AMD 2010 Annual Report Download - page 94

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During 2009, pursuant to a funding request from GF in accordance with the Funding Agreement, ATIC
contributed $260 million of cash to GF in exchange for GF securities consisting of $52 million aggregate
principal amount of Class A Notes and $208 million aggregate principal amount of Class B Notes. The Company
declined to participate in the funding. As of December 26, 2009, the Company’s ownership interest in GF (on a
fully converted to Ordinary Shares basis) was approximately 32%.
Wafer Supply Agreement. The Wafer Supply Agreement governs the terms by which the Company
purchases products manufactured by GF. Pursuant to the Wafer Supply Agreement, the Company purchases
substantially all of its microprocessor unit (MPU) product requirements from GF. The Company currently pays
GF for wafers on a cost-plus basis. If the Company acquires a third-party business that manufactures MPU
products, it will have up to two years to transition the manufacture of such MPU products to GF. In addition,
once GF establishes certain specific qualified processes for bulk silicon wafers, the Company will purchase from
GF, where competitive, specified percentages of its GPU requirements. At its request, GF will also provide sort
services to the Company on a product-by-product basis.
The Company will provide GF with binding product forecasts of its MPU and GPU product requirements.
The price for GPU products will be determined by the parties when GF is able to begin manufacturing GPU
products for the Company.
The Wafer Supply Agreement is in effect through March 2, 2024. However, the Wafer Supply Agreement
may be terminated if a business plan deadlock occurs because AMD or ATIC, as the shareholders of GF, are
unable to agree on GF’s annual business plan and ATIC elects to enter into a transition period pursuant to the
Funding Agreement. GF has agreed to use commercially reasonable efforts to assist the Company to transition
the supply of products to another provider, and to continue to fulfill purchase orders for up to two years
following the termination or expiration of the Wafer Supply Agreement. During the transition period, pricing for
microprocessor products will remain as set forth in the Wafer Supply Agreement, but the Company’s purchase
commitments to GF will no longer apply.
Governance Changes, Funding and Accounting in 2010
Deconsolidation of GF
On December 18, 2009, ATIC International Investment Company (ATIC II) acquired Chartered
Semiconductor Manufacturing Ltd. (Chartered). On December 28, 2009, with the Company’s consent, ATIC II,
Chartered and GF entered into a Management and Operating Agreement (MOA), which provided for the joint
management and operation of GF and Chartered, thereby allowing GF and Chartered to share costs, take
advantage of operating synergies and market wafer fabrications services on a collective basis. In order to allow
for the signing of the MOA on December 28, 2009 prior to obtaining any regulatory approvals, the Company
agreed to irrevocably waive rights under the Shareholders Agreement with respect to certain matters that require
unanimous GF Board approval. Additionally, if any such matters come before the GF Board, the Company
agreed that its designated GF directors will vote in the same manner as the majority of ATIC-designated GF
Board members voting on any such matters. As a result of waiving such approval rights, as of December 28,
2009, for financial reporting purposes the Company no longer shared the control with ATIC over GF. Based on
its fully diluted ownership interest in GF, the Company had the right to designate two directors to the GF Board
of Directors as of December 25, 2010.
In June 2009, the FASB issued an amendment to improve financial reporting by enterprises involved with
variable interest entities. This new guidance became effective for the Company beginning the first day of 2010.
Under the new guidance, the investor who is deemed to both (i) have the power to direct the activities of the
variable interest entity that most significantly impact the variable interest entity’s economic performance and
(ii) be exposed to losses and returns will be the primary beneficiary who should then consolidate the variable
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