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49
On January 17, 2013, we entered into a new supply agreement with Nanya and Inotera (the "Inotera Supply Agreement"),
retroactively effective beginning on January 1, 2013. Under the Inotera Supply Agreement, we are obligated to purchase for an
initial three-year term substantially all of Inotera's output at a purchase price based on a discount from market prices for our
comparable components. The Inotera Supply Agreement contemplates annual negotiations with respect to potential successive
one-year extensions and if in any year the parties do not agree to an extension, the agreement will terminate following the end
of the then-existing term plus a subsequent three-year wind-down period. Our share of Inotera's capacity would decline over
the three year wind-down period. We purchased $1,260 million of DRAM products from Inotera in 2013 under the Inotera
Supply Agreement and a prior supply agreement with Inotera. The Inotera Supply Agreement does not contain a fixed or
minimum purchase quantity as quantities are based on qualified production output and pricing fluctuates as it is based on
market prices. Therefore, we did not include our obligations under the Inotera Supply Agreement in the contractual obligations
table above.
Off-Balance Sheet Arrangements
Issued and Outstanding Capped Calls: Concurrent with the offering of the 2031 Notes in July 2011, we entered into
capped call transactions (the "2031 Capped Calls") that have an initial strike price of approximately $9.50 per share, subject to
certain adjustments, which was set to the initial conversion price of the 2031 Notes. The 2031 Capped Calls are in four equal
tranches, have cap prices of $11.40, $12.16, $12.67 and $13.17 per share, and cover, subject to anti-dilution adjustments similar
to those contained in the 2031 Notes, an approximate combined total of 72.6 million shares of common stock. The 2031
Capped Calls expire on various dates between July 2014 and February 2016 and are intended to reduce the potential dilution
upon conversion of the 2031 Notes.
Concurrent with the offering of the 2032C and 2032D Notes in April 2012, we entered into the 2032C and 2032D Capped
Call Transactions (collectively, the "2032 Capped Calls"). The 2032C Capped Calls have a range of cap prices from $14.26 to
$15.69 and an initial strike price of, subject to certain adjustments, approximately $9.80, which is set slightly higher than the
$9.63 conversion price of the 2032C Notes. The 2032D Capped Calls have a range of cap prices from $14.62 to $16.04 and an
initial strike price of, subject to certain adjustments, approximately $10.16, which is set slightly higher than the $9.98
conversion price of the 2032D Notes. The 2032 Capped Calls cover, subject to anti-dilution adjustments similar to those
contained in the 2032 Notes, an approximate combined total of 100.6 million shares of common stock. The 2032 Capped Calls
expire on various dates between May 2016 and May 2018 and are intended to reduce the potential dilution upon conversion of
the 2032C and 2032D Notes.
Concurrent with the offering of the 2033 Notes in February 2013, we entered into the 2033 Capped Call Transactions. The
2033 Capped Calls have a cap price of $14.51 and an initial strike price of, subject to certain adjustments, approximately
$10.93, which is equal to the conversion price of the 2033 Notes. The 2033 Capped Calls cover, subject to anti-dilution
adjustments similar to those contained in the 2033 Notes, an approximate combined total of 55.0 million shares of common
stock. The 2033 Capped Calls expire on various dates between January 2018 and February 2020 and are intended to reduce the
potential dilution upon conversion of the 2033 Notes.
Settlement of Capped Calls: Concurrent with the issuance in April 2009 of our 4.25% Convertible Senior Notes due 2013,
we entered into capped call transactions (the "2013 Capped Calls") covering approximately 45.2 million shares of common
stock with an initial strike price of approximately $5.08 per share and a cap price of $6.64 per share. The 2013 Capped Calls
expired in October, 2012 and November, 2012. We elected cash settlement and received $24 million in 2013.
Concurrent with the offering of the 2014 Notes, we purchased capped calls with a strike price of approximately $14.23 per
share and various expiration dates between November 2011 and December 2012 (the "2014 Capped Calls"). In the first six
months of 2012, 2014 Capped Calls covering 30.4 million shares expired according to their terms. In April 2012, we settled the
remaining 2014 Capped Calls, covering 60.9 million shares, and received a de minimis payment.
(See "Item 8. Financial Statements and Supplementary Data – Notes to Consolidated Financial Statements – Shareholders'
Equity – Capped Calls" note.)