AMD 2002 Annual Report Download - page 33

Table of Contents
The Subsidy Agreement, as amended, imposes conditions on AMD Saxony, including the requirement to attain a certain employee headcount by
December 2003 and to maintain such headcount until December 2008. Noncompliance with the conditions of the grants, allowances 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. In December 2002,
AMD Saxony reduced its anticipated December 2003 employment levels as a result of the 2002 Restructuring Plan (see Note 14). Consequently, the anticipated
headcount is below the level required to be maintained by the Subsidy Agreement. Based on these revised headcount estimates, the maximum amount of capital
investment grants and allowances available under the Subsidy Agreement would be reduced from $433 million to $379 million. We adjusted the quarterly
amortization of these amounts accordingly. There have been no conditions of noncompliance through December 29, 2002 that would result in forfeiture of any of
the grants and allowances.
The Dresden Loan Agreements, as amended, also require that we:
• 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;
• fund shortfalls in government subsidies resulting from any default under the Subsidy Agreement caused by AMD Saxony or its affiliates; and
• guarantee up to 50 percent of AMD Saxony’s obligations under the Dresden Loan Agreements, which guarantee must not be less than $116 million or
more than $313 million, until the bank loans are repaid in full. As of December 29, 2002, the amount outstanding under the guarantee was $294 million.
As AMD Saxony’s obligations under the Dresden Loan Agreements are included in our consolidated financial statements, no incremental liability is
recorded under the Dresden guarantee.
AMD Saxony would be in default under the Dresden Loan Agreements if we, AMD Saxony or AMD Saxony Holding GmbH (AMD Holding) fail to
comply with certain obligations thereunder or upon the occurrence of certain events, including:
• material variances from the approved plan and specifications;
• our failure to fund equity contributions or 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 or proceedings in bankruptcy or insolvency with respect to us, AMD Saxony or AMD Holding;
• the occurrence of a default under the July 1999 Loan Agreement or the September 2002 Loan Agreement; and
• noncompliance with specified financial covenants.
Generally, any default with respect to borrowings made or guaranteed by AMD that results in recourse to us of more than $2.5 million, and that is not
cured by us, would result in a cross-default under the Dresden Loan Agreements, the July 1999 Loan Agreement and the September 2002 Loan Agreement. As of
December 29, 2002, we were in compliance with all conditions of the Dresden Loan Agreements.
In the event we are unable to meet our obligations to AMD Saxony as required under the Dresden Loan Agreements, we will be in default under the
Dresden Loan Agreements, the July 1999 Loan Agreement and the September 2002 Loan Agreement, which would permit acceleration of certain indebtedness,
which could have a
28
Source: ADVANCED MICRO DEVIC, 10-K, March 14, 2003