AMD 2007 Annual Report Download - page 291

Spansion Inc.
Notes to Condensed Consolidated Financial Statements - Continued
(Unaudited)
Sort Services Agreement
Spansion Japan and Fujitsu entered into a Sort Services Agreement (the “Sort Services Agreement”), pursuant to which Fujitsu will provide probe testing
services of Spansion Japan’s wafers at the JV1/JV2 Facilities (the “Sort Services”). The term of the Sort Services Agreement commenced on April 2, 2007 and is
effective until December 31, 2009. Spansion Japan may terminate the Sort Services Agreement in its sole discretion with 60 days’ prior written notice to Fujitsu,
and either Spansion Japan or Fujitsu may terminate the Sort Services Agreement in the event that the other party fails to correct or cure any material breach by
such other party of any covenant or obligation under the Sort Services Agreement within 60 days of receipt of written notice from the non-defaulting party
specifying such breach.
Rental Agreement
Spansion Japan and Fujitsu entered into a Rental Agreement (the “Rental Agreement”), pursuant to which Spansion Japan will rent certain equipment (the
“Rental Equipment”) to Fujitsu for the sole purpose of fulfilling the obligations of Fujitsu in the Sort Services Agreement. Spansion Japan will retain title to the
Rental Equipment at all times, and Fujitsu is prohibited from selling, pledging or otherwise encumbering or disposing of the Rental Equipment. The term of the
Rental Agreement commenced on April 2, 2007 and is effective until the termination or expiration of the Sort Services Agreement.
Services Agreement
Spansion Japan and Fujitsu entered into a Services Agreement (the “Services Agreement”), pursuant to which Spansion Japan will provide certain human
resource services and information technology (“IT”) services to Fujitsu (collectively, the “Services”). Any services are to be provided pursuant to statements of
work, which may be updated by Spansion Japan and Fujitsu from time to time upon mutual agreement. Spansion Japan will provide the Services to Fujitsu at cost
plus five percent. The term of the Services Agreement commenced on April 2, 2007 and is effective until March 31, 2009. Fujitsu may terminate all or a part of
any individual Service at any time with six months’ advance notice to Spansion Japan.
The total gain from the Transaction, which was the difference between the sales proceeds and the net book value of the assets sold under the terms of the
agreement, was approximately $72.5 million as of April 2, 2007. The Company accounted for the Transaction in accordance with FASB Statement No. 66,
Accounting for Sales of Real Estate, as a sale of real estate that included property improvements and integral equipment, because the building was subject to an
existing lease of the underlying land. The Company determined that continuing involvement existed with Fujitsu under the Foundry Agreement effective until
December 2009 and, accordingly, will recognize the gain over the term of the Foundry Agreement (i.e., over the period of continuing involvement).
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Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008