AMD 1999 Annual Report Download - page 15

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 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,
in which event the funding would 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 one U.S. dollar (which we used to
calculate the amounts denominated in deutsche marks). We entered into foreign
currency hedging transactions for Dresden Fab 30 in 1997, 1998 and 1999 and
anticipate entering into additional such foreign currency hedging transactions
in 2000 and in future years.
Motorola. In 1998, we entered into an alliance with Motorola for the
development of Flash memory and logic technology. The alliance includes a
seven-year technology development and license agreement, which was amended on
January 21, 2000 to include certain additional technology, and a patent cross-
license agreement. The agreements provide that we will co-develop with
Motorola future generation logic process and embedded Flash technologies. In
addition, we will receive certain licenses to Motorola's semiconductor logic
process technology, including copper interconnect technology, which may be
subject to variable royalty rates. In exchange, we will develop and license to
Motorola a Flash module design to be used in Motorola's future embedded Flash
products. Motorola will have additional rights, subject to certain conditions,
to make stand-alone Flash devices, and to make and sell certain data
networking devices. The rights to data networking devices may be subject to
variable royalty payment provisions.
Marketing and Sales
Our products are marketed and sold under the AMD trademark. We employ a
direct sales force through our principal facilities in Sunnyvale, California,
and field sales offices throughout the United States and abroad (primarily
Europe and Asia Pacific). We also sell our products through third-party
distributors and independent representatives in both domestic and
international markets pursuant to nonexclusive agreements. The distributors
also sell products manufactured by our competitors, including those products
for which we are an alternate source. One of our OEMs, Compaq Computer
Corporation, accounted for approximately 13 percent of our 1999 net sales. No
other single distributor or OEM customer accounted for 10 percent or more of
our net sales in 1999.
Distributors typically maintain an inventory of our products. In most
instances, our agreements with distributors protect their inventory of our
products against price reductions, as well as products that are slow moving or
have been discontinued. These agreements, which may be canceled by either
party on a specified
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Source: ADVANCED MICRO DEVIC, 10-K405, March 21, 2000