AMD 1998 Annual Report Download - page 215

The Dresden Loan Agreements, which were amended in February 1998 to reflect
upgrades in wafer production technology as well as the decline in the deutsche
mark relative to the U.S. dollar, require that we partially fund Dresden Fab 30
project costs in the form of subordinated loans to, or equity investments in,
AMD Saxony. In accordance with the terms of the Dresden Loan Agreements, we have
invested $270 million to date in the form of subordinated loans and equity in
AMD Saxony, which includes $100 million in subordinated loans in 1998 ($60
million of which was paid after fiscal 1998 but before December 31, 1998). We
are required to make additional subordinated loans to, or equity investments in,
AMD Saxony totaling $170 million in 1999, $70 million of which must be funded
through the sale of at least $200 million of our stock by June 30, 1999. We
cannot give any assurance that the requisite external financing will be
available on favorable terms, if at all.
In addition to support from AMD, the consortium of banks referred to above has
made available $989 million in loans (denominated in deutsche marks) to AMD
Saxony to help fund Dresden Fab 30 project costs. AMD Saxony had $300 million of
such loans outstanding as of December 27, 1998.
Finally, the Federal Republic of Germany and the State of Saxony are supporting
the Dresden Fab 30 project, in accordance with the Dresden Loan Agreements, in
the form of:
. guarantees of 65 percent of AMD Saxony bank debt up to a maximum amount
of $989 million;
. capital investment grants and allowances totaling $289 million; and
. interest subsidies totaling $180 million.
Of these amounts (which are all denominated in deutsche marks), AMD Saxony has
received $275 million in capital investment grants and $8 million in interest
subsidies as of December 27, 1998. The grants and subsidies are subject to
conditions, including meeting specified levels of employment in December 2001
and maintaining those levels until June 2007. Noncompliance with the conditions
of the grants and subsidies could result in the forfeiture of all or a portion
of the future amounts to be received as well as the repayment of all or a
portion of amounts received to date. As of December 27, 1998, we were in
compliance with all of the conditions of the grants and subsidies.
The Dresden Loan Agreements also require that we:
. provide interim funding to AMD Saxony if either the remaining capital
investment allowances or the remaining interest subsidies are delayed,
which will be repaid to AMD as AMD Saxony receives the grants or
subsidies from the State of Saxony;
. fund shortfalls in government subsidies resulting from any default under
the subsidy agreements caused by AMD Saxony or its affiliates;
. guarantee a portion of AMD Saxony's obligations under the Dresden Loan
Agreements up to a maximum of $130 million (denominated in deutsche
marks) until Dresden Fab 30 has been completed;
. fund certain contingent obligations including obligations to fund
project cost overruns, if any; and
. make funds available to AMD Saxony, after completion of Dresden Fab 30,
up to approximately $87 million (denominated in deutsche marks) if AMD
Saxony does not meet its fixed charge coverage ratio covenant.
Because our obligations under the Dresden Loan Agreements are denominated in
deutsche marks, the dollar amounts set forth herein are subject to change based
on applicable conversion rates. At the end of the fourth quarter of 1998, the
exchange rate was approximately 1.67 deutsche marks to 1 U.S. dollar (which we
used to calculate our obligations denominated in deutsche marks).
The definition of defaults under the Dresden Loan Agreements includes the
failure of AMD, AMD Saxony or AMD Holding, the parent company of AMD Saxony and
the wholly owned subsidiary of AMD, to comply with obligations in connection
with the Dresden Loan Agreements, including:
. material variances from the approved schedule and budget;
. our failure to fund equity contributions or share holder loans or
otherwise comply with our 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 of proceedings in
bankruptcy or insolvency with respect to us, AMD Saxony or AMD Holding;
and
. the occurrence of default under the indenture pursuant to which the
Senior Secured Notes were issued (the Indenture) or the Credit
Agreement.
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Source: ADVANCED MICRO DEVIC, 10-K, March 29, 1999