AMD 1999 Annual Report Download - page 127

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 $421 million as of December 26, 1999 in the form of subordinated loans
and equity in AMD Saxony (denominated in both deutsche marks and U.S. dollars).
The Dresden Loan Agreements were amended again in June 1999 to remove a
requirement that we sell at least $200 million of our stock by June 30, 1999 in
order to fund a $70 million loan to AMD Saxony. In lieu of the stock offering,
we funded the $70 million loan to AMD Saxony with proceeds from the sale of
Vantis.
In addition to support from AMD, the consortium of banks referred to above
has made available $850 million in loans (denominated in deutsche marks) to AMD
Saxony to help fund Dresden Fab 30 project costs. AMD Saxony had $270 million of
such loans outstanding as of December 26, 1999.
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
$850 million;
. capital investment grants and allowances totaling $287 million; and
. interest subsidies totaling $156 million.
Of these amounts (which are all denominated in deutsche marks), AMD Saxony
has received $275 million in capital investment grants and $23 million in
interest subsidies as of December 26, 1999. The grants and subsidies are subject
to conditions, including meeting specified levels of employment in December 2001
and maintaining those levels until June 2007. Non-compliance 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 26, 1999, 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 $112 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 $75 million (denominated in deutsche marks) if AMD Saxony does
not meet its fixed charge coverage ratio covenant.
Because the amounts 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 1999, the exchange rate was
approximately 1.94 deutsche marks to 1 U.S. dollar (which we used to calculate
the amounts 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 shareholder 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 11
percent Senior Secured Notes due 2003 were issued (the Indenture) or the Loan
Agreement.
Source: ADVANCED MICRO DEVIC, 10-K405, March 21, 2000