Crucial 2013 Annual Report Download - page 26

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The trustees initially submitted the proposed plans of reorganization for the Elpida Companies to the Japan Court on
August 21, 2012, and submitted final proposed plans on October 29, 2012. On October 31, 2012, the Japan Court approved
submission of the trustees' proposed plans of reorganization to creditors for approval. On February 26, 2013, the Elpida
Companies' creditors approved the reorganization plans and on February 28, 2013, the Japan Court issued an order approving
the plans of reorganization. Appeals filed by certain creditors of Elpida in Japan challenging the plan approval order issued by
the Japan Court were denied.
In a related action, Elpida filed a Verified Petition for Recognition and Chapter 15 Relief in the United States Bankruptcy
Court for the District of Delaware (the "U.S. Court") on March 19, 2012 and, on April 24, 2012, the U.S. Court entered an
order that, among other things, recognized Elpida's corporate reorganization proceeding as a foreign main proceeding pursuant
to 11 U.S.C. § 1517(b). On June 25, 2013, the U.S. Court issued a recognition order, which recognized the order of the Japan
Court approving Elpida's plan of reorganization.
The plans of reorganization provide for payments by the Elpida Companies to their secured and unsecured creditors in an
aggregate amount of 200 billion yen (or the equivalent of approximately $2.05 billion as of August 29, 2013), less certain
expenses of the reorganization proceedings and certain other items. The plans of reorganization also provided for the
investment by us pursuant to the Sponsor Agreement of 60 billion yen ($615 million paid at closing) in cash into Elpida in
exchange for 100% ownership of Elpida's equity and the use of such investment to fund the initial installment payment by the
Elpida Companies to their creditors of 60 billion yen, subject to reduction for certain items specified in the Sponsor Agreement
and plans of reorganization. The initial installment payment was made to the creditors of the Elpida Companies in October
2013. The plans of reorganization also provide for 140 billion yen (or the equivalent of approximately $1.43 billion as of
August 29, 2013) of additional payments by the Elpida Companies to their creditors, to be paid in six annual installments
beginning December 2014, with payments of 20 billion yen (or the equivalent of approximately $205 million as of August 29,
2013) in each of the first four annual installment payments, and payments of 30 billion yen (or the equivalent of approximately
$307 million as of August 29, 2013) in each of the final two annual installment payments.
Under the Sponsor Agreement, we agreed that we would, subject to certain conditions, implement and maintain a cost plus
model with the Elpida Companies in support of the execution of their plans of reorganization. In connection with these
commitments, we entered into a series of cost-plus agreements with Elpida and Akita, including supply agreements, research
and development services agreements and general services agreements (the "Cost Plus Agreements"). The Cost Plus
Agreements are intended to generate more stable operating cash flows to meet the requirements of the Elpida Companies'
businesses, including the funding of the installment payments to the Elpida Companies' creditors. We anticipate that, once fully
in effect, payments we make under the Cost Plus Agreements will generally cover all of Elpida and Akita's costs.
Under Elpida's plan of reorganization, secured creditors will recover 100% of the amount of their fixed claims and
unsecured creditors will recover at least 17.4% of the amount of their fixed claims. The actual recovery of unsecured creditors
will be higher, however, based, in part, on events and circumstances occurring following the plan approval. The remaining
portion of the unsecured claims will be discharged, without payment, over the period that payments are made pursuant to the
plans of reorganization. The secured creditors will be paid in full on or before the sixth installment payment date, while the
unsecured creditors will be paid in seven installments. Akita's plan of reorganization provides that secured creditors will
recover 100% of the amount of their claims, whereas unsecured creditors will recover 19% of the amount of their claims. The
secured creditors of Akita will be paid in full on the first installment payment date, while the unsecured creditors will be paid in
seven installments.
Certain contingency matters related to the Elpida Companies, which are primarily comprised of outstanding litigation
claims, were not treated as fixed claims under the plans of reorganization at the time the plans were filed with the Japan Court.
A portion of each installment amount payable to the creditors of the Elpida Companies will be reserved for use in the event that
any of these matters become fixed claims, in which case these fixed claims will be paid under the plans of reorganization in the
same manner as the fixed claims of other creditors. To the extent the aggregate amounts reserved from the installment
payments exceed the aggregate amounts payable with respect to these unfixed claims once they become fixed, the excess
amounts reserved will be distributed to unsecured creditors with respect to their fixed claims, resulting in an increased recovery
for the unsecured creditors out of the installment payments. To the extent the aggregate amounts reserved are less than the
aggregate amounts payable with respect to these unfixed claims once they become fixed, the Elpida Companies would be
responsible to fund any shortfall to ensure that the creditors receive the minimum recovery to which they are entitled under the
plans of reorganization with respect to these claims. As a result, there is a possibility that the total amount payable by the
Elpida Companies to their creditors under the plans of reorganization will exceed 200 billion yen. In addition, certain of these
unfixed claims may be resolved pursuant to settlement arrangements or other post-petition agreements and a substantial portion
of the amounts payable under such agreements may have to be funded by the Elpida Companies outside of the plans of
reorganization.