AMD 2005 Annual Report Download - page 107

Table of Contents
The partnership agreements set forth each limited partner’s aggregate capital contribution to AMD Fab 36 KG and the milestones for such contributions.
Pursuant to the terms of the partnership agreements, AMD, through AMD Fab 36 Holding and AMD Fab 36 Admin, agreed to provide an aggregate of $694
million, Leipziger Messe agreed to provide an aggregate of $237 million and Fab 36 Beteiligungs agreed to provide an aggregate of $143 million. The capital
contributions of Leipziger Messe and Fab 36 Beteiligungs are comprised of limited partnership contributions and silent partnership contributions. These
contributions are due at various dates upon the achievement of milestones relating to the construction and operation of Fab 36. As of December 25, 2005, all
capital contributions were made in full.
The partnership agreements also specify that the unaffiliated limited partners will receive a guaranteed rate of return of between 11 percent and 13 percent
per annum on their total investment depending upon the monthly wafer output of Fab 36. The Company guaranteed these payments by AMD Fab 36 KG.
In April 2005, we amended the partnership agreements in order to restructure the proportion of Leipziger Messe’s silent partnership and limited
partnership contributions. Although the total aggregate amount that Leipziger Messe has agreed to provide remained unchanged, the portion of its contribution
that constitutes limited partnership interests was reduced by $59 million while the portion of its contribution that constitutes silent partnership interests was
increased by a corresponding amount. In this report, we refer to this additional silent partnership contribution as the New Silent Partnership Amount.
Pursuant to the terms of the partnership agreements and subject to the prior consent of the Federal Republic of Germany and the State of Saxony, AMD
Fab 36 Holding and AMD Fab 36 Admin have a call option over the limited partnership interests held by Leipziger Messe and Fab 36 Beteiligungs, first
exercisable three and one-half years after the relevant partner has completed the applicable capital contribution and every three years thereafter. Also,
commencing five years after completion of the relevant partner’s capital contribution, Leipziger Messe and Fab 36 Beteiligungs each have the right to sell their
limited partnership interest to third parties (other than competitors), subject to a right of first refusal held by AMD Fab 36 Holding and AMD Fab 36 Admin, or
to put their limited partnership interest to AMD Fab 36 Holding and AMD Fab 36 Admin. The put option is thereafter exercisable every three years. Leipziger
Messe and Fab 36 Beteiligungs also have a put option in the event they are outvoted at AMD Fab 36 KG partners’ meetings with respect to certain specified
matters such as increases in the partners’ capital contributions beyond those required by the partnership agreements, investments significantly in excess of the
business plan, or certain dispositions of the limited partnership interests of AMD Fab 36 Holding and AMD Fab 36 Admin. The purchase price under the put
option is the partner’s capital account balance plus accumulated or accrued profits due to such limited partner. The purchase price under the call option is the
same amount, plus a premium of $4.2 million to Leipziger Messe and a premium of $2.5 million to Fab 36 Beteiligungs. The right of first refusal price is the
lower of the put option price or the price offered by the third party that triggered the right. The Company guaranteed the payments under the put options.
In addition, AMD Fab 36 Holding and AMD Fab 36 Admin are obligated to repurchase the silent partnership interest of Leipziger Messe’s and Fab 36
Beteiligungs’ contributions over time. This mandatory repurchase obligation does not apply to the New Silent Partnership Amount. Specifically, AMD Fab 36
Holding and AMD Fab 36 Admin are required to repurchase Leipziger Messe’s silent partnership interest of $95 million in annual 25 percent installments
commencing in December 2006, and Fab 36 Beteiligungs’ silent partnership interest of $71 million in annual 20 percent installments commencing in October
2005. On September 30, 2005, AMD Fab 36 Holding and AMD Fab 36 Admin repurchased $14 million of Fab 36 Beteiligungs’ silent partnership contributions.
For accounting and financial reporting purposes under U.S. generally accepted accounting principles, the Company initially classifies the portion of the
silent partnership contribution that is mandatorily redeemable as debt on the accompanying consolidated balance sheet at its fair value at the time of issuance
because of the mandatory redemption features described in the prior paragraph. Each accounting period, the Company increases the carrying value of this debt
towards its ultimate redemption value of the silent partnership contributions by the
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Source: ADVANCED MICRO DEVIC, 10-K, February 27, 2006