AMD 2003 Annual Report Download - page 96

Table of Contents
AMD Saxony does not believe it has received grants and allowances in excess of its entitlement under the Subsidy Agreement. However, the Company
anticipates that the maximum amount of capital investment grants and allowances available under the Subsidy Agreement will be reduced from an originally
anticipated amount of $517 million to approximately $453 million. The Company adjusted the quarterly amortization of these amounts accordingly.
The Dresden Loan Agreements, as amended, also require that the Company:
• provide interim funding to AMD Saxony if either the remaining capital investment grants and allowances or the remaining interest subsidies are
delayed, such funding to be repaid to AMD, as AMD Saxony receives the investment grants and allowances or subsidies from the State of Saxony and
the Federal Republic of Germany;
• fund shortfalls in government subsidies resulting from any default under the Subsidy Agreement caused by AMD Saxony or its affiliates; and
• guarantee of up to 50 percent of AMD Saxony’s obligations under the Dresden Loan Agreements, which guarantee must not be less than $138 million
or more than $373 million, until the bank loans are repaid in full. As of December 28, 2003, the amount outstanding under the guarantee was $332
million.
As AMD Saxony’s obligations under the Dresden Loan Agreements are included in the Company’s consolidated financial statements, no incremental
liability is recorded under the Dresden guarantee.
AMD Saxony would be in default under the Dresden Loan Agreements if the Company, AMD Saxony or AMD Saxony Holding GmbH (AMD Holding)
fails to comply with certain obligations thereunder or upon the occurrence of certain events and if, after the occurrence of the event, the lenders determine that
their legal or risk position is materially adversely affected. Circumstances that could result in a default include:
• failure to fund equity contributions or loans or otherwise comply with the Company’s obligations relating to the Dresden Loan Agreements;
• the sale of shares in AMD Saxony or AMD Holding;
• the failure to pay material obligations;
• the occurrence of a material adverse change or filings or proceedings in bankruptcy or insolvency with respect to the Company, AMD Saxony or AMD
Holding;
• the occurrence of a default under the July 2003 Loan Agreement; and
• AMD Saxony’s noncompliance with certain financial covenants, including minimum tangible net worth, minimum interest cover ratio, asset cover ratio
and a minimum liquidity covenant.
Generally, any default with respect to borrowings made or guaranteed by AMD that results in recourse to the Company of more than $2.5 million, and that
is not cured by the Company, would result in a cross-default under the Dresden Loan Agreements. As of December 28, 2003, the Company was in compliance
with all conditions of the Dresden Loan Agreements.
In the event the Company is unable to meet its obligations to AMD Saxony as required under the Dresden Loan Agreements and the lenders determine that
their legal or risk position is materially adversely affected, the Company will be in default under the Dresden Loan Agreements, which would permit acceleration
of the
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Source: ADVANCED MICRO DEVIC, 10-K, March 09, 2004