, vacancies and newly created directorships resulting from any increase in the authorized number of directors elected by all of the stockholders having the right to vote as a single class may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director. If the directors are divided into classes, a person so elected by the directors then in office to fill a vacancy or newly created directorship shall hold office until the next election of the class for which such director shall have been chosen and until his or her successor shall have been duly elected and qualified.

-7-


 

     If at any time, by reason of death or resignation or other cause, the corporation should have no directors in office, then any officer or any stockholder or an executor, administrator, trustee or guardian of a stockholder, or other fiduciary entrusted with like responsibility for the person or estate of a stockholder, may call a special meeting of stockholders in accordance with the provisions of the certificate of incorporation or these bylaws, or may apply to the Court of Chancery for a decree summarily ordering an election as provided in Section 211 of the General Corporation Law of Delaware.
     If, at the time of filling any vacancy or any newly created directorship, the directors then in office constitute less than a majority of the whole board of directors (as constituted immediately prior to any such increase), then the Court of Chancery may, upon application of any stockholder or stockholders holding at least ten (10) percent of the total number of the shares at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office as aforesaid, which election shall be governed by the provisions of Section 211 of the General Corporation Law of Delaware as far as applicable.
     3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
     The board of directors of the corporation may hold meetings, both regular and special, either within or outside the State of Delaware.
     Unless otherwise restricted by the certificate of incorporation or these bylaws, members of the board of directors, or any committee designated by the board of directors, may participate in a meeting of the board of directors, or any committee, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting.
     3.6 CHAIRPERSON OF THE BOARD
     The chairperson of the board shall, if present, preside at meetings of the board of directors and exercise and perform such other powers and duties as may from time to time be assigned to him or her by the board of directors or as may be prescribed by these bylaws. If there is no chief executive officer and no president, then the chairperson of the board shall also be the chief executive officer of the corporation and shall have the powers and duties prescribed in Section 5.7 (chief executive officer) of these bylaws.
     3.7 REGULAR MEETINGS
     Regular meetings of the board of directors may be held without notice at such time and at such place as shall from time to time be determined by the board of directors.

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     3.8 SPECIAL MEETINGS; NOTICE
     Special meetings of the board of directors for any purpose or purposes may be called at any time by the chairperson of the board of directors, the president, the secretary or a majority of the authorized number of directors.
     Notice of the time and place of special meetings shall be delivered personally or by telephone to each director or sent by first-class mail or telegram, charges prepaid, addressed to each director at that director’s address as it is shown on the records of the corporation. If the notice is mailed, it shall be deposited in the United States mail at least four (4) days before the time of the holding of the meeting. If the notice is delivered personally or by telephone or by telegram, it shall be delivered personally or by telephone or to the telegraph company at least forty-eight (48) hours before the time of the holding of the meeting. Any oral notice given personally or by telephone may be communicated either to the director or to a person at the office of the director who the person giving the notice has reason to believe will promptly communicate it to the director. The notice need not specify the purpose or the place of the meeting, if the meeting is to be held at the principal executive office of the corporation.
     3.9 QUORUM
     At all meetings of the board of directors, a majority of the authorized number of directors shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum present shall be the act of the board of directors, except as may be otherwise specifically provided by statute, the certificate of incorporation or these bylaws. If a quorum is not present at any meeting of the board of directors, then the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present.
     A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for that meeting.
     3.10 ADJOURNED MEETING; NOTICE
     If a quorum is not present at any meeting of the board of directors, then the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present.
     3.11 WAIVER OF NOTICE
     Whenever notice is required to be given under any provision of the General Corporation Law of Delaware or of the certificate of incorporation or these bylaws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the

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beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the directors, or members of a committee of directors, need be specified in any written waiver of notice unless so required by the certificate of incorporation or these bylaws.
     3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
     Unless otherwise restricted by the certificate of incorporation or bylaws, any action required or permitted to be taken at any meeting of the board of directors or of any committee thereof may be taken without a meeting if all members of the board or committee, as the case may be, consent thereto in writing, or by electronic transmission and the writing or writings or electronic transmission or transmissions are filed with the minutes of the proceedings of the board, or committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.
     3.13 FEES AND COMPENSATION OF DIRECTORS
     Unless otherwise restricted by the certificate of incorporation or these bylaws, the board of directors shall have the authority to fix the compensation of directors.
     3.14 APPROVAL OF LOANS TO EMPLOYEES
     The corporation may lend money to, or guarantee any obligation of, or otherwise assist officers or employees of the corporation or of its subsidiary, including any officer or employee who is a director of the corporation or of its subsidiary, whenever, in the judgment of the board of directors, such loan, guaranty or assistance may reasonably be expected to benefit the corporation. The loan, guaranty or other assistance may be with or without interest and may be unsecured, or secured in such manner as the board of directors shall approve, including, without limitation, a pledge of shares of stock of the corporation. Notwithstanding the foregoing, the corporation may not, directly or indirectly, including through any subsidiary, extend or maintain credit, arrange for the extension of credit, or renew an extension of credit, in the form of a personal loan to or for any director or executive officer (or equivalent thereof) of the corporation.
     3.15 REMOVAL OF DIRECTORS
     Unless otherwise restricted by statute, by the certificate of incorporation or by these bylaws, any director or the entire board of directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors.
     No reduction of the authorized number of directors shall have the effect of removing any director prior to the expiration of such director’s term of office.

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ARTICLE IV
COMMITTEES
     4.1 COMMITTEES OF DIRECTORS
     The board of directors may, by resolution passed by a majority of the whole board of directors, designate one or more committees, with each committee to consist of one or more of the directors of the corporation. The board of directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the board of directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the board of directors or in the bylaws of the corporation, shall have and may exercise all the powers and authority of the board of directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers that may require it; but no such committee shall have the power or authority to (i) approve, adopt or recommend to the stockholders any action or matter expressly required by the General Corporation Law of Delaware to be submitted to stockholders for approval, or (ii) adopt, amend or repeal any bylaw of the corporation.
     4.2 COMMITTEE MINUTES
     Each committee shall keep regular minutes of its meetings and report the same to the board of directors when required.
     4.3 MEETINGS AND ACTION OF COMMITTEES
     Meetings and actions of committees shall be governed by, and held and taken in accordance with, the provisions of Article III of these bylaws, Section 3.5 (place of meetings; meetings by telephone), Section 3.7 (regular meetings), Section 3.8 (special meetings; notice), Section 3.9 (quorum), and Section 3.12 (board action by written consent without a meeting), with such changes in the context of those bylaws as are necessary to substitute the committee and its members for the board of directors and its members; provided , however , that the time of regular meetings of committees may be determined either by resolution of the board of directors or by resolution of the committee, that special meetings of committees may also be called by resolution of the board of directors and that notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee. The board of directors may adopt rules for the government of any committee not inconsistent with the provisions of these bylaws.

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ARTICLE V
OFFICERS
     5.1 OFFICERS
     The corporate officers of the corporation shall be a president and a secretary, and may include a chief executive officer, a chief financial officer, and a treasurer. The corporation may also have, at the discretion of the board of directors, one or more senior vice presidents, one or more vice presidents, one or more assistant vice presidents, one or more assistant secretaries, one or more assistant treasurers, and any such other officers as may be appointed in accordance with the provisions of these bylaws. Any number of offices may be held by the same person.
     5.2 APPOINTMENT OF CORPORATE OFFICERS
     The corporate officers of the corporation shall be appointed by the board of directors, subject to the rights, if any, of an officer under any contract of employment, and shall hold their respective offices for such terms as the Board of Directors may from time to time determine; provided , however , that the treasurer may also be appointed in accordance with Section 5.3 below.
     5.3 SUBORDINATE OFFICERS
     In addition to the corporate officers of the corporation as provided in Section 5.1 of these bylaws, the board of directors may appoint, or empower the chief executive officer or the president to appoint, such other officers and agents as the business of the corporation may require, each of whom shall hold office for such period, have such authority, and perform such duties as are provided in these bylaws or as the board of directors may from time to time determine.
     5.4 REMOVAL AND RESIGNATION OF OFFICERS
     Subject to the rights, if any, of an officer under any contract of employment, any officer may be removed, either with or without cause, by an affirmative vote of the majority of the board of directors at any regular or special meeting of the board of directors or, except in the case of an officer chosen by the board of directors, by any officer upon whom such power of removal may be conferred by the board of directors.
     Any officer may resign at any time by giving written notice to the corporation. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice; and, unless otherwise specified in that notice, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the corporation under any contract to which the officer is a party.

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     5.5 VACANCIES IN OFFICES
     Any vacancy occurring in any office of the corporation shall be filled by the board of directors.
     5.6 [reserved]
     5.7 CHIEF EXECUTIVE OFFICER
     Subject to the supervisory powers, if any, as may be given by the board of directors to the chairperson of the board, if there be such a director so designated, the chief executive officer, if any, shall, subject to the control of the board of directors, have general supervision, direction, and control of the business and the officers of the corporation. In the absence or nonexistence of a chairperson of the board, the chief executive officer shall preside at meetings of the board of directors. The chief executive officer shall preside at all meetings of the stockholders. The chief executive officer shall have such other powers and duties as may be prescribed by the board of directors or these bylaws. If there be a chief executive officer, all rights assigned by these bylaws to the president shall be deemed to be those of the chief executive officer.
     5.8 PRESIDENT
     The president shall preside at all meetings of the stockholders in the absence or nonexistence of a chairperson of the board or a chief executive officer. The president shall have the general powers and duties of management usually vested in the office of president of a corporation and shall have such other powers and duties as may be prescribed by the board of directors or these bylaws. If there is no chief executive officer, then the president shall also be the chief executive officer of the corporation and shall have the powers and duties prescribed in Section 5.7 (chief executive officer) of these bylaws.
     5.9 VICE PRESIDENTS
     In the absence or disability of the president, the vice presidents, if any, in order of their rank as fixed by the board of directors or, if not ranked, a vice president designated by the board of directors, shall perform all the duties of the president and when so acting shall have all the powers of, and be subject to all the restrictions upon, the president. The vice presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the board of directors, these bylaws or the president.
     5.10 SECRETARY
     The secretary shall keep or cause to be kept, at the principal executive office of the corporation or such other place as the board of directors may direct, a book of minutes of all meetings and actions of directors, committees of directors, and stockholders. The minutes shall show the time and place of each meeting, whether regular or special (and, if special, how authorized

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and the notice given), the names of those present at directors’ meetings or committee meetings, the number of shares present or represented at stockholders’ meetings, and the proceedings thereof.
     The secretary shall keep, or cause to be kept, at the principal executive office of the corporation or at the office of the corporation’s transfer agent or registrar, as determined by resolution of the board of directors, a share register, or a duplicate share register, showing the names of all stockholders and their addresses, the number and classes of shares held by each, the number and date of certificates evidencing such shares, and the number and date of cancellation of every certificate surrendered for cancellation.
     The secretary shall give, or cause to be given, notice of all meetings of the stockholders and of the board of directors required to be given by law or by these bylaws. The secretary shall keep the seal of the corporation, if one be adopted, in safe custody and shall have such other powers and perform such other duties as may be prescribed by the board of directors or by these bylaws.
     5.11 CHIEF FINANCIAL OFFICER
     The chief financial officer shall keep and maintain, or cause to be kept and maintained, adequate and correct books and records of accounts of the properties and business transactions of the corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital retained earnings, and shares. The books of account shall at all reasonable times be open to inspection by any director.
     The chief financial officer shall deposit all moneys and other valuables in the name and to the credit of the corporation with such depositories as may be designated by the board of directors. The chief financial officer shall disburse the funds of the corporation as may be ordered by the board of directors, shall render to the president and directors, whenever they request it, an account of all his or her transactions as chief financial officer and of the financial condition of the corporation, and shall have other powers and perform such other duties as may be prescribed by the board of directors or these bylaws.
     5.12 ASSISTANT SECRETARY
     The assistant secretary, or, if there is more than one, the assistant secretaries in the order determined by the stockholders or board of directors (or if there be no such determination, then in the order of their election) shall, in the absence of the secretary or in the event of his or her inability or refusal to act, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as may be prescribed by the board of directors or these bylaws.
     5.13 TREASURER AND ASSISTANT TREASURER
     The treasurer may perform the duties and exercise the powers of the chief financial officer, to the extent such duties and powers are delegated to the treasurer by the chief financial officer. The treasurer first, and the assistant treasurer, or, if there is more than one, the assistant treasurers, in the

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order determined by the stockholders, board of directors or chief executive officer (or if there be no such determination, then in the order of the appointment of the assistant treasurers) next, shall, in the absence of the chief financial officer or in the event of his or her inability or refusal to act, perform the duties and exercise the powers of the chief financial officer and shall perform such other duties and have such other powers as may be prescribed by the board of directors or these bylaws.
     5.14 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
     The president, any vice president, the chief financial officer, the secretary or assistant secretary of this corporation, or any other person authorized by the board of directors or the president or a vice president, is authorized to vote, represent, and exercise on behalf of this corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of this corporation. The authority granted herein may be exercised either by such person directly or by any other person authorized to do so by proxy or power of attorney duly executed by such person having the authority.
     5.15 AUTHORITY AND DUTIES OF OFFICERS
     All officers of the corporation shall respectively have such authority and perform such duties in the management of the business of the corporation as may be designated from time to time by the board of directors or the stockholders and, to the extent not so provided, as generally pertain to their respective offices, subject to the control of the board of directors.
ARTICLE VI
INDEMNITY
     6.1 THIRD PARTY ACTIONS
     The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement (if such settlement is approved in advance by the corporation, which approval shall not be unreasonably withheld) actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interest of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful.

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     6.2 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION
     The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person is or was a director, officer, employee or agent of corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys’ fees) and amounts paid in settlement (if such settlement is approved in advance by the corporation, which approval shall not be unreasonably withheld) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if the person acted in good faith and in manner the person reasonably believed to be in or not opposed to the best interests of the corporation, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. Notwithstanding any other provision of this Article VI, no person shall be indemnified hereunder for any expenses or amounts paid in settlement with respect to any action to recover short-swing profits under Section 16(b) of the Securities Exchange Act of 1934, as amended.
     6.3 SUCCESSFUL DEFENSE
     To the extent that a director, officer, employee or agent of the corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Sections 6.1 (third party actions) and 6.2 (actions by or in the right of the corporation), or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by the person in connection therewith.
     6.4 DETERMINATION OF CONDUCT
     Any indemnification under Sections 6.1 and 6.2 (unless ordered by a court) shall be made by the corporation only as authorized in the specific case upon a determination that the indemnification of the director, officer, employee or agent is proper in the circumstances because the person has met the applicable standard of conduct set forth in Sections 6.1 and 6.2. Such determination shall be made (1) by a majority vote of the directors who are not parties to such action, suit or proceeding, even though less than a quorum, or (2) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion, or (3) by the stockholders. Notwithstanding the foregoing, a director, officer, employee or agent of the corporation shall be entitled to contest any determination that the director, officer, employee or agent has not met the applicable standard of conduct set forth in Sections 6.1 and 6.2 by petitioning a court of competent jurisdiction.

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     6.5 PAYMENT OF EXPENSES IN ADVANCE
     Expenses incurred in defending a civil or criminal action, suit or proceeding, by an individual who may be entitled to indemnification pursuant to Section 6.1 or 6.2, shall be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the director, officer, employee or agent to repay such amount if it shall ultimately be determined that the individual is not entitled to be indemnified by the corporation as authorized in this Article VI.
     6.6 INDEMNITY NOT EXCLUSIVE
     The indemnification and advancement of expenses provided by or granted pursuant to the other sections of this Article VI shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in their official capacity and as to action in another capacity while holding such office.
     6.7 INSURANCE INDEMNIFICATION
     The corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against any liability asserted against the person and incurred by the person in any such capacity or arising out of the person’s status as such, irrespective of whether the corporation would have the power to indemnify such person against such liability under the provisions of this Article VI.
     6.8 THE CORPORATION
     For purposes of this Article VI, references to “the corporation” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under and subject to the provisions of this Article VI (including, without limitation the provisions of Section 6.4 (determination of conduct)) with respect to the resulting or surviving corporation as the person would have with respect to such constituent corporation if its separate existence had continued.
     6.9 EMPLOYEE BENEFIT PLANS
     For purposes of this Article VI, references to “other enterprises” shall include employee benefit plans; references to “fines” shall include any excise taxes assessed on a person with respect

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to an employee benefit plan; and references to “serving at the request of the corporation” shall include any service as a director, officer, employee or agent of the corporation which imposes duties on, or involves services by, such director, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries; and a person who acted in good faith and in a manner he or she reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the corporation” as referred to in this Article VI.
     6.10 CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES
     The indemnification and advancement of expenses provided by, or granted pursuant to, this Article VI shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such person.
ARTICLE VII
RECORDS AND REPORTS
     7.1 MAINTENANCE AND INSPECTION OF RECORDS
     The corporation shall, either at its principal executive officer or at such place or places as designated by the board of directors, keep a record of its stockholders listing their names and addresses and the number and class of shares held by each stockholder, a copy of these bylaws as amended to date, accounting books, and other records.
     Any stockholder of record, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose the corporation’s stock ledger, a list of its stockholders, and its other books and records and to make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to such person’s interest as a stockholder. In every instance where an attorney or other agent is the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing that authorizes the attorney or other agent so to act on behalf of the stockholder. The demand under oath shall be directed to the corporation at its registered office in Delaware or at its principal place of business.
     7.2 INSPECTION BY DIRECTORS
     Any director shall have the right to examine the corporation’s stock ledger, a list of its stockholders, and its other books and records for a purpose reasonably related to his or her position as a director. The Court of Chancery is hereby vested with the exclusive jurisdiction to determine whether a director is entitled to the inspection sought. The Court of Chancery may summarily order the corporation to permit the director to inspect any and all books and records, the stock ledger, and the stock list and to make copies or extracts therefrom. The Court of Chancery may, in its

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discretion, prescribe any limitations or conditions with reference to the inspection, or award such other and further relief as it may deem just and proper.
     7.3 ANNUAL STATEMENT TO STOCKHOLDERS
     The board of directors shall present at each annual meeting, and at any special meeting of the stockholders when called for by vote of the stockholders, a full and clear statement of the business and condition of the corporation.
ARTICLE VIII
GENERAL MATTERS
     8.1 CHECKS
     From time to time, the board of directors shall determine by resolution which person or persons may sign or endorse all checks, drafts, other orders for payment of money, notes or other evidences of indebtedness that are issued in the name of or payable to the corporation, and only the persons so authorized shall sign or endorse those instruments.
     8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS
     The board of directors, except as otherwise provided in these bylaws, may authorize any officer or officers, or agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the corporation; such authority may be general or confined to specific instances. Unless so authorized or ratified by the board of directors or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount.
     8.3 STOCK CERTIFICATES; PARTLY PAID SHARES
     The shares of the corporation shall be represented by certificates, provided that the board of directors of the corporation may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the corporation. Every holder of stock in the corporation represented by certificates shall be entitled to have a certificate signed by, or in the name of the corporation by, the chairman or vice-chairman of the board of directors, or the president or vice-president, and by the chief financial officer, or the treasurer or an assistant treasurer, or the secretary or an assistant secretary of such corporation representing the number of shares registered in certificate form. Any or all of the signatures on the certificate may be a facsimile. In case any officer, director, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if the person were such officer, transfer agent or registrar at the date of issue.

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     The corporation may issue the whole or any part of its shares as partly paid and subject to call for the remainder of the consideration to be paid therefor. Upon the face or back of each stock certificate issued to represent any such partly paid shares, upon the books and records of the corporation in the case of uncertificated partly paid shares, the total amount of the consideration to be paid therefor and the amount paid thereon shall be stated. Upon the declaration of any dividend on fully paid shares, the corporation shall declare a dividend upon partly paid shares of the same class, but only upon the basis of the percentage of the consideration actually paid thereon.
     8.4 SPECIAL DESIGNATION ON CERTIFICATES
     If the corporation is authorized to issue more than one class of stock or more than one series of any class, then the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate that the corporation shall issue to represent such class or series of stock; provided , however , that, except as otherwise provided in Section 202 of the General Corporation Law of Delaware, in lieu of the foregoing requirements there may be set forth on the face or back of the certificate that the corporation shall issue to represent such class or series of stock a statement that the corporation will furnish without charge to each stockholder who so requests the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.
     8.5 LOST CERTIFICATES
     Except as provided in this Section 8.5 (lost certificates), no new certificates for shares shall be issued to replace a previously issued certificate unless the latter is surrendered to the corporation and canceled at the same time. The corporation may issue a new certificate of stock or uncertificated shares in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the corporation may require the owner of the lost, stolen or destroyed certificate, or the owner’s legal representative, to give the corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares.
     8.6 CONSTRUCTION; DEFINITIONS
     Unless the context requires otherwise, the general provisions, rules of construction, and definitions in the Delaware General Corporation Law shall govern the construction of these bylaws. Without limiting the generality of this provision, the singular number includes the plural, the plural number includes the singular, and the term “person” includes both a corporation and a natural person.

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     8.7 DIVIDENDS
     The directors of the corporation, subject to any restrictions contained in (i) the General Corporation Law of Delaware or (ii) the certificate of incorporation, may declare and pay dividends upon the shares of its capital stock. Dividends may be paid in cash, in property, or in shares of the corporation’s capital stock.
     The directors of the corporation may set apart out of any of the funds of the corporation available for dividends a reserve or reserves for any proper purpose and may abolish any such reserve. Such purposes shall include but not be limited to equalizing dividends, repairing or maintaining any property of the corporation, and meeting contingencies.
     8.8 FISCAL YEAR
     The fiscal year of the corporation shall be fixed by resolution of the board of directors and may be changed by the board of directors.
     8.9 SEAL
     The corporation may adopt a corporate seal, which shall be adopted and which may be altered by the board of directors, and may use the same by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced.
     8.10 TRANSFER OF STOCK
     Stock of the corporation shall be transferable in the manner prescribed by law and in these bylaws. Transfers of stock shall be made on the books of the corporation only by the record holder of such stock or by his or her attorney lawfully constituted in writing and, if such stock is certificated, upon the surrender of the certificate therefor, which shall be canceled before a new certificate shall be issued.
     8.11 STOCK TRANSFER AGREEMENTS
     The corporation shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes of stock of the corporation to restrict the transfer of shares of stock of the corporation of any one or more classes owned by such stockholders in any manner not prohibited by the General Corporation Law of Delaware.
     8.12 REGISTERED STOCKHOLDERS
     The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends and to vote as such owner, shall be entitled to hold liable for calls and assessments the person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the

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part of another person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.
ARTICLE IX
AMENDMENTS
     The bylaws of the corporation may be adopted, amended or repealed by the stockholders entitled to vote; provided , however , that the corporation may, in its certificate of incorporation, confer the power to adopt, amend or repeal bylaws upon the directors. The fact that such power has been so conferred upon the directors shall not divest the stockholders of the power, nor limit their power to adopt, amend or repeal bylaws.

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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, Harold Hughes, certify that:
     1. I have reviewed this quarterly report on Form 10-Q 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: July 30, 2010    
 
           
 
  By:
Name:
  /s/ Harold Hughes
 
Harold Hughes
   
 
  Title:   Chief Executive Officer and President    

Exhibit 31.2
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, Satish Rishi, certify that:
     1. I have reviewed this quarterly report on Form 10-Q 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: July 30, 2010    
 
           
 
  By:
Name:
  /s/ Satish Rishi
 
Satish Rishi
   
 
  Title:   Senior Vice President, Finance and Chief Financial Officer    

Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
     I, Harold Hughes, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Rambus Inc. on Form 10-Q for the quarter ended June 30, 2010, 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 Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of Rambus Inc.
Date: July 30, 2010
             
 
  By:
Name:
  /s/ Harold Hughes
 
Harold Hughes
   
 
  Title:   Chief Executive Officer and President    

Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
     I, Satish Rishi, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Rambus Inc. on Form 10-Q for the quarter ended June 30, 2010, 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 Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of Rambus Inc.
Date: July 30, 2010
             
 
  By:
Name:
  /s/ Satish Rishi
 
Satish Rishi
   
 
  Title:   Senior Vice President, Finance and Chief Financial Officer