AMD 2004 Annual Report Download - page 104

Table of Contents
minority interest toward its ultimate redemption value of these contributions by the guaranteed rate of return of between 11 percent and 13 percent. The Company
is classifying this periodic accretion of redemption value as an additional minority interest allocation. No separate accounting is required for the put and call
options because they are not freestanding instruments and not considered derivatives under SFAS 133, “Accounting for Derivative Instruments and Hedging
Activities.”
As of December 26, 2004, AMD Fab 36 KG received $122 million of silent partnership contributions and $128 million of limited partnership contributions
from the unaffiliated limited partners. These contributions were recorded as debt and minority interest, respectively, in the accompanying consolidated balance
sheet.
In addition to support from the Company and the consortium of banks referred to above, the Federal Republic of Germany and the State of Saxony have
agreed to support the Fab 36 project in the form of:
• a loan guarantee equal to 80 percent of the losses sustained by the lenders after foreclosure on all other security; and
• subsidies consisting of grants and allowances totaling up to approximately $735 million.
As of December 26, 2004, AMD Fab 36 KG received cash allowances of $5 million for investments made in 2003 and cash grants of $25 million for
investments made in 2003 and 2004.
The Fab 36 Loan Agreements also require that the Company:
• provides funding to AMD Fab 36 KG if cash shortfalls occur, including funding shortfalls in government subsidies resulting from any defaults caused
by AMD Fab 36 KG or its affiliates; and
• guarantees 100 percent of AMD Fab 36 KG’s obligations under the Fab 36 Loan Agreements until the bank loans are repaid in full.
Under the Fab 36 Loan Agreements, AMD Fab 36 KG, AMD Fab 36 Holding and AMD Fab 36 Admin are generally prevented from paying dividends or
making other payments to the Company. In addition, AMD Fab 36 KG would be in default under the Fab 36 Loan Agreements if the Company or any of the
AMD companies fail 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 adversely affected. Circumstances that could result in a default include:
• failure of any limited partner to make contributions to AMD Fab 36 KG as required under the partnership agreements or the Company’s failure to
provide loans to AMD Fab 36 KG as required under the Fab 36 Loan Agreements;
• failure to pay any amount due under the Fab 36 Loan Agreements within five days of the due date;
• occurrence of any event which the lenders reasonably believe has had or is likely to have a material adverse effect on the business, assets or condition
of AMD Fab 36 KG or AMD or their ability to perform under the Fab 36 Loan Agreements;
• filings or proceedings in bankruptcy or insolvency with respect to us, AMD Fab 36 KG or any limited partner;
• occurrence of a change in control (as defined in the Fab 36 Loan Agreements) of AMD;
• AMD Fab 36 KG’s noncompliance with certain affirmative and negative covenants, including restrictions on payment of profits, dividends or other
distributions except in limited circumstances and restrictions on incurring additional indebtedness, disposing of assets and repaying subordinated debt;
and
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Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2005