AMD 2006 Annual Report Download - page 86

Table of Contents
over the life of the equipment because these allowances are intended to subsidize the capital investments in equipment. Noncompliance with the covenants
contained in the subsidy grant documents could result in 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 31, 2006, AMD Fab 36 KG received cash allowances of $157 million for capital investments made in 2003 through 2005 as well as cash
grants of $207 million for capital investments made in 2003 through 2006 and a prepayment for capital investments planned in 2007 and the first half of 2008.
The Fab 36 Loan Agreements also require that we:
• provide 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
• guarantee 100 percent of AMD Fab 36 KG’s obligations under the Fab 36 Loan Agreements until the 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 us. In addition, AMD Fab 36 KG would be in default under the Fab 36 Loan Agreements if we 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:
• our 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
• AMD Fab 36 KG’s noncompliance with certain financial covenants, including loan to fixed asset value ratio and, in certain circumstances, a minimum
cash covenant.
In general, any default with respect to other indebtedness of AMD or AMD Fab 36 KG that is not cured, would result in a cross-default under the Fab 36
Loan Agreements.
The occurrence of a default under the Fab 36 Loan Agreements would permit the lenders to accelerate the repayment of all amounts outstanding under the
Fab 36 Term Loan. In addition, the occurrence of a default under this agreement could result in a cross-default under the indenture governing our 7.75% Notes
and the October 2006 Term Loan. We cannot provide assurance that we would be able to obtain the funds necessary to fulfill these obligations. Any such failure
would have a material adverse effect on us.
7.75% Senior Notes Due 2012
On October 29, 2004, we issued $600 million of 7.75% Notes due 2012 in a private offering pursuant to Rule 144A and Regulation S under the Securities
Act of 1933, as amended. On April 22, 2005, we exchanged these notes for publicly registered notes which have substantially identical terms as the old notes
except that the
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Source: ADVANCED MICRO DEVIC, 10-K, March 01, 2007