Securities Law & Instruments

Headnote

Subsection 74(1) - distribution of shares of a U.S. company which is not a reportingissuer as a dividend in kind is not subject to sections 25 and 53 of the Act, subject tocertain conditions - first trade is a distribution unless conducted through a stockexchange outside of Canada.

Statutes Cited

Securities Act, R.S.O. 1990, c.S.5 as am. ss. 25, 53, 35(1)(13), 72(1)(q), 74(1).

IN THE MATTER OF THE SECURITIES ACT,
R.S.O. 1990, c.S.5, AS AMENDED (the "Act")

AND

IN THE MATTER OF
SILICON GRAPHICS, INC.

RULING
(Subsection 74(1))


UPON the application (the "Application") of Silicon Graphics, Inc ("Silicon") to theOntario Securities Commission (the "Commission") for a ruling pursuant to subsection74(1) of the Act, that (i) the distribution by Silicon of class B common shares (the "MIPSClass B Shares") of MIPS Technologies, Inc. ("MIPS"), a majority-owned subsidiary ofSilicon to holders of exchangeable shares (the "Exchangeable Shares") of SiliconGraphics Limited ("SGL"), a majority-owned subsidiary of Silicon, not be subject tosections 25 and 53 of the Act; and (ii) the first trades in the MIPS Class B Common Sharesby holders of the Exchangeable Shares shall be a distribution under the Act unless suchtrades are executed on a stock exchange outside of Canada and certain other conditionsare met;

AND UPON considering the Application and the recommendation of the staff of theCommission;

AND UPON Silicon having represented to the Commission that:

1. Silicon is a corporation incorporated under the laws of the State of Delaware in theUnited States of America, is not, and has no intention of becoming, a reportingissuer under the Act or in any other province or territory in Canada.

2. The common shares of Silicon (the "Silicon Common Shares") are listed for tradingon the New York Stock Exchange; the Silicon Common Shares are not listed orposted for trading on any Canadian stock exchange and no published market existsfor the Silicon Common Shares in Canada.

3. The authorized capital of Silicon consists of 500,000,000 Silicon Common Shares,$0.001 par value, and 2,000,000 shares of preferred stock, $0.001 par value, ofwhich 35,000 shares are designated Series A Preferred Stock, $0.001 par value;as of May 31, 2000, 184,916,416 Silicon Common Shares were outstanding and17,500 shares of Series A Preferred Stock were outstanding; as at such date, noSilicon Common Shares were held by residents of Canada.

4. Pursuant to a plan of arrangement (the "Arrangement") effected by articles ofarrangement dated June 15, 1995, filed pursuant to the Business Corporations Act(Ontario) (the "OBCA"), Silicon, through SGL, acquired Alias Research Inc.("Alias"), a corporation existing under the OBCA; in connection with theArrangement, holders of common shares in the capital of Alias were issued sharesin the capital of SGL exchangeable for Silicon Common Shares (the "ExchangeableShares"); pursuant to the terms of a support agreement entered into, inter alia, bySilicon and SGL (the "Support Agreement") in connection with the Arrangement,and the provisions attaching to the Exchangeable Shares, a holder ofExchangeable Shares is entitled to receive a dividend, in case a dividend isdeclared by Silicon on the Silicon Common Shares, in such type and amount ofproperty for each Exchangeable Share as is the same or economically equivalentto the type and amount of property declared as a dividend on each Silicon CommonShare.

5. SGL is a corporation continued under the OBCA and (excluding the outstandingExchangeable Shares) is a wholly-owned subsidiary of Silicon.

6. SGL is a reporting issuer under the Act; pursuant to discretionary rulings obtainedin connection with the Arrangement, SGL is exempt from the continuous disclosureobligations under the Act.

7. The authorized capital of SGL consists of an unlimited number of class A commonshares, an unlimited number of class B non-voting common shares, 2,000,000 classC voting preferred shares, 100,000 class D non-voting preferred shares, anunlimited number of class E voting preferred shares, 20,000,000 class F votingpreferred shares and an unlimited number of Exchangeable Shares; as at May 31,2000, 1 class A common share, no class B non-voting common shares, 1,603,535class C voting preferred shares, 100,000 class D non-voting preferred shares,578,357 class E voting preferred shares, 10,365,492 class F voting preferredshares and 38,791 Exchangeable Shares were issued and outstanding; theExchangeable Shares are listed and posted for trading on The Winnipeg StockExchange under the symbol SGH.B.

8. As of May 30, 2000, 38,791 Exchangeable Shares, being all the issued andoutstanding Exchangeable Shares, were held by nine residents in Ontario; all ofwhom are employees or former employees of SGL.

9. MIPS is a Delaware corporation and is not, has never been, and has no intentionof becoming a reporting issuer under the Act or in any other province or territory inCanada.

10. The authorized capital of MIPS consists of 150,000,000 class A common shares,100,000,000 MIPS Class B Shares and 50,000,000 shares of preferred stock,issuable in series; the class A common shares are quoted on the NASDAQ NationalMarket ("NASDAQ"), are not listed or posted for trading on any Canadian stockexchange and no published market exists for such shares in Canada; the MIPSClass B Shares began trading on NASDAQ as of June 21, 2000 under the symbolMIPSB, and are registered under the United States Securities Act of 1933, asamended (the "1933 Act") and the United States Securities Exchange Act of 1934,as amended (the "1934 Act"); the MIPS Class B Shares are not listed or posted fortrading on any Canadian stock exchange and no published market exists for suchshares in Canada; as of June 5, 2000, Silicon owned 65% of the MIPS Class BShares.

11. Silicon intends to distribute, as a dividend in kind, all of the MIPS Class B Sharesheld by it pro rata among holders of the Silicon Common Shares; pursuant to theterms of the Support Agreement and the provisions attaching to the ExchangeableShares, holders of the Exchangeable Shares will be entitled to receive certain of theMIPS Class B Shares (the "Distribution"); after giving effect to the Distribution,Ontario residents would hold less than 1% of the MIPS Class B Shares.

12. Pursuant to an agreement entered into between Silicon and SGL, Silicon hasagreed to assume the obligation of SGL to deliver the MIPS Class B Shares directlyto holders of Exchangeable Shares.

13. Subsequent to completion of the Distribution, Silicon will not own any MIPS ClassB Shares.

14. The Distribution will be effected in compliance with Delaware laws and the 1933 Actand the regulations made thereunder (collectively, the "Applicable U.S. Laws").

15. Silicon cannot rely upon the registration and prospectus exemptions contained inparagraph 35(1)(13) and clause 72(1)(g) of the Act to effect the Distributionbecause MIPS is not, and will not be, a reporting issuer under the Act; in addition,there are no registration and prospectus exemptions applicable to the resale ofMIPS Class B Shares outside of Canada by the holders of Exchangeable Shares.

16. Silicon has filed a Form 8-A with the United States Securities and ExchangeCommission to register under the 1934 Act the MIPS Class B Shares issuablepursuant to the Distribution.

17. Ontario residents holding Exchangeable Shares will have the same rights at law,if any, in respect of the MIPS Class B Shares and the disclosure documentationreceived in connection with the Distribution, as Silicon shareholders with addressesin the United States.

AND UPON the Commission being satisfied that to do so would not be prejudicialto the public interest;

IT IS RULED pursuant to subsection 74(1) of the Act that the Distribution is notsubject to Sections 25 and 53 of the Act provided that:

A. the Distribution is effected in accordance with Applicable U.S. Laws;

B. all material relating to the Distribution sent by or on behalf of Silicon toholders of Silicon Common Shares is sent concurrently to holders ofExchangeable Shares resident in Ontario; and

C. the first trade in MIPS Class B Shares acquired pursuant to this ruling shallbe a distribution under the Act unless:

(i) such first trades are executed through the facilities of a stockexchange outside of Canada (including NASDAQ); and

(ii) such first trades are made in accordance with the rules of such stockexchange and in compliance with the laws of the jurisdiction outsideCanada in which such first trades take place.

June 27th, 2000.

"Howard I. Wetston"     "Robert W. Davis"