UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended December 27, 1997 or
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ________ to ________.
COMMISSION FILE NUMBER 0-18548
XILINX, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
77-0188631
(I.R.S. Employer Identification No.)
2100 LOGIC DRIVE, SAN JOSE, CA 95124
(Address of principal executive offices) (Zip Code)
(408) 559-7778
(Registrant's telephone number, including area code)
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 requirements for the past 90 days.
YES [ X ] NO [ ]
Class Shares Outstanding at December 27, 1997
----- ---------------------------------------
Common Stock, $.01 par value 74,236,791
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
XILINX, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(in thousands except per share amounts)
Three Months Ended Nine Months Ended
Dec. 27, Dec. 28, Dec. 27, Dec. 28,
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net revenues $ 148,735 $ 135,587 $ 459,768 $ 416,366
Costs and expenses:
Cost of revenues 55,668 52,156 172,622 156,139
Write-off of discontinued product family - - - 5,000
Research and development 19,536 17,698 59,424 52,283
Marketing, general and administrative 32,460 28,830 96,352 87,087
---------- ---------- ---------- ----------
Operating costs and expenses 107,664 98,684 328,398 300,509
---------- ---------- ---------- ----------
Operating income 41,071 36,903 131,370 115,857
Interest income and other 4,425 5,353 15,514 15,121
Interest expense (3,487) (3,407) (10,474) (10,320)
---------- ---------- ---------- ----------
Income before provision for taxes on income
and equity in joint venture 42,009 38,849 136,410 120,658
Provision for taxes on income 13,023 12,626 43,030 40,725
---------- ---------- ---------- ----------
Income before equity in joint venture 28,986 26,223 93,380 79,933
Equity in net income of joint venture 2,614 - 2,614 -
---------- ---------- ---------- ----------
Net income $ 31,600 $ 26,223 $ 95,994 $ 79,933
========== ========== ========== ==========
Net income per share:
Basic $ 0.43 $ 0.36 $ 1.30 $ 1.10
========== ========== ========== ==========
Diluted $ 0.40 $ 0.33 $ 1.19 $ 1.01
========== ========== ========== ==========
Common shares used in computing Basic net
income per share amounts 74,196 72,931 73,871 72,653
========== ========== ========== ==========
Common and equivalent shares used in computing
Diluted net income per share amounts 79,248 79,791 80,663 79,371
========== ========== ========== ==========
<FN>
(See accompanying Notes to Consolidated Condensed Financial Statements.)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
XILINX, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands except per share amounts)
Dec. 27, March 29,
1997 1997
---------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 244,079 $ 215,903
Short-term investments 173,480 209,944
Accounts receivable, net 63,802 72,248
Inventories 54,605 62,367
Advances for wafer purchases 55,000 -
Deferred income taxes and other current assets 48,755 41,093
---------- -----------
Total current assets 639,721 601,555
Property, plant and equipment, at cost 165,518 154,443
Accumulated depreciation and amortization (82,287) (67,863)
---------- -----------
Net property, plant and equipment 83,231 86,580
Restricted investments 36,745 36,257
Investment in joint venture 91,850 35,286
Advances for wafer purchases 65,000 60,000
Developed technology and other assets 50,300 28,015
---------- -----------
$ 966,847 $ 847,693
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 25,042 $ 16,758
Accrued payroll, other accrued liabilities and interest payable 24,210 33,282
Income taxes payable 22,868 10,858
Deferred income on shipments to distributors 49,244 36,355
---------- -----------
Total current liabilities 121,364 97,253
Long-term debt 250,000 250,000
Deferred tax liabilities 11,228 9,760
Stockholders' equity:
Preferred stock, $.01 par value - -
Common stock, $.01 par value 742 733
Additional paid-in capital 129,797 114,530
Retained earnings 473,875 377,881
Treasury stock, at cost (4,054) (1,847)
Cumulative translation adjustment (16,105) (617)
---------- -----------
Total stockholders' equity 584,255 490,680
---------- -----------
$ 966,847 $ 847,693
========== ===========
<FN>
(See accompanying Notes to Consolidated Condensed Financial Statements.)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
XILINX, INC.
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
Increase (decrease) in cash and cash equivalents
(in thousands)
Nine Months Ended
Dec. 27, Dec. 28,
1997 1996
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 95,994 $ 79,933
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 24,822 20,195
Undistributed earnings of joint venture (3,642) (938)
Changes in assets and liabilities:
Accounts receivable 8,446 10,979
Inventories 7,762 (21,908)
Deferred income taxes and other 8,114 1,607
Accounts payable, accrued liabilities and income taxes payable 11,222 7,044
Deferred income on shipments to distributors 12,889 (8,221)
---------- ----------
Total adjustments 69,613 8,758
---------- ----------
Net cash provided by operating activities 165,607 88,691
Cash flows from investing activities:
Purchases of short-term available-for-sale investments (281,860) (209,111)
Proceeds from sale or maturity of short-term available-for-sale investments 318,241 240,650
Purchases of restricted held-to-maturity investments (36,136) (36,097)
Proceeds from sale or maturity of restricted held-to maturity investments 35,648 36,092
Advances for wafer purchases (60,000) (60,000)
Property, plant and equipment (17,947) (22,300)
Investment in joint venture (67,422) -
Deposit on building (28,351) -
---------- ----------
Net cash used in investing activities (137,827) (50,766)
Cash flows from financing activities:
Acquisition of Treasury stock (22,682) (15,729)
Principal payments on capital lease obligations - (779)
Proceeds from issuance of common stock 23,078 22,693
---------- ----------
Net cash provided by financing activities 396 6,185
---------- ----------
Net increase in cash and cash equivalents 28,176 44,110
Cash and cash equivalents at beginning of period 215,903 110,893
---------- ----------
Cash and cash equivalents at end of period $ 244,079 $ 155,003
========== ==========
Schedule of non-cash transactions:
Tax benefit from stock options $ 12,723 $ 5,484
Issuance of Treasury stock under employee stock plans 20,475 15,511
Receipts against advances for wafer purchases - 9,035
Supplemental disclosures of cash flow information:
Interest paid 13,195 12,561
Income taxes paid $ 26,489 $ 26,416
<FN>
(See accompanying Notes to Consolidated Condensed Financial Statements.)
</TABLE>
XILINX, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. The accompanying interim consolidated financial statements have been
prepared in conformity with generally accepted accounting principles and
should be read in conjunction with the Xilinx, Inc. ("Xilinx" or the
"Company") consolidated financial statements for the year ended March 29,
1997. The balance sheet at March 29, 1997 is derived from audited financial
statements, although certain prior period amounts have been reclassified to
conform to the fiscal 1998 presentation. The interim financial statements are
unaudited but reflect all adjustments which are in the opinion of management
of a normal, recurring nature necessary to present fairly the statements of
financial position, results of operations and cash flows for the interim
periods presented. The results for the nine-month period ended December 27,
1997 are not necessarily indicative of the results that may be expected for
the year ending March 28, 1998.
2. Inventories are stated at the lower of cost (first-in, first-out) or
market (estimated net realizable value). Inventories at December 27, 1997 and
March 29, 1997 are as follows:
<TABLE>
<CAPTION>
December 27, March 29,
1997 1997
------------- ----------
<S> <C> <C>
Raw materials $ 5,880 $ 4,952
Work-in-process 25,713 30,898
Finished goods 23,012 26,517
------------- ----------
$ 54,605 $ 62,367
============= ==========
</TABLE>
3. In October 1997, the Company entered into a lease agreement for a
facility to be built on property adjacent to the Company's corporate
facilities. Building construction and occupancy is expected to be completed
in calendar 1998. Upon signing the lease agreement, the Company paid the
lessor $31.3 million for prepaid rent and an option to purchase the facility.
The rent prepayment covers one year and was discounted to its present value.
Additionally, the Company can exercise the lease agreement's purchase option
between the sixth and twelfth month following the commencement date of the
lease term. If the Company elects to exercise the option, the prepaid
purchase option will be considered payment in full. However, if the Company
decides not to exercise the purchase option, the prepaid option will be
returned without interest at the end of the first year lease.
4. The Company, United Microelectronics Corporation ("UMC") and other
parties have entered into a joint venture to construct a wafer fabrication
facility in Taiwan, known as United Silicon Inc. ("USIC"). In fiscal 1998,
the Company invested additional equity of $67.4 million in USIC in which the
Company now holds a 25% equity ownership. UMC has committed to supply and is
currently supplying the Company with wafers manufactured in an existing
facility until capacity is available in the new facility.
The Company records 25% of the net income of USIC as joint venture equity
income. To date, USIC's net income has resulted primarily from favorable
exchange gains on its foreign currency investments as well as interest earned
on its investment portfolio. Net joint venture equity income for the third
quarter of fiscal 1998 was $2.6 million. This amount was largely attributable
to foreign exchange gains incurred by USIC relating to its US dollar
denominated investments. All prior period amounts were immaterial and remain
classified as "Interest income and other".
5. In May 1996 the Company entered into an agreement with Seiko Epson.
This agreement was amended in December 1997 and now provides for an advance to
Seiko Epson of $150.0 million to be used in the construction of a wafer
fabrication facility in Japan. Through December 27, 1997, the Company has
advanced a total of $120.0 million to Seiko Epson under the agreement. The
final installment of $30.0 million was paid on February 2, 1998.
6. During the quarter ended December 27, 1997, the Company adopted the
Financial Accounting Standards Board's Statement No. 128, Earnings per Share.
The new standard requires the Company to change the method used to compute net
income per share and to restate all prior periods. The new requirement
includes a calculation of "basic" net income per share, which excludes the
dilutive effect of stock options. The calculations of basic and diluted net
income per share for the third quarter and first nine months of fiscal 1998
and fiscal 1997 are shown below.
<TABLE>
<CAPTION>
(in thousands except per share amounts) Three Months Ended Nine Months Ended
Dec. 27, Dec. 28, Dec. 27, Dec. 28,
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
BASIC
Weighted average number of
common shares outstanding 74,196 72,931 73,871 72,653
========= ========= ========= =========
Net income $ 31,600 $ 26,223 $ 95,994 $ 79,933
========= ========= ========= =========
Net income per share $ 0.43 $ 0.36 $ 1.30 $ 1.10
========= ========= ========= =========
DILUTED
Weighted average number of
common shares outstanding 74,196 72,931 73,871 72,653
Incremental common shares
attributable to outstanding options 5,052 6,860 6,792 6,718
--------- --------- --------- ---------
Total shares 79,248 79,791 80,663 79,371
========= ========= ========= =========
Net income $ 31,600 $ 26,223 $ 95,994 $ 79,933
========= ========= ========= =========
Net income per share $ 0.40 $ 0.33 $ 1.19 $ 1.01
========= ========= ========= =========
</TABLE>
The shares issuable upon conversion of long-term debt to equity, approximately
4.9 million shares, are not included in the calculation of diluted net income
per share as their inclusion would have had an anti-dilutive effect for all
periods presented. In addition, outstanding options to purchase approximately
3.4 million and 1.0 million shares, for the third quarter of fiscal 1998 and
1997, respectively, under the Company's Stock Option Plan were not included in
the treasury stock calculation to derive diluted income per share as their
inclusion would have had an anti-dilutive effect.
7. The Company is currently involved in patent litigation with Altera
Corporation (see Part II, Item 1, Legal Proceedings). Due to the uncertain
nature of the litigation with Altera and because the lawsuits are still in the
pre-trial stage, the ultimate outcome of these matters cannot be determined at
this time. Management believes that it has meritorious defenses to Altera's
claims, is defending them vigorously, and has not recorded a provision for the
ultimate outcome of these matters in its financial statements. The foregoing
is a forward-looking statement subject to risks and uncertainties, and the
future outcome could differ materially due to the uncertain nature of the
litigation with Altera and because the lawsuits are still in the pre-trial
stage.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion contains forward-looking statements, which involve
numerous risks and uncertainties. Actual results may differ materially.
Certain of these risks and uncertainties are discussed under "Risk Factors".
RESULTS OF OPERATIONS - THIRD QUARTER AND FIRST NINE MONTHS OF FISCAL 1998
COMPARED TO THE THIRD QUARTER AND FIRST NINE MONTHS OF FISCAL 1997
Revenues
- --------
Revenues for the third quarter of fiscal 1998 were $148.7 million, which
represented a $13.1 million, or 9.7%, increase from the corresponding period
of fiscal 1997. In addition, revenues for the first nine months of fiscal
1998 were $459.8 million, up 10.4% from the corresponding period of 1997. The
revenue increase during the third quarter of fiscal 1998, as compared to the
comparable quarter of fiscal 1997, was primarily attributable to increased
demand for the Company's XC4000X product family, which includes revenues from
the XC4000EX and XC4000XL devices, as well as the XC5200 and XC9500 product
families. The increase was offset primarily by reduced demand for the
Company's XC3000 and XC4000 families. The XC4000X and XC9500 devices, which
constitute the Company's newest product families, represented 13.0% of
revenues during the third quarter of fiscal 1998 as compared to 1.7% in the
comparable quarter in the prior year.
Revenues relating to first generation products, which include the XC2000,
XC3000 and XC3100 product families, represented 26.1% and 26.6% of total
revenues during the third quarter and first nine months of fiscal 1998,
respectively, as compared to 31.4% and 33.4% of total revenues during the
third quarter and first nine months of fiscal 1997, respectively. Revenues
relating to second generation products, which include the XC4000, XC4000X,
XC5200 and XC6200 product families, represented 56.8% and 57.5% of total
revenues during the third quarter and first nine months of fiscal 1998,
respectively, as compared to 53.0% and 51.7% of total revenues during the
third quarter and first nine months of fiscal 1997, respectively. The
increase in revenues relating to second generation products is primarily a
function of the decreasing requirements for first generation products and the
increasing demand for the functionality and performance provided by devices
within the second generation product families. Additionally, within the
second generation products, demand is increasing for the newer product family
members, including the XC4000X devices, and decreasing for mature devices,
including the XC4000 product family.
Revenues relating to other products, which include HardWire, serial proms and
the XC7000 and XC9500 product families, represented 14.1% and 13.1% of total
revenues during the third quarter and first nine months of fiscal 1998,
respectively, as compared to 12.2% and 11.7% of total revenues during the
third quarter and first nine months of fiscal 1997, respectively.
Additionally, software revenues represented approximately 3% of total revenues
for both the third quarter and first nine month periods of both fiscal 1998
and fiscal 1997. Software revenues include the sale of approximately 4000
revenue seats for the third quarter of fiscal 1998 as compared to
approximately 1300 revenue seats for the comparable period in the prior fiscal
year. The increase in revenue seats resulted primarily from increased demand
for the Company's lower cost, easier to use Foundation Series software
introduced in April 1996, as well as increased demand for the software
utilized to design high volume logic devices. The percentage increase in
software revenues was less than the proportional increase in software revenue
seats due primarily to the change in the sales mix towards lower priced
products.
International revenues constituted approximately 38% of total revenues in the
third quarter of both fiscal 1998 and fiscal 1997. Additionally,
international revenues were approximately 38% of total revenues for the first
nine months of fiscal 1998 as compared to approximately 37% for the prior year
comparable period. International revenues are primarily derived from
customers in Europe, Japan and Southeast Asia/Rest of World, which represented
approximately 22%, 10% and 6% of the Company's worldwide sales, respectively
in the December quarter. Revenue growth in the European and Southeast
Asian/Rest of World markets was 13.6% and 38.5%, respectively, in the third
quarter of 1998 as compared to the third quarter in 1997. When comparing
revenues in Japan over the same periods, yen denominated revenues increased
approximately 4% but were adversely impacted by the change in exchange rates
relative to the prior year period, resulting in an overall decline of
approximately 4% in US dollar equivalent revenues.
Gross Margin
- -------------
Costs of revenues were $55.7 million, or 37.4% of revenues, and $172.6
million, or 37.5% of revenues, for the third quarter and first nine months of
fiscal 1998, respectively. Costs of revenues for the comparable periods of
fiscal 1997 were $52.2 million, or 38.5% of revenues, and $156.1 million, or
37.5% of revenues, respectively, excluding the impact of the $5.0 million
non-recurring write-off of the XC8100 product family in the second quarter of
fiscal 1997. The decrease in the cost of revenues as a percentage of revenues
from the prior year third quarter was primarily attributable to ongoing yield
improvements and the favorable impact of lower wafer costs, including the
impact of favorable movements in the yen exchange rate, partially offset by
selling price reductions. Historically, Xilinx has been able to offset much
of the erosion in gross margin percentages on more mature integrated circuits
with increased volumes of newer, proprietary, higher margin products, although
there can be no assurance that this will occur in future periods. The Company
recognizes that ongoing manufacturing cost reductions for its integrated
circuits, which assist the Company in its efforts to lower selling prices
while maintaining historical margins, represent a significant element in
expanding the market for its products. Company management believes that
future gross margin objectives in the range of 60% to 62% of revenues are
consistent with expanding market share while realizing acceptable returns,
although there can be no assurance that future gross margins will be in this
range.
Research and Development
- --------------------------
Research and development expenditures were $19.5 million for the third quarter
and $59.4 million for the first nine months of fiscal 1998, or 13.1% and 12.9%
of revenues, respectively. The expenditures for the comparable periods in the
prior year were $17.7 million and $52.3 million, or 13.1% and 12.6% of
revenues, respectively. The 10.4% and 13.7% increase in expenditures over the
prior year third quarter and nine month periods, respectively, resulted
primarily from increased testing of products in development and labor-related
expenses partially offset by a decline in engineering wafer purchases. The
Company remains committed to a significant level of research and development
effort in order to continue to compete aggressively in the programmable logic
marketplace.
Marketing, General and Administrative
- ----------------------------------------
Marketing, general and administrative expenses increased as a percentage of
revenue to 21.8% and 21.0% of revenues, or $32.5 million and $96.4 million,
respectively, during the third quarter and first nine months of fiscal 1998,
up from 21.3% and 20.9% of revenues, or $28.8 million and $87.1 million,
respectively, during the third quarter and first nine months of fiscal 1997.
These expenses have increased in percentage and amount primarily as a result
of increased staffing and labor-related expenses as well as increased legal
costs. The Company remains committed to controlling administrative expenses
and believes that, over time, most of these expenses should grow at a lower
rate than revenue growth, although there can be no assurance that the Company
will be successful in achieving these strategies. However, the timing and
extent of future legal costs associated with the ongoing enforcement of the
Company's intellectual property rights are not readily predictable and may
significantly increase the level of general and administrative expenses in the
future.
Operating Income
- -----------------
Operating income of $41.1 million, or 27.6% of revenues, was generated during
the third quarter of fiscal 1998, an increase of 11.3% from the $36.9 million
or 27.2% of revenues, for the comparable prior year period. In addition,
operating income for the first nine months of fiscal 1998 increased 13.4% to
$131.4 million, or 28.6% of revenues, from $115.9 million or 27.8% of revenues
in the comparable fiscal 1997 period. Excluding the impact of the $5.0
million non-recurring write-off of the discontinued product family, for the
first nine months of fiscal 1998 operating income was 8.7% higher than the
operating income for the comparable prior year period. This increase in
operating income in the third quarter of 1998 compared to the third quarter of
1997 is primarily a result of the 9.7% revenue growth and the level of all
other expenses. Operating income as a percentage of revenues could be
adversely impacted in future years by the factors noted under "Risk Factors".
Interest and Other, net
- --------------------------
The Company earns interest income on its cash, cash equivalents, short-term
investments and restricted investments. The amount of interest earned is a
function of the balance of cash invested as well as prevailing interest rates.
The Company incurs interest expense on the $250 million of 5 1/4% convertible
subordinated notes issued in November 1995. The Company's investment
portfolio contains tax-advantaged municipal securities, which have pretax
yields that are less than the interest rate on the convertible subordinated
notes. For financial reporting purposes, the Company effectively records the
difference between the pretax and tax-equivalent yields as a reduction in
provision for taxes on income.
Net interest and other income declined in the third quarter of fiscal 1998
compared to the third quarter of fiscal 1997 primarily due to decreased
interest income resulting from lower investment portfolio balances and to
separate disclosure of joint venture equity income beginning in the third
quarter of fiscal 1998. See additional information under "Joint Venture
Equity Income". For the first nine months of fiscal 1998, net interest and
other income was consistent with the comparable prior year period. As a
result of the difference in interest income and expense yields and future uses
of the Company's investment portfolio, levels of net interest and other income
could decrease in the future.
Provision for Income Taxes
- -----------------------------
The Company recorded a tax provision of $13.0 million (31.0% of income before
taxes and equity in joint venture) for the third quarter of fiscal 1998 as
compared to $12.6 million (32.5% of income before taxes and equity in joint
venture) in the comparable prior year period. For the first nine months of
fiscal 1998 the Company recorded a provision of $43.0 million (31.5% of income
before taxes and equity in joint venture) as compared to $40.7 million (33.8%
of income before taxes and equity in joint venture) for the first nine months
of fiscal 1997. The lower tax rate for the first nine months of fiscal 1998
is primarily due to legislation extending the R&D tax credit as well as
increased profits in foreign operations.
Joint Venture Equity Income
- ------------------------------
The Company records 25% of the net income of United Silicon Inc. ("USIC"), a
wafer fabrication joint venture located in Taiwan, as joint venture equity
income. To date, USIC's net income has resulted primarily from favorable
exchange gains on its foreign currency investments as well as interest earned
on its investment portfolio. Net joint venture equity income for the third
quarter of fiscal 1998 was $2.6 million. This amount was largely attributable
to foreign exchange gains incurred by USIC relating to its US dollar
denominated investments. All prior period amounts were immaterial and remain
classified in "Interest income and other". The Company expects to incur joint
venture equity losses as the USIC wafer fabrication facility begins to ramp up
production, as many of the expenses associated with full foundry operation
will be incurred in the early stages of limited production. The Company
expects that profitability will occur, if at all, only after a sufficient
volume of wafer production is obtained.
RISK FACTORS
The following risk factors are associated with the Company's business:
Factors Affecting Future Operating Results
- ----------------------------------------------
The semiconductor industry is characterized by rapid technological change,
intense competitive pressure and cyclical market patterns. The Company's
results of operations are affected by a wide variety of factors, including
general economic conditions, conditions relating to technology companies,
conditions specific to the semiconductor industry, decreases in average
selling prices over the life of any particular product, the timing of new
product introductions (by the Company, its competitors and others), the
ability to manufacture sufficient quantities of a given product in a timely
manner, the timely implementation of new manufacturing technologies, the
ability to safeguard patents and intellectual property from competitors, and
the impact of new technologies resulting in rapid escalation of demand for
some products in the face of equally steep decline in demand for others.
Market demand for the Company's products, particularly for those most recently
introduced, can be difficult to predict, especially in light of customers'
demands to shorten product lead times and minimize inventory levels.
Unpredictable market demand could lead to revenue volatility if the Company
were unable to provide sufficient quantities of specified products in a given
quarter. In addition, any difficulty in achieving targeted wafer production
yields could adversely impact the Company's financial condition and results of
operations. The Company attempts to identify changes in market conditions as
soon as possible; however, the dynamics of the market make prediction of and
timely reaction to such events difficult. Due to the foregoing and other
factors, past results, including those described in this report, are much less
reliable predictors of the future than is the case in many older, more stable
and less dynamic industries. Based on the factors noted herein, the Company
may experience substantial period-to-period fluctuations in future operating
results.
The semiconductor industry has historically been cyclical and subject to, at
various times, significant economic downturns characterized by diminished
product demand, limited visibility to demand for products further out than
three to nine months, accelerated erosion of average selling prices and
overcapacity. The Company may experience substantial period-to-period
fluctuations in future operating results due to general semiconductor industry
conditions, overall economic conditions or other factors.
The Company's future success depends in large part on the continued service of
its key technical, sales, marketing and management personnel and on its
ability to continue to attract and retain qualified employees. Particularly
important are those highly skilled design, process and test engineers involved
in the manufacture of existing products and the development of new products
and processes. The competition for such personnel is intense, and the loss of
key employees could have a material, adverse effect on the Company's financial
condition and results of operations.
Sales and operations outside of the United States subject the Company to risks
associated with conducting business in foreign economic and regulatory
environments. The Company's financial condition and results of operations
could be adversely impacted by unfavorable economic conditions in countries in
which it does significant business and by changes in foreign currency exchange
rates affecting those countries. Specifically, the Company has sales and
operations in the Asian markets. The recent instability in the Asian
financial markets appears to have adversely impacted sales and may continue to
adversely impact sales in those markets in several ways, including reducing
access to sources of capital needed by customers to make purchases and
creating exchange rate differentials that may adversely effect the customer's
ability to purchase or the Company's ability to sell at competitive prices.
In addition, the instability may increase credit risks as the recent weakening
of certain Asian currencies may impair customers' ability to repay existing
obligations. Depending on the situation in Asia in coming quarters, any or
all of these factors could adversely impact the Company's financial condition
and results of operations in the near future.
Additionally, risks include government regulation of exports, tariffs and
other potential trade barriers, reduced protection for intellectual property
rights in some countries, and generally longer receivable collection periods.
The Company's business is also subject to the risks associated with the
imposition of legislation and regulations relating specifically to the import
or export of semiconductor products. The Company cannot predict whether
quotas, duties, taxes or other charges or restrictions will be imposed by the
United States or other countries upon the importation or exportation of the
Company's products in the future or what, if any, effect such actions would
have on the Company's financial condition and results of operations.
In order to expand international sales and service, the Company will need to
maintain and expand existing foreign operations or establish new foreign
operations. This entails hiring additional personnel and maintaining or
expanding existing relationships with international distributors and sales
representatives. This will require significant management attention and
financial resources and could adversely affect the Company's financial
condition and results of operations. There can be no assurance that the
Company will be successful in its maintenance or expansion of existing foreign
operations, in its establishment of new foreign operations or in its efforts
to maintain or expand its relationships with international distributors or
sales representatives.
Many of the Company's operations are centered in an area of California that
has been seismically active. Should there be a major earthquake in this area,
the Company's operations may be disrupted resulting in the inability of the
Company to manufacture or ship products in a timely manner, thereby materially
adversely affecting the Company's financial condition and results of
operations.
In addition, the securities of many high technology companies have
historically been subject to extreme price and volume fluctuations, which may
adversely affect the market price of the Company's common stock.
Dependence Upon Independent Manufacturers and Subcontractors
- -----------------------------------------------------------------
The Company does not manufacture the wafers used for its products. During the
past two years, most of the Company's wafers have been manufactured by Seiko
Epson Corporation ("Seiko Epson") and United Microelectronics Corporation
("UMC"). The Company has depended upon these suppliers and others to produce
wafers with competitive performance and cost attributes, including
transitioning to advanced process technologies, producing wafers at acceptable
yields, and delivering them to the Company in a timely manner. While the
timeliness, yield and quality of wafer deliveries have met the Company's
requirements to date, there can be no assurance that the Company's wafer
suppliers will not experience future manufacturing problems, including delays
in the realization of advanced process technologies. The Company is also
dependent on subcontractors to provide semiconductor assembly services. Any
prolonged inability to obtain wafers or assembly services with competitive
performance and cost attributes, adequate yields or timely deliveries from
these manufacturers/subcontractors, or any other circumstance that would
require the Company to seek alternative sources of supply, could delay
shipments, and have a material adverse effect on the Company's financial
condition and results of operations.
The Company's long-term growth will depend in large part on the Company's
ability to obtain increased wafer fabrication capacity and assembly services
from suppliers. A significant increase in general industry demand or any
interruption of supply could reduce the Company's supply of wafers or increase
the Company's cost of such wafers, thereby materially adversely affecting the
Company's financial condition and results of operations.
In order to secure additional wafer capacity, the Company from time to time
considers alternatives, including, without limitation, equity investments in,
or loans, deposits, or other financial commitments to, independent wafer
manufacturers to secure production capacity, or the use of contracts which
commit the Company to purchase specified quantities of wafers over extended
periods. Although the Company is currently able to obtain wafers from
existing suppliers in a timely manner, the Company has at times been unable,
and may in the future be unable, to fully satisfy customer demand because of
production constraints, including the ability of suppliers and subcontractors
to provide materials and services in satisfaction of customer delivery dates,
as well as the ability of the Company to process products for shipment. The
Company's future growth will depend in part on its ability to locate and
qualify additional suppliers and subcontractors and to increase its own
capacity to ship products, and there can be no assurance that the Company will
be able to do so. Any increase in these constraints on the Company's
production could result in a material adverse impact on the Company's
financial condition and results of operations. In this regard, the Company
has entered into the USIC joint venture with UMC and other parties to obtain
wafer capacity from a new wafer fabrication facility. However, there are many
risks associated with the construction of a new facility, and there can be no
assurance that such facility will become operational and/or cost effective in
a timely manner. In addition, the Company has entered into an agreement with
Seiko Epson to obtain additional capacity from a facility currently under
construction and expected to provide wafers in calendar 1998. If the Company
requires additional capacity and such capacity is unavailable, or unavailable
on reasonable terms, the Company's financial condition and results of
operations could be materially adversely affected.
Litigation
- ----------
The Company is currently engaged in patent litigation with Altera Corporation
("Altera"). See "Legal Proceedings" in Part II.
Dependence on New Products
- -----------------------------
The Company's future success depends in large part on its ability to develop
and introduce on a timely basis new products which address customer
requirements and compete effectively on the basis of price and performance.
The success of new product introductions is dependent upon several factors,
including timely completion of new product designs, the ability to utilize
advanced process technologies, achievement of acceptable yields, availability
of supporting design software and market acceptance. No assurance can be
given that the Company's product development efforts will be successful or
that its new products will achieve market acceptance. Revenues relating to
the Company's mature products are expected to continue to decline in the
future as a percentage of aggregate revenues, and the Company will be
increasingly dependent on revenues derived from newer or future product
generation devices. In addition, the average selling price for any particular
product tends to decrease rapidly over the product's life. To offset such
decreases, the Company relies primarily on obtaining yield improvements and
corresponding cost reductions in the manufacture of existing products and on
introducing new products which incorporate advanced features and other
price/performance factors such that higher average selling prices and higher
margins are achievable relative to mature product lines. To the extent that
such cost reductions and new product introductions do not occur in a timely
manner, or the Company's products do not achieve market acceptance at prices
with higher margins, the Company's financial condition and results of
operations could be adversely affected.
Competition
- -----------
The Company's field programmable gate arrays (FPGAs) and complex programmable
logic devices (CPLDs) compete in the programmable logic marketplace, with a
substantial majority of the Company's revenues derived from its FPGA product
families. The industries in which the Company competes are intensely
competitive and are characterized by rapid technological change, rapid product
obsolescence and continuous price erosion. The Company expects significantly
increased competition both from existing competitors and from a number of
companies that may enter its market.
Xilinx believes that important competitive factors in the programmable logic
market include price, product performance and reliability, adaptability of
products to specific applications, ease of use and functionality of design
software, and the ability to provide timely customer service and support. The
Company's strategy for expansion in the programmable logic market includes
continued price reductions commensurate with the ability to lower the cost of
manufacture for established products and continued introduction of new product
architectures which address high volume, low cost applications as well as high
performance, leading edge density applications. However, there can be no
assurance that the Company will be successful in achieving these strategies.
The Company's major sources of competition are comprised of three elements:
the manufacturers of custom CMOS gate arrays, providers of high density
programmable logic products characterized by FPGA-type architectures and other
providers of programmable logic products. The Company competes with custom
gate array manufacturers on the basis of lower design costs, shorter
development schedules and reduced inventory risks. The primary attributes of
custom gate arrays are high density, high speed and low production costs in
high volumes. The Company continues to develop lower cost architectures
intended to narrow the gap between current custom gate array production costs
(in high volumes) and FPGA production costs. The Company competes with high
density programmable logic suppliers on the basis of performance, the ability
to deliver complete solutions to customers and customer support, taking
advantage of the primary characteristics of flexible, high speed
implementation and quick time-to-market capabilities of the Company's PLD
product offerings. In addition, the Company competes with manufacturers of
other programmable logic products on the basis of price, performance, design
and software utility. Some of the Company's current or potential competitors
have substantially greater financial, manufacturing, marketing and technical
resources than Xilinx. To the extent that such efforts to compete are not
successful, the Company's financial condition and results of operations could
be materially adversely affected.
Intellectual Property
- ----------------------
The Company relies upon patent, trademark, trade secret and copyright law to
protect its intellectual property. There can be no assurance that such
intellectual property rights can be successfully asserted in the future or
will not be invalidated, circumvented or challenged. From time to time, third
parties, including competitors of the Company, have asserted exclusive patent,
copyright and other intellectual property rights to technologies that are
important to the Company. There can be no assurance that third parties will
not assert infringement claims against the Company in the future, that
assertions by third parties will not result in costly litigation or that the
Company would prevail in such litigation or be able to license any valid and
infringed patents from third parties on commercially reasonable terms.
Litigation, regardless of its outcome, could result in substantial cost and
diversion of resources of the Company. Any infringement claim or other
litigation against or by the Company could materially, adversely affect the
Company's financial condition and results of operations.
Year 2000 Compliance
- ----------------------
As is the case with most other companies using computers in their operations,
the Company is currently working to resolve the potential impact of the year
2000 on the processing of date-sensitive information by the Company's
computerized information systems, as well as the vendor and customer
date-sensitive computerized information electronically transferred to the
Company. The year 2000 issue is the result of computer programs being written
using two digits, rather than four, to define the applicable year. Any of the
Company's programs that have time-sensitive software may recognize the year
"00" as 1900 rather than the year 2000, which could result in miscalculations,
classification errors or system failures. Based on preliminary information,
costs of addressing potential problems are not currently expected to have a
material adverse impact on the Company's financial position, results of
operations or cash flows in future periods. However, if the Company, its
customers or vendors are unable to resolve such processing issues timely, it
could result in a material financial risk. Accordingly, the Company plans to
devote the necessary resources to resolve all significant year 2000 issues in
a timely manner.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The Company's financial condition at December 27, 1997 remained strong. Total
current assets exceeded total current liabilities by 5.3 times, compared to
6.2 times at March 29, 1997. Since its inception, the Company has used a
combination of equity and debt financing and cash flow from operations to
support on-going business activities, make acquisitions and investments in
complementary technologies, obtain facilities and capital equipment and
finance inventory and accounts receivable.
The Company continued to generate positive cash flows from operations during
the first nine months of fiscal 1998. As of December 27, 1997, the Company
had cash, cash equivalents and short-term investments of $417.6 million and
working capital of $518.4 million. Cash generated by operations of $165.6
million for the first nine months of fiscal 1998 was $76.9 million higher than
the $88.7 million generated for the first nine months of fiscal 1997. The
increase in cash generated by operations during the first nine months of
fiscal 1998 over the comparable fiscal 1997 period resulted primarily from the
favorable cash flow impact of net income, changes in deferred income on
shipments to distributors and the impact of reduced cash expenditures for
inventories.
Cash flows used for investing activities for the nine months ended December
27, 1997, included an additional equity investment of $67.4 million in the
USIC joint venture (see Note 4 of Notes to Consolidated Condensed Financial
Statements), $60.0 million in advances to Seiko Epson for wafer purchases, and
$17.9 million of property, plant and equipment acquisitions along with a
building deposit of $28.4 million (see Note 3 of Notes to Consolidated
Condensed Financial Statements), which were partially offset by the net
investment maturities of $35.9 million in short-term investments. In the
first nine months of fiscal 1997, investing activities used funds for advances
to Seiko Epson for wafer purchases of $60.0 million (see Note 5 of Notes to
Consolidated Condensed Financial Statements) and acquisitions in property,
plant and equipment of $22.3 million, partially offset by net investment
maturities of $31.5 million in short-term investments. Significant increases
in investing activities when comparing the first nine months of 1997 to 1998
are primarily attributable to the additional $67.4 million investment in the
USIC joint venture and the $28.4 million building deposit.
Net cash flows provided by financing activities were $0.4 million in the first
nine months of fiscal 1998, as the proceeds from the issuance of common stock
under employee stock plans of $23.1 million were substantially offset by the
acquisition of treasury stock during the nine month period of $22.7 million.
For the comparable fiscal 1997 period, financing activities included $22.7
million in proceeds from issuance of common stock under corporate stock plans
partially offset by the acquisition of treasury stock during the period of
$15.7 million.
Stockholders' equity increased by $93.6 million at December 27, 1997,
principally as a result of the net income for the nine months ended December
27, 1997. In addition, proceeds from the issuance of common stock under
employee stock plans and related tax benefits from stock options contributed
to the increase in equity, which was partially offset by the acquisition of
treasury stock and the cumulative translation adjustment in the period. The
increase during the first nine months of fiscal 1998 of $15.5 million in the
cumulative translation adjustment resulted primarily from changes in the
exchange rate of the New Taiwan dollar relative to the U.S. dollars.
The Company has available credit line facilities for up to $47.0 million of
which $7.0 million is intended to meet occasional working capital requirements
for the Company's wholly owned Irish subsidiary. At December 27, 1997, no
borrowings were outstanding under the lines of credit.
Subsequent to December 27, 1997, the Company purchased a 59-acre business park
located in Longmont, Colorado, near the Company's current Boulder, Colorado
facility. The land was purchased for approximately $7.0 million. Plans for
infrastructure and the future development of the new property have not been
finalized.
In July 1997, the Company invested additional equity of $67.4 million towards
the construction of the USIC wafer fabrication facility in Taiwan. UMC has
committed to supply the Company with wafers manufactured in an existing
facility until capacity is available in the new facility. In October 1997, a
fire occurred at a UMC related facility. The Company currently does not
anticipate that this event will have an adverse effect on its ability to
obtain wafers from UMC in the near future, or adversely impact the USIC joint
venture, although there can be no assurance of this.
In May 1996 the Company entered into an agreement with Seiko Epson. This
agreement was amended in December 1997 and now provides for an advance to
Seiko Epson of $150.0 million to be used in the construction of a wafer
fabrication facility in Japan. Through December 27, 1997, the Company has
advanced a total of $120.0 million to Seiko Epson under the agreement. The
final installment of $30.0 million was paid on February 2, 1998.
The Company anticipates that existing sources of liquidity and cash flow from
operations will be sufficient to satisfy the Company's cash needs for the
foreseeable future. The Company will continue to evaluate opportunities to
obtain additional wafer capacity, procure additional capital equipment and
facilities, develop new products, and acquire businesses, products or
technologies that would complement the Company's businesses and may use
available cash or other sources of funding for such purposes.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
On June 7, 1993, the Company filed suit against Altera Corporation ("Altera")
in the United States District Court for the Northern District of California
for infringement of certain of the Company's patents. Subsequently, Altera
filed suit against the Company, alleging that certain of the Company's
products infringe certain Altera patents. Fact and expert discovery has been
completed in both cases, which have been consolidated. On April 20, 1995,
Altera filed an additional suit against the Company in the Federal District
Court in Delaware, alleging that the Company's XC5200 family infringes an
Altera patent. The Company answered the Delaware suit denying that the XC5200
family infringes the patent in suit, asserting certain affirmative defenses
and counterclaiming that the Altera Max 9000 family infringes certain of the
Company's patents. The Delaware suit was transferred to the United States
District Court for the Northern District of California and is also before the
same judge. In October 1997, the Court held a hearing with respect to
construction of the claims of the various patents in suit. The ultimate
outcome of these matters cannot be determined at this time. Management
believes that it has meritorious defenses to such claims and is defending them
vigorously. The foregoing is a forward-looking statement subject to risks and
uncertainties, and the future outcome could differ materially due to the
uncertain nature of the litigation with Altera and because the lawsuits are
still in the pre-trial stage.
There are no other pending legal proceedings of a material nature to which the
Company is a party or of which any of its property is the subject.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit 10.1: Amended Services and Compensation Exhibit to the
Consulting Agreement dated as of June 1, 1996
between the Company and Bernard Vonderschmitt
Exhibit 10.2: Second Amendment to the Consulting Agreement dated
as of June 1, 1996 between the Company and Bernard
Vonderschmitt
Exhibit 10.3: Agreement of Purchase and Sale of Land in Longmont
Colorado, dated November 24, 1997
Exhibit 10.4: First Amendment to Agreement of Purchase and Sale
of Land in Longmont Colorado, dated January 15, 1998
Exhibit 10.5: Amended and Restated Advance Payment Agreement with
Seiko Epson dated December 12, 1997
Exhibit 12: Statement of Computation of Ratio of Earning to
Fixed Charges
(b) Reports on Form 8-K - None
<PAGE>
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.
Date February 4, 1998 XILINX, INC.
- ----------------------- -------------------------------------------------
/s/ Gordon M. Steel
-------------------------------------------------
Gordon M. Steel
Senior Vice President of Finance and
Chief Financial Officer
(as principal accounting and financial officer
and on behalf of Registrant)
<PAGE>
EXHIBIT 10.1
EXHIBIT A
---------
SERVICES AND COMPENSATION
-------------------------
1. Contact Consultant's principal Company contact:
-------
Name: Willem P. Roelandts
--------------------------------------
Title: Chief Executive Officer
--------------------------------------
2. Services Consultant will render to the Company the following Services:
--------
Service as Chairman of the Board of the Company and, as reasonably requested
by the Company, provision of advice on issues of importance to the Company
including general corporate, technological and marketing issues.
3. Compensation
------------
(a) Continued vesting of all stock options which Consultant received as Chief
Executive Officer of the Company.
(b) The Company shall reimburse Consultant for all reasonable travel and
living expenses incurred by Consultant in performing Services pursuant to this
agreement
(c) Consultant shall receive $5.00 per quarter.
(d) Consultant shall submit all statements for services and expenses in a
form prescribed by the Company and such statement shall be approved by the
contact person listed above or by his or her supervisor.
Amended as of March 6, 1997.
Consultant /s/ Bernard V. Vonderschmitt
----------------------------
Bernard V. Vonderschmitt
Company /s/ Willem P. Roelandts
----------------------------
Willem P. Roelandts
<PAGE>
EXHIBIT 10.2
SECOND AMENDMENT TO CONSULTING AGREEMENT
THIS SECOND AMENDMENT TO CONSULTING AGREEMENT (this "Amendment"), dated as of
October 10, 1997, is entered into by and between Xilinx, Inc. ("Company"), and
Bernard V. Vonderschmitt ("Consultant").
WHEREAS, the parties entered into that certain Consulting Agreement dated as
of June 1, 1996, as amended March 6, 1997 (as amended, the "Agreement"),
providing for, among other things, the provision of consulting services to
Company; and
WHEREAS, the parties now desire to clarify the terms of the Agreement as more
particularly set forth herein.
NOW THEREFORE, for good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties hereby agree that the Agreement
is amended as follows:
1. Compensation. Due to an inadvertent omission, the Agreement did not
------------
include the Company's agreement to provide medical insurance to Consultant.
Therefore, to clarify the parties' intent and rectify the omission,
retroactive to June 1, 1996, in addition to the compensation provided for in
the Agreement, and not in replacement thereof, the Company agrees to provide
Consultant and his spouse with medical and dental insurance coverage in the
same form available to Company employees. All such coverage shall be taxable
to Consultant.
2. References to Agreement. From and after the date hereof, any reference
-----------------------
to the Agreement shall mean the Agreement as amended by this Amendment.
3. Limitation of Amendment. Except as expressly clarified and amended
-----------------------
hereby, all the terms and provisions of the Agreement are hereby ratified and
confirmed in all respects and shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly executed
by their authorized officers as of the date first above written.
XILINX, INC. CONSULTANT
By: /s/ Willem P. Roelandts /s/ Bernard V. Vonderschmitt
------------------------- ----------------------------
Its: President & CEO Bernard V. Vonderschmitt
-------------------------
<PAGE>
EXHIBIT 10.3
AGREEMENT OF PURCHASE AND SALE
THIS AGREEMENT OF PURCHASE AND SALE ("Agreement") is dated for reference
purposes November 24, 1997, and is made and entered into by and between
MICHAEL D. DOLLAGHAN, an individual ("Seller"), and XILINX, INC., a Delaware
corporation ("Buyer").
1. PROPERTY.
--------
1.1 SITE PLAN. Seller is the owner of the real property situated in the
---------
City of Longmont, Boulder County, State of Colorado, containing approximately
58.81 acres, which property is commonly known as the Gateway Center and is
labeled "Property" and outlined in RED on the site plan attached hereto as
Exhibit A and made a part hereof (the "Property").
- ---------
1.2 LEGAL DESCRIPTION. The legal description of the Property is attached
-----------------
to the site plan as Exhibit A-1. Such description shall be used in the Deed.
-----------
1.3 WATER RIGHTS. Seller is also the owner of two (2) shares in the Union
------------
Reservoir Company (the "Water Rights").
2. TOTAL PURCHASE PRICE; DEPOSIT.
-------------------------------
2.1 TOTAL PURCHASE PRICE. The purchase price for the Property and the
--------------------
Water Rights is SIX MILLION FOUR HUNDRED THOUSAND DOLLARS ($6,400,000) (the
"Total Purchase Price"). The Total Purchase Price shall be payable in part by
the Deposit, with the balance payable at the Closing in immediately available
U.S. funds.
2.2 DEPOSIT.
-------
2.2.1 Within five (5) days after the execution of this Agreement, Buyer
shall deliver to Escrow Agent by check or draft the sum of FIVE HUNDRED
THOUSAND DOLLARS ($500,000) as a deposit towards the Total Purchase Price
(said deposit, together with any interest thereon, is referred to in this
Agreement as the "Deposit"). The Deposit shall be invested by Escrow Agent in
an interest-bearing liquid bank or money market account approved by Seller and
Buyer. The Deposit shall be applied towards the Total Purchase Price and/or
shall be released from Escrow in accordance with this Agreement.
2.2.2 In the event that Buyer terminates this Agreement under Section 4.1,
-----------
the Deposit shall be refunded to Buyer. In the event that Buyer does not
terminate this Agreement on or before December 8, 1997, the Deposit shall be
deemed earned by Seller on account of Seller's obligations hereunder prior to
the Closing and shall be non-refundable to Buyer except for default of Seller
and except as otherwise specifically provided herein.
3. ESCROW; TITLE.
-------------
3.1 ESCROW. Longmont Title Company, 850 23rd Avenue, Suite E, Longmont,
------
Colorado 80501 ("Escrow Agent") shall hold the Deposit and shall be the
closing agent as provided for herein. Buyer and Seller shall each from time
to time execute whatever instructions to the Escrow Agent as are reasonably
requested by the other to cause the Escrow Agent to hold and disburse the
Deposit in accordance with this Agreement. At the Closing, Escrow Agent shall
act as the closing agent for the Property and shall conduct the Closing in
accordance with its normal practices and any specific instructions executed
jointly by Buyer and Seller. Escrow Agent's services as closing agent shall
include the recording of the Deed and any other documents which require
recording at the Closing.
3.2 TITLE COMMITMENT. A current title commitment, together with legible
----------------
copies of all record documents referred to in Schedule B thereto (together the
"Title Commitment") of the Property has already been issued to Buyer by First
American Title Insurance Company (the "Title Company"), through the Escrow
Agent.
3.3 SURVEY. Buyer acknowledges receipt of a copy of the survey previously
------
prepared on the Property for Seller. Buyer shall proceed promptly with any
additional work required to convert Seller's existing survey into an ALTA
survey of the Property (the "Survey") meeting Buyer's requirements and shall
cause the Survey to be completed on or before December 8, 1997.
3.4 TITLE DEFECTS. On or before December 4, 1997, Buyer shall give Seller
-------------
notice of all title defects shown in the Commitment which are not accepted by
Buyer as Permitted Exceptions and shall notify Seller at the earliest
practical time of any defects or exceptions shown by the Survey which are not
accepted by Buyer as Permitted Exceptions. Any and all exceptions affecting
all or any portion of the Property disclosed by the Commitment (as exceptions,
requirements, or otherwise) which are not the subject of a notice from Buyer
to Seller given within the applicable period of time, shall be deemed accepted
by Buyer as Permitted Exceptions and shall be listed in the deed as exceptions
to the warranty of title contained in the Deed. In the event Buyer notifies
Seller of any title defects shown by the Commitment or the Survey which are
not accepted, and have not previously been accepted, by Buyer as Permitted
Exceptions, Seller may cure such defects in a manner reasonably acceptable to
Buyer; provided that Seller shall not be obligated hereby to cure any such
defects or to incur any expense in connection with any such cure. For
purposes hereof, a title defect or exception shall be deemed cured if the
Title Company deletes the defect from the Title Commitment. If each of the
defects objected to by Buyer has not been cured on or before December 8, 1997,
Buyer may, by written notice delivered to Seller on or before December 8,
1997, either (a) terminate this Agreement or (b) waive such defects and accept
the same as Permitted Exceptions. In the event Buyer does not notify Seller
of its decision to terminate or waive on or before December 8, 1997, Buyer
shall be deemed to have waived its objection to such defects and to have
accepted such defects as Permitted Exceptions and shall be deemed to have
waived and accepted as Permitted Exceptions any defects and exceptions shown
by the Survey, even if not previously made the subject of a notice to Seller.
3.5 SUBSEQUENT TITLE DEFECTS. If this Contract continues in effect after
------------------------
December 8, 1997, and any update or endorsement to the Title Commitment
discloses defects or exceptions (the "New Exceptions") which were not
disclosed to Buyer before noon on December 8, 1997 and which are not Permitted
Exceptions and Buyer objects to any such New Exceptions, Buyer shall give
Seller notice of the New Exceptions to which Buyer objects promptly, and in
any event, within five business days after the receipt of the update or
endorsement to the Title Commitment first disclosing such New Exceptions. Any
and all New Exceptions affecting all or any portion of the Property disclosed
by any such update or endorsement to the Commitment (as exceptions,
requirements, or otherwise) which are not objected to by Buyer in such a
notice from Buyer to Seller given within the applicable period of time shall
be deemed accepted by Buyer as Permitted Exceptions and shall be listed in the
Deed as exceptions to the warranty of title contained in the Deed. In the
event Buyer notifies Seller of any New Exceptions shown by the Commitment or
by the Survey which are not accepted, and have not previously been accepted,
by Buyer as Permitted Exceptions, Seller may cure such New Exceptions in a
manner reasonably acceptable to Buyer; provided that Seller shall not be
obligated hereby to cure any such defects or to incur any expense in
connection with any such cure. For purposes hereof, a New Exception shall
be deemed cured if the Title Company deletes the same from the Title
Commitment. If each of the New Exceptions so objected to by Buyer has not
been cured on or before the Closing, Buyer may, by written notice delivered to
Seller on or before the Closing, either (a) terminate this Agreement or (b)
waive such New Exceptions and accept the same as Permitted Exceptions. If
Buyer does not notify Seller of its decision to terminate or waive at or
before the Closing, Buyer shall be deemed to have waived its objection to such
New Exceptions and to have accepted such New Exceptions as Permitted
Exceptions.
3.6 DEEDS OF TRUST. Notwithstanding any other provision of this
--------------
Agreement, Seller shall be required to cause to be released from the Property
at or before the Closing the two deeds of trust (the "Deeds of Trust")
encumbering the Property for the benefit of Colorado Community First State
Bank recorded on March 17, 1997, as Reception No. 1683715 and recorded on
February 7, 1996, as Reception No. 1583215, and Buyer shall not be required to
give Seller notice of the Deeds of Trust to require Seller to release the
Deeds of Trust and the failure to give any such notice or to terminate this
Agreement shall not render the Deeds of Trust to be Permitted Exceptions.
Seller may use the proceeds of the Closing to pay off and/or release the Deeds
of Trust and the loan(s) secured thereby.
3.7 TITLE. At the Closing, Seller shall convey to Buyer marketable and
-----
insurable fee simple title to the Property, subject to the Permitted
Exceptions, by general warranty deed (the "Deed"). Promptly after the
Closing, Seller shall cause Escrow Agent to issue the standard ALTA Owner's
Extended Coverage Policy of Title Insurance ("Title Policy") of First American
Title Insurance Company pursuant to the Title Commitment, insuring marketable
fee simple title to the Property in Buyer, subject only to the Permitted
Exceptions, in the full amount of the Total Purchase Price. The "Permitted
Exceptions" shall mean only (i) the standard printed exceptions contained in
the Title Policy, except for the standard printed exceptions for mechanic's
and materialmen's liens not of record and not created by, through, or under
Buyer, and for bankruptcy or insolvency claims, which shall be removed, (ii) a
lien to secure payment of real property taxes not delinquent, (iii) matters
affecting the condition of title created by, through, or under Buyer or with
the written consent of Buyer, and (iv) exceptions which are disclosed by the
Title Commitment and Survey and which are approved or deemed approved by Buyer
in accordance with Section 3.4 or Section 3.5.
----------- -----------
3.8 CLOSING DATE. The closing (the "Closing") of the sale of the Property
------------
and the Water Rights from Seller to Buyer (the "Closing Date") shall be
January 15, 1998, or such earlier date (which shall not, without Seller's
consent, which Seller may withhold in his discretion, be before January 1,
1998) as Buyer shall specify by notice to Seller given at least three business
days before such earlier Closing Date. Notwithstanding the foregoing
provisions of this Section 3.8, in the event of damage to the Property of the
-----------
type which would give Buyer the right to terminate under Section 6.1, the
-----------
Closing Date shall be extended until the tenth day after the occurrence of
such damage; provided that the Closing Date shall not, in any event, be
extended under this Section 3.8 beyond January 26, 1998.
-----------
3.9 PRORATIONS; ESCROW EXPENSES. Rents and water charges, if any, and
----------------------------
real property taxes for the year of the Closing shall be prorated as of the
Closing Date. Other charges and costs shall be allocated as follows: If the
Property is subject to any special improvement district, for improvements
completed or partially completed prior to the execution and delivery of this
Agreement, Seller shall pay the same at or before the Closing. Seller shall
pay the costs of releasing and recording the releases of the Deeds of Trust
and the premium for the Title Policy (excluding any premium for ALTA extended
coverage and any costs of any special endorsements). Buyer shall pay any
document preparation fees, the documentary transfer tax, any premium for ALTA
extended coverage and any costs of special endorsements and the cost of
recording the Deed. Buyer and Seller shall each pay one-half of the Escrow
fee.
4. PURCHASE CONDITIONS.
-------------------
4.1 INSPECTION PERIOD. Buyer shall have until December 8, 1997 to
-----------------
evaluate the Property for its purposes and to determine whether the Property
is suitable for Buyer's use. Buyer may (i) terminate this Agreement for any
reason by notice given to Seller at any time on or before 5:00 p.m. Denver
time on December 8, 1997, or (ii) elect to proceed, in which event Buyer's
right to terminate under this Section 4.1 shall be waived. In order to
-----------
elect to proceed, Buyer shall be required to give notice to Seller and the
Escrow Agent, on or before December 8, 1997, that it has elected to proceed
and that its right to terminate under this Section 4.1 has been waived. If
-----------
Buyer fails to elect either to terminate or to proceed, Buyer shall be deemed
to have elected to terminate this Agreement. Buyer's determination to proceed
and not to terminate shall waive any cause of action Buyer may have against
Seller for breach of this Agreement.
4.2 EFFECT OF TERMINATION. In the event that Buyer terminates this
---------------------
Agreement in accordance with any of Sections 3.4, 3.5, 4.1, 5.3, or 6.1, (i)
-----------------------------------
Buyer shall deliver to Seller all copies of the Survey, if a Survey has then
been obtained by Buyer, copies of all reports, studies, and tests prepared by
or for Buyer relating to the physical characteristics of the Property, (ii)
the Deposit shall be paid to Seller or Buyer as otherwise provided in this
Agreement, and (iii) both parties shall thereupon be relieved of all further
obligation hereunder, except for any obligations of Buyer arising under any of
Sections 3.1, 5.2.2, 7.1, 7.3, 10.6, 13.1, 13.3, 13.7, or 13.8, all of which
- ------------
shall continue in full force and effect and shall be enforceable by Seller by
all remedies available at law or in equity, and except for any obligations of
Seller under Sections 3.1, 7.3, 10.6, 13.1, and 13.3, all of which shall
------------
continue in full force and effect and be enforceable by Buyer by all remedies
available at law or in equity.
5. REPRESENTATIONS AND WARRANTIES.
-------------------------------
5.1 REPRESENTATIONS AND WARRANTIES Seller hereby represents and warrants
-------------------------------
to and from the benefit of Buyer as follows:
5.1.1 To Seller's Knowledge, there are no, and Seller has received no
notification of any, suits (including, without limitation, condemnation or
eminent domain proceedings or actions), hearings, governmental investigations
or other legal proceedings (collectively "Proceeding") pending or threatened
against Seller, before any court or governmental department or agency in any
way relating to the Property. As used herein, the term "Proceeding" shall not
include any proceedings to obtain zoning, annexation, or other governmental
approvals with respect to the Property which do not involve the possibility of
claims for liability or damages against Seller or the Property. To Seller's
Knowledge, there is no pending or threatened proceeding in eminent domain
relating to or affecting the Property. Seller has not received any offer
("Offer") from any public or quasi-public authority, having powers of eminent
domain over the Property, to purchase or acquire the Property or any portion
thereof or interest therein which might lead to a proceeding in eminent domain
with respect to the Property. Seller has received no notification
("Notification") that Seller is subject to or in default with respect to, any
order, writ, injunction or decree of any court or governmental department or
agency directed specifically to Seller relating to the use of the Property.
Seller shall give Buyer immediate written notice of any Proceeding, Offer or
Notification which may occur prior to the Closing.
5.1.2 Seller is not the subject of any insolvency or bankruptcy
proceedings at law or in equity or otherwise, the result of which might affect
title to the Property or the right of Seller to transfer and convey, or cause
to be transferred and conveyed, the Property to Buyer.
5.1.3 There are no leases, subleases or licenses or occupancy agreements
of any kind affecting the Property, other than leases made by Seller to family
members in connection with the formation of a business improvement district
affecting the Property (the "BID"), all of which shall be terminated at or
before the Closing.
5.1.4 Seller has full right, power and authority to enter into this
Agreement and to transfer and convey title to the Property to Buyer and to
consummate all transactions contemplated hereby.
5.1.5 Seller has previously disclosed to Buyer or shall, on or before
November 26, 1997, disclose to Buyer in writing, any and all defects in the
physical condition of the land underlying the Property which are within
Seller's Knowledge and which would materially and adversely impair the normal
development of the Property in the ordinary course.
As used herein, "Seller's Knowledge" shall mean Seller's actual knowledge as
of the date hereof without any obligation to make further inquiry.
5.2 BUYER REPRESENTATIONS AND WARRANTIES. Buyer hereby represents and
------------------------------------
warrants to and for the benefit of Seller, as follows:
5.2.1 Buyer shall use due diligence in satisfying each of the conditions
in this Agreement which were created for Buyer's benefit. In addition, Buyer
shall use due diligence in attempting to close the transaction at the earliest
possible date.
5.2.2 Buyer shall not allow the creation of any mechanic's liens on the
Property as the result of the activities of Buyer, its employees, agents,
servants, representatives or contractors on the Property. Buyer agrees to
immediately take steps to remove any mechanic's lien filed against the
Property as the result of its activities, and to indemnify, defend and hold
Seller harmless from damages arising to Seller or its Property as a result of
such liens, including attorneys' fees.
5.3 CERTIFICATE AT CLOSING. At the Closing, Seller shall deliver to Buyer
----------------------
a written certificate (the "Certificate") certifying to Buyer, as of the date
of the Closing, with such modifications and exclusions as shall be necessary
to make the Certificate accurate when given, the accuracy of the matters
represented and warranted to in Sections 5.1 and 12.3, except that, as used in
------------ ----
the Certificate, "Seller's Knowledge" shall mean as of the Closing Date. If
the Certificate delivered by Seller at the Closing modifies or excludes any of
such matters, Buyer may either (i) terminate this Agreement or (ii) accept the
Certificate in the form delivered by Seller. If Buyer proceeds to close,
Buyer shall be deemed to have elected the option described in clause (ii)
above. By accepting the Certificate at the Closing, Buyer shall be deemed to
have waived, released, and forever relinquished any and all claims or causes
of action arising under the warranties and representations contained in
Sections 5.1 and 12.3 but not those contained in the Certificate. Any and all
- ------------ ----
claims or causes of action under the Certificate shall be asserted or
commenced by Buyer within one year after the date of the Closing and any and
all claims or causes of action under the Certificate which are not asserted or
commenced within such period of time shall be deemed waived, released, and
forever relinquished by Buyer.
5.4 PROPERTY SOLD AS IS. Except for the warranties and representations
-------------------
set forth in Sections 5.1 and 12.3, as restated in the Certificate, Buyer is
------------ ----
relying upon its own inspection of the Property to evaluate the condition of
the Property and the suitability of the Property for Buyer's intended use and
development. Except as specifically set forth in Sections 5.1 and 12.3, (i)
------------ ----
Buyer understands and agrees that the Property will be sold and conveyed to
Buyer hereunder as is, without any representation or warranty by Seller of any
kind or nature whatsoever, and Buyer hereby acknowledges that Seller hereby
disclaims any and all express or implied warranties regarding the Property or
the condition thereof, including, without limitation, the fitness of the
Property for any particular purpose and (ii) Buyer shall have no remedy or
cause of action whatsoever, and Buyer hereby waives any remedies and causes of
action otherwise available, against Seller arising from or in any way related
to the condition of the Property. Seller shall have no obligation to improve
or otherwise alter any portion of the Property from its current condition in
any manner whatsoever.
6. RISK OF LOSS.
------------
6.1 RISK OF LOSS. Seller shall give Buyer prompt notice of any material
------------
or substantial damage to the Property which occurs after the date hereof. If,
prior to the Closing, the Property is totally damaged or suffers such material
and substantial damage that it cannot thereafter reasonably be used for the
purposes for which Buyer intends to use it, Buyer shall have the option, which
shall be exercised within ten (10) days after receipt of notice from Seller of
such damage or destruction, either (1) to accept the Property in its damaged
condition, in which event any insurance proceeds payable to Seller shall be
assigned to Buyer, or (2) to terminate this Agreement. Failure of Buyer to
terminate within such period shall be deemed to be the election of the
alternative set forth in clause (1), not to terminate and to continue this
Agreement in full force and effect.
7. TESTS; DOCUMENTS; CONSULTANTS.
-----------------------------
7.1 TESTS. During the Escrow period, Buyer and its employees, agents,
-----
servants, representatives and contractors may enter upon the Property at
reasonable times and in a reasonable manner for purposes of making or
performing, at Buyer's expense, such borings, surveys, engineering studies,
soil tests and studies, environmental sampling and/or tests (collectively
"Tests"), as Buyer deems necessary or advisable; provided, however, that (i)
all such Tests conducted on the Property shall be undertaken in a safe,
workmanlike and reasonable manner, and (ii) Buyer shall substantially restore
the property which may be disturbed to its condition prior to such Tests.
Prior to entering upon the Property, Buyer shall notify Seller of the date,
time, duration and purpose of such entry. Buyer agrees to indemnify, defend
and hold Seller and Property harmless from any and all damages, claims,
liabilities or costs arising from the activities of Buyer, its employees,
agents, servants, representatives or contractors on the Property, including
attorneys' fees. Buyer shall pay for all work performed on the Property by
Buyer, or at Buyer's instance or request, as and when such payments are due
and shall remove at Buyer's expenses within fifteen days after notice thereof
is given to Buyer any mechanic's and other liens filed against the Property on
account of any activities on the Property by Buyer or anyone acting at Buyer's
instance or request.
7.2 DELIVERY OF DOCUMENTS. To the extent such items are in the possession
---------------------
and/or control of Seller, Seller shall deliver or make available to Buyer for
inspection within two (2) days after the execution and delivery of this
Agreement copies of all documents relating to the Property such as existing
surveys, soils reports, permits, annexation documents, applications to
governmental agencies, site plans and tentative parcel maps. Seller makes no
representation or warranty as to the accuracy or completeness of any of the
above items. Seller agrees to instruct all of its contractors and agents to
fully cooperate with Buyer and its agents in connection with Buyer's
inspections.
7.3 CONSULTANTS. Seller currently has engaged the consultants (the
-----------
"Consultants") listed on Exhibit B attached hereto and by this reference made
---------
part hereof who are working with respect to the Property. Seller shall be
responsible for payment of all fees and disbursements of the Consultants
incurred in connection with such work on or before December 8, 1997. Buyer
shall be responsible for the payment of all fees and disbursements incurred by
the Consultants for such work from and after December 9, 1997. At Buyer's
request, Seller shall assign the contracts Seller has with the Consultants to
Buyer on December 9, 1997; provided that, if, for any reason, Buyer does not
close the purchaser of the Property hereunder, Buyer shall, at Seller's
request, assign to Seller, upon the termination of Buyer's right to purchase
the Property, such contracts and all work done thereunder.
8. CLOSING. The closing of the sale of the Property and Water Rights from
-------
Seller to Buyer (the "Closing") shall take place on the Closing Date at 10:00
a.m., Denver time, in the offices of the Title Company. At the Closing:
8.1 The parties shall execute instructions to the Escrow Agent to pay the
Deposit to Seller, the Deposit shall be paid to Seller, and the Deposit shall
be credited against the Purchase Price and paid to Seller.
8.2 Buyer shall pay the balance of the purchase price, as adjusted for
prorations, in immediately available U.S. funds acceptable to Seller.
8.3 General ad valorem real property taxes on the Property for the year of
the Closing, based on the actual taxes for the preceding year, shall be
prorated to the date of the Closing. Such proration shall be final.
8.4 Seller shall (i) endorse to Buyer the certificates for the Water
Rights and, as to any of the certificates which are in the name of Constance
Dollaghan, also known as Constance E. Dollaghan, cause her to endorse to Buyer
the certificates for the Water Rights, (ii) deliver the certificates for the
Water Rights to Buyer, (iii) execute and/or deliver to Buyer any other
documents required to transfer the Water Rights to Buyer, and (iv) take any
other actions required to effect the transfer of the Water Rights to Buyer.
8.5 Seller shall convey the Property to Buyer by the Deed. The Deed shall
specifically provide that it is subject to all matters of record. Seller
shall cause the Deeds of Trust to be released and shall cause the leases on
the Property referenced in Section 5.1.3 to be terminated and surrendered.
-------------
8.6 Seller shall deliver the Certificate to Buyer.
8.7 Seller shall execute and deliver to the Escrow Agent an affidavit and
agreement, protecting the Escrow Agent against mechanic's liens arising for
work done at the instance of Seller.
8.8 Buyer shall execute and deliver to the Escrow Agent an affidavit and
agreement, protecting the Escrow Agent against mechanic's liens arising for
work done at the instance of Buyer.
8.9 Buyer and Seller shall each execute and deliver such certificates as
shall be necessary with respect to withholding taxes and similar items.
8.10 Seller shall cause the Escrow Agent to deliver to Buyer the Escrow
Agent's unconditional written undertaking (which shall be in form approved by
both Buyer and Seller) to issue to Buyer its standard form owner's policy (the
"Owner's Policy") insuring title to the Property in Buyer in the amount of the
Purchase Price, subject only to the Permitted Exceptions.
8.11 Seller shall assign to Buyer all right, title, and interest in all
studies, reports, and other documents developed by third parties for Seller
relating to the Property.
8.12 The parties shall each do or cause to be done such other matters and
things as shall be necessary to close the transaction contemplated herein.
9. TAX-DEFERRED EXCHANGE. Seller may elect to close the sale of the
---------------------
Property through one or more exchanges qualifying for tax-deferred treatment
under Section 1031 of the Internal Revenue Code through a qualified
intermediary as provided for in Treasury Regulation Section 1.1031(k)-1(g).
Buyer shall cooperate with Seller in all ways reasonably requested by Seller
to assist Seller in effecting any such exchange so long as Buyer is not
thereby subjected to any liability or risk of liability and is not required to
bear any additional cost or expense. Seller shall indemnify Buyer against all
costs and liabilities incurred in so cooperating with Seller to satisfy the
requirements of Section 1031. Buyer shall not have any responsibility to
Buyer for the tax effect of any such exchange effected by Buyer.
10. ENFORCEMENT.
-----------
10.1 SELLER'S REMEDIES. If Buyer fails to close the purchase of the
-----------------
Property and Water Rights on the Closing Date (except for Seller's failure to
convey or any other material and substantial default by Seller which has not
been cured as of the Closing), and such failure continues uncured for two
business days after Seller gives Buyer notice thereof, Seller, as its sole and
exclusive remedy for Buyer's failure to close, may terminate this Agreement by
written notice to Buyer and Escrow Agent. Upon such termination, the Escrow
Agent shall pay the Deposit to Seller and Seller shall be entitled to retain
the Deposit as liquidated damages for Buyer's failure to close. In no event
shall Buyer be liable for specific performance or for consequential damages
for Buyer's failure to close the purchase of the Property and Water Rights.
Nothing contained herein shall be construed as limiting Seller's remedies for
any failure of Buyer to perform its obligations under any of Sections 3.1,
------------
5.2.2, 7.1, 7.3, 10.6, 13.1, 13.3, 13.7, or 13.8.
10.2 BUYER'S REMEDIES. If Seller fails to close the conveyance of the
----------------
Property and Water Rights to Buyer at the Closing (except for Buyer's failure
to close or any other material and substantial default by Buyer) and such
failure continues uncured for two business days after Buyer gives written
notice of such failure to Seller, in addition to whatever other remedies are
available to Buyer at law or in equity, including the right to have specific
performance of this Agreement, Buyer may terminate this Agreement by written
notice to Seller. Upon such termination, the Deposit shall be paid to and
retained by Buyer and except for Buyer's obligations under any of Sections 3.1
------------
5.2.2, 7.1, 7.3, 10.6, 13.1, 13.3, 13.7, or 13.8, Buyer shall be relieved
of all further obligations under this Agreement.
10.3 REMEDIES CUMULATIVE. All remedies permitted or available to Buyer
-------------------
hereunder, or at law, or in equity, or by statute, shall be cumulative and not
alternative.
10.4 NO WAIVER. No waiver by either party of any default under this
---------
Agreement by the other party shall be effective or binding upon such party
unless given in the form of a written instrument signed by such party, and no
such waiver shall be implied from any omission by such party to take action
with respect to such default. No express written waiver of any default shall
affect any other default or cover any period of time other than the default
and/or period of time specified in such express waiver. One or more written
waivers of any default under any provision of this Agreement shall not be
deemed to be a waiver of any subsequent default in the performance of the same
provision or any other term or provision contained in this Agreement.
10.5 GOVERNING LAW. This Agreement shall be governed and enforced by, and
-------------
construed in accordance with the laws of the state in which the Property is
located.
10.6 ATTORNEYS' FEES. In the event either party hereto finds it necessary
---------------
to employ legal counsel or to bring an action at law or other proceedings
against the other party to enforce any of the terms, covenants or conditions
hereof, the prevailing party in such action or proceeding shall be paid all
reasonable attorneys' fees, as determined by the court and not the jury, and
in the event any judgment is secured by such prevailing party, all such
attorneys' fees shall be included in any such judgment in such action or
proceedings.
11. NOTICES.
-------
11.1 NOTICES. All notices and other communications provided for herein
-------
shall be in writing. Notices may be given by hand delivery, by successful
telecopy transmission, by commercial courier service, or by United States
certified or registered mail, to the parties at their respective addresses as
follows:
If to Seller: Michael D. Dollaghan
7001 Rozena Road
Longmont, CO 80503
(303) 776-7140
Fax: (303) 776-2557
James E. Culhane, Esq.
Davis, Graham & Stubbs LLP
370 17th Street, Suite 4700
Denver, Colorado 80202
(303) 892-9400
Fax: (303) 893-1379
If to Buyer: Xilinx, Inc.
2100 Logic Drive
San Jose, CA 95124
Attention: Forrest James
(408) 879-5335
Fax: (408) 879-6535
Xilinx, Inc.
2100 Logic Drive
San Jose, CA 95124
Attention: David Granoff
(408) 879-4722
Fax: (408) 377-6137
The foregoing addresses may be changed by written notice given pursuant to
provisions of this Section. All notices shall be deemed effective when
received, or if receipt is frustrated by the recipient, when tendered.
As a courtesy, but not as a requirement to effect valid delivery of a notice,
notices shall also be given at the following addresses:
If to Seller:
The Prudential LTM, Realtors
203 S. Main Street
Longmont, CO 80501
Attn: Ken Kanemoto
Phone:
Fax:
Larry Green & Associates
10552 Mooring Road
Longmont, CO 80501
Attn: Larry Green
Phone:
Fax:
If to Buyer:
Colorado Group
3434 47th Street, Suite 220
Boulder, CO 80301
Attn: Gary Aboussie
(303) 449-2131
Fax: (303) 449-8250
12. ENVIRONMENTAL PROVISIONS.
------------------------
12.1 HAZARDOUS MATERIALS. For the purposes of this Agreement, the term
-------------------
"Hazardous Materials" shall mean any hazardous or toxic substance, material or
waste, including without limitation petroleum oil and its fractions, as
defined by any federal, state or local law, regulation or ordinance.
12.2 ENVIRONMENTAL HISTORY AND REPORTS. To the extent such items are in
---------------------------------
the possession and/or control of Seller, and to the extent that Seller may not
have already done so, Seller shall furnish to Buyer within two (2) days after
execution of this Agreement, true, accurate, and complete copies of all
sampling and test results obtained from all environmental and/or health
samples and tests taken at or around the Property and property adjacent
thereto by, or on behalf of or otherwise delivered to Seller.
12.3 REPRESENTATIONS AND WARRANTIES. Seller has delivered to Buyer a copy
------------------------------
of the Phase I environmental Assessment prepared by Empire Laboratories, Inc.,
dated April 26, 1993, and a letter dated October 15, 1997 from Terracon
Consultants Western, Inc. Except as noted in such report and letter, Seller
hereby represents, warrants and covenants to Buyer that Seller has no actual
knowledge, without an obligation of inquiry, of (i) any underground storage
tanks, PCB containing or contaminated equipment, or asbestos containing
construction materials on the Property, (ii) any unlawful handling,
transportation, storage, treatment or usage of Hazardous Materials that has
occurred on the Property, (iii) any leaks, spills, release, discharge,
emission or disposal of Hazardous Materials into or upon the Property or
property adjacent thereto, or of any migration of Hazardous Materials into or
upon the Property from adjacent property (collectively "Hazardous Discharge"),
or (iv) any complaint, order, directive, citation or other notice
(collectively "Environmental Notice") by any governmental authority or any
other person or entity with regard to the matters set forth in above in this
Section 12.3.
- ------------
12.4 NOTICE. Seller shall give Buyer immediate written notice of any
------
Hazardous Discharge or Environmental Notice which may occur, of which Seller
has actual knowledge, whether before or after the execution and delivery of
this Agreement.
13. GENERAL PROVISIONS.
------------------
13.1 BROKER'S COMMISSION. Seller represents and warrants to Buyer and
-------------------
Buyer represents and warrants to Seller that neither has used any broker,
agent, finder or other person in connection with the transaction contemplated
hereby to whom a brokerage or other commission or fee may be payable, other
than The Prudential LTM, Realtors and Larry Green & Associates, as Seller's
brokers, and the Colorado Group, as Buyer's broker. At the Closing, Seller
shall pay to Seller's brokers the commission payable under Seller's separate
agreement with Seller's brokers. Seller's brokers shall pay a portion of that
commission to Buyer's broker in accordance with a separate agreement between
Buyer's and Seller's brokers or, if none, in accordance with normal commission
sharing practices. Both Buyer's broker and Seller's brokers agree to accept
such payments in full satisfaction for all services rendered in connection
with the transaction contemplated hereby and in connection with the Property
and Water Rights. Neither Buyer's broker nor Seller's broker shall be
entitled to any fee or other compensation in connection with this transaction
unless the Closing provided for herein is consummated. Each party indemnifies
and agrees to defend and hold the other harmless from any claims resulting
from the breach by the indemnifying party of the warranties and
representations in this Section. Seller shall indemnify, defend, and hold
Buyer harmless from any claims arising as a result of any failure by Seller to
make the payment to Seller's brokers provided for herein. Buyer's broker, and
Seller's brokers, by executing below, agree to be bound by the terms of this
Section.
13.2 AFFIDAVIT. Prior to the close of Escrow, Seller shall deliver to
---------
Escrow Agent for delivery to Buyer at the close of Escrow an affidavit in a
form satisfactory to Buyer executed by Seller evidencing Seller's exemption
from withholding under the Internal Revenue Code Section 1445.
13.3 CONFIDENTIALITY. Unless and until the Closing is consummated under
---------------
this Agreement, Buyer shall, as an ethical commitment to Seller but not as a
legally binding obligation, use reasonable good faith efforts to keep all the
terms and conditions of this Agreement and, if this Agreement is terminated by
Buyer, Buyer's reasons for terminating confidential and to avoid disclosing
any of the same except as is otherwise reasonably required in the reasonable
and ordinary conduct of Buyer's business. Seller shall, as an ethical
commitment to Buyer but not as a legally binding obligation, use reasonable
good faith efforts to keep all the terms and conditions of this Agreement
confidential until the Closing except as is reasonably and necessarily
required in connection with Seller's normal activities (including financing
activities) with respect to the Property and as shall reasonably be required
to perform his obligations hereunder and prepare for and consummate the
Closing. Seller and Buyer both recognize that their ethical obligations under
this Section 13.3 shall not be legally binding. Neither Buyer nor Seller
------------
shall have any liability for failing to observe the requirements of this
Section 13.3.
- ------------
13.4 SURVIVAL. Except as otherwise provided in Section 5.3, all
-------- -----------
covenants, agreements, representations or warranties contained in this
Agreement shall survive the close of Escrow and the conveyance of the Property
and shall not be deemed to be merged into or waived by the instruments of
closing or transfer, but shall expressly survive and be binding upon the
parties obligated by the covenant, agreement, representation or warranty.
Notwithstanding any other provision of this Agreement, all hold harmless,
indemnification, defense and attorney fee provisions of this Agreement shall
survive any termination or expiration of this Agreement.
13.5 INTERPRETATION. Whenever used herein, the term "including" shall be
--------------
deemed to be followed by the words "without limitation." Words used in the
singular number shall include the plural, and vice-versa, and any gender shall
be deemed to include each other gender. The captions and headings of the
Sections of this Agreement are for convenience of reference only, and shall
not be deemed to define or limit the provisions hereof.
13.6 EXECUTION AND MODIFICATION. It is understood and agreed that until
--------------------------
this Agreement is fully executed and delivered by the authorized partners,
corporate officers or other individuals, as applicable, of the parties hereto,
there is not and shall not be an agreement of any kind between the parties
hereto upon which any commitment, undertaking or obligation can be founded.
It is further agreed that once this Agreement is fully executed and delivered
that it contains the entire agreement between the parties hereto and that, in
executing it, the parties do not rely upon any statement, promise, or
representation not herein expressed and this Agreement once executed and
delivered shall not be modified, changed or altered in any respect except by a
writing executed and delivered in the same manner as required for this
Agreement.
13.7 NO ASSIGNMENT. This Agreement shall be binding and effective on and
-------------
inure to the benefit of the successors and assigns of the parties hereto.
Buyer shall not, without the prior written consent of Seller, which consent
shall not be unreasonably withheld, assign or otherwise transfer or encumber
this Agreement or any interest of Buyer herein; except that Buyer may assign
this Agreement without obtaining the prior written consent of Seller to (i)
any entity that is owned or controlled by Buyer or (ii) any limited
partnership in which Buyer, or any entity owned or controlled by Buyer, is the
general partner. Buyer shall promptly notify Seller of any proposed
assignment of this Agreement. No assignment of this Agreement shall be
effective until Buyer has delivered to Seller the written agreement of the
proposed assignee, in form reasonably acceptable to Seller, assuming all
obligations of Buyer arising hereunder both prior to and after the assignment.
Notwithstanding such assumption, Buyer shall remain liable to Seller for all,
and shall not be released from any, obligations of Buyer arising hereunder
either prior to or after the assignment. Any assignment, transfer, or
encumbrance of this Agreement or any interest of Buyer herein by Buyer in
violation hereof shall be a material default by Buyer.
13.8 MEMORANDUM; NO OTHER RECORDING. If this Agreement is not terminated
------------------------------
on or before December 8, 1997, Seller and Buyer shall execute a Memorandum of
this Agreement which Buyer may record to give notice of this Agreement. Buyer
and Seller shall, on or before December 5, 1997, execute the Memorandum and
deliver it to the Escrow Agent with written instructions executed by both
Buyer and Seller that, if Buyer elects to proceed and not to terminate under
Section 4.1 so that the Deposit becomes nonrefundable as contemplated by
- -----------
Section 2.2.2 and Buyer gives Escrow Agent notice thereof on or before
- -------------
December 8, 1997, Escrow Agent is instructed to record the Memorandum
immediately in the real property records of Boulder County, Colorado, and if
Escrow Agent has not received such notice or receives notice from Buyer that
Buyer has elected to terminate under Section 4.1 so that the Deposit is to be
-----------
returned to Buyer under Section 4.2, the Escrow Agent is instructed to mark
-----------
void on the Memorandum and return it to Seller without recording it. Buyer
shall not otherwise record this Agreement or any evidence thereof. Recording
this Agreement or any evidence hereof other than the Memorandum shall
constitute a material default by Buyer entitling Seller to all remedies
available at law or in equity, including consequential damages. In the event
this Contract is terminated, Buyer shall promptly execute and deliver to
Seller a quit claim deed conveying the Property to Seller and such other
instruments as Seller shall from time to time reasonably request to confirm
the termination of this Agreement and any interest of Buyer in the Property
hereunder. Delivery of such quit claim deed shall not waive any claim that
Buyer may have against Seller for any wrongful failure of Seller to close the
sale of the Property hereunder which is made in a lawsuit filed and served
within ninety (90) days after the occurrence of such wrongful failure by
Seller. Any claim which Buyer might otherwise have hereunder, or which is
otherwise available at law or in equity, which is not commenced by Buyer
within such ninety-day period shall be deemed to have been waived by Buyer.
13.9 DAYS. If the date for any performance hereunder falls on a day which
----
is a Saturday, Sunday, or bank holiday in Denver, Colorado, the date for
performance shall be extended to the next day which is not a Saturday, Sunday,
or holiday in Denver, Colorado.
13.10 TIME OF THE ESSENCE. Time is of the essence of this Agreement and
-------------------
each and every term, condition and provision hereof.
13.11 NO JOINT VENTURE. It is not intended by this Agreement to, and
----------------
nothing contained in this Agreement shall, create any partnership, joint
venture or other joint or equity type agreement between Buyer and Seller. No
term or provision of this Agreement is intended to be, or shall be, for the
benefit of any person, firm, organization, or corporation not a party hereto,
and no such other person, firm, organization or corporation shall have any
right or cause of action hereunder.
13.12 FURTHER ACTS. Each party shall, at the request of the other,
------------
execute, acknowledge (if appropriate) and deliver whatever additional
documents, and do such other acts, as may be reasonably required in order to
accomplish the intent and purposes of this Agreement.
13.13 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon, and
----------------------
inure to the benefit of, the parties hereto and their respective successors,
heirs, administrators and assigns.
13.14 EXECUTION. This Agreement may be executed in counterparts and, when
---------
counterparts of this Agreement have been executed and delivered by all of the
parties hereto, this Agreement shall be fully binding and effective, just as
if all of the parties hereto had executed and delivered a single counterpart
hereof. Without limiting the manner in which execution of this Agreement may
otherwise be effected hereunder, execution by any party may be effected by
facsimile transmission of a signature page hereof executed by such party. If
any party effects execution in such manner, such party shall also promptly
deliver to the other parties the counterpart physically signed by such party,
but the failure of any such party to do so shall not invalidate the execution
hereof effected by facsimile transmission.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the dates set forth below.
XILINX, INC., a Delaware corporation
/s/ Michael D. Dollaghan By: /s/ Willem P. Roelandts
- ------------------------ --------------------------------
MICHAEL D. DOLLAGHAN Its: President
--------------------------------
BROKERS' ACKNOWLEDGMENT
- -----------------------
The following brokers hereby acknowledge their agreement to the foregoing
Agreement, including the provisions of Section 13.1.
------------
THE PRUDENTIAL LTM, REALTORS LARRY GREEN & ASSOCIATES
By: /s/ Ken Kanemoto By: /s/ Larry Green
------------------------- --------------------------------
Ken Kanemoto Larry Green
COLORADO GROUP
By: /s/ Gary Aboussie
------------------
Gary Aboussie
ESCROW AGENT'S ACKNOWLEDGMENT
- -----------------------------
Escrow Agent, as named in the foregoing Agreement, hereby agrees to hold
and disburse the Deposit in accordance with the provisions of the foregoing
Agreement.
LONGMONT TITLE COMPANY
By: /s/ Kathy Williams
-------------------------------
<PAGE>
EXHIBIT 10.4
FIRST AMENDMENT TO AGREEMENT OF PURCHASE AND SALE
THIS FIRST AMENDMENT TO AGREEMENT OF PURCHASE AND SALE (this "Amendment")
is made this 15th day of January, 1998, by and between MICHAEL D. DOLLAGHAN,
an individual ("Seller"), and XILINX, INC., a Delaware corporation ("Buyer").
RECITALS
--------
This Amendment is made with respect to the following facts:
A. Seller and Buyer are the parties to the Agreement of Purchase and
Sale (the "Sale Agreement") dated as of November 24, 1997, providing for the
sale of the real property situated in the City of Longmont, Boulder County,
State of Colorado, described on Exhibit A attached hereto and made a part
---------
hereof (the "Property").
Amendment
---------
In consideration of the Sale Agreement and the promises and agreements of
Buyer and Seller provided in this Agreement, Buyer and Seller do hereby
promise and agree as follows:
1. Amendment of Sale Agreement. The Sale Agreement is hereby amended
---------------------------
as follows:
1.1 Payment of Encumbrances. Notwithstanding the provisions of
-----------------------
Section 8.5 of the Sale Agreement and any other provision of the Sale
Agreement requiring Seller to convey the Property at the Closing free and
clear of all liens and encumbrances, Buyer shall take title to the Property
subject to (i) the deed of trust encumbering the land portion of the Property
in favor of Colorado Community First State Bank recorded March 17, 1997 as
Reception No. 1683715 (the "Deed of Trust") and the note secured thereby
(together the "CCF Loan"), with an outstanding balance of principal and
accrued and unpaid interest as of the date hereof in the total amount of
$1,419, 527.17 (the "CCF Loan Balance") and (ii) the security interest (the
"NW Security Interest") encumbering the water portion of the Property and the
note secured thereby (the "NW Loan") in favor of Norwest Bank Colorado, N.A.
with an outstanding balance of principal and accrued and unpaid interest as of
the date hereof in the total amount of $69,901.88 (the "NW Loan Balance"), and
Buyer shall be responsible for paying the CCF Loan Balance and the NW Loan
Balance. Buyer shall receive a credit at the Closing in the total amount of
the CCF Loan Balance and the NW Loan Balance, against the purchase price for
the Property of $6,400,000, with the balance of the purchase price of
$4,980,272.83 being payable in cash at the Closing in accordance with the
provisions of the Sale Agreement. The parties agree that the Total Purchase
Price for the Property remains $6,400,000, and that this Amendment changes
only the form and timing of such amount.
1.2 Indemnity. Seller shall protect, defend, indemnify and hold
---------
Buyer and the Property harmless from and against any obligation or liability
under the Deed of Trust and CCF Loan in excess of the CCF Loan Balance and
against any amount in excess of the CCF Loan Balance required to pay off the
CCF Loan in full and release the Deed of Trust as of January 15, 1998 and
against any costs and expenses which would be incurred in paying off the CCF
Loan and releasing the Deed of Trust as of January 15, 1998. Seller shall
protect, defend, indemnify and hold Buyer and the Water Rights harmless from
and against any obligation or liability under the NW Security Interest and/or
NW Loan in excess of the NW Loan Balance and against any amount in excess of
the NW Loan Balance required to pay off the NW Loan in full and release the NW
Security Interest as of January 15, 1998 and against any costs and expenses
which would be incurred in paying off the NW Loan and releasing the NW
Security Interest as of January 15, 1998.
1.3 Survival. The obligations of the parties under this Section 1
--------
shall survive the Closing.
2. Effect. Except as specifically provided in Section 1 of this
------
Amendment, the Sale Agreement shall not be modified or amended hereby. As
amended by Section 1 of this Agreement, the Sale Agreement shall continue in
full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment on
the respective dates set forth below.
XILINX, INC., a Delaware corporation
/s/ Michael D. Dollachan By: /s/ Willem Roelandts
- ------------------------------ ------------------------------------
MICHAEL D. DOLLAGHAN Its: President
------------------------------------
January 15, 1998 January 15, 1998
EXHIBIT 10.5
S017.08.02
AMENDED AND RESTATED
ADVANCE PAYMENT AGREEMENT
AREAS MARKED "***" REPRESENT SECTIONS FOR WHICH CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED. THESE OMITTED SECTIONS HAVE BEEN FILED SEPARATELY WITH THE
COMMISSION.
THIS AMENDED AND RESTATED ADVANCE PAYMENT AGREEMENT (this "Agreement"), is
entered into as of December 12, 1997, by and between SEIKO EPSON CORPORATION,
a Japanese corporation having its principal place of business at 3-5, Owa
3-chome, Suwa-shi, Nagano-ken 392, Japan ("Epson"), Xilinx, Inc., a Delaware
corporation having its principal place of business at 2100 Logic Dr., San
Jose, CA 95124, U.S.A. ("Xilinx US"), and Xilinx Ireland, a company formed
under the laws of Ireland, having its principal place of business at Logic
Drive, City West Business Campus, Saggart, Dublin, Ireland ("Xilinx Ireland").
Xilinx US and Xilinx Ireland are collectively referred to herein as "Xilinx".
1 Background
----------
1.1 Epson. Epson is in the business of designing, manufacturing, testing
-----
and selling semiconductor devices, among other products. Epson manufactures
such semiconductor devices at its plant located at 281 Fujimi, Fujimi-machi,
Suwa-gun, Nagano-ken 399-02, Japan (the "Fujimi Facility") and its plant
located at 166-3 Jurizuka, Sakata-shi, Yamagata-ken 998-01, Japan (the "Sakata
Facility").
1.2 Xilinx. Xilinx is in the business of designing, developing and
------
marketing CMOS programmable logic devices and related development system
software.
1.3 Prior Agreement. Epson and Xilinx US have an ongoing business
---------------
relationship whereby Epson fabricates semiconductor devices for Xilinx US. The
parties entered into an advance payment agreement dated April 1, 1994 for
development and manufacture of ***. The parties desired to expand their
relationship. Specifically, Xilinx desires to develop and sell high
performance, advanced architecture semiconductor devices and Epson desires to
construct a *** process line in order to fabricate such semiconductor devices
(as hereinafter further defined the "New Facility Wafers"). Accordingly, Epson
and Xilinx US entered into an Advance Payment Agreement dated as of May 17,
1996 (the "Prior Agreement") which provided that, among other things, Xilinx
US would advance money to Epson as an advance payment to be used as a credit
to purchase New Facility Wafers from Epson over a specified period of time.
1.4 Prior Ireland Agreement. Epson and Xilinx Ireland entered into an
-----------------------
Agreement on Purchase and Sale of *** dated as of May 17, 1996 (the "Prior
Ireland Agreement") which provided that, among other things, Xilinx Ireland
would purchase a specified number of New Facility Wafers from Epson over a
specified period of time.
1.5 Amended Agreement. The parties have agreed to amend certain terms of
-----------------
the Prior Agreement pursuant to the terms hereof. This Amended and Restated
Agreement amends the Prior Agreement, and shall be a replacement for, and not
in addition to, the Prior Agreement. Except as may be otherwise noted, all
references to the Prior Agreement shall be deemed to refer to this Agreement.
Effective on the date of this Agreement, the Prior Ireland Agreement shall be
deemed terminated and void for all purposes.
1.6 Purchase Agreement. The ordering, fabrication, testing and delivery
------------------
requirements for the New Facility Wafers covered by this Agreement will be set
forth in a purchase agreement between Xilinx and Epson (as hereafter further
defined the "Purchase Agreement"). The parties acknowledge and agree that even
though their obligations with respect to the quantity of the Products sold and
purchased under this Advance Payment Agreement are stipulated in terms of
"wafers", pricing of all Products will be done on a "good die basis" under the
Purchase Agreement.
1.7 Responsibility for Process. The parties agree that each party will
--------------------------
contribute to the design and implementation of the process line contemplated
by this Agreement. Epson expects significant contributions from Xilinx in the
construction of the *** process line described above, similar to Xilinx's
contributions to previous process generations, and Xilinx expects to be able
to make significant contributions to the process in order to optimize the
processes for Xilinx products.
2 Definitions
-----------
2.1 "***" will have the meaning ascribed to it in Article 1.3, provided
that the term shall not refer to or include *** products.
2.2 "Advance Payment" will mean the One Hundred Fifty Million U.S. Dollar
(US$150,000,000) payment to be made by Xilinx to Epson in the manner described
in Article 4.1.
2.3 "Equipment" will mean the semiconductor fabrication equipment that
Epson will install in the New Facility for purposes of fabricating New
Facility Wafers.
2.4 "Existing Agreements" will mean those contracts for the development,
fabrication, testing and/or sale of semiconductor devices between Epson and
Xilinx in effect as of the date of this Agreement, but not including the Prior
Agreement.
2.5 "***" will have the meaning ascribed to it in Article 6.8.
2.6 "Fujimi Facility" will have the meaning ascribed to it in Article 1.1.
2.7 "New Facility" will mean the *** process line constructed at the Site
using the Equipment.
2.8 "New Facility Wafers" will mean the semiconductor wafers fabricated by
Epson for Xilinx at the New Facility. The parties agree that New Facility
Wafers will consist of high performance, advanced architecture semiconductor
devices. The parties do not intend that the New Facility will be used to
fabricate low performance, less advanced architecture semiconductor devices.
2.9 "Price" will have the meaning ascribed to it in Article 9.1.
2.10 "Products" will mean those specific types of New Facility Wafers and
*** Wafers fabricated using the same masks and the same process flow and
identified by the same series or product name or number. The Products will be
ordered, fabricated, delivered and sold pursuant to the terms and conditions
of Purchase Agreement(s). Those Products which the parties desire to fabricate
at the New Facility will be negotiated and agreed by and between Epson and
Xilinx, referring to the Technology Road Map attached hereto as Exhibit B,
which may be reviewed and amended from time to time by mutual agreement of the
parties. The parties acknowledge, however, that the final determination of
what Products will be fabricated may depend on the results of joint
development and product qualification.
2.11 "Projected Completion Schedule" will have the meaning ascribed to it
in Article 3.1.2.
2.12 "Purchase Agreement(s)" will mean the agreement(s) by and between
Epson and Xilinx pursuant to which Epson agrees to sell and Xilinx agrees to
purchase the Products, and the terms of which shall be negotiated and agreed
by and between the parties after the execution of this Agreement.
2.13 "Sakata Facility" will have the meaning ascribed to it in Article 1.1.
2.14 "Site" will mean that portion of the Sakata Facility where the New
Facility will be constructed.
2.15 "Subsidiary" will mean any corporation, partnership, joint venture or
other legal entity which agrees in writing to be bound by the terms and
conditions of this Agreement and more than fifty percent (50%) of whose
ownership rights are controlled directly or indirectly by Epson or Xilinx, as
the case may be, but only so long as such control exists.
2.16 "***" will mean the *** process owned, licensed or developed by Epson
which will be used at the New Facility. The *** Process will include (a) all
process flow, process steps, process conditions (and modifications thereto)
used to manufacture semiconductor wafers at the New Facility as well as (b)
all methods, formulae, procedures, technology and know-how associated with
such process steps and process conditions. The *** Process will not include
any methods, formulae, procedures, technology or know-how licensed or received
from Xilinx under this Agreement, the Existing Agreements or other agreements
executed between the parties in the future unless otherwise agreed in writing.
If the parties find it necessary or convenient to document process flow for
any Product, such documentation will be signed by the parties and attached to
the appropriate Purchase Agreement as an exhibit.
3 Construction of New Facility
----------------------------
3.1 Construction and Operation of the New Facility
----------------------------------------------
3.1.1 Location and Costs. Epson hereby agrees, subject to its receipt of
------------------
the full amount of the Advance Payment as provided in Article 4.1, to
construct the New Facility at the Site and to install the Equipment therein.
3.1.2 Completion Schedule. The projected completion schedule for the
-------------------
construction of the New Facility (the "Projected Completion Schedule") is set
forth in Exhibit A attached hereto. In the event Epson has reason to believe
that any item in the Projected Completion Schedule designated as a
Construction Milestone will be delayed by more than thirty (30) calendar days,
Epson will promptly notify Xilinx in writing and (a) explain the reason for
the delay, (b) describe the estimated amount of time that construction will be
delayed and (c) describe the action that Epson will take to minimize the
delay.
3.1.3 Business Interruption Insurance. Epson will use its best efforts to
-------------------------------
obtain business interruption insurance coverage for the New Facility once the
construction of the New Facility is complete. The insurance will cover at
least such risks as are usually insured against by companies engaged in the
manufacture of semiconductor devices in Japan. Epson will maintain such
business interruption insurance coverage during the term of this Agreement.
Epson will furnish to Xilinx, upon written request, full information
concerning the business interruption insurance coverage.
3.1.4 First Shipment Delay. For every month that production shipment of
--------------------
New Facility Wafers is delayed beyond *** as specified in Exhibit A, Epson
shall, in addition to the *** as prescribed in Article 6.8 hereof, provide
additional ***.
3.1.5 Design Requirements. Epson acknowledges that Xilinx's insurers have
-------------------
set forth certain safety and security requirements for semiconductor
fabrication facilities, and Epson agrees to work with Xilinx to incorporate
such requirements into the design of the New Facility to the extent reasonably
requested by Xilinx and commercially feasible.
3.2 Representations of Epson. In order to induce Xilinx to enter into this
------------------------
Agreement and to make the Advance Payment hereunder, Epson hereby represents
and warrants that:
3.2.1 Corporate Status. Epson (a) is duly organized, validly existing and
----------------
in good standing under the laws of the jurisdiction of its incorporation, (b)
has the corporate power to own or lease its assets and to transact the
business in which it is currently engaged and (c) is in compliance with all
requirements of law except to the extent that the failure to comply therewith
will not materially affect the ability of Epson to perform its obligations
under this Agreement.
3.2.2 Corporate Authority. (a) Epson has the corporate power, authority
-------------------
and legal right to execute, deliver and perform this Agreement and has taken
as of the date hereof all necessary corporate action to execute this
Agreement, (b) the person executing this Agreement has actual authority to do
so on behalf of Epson and (c) there are no outstanding assignments, grants,
licenses, encumbrances, obligations or agreements, either written, oral or
implied, that prohibit execution of this Agreement.
3.2.3 Ownership of the Site. Epson has such right, title and interest in
---------------------
and to the Site and the structures located thereon as is required to permit
the operation of the Site as currently conducted and contemplated to be
conducted under this Agreement.
3.3 Representations of Xilinx. In order to induce Epson to enter into this
-------------------------
Agreement and to make the Supply Commitment, Xilinx hereby represents and
warrants that:
3.3.1 Corporate Status. Xilinx is duly organized, validly existing and in
----------------
good standing under the laws of the jurisdiction of its incorporation, (b) has
the corporate power to own or lease its assets and to transact the business in
which it is currently engaged and (c) is in compliance with all requirements
of law except to the extent that the failure to comply therewith will not
materially affect the ability of Xilinx to perform its obligations under this
Agreement.
3.3.2 Corporate Authority. (a) Xilinx has the corporate power, authority
-------------------
and legal right to execute, deliver and perform this Agreement and has taken
as of the date hereof all necessary corporate action to execute this
Agreement, (b) the person executing this Agreement has actual authority to do
so on behalf of Xilinx and (c) there are no outstanding assignments, grants,
licenses, encumbrances, obligations or agreements, either written, oral or
implied, that prohibit execution of this Agreement.
4 Advance Payment
---------------
4.1 Advance Payment. Xilinx shall pay to Epson an amount equal to One
---------------
Hundred Fifty Million U.S. Dollars (US$150,000,000) (the "Advance Payment"),
which Advance Payment will be credited against certain future purchases by
Xilinx of Products as provided in Article 5. The Advance Payment has been and
will be made in the following installments, and the parties agree that all
payments are current:
a) First installment of Thirty Million U.S. Dollars (US$30,000,000) by May
28, 1996 or such later date, which may be designated in writing by Epson.
b) Second installment of Thirty Million U.S. Dollars (US$30,000,000) by
November 1, 1996.
c) Third installment of Thirty Million U.S. Dollars (US$30,000,000) by May
1, 1997. Fourth installment of Thirty Million U.S. Dollars (US$30,000,000) by
November 1, 1997 or installment and acceptance of the first wafer stepper, as
part of Equipment, whichever is later.
d) Fifth installment of Thirty Million U.S. Dollars (US$30,000,000) by
February 1, 1998 or mass production start, whichever is later.
4.2 Payment Method. All payments made by Xilinx to Epson will be in
--------------
immediately available funds and will be made by wire transfer in U.S. Dollars
to a bank account designated by Epson.
4.3 Separate Accounts. Xilinx US will make the first, second and third
-----------------
installments, together with Twenty Two Million Five Hundred Thousand U.S.
Dollars (US$22,500,000) of the fourth installment. Xilinx Ireland make the
fifth installment, together with Seven Million Five Hundred Thousand U.S.
Dollars (US$7,500,000) of the fourth installment. Epson will maintain
separate balances for all payments, Wafer orders and *** made by or due to
each of Xilinx US and Xilinx Ireland. Orders made by Xilinx US shall be
offset only against payments made by Xilinx US, and orders made by Xilinx
Ireland shall be offset only against payments made by Xilinx Ireland.
4.4 Non-Refund of Advance Payment. The Advance Payment will not be
-----------------------------
refundable except as provided in Articles 6.7.1 or 14.4.
5 Application of Advance Payment
------------------------------
5.1 Purchase of Products. The Purchase price of all Products purchased by
--------------------
Xilinx as determined in accordance with Article 9.1 will be credited against
the amount of the Advance Payment until the aggregate dollar value of all
Products purchased, calculated pursuant to Article 5.2, equals or exceeds the
amount of the Advance Payment.
5.2 Calculation of Aggregate Value of Wafers Purchased. The Advance
--------------------------------------------------
Payment will be offset and reduced at the end of each calendar month in the
manner set forth in Exhibit D attached hereto.
5.3 Timing. Xilinx shall have the right to credit the Advance Payment
------
against all New Facility Wafers purchased under this Agreement, commencing at
such time as Epson is able to deliver such New Facility Wafers to Xilinx.
Notwithstanding anything to the contrary in this Agreement, however, Xilinx
shall not have the right to credit the Advance Payment against purchases of
*** Wafers until shipments of *** Wafers on and after ***.
5.4 Obligations After the Completion of Off-setting the Advance Payment.
-------------------------------------------------------------------
Xilinx will be required to pay for any Products ordered in accordance with the
Purchase Agreement once the Advance Payment has been fully offset and reduced.
Xilinx will make the payments to Epson in U.S. Dollars based on the Price.
6 Forecasts; Purchase Orders; Supply Commitment
---------------------------------------------
6.1 Forecasting. On or before the 25th of each month during the term of
-----------
this Agreement, Xilinx shall provide Epson with a six (6) month rolling
forecast which will set forth the estimated quantity of Products to be
fabricated by Epson pursuant to the Purchase Orders from Xilinx. The forecast
shall be provided by Xilinx only for forecasting purposes and shall not bind
either party legally except as may otherwise be expressly set forth in this
Agreement. Each month, Epson shall review any changes in the new 6-month
forecast, and determine in good faith whether such changes are acceptable.
Xilinx agrees to try to minimize fluctuations in its forecast for the first
two months of each forecast.
6.2 Business Meetings; Long-range Forecasts. The parties shall attempt to
---------------------------------------
hold business meetings to discuss issues arising under this Agreement
quarterly, but in no event less than three times annually. At each such
meeting, Xilinx shall provide Epson with a two (2) year forecast setting forth
the estimated quantity of Products to be fabricated by Epson, and Epson will
provide Xilinx with a two (2) year forecast of its capacity plan by facility
and by process. In addition, Xilinx will provide Epson with its tape-out plans
for forecasted Products, and Epson will provide Xilinx with its forecasted
process technology road map. All of these forecasts and plans shall be
provided only for forecasting purposes and shall not bind either party
legally.
6.3 Ordering. Xilinx shall place the Purchase Orders for the Products in
--------
accordance with one of the two procedures mutually agreed upon by the parties
and set forth in Exhibit C. In such Purchase Orders, Xilinx shall, in its
sole discretion, determine which of the two procedures is to be used and shall
provide Epson with reasonable notice should Xilinx decide to use the other
procedure. Xilinx shall specifically set forth the specific type of
Products, the number of the Products to be fabricated by Epson, delivery date
in release form, delivery place, purchase order number, and unit price of the
Products in each Purchase Order.
6.4 Delivery. Epson shall fabricate the Products based on the Purchase
--------
Agreement(s) and the Purchase Orders, and shall deliver the Products pursuant
to the Purchase Orders.
6.5 Supply Commitment. In the event, and only in the event, Epson and
-----------------
Xilinx are unable to agree on the amount of Product to be ordered by Xilinx
and delivered by Epson, Epson commits to supply Xilinx with sufficient foundry
capacity to deliver the amount of Products necessary to amortize the remaining
outstanding Advance Payment over three (3) years from the date of such
disagreement, based on a linear amortization (the "Supply Commitment"), and
Xilinx shall be obligated to purchase Products in at least such capacities
until the Advance Payment has been fully credited to such purchases.
6.6 Excess Capacity. Epson will use its best efforts to provide Xilinx
---------------
with excess capacity in the manner specified below:
First, in the event that Xilinx desires to purchase Products in excess of its
forecast requirements, Xilinx will specify in writing the amount of capacity
required, the Product(s) it desires to purchase and the date from which such
capacity is required.
Second, Epson will then determine how much capacity is available and notify
Xilinx of its determination. Epson will give Xilinx priority over third
parties for excess capacity of the New Facility except to the extent that
Epson is already obligated to provide such third parties with capacity.
Third, the parties will then mutually agree upon a preliminary excess capacity
allocation.
In order to provide Xilinx with first priority for unused capacity, Epson
agrees to give Xilinx monthly written notice of any unused capacity for the
next six (6) months, and to provide Xilinx the first right to reserve such
unused capacity for any New Facility Wafers which Xilinx desires to purchase
in excess of its forecast requirements. Xilinx will have a reasonable time to
elect to reserve such excess capacity.
<PAGE>
6.7 Failure to Meet Supply Commitment
---------------------------------
6.7.1 Failure Due to Epson. In the event that (a) Epson fails to fulfill
--------------------
the deliver Products specified in Purchase Orders in the manner specified by
this Agreement by the end of any month or (b) Epson has reason to believe that
it will be unable to fabricate such Products by the end of such month, then
Epson will take the following measures:
First, Epson will promptly notify Xilinx in writing and describe the nature of
the difficulty.
Second, Epson will use its best efforts to remedy the difficulty in an
expeditious manner by the end of the second full month following the month in
which Epson is unable to deliver such Products (in other words, the third
month including the month in which the difficulty occurs).
Third, Epson will use its best efforts to make available during the
above-referenced three (3) month period sufficient capacity at the Sakata
Facility and the Fujimi Facility to cover the deficiency between the Products
ordered and the actual capacity subject to completion of product
qualification. The parties acknowledge, however, that Epson cannot guarantee
the use of capacity at the Sakata Facility or the Fujimi Facility.
***
Fifth, in the event that the above measures are insufficient and the parties
are unable to negotiate in good faith a resolution of the difficulty, then
Xilinx, at its option, may elect to be repaid in U.S. Dollars that portion of
the Advance Payment currently outstanding, and Xilinx shall have no further
obligations under this Agreement.
6.7.2 Failure Due to Xilinx. Notwithstanding anything contained in Article
---------------------
6.7 to the contrary, in the event that Epson fails to fulfill a Purchase Order
in any month due to (a) design defects in Products caused by Xilinx, (b)
design changes requested by Xilinx, (c) process flow changes requested by
Xilinx or (d) any other reason caused by Xilinx, Epson will only be required
to make reasonable efforts to fulfill the Purchase Order in such month.
6.7.3 Failure Due to Both Parties. Notwithstanding anything contained in
---------------------------
Article 6.7.1, or 6.7.2 to the contrary, in the event that Epson fails to
fulfill a Purchase Order (and Xilinx fails to fulfill the Purchase Commitment)
due to difficulties caused jointly by Xilinx and Epson, the parties will
mutually agree in writing upon a fair and equitable solution.
6.7.4 Failure Due to Catastrophe. In the event that any fire, flood,
--------------------------
earthquake, explosion or any other catastrophe prevents Epson from fabricating
Products for Xilinx, (a) Epson will immediately implement the measures
required by Article 6.7.1, (b) Epson will permit Xilinx to inspect the New
Facility or such other facilities as may be necessary, and (c) the parties
will begin good faith negotiations to agree on a corrective action plan.
6.8 Coordination. Xilinx US and Xilinx Ireland agree to work with each
------------
other to make sure that all forecasts and other directions given to Epson are
coordinated with each other and do not create any conflicts. If any such
conflicts occur, all parties will work together to resolve them.
7 ***
8 Fabrication and Purchase and Sale of the Product
------------------------------------------------
8.1 General Terms and Conditions. The terms and conditions for the
----------------------------
prototype wafer fabrication, wafer fabrication, order and acceptance,
shipping, insurance and warranty for the Products will be set forth in the
Purchase Agreements. The parties hereby express their good-faith commitment to
sign all Purchase Agreements required to implement the terms and conditions of
this Agreement. Epson agrees to provide all Products covered by this Agreement
in the manner required by the Purchase Agreements. The parties acknowledge
that a best estimation and target of defect densities as at the date of this
Agreement is set forth in Exhibit E attached hereto, which will be reviewed
and amended from time to time by the parties hereto, and will be incorporated
into all Purchase Agreements.
8.2 Start of Production. Qualification testing for the Products will be
-------------------
conducted in the manner mutually agreed upon in writing by the parties. Once
any Product has been qualified, Epson will begin mass production of such
Product.
8.3 Turn Around Time. The parties acknowledge that the lead time for
----------------
shipment of Products, defined as the time from Xilinx's process release until
delivery of Products to assembler, known as "turn around time", is of the
essence, and agree that the parties shall set annual target turn around time
and make their joint efforts to achieve such target in accordance with Exhibit
F ("Turn Around Time").
9 Wafer Pricing and Payment
-------------------------
9.1 Determination of Price. The parties have already expressly agreed to
----------------------
(a) certain procedures to annually determine prices of Products (the "Price")
and (b) certain procedures of determining the price of all Products on a per
die basis, as described in Exhibit D. The Price herein shall be applicable
until Xilinx has received a credit against the full Advance Payment for
purchase of Products under the terms of this Agreement.
9.2 Shipping, Insurance, Taxes, Duties and Other Fees. Epson will deliver
-------------------------------------------------
the Products to Xilinx's designated facility in Japan or Xilinx's designated
carrier in Japan on an F.O.B. basis. Epson will be responsible for paying, in
connection with such sale and delivery in Japan (a) all domestic freight,
insurance and other shipping expenses and (b) sales, use, excise, ad valorem,
withholding or other taxes. The risk of loss will pass to Xilinx at F.O.B.
point in Japan. Further, Xilinx will be responsible for paying all freight,
insurance, fees, expenses, taxes, tariffs and duties required in connection
with the export of the Products from F.O.B. point in Japan and the import into
any other country.
9.3 Payment. Other than through offset of the Advance Payment, Xilinx will
-------
not be required to pay for any Products delivered under this Agreement or any
Purchase Agreement until the Advance Payment has been fully offset and
reduced, including the receipt of any applicable ***. Once the Advance Payment
is fully offset and reduced, Xilinx will be required to pay Epson in the
manner specified in the Purchase Agreements based on the Price for any
additional Products purchased.
9.4 Die Based Transaction. Notwithstanding anything to the contrary
---------------------
contained herein, the parties acknowledge and agree that all purchases made
pursuant to Purchase Agreements, starting with the purchase of *** devices,
will be made on a "good die basis" even though the Supply Commitment, the
Purchase Commitment and other obligations of this Agreement are described on a
wafer basis. Such "good die basis" transaction shall be made in reference to
"Die Pricing Mechanism" in Exhibit D and "Defect Density Goal" in Exhibit E.
10 Additional Funding by Xilinx
----------------------------
Subsequent to the final payment of the Advance Payment pursuant to Article 4.1
above, the parties shall meet to review and discuss the terms and conditions
of future funding by Xilinx and purchases of Products. Neither party has
agreed or committed to any such terms, and neither party shall be bound unless
and until an agreement on such subsequent terms and conditions is reached.
11 Technical Cooperation and Support
---------------------------------
The parties desire to engage in various types of joint development and
technical cooperation activities required to fabricate Products and to
effectuate the terms and conditions of this Agreement. The parties agree to
negotiate in good faith a joint development and technical cooperation
agreement in the future. Also the parties will continue to develop jointly new
state of the art CMOS logic processes under the terms of separate agreements
to be executed between the parties from time to time for specific projects or
product development work.
12 Intellectual Property Rights
----------------------------
Epson warrants that it has all necessary rights to develop, manufacture and
sell to Xilinx the Products. Epson will indemnify and hold harmless Xilinx
from any loss, damage or expense (including attorney's fees) arising from
claims that the sale or use of the Products infringes on the intellectual
property rights of third parties except where such infringement is caused by
Xilinx's instruction or specifications thereto.
13 Confidential Information
------------------------
13.1 Definitions. Confidential Information' means technical information,
-----------
specifications, data, drawings, designs or know-how disclosed between Epson
and Xilinx in connection with this Agreement. Confidential Information does
not include information or material that is expressly covered by
confidentiality provisions of Existing Agreements, it being understood that
such provisions will apply.
13.2 Marking. If Confidential Information is provided in a tangible form,
-------
it will be marked as confidential or proprietary. If Confidential Information
is provided orally, it will be treated as confidential and proprietary if it
is treated as confidential or proprietary at the time of disclosure by the
disclosing party and described as such in a writing provided to the other
party within thirty (30) days of the oral disclosure, which writing will be
marked as confidential or proprietary. Material that is not marked as required
by this Article 13.2 will not be deemed Confidential Information.
13.3 Restrictions on Use. During the term of this Agreement and for a
-------------------
period of five (5) years following disclosure of any Confidential Information,
the receiving party will: (a) hold the Confidential Information in confidence
using the same degree of care that it normally exercises to protect its own
proprietary information but no less than a reasonable degree of care, (b)
restrict disclosure and use of Confidential Information solely to those
employees (including any contract employees or consultants) of such party on a
need-to-know basis, and not disclose it to other employees or parties, and (c)
restrict the number of copies of Confidential Information to the number
required to carry out its obligations under this Agreement.
13.4 Exceptions to Confidentiality Obligations. Neither party will use or
-----------------------------------------
disclose the other party's Confidential Information except as permitted by
this Agreement. The receiving party, however, will have no obligations
concerning the disclosing party's Confidentiality Information if the
disclosing party's Confidential Information:
a) is made public before the disclosing party discloses it to the receiving
party;
b) is made public after the disclosing party discloses it to the receiving
party (unless its publication is a breach of this Agreement or any other
agreement between Epson and Xilinx);
c) is rightfully in the possession of the receiving party before the
disclosing party discloses it to the receiving party;
d) is independently developed by the receiving party without the use of the
Confidential Information, if such independent development is supported by
documentary evidence; or
e) is rightfully obtained by the receiving party from a third party who is
lawfully in possession of the information and not in violation of any
contractual, legal or fiduciary obligation to the disclosing party with
respect to the information.
13.5 Return of Confidential Information. Upon termination of this
----------------------------------
Agreement, a party who has received Confidential Information from the other
party pursuant to this Agreement will return, within fourteen (14) days of the
disclosing party's request for return, all Confidential Information that was
obtained or learned by the receiving party from the disposing party, together
with all copies, excerpts and translations thereof.
14 Term and Termination of Agreement
---------------------------------
14.1 Term. The term of this Agreement will extend from the date first
----
written above until all of the Advance Payment has been credited against Wafer
purchases hereunder and all *** due in connection therewith have been
provided, unless terminated earlier pursuant to Article 14.2 or 14.3. After
the expiration of this Agreement, Epson and Xilinx shall continue to make
efforts to supply and purchase a certain volume of wafers per month under fair
and competitive prices to be determined between the parties.
14.2 Termination. Either party may terminate or suspend this Agreement
-----------
immediately and without liability upon written notice to the other party if
any one of the following events occurs:
a) the other party files a voluntary petition in bankruptcy or otherwise
seeks protection under any law for the protection of debtors;
b) a proceeding is instituted against the other party under any provision of
any bankruptcy laws which is not dismissed within ninety (90) days;
c) the other party is adjudged bankrupt;
d) a court assumes jurisdiction of all or a substantial portion of the assets
of the other party under a reorganization law;
e) a trustee or receiver is appointed by a court for all or a substantial
portion of the assets of the other party;
f) the other party becomes insolvent, ceases or suspends all or substantially
all of its business;
g) the other party makes an assignment of the majority of its assets for the
benefit of creditors; or
h) a direct competitor of one party acquires, through merger, consolidation,
acquisition or otherwise, an interest in excess of fifty percent (50%) of the
voting securities or assets of the other party.
14.3 Termination for Cause. If either party fails to perform or violates
---------------------
any material obligation of this Agreement, then, sixty (60) days after
providing written notice to the breaching party specifying the default (the
"Default Notice"), the non-breaching party may terminate this Agreement,
without liability, unless:
a) the breach specified in the Default Notice has been cured within the sixty
(60) day period; or
b) the default reasonably required more than sixty (60) days to correct, and
the defaulting party has begun substantial corrective action to remedy the
default within such sixty (60) day period and diligently pursues such action,
in which event, the non-breaching party may not terminate or suspend this
Agreement unless one hundred twenty (120) days has expired from the date of
the Default Notice without such corrective action being completed and the
default remedied.
14.4 Effect of Termination. In the event of any termination of this
---------------------
Agreement, Epson shall pay to Xilinx within thirty (30) days after such
termination an amount of money in U.S. Dollars equal to the unused balance of
the Advance Payment (including the dollar amount equivalent to the outstanding
balance of ***, if any, resulting from delays in wafer shipment as prescribed
in Articles 3.1.4 and 6.7.1, based on the pricing mechanism set forth in
Exhibit D).
14.5 Survival of Obligations. The following Articles will survive any
-----------------------
expiration, termination or cancellation of this Agreement and the parties will
continue to be bound by the terms and conditions thereof:12, 13, 14.2, 14.3
and 14.4.
15 Miscellaneous
-------------
15.1 Order of Precedence. In the event of any conflicts between this
-------------------
Agreement and any Purchase Agreement, any purchase orders, acceptances,
correspondence, memoranda, listing sheets or other documents forming part of
an order for the Products placed by Xilinx and accepted by Epson, priority
will be given first to this Agreement, second to the Purchase Agreements,
third to Epson's acceptance, fourth to Xilinx's order and then to any other
documents. In no event, however, will either party's standard terms and
conditions be applicable to the transactions between the parties, unless
expressly accepted in writing by the other party.
15.2 Dispute Resolution
------------------
15.2.1 Meeting of Executives. In the event that any dispute or
---------------------
disagreement between the parties as to any provision of this Agreement arises,
prior to taking any other action, the matter will be referred to responsible
executives of the parties for consideration and resolution. Any party may
commence such proceedings by delivering a written request to the other party
for a meeting of such responsible executives. The other party will be required
to set a date for the meeting to be held within thirty (30) days after receipt
of such request and the parties agree to exercise their best efforts to settle
the matter amicably.
15.2.2 Location of Meeting. In the event that Epson initiates the
-------------------
proceedings described in Article 15.2.1, the first meeting will be held in San
Jose, California and all subsequent meetings will alternate between Tokyo,
Japan, and San Jose, California. In the event that Xilinx initiates the
proceedings described in Article 15.2.1, the first meeting will be held in
Tokyo, Japan and all subsequent meetings will alternate between San Jose,
California and Tokyo, Japan.
15.2.3 Demand for Arbitration. Any dispute relating to and/or arising out
----------------------
of this Agreement will be decided exclusively by binding arbitration under
procedures which ensure efficient and speedy resolution. Such an arbitration
may be commenced by either party involved in the dispute (i) after the
expiration of a sixty (60) day period following the written request to resolve
the dispute, and/or (ii) at such earlier time as any party involved repudiates
and/or refuses to continue with its obligations to negotiate in good faith.
The arbitration hearing will be conducted in the State of Hawaii, and will be
in the English language (with translations and interpretations as reasonable
for the presentation of evidence and/or conduct of the arbitration).
Notwithstanding anything to the contrary, any party may apply to any court of
competent jurisdiction for interim injunctive relief as may be allowed under
applicable law with respect to irreparable harm which cannot be avoided and/or
compensated by such arbitration proceedings, without breach of this Article
15.2.3 and without any abridgment of the powers of the arbitrators.
The arbitration will be conducted under the Rules of the Asia Pacific
Arbitration Center. Notwithstanding anything to the contrary, (i) the
arbitrators will have the power to order discovery to the extent they find
such discovery necessary to achieve a fair and equitable result and (ii) the
arbitrators shall require pre-hearing exchange of documentary evidence to be
relied upon by each of the respective parties in their respective cases in
chief, and pre-hearing exchange of briefs, witness lists, and summaries of
expected testimony.
The arbitrators will make their decision in writing.
15.2.4 Arbitrators. The arbitration will be conducted by three (3)
-----------
arbitrators. No person with a beneficial interest in the dispute under
arbitration may be an arbitrator. The parties will make reasonable efforts to
select arbitrators with experience in the field of computers and law.
15.2.5 Binding Effect. The decision or award rendered or made in
--------------
connection with such arbitration will be binding upon the parties and judgment
thereon may be entered in any court having jurisdiction and/or application may
be made to such court for enforcement of such decision or award. However, the
arbitrators will not have the authority to create any licenses. They will only
be permitted to enforce licenses which the parties have otherwise agreed to in
the Agreement or the Existing Agreements.
15.2.6 Expenses. The expenses of the arbitrators will be shared equally by
--------
the parties; each party will otherwise be responsible for the costs and
attorney's fees incurred by it.
15.3 Consequential Damages.
---------------------
IN NO EVENT WILL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR ANY INDIRECT,
SPECIAL, CONSEQUENTIAL OR INCIDENTAL DAMAGES (INCLUDING LOST PROFITS) WHETHER
BASED ON WARRANTY, CONTRACT, TORT OR ANY OTHER LEGAL THEORY REGARDLESS OF
WHETHER SUCH PARTY HAD ACTUAL OR CONSTRUCTIVE NOTICE OF SUCH DAMAGES.
15.4 Assignment. Neither party will assign, transfer or otherwise dispose
----------
of this Agreement in whole or in part without the prior consent of the other
party in writing, and such consent will not be unreasonably withheld. Except
as the case set forth in Article 14.2(h) above, this Agreement may be assigned
in whole or in part to any Subsidiary or to a successor who has acquired a
majority of its business or assets of the assigning party.
15.5 Public Announcements. Neither party will publicly announce the
--------------------
execution or existence of this Agreement or disclose the terms and conditions
of this Agreement without first submitting the text of such announcement to
the other party and receiving the approval of the other party of such text,
which approval, unless public disclosure is required by a court or a
government agency, may be withheld for any reason. However, Xilinx may
disclose the existence and the terms of this Agreement in a registration
statement filed with the Securities and Exchange Commission or in accordance
with generally accepted accounting procedures under the rules of the
Securities and Exchange Commission or National Association of Securities
Dealers Automated Quotations.
15.6 Notice and Communications. Any notices required or permitted to be
-------------------------
given hereunder will be in English and be sent by (i) registered airmail or
(ii) cable, facsimile or telex to be confirmed by registered airmail,
addressed to:
To Epson:
Fujimi, Fujimi-machi, Suwa-gun
Nagano-ken 399-02, Japan
Attn.: Nobuo Hashizume
Director and Corporate General Manager
Semiconductor Operations Division
Tel: 81-266-61-1211
Fax: 81-266-61-1270
To Xilinx:
2100 Logic Dr.
San Jose, CA 95124, U.S.A.
Attn.: Willem Roelandts
President and Chief Executive Officer, Xilinx, Inc.
Tel: 1-408-559-7778
Fax: 1-408-559-7114
Any such notice will be deemed given at the time of its receipt by the
addressee.
15.7 Relationship of the Parties. Epson and Xilinx are independent
---------------------------
contractors and neither of them will be nor represent themselves to be the
legal agent, partner or employee of the other party for any purpose. Neither
party will have the authority to make any warranty or representation on behalf
of the other party nor to execute any contract or otherwise assume any
obligation or responsibility in the name of or on behalf of the other party.
In addition, neither party will be bound by, nor liable to, any third person
for any act or any obligations or debt incurred by the other party, except to
the extent specifically agreed to in writing by the parties.
15.8 Waiver and Amendment. Failure by either party, at any time, to
--------------------
require performance by the other party or to claim a breach of any provision
of this Agreement will not be construed as a waiver of any right accruing
under this Agreement, nor will it affect any subsequent breach or the
effectiveness of this Agreement or any part hereof, or prejudice either party
with respect to any subsequent action. A waiver of any right accruing to
either party pursuant to this Agreement will not be effective unless given in
writing.
15.9 Severability. In the event that any provision of this Agreement will
------------
be unlawful or otherwise unenforceable, such provision will be severed, and
the entire agreement will not fail on account thereof, the balance continuing
in full force and effect, and the parties will endeavor to replace the severed
provision with a similar provision that is not unlawful or otherwise
unenforceable.
15.10 Rights and Remedies Cumulative. The rights and remedies provided
------------------------------
herein will be cumulative and not exclusive of any other rights or remedies
provided by law or otherwise.
15.11 Headings. The Article headings in this Agreement are for convenience
--------
only and will not be considered a part of, or affect the interpretation of,
any provision of this Agreement.
15.12 Governing Language. This Agreement and all communications pursuant
------------------
to it will be in the English language. If there is any conflict between the
English version and any translated version of this Agreement, the English
version will govern.
15.13 Force Majeure. Except as otherwise expressly provided for herein, no
-------------
party will be liable in any manner for failure or delay in fulfillment of all
or part of this Agreement directly or indirectly owing to any causes or
circumstances beyond its control, including, but not limited to, acts of God,
governmental order or restrictions, war, war-like conditions, hostilities,
sanctions, revolutions, riot, looting, strike, lockout, plague or other
epidemics, fire and flood.
15.14 Counterparts. This Agreement may be executed in any number of
------------
counterparts, and all such counterparts will together constitute but one
Agreement.
15.15 Integration. This Agreement sets forth the entire agreement and
-----------
understanding between the parties as to its subject matter and supersedes all
prior agreements, understandings and memoranda between the parties, except for
the Existing Agreements. No amendments or supplements to this Agreement will
be effective for any purpose except by a written agreement signed by the
parties.
15.16 Government Approvals; Export Control Laws. Epson will file all
-----------------------------------------
reports and notifications that may be required to be filed with any agency of
the Government of Japan in order to allow the performance of this agreement
according to its terms. Xilinx will be responsible for obtaining all licenses
and permits required to export the Products from Japan. Neither party will
transmit indirectly or directly any Products or technical information
contained in the Confidential Information except in accordance with applicable
Japanese and United States export control laws, regulations and procedures.
IN WITNESS WHEREOF, the parties have signed this Agreement as of the date
first above written.
SEIKO EPSON CORPORATION
By: /s/ Nobuo Hashizume
--------------------------------------
Name: Nobuo Hashizume
Title: Director and Corporate General Manager
Semiconductor Operations Division
XILINX, INC.
By: /s/ Willem Roelandts
--------------------------------------
Name: Willem Roelandts
Title: President and Chief Executive Officer
XILINX IRELAND
By: /s/ Paul McCambridge
--------------------------------------
Name: Paul McCambridge
Title: Managing Director
AREAS MARKED "***" REPRESENT SECTIONS FOR WHICH CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED. THESE OMITTED SECTIONS HAVE BEEN FILED SEPARATELY WITH THE
COMMISSION.
<PAGE>
EXHIBIT 12
<TABLE>
<CAPTION>
XILINX, INC.
STATEMENT OF COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
(in thousands, except ratios)
Three Months Ended Nine Months Ended
Dec. 27, Dec. 28, Dec. 27, Dec. 28,
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Income before taxes and joint venture $ 42,009 $ 38,849 $ 136,410 $ 120,658
Add fixed charges 3,665 3,614 11,024 10,868
--------- --------- --------- ---------
Earnings (as defined) $ 45,674 $ 42,463 $ 147,434 $ 131,526
========= ========= ========= =========
Fixed charges
Interest expense $ 3,270 $ 3,184 $ 9,821 $ 9,655
Amortization of debt issuance costs 218 223 653 664
Estimated interest component of rent expenses 177 207 550 549
--------- --------- --------- ---------
Total fixed charges $ 3,665 $ 3,614 $ 11,024 $ 10,868
========= ========= ========= =========
Ratio of earnings to fixed charges 12.5 11.7 13.4 12.1
========= ========= ========= =========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> MAR-28-1998 MAR-28-1998
<PERIOD-START> SEP-28-1997 MAR-30-1997
<PERIOD-END> DEC-27-1997 DEC-27-1997
<CASH> 244,079 244,079
<SECURITIES> 173,480 173,480
<RECEIVABLES> 70,709 70,709
<ALLOWANCES> 6,907 6,907
<INVENTORY> 54,605 54,605
<CURRENT-ASSETS> 639,721 639,721
<PP&E> 165,518 165,518
<DEPRECIATION> 82,287 82,287
<TOTAL-ASSETS> 966,847 966,847
<CURRENT-LIABILITIES> 121,364 121,364
<BONDS> 250,000 250,000
0 0
0 0
<COMMON> 742 742
<OTHER-SE> 583,513 583,513
<TOTAL-LIABILITY-AND-EQUITY> 966,847 966,847
<SALES> 148,735 459,768
<TOTAL-REVENUES> 148,735 459,768
<CGS> 55,668 172,622
<TOTAL-COSTS> 55,668 172,622
<OTHER-EXPENSES> 51,996 155,776
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 3,487 10,474
<INCOME-PRETAX> 42,009 136,410
<INCOME-TAX> 13,023 43,030
<INCOME-CONTINUING> 31,600 95,994
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 31,600 95,994
<EPS-PRIMARY> 0.43 1.30
<EPS-DILUTED> 0.40 1.19
</TABLE>
