Xilinx Inc. and Subsidiaries - Page 4

          in Europe, and conducted research and development.                          
          II. The Cost-Sharing Agreement                                              
               On April 2, 1995, petitioner and XI entered into a                     
          Technology Cost and Risk Sharing Agreement (cost-sharing                    
          agreement).  The cost-sharing agreement provided that all “New              
          Technology” developed by either petitioner or XI would be jointly           
          owned.  New Technology was defined as technology developed by               
          petitioner, XI, or petitioner’s consolidated subsidiaries, on or            
          after the execution date of the cost-sharing agreement.  Each               
          party was required to pay a percentage of the total research and            
          development costs based on the respective anticipated benefits              
          from New Technology.  The cost-sharing agreement further provided           
          that each year the parties would review and, when appropriate,              
          adjust such percentages to ensure that costs continued to be                
          based on the anticipated benefits to each party.                            
               Petitioner and XI were required to share direct costs,                 
          indirect costs, and acquired intellectual property rights costs.            
          Direct costs were defined in the agreement as those costs                   
          directly related to the research and development of New                     
          Technology including, but not limited to, salaries, bonuses, and            
          other payroll costs and benefits.  Indirect costs were defined as           
          those costs, incurred by other departments, that generally                  
          benefit all research and development including, but not limited             
          to, administrative, legal, accounting, and insurance costs.                 

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