UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended July 3, 2010
or
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from
to
.
Commission File Number 000-18548
Xilinx, Inc.
(Exact name of registrant as specified in its charter)
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Delaware
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77-0188631
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(State or other jurisdiction of
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(I.R.S. Employer
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incorporation or organization)
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Identification No.)
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2100 Logic Drive, San Jose, California
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95124
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(Address of principal executive offices)
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(Zip Code)
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(408) 559-7778
(Registrants telephone number, including area code)
N/A
(Former name, former address, and former fiscal year, if changed since last report)
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 Website, if any, every Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T 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.
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Large accelerated filer
þ
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Accelerated filer
o
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Non-accelerated filer
o
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Smaller reporting company
o
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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
Shares outstanding of the registrants common stock:
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Class
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Shares Outstanding as of July 23, 2010
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Common Stock, $.01 par value
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258,831,177
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TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
XILINX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
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Three Months Ended
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July 3,
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June 27,
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(In thousands, except per share amounts)
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2010
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2009
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Net revenues
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$
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594,737
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$
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376,235
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Cost of revenues
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208,176
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143,822
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Gross margin
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386,561
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232,413
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Operating expenses:
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Research and development
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94,484
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83,233
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Selling, general and administrative
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84,058
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73,556
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Amortization of acquisition-related intangibles
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2,493
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Restructuring charges
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15,771
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Total operating expenses
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178,542
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175,053
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Operating income
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208,019
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57,360
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Interest and other expense, net
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(5,130
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)
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(10,910
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)
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Income before income taxes
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202,889
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46,450
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Provision for income taxes
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44,302
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8,444
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Net income
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$
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158,587
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$
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38,006
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Net income per common share:
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Basic
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$
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0.58
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$
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0.14
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Diluted
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$
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0.58
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$
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0.14
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Cash dividends declared per common share
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$
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0.16
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$
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0.14
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Shares used in per share calculations:
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Basic
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272,097
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275,523
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Diluted
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275,541
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276,258
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See notes to condensed consolidated financial statements.
2
XILINX, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
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July 3,
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April 3,
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(In thousands, except par value amounts)
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2010
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2010*
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(Unaudited)
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ASSETS
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Current assets:
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Cash and cash equivalents
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$
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912,445
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$
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1,031,457
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Short-term investments
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631,220
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355,148
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Accounts receivable, net
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355,406
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262,735
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Inventories
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151,630
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130,628
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Deferred tax assets
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102,075
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101,126
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Prepaid expenses and other current assets
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69,396
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25,972
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Total current assets
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2,222,172
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1,907,066
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Property, plant and equipment, at cost
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727,654
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714,905
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Accumulated depreciation and amortization
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(355,700
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(349,027
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Net property, plant and equipment
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371,954
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365,878
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Long-term investments
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580,386
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582,202
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Goodwill
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117,955
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117,955
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Other assets
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180,537
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211,217
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Total Assets
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$
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3,473,004
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$
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3,184,318
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LIABILITIES AND STOCKHOLDERS EQUITY
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Current liabilities:
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Accounts payable
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$
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122,362
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$
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96,169
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Accrued payroll and related liabilities
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111,066
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114,663
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Income taxes payable
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8,012
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14,452
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Deferred income on shipments to distributors
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74,207
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80,132
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Other accrued liabilities
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57,445
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51,745
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Total current liabilities
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373,092
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357,161
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Convertible debentures
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849,505
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354,798
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Deferred tax liabilities
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322,664
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294,149
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Long-term income taxes payable
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59,141
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56,248
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Other long-term liabilities
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1,479
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1,492
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Commitments and contingencies
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Stockholders equity:
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Preferred stock, $.01 par value (none issued)
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Common stock, $.01 par value
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2,580
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2,735
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Additional paid-in capital
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976,584
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1,102,411
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Retained earnings
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886,835
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1,016,545
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Accumulated other comprehensive income (loss)
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1,124
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(1,221
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)
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Total stockholders equity
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1,867,123
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2,120,470
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Total Liabilities and Stockholders Equity
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$
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3,473,004
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$
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3,184,318
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*
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Derived from audited financial statements
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See notes to condensed consolidated financial statements.
3
XILINX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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Three Months Ended
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July 3,
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June 27,
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(In thousands)
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2010
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2009
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Cash flows from operating activities:
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Net income
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$
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158,587
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$
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38,006
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Adjustments to reconcile net income to net cash provided by operating activities:
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Depreciation
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12,191
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13,009
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Amortization
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1,743
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5,307
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Stock-based compensation
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15,120
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13,729
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Net (gain) loss on sale of available-for-sale securities
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(548
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)
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66
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Amortization of debt discount on convertible debentures
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2,063
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947
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Derivatives revaluation and amortization
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484
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(723
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)
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Tax benefit from exercise of stock options
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188
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216
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(Excess) reduction of tax benefit from stock-based compensation
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(1,021
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)
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16,492
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Changes in assets and liabilities:
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Accounts receivable, net
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(92,671
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)
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20,460
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Inventories
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(20,966
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)
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18,744
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Deferred income taxes
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29,159
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9,863
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Prepaid expenses and other current assets
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(41,291
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)
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(22,201
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)
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Other assets
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35,929
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33,910
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Accounts payable
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26,193
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20,247
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Accrued liabilities (including restructuring activities)
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(10,646
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)
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17,419
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Income taxes payable
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(3,547
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)
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(25,891
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)
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Deferred income on shipments to distributors
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(5,925
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)
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(12,633
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)
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Net cash provided by operating activities
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105,042
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146,967
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Cash flows from investing activities:
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Purchases of available-for-sale securities
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(583,707
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)
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(436,610
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)
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Proceeds from sale and maturity of available-for-sale securities
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327,664
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120,097
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Purchases of property, plant and equipment
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(18,267
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)
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(4,714
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)
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Other investing activities
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(1,000
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)
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(716
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)
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Net cash used in investing activities
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(275,310
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)
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(321,943
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)
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Cash flows from financing activities:
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Repurchases of common stock
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(433,333
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)
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Proceeds from issuance of common stock through various stock plans
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4,796
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|
436
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Proceeds from issuance of convertible debts, net of issuance costs
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588,000
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Purchase of call options
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(112,319
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)
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|
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Proceeds from issuance of warrants
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|
46,908
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|
|
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Payment of dividends to stockholders
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(43,817
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)
|
|
|
(38,574
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)
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Excess (reduction) of tax benefit from stock-based compensation
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|
1,021
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|
|
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(16,492
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)
|
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|
|
|
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Net cash provided by (used in) financing activities
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|
|
51,256
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|
|
|
(54,630
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)
|
|
|
|
|
|
|
|
|
|
|
|
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|
Net decrease in cash and cash equivalents
|
|
|
(119,012
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)
|
|
|
(229,606
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)
|
|
|
|
|
|
|
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Cash and cash equivalents at beginning of period
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|
|
1,031,457
|
|
|
|
1,065,987
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Cash and cash equivalents at end of period
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|
$
|
912,445
|
|
|
$
|
836,381
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
Income taxes paid, net of refunds
|
|
$
|
18,796
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|
|
$
|
16,991
|
|
See notes to condensed consolidated financial statements.
4
XILINX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Basis of Presentation
The accompanying interim condensed consolidated financial statements have been prepared in
conformity with United States (U.S.) generally accepted accounting principles for interim financial
information and the instructions to Form 10-Q and Article 10 of Regulation S-X, and should be read
in conjunction with the Xilinx, Inc. (Xilinx or the Company) consolidated financial statements
filed with the U.S. Securities and Exchange Commission (SEC) on Form 10-K for the fiscal year ended
April 3, 2010. The interim financial statements are unaudited, but reflect all adjustments which
are, in the opinion of management, of a normal, recurring nature necessary to provide a fair
statement of results for the interim periods presented. The results of operations for the interim
periods shown in this report are not necessarily indicative of the results that may be expected for
the fiscal year ending April 2, 2011 or any future period.
The Company uses a 52- to 53-week fiscal year ending on the Saturday nearest March 31. Fiscal 2011
is a 52-week year ending on April 2, 2011. Fiscal 2010, which ended on April 3, 2010, was a
53-week fiscal year. The third quarter of fiscal 2010 was a 14-week quarter ended on January 2,
2010. The quarters ended July 3, 2010 and June 27, 2009 each included 13 weeks.
Note 2. Recent Accounting Pronouncements
In October 2009, the Financial Accounting Standards Board (FASB) issued the authoritative
guidance to update the accounting and reporting requirements for revenue arrangements with multiple
deliverables. This guidance established a selling price hierarchy, which allows the use of an
estimated selling price to determine the selling price of a deliverable in cases where neither
vendor-specific objective evidence nor third-party evidence is available. This guidance is to be
applied prospectively for revenue arrangements entered into or materially modified in fiscal years
beginning on or after June 15, 2010, which for the Company is its fiscal 2012. Early adoption is
permitted, and if this update is adopted early in other than the first quarter of an entitys
fiscal year, then it must be applied retrospectively to the beginning of that fiscal year. The
Company is currently assessing the impact of the adoption on its consolidated financial statements.
In October 2009, the FASB issued the authoritative guidance that clarifies which revenue allocation
and measurement guidance should be used for arrangements that contain both tangible products and
software, in cases where the software is more than incidental to the tangible product as a whole.
More specifically, if the software sold with or embedded within the tangible product is essential
to the functionality of the tangible product, then this software as well as undelivered software
elements that relate to this software are excluded from the scope of existing software revenue
guidance. This guidance is to be applied prospectively for revenue arrangements entered into or
materially modified in fiscal years beginning on or after June 15, 2010, which for the Company is
its fiscal 2012. Early adoption is permitted, and if this update is adopted early in other than
the first quarter of an entitys fiscal year, then it must be applied retrospectively to the
beginning of that fiscal year. The Company is currently assessing the impact of the adoption on
its consolidated financial statements.
In January 2010, the FASB issued amended standards that require additional disclosures about inputs
and valuation techniques used to measure fair value as well as disclosures about significant
transfers, beginning in the Companys fourth quarter of fiscal 2010. Additionally, these amended
standards require presentation of disaggregated activity within the reconciliation for fair value
measurements using significant unobservable inputs (Level 3), beginning in the Companys first
quarter of fiscal 2012. The Company does not expect these new standards to have significant impacts
on the Companys consolidated financial statements.
In April 2010, the FASB issued the authoritative guidance on milestone method of revenue
recognition. Under the new guidance, an entity can recognize revenue from consideration that is
contingent upon achievement of a milestone in the period in which the milestone is achieved only if
the milestone meets all criteria to be considered substantive. This guidance is to be applied
prospectively for milestones achieved in fiscal years, and interim period within those years,
beginning on or after June 15, 2010, which for the Company is its fiscal 2012. Early adoption is
permitted, and if this update is adopted early in other than the first quarter of an entitys
fiscal year, then it must be applied retrospectively to the beginning of that fiscal year. The
Company is currently assessing the impact of the adoption on its consolidated financial statements.
Note 3. Significant Customers and Concentrations of Credit Risk
Avnet, Inc. (Avnet), one of the Companys distributors, distributes the substantial majority of the
Companys products worldwide. As of July 3, 2010 and April 3, 2010, Avnet accounted for 75% and
83% of the Companys total accounts receivable, respectively. Resale of product through Avnet
accounted for 52% of the Companys worldwide net revenues in the first quarter of fiscal 2011 and
2010. The percentage of accounts receivable due from Avnet and the percentage of worldwide net
revenues from Avnet are consistent with historical patterns.
5
Xilinx is subject to concentrations of credit risk primarily in its trade accounts receivable and
investments in debt securities to the extent of the amounts recorded on the consolidated balance
sheet. The Company attempts to mitigate the concentration of credit risk in its trade receivables
through its credit evaluation process, collection terms, distributor sales to diverse end customers
and through geographical dispersion of sales. Xilinx generally does not require collateral for
receivables from its end customers or from distributors.
No end customer accounted for more than 10% of net revenues for any of the periods presented.
The Company mitigates concentrations of credit risk in its investments in debt securities by
currently investing more than 94% of its portfolio in AA or higher grade securities as rated by
Standard & Poors or Moodys Investors Service. The Companys methods to arrive at investment
decisions are not solely based on the rating agencies credit ratings. Xilinx also performs
additional credit due diligence and conducts regular portfolio credit reviews, including a review
of counterparty credit risk related to the Companys forward currency exchange and interest rate
swap contracts. Additionally, Xilinx limits its investments in the debt securities of a single
issuer based upon the issuers credit rating and attempts to further mitigate credit risk by
diversifying risk across geographies and type of issuer.
As of July 3, 2010, approximately 3% of the Companys $2.06 billion investment portfolio consisted
of student loan auction rate securities and all of these securities are rated AAA with the
exception of $8.6 million that were downgraded to an A rating during fiscal 2009. More than 98% of
the underlying assets that secure these securities are pools of student loans originated under the
Federal Family Education Loan Program (FFELP), which are substantially guaranteed by the U.S.
Department of Education. These securities experienced failed auctions in the fourth quarter of
fiscal 2008 due to liquidity issues in the global credit markets. In a failed auction, the
interest rates are reset to a maximum rate defined by the contractual terms for each security. The
Company has collected and expects to collect all interest payable on these securities when due.
During the first quarter of fiscal 2011, $450 thousand of these student loan auction rate
securities were redeemed for cash by the issuers at par value. Because there can be no assurance
of a successful auction in the future, the student loan auction rate
securities are classified as long-term investments on the consolidated balance sheets. The maturity dates range from March 2023 to November 2047.
As of July 3, 2010, approximately 22% of the portfolio consisted of mortgage-backed securities. All
of the mortgage-backed securities in the investment portfolio are AAA rated and were issued by U.S.
government-sponsored enterprises and agencies.
The global credit and capital markets have continued to experience adverse conditions that have
negatively impacted the values of various types of investment and non-investment grade securities,
and have experienced volatility and disruption due to instability in the global financial system,
uncertainty related to global economic conditions and concerns regarding sovereign financial
stability. While general conditions in the global credit markets have improved, there is a risk
that the Company may incur other-than-temporary impairment charges for certain types of investments
should credit market conditions deteriorate or the underlying assets fail to perform as
anticipated. See Note 5. Financial Instruments for a table of the Companys available-for-sale
securities.
Note 4. Fair Value Measurements
The guidance for fair value measurements established by the FASB defines fair value as the exchange
price that would be received from selling an asset or paid to transfer a liability (an exit price)
in an orderly transaction between market participants at the measurement date. When determining
the fair value measurements for assets and liabilities required or permitted to be recorded at fair
value, the Company considers the principal or most advantageous market in which Xilinx would
transact and also considers assumptions that market participants would use when pricing the asset
or liability, such as inherent risk, transfer restrictions and risk of nonperformance.
The Company determines the fair value for marketable debt securities using industry standard
pricing services, data providers and other third-party sources and by internally performing
valuation analyses. The Company primarily uses a consensus price or weighted average price for its
fair value assessment. The Company determines the consensus price using market prices from a
variety of industry standard pricing services, data providers, security master files from large
financial institutions and other third party sources and uses those multiple prices as inputs into
a distribution-curve-based algorithm to determine the daily market value. The pricing services use
multiple inputs to determine market prices, including reportable trades, benchmark yield curves,
credit spreads and broker/dealer quotes as well as other industry and economic events. For certain
securities with short maturities, such as discount commercial paper and certificates of deposit,
the security is accreted from purchase price to face value at maturity. If a subsequent
transaction on the same security is observed in the marketplace, the price on the subsequent
transaction is used as the current daily market price and the security will be accreted to face
value based on the revised price. For certain other securities, such as student loan auction rate
securities, the Company performs its own valuation analysis using a discounted cash flow pricing
model.
6
The Company validates the consensus prices by taking random samples from each asset type and
corroborating those prices using reported trade activity, benchmark yield curves, binding
broker/dealer quotes or other relevant price information. There have not been any changes to the Companys fair value methodology during the first quarter of fiscal 2011 and the
Company did not adjust or override any fair value measurements as of July 3, 2010.
Fair Value Hierarchy
The measurements of fair value were established based on a fair value hierarchy that prioritizes
the utilized inputs. This hierarchy requires an entity to maximize the use of observable inputs
and minimize the use of unobservable inputs when measuring fair value. The fair value framework
requires the categorization of assets and liabilities into three levels based upon the assumptions
(inputs) used to price the assets or liabilities. The guidance for fair value measurements
requires that assets and liabilities carried at fair value be classified and disclosed in one of
the following categories:
Level 1 Quoted (unadjusted) prices in active markets for identical assets or liabilities.
The Companys Level 1 assets consist of U.S. Treasury securities and money market funds.
Level 2 Observable inputs other than quoted prices included in Level 1, such as quoted prices for
similar assets or liabilities in active markets; quoted prices for identical or similar assets or
liabilities in markets that are not active; or other inputs that are observable or can be
corroborated by observable market data for substantially the full term of the asset or liability.
The Companys Level 2 assets consist of bank certificates of deposit, commercial paper, corporate
bonds, municipal bonds, U.S. agency securities, foreign government and agency securities,
floating-rate notes and mortgage-backed securities. The Companys Level 2 assets and liabilities
include foreign currency forward contracts and interest rate swaps.
Level 3 Unobservable inputs to the valuation methodology that are supported by little or no
market activity and that are significant to the measurement of the fair value of the assets or
liabilities. Level 3 assets and liabilities include those whose fair value measurements are
determined using pricing models, discounted cash flow methodologies or similar valuation
techniques, as well as significant management judgment or estimation.
The Companys Level 3 assets and liabilities include student loan auction rate securities and the
embedded derivative related to the Companys debentures.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
In instances where the inputs used to measure fair value fall into different levels of the fair
value hierarchy, the fair value measurement has been determined based on the lowest level input
that is significant to the fair value measurement in its entirety. The Companys assessment of the
significance of a particular item to the fair value measurement in its entirety requires judgment,
including the consideration of inputs specific to the asset or liability. The following tables
present information about the Companys assets and liabilities measured at fair value on a
recurring basis as of July 3, 2010 and April 3, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 3, 2010
|
|
|
|
Quoted Prices
|
|
|
|
|
|
|
|
|
|
|
|
|
in Active
|
|
|
Significant
|
|
|
|
|
|
|
|
|
|
Markets for
|
|
|
Other
|
|
|
Significant
|
|
|
|
|
|
|
Identical
|
|
|
Observable
|
|
|
Unobservable
|
|
|
|
|
|
|
Instruments
|
|
|
Inputs
|
|
|
Inputs
|
|
|
Total Fair
|
|
(In thousands)
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Value
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
$
|
325,681
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
325,681
|
|
Bank certificates of deposit
|
|
|
|
|
|
|
59,974
|
|
|
|
|
|
|
|
59,974
|
|
Commercial paper
|
|
|
|
|
|
|
421,308
|
|
|
|
|
|
|
|
421,308
|
|
Corporate bonds
|
|
|
|
|
|
|
529
|
|
|
|
|
|
|
|
529
|
|
Auction rate securities
|
|
|
|
|
|
|
|
|
|
|
63,042
|
|
|
|
63,042
|
|
Municipal bonds
|
|
|
|
|
|
|
8,809
|
|
|
|
|
|
|
|
8,809
|
|
U.S. government and agency securities
|
|
|
49,991
|
|
|
|
73,524
|
|
|
|
|
|
|
|
123,515
|
|
Foreign government and agency securities
|
|
|
|
|
|
|
517,921
|
|
|
|
|
|
|
|
517,921
|
|
Floating rate notes
|
|
|
|
|
|
|
82,474
|
|
|
|
|
|
|
|
82,474
|
|
Mortgage-backed securities
|
|
|
|
|
|
|
454,524
|
|
|
|
|
|
|
|
454,524
|
|
Interest rate swaps, net
|
|
|
|
|
|
|
44
|
|
|
|
|
|
|
|
44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets measured at fair value
|
|
$
|
375,672
|
|
|
$
|
1,619,107
|
|
|
$
|
63,042
|
|
|
$
|
2,057,821
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency forward contracts (net)
|
|
$
|
|
|
|
$
|
632
|
|
|
$
|
|
|
|
$
|
632
|
|
Convertible debentures embedded
derivative
|
|
|
|
|
|
|
|
|
|
|
1,317
|
|
|
|
1,317
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities measured at fair value
|
|
$
|
|
|
|
$
|
632
|
|
|
$
|
1,317
|
|
|
$
|
1,949
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets measured at fair value
|
|
$
|
375,672
|
|
|
$
|
1,618,475
|
|
|
$
|
61,725
|
|
|
$
|
2,055,872
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 3, 2010
|
|
|
|
Quoted Prices
|
|
|
|
|
|
|
|
|
|
|
|
|
in Active
|
|
|
Significant
|
|
|
|
|
|
|
|
|
|
Markets for
|
|
|
Other
|
|
|
Significant
|
|
|
|
|
|
|
Identical
|
|
|
Observable
|
|
|
Unobservable
|
|
|
|
|
|
|
Instruments
|
|
|
Inputs
|
|
|
Inputs
|
|
|
Total Fair
|
|
(In thousands)
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Value
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
$
|
138,738
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
138,738
|
|
Bank certificates of deposit
|
|
|
|
|
|
|
59,996
|
|
|
|
|
|
|
|
59,996
|
|
Commercial paper
|
|
|
|
|
|
|
437,790
|
|
|
|
|
|
|
|
437,790
|
|
Corporate bonds
|
|
|
|
|
|
|
538
|
|
|
|
|
|
|
|
538
|
|
Auction rate securities
|
|
|
|
|
|
|
|
|
|
|
61,644
|
|
|
|
61,644
|
|
Municipal bonds
|
|
|
|
|
|
|
9,703
|
|
|
|
|
|
|
|
9,703
|
|
U.S. government and agency securities
|
|
|
49,995
|
|
|
|
71,961
|
|
|
|
|
|
|
|
121,956
|
|
Foreign government and agency securities
|
|
|
|
|
|
|
488,845
|
|
|
|
|
|
|
|
488,845
|
|
Floating rate notes
|
|
|
|
|
|
|
112,430
|
|
|
|
|
|
|
|
112,430
|
|
Mortgage-backed securities
|
|
|
|
|
|
|
442,199
|
|
|
|
|
|
|
|
442,199
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets measured at fair value
|
|
$
|
188,733
|
|
|
$
|
1,623,462
|
|
|
$
|
61,644
|
|
|
$
|
1,873,839
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency forward contracts (net)
|
|
$
|
|
|
|
$
|
1,477
|
|
|
$
|
|
|
|
$
|
1,477
|
|
Convertible debentures embedded
derivative
|
|
|
|
|
|
|
|
|
|
|
848
|
|
|
|
848
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities measured at fair value
|
|
$
|
|
|
|
$
|
1,477
|
|
|
$
|
848
|
|
|
$
|
2,325
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets measured at fair value
|
|
$
|
188,733
|
|
|
$
|
1,621,985
|
|
|
$
|
60,796
|
|
|
$
|
1,871,514
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in Level 3 Instruments Measured at Fair Value on a Recurring Basis
The following table is a reconciliation of all assets and liabilities measured at fair value on a
recurring basis using significant unobservable inputs (Level 3):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
July 3,
|
|
|
June 27,
|
|
(In thousands)
|
|
2010
|
|
|
2009
|
|
Balance as of beginning of period
|
|
$
|
60,796
|
|
|
$
|
92,736
|
|
Total realized and unrealized gains (losses):
|
|
|
|
|
|
|
|
|
Included in interest and other expense, net
|
|
|
(469
|
)
|
|
|
738
|
|
Included in accumulated other comprehensive income (loss)
|
|
|
1,848
|
|
|
|
3,429
|
|
Net settlements (1)
|
|
|
(450
|
)
|
|
|
(750
|
)
|
|
|
|
|
|
|
|
Balance as of end of period
|
|
$
|
61,725
|
|
|
$
|
96,153
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
During the three months ended July 3, 2010 and June 27, 2009, $450 thousand and $750
thousand of student loan auction rate securities, respectively, were redeemed for cash
at par value.
|
The amount of total gains included in net income attributable to the change in unrealized
gains or losses relating to assets and liabilities still held as of the end of the period was as
follows:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
July 3,
|
|
|
June 27,
|
|
(In thousands)
|
|
2010
|
|
|
2009
|
|
|
Included in interest and other expense, net
|
|
$
|
(425
|
)
|
|
$
|
738
|
|
8
As of July 3, 2010, marketable securities measured at fair value using Level 3 inputs were
comprised of $63.0 million of student loan auction rate securities. Auction failures during the
fourth quarter of fiscal 2008 and the lack of market activity and liquidity required that the
Companys student loan auction rate securities be measured using observable market data and Level 3
inputs. The fair values of the Companys student loan auction rate securities were based on the
Companys assessment of the underlying collateral and the creditworthiness of the issuers of the
securities. More than 98% of the underlying assets that secure the student loan auction rate
securities are pools of student loans originated under FFELP, which are substantially guaranteed by
the U.S. Department of Education. The fair values of the Companys student loan auction rate
securities were determined using a discounted cash flow pricing model that incorporated financial
inputs such as projected cash flows, discount rates, expected interest rates to be paid to
investors and an estimated liquidity discount. The weighted-average life over which cash flows
were projected was determined to be approximately nine years, given the collateral composition of
the securities. The discount rates that were applied to the pricing model were based on market data
and information for comparable- or similar-term student loan asset-backed securities. The expected
interest rate to be paid to investors in a failed auction was determined by the contractual terms
for each security. The liquidity discount represents an estimate of the additional return an
investor would require to compensate for the lack of liquidity of the student loan auction rate
securities. The Company does not intend to sell, nor does it believe it is more likely than not
that it would be required to sell, the student loan auction rate securities before anticipated
recovery, which could be at final maturity that ranges from March 2023 to November 2047. Because
there can be no assurance of a successful auction in the future, all of the Companys student loan
auction rate securities are recorded in long-term investments on its condensed consolidated balance
sheets. All of the Companys student loan auction rate securities are rated AAA with the exception
of $8.6 million that were downgraded to an A rating during the fourth quarter of fiscal 2009.
In March 2007, the Company issued $1.00 billion principal amount of 3.125% junior convertible
debentures due March 15, 2037 (3.125% Debentures) to an initial purchaser in a private offering.
As a result of repurchases in fiscal 2009, the remaining principal amount of the 3.125% Debentures
as of July 3, 2010 was $689.6 million. The fair value of the 3.125% Debentures as of July 3, 2010
was approximately $636.6 million, based on the last trading price of the 3.125% Debentures of the
period. The 3.125% Debentures included embedded features that qualify as an embedded derivative
under authoritative guidance for derivatives instruments and hedging activities issued by the FASB.
The embedded derivative was separately accounted for as a discount on the 3.125% Debentures and
its fair value was established at the inception of the 3.125% Debentures. Each quarter, the change
in the fair value of the embedded derivative, if any, is recorded in the consolidated statements of
income. The Company uses a derivative valuation model to derive the value of the embedded
derivative. Key inputs into this valuation model are the Companys current stock price, risk-free
interest rates, the stock dividend yield, the stock volatility and the 3.125% Debentures credit
spread over London Interbank Offered Rate (LIBOR). The first three inputs are based on observable
market data and are considered Level 2 inputs while the last two inputs require management judgment
and are Level 3 inputs.
Interest Rate Swaps
In June 2010, the Company issued $600.0 million principal amount of 2.625% senior convertible
debentures due June 15, 2017 (2.625% Debentures) to qualified institutional investors. The fair
value of the 2.625% Debentures as of July 3, 2010 was approximately $609.2 million, based on the
last trading price of the 2.625% Debentures. In relation to this issuance, the Company also entered
into fixed to floating interest rate swap agreements (interest rate swaps) with certain independent
financial institutions. The interest rate swaps were designated and qualified as fair value hedges
of the 2.625% Debentures, and were separately accounted for as a derivative. Each quarter, the
change in fair value of the interest rate swaps and the underlying 2.625% Debentures, if any, is
recorded in the consolidated statements of income. The fair value of the interest rate swaps is
estimated using a discounted cash flows model, with the three-month forward discount curve of LIBOR
and discount rates as the key inputs. These inputs are based on observable market data and are
considered Level 2 inputs. See Note 10. Convertible Debentures and Revolving Credit Facility for
more discussion related to the interest rate swaps.
Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis
As of July 3, 2010, the Company had non-marketable equity securities in private companies of $18.7
million (adjusted cost). The Companys investments in non-marketable securities of private
companies are accounted for by using the cost method. These investments are measured at fair value
on a non-recurring basis when they are deemed to be other-than-temporarily impaired. In
determining whether a decline in value of non-marketable equity investments in private companies
has occurred and is other than temporary, an assessment is made by considering available evidence,
including the general market conditions in the investees industry, the investees product
development status and subsequent rounds of financing and the related valuation and/or Xilinxs
participation in such financings. The Company also assesses the investees ability to meet
business milestones and the financial condition and near-term prospects of the individual investee,
including the rate at which the investee is using its cash and the investees need for possible
additional funding at a lower valuation. The valuation methodology for determining the fair value
of non-marketable equity securities is based on the factors noted above which require management
judgment and are Level 3 inputs. No impairment loss on non-marketable equity investments was
recognized during the first quarter of fiscal 2011 or 2010.
9
Note 5. Financial Instruments
The following is a summary of available-for-sale securities as of the end of the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 3, 2010
|
|
|
April 3, 2010
|
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
Estimated
|
|
|
|
|
|
|
Gross
|
|
|
Gross
|
|
|
Estimated
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
(In thousands)
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
Money market funds
|
|
$
|
325,681
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
325,681
|
|
|
$
|
138,738
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
138,738
|
|
Bank certificates of
deposit
|
|
|
59,974
|
|
|
|
|
|
|
|
|
|
|
|
59,974
|
|
|
|
59,996
|
|
|
|
|
|
|
|
|
|
|
|
59,996
|
|
Commercial paper
|
|
|
421,308
|
|
|
|
|
|
|
|
|
|
|
|
421,308
|
|
|
|
437,790
|
|
|
|
|
|
|
|
|
|
|
|
437,790
|
|
Corporate bonds
|
|
|
507
|
|
|
|
22
|
|
|
|
|
|
|
|
529
|
|
|
|
523
|
|
|
|
15
|
|
|
|
|
|
|
|
538
|
|
Auction rate securities
|
|
|
68,750
|
|
|
|
|
|
|
|
(5,708
|
)
|
|
|
63,042
|
|
|
|
69,200
|
|
|
|
|
|
|
|
(7,556
|
)
|
|
|
61,644
|
|
Municipal bonds
|
|
|
8,717
|
|
|
|
138
|
|
|
|
(46
|
)
|
|
|
8,809
|
|
|
|
9,688
|
|
|
|
75
|
|
|
|
(60
|
)
|
|
|
9,703
|
|
U.S. government and
agency securities
|
|
|
123,441
|
|
|
|
76
|
|
|
|
(2
|
)
|
|
|
123,515
|
|
|
|
121,991
|
|
|
|
5
|
|
|
|
(40
|
)
|
|
|
121,956
|
|
Foreign government and
agency securities
|
|
|
517,870
|
|
|
|
85
|
|
|
|
(34
|
)
|
|
|
517,921
|
|
|
|
488,845
|
|
|
|
|
|
|
|
|
|
|
|
488,845
|
|
Floating rate notes
|
|
|
82,861
|
|
|
|
160
|
|
|
|
(547
|
)
|
|
|
82,474
|
|
|
|
112,852
|
|
|
|
142
|
|
|
|
(564
|
)
|
|
|
112,430
|
|
Mortgage-backed
securities
|
|
|
445,039
|
|
|
|
10,585
|
|
|
|
(1,100
|
)
|
|
|
454,524
|
|
|
|
435,375
|
|
|
|
8,643
|
|
|
|
(1,819
|
)
|
|
|
442,199
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,054,148
|
|
|
$
|
11,066
|
|
|
$
|
(7,437
|
)
|
|
$
|
2,057,777
|
|
|
$
|
1,874,998
|
|
|
$
|
8,880
|
|
|
$
|
(10,039
|
)
|
|
$
|
1,873,839
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
846,171
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
936,489
|
|
Short-term investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
631,220
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
355,148
|
|
Long-term investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
580,386
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
582,202
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,057,777
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,873,839
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following tables show the fair values and gross unrealized losses of the Companys
investments, aggregated by investment category, for individual securities that have been in a
continuous unrealized loss position for the length of time specified, as of July 3, 2010 and April
3, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 3, 2010
|
|
|
|
Less Than 12 Months
|
|
|
12 Months or Greater
|
|
|
Total
|
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
|
Gross
|
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
(In thousands)
|
|
Value
|
|
|
Losses
|
|
|
Value
|
|
|
Losses
|
|
|
Value
|
|
|
Losses
|
|
Auction rate securities
|
|
$
|
|
|
|
$
|
|
|
|
$
|
63,042
|
|
|
$
|
(5,708
|
)
|
|
$
|
63,042
|
|
|
$
|
(5,708
|
)
|
Municipal bonds
|
|
|
322
|
|
|
|
(2
|
)
|
|
|
1,341
|
|
|
|
(44
|
)
|
|
|
1,663
|
|
|
|
(46
|
)
|
U.S government and agency securities
|
|
|
69,980
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
69,980
|
|
|
|
(2
|
)
|
Foreign government and agency
securities
|
|
|
10,182
|
|
|
|
(34
|
)
|
|
|
|
|
|
|
|
|
|
|
10,182
|
|
|
|
(34
|
)
|
Floating rate notes
|
|
|
19,300
|
|
|
|
(308
|
)
|
|
|
35,789
|
|
|
|
(239
|
)
|
|
|
55,089
|
|
|
|
(547
|
)
|
Mortgage-backed securities
|
|
|
98,892
|
|
|
|
(1,100
|
)
|
|
|
|
|
|
|
|
|
|
|
98,892
|
|
|
|
(1,100
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
198,676
|
|
|
$
|
(1,446
|
)
|
|
$
|
100,172
|
|
|
$
|
(5,991
|
)
|
|
$
|
298,848
|
|
|
$
|
(7,437
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 3, 2010
|
|
|
|
Less Than 12 Months
|
|
|
12 Months or Greater
|
|
|
Total
|
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
|
Gross
|
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
|
Fair
|
|
|
Unrealized
|
|
(In thousands)
|
|
Value
|
|
|
Losses
|
|
|
Value
|
|
|
Losses
|
|
|
Value
|
|
|
Losses
|
|
Auction rate securities
|
|
$
|
|
|
|
$
|
|
|
|
$
|
61,644
|
|
|
$
|
(7,556
|
)
|
|
$
|
61,644
|
|
|
$
|
(7,556
|
)
|
Municipal bonds
|
|
|
623
|
|
|
|
(1
|
)
|
|
|
1,727
|
|
|
|
(59
|
)
|
|
|
2,350
|
|
|
|
(60
|
)
|
U.S. government and agency securities
|
|
|
109,451
|
|
|
|
(40
|
)
|
|
|
|
|
|
|
|
|
|
|
109,451
|
|
|
|
(40
|
)
|
Floating rate notes
|
|
|
|
|
|
|
|
|
|
|
67,145
|
|
|
|
(564
|
)
|
|
|
67,145
|
|
|
|
(564
|
)
|
Mortgage-backed securities
|
|
|
191,255
|
|
|
|
(1,819
|
)
|
|
|
|
|
|
|
|
|
|
|
191,255
|
|
|
|
(1,819
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
301,329
|
|
|
$
|
(1,860
|
)
|
|
$
|
130,516
|
|
|
$
|
(8,179
|
)
|
|
$
|
431,845
|
|
|
$
|
(10,039
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
The gross unrealized losses on these investments were primarily related to failed auction rate
securities, which was due to adverse conditions in the global credit markets during the past two
years. The Company reviewed the investment portfolio and determined that the gross unrealized
losses on these investments as of July 3, 2010 and April 3, 2010 were temporary in nature, as
evidenced by the reduction in the total gross unrealized losses in recent periods. The aggregate of
individual unrealized losses that had been outstanding for 12 months or more were not significant
as of July 3, 2010 and April 3, 2010. The Company neither intends to sell these investments nor
concludes that it is more-likely-than-not that it will have to sell them until recovery of their
carrying values. The Company also believes that it will be able to collect both principal and
interest amounts due to the Company at maturity, given the high credit quality of these investments
and any related underlying collateral.
The amortized cost and estimated fair value of marketable debt securities (bank certificates of
deposit, commercial paper, corporate bonds, auction rate securities, municipal bonds, U.S. and
foreign government and agency securities, floating rate notes and mortgage-backed securities) as of
July 3, 2010, by contractual maturity, are shown below. Actual maturities may differ from
contractual maturities because issuers may have the right to call or prepay obligations without
call or prepayment penalties.
|
|
|
|
|
|
|
|
|
|
|
Amortized
|
|
|
Estimated
|
|
(In thousands)
|
|
Cost
|
|
|
Fair Value
|
|
Due in one year or less
|
|
$
|
1,151,505
|
|
|
$
|
1,151,711
|
|
Due after one year through five years
|
|
|
70,781
|
|
|
|
70,608
|
|
Due after five years through ten years
|
|
|
159,712
|
|
|
|
162,994
|
|
Due after ten years
|
|
|
346,469
|
|
|
|
346,783
|
|
|
|
|
|
|
|
|
|
|
$
|
1,728,467
|
|
|
$
|
1,732,096
|
|
|
|
|
|
|
|
|
Certain information related to available-for-sale securities is as follows:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
July 3,
|
|
|
June 27,
|
|
(In thousands)
|
|
2010
|
|
|
2009
|
|
Proceeds from sale of available-for-sale securities
|
|
$
|
25,402
|
|
|
$
|
13,608
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross realized gains on sale of available-for-sale securities
|
|
$
|
571
|
|
|
$
|
217
|
|
Gross realized losses on sale of available-for-sale securities
|
|
|
(23
|
)
|
|
|
(283
|
)
|
|
|
|
|
|
|
|
Net realized gains (losses) on sale of available-for-sale securities
|
|
$
|
548
|
|
|
$
|
(66
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of premiums (discounts) on available-for-sale securities
|
|
$
|
1,541
|
|
|
$
|
(230
|
)
|
|
|
|
|
|
|
|
The cost of securities matured or sold is based on the specific identification method.
Note 6. Derivative Financial Instruments
The Companys primary objective for holding derivative financial instruments is to manage foreign
currency exchange rate risk and interest rate risk. As a result of the use of derivative financial
instruments, the Company is exposed to the risk that counterparties to derivative contracts will
fail to meet their contractual obligations. The Company manages counterparty credit risk in
derivative contracts by reviewing counterparty creditworthiness on a regular basis, establishing
collateral requirement and limiting exposure to any single counterparty. The right of set-off that
exists with certain transactions enables the Company to net amounts due to and from the
counterparty, reducing the maximum loss from credit risk in the event of counterparty default.
As of July 3, 2010 and April 3, 2010, the Company had the following outstanding forward currency
exchange contracts which are derivative financial instruments:
|
|
|
|
|
|
|
|
|
|
|
July 3,
|
|
|
April 3,
|
|
(In thousands and U.S. dollars)
|
|
2010
|
|
|
2010
|
|
Euro
|
|
$
|
33,858
|
|
|
$
|
21,190
|
|
Singapore dollar
|
|
|
46,851
|
|
|
|
58,420
|
|
Japanese Yen
|
|
|
12,117
|
|
|
|
12,268
|
|
British Pound
|
|
|
7,222
|
|
|
|
4,889
|
|
|
|
|
|
|
|
|
|
|
$
|
100,048
|
|
|
$
|
96,767
|
|
|
|
|
|
|
|
|
As part of the Companys strategy to reduce volatility of operating expenses due to foreign
exchange rate fluctuations, the Company employs a hedging program with a five-quarter forward
outlook for major foreign-currency-denominated operating expenses. The outstanding forward
currency exchange contracts expire at various dates between July 2010 and July 2011. The net
unrealized gain or loss, which approximates the fair market value of the above contracts, is
expected to be realized and reclassified into net income within the next 12 months.
11
As of July 3, 2010, all the forward foreign currency exchange contracts were designated and
qualified as cash flow hedges and the effective portion of the gain or loss on the forward contract
was reported as a component of other comprehensive income and reclassified into net income in the
same period during which the hedged transaction affects earnings. The ineffective portion of the
gain or loss on the forward contract was immaterial and included in the net income for all periods
presented.
The Company may enter into forward foreign currency exchange contracts to hedge firm commitments
such as the acquisition of capital expenditures. Gains and losses on foreign currency forward
contracts that are designated as hedges of anticipated transactions, for which a firm commitment
has been attained and the hedged relationship has been effective, are deferred and included in
income or expenses in the same period that the underlying transaction is settled. Gains and losses
on any instruments not meeting the above criteria are recognized in income or expenses in the
consolidated statements of income as they are incurred.
The Company entered into interest rate swaps with certain independent financial institutions in the
attempt to manage interest rate risks related to fixed interest rate expenses from its 2.625%
Debentures and floating interest rate income from its investments in marketable debt securities.
See Note 10. Convertible Debentures and Revolving Credit Facility for more discussion related to
interest rate swaps. The interest rate swaps were designated and qualified as fair value hedges of
the 2.625% Debentures, and were separately accounted for as a derivative. The interest rate swaps
and the 2.625% Debentures were initially measured at fair value. Any subsequent changes in fair
values of the interest rate swaps and the 2.625% Debentures will be recorded in the Companys
consolidated statements of income. During the first quarter of fiscal 2011, the net change in fair
values of the interest rate swaps and the underlying 2.625% Debentures was $44 thousand, which was
recorded as a reduction to interest and other expense, net, on the Companys condensed consolidated
statements of income.
The 3.125% Debentures include provisions which qualify as an embedded derivative. See Note 10.
Convertible Debentures and Revolving Credit Facility for detailed discussion about the embedded
derivative. The embedded derivative was separated from the 3.125% Debentures and its fair value
was established at the inception of the 3.125% Debentures. Any subsequent change in fair value of
the embedded derivative would be recorded in the Companys consolidated statement of income. The
changes in the fair value of the embedded derivative of $469 thousand and $(738) thousand during
the first quarter of fiscal 2011 and 2010, respectively, were recorded respectively as an addition
and a reduction to interest and other expense, net, on the Companys condensed consolidated
statement of income.
The Company had the following derivative instruments as of July 3, 2010 and April 3, 2010, located
on the condensed consolidated balance sheet, utilized for risk management purposes detailed above:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Exchange Contracts
|
|
|
|
Asset Derivatives
|
|
|
Liability Derivatives
|
|
|
|
Balance Sheet
|
|
|
|
|
|
|
Balance Sheet
|
|
|
|
|
(In thousands)
|
|
Location
|
|
|
Fair Value
|
|
|
Location
|
|
|
Fair Value
|
|
|
July 3, 2010
|
|
Prepaid expenses and other current assets
|
|
$
|
1,427
|
|
|
Other accrued liabilities
|
|
$
|
2,058
|
|
|
|
|
Other assets
|
|
$
|
44
|
|
|
|
|
|
|
|
|
|
|
April 3, 2010
|
|
Prepaid expenses and other current assets
|
|
$
|
700
|
|
|
Other accrued liabilities
|
|
$
|
2,177
|
|
The following table summarizes the effect of derivative instruments on the condensed
consolidated statements of income for the first quarter of fiscal 2011 and 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Loss
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Amount of Gain
|
|
|
|
|
|
|
Reclassified from
|
|
|
|
|
|
|
|
|
Derivatives in Cash
|
|
Recognized in OCI
|
|
|
Statement of
|
|
|
Accumulated OCI
|
|
|
|
|
|
|
Amount of Gain
|
|
Flow Hedging
|
|
on Derivative
|
|
|
Income
|
|
|
into Income
|
|
|
Statement of
|
|
|
Recorded
|
|
Relationships
|
|
(Effective portion)
|
|
|
Location
|
|
|
(Effective portion)
|
|
|
Income Location
|
|
|
(Ineffective portion)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended July 3, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
|
$
|
868
|
|
|
Interest and other expense, net
|
|
$
|
(612
|
)
|
|
Interest and other income, net
|
|
$
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 27, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts
|
|
$
|
3,586
|
|
|
Interest and other expense, net
|
|
$
|
(737
|
)
|
|
Interest and other income, net
|
|
$
|
44
|
|
12
Note 7. Stock-Based Compensation Plans
The Companys equity incentive plans are broad-based, long-term retention programs that cover
employees, consultants and non-employee directors of the Company. These plans are intended to
attract and retain talented employees, consultants and non-employee directors and to provide such
persons with a proprietary interest in the Company.
Stock-Based Compensation
The following table summarizes stock-based compensation expense related to stock awards granted
under the Companys equity incentive plans and rights to acquire stock granted under the Companys
Employee Stock Purchase Plan:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
(In thousands)
|
|
July 3,
2010
|
|
|
June 27,
2009
|
|
Stock-based compensation included in:
|
|
|
|
|
|
|
|
|
Cost of revenues
|
|
$
|
1,267
|
|
|
$
|
1,115
|
|
Research and development
|
|
|
7,204
|
|
|
|
5,996
|
|
Selling, general and administrative
|
|
|
6,649
|
|
|
|
5,673
|
|
Restructuring charges
|
|
|
|
|
|
|
945
|
|
|
|
|
|
|
|
|
|
|
$
|
15,120
|
|
|
$
|
13,729
|
|
|
|
|
|
|
|
|
During the first quarter of fiscal 2011 and 2010, the tax benefit realized for the tax deduction
from option exercises and other awards, including amounts credited to additional paid-in capital,
totaled $188 thousand and $216 thousand, respectively.
The fair values of stock options and stock purchase plan rights under the Companys equity
incentive plans and Employee Stock Purchase Plan were estimated as of the grant date using the
Black-Scholes option pricing model. The Companys expected stock price volatility assumption for
stock options is estimated using implied volatility of the Companys traded options. The expected
life of options granted is based on the historical exercise activity as well as the expected
disposition of all options outstanding. The expected life of options granted also considers the
contractual term which is seven years for all option awards granted on or after April 1, 2007. The
per-share weighted-average fair values of stock options granted during the first quarter of fiscal
2011 and 2010 were $6.39 and $6.09, respectively, which were estimated at the date of grant using
the following weighted-average assumptions:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
July 3,
|
|
|
June 27,
|
|
|
|
2010
|
|
|
2009
|
|
Expected life of options (years)
|
|
|
5.1
|
|
|
|
5.2
|
|
Expected stock price volatility
|
|
|
0.31
|
|
|
|
0.42
|
|
Risk-free interest rate
|
|
|
2.5
|
%
|
|
|
1.9
|
%
|
Dividend yield
|
|
|
2.5
|
%
|
|
|
2.8
|
%
|
The estimated fair values of RSU awards were calculated based on the market price of Xilinx common
stock on the date of grant, reduced by the present value of dividends expected to be paid on Xilinx
common stock prior to vesting. The per share weighted-average fair values of RSUs granted during
the first quarter of fiscal 2011 and 2010 were $24.04 and $18.40, respectively, which were
calculated based on estimates at the date of grant using the following weighted-average
assumptions:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
July 3,
|
|
|
June 27,
|
|
|
|
2010
|
|
|
2009
|
|
Risk-free interest rate
|
|
|
1.5
|
%
|
|
|
1.4
|
%
|
Dividend yield
|
|
|
2.5
|
%
|
|
|
2.9
|
%
|
13
Employee Stock Option Plans
A summary of the Companys option plans activity and related information is as follows:
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
Average
|
|
|
|
Number of
|
|
|
Exercise Price
|
|
(Shares in thousands)
|
|
Shares
|
|
|
Per Share
|
|
March 28, 2009
|
|
|
41,021
|
|
|
$
|
32.51
|
|
Granted
|
|
|
2,461
|
|
|
$
|
21.19
|
|
Exercised
|
|
|
(1,600
|
)
|
|
$
|
22.95
|
|
Forfeited/cancelled/expired
|
|
|
(10,856
|
)
|
|
$
|
37.04
|
|
|
|
|
|
|
|
|
|
April 3, 2010
|
|
|
31,026
|
|
|
$
|
30.51
|
|
Granted
|
|
|
33
|
|
|
$
|
26.12
|
|
Exercised
|
|
|
(490
|
)
|
|
$
|
23.55
|
|
Forfeited/cancelled/expired
|
|
|
(765
|
)
|
|
$
|
50.53
|
|
|
|
|
|
|
|
|
|
July 3, 2010
|
|
|
29,804
|
|
|
$
|
30.11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at:
|
|
|
|
|
|
|
|
|
July 3, 2010
|
|
|
26,116
|
|
|
$
|
31.18
|
|
April 3, 2010
|
|
|
26,585
|
|
|
$
|
31.84
|
|
The 2007 Equity Plan, which became effective on January 1, 2007, replaced both the Companys 1997
Stock Plan (which expired on May 8, 2007) and the Supplemental Stock Option Plan and all available
but unissued shares under these prior plans were cancelled as of April 1, 2007. The 2007 Equity
Plan is now Xilinxs only plan for providing stock-based awards to eligible employees, consultants
and non-employee directors. The types of awards allowed under the 2007 Equity Plan include
incentive stock options, non-qualified stock options, RSUs, restricted stock and stock appreciation
rights. To date, the Company has issued a mix of non-qualified stock options and RSUs under the
2007 Equity Plan. The mix of stock options and RSU awards will change depending upon the grade
level of the employees. Employees at the lower grade levels will receive mostly RSUs and may also
receive stock options, whereas employees at the higher grade levels, including the Companys
executive officers, will receive mostly stock options and may also receive RSUs. As of July 3,
2010, 12.4 million shares remained available for grant under the 2007 Equity Plan.
The total pre-tax intrinsic value of options exercised during the three months ended July 3, 2010
and June 27, 2009 was $1.6 million and $52 thousand, respectively. This intrinsic value represents
the difference between the exercise price and the fair market value of the Companys common stock
on the date of exercise.
Restricted Stock Unit Awards
A summary of the Companys RSU activity and related information is as follows:
|
|
|
|
|
|
|
|
|
|
|
RSUs Outstanding
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
Grant-Date
|
|
|
|
Number of
|
|
|
Fair Value
|
|
(Shares in thousands)
|
|
Shares
|
|
|
Per Share
|
|
March 28, 2009
|
|
|
2,970
|
|
|
$
|
22.99
|
|
Granted
|
|
|
1,885
|
|
|
$
|
20.38
|
|
Vested
|
|
|
(901
|
)
|
|
$
|
22.16
|
|
Cancelled
|
|
|
(302
|
)
|
|
$
|
22.56
|
|
|
|
|
|
|
|
|
|
April 3, 2010
|
|
|
3,652
|
|
|
$
|
21.70
|
|
Granted
|
|
|
63
|
|
|
$
|
24.04
|
|
Vested
|
|
|
(843
|
)
|
|
$
|
22.61
|
|
Cancelled
|
|
|
(75
|
)
|
|
$
|
21.59
|
|
|
|
|
|
|
|
|
|
July 3, 2010
|
|
|
2,797
|
|
|
$
|
21.49
|
|
|
|
|
|
|
|
|
|
14
Employee Stock Purchase Plan
Under the Employee Stock Purchase Plan, no shares were issued during the first quarter of fiscal
2011 or 2010. The next scheduled purchase under the Employee Stock Purchase Plan is in the second
quarter of fiscal 2011. As of July 3, 2010, 7.7 million shares were available for future issuance
out of 42.5 million shares authorized.
Note 8. Net Income Per Common Share
The computation of basic net income per common share for all periods presented is derived from the
information on the condensed consolidated statements of income, and there are no reconciling items
in the numerator used to compute diluted net income per common share. The total shares used in the
denominator of the diluted net income per common share calculation includes 3.4 million and 735
thousand potentially dilutive common equivalent shares outstanding for the first quarter of fiscal
2011 and 2010, respectively, that are not included in basic net income per common share.
Potentially dilutive common equivalent shares are determined by applying the treasury stock method
to the assumed exercise of outstanding stock options, the assumed vesting of outstanding RSUs and
the assumed issuance of common stock under the Employee Stock Purchase Plan.
Outstanding stock options, RSUs and warrants (see Note 10. Convertible Debentures and Revolving
Credit Facility for more discussion of warrants) to purchase approximately 24.5 million and 40.7
million shares, for the first quarter of fiscal 2011 and 2010, respectively, under the Companys
stock award plans were excluded from diluted net income per common share, applying the treasury
stock method, as their inclusion would have been antidilutive. These options and RSUs could be
dilutive in the future if the Companys average share price increases and is greater than the
combined exercise prices and the unamortized fair values of these options and RSUs.
Diluted net income per common share does not include any incremental shares issuable upon the
exchange of the 2.625% Debentures and the 3.125% Debentures (see Note 10. Convertible Debentures
and Revolving Credit Facility). The debentures will have no impact on diluted net income per
common share until the price of the Companys common stock exceeds the conversion price of each
debenture, because the principal amount of these debentures will be settled in cash upon
conversion. Prior to conversion, the Company will include, in the diluted net income per common
share calculation, the effect of the additional shares that may be issued upon conversions using
the treasury stock method.
The call options to purchase the Companys common stock, which the Company purchased to hedge
against potential dilution upon conversion of the 2.625% Debentures (see Note 10. Convertible
Debentures and Revolving Credit Facility), are not considered for purposes of calculating the
total shares outstanding under the basic and diluted net income per share, as their effect would be
anti-dilutive. Upon exercise, the call options will automatically serve to neutralize the dilutive
effect of the 2.625% Debentures.
Note 9. Inventories
Inventories are stated at the lower of cost (determined using the first-in, first-out method), or
market (estimated net realizable value) and are comprised of the following:
|
|
|
|
|
|
|
|
|
|
|
July 3,
|
|
|
April 3,
|
|
(In thousands)
|
|
2010
|
|
|
2010
|
|
Raw materials
|
|
$
|
18,754
|
|
|
$
|
13,257
|
|
Work-in-process
|
|
|
104,272
|
|
|
|
85,990
|
|
Finished goods
|
|
|
28,604
|
|
|
|
31,381
|
|
|
|
|
|
|
|
|
|
|
$
|
151,630
|
|
|
$
|
130,628
|
|
|
|
|
|
|
|
|
Note 10. Convertible Debentures and Revolving Credit Facility
2.625% Senior Convertible Debentures
In June 2010, the Company issued $600.0 million principal amount of 2.625% Debentures to qualified
institutional investors. The 2.625% Debentures are senior in right of payment to the Companys
existing and future unsecured indebtedness that is expressly subordinated in right of payment to
the 2.625% Debentures, including the 3.125% Debentures described below. The 2.625% Debentures are
initially convertible, subject to certain conditions, into shares of Xilinx common stock at a
conversion rate of 33.0164 shares of common stock per $1 thousand principal amount of the 2.625%
Debentures, representing an initial effective
conversion price of approximately $30.29 per share of common stock. The conversion rate is subject
to adjustment for certain events as outlined in the indenture governing the 2.625% Debentures but
will not be adjusted for accrued interest.
15
The Company received net proceeds of $588.0 million from issuance of the 2.625% Debentures, after
deduction of issuance costs of $12.0 million. The debt issuance costs, as adjusted based on the
authoritative guidance for the accounting of convertible debentures issued by the FASB, are
recorded in current and non-current assets and are being amortized to interest expense over 7
years. Interest is payable semiannually in arrears on June 15 and December 15, beginning on
December 15, 2010. The Company recognizes an effective interest rate of 5.75% on the carrying value
of the 2.625% Debentures. The effective rate is based on the interest rate for a similar
instrument that does not have a conversion feature. Additionally, the Company may be required to
pay additional interest under certain events as outlined in the indenture governing the 2.625%
Debentures. During the three months ended July 3, 2010, the Company utilized $433.3 million of the
net proceeds to repurchase its common stock under an accelerated share repurchase agreement (see
Note 11. Common Stock and Debentures Repurchase Program). The remaining net proceeds will be used
for general corporate purposes.
The carrying values of the liability and equity components of the 2.625% Debentures are reflected
in the Companys condensed consolidated balance sheets as follows:
|
|
|
|
|
(In thousands)
|
|
July 3, 2010
|
|
Liability component:
|
|
|
|
|
Principal amount of the 2.625% Debentures
|
|
$
|
600,000
|
|
Unamortized discount of liability component
|
|
|
(106,795
|
)
|
|
|
|
|
Carrying value of liability component
|
|
$
|
493,205
|
|
|
|
|
|
|
|
|
|
|
Equity component net carrying value
|
|
$
|
105,684
|
|
|
|
|
|
The remaining debt discount is being amortized as additional non-cash interest expense over the
expected remaining term of the 2.625% Debentures, using the effective interest rate of 5.75%. As
of July 3, 2010, the remaining term of the 2.625% Debentures is 6.9 years.
Interest expense related to the 2.625% Debentures was included in interest and other expense, net
on the condensed consolidated statements of income as follows:
|
|
|
|
|
|
|
Three Months
|
|
|
|
Ended
|
|
(In thousands)
|
|
July 3, 2010
|
|
Contractual coupon interest
|
|
$
|
1,050
|
|
Amortization of debt issuance costs
|
|
|
117
|
|
Amortization of debt discount
|
|
|
1,046
|
|
|
|
|
|
Total interest expense related to the 2.625% Debentures
|
|
$
|
2,213
|
|
|
|
|
|
The Company may not redeem the 2.625% Debentures prior to maturity. However, holders of the 2.625%
Debentures may convert their 2.625% Debentures only upon the occurrence of certain events in the
future, as outlined in the indenture. The Company will adjust the conversion rate for holders who
elect to convert their 2.625% Debentures in connection with the occurrence of certain specified
corporate events, as defined in the indenture. In addition, holders who convert their 2.625%
Debentures in connection with a fundamental change, as defined in the indenture, may be entitled to
a make-whole premium in the form of an increase in the conversion rate. Furthermore, in the event
of a fundamental change, the holders of the 2.625% Debentures may require Xilinx to purchase all or
a portion of their 2.625% Debentures at a purchase price equal to 100% of the principal amount of
the 2.625% Debentures, plus accrued and unpaid interest, if any. As of July 3, 2010, none of the
conditions allowing holders of the 2.625% Debentures to convert had been met.
The Company has concluded that the 2.625% Debentures are not conventional convertible debt
instruments and that the embedded stock conversion option discussed above qualifies as a
derivative. In addition, the Company has also concluded that the embedded conversion option would
be classified in stockholders equity if it were a freestanding instrument. Accordingly, the
embedded conversion option is not required to be accounted for separately as a derivative.
Upon conversion, the Company would pay the holders of the 2.625% Debentures cash up to the
aggregate principal amount of the 2.625% Debentures. If the conversion value exceeds the principal
amount, the Company would deliver shares of its common stock in respect to the remainder of its
conversion obligation in excess of the aggregate principal amount (conversion spread).
Accordingly, there would be no adjustment to the numerator in the net income per common share
computation for the cash settled portion of the 2.625% Debentures as that portion of the debt
liability will always be settled in cash. The conversion spread will be included in the
denominator for the computation of diluted net income per common share, using the treasury stock
method.
16
In relation to the issuance of the 2.625% Debentures, the Company entered into interest rate swaps
with certain independent financial institutions, whereby the Company pays on a quarterly basis, a
variable interest rate equal to the three-month LIBOR minus 0.2077%, and receives on a semi-annual
basis, interest income at a fixed interest rate of 2.625%. For the three months ended July 3, 2010,
the Company earned a net amount of $845 thousand from these interest rate swaps, which was
included in interest and other expense, net, on the condensed consolidated statements of income as
a reduction to interest expense. In addition, the net change in fair values of $44 thousand from
the interest rate swaps and the underlying 2.625% Debentures was included as reduction to interest
and other expense), net, on the Companys condensed consolidated statements of income.
To hedge against potential dilution upon conversion of the 2.625% Debentures, the Company also
purchased call options on its common stock from the hedge counterparties. The call options give the
Company the right to purchase up to 19.8 million shares of its common stock at $30.29 per share.
The Company paid an aggregate of $112.3 million to purchase these call options. The call options
will terminate upon the earlier of the maturity of the 2.625% Debentures or the last day any of the
2.625% Debentures remain outstanding. To reduce the hedging cost, under separate transactions the
Company sold warrants to the hedge counterparties, which give the hedge counterparties the right to
purchase up to 19.8 million shares of the Companys common stock at $42.91 per share. These
warrants expire on a gradual basis over a specified period starting on September 13, 2017. The
Company received an aggregate of $46.9 million from the sale of these warrants. In accordance to
the authoritative guidance issued by the FASB on determining whether an instrument (or embedded
feature) is indexed to an entitys own stock, the Company concluded that the call options and
warrants were indexed to the Companys stock. Therefore, the call options and warrants were
classified as equity instruments and will not be marked to market prospectively. The net amount of
$65.4 million paid to the hedge counterparties, less the applicable tax benefit related to the call
options of $41.7 million, was recorded as a reduction to additional paid-in capital. The settlement
terms of the call options and warrants provide for net share settlement.
3.125% Junior Subordinated Convertible Debentures
In March 2007, the Company issued $1.00 billion principal amount of 3.125% Debentures to an initial
purchaser in a private offering. The 3.125% Debentures are subordinated in right of payment to the
Companys existing and future senior debt, including the 2.625% Debentures, and to the other
liabilities of the Companys subsidiaries. The 3.125% Debentures were initially convertible,
subject to certain conditions, into shares of Xilinx common stock at a conversion rate of
32.0760 shares of common stock per $1 thousand principal amount of 3.125% Debentures, representing
an initial effective conversion price of approximately $31.18 per share of common stock. The
conversion rate is subject to adjustment for certain events as outlined in the indenture governing
the 3.125% Debentures but will not be adjusted for accrued interest. Due to the accumulation of
cash dividend distributions to common stockholders, the conversion rate for the 3.125% Debentures
was adjusted to 32.8092 shares of common stock per $1 thousand principal amount of 3.125%
Debentures, representing an adjusted conversion price of $30.48 per share at the end of first
quarter of fiscal 2011.
The Company received net proceeds of $980.0 million from issuance of the 3.125% Debentures, after
deduction of issuance costs of $20.0 million. During fiscal 2009, the Company paid $193.2 million
in cash to repurchase $310.4 million (principal amount) of its 3.125% Debentures, resulting in
approximately $689.6 million of debt outstanding as of July 3, 2010. The debt issuance costs, as
adjusted for the authoritative guidance for the accounting of convertible debentures issued by the
FASB, were recorded in current and non-current assets and are being amortized to interest expense
over 30 years. Interest is payable semiannually in arrears on March 15 and September 15, beginning
on September 15, 2007. However, the Company recognizes an effective interest rate of 7.20% on the
carrying value of the 3.125% Debentures. The effective rate is based on the interest rate for a
similar instrument that does not have a conversion feature. The 3.125% Debentures also have a
contingent interest component that may require the Company to pay interest based on certain
thresholds beginning with the semi-annual interest period commencing on March 15, 2014 (the maximum
amount of contingent interest that will accrue is 0.50% per year) and upon the occurrence of
certain events, as outlined in the indenture governing the 3.125% Debentures.
The carrying values of the liability and equity components of the 3.125% Debentures are reflected
in the Companys condensed consolidated balance sheets as follows:
|
|
|
|
|
|
|
|
|
|
|
July 3,
|
|
|
April 3,
|
|
(In thousands)
|
|
2010
|
|
|
2010
|
|
Liability component:
|
|
|
|
|
|
|
|
|
Principal amount of the 3.125% Debentures
|
|
$
|
689,635
|
|
|
$
|
689,635
|
|
Unamortized discount of liability component
|
|
|
(333,105
|
)
|
|
|
(334,123
|
)
|
Unamortized discount of embedded derivative from date of issuance
|
|
|
(1,547
|
)
|
|
|
(1,562
|
)
|
|
|
|
|
|
|
|
Carrying value of liability component
|
|
|
354,983
|
|
|
|
353,950
|
|
Carrying value of embedded derivative component
|
|
|
1,317
|
|
|
|
848
|
|
|
|
|
|
|
|
|
Net carrying value of the 3.125% Debentures
|
|
$
|
356,300
|
|
|
$
|
354,798
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity component net carrying value
|
|
$
|
229,513
|
|
|
$
|
229,513
|
|
|
|
|
|
|
|
|
17
The remaining debt discount is being amortized as additional non-cash interest expense over the
expected remaining term of the 3.125% Debentures using the effective interest rate of 7.20%. As of
July 3, 2010, the remaining term of the 3.125% Debentures is 26.7 years. Interest expense related
to the 3.125% Debentures was included in interest and other expense, net on the condensed
consolidated statements of income and was recognized as follows:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
July 3,
|
|
|
June 27,
|
|
(In thousands)
|
|
2010
|
|
|
2009
|
|
Contractual coupon interest
|
|
$
|
5,388
|
|
|
$
|
5,652
|
|
Amortization of debt issuance costs
|
|
|
56
|
|
|
|
56
|
|
Amortization of embedded derivative
|
|
|
15
|
|
|
|
15
|
|
Amortization of debt discount
|
|
|
1,017
|
|
|
|
947
|
|
|
|
|
|
|
|
|
Total interest expense related to the 3.125% Debentures
|
|
$
|
6,476
|
|
|
$
|
6,670
|
|
|
|
|
|
|
|
|
On or after March 15, 2014, the Company may redeem all or part of the remaining 3.125% Debentures
outstanding for the principal amount plus any accrued and unpaid interest if the closing price of
the Companys common stock has been at least 130% of the conversion price then in effect for at
least 20 trading days during any 30 consecutive trading-day period prior to the date on which the
Company provides notice of redemption. Upon conversion, the Company would pay the holders of the
3.125% Debentures cash value of the applicable number of shares of Xilinx common stock, up to the
principal amount of the 3.125% Debentures. If the conversion value exceeds the aggregate principal
amount, the Company may also deliver, at its option, cash or common stock or a combination of cash
and common stock for the conversion value in excess of the principal amount (conversion spread).
Accordingly, there would be no adjustment to the numerator in the net income per common share
computation for the cash settled portion of the 3.125% Debentures as that portion of the debt
instrument will deem to be settled in cash. The conversion spread will be included in the
denominator for the computation of diluted net income per common share, using the treasury stock
method.
Holders of the 3.125% Debentures may convert their 3.125% Debentures only upon the occurrence of
certain events in the future, as outlined in the indenture. In addition, holders who convert their
3.125% Debentures in connection with a fundamental change, as defined in the indenture, may be
entitled to a make-whole premium in the form of an increase in the conversion rate. Furthermore, in
the event of a fundamental change, the holders of the 3.125% Debentures may require Xilinx to
purchase all or a portion of their 3.125% Debentures at a purchase price equal to 100% of the
principal amount of 3.125% Debentures, plus accrued and unpaid interest, if any. As of July 3,
2010, none of the conditions allowing holders of the 3.125% Debentures to convert had been met.
The Company concluded that the embedded features related to the contingent interest payments and
the Company making specific types of distributions (e.g., extraordinary dividends) qualify as
derivatives and should be bundled as a compound embedded derivative under the authoritative
guidance for derivatives instruments and hedging activities issued by the FASB. The fair value of
the derivative at the date of issuance of the 3.125% Debentures was $2.5 million and is accounted
for as a discount on the 3.125% Debentures. Due to the repurchase of a portion of the 3.125%
Debentures in fiscal 2009, the carrying value of the derivative was reduced to $1.6 million and
will continue to be amortized to interest expense over the remaining term of the 3.125% Debentures.
Any change in fair value of this embedded derivative will be included in interest and other
expense, net on the Companys consolidated statements of income. The Company also concluded that
the 3.125% Debentures are not conventional convertible debt instruments and that the embedded stock
conversion option qualifies as a derivative. In addition, the Company has concluded that the
embedded conversion option would be classified in stockholders equity if it were a freestanding
instrument. Accordingly, the embedded conversion option is not required to be accounted for
separately as a derivative.
Revolving Credit Facility
In April 2007, Xilinx entered into a five-year $250.0 million senior unsecured revolving credit
facility with a syndicate of banks. Borrowings under the credit facility will bear interest at a
benchmark rate plus an applicable margin based upon the Companys credit rating. In connection
with the credit facility, the Company is required to maintain certain financial and nonfinancial
covenants. As of July 3, 2010, the Company had made no borrowings under this credit facility and
was not in violation of any of the covenants.
Note 11. Common Stock and Debentures Repurchase Program
The Board of Directors has approved stock repurchase programs enabling the Company to repurchase
its common stock in the open market or through negotiated transactions with independent financial
institutions. In February 2008, the Board authorized the repurchase of up to $800.0 million of
common stock (2008 Repurchase Program). In November 2008, the Board of Directors approved an
amendment to the Companys 2008 Repurchase Program to provide that the funds may also be used to
repurchase outstanding debentures. On June 3, 2010, the Board authorized the repurchase of up to
$500.0 million of common stock (2010 Repurchase Program). The 2008 and 2010 Repurchase Programs
have no stated expiration date. Through July 3, 2010, the Company had used the entire amount
authorized under the 2008 Repurchase program and $57.6 million of the $500.0 million authorized
under the 2010 Repurchase Program, leaving $442.4 million available for future purchases. Of the
$800.0 million used under the 2008 Repurchase Program, $606.8 million was used to repurchase 23.5.
million shares of the Companys outstanding common stock and
$193.2 million was used to repurchase $310.4 million (principal amount) of its 3.125% Debentures.
See Note 10. Convertible Debentures and Revolving Credit Facility for additional information
about the 3.125% Debentures. The Companys current policy is to retire all repurchased shares and
debentures, and consequently, no treasury shares or debentures were held as of July 3, 2010 and
April 3, 2010.
18
During fiscal 2010, the Company repurchased 6.2 million shares of common stock in the open market
for a total of $150.0 million under the 2008 Repurchase Program. During the first quarter of fiscal
2011, the Company entered into a stock repurchase agreement with an independent financial
institution to repurchase shares under both the 2008 Repurchase Program and 2010 Repurchase
Program. Under the agreement, Xilinx provided the financial institution with up-front payments
totaling $433.3 million during the first quarter of fiscal 2011. The financial institution agreed
to deliver to Xilinx a certain number of shares based upon the volume weighted-average price,
during an averaging period, less a specified discount. Under these arrangements, the Company received 16.3 million shares of common stock during the first quarter of fiscal 2011.
Note 12. Restructuring Charges
During the first quarter of fiscal 2010, the Company announced restructuring measures designed to
drive structural operating efficiencies across the company. The Company completed this
restructuring plan in the end of the fourth quarter of fiscal 2010, and reduced its global
workforce by approximately 200 net positions, or about 6%. These employee terminations impacted
various geographies and functions worldwide. The Company recorded total restructuring charges of
$15.8 million for the first quarter of fiscal 2010 ($30.1 million in total for fiscal 2010),
primarily related to severance costs and benefits expenses. The remaining accrual balance as of
July 3, 2010 was immaterial.
Note 13. Interest and Other Expense, Net
The components of interest and other expense, net are as follows:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
July 3,
|
|
|
June 27,
|
|
(In thousands)
|
|
2010
|
|
|
2009
|
|
Interest income
|
|
$
|
4,519
|
|
|
$
|
5,311
|
|
Reversal of interest income
|
|
|
|
|
|
|
(8,656
|
)
|
Interest expense
|
|
|
(7,773
|
)
|
|
|
(6,729
|
)
|
Other expense, net
|
|
|
(1,876
|
)
|
|
|
(836
|
)
|
|
|
|
|
|
|
|
|
|
$
|
(5,130
|
)
|
|
$
|
(10,910
|
)
|
|
|
|
|
|
|
|
Due to an earlier decision by the U.S. Court of Appeals for the Ninth Circuit (Appeals Court),
during the first quarter of fiscal 2010 the Company recorded expense of $8.7 million in order to
reverse the interest income it previously accrued through March 28, 2009 related to an earlier
prepayment it made to the Internal Revenue Service (IRS). See Note 15. Income Taxes for
additional information.
Note 14. Comprehensive Income
The components of comprehensive income are as follows:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
July 3,
|
|
|
June 27,
|
|
(In thousands)
|
|
2010
|
|
|
2009
|
|
Net income
|
|
$
|
158,587
|
|
|
$
|
38,006
|
|
Net change in unrealized gain on available-for-sale securities, net of tax
|
|
|
3,289
|
|
|
|
9,240
|
|
Reclassification adjustment for (gains) losses on available-for-sale securities,
net of tax, included in net income
|
|
|
(323
|
)
|
|
|
30
|
|
Net change in unrealized loss on non-marketable equity security, net of tax
|
|
|
|
|
|
|
(2,001
|
)
|
Net change in unrealized gain on hedging transactions, net of tax
|
|
|
867
|
|
|
|
4,598
|
|
Net change in cumulative translation adjustment
|
|
|
(1,488
|
)
|
|
|
3,832
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
$
|
160,932
|
|
|
$
|
53,705
|
|
|
|
|
|
|
|
|
19
The components of accumulated other comprehensive income (loss) are as follows:
|
|
|
|
|
|
|
|
|
|
|
July 3,
|
|
|
April 3,
|
|
(In thousands)
|
|
2010
|
|
|
2010
|
|
Accumulated unrealized gain (loss) on available-for-sale securities, net of tax
|
|
$
|
2,248
|
|
|
$
|
(718
|
)
|
Accumulated unrealized loss on hedging transactions, net of tax
|
|
|
(686
|
)
|
|
|
(1,553
|
)
|
Accumulated cumulative translation adjustment
|
|
|
(438
|
)
|
|
|
1,050
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive income (loss)
|
|
$
|
1,124
|
|
|
$
|
(1,221
|
)
|
|
|
|
|
|
|
|
Note 15. Income Taxes
The Company recorded a tax provision of $44.3 million for the first quarter of fiscal 2011 as
compared to $8.4 million in the same prior year period, representing effective tax rates of 22% and
18%, respectively.
The difference between the U.S. federal statutory tax rate of 35% and the Companys effective tax
rate is primarily due to income earned in lower tax rate jurisdictions, for which no U.S. income
tax has been provided, as the Company intends to permanently reinvest these earnings outside of the
U.S.
The Companys total gross unrecognized tax benefits as of July 3, 2010, determined in accordance
with FASB authoritative guidance for measuring uncertain tax position, decreased by $3.4 million in
the first quarter of fiscal 2011 to $92.8 million. Such decrease relates to various matters
including the uncertainty over estimates and judgments made in calculating the research credit, and
uncertainty regarding the cost sharing of acquired technology net of decreases including the
finalization of the judicial ruling from the Appeals Court described below. The total amount of
unrecognized tax benefits that, if realized in a future period, would favorably affect the
effective tax rate was $64.8 million as of July 3, 2010.
The Companys policy is to include interest and penalties related to income tax liabilities within
the provision for income taxes on the consolidated statements of income. The balance of accrued
interest and penalties recorded in the condensed consolidated balance sheet as of July 3, 2010 was
$2.4 million. Reduction of interest and penalties included in the Companys provision for income
taxes totaled $641 thousand in the first quarter of fiscal 2011.
The Company is no longer subject to U.S. federal and state audits by taxing authorities for years
through fiscal 2004. The U.S. federal statute of limitations on fiscal 2006 has also expired. The
Company is no longer subject to tax audits in Ireland for years through fiscal 2005.
On December 8, 2008, the IRS issued a statutory notice of deficiency reflecting proposed audit
adjustments for fiscal 2005. The Company filed a petition with the Tax Court on March 2, 2009, in
response to this notice of deficiency. The Company began negotiations with the IRS Appeals Division
on this matter in the third quarter of fiscal 2010. On March 22, 2010, the Company settled the
proposed adjustment related to acquired technology with no net change in tax liability. The
Company believes it has provided adequate reserves for the other proposed adjustments to fiscal
2005.
The IRS audited and issued proposed adjustments to the Companys tax returns for fiscal 1996
through 2001. The Company filed petitions with the Tax Court in response to assertions by the IRS
relating to fiscal 1996 through 2000. The Company did not file a petition with the Tax Court for
fiscal 2001. The Company settled all proposed adjustments with no net change in tax liability for
that year. All remaining issues for fiscal 1996 through 2000 have been settled with the IRS as
described below.
On August 30, 2005, the Tax Court issued its opinion concerning whether the value of stock options
must be included in the cost sharing agreement with Xilinx Ireland. The Tax Court agreed with the
Company that no amount for stock options was to be included in the cost sharing agreement, and
thus, the Company had no tax, interest, or penalties due for this issue. The Tax Court entered its
decision on May 31, 2006. On August 25, 2006, the IRS appealed the decision to the Appeals Court.
The Company and the IRS presented oral arguments to a three-judge panel of the Appeals Court on
March 12, 2008. On May 27, 2009, the Company received a 2-1 adverse judicial ruling from the
Appeals Court reversing the Tax Court decision and holding that the Company should include stock
option amounts in its cost sharing agreement with Xilinx Ireland. As a result, the Company
recorded expense of $8.6 million in the first quarter of fiscal 2010 in order to reverse the
interest income it accrued through March 28, 2009 on the earlier prepayment it made to the IRS. As
a result of the May 27, 2009 decision, the Company increased its accrual for penalties and interest
in the first quarter of fiscal 2010 from $4.0 million to $21.9 million. The Company did not agree
with the Appeals Court decision and filed a motion for rehearing on August 12, 2009. On January 13,
2010, the Appeals Court issued an order withdrawing both the majority and dissent opinions that
were issued on May 27, 2009. On March 22, 2010 the Appeals Court in a 2-1 majority opinion
affirmed the Tax Court decision in Xilinxs favor. On June 21, 2010 the time for the IRS to appeal
the March 22, 2010 decision to the United States Supreme Court lapsed; accordingly all issues
concerning this matter with the IRS are closed and the Company expects to receive a refund from the
IRS of approximately $25.2 million and interest of approximately $9.5 million.
Due to various factors, the Company believes it is impractical to determine the amount of uncertain
tax benefits that will significantly increase or decrease within the next 12 months.
20
Note 16. Commitments
Xilinx leases some of its facilities and office buildings under non-cancelable operating leases
that expire at various dates through October 2018. Additionally, Xilinx entered into a land lease
in conjunction with the Companys building in Singapore, which will expire in November 2035 and the
lease cost was settled in an up-front payment in June 2006. Some of the operating leases for
facilities and office buildings require payment of operating costs, including property taxes,
repairs, maintenance and insurance. Most of the Companys leases contain renewal options for
varying terms. Approximate future minimum lease payments under non-cancelable operating leases are
as follows:
|
|
|
|
|
Years ending March 31,
|
|
(In thousands)
|
|
2011 (remaining nine months)
|
|
$
|
5,422
|
|
2012
|
|
|
3,081
|
|
2013
|
|
|
2,389
|
|
2014
|
|
|
1,399
|
|
2015
|
|
|
1,169
|
|
Thereafter
|
|
|
1,620
|
|
|
|
|
|
|
|
$
|
15,080
|
|
|
|
|
|
Aggregate future rental income to be received, which includes rents from both owned and leased
property, totaled $10.6 million as of July 3, 2010. Rent expense, net of rental income, under all
operating leases was $1.0 million and $1.3 million for the three months ended July 3, 2010 and June
27, 2009, respectively. Rental income was not material for the first quarter of fiscal 2011 or
2010.
Other commitments as of July 3, 2010 totaled $114.7 million and consisted of purchases of inventory
and other non-cancelable purchase obligations related to subcontractors that manufacture silicon
wafers and provide assembly and some test services. The Company expects to receive and pay for
these materials and services in the next three to six months, as the products meet delivery and
quality specifications. As of July 3, 2010, the Company also had $7.8 million of non-cancelable
license obligations to providers of electronic design automation software and hardware/software
maintenance expiring at various dates through September 2011.
The Company committed up to $5.0 million to acquire, in the future, rights to intellectual property
until July 2023. License payments will be amortized over the useful life of the intellectual
property acquired.
Note 17. Product Warranty and Indemnification
The Company generally sells products with a limited warranty for product quality. The Company
provides an accrual for known product issues if a loss is probable and can be reasonably estimated.
As of the end of the first quarter of fiscal 2011 and the end of fiscal 2010, the accrual balance
of the product warranty liability was immaterial.
The Company offers, subject to certain terms and conditions, to indemnify certain customers and
distributors for costs and damages awarded against these parties in the event the Companys
hardware products are found to infringe third-party intellectual property rights, including
patents, copyrights or trademarks, and to compensate certain customers for limited specified costs
they actually incur in the event our hardware products experience epidemic failure. To a lesser
extent, the Company may from time-to-time offer limited indemnification with respect to its
software products. The terms and conditions of these indemnity obligations are limited by
contract, which obligations are typically perpetual from the effective date of the agreement. The
Company has historically received only a limited number of requests for indemnification under these
provisions and has not made any significant payments pursuant to these provisions. The Company
cannot estimate the maximum amount of potential future payments, if any, that the Company may be
required to make as a result of these obligations due to the limited history of indemnification
claims and the unique facts and circumstances that are likely to be involved in each particular
claim and indemnification provision. However, there can be no assurances that the Company will not
incur any financial liabilities in the future as a result of these obligations.
Note 18. Contingencies
Internal Revenue Service
The IRS audited and issued proposed adjustments to the Companys tax returns for fiscal 1996
through 2001. The Company filed petitions with the Tax Court in response to assertions by the IRS
relating to fiscal 1996 through 2000. The Company did not file a petition with the Tax Court for
fiscal 2001. The Company settled all proposed adjustments with no net change in tax liability for
that year. All remaining issues for fiscal 1996 through 2000 have been settled with the IRS as
described below.
21
On August 30, 2005, the Tax Court issued its opinion concerning whether the value of stock options
must be included in the cost sharing agreement with Xilinx Ireland. The Tax Court agreed with the
Company that no amount for stock options was to be included in the cost sharing agreement, and
thus, the Company had no tax, interest, or penalties due for this issue. The Tax Court entered its
decision on May 31, 2006. On August 25, 2006, the IRS appealed the decision to the Appeals Court.
The Company and the IRS presented oral arguments to a three-judge panel of the Appeals Court on
March 12, 2008. On May 27, 2009, the Company received a 2-1 adverse judicial ruling from the
Appeals Court reversing the Tax Court decision and holding that the Company should include stock
option amounts in its cost sharing agreement with Xilinx Ireland. The Company did not agree with
the Appeals Court decision and filed a motion for rehearing on August 12, 2009. On January 13,
2010, the Appeals Court issued an order withdrawing both the majority and dissent opinions that
were issued on May 27, 2009. On March 22, 2010 the Appeals Court in a 2-1 majority opinion
affirmed the Tax Court decision in Xilinxs favor. On June 21, 2010 the time for the IRS to appeal
the March 22, 2010 decision to the United States Supreme Court lapsed. All issues concerning this
matter with the IRS are closed.
In a separate matter, on December 8, 2008, the IRS issued a statutory notice of deficiency
reflecting proposed audit adjustments for fiscal 2005. The Company began negotiations with the IRS
Appeals Division on this matter in the third quarter of fiscal 2010. On March 22, 2010, the
Company settled the proposed adjustment related to acquired technology with no net change in tax
liability. The Company believes it has adequate reserves for the remaining issues.
Patent Litigation
On December 28, 2007, a patent infringement lawsuit was filed by PACT XPP Technologies, AG (PACT)
against the Company in the U.S. District Court for the Eastern District of Texas, Marshall Division
(PACT XPP Technologies, AG. v. Xilinx, Inc. and Avnet, Inc. Case No. 2:07-CV-563). The lawsuit
pertains to 11 different patents and PACT seeks injunctive relief, unspecified damages, interest
and attorneys fees. Neither the likelihood, nor the amount of any potential exposure to the
Company is estimable at this time.
Other Matters
Except as stated above, there are no pending legal proceedings of a material nature to which the
Company is a party or of which any of its property is the subject.
Note 19. Goodwill
As of July 3, 2010 and April 3, 2010, the balance of goodwill was $118.0 million. All
acquisition-related intangibles were fully amortized as of the end of the Companys first quarter
of fiscal 2010. Amortization expense for acquisition-related intangible assets for the first
quarter of fiscal 2010 was $2.5 million, which was based on a straight-line basis.
Note 20. Subsequent Event
On July 20, 2010, the Companys Board of Directors declared a cash dividend of $0.16 per common
share for the second quarter of fiscal 2011. The dividend is payable on September 1, 2010 to
stockholders of record on August 11, 2010.
On July 30, 2010, a patent infringement lawsuit was filed by Intellitech Corporation (Intellitech)
against the Company in the U.S. District Court for the District of Delaware (Intellitech
Corporation v. Altera Corporation, Xilinx, Inc. and Lattice Semiconductor Corporation Case No.
1:10-CV-00645-UNA). The lawsuit pertains to a single patent and Intellitech seeks declaratory and
injunctive relief, unspecified damages, interest and attorneys fees. The Company has not been
served with the complaint. Neither the likelihood, nor the amount of any potential exposure to the
Company is estimable at this time.
22
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The statements in this Managements Discussion and Analysis that are forward looking, within
the meaning of the Private Securities Litigation Reform Act of 1995, involve numerous risks and
uncertainties and are based on current expectations. The reader should not place undue reliance on
these forward-looking statements. Our actual results could differ materially from those anticipated
in these forward-looking statements for many reasons, including those risks discussed under Risk
Factors and elsewhere in this document. Often, forward-looking statements can be identified by
the use of forward-looking words, such as may, will, could, should, expect, believe,
anticipate, estimate, continue, plan, intend, project and other similar terminology, or
the negative of such terms. We disclaim any responsibility to update or revise any forward-looking
statement provided in this document for any reason.
Critical Accounting Policies and Estimates
The methods, estimates and judgments we use in applying our most critical accounting policies have
a significant impact on the results we report in our consolidated financial statements. The SEC
has defined critical accounting policies as those that are most important to the portrayal of our
financial condition and results of operations and require us to make our most difficult and
subjective judgments, often as a result of the need to make estimates of matters that are
inherently uncertain. Based on this definition, our critical accounting policies include:
valuation of marketable and non-marketable securities, which impacts losses on debt and equity
securities when we record impairments; revenue recognition, which impacts the recording of
revenues; and valuation of inventories, which impacts cost of revenues and gross margin. Our
critical accounting policies also include: the assessment of impairment of long-lived assets, which
impacts their valuation; the assessment of the recoverability of goodwill, which impacts goodwill
impairment; accounting for income taxes, which impacts the provision or benefit recognized for
income taxes, as well as the valuation of deferred tax assets recorded on our consolidated balance
sheet; and valuation and recognition of stock-based compensation, which impacts gross margin,
research and development (R&D) expenses, and selling, general and administrative (SG&A) expenses.
Below, we discuss these policies further, as well as the estimates and judgments involved. We also
have other key accounting policies that are not as subjective, and therefore, their application
would not require us to make estimates or judgments that are as difficult, but which nevertheless
could significantly affect our financial reporting.
Valuation of Marketable and Non-marketable Securities
Our short-term and long-term investments include marketable debt securities and non-marketable
equity securities. As of July 3, 2010, we had marketable debt securities with a fair value of
$1.73 billion and non-marketable equity securities in private companies of $18.7 million (adjusted
cost).
We determine the fair values for marketable debt and equity securities using industry standard
pricing services, data providers and other third-party sources and by internally performing
valuation analyses. See Note 4. Fair Value Measurements to our condensed consolidated financial
statements, included in Part 1. Financial Information, for details of the valuation
methodologies. In determining if and when a decline in value below adjusted cost of marketable debt
and equity securities is other than temporary, we evaluate on an ongoing basis the market
conditions, trends of earnings, financial condition, credit ratings, any underlying collateral and
other key measures for our investments. We assess other-than-temporary impairment of debt and
equity securities in accordance with the latest guidance issued by the FASB. We did not record any
other-than-temporary impairment for marketable debt or equity securities during the first quarter
of fiscal 2011 and 2010.
Our investments in non-marketable securities of private companies are accounted for by using the
cost method. These investments are measured at fair value on a non-recurring basis when they are
deemed to be other-than-temporarily impaired. In determining whether a decline in value of
non-marketable equity investments in private companies has occurred and is other than temporary, an
assessment is made by considering available evidence, including the general market conditions in
the investees industry, the investees product development status and subsequent rounds of
financing and the related valuation and/or our participation in such financings. We also assess
the investees ability to meet business milestones and the financial condition and near-term
prospects of the individual investee, including the rate at which the investee is using its cash
and the investees need for possible additional funding at a lower valuation. The valuation
methodology for determining the fair value of non-marketable equity securities is based on the
factors noted above which require management judgment and are Level 3 inputs. See Note 4. Fair
Value Measurements to our condensed consolidated financial statements, included in Part 1.
Financial Information, for additional information. When a decline in value is deemed to be other
than temporary, we recognize an impairment loss in the current periods operating results to the
extent of the decline. We did not record any other-than-temporary impairment for non-marketable
equity securities during the first quarter of fiscal 2011 or 2010.
23
Revenue Recognition
Sales to distributors are made under agreements providing distributor price adjustments and rights
of return under certain circumstances. Revenue and costs relating to distributor sales are
deferred until products are sold by the distributors to the distributors end customers. For the
first quarter of fiscal 2011, approximately 67% of our net revenues were from products sold to
distributors for subsequent resale to original equipment manufacturers (OEMs) or their subcontract
manufacturers. Revenue recognition depends on notification from the distributor that product has
been sold to the distributors end customer. Also reported by the distributor are product resale
price, quantity and end customer shipment information, as well as inventory on hand. Reported
distributor inventory on hand is reconciled to deferred revenue balances monthly. We maintain
system controls to validate distributor data and to verify that the reported information is
accurate. Deferred income on shipments to distributors reflects the effects of distributor price
adjustments and the amount of gross margin expected to be realized when distributors sell through
product purchased from us. Accounts receivable from distributors are recognized and inventory is
relieved when title to inventories transfers, typically upon shipment from Xilinx at which point we
have a legally enforceable right to collection under normal payment terms.
As of July 3, 2010, we had $106.1 million of deferred revenue and $31.9 million of deferred cost of
revenues recognized as a net $74.2 million of deferred income on shipments to distributors. As of
April 3, 2010, we had $110.4 million of deferred revenue and $30.3 million of deferred cost of
revenues recognized as a net $80.1 million of deferred income on shipments to distributors. The
deferred income on shipments to distributors that will ultimately be recognized in our consolidated
statement of income will be different than the amount shown on the consolidated balance sheet due
to actual price adjustments issued to the distributors when the product is sold to their end
customers.
Revenue from sales to our direct customers is recognized upon shipment provided that persuasive
evidence of a sales arrangement exists, the price is fixed, title has transferred, collection of
resulting receivables is reasonably assured, and there are no customer acceptance requirements and
no remaining significant obligations. For each of the periods presented, there were no significant
formal acceptance provisions with our direct customers.
Revenue from software licenses is deferred and recognized as revenue over the license term of one
year. Revenue from support services is recognized when the service is performed. Revenue from
Support Products, which includes software and services sales, was less than 6% of net revenues for
all of the periods presented.
Allowances for end customer sales returns are recorded based on historical experience and for known
pending customer returns or allowances.
Valuation of Inventories
Inventories are stated at the lower of actual cost (determined using the first-in, first-out
method) or market (estimated net realizable value). The valuation of inventory requires us to
estimate excess or obsolete inventory as well as inventory that is not of saleable quality. We
review and set standard costs quarterly to approximate current actual manufacturing costs. Our
manufacturing overhead standards for product costs are calculated assuming full absorption of
actual spending over actual volumes, adjusted for excess capacity. Given the cyclicality of the
market and the obsolescence of technology and product lifecycles, we write down inventory based on
forecasted demand and technological obsolescence. These factors are impacted by market and
economic conditions, technology changes, new product introductions and changes in strategic
direction and require estimates that may include uncertain elements. The estimates of future
demand that we use in the valuation of inventory are the basis for our published revenue forecasts,
which are also consistent with our short-term manufacturing plans. If our demand forecast for
specific products is greater than actual demand and we fail to reduce manufacturing output
accordingly, we could be required to write down additional inventory, which would have a negative
impact on our gross margin.
Impairment of Long-Lived Assets
Long-lived assets to be held and used are reviewed for impairment if indicators of potential
impairment exist. Impairment indicators are reviewed on a quarterly basis. When indicators of
impairment exist and assets are held for use, we estimate future undiscounted cash flows
attributable to the assets. In the event such cash flows are not expected to be sufficient to
recover the recorded value of the assets, the assets are written down to their estimated fair
values based on the expected discounted future cash flows attributable to the assets or based on
appraisals. Factors affecting impairment of assets held for use include the ability of the
specific assets to generate separately identifiable positive cash flows.
When assets are removed from operations and held for sale, we estimate impairment losses as the
excess of the carrying value of the assets over their fair value. Factors affecting impairment of
assets held for sale include market conditions. Changes in any of these factors could necessitate
impairment recognition in future periods for assets held for use or assets held for sale.
Long-lived assets such as goodwill, other intangible assets and property, plant and equipment, are
considered non-financial assets, and are only measured at fair value when indicators of impairment
exist.
24
Goodwill
As required by the authoritative guidance for goodwill established by the FASB, goodwill is not
amortized but is subject to impairment tests on an annual basis, or more frequently if indicators
of potential impairment exist, and goodwill is written down when it is determined to be impaired.
We perform an annual impairment review in the fourth quarter of each fiscal year and compare the
fair value of the reporting unit in which the goodwill resides to its carrying value. If the
carrying value exceeds the fair value, the goodwill of the reporting unit is potentially impaired.
For purposes of impairment testing, Xilinx operates as a single reporting unit. We use the quoted
market price method to determine the fair value of the reporting unit. Based on the impairment
review performed during the fourth quarter of fiscal 2010, there was no impairment of goodwill in
fiscal 2010. Unless there are indicators of impairment, our next impairment review for goodwill
will be performed and completed in the fourth quarter of fiscal 2011. To date, no impairment
indicators have been identified.
Accounting for Income Taxes
Xilinx is a multinational corporation operating in multiple tax jurisdictions. We must determine
the allocation of income to each of these jurisdictions based on estimates and assumptions and
apply the appropriate tax rates for these jurisdictions. We undergo routine audits by taxing
authorities regarding the timing and amount of deductions and the allocation of income among
various tax jurisdictions. Tax audits often require an extended period of time to resolve and may
result in income tax adjustments if changes to the allocation are required between jurisdictions
with different tax rates.
In determining income for financial statement purposes, we must make certain estimates and
judgments. These estimates and judgments occur in the calculation of certain tax liabilities and
in the determination of the recoverability of certain deferred tax assets, which arise from
temporary differences between the tax and financial statement recognition of revenue and expense.
Additionally, we must estimate the amount and likelihood of potential losses arising from audits or
deficiency notices issued by taxing authorities. The taxing authorities positions and our
assessment can change over time resulting in a material effect on the provision for income taxes in
periods when these changes occur.
We must also assess the likelihood that we will be able to recover our deferred tax assets. If
recovery is not likely, we must increase our provision for taxes by recording a reserve in the form
of a valuation allowance for the deferred tax assets that we estimate will not ultimately be
recoverable.
We perform a two-step approach to recognizing and measuring uncertain tax positions relating to
accounting for income taxes. The first step is to evaluate the tax position for recognition by
determining if the weight of available evidence indicates that it is more likely than not that the
position will be sustained on audit, including resolution of related appeals or litigation
processes, if any. The second step is to measure the tax benefit as the largest amount that is
more than 50% likely of being ultimately realized. See Note 15. Income Taxes to our condensed
consolidated financial statements included in Part 1. Financial Information.
Stock-Based Compensation
Determining the appropriate fair-value model and calculating the fair value of stock-based awards
at the date of grant requires judgment. We use the Black-Scholes option-pricing model to estimate
the fair value of employee stock options and rights to purchase shares under our Employee Stock
Purchase Plan. Option pricing models, including the Black-Scholes model, also require the use of
input assumptions, including expected stock price volatility, expected life, expected dividend
rate, expected forfeiture rate and expected risk-free rate of return. We use implied volatility
based on traded options in the open market as we believe implied volatility is more reflective of
market conditions and a better indicator of expected volatility than historical volatility. In
determining the appropriateness of implied volatility, we considered: the volume of market activity
of traded options, and determined there was sufficient market activity; the ability to reasonably
match the input variables of traded options to those of options granted by us, such as date of
grant and the exercise price, and determined the input assumptions were comparable; and the length
of term of traded options used to derive implied volatility, which is generally one to two years
and which was extrapolated to match the expected term of the employee options granted by us, and
determined the length of the option term was reasonable. The expected life of options granted is
based on the historical exercise activity as well as the expected disposition of all options
outstanding. We will continue to review our input assumptions and make changes as deemed
appropriate depending on new information that becomes available. Higher volatility and expected
lives result in a proportional increase to stock-based compensation determined at the date of
grant. The expected dividend rate and expected risk-free rate of return do not have as significant
an effect on the calculation of fair value.
In addition, we developed an estimate of the number of stock-based awards which will be forfeited
due to employee turnover. Quarterly changes in the estimated forfeiture rate have an effect on
reported stock-based compensation, as the effect of adjusting the rate for all expense amortization
is recognized in the period the forfeiture estimate is changed. If the actual forfeiture rate is
higher than the estimated forfeiture rate, then an adjustment is made to increase the estimated
forfeiture rate, which will result in a decrease to the expense recognized in the financial
statements. If the actual forfeiture rate is lower than the estimated forfeiture rate, then an
adjustment is made to decrease the estimated forfeiture rate, which will result in an increase to
the expense recognized in the financial statements. The impact of forfeiture true up and
forfeiture rate estimates in the first quarter of fiscal 2011 and 2010 reduced stock-based compensation expense by $3.9 million and $3.4 million, respectively. The expense we
recognize in future periods could also differ significantly from the current period and/or our
forecasts due to adjustments in the assumed forfeiture rates.
25
Results of Operations: First quarter of fiscal 2011 compared to the first quarter of fiscal 2010
The following table sets forth statement of income data as a percentage of net revenues for
the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
July 3,
|
|
|
June 27,
|
|
|
|
2010
|
|
|
2009
|
|
Net Revenues
|
|
|
100.0
|
%
|
|
|
100.0
|
%
|
Cost of revenues
|
|
|
35.0
|
|
|
|
38.2
|
|
|
|
|
|
|
|
|
Gross Margin
|
|
|
65.0
|
|
|
|
61.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
15.9
|
|
|
|
22.1
|
|
Selling, general and administrative
|
|
|
14.1
|
|
|
|
19.6
|
|
Amortization of acquisition-related intangibles
|
|
|
|
|
|
|
0.7
|
|
Restructuring charges
|
|
|
|
|
|
|
4.2
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
30.0
|
|
|
|
46.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income
|
|
|
35.0
|
|
|
|
15.2
|
|
Interest and other expense, net
|
|
|
(0.9
|
)
|
|
|
(2.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Before Income Taxes
|
|
|
34.1
|
|
|
|
12.3
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
|
7.4
|
|
|
|
2.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
|
26.7
|
%
|
|
|
10.1
|
%
|
|
|
|
|
|
|
|
Net Revenues
We sell our products to global manufacturers of electronic products in end markets such as wired
and wireless communications, aerospace and defense, industrial, scientific and medical and audio,
video and broadcast. The vast majority of our net revenues are generated by sales of our
semiconductor products, but we also generate sales from support products. We classify our product
offerings into four categories: New, Mainstream, Base and Support Products. The composition of
each product category is as follows:
|
|
|
New Products include our most recent product offerings and include the
Virtex
®
-6, Virtex-5, Spartan
®
-6, Spartan-3A and Spartan-3E product
families.
|
|
|
|
|
Mainstream Products include the Virtex-4, Spartan-3, Spartan-II and CoolRunner-II
product families.
|
|
|
|
|
Base Products consist of our older product families including the Virtex, Virtex-E,
Virtex-II, Spartan, XC4000, CoolRunner and XC9500 products.
|
|
|
|
|
Support Products include configuration products or programmable read-only memory
(PROMs), software, intellectual property (IP) cores, customer training, design services and
support.
|
These product categories, except for Support Products, are modified on a periodic basis to better
reflect the age of the products and advances in technology. The most recent modification was made
on March 29, 2009, which was the beginning of our fiscal 2010. New Products include our most recent
product offerings and are typically designed into our customers latest generation of electronic
systems. Mainstream Products are generally several years old and designed into customer programs
that are currently shipping in full production. Base Products are older than Mainstream Products
with demand generated generally by the oldest customer systems still in production. Support
Products are generally products or services sold in conjunction with our semiconductor devices to
aid customers in the design process.
Our net revenues of $594.7 million in the first quarter of fiscal 2011 represented a 58% increase
from the comparable prior year period of $376.2 million. The year-over-year increase in net
revenues was primarily driven by strong New Product growth as well as broad-based strengthening
across all of our end markets and geographies. Total unit sales increased in the first quarter of
fiscal 2011 compared with the same quarter of the prior year. The average selling price per unit
also increased during the same time period. No end customer accounted for more than 10% of our net
revenues for any of the periods presented.
26
Net Revenues by Product
Net revenues by product categories for the first quarter of fiscal 2011 and 2010 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
July 3,
|
|
|
% of
|
|
|
%
|
|
|
June 27,
|
|
|
% of
|
|
(In millions)
|
|
2010
|
|
|
Total
|
|
|
Change
|
|
|
2009
|
|
|
Total
|
|
New Products
|
|
$
|
233.0
|
|
|
|
39
|
|
|
|
148
|
%
|
|
$
|
94.1
|
|
|
|
25
|
|
Mainstream Products
|
|
|
178.0
|
|
|
|
30
|
|
|
|
33
|
%
|
|
|
133.5
|
|
|
|
36
|
|
Base Products
|
|
|
157.4
|
|
|
|
27
|
|
|
|
22
|
%
|
|
|
128.8
|
|
|
|
34
|
|
Support Products
|
|
|
26.3
|
|
|
|
4
|
|
|
|
33
|
%
|
|
|
19.8
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenues
|
|
$
|
594.7
|
|
|
|
100
|
|
|
|
58
|
%
|
|
$
|
376.2
|
|
|
|
100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues from New Products increased significantly from the comparable prior year period as a
result of continued strong market acceptance of these products, particularly for our 65-nanometer
(nm) Virtex-5 product family. Our newest product families, which include our high-end, 40-nm
Virtex-6 field programmable gate arrays (FPGAs) and our high-volume, 45-nm Spartan-6 FPGAs, also
contributed to the increase in net revenues from New Products. We expect sales of New Products to
continue to increase over time as more customers programs go into volume production with our 65-nm
and 40/45-nm products.
Net revenues from Mainstream Products increased from the comparable prior year period primarily due
to increased sales of our Virtex-4 product family.
Net revenues from Base Products increased from the comparable prior year period due to last time
buying activities.
Net revenues from Support Products increased compared to the prior year period, primarily due to an
increase in sales from our PROM products.
Net Revenues by End Markets
Our end market revenue data is derived from our understanding of our end customers primary
markets. We classify our net revenues by end markets into four categories: Communications,
Industrial and Other, Consumer and Automotive and Data Processing. The percentage change
calculation in the table below represents the year-to-year dollar change in each end market.
Net revenues by end markets for the first quarter of fiscal 2011 and 2010 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
July 3,
|
|
|
% Change
|
|
|
June 27,
|
|
(% of total net revenues)
|
|
2010
|
|
|
in Dollars
|
|
|
2009
|
|
Communications
|
|
|
47
|
%
|
|
|
53
|
|
|
|
49
|
%
|
Industrial and Other
|
|
|
32
|
|
|
|
64
|
|
|
|
31
|
|
Consumer and Automotive
|
|
|
15
|
|
|
|
67
|
|
|
|
14
|
|
Data Processing
|
|
|
6
|
|
|
|
54
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenues
|
|
|
100
|
%
|
|
|
58
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues from Communications increased from the comparable prior year period due to increased
sales from wireless and wired applications.
Net revenues from Industrial and Other increased due to broad-based strength across all
sub-segments of this category, including defense, industrial, scientific and medical applications
as well as test and measurement applications.
Net revenues from Consumer and Automotive increased primarily due to increased sales in audio,
video and broadcast applications, as well as automotive applications.
Net revenues from Data Processing increased due to higher sales from computing and storage
applications.
Net Revenues by Geography
Geographic revenue information reflects the geographic location of the distributors, OEMs or
contract manufacturers who purchased our products. This may differ from the geographic location of
the end customers. Net revenues by geography for the first quarter of fiscal 2011 and 2010 were as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
July 3,
|
|
|
% of
|
|
|
%
|
|
|
June 27,
|
|
|
% of
|
|
(In millions)
|
|
2010
|
|
|
Total
|
|
|
Change
|
|
|
2009
|
|
|
Total
|
|
North America
|
|
$
|
191.9
|
|
|
|
32
|
|
|
|
48
|
|
|
$
|
129.6
|
|
|
|
35
|
|
Asia Pacific
|
|
|
204.2
|
|
|
|
34
|
|
|
|
46
|
|
|
|
139.5
|
|
|
|
37
|
|
Europe
|
|
|
154.2
|
|
|
|
26
|
|
|
|
103
|
|
|
|
75.8
|
|
|
|
20
|
|
Japan
|
|
|
44.4
|
|
|
|
8
|
|
|
|
42
|
|
|
|
31.3
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenues
|
|
$
|
594.7
|
|
|
|
100
|
|
|
|
58
|
|
|
$
|
376.2
|
|
|
|
100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27
Net revenues in all geographies increased from the comparable prior year period due to broad-based
strengthening across all end market segments.
Net revenues in North America grew from the comparable prior year period with higher sales in each
of the end market sub-segments. Sales from wired communications applications as well as defense,
industrial, scientific and medical, test and measurement applications and audio, video and
broadcast applications were particularly strong.
Net revenues in Asia Pacific increased from the comparable prior year period mainly due to higher
sales in wired and wireless communications along with industrial, scientific and medical
applications.
The significant year over year increase in Europe was driven by broad-based strength in each of the
end market sub-segments.
The Communications end market was particularly strong, mainly due to higher sales from wireless
communications applications.
Net revenues in Japan increased from the comparable prior year period primarily due to higher sales
in the Industrial and Other end market, driven by higher sales in industrial, scientific and
medical as well as test and measurement applications.
Gross Margin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
|
|
|
July 3,
|
|
|
June 27,
|
|
|
$
|
|
|
%
|
|
(In millions)
|
|
2010
|
|
|
2009
|
|
|
Change
|
|
|
Change
|
|
Gross margin
|
|
$
|
386.6
|
|
|
$
|
232.4
|
|
|
$
|
154.2
|
|
|
|
66
|
%
|
Percentage of net revenues
|
|
|
65.0
|
%
|
|
|
61.8
|
%
|
|
|
|
|
|
|
|
|
The gross margin increase of 3.2 percentage points in the first quarter of fiscal 2011 from the
comparable prior year period was driven primarily by supply chain efficiencies, improvement in
product costs and cost savings related to overall restructuring effort in fiscal 2010. This
favorable impact was partially offset by the product mix effect of New Product growth
year-over-year. New Products generally have lower gross margins than Mainstream and Base Products
as they are in the early stage of their product life cycle and have higher unit costs associated
with relatively lower volumes and early manufacturing maturity.
Gross margin may be affected in the future due to mix shifts, competitive-pricing pressure,
manufacturing-yield issues and wafer pricing. We expect to mitigate any adverse impacts from these
factors by continuing to improve yields on our New Products and by improving manufacturing
efficiencies.
In order to compete effectively, we pass manufacturing cost reductions to our customers in the form
of reduced prices to the extent that we can maintain acceptable margins. Price erosion is common
in the semiconductor industry, as advances in both product architecture and manufacturing process
technology permit continual reductions in unit cost. We have historically been able to offset much
of this revenue decline in our mature products with increased revenues from newer products.
Research and Development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
|
|
|
July 3,
|
|
|
June 27,
|
|
|
$
|
|
|
%
|
|
(In millions)
|
|
2010
|
|
|
2009
|
|
|
Change
|
|
|
Change
|
|
Research and development
|
|
$
|
94.5
|
|
|
$
|
83.2
|
|
|
$
|
11.3
|
|
|
|
14
|
%
|
Percentage of net revenues
|
|
|
16
|
%
|
|
|
22
|
%
|
|
|
|
|
|
|
|
|
R&D spending increased $11.3 million, or 14%, for the first quarter of fiscal 2011 compared to the
same period last year. The increase was primarily attributable to higher variable spending
associated with higher revenue and operating margin, such as
incentive compensation expenses.
We plan to continue to selectively invest in R&D efforts in areas such as new products and more
advanced process development, IP cores and the development of new design and layout software. We
may also consider acquisitions to complement our strategy for technology leadership and engineering
resources in critical areas.
28
Selling, General and Administrative
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
|
|
|
July 3,
|
|
|
June 27,
|
|
|
$
|
|
|
%
|
|
(In millions)
|
|
2010
|
|
|
2009
|
|
|
Change
|
|
|
Change
|
|
Selling, general and administrative
|
|
$
|
84.1
|
|
|
$
|
73.6
|
|
|
$
|
10.5
|
|
|
|
14
|
%
|
Percentage of net revenues
|
|
|
14
|
%
|
|
|
20
|
%
|
|
|
|
|
|
|
|
|
SG&A expenses increased $10.5 million, or 14%, for the first quarter of fiscal 2011 compared to the
same period last year. The increase was primarily due to higher variable spending associated with
higher revenue and operating margin, particularly sales commissions
and incentive compensation expenses.
Amortization of Acquisition-Related Intangibles
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
|
|
|
July 3,
|
|
|
June 27,
|
|
|
$
|
|
|
%
|
|
(In millions)
|
|
2010
|
|
|
2009
|
|
|
Change
|
|
|
Change
|
|
Amortization
|
|
$
|
|
|
|
$
|
2.5
|
|
|
$
|
(2.5
|
)
|
|
|
(100
|
)%
|
Percentage of net revenues
|
|
|
|
|
|
|
1
|
%
|
|
|
|
|
|
|
|
|
Amortization expense was related to the intangible assets acquired from prior acquisitions, which
had been fully amortized as of the end of the first quarter of fiscal 2010.
Stock-Based Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
July 3,
|
|
|
June 27,
|
|
|
|
|
(In millions)
|
|
2010
|
|
|
2009
|
|
|
Change
|
|
Stock-based compensation included in:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues
|
|
$
|
1.3
|
|
|
$
|
1.1
|
|
|
|
14
|
%
|
Research and development
|
|
|
7.2
|
|
|
|
6.0
|
|
|
|
20
|
%
|
Selling, general and administrative
|
|
|
6.6
|
|
|
|
5.7
|
|
|
|
17
|
%
|
Restructuring charges
|
|
|
|
|
|
|
0.9
|
|
|
|
(100
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
15.1
|
|
|
$
|
13.7
|
|
|
|
10
|
%
|
|
|
|
|
|
|
|
|
|
|
|
The 10% increase in stock-based compensation expense for the first quarter of fiscal 2011, as
compared to the same period last year, was mainly due to RSU shares granted at higher
weighted-average fair values. The increase in RSU expense was partly offset by decline in options
grants and options that were fully amortized after they reached the four-year term. We amortize
our stock-based compensation using straight-line method over the requisite service period of
generally four years.
Restructuring Charges
During the first quarter of fiscal 2010, we announced restructuring measures designed to drive
structural operating efficiencies across the Company. We completed this restructuring plan in the
end of the fourth quarter of fiscal 2010, and reduced our global workforce by approximately 200 net
positions, or about 6%. These employee terminations impacted various geographies and functions
worldwide. We recorded total restructuring charges of $15.8 million for the first quarter of fiscal
2010 ($30.1 million in total for fiscal 2010), primarily related to severance costs and benefits
expenses. The remaining accrual as of July 3, 2010 was immaterial.
Interest and Other Expense, Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
|
|
|
July 3,
|
|
|
June 27,
|
|
|
$
|
|
|
%
|
|
(In millions)
|
|
2010
|
|
|
2009
|
|
|
Change
|
|
|
Change
|
|
Interest and other expense, net
|
|
$
|
5.1
|
|
|
$
|
10.9
|
|
|
$
|
(5.8
|
)
|
|
|
(53
|
)%
|
Percentage of net revenues
|
|
|
1
|
%
|
|
|
3
|
%
|
|
|
|
|
|
|
|
|
During the first quarter of fiscal 2010, we recorded expense of $8.7 million in order to reverse
the interest income it accrued through March 28, 2009 related to an earlier prepayment it made to
the IRS. See Note 15. Income Taxes to our condensed consolidated financial statements, included
in Part 1. Financial Information, for additional information. Excluding the reversal of interest
income, interest and other expense, net, increased $2.9 million for the first quarter of fiscal
2011 compared to the same period last year, primarily due to the impact of the debt discount
amortization related to the 2.625% Debentures and, to a lesser extent, due to lower interest income
earned on the investment portfolio as the average interest rate yield slightly decreased year over
year.
29
Provision for Income Taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
|
|
|
July 3,
|
|
|
June 27,
|
|
|
$
|
|
|
%
|
|
(In millions)
|
|
2010
|
|
|
2009
|
|
|
Change
|
|
|
Change
|
|
Provision for income taxes
|
|
$
|
44.3
|
|
|
$
|
8.4
|
|
|
$
|
35.9
|
|
|
|
425
|
%
|
Percentage of net revenues
|
|
|
7
|
%
|
|
|
2
|
%
|
|
|
|
|
|
|
|
|
Effective tax rate
|
|
|
22
|
%
|
|
|
18
|
%
|
|
|
|
|
|
|
|
|
The effective tax rates in all periods reflected the favorable impact of foreign income at
statutory rates less than the U.S. rate and tax credits earned.
The increase in the effective tax rate in the first quarter of fiscal 2011 as compared to the prior
year period was primarily due to a decrease in the portion of income earned in lower tax rate
jurisdictions and expiration of the federal research credit provision for fiscal 2011.
The IRS has completed the examination of our tax returns for fiscal 1996 through 2001. All issues
related to this examination are closed as described below.
On August 30, 2005, the Tax Court issued its opinion concerning whether the value of stock options
must be included in the cost sharing agreement with Xilinx Ireland. The Tax Court agreed with us
that no amount for stock options was to be included in the cost sharing agreement. Accordingly,
there were no additional taxes, penalties or interest due for this issue. The Tax Court entered
its decision on May 31, 2006. On August 25, 2006, the IRS appealed the decision to the Ninth
Circuit Court of Appeals. On May 27, 2009, we received a 2-1 adverse judicial ruling from the
Appeals Court reversing the Tax Court decision and holding that we should include stock option
amounts in its cost sharing agreement with Xilinx Ireland. We did not agree with the Appeals Court
decision and filed a motion for rehearing on August 12, 2009. On January 13, 2010, the Appeals
Court issued an order withdrawing both the majority and dissent opinions that were issued on May
27, 2009. On March 22, 2010 the Appeals Court in a 2-1 majority opinion affirmed the Tax Court
decision in Xilinxs favor. On June 21, 2010 the time for the IRS to appeal the March 22, 2010
decision to the United States Supreme Court lapsed. All issues concerning this matter with the IRS
are closed. See Note 15. Income Taxes and Note 18. Contingencies to our condensed consolidated
financial statements, included in Part 1. Financial Information, and Item 1. Legal Proceedings,
included in Part II. Other Information.
Financial Condition, Liquidity and Capital Resources
We have historically used a combination of cash flows from operations and equity and debt
financing to support ongoing business activities, acquire or invest in critical or complementary
technologies, purchase facilities and capital equipment, repurchase our common stock and debentures
under our repurchase program, pay dividends and finance working capital. Additionally, our
investments in debt securities are available for future sale.
The combination of cash, cash equivalents and short-term and long-term investments as of July 3,
2010 and April 3, 2010 totaled $2.12 billion and $1.97 billion, respectively. As of July 3, 2010,
we had cash, cash equivalents and short-term investments of $1.54 billion and working capital of
$1.85 billion. As of April 3, 2010, cash, cash equivalents and short-term investments were $1.39
billion and working capital was $1.55 billion.
Operating Activities
During the first quarter of fiscal 2011, our operations generated net
positive cash flow of $105.0 million, which was $42.0 million lower than the $147.0 million
generated during the first quarter of fiscal 2010. The positive cash flow from operations
generated during the first quarter of fiscal 2011 was primarily from net income as adjusted for
noncash related items, decreases in other assets and deferred income taxes, and increase in
accounts payable. These items were partially offset by an increase in accounts receivable, prepaid
expenses and other current assets and inventories. Accounts receivable increased by $92.7 million
at July 3, 2010 from the levels at April 3, 2010, due to higher shipments during the first quarter
of fiscal 2011 compared to the fourth quarter of fiscal 2010. Consequently, days sales outstanding
increased slightly to 54 days at July 3, 2010 from 53 days at April 3, 2010. Our inventory levels
were $21.0 million higher at July 3, 2010 compared to April 3, 2010. Combined inventory days at
Xilinx
and distribution decreased to 80 days at July 3, 2010 from 89 days at April 3, 2010, due to higher
turnover of inventory at Xilinx and in the distributor channel.
To align with our strategic initiative to consolidate our distribution channel, we have
further strengthened our partnership with Avnet. Avnet now supports more of our customers and has
committed more personnel and resources to our business. In return for these long-term commitments,
we have agreed to temporarily extend payment terms to Avnet over the next three quarters. The
extensions of payment terms are scheduled to be reduced each quarter and Avnet is expected to
return to normal payment terms by April 2011. We expect this change in payment terms to reduce our
cash flow and increase our days sales outstanding over the next three quarters, with the impact
tapering off over the same periods.
30
For the first quarter of fiscal 2010, the net positive cash flow from operations was primarily from
net income as adjusted for noncash related items, decreases in accounts receivable, inventories and
other assets and increases in accounts payable and accrued liabilities. These items were partially
offset by increase in prepaid expenses and a decrease in income taxes payable.
Investing Activities
Net cash used in investing activities of $275.3 million during the first
quarter of fiscal 2011 included net purchases of available-for-sale securities of $256.0 million,
$18.3 million for purchases of property, plant and equipment and $1.0 million for other investing
activities. Net cash used in investing activities of $321.9 million during the first quarter of
fiscal 2010 included net purchases of available-for-sale securities of $316.5 million, $4.7 million
for purchases of property, plant and equipment and $716 thousand for other investing activities.
Financing
Activities
Net cash provided by financing activities was
$51.3 million in the first
quarter of fiscal 2011 and consisted of $588.0 million of net proceeds from issuance of the 2.625%
Debentures, $46.9 million of proceeds from issuance of warrants, $4.8 million of proceeds from
issuance of common stock under employee stock plans and
$1.0 million for the excess of tax benefit from stock-based
compensation, offset by $433.3 million of
repurchase of common stocks, $112.3 million for purchase of call options to hedge against potential
dilution upon conversion of the 2.625% Debentures and $43.8 million for dividend payments to
stockholders. For the comparable fiscal 2010 period, net cash used in financing activities was $54.6 million in the
first quarter of fiscal 2010 and consisted of $38.6 million for dividend payments to stockholders
and $16.5 million for the reduction of tax benefit from stock-based compensation, offset
by $436 thousand of proceeds from the issuance of common stock under employee stock plans.
Stockholders equity decreased $253.3 million during the first quarter of fiscal 2011. The
decrease was attributable to $433.3 million of repurchase of common stocks, $70.6 million for
purchase of call options to hedge against potential dilution upon conversion of the 2.625%
Debentures, net of deferred tax assets, $43.8 million of payment of dividends to stockholders, $1.5
million of cumulative translation adjustment and $188 thousand of reduction of tax benefit
associated with stock option exercises. The decreases were offset by $158.6 million in
net income for the first quarter of fiscal 2011, $66.5 million of debt discount of liability
component related to the issuance of the 2.625% Debentures, net of deferred tax liabilities, $46.9
million of proceeds from issuance of warrants, $15.2 million of stock-based compensation, $4.8
million of issuance of common stock under employee stock plans, $3.0 million of change in
unrealized losses on available-for-sale securities, net of deferred tax liabilities and $867
thousand of change in hedging transaction gain.
Contractual Obligations
We lease some of our facilities, office buildings and land under non-cancelable operating leases
that expire at various dates through October 2018. See Note 16. Commitments to our condensed
consolidated financial statements, included in Part 1. Financial Information, for a schedule of
our operating lease commitments as of July 3, 2010 and additional information about operating
leases.
Due to the nature of our business, we depend entirely upon subcontractors to manufacture our
silicon wafers and provide assembly and some test services. The lengthy subcontractor lead times
require us to order the materials and services in advance, and we are obligated to pay for the
materials and services when completed. As of July 3, 2010, we had $114.7 million of outstanding
inventory and other non-cancelable purchase obligations to subcontractors. We expect to receive
and pay for these materials and services in the next three to six months, as the products meet
delivery and quality specifications. As of July 3, 2010, we also had $7.8 million of
non-cancelable license obligations to providers of electronic design automation software and
hardware/software maintenance expiring at various dates through September 2011.
We committed up to $5.0 million to acquire, in the future, rights to intellectual property until
July 2023. License payments will be amortized over the useful life of the intellectual property
acquired.
In March 2007, we issued $1.00 billion principal amount of 3.125% Debentures. As a result of the
repurchases in fiscal 2009, the remaining principal amount of the 3.125% Debentures as of June 27,
2009 was $689.6 million. The 3.125% Debentures require payment of interest semiannually on March
15 and September 15 of each year, beginning September 15, 2007. In June 2010, we issued another
$600.0 million principal amount of 2.625% Debentures. The 2.625% Debentures require payment of
interest semiannually on June 15 and December 15 of each year, beginning December 15, 2010. In
relation to the 2.625% Debentures, we
entered into interest rate swaps whereby we pay variable interest at a rate equal to the
three-month LIBOR minus 0.2077%, quarterly on March 15, June 15, September 15 and December 15 of
each year, beginning September 15, 2010, and receive fixed interest at a rate of 2.625%
semiannually on June 15 and December 15 of each year, beginning December 15, 2010. See Note 10.
Convertible Debentures and Revolving Credit Facility to our condensed consolidated financial
statements, included in Part 1. Financial Information, for additional information about our
debentures.
As of July 3, 2010, $59.1 million of liabilities for uncertain tax position and related interest
and penalties were classified as long-term income taxes payable in the condensed consolidated
balance sheet. Due to the inherent uncertainty with respect to the timing of future cash outflows
associated with such liabilities, we are unable to reliably estimate the timing of cash settlement
with the respective taxing authority.
31
Off-Balance-Sheet Arrangements
As of July 3, 2010, we did not have any significant off-balance-sheet arrangements, as defined in
Item 303(a)(4)(ii) of SEC Regulation S-K.
Liquidity and Capital Resources
Cash generated from operations is used as our primary source of liquidity and capital resources.
Our investment portfolio is also available for future cash requirements as is our $250.0 million
revolving credit facility entered into in April 2007. We are not aware of any lack of access to
the revolving credit facility; however, we can provide no assurance that access to the credit
facility will not be impacted by adverse conditions in the financial markets. Our credit facility
is not reliant upon a single bank. There have been no borrowings to date under our existing
revolving credit facility.
During the first quarter of fiscal 2011, we entered into stock repurchase agreement with an
independent financial institution and paid $433.3 million, and received 16.3 million
shares of common stock (see Note 11. Common Stock and Debentures Repurchase Program to our
condensed consolidated financial statements, included in Part 1. Financial Information, for
additional information). We did not repurchase any common stock or debentures during the first
quarter of fiscal 2010. During the first quarter of fiscal 2011, we paid $43.8 million in cash
dividends to stockholders, representing $0.16 per common share. During the first quarter of fiscal
2010, we paid $38.6 million in cash dividends to stockholders, representing $0.14 per common share.
On July 20, 2010, our Board of Directors declared a cash dividend of $0.16 per common share for
the second quarter of fiscal 2011. The dividend is payable on September 1, 2010 to stockholders of
record on August 11, 2010. Our common stock and debentures repurchase program and dividend policy
could be impacted by, among other items, our views on potential future capital requirements
relating to R&D, investments and acquisitions, legal risks, principal and interest payments on our
debentures and other strategic investments.
The global credit crisis has imposed exceptional levels of volatility and disruption in the capital
markets, severely diminished liquidity and credit availability, and increased counterparty risk.
Nevertheless, we anticipate that existing sources of liquidity and cash flows from operations will
be sufficient to satisfy our cash needs for the foreseeable future. We will continue to evaluate
opportunities for investments to obtain additional wafer capacity, procurement of additional
capital equipment and facilities, development of new products, and potential acquisitions of
technologies or businesses that could complement our business. However, the risk factors discussed
in Item 1A included in Part II. Other Information and below could affect our cash positions
adversely. In addition, certain types of investments such as auction rate securities may present
risks arising from liquidity and/or credit concerns. In the event that our investments in auction
rate securities become illiquid, we do not expect this will materially affect our liquidity and
capital resources or results of operations.
As of July 3, 2010, marketable securities measured at fair value using Level 3 inputs were
comprised of $63.0 million of student loan auction rate securities. The amount of assets and
liabilities measured using significant unobservable inputs (Level 3) as a percentage of the total
assets and liabilities measured at fair value were approximately 3% as of July 3, 2010. See Note
4. Fair Value Measurements to our condensed consolidated financial statements, included in Part 1.
Financial Information, for additional information.
|
|
|
ITEM 3.
|
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
Interest Rate Risk
Our exposure to interest rate risk relates primarily to our investment portfolio, which consists of
fixed income securities with a fair value of approximately $1.73 billion as of July 3, 2010, and to
our interest rate swaps in relation to the issuance of the 2.625% Debentures. Our primary aim with
our investment portfolio is to invest available cash while preserving principal and meeting
liquidity needs. Our investment portfolio includes municipal bonds, floating rate notes,
mortgage-backed securities, bank certificates of deposit, commercial paper, corporate bonds,
student loan auction rate securities and U.S. and foreign government and agency securities. In
accordance with our investment policy, we place investments with high credit quality issuers and
limit the amount of credit exposure to any one issuer based upon the issuers credit rating. These
securities are subject to interest rate risk and will
decrease in value if market interest rates increase. A hypothetical 100 basis-point (one
percentage point) increase or decrease in interest rates compared to rates at July 3, 2010 would
have affected the fair value of our investment portfolio by less than $10.0 million.
Credit Market Risk
Since September 2007, the global credit markets have experienced adverse conditions that have
negatively impacted the values of various types of investment and non-investment grade securities.
During this time the global credit and capital markets have experienced significant volatility and
disruption due to instability in the global financial system, uncertainty related to global
economic conditions and concerns regarding sovereign financial stability. While general conditions
in the global credit markets have improved, there is a risk that we may incur other-than-temporary
impairment charges for certain types of investments should credit market conditions deteriorate or
the underlying assets fail to perform as anticipated. See Note 5. Financial Instruments to our
condensed consolidated financial statements, included in Part 1. Financial Information, for
additional information about our investments.
32
Foreign Currency Exchange Risk
Sales to all direct OEMs and distributors are denominated in U.S. dollars.
Gains and losses on foreign currency forward contracts that are designated as hedges of anticipated
transactions, for which a firm commitment has been attained and the hedged relationship has been
effective, are deferred and included in income or expenses in the same period that the underlying
transaction is settled. Gains and losses on any instruments not meeting the above criteria are
recognized in income or expenses in the consolidated statements of income as they are incurred.
We enter into forward currency exchange contracts to hedge our overseas operating expenses and
other liabilities when deemed appropriate. As of July 3, 2010 and April 3, 2010, we had the
following outstanding forward currency exchange contracts:
|
|
|
|
|
|
|
|
|
|
|
July 3,
|
|
|
April 3,
|
|
(In thousands and U.S. dollars)
|
|
2010
|
|
|
2010
|
|
Euro
|
|
$
|
33,858
|
|
|
$
|
21,190
|
|
Singapore dollar
|
|
|
46,851
|
|
|
|
58,420
|
|
Japanese Yen
|
|
|
12,117
|
|
|
|
12,268
|
|
British Pound
|
|
|
7,222
|
|
|
|
4,889
|
|
|
|
|
|
|
|
|
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|
$
|
100,048
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|
|
$
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96,767
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|
|
As part of our strategy to reduce volatility of operating expenses due to foreign exchange rate
fluctuations, we employ a hedging program with a five-quarter forward outlook for major
foreign-currency-denominated operating expenses. The outstanding forward currency exchange
contracts expire at various dates between July 2010 and July 2011. The net unrealized gain or
loss, which approximates the fair market value of the above contracts, was immaterial as of July 3,
2010 and April 3, 2010.
Our investments in several of our wholly-owned subsidiaries are recorded in currencies other than
the U.S. dollar. As the financial statements of these subsidiaries are translated at each quarter
end during consolidation, fluctuations of exchange rates between the foreign currency and the U.S.
dollar increase or decrease the value of those investments. These fluctuations are recorded within
stockholders equity as a component of accumulated other comprehensive income (loss). Other
monetary foreign-denominated assets and liabilities are revalued on a monthly basis with gains and
losses on revaluation reflected in net income. A hypothetical 10% favorable or unfavorable change
in foreign currency exchange rates at July 3, 2010 would have affected the annualized
foreign-currency-denominated operating expenses of our foreign subsidiaries by approximately $7.0
million. In addition, a hypothetical 10% favorable or unfavorable change in foreign currency
exchange rates compared to rates at July 3, 2010 would have affected the value of
foreign-currency-denominated cash and investments by less than $4.0 million.
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ITEM 4.
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CONTROLS AND PROCEDURES
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We maintain a system of disclosure controls and procedures designed to ensure that information
required to be disclosed in our reports filed or submitted under the U.S. Securities Exchange Act
of 1934, as amended (Exchange Act), is recorded, processed, summarized and reported within the time
periods specified in the SEC rules and forms. These controls and procedures are also designed to
ensure that such information is accumulated and communicated to our management, including the Chief
Executive Officer (CEO) and Chief Financial Officer (CFO), as appropriate to allow timely decisions
regarding required disclosure. Internal controls are procedures designed to provide reasonable
assurance that: transactions are properly authorized; assets are safeguarded against unauthorized
or improper use; and transactions are properly recorded and reported, to permit the preparation of
our financial statements in conformity with generally accepted accounting principles.
A control system, no matter how well designed and operated, can provide only reasonable, not
absolute, assurance that the control systems objectives will be met. Further, the design of a
control system must reflect the fact that there are resource constraints, and the benefits of
controls must be considered relative to their costs. Because of the inherent limitations in all
control systems, no evaluation of controls can provide absolute assurance that all control issues
and instances of fraud, if any, within the company have been detected. These inherent limitations
include the realities that judgments in decision-making can be faulty, and that breakdowns can
occur because of simple errors or mistakes. Controls can also be circumvented by the individual
acts of some persons, by collusion of two or more people, or by management override of the
controls. The design of any system of controls is based in part upon certain assumptions about the
likelihood of future events, and there can be no assurance that any design will succeed in
achieving its stated goals under all potential future conditions. Over time, controls may become
inadequate because of changes in conditions or deterioration in the degree of compliance with its
policies or procedures. Because of the inherent limitations in a cost-effective control system,
misstatements due to error or fraud may occur and not be detected. We continuously evaluate our
internal controls and make changes to improve them as necessary. Our intent is to maintain our
disclosure controls as dynamic systems that change as conditions warrant.
33
An evaluation was carried out, under the supervision of and with the participation of our
management, including our CEO and CFO, of the effectiveness of our disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of
the period covered by this report. Based upon the controls evaluation, our CEO and CFO have
concluded that, as of the end of the period covered by this Form 10-Q, our disclosure controls and
procedures are effective to provide reasonable assurance that information required to be disclosed
in our Exchange Act reports is recorded, processed, summarized and reported within the time periods
specified in the SEC rules and forms, and is accumulated and communicated to our management,
including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.
There were no changes in our internal control over financial reporting (as defined in Rules
13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended July 3, 2010 that
materially affected, or are reasonably likely to materially affect, our internal control over
financial reporting.
PART II. OTHER INFORMATION
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ITEM 1.
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LEGAL PROCEEDINGS
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Internal Revenue Service
The IRS audited and issued proposed adjustments to the Companys tax returns for fiscal 1996
through 2001. The Company filed petitions with the Tax Court in response to assertions by the IRS
relating to fiscal 1996 through 2000. The Company did not file a petition with the Tax Court for
fiscal 2001. The Company settled all proposed adjustments with no net change in tax liability for
that year. All remaining issues for fiscal 1996 through 2000 have been settled with the IRS as
described below.
On August 30, 2005, the Tax Court issued its opinion concerning whether the value of stock options
must be included in the cost sharing agreement with Xilinx Ireland. The Tax Court agreed with the
Company that no amount for stock options was to be included in the cost sharing agreement, and
thus, the Company had no tax, interest, or penalties due for this issue. The Tax Court entered its
decision on May 31, 2006. On August 25, 2006, the IRS appealed the decision to the Appeals Court.
The Company and the IRS presented oral arguments to a three-judge panel of the Appeals Court on
March 12, 2008. On May 27, 2009, the Company received a 2-1 adverse judicial ruling from the
Appeals Court reversing the Tax Court decision and holding that the Company should include stock
option amounts in its cost sharing agreement with Xilinx Ireland. The Company did not agree with
the Appeals Court decision and filed a motion for rehearing on August 12, 2009. On January 13,
2010, the Appeals Court issued an order withdrawing both the majority and dissent opinions that
were issued on May 27, 2009. On March 22, 2010, the Appeals Court affirmed the August 30, 2005
Tax Court decision in Xilinxs favor. On June 21, 2010, the time for the IRS to appeal the March
22, 2010 decision to the United States Supreme Court lapsed. All issues concerning this matter
with the IRS are closed.
In a separate matter, on December 8, 2008, the IRS issued a statutory notice of deficiency
reflecting proposed audit adjustments for fiscal 2005. The Company began negotiations with the IRS
Appeals Division on this matter in the third quarter of fiscal 2010. On March 22, 2010, the Company
settled the proposed adjustment related to the acquired technology with no net change in tax
liability. The Company believes it has provided adequate reserves for the remaining issues.
Patent Litigation
On December 28, 2007, a patent infringement lawsuit was filed by PACT XPP Technologies, AG (PACT)
against the Company in the U.S. District Court for the Eastern District of Texas, Marshall Division
(PACT XPP Technologies, AG. v. Xilinx, Inc. and Avnet, Inc. Case No. 2:07-CV-563). The lawsuit
pertains to eleven different patents and PACT seeks injunctive relief, unspecified damages,
interest and attorneys fees. Neither the likelihood, nor the amount of any potential exposure to
the Company is estimable at this time.
On July 30, 2010, a patent infringement lawsuit was filed by Intellitech Corporation (Intellitech)
against the Company in the U.S. District Court for the District of Delaware (Intellitech
Corporation v. Altera Corporation, Xilinx, Inc. and Lattice Semiconductor Corporation Case No.
1:10-CV-00645-UNA). The lawsuit pertains to a single patent and Intellitech seeks declaratory and
injunctive relief, unspecified damages, interest and attorneys fees. The Company has not been
served with the complaint. Neither the likelihood, nor the amount of any potential exposure to the
Company is estimable at this time.
34
Other Matters
From time to time, we are involved in various disputes and litigation matters that arise in the
ordinary course of our business. These include disputes and lawsuits related to intellectual
property, mergers and acquisitions, licensing, contract law, tax, regulatory, distribution arrangements, employee relations and other matters. Periodically, we review the status of each
matter and assess its potential financial exposure. If the potential loss from any claim or legal
proceeding is considered probable and a range of possible losses can be estimated, we accrue a
liability for the estimated loss. Legal proceedings are subject to uncertainties, and the outcomes
are difficult to predict. Because of such uncertainties, accruals are based only on the best
information available at the time. As additional information becomes available, we continue to
reassess the potential liability related to pending claims and litigation and may revise estimates.
ITEM 1A. RISK FACTORS
The following risk factors and other information included in this Quarterly Report on Form 10-Q
should be carefully considered. The risks and uncertainties described below are not the only risks
to the Company. Additional risks and uncertainties not presently known to the Company or that the
Companys management currently deems immaterial also may impair its business operations. If any of
the risks described below were to occur, our business, financial condition, operating results and
cash flows could be materially adversely affected.
We have updated the risk factors previously disclosed in Part I, Item 1A of our Annual Report on
Form 10-K for the fiscal year ended April 3, 2010 as set forth below. The updated risk factors
below include risks related to our outstanding debentures and transactions related to our 2.625%
Debentures.
Our success depends on our ability to develop and introduce new products and failure to do so would
have a material adverse impact on our financial condition and results of operations.
Our success depends in large part on our ability to develop and introduce new products that
address customer requirements and compete effectively on the basis of price, density,
functionality, power consumption and performance. The success of new product introductions is
dependent upon several factors, including:
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timely completion of new product designs;
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ability to generate new design opportunities or design wins;
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availability of specialized field application engineering resources supporting demand
creation and customer adoption of new products;
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ability to utilize advanced manufacturing process technologies on circuit geometries of
45-nm and smaller;
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achieving acceptable yields;
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ability to obtain adequate production capacity from our wafer foundries and assembly and
test subcontractors;
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ability to obtain advanced packaging;
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availability of supporting software design tools;
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utilization of predefined IP cores of logic;
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customer acceptance of advanced features in our new products; and
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market acceptance of our customers products.
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Our product development efforts may not be successful, our new products may not achieve industry
acceptance and we may not achieve the necessary volume of production that would lead to further per
unit cost reductions. Revenues relating to our mature products are expected to decline in the
future, which is normal for our product life cycles. As a result, we may be increasingly dependent
on revenues derived from design wins for our newer products as well as anticipated cost reductions
in the manufacture of our current products. We rely primarily on obtaining yield improvements and
corresponding cost reductions in the manufacture of existing products and on introducing new
products that incorporate advanced features and other price/performance factors that enable
us to increase revenues while maintaining consistent margins. To the extent that such cost
reductions and new product introductions do not occur in a timely manner, or to the extent that our
products do not achieve market acceptance at prices with higher margins, our financial condition
and results of operations could be materially adversely affected.
35
We rely on independent foundries for the manufacture of all of our products and a manufacturing
problem or insufficient foundry capacity could adversely affect our operations.
Nearly all of our wafers were manufactured either in Taiwan, by United Microelectronics Corporation
(UMC), or in Japan, by Toshiba Corporation (Toshiba). In addition, the wafers for our older
products are manufactured in Japan by Seiko Epson Corporation (Seiko) and the wafers for some of
our newer products are manufactured in South Korea, by Samsung Electronics Co., Ltd. Terms with
respect to the volume and timing of wafer production and the pricing of wafers produced by the
semiconductor foundries are determined by periodic negotiations between Xilinx and these wafer
foundries, which usually result in short-term agreements that do not provide for long-term supply
or allocation commitments. We are dependent on these foundries, especially UMC, which supplies the
substantial majority of our wafers. We rely on UMC and our other foundries to produce wafers with
competitive performance and cost attributes. These attributes include an ability to transition to
advanced manufacturing process technologies and increased wafer sizes, produce wafers at acceptable
yields and deliver them in a timely manner. We cannot guarantee that the foundries that supply our
wafers will not experience manufacturing problems, including delays in the realization of advanced
manufacturing process technologies or difficulties due to limitations of new and existing process
technologies. Furthermore, we cannot guarantee the foundries will be able to manufacture sufficient
quantities of our products. In addition, unpredictable economic conditions may adversely impact the
financial health and viability of the foundries and result in their insolvency or their inability
to meet their commitments to us. For example, in the first quarter of fiscal 2010, we experienced
supply shortages due to the difficulties encountered by the foundries in rapidly increasing their
production capacities from low utilization levels to high utilization levels because of an
unexpected increase in demand. In the first quarter of fiscal 2011 and fourth quarter of fiscal
2010, we also experienced supply shortages due to very strong demand for our products and a surge
in demand for semiconductors in general, which has led to tightening of foundry capacity across the
industry. The insolvency of a foundry or any significant manufacturing problem or insufficient
foundry capacity would disrupt our operations and negatively impact our financial condition and
results of operations.
We have established other sources of wafer supply for many of our products in an effort to secure a
continued supply of wafers. However, establishing, maintaining and managing multiple foundry
relationships require the investment of management resources as well as additional costs. If we do
not manage these relationships effectively, it could adversely affect our results of operations.
General economic conditions and the related deterioration in the global business environment could
have a material adverse effect on our business, operating results and financial condition.
During the past two years, global consumer confidence eroded amidst concerns over declining asset
values, inflation, volatility in energy costs, geopolitical issues, the availability and cost of
credit, rising unemployment, and the stability and solvency of financial institutions, financial
markets, businesses and sovereign nations, among other concerns. These concerns slowed global
economic growth and resulted in recessions in numerous countries, including many of those in North
America, Europe and Asia. These economic conditions had a negative impact on our results of
operations during the third and fourth quarters of fiscal 2009 and the first and second quarters of
fiscal 2010 due to reduced customer demand. While there have been recent improvements in global
economic conditions and our results of operations improved during the second half of fiscal 2010
and the first quarter of fiscal 2011, there is no guarantee that these improvements will continue
in the future. Recent events have highlighted that the financial condition of sovereign nations,
particularly in Europe, is of continuing concern. If unpredictable economic conditions persist or
worsen, a number of negative effects on our business could result, including customers or potential
customers reducing or delaying orders, the insolvency of key suppliers, which could result in
production delays, the inability of customers to obtain credit, and the insolvency of one or more
customers. Any of these effects could impact our ability to effectively manage inventory levels and
collect receivables and ultimately decrease our net revenues and profitability.
The semiconductor industry is characterized by cyclical market patterns and a significant industry
downturn could adversely affect our operating results.
The semiconductor industry is highly cyclical and our financial performance had been affected by
downturns in the industry. Down cycles are generally characterized by price erosion and weaker
demand for our products. Weaker demand for our products resulting from economic conditions in the
end markets we serve and reduced capital spending by our customers can result, and in the past has
resulted in excess and obsolete inventories and corresponding inventory write-downs. We attempt to
identify changes in market conditions as soon as possible; however, the dynamics of the market in
which we operate make prediction of and timely reaction to such events difficult. Due to these and
other factors, our past results are not reliable predictors of our future results.
The nature of our business makes our revenues difficult to predict which could have an adverse
impact on our business.
In addition to the challenging market conditions we may face, we have limited visibility into the
demand for our products, particularly new products, because demand for our products depends upon
our products being designed into our end customers products and those products achieving market
acceptance. Due to the complexity of our customers designs, the design to volume production
process for our customers requires a substantial amount of time, frequently longer than a year. In
addition, we are dependent upon turns, orders received and turned for shipment in the same
quarter. These factors make it difficult for us to forecast future sales and project quarterly
revenues. The difficulty in forecasting future sales impairs our ability to project our inventory
requirements, which could result, and in the past has resulted, in inventory write-downs or failure
to timely meet customer product demands. In addition, difficulty in forecasting revenues
compromises our ability to provide forward-looking revenue and earnings guidance.
36
If we are not able to successfully compete in our industry, our financial results and future
prospects will be adversely affected.
Our programmable logic devices (PLDs) compete in the logic IC industry, an industry that is
intensely competitive and characterized by rapid technological change, increasing levels of
integration, product obsolescence and continuous price erosion. We expect increased competition
from our primary PLD competitors, Altera Corporation, Lattice Semiconductor Corporation and Actel
Corporation, from the application specific integrated circuit (ASIC) market, which has been ongoing
since the inception of FPGAs, from the application specific standard product (ASSP) market, and
from new companies that may enter the traditional programmable logic market segment. We believe
that important competitive factors in the logic IC industry include:
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product pricing;
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time-to-market;
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product performance, reliability, quality, power consumption and density;
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field upgradeability;
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adaptability of products to specific applications;
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ease of use and functionality of software design tools;
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availability and functionality of predefined IP cores of logic;
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inventory and supply chain management;
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access to leading-edge process technology and assembly capacity; and
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ability to provide timely customer service and support.
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Our strategy for expansion in the logic market includes continued introduction of new product
architectures that address high-volume, low-cost and low-power applications as well as
high-performance, high-density applications. In addition, we anticipate continued price reductions
proportionate with our ability to lower the cost for established products. However, we may not be
successful in executing these strategies.
Other competitors include manufacturers of:
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high-density programmable logic products characterized by FPGA-type architectures;
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high-volume and low-cost FPGAs as programmable replacements for ASICs and ASSPs;
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ASICs and ASSPs with incremental amounts of embedded programmable logic;
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high-speed, low-density complex programmable logic devices;
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high-performance digital signal processing devices;
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products with embedded processors;
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products with embedded multi-gigabit transceivers; and
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other new or emerging programmable logic products.
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Several companies have introduced products that compete with ours or have announced their intention
to sell PLD products. To the extent that our efforts to compete are not successful, our financial
condition and results of operations could be materially adversely affected.
The benefits of programmable logic have attracted a number of competitors to this segment. We
recognize that different applications require different programmable technologies, and we are
developing architectures, processes and products to meet these varying customer needs. Recognizing
the increasing importance of standard software solutions, we have developed common software design
tools that support the full range of our IC products. We believe that automation and ease of design
are significant competitive factors in this segment.
We could also face competition from our licensees. In the past we have granted limited rights to
other companies with respect to certain of our older technology, and we may do so in the future.
Granting such rights may enable these companies to manufacture and market products that may be
competitive with some of our older products.
Increased costs of wafers and materials, or shortages in wafers and materials, could adversely
impact our gross margins and lead to reduced revenues.
If greater demand for wafers is not offset by an increase in foundry capacity, or market demand for
wafers or production and assembly materials increases, our supply of wafers and other materials
could become limited. Such shortages raise the likelihood of potential wafer price increases and
wafer shortages or shortages in materials at production and test facilities and our resulting
potential inability to address customer product demands in a timely manner. Such increases in wafer
prices or materials could adversely affect our gross margins and shortages of wafers and materials
would adversely affect our ability to meet customer demands and lead to reduced revenue.
37
We depend on distributors, primarily Avnet, to generate a majority of our sales and complete order
fulfillment.
Resale of product through Avnet accounted for 52% of the Companys worldwide net revenues in the
first quarter of fiscal 2011, and as of July 3, 2010, Avnet accounted for 75% of our total accounts
receivable. In addition, we are subject to concentrations of credit risk in our trade accounts
receivable, which includes accounts of our distributors. A significant reduction of effort by a
distributor to sell our products or a material change in our relationship with one or more
distributors may reduce our access to certain end customers and adversely affect our ability to
sell our products. To align with our strategic initiative to consolidate our distribution channel,
we have further strengthened our partnership with Avnet and recently, Avnet committed more
personnel and resources to our business. In return for these long-term commitments, we have agreed
to temporarily extend payment terms for Avnet over the next three quarters which will increase our
credit risk in our trade accounts receivable over the same periods. In addition, any adverse
change to our relationship with Avnet or our remaining distributors could have a material impact on
our business. Furthermore, if a key distributor materially defaults on a contract or otherwise
fails to perform, our business and financial results would suffer.
In addition, the financial health of our distributors and our continuing relationships with them
are important to our success. Unpredictable economic conditions may adversely impact the financial
health of some of these distributors, particularly our smaller distributors. This could result in
the insolvency of certain distributors, the inability of distributors to obtain credit to finance
the purchase of our products, or cause distributors to delay payment of their obligations to us and
increase our credit risk exposure. Our business could be harmed if the financial health of these
distributors impairs their performance and we are unable to secure alternate distributors.
We are dependent on independent subcontractors for most of our assembly and test services and
unavailability or disruption of these services could negatively impact our financial condition and
results of operations.
We are also dependent on subcontractors to provide semiconductor assembly, substrate, test and
shipment services. Any prolonged inability to obtain wafers with competitive performance and cost
attributes, adequate yields or timely delivery, any disruption in assembly, test or shipment
services, or any other circumstance that would require us to seek alternative sources of supply,
could delay shipments and have a material adverse effect on our ability to meet customer demands.
In addition, unpredictable economic conditions may adversely impact the financial health and
viability of these subcontractors and result in their insolvency or their inability to meet their
commitments to us. These factors would result in reduced net revenues and could negatively impact
our financial condition and results of operations.
A number of factors can impact our gross margins.
A number of factors, including yield, wafer pricing, product mix, market acceptance of our new
products, competitive pricing dynamics, geographic and/or market segment pricing strategies cause
our gross margins to fluctuate. In addition, forecasting our gross margins is difficult because the
majority of our business is based on turns within the same quarter.
Reductions in the average selling prices of our products could have a negative impact on our gross
margins.
The average selling prices of our products generally decline as the products mature. We seek to
offset the decrease in selling prices through yield improvement, manufacturing cost reductions and
increased unit sales. We also continue to develop higher value products or product features that
increase, or slow the decline of, the average selling price of our products. However, there is no
guarantee that our ongoing efforts will be successful or that they will keep pace with the decline
in selling prices of our products, which could ultimately lead to a decline in revenues and have a
negative effect on our gross margins.
Because of our international business and operations, we are vulnerable to the economic conditions
of the countries in which we operate and currency fluctuations could have a material adverse affect
on our business and negatively impact our financial condition and results of operations.
In addition to our U.S. operations, we also have significant international operations, including
foreign sales offices to support our international customers and distributors, our regional
headquarters in Ireland and Singapore and a research and development site in India. In connection
with the restructuring we announced in April 2009, our international operations grew as we
relocated certain operations and administrative functions outside the U.S. Sales and operations
outside of the U.S. subject us to the risks associated with conducting business in foreign economic
and regulatory environments. Our financial condition and results of operations could be adversely
affected by unfavorable economic conditions in countries in which we do significant business or by
changes in foreign currency exchange rates affecting those countries. We derive over one-half of
our revenues from international sales, primarily in the Asia Pacific region, Europe and Japan. Past
economic weakness in these markets adversely affected revenues. While there have been signs of
economic recovery in the U.S. and other markets, there can be no assurance that such improvement
will continue or is sustainable. Sales to all direct OEMs and distributors are denominated in U.S.
dollars. While the recent movement of the Euro and Yen against the U.S. dollar had no material
impact to our business, increased volatility could impact our European and Japanese customers.
Currency instability and volatility and disruptions in the credit and capital markets may increase
credit risks for some of our customers and may impair our customers ability to repay existing
obligations. Increased currency volatility could also positively or negatively impact our
foreign-currency-denominated costs, assets and liabilities. In addition, devaluation of the U.S.
dollar relative to other foreign currencies may increase the operating expenses of our foreign
subsidiaries adversely affecting our results of operations. Furthermore, because we are
increasingly dependent on the global economy, instability in worldwide economic environments
occasioned, for example, by political instability, terrorist activity or U.S. or other military
actions could adversely impact economic activity and lead to a contraction of capital spending by
our customers. Any or all of these factors could adversely affect our financial condition and
results of operations in the future.
38
We are subject to the risks associated with conducting business operations outside of the U.S.
which could adversely affect our business.
In addition to international sales and support operations and development activities, we purchase
our wafers from foreign foundries and have our commercial products assembled, packaged and tested
by subcontractors located outside the U.S. All of these activities are subject to the uncertainties
associated with international business operations, including tax laws and regulations, trade
barriers, economic sanctions, import and export regulations, duties and tariffs and other trade
restrictions, changes in trade policies, foreign governmental regulations, potential vulnerability
of and reduced protection for IP, longer receivable collection periods and disruptions or delays in
production or shipments, any of which could have a material adverse effect on our business,
financial condition and/or operating results. Additional factors that could adversely affect us due
to our international operations include rising oil prices and increased costs of natural resources.
Moreover, our financial condition and results of operations could be affected in the event of
political conflicts or economic crises in countries where our main wafer providers, end customers
and contract manufacturers who provide assembly and test services worldwide, are located. Adverse
change to the circumstances or conditions of our international business operations could have a
material adverse effect on our business.
We are exposed to fluctuations in interest rates and changes in credit rating and in the market
values of our portfolio investments which could have a material adverse impact on our financial
condition and results of operations.
Our cash, short-term and long-term investments represent significant assets that may be subject to
fluctuating or even negative returns depending upon interest rate movements, changes in credit
rating and financial market conditions. Since September 2007, the global credit markets have
experienced adverse conditions that have negatively impacted the values of various types of
investment and non-investment grade securities. During this time, the global credit and capital
markets have experienced significant volatility and
disruption due to instability in the global financial system, uncertainty related to global
economic conditions and concerns regarding sovereign financial stability.
While general conditions in the global credit markets have improved, there is a risk that we may
incur other-than-temporary impairment charges for certain types of investments should credit market
conditions deteriorate or the underlying assets fail to perform as anticipated. Our future
investment income may fall short of expectations due to changes in interest rates or if the decline
in fair values of our debt securities is judged to be other than temporary. Furthermore, we may
suffer losses in principal if we are forced to sell securities that have declined in market value
due to changes in interest rates or financial market conditions.
Our failure to protect and defend our intellectual property could impair our ability to compete
effectively.
We rely upon patent, copyright, trade secret, mask work and trademark laws to protect our
intellectual property. We cannot provide assurance that such intellectual property rights can be
successfully asserted in the future or will not be invalidated, violated, circumvented or
challenged. From time to time, third parties, including our competitors, have asserted against us
patent, copyright and other intellectual property rights to technologies that are important to us.
Third parties may attempt to misappropriate our IP through electronic or other means or assert
infringement claims against our indemnitees or us in the future. Such assertions by third parties
may result in costly litigation, indemnity claims or other legal actions and we may not prevail in
such matters or be able to license any valid and infringed patents from third parties on
commercially reasonable terms. This could result in the loss of our ability to import and sell our
products. Any infringement claim, indemnification claim, or impairment or loss of use of our
intellectual property could materially adversely affect our financial condition and results of
operations.
We rely on information technology systems, and failure of these systems to function properly or
unauthorized access to our systems could result in business disruption.
We rely in part on various information technology (IT) systems to manage our operations, including
financial reporting, and we regularly evaluate these systems and make changes to improve them as
necessary. Consequently, we periodically implement new, or enhance existing, operational and IT
systems, procedures and controls. For example, we recently simplified our supply chain and were
required to make certain changes to our IT systems. Any delay in the implementation of, or
disruption in the transition to, new or enhanced systems, procedures or controls, could harm our
ability to record and report financial and management information on a timely and accurate basis.
These systems are also subject to power and telecommunication outages or other general system
failures. Failure of our IT systems or difficulties in managing them could result in business
disruption. We also may be subject to unauthorized access to our IT systems through a security
breach or attack. We seek to detect and investigate any security incidents and prevent their
recurrence, but in some cases, we might be unaware of an incident or its magnitude and effects.
Our business could be significantly harmed and we could be subject to third party claims in the
event of such a security breach.
39
Earthquakes and other natural disasters could disrupt our operations and have a material adverse
affect on our financial condition and results of operations.
The independent foundries upon which we rely to manufacture our products, as well as our California
and Singapore facilities, are located in regions that are subject to earthquakes and other natural
disasters. UMCs foundries in Taiwan and Toshibas and Seikos foundries in Japan as well as many
of our operations in California are centered in areas that have been seismically active in the
recent past and some areas have been affected by other natural disasters such as typhoons. Any
catastrophic event in these locations will disrupt our operations, including our manufacturing
activities. This type of disruption could result in our inability to manufacture or ship products,
thereby materially adversely affecting our financial condition and results of operations. Our
insurance may not cover losses resulting from such disruptions of our operations. Additionally,
disruption of operations at these foundries for any reason, including other natural disasters such
as typhoons, volcano eruptions, fires or floods, as well as disruptions in access to adequate
supplies of electricity, natural gas or water could cause delays in shipments of our products, and
could have a material adverse effect on our results of operations.
If we are unable to maintain effective internal controls, our stock price could be adversely
affected.
We are subject to the ongoing internal control provisions of Section 404 of the Sarbanes-Oxley Act
of 2002 (the Act). Our controls necessary for continued compliance with the Act may not operate
effectively at all times and may result in a material weakness disclosure. The identification of
material weaknesses in internal control, if any, could indicate a lack of proper controls to
generate accurate financial statements and could cause investors to lose confidence and our stock
price to drop.
We compete with others to attract and retain key personnel, and any loss of, or inability to
attract, such personnel would harm us.
We depend on the efforts and abilities of certain key members of management and other technical
personnel. Our future success depends, in part, upon our ability to retain such personnel and
attract and retain other highly qualified personnel, particularly product engineers. Competition
for such personnel is intense and we may not be successful in hiring or retaining new or existing
qualified personnel. From time to time we have effected restructurings which eliminate a number of
positions. Even if such personnel are not directly affected by the restructuring effort, such
terminations can have a negative impact on morale and our ability to attract and hire new qualified
personnel in the future. If we lose existing qualified personnel or are unable to hire new
qualified personnel, as needed, our business, financial condition and results of operations could
be seriously harmed.
Unfavorable results of legal proceedings could adversely affect our financial condition and
operating results.
From time to time we are subject to various legal proceedings and claims that arise out of the
ordinary conduct of our business. Certain claims are not yet resolved, including those that are
discussed under Item 1. Legal Proceedings, included in Part II, and additional claims may arise
in the future. Results of legal proceedings cannot be predicted with certainty. Regardless of its
merit, litigation may be both time-consuming and disruptive to our operations and cause significant
expense and diversion of management attention and we may enter into material settlements to avoid
these risks. Should we fail to prevail in certain matters, or should several of these matters be
resolved against us in the same reporting period, we may be faced with significant monetary damages
or injunctive relief against us that would materially and adversely affect a portion of our
business and might materially and adversely affect our financial condition and operating results.
Our products could have defects which could result in reduced revenues and claims against us.
We develop complex and evolving products that include both hardware and software. Despite our
testing efforts and those of our subcontractors, defects may be found in existing or new products.
These defects may cause us to incur significant warranty, support and repair or replacement costs,
divert the attention of our engineering personnel from our product development efforts and harm our
relationships with customers. Subject to certain terms and conditions, we have agreed to compensate
certain customers for limited specified costs they actually incur in the event our hardware
products experience epidemic failure. As a result, epidemic failure and other performance problems
could result in claims against us, the delay or loss of market acceptance of our products and would
likely harm our business. Our customers could also seek damages from us for their losses.
In addition, we could be subject to product liability claims. A product liability claim brought
against us, even if unsuccessful, would likely be time-consuming and costly to defend. Product
liability risks are particularly significant with respect to aerospace, automotive and medical
applications because of the risk of serious harm to users of these products. Any product liability
claim, whether or not determined in our favor, could result in significant expense, divert the
efforts of our technical and management personnel, and harm our business.
40
In preparing our financial statements, we make good faith estimates and judgments that may change
or turn out to be erroneous.
In preparing our financial statements in conformity with accounting principles generally accepted
in the U. S., we must make estimates and judgments in applying our most critical accounting
policies. Those estimates and judgments have a significant impact on the results we report in our
consolidated financial statements. The most difficult estimates and subjective judgments that we
make concern valuation of marketable and non-marketable securities, revenue recognition,
inventories, long-lived assets, goodwill, taxes and stock-based compensation. We base our estimates
on historical experience and on various other assumptions that we believe 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. We also have
other key accounting policies that are not as subjective, and therefore, their application would
not require us to make estimates or judgments that are as difficult, but which nevertheless could
significantly affect our financial reporting. Actual results may differ materially from these
estimates. If these estimates or their related assumptions change, our operating results for the
periods in which we revise our estimates or assumptions could be adversely and perhaps materially
affected.
Our failure to comply with the requirements of the International Traffic and Arms Regulations could
have a material adverse effect on our financial condition and results of operations.
Based on a recent jurisdictional ruling, certain Xilinx space-grade FPGAs and related technologies
are subject to the International Traffic in Arms Regulations (ITAR), which are administered by the
U.S. Department of State. The ITAR governs the export and reexport of these FPGAs, the transfer of
related technical data and the provision of defense services, as well as offshore production, test
and assembly. We are required to maintain an internal compliance program and security
infrastructure to meet ITAR requirements.
An inability to obtain the required export licenses, or to predict when they will be granted,
increases the difficulties of forecasting shipments. In addition, security or compliance program
failures that could result in penalties or a loss of export privileges, as well as stringent ITAR
licensing restrictions that may make our products less attractive to overseas customers, could have
a materially adverse effect on our business, financial condition, and/or operating results.
Considerable amounts of our common shares are available for issuance under our equity incentive
plans and convertible debentures, and significant issuances in the future may adversely impact the
market price of our common shares.
As of July 3, 2010, we had 2.00 billion authorized common shares, of which 258.0 million shares
were outstanding. In addition, 52.7 million common shares were reserved for issuance pursuant to
our equity incentive plans and Employee Stock Purchase Plan, 42.4 million common shares were
reserved for issuance upon conversion or repurchase of the convertible debentures and 19.8 million
common shares were reserved for issuance upon exercise of warrants. The availability of substantial
amounts of our common shares resulting from the exercise or settlement of equity awards outstanding
under our equity incentive plans or the conversion or repurchase of convertible debentures using
common shares, which would be dilutive to existing stockholders, could adversely affect the
prevailing market price of our common shares and could impair our ability to raise additional
capital through the sale of equity securities.
We have indebtedness that could adversely affect our financial position and prevent us from
fulfilling our debt obligations.
The aggregate principal amount of our consolidated indebtedness as of July 3, 2010 was $1.29
billion (principal amount). We also may incur additional indebtedness in the future. Our
indebtedness may:
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make it difficult for us to satisfy our financial obligations, including making
scheduled principal and interest payments on the debentures and our other indebtedness;
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limit our ability to borrow additional funds for working capital, capital
expenditures, acquisitions or other general corporate purposes;
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limit our ability to use our cash flow or obtain additional financing for future
working capital, capital expenditures, acquisitions or other general business purposes;
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require us to use a substantial portion of our cash flow from operations to make debt
service payments;
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limit our flexibility to plan for, or react to, changes in our business and industry;
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place us at a competitive disadvantage compared to our less leveraged competitors; and
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increase our vulnerability to the impact of adverse economic and industry conditions.
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Our ability to meet our debt service obligations will depend on our future performance, which will
be subject to financial, business and other factors affecting our operations, many of which are
beyond our control.
41
The call options and warrant transactions related to our 2.625% Debentures may affect the value of
the debentures and our common stock.
To hedge against potential dilution upon conversion of the 2.625% Debentures, we purchased call
options on our common stock from the hedge counterparties. We also sold warrants to the hedge
counterparties, which could separately have a dilutive effect on our earnings per share to the
extent that the market price per share of our common stock exceeds the applicable strike price of
the warrants of $42.91 per share.
As the hedge counterparties and their respective affiliates modify hedge positions, they may enter
or unwind various derivatives with respect to our common stock and/or purchase or sell our common
stock in secondary market transactions. This activity also could affect the market price of our
common stock and/or debentures, which could affect the ability of the holders of the debentures to
convert and the number of shares and value of the consideration that will be received by the
holders of the debentures upon conversion.
The conditional conversion features of the outstanding debentures, if triggered, may adversely
affect our financial condition and operating results.
Our outstanding debentures have conditional conversion features. In the event the conditional
conversion features of the debentures are triggered, holders of such debentures will be entitled to
convert the debentures at any time during specified periods at their option. If one or more holders
elect to convert their debentures, we would be required to settle any converted principal through
the payment of cash, which could adversely affect our liquidity. In addition, even if holders do
not elect to convert their debentures, we could be required under applicable accounting rules to
reclassify all or a portion of the outstanding principal of the debentures as a current rather than
long-term liability, which would result in a material reduction of our net working capital.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
In February 2008, the Board authorized the repurchase of up to $800.0 million of common stock (2008
Repurchase Program). In November 2008, the Board of Directors approved an amendment to the
Companys 2008 Repurchase Program to provide that the funds may also be used to repurchase
outstanding debentures. On June 3, 2010, the Board authorized the repurchase of up to $500.0
million of common stock (2010 Repurchase Program). The 2008 and 2010 Repurchase Programs have no
stated expiration date. Through July 3, 2010, the Company had used the entire amount authorized
under the 2008 Repurchase program and $57.6 million out of the $500.0 million authorized under the
2010 Repurchase Program, leaving $442.4 million available for future purchases.
The following table summarizes the Companys repurchase of its common stock during the fourth
quarter of fiscal 2010:
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Approximate
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Total Number of
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Dollar Value of
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Total Number
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Average
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Shares Purchased
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Shares that May
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(In thousands, except per share amounts)
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of Shares
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Price Paid
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as Part of Publicly
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Yet Be Purchased
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Period
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Purchased
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per Share
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Announced Program
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Under the Programs
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April 4, 2010 to May 8, 2010
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$
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$
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375,709
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May 9, 2010 to June 5, 2010
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$
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$
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875,709
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June 6, 2010 to July 3, 2010
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16,305
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$
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26.58
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*
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16,305
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$
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442,376
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Total for the Quarter
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16,305
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$
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26.58
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*
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16,305
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*
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During the first quarter of fiscal 2011, the Company entered into stock repurchase agreement
with an independent financial institution to repurchase shares under both the 2008 Repurchase
Program and 2010 Repurchase Program. Under the agreement, Xilinx provided these financial
institutions with up-front payments totaling $433.3 million. The financial institution agreed
to deliver to Xilinx a certain number of shares based upon the volume weighted-average price,
during an averaging period, less a specified discount. Under these arrangements, the Company received 16.3 million shares of common stock during the first quarter of fiscal
2011.
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42
ITEM 6. EXHIBITS
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4.2
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Indenture dated June 9, 2010 between the Company as Issuer and the Bank of New York Trust
Company, N.A. as Trustee
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31.1
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Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
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31.2
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Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
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32.1
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Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
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32.2
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Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
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101.INS*
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XBRL Instance Document
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101.SCH*
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XBRL Taxonomy Extension Schema Document
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101.CAL*
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XBRL Taxonomy Extension Calculation Linkbase Document
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101.LAB*
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XBRL Taxonomy Extension Label Linkbase Document
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101.PRE*
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XBRL Taxonomy Extension Presentation Linkbase Document
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*
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Pursuant to applicable securities laws and regulations, we are deemed to have complied with the
reporting obligation relating to the submission of interactive data files in such exhibits and are
not subject to liability under any anti-fraud provisions of the federal securities laws as long as
we have made a good faith attempt to comply with the submission requirements and promptly amend the
interactive data files after becoming aware that the interactive data files fail to comply with the
submission requirements. Users of this data are advised that, pursuant to Rule 406T, these
interactive data files are deemed not filed and otherwise are not subject to liability.
|
Items 3, 4 and 5 are not applicable and have been omitted.
43
SIGNATURES
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.
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XILINX, INC.
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Date: August 9, 2010
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/s/ Jon A. Olson
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Jon A. Olson
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Senior Vice President, Finance
and Chief Financial Officer
(as principal accounting and financial
officer and on behalf of Registrant)
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44
Exhibit 4.2
XILINX, INC.
as Issuer
AND
THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.
as Trustee
Indenture
Dated as of June 9, 2010
2.625% Convertible Senior Notes due 2017
TABLE OF CONTENTS
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Page
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ARTICLE 1
Definitions and Other Provisions of General Application
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Section 1.01
. Definitions
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1
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Section 1.02
. Form of Documents Delivered to Trustee
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12
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Section 1.03
. Acts of Holders; Record Dates
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13
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Section 1.04
. Notices, Etc., to Trustee and Company
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14
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Section 1.05
. Notice to Holders; Waiver
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14
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ARTICLE 2
Security Forms
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Section 2.01
. Forms Generally
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15
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Section 2.02
. Form of Face of Security
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15
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Section 2.03
. Form of Reverse of Security
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19
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Section 2.04
. Form of Trustees Certificate of Authentication
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28
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Section 2.05
. Legend on Restricted Securities
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28
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ARTICLE 3
The Securities
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Section 3.01
. Title and Terms; Payments
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28
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Section 3.02
. Denominations
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29
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Section 3.03
. Execution, Authentication, Delivery and Dating
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29
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Section 3.04
. Temporary Securities
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30
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Section 3.05
. Registration; Registration of Transfer and Exchange;
Restrictions On Transfer
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30
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Section 3.06
. Mutilated, Destroyed, Lost and Stolen Securities
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33
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Section 3.07
. Persons Deemed Owners
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34
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Section 3.08
. Book-entry Provisions for Global Securities
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34
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Section 3.09
. Cancellation and Transfer Provisions
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36
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Section 3.10
. CUSIP Numbers
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37
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ARTICLE 4
Interest
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Section 4.01
. Generally
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37
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i
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Page
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ARTICLE 5
Covenants
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Section 5.01
. Payments
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39
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Section 5.02
. Maintenance of Office or Agency
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39
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Section 5.03
. Appointments to Fill Vacancies in Trustees Office
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40
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Section 5.04
. Provisions as to Paying Agent
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40
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Section 5.05
. Existence
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41
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Section 5.06
. Rule 144A Information Requirement
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41
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Section 5.07
. Commission Filings and Reports
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42
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Section 5.08.
Additional Interest
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42
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Section 5.09
. Stay; Extension and Usury Laws
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42
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Section 5.10
. Compliance Certificate
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43
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Section 5.11
. Further Instruments and Acts
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43
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ARTICLE 6
Fundamental Changes and Repurchases Thereupon
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Section 6.01
. Repurchase at Option of Holders upon a Fundamental Change
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43
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Section 6.02
. Effect of Fundamental Change Repurchase Notice
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46
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Section 6.03
. Withdrawal of Fundamental Change Repurchase Notice
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47
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|
Section 6.04
. Deposit of Fundamental Change Repurchase Price
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47
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|
Section 6.05
. Securities Repurchased in Whole or in Part
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|
48
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|
Section 6.06
. Covenant to Comply With Securities Laws Upon Repurchase of Securities
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48
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|
Section 6.07
. Repayment to The Company
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48
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Section 6.08
. Purchase by Third Party
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48
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ARTICLE 7
Conversion
|
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|
Section 7.01
. Right to Convert
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49
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Section 7.02
. Conversion Procedures
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51
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Section 7.03
. Adjustment of Conversion Rate
|
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|
54
|
|
Section 7.04
. Shares to be Fully Paid
|
|
|
64
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|
Section 7.05.
Adjustments of Prices
|
|
|
64
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|
Section 7.06
. Adjustments upon Certain Fundamental Changes
|
|
|
64
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|
Section 7.07
. Effect of Recapitalization, Reclassification,
Consolidation, Merger or Sale
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66
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|
Section 7.08
. Certain Covenants
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|
|
67
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Section 7.09
. Responsibility of Trustee
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|
68
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|
Section 7.10.
Notice to Holders Prior to Certain Actions
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69
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Section 7.11
. Stockholder Rights Plans
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|
69
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|
Section 7.12
. Exchange in Lieu of Conversion
|
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|
70
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ARTICLE 8
Events of Default; Remedies
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|
|
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|
Section 8.01
. Events of Default
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|
71
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|
Section 8.02
. Acceleration of Maturity; Rescission and Annulment
|
|
|
72
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|
Section 8.03
. Additional Interest
|
|
|
73
|
|
Section 8.04
. Collection of indebtedness and Suits For Enforcement by Trustee
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|
75
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|
ii
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|
Page
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Section 8.05
. Trustee May File Proofs of Claim
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|
|
75
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|
Section 8.06
. Application of Money Collected
|
|
|
76
|
|
Section 8.07
. Limitation on Suits
|
|
|
76
|
|
Section 8.08
. Unconditional Right of Holders to Receive Payment
|
|
|
77
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|
Section 8.09
. Restoration of Rights and Remedies
|
|
|
77
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|
Section 8.10
. Rights and Remedies Cumulative
|
|
|
77
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|
Section 8.11
. Delay or Omission Not Waiver
|
|
|
77
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|
Section 8.12
. Control by Holders
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|
78
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|
Section 8.13
. Waiver of Past Defaults
|
|
|
78
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|
Section 8.14
. Undertaking for Costs
|
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|
78
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|
Section 8.15
. Waiver of Stay or Extension Laws
|
|
|
79
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|
Section 8.16.
Violations of Certain Covenants
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|
79
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|
ARTICLE 9
Consolidation, Merger, Conveyance, Transfer or Lease
|
|
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|
Section 9.01
. Company May Consolidate, Etc., Only on Certain Terms
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|
79
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Section 9.02
. Successor Substituted
|
|
|
79
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|
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|
|
ARTICLE 10
The Trustee
|
|
|
|
|
|
Section 10.01
. Duties and Responsibilities of Trustee
|
|
|
80
|
|
Section 10.02
. Notice of Defaults.
|
|
|
81
|
|
Section 10.03
. Reliance on Documents, Opinions, Etc.
|
|
|
81
|
|
Section 10.04
. No Responsibility for Recitals, Etc.
|
|
|
83
|
|
Section 10.05
. Trustee, Paying Agents, Conversion Agents or
Registrar May Own Securities
|
|
|
83
|
|
Section 10.06
. Monies to be Held in Trust
|
|
|
83
|
|
Section 10.07
. Compensation and Expenses of Trustee
|
|
|
83
|
|
Section 10.08
. Conflicting Interests of Trustee
|
|
|
84
|
|
Section 10.09
. Eligibility of Trustee
|
|
|
84
|
|
Section 10.10
. Resignation or Removal of Trustee
|
|
|
84
|
|
Section 10.11
. Acceptance by Successor Trustee
|
|
|
86
|
|
Section 10.12
. Succession by Merger, Etc.
|
|
|
86
|
|
Section 10.13
. Preferential Collection of Claims
|
|
|
87
|
|
|
|
|
|
|
ARTICLE 11
Holders Lists and Reports by Trustee
|
|
|
|
|
|
Section 11.01
. Company to Furnish Trustee Names and Addresses of Holders
|
|
|
87
|
|
Section 11.02
. Preservation of Information; Communications to Holders
|
|
|
87
|
|
Section 11.03
. Reports by Trustee
|
|
|
88
|
|
iii
|
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Page
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ARTICLE 12
Satisfaction and Discharge
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Section 12.01
. Satisfaction and Discharge of Indenture
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88
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Section 12.02
. Application of Trust Money
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89
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Section 12.03.
Paying Agent to Repay Monies Held
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89
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Section 12.04.
Return of Unclaimed Monies
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89
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Section 12.05.
Reinstatement
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89
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ARTICLE 13
Supplemental Indentures
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Section 13.01
. Without Consent of Holders
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90
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Section 13.02
. Supplemental Indentures With Consent of Holders
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91
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Section 13.03
. Execution of Supplemental Indentures
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92
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Section 13.04
. Effect of Supplemental Indentures
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92
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Section 13.05
. Conformity with Trust Indenture Act
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92
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Section 13.06
. Reference in Securities to Supplemental Indentures
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92
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Section 13.07
. Notice to Holders of Supplemental Indentures
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92
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ARTICLE 14
Miscellaneous
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Section 14.01
. Trust Indenture Act Controls
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92
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Section 14.02
. Notices
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93
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Section 14.03
. Communication by Holders with other Holders
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93
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Section 14.04.
Certificate and Opinion as to Conditions Precedent
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94
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Section 14.05.
Statements Required in Certificate or Opinion
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94
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Section 14.06.
Rules by Trustee, Paying Agent and Registrar
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94
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Section 14.07.
Legal Holidays
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94
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Section 14.08
. Conflict with Trust Indenture Act
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95
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Section 14.09.
Successors
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95
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Section 14.10
. Table of Contents; Headings
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95
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Section 14.11
. Severability Clause
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95
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Section 14.12
. U.S.A. Patriot Act
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95
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Section 14.13
. Execution in Counterparts
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95
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Section 14.14
. Calculations
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96
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Section 14.15
. Governing Law
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96
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Section 14.16
. Waiver of Jury Trial
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96
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Section 14.17
. Force Majeure
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96
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Section 14.18
. Benefits of Indenture
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96
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Section 14.19
. No Recourse Against Others
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96
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iv
INDENTURE, dated as of June 9, 2010, between Xilinx, Inc., a corporation duly organized and
existing under the laws of the State of Delaware, as Issuer (the
Company
), having its principal
office at 2100 Logic Drive, San Jose, California 95124 and The Bank of New York Mellon Trust
Company, N.A., as Trustee (the
Trustee
).
RECITALS OF THE COMPANY
WHEREAS, the Company has duly authorized the creation of an issue of 2.625% Convertible Senior
Notes due 2017 (each a
Security
and collectively, the
Securities
) of the tenor and amount
hereinafter set forth, and to provide therefor the Company has duly authorized the execution and
delivery of this Indenture; and
WHEREAS, all things necessary to make the Securities, when executed by the Company and
authenticated and delivered hereunder and duly issued by the Company, the valid and legally binding
obligations of the Company, and to make this Indenture a valid and legally binding agreement of the
Company, in accordance with the terms of the Securities and the Indenture, have been done;
NOW, THEREFORE, THIS INDENTURE WITNESSETH, for and in consideration of the premises and the
purchases of the Securities by the Holders thereof, it is mutually agreed, for the benefit of the
Company and the equal and proportionate benefit of all Holders of the Securities, as follows:
ARTICLE 1
Definitions and Other Provisions of General Application
Section 1.01
. Definitions.
For all purposes of this Indenture, except as otherwise
expressly provided or unless the context otherwise requires:
(i) the terms defined in this Article 1 have the meanings assigned to them in this
Article and include the plural as well as the singular;
(ii) all other terms used herein that are defined in the Trust Indenture Act, either
directly or by reference therein, have the meanings assigned to them therein;
(iii) all accounting terms not otherwise defined herein have the meanings assigned to
them in accordance with GAAP; and
(iv) the words herein, hereof and hereunder and other words of similar import
refer to this Indenture as a whole and not to any particular Article, Section or other
subdivision.
Act
when used with respect to any Holder, has the meaning specified in Section 1.03.
Additional Interest
means all amounts payable, if any pursuant to Section 8.03 hereof.
Additional Securities
means any Securities (other than the Initial Securities) issued under
this Indenture in accordance with Section 3.01 hereof, as part of the same series and with the same
CUSIP number as the Initial Securities.
Additional Shares
has the meaning specified in Section 7.06(a).
Adjustment Determination Date
has the meaning specified in Section 7.03(j).
Adjustment Event
has the meaning specified in Section 7.03(j).
Affiliate
of any specified Person means any other Person that directly or indirectly through
one or more intermediaries, controls or is controlled by, or is under common control with, the
Person specified. For the purposes of this definition, control when used with respect to any
specified Person means the power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or otherwise; and the
terms controlling and controlled have meanings correlative to the foregoing.
Agent Members
has the meaning specified in Section 3.08.
Bid Solicitation Agent
means the agent appointed by the Company to solicit market bid
quotations for the Securities, which shall in no event be an Affiliate of the Company.
Board of Directors
means, with respect to any Person, either the board of directors of such
Person or any duly authorized committee of that board.
Board Resolution
means, with respect to any Person, a copy of a resolution certified by the
Secretary or an Assistant Secretary of such Person to have been duly adopted by the Board of
Directors and to be in full force and effect on the date of such certification, and delivered to
the Trustee.
Business Day
means any day other than a Saturday, a Sunday or a day on which the Federal
Reserve Bank of New York is authorized or required by law or executive order to close or be closed.
Capital Stock
means any and all shares, interests, participations, rights or other
equivalents (however designated) of corporate stock and, with respect to partnerships or limited
liability companies, partnership interests (whether general or limited), limited liability company
interests and any other interest or
participation that confers on a Person the right to receive a share of the profits and losses
of, or distributions of assets of, such partnership or limited liability company.
2
Close of Business
means 5:00 p.m., New York City time.
Code
means the Internal Revenue Code of 1986, as amended.
Commission
means the Securities and Exchange Commission, as from time to time constituted,
created under the Exchange Act, or, if at any time after the execution of this instrument such
Commission is not existing and performing the duties now assigned to it under the Trust Indenture
Act, then the body performing such duties at such time.
Common Stock
means the shares of common stock, par value $0.01 per share, of the Company as
they exist on the date of this Indenture or any other shares of Capital Stock of the Company into
which the Common Stock shall be reclassified or changed or, in the event of a merger, consolidation
or other similar transaction involving the Company that is otherwise permitted hereunder in which
the Company is not the surviving corporation, the common stock, common equity interests, ordinary
shares or depositary shares or other certificates representing common equity interests of such
surviving corporation or its direct or indirect parent corporation.
Company
means the Person named as the Company in the first paragraph of this instrument
until a successor Person shall have become such pursuant to the applicable provisions of this
Indenture, and thereafter Company shall mean such successor Person.
Company Request
or
Company Order
means a written request or order signed in the name of
the Company by any of its Chairman of the Board of Directors, its Vice Chairman of the Board of
Directors, its Chief Executive Officer, its President or any Vice President, its Chief Financial
Officer, its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary and
delivered to the Trustee.
Conversion Agent
means the Trustee or such other office or agency designated by the Company
where Securities may be presented for conversion.
Conversion Date
has the meaning specified in Section 7.02(f).
Conversion Price
means as of any date $1,000 divided by the Conversion Rate as of such date.
Conversion Rate
has the meaning specified in Section 7.01(a).
3
Corporate Trust Office
means the office of the Trustee at which the corporate trust business
of the Trustee shall, at any particular time, be principally
administered, which office is, at the date of this Indenture, located at The Bank of New York
Mellon Trust Company, N.A., 700 South Flower Street, Suite 500, Los Angeles, California 90017,
Attention: Corporate Trust Administration, and shall mean for purposes of Section 5.02 c/o The
Bank of New York Mellon, 101 Barclay Street, New York, New York 10286, Attention: Corporate Trust
Administration.
Corporation
means a corporation, association, company, joint-stock company or business
trust.
Custodian
means The Bank of New York Mellon Trust Company, N.A., as custodian with respect
to the Securities in global form, or any successor entity.
Daily Conversion Value
has the meaning specified in Section 7.02.
Daily Settlement Amount
has the meaning specified in Section 7.02.
Daily VWAP
means, for each of the 30 consecutive Trading Days during the Observation Period,
the per share volume-weighted average price as displayed under the heading Bloomberg VWAP on
Bloomberg page XLNX.UQ <equity> AQR (or its equivalent successor if such page is not
available) in respect of the period from the scheduled open of trading until the scheduled close of
trading of the primary trading session on such Trading Day (or if such volume-weighted average
price is unavailable, the market value of one share of Common Stock on such Trading Day determined,
using a volume-weighted average method, by a nationally recognized independent investment banking
firm retained for such purpose by the Company),
provided
, that after consummation of a transaction
described in clause (2) of the definition of Fundamental Change in which the consideration is
comprised entirely of cash, the Daily VWAP will be deemed to be the cash price per share received
by holders of the Common Stock in such Fundamental Change.
Default
means any event that is or with the passage of time or the giving of notice or both
would become an Event of Default.
Depositary
means The Depository Trust Company until a successor Depositary shall have become
such pursuant to the applicable provisions of this Indenture, and thereafter
Depositary
shall
mean such successor Depositary.
Designated Institution
has the meaning specified in Section 7.12(a).
Effective Date
has the meaning specified in Section 7.03(f).
Event of Default
has the meaning specified in Section 8.01.
Ex Date
means, with respect to any dividend, distribution or issuance on the Common Stock or
any other equity security, the first date on which the shares of Common Stock or such other equity
security trade on the applicable
exchange or in the applicable market, regular way, without the right to receive such issuance,
dividend or distribution in question from the Company either directly or indirectly through due
bills.
4
Exchange Act
means the U.S. Securities Exchange Act of 1934, as amended.
Fundamental Change
means the occurrence of any of the following events at any time after the
Securities are originally issued:
(1) a person or group within the meaning of Section 13(d) of the Exchange Act other than
the Company, its Subsidiaries and the Companys and its Subsidiaries employee benefit plans, files
a Schedule TO or any schedule, form or report under the Exchange Act disclosing that such person or
group has become the direct or indirect ultimate beneficial owner, as defined in Rule 13d-3 under
the Exchange Act, of the Common Stock representing more than 50% of the total voting power of all
shares of the Companys Capital Stock entitled to vote generally in elections of directors;
(2) consummation of (A) any recapitalization, reclassification or change of the Common Stock
(other than changes resulting from a subdivision or combination of the Common Stock) as a result of
which the Common Stock would be converted into, or exchanged for, stock, other securities, other
property or assets or (B) any share exchange, consolidation or merger of the Company pursuant to
which the Common Stock will be converted into cash, securities or other property or any sale, lease
or other transfer in one transaction or a series of transactions of all or substantially all of the
consolidated assets of the Company and its Subsidiaries, taken as a whole, to any Person other than
the Company or one or more of the Companys Subsidiaries;
provided
,
however
that a transaction
pursuant to which (i) the Common Stock is not changed or exchanged except to the extent necessary
to reflect a change in the Companys jurisdiction of incorporation or (ii) the holders of more than
50% of all classes of the Companys common equity immediately prior to such transaction own,
directly or indirectly, more than 50% of the aggregate voting power of all shares of Capital Stock
of the continuing or surviving corporation or transferee or the parent thereof immediately after
such event shall not be a Fundamental Change;
(3) the Companys stockholders approve any plan or proposal for the liquidation or dissolution
of the Company; or
(4) the Common Stock, or other common stock into which the Securities are then convertible,
ceases to be listed or quoted on any of The New York Stock Exchange, The NASDAQ Global Select
Market or The NASDAQ Global Market (or any of their respective successors).
5
Notwithstanding the foregoing, a Fundamental Change as a result of clause (2) above will not
be deemed to have occurred if at least 90% of the
consideration received or to be received by holders of Common Stock (excluding cash payments
for fractional shares and cash payments made in respect of dissenters rights) in connection with
the transaction or transactions otherwise constituting the Fundamental Change consists of Publicly
Traded Securities and, as a result of such transaction or transactions, the Securities become
convertible into such Publicly Traded Securities and cash as described in Section 7.07.
Fundamental Change Company Notice
has the meaning specified in Section 6.01(b).
Fundamental Change Repurchase Date
has the meaning specified in Section 6.01(a).
Fundamental Change Repurchase Notice
has the meaning specified in Section 6.01(a)(i).
Fundamental Change Repurchase Price
has the meaning specified in Section 6.01(a).
GAAP
means generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as have been approved by a significant segment of the
accounting profession, in each case, as in effect in the United States on the date hereof.
Global Security
means a Security in global form registered in the Security Register in the
name of a Depositary or a nominee thereof.
Holder
means a Person in whose name a Security is registered in the Security Register.
Indenture
means this instrument as originally executed or as it may from time to time be
supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the
applicable provisions hereof.
Initial Conversion Rate
has the meaning specified in Section 7.03.
Initial Dividend Threshold
has the meaning specified in Section 7.03(d).
Initial Purchasers
means J.P. Morgan Securities Inc. and Deutsche Bank Securities Inc.
Initial Securities
means Securities in an aggregate Principal Amount of $520,000,000,
initially issued under this Indenture.
6
Interest
means (i) Regular Interest and (ii) Additional Interest, if any.
Interest Payment Date
means each June 15 and December 15 of each year, beginning December
15, 2010.
Issue Date
means the date Securities are originally issued as set forth on the face of such
Security under this Indenture.
Last Reported Sale Price
means, on any date, the closing sale price per share of the Common
Stock (or if no closing sale price is reported, the average of the bid and ask prices or, if more
than one in either case, the average of the average bid and the average ask prices) on that date as
reported in composite transactions for the principal U.S. securities exchange on which the Common
Stock is listed for trading. If the Common Stock is not listed for trading on a U.S. national or
regional securities exchange on such date, the Last Reported Sale Price will be the last quoted
bid price for the Common Stock in the over-the-counter market on the relevant date as reported by
Pink OTC Markets Inc. or a similar organization. If the Common Stock is not so quoted, the Last
Reported Sale Price will be the average of the mid-point of the last bid and ask prices for the
Common Stock on the relevant date from each of at least three nationally recognized independent
investment banking firms (which may include any of the Initial Purchasers) selected by the Company
for this purpose.
Legal Holiday
has the meaning specified in Section 14.07.
Make-Whole Effective Date
has the meaning specified in Section 7.06(b).
Make-Whole Fundamental Change
means any transaction or event that constitutes a Fundamental
Change described in clause (1) or (2) of the definition thereof (but without regard to proviso (ii)
in clause (2) of the definition thereof)
Make-Whole Fundamental Change Notice
has the meaning specified in Section 7.06(e).
Market Disruption Event
has the meaning specified in Section 7.02(d).
Maturity
, when used with respect to any Security, means the date on which the principal or
Fundamental Change Repurchase Price of such Security becomes due and payable as therein or herein
provided, whether at the Stated Maturity or on a Fundamental Change Repurchase Date, by declaration
of acceleration or otherwise.
Measurement Period
has the meaning specified in Section 7.01(a).
7
National Securities Exchange
means a securities exchange that has registered with the
Commission under Section 6 of the Exchange Act, or any successor provision.
Notice of Conversion
has the meaning specified in Section 7.02(e).
Notice of Default
has the meaning specified in Section 8.01(f).
Observation Period
with respect to any Security surrendered for conversion means the 30
consecutive Trading Day period beginning on and including the second Trading Day after the related
Conversion Date, except that with respect to any conversion date occurring during the period
beginning on or after March 15, 2017, Observation Period means the first 30 Trading Days beginning
on and including the 32nd Scheduled Trading Day prior to the Stated Maturity of the Securities.
Officers Certificate
means a certificate signed by any two of the Chairman of the Board of
Directors, the President, any Vice President, the Treasurer, an Assistant Treasurer, the Secretary
or an Assistant Secretary, in each case of the Company, and delivered to the Trustee. One of the
officers signing an Officers Certificate given pursuant to Section 5.10 shall be the principal
executive, financial or accounting officer of the Company.
Open of Business
means 9:00 a.m., New York City time.
Opinion of Counsel
means a written opinion of counsel, who may be external or in-house
counsel for the Company, and who shall be reasonably acceptable to the Trustee.
Outstanding,
when used with respect to Securities, means, as of the date of determination,
all Securities theretofore authenticated and delivered under this Indenture, except:
(i) Securities theretofore cancelled by the Trustee or accepted by the Trustee for
cancellation;
(ii) Securities, or portions thereof, for whose payment or repurchase money in the
necessary amount has been theretofore deposited with the Trustee or any Paying Agent
(other than the Company) in trust or set aside and segregated in trust by the Company (if
the Company shall act as its own Paying Agent) for the Holders of such Securities;
provided
that if such Securities are to be repurchased prior to the Maturity thereof,
notice of such repurchase shall have been given to the Holders as herein provided, or
provision satisfactory to a Responsible Officer of the Trustee shall have been made for
giving such notice;
8
(iii) Securities that have been paid or in exchange for or in lieu of which other
Securities have been authenticated and delivered pursuant to this Indenture; and
(iv) Securities converted into Common Stock pursuant to Article 7;
provided,
however, that, in determining whether the Holders of the requisite Principal Amount of
the Outstanding Securities have given any request, demand, authorization, direction, notice,
consent or waiver hereunder, Securities owned by the Company or any other obligor upon the
Securities or any Affiliate of the Company or of such other obligor shall be disregarded and deemed
not to be Outstanding, except that, in determining whether the Trustee shall be protected in
relying upon any such request, demand, authorization, direction, notice, consent or waiver, only
Securities which a Responsible Officer of the Trustee actually knows to be so owned shall be so
disregarded. Securities so owned which have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgees right so to
act with respect to such Securities and that the pledgee is not the Company or any other obligor
upon the Securities or any Affiliate of the Company or of such other obligor.
Paying Agent
means any Person (including the Company) authorized by the Company to pay the
Principal Amount of, Interest on, or Fundamental Change Repurchase Price of, any Securities on
behalf of the Company. The Trustee shall initially be the Paying Agent.
Person
means any individual, Corporation, partnership, limited liability company, joint
venture, trust, unincorporated organization or government or any agency or political subdivision
thereof.
Physical Securities
means permanent certificated Securities in registered form issued in
denominations of $2,000 Principal Amount and multiples of $1,000 in excess thereof.
Principal Amount
of a Security means the principal amount as set forth on the face of the
Security.
Publicly Traded Securities
means shares of Common Stock that are listed or quoted on any of
The New York Stock Exchange, The NASDAQ Global Select Market or The NASDAQ Global Market (or any of
their respective successors) or which will be so listed or quoted when issued or exchanged.
Purchase Agreement
means the Purchase Agreement, dated June 3, 2010, entered into by the
Company and the Initial Purchasers in connection with the sale of the Securities.
9
Qualified Institutional Buyer
or
QIB
shall have the meaning specified in Rule 144A.
Record Date
means, with respect to any payment of Interest on the Securities, the Close of
Business on each June 1 and December 1, as the case may be, immediately preceding the relevant
Interest Payment Date (whether or not a Business Day).
Reference Property
and
Unit of Reference Property
have the meaning specified in Section
7.07(a).
Regular Interest
has the meaning specified in Section 4.01(a).
Responsible Officer
means any officer of the Trustee within the corporate trust department
of the Trustee, including any vice president, assistant vice president, assistant secretary,
assistant treasurer, trust officer or any other officer of the Trustee who customarily performs
functions similar to those performed by the Persons who at the time shall be such officers
respectively, or to whom such matter is referred because of such officers knowledge and
familiarity with the particular subject and who shall have direct responsibility for the
administration of this Indenture.
Restricted Security
or
Restricted Securities
has the meaning specified in Section 2.05.
Rule 144
means Rule 144 under the Securities Act (including any successor rule thereto), as
the same may be amended from time to time.
Rule 144A
means Rule 144A under the Securities Act (including any successor rule thereto),
as the same may be amended from time to time.
Rule 144A Information
has the meaning specified in the Securities.
Scheduled Trading Day
means a day that is scheduled to be a Trading Day on the principal
U.S. national or regional securities exchange or market on which the Common Stock is listed or
admitted for trading. If the Common Stock is not so listed or admitted for trading, Scheduled
Trading Day means a Business Day.
Securities Act
means the U.S. Securities Act of 1933, as amended, and the rules and
regulations of the Commission promulgated thereunder.
Security
or
Securities
has the meaning specified in the first paragraph of the Recitals to
this Indenture, and includes any Security or Securities, as the case may be, authenticated and
delivered under this Indenture, including any Global Security. The Initial Securities and the
Additional Securities shall be treated as a single class and have the same CUSIP number for
purposes of this Indenture.
10
Security Register
and
Security Registrar
have the respective meanings specified in
Section 3.05.
Settlement Amount
has the meaning specified in Section 7.02.
Significant Subsidiary
means a Subsidiary of the Company that would be a significant
subsidiary as defined in Article I, Rule 1-02(w) of Regulation S-X, promulgated pursuant to the
Securities Act, as such Regulation is in effect on the date hereof.
Spin-Off
has the meaning specified in Section 7.03(c).
Stated Maturity,
when used with respect to any Security, means the date specified in such
Security as the fixed date on which an amount equal to the Principal Amount of such Security
together with accrued and unpaid Interest, if any, is due and payable.
Stock Price
means, with respect to the Common Stock in connection with a Make-Whole
Fundamental Change, (i) if holders of Common Stock receive only cash in a Make-Whole Fundamental
Change described in clause (2) of the definition of Fundamental Change, the cash amount paid per
share of Common Stock or (ii) if holders of Common Stock receive any consideration other than cash
in such Make-Whole Fundamental Change or if a Make-Whole Fundamental Change occurs other than a
Make-Whole Fundamental Change described in clause (2) of the definition of Fundamental Change, the
average of the Last Reported Sales Prices of the Common Stock over the five Trading Day period
ending on, and including, the Trading Day immediately preceding the effective date of such
Make-Whole Fundamental Change.
Subsidiary
means a Corporation more than 50% of the outstanding voting stock of which is
owned, directly or indirectly, by the Company or by one or more other Subsidiaries, or by the
Company and one or more other Subsidiaries. For the purposes of this definition,
voting stock
means stock which ordinarily has voting power for the election of directors, whether at all times
or only so long as no senior class of stock has such voting power by reason of any contingency.
Surviving Entity
has the meaning specified in Section 9.01(a).
Trading Day
means a day on which (i) trading of the Common Stock generally occurs on The
NASDAQ Global Select Market or, if the Common Stock is not then listed on The NASDAQ Global Select
Market, on the principal other United States national or regional securities exchange on which the
Common Stock is then listed or, if the Common Stock is not then listed on a United States national
or regional securities exchange, on the principal other market on which the Common Stock is then
traded, and (ii) a Last Reported Sale Price for the Common Stock is available on such securities
exchange or market. If the Common Stock (or other security for which the closing sale price must
be determined) is not so listed or traded, Trading Day means any Business Day.
11
Trading Price
of the Securities on any date of determination means the average of the
secondary market bid quotations obtained by the Bid Solicitation Agent for $5,000,000 Principal
Amount of Securities at approximately 3:30 p.m., New York City time, on such determination date
from three independent nationally recognized securities dealers that are selected by the Company
(which may include any of the Initial Purchasers);
provided
that if at least three such bids cannot
reasonably be obtained by the Bid Solicitation Agent, but two such bids are obtained, then the
average of the two bids shall be used, and if only one such bid can reasonably be obtained, that
one bid shall be used. If the Bid Solicitation Agent cannot reasonably obtain at least one such
bid for $5,000,000 Principal Amount of Securities from an independent nationally recognized
securities dealer then the Trading Price per $1,000 Principal Amount of Securities will be deemed
to be less than 98% of the product of the Last Reported Sale Price of the Common Stock and the
applicable Conversion Rate.
Trading Price Condition
has the meaning specified in Section 7.01(a)(ii).
Trust Indenture Act
means the Trust Indenture Act of 1939 as in effect on the date as of
which this Indenture was executed;
provided
,
however
, that in the event the Trust Indenture Act of
1939 is amended after such date,
Trust Indenture Act
means, to the extent required by any such
amendment, the Trust Indenture Act of 1939 as so amended.
Trustee
means the Person named as the
Trustee
in the first paragraph of this instrument
until a successor Trustee shall have become such pursuant to the applicable provisions of this
Indenture, and thereafter
Trustee
shall mean such successor Trustee.
Valuation Period
has the meaning specified in Section 7.03(c).
Vice President,
when used with respect to the Company or the Trustee, means any vice
president, whether or not designated by a number or a word or words added before or after the title
vice president.
Section 1.02
. Form of Documents Delivered to Trustee.
In any case where several matters are
required to be certified by, or covered by an opinion of, any specified Person, it is not necessary
that all such matters be certified by, or covered by the opinion of, only one such Person, or that
they be so certified or covered by only one document, but one such Person may certify or give an
opinion with respect to some matters and one or more other such Persons as to other matters, and
any such Person may certify or give an opinion as to such matters in one or several documents.
12
Any certificate or opinion of an officer of the Company may be based, insofar as it relates to
legal matters, upon a certificate or opinion of, or representations by, counsel, unless such
officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations with respect
to the matters upon which his certificate or opinion is based are erroneous. Any such certificate
or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or
opinion of, or representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the Company, unless such
counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion
or representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more applications, requests,
consents, certificates, statements, opinions or other instruments under this Indenture, they may,
but need not, be consolidated and form one instrument.
Section 1.03
. Acts of Holders; Record Dates.
(a) Any request, demand, authorization,
direction, notice, consent, waiver or other action provided by this Indenture to be given or taken
by Holders may be embodied in and evidenced by one or more instruments of substantially similar
tenor signed by such Holders in person or by agent duly appointed in writing and, except as herein
otherwise expressly provided, such action shall become effective when such instrument or
instruments are delivered to the Trustee and, where it is hereby expressly required, to the
Company. Such instrument or instruments (and the action embodied therein and evidenced thereby)
are herein sometimes referred to as an
Act
of the Holders signing such instrument or instruments.
Proof of execution of any such instrument or of a writing appointing any such agent shall be
sufficient for any purpose of this Indenture and (subject to Section 10.01) conclusive in favor of
the Trustee and the Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such instrument or writing may be
proved by the affidavit of a witness of such execution or by a certificate of a notary public or
other officer authorized by law to take acknowledgments of deeds, certifying that the individual
signing such instrument or writing acknowledged to him the execution thereof. Where such execution
is by a signer acting in a capacity other than his individual capacity, such certificate or
affidavit shall also constitute sufficient proof of his authority. The fact and date of the
execution of any such instrument or writing, or the authority of the Person executing the same, may
also be proved in any other manner which the Trustee reasonably deems sufficient.
(c) The Company may, in the circumstances permitted by the Trust Indenture Act, fix any day as
the record date for the purpose of determining the Holders entitled to give or take any request,
demand, authorization, direction, notice, consent, waiver or other action, or to vote on any
action, authorized or permitted to be given or taken by Holders. If not set by the Company prior
to the first solicitation of a Holder made by any Person in respect of any such action, or, in the
case of any such vote, prior to such vote, the record date for any such action or vote shall be the
30th day (or, if later, the date of the most recent list of Holders
required to be provided pursuant to Section 11.01) prior to such first solicitation or vote,
as the case may be. With regard to any record date, only the Holders on such date (or their duly
designated proxies) shall be entitled to give or take, or vote on, the relevant action.
13
(d) The ownership of Securities shall be proved by the Security Register.
(e) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the
Holder of any Security shall bind every future Holder of the same Security and the Holder of every
Security issued upon the registration of transfer thereof or in exchange therefor or in lieu
thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company
in reliance thereon, whether or not notation of such action is made upon such Security.
Section 1.04
. Notices, Etc., to Trustee and Company.
Any request, demand, authorization,
direction, notice, consent, waiver or Act of Holders or other document provided or permitted by
this Indenture to be made upon, given or furnished to, or filed with:
(a) the Trustee by any Holder or by the Company shall be sufficient for every purpose
hereunder if made, given, furnished or filed in writing (including facsimile) to or with
the Trustee at its applicable Corporate Trust Office; or
(b) the Company by the Trustee or by any Holder shall be sufficient for every purpose
hereunder (unless otherwise herein expressly provided) if in writing (including facsimile)
and mailed, first-class postage prepaid (unless facsimile), to the Company addressed to it
at the address of its principal office specified in the first paragraph of this instrument
or at any other address previously furnished in writing to the Trustee by the Company,
Attention: General Counsel.
Section 1.05
. Notice to Holders; Waiver.
Where this Indenture provides for notice to
Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly
provided) if in writing and mailed, first-class postage prepaid, to each Holder affected by such
event, at such Holders address as it appears in the Security Register, not later than the latest
date (if any), and not earlier than the earliest date (if any), prescribed for the giving of such
notice. In any case where notice to Holders is given by mail, neither the failure to mail such
notice, nor any defect in any notice so mailed, to any particular Holder shall affect the
sufficiency of such notice with respect to other Holders. Where this Indenture provides for notice
in any manner, such notice may be waived in writing by the Person entitled to receive such notice,
either before or after the event, and such waiver shall be the equivalent of such notice. Waivers
of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition
precedent to the validity of any action taken in reliance upon such waiver.
14
In case by reason of the suspension of regular mail service or by reason of any other cause it
shall be impracticable to give such notice by mail, then such notification as shall be made with
the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder.
Whenever under this Indenture the Trustee is required to provide any notice by mail, in all
cases the Trustee may alternatively provide notice by overnight courier or by telefacsimile, with
confirmation of transmission.
ARTICLE 2
Security Forms
Section 2.01
. Forms Generally.
The Securities and the Trustees certificates of
authentication shall be in substantially the forms set forth in this Article, with such appropriate
insertions, omissions, substitutions and other variations as are required or permitted by this
Indenture, and may have such letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with the rules of any securities exchange
or Depositary therefor, the Code and regulations thereunder, or as may, consistently herewith, be
determined by the officers executing such Securities, as evidenced by their execution thereof.
The Securities shall initially be issued in the form of permanent Global Securities in
registered form in substantially the form set forth in this Article. The aggregate Principal
Amount of the Global Securities may from time to time be increased or decreased by adjustments made
on the records of the Trustee, as custodian for the Depositary, as hereinafter provided.
Section 2.02
. Form of Face of Security.
[INCLUDE IF SECURITY IS A RESTRICTED SECURITY
THIS SECURITY AND THE COMMON STOCK, IF ANY, ISSUED UPON CONVERSION OF THIS SECURITY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
SECURITIES ACT
), AND MAY NOT BE
OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE FOLLOWING SENTENCE.
BY ITS ACQUISITION HEREOF OR A BENEFICIAL INTEREST HEREIN, THE ACQUIRER: (1) REPRESENTS THAT IT AND
ANY ACCOUNT FOR WHICH IT IS ACTING IS A QUALIFIED INSTITUTIONAL BUYER (WITHIN THE MEANING OF RULE
144A UNDER THE SECURITIES ACT) AND THAT IT EXERCISES SOLE INVESTMENT DISCRETION WITH RESPECT TO
EACH SUCH ACCOUNT, AND (2) AGREES FOR THE BENEFIT OF THE COMPANY THAT IT WILL NOT OFFER, SELL,
PLEDGE OR OTHERWISE TRANSFER THIS SECURITY OR ANY BENEFICIAL INTEREST HEREIN, PRIOR TO THE DATE
THAT IS THE LATER OF (X) ONE YEAR AFTER THE LAST ORIGINAL ISSUE DATE HEREOF OR SUCH SHORTER PERIOD
OF TIME AS PERMITTED BY RULE 144 UNDER
15
THE SECURITIES ACT OR ANY SUCCESSOR PROVISION THERETO AND (Y) SUCH LATER DATE, IF ANY, AS MAY
BE REQUIRED BY APPLICABLE LAW, EXCEPT (A) TO XILINX, INC. (THE COMPANY) OR ANY SUBSIDIARY
THEREOF, OR (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BECOME EFFECTIVE UNDER THE
SECURITIES ACT, OR (C) TO A QUALIFIED INSTITUTIONAL BUYER (IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT), OR (D) PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE
SECURITIES ACT OR ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. PRIOR TO THE REGISTRATION OF ANY TRANSFER IN ACCORDANCE WITH (2)(D) ABOVE, THE
COMPANY AND THE TRUSTEE RESERVE THE RIGHT TO REQUIRE THE DELIVERY OF SUCH LEGAL OPINIONS,
CERTIFICATIONS OR OTHER EVIDENCE AS MAY REASONABLY BE REQUIRED IN ORDER TO DETERMINE THAT THE
PROPOSED TRANSFER IS BEING MADE IN COMPLIANCE WITH THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS. NO REPRESENTATION IS MADE AS TO THE AVAILABILITY OF ANY EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.]
[
INCLUDE IF SECURITY IS A GLOBAL SECURITY
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE
MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A
NOMINEE THEREOF. THIS SECURITY MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A SECURITY REGISTERED,
AND NO TRANSFER OF THIS SECURITY IN WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME OF ANY PERSON
OTHER THAN SUCH DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN
THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY (
DTC
), A NEW YORK CORPORATION, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE
& CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL IN AS
MUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]
16
2.625
% Convertible Senior Notes due 2017
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No.
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CUSIP NO. 983919 AE1 U.S.
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$
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Xilinx, Inc., a corporation duly organized and validly existing under the laws of the State of
Delaware (herein called the
Company
), which term includes any successor corporation under the
Indenture referred to on the reverse hereof), for value received hereby promises to pay to Cede &
Co., or registered assigns, the principal sum of
($
) (which
amount may from time to time be increased or decreased by adjustments made on the records of the
Trustee, as custodian for the Depositary, in accordance with the rules and procedures of the
Depositary) on June 15, 2017. The Principal Amount of this Security shall be payable at the
Corporate Trust Office and at any other office or agency maintained for such purpose and at any
other office or agency maintained by the Company for such purpose. Interest on this Security will
be payable (i) to Holders having an aggregate Principal Amount of $5,000,000 or less of Securities,
by check mailed to such Holders and (ii) to Holders having an aggregate Principal Amount of more
than $5,000,000 of Securities, either by check mailed to such Holders or, upon application by a
Holder to the Security Registrar not later than the relevant Record Date for such Interest payment,
by wire transfer in immediately available funds to such Holders account within the United States.
The Issue Date of this Security is June 9, 2010.
Reference is made to the further provisions of this Security set forth on the reverse hereof,
including, without limitation, provisions giving the Holder the right to convert this Security into
Common Stock of the Company and to require the Company to repurchase this Security upon certain
events, in each case, on the terms and subject to the limitations referred to on the reverse hereof
and as more fully specified in the Indenture. Such further provisions shall for all purposes have
the same effect as though fully set forth at this place. Capitalized terms used but not defined
herein shall have such meanings as are ascribed to such terms in the Indenture.
This Security shall be deemed to be a contract made under the laws of the State of New York,
and for all purposes shall be construed in accordance with and governed by the laws of said State.
This Security shall not be valid or become obligatory for any purpose until the certificate of
authentication hereon shall have been manually signed by the Trustee or a duly authorized
authenticating agent under the Indenture.
17
IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed.
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XILINX, INC.
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By:
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Authorized Signatory
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18
Section 2.03
. Form of Reverse of Security.
XILINX, INC.
2.625
% Convertible Senior Notes due 2017
This Security is one of a duly authorized issue of Securities of the Company, designated as
its 2.625% Convertible Senior Notes due 2017 (the
Securities
), all issued or to be issued under
and pursuant to an Indenture dated as of June 9, 2010 (the
Indenture
), between the Company and
The Bank of New York Mellon Trust Company, N.A. (the
Trustee
), to which the Indenture and all
indentures supplemental thereto reference is hereby made for a description of the rights,
limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Company
and the Holders of the Securities.
Interest
. The Securities will bear Regular Interest at a rate of 2.625% per year.
Interest on the Securities will accrue from June 9, 2010, payable semi-annually in arrears on June
15 and December 15 of each year, beginning on December 15, 2010, and at Maturity. Pursuant to
Section 8.03 of the Indenture, in certain circumstances, the Holders shall be entitled to receive
Additional Interest.
Except as otherwise provided in Section 4.01(c) of the Indenture, Interest will be paid to the
Person in whose name a Security is registered at the Close of Business on June 1 or December 1, as
the case may be, immediately preceding the relevant Interest Payment Date. Interest on the
Securities will be computed on the basis of a 360-day year composed of twelve 30-day months.
Redemption at the Option of the Company
. The Securities will not be redeemable at the
option of the Company.
Repurchase by the Company at the Option of the Holder Upon a Fundamental Change
.
Subject to the terms and conditions of the Indenture, the Company shall become obligated, at the
option of the Holder, to repurchase the Securities if a Fundamental Change occurs at any time prior
to the Stated Maturity at 100% of the Principal Amount plus accrued and unpaid Interest (subject to
Section 4.01(c)(ii) of the Indenture) to, but excluding, the Fundamental Change Repurchase Date
(the
Fundamental Change Repurchase Price
), which Fundamental Change Repurchase Price will be paid
in cash. If the Fundamental Change Repurchase Date is between a regular Record Date and the
Interest Payment Date to which it relates, the Company will instead pay the full amount of accrued
and unpaid Interest to the Holder of record on such regular Record Date.
Withdrawal of Fundamental Change Repurchase Notice
. Holders have the right to
withdraw, in whole or in part, any Fundamental Change Repurchase Notice by delivering to the Paying
Agent a written notice of withdrawal in accordance with the provisions of the Indenture.
19
Payment of Fundamental Change Repurchase Price
. If cash sufficient to pay the
Fundamental Change Repurchase Price of all Securities or portions thereof to be repurchased on a
Fundamental Change Repurchase Date is deposited with the Paying Agent on the Fundamental Change
Repurchase Date such Securities will cease to be Outstanding and Interest will cease to accrue on
such Securities (or portions thereof) immediately after such Fundamental Change Repurchase Date and
the Holder thereof shall have no other rights as such (other than the right to receive the
Fundamental Change Repurchase Price upon surrender of such Security).
Conversion
. Subject to and in compliance with the provisions of the Indenture
(including without limitation the conditions of conversion of this Security set forth in Article 7
thereof), the Holder hereof has the right, at its option, to convert the Principal Amount hereof or
any portion of such principal which is $1,000 or a multiple thereof, into, subject to Section 7.01
of the Indenture, cash and shares of Common Stock, if any, at the Conversion Rate. The initial
Conversion Rate is 33.0164 shares of Common Stock per $1,000 Principal Amount of Securities
(equivalent to a Conversion Price of approximately $30.29), subject to adjustment in certain events
described in the Indenture. Upon conversion, the Company shall deliver, for each $1,000 Principal
Amount of Securities being converted, cash and shares of Common Stock, if any, based on a
Settlement Amount in accordance with the Indenture. No fractional shares will be issued upon any
conversion, but an adjustment and payment in cash will be made, as provided in the Indenture, in
respect of any fraction of a share which would otherwise be issuable upon the surrender of any
Securities for conversion. Securities in respect of which a Holder is exercising its right to
require repurchase on a Fundamental Change Repurchase Date may be converted only if such Holder
withdraws its election to exercise such right in accordance with the terms of the Indenture.
In the event of a deposit or withdrawal of an interest in this Security, including an
exchange, transfer, repurchase or conversion of this Security in part only, the Trustee, as
custodian of the Depositary, shall make an adjustment on its records to reflect such deposit or
withdrawal in accordance with the rules and procedures of the Depositary.
Subject to certain limitations in the Indenture, at any time when the Company is not subject
to Section 13 or 15(d) of the United States Securities Exchange Act of 1934, as amended, upon the
request of a Holder of a Restricted Security, the Company will promptly furnish or cause to be
furnished Rule 144A Information (as defined below) to such Holder of Restricted Securities, or to a
prospective purchaser of any such security designated by any such Holder, to the extent required to
permit compliance by any such Holder with Rule 144A under the Securities Act of 1933, as amended
(the
Securities Act
).
Rule 144A Information
shall be such information as is specified pursuant
to Rule 144A(d)(4) under the Securities Act (or any successor provision thereto).
20
If an Event of Default shall occur and be continuing, the Principal Amount plus Interest
through such date on all the Securities may be declared due and payable in the manner and with the
effect provided in the Indenture.
The Indenture permits, with certain exceptions as therein provided, the amendment thereof and
the modification of the rights and obligations of the Company and the rights of the Holders of the
Securities under the Indenture at any time by the Company and the Trustee with the consent of the
Holders of not less than a majority in aggregate Principal Amount of the Outstanding Securities.
The Indenture also contains provisions permitting the Holders of specified percentages in aggregate
Principal Amount of the Outstanding Securities, on behalf of the Holders of all the Securities, to
waive compliance by the Company with certain provisions of the Indenture and certain past Defaults
under the Indenture and their consequences. Any such consent or waiver by the Holder of any
provision of or applicable to this Security shall be conclusive and binding upon such Holder and
upon all future Holders of this Security and of any Security issued upon the registration of
transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent
or waiver is made upon this Security.
As provided in and subject to the provisions of the Indenture, the Holder of this Security
shall not have the right to institute any proceeding with respect to the Indenture or for the
appointment of a receiver or trustee or for any other remedy thereunder, unless such Holder shall
have previously given the Trustee written notice of a continuing Event of Default with respect to
the Securities, the Holders of not less than 25% in aggregate Principal Amount of the Outstanding
Securities shall have made written request to the Trustee to institute proceedings in respect of
such Event of Default as Trustee and offered the Trustee reasonable indemnity satisfactory to it,
the Trustee shall not have received from the Holders of a majority in Principal Amount of
Outstanding Securities a direction inconsistent with such request, and the Trustee shall have
failed to institute any such proceeding, for 60 days after receipt of such notice, request and
offer of indemnity. The foregoing shall not apply to any suit instituted by the Holder of this
Security for the enforcement of any payment of the Principal Amount, Fundamental Change Repurchase
Price hereof on or after the respective due dates expressed herein or to convert the Securities in
accordance with Article 7 of the Indenture.
No reference herein to the Indenture and no provision of this Security or of the Indenture
shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay
the Principal Amount, Fundamental Change Repurchase Price of, and Interest on, this Security at the
times, place and rate, and in the coin or currency, herein prescribed.
21
As provided in the Indenture and subject to certain limitations therein set forth, the
transfer of this Security is registrable in the Security Register, upon surrender of this Security
for registration of transfer at the office or agency of the
Company in The City of New York, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Security Registrar duly executed by, the
Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities,
of authorized denominations and for the same aggregate Principal Amount, will be issued to the
designated transferee or transferees.
The Securities are issuable only in registered form in denominations of $2,000 and any
multiple of $1,000 in excess thereof, as provided in the Indenture and subject to certain
limitations therein set forth. Securities are exchangeable for a like aggregate Principal Amount
of Securities of a different authorized denomination, as requested by the Holder surrendering the
same.
No service charge shall be made for any such registration of transfer or exchange, but the
Company and the Security Registrar may require payment of a sum sufficient to cover any tax or
other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer, the Company, the
Trustee and the Security Registrar and any agent of the Company or the Trustee may treat the Person
in whose name this Security is registered as the owner hereof for all purposes, whether or not this
Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by
notice to the contrary.
This Security shall be governed by and construed in accordance with the laws of the State of
New York, without regard to conflicts of laws principles thereof.
All terms used in this Security that are defined in the Indenture shall have the meanings
assigned to them in the Indenture.
22
XILINX, INC.
ASSIGNMENT FORM
If you want to assign this Security, fill in the form below and have your signature
guaranteed:
I or we assign and transfer this Security to:
(Print or type name, address and zip code and social security or tax ID number of assignee)
and irrevocably appoint
_____
agent to transfer this Security on
the books of the Company. The agent may substitute another to act for him.
(Sign exactly as your name appears on the other side of this Security)
Note: Signatures must be guaranteed by an eligible guarantor institution meeting the
requirements of the Security Registrar, which requirements include membership or participation in
the Security Transfer Agent Medallion Program (
STAMP
) or such other signature guarantee program
as may be determined by the Security Registrar in addition to, or in substitution for, STAMP, all
in accordance with the Securities Exchange Act of 1934, as amended.
23
In connection with any transfer of this Security occurring prior to the date which is the
later of (i) one year after the last Issue Date of the Securities or such shorter period of time
permitted by Rule 144 under the Securities Act, as amended (the
Securities Act
), or any successor
provision thereto and (ii) such later date, if any, as may be required by applicable law, the
undersigned confirms that it has not utilized any general solicitation or general advertising in
connection with the transfer and that this Security is being transferred:
[
Check One
]
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(1)
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o
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to the Company or a subsidiary thereof; or
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(2)
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o
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to a Qualified Institutional Buyer pursuant to and in
compliance with Rule 144A under the Securities Act;
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(3)
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o
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pursuant to the exemption from registration provided by
Rule 144 under the Securities Act; or
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(4)
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o
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pursuant to any other exemption from the registration
requirements of the Securities Act.
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Unless one of the above boxes is checked, the Trustee will refuse to register any of the Securities
evidenced by this certificate in the name of any Person other than the registered Holder thereof,
provided
that if box (3) or (4) is checked, the Company and the Trustee may require, prior to
registering any such transfer of the Securities, in their sole discretion, such legal opinions,
certifications and other information as may reasonably be required in order to determine that such
transfer is being made pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act and applicable state securities laws.
If none of the foregoing boxes is checked, the Trustee or Security Registrar shall not be
obligated to register this Security in the name of any Person other than the Holder hereof unless
and until the conditions to any such transfer of registration set forth herein and in Section 3.09
of the Indenture shall have been satisfied.
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Date:
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Signed:
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(Sign exactly as your name appears
on the other side of this Security)
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Note: Signatures must be guaranteed by an eligible guarantor institution meeting the
requirements of the Security Registrar, which requirements include membership or participation in
the Security Transfer Agent Medallion Program
(
STAMP
) or such other signature guarantee program as may be determined by the Security
Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities
Exchange Act of 1934, as amended.
24
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this Security for its own
account or an account with respect to which it exercises sole investment discretion and that it and
any such account is a
qualified institutional buyer
within the meaning of Rule 144A under the
Securities Act and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the undersigned has
requested pursuant to Rule 144A or has determined not to request such information and that it is
aware that the transferor is relying upon the undersigneds foregoing representations in order to
claim the exemption from registration provided by Rule 144A.
NOTICE: To be executed by an executive officer.
25
XILINX, INC.
NOTICE OF CONVERSION
If you want to convert this Security into Common Stock of the Company, check the box:
o
To convert only part of this Security, state the Principal Amount to be converted (which must
be $1,000 or a multiple of $1,000):
$
If you want the stock certificate, if any, made out in another persons name, fill in the form
below:
(Insert other persons social security or tax ID no.)
(Print or type other persons name, address and zip code)
(Sign exactly as your name appears on the other side of this Security)
Note: Signatures must be guaranteed by an eligible guarantor institution meeting the
requirements of the Security Registrar, which requirements include membership or participation in
the Security Transfer Agent Medallion Program (
STAMP
) or such other signature guarantee program
as may be determined by the Security Registrar in addition to, or in substitution for, STAMP, all
in accordance with the Securities Exchange Act of 1934, as amended.
26
XILINX, INC.
FORM OF FUNDAMENTAL CHANGE REPURCHASE NOTICE
_______________, ____
The Bank of New York Mellon Trust Company, N.A.
700 South Flower Street, Suite 500
Los Angeles, CA 90017
Attention: Corporate Trust Department
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Re:
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Xilinx, Inc. (the
Company
)
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2.625% Convertible Senior Notes due 2017
|
This is a Fundamental Change Repurchase Notice as defined in Section 6.01(a) of the Indenture dated
as of June 9, 2010 (the
Indenture
) between the Company and The Bank of New York Mellon Trust
Company, N.A., as Trustee. Terms used but not defined herein shall have the meanings ascribed to
them in the Indenture.
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Certificate No(s). of Securities:
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I intend to deliver the following aggregate Principal
Amount of Securities for purchase by the Company pursuant to
Section 6.01 of the Indenture (in multiples of $1,000):
$
I hereby agree that the Securities will be purchased as of the Fundamental Change Repurchase
Date pursuant to the terms and conditions thereof and of the Indenture.
(Sign exactly as your name appears on the other side of this Security)
Note: Signatures must be guaranteed by an eligible guarantor institution meeting the
requirements of the Security Registrar, which requirements include membership or participation in
the Security Transfer Agent Medallion Program (
STAMP
) or such other signature guarantee program
as may be determined by the Security Registrar in addition to, or in substitution for, STAMP, all
in accordance with the Securities Exchange Act of 1934, as amended.
27
Section 2.04
. Form of Trustees Certificate of Authentication.
This is one of the Securities
referred to in the within-mentioned Indenture.
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Dated:
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The Bank of New York Mellon Trust
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Company, N.A.
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By
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Authorized Signatory
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Section 2.05
. Legend on Restricted Securities.
During the period beginning on the last Issue
Date and ending on the date one year from such date, any Security, including any Security issued in
exchange therefor or in lieu thereof, shall be deemed a
Restricted Security
and shall be subject
to the restrictions on transfer provided in the legends set forth on the face of the form of
Security in Section 2.02;
provided
,
however
, that the term
Restricted Security
shall not include
any Securities as to which restrictions have been terminated in accordance with Section 3.05. All
Securities shall bear the applicable legends set forth on the face of the form of Security in
Section 2.02. Except as provided in Section 3.05 and Section 3.09, the Trustee shall not issue
any unlegended Security until it has received an Officers Certificate from the Company directing
it to do so.
ARTICLE 3
The Securities
Section 3.01
. Title and Terms; Payments.
The aggregate Principal Amount of Securities that
may be authenticated and delivered under this Indenture is initially limited to $520,000,000 (or up
to $600,000,000 to the extent the Initial Purchasers exercise their overallotment option granted
pursuant to the Purchase Agreement), except for Securities authenticated and delivered upon
registration or transfer of, or in exchange for, or in lieu of, other Securities pursuant to
Sections 2.05, 3.04, 3.05, 3.06, 6.05 or 13.06. The Company may, from time to time after the
execution of this Indenture, execute and deliver to the Trustee for authentication Additional
Securities of an unlimited aggregate Principal Amount, and the Trustee shall thereupon authenticate
and deliver said Additional Securities to or upon the written order of the Company, without any
further action by the Company hereunder; provided however that the Company may issue Additional
Securities only if: (1) such Additional Securities and Initial Securities are treated as fungible
for purposes of U.S. federal income tax laws; (2) such Additional Securities have the same CUSIP
number as the Initial Securities; and (3) the Trustee receives an Officers Certificate to the
effect that such
issuance of Additional Securities complies with the provisions of this Indenture, including
each provision of this paragraph.
28
The Securities shall be known and designated as the 2.625% Convertible Senior Notes due 2017
of the Company. The Principal Amount shall be payable at the Stated Maturity.
The Principal Amount of and Interest on Global Securities registered in the name of The
Depository Trust Company or its nominee shall be paid by wire transfer in immediately available
funds to The Depository Trust Company or its nominee, as applicable.
The Principal Amount of Physical Securities shall be payable at the Corporate Trust Office and
at any other office or agency maintained for such purpose and at any other office or agency
maintained by the Company for such purpose. Interest on Physical Securities will be payable (i) to
Holders having an aggregate Principal Amount of $5,000,000 or less of Securities, by check mailed
to such Holders at the address set forth in the Security Register and (ii) to Holders having an
aggregate Principal Amount of more than $5,000,000 of Securities, either by check mailed to such
Holders or, upon application by a Holder to the Security Registrar not later than the relevant
Record Date for such Interest payment, by wire transfer in immediately available funds to such
Holders account within the United States, which application shall remain in effect until the
Holder notifies the Security Registrar to the contrary in writing.
Section 3.02
. Denominations.
The Securities shall be issuable only in registered form
without coupons and in denominations of $2,000 and any multiple of $1,000 in excess thereof.
Section 3.03
. Execution, Authentication, Delivery and Dating.
The Securities shall be
executed on behalf of the Company by the Chairman of the Board of Directors, its President, or one
of its Vice Presidents.
Securities bearing the manual or facsimile signatures of individuals who were at any time the
proper officers of the Company shall bind the Company, notwithstanding that such individuals or any
of them have ceased to hold such offices prior to the authentication and delivery of such
Securities or did not hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of this Indenture, the
Company may deliver Securities executed by the Company to the Trustee for authentication, together
with a Company Order for the authentication and delivery of such Securities. The Company Order
shall specify the amount of Securities to be authenticated, and shall further specify the amount of
such Securities to be issued as a Global Security or as Physical Securities. If Physical
Securities are to be authenticated, such Company Order shall also specify the Holders of, and
delivery instructions for, such Securities. The Trustee in
accordance with such Company Order shall authenticate and deliver such Securities as in this
Indenture provided and not otherwise.
29
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or be valid or obligatory
for any purpose unless there appears on such Security a certificate of authentication substantially
in the form provided for herein executed by the Trustee by manual signature, and such certificate
upon any Security shall be conclusive evidence, and the only evidence, that such Security has been
duly authenticated and delivered hereunder.
Section 3.04
. Temporary Securities.
Pending the preparation of definitive Securities, the
Company may execute, and upon Company Order the Trustee shall authenticate and deliver, temporary
Securities that are printed, lithographed, typewritten, mimeographed or otherwise produced, in any
authorized denomination, substantially of the tenor of the definitive Securities in lieu of which
they are issued and with such appropriate insertions, omissions, substitutions and other variations
as the officers executing such Securities may determine, as evidenced by their execution of such
Securities;
provided
, that any such temporary Securities shall bear legends (other than the Global
Security legend) on the face of such Securities as set forth in Section 2.02.
If temporary Securities are issued, the Company will cause definitive Securities to be
prepared without unreasonable delay. After the preparation of definitive Securities, the temporary
Securities shall be exchangeable for definitive Securities upon surrender of the temporary
Securities at any office or agency of the Company designated pursuant to Section 5.02, without
charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities, the
Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a like
Principal Amount of Physical Securities of authorized denominations. Until so exchanged, the
temporary Securities shall in all respects be entitled to the same benefits under this Indenture as
Physical Securities.
Section 3.05
. Registration; Registration of Transfer and Exchange; Restrictions On Transfer.
(a) The Company shall cause to be kept at the applicable Corporate Trust Office of the Trustee a
register (the register maintained in such office and in any other office or agency designated
pursuant to Section 5.02 being herein sometimes collectively referred to as the
Security
Register
) in which, subject to such reasonable regulations as it may prescribe, the Company shall
provide for the registration of Securities and transfers of Securities. The Trustee is hereby
appointed Security Registrar (the
Security Registrar
) for the purpose of registering Securities
and transfers of Securities as herein provided.
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Upon surrender for registration of transfer of any Security at an office or agency of the
Company designated pursuant to Section 5.02 for such purpose, the
Company shall execute, and the Trustee shall authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Securities of any authorized denominations
and of a like aggregate Principal Amount and tenor, each such Security bearing such restrictive
legends as may be required by this Indenture (including Sections 2.02, 2.05 and 3.09).
At the option of the Holder and subject to the other provisions of this Section 3.05 and to
Section 3.09, Securities may be exchanged for other Securities of any authorized denominations and
of a like aggregate Principal Amount and tenor, upon surrender of the Securities to be exchanged at
such office or agency. Whenever any Securities are so surrendered for exchange, the Company shall
execute, and the Trustee shall authenticate and deliver, the Securities which the Holder making the
exchange is entitled to receive.
All Securities issued upon any registration of transfer or exchange of Securities shall be the
valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under
this Indenture, as the Securities surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer or for exchange shall (if
so required by the Company or the Trustee) be duly endorsed, or be accompanied by a written
instrument of transfer in form satisfactory to the Company and the Security Registrar duly
executed, by the Holder thereof or his attorney duly authorized in writing. As a condition to the
registration of transfer of any Restricted Securities, the Company or the Trustee may require
evidence satisfactory to them as to the compliance with the restrictions set forth in the legend on
such securities.
Except as provided in the following sentence and in Section 3.09, all Securities originally
issued hereunder and all Securities issued upon registration of transfer or exchange or replacement
thereof shall be Restricted Securities and shall bear the legends required by Sections 2.02 and
2.05, unless the Company shall have delivered to the Trustee (and the Security Registrar, if other
than the Trustee) a Company Order stating that the Security is not a Restricted Security and may be
issued without such legend thereon. Securities that are issued upon registration of transfer of,
or in exchange for, Securities that are not Restricted Securities shall not be Restricted
Securities and shall not bear such legend.
So long as and to the extent that any Securities are represented by one or more Global
Securities held by or on behalf of the Depositary only, the Company may cause the removal of the
legends required by Section 2.02 and Section 2.05 from such Securities at any time on or after the
first anniversary of the last Issue Date of the Securities by:
(i) providing to the Trustee written notice stating that such first anniversary has
occurred and instructing the Trustee to remove the such legends from such Securities;
(ii) providing to the Holders of such Securities written notice that such legends
have been removed or deemed removed;
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(iii) providing to the Trustee and the Depositary written notice to change the CUSIP
number for the Securities to the applicable unrestricted CUSIP number; and
(iv) complying with any applicable procedures for delegending in accordance with Rule
144 under the Securities Act and applicable policies of the Commission;
whereupon any legends otherwise required by Sections Section 2.02 and Section 2.05 shall be
deemed removed from any Global Securities without any further action on the part of the Holders.
No service charge shall be made for any registration of transfer or exchange of Securities,
but the Company and the Security Registrar may require payment of a sum sufficient to cover any tax
or other governmental charge that may be imposed in connection with any registration of transfer or
exchange of Securities, other than exchanges pursuant to Section 3.04 not involving any transfer.
Neither the Company nor the Security Registrar shall be required to exchange or register a
transfer of any Security (i) that has been surrendered for conversion or (ii) as to which a
Fundamental Change Repurchase Notice has been delivered and not withdrawn, except that where such
Fundamental Change Repurchase Notice provides that such Security is to be purchased only in part,
the Company and the Security Registrar shall be required to exchange or register a transfer of the
portion thereof not to be purchased.
(b) Beneficial ownership of every Restricted Security shall be subject to the restrictions on
transfer provided in the legends required to be set forth on the face of each Restricted Security
pursuant to Sections 2.02 and 2.05, unless such restrictions on transfer shall be terminated in
accordance with this Section 3.05(b) or Section 3.09. The Holder of each Restricted Security, by
such Holders acceptance thereof, agrees to be bound by such restrictions on transfer.
The restrictions imposed by this Section 3.05 and by Sections 2.02, 2.05 and 3.09 upon the
transferability of any particular Restricted Security shall cease and terminate upon delivery by
the Company to the Trustee of an Officers Certificate stating that such Restricted Security has
been transferred in compliance with Rule 144 under the Securities Act (or any successor provision
thereto). Any Restricted Security as to which the Company has delivered to the Trustee an
Officers Certificate stating that such restrictions on transfer shall have expired in accordance
with their terms or shall have terminated may, upon surrender of such Restricted Security for
exchange to the Security Registrar in accordance with the provisions of this Section 3.05, be
exchanged for a new
Security, of like tenor and aggregate Principal Amount, which shall not bear the restrictive
legends required by Sections 2.02 and 2.05.
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As used in the preceding two paragraphs of this Section 3.05, the term
transfer
encompasses
any sale, pledge, transfer or other disposition of any Restricted Security.
(c) Neither the Trustee, the Security Registrar nor any of their respective agents shall (i)
have any duty to monitor compliance with or with respect to any federal or state or other
securities or tax laws or (ii) have any duty to obtain documentation relating to any transfers or
exchanges other than as specifically required hereunder.
(d) Notwithstanding the foregoing, during the period of one year after the last Issue Date of
the Securities, if any of the Securities that constitute restricted securities under Rule 144
under the Securities Act have been reacquired by the Company or any of its affiliates (as defined
in Rule 144 under the Securities Act), such Securities may not be resold by the Company or such
affiliate, as applicable. Neither the Trustee nor the Securities Registrar shall be charged with
the knowledge of whether such Securities have been reacquired by the Company or its affiliates.
Section 3.06
. Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security is
surrendered to the Trustee, the Company shall execute and the Trustee shall authenticate and
deliver in exchange therefor a new Security of like tenor and Principal Amount and bearing a number
not contemporaneously Outstanding.
If there shall be delivered to the Company and the Trustee (i) evidence to their satisfaction
of the destruction, loss or theft of any Security and (ii) such security or indemnity as may be
required by them to save each of them and any agent of either of them harmless, then, in the
absence of notice to the Company or the Trustee that such Security has been acquired by a bona fide
purchaser, the Company shall execute and the Trustee shall authenticate and deliver, in lieu of any
such destroyed, lost or stolen Security, a new Security of like tenor and Principal Amount and
bearing a number not contemporaneously Outstanding.
In case any such mutilated, destroyed, lost or stolen Security has become or is about to
become due and payable, the Company in its discretion may, instead of issuing a new Security, pay
such Security.
Upon the issuance of any new Security under this Section 3.06, the Company may require
payment by the Holder of a sum sufficient to cover any tax or other governmental charge that may be
imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee)
connected therewith.
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Every new Security issued pursuant to this Section 3.06 in lieu of any destroyed, lost or
stolen Security shall constitute an original additional contractual obligation of the Company,
whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone,
and shall be entitled to all the benefits of this Indenture equally and proportionately with any
and all other Securities duly issued hereunder.
The provisions of this Section 3.06 are exclusive and shall preclude (to the extent lawful)
all other rights and remedies with respect to the replacement or payment of mutilated, destroyed,
lost or stolen Securities.
Section 3.07
. Persons Deemed Owners.
Prior to due presentment of a Security for registration
of transfer, the Company, the Trustee, the Security Registrar and any agent of the Company, the
Trustee or the Security Registrar may treat the Person in whose name such Security is registered as
the owner of such Security for the purpose of receiving payment of the principal of such Security
and for all other purposes whatsoever, whether or not such Security be overdue, and neither the
Company, the Trustee, the Security Registrar nor any agent of the Company, the Trustee or the
Security Registrar shall be affected by notice to the contrary.
Section 3.08
. Book-entry Provisions for Global Securities.
(a) The Global Securities
initially shall (i) be registered in the name of the Depositary or the nominee of such Depositary,
(ii) be delivered to the Trustee as custodian for the Depositary and (iii) bear legends as set
forth on the face of the form of Security in Section 2.02.
Members of, or participants in, the Depositary (
Agent Members
) shall have no rights under
this Indenture with respect to any Global Security held on their behalf by the Depositary, or the
Trustee as its custodian, or under the Global Security, and the Depositary may be treated by the
Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of the
Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall
prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to
any written certification, proxy or other authorization furnished by the Depositary or impair, as
between the Depositary and its Agent Members, the operation of customary practices governing the
exercise of the rights of any Holder.
34
(b) Transfers of the Global Securities shall be limited to transfers in whole, but not in
part, to the Depositary, its successors or their respective nominees. Interests of beneficial
owners in a Global Security may be transferred or exchanged, in whole or in part, for Physical
Securities in accordance with the rules and procedures of the Depositary and the provisions of
Section 3.09. In addition, Physical Securities shall be transferred to all beneficial owners in
exchange for their beneficial interests in the Global Securities if (A) such Depositary has
notified the Company that the Depositary (i) is unwilling or unable
to continue as Depositary for such Global Security or (ii) has ceased to be a clearing agency
registered under the Exchange Act when the Depositary is required to be so registered to act as
such Depositary and, in either such case, no successor Depositary shall have been appointed within
90 days of such notification, (B) there shall have occurred and be continuing an Event of Default
with respect to such Global Security and the Outstanding Securities shall have become due and
payable pursuant to Section 8.02 and the Trustee requests that Physical Securities be issued or
(C) the Company, at its option, notifies the Trustee that it elects to cause the issuance of
Physical Securities, subject to applicable procedures of the Depositary;
provided
that Holders of
Physical Securities offered and sold in reliance on Rule 144A shall have the right, subject to
applicable law, to request that such Securities be exchanged for interests in the applicable Global
Security.
(c) In connection with any transfer or exchange of a portion of the beneficial interest in the
Global Security to beneficial owners pursuant to paragraph (b) above, the Security Registrar shall
(if one or more Physical Securities are to be issued) reflect on its books and records the date and
a decrease in the Principal Amount of the Global Security in an amount equal to the Principal
Amount of the beneficial interest in the Global Security to be transferred, and the Company shall
execute, and the Trustee shall authenticate and deliver, one or more Physical Securities of like
tenor and amount.
(d) In connection with the transfer of the entire Global Security to beneficial owners
pursuant to paragraph (b) above, the Global Security shall be deemed to be surrendered to the
Trustee for cancellation, and the Company shall execute, and the Trustee shall authenticate and
deliver, to each beneficial owner identified by the Depositary in exchange for its beneficial
interest in the Global Security, an equal aggregate Principal Amount of Physical Securities of
authorized denominations and the same tenor.
(e) Any Physical Security constituting a Restricted Security delivered in exchange for an
interest in the Global Security pursuant to paragraph (c) or (d) above shall, except as otherwise
provided by Section 3.05(a) or Section 3.05(b), bear the legend regarding transfer restrictions
applicable to the Physical Securities set forth on the face of the form of Security in Section
2.02.
(f) The Holder of the Global Securities may grant proxies and otherwise authorize any Person,
including Agent Members and Persons that may hold interests through Agent Members, to take any
action that a Holder is entitled to take under this Indenture or the Securities.
35
Section 3.09
. Cancellation and Transfer Provisions.
The Company at any time may deliver to
the Trustee for cancellation any Securities previously authenticated and delivered hereunder that
the Company may have acquired in any manner whatsoever, and may deliver to the Trustee for
cancellation any Securities previously authenticated hereunder which the Company has not issued
and sold. The Trustee shall cancel and dispose of all Securities surrendered for registration
of transfer, exchange, payment, repurchase, conversion (pursuant to Article 7 hereof) or
cancellation in accordance with its customary practices. If the Company shall acquire any of the
Securities, such acquisition shall not operate as a satisfaction of the indebtedness represented by
such Securities unless and until the same are delivered to the Trustee for cancellation. The
Company may not issue new Securities to replace Securities it has paid in full or delivered to the
Trustee for cancellation. Any Securities repurchased by the Company will be retired and cancelled
pursuant to this Section 3.09, and they will deemed no longer to be Outstanding under this
Indenture upon their repurchase.
(a)
Transfers to QIBs
. The following provisions shall apply with respect to the registration
of any proposed transfer of a Security constituting a Restricted Security to a QIB:
(i) the Security Registrar shall register the transfer if such transfer is being made
by a proposed transferor who has checked the box provided for on the form of Security
stating, or has otherwise advised the Company and the Security Registrar in writing, that
the sale has been made in compliance with the provisions of Rule 144A to a transferee who
has signed the certification provided for on the form of Security stating, or has
otherwise advised the Company and the Security Registrar in writing, that it is purchasing
the Security for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a QIB within the meaning of Rule
144A, and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as it has
requested pursuant to Rule 144A or has determined not to request such information and that
it is aware that the transferor is relying upon its foregoing representations in order to
claim the exemption from registration provided by Rule 144A; and
(ii) if the proposed transferee is an Agent Member, and the Securities to be
transferred consist of Physical Securities which after transfer are to be evidenced by an
interest in the Global Security, upon receipt by the Security Registrar of instructions
given in accordance with the Depositarys and the Security Registrars procedures, the
Security Registrar shall reflect on its books and records the date and an increase in the
Principal Amount of the Global Security in an amount equal to the Principal Amount of the
Physical Securities to be transferred, and the Trustee shall cancel the Physical
Securities so transferred.
(b)
Private Placement Legend
. Upon the registration of transfer, exchange or replacement of
Securities not bearing the legends required by Sections 2.02 and 2.05, the Security Registrar shall
deliver Securities that do not bear such legends. Except as otherwise provided pursuant to Section
3.05(a) or Section 3.05(b), upon the registration of transfer, exchange or replacement of
Securities bearing the legends required by Sections 2.02 and 2.05, the Security Registrar
shall deliver only Securities that bear such legends unless there is delivered to the Security
Registrar an Opinion of Counsel reasonably satisfactory to the Company and the Trustee to the
effect that neither such legend nor the related restrictions on transfer are required in order to
maintain compliance with the provisions of the Securities Act.
36
(c)
General
. By its acceptance of any Security bearing the legends required by Sections 2.02
and 2.05, each Holder of such a Security acknowledges the restrictions on transfer of such Security
set forth in this Indenture and in such legends and agrees that it will transfer such Security only
as provided in this Indenture.
The Security Registrar shall retain, in accordance with its customary procedures, copies of
all letters, notices and other written communications received pursuant to this Section 3.09. The
Company shall have the right to inspect and make copies of all such letters, notices or other
written communications at any reasonable time upon the giving of reasonable written notice to the
Security Registrar.
Section 3.10
. CUSIP Numbers.
In issuing the Securities, the Company may use
CUSIP
numbers
(if then generally in use), and, if so, the Trustee shall use CUSIP numbers in repurchase notices
as a convenience to Holders;
provided
that any such notice may state that no representation is made
as to the correctness of such numbers either as printed on the Securities or as contained in any
repurchase notice and that reliance may be placed only on the other identification numbers printed
on the Securities, and any such repurchase shall not be affected by any defect in or omission of
such numbers. The Company will promptly notify the Trustee of any change in the CUSIP numbers.
ARTICLE 4
Interest
Section 4.01
. Generally.
(a) Regular interest (
Regular Interest
) shall accrue on the Securities from June 9, 2010 at
a rate of 2.625% per annum until the principal thereof is paid or made available for payment.
Regular Interest shall be payable semi-annually in arrears on June 15 and December 15 of each year,
commencing December 15, 2010.
(b) Interest on the Securities shall be computed (i) for any full semi-annual period for which
a particular interest rate (inclusive of any Additional Interest payable with respect to the
Securities) is applicable, on the basis of a 360-day year of twelve 30-day months and (ii) for any
period for which a particular interest rate (inclusive of any Additional Interest payable with
respect to the
Securities) is applicable shorter than a full semi-annual period for which interest is
calculated, on the basis of a 30-day month and, for such periods of less than a month, the actual
number of days elapsed over a 30-day month.
37
(c) Except as otherwise provided in this Section 4.01(c), a Holder of any Securities at the
Close of Business on a Record Date shall be entitled to receive Interest on such Securities on the
corresponding Interest Payment Date.
(i) A Holder of any Securities as of a Record Date that are converted after the Close
of Business on such Record Date and prior to the Open of Business on the corresponding
Interest Payment Date shall receive the Interest on the Principal Amount of such
Securities, notwithstanding the conversion of such Securities prior to such Interest
Payment Date. However, a Holder that surrenders any Securities for conversion between the
Close of Business on a Record Date and the Open of Business on the corresponding Interest
Payment Date shall be required to pay the Company an amount equal to the Interest payable
by the Company with respect to such Securities on such Interest Payment Date at the time
such Holder surrenders such Securities for conversion,
provided
,
however
, that this
sentence shall not apply to a Holder that converts Securities:
(A) in respect of which the Company has specified a Fundamental Change
Repurchase Date that is after the relevant Record Date and on or prior to the
relevant Interest Payment Date;
(B) following the Record Date for the payment of Regular Interest on June
15, 2017; or
(C) to the extent of any overdue Interest, if any overdue Interest exists
at the time of conversion with respect to the Securities being converted.
Accordingly, a Holder that converts Securities under any of the circumstances described in
clauses (A), (B) or (C) above (in the case of clause (C), to the extent applicable) will not be
required to pay to the Company an amount equal to the Interest payable by the Company with respect
to such Securities on the relevant Interest Payment Date.
(ii) Notwithstanding any other provision of this Section 4.01(c), any Interest
payable on a Fundamental Change Repurchase Date that falls after the Close of Business on
a Record Date but at or prior to the Close of Business on the corresponding Interest
Payment Date shall be payable to the Holder of record on the corresponding Record Date as
provided in Section 6.01(a) and shall not be payable to the Holder of the Securities being
purchased. The payment of such Interest to the Holder on the
Record Date as provided in Section 6.01(a) shall be deemed to satisfy the Companys
obligations in respect of such Interest.
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ARTICLE 5
Covenants
Section 5.01
. Payments.
The Company shall duly and punctually make all payments in respect
of the Securities in accordance with the terms of the Securities and this Indenture.
Any payments made or due pursuant to this Indenture shall be considered paid on the applicable
date due if by 10:00 a.m., New York City time, on such date the Paying Agent holds, in accordance
with this Indenture, cash sufficient to pay all such amounts then due. Payment of the principal of
and Interest on the Securities shall be in such coin or currency of the United States of America as
at the time of payment is legal tender for payment of public and private debts.
Section 5.02
. Maintenance of Office or Agency.
The Company shall maintain an office or
agency in the Borough of Manhattan, The City of New York, where Securities may be presented or
surrendered for payment or conversion, where Securities may be surrendered for registration of
transfer or exchange and where notices and demands to or upon the Company in respect of the
Securities and this Indenture may be served, which shall initially be the applicable Corporate
Trust Office of the Trustee. The Company shall give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency not designated or appointed by
the Trustee. If at any time the Company shall fail to maintain any such required office or agency
or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office, and the Company hereby
appoints the Trustee as its agent to receive all such presentations, surrenders, notices and
demands.
The Company may also from time to time designate one or more other offices or agencies (in or
outside the Borough of Manhattan, The City of New York) where the Securities may be presented or
surrendered for any or all such purposes and may from time to time rescind such designations;
provided
,
however
that no such designation or rescission shall in any manner relieve the Company of
its obligation to maintain an office or agency in the Borough of Manhattan, The City of New York,
for such purposes. The Company shall give prompt written notice to the Trustee of any such
designation or rescission and of any change in the location of any such other office or agency.
So long as the Trustee is the Security Registrar, the Trustee agrees to mail, or cause to be
mailed, the notices set forth in Section 10.10(c) and the third paragraph of Section 10.11. If
co-registrars have been appointed in accordance
with this Section, the Trustee shall mail such notices only to the Company and the holders of
Securities it can identify from its records.
39
The Company hereby initially designates the Trustee as Paying Agent, Security Registrar,
Custodian and Conversion Agent and the Corporate Trust Office.
Section 5.03
. Appointments to Fill Vacancies in Trustees Office.
The Company, whenever
necessary to avoid or fill a vacancy in the office of Trustee, will appoint, in the manner provided
in Section 10.10(a), a Trustee, so that there shall at all times be a Trustee hereunder.
Section 5.04
. Provisions as to Paying Agent.
(a) If the Company shall appoint a Paying Agent other than the Trustee, or if the Trustee
shall appoint such a Paying Agent, the Company will cause such Paying Agent to execute and deliver
to the Trustee an instrument in which such agent shall agree with the Trustee, subject to the
provisions of this Section 5.04:
(i) that it will hold all sums held by it as such agent for the payment of the
principal of or Interest on the Securities (whether such sums have been paid to it by the
Company or by any other obligor on the Securities) in trust for the benefit of the holders
of the Securities;
(ii) that it will give the Trustee notice of any failure by the Company (or by any
other obligor on the Securities) to make any payment of the principal of or Interest on
the Securities when the same shall be due and payable; and
(iii) that at any time during the continuance of an Event of Default, upon request of
the Trustee, it will forthwith pay to the Trustee all sums held in trust by such Paying
Agent as such.
The Company shall, on or before each due date of the Principal Amount of or Interest on the
Securities, deposit with the Paying Agent a sum (in funds which are immediately available on the
due date for such payment) sufficient to pay such Principal Amount or Interest, and (unless such
Paying Agent is the Trustee) the Company will promptly notify the Trustee of any failure to take
such action;
provided
, however, that if such deposit is made on the due date, such deposit shall be
received by the Paying Agent by 10:00 a.m. New York City time, on such date.
(b) If the Company shall act as its own Paying Agent, it will, on or before each due date of
the Principal Amount of or Interest on the Securities, set aside, segregate and hold in trust for
the benefit of the Holders of the Securities a sum sufficient to pay such Principal Amount or
Interest, so becoming due and will promptly notify the Trustee of any failure to take such action
and of any failure by the Company (or any other obligor under the Securities) to make any payment
of
the Principal Amount of or Interest on the Securities when the same shall become due and
payable.
40
(c) Anything in this Section 5.04 to the contrary notwithstanding, the Company may, at any
time, for the purpose of obtaining a satisfaction and discharge of this Indenture, or for any other
reason, pay or cause to be paid to the Trustee all sums held in trust by the Company or any Paying
Agent hereunder as required by this Section 5.04, such sums to be held by the Trustee upon the
trusts herein contained and upon such payment by the Company or any Paying Agent to the Trustee,
the Company or such Paying Agent shall be released from all further liability with respect to such
sums.
(d) Anything in this Section 5.04 to the contrary notwithstanding, the agreement to hold sums
in trust as provided in this Section 5.04 is subject to Section 12.03 and Section 12.04.
The Trustee shall not be responsible for the actions of any other Paying Agents (including the
Company if acting as its own Paying Agent) and shall have no control of any funds held by such
other Paying Agents.
Section 5.05
. Existence.
Subject to Article 9, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its existence and rights (charter
and statutory);
provided
, however, that the Company shall not be required to preserve any such
right if the Company shall determine that the preservation thereof is no longer desirable in the
conduct of the business of the Company and that the loss thereof is not disadvantageous in any
material respect to the Holders of the Securities.
Section 5.06
. Rule 144A Information Requirement.
Within the period prior to the expiration
of the holding period applicable to sales of Securities or any Common Stock issuable on conversion
thereof under Rule 144 under the Securities Act (or any successor provision), the Company covenants
and agrees that it shall, during any period in which it is not subject to Section 13 or 15(d) under
the Exchange Act, make available to any Holder or beneficial holder of Securities or any Common
Stock issued upon conversion thereof, in each case which continue to be Restricted Securities in
connection with any sale thereof and any prospective purchaser of Securities or such Common Stock
designated by such Holder or beneficial holder, the information required pursuant to Rule
144A(d)(4) under the Securities Act upon the request of any Holder or beneficial holder of the
Securities or such Common Stock and it will take such further action as any Holder or beneficial
holder of such Securities or such Common Stock may reasonably request, all to the extent required
from time to time to enable such Holder or beneficial holder to sell its Securities or Common Stock
without registration under the Securities Act within the limitation of the exemption provided by
Rule 144A, as such rule may be amended from time to time. Upon the request of any Holder or any
beneficial holder of the Securities or such
Common Stock, the Company will deliver to such Holder a written statement as to whether it has
complied with such requirements.
41
Section 5.07
. Commission Filings and Reports.
The Company covenants to file with the Trustee
copies of the annual reports and of the information, documents and other reports (or copies of such
portions of any of the foregoing as the Commission may from time to time by rules and regulations
prescribe), other than current reports on Form 8-K, which the Company may be required to file with
the Commission pursuant to Section 13 or Section 15(d) of the Exchange Act, within 15 days after
the same is required to be filed with the Commission (giving effect to any grace period provided by
Rule 12b-25 under the Exchange Act);
provided
that in each case the delivery of materials to the
Trustee by electronic means or filing of documents pursuant to the Commissions EDGAR system (or
any successor electronic filing system) shall be deemed to constitute filing with the Trustee for
purposes of this Section 5.07 at the time such documents are so delivered or filed,
provided
,
however, that the Trustee shall have no responsibility whatsoever to determine whether such filing
has been made. Delivery of such reports, information and documents to the Trustee is for
informational purposes only and the Trustees receipt of such shall not constitute constructive
notice of any information contained therein or determinable from information contained therein,
including the Companys compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers Certificates).
Section 5.08.
Additional Interest.
If at any time Additional Interest becomes payable by the
Company pursuant to Section 8.03, the Company shall promptly deliver to the Trustee a certificate
to that effect and stating (1) the amount of such Additional Interest that is payable and (2) the
date on which such Additional Interest is payable. Additional Interest payable in accordance with
Section 8.03 shall be payable in arrears on each Interest Payment Date following accrual in the
same manner as Regular Interest on the Securities. Unless and until a Responsible Officer of the
Trustee receives such a certificate, the Trustee may assume without inquiry that no Additional
Interest is payable. If the Company has paid Additional Interest directly to the Persons entitled
to such Additional Interest, the Company shall deliver to the Trustee a certificate setting forth
the particulars of such payment.
Section 5.09
. Stay; Extension and Usury Laws.
The Company covenants (to the extent that it
may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay, extension or usury law or other law which
would prohibit or forgive the Company from paying all or any portion of the principal of or
Interest, on the Securities as contemplated herein, wherever enacted, now or at any time hereafter
in force, or which may affect the covenants or the performance of this Indenture and the Company
(to the extent it may lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not, by resort to any such law, hinder, delay or impede the
execution of any power herein granted
to the Trustee, but will suffer and permit the execution of every such power as though no such
law had been enacted.
42
Section 5.10
. Compliance Certificate.
The Company shall deliver to the Trustee, within 120
days after the end of each fiscal year of the Company (beginning with the fiscal year that begins
after April 3, 2010), an Officers Certificate, stating whether or not to the knowledge of the
signers thereof any Event of Default or Default has occurred in such fiscal year and, if the
Company shall be in default, specifying all such Defaults and the nature and the status thereof of
which the signer may have knowledge.
The Company shall deliver to the Trustee within 60 days after the Company becomes aware of the
occurrence of any Event of Default or Default, written notice setting forth the details of such
Event of Default or Default, its status and the action which the Company proposes to take or is
taking with respect thereto.
Any notice required to be given under this Section 5.10 shall be delivered to a Responsible
Officer of the Trustee at its Corporate Trust Office.
Section 5.11
. Further Instruments and Acts.
Upon request of the Trustee, the Company will
execute and deliver such further instruments and do such further acts as may be reasonably
necessary or proper to carry out more effectively the purposes of this Indenture.
ARTICLE 6
Fundamental Changes and Repurchases Thereupon
Section 6.01
. Repurchase at Option of Holders upon a Fundamental Change.
(a)
Generally
. If a Fundamental Change occurs at any time, then each Holder shall have the
right, at such Holders option, to require the Company to repurchase for cash all of such Holders
Securities or any portion thereof that is equal to $1,000 or a multiple of $1,000 Principal Amount,
on a Business Day (the
Fundamental Change Repurchase Date
) specified by the Company that is not
less than 20 nor more than 35 calendar days after the date of the Fundamental Change Company Notice
(as defined below) at a repurchase price equal to 100% of the Principal Amount thereof, together
with accrued and unpaid Interest thereon to, but excluding, the Fundamental Change Repurchase Date
(the
Fundamental Change Repurchase Price
);
provided
,
however
that if Securities are repurchased
pursuant to this Section 6.01 on any date between a Record Date and the Interest Payment Date to
which such Record Date relates, the full amount of Interest payable in respect of such Interest
Payment Date shall be payable to the Holders of record as of the corresponding Record Date, in
which
case, the Fundamental Change Repurchase Price shall be equal to 100% of the Principal Amount
of the Securities being purchased.
43
Repurchases of Securities under this Section 6.01, at the option of the Holder thereof, shall
be made upon:
(i) delivery to the Trustee (or other Paying Agent appointed by the Company) by a
Holder, prior to the Close of Business on the Business Day immediately preceding the
Fundamental Change Repurchase Date, of a duly completed notice (the
Fundamental Change
Repurchase Notice
) in the form set forth on the reverse of the Securities prior to the
Close of Business on the Fundamental Change Repurchase Date; and
(ii) delivery or book-entry transfer of the Securities to be repurchased to the
Trustee (or other Paying Agent appointed by the Company) prior to the Close of Business on
the Business Day immediately preceding the Fundamental Change Repurchase Date therefor;
provided
that such Fundamental Change Repurchase Price shall be so paid pursuant to this
Section 6.01 only if the Securities so delivered to the Trustee (or other Paying Agent
appointed by the Company) shall conform in all respects to the description thereof in the
related Fundamental Change Repurchase Notice.
The Fundamental Change Repurchase Notice shall state:
(A) if Physical Securities are to be delivered, the certificate numbers of
Securities to be delivered for repurchase;
(B) the portion of the Principal Amount of Securities to be repurchased,
which must be $1,000 or a multiple thereof; and
(C) that the Securities are to be repurchased by the Company pursuant to
the applicable provisions of the Securities and this Indenture;
provided
,
however
, that if the Securities are not Physical Securities, the notice must comply with
appropriate procedures of the Depositary.
Any purchase by the Company contemplated pursuant to the provisions of this Section 6.01
shall be consummated by the delivery of the consideration to be received by the Holder promptly
following the later of the Fundamental Change Repurchase Date and the time of the book-entry
transfer or delivery of the Securities.
Notwithstanding anything herein to the contrary, any Holder delivering to the Trustee (or
other Paying Agent appointed by the Company) the Fundamental Change Repurchase Notice contemplated
by this Section 6.01 shall have the right
to withdraw such Fundamental Change Repurchase Notice at any time prior to the Close of
Business on the Business Day prior to the Fundamental Change Repurchase Date by delivery of a
written notice of withdrawal to the Trustee (or other Paying Agent appointed by the Company) in
accordance with Section 6.03 below.
44
The Trustee (or other Paying Agent appointed by the Company) shall promptly notify the Company
of the receipt by it of any Fundamental Change Repurchase Notice or written notice of withdrawal
thereof. If any Fundamental Change Repurchase Notice is given and then withdrawn prior to the
Close of Business of the Business Day immediately preceding the Fundamental Change Repurchase Date,
the Company will not be obligated to purchase the Securities to which such Fundamental Change
Repurchase Notice relates.
(b)
Fundamental Change Company Notice
. On or before the 20th Business Day after the
occurrence of a Fundamental Change, the Company shall provide to all Holders of record of the
Securities and the Trustee and Paying Agent a notice (the
Fundamental Change Company Notice
) of
the occurrence of such Fundamental Change and of the repurchase right at the option of the Holders
arising as a result thereof. Such mailing shall be by first class mail. Simultaneously with
providing such Fundamental Change Company Notice, the Company shall publish a notice containing the
information included therein once in a newspaper of general circulation in The City of New York or
publish such information on the Companys website or through such other public medium as the
Company may use at such time.
Each Fundamental Change Company Notice shall specify:
(i) the events causing the Fundamental Change;
(ii) the date of the Fundamental Change;
(iii) the last date on which a Holder may exercise the repurchase right;
(iv) the Fundamental Change Repurchase Price;
(v) the Fundamental Change Repurchase Date;
(vi) the name and address of the Paying Agent and the Conversion Agent, if
applicable;
(vii) if applicable, the applicable Conversion Rate and any adjustments to the
applicable Conversion Rate;
45
(viii) if applicable, that the Securities with respect to which a Fundamental Change
Repurchase Notice has been delivered by a
Holder may be converted only if the Holder withdraws the Fundamental Change
Repurchase Notice in accordance with Section 6.03; and
(ix) the procedures that Holders must follow to require the Company to repurchase
their Securities.
No failure of the Company to give the foregoing notices and no defect therein shall limit the
Holders repurchase rights or affect the validity of the proceedings for the repurchase of the
Securities pursuant to this Section 6.01.
(c)
No Payment During Acceleration
. There shall be no repurchase of any Securities pursuant
to this Section 6.01 if (prior to, on or after, as the case may be, the giving, by the Holders of
such Securities, of the required Fundamental Change Repurchase Notice) the Principal Amount of the
Securities has been accelerated in accordance with this Indenture and such acceleration has not
been rescinded on or prior to the Fundamental Change Repurchase Date (except in the case of an
acceleration resulting from a Default by the Company in payment of the Fundamental Change
Repurchase Price with respect to such Securities). The Paying Agent will promptly return to the
respective Holders thereof any Securities (i) with respect to which a Fundamental Change Repurchase
Notice has been withdrawn in compliance with this Indenture, or (ii) held by it during the
continuance of an acceleration (other than an acceleration resulting from a Default that is cured
by the payment of the Fundamental Change Repurchase Price with respect to such Securities) and
shall deem to be cancelled any instructions for book-entry transfer of the Securities in compliance
with the procedures of the Depositary in which case, upon such return, the Fundamental Change
Repurchase Notice with respect thereto shall be deemed to have been withdrawn.
(d)
Payment of Fundamental Change Repurchase Price
. The Securities to be repurchased pursuant
to this Section 6.01 shall be paid for in cash.
Section 6.02
. Effect of Fundamental Change Repurchase Notice.
Upon receipt by the Paying
Agent of the Fundamental Change Repurchase Notice specified in Section 6.01(a), the Holder of the
Security in respect of which such Fundamental Change Repurchase Notice was given shall (unless such
Fundamental Change Repurchase Notice is withdrawn as specified in Section 6.03) thereafter be
entitled to receive solely the Fundamental Change Repurchase Price with respect to such Security.
Such Fundamental Change Repurchase Price shall be paid to such Holder, subject to receipt of funds
by the Paying Agent, promptly following the later of (x) the Fundamental Change Repurchase Date
with respect to such Security (
provided
the conditions in Section 6.01(a) have been satisfied) and
(y) the time of delivery of such Security to the Paying Agent by the Holder thereof in the manner
required by Section 6.01(a).
46
Section 6.03
. Withdrawal of Fundamental Change Repurchase Notice.
A Fundamental Change
Repurchase Notice may be withdrawn in whole or in part by
means of a written notice of withdrawal delivered to the Paying Agent in accordance with the
Fundamental Change Company Notice at any time prior to the Close of Business on the Business Day
immediately preceding the Fundamental Change Repurchase Date, specifying:
(i) the Principal Amount of the Securities with respect to which such notice of
withdrawal is being submitted;
(ii) if Physical Securities have been issued, the certificate numbers of the
withdrawn Securities; and
(iii) the Principal Amount, if any, of such Securities that remains subject to the
original Fundamental Change Repurchase Notice, which portion must be in Principal Amounts
of $1,000 or a multiple of $1,000;
provided
,
however
, that if the Securities are not Physical Securities, the notice must comply with
appropriate procedures of the Depositary.
Section 6.04
. Deposit of Fundamental Change Repurchase Price.
Prior to 10:00 a.m. (New York
City time) on the Fundamental Change Repurchase Date, the Company shall deposit with the Trustee or
with the Paying Agent (or, if the Company or a Subsidiary or an Affiliate of either of them is
acting as the Paying Agent, shall segregate and hold in trust as provided herein) an amount of
money (in immediately available funds if deposited on such Business Day) sufficient to pay the
Fundamental Change Repurchase Price, of all the Securities or portions thereof that are to be
repurchased as of the Fundamental Change Repurchase Date. The Company shall promptly notify the
Trustee in writing of the amount of any deposits of cash made pursuant to this Section 6.04. If
the Paying Agent holds cash sufficient to pay the Fundamental Change Repurchase Price of any
Security for which a Fundamental Change Repurchase Notice has been tendered and not withdrawn in
accordance with this Indenture as of the Close of Business on the Business Day prior to the
Fundamental Change Repurchase Date, then immediately following the Fundamental Change Repurchase
Date, (a) such Security will cease to be Outstanding and Interest will cease to accrue thereon
(whether or not book-entry transfer of such Security is made or whether or not such Security is
delivered to the Paying Agent) and (b) all other rights of the Holder in respect thereof will
terminate (other than the right to receive the Fundamental Change Repurchase Price and previously
accrued and unpaid Interest upon delivery or transfer of such Security).
47
Section 6.05
. Securities Repurchased in Whole or in Part.
Any Security that is to be
repurchased, whether in whole or in part, shall be surrendered at the office of the Paying Agent
(with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of
transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof
or such Holders attorney duly authorized in writing) and the Company shall execute and the
Trustee shall authenticate and deliver to the Holder of such Security, without service charge,
a new Security or Securities, of any authorized denomination as requested by such Holder in
aggregate Principal Amount equal to, and in exchange for, the portion of the Principal Amount of
the Security so surrendered which is not repurchased, provided, that such Principal Amount must be
$2,000 or greater.
Section 6.06
. Covenant to Comply With Securities Laws Upon Repurchase of Securities.
In
connection with any offer to repurchase Securities under Section 6.01 (
provided
that such offer or
repurchase constitutes an issuer tender offer for purposes of Rule 13e-4 (which term, as used
herein, includes any successor provision thereto) under the Exchange Act at the time of such offer
or repurchase), the Company shall (i) comply with the provisions of the tender offer rules under
the Exchange Act that may then be applicable, (ii) file the related Schedule TO (or any successor
schedule, form or report) to the extent required or any other required schedule under the Exchange
Act, and (iii) otherwise comply with all Federal and state securities laws so as to permit the
rights and obligations under Section 6.01 to be exercised in the time and in the manner specified
in Section 6.01.
Section 6.07
. Repayment to The Company.
The Trustee and the Paying Agent shall return to the
Company any cash that remains unclaimed, together with interest or dividends, if any, thereon, held
by them for the payment of the Fundamental Change Repurchase Price;
provided
that to the extent
that the aggregate amount of cash deposited by the Company pursuant to Section 6.04 exceeds the
aggregate Fundamental Change Repurchase Price of the Securities or portions thereof which the
Company is obligated to repurchase as of the Fundamental Change Repurchase Date, then as soon as
practicable following the Fundamental Change Repurchase Date, the Trustee or the Paying Agent, as
the case may be, shall return any such excess to the Company.
Section 6.08
. Purchase by Third Party.
Notwithstanding the foregoing provisions of this
Article 6, the Company shall not be required to issue a Fundamental Change Company Notice upon a
Fundamental Change (i) if another Person issues a Fundamental Change Company Notice in the manner,
at the times and otherwise in compliance with the requirements set forth in Section 6.01(b)
applicable to a Fundamental Change Company Notice made by the Company and otherwise complies with
the provisions of this Article 6 as if it were the Company, and (ii) purchases and pays for all
Securities validly tendered and not withdrawn pursuant to such Fundamental Change Company Notice.
48
ARTICLE 7
Conversion
Section 7.01
. Right to Convert.
(a) Subject to and upon compliance with the provisions of
this Indenture, each Holder shall have the right, at such Holders
option, at any time prior to the Close of Business on the second Scheduled Trading Day
immediately preceding the Stated Maturity to convert the Principal Amount of any such Securities,
or any portion of such Principal Amount which is $1,000 or a multiple thereof at a rate per $1,000
Principal Amount of such Security (the
Conversion Rate
) then in effect, (x) on or after March 15,
2017, without regard to the conditions described in clauses (i) through (iv) below and (y) prior to
the Close of Business on the Business Day immediately preceding March 15, 2017, only upon the
satisfaction of any of the following conditions:
(i) A Holder may surrender all or a portion of its Securities for conversion during
any fiscal quarter (and only during such fiscal quarter) commencing after October 2, 2010
if the Last Reported Sale Price for the Common Stock for at least 20 Trading Days (whether
or not consecutive) during the period of 30 consecutive Trading Days ending on the last
Trading Day of the immediately preceding fiscal quarter is greater than or equal to 130%
of the applicable Conversion Price in effect on each applicable Trading Day.
(ii) A Holder may surrender its Securities for conversion during the five Business
Day period after any 10 consecutive Trading Day period (the
Measurement Period
) in which
the Trading Price per $1,000 Principal Amount of Securities, as determined by the Bid
Solicitation Agent following a request by a Holder in accordance with the procedures set
forth in this Section 7.01(a)(ii), for each day of such Measurement Period was less than
98% of the product of the Last Reported Sale Price of the Common Stock and the applicable
Conversion Rate (
Trading Price Condition
). If the Company did not so instruct the Bid
Solicitation Agent to obtain bids when required, the Trading Price per $1,000 Principal
Amount of Securities would deemed to be less than 98% of the product of the Last Reported
Sale Price of the Common Stock and the applicable Conversion Rate on each day the Company
fails to do so. In connection with any conversion in accordance with this Section
7.01(a)(ii), the Bid Solicitation Agent shall have no obligation to determine the Trading
Price of the Securities unless requested by the Company; and the Company shall have no
obligation to make such request to the Bid Solicitation Agent unless a Holder of a
Security provides the Company with reasonable evidence that the Trading Price per $1,000
Principal Amount of Securities would be less than 98% of the product of the Last Reported
Sale Price of the Common Stock and the applicable Conversion Rate. After receiving such
evidence, the Company shall instruct the Bid Solicitation Agent to determine the Trading
Price of the Securities beginning on the next Trading Day and on each successive Trading
Day until the Trading Price per $1,000 Principal Amount of Securities is greater than or
equal to 98% of the product of the Last Reported Sale Price of the Common Stock and the
applicable Conversion Rate. If the Trading Price Condition has been met, the Company will
notify the Holders and the Trustee. If, at any time after the Trading Price
Condition has been met, the Trading Price per $1,000 Principal Amount of Securities
is greater than 98% of the product of the Last Reported Sale Price of the Common Stock and
the Conversion Rate for such date, the Company will so notify the Holders and the Trustee.
49
(iii) In the event that the Company elects to:
(A) issue to all or substantially all holders of Common Stock rights,
options or warrants entitling them to subscribe for or purchase, for a period
expiring within 60 days after the date of the distribution, shares of Common
Stock at less than the average of the Last Reported Sale Prices of a share of
Common Stock for the 10 consecutive Trading Day period ending on the Trading Day
immediately preceding the date of announcement of such issuance; or
(B) distribute to all or substantially all holders of Common Stock assets
of the Company, debt securities or rights to purchase securities of the Company,
which distribution has a per share value, as determined by the Companys Board
of Directors in good faith, exceeding 10% of the Last Reported Sale Price of the
Common Stock on the Trading Day preceding the declaration date for such
distribution,
then, in either case, the Company shall notify the Holders, in the manner provided in Section
1.05, at least 35 Scheduled Trading Days prior to the Ex Date for such distribution. Once the
Company has given such notice, Holders may surrender Securities for conversion at any time until
the earlier of the Close of Business on the Business Day immediately prior to such Ex Date and the
Companys announcement that such distribution will not take place, even if the Securities are not
otherwise convertible at such time.
(iv) If the Company is party to a transaction or event that constitutes a Fundamental
Change or a Make-Whole Fundamental Change, regardless of whether a Holder has the right to
require the Company to repurchase its Securities pursuant to Section 6.01, or if the
Company is a party to a consolidation, merger, binding share exchange, or transfer or
lease of all or substantially all of the assets of the Company, pursuant to which the
Common Stock would be converted into cash, securities or other assets, the Securities may
be surrendered for conversion at any time from or after the date which is 35 Scheduled
Trading Days prior to the anticipated effective date for such transaction (or, if later,
the Business Day after the Company gives notice of such transaction) until the earlier of
(A) the date which is 35 Scheduled Trading Days after the actual effective date of such
transaction (or, if such transaction also constitutes a Fundamental Change, until the
related
50
Fundamental Change Repurchase Date) or (B) the date the Company announces that the
transaction will not
take place. The Company shall notify Holders and the Trustee (i) as promptly as
practicable following the date the Company publicly announces such transaction but in no
event less than 35 Scheduled Trading Days prior to the anticipated effective date of such
transaction or (ii) if the Company does not have knowledge of such transaction, or the
anticipated effective date thereof, at least 35 Scheduled Trading Days prior to the
anticipated effective date of such transaction, within one Business Day of the date upon
which the Company receives notice, or otherwise becomes aware, of such transaction or the
anticipated effective date but in no event later than the actual effective date of the
transaction.
Section 7.02
. Conversion Procedures.
(a) Upon conversion of any Security, subject to this
Section 7.02 and Section 7.01 and Section 7.07, the Company will deliver to Holders in respect of
each $1,000 Principal Amount of Securities tendered for conversion a settlement amount equal to the
sum of the Daily Settlement Amounts for each of the 30 consecutive Trading Days during the
Observation Period (the
Settlement Amount
).
The
Daily Settlement Amount
for each of the 30 consecutive Trading Days during the
Observation Period shall consist of:
(i) cash equal to the lesser of one-thirtieth of $1,000 and the Daily Conversion
Value; and
(ii) if the Daily Conversion Value exceeds one-thirtieth of $1,000, a number of
shares of Common Stock equal to (A) the difference between the Daily Conversion Value and
one-thirtieth of $1,000, divided by (B) the Daily VWAP for such Trading Day.
The
Daily Conversion Value
means, for each of the 30 consecutive Trading Days during the
Observation Period, one-thirtieth of the product of (i) the applicable Conversion Rate for such
Trading Day and (ii) the Daily VWAP of the Common Stock on such Trading Day.
(b) If any adjustment to the Conversion Rate or conversion of Securities pursuant to this
Section 7.02 would require the Company to issue shares of Common Stock in excess of the amount
permitted by applicable listing standards of The NASDAQ Global Select Market to be issued without
approval by the Companys stockholders, the Company shall, at its option, either (i) obtain the
approval of its stockholders with respect to such issuance or (ii) in lieu of delivering shares of
Common Stock in excess of such limitations, pay cash on a pro rata basis to the Holders of
Securities being converted in an amount per share of Common Stock equal to the Daily VWAP of the
Common Stock on each Trading Day of the relevant Observation Period in respect of which such shares
would otherwise be required to be delivered to the converting Holders.
51
(c) For purposes of this Section 7.02, and notwithstanding the definition contained in
Section 1.01, the term
Trading Day
shall mean a day on which (A) there is no Market Disruption
Event and (B) trading in the Common Stock generally occurs on The NASDAQ Global Select Market or,
if the Common Stock is not then listed on The NASDAQ Global Select Market, on the other principal
U.S. national or regional securities exchange on which the Common Stock is then listed or, if the
Common Stock is not then listed on a U.S. national or regional securities exchange, on the
principal other market on which the Common Stock is then listed or admitted for trading. If the
Common Stock (or other security for which a Daily VWAP must be determined for purposes of this
Section 7.02) is not so listed or admitted for trading, then, for purposes of this Section 7.02,
Trading Day
shall mean a Business Day.
(d) For purposes of this Section 7.02, the term
Market Disruption Event
means (i) a failure
by the primary U.S. national or regional securities exchange or market on which the Common Stock is
listed or admitted to trading to open for trading during its regular trading session or (ii) the
occurrence or existence prior to 1:00 p.m., New York City time, on any Scheduled Trading Day for
the Common Stock for more than one half-hour period in the aggregate during regular trading hours
of any suspension or limitation imposed on trading (by reason of movements in price exceeding
limits permitted by the relevant stock exchange or otherwise) in the Common Stock or in any
options, contracts or future contracts relating to the Common Stock.
(e) Before any Holder of a Security shall be entitled to convert the same as set forth above,
such Holder shall (1) in the case of a Global Security, comply with the procedures of the
Depositary in effect at that time and, if required, pay funds equal to interest payable on the next
Interest Payment Date to which such Holder is not entitled as set forth in Section 7.02(l) and, if
required pursuant to Section 7.02(a)(i), pay all stamp, transfer or similar taxes or duties, if
any, in connection with such conversion and (2) in the case of a Security issued in certificated
form, (A) complete and manually sign and deliver an irrevocable written notice to the Conversion
Agent in the form on the reverse of such certificated Security (or a facsimile thereof) (a
Notice
of Conversion
) at the office of the Conversion Agent and shall state in writing therein the
Principal Amount of Securities to be converted and the name or names (with addresses) in which such
Holder wishes the certificate or certificates for any shares of Common Stock, if any, to be
delivered upon settlement of the Companys conversion obligation to be registered, (B) surrender
such Securities, duly endorsed to the Company or in blank (and accompanied by appropriate
endorsement and transfer documents), at the office of the Conversion Agent, (C) if required
pursuant to Section 7.02(a)(i), pay all stamp, transfer or similar taxes or duties, if any, in
connection with such conversion, and (D) if required, pay funds equal to interest payable on the
next Interest Payment Date to which such Holder is not entitled as set forth in Section 7.02(l).
No Notice of Conversion with respect to any Securities may be tendered by a Holder thereof if such
Holder has also tendered a Fundamental Change Repurchase Notice and not validly withdrawn such
Fundamental Change Repurchase Notice, as the case may be, in accordance with Section 6.03.
52
If more than one Security shall be surrendered for conversion at one time by the same Holder,
the Companys conversion obligation with respect to such Securities, if any, that shall be payable
upon conversion shall be computed on the basis of the aggregate Principal Amount of the Securities
(or specified portions thereof to the extent permitted thereby) so surrendered.
(f) A Security shall be deemed to have been converted immediately prior to the Close of
Business on the date (the
Conversion Date
) that the Holder has complied with the requirements set
forth in clause (e); provided, however, that the Person in whose name any shares of the Common
Stock shall be issuable upon such conversion will become the Holder of record of such shares as of
the Close of Business on the last Trading Day of the relevant Observation Period.
(g) Except as set forth in Section 7.06, payment of the Settlement Amount pursuant to Section
7.02 in satisfaction of the Companys conversion obligation shall be made by the Company in no
event later than the third Business Day immediately following the last Trading Day of the
Observation Period. The Company shall deliver cash in lieu of any fractional share of Common Stock
issuable in connection with payment of the Settlement Amount (based on the Daily VWAP of the last
Trading Day of the applicable Observation Period.
(h) In case any Security shall be surrendered for partial conversion, the Company shall
execute and the Trustee shall authenticate and deliver to or upon the written order of the Holder
of the Security so surrendered, without charge to such Holder, a new Security or Securities in
authorized denominations in an aggregate Principal Amount equal to the unconverted portion of the
surrendered Securities.
(i) If a Holder submits a Security for conversion, the Company shall pay any documentary,
stamp or similar issue or transfer tax due on the issue of any shares of Common Stock upon the
conversion, unless the tax is due because the Holder requests any shares to be issued in a name of
other than the Holders name or, solely because as a result of actions by the Holder, the tax is
imposed by any taxing authority outside the United States, in which case the Holder will pay that
tax. The Conversion Agent may refuse to deliver the certificates representing the shares of Common
Stock being issued in a name other than the Holders name until the Trustee receives a sum
sufficient to pay any tax which will be due because the shares are to be issued in a name other
than the Holders name or because of such tax imposed by such taxing authority outside the United
States. Nothing herein shall preclude any tax withholding required by law or regulations.
53
(j) Except as provided in Section 7.03, no adjustment shall be made for dividends on any
shares issued upon the conversion of any Security as provided in this Article 7.
(k) Upon the conversion of an interest in a Global Security, the Trustee shall make a notation
on such Global Security as to the reduction in the Principal Amount represented thereby. The
Company shall notify the Trustee in writing of any conversion of any Security effected through any
Conversion Agent other than the Trustee.
(l) Upon conversion, a Holder will not receive any separate cash payment for accrued and
unpaid Interest except as set forth below. The Companys settlement of the conversion obligation
as described above shall be deemed to satisfy its obligation to pay the Principal Amount of the
Security and accrued and unpaid Interest to, but not including, the Conversion Date. As a result,
accrued and unpaid Interest to, but not including, the Conversion Date shall be deemed to be paid
in full rather than cancelled, extinguished or forfeited, and to have been paid first out of the
cash paid upon such conversion. Notwithstanding the preceding sentence, payments in respect of
accrued and unpaid Interest on Securities converted after the Close of Business on a Record Date
and prior to the Open of Business on the related Interest Payment Date shall be governed by the
provisions of Section 4.01 hereof. Except as described above, no payment or adjustment will be
made for accrued Interest on converted Securities.
Section 7.03
. Adjustment of Conversion Rate.
The initial Conversion Rate (the
Initial
Conversion Rate
) is 33.0164 shares of Common Stock per $1,000 Principal Amount of Securities
(equivalent to a Conversion Price of approximately $30.29). The Conversion Rate shall be adjusted
from time to time by the Company as follows, except that the Conversion Rate shall not be adjusted
if Holders of Securities may participate (other than in the case of a share split or share
combination), at the same time and upon the same terms as holders of the Common Stock and solely as
a result of holding the Securities, in any of the transactions described in this Section 7.03
without having to convert their Securities as if they held a number of shares of Common Stock equal
to the applicable Conversion Rate, multiplied by the Principal Amount of Securities held by such
Holders divided by $1,000:
(a) If the Company shall exclusively issue shares of its Common Stock as a dividend or
distribution on all or substantially all shares of the Common Stock, or if the Company effects a
share split or share combination in respect of the Common Stock, then the Conversion Rate shall be
adjusted based on the following formula:
54
where
|
|
|
|
|
|
|
|
|
CR
0
|
|
=
|
|
the Conversion Rate in effect immediately prior to the Open of Business
on the Ex Date of such dividend or distribution, or immediately prior to the Open of
Business on the Effective Date of such share split or combination, as applicable;
|
|
|
|
|
|
|
|
|
|
CR
|
|
=
|
|
the Conversion Rate in effect immediately after the Open of Business on
such Ex Date or Effective Date;
|
|
|
|
|
|
|
|
|
|
OS
0
|
|
=
|
|
the number of shares of Common Stock outstanding immediately prior to the
Open of Business on such Ex Date or Effective Date; and
|
|
|
|
|
|
|
|
|
|
OS
|
|
=
|
|
the number of shares of Common Stock outstanding immediately after giving
effect to such dividend, distribution, share split or share combination.
|
Any adjustment made pursuant to this Section 7.03(a) shall become effective immediately after
the Open of Business on the Ex Date for such dividend or distribution, or immediately after the
Open of Business on the Effective Date for such share split or share combination. If any dividend
or distribution of the type described in this Section 7.03(a) is declared but not so paid or made,
and an adjustment to the Conversion Rate has become effective pursuant to the preceding sentence,
the Conversion Rate shall be immediately readjusted, effective as of the date the Companys Board
of Directors determines not to pay such dividend or distribution to the Conversion Rate that would
then be in effect if such dividend or distribution had not been declared.
(b) In case the Company shall issue to all or substantially all holders of its outstanding
shares of Common Stock any rights, options or warrants entitling them for a period of not more than
60 calendar days after the announcement date of such issuance to subscribe for or purchase shares
of Common Stock at a price per share less than the average of the Last Reported Sale Prices of
Common Stock for the 10 consecutive Trading Day period ending on the Trading Day immediately
preceding the date of announcement of such issuance, the Conversion Rate shall be adjusted based on
the following formula:
where
|
|
|
|
|
|
|
|
|
CR
0
|
|
=
|
|
the Conversion Rate in effect immediately prior to the Open of Business
on the Ex Date for such issuance;
|
|
|
|
|
|
|
|
|
|
CR
|
|
=
|
|
the Conversion Rate in effect immediately after the Open of Business on
such Ex Date;
|
55
|
|
|
|
|
|
|
|
|
OS
0
|
|
=
|
|
the number of shares of Common Stock outstanding immediately prior to the
Open of Business on such Ex Date;
|
|
|
|
|
|
|
|
|
|
X
|
|
=
|
|
the total number of shares of Common Stock issuable pursuant to such
rights, options or warrants; and
|
|
|
|
|
|
|
|
|
|
Y
|
|
=
|
|
the number of shares of Common Stock equal to the aggregate price payable
to exercise such rights, options or warrants divided by the average of the Last
Reported Sale Prices of Common Stock for the 10 consecutive Trading Day period ending
on the Trading Day immediately preceding the date of announcement of the issuance of
such rights, options or warrants.
|
Any increase pursuant to this Section 7.03(b) shall be made successively whenever any such
rights, options or warrants are issued and shall become effective immediately after the Open of
Business on the Ex Date for such issuance. To the extent such rights, options or warrants are not
exercised or converted prior to their expiration or termination, the Conversion Rate shall be
decreased to the Conversion Rate that would then be in effect had the increase with respect to the
issuance of such rights, options or warrants been made on the basis of delivery of only the number
of shares of Common Stock actually delivered. If such rights, options or warrants are not so
issued, the Conversion Rate shall be decreased to the Conversion Rate that would then be in effect
if such Ex Date for such issuance had not occurred.
In determining whether any rights, options or warrants entitle the Holders to subscribe for or
purchase shares of the Common Stock at less than the average of the Last Reported Sale Prices for
the 10 consecutive Trading Day period ending on the Trading Day immediately preceding the date of
announcement for such issuance, and in determining the aggregate offering price of such shares of
the Common Stock, there shall be taken into account any consideration received by the Company for
such rights, options or warrants and any amount payable on exercise or conversion thereof, with the
value of such consideration, if other than cash, to be determined by the Companys Board of
Directors.
56
(c) If the Company distributes shares of its Capital Stock, evidences of its indebtedness,
other assets or property of the Company or rights, options or warrants to acquire the Companys
Capital Stock or other securities, to all or substantially all holders of its Common Stock,
excluding:
(i) Dividends or distributions, and rights, options or warrants as to which an
adjustment to the Conversion Rate is effected pursuant to Section 7.03(a) or Section
7.03(b) above or Section 7.03(e) below;
(ii) dividends or distributions paid exclusively in cash, including as described in
Section 7.03(d);
(iii) Spin-Offs to which the provisions set forth below in this Section 7.03(c)
apply; and
(iv) dividends or distributions in connection with a reclassification, merger, sale
or conveyance resulting in a change in the consideration the Holders would receive upon
conversion of the Securities, as set forth in Section 7.07.
then the Conversion Rate will be adjusted based on the following formula:
where
|
|
|
|
|
|
|
|
|
CR
0
|
|
=
|
|
the Conversion Rate in effect immediately prior to the Open of Business
on the Ex Date for such distribution;
|
|
|
|
|
|
|
|
|
|
CR
|
|
=
|
|
the Conversion Rate in effect immediately after the Open of Business on
such Ex Date for such distribution;
|
|
|
|
|
|
|
|
|
|
SP
0
|
|
=
|
|
the average of the Last Reported Sale Prices of the Common Stock over the
10 consecutive Trading Day period ending on the Trading Day immediately preceding the
Ex Date for such distribution; and
|
|
|
|
|
|
|
|
|
|
FMV
|
|
=
|
|
the fair market value (as determined by the Companys Board of Directors)
of the shares of Capital Stock of the Company, evidences of indebtedness, assets,
property, rights, options or warrants distributed with respect to each outstanding
share of Common Stock on the Ex Date for such distribution.
|
provided
that if FMV as set forth above is equal to or greater than SP
0
as set forth
above, in lieu of the foregoing increase, each Holder shall receive, in respect of each $1,000
Principal Amount of the Securities, at the same time and upon the same terms as holders of the
Common Stock, the amount and kind of the Companys Capital Stock, evidences of indebtedness, other
assets or property of the Company or rights, options or warrants to acquire the Companys Capital
Stock or other securities that such Holder would have received as if such Holder owned a number of
shares of the Common Stock equal to the Conversion Rate in effect immediately prior to the Open of
Business on the Ex Date for the distribution.
57
Such increase shall become effective immediately after the Open of Business on the Ex Date for
such distribution. If such distribution is not so paid or made, the Conversion Rate shall be
decreased to be the Conversion Rate that would then be in effect if such dividend or distribution
had not been declared. If the Board of Directors of the Company determines the fair market value of
any
distribution for purposes of this Section 7.03(c) by reference to the actual or when issued
trading market for any securities, it shall in doing so consider the prices in such market over the
same period used above in computing the average of the Last Reported Sale Prices of the Common
Stock.
With respect to an adjustment pursuant to this Section 7.03(c) where there has been a payment
of a dividend or other distribution on the Common Stock of shares of Capital Stock of any class or
series, or similar equity interest, of or relating to a Subsidiary or other business unit (a
Spin-Off
), the Conversion Rate will be increased based on the following formula:
where
|
|
|
|
|
|
|
|
|
CR
0
|
|
=
|
|
the Conversion Rate in effect immediately prior to the end of the
Valuation Period;
|
|
|
|
|
|
|
|
|
|
CR
|
|
=
|
|
the Conversion Rate in effect immediately after the end of the Valuation
Period;
|
|
|
|
|
|
|
|
|
|
FMV
0
|
|
=
|
|
the average of the Last Reported Sale Prices of the Capital Stock or
similar equity interest distributed to holders of Common Stock applicable to one
share of Common Stock over the first 10 consecutive Trading Day period after and, if
the Ex Date is effective as of the open of trading on the Ex Date of the Spin Off,
including, the Ex Date of the Spin-Off (the
Valuation Period
); and
|
|
|
|
|
|
|
|
|
|
MP
0
|
|
=
|
|
the average of the Last Reported Sale Prices of Common Stock over the
Valuation Period.
|
Such adjustment shall occur on the last day of the Valuation Period;
provided
that in respect
of any conversion (or calculation of a Daily Conversion Value in respect of a conversion occurring
before the Ex Date of any Spin-Off) during the Valuation Period, references above with respect to
10 Trading Days shall be deemed replaced with such lesser number of Trading Days as have elapsed
between the Ex Date of such Spin-Off and the Conversion Date or the date of such calculation of a
Daily Conversion Value in determining the applicable Conversion Rate.
58
For purposes of this Section 7.03(c), Section 7.03(a) and Section 7.03(b), any dividend or
distribution to which this Section 7.03(c) is applicable that also includes shares of Common
Stock, or rights, options, or warrants to subscribe for, purchase or convert into shares of Common
Stock to which Section 7.03(a) and/or 7.03(b) applies (or both), shall be deemed instead to be
(1) a dividend or distribution of the evidences of indebtedness, assets or shares of Capital Stock
other than such shares of Common Stock or rights, options or warrants to which
Section 7.03(a) or 7.03(b) applies (and any Conversion Rate adjustment required by this
Section 7.03(c) with respect to such dividend or distribution shall then be made) immediately
followed by (2) a dividend or distribution of such shares of Common Stock or such rights, options
or warrants to which Section 7.03(a) or 7.03(b) applies (and any further Conversion Rate
adjustment required by Section 7.03(a) and 7.03(b) with respect to such dividend or distribution
shall then be made), except (A) the Ex Date of such dividend or distribution shall be substituted
for the Ex Date, the Ex Date or Effective Date, and the Ex Date for such issuance within the
meaning of Section 7.03(a) and Section 7.03(b) and (B) any shares of Common Stock included in
such dividend or distribution shall not be deemed outstanding immediately prior to the Ex Date or
Effective Date within the meaning of Section 7.03(a).
(d) If a cash dividend or distribution is made to all or substantially all holders of the
Common Stock (other than (i) distributions described in Section 7.03(e) pursuant to which an
adjustment to the Conversion Rate is made pursuant to Section 7.03(e), (ii) an extraordinary cash
dividend or distribution that the Companys Board of Directors designates as payable with respect
to the Securities or (iii) regular quarterly cash dividends that do not exceed $0.16 per share
(the
Initial Dividend Threshold
)), the Conversion Rate shall be adjusted based on the following
formula:
where
|
|
|
|
|
|
|
|
|
CR
0
|
|
=
|
|
the Conversion Rate in effect immediately prior to the Open of Business
on the Ex Date for such dividend or distribution;
|
|
|
|
|
|
|
|
|
|
CR
|
|
=
|
|
the Conversion Rate in effect immediately after the Open of Business on
the Ex Date for such dividend or distribution;
|
59
|
|
|
|
|
|
|
|
|
SP
0
|
|
=
|
|
the Last Reported Sale Price of the Common Stock on the Trading Day
immediately preceding the Ex Date for such dividend or distribution; and
|
|
|
|
|
|
|
|
|
|
C
|
|
=
|
|
the amount in cash per share that the Company distributes to holders of
Common Stock in excess of the Initial Dividend Threshold
provided
that if the
dividend or distribution is not a regular quarterly cash dividend, the Initial
Dividend Threshold will be deemed to be zero. The Initial Dividend Threshold is
subject to adjustment in a manner inversely proportional to adjustments to the
Conversion Rate, provided that no adjustment will be made
to the Initial Dividend Threshold for any adjustment made to the
Conversion Rate under this Section 7.03(d).
|
provided
that if C as set forth above is equal to or greater than SP
0
as set
forth above, in lieu of the foregoing increase, each Holder shall receive, for each $1,000
Principal Amount of Securities, at the same time and upon the same terms as holders of shares of
Common Stock, the amount of cash that such Holder would have received if such Holder owned a number
of shares of Common Stock equal to the Conversion Rate in effect immediately prior to the Open of
Business on the Ex Date for such cash dividend or distribution. Such increase shall become
effective immediately after the Open of Business on the Ex Date for such dividend or distribution.
If such dividend or distribution is not so paid or made, the Conversion Rate shall be decreased to
be the Conversion Rate that would then be in effect if such dividend or distribution had not been
declared.
For the avoidance of doubt, for purposes of this Section 7.03(d), in the event of any
reclassification of the Common Stock, as a result of which the Securities become convertible into
more than one class of Common Stock, if an adjustment to the Conversion Rate is required pursuant
to this Section 7.03(d), references in this Section 7.03(d) to one share of Common Stock or Last
Reported Sale Price of one share of Common Stock shall be deemed to refer to a unit or to the price
of a unit consisting of the number of shares of each class of Common Stock into which the
Securities are then convertible equal to the numbers of shares of such class issued in respect of
one share of Common Stock in such reclassification. The above provisions of this paragraph shall
similarly apply to successive reclassifications.
60
(e) If the Company or any of its Subsidiaries makes a payment in respect of a tender offer or
exchange offer for all or any portion of the Common Stock (subject to the tender offer rules under
the Exchange Act that may then be applicable), to the extent that the cash and value of any other
consideration included in the payment per share of Common Stock exceeds the Last Reported Sale
Price of the Common Stock on the Trading Day next succeeding the last date on which tenders or
exchanges may be made pursuant to such tender or exchange offer (as it may be amended), the
Conversion Rate shall be increased based on the following formula:
where
|
|
|
|
|
|
|
|
|
CR
0
|
|
=
|
|
the Conversion Rate in effect immediately prior to the Close of Business
on the 10
th
Trading Day immediately following, and including, the Trading
Day next succeeding the date such tender or exchange offer expires;
|
|
|
|
|
|
|
|
|
|
CR
|
|
=
|
|
the Conversion Rate in effect immediately after the Close of Business on
the 10
th
Trading Day immediately following, and including, the Trading Day
next succeeding the date such tender or exchange offer expires;
|
|
|
|
|
|
|
|
|
|
AC
|
|
=
|
|
the aggregate value of all cash and any other consideration (as
determined by the Companys Board of Directors) paid or payable for shares of Common
Stock purchased in such tender or exchange offer;
|
|
|
|
|
|
|
|
|
|
OS
0
|
|
=
|
|
the number of shares of Common Stock outstanding immediately prior to the
date such tender or exchange offer expires (prior to giving effect to the purchase of
all shares accepted for purchase or exchange in such tender or exchange offer);
|
|
|
|
|
|
|
|
|
|
OS
|
|
=
|
|
the number of shares of Common Stock outstanding immediately after the
date such tender or exchange offer expires (after giving effect to the purchase of
all shares accepted for purchase or exchange in such tender or exchange offer); and
|
|
|
|
|
|
|
|
|
|
SP
|
|
=
|
|
the average of the Last Reported Sale Prices of Common Stock over the 10
consecutive Trading Day period commencing on the Trading Day next succeeding the date
such tender or exchange offer expires,
|
The adjustment to the Conversion Rate under this Section 7.03(e) shall occur at the Close of
Business on the 10th Trading Day immediately following, and including, the Trading Day next
succeeding the date such tender or exchange offer expires;
provided
that in respect of any
conversion (or calculation of a Daily Conversion Value in respect of a conversion occurring before
the expiration of such tender or exchange offer) within the 10 Trading Days immediately following,
and including, the expiration date of any tender or exchange offer, references with respect to 10
Trading Days shall be deemed replaced with such lesser number of Trading Days as have elapsed
between the expiration date of such tender or exchange offer and the Conversion Date or the date of
such calculation of Daily Conversion Value in determining the applicable Conversion Rate.
61
If the Company is obligated to repurchase shares pursuant to any such tender or exchange
offer, but the Company is permanently prevented by
applicable law from effecting any such purchases or all such purchases are rescinded, the
Conversion Rate shall again be adjusted to be the Conversion Rate that would then be in effect if
such tender or exchange offer had not been made.
(f) For purposes of this Section 7.03, the term
Effective Date
shall mean the first date on
which the shares of Common Stock trade on the applicable exchange or in the applicable market,
regular way, reflecting the transaction.
(g) In addition to those required by clause (a), (b), (c), (d), or (e) of this Section 7.03
(and subject to Section 7.02(b), the Company from time to time may increase the Conversion Rate by
any amount for a period at least 20 Business Days if the Companys Board of Directors determines
that such increase would be in the Companys best interest. In addition, the Company may also (but
is not required to) increase the Conversion Rate to avoid or diminish any income tax to holders of
Common Stock or rights to purchase Common Stock in connection with any dividend or distribution of
shares (or rights to acquire shares) or similar event. Whenever the Conversion Rate is increased
pursuant to the preceding sentence, the Company shall mail to the Holder of each Security at such
Holders last address appearing on the Security Register provided for in Section 3.05 a notice of
the increase at least fifteen days prior to the date the increased Conversion Rate takes effect,
and such notice shall state the increased Conversion Rate and the period during which it will be in
effect.
(h) All calculations and other determinations under this Article 7 shall be made by the
Company or its agents (exclusive of the Conversion Agent) and shall be made to the nearest cent or
to the nearest one-ten thousandth (1/10,000) of a share, as the case may be. No adjustment shall
be made for the Companys issuance of Common Stock or convertible or exchangeable securities or
rights to purchase Common Stock or convertible or exchangeable securities, other than as provided
in this Section 7.03. No adjustment shall be made to the Conversion Rate unless such adjustment
would require a change of at least 1% in the Conversion Rate then in effect at such time. However,
the Company will carry forward any adjustments that are less than 1% of the applicable Conversion
Rate and make such carried-forward adjustments, regardless of whether the aggregate adjustment is
less than 1% of the Conversion Rate then in effect at such time, (i) in connection with any
subsequent adjustment to the Conversion Rate or (ii) on each trading day of any Observation Period
in connection with any conversion of the Securities.
62
(i) Whenever the Conversion Rate is adjusted as herein provided, the Company shall promptly
file with the Trustee and any Conversion Agent other than the Trustee an Officers Certificate
setting forth the Conversion Rate after such adjustment and setting forth a brief statement of the
facts requiring such adjustment. Unless and until a Responsible Officer of the Trustee and the
Conversion Agent shall have received such Officers Certificate, neither the Trustee nor the
Conversion Agent shall be deemed to have knowledge of any adjustment of the Conversion Rate and may
assume without inquiry that the last
Conversion Rate of which a Responsible Officer of the Trustee or the Conversion Agent, as
applicable, has actual knowledge is still in effect. Promptly after delivery of such certificate,
the Company shall prepare a notice of such adjustment of the Conversion Rate setting forth the
adjusted Conversion Rate and the date on which each adjustment becomes effective and shall mail
such notice of such adjustment of the Conversion Rate to each Holder at such Holders last address
appearing on the Security Register provided for in Section 3.05 of this Indenture, within 20 days
of the effective date of such adjustment. Failure to deliver such notice shall not affect the
legality or validity of any such adjustment.
(j) In any case in which this Section 7.03 provides that an adjustment shall become effective
immediately after (1) an Ex Date or Effective Date for an event or (2) the expiration date for any
tender or exchange offer pursuant to Section 7.03(e) (each an
Adjustment Determination Date
), the
Company may elect to defer until the occurrence of the applicable Adjustment Event (as hereinafter
defined) (x) issuing to the Holder of any Security converted after such Adjustment Determination
Date and before the occurrence of such Adjustment Event, the additional shares of Common Stock or
other securities issuable upon such conversion by reason of the adjustment required by such
Adjustment Event over and above the Common Stock issuable upon such conversion before giving effect
to such adjustment and (y) paying to such Holder any amount in cash in lieu of any fraction
pursuant to Section 7.03. For purposes of this Section 7.03(j), the term
Adjustment Event
shall
mean:
(i) in any case referred to in clause (1) hereof, the occurrence of such event,
(ii) in any case referred to in clause (2) hereof, the date a sale or exchange of
Common Stock pursuant to such tender or exchange offer is consummated and becomes
irrevocable.
(k) For purposes of this Section 7.03, the number of shares of Common Stock at any time
outstanding shall not include shares held in the treasury of the Company but shall include shares
issuable in respect of scrip certificates issued in lieu of fractions of shares of Common Stock.
The Company will not pay any dividend or make any distribution on shares of Common Stock held in
the treasury of the Company.
63
(l) Notwithstanding any of the foregoing, the Conversion Rate will not be adjusted: (i) upon
the issuance of any shares of Common Stock pursuant to any present or future plan providing for the
reinvestment of dividends or interest payable on the securities of the Company and the investment
of additional optional amounts in shares of Common Stock under any plan; (ii) upon the issuance of
any shares of Common Stock or options or rights to purchase those shares pursuant to any present or
future employee, director or consultant benefit plan or program of or assumed by the Company or any
Subsidiary; (iii) upon the issuance of any shares of Common Stock pursuant to any option, warrant,
right or exercisable, exchangeable or convertible security not described in clause (ii) and
outstanding as of the date the Securities were first issued; (iv) for any dividend or distribution
in connection with a merger, sale or conveyance effected solely for the purpose of changing the
Companys jurisdiction of incorporation as permitted by the terms of this Indenture; (v) for a
change in the par value of the Common Stock; or (vi) for accrued and unpaid Interest.
Section 7.04
. Shares to be Fully Paid.
The Company shall provide, free from preemptive
rights, out of its authorized but unissued shares or shares held in treasury, sufficient shares of
Common Stock to provide for conversion of the Securities from time to time as such Securities are
presented for conversion.
Section 7.05.
Adjustments of Prices.
Whenever a provision of this Indenture requires the
calculation of the Last Reported Sale Prices, Daily VWAP, the Daily Conversion Values or the Daily
Settlement Amounts over a span of multiple days (including an Observation Period and the Stock
Price for purposes of a Make-Whole Fundamental Change), the Companys Board of Directors will make
appropriate adjustments to each to account for any adjustment to the Conversion Rate that becomes
effective, or any event requiring an adjustment to the Conversion Rate where the Ex Date of the
event occurs, at any time during the period when the Last Reported Sale Prices, the Daily VWAPs,
the Daily Conversion Values or the Daily Settlement Amounts are to be calculated, including upon
the occurrence of multiple events that each result in an adjustment to the Conversion Rate in such
period.
Section 7.06
. Adjustments upon Certain Fundamental Changes.
(a) If a Make-Whole Fundamental
Change occurs and a Holder elects to convert its Securities in connection with such Make-Whole
Fundamental Change, the Company shall increase the Conversion Rate for the Securities so
surrendered for conversion by a number of additional shares of Common Stock (the
Additional
Shares
) under the circumstances and as described below. A conversion of Securities shall be
deemed for these purposes to be in connection with such Make-Whole Fundamental Change if the
Notice of Conversion of the Securities is received by the Conversion Agent from, and including, the
effective date of the Make-Whole Fundamental Change up to, and including, the Business Day
immediately prior to the related Fundamental Change Repurchase Date (or, in the case of a
Make-Whole Fundamental Change that would have been a Fundamental Change but for proviso (ii) in
clause (2) of the definition thereof, the 35th Trading
Day immediately following the effective date of such Make-Whole Fundamental Change).
64
(b) The number of Additional Shares, if any, by which the Conversion Rate will be increased
shall be determined by reference to the table attached as
Schedule A
hereto, based on the
date on which the Make-Whole Fundamental Change occurs or becomes effective (the
Make-Whole
Effective Date
) and the Stock Price paid (or deemed paid) per share of Common Stock in the
Make-Whole Fundamental Change;
provided
that if the actual Stock Price is between two Stock Price
amounts in such table or the Make-Whole Effective Date is between two Make-Whole Effective Dates in
such table, the number of Additional Shares shall be determined by a straight-line interpolation
between the number of Additional Shares set forth for the next higher and next lower Stock Price
amounts and the earlier and later Effective Dates, as applicable, based on a 365-day year;
provided
further
that if (1) the Stock Price is greater than $75.00 per share of Common Stock (subject to
adjustment in the same manner and at the same time as set forth in Section 7.06(c)), no Additional
Shares will be added to the Conversion Rate, and (2) the Stock Price is less than $25.24 per share
(subject to adjustment in the same manner as set forth in Section 7.06(c)), no Additional Shares
will be added to the Conversion Rate. Notwithstanding the foregoing, in no event will the total
number of Additional Shares issuable upon conversion in connection with a Make-Whole Fundamental
Change exceed 6.6033 shares per $1,000 Principal Amount of Securities provided that this limit will
be subject to adjustment in the same manner as set forth in Section 7.03).
(c) The Stock Prices set forth in the column headings of the table in
Schedule A
hereto shall be adjusted as of any date on which the Conversion Rate of the Securities is adjusted.
The adjusted Stock Prices shall equal the Stock Prices applicable immediately prior to such
adjustment, multiplied by a fraction, the numerator of which is the Conversion Rate in effect
immediately prior to such adjustment and the denominator of which is the Conversion Rate as so
adjusted. The number of Additional Shares set forth in such table will be adjusted in the same
manner and at the same time as the Conversion Rate as set forth in Section 7.03 (other than by
operation of an adjustment to the Conversion Rate by adding Additional Shares).
(d) The table in
Schedule A
hereto sets forth the number of additional shares to be
received per $1,000 Principal Amount of Securities.
(e) Upon surrender of Securities for conversion in connection with a Make-Whole Fundamental
Change, the Company shall pay or deliver, as the case may be, in lieu of shares of Common Stock,
including the Additional Shares, cash or a combination of cash and shares of Common Stock as
provided under Section 7.02;
provided
, however, that if the consideration for the Common Stock in
any Make-Whole Fundamental Change described in clause (2) of the definition of Fundamental Change
is comprised entirely of cash, for any conversion of Securities following the Make-Whole Effective
Date, the conversion obligation
will be calculated based solely on the Stock Price for the transaction and will be deemed to
be an amount of cash per $1,000 Principal Amount of converted Securities equal to the applicable
Conversion Rate (including any adjustment) multiplied by the Stock Price. In such event, the
conversion obligation shall be determined and paid to Holders in cash on the third Business Day
following the Conversion Date. The Company shall notify Holders of the Make-Whole Effective Date
(the
Make-Whole Fundamental Change Notice
) and issue a press release announcing such Make-Whole
Effective Date no later than five Business Days after such Make-Whole Effective Date.
65
(f) At the Companys option, in lieu of increasing the Conversion Rate as described in this
Section 7.06 in the event of a Make-Whole Fundamental Change, the Company may elect to make a cash
payment in respect of the Additional Shares. Such cash payment to any Holder electing to convert
its Securities would be equal to the number of Additional Shares issuable upon conversion
determined by reference to the table in
Schedule A
multiplied by the effective share price
of the transaction which constitutes a Fundamental Change. Any such election by the Company will be
disclosed in the Fundamental Change Company Notice. Once this notice has been provided, the
Company may not modify or withdraw its election.
Section 7.07
. Effect of Recapitalization, Reclassification, Consolidation, Merger or Sale
.
(a) If any of the following events occur:
(i) any recapitalization, reclassification or change of the Common Stock (other than
changes resulting from a subdivision or combination);
(ii) any consolidation, merger or combination involving the Company;
(iii) any sale, lease or other transfer to any other Person of the consolidated
assets of the Company and the Companys Subsidiaries substantially as an entirety; or
(iv) any statutory share exchange,
in each case as a result of which the Common Stock would be converted into, or exchanged for,
stock, other securities, other property or assets (including cash or any combination thereof),
then, at and after the effective time of the transaction, the right to convert each $1,000
Principal Amount of Securities shall be changed into a right to convert such principal amount of
Securities into the kind and amount of shares of stock, other securities or other property or
assets (including cash or any combination thereof) that a holder of a number of shares of Common
Stock equal to the Conversion Rate immediately prior to such transaction would have owned or been
entitled to receive (the
Reference Property
) upon such transaction, with each
unit of Reference
Property
meaning the kind and
amount of Reference Property that a holder of one share of Common Stock is entitled to receive upon
such transaction. In such a case, any increase in the Conversion Rate by the Additional Shares as
described in Section 7.06 will not be payable in Additional Shares (or cash and Additional Shares),
but will represent a right to receive the aggregate amount of cash, securities and other property
into which the Additional Shares would convert in the transaction from the surviving entity (or a
direct or indirect parent thereof). However, at and after the effective time of such transaction,
(x) any amount otherwise payable in cash upon conversion of the Securities pursuant to Section 7.02
shall continue to be payable in cash, (y) the number of shares of Common Stock otherwise
deliverable upon conversion of the Securities pursuant to Section 7.02 shall instead be deliverable
in the amount and type of Reference Property that a holder of that number of shares of Common Stock
would have been entitled to receive in such transaction and (z) the Daily VWAP shall be calculated
based on the value of a unit of Reference Property.
66
If the transaction causes the Common Stock to be converted into, or exchanged for, the right
to receive more than a single type of consideration (determined based in part upon any form of
stockholder election), then (i) the Reference Property into which the Securities will be
convertible shall be deemed to be the weighted average of the types and amounts of consideration
received by the holders of Common Stock that affirmatively make such election, and (ii) the unit of
Reference Property for purposes of the immediately preceding paragraph shall refer to the
consideration referred to in clause (i) attributable to one share of Common Stock. The Company
shall notify Holders, the Trustee and the Conversion Agent (if other than the Trustee) of such
weighted average as soon as practicable after such determination is made. The Company shall not
enter into any agreement to become a party to such a transaction unless the terms of the
transaction are consistent with this Section 7.07.
(b) The above provisions of this Section shall similarly apply to successive transactions
described in Section 7.07(a).
(c) In connection with any adjustment to the Conversion Rate described in Section 7.07(a), the
Initial Dividend Threshold shall be adjusted based on the number of shares of Common Stock
comprising the Reference Property and (if applicable) the value of any non-stock consideration
comprising the Reference Property. If the Reference Property is comprised solely of non-stock
consideration, the Initial Dividend Threshold will be zero.
Section 7.08
. Certain Covenants.
(a) Before taking any action which would cause an adjustment reducing the Conversion Rate
below the then par value, if any, of the shares of Common Stock issuable upon conversion of the
Securities, the Company will take all corporate action which may, in the opinion of its counsel, be
necessary in order
that the Company may validly and legally issue shares of such Common Stock at such adjusted
Conversion Rate.
67
The Company covenants that all shares of Common Stock issued upon conversion of Securities
will be fully paid and non-assessable by the Company and free from all taxes, liens and changes
with respect to the issue thereof.
(b) The Company covenants that, if any shares of Common Stock to be provided for the purpose
of conversion of Securities hereunder require registration with or approval of any governmental
authority under any federal or state law before such shares may be validly issued upon conversion,
the Company will in good faith and as expeditiously as possible, to the extent then permitted by
the rules and interpretations of the Commission (or any successor thereto), endeavor to secure such
registration or approval, as the case may be.
(c) The Company covenants that if at any time the Common Stock shall be listed on any other
National Securities Exchange or automated quotation system the Company will, if permitted and
required by the rules of such exchange or automated quotation system, list and keep listed, so long
as the Common Stock shall be so listed on such exchange or automated quotation system, all Common
Stock issuable upon conversion of the Securities.
Section 7.09
. Responsibility of Trustee.
The Trustee and any other Conversion Agent shall
not at any time be under any duty or responsibility to any Holder to determine the Conversion Rate
or whether any facts exist which may require any adjustment of the Conversion Rate, or with respect
to the nature or extent or calculation of any such adjustment when made, or with respect to the
method employed, or herein or in any supplemental indenture provided to be employed, in making the
same. The Trustee and any other Conversion Agent shall not be accountable with respect to the
validity or value (or the kind or amount) of any shares of Common Stock, or of any securities or
property, which may at any time be issued or delivered upon the conversion of any Security; and the
Trustee and any other Conversion Agent make no representations with respect thereto. Neither the
Trustee nor any Conversion Agent shall be responsible for any failure of the Company to issue,
transfer or deliver any shares of Common Stock or stock certificates or other securities or
property or cash upon the surrender of any Security for the purpose of conversion or to comply with
any of the duties, responsibilities or covenants of the Company contained in this Article 7.
Without limiting the generality of the foregoing, neither the Trustee nor any Conversion Agent
shall be under any responsibility to determine the correctness of any provisions contained in any
supplemental indenture entered into pursuant to Section 7.07 relating either to the kind or amount
of shares of stock or securities or property (including cash) receivable by Holders upon the
conversion of their Securities after any event referred to in such Section 7.07 or to any
adjustment to be made with respect thereto, but, subject to the provisions of Section 10.01, may
accept as conclusive evidence of the correctness of any such provisions, and shall be protected in
relying upon, the Officers Certificate (which
the Company shall be obligated to file with the Trustee prior to the execution of any such
supplemental indenture) with respect thereto.
68
Section 7.10.
Notice to Holders Prior to Certain Actions.
In case:
(a) the Company shall declare a dividend (or any other distribution) on its Common Stock that
would require an adjustment in the Conversion Rate pursuant to Section 7.03;
(b) the Company shall authorize the granting to all of the holders of its Common Stock of
rights or warrants to subscribe for or purchase any share of any class or any other rights or
warrants;
(c) of any reclassification of the Common Stock of the Company (other than a subdivision or
combination of its outstanding Common Stock, or a change in par value, or from par value to no par
value, or from no par value to par value), or of any consolidation or merger to which the Company
is a party and for which approval of any stockholders of the Company is required, or of the sale or
transfer of all or substantially all of the assets of the Company; or
(d) of the voluntary or involuntary dissolution, liquidation or winding-up of the Company
the Company shall cause to be filed with the Trustee and the Conversion Agent and to be mailed to
each Holder at such Holders address appearing on the Security Register, provided for in Section
3.05 of this Indenture, as promptly as possible but in any event at least 10 days prior to the
applicable date hereinafter specified, a notice stating (x) the date on which a record is to be
taken for the purpose of such dividend, distribution or rights or warrants, or, if a record is not
to be taken, the date as of which the holders of Common Stock of record to be entitled to such
dividend, distribution or rights are to be determined, or (y) the date on which such
reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding-up is
expected to become effective or occur, and the date as of which it is expected that holders of
Common Stock of record shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding-up. Failure to give such notice, or any defect therein, shall
not affect the legality or validity of such dividend, distribution, reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding-up.
Section 7.11
. Stockholder Rights Plans.
Each share of Common Stock issued upon conversion of
Securities pursuant to this Article 7 shall be entitled to receive the appropriate number of
rights, if any, and the certificates representing the Common Stock issued upon such conversion
shall bear such legends, if any, in each case as may be provided by the terms of any stockholder
rights plan adopted by the Company, as the same may be amended from time to time. If at
the time of conversion, however, the rights have separated from the shares of Common Stock in
accordance with the provisions of the applicable stockholder rights agreement so that the Holders
of the Securities would not be entitled to receive any rights in respect of Common Stock issuable
upon conversion of the Securities, the Conversion Rate will be adjusted at the time of separation
as if the Company has distributed to all holders of Common Stock, shares of Capital Stock of the
Company, evidences of indebtedness, assets, property, rights, options or warrants as provided in
Section 7.03(c), subject to readjustment in the event of the expiration, termination or redemption
of such rights.
69
Section 7.12
. Exchange in Lieu of Conversion.
(a) If at any time when a Holder surrenders Securities for conversion prior to the Stated
Maturity of the Securities the Company:
(i) has designated a financial institution (a
Designated Institution
) to accept
such Securities in exchange for shares of Common Stock and cash, as applicable, equal to
the consideration due upon conversion as provided in Section 7.02; and
(ii) notifies the Holder surrendering such Securities for conversion by the Close of
Business on the Trading Day immediately preceding the start of the applicable Observation
Period, that it has directed the Designated Institution to make an exchange in lieu of
conversion,
then, notwithstanding anything in this Indenture to the contrary, the Company may direct the
Conversion Agent to surrender such Securities, on or prior to the commencement of the applicable
Observation Period to the Designated Institution for exchange in lieu of conversion.
(b) If the Designated Institution accepts Securities surrendered for exchange, it shall notify
the Conversion Agent of the terms of such exchange and shall deliver cash and, if applicable, the
appropriate number of shares of Common Stock, as specified in Section 7.02 to the Conversion Agent
and the Conversion Agent shall deliver the cash and shares of Common Stock, as applicable, to the
Holder, within the time period specified in Section 7.02(j), which delivery shall be deemed to
satisfy the Companys conversion obligations under this Article 7 with respect to such Holder.
Any Securities so exchanged by such Designated Institution shall remain Outstanding for all
purposes under this Indenture.
(c) If the Designated Institution agrees to accept any Securities for exchange but does not
timely deliver the related consideration to the Conversion Agent, or if the Designated Institution
does not accept such Securities for exchange, the Company shall, within the time period specified
in Section 7.02(j), convert such Securities into cash and shares of Common Stock, as applicable, in
accordance with the provisions of Section 7.02.
(d) For the avoidance of doubt, in no event will the Companys designation of a financial
institution pursuant to this Section 7.12 require such financial institution to accept any
Securities for exchange (unless the institution has separately made an agreement with the Company).
70
ARTICLE 8
Events of Default; Remedies
Section 8.01
. Events of Default.
Event of Default,
wherever used herein, means any one of
the following events (whatever the reason for such Event of Default and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or
order of any court or any order, rule or regulation of any administrative or governmental body):
(a) default in the payment of Interest on any Securities when due and payable and such default
continues for a period of 30 days;
(b) default in the payment of the Principal Amount or Fundamental Change Repurchase Price on
any Security when due and payable;
(c) default in the Companys obligation to deliver the cash and Common Stock, if any, payable
upon exercise of a Holders conversion rights in accordance with Article 7 hereof;
(d) failure by the Company to issue a Fundamental Change Company Notice or the notice required
pursuant to Section 7.01(a)(iii) or Section 7.01(a)(iv), in each case when due;
(e) failure by the Company to comply with its obligations under Article 9 hereof;
(f) default in the performance of any covenant or agreement of the Company in this Indenture
or the Securities (other than a default specified in paragraph (a) or (b) above), and such
default continues for a period of 60 days after there has been given, by registered or certified
mail, 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 Outstanding Securities a written notice specifying such
default and requiring it to be remedied and stating that such notice is a
Notice of Default
hereunder;
(g) default by the Company in the payment of the principal or Interest in excess of
$50,000,000 by the end of any applicable grace period after maturity of indebtedness for borrowed
money and continuance of such failure on any mortgage, agreement or other instrument under which
there may be outstanding, or by which there may be secured or evidenced any indebtedness for
borrowed money, whether such indebtedness now exists or is hereafter created;
71
(h) the acceleration of indebtedness of the Company for borrowed money in an amount in excess
of $50,000,000 in the aggregate because of a default with respect to such indebtedness without such
indebtedness having been discharged or such acceleration having been cured, waived, rescinded or
annulled for a period of 30 days after written notice to the Company by the Trustee or to the
Company and Trustee by the Holders of at least 25% in aggregate Principal Amount of the Outstanding
Securities;
(i) the entry by a court having jurisdiction in the premises of (i) a decree or order for
relief in respect of the Company or any of its Significant Subsidiaries of a voluntary case or
proceeding under any applicable federal or state bankruptcy, insolvency, reorganization or other
similar law or (ii) a decree or order adjudging the Company or any of its Significant Subsidiaries
as bankrupt or insolvent, or approving as properly filed a petition seeking reorganization,
arrangement, adjustment or composition of or in respect of the Company or such Significant
Subsidiary under any applicable federal or state law or (iii) appointing a custodian, receiver,
liquidator, assignee, trustee, sequestrator or other similar official of the Company or any of its
Significant Subsidiary or of any substantial part of its respective property, or ordering the
winding up or liquidation of its affairs, and the continuance of any such decree or order for
relief or any such other decree or order unstayed and in effect for a period of 60 consecutive
days; or
(j) the commencement by the Company or any of its Significant Subsidiaries of a voluntary case
or proceeding under any applicable federal or state bankruptcy, insolvency, reorganization or other
similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the
consent by it to the entry of a decree or order for relief in respect of the Company or any of its
Significant Subsidiaries in an involuntary case or proceeding under any applicable federal or state
bankruptcy, insolvency, reorganization or other similar law or to the commencement of any
bankruptcy or insolvency case or proceeding against it, or the filing by it of a petition or answer
or consent seeking reorganization or relief under any applicable federal or state law, or the
consent by it to the filing of such petition or to the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the
Company or any of its Significant Subsidiaries or of any substantial part of its property, or the
making by it of an assignment for the benefit of creditors, or the admission by it in writing of
its inability to pay its debts generally as they become due, or the taking of corporate action by
the Company or any of its Significant Subsidiaries in furtherance of any such action.
Section 8.02
. Acceleration of Maturity; Rescission and Annulment.
(a) If an Event of Default
(other than those specified in Section 8.01(i) and Section 8.01(j)) occurs and is continuing,
then and in every such case the Trustee or the Holders of not less than 25% in aggregate Principal
Amount of the Outstanding Securities may declare the Principal Amount plus accrued and unpaid
Interest on all the Outstanding Securities to be due and payable immediately, by a notice in
writing to the Company (and to the Trustee if given by Holders), and upon any such declaration
such Principal Amount plus accrued and unpaid Interest shall become immediately due and payable.
72
Notwithstanding the foregoing, in the case of an Event of Default specified in Section
8.01(i) or Section 8.01(j), the Principal Amount plus accrued and unpaid Interest on all
Outstanding Securities will
ipso facto
become due and payable without any declaration or other act
on the part of the Trustee or any Holder.
(b) At any time after such a declaration of acceleration has been made and before a judgment
or decree for payment of the money due has been obtained by the Trustee as hereinafter in this
Article 8 provided, the Holders of a majority in aggregate Principal Amount of the Outstanding
Securities, by written notice to the Company and the Trustee, may rescind and annul such
declaration and its consequences (except with respect to nonpayment of principal, including the
Fundamental Change Price, if applicable, or interest or with respect to the failure to deliver the
consideration due upon conversion) if:
(i) such rescission and annulment will not conflict with any judgment or decree of a
court of competent jurisdiction; and
(ii) all Events of Default, other than the non-payment of the Principal Amount plus
accrued and unpaid Interest on Securities that have become due solely by such declaration
of acceleration, have been cured or waived as provided in Section 8.13.
No such rescission shall affect any subsequent Default or impair any right consequent thereon.
Section 8.03
. Additional Interest.
(a) If, at any time during the six-month period beginning
on, and including, the date which is six months after the last Issue Date of the Securities, the
Company fails to timely file any document or report that the Company is required to file with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act, as applicable (after giving effect
to all applicable grace periods thereunder and other than current reports on Form 8-K), or the
Securities are not otherwise freely tradable by Holders, other than the Companys affiliates (as a
result of restrictions pursuant to U.S. securities law or the terms of this Indenture or the
Securities), the Company shall pay Additional Interest on the Securities which shall accrue on the
Securities at a rate of 0.50% per annum of the Principal Amount of Outstanding Securities for each
day during such period for which the Companys failure to file, or the failure of the Securities to
be freely tradable by Holders, other than the Companys affiliates, as described above, has
occurred and is continuing ending on the date that is one year after the last Issue Date of the
Securities.
73
(b) If, and for so long as, the restrictive legend on the Securities has not been removed in
accordance with Article 2 or the Securities are not otherwise freely tradable by Holders, other
than the Companys affiliates (without restrictions pursuant to U.S. securities laws or the terms
of this Indenture or the Securities), as of the 365th day after the last Issue Date of the
Securities (or the next succeeding Business Day if such 365th day is not a Business Day), the
Company shall pay Additional Interest on the Securities which shall accrue on the Securities at a
rate equal to 0.50% per annum of the Principal Amount of Outstanding Securities until, as
applicable (i) the restrictive legend on the Securities has been removed in accordance with Article
2, or (ii) the Securities are freely tradable by Holders other than the Companys Affiliates
(without restrictions pursuant to U.S. securities law or the terms of this Indenture or the
Securities)
(c) Notwithstanding Section 8.02, if so elected by the Company, the sole remedy for any Event
of Default relating Companys failure to comply with Section 5.07 hereof, will for the first 360
days after the occurrence of such an Event of Default consist exclusively of the right to receive
Additional Interest on the Securities at an annual rate equal to 0.25% per annum of the Principal
Amount of Outstanding Securities during the first 360 day period on which such Event of Default is
continuing beginning on, and including, the date on which such an Event of Default first occurs.
The Additional Interest payable pursuant to this Section 8.03(c) will be in addition to any
Additional Interest that may accrue pursuant to Section 8.03(a) or Section 8.03(b) hereof. If the
Company so elects, the Additional Interest payable under this Section 8.03(c) will be payable on
all Outstanding Securities from and including the date on which such Event of Default first occurs,
to the 360
th
day thereafter, or such earlier date on which such Event of Default has
been cured or waived. On the 361
st
day after such Event of Default (or earlier, if the
Event of Default is cured or waived prior to such 361
st
day), Additional Interest
payable pursuant to this Section 8.03(c) will cease to accrue and, to the extent the Event of
Default is continuing after such 361
st
day, the Securities will be subject to
acceleration as provided in Section 8.02. In the event the Company does not elect to pay the
Additional Interest payable pursuant to this Section 8.03(c) upon an Event of Default in accordance
with this paragraph, the Securities will be subject to acceleration as provided in Section 8.02.
In order to elect to pay the Additional Interest payable pursuant to this Section 8.03 as the
sole remedy during the first 360 days after the occurrence of an Event of Default relating to the
failure to comply with Section 5.07 in accordance with the immediately preceding paragraph, the
Company must notify all Holders, the Trustee and Paying Agent of such election prior to the
beginning of such 360 day period. Upon the failure to timely give all Holders, the Trustee and
Paying Agent such notice, the Securities will be subject to acceleration as provided in Section
8.02.
(d) For purposes of this Section 8.03: an affiliate of the Company means, at any time, (i) a
Person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with, the Company
and/or (ii) has been such a Person within the preceding three months; and freely tradable means
such Securities may be sold pursuant to Rule 144 without compliance with the volume and manner of
sale restrictions thereof.
74
Section 8.04
. Collection of indebtedness and Suits For Enforcement by Trustee.
The Company
covenants that if a Default is made in the payment of the Principal Amount plus accrued and unpaid
Interest at the Maturity thereof or in the payment of the Fundamental Change Repurchase Price in
respect of any Security, the Company will, upon demand of the Trustee, pay to it, for the benefit
of the Holders of such Securities, the whole amount then due and payable on such Securities, and,
in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel.
If an Event of Default occurs and is continuing, the Trustee may, but shall not be obligated
to, pursue any available remedy to collect the payment of the Principal Amount plus accrued but
unpaid Interest on the Securities or to enforce the performance of any provision of the Securities
or this Indenture. The Trustee may maintain a proceeding even if the Trustee does not possess any
of the Securities or does not produce any of the Securities in the proceeding. A delay or omission
by the Trustee or any Holder in exercising any right or remedy accruing upon an Event of Default
shall not impair the right or remedy or constitute a waiver of, or acquiescence in, the Event of
Default. No remedy is exclusive of any other remedy. All available remedies are cumulative.
Section 8.05
. Trustee May File Proofs of Claim.
In case of any judicial proceeding relative
to the Company (or any other obligor upon the Securities), its property or its creditors, the
Trustee shall be entitled and empowered, by intervention in such proceeding or otherwise, to take
any and all actions authorized under the Trust Indenture Act in order to have claims of the Holders
and the Trustee allowed in any such proceeding. In particular, the Trustee shall be authorized to
collect and receive any moneys or other property payable or deliverable on any such claims and to
distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by each Holder to make
such payments to the Trustee and, in the event that the Trustee shall consent to the making of such
payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents and counsel and any
other amounts due the Trustee under Section 10.07.
No provision of this Indenture shall be deemed to authorize the Trustee to authorize or
consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement,
adjustment or composition affecting the Securities or the rights of any Holder thereof or to
authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding.
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Section 8.06
. Application of Money Collected.
Any money collected by the Trustee pursuant to
this Article 8 shall be applied in the following order, at the date or dates fixed by the Trustee
and, in case of the distribution of such money to Holders, upon presentation of the Securities and
the notation thereon of the payment if only partially paid and upon surrender thereof if fully
paid:
FIRST: To the payment of all amounts due the Trustee under Section 10.07;
SECOND: To the payment of the amounts then due and unpaid on the Securities for the
Principal Amount, Fundamental Change Repurchase Price or Interest, as the case may be, in
respect of which or for the benefit of which such money has been collected, ratably,
without preference or priority of any kind, according to the amounts due and payable on
such Securities; and
THIRD: To the payment of the remainder, if any, to the Company or as a court of
competent jurisdiction shall direct in writing.
Section 8.07
. Limitation on Suits.
No Holder of any Security shall have any right to
institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder (other than in the case of
an Event of Default specified in Section 8.01(a), Section 8.01(b) or Section 8.01(c)), unless:
(i) such Holder has previously given written notice to the Trustee of a continuing
Event of Default;
(ii) the Holders of not less than 25% in aggregate Principal Amount of the
Outstanding Securities shall have made written request to the Trustee to institute
proceedings in respect of such Event of Default in its own name as Trustee hereunder;
(iii) such Holder or Holders have offered to the Trustee indemnity reasonably
satisfactory to it against the costs, expenses and liabilities to be incurred in
compliance with such request;
(iv) the Trustee for 60 days after its receipt of such notice, request and offer of
security or indemnity has failed to institute any such proceeding; and
(v) no direction, in the opinion of the Trustee, inconsistent with such written
request has been given to the Trustee during such 60-day period by the Holders of a
majority in aggregate Principal Amount of the Outstanding Securities;
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it being understood and intended that no one or more Holders shall have any right in any manner
whatever by virtue of, or by availing itself of, any provision of this
Indenture to affect, disturb or prejudice the rights of any other Holders, or to obtain or to seek
to obtain priority or preference over any other Holders or to enforce any right under this
Indenture, except in the manner herein provided and for the equal and ratable benefit of all the
Holders.
Section 8.08
. Unconditional Right of Holders to Receive Payment.
Notwithstanding any other
provision of this Indenture, the right of any Holder to receive payment of the Principal Amount,
Fundamental Change Repurchase Price or accrued and unpaid Interest in respect of the Securities
held by such Holder, on or after the respective due dates expressed in the Securities or
Fundamental Change Repurchase Date, as applicable, and to convert the Securities in accordance with
Article 7, or to bring suit for the enforcement of any such payment on or after such respective
dates or the right to convert, shall not be impaired or affected adversely without the consent of
such Holder.
Section 8.09
. Restoration of Rights and Remedies.
If the Trustee or any Holder has
instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding
has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee
or to such Holder, then and in every such case, subject to any determination in such proceeding,
the Company, the Trustee and the Holders shall be restored severally and respectively to their
former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders
shall continue as though no such proceeding had been instituted.
Section 8.10
. Rights and Remedies Cumulative.
Except as otherwise provided with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Securities in the last paragraph
of Section 3.06, no right or remedy herein conferred upon or reserved to the Trustee or to the
Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall,
to the extent permitted by law, be cumulative and in addition to every other right and remedy given
hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
Section 8.11
. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any
Holder of any Security to exercise any right or remedy accruing upon any Event of Default shall
impair any such right or remedy or constitute a waiver of any such Event of Default or an
acquiescence therein. Every right and remedy given by this Article 8 or by law to the Trustee or
to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the
Trustee or by the Holders, as the case may be.
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Section 8.12
. Control by Holders.
The Holders of a majority in Principal Amount of the
Outstanding Securities shall have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee,
provided
that:
(i) such direction shall not be in conflict with any rule of law or with this
Indenture;
(ii) the Trustee may take any other action deemed proper by the Trustee which is not
inconsistent with such direction; and
(iii) the Trustee has not determined that such action would either subject it to
liability or be unduly prejudicial to the rights of the other Holders.
Section 8.13
. Waiver of Past Defaults.
The Holders of not less than a majority in Principal
Amount of the Outstanding Securities may on behalf of the Holders of all the Securities waive any
past Default hereunder and its consequences (including waivers obtained in connection with a
repurchase of, or tender offer or exchange for Securities), except a Default:
(i) Described in Section 8.01(a), Section 8.01(b) or Section 8.01(c); or
(ii) in respect of a covenant or provision hereof which under Article 13 cannot be
modified or amended without the consent of the Holder of each Outstanding Security
affected.
Upon any such waiver, such Default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such
waiver shall extend to any subsequent or other Default or impair any right consequent thereon.
Section 8.14
. Undertaking for Costs.
In any suit for the enforcement of any right or remedy
under this Indenture or in any suit against the Trustee for any action taken or omitted by it as
Trustee, in either case in respect of the Securities, a court may require any party litigant in
such suit to file an undertaking to pay the costs of the suit, and the court may assess reasonable
costs, including reasonable attorneys fees and expenses, against any party litigant in the suit
having due regard to the merits and good faith of the claims or defenses made by the party
litigant; but the provisions of this Section 8.14 shall not apply to any suit instituted by the
Company, to any suit instituted by the Trustee, to any suit instituted by any Holder, or group of
Holders, holding in the aggregate more than 10% in Principal Amount of the Outstanding Securities,
or to any suit instituted by any Holder for the enforcement of the payment of the Principal Amount
on any Security on or after Maturity of such Security, the Fundamental Change Repurchase Price or
the Settlement Amount.
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Section 8.15
. Waiver of Stay or Extension Laws.
The Company covenants (to the extent that it
may lawfully do so) that it will not at any time
insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay, or extension law wherever enacted, now or at any time hereafter in force, which may
affect the covenants or the performance of this Indenture; and the Company (to the extent that it
may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants
that it will not hinder, delay or impede the execution of any power herein granted to the Trustee,
but will suffer and permit the execution of every such power as though no such law had been
enacted.
Section 8.16.
Violations of Certain Covenants.
A violation of Section 5.07 or any other
covenant or agreement in this Indenture that expressly provides that a violation of such covenant
or agreement shall not constitute an Event of Default may only be enforced by the Trustee by
instituting a legal proceeding against the Company for enforcement of such covenant or agreement.
ARTICLE 9
Consolidation, Merger, Conveyance, Transfer or Lease
Section 9.01
. Company May Consolidate, Etc., Only on Certain Terms.
The Company shall not
consolidate with or merge with or into another Person or sell, convey, transfer or lease all or
substantially all of its properties and assets to another Person, unless:
(a) either (i) the Company is the resulting, surviving or transferee Person or (ii) the Person
(if other than the Company) formed by such consolidation or into which the Company is merged or the
Person which acquires by conveyance or transfer, or which leases, the properties and assets of the
Company substantially as an entirety (the
Surviving Entity
), (1) is a Corporation organized and
validly existing under the laws of the United States of America, any State thereof or the District
of Columbia and (2) the Surviving Entity expressly assumes, by an indenture supplemental hereto,
executed and delivered to the Trustee, all of the obligations of the Company under the Securities,
and this Indenture; and
(b) immediately after giving effect to such transaction, no Default or Event of Default shall
have occurred and be continuing.
Section 9.02
. Successor Substituted.
Upon any consolidation of the Company with, or merger
with or into or sale of the Company into, any other Person or any conveyance, transfer or lease of
all or substantially all of the properties and assets of the Company in accordance with Section
9.01, the successor Person formed by such consolidation or which the Company is merged with or into
or sold or to which such conveyance, transfer or lease is made shall succeed to, and be substituted
for, and may exercise every right and power of, the Company under this Indenture with the same
effect as if such successor Person had been named as the Company herein, and thereafter, except in
the case of a
lease of all or substantially all of the Companys properties and assets, the predecessor
Person shall be relieved of all obligations and covenants under this Indenture and the Securities.
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ARTICLE 10
The Trustee
Section 10.01
. Duties and Responsibilities of Trustee.
The Trustee, prior to the occurrence
of an Event of Default and after the curing of all Events of Default which may have occurred,
undertakes to perform such duties and only such duties as are specifically set forth in this
Indenture and no implied covenants or obligations shall be read into this Indenture against the
Trustee. In case an Event of Default has occurred (which has not been cured or waived), the
Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the
same degree of care and skill in their exercise, as a prudent person would exercise or use under
the circumstances in the conduct of his own affairs.
No provision of this Indenture shall be construed to relieve the Trustee from liability for
its own negligent action, its own negligent failure to act or its own willful misconduct, except
that:
(a) prior to the occurrence of an Event of Default and after the curing or waiving of all
Events of Default which may have occurred:
(i) the duties and obligations of the Trustee shall be determined solely by the
express provisions of this Indenture and the Trust Indenture Act, and the Trustee shall
not be liable except for the performance of such duties and obligations as are
specifically set forth in this Indenture and no implied covenants or obligations shall be
read into this Indenture against the Trustee; and
(ii) in the absence of bad faith and willful misconduct on the part of the Trustee,
the Trustee may conclusively rely as to the truth of the statements and the correctness of
the opinions expressed therein, upon any certificates or opinions furnished to the Trustee
and conforming to the requirements of this Indenture; but, in the case of any such
certificates or opinions which by any provisions hereof are specifically required to be
furnished to the Trustee, the Trustee shall be under a duty to examine the same to
determine whether or not they conform to the requirements of this Indenture (but need not
confirm or investigate the accuracy of any mathematical calculations or other facts stated
therein);
(b) the Trustee shall not be liable for any error of judgment made in good faith by a
Responsible Officer or Officers of the Trustee, unless it is proved that the Trustee was negligent
in ascertaining the pertinent facts;
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(c) the Trustee shall not be liable with respect to any action taken or omitted to be taken by
it in good faith in accordance with the written direction of the Holders of not less than a
majority in Principal Amount of the Securities at the time Outstanding determined as provided in
Section 1.03 relating to the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this
Indenture;
(d) whether or not therein provided, every provision of this Indenture relating to the conduct
or affecting the liability of, or affording protection to, the Trustee shall be subject to the
provisions of this Section;
(e) the Trustee shall not be liable in respect of any payment (as to the correctness of
amount, entitlement to receive or any other matters relating to payment) or notice effected by the
Company or any Paying Agent or any records maintained by any co-registrar with respect to the
Securities; and
(f) if any party fails to deliver a notice relating to an event the fact of which, pursuant to
this Indenture, requires notice to be sent to the Trustee, the Trustee may conclusively rely on its
failure to receive such notice as reason to act as if no such event occurred.
None of the provisions contained in this Indenture shall require the Trustee to expend or risk
its own funds or otherwise incur personal financial liability in the performance of any of its
duties or in the exercise of any of its rights or powers, if there is reasonable ground for
believing that the repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
Section 10.02
. Notice of Defaults.
The Trustee shall give the Holders notice of any Default
hereunder known to the Trustee within 60 days after the occurrence thereof;
provided
, that (except
in the case of any Default in the payment of Principal Amount or Interest on any of the Securities
or Fundamental Change Repurchase Price or a Default in the payment or delivery of the consideration
due upon conversion), the Trustee shall be protected in withholding such notice if and so long as a
committee of officers of the Trustee in good faith determines that the withholding of such notice
is in the interest of the Holders.
Section 10.03
. Reliance on Documents, Opinions, Etc.
Except as otherwise provided in
Section 10.01:
(a) the Trustee may conclusively rely and shall be protected in acting upon any resolution,
certificate, statement, instrument, opinion, report, notice, request, consent, order, bond,
debenture, note, coupon or other paper or document (whether in its original or facsimile form)
believed by it in good faith to be genuine and to have been signed or presented by the proper party
or parties;
81
(b) any request, direction, order or demand of the Company mentioned herein shall be
sufficiently evidenced by an Officers Certificate (unless other evidence in respect thereof be
herein specifically prescribed); and any resolution of the Board of Directors may be evidenced to
the Trustee by a copy thereof certified by the Secretary or an Assistant Secretary of the Company;
(c) the Trustee may consult with counsel of its own selection and any advice or Opinion of
Counsel shall be full and complete authorization and protection in respect of any action taken or
omitted by it hereunder in good faith and in accordance with such advice or Opinion of Counsel;
(d) the Trustee shall be under no obligation to exercise any of the rights or powers vested in
it by this Indenture at the request, order or direction of any of the Holders pursuant to the
provisions of this Indenture, unless such Holders shall have offered to the Trustee security or
indemnity reasonably satisfactory to it against the costs, expenses and liabilities which may be
incurred therein or thereby;
(e) the Trustee shall not be bound to make any investigation into the facts or matters stated
in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture or other paper or document, but the Trustee, in its discretion, may
make such further inquiry or investigation into such facts or matters as it may see fit, and, if
the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to
examine the books, records and premises of the Company, personally or by agent or attorney (at the
reasonable expense of the Company and shall incur no liability of any kind by reason of such
inquiry or investigation);
(f) the Trustee may execute any of the trusts or powers hereunder or perform any duties
hereunder either directly or by or through agents or attorneys and the Trustee shall not be
responsible for any misconduct or negligence on the part of any agent or attorney appointed by it
with due care hereunder;
(g) the Trustee shall not be liable for any action taken, suffered, or omitted to be taken by
it in good faith and reasonably believed by it to be authorized or within the discretion or rights
or powers conferred upon it by this Indenture;
(h) in no event shall the Trustee be responsible or liable for special, indirect, or
consequential loss or damage of any kind whatsoever (including, but not limited to, loss of profit)
irrespective of whether the Trustee has been advised of the likelihood of such loss or damage and
regardless of the form of action;
(i) the Trustee shall not be deemed to have notice of any Default or Event of Default unless a
Responsible Officer of the Trustee has actual knowledge thereof or unless written notice of any
event which is in fact such a
Default is received by the Trustee at the Corporate Trust Office of the Trustee, and such
notice references the Securities and this Indenture; and
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(j) the rights, privileges, protections, immunities and benefits given to the Trustee,
including, without limitation, its right to be indemnified, are extended to, and shall be
enforceable by, the Trustee in each of its capacities hereunder, and each agent, custodian and
other Person employed to act hereunder.
Section 10.04
. No Responsibility for Recitals, Etc.
The recitals contained herein and in the
Securities (except in the Trustees certificate of authentication) shall be taken as the statements
of the Company, and the Trustee assumes no responsibility for the correctness of the same. The
Trustee makes no representations as to the validity or sufficiency of this Indenture or of the
Securities. The Trustee shall not be accountable for the use or application by the Company of any
Securities or the proceeds of any Securities authenticated and delivered by the Trustee in
conformity with the provisions of this Indenture.
Section 10.05
. Trustee, Paying Agents, Conversion Agents or Registrar May Own Securities.
The Trustee, any Paying Agent, any Conversion Agent or Security Registrar, in its individual or any
other capacity, may become the owner or pledgee of Securities with the same rights it would have if
it were not Trustee, Paying Agent, Conversion Agent or Security Registrar.
Section 10.06
. Monies to be Held in Trust.
Subject to the provisions of Section 12.02, all
monies and properties received by the Trustee shall, until used or applied as herein provided, be
held in trust for the purposes for which they were received. Money held by the Trustee in trust
hereunder need not be segregated from other funds except to the extent required by law. The
Trustee shall be under no liability for interest on any money received by it hereunder except as
may be agreed in writing from time to time by the Company and the Trustee.
Section 10.07
. Compensation and Expenses of Trustee.
The Company covenants and agrees to pay
to the Trustee from time to time, and the Trustee shall be entitled to, reasonable compensation for
all services rendered by it hereunder in any capacity (which shall not be limited by any provision
of law in regard to the compensation of a trustee of an express trust) as mutually agreed to from
time to time in writing between the Company and the Trustee, and the Company will pay or reimburse
the Trustee upon its request for all reasonable expenses, disbursements and advances reasonably
incurred or made by the Trustee in accordance with any of the provisions of this Indenture
(including the reasonable compensation and the expenses and disbursements of its counsel and of all
Persons not regularly in its employ) except any such expense, disbursement or advance as may arise
from its negligence, willful misconduct or bad faith. The Company also covenants to indemnify the
Trustee (or any officer, director or employee of the Trustee), in any capacity under this Indenture
and its agents and any authenticating agent for, and to hold them harmless against, any and all
loss,
liability, claim or expense incurred without negligence, willful misconduct or bad faith on
the part of the Trustee or such officers, directors, employees and agent or authenticating agent,
as the case may be, and arising out of or in connection with the acceptance or administration of
this trust or in any other capacity hereunder, including the costs and expenses of defending
themselves against any claim of liability in the premises. The obligations of the Company under
this Section 10.07 to compensate or indemnify the Trustee and to pay or reimburse the Trustee for
expenses, disbursements and advances shall be secured by a lien prior to that of the Securities
upon all property and funds held or collected by the Trustee as such, except funds held in trust
for the benefit of the holders of particular Securities. The obligation of the Company under this
Section 10.07 shall survive the satisfaction and discharge of this Indenture.
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When the Trustee and its agents and any authenticating agent incur expenses or render services
after an Event of Default specified in Section 8.01(i) or Section 8.01(j) with respect to the
Company occurs, the expenses and the compensation for the services are intended to constitute
expenses of administration under any bankruptcy, insolvency or similar laws.
Section 10.08
. Conflicting Interests of Trustee.
If the Trustee has or shall acquire a
conflicting interest within the meaning of the Trust Indenture Act, the Trustee shall either
eliminate such interest or resign, to the extent and in the manner provided by, and subject to the
provisions of, the Trust Indenture Act and this Indenture.
Section 10.09
. Eligibility of Trustee.
There shall at all times be a Trustee hereunder which
shall be a Person that is eligible pursuant to the Trust Indenture Act to act as such and has a
combined capital and surplus of at least $50,000,000 (or if such Person is a member of a bank
holding company system, its bank holding company shall have a combined capital and surplus of at
least $50,000,000). If such Person publishes reports of condition at least annually, pursuant to
law or to the requirements of any supervising or examining authority, then for the purposes of this
Section 10.09 the combined capital and surplus of such Person shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so published. If at any
time the Trustee shall cease to be eligible in accordance with the provisions of this Section
10.09, it shall resign promptly in the manner and with the effect hereinafter specified in this
Article 10.
Section 10.10
. Resignation or Removal of Trustee.
(a) The Trustee may at any time resign by
giving written notice of such resignation to the Company and to the Holders. Upon receiving such
notice of resignation, the Company shall promptly appoint a successor Trustee by written
instrument, in duplicate, executed by order of the Board of Directors, one copy of which instrument
shall be delivered to the resigning Trustee and one copy to the successor Trustee. If no successor
Trustee shall have been so appointed and have accepted appointment 60 days after the mailing of
such notice of resignation to the Holders, the resigning
Trustee may, upon 10 Business Days notice to the Company and the Holders, appoint a successor
identified in such notice or may petition, at the expense of the Company, any court of competent
jurisdiction for the appointment of a successor Trustee, or, if any Holder who has been a bona fide
Holder for at least six months may, subject to the provisions of Section 8.14, on behalf of
himself and all others similarly situated, petition any such court for the appointment of a
successor Trustee. Such court may thereupon, after such notice, if any, as it may deem proper and
prescribe, appoint a successor Trustee.
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(b) In case at any time any of the following shall occur:
(i) the Trustee shall fail to comply with Section 10.08 after written request
therefor by the Company or by any Holder who has been a bona fide Holder of a Security or
Securities for at least six months; or
(ii) the Trustee shall cease to be eligible in accordance with the provisions of
Section 10.09 and shall fail to resign after written request therefor by the Company or
by any such Holder; or
(iii) the Trustee shall become incapable of acting, or shall be adjudged a bankrupt
or insolvent, or a receiver of the Trustee or of its property shall be appointed, or any
public officer shall take charge or control of the Trustee or of its property or affairs
for the purpose of rehabilitation, conservation or liquidation; then, in any such case,
the Company may remove the Trustee and appoint a successor Trustee by written instrument,
in duplicate, executed by order of the Board of Directors, one copy of which instrument
shall be delivered to the Trustee so removed and one copy to the successor Trustee, or,
subject to the provisions of Section 8.14, any Holder who has been a bona fide Holder for
at least six months may, on behalf of himself and all others similarly situated, petition
any court of competent jurisdiction for the removal of the Trustee and the appointment of
a successor Trustee;
provided
,
however
, that if no successor Trustee shall have been
appointed and have accepted appointment 60 days after either the Company or the Holder has
removed the Trustee, the Trustee so removed may petition any court of competent
jurisdiction for an appointment of a successor Trustee. Such court may thereupon, after
such notice, if any, as it may deem proper and prescribe, remove the Trustee and appoint a
successor Trustee.
(c) The Holders of a majority in aggregate Principal Amount of the Securities at the time
Outstanding may at any time remove the Trustee and nominate a successor Trustee which shall be
deemed appointed as successor Trustee unless, within 10 days after notice to the Company of such
nomination, the Company objects thereto, in which case the Trustee so removed or any Holder, or if
such Trustee so removed or any Holder fails to act, the Company, upon the terms and conditions and
otherwise as in Section 10.10(a) provided, may petition any court of competent jurisdiction for an
appointment of a successor Trustee.
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(d) Any resignation or removal of the Trustee and appointment of a successor Trustee pursuant
to any of the provisions of this Section 10.10 shall become effective upon acceptance of
appointment by the successor Trustee as provided in Section 10.11.
Section 10.11
. Acceptance by Successor Trustee.
Any successor Trustee appointed as provided
in Section 10.10 shall execute, acknowledge and deliver to the Company and to its predecessor
Trustee an instrument accepting such appointment hereunder, and thereupon the resignation or
removal of the predecessor Trustee shall become effective and such successor Trustee, without any
further act, deed or conveyance, shall become vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with like effect as if originally named as trustee
herein; but, nevertheless, on the written request of the Company or of the successor Trustee, the
trustee ceasing to act shall, upon payment of any amount then due it pursuant to the provisions of
Section 10.07, execute and deliver an instrument transferring to such successor Trustee all the
rights and powers of the trustee so ceasing to act. Upon request of any such successor Trustee,
the Company shall execute any and all instruments in writing for more fully and certainly vesting
in and confirming to such successor Trustee all such rights and powers. Any trustee ceasing to act
shall, nevertheless, retain a lien upon all property and funds held or collected by such trustee as
such, except for funds held in trust for the benefit of Holders of particular Securities, to secure
any amounts then due it pursuant to the provisions of Section 10.07.
No successor Trustee shall accept appointment as provided in this Section 10.11 unless, at
the time of such acceptance, such successor Trustee shall be qualified under the provisions of
Section 10.08 and be eligible under the provisions of Section 10.09.
Upon acceptance of appointment by a successor Trustee as provided in this Section 10.11, the
Company (or the former trustee, at the written direction of the Company) shall mail or cause to be
mailed notice of the succession of such trustee hereunder to the Holders at their addresses as they
shall appear on the Security Register. If the Company fails to mail such notice within 10 days
after acceptance of appointment by the successor Trustee, the successor Trustee shall cause such
notice to be mailed at the expense of the Company.
Section 10.12
. Succession by Merger, Etc..
Any Corporation into which the Trustee may be
merged or converted or with which it may be consolidated, or any Corporation resulting from any
merger, conversion or consolidation to which the Trustee shall be a party, or any Corporation
succeeding to all or substantially all of the corporate trust business of the Trustee (including
any trust created by this Indenture), shall be the successor to the Trustee hereunder without the
execution or filing of any paper or any further act on the part of any of the parties hereto,
provided
that in the case of any Corporation succeeding to all or substantially all of the
corporate trust business of the Trustee, such Corporation
shall be qualified under the provisions of Section 10.08 and eligible under the provisions of
Section 10.09.
86
In case at the time such successor to the Trustee shall succeed to the trusts created by this
Indenture, any of the Securities shall have been authenticated but not delivered, any such
successor to the Trustee may adopt the certificate of authentication of any predecessor Trustee or
authenticating agent appointed by such predecessor Trustee, and deliver such Securities so
authenticated; and in case at that time any of the Securities shall not have been authenticated,
any successor to the Trustee or any authenticating agent appointed by such successor Trustee may
authenticate such Securities in the name of the successor Trustee; and in all such cases such
certificates shall have the full force that is provided in the Securities or in this Indenture;
provided
,
however
that the right to adopt the certificate of authentication of any predecessor
Trustee or authenticate Securities in the name of any predecessor Trustee shall apply only to its
successor or successors by merger, conversion or consolidation.
Section 10.13
. Preferential Collection of Claims.
If and when the Trustee shall be or become
a creditor of the Company (or any other obligor upon the Securities), the Trustee shall be subject
to the provisions of the Trust Indenture Act regarding the collection of the claims against the
Company (or any such other obligor).
ARTICLE 11
Holders Lists and Reports by Trustee
Section 11.01
. Company to Furnish Trustee Names and Addresses of Holders.
The Company will
furnish or cause to be furnished to the Trustee:
(a) semi-annually, not more than 15 days after each Record Date, a list, in such form
as the Trustee may reasonably require, of the names and addresses of the Holders as of
such Record Date; and
(b) at such other times as the Trustee may request in writing, within 30 days after
the receipt by the Company of any such request, a list of similar form and content as of a
date not more than 15 days prior to the time such list is furnished;
excluding
from any such list names and addresses received by the Trustee in its capacity as
Security Registrar;
provided
,
however
, that no such list need be furnished so long as the Trustee
is acting as Security Registrar.
Section 11.02
. Preservation of Information; Communications to Holders.
(a) The Trustee shall
preserve, in as current a form as is reasonably practicable, the names and addresses of Holders
contained in the most recent list furnished to the Trustee as provided in Section 11.01 and the
names and addresses of Holders
received by the Trustee in its capacity as Security Registrar. The Trustee may destroy any
list furnished to it as provided in Section 11.01 upon receipt of a new list so furnished.
87
(b) The rights of Holders to communicate with other Holders with respect to their rights under
this Indenture or under the Securities, and the corresponding rights and duties of the Trustee,
shall be as provided by the Trust Indenture Act.
(c) Every Holder of Securities, by receiving and holding the same, agrees with the Company and
the Trustee that neither the Company nor the Trustee nor any agent of either of them shall be held
accountable by reason of any disclosure of information as to names and addresses of Holders made
pursuant to the Trust Indenture Act.
Section 11.03
. Reports by Trustee.
(a) The Trustee shall transmit to Holders such reports
concerning the Trustee and its actions under this Indenture as may be required pursuant to the
Trust Indenture Act at the times and in the manner provided pursuant thereto. Reports so required
to be transmitted at stated intervals of not more than 12 months shall be transmitted no later than
June 15 in each calendar year, commencing on June 15, 2011. Each such report shall be dated as of
a date not more than 60 days prior to the date of transmission.
(b) A copy of each such report shall, at the time of such transmission to Holders, be filed by
the Trustee with each stock exchange, if any, upon which the Securities are listed, with the
Commission and with the Company. The Company will notify the Trustee when the Securities are
listed on any stock exchange or of any delisting thereof.
ARTICLE 12
Satisfaction and Discharge
Section 12.01
. Satisfaction and Discharge of Indenture.
When (a) the Company delivers to the
Trustee all Outstanding Securities (other than Securities replaced pursuant to Section 3.07) for
cancellation or (b) all outstanding Securities have become due and payable, and the Company
irrevocably deposits with the Trustee or delivers to the Holders, as applicable, cash and/or shares
of Common Stock (solely to satisfy outstanding conversions, if applicable) sufficient to pay all
amounts due and owing on all Outstanding Securities (other than Securities replaced pursuant to
Section 3.07), and if in either case the Company pays all other sums payable hereunder by the
Company with respect to the Outstanding Securities, then this Indenture shall cease to be of
further effect with respect to the Securities or any Holders. The Trustee shall acknowledge
satisfaction and discharge of this Indenture with respect to the Securities on demand of the
Company accompanied by an Officers Certificate and an Opinion of Counsel and at the cost and
expense of the Company.
88
Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the
Company to the Trustee under Section 10.07 and, if money shall have been deposited with the Trustee
pursuant to Section 12.01, the obligations of the Trustee under Section 12.01 and Section 12.04
shall survive such satisfaction and discharge.
Section 12.02
. Application of Trust Money.
Subject to the provisions of Section 12.04, all
money deposited with the Trustee pursuant to Section 12.01 shall be held in trust and applied by
it, in accordance with the provisions of the Securities and this Indenture, to the payment, either
directly or through any Paying Agent (including the Company acting as its own Paying Agent) to the
Persons entitled thereto, of the principal and Interest for whose payment such money has been
deposited with the Trustee.
Section 12.03.
Paying Agent to Repay Monies Held
. Upon the satisfaction and discharge of
this Indenture, all monies then held by any Paying Agent of the Securities (other than the Trustee)
shall, upon written request of the Company, be repaid to it or paid to the Trustee, and thereupon
such Paying Agent shall be released from all further liability with respect to such monies.
Section 12.04.
Return of Unclaimed Monies
. Subject to the requirements of applicable law, any
monies deposited with or paid to the Trustee for payment of the principal of or Interest, on
Securities and not applied but remaining unclaimed by the holders of Securities for two years after
the date upon which the principal of or Interest on such Securities, as the case may be, shall have
become due and payable, shall be repaid to the Company by the Trustee on demand and all liability
of the Trustee shall thereupon cease with respect to such monies; and the holder of any of the
Securities shall thereafter look only to the Company for any payment that such Holder may be
entitled to collect unless an applicable abandoned property law designates another Person.
Section 12.05.
Reinstatement
. If the Trustee or the Paying Agent is unable to apply any
money in accordance with Section 12.02 by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such application, the
Companys obligations under this Indenture and the Securities shall be revived and reinstated as
though no deposit had occurred pursuant to Section 12.01 until such time as the Trustee or the
Paying Agent is permitted to apply all such money in accordance with Section 12.02;
provided
,
however, that if the Company makes any payment of Interest on or principal of any Security
following the reinstatement of its obligations, the Company shall be subrogated to the rights of
the Holders of such Securities to receive such payment from the money held by the Trustee or Paying
Agent.
89
ARTICLE 13
Supplemental Indentures
Section 13.01
. Without Consent of Holders.
Without the consent of any Holders, the Company,
when authorized by a Board Resolution, and the Trustee, at any time and from time to time, may
enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any
of the following purposes:
(i) to cure any ambiguity or correct any omission, defect or inconsistency contained
herein, so long as such action does not adversely affect to a material extent the interest
of the Holders;
provided
that any such action made solely to conform the provisions of
this Indenture to the description thereof contained in the final offering memorandum dated
June 3, 2010, shall be deemed not to adversely affect the interests of the Holders;
(ii) to provide for the assumption by a successor Corporation of the obligations of
the Company contained herein and in the Securities;
(iii) to provide for uncertificated Securities in addition to or in place of Physical
Securities;
provided
that the Company receives an opinion of nationally recognized tax
counsel that such uncertificated Securities are issued in registered form for purposes of
Section 163(f) of the Code, or in a manner such that the uncertificated notes are
described in Sections 163(f)(2)(A)(iv) and 163(f)(2)(B) of the Code, if then applicable;
(iv) to add guarantees with respect to the Securities;
(v) to secure the Securities;
(vi) to add to the covenants of the Company for the benefit of the Holders, or to
surrender any right or power herein conferred upon the Company;
(vii) to make any change that does not adversely affect the rights of any Holder; or
(viii) to modify, eliminate or add to the provisions of this Indenture to such extent
as shall be necessary to effect the qualifications of this Indenture under the Trust
Indenture Act, or under any similar federal statute hereafter enacted.
90
Section 13.02
. Supplemental Indentures With Consent of Holders.
With the consent of the
Holders of not less than a majority in Principal Amount of the Outstanding Securities (including
consents obtained in connection with a purchase of, or tender offer or exchange offer for
Securities), by Act of said Holders delivered to the Company and the Trustee, the Company, when
authorized by a Board Resolution, and the Trustee may enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the
Holders under this Indenture;
provided
,
however
, that no such supplemental indenture shall, without
the consent of the Holder of each Outstanding Security affected thereby,
(i) reduce the rate or extend the time of payment of any Interest on any Security;
(ii) reduce the Principal Amount of, or extend the Stated Maturity of, any Security;
(iii) make any change that impairs or adversely affects right of a Holder to convert
any Security or the Conversion Rate of any Securities;
(iv) reduce the Fundamental Change Repurchase Price of any Security or amend or
modify in any manner adverse to the Holders of Securities the Companys obligation to make
such payments, whether through an amendment or waiver of provisions in the covenants,
definitions or otherwise;
(v) make any Security payable in money other than that stated in the Security;
(vi) change the ranking of the Securities;
(vii) impair the right of any Holder to receive payment of principal and Interest on
such Holders Securities on or after the due dates therefor or institute suit for the
enforcement of any payment on or with respect to such Holders Securities;
(viii) modify any of the provisions of this Section 13.02, Section 13.03 or Section
8.13, except to increase any such percentage or to provide that certain other provisions
of this Indenture cannot be modified or waived without the consent of the Holder of each
Outstanding Security affected thereby.
It shall not be necessary for any Act of Holders under this Section 13.02 to approve the
particular form of any proposed supplemental indenture, but it shall be sufficient if such Act
shall approve the substance thereof.
91
Section 13.03
. Execution of Supplemental Indentures.
In executing, or accepting the
additional trusts created by, any supplemental indenture permitted by this Article 13 or the
modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to
receive, and (subject to Section 10.01) shall be fully protected in relying upon, in addition to
the documents required by Section 14.04, an Opinion of Counsel stating that the execution of such
supplemental indenture is authorized or permitted by this Indenture. Subject to the preceding
sentence, the Trustee shall sign such supplemental indenture if the same does not adversely affect
the Trustees own rights, duties or immunities under this Indenture or otherwise. The Trustee may,
but shall not be obligated to, enter into any such supplemental indenture that adversely affects
the Trustees own rights, duties or immunities under this Indenture or otherwise.
Section 13.04
. Effect of Supplemental Indentures.
Upon the execution of any supplemental
indenture under this Article 13, this Indenture shall be modified in accordance therewith, and
such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound
thereby.
Section 13.05
. Conformity with Trust Indenture Act.
Every supplemental indenture executed
pursuant to this Article 13 shall conform to the requirements of the Trust Indenture Act.
Section 13.06
. Reference in Securities to Supplemental Indentures.
Securities authenticated
and delivered after the execution of any supplemental indenture pursuant to this Article 13 shall
bear a notation in form approved by the Trustee as to any matter provided for in such supplemental
indenture. If the Company shall so determine, new Securities so modified as to conform, in the
opinion of the Trustee and the Company, to any such supplemental indenture may be prepared and
executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding
Securities.
Section 13.07
. Notice to Holders of Supplemental Indentures.
The Company shall cause notice
of the execution of any supplemental indenture to be mailed to each Holder, at his address
appearing on the Security Register provided for in this Indenture, within 20 days after execution
thereof. Failure to deliver such notice shall not affect the legality or validity of such
supplemental indenture.
ARTICLE 14
Miscellaneous
Section 14.01
. Trust Indenture Act Controls
. If any provision of this Indenture limits,
qualifies or conflicts with another provision which is required to be included in this Indenture by
the Trust Indenture Act, the provision required by the Trust Indenture Act shall control.
92
Section 14.02
. Notices.
Any notice or communication shall be in writing (including telecopy
promptly confirmed in writing) and delivered in person or mailed by first-class mail addressed as
follows:
if to the Company:
Xilinx, Inc.
2100 Logic Drive
San Jose, CA 95124
Attn: Treasurer
to the Trustee:
The Bank of New York Mellon Trust Company, N.A.
700 South Flower Street, Suite 500
Los Angeles, CA 90017
The Company or the Trustee by notice to the other may designate additional or different
addresses for subsequent notices or communications.
Any notice or communication mailed to a registered Holder shall be mailed to the Holder at the
Holders address as it appears on the registration books of the Security Registrar and shall be
sufficiently given if so mailed within the time prescribed.
Failure to mail a notice or communication to a Holder or any defect in it shall not affect its
sufficiency with respect to other Holders. If a notice or communication is mailed in the manner
provided above, it is duly given, whether or not the addressee receives it, except that notices to
the Trustee shall be effective only upon receipt.
The Trustee agrees to accept and act upon instructions or directions pursuant to this
Indenture sent by unsecured e-mail, facsimile transmission or other similar unsecured electronic
methods (including pdf files). If the party elects to give the Trustee e-mail or facsimile
instructions (or instructions by a similar electronic method) and the Trustee in its discretion
elects to act upon such instructions, the Trustees understanding of such instructions shall be
deemed controlling. The party providing electronic instructions agrees to assume the risk arising
from the use of such electronic methods to submit instructions to the Trustee.
Section 14.03
. Communication by Holders with other Holders.
Holders may communicate pursuant
to Trust Indenture Act § 312(b) with other Holders with respect to their rights under this
Indenture or the Securities. The Company, the Trustee, the Registrar and anyone else shall have
the protection of Trust Indenture Act § 312(c).
93
Section 14.04.
Certificate and Opinion as to Conditions Precedent.
Upon any request or
application by the Company to the Trustee to take or refrain from taking any action under this
Indenture, the Company shall furnish to the Trustee:
(a) an Officers Certificate in form and substance reasonably satisfactory to the Trustee
stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
(b) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee stating
that, in the opinion of such counsel, all such conditions precedent have been complied with.
Section 14.05.
Statements Required in Certificate or Opinion.
Each certificate or opinion
with respect to compliance with a covenant or condition provided for in this Indenture shall
include:
(a) a statement that the individual making such certificate or opinion has read such covenant
or condition and the definitions herein relating thereto;
(b) a brief statement as to the nature and scope of the examination or investigation upon
which the statements or opinions contained in such certificate or opinion are based;
(c) a statement that, in the opinion of such individual, has made such examination or
investigation as is necessary to enable such individual to express an informed opinion as to
whether or not such covenant or condition has been complied with; and
(d) a statement as to whether or not, in the opinion of such individual, such covenant or
condition has been complied with.
In giving such Opinion of Counsel, counsel may rely as to factual matters on an Officers
Certificate or on certificates of public officials.
Section 14.06.
Rules by Trustee, Paying Agent and Registrar.
The Trustee may make reasonable
rules for action by, or a meeting of, Holders. The Registrar and the Paying Agent may make
reasonable rules for their functions.
Section 14.07.
Legal Holidays.
A
Legal Holiday
is a Saturday, a Sunday or other day on
which commercial banking institutions are authorized or required to be closed in The City of New
York. If an Interest Payment Date is any Fundamental Change Repurchase Date falls on a Legal
Holiday, payment shall be made on the next succeeding Business Day that is not a Legal Holiday, and
no Interest shall accrue for the intervening period. If a Record Date is a Legal Holiday, the
Record Date shall not be affected. In any case where the Stated Maturity of any Security is a
Legal Holiday, then (notwithstanding any other provision of this Indenture or of the Securities)
payment of principal need not be made on such date, but may be made on the next succeeding Business
Day that is not a Legal Holiday, with the same force and effect as if made on at the Stated
Maturity.
94
Section 14.08
. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies
or conflicts with a provision of the Trust Indenture Act that is required hereunder to be a part of
and govern this Indenture, the latter provision shall control. If any provision of this Indenture
modifies or excludes any provision of the Trust Indenture Act that may be so modified or excluded,
the latter provision shall be deemed to apply to this Indenture as so modified or to be excluded,
as the case may be.
Section 14.09.
Successors.
All agreements of the Company in this Indenture and the
Securities shall bind their respective successors. All agreements of the Trustee in this Indenture
shall bind its successors.
Section 14.10
. Table of Contents; Headings.
The table of contents, cross-reference sheet and
headings of the Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not intended to be considered a part hereof and shall not modify or restrict
any of the terms or provisions hereof.
Section 14.11
. Severability Clause.
In case any provision in this Indenture shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby and such provision shall be
ineffective only to the extent of such invalidity, illegality or unenforceability.
Section 14.12
. U.S.A. Patriot Act.
The parties hereto acknowledge that in accordance with
Section 326 of the U.S.A. Patriot Act, the Trustee, like all financial institutions and in order to
help fight the funding of terrorism and money laundering, is required to obtain, verify, and record
information that identifies each Person or legal entity that establishes a relationship or opens an
account with the Trustee. The parties to this Indenture agree that they will provide the Trustee
with such information as it may request in order for the Trustee to satisfy the requirements of the
U.S.A. Patriot Act.
Section 14.13
. Execution in Counterparts.
This Indenture may be executed in two or more
counterparts, which when so executed shall constitute one and the same agreement. The exchange of
copies of this Indenture and of signature pages by facsimile or Portable Document Format (PDF)
transmission shall constitute effective execution and delivery of this Indenture as to the parties
hereto and may be used in lieu of the original Indenture for all purposes. Signatures of the
parties hereto transmitted by facsimile or PDF shall be deemed to be their original signatures for
all purposes.
95
Section 14.14
. Calculations.
Except as otherwise provided herein, the Company will be
responsible for making all calculations called for under this Indenture and the Securities. Such
calculations include but are not limited to, determinations of the Last Reported Sale Price of the
Common Stock, Interest payable on the Securities and the Conversion Rate. The Company will make
all such calculations in good faith and, absent manifest error, its calculations will be
final and binding on Holders. The Company will provide a schedule of its calculations to each
of the Trustee and the Conversion Agent, and each of the Trustee and Conversion Agent is entitled
to rely conclusively upon the accuracy of the Companys calculations without independent
verification. The Trustee will deliver a copy of such schedule to any Holder upon the request of
such Holder. For the avoidance of doubt, the Trustee and the Conversion Agent shall rely
conclusively on the calculations and information provided to them by the Company as to Daily VWAP,
Trading Price and Last Reported Sale Price. Nor shall the Trustee or the Conversion Agent be
charged with knowledge of or have any duties to monitor the stock price or any Measurement Period.
Section 14.15
. Governing Law.
This Indenture and the Securities, and any claims controversy
or dispute arising under or related to this Indenture or the Securities, shall be governed by and
construed in accordance with the laws of the State of New York, without regard to the conflicts of
law principles thereof.
Section 14.16
. Waiver of Jury Trial.
EACH OF THE COMPANY AND THE TRUSTEE HEREBY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN
ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE NOTES OR THE TRANSACTION
CONTEMPLATED THEREBY.
Section 14.17
. Force Majeure.
In no event shall the Trustee be responsible or liable for any
failure or delay in the performance of its obligations hereunder arising out of or caused by,
directly or indirectly, forces beyond its control, including, without limitation, strikes, work
stoppages, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural
catastrophes or acts of God, and interruptions, loss or malfunctions of utilities, communications
or computer (software or hardware) services; it being understood that the Trustee shall use
reasonable efforts which are consistent with accepted practices in the banking industry to resume
performance as soon as practicable under the circumstances.
Section 14.18
. Benefits of Indenture.
Nothing in this Indenture or in the Securities,
express or implied, shall give to any Person, other than the parties hereto and their respective
successors hereunder and the Holders of Securities, any benefit or any legal or equitable right,
remedy or claim under this Indenture.
Section 14.19
. No Recourse Against Others.
None of the Companys, or of any successor
entitys, direct or indirect stockholders, employees, officers or directors, as such, past, present
or future, shall have any personal liability in respect of the obligations of the Company under
this Indenture or the Securities solely by reason of his or its status as such stockholder,
employee, officer or director.
96
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed as of
the day and year first above written.
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XILINX, INC.
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By:
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/s/ Jon A. Olson
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Name:
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Jon A. Olson
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Title:
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Senior Vice President, Finance and
Chief Financial Officer
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[Trustee Signature Follows]
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THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.
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By:
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/s/ Alex Briffett
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Name:
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John A. (Alex) Briffett
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Title:
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Authorized Signatory
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98
SCHEDULE A
Additional Shares to Be Delivered in Connection with Conversion Upon a Make-Whole Fundamental Change
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Stock Price
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Effective Date
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$25.24
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$30.00
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$35.00
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$40.00
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$45.00
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$50.00
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$55.00
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$60.00
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$65.00
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$70.00
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$75.00
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June 9, 2010
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|
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6.6033
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|
|
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4.6807
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|
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2.8909
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|
|
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1.8046
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|
|
|
1.1259
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|
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0.6935
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0.4152
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0.2359
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0.1216
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0.0518
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|
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0.0141
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June 15, 2011
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|
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6.6033
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|
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4.9306
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|
|
3.0162
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|
|
|
1.8645
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|
|
|
1.1515
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|
|
|
0.7021
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|
|
|
0.4157
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|
|
|
0.2333
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|
|
|
0.1184
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|
|
|
0.0491
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|
|
|
0.0125
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|
June 15, 2012
|
|
|
6.6033
|
|
|
|
5.1042
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|
|
|
3.0712
|
|
|
|
1.8647
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|
|
|
1.1301
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|
|
|
0.6752
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|
|
|
0.3908
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|
|
|
0.2131
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|
|
|
0.1038
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|
|
0.0399
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|
|
|
0.0081
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June 15, 2013
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|
|
6.6033
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|
|
|
5.1449
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3.0071
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1.7679
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1.0339
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0.5933
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0.3271
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0.1669
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|
|
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0.0728
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|
|
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0.0221
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|
|
|
0.0016
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June 15, 2014
|
|
|
6.6033
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|
|
|
4.9678
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|
|
|
2.7595
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|
|
|
1.5293
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|
|
|
0.8358
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|
|
|
0.4425
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|
|
|
0.2195
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|
|
|
0.0951
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|
|
|
0.0300
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|
|
|
0.0030
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|
|
|
0.0000
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|
June 15, 2015
|
|
|
6.6033
|
|
|
|
4.4546
|
|
|
|
2.2387
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|
|
|
1.0990
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|
|
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0.5189
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|
|
|
0.2272
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|
|
|
0.0838
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|
|
|
0.0193
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|
|
|
0.0001
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|
|
|
0.0000
|
|
|
|
0.0000
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|
June 15, 2016
|
|
|
6.6033
|
|
|
|
3.3899
|
|
|
|
1.2970
|
|
|
|
0.4404
|
|
|
|
0.1229
|
|
|
|
0.0191
|
|
|
|
0.0000
|
|
|
|
0.0000
|
|
|
|
0.0000
|
|
|
|
0.0000
|
|
|
|
0.0000
|
|
June 15, 2017
|
|
|
6.6033
|
|
|
|
0.3169
|
|
|
|
0.0000
|
|
|
|
0.0000
|
|
|
|
0.0000
|
|
|
|
0.0000
|
|
|
|
0.0000
|
|
|
|
0.0000
|
|
|
|
0.0000
|
|
|
|
0.0000
|
|
|
|
0.0000
|
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