|
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þ
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
|
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|
|
Delaware
|
|
94-1692300
|
(State or other jurisdiction of
incorporation or organization)
|
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(I.R.S. Employer
Identification No.)
|
|
|
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2485 Augustine Drive
Santa Clara, California
|
|
95054
|
(Address of principal executive offices)
|
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(Zip Code)
|
|
|
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Large accelerated filer
|
|
þ
|
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Accelerated filer
|
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¨
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|
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|
|||
Non-accelerated filer
|
|
¨
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Smaller reporting company
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¨
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Emerging growth company
|
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¨
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Page No.
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Item 2
|
||
ITEM 1.
|
FINANCIAL STATEMENTS
|
|
Three Months Ended
|
||||||
|
March 30,
2019 |
|
March 31,
2018 |
||||
|
(In millions, except per share amounts)
|
||||||
Net revenue
|
$
|
1,272
|
|
|
$
|
1,647
|
|
Cost of sales
|
751
|
|
|
1,050
|
|
||
Gross margin
|
521
|
|
|
597
|
|
||
Research and development
|
373
|
|
|
343
|
|
||
Marketing, general and administrative
|
170
|
|
|
134
|
|
||
Licensing gain
|
(60
|
)
|
|
—
|
|
||
Operating income
|
38
|
|
|
120
|
|
||
Interest expense
|
(27
|
)
|
|
(31
|
)
|
||
Other income (expense), net
|
(7
|
)
|
|
1
|
|
||
Income before income taxes and equity loss
|
4
|
|
|
90
|
|
||
Provision (benefit) for income taxes
|
(13
|
)
|
|
8
|
|
||
Equity loss in investee
|
(1
|
)
|
|
(1
|
)
|
||
Net income
|
$
|
16
|
|
|
$
|
81
|
|
Earnings per share
|
|
|
|
||||
Basic
|
$
|
0.01
|
|
|
$
|
0.08
|
|
Diluted
|
$
|
0.01
|
|
|
$
|
0.08
|
|
Shares used in per share calculation
|
|
|
|
||||
Basic
|
1,044
|
|
|
968
|
|
||
Diluted
|
1,094
|
|
|
1,039
|
|
|
Three Months Ended
|
||||||
|
March 30,
2019 |
|
March 31,
2018 |
||||
|
(In millions)
|
||||||
Net income
|
$
|
16
|
|
|
$
|
81
|
|
Other comprehensive income (loss), net of tax of zero:
|
|
|
|
||||
Unrealized gains (losses) on cash flow hedges:
|
|
|
|
||||
Unrealized gains arising during the period
|
5
|
|
|
1
|
|
||
(Gains) losses reclassified into income
|
2
|
|
|
(4
|
)
|
||
Total change in unrealized gains (losses) on cash flow hedges
|
7
|
|
|
(3
|
)
|
||
Cumulative-effect adjustment to accumulated deficit related to the adoption of ASU 2016-01, Financial Instruments
|
—
|
|
|
2
|
|
||
Total comprehensive income
|
$
|
23
|
|
|
$
|
80
|
|
|
March 30,
2019 |
|
December 29,
2018 |
||||
|
(In millions, except par value amounts)
|
||||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
978
|
|
|
$
|
1,078
|
|
Marketable securities
|
216
|
|
|
78
|
|
||
Accounts receivable, net
|
1,241
|
|
|
1,235
|
|
||
Inventories, net
|
955
|
|
|
845
|
|
||
Prepayment and receivables—related parties
|
50
|
|
|
52
|
|
||
Prepaid expenses
|
65
|
|
|
57
|
|
||
Other current assets
|
172
|
|
|
195
|
|
||
Total current assets
|
3,677
|
|
|
3,540
|
|
||
Property and equipment, net
|
377
|
|
|
348
|
|
||
Operating lease right-of-use assets
|
214
|
|
|
—
|
|
||
Goodwill
|
289
|
|
|
289
|
|
||
Investment: equity method
|
57
|
|
|
58
|
|
||
Other assets
|
317
|
|
|
321
|
|
||
Total assets
|
$
|
4,931
|
|
|
$
|
4,556
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Short-term debt, net
|
$
|
70
|
|
|
$
|
136
|
|
Accounts payable
|
484
|
|
|
528
|
|
||
Payables to related parties
|
446
|
|
|
533
|
|
||
Accrued liabilities
|
719
|
|
|
763
|
|
||
Other current liabilities
|
45
|
|
|
24
|
|
||
Total current liabilities
|
1,764
|
|
|
1,984
|
|
||
Long-term debt, net
|
1,024
|
|
|
1,114
|
|
||
Long-term operating lease liabilities
|
213
|
|
|
—
|
|
||
Other long-term liabilities
|
142
|
|
|
192
|
|
||
Contingencies (See Note 12)
|
|
|
|
||||
Stockholders’ equity:
|
|
|
|
||||
Capital stock:
|
|
|
|
||||
Common stock, par value $0.01; shares authorized: 2,250; shares issued: 1,087 and 1,010; shares outstanding: 1,082 and 1,005
|
11
|
|
|
10
|
|
||
Additional paid-in capital
|
9,246
|
|
|
8,750
|
|
||
Treasury stock, at cost (shares issued: 5 and 5)
|
(48
|
)
|
|
(50
|
)
|
||
Accumulated deficit
|
(7,420
|
)
|
|
(7,436
|
)
|
||
Accumulated other comprehensive loss
|
(1
|
)
|
|
(8
|
)
|
||
Total stockholders’ equity
|
1,788
|
|
|
1,266
|
|
||
Total liabilities and stockholders’ equity
|
$
|
4,931
|
|
|
$
|
4,556
|
|
|
Three Months Ended
|
||||||
|
March 30,
2019 |
|
March 31,
2018 |
||||
|
(In millions)
|
||||||
Cash flows from operating activities:
|
|
|
|
||||
Net income
|
$
|
16
|
|
|
$
|
81
|
|
Adjustments to reconcile net income to net cash used in operating activities:
|
|
|
|
||||
Depreciation and amortization
|
46
|
|
|
44
|
|
||
Stock-based compensation
|
41
|
|
|
32
|
|
||
Amortization of debt discount and issuance costs
|
9
|
|
|
10
|
|
||
Loss on debt redemption
|
8
|
|
|
1
|
|
||
Loss on sale/disposal of property and equipment
|
6
|
|
|
—
|
|
||
Other
|
(1
|
)
|
|
1
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Accounts receivable
|
(5
|
)
|
|
(295
|
)
|
||
Inventories
|
(110
|
)
|
|
(21
|
)
|
||
Prepayment and receivables - related parties
|
2
|
|
|
15
|
|
||
Prepaid expenses and other assets
|
(11
|
)
|
|
24
|
|
||
Payables to related parties
|
(87
|
)
|
|
(38
|
)
|
||
Accounts payable, accrued liabilities and other
|
(127
|
)
|
|
39
|
|
||
Net cash used in operating activities
|
(213
|
)
|
|
(107
|
)
|
||
Cash flows from investing activities:
|
|
|
|
||||
Purchases of property and equipment
|
(62
|
)
|
|
(46
|
)
|
||
Purchases of available-for-sale debt securities
|
(231
|
)
|
|
—
|
|
||
Proceeds from maturity of available-for-sale debt securities
|
93
|
|
|
—
|
|
||
Collection of deferred proceeds on sale of receivables
|
25
|
|
|
21
|
|
||
Other
|
2
|
|
|
—
|
|
||
Net cash used in investing activities
|
(173
|
)
|
|
(25
|
)
|
||
Cash flows from financing activities:
|
|
|
|
||||
Proceeds from warrant exercise by related party
|
449
|
|
|
—
|
|
||
Proceeds from issuance of common stock through employee equity incentive plans
|
1
|
|
|
6
|
|
||
Repayments of long-term debt
|
(164
|
)
|
|
(14
|
)
|
||
Net cash provided by (used in) financing activities
|
286
|
|
|
(8
|
)
|
||
Net decrease in cash, cash equivalents, and restricted cash
|
(100
|
)
|
|
(140
|
)
|
||
Cash, cash equivalents, and restricted cash at beginning of period
|
1,083
|
|
|
1,191
|
|
||
Cash, cash equivalents, and restricted cash at end of period
|
$
|
983
|
|
|
$
|
1,051
|
|
Supplemental cash flow information:
|
|
|
|
||||
Non-cash activities:
|
|
|
|
||||
Purchases of property and equipment, accrued but not paid
|
$
|
62
|
|
|
$
|
47
|
|
Issuance of treasury stock to partially settle debt
|
$
|
7
|
|
|
$
|
—
|
|
Deferred proceeds on sale of receivables
|
$
|
—
|
|
|
$
|
11
|
|
Other
|
$
|
3
|
|
|
$
|
—
|
|
|
|
|
|
||||
Reconciliation of cash, cash equivalents, and restricted cash
|
|
|
|
||||
Cash and cash equivalents
|
$
|
978
|
|
|
$
|
1,045
|
|
Restricted cash included in Other current assets
|
5
|
|
|
3
|
|
||
Restricted cash included in Other assets
|
—
|
|
|
3
|
|
||
Total cash, cash equivalents, and restricted cash
|
$
|
983
|
|
|
$
|
1,051
|
|
|
Three Months Ended
|
||||||
|
March 30,
2019 |
|
March 31,
2018 |
||||
|
(In millions)
|
||||||
Capital stock
|
|
|
|
||||
Common stock
|
|
|
|
||||
Balance, beginning of period
|
$
|
10
|
|
|
$
|
9
|
|
Common stock issued under employee equity
incentive plans, net of tax withholding |
—
|
|
|
1
|
|
||
Issuance of common stock upon warrant exercise
|
1
|
|
|
—
|
|
||
Balance, end of period
|
$
|
11
|
|
|
$
|
10
|
|
Additional paid-in capital
|
|
|
|
||||
Balance, beginning of period
|
$
|
8,750
|
|
|
$
|
8,464
|
|
Common stock issued under employee equity
incentive plans, net of tax withholding |
1
|
|
|
6
|
|
||
Stock-based compensation
|
41
|
|
|
32
|
|
||
Issuance of common stock upon warrant exercise
|
448
|
|
|
—
|
|
||
Issuance of treasury stock to partially settle debt
|
5
|
|
|
—
|
|
||
Other
|
1
|
|
|
—
|
|
||
Balance, end of period
|
$
|
9,246
|
|
|
$
|
8,502
|
|
Treasury stock
|
|
|
|
||||
Balance, beginning of period
|
$
|
(50
|
)
|
|
$
|
(108
|
)
|
Issuance of treasury stock to partially settle debt
|
2
|
|
|
—
|
|
||
Balance, end of period
|
$
|
(48
|
)
|
|
$
|
(108
|
)
|
Accumulated deficit
|
|
|
|
||||
Balance, beginning of period
|
$
|
(7,436
|
)
|
|
$
|
(7,775
|
)
|
Net income
|
16
|
|
|
81
|
|
||
Cumulative effect adjustment to accumulated
deficit related to the adoption of ASU 2016-01, Financial Instruments |
—
|
|
|
2
|
|
||
Balance, end of period
|
$
|
(7,420
|
)
|
|
$
|
(7,692
|
)
|
Accumulated other comprehensive income (loss)
|
|
|
|
||||
Balance, beginning of period
|
$
|
(8
|
)
|
|
$
|
6
|
|
Other comprehensive income (loss)
|
7
|
|
|
(3
|
)
|
||
Balance, end of period
|
(1
|
)
|
|
3
|
|
||
Total stockholders' equity
|
$
|
1,788
|
|
|
$
|
715
|
|
|
March 30,
2019 |
|
December 29,
2018 |
||||
|
(In millions)
|
||||||
Raw materials
|
$
|
120
|
|
|
$
|
134
|
|
Work in process
|
548
|
|
|
354
|
|
||
Finished goods
|
287
|
|
|
357
|
|
||
Total inventories, net
|
$
|
955
|
|
|
$
|
845
|
|
|
March 30,
2019 |
|
December 29,
2018 |
||||
|
(In millions)
|
||||||
Leasehold improvements
|
$
|
181
|
|
|
$
|
179
|
|
Equipment
|
808
|
|
|
798
|
|
||
Construction in progress
|
112
|
|
|
78
|
|
||
Property and equipment, gross
|
1,101
|
|
|
1,055
|
|
||
Accumulated depreciation
|
(724
|
)
|
|
(707
|
)
|
||
Total property and equipment, net
|
$
|
377
|
|
|
$
|
348
|
|
|
March 30,
2019 |
|
December 29,
2018 |
||||
|
(In millions)
|
||||||
Software technology and licenses, net
|
$
|
222
|
|
|
$
|
226
|
|
Other
|
95
|
|
|
95
|
|
||
Total other assets
|
$
|
317
|
|
|
$
|
321
|
|
|
March 30,
2019 |
|
December 29,
2018 |
||||
|
(In millions)
|
||||||
Accrued compensation and benefits
|
$
|
226
|
|
|
$
|
236
|
|
Marketing programs and advertising expenses
|
241
|
|
|
275
|
|
||
Software technology and licenses payable
|
56
|
|
|
28
|
|
||
Other
|
196
|
|
|
224
|
|
||
Total accrued liabilities
|
$
|
719
|
|
|
$
|
763
|
|
|
March 30,
2019 |
|
December 29,
2018 |
||||
|
(In millions)
|
||||||
Unearned revenue
|
$
|
2
|
|
|
$
|
11
|
|
Operating lease liabilities
|
38
|
|
|
—
|
|
||
Other
|
5
|
|
|
13
|
|
||
Total other current liabilities
|
$
|
45
|
|
|
$
|
24
|
|
|
Three Months Ended
|
||||||
|
March 30,
2019 |
|
March 31,
2018 |
||||
|
(In millions)
|
||||||
Beginning balance
|
$
|
11
|
|
|
$
|
85
|
|
Unearned revenue
|
1
|
|
|
86
|
|
||
Revenue recognized during the period
|
(10
|
)
|
|
(24
|
)
|
||
Ending balance
|
$
|
2
|
|
|
$
|
147
|
|
|
March 30,
2019 |
|
December 29,
2018 |
||||
|
(In millions)
|
||||||
Principal amounts:
|
|
|
|
||||
Principal
|
$
|
805
|
|
|
$
|
805
|
|
Unamortized debt discount
(1)
|
(256
|
)
|
|
(262
|
)
|
||
Unamortized debt issuance costs
|
(10
|
)
|
|
(11
|
)
|
||
Net carrying amount
|
$
|
539
|
|
|
$
|
532
|
|
Carrying amount of the equity component, net
(2)
|
$
|
305
|
|
|
$
|
305
|
|
(1)
|
Included in the consolidated balance sheets within Long-term debt, net and amortized over the remaining life of the notes using the effective interest rate method.
|
(2)
|
Included in the consolidated balance sheets within additional paid-in capital, net of
$9 million
of equity issuance costs.
|
|
Three Months Ended
|
||||||
|
March 30,
2019 |
|
March 31,
2018 |
||||
|
(In millions)
|
||||||
Contractual interest expense
|
$
|
4
|
|
|
$
|
4
|
|
Interest cost related to amortization of the debt discount
|
$
|
6
|
|
|
$
|
6
|
|
|
Three Months Ended
|
||||||
|
March 30,
2019 |
|
March 31,
2018 |
||||
|
(In millions, except per share amounts)
|
||||||
Numerator
|
|
|
|
||||
Net income
|
$
|
16
|
|
|
$
|
81
|
|
Denominator
|
|
|
|
||||
Basic weighted-average shares
|
1,044
|
|
|
968
|
|
||
Effect of potentially dilutive shares:
|
|
|
|
||||
Employee equity incentive plans and warrants
|
50
|
|
|
71
|
|
||
Diluted weighted-average shares
|
1,094
|
|
|
1,039
|
|
||
Earnings per share:
|
|
|
|
||||
Basic
|
$
|
0.01
|
|
|
$
|
0.08
|
|
Diluted
|
$
|
0.01
|
|
|
$
|
0.08
|
|
|
Total Fair
Value |
|
Cash and
Cash Equivalents |
|
Short-Term
Marketable
Securities
|
||||||
|
(In millions)
|
||||||||||
March 30, 2019
|
|
|
|
|
|
||||||
Cash
|
$
|
630
|
|
|
$
|
630
|
|
|
$
|
—
|
|
Level 1
(1)
|
|
|
|
|
|
||||||
Government money market funds
|
$
|
5
|
|
|
$
|
5
|
|
|
$
|
—
|
|
Total level 1
|
$
|
5
|
|
|
$
|
5
|
|
|
$
|
—
|
|
Level 2
(2)
|
|
|
|
|
|
||||||
Commercial paper
|
$
|
559
|
|
|
$
|
343
|
|
|
$
|
216
|
|
Total level 2
|
$
|
559
|
|
|
$
|
343
|
|
|
$
|
216
|
|
Total
|
$
|
1,194
|
|
|
$
|
978
|
|
|
$
|
216
|
|
|
Total Fair
Value |
|
Cash and
Cash Equivalents |
|
Short-Term
Marketable
Securities
|
||||||
|
(In millions)
|
||||||||||
December 29, 2018
|
|
|
|
|
|
||||||
Cash
|
$
|
315
|
|
|
$
|
315
|
|
|
$
|
—
|
|
Level 1
(1)
|
|
|
|
|
|
||||||
Government money market funds
|
$
|
275
|
|
|
$
|
275
|
|
|
$
|
—
|
|
Total level 1
|
$
|
275
|
|
|
$
|
275
|
|
|
$
|
—
|
|
Level 2
(2)
|
|
|
|
|
|
||||||
Commercial paper
|
$
|
566
|
|
|
$
|
488
|
|
|
$
|
78
|
|
Total level 2
|
$
|
566
|
|
|
$
|
488
|
|
|
$
|
78
|
|
Total
|
$
|
1,156
|
|
|
$
|
1,078
|
|
|
$
|
78
|
|
(1)
|
The Company
’
s Level 1 assets are valued using quoted prices for identical instruments in active markets.
|
(2)
|
The Company’s Level 2 assets are valued using broker reports that utilize quoted prices for identical instruments in markets that are not active or comparable instruments in active markets. Brokers gather observable inputs for all of the Company’s fixed income securities from a variety of industry data providers and other third-party sources.
|
|
March 30, 2019
|
|
December 29, 2018
|
||||||||||||
|
Carrying
Amount
|
|
Estimated
Fair Value
|
|
Carrying
Amount
|
|
Estimated
Fair Value
|
||||||||
|
(In millions)
|
||||||||||||||
Short-term debt, net
|
$
|
70
|
|
|
$
|
70
|
|
|
$
|
136
|
|
|
$
|
136
|
|
Long-term debt, net
(1)
|
$
|
1,024
|
|
|
$
|
3,147
|
|
|
$
|
1,114
|
|
|
$
|
2,428
|
|
(1)
|
Carrying amounts of long-term debt are net of unamortized debt issuance costs of
$14 million
as of
March 30, 2019
and
$16 million
as of
December 29, 2018
, and net of unamortized debt discount associated with the
2.125%
Notes of
$256 million
as of
March 30, 2019
and
$262 million
as of
December 29, 2018
.
|
|
Gains (Losses) Recognized in Income
|
||||||||||||||||||||||
|
Three Months Ended
|
||||||||||||||||||||||
|
March 30,
2019 |
|
March 31,
2018 |
||||||||||||||||||||
|
Research and development
|
|
Marketing, general and administrative
|
|
Other income (expense), net
|
|
Research and development
|
|
Marketing, general and administrative
|
|
Other income (expense), net
|
||||||||||||
|
(In millions)
|
||||||||||||||||||||||
Total amounts presented in the condensed consolidated statements of operations in which the effects of cash flow hedges were recorded
|
$
|
373
|
|
|
$
|
170
|
|
|
$
|
(7
|
)
|
|
$
|
343
|
|
|
$
|
134
|
|
|
$
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Foreign Currency Forward Contracts -
gains (losses)
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Contracts designated as cash flow hedging instruments
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Gains (losses) reclassified from OCI into income
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
3
|
|
|
1
|
|
|
—
|
|
||||||
Contracts not designated as hedging instruments
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Gains (losses) recognized in income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
||||||
Total Gains (losses)
|
$
|
(2
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3
|
|
|
$
|
1
|
|
|
$
|
(2
|
)
|
|
March 30,
2019 |
|
December 29,
2018 |
||||
|
(In millions)
|
||||||
Foreign Currency Forward Contracts - gains (losses)
|
|
|
|
||||
Contracts designated as cash flow hedging instruments - Gain
|
$
|
3
|
|
|
$
|
8
|
|
Contracts designated as cash flow hedging instruments - Loss
|
$
|
(3
|
)
|
|
$
|
(1
|
)
|
•
|
the Computing and Graphics segment, which primarily includes desktop and notebook processors and chipsets, discrete and integrated graphics processing units (GPUs), and datacenter and professional GPUs. The Company also licenses portions of its IP portfolio; and
|
•
|
the Enterprise, Embedded and Semi-Custom segment, which primarily includes server and embedded processors, semi-custom System-on-Chip (SoC) products, development services and technology for game consoles. The Company also licenses portions of its IP portfolio.
|
|
Three Months Ended
|
||||||
|
March 30,
2019 |
|
March 31,
2018 |
||||
|
(In millions)
|
||||||
Net revenue:
|
|
|
|
||||
Computing and Graphics
|
$
|
831
|
|
|
$
|
1,115
|
|
Enterprise, Embedded and Semi-Custom
|
441
|
|
|
532
|
|
||
Total net revenue
|
$
|
1,272
|
|
|
$
|
1,647
|
|
Operating income (loss):
|
|
|
|
||||
Computing and Graphics
|
$
|
16
|
|
|
$
|
138
|
|
Enterprise, Embedded and Semi-Custom
|
68
|
|
|
14
|
|
||
All Other
(1)
|
(46
|
)
|
|
(32
|
)
|
||
Total operating income
|
$
|
38
|
|
|
$
|
120
|
|
•
|
MediaTek Inc. v. Advanced Micro Devices, Inc., AMD Products (China) Co., Ltd, and Shenzhen Ningjing Technology Co., Ltd.,
2019 Yue 03 Min Chu No. 725 (Intermediate People’s Court of Shenzhen, China). On March 18, 2019, AMD Products (China) Co., Ltd. was provided with a complaint by the Shenzhen Court. MediaTek alleges that defendants infringe patent 201110060964.1, titled “Integrated Circuit Chip.” On April 2, 2019, the Company submitted a challenge
|
•
|
MediaTek Inc. v. Advanced Micro Devices, Inc., AMD Products (China) Co., Ltd.
,
and
Shenzhen Ningjing Technology Co., Ltd.,
2019 Yue 03 Min Chu No. 726 (Intermediate People’s Court of Shenzhen, China). On March 18, 2019, AMD Products (China) Co., Ltd. was provided with a complaint by the Shenzhen Court. MediaTek alleges that defendants infringe patent 200920178360.5, titled “Integrated Inductor Structure.” On April 2, 2019, the Company submitted a challenge to the Court’s jurisdiction, and separately initiated invalidity proceedings in the CNIPA. The Court has set an initial hearing for June 20, 2019.
|
•
|
MediaTek Inc. v. Advanced Micro Devices, Inc., Advanced Micro Devices (China) Co., Ltd., AMD Products (China) Co., Ltd. and Shenzhen Shundian Chain Co., Ltd., Nanshan Wanxiang Tiandi Branch Store, .
2019 Yue 03 Min Chu No. 727 (Intermediate People’s Court of Shenzhen, China). On March 18, 2019, AMD Products (China) Co., Ltd. was provided with a complaint by the Shenzhen Court. MediaTek alleges that defendants infringe patent 200910000212.9, titled “Integrated Circuit Chip and Seal Ring Structure of the Same.” On April 2, 2019, the Company submitted a challenge to the Court’s jurisdiction, and separately initiated invalidity proceedings in the CNIPA. The Court has set an initial hearing for June 21, 2019.
|
•
|
MediaTek, Inc. v. Advanced Micro Devices, Inc., Advanced Micro Devices (China) Co., Ltd., AMD Products (China) Co., Ltd. and Shenzhen Shundian Chain Co., Ltd. Nanshan Wanxiang Tiandi Branch Store,
2019 Yue 03 Min Chu No. 728 (Intermediate People’s Court of Shenzhen, China). On March 18, 2019, AMD Products (China) Co., Ltd. was provided with a complaint by the Shenzhen Court. MediaTek alleges that defendants infringe patent 200910000930.6, titled “Seal Ring Structure for Integrated Circuit.” On April 2, 2019, the Company submitted a challenge to the Court’s jurisdiction, and separately initiated invalidity proceedings in the CNIPA. The Court has set an initial hearing for June 21, 2019.
|
|
Unrealized gains (losses) on cash flow hedges
|
||||||
|
Three Months Ended
|
||||||
|
March 30,
2019 |
|
March 31,
2018 |
||||
|
(In millions)
|
||||||
Beginning balance
|
$
|
(8
|
)
|
|
$
|
6
|
|
Unrealized gains arising during the period
|
5
|
|
|
1
|
|
||
(Gains) losses reclassified into income
|
2
|
|
|
(4
|
)
|
||
Total other comprehensive income (loss)
|
7
|
|
|
(3
|
)
|
||
Ending balance
|
$
|
(1
|
)
|
|
$
|
3
|
|
|
March 30, 2019
|
||
|
(In millions)
|
||
Cash paid for operating leases included in operating cash flows
|
$
|
9
|
|
Weighted-average remaining lease term – operating leases
|
7 years
|
|
|
Weighted-average discount rate – operating leases
|
6.20
|
%
|
|
March 30, 2019
|
||
|
(In millions)
|
||
2019 (9 months remaining)
|
$
|
41
|
|
2020
|
49
|
|
|
2021
|
43
|
|
|
2022
|
40
|
|
|
2023
|
36
|
|
|
Thereafter
|
103
|
|
|
Total minimum lease payments
|
$
|
312
|
|
Less: interest
|
(61
|
)
|
|
Present value of net minimum lease payments
|
251
|
|
|
Less: current portion
|
(38
|
)
|
|
Total
|
$
|
213
|
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
•
|
x86 microprocessors, as standalone devices or as incorporated into an accelerated processing unit (APU), chipsets, discrete and integrated graphics processing units (GPUs), and datacenter and professional GPUs; and
|
•
|
server and embedded processors, semi-custom System-on-Chip (SoC) products, development services and technology for game consoles.
|
|
|
Three Months Ended
|
||||||
|
|
March 30,
2019 |
|
March 31,
2018 |
||||
|
(In millions)
|
|||||||
Net revenue:
|
|
|
|
|
||||
Computing and Graphics
|
|
$
|
831
|
|
|
$
|
1,115
|
|
Enterprise, Embedded and Semi-Custom
|
|
441
|
|
|
532
|
|
||
Total net revenue
|
|
$
|
1,272
|
|
|
$
|
1,647
|
|
Operating income (loss):
|
|
|
|
|
||||
Computing and Graphics
|
|
$
|
16
|
|
|
$
|
138
|
|
Enterprise, Embedded and Semi-Custom
|
|
68
|
|
|
14
|
|
||
All Other
|
|
(46
|
)
|
|
(32
|
)
|
||
Total operating income
|
|
$
|
38
|
|
|
$
|
120
|
|
|
|
Three Months Ended
|
||||||
|
|
March 30,
2019 |
|
March 31,
2018 |
||||
|
|
(In millions except for percentages)
|
||||||
Cost of sales
|
|
$
|
751
|
|
|
$
|
1,050
|
|
Gross margin
|
|
521
|
|
|
597
|
|
||
Gross margin percentage
|
|
41
|
%
|
|
36
|
%
|
||
Research and development
|
|
373
|
|
|
343
|
|
||
Marketing, general and administrative
|
|
170
|
|
|
134
|
|
||
Licensing gain
|
|
(60
|
)
|
|
—
|
|
||
Interest expense
|
|
(27
|
)
|
|
(31
|
)
|
||
Other income (expense), net
|
|
(7
|
)
|
|
1
|
|
||
Provision (benefit) for income taxes
|
|
(13
|
)
|
|
8
|
|
||
Equity loss in investee
|
|
$
|
(1
|
)
|
|
$
|
(1
|
)
|
|
|
Three Months Ended
|
||||||
|
|
March 30,
2019 |
|
March 31,
2018 |
||||
|
|
(In millions )
|
||||||
Net cash provided by (used in):
|
|
|
|
|
||||
Operating activities
|
|
$
|
(213
|
)
|
|
$
|
(107
|
)
|
Investing activities
|
|
$
|
(173
|
)
|
|
$
|
(25
|
)
|
Financing activities
|
|
$
|
286
|
|
|
$
|
(8
|
)
|
|
Payments due by period as of March 30, 2019
|
||||||||||||||||||||||||||
(In millions)
|
Total
|
|
2019
(9 months remaining) |
|
2020
|
|
2021
|
|
2022
|
|
2023
|
|
2024 and
thereafter |
||||||||||||||
Term Debt
|
$
|
1,293
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
312
|
|
|
$
|
—
|
|
|
$
|
981
|
|
Secured Revolving Line of Credit
|
70
|
|
|
70
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Other long-term liabilities
(1)
|
150
|
|
|
27
|
|
|
44
|
|
|
41
|
|
|
35
|
|
|
1
|
|
|
2
|
|
|||||||
Aggregate interest obligation
(2)
|
274
|
|
|
41
|
|
|
54
|
|
|
54
|
|
|
44
|
|
|
29
|
|
|
52
|
|
|||||||
Operating leases
|
317
|
|
|
41
|
|
|
51
|
|
|
45
|
|
|
41
|
|
|
36
|
|
|
103
|
|
|||||||
Purchase obligations
(3)
|
339
|
|
|
285
|
|
|
31
|
|
|
16
|
|
|
5
|
|
|
2
|
|
|
—
|
|
|||||||
Obligations to GF
(4)
|
2,315
|
|
|
1,014
|
|
|
781
|
|
|
520
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Total contractual obligations
(5)
|
$
|
4,758
|
|
|
$
|
1,478
|
|
|
$
|
961
|
|
|
$
|
676
|
|
|
$
|
437
|
|
|
$
|
68
|
|
|
$
|
1,138
|
|
(1)
|
Amounts largely represent future fixed and non-cancellable cash payments associated with software technology and licenses and IP licenses, including the payments due within the next 12 months.
|
(2)
|
Represents estimated aggregate interest obligations for our outstanding debt obligations that are payable in cash, excluding non-cash amortization of debt issuance costs and debt discount.
|
(3)
|
We have purchase obligations for goods and services where payments are based, in part, on the volume or type of services we acquire. In those cases, we only included the minimum volume of purchase obligations in the table above. Purchase orders for goods and services that are cancellable upon notice and without significant penalties are not included in the amounts above.
|
(4)
|
Includes our currently expected purchases from GF for the remainder of 2019 for wafer manufacturing and research and development activities and minimum purchase obligations for wafer purchases for years 2019 through 2021. We cannot meaningfully quantify or estimate our future purchase obligations to GF beyond 2021 but expect that our future purchases from GF will continue to be material.
|
(5)
|
Total amount excludes contractual obligations already recorded on our condensed consolidated balance sheets except for debt obligations, leases, and other liabilities related to software and technology licenses and IP licenses.
|
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
ITEM 4.
|
CONTROLS AND PROCEDURES
|
ITEM 1.
|
LEGAL PROCEEDINGS
|
ITEM 1A.
|
RISK FACTORS
|
•
|
business practices, including rebating and allocation strategies and pricing actions, designed to limit our market share and margins;
|
•
|
de facto control over industry standards, and heavy influence on PC manufacturers and other PC industry participants, including motherboard, memory, chipset and basic input/output system (BIOS) suppliers and software companies as well as the graphics interface for Intel platforms; and
|
•
|
marketing and advertising expenditures in support of positioning the Intel brand over the brand of its original equipment manufacturer OEM customers and retailers.
|
•
|
enhancing and implementing information security controls, including costs related to upgrading application, computer, and network security components;
|
•
|
compliance with external regulations, such as the European Union's General Data Protection Regulation and the California Consumer Privacy Act.
|
•
|
make it difficult for us to satisfy our financial obligations, including making scheduled principal and interest payments;
|
•
|
limit our ability to borrow additional funds for working capital, capital expenditures, acquisitions and general corporate and other purposes;
|
•
|
limit our ability to use our cash flow or obtain additional financing for future working capital, capital expenditures, acquisitions or other general corporate purposes;
|
•
|
create or permit restrictions on the ability of certain restricted subsidiaries to pay dividends or make other distributions to us;
|
•
|
create liens upon any of the Loan Parties’ property (other than customary permitted liens and liens in respect of up to $1.5 billion of secured credit facilities debt, which amount includes our Secured Revolving Line of Credit);
|
•
|
make asset dispositions other than certain ordinary course dispositions and certain supply chain finance arrangements;
|
•
|
make certain loans, make payments with respect to subordinated debt or certain borrowed money prior to its due date; and
|
•
|
expropriation;
|
•
|
compliance with U.S. laws and regulations related to international operations, including export control and economic sanctions laws and regulations and the Foreign Corrupt Practices Act.
|
•
|
a sudden or significant decrease in demand for our products;
|
•
|
a failure to accurately estimate customer demand for our products, including for our older products as our new products are introduced; or
|
•
|
substantial declines in average selling prices;
|
ITEM 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
ITEM 6.
|
EXHIBITS
|
*10.1
|
|
|
**10.2
|
|
|
**10.3
|
|
|
31.1
|
|
|
31.2
|
|
|
32.1
|
|
|
32.2
|
|
|
101.INS
|
|
XBRL Instance Document.
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document.
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document.
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
|
|
|
* Portions of this exhibit have been omitted because they are both (i) not material and (ii) would be competitively harmful if publicly disclosed.
|
|
** Management contracts and compensatory plans or arrangements.
|
|
|
|
|
ADVANCED MICRO DEVICES, INC.
|
|
|
|
|
|
May 1, 2019
|
|
By:
|
/s/Devinder Kumar
|
|
|
Name:
|
Devinder Kumar
|
|
|
Title:
|
Senior Vice President, Chief Financial Officer and Treasurer
Signing on behalf of the Registrant as the Principal Financial Officer
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Certain confidential information contained in this document, marked by brackets, has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
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1.
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TERM
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a.
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The term of this Seventh Amendment shall be concurrent with the New Period. This Seventh Amendment shall supersede all Prior Amendments, and such Prior Amendments shall have no further force and effect, except with respect to Sections 7 and 8 below, such provisions shall apply to reports, auditable items and Disputes that relate to products purchased, or obligations or events occurring or arising prior to the effective date of this Seventh Amendment.
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2.
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FUTURE TAPEOUTS, EXCLUSIVITY AND WAIVER PRODUCTS
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a.
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General Exclusivity Obligations
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i.
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AMD shall not [****];
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ii.
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notwithstanding any provision of the Original WSA to the contrary, AMD may at any time tape out products of any type with and procure foundry manufacturing services from any other foundry with respect to any and all products at the 7nm and subsequent Process Nodes (e.g. 5nm, 3nm) without any obligation or liability of any kind to FoundryCo as a result; and
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iii.
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as to all other matters not addressed here, each of AMD’s and FoundryCo’s rights and obligations with respect to MPU Products, GPU Products and Chipset Products shall remain as governed by the Original WSA.
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b.
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[****]
Waivers
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c.
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[****]
Waiver
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d.
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[****]
Waiver Payments
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i.
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Intentionally omitted
.
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ii.
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Quarterly Payments.
As partial consideration for the [****] Waivers, AMD shall pay FoundryCo, on a quarterly basis, payments on a per-wafer basis to be calculated pursuant to Schedule 2(d)(i)(“[****]
Quarterly
[****]
Waiver Payments
”), such that for each relevant year in Column A, the total production wafer volume for such [****] Waiver Products supplied to AMD by [****] in the aggregate during such fiscal quarter is multiplied by the dollar amount in Column B. The term “
AMD
[****]
Wafers
” means [****]. For purposes of calculating the [****] Quarterly [****] Waiver Payments, any AMD [****] Wafer volumes that were included in AMD’s Binding Forecasts to FoundryCo and were accepted by FoundryCo in writing, but that AMD subsequently purchased from [****] solely because FoundryCo subsequently informed AMD in writing that FoundryCo would not make the necessary capacity available to AMD (“Decommitted Wafers”), will be treated as if they had been purchased from FoundryCo rather than from [****]. In order to facilitate and formalize the Parties’ communications
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e.
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Intentionally omitted
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f.
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Intentionally omitted
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g.
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Chipset Products
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3.
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AMENDMENTS RELATED TO PRODUCT AND PRODUCT PRICING
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a.
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Product Forecasts, Purchase Orders and Roadmaps
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i.
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In lieu of the forecasting requirements of Section 5.1 of the Original WSA, AMD will provide FoundryCo, in writing on a monthly basis, with a non-binding, rolling [****] forecast of its monthly volume requirements for [****] MPU Products, [****] MPU Products, GPU Products, Chipset Products and Other Future Products, identified by Product and Process Node. Notwithstanding the foregoing, the first [****] of the [****] rolling forecast referenced above will be binding with respect to the total Wafer volume on a Product level basis during such [****] period only, and the [****] of the [****] rolling forecast will be binding with respect to the total Wafer volume on a technology basis during such [****] period only (accordingly, notwithstanding the Original WSA, the term “Binding Forecast” will mean AMD’s Product forecast for the first [****] of such [****] forecast as provided herein, and “Binding Forecast Period” will mean such [****] period). AMD acknowledges and agrees that FoundryCo may rely on such forecasts for the purposes of scheduling manufacturing and other resources in accordance with the terms of the Agreement. AMD’s Binding Forecast for [****] is attached as Schedule 3(a)(i).
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ii.
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In addition to the forecast requirements described in Section 3(a)(i) above, AMD shall provide FoundryCo the following within [****] following the execution of this Seventh Amendment:
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1.
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A non-binding product roadmap by technology for Process Nodes larger than 7nm only that includes the tape-out dates for a [****] horizon (i.e., [****]), to be updated and provided to FoundryCo on a [****] basis (end of each [****]); and
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2.
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A non-binding volumes forecast that includes all Products, separately aggregated by technology and by product type ([****] MPU Products, [****] MPU Products, GPU Products, Chipset Products,
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iii.
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AMD agrees to provide FoundryCo detailed Product mix information in the form of its Universal Order Book and purchase orders, within [****] of the date hereof, for all 2019 Production Wafers scheduled for delivery in the [****] of 2019. Notwithstanding the foregoing or any other provision of this Agreement or any purchase order to the contrary, FoundryCo acknowledges and agrees that AMD may update actual Product mix information in accordance with AMD’s [****] process (currently referred to as the Universal Order Book process), by which AMD will provide FoundryCo updated Product mix information by [****]. The Parties agree to meet and discuss in good faith any flexibility regarding Product volumes, taking into consideration purchase orders, pricing, capacity constraints, Products started to date and margin. In the event the Parties are unable to agree within [****] after discussing in good faith, such disagreement will be escalated to the Partnership Committee and, if required, the Parties’ respective Chief Executive Officers pursuant to Section 3.2 of the Agreement.
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iv.
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AMD agrees to provide FoundryCo detailed Product mix information in the form of its Universal Order Book and purchase orders on a [****] frequency. The Product mix information and purchase orders shall be released and reflect the Product mix for at least [****] in advance of the commencement of manufacturing for each Product. Notwithstanding the foregoing or any other provision of this Agreement or any purchase order to the contrary, but without diminishing any of AMD’s obligations to comply with Section 4 of this Seventh Amendment,
FoundryCo acknowledges and agrees that AMD may update actual Product mix information in accordance with AMD’s [****] process (currently referred to as the Universal Order Book process), by which AMD will provide FoundryCo updated Product mix information by [****]. Without diminishing any of AMD’s obligations to comply with Section 4 of this Seventh Amendment,
the Parties agree to meet and discuss in good faith any flexibility regarding product volumes, taking into consideration purchase orders, pricing, capacity constraints, Product started to date and margin. In the event the Parties are unable to agree within [****] after discussing in good faith, such disagreement will be escalated to the Partnership Committee and, if required, the Parties’ respective Chief Executive Officers pursuant to Section 3.2 of the Agreement.
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v.
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FoundryCo may at its option [****]. Within [****] of receiving such notice, AMD shall provide FoundryCo with its desired Product mix for such [****] period, and FoundryCo will adhere to such Product mix. If AMD does not respond within [****], FoundryCo may [****] based on the latest the Product mix information released by AMD to FoundryCo and such Product mix shall be binding upon AMD.
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vi.
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If and to the extent that AMD has not delivered the applicable Product mix information relating to Production Wafers in accordance with the dates set forth in Section3(a)(iii) or 3(a)(iv) above, then FoundryCo may manufacture such Production Wafers based on the most recent Product mix information in the Universal Order Book (or absent Universal Order Book information, in the most recent forecast), provided by AMD pursuant to Section 3(a)(i) above; provided, that if AMD had not previously made available the contemplated Product mix information FoundryCo may develop and submit its plan for production of Products to AMD for discussion, and in the absence of a definitive response by AMD within [****] of receipt of such plan FoundryCo may manufacture such Production Wafers based on its proposed plan and AMD shall be obligated to take delivery of and pay for such Wafers pursuant to the payment provisions set forth in the Agreement. If and to the extent that AMD has not delivered purchase orders for specified Production Wafers in accordance with the dates set forth in Section 3(a)(iii) or 3(a)(iv) above, then FoundryCo shall thereafter have the right to send an invoice to AMD at the time when the applicable specified Production Wafers are delivered reflecting the price of the applicable Production Wafers for which such purchase orders have not been provided.
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b.
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Product Pricing
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i.
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Notwithstanding Section 7.1 and Exhibit A of the Original WSA, the Parties agree to the pricing for 2019, 2020 and 2021 products as set forth in Schedule 3(b)(i) herein.
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ii.
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Subject at all times to the exclusivity obligations of the Agreement and the New Annual Fixed Revenue Floor requirements set forth in the Seventh Amendment, commencing in 2021 AMD and FoundryCo agree to use commercially reasonable efforts to agree by [****] of each year during the remainder of the New Period on the pricing for the annual period following December 31 of such year.
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iii.
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With respect to [****] Products only and the annual pricing negotiations commencing in 2021, the Parties agree that such pricing will be set at [****] and to the extent mutually agreed, [****]. If the Parties are unable to agree upon the [****] and [****], if any, for [****] Products, FoundryCo may elect to consult with a third party independent advisor (“[****] Advisor”) to provide a prompt opinion as to the [****]. The identity of the [****] Advisor must also be reasonably agreeable to AMD, and both Parties shall consider the opinion of the [****] Advisor in good faith.
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iv.
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If AMD and FoundryCo are unable to agree on the pricing pursuant to Section 3(b)(ii) or 3(b)(iii) above with respect to any calendar year, then the price for all existing [****] Products (including, for avoidance of doubt, any [****] Products), shall [****]. In addition, Section 7.1(b) of the Agreement shall be amended and restated in its entirety to read as follows:
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v.
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Section 7.1 of the Agreement shall be amended by the addition of the following language as a new sub-Section 7.1(c-2) (to be inserted between existing sub-Sections 7.1(c) and 7.1(d)), which shall read in its entirety as follows:
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c.
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Subsection 3(b)(iv) above will expire at the end of the New Period; provided, however, if prior to March 1, 2024 the Parties have agreed that the pricing for any [****] Products will be effective for a period of time following the expiration
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4.
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ANNUAL FLOOR AND MITIGATION PAYMENTS
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i.
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AMD shall purchase from FoundryCo, for each fiscal year during the New Period, at a minimum the applicable New Annual Fixed Revenue Floor.
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ii.
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For the purposes of this Seventh Amendment, the following definitions shall apply:
|
1.
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“New Annual Fixed Revenue Floor”
shall for a given fiscal year equal the dollar amounts set forth for that year in Schedule 4(a)(ii)(1) attached hereto.
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2.
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“Delta from the New Applicable Floor”
shall mean, in cases where FoundryCo’s Actual Annual Revenue from AMD is less than the New Annual Fixed Revenue Floor in any given year, the dollar amount equal to the difference between these two amounts.
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3.
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“FoundryCo’s Actual Annual Revenue From AMD”
shall mean the total amounts invoiced by FoundryCo ([****]) from AMD’s purchase of Production Wafers from FoundryCo during each fiscal year. For the avoidance of doubt, “FoundryCo’s Actual Annual Revenue From AMD” shall include [****].
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b.
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In the event FoundryCo’s Actual Annual Revenue From AMD is less than the New Annual Fixed Revenue Floor, AMD shall make mitigation payments (“
Mitigation Payments
”) to FoundryCo, within [****] of the end of such fiscal year, equal to the following:
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i.
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In the event the Delta from the New Applicable Floor is less than [****] for the applicable year, AMD shall pay to FoundryCo an amount equal to [****] of the Delta from the New Applicable Floor for the applicable fiscal year.
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ii.
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In the event the Delta from the New Applicable Floor is greater than or equal to [****] for the applicable year, AMD shall pay to Foundry an amount equal to [****] of the Delta from the New Applicable Floor for the applicable fiscal year.
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iii.
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An illustrative example of the calculation of Mitigation Payments is set forth in Schedule 4(b)(iii) attached hereto.
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c.
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In the event AMD is unable to meet the requirements of Section 4(a) as a direct result of FoundryCo having insufficient capacity (as acknowledged in a writing by FoundryCo to AMD) and AMD had provided sufficient forecasting to allow FoundryCo a reasonable opportunity to prepare for the volume of Product ordered, or if FoundryCo had sufficient capacity in place to meet AMD’s Product requirements but informed AMD in writing that it allocated such capacity to other FoundryCo customers, then the Parties will engage in good faith discussions to adjust the Mitigation Payments to account for such unavailable capacity for the applicable time periods.
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d.
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FoundryCo agrees that receipt of the Mitigation Payments shall be the sole and exclusive remedy for AMD’s failure to meet the New Annual Fixed Revenue Floor. The foregoing sentence shall not limit FoundryCo’s remedies with respect to any other failure or breach of the Agreement by AMD, including without limitation any failure by AMD to comply with its exclusivity obligations and its obligations to remit payments for Products, services and waivers in a timely manner.
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e.
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The provisions of this Section 4 shall survive the expiration of the New Period but only as applicable to any Mitigation Payments owed with respect to the New Period.
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5.
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SORTING AND MASK SERVICES
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a.
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The Parties agree that Section 4.2(a) of the Original WSA will no longer apply, and that the Parties shall negotiate in good faith and mutually agree upon terms and conditions to govern AMD’s future purchases of Sort Services from FoundryCo. Notwithstanding the foregoing, AMD shall [****]. The Parties’ good faith discussions shall take into account FoundryCo’s utilization of its existing equipment and tooling, and its performance of Sort Services on all new Products (including [****]), and that consignment by AMD of equipment and tooling necessary for FoundryCo to perform Sort Services, [****], will be only as mutually agreed.
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b.
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To assist AMD with the [****] or other AMD Furnished Property for use at FoundryCo’s manufacturing site in Dresden, Germany from a place outside the European Union (“EU”), upon request, FoundryCo will provide logistics and clearance services for such AMD Furnished Property (“Import Services”). Such requests will be made in the form of a purchase order for Import Services at a mutually agreed price quoted by FoundryCo. AMD will deliver the AMD Furnished Property DAP to FoundryCo's Fab 1 in Dresden, Germany. Upon acceptance of such purchase order and completion of performance of such Import Services, FoundryCo will invoice AMD for the Import Services and any expenses necessarily incurred in connection therewith, which expenses may include freight, duties, clearance costs, and
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c.
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Once such AMD Furnished Property is no longer required, in particular due to Product termination or end of life, FoundryCo will give AMD no less than [****] prior written notice to take delivery of such AMD Furnished Property. FoundryCo will deliver the AMD Furnished Property FCA FoundryCo's Fab 1 in Dresden, Germany. If AMD fails to collect the AMD Furnished Property, FoundryCo will be entitled to scrap, dispose or destroy such AMD Furnished Property in a manner FoundryCo elects, provided that industry-standard measures are used to protect AMD’s intellectual property in such AMD Furnished Property. The Parties assume that the return of AMD Furnished Property is not subject to VAT. However, in case FoundryCo is required to pay VAT related to AMD Furnished Property by a tax authority, FoundryCo will invoice VAT, including interest (if charged by the tax authority) to AMD and AMD will pay such invoice in accordance with Section 7.4 of the Agreement.
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d.
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AMD agrees that it shall procure mask services for Production Wafers provided by FoundryCo [****] from FoundryCo during the New Period.
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6.
|
[****]
|
a.
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There are no [****] or [****] requirements or other committed [****] with respect to any Products to be delivered by FoundryCo to AMD during the New Period, other than any mutually agreed arrangements in response to [****]. FoundryCo’s obligations with respect to [****] and [****] shall remain as set forth in the Original WSA.
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7.
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REPORTS AND AUDIT
|
a.
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Reports Related to Waived Products.
In order to assist FoundryCo in confirming AMD’s compliance with the exclusivity obligations set forth in the Agreement and the applicable waiver payments, AMD agrees to provide the following written reports, which AMD represents to be true and accurate upon issuance of each report and which, in all cases, shall be subject to the audit provisions set forth in Section 8 of the Agreement.
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i.
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No later than [****] following the conclusion of each [****], AMD shall provide FoundryCo with a written report stating:
|
1.
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the name and technology node of each [****] Waiver Product and [****] Waiver Product;
|
2.
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the total wafer volumes purchased of the [****] Waiver Products and [****] Waiver Products that were manufactured at [****] during the prior [****].
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d.
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The provisions of this Section 7 shall survive the expiration of the New Period but only as applicable to activities that occurred during the New Period, and payments owed in connection with such activities.
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8.
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PRIOR AMENDMENTS
|
a.
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Section 1.48 of the Agreement is hereby amended and restated in its entirety to read as follows:
|
b.
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Section 15.11(c) of the Agreement shall be amended and restated in its entirety as follows:
|
c.
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The provisions of this Section 8 shall survive the expiration of the New Period but only as applicable to activities that occurred during the New Period.
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9.
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ADDITIONAL AGREEMENTS
|
a.
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Section 15.4 of the Original WSA is hereby amended and restated in its entirety as follows:
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10.
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MISCELLANEOUS
|
a.
|
The Partnership Committee will consist of the people listed in Schedule 10(a) or their equivalent replacements. The Partnership Committee may invite any other executives or subject matter experts to attend a Partnership Committee meeting to the extent required to resolve a dispute. For the avoidance of doubt, the Partnership Committee responsibilities, in addition to the responsibilities set forth in Section 3.2(a) of the Agreement, include the following specific items:
|
1.
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Any disputes arising out of the calculations or payments to be made as a result of [****] Waiver Payments or other payments to be made under the Sixth Amendment or Seventh Amendment; and
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2.
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Any disputes arising out of the calculations or payments to be made pursuant to Section 4 of this Seventh Amendment.
|
b.
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Each of FoundryCo and AMD represents and warrants that this Seventh Amendment has been duly authorized, executed and delivered by it, that this Seventh Amendment is duly enforceable pursuant to its terms and that the execution, delivery and performance of this Seventh Amendment does not conflict with applicable law or any of its organizational documents or result in a breach or violation of, or constitute a default under, any agreement to which it is a respective party.
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c.
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Each of FoundryCo and AMD acknowledges the importance of prompt collaboration and communication with respect to all communications and announcements, whether by press release or otherwise, in respect of their commercial relationship and, as such, agrees to work together and coordinate
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d.
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In order to avoid miscommunications or misunderstandings concerning whether a Party has agreed to amend or waive any provision of the Agreement, no amendments or waivers shall be effective or agreed by any Party unless such amendment or waiver is expressed in a writing specifically identified as such and signed by the Chief Executive Officer or Chief Financial Officer of FoundryCo and by the Chief Executive Officer or Chief Financial Officer of AMD, and no emails or other written communications, oral communications or actions or inactions by employees of any Party that may be inconsistent with the expressed written provisions of the Agreement shall serve as a basis for any Party to argue or establish that an amendment, waiver, or estoppel has been effected with respect to any written provision of this Agreement.
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e.
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All references to “fiscal quarter” or “fiscal year” herein shall mean FoundryCo’s fiscal quarter or fiscal year, unless explicitly noted otherwise.
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f.
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Other than as expressly provided in this Seventh Amendment, no other amendments are being made to the Agreement, and all other provisions of the Agreement shall remain in full force and effect in accordance with the terms of the Agreement.
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Calendar Year
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2019
|
2020
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2021
|
2022
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2023
|
2024
|
Annual Fixed Revenue Floor
|
[****]
|
[****]
|
[****]
|
TBD*
|
Not applicable
|
Not applicable
|
•
|
An award of
$6,000,000 USD
in value granted in Advanced Micro Devices, Inc. Restricted Stock Units (RSUs) The number of RSUs granted will generally be determined by dividing your award value by the 30-trading day average closing stock price prior to and including the grant date. RSUs will be typically granted on the 15th day of the month following your start date or on the 15th day of the same month if your start date is on the first day of the month.
|
•
|
1/3rd of the RSUs will vest on the first, second, and third anniversary of the grant date, subject to continued active service through each applicable vesting date.
|
•
|
An award of
$2,500,000 USD
in value granted in Advanced Micro Devices, Inc. shares, to be granted as 50% ($1,250,000) in value of Performance Restricted Stock Units (PRSUs), 25% ($625,000) in value of Stock Options, and 25% ($625,000) in value of RSUs;
|
•
|
The number of PRSUs and RSUs granted will generally be determined by dividing your award value by the 30-trading day average closing stock price prior to and including the grant date. Your Option award value will be further determined using a binomial factor in accordance with the Company’s stock option valuation practices.
|
•
|
PRSUs, RSUs and Options will be typically granted on the 15
th
day of the month following your start date or on the 15
th
day of the same month if your start date is on the first day of the month.
|
•
|
1/3 of these RSUs and Options will vest on the first, second, and third anniversary of the grant date, subject to continued active service through each applicable vesting date.
|
•
|
Stock Options will have an exercise price equal to 100% of the fair market value of the Company’s common stock on the grant date.
|
•
|
PRSUs will be the same as described in the 8-K filed by AMD on 8/6/18. Earned and vested PRSUs will generally be settled on the later of August 15, 2021, or the date following the Committee’s certification of performance in 2021.
|
•
|
Once approved, these PRSUs, Options, and RSUs will be granted by Advanced Micro Devices, Inc. and are separate from your regular compensation, with rights and obligations governed by the applicable grant and equity plan documents.
|
•
|
An award of $2,500,000 USD in value granted in Advanced Micro Devices, Inc. shares, to be granted commensurate with the type and mix of awards provided to the other AMD Executive Team (AET) members at your level.
|
•
|
The awards are expected to be granted in August of 2019.
|
•
|
401(k) and Roth 401(k) Retirement Savings Plan with Company Match
|
•
|
Medical, Dental and Vision Plans
|
•
|
Healthcare and Dependent Care Reimbursement Accounts
|
•
|
In your situation, we are offering you 20 days of vacation minimum, subject to our typical vacation accrual policies. In addition, AMD offers its employees at least 10 paid holidays each year.
|
1.
|
a lump sum cash payment in an amount equal to your base annual salary in effect at the time of the termination (or, if greater, in effect immediately prior to the occurrence of the event(s) giving rise to Good Reason), less deductions and withholdings required by law, which shall be paid as soon as administratively practicable following your date of termination;
|
2.
|
12 months of AMD paid COBRA medical, dental and/or vision insurance premiums based on your benefits elections in effect at the time of the termination;
|
3.
|
Use of the Employee Assistance Plan provided by the Company as part of the twelve months’ of COBRA coverage;
|
4.
|
all RSUs and Stock Options awarded to you as a part of the Sign-On and New Hire stock grants detailed in this offer shall, to the extent then outstanding and unvested, become fully vested and exercisable (in the case of the Stock Options); and
|
5.
|
the service-based vesting conditions applicable to all then outstanding and unvested PRSUs awarded to you as a part of the New Hire stock grant detailed in this offer shall be deemed satisfied, and such PRSUs shall remain outstanding and shall vest or be forfeited based on actual performance for the applicable performance period, as set forth in the PRSU award agreement.
|
1.
|
Sign-On Bonus
. AMD agrees to pay Employee a one-time Sign-On Bonus of $
300,000 (USD)
(“Bonus”), within thirty (30) days of Employee’s first day of work for AMD (“Hire Date”) and subject to all required taxes and withholdings.
The Parties agree that the Bonus is an unvested wage advance upon receipt that Employee will earn in its entirety by remaining employed by AMD for 12 months following the Bonus payment date
.
|
2.
|
Repayment of Bonus.
Employee agrees to repay to AMD all or a prorated amount of the Bonus, according to the following terms:
|
(a)
|
Repayment Due to Termination of Employment.
If Employee’s employment with AMD terminates less than 12 full months after the Bonus payment date, Employee agrees to repay one hundred percent (100%) of the Bonus
.
Employee agrees that repayment obligations under this Agreement are not reduced by completion of partial months of employment. Employee further agrees that Employee will repay the Bonus by no later than the effective date of the employment termination, and that any outstanding balance on such repayment obligation is delinquent and immediately collectable the day following the effective date of termination, or on the date notice of resignation is provided, whichever is earlier.
|
(b)
|
Repayment Forgiveness.
AMD agrees to forgive any repayment due AMD under this Agreement where AMD terminates Employee’s employment due to a company- or department-wide reduction-in-force. AMD may also, in its sole discretion, forgive any repayment due AMD under this Agreement under circumstances of an extraordinary or unavoidable nature.
The Parties agree that Employee’s voluntary termination of his/her employment, or AMD’s termination of Employee’s employment for any reason other than those stated in this section 2(b), are not conditions requiring forgiveness of any repayment due AMD under this Agreement.
|
3.
|
No Guarantee of Continued Employment.
Nothing in this Agreement guarantees employment for any period of time.
|
4.
|
Consent to Offset.
Employee agrees that any repayment due AMD under this Agreement may be deducted to the extent permitted by law from any amounts due Employee from AMD at the time of employment termination, including wages, accrued vacation pay, incentive compensation payments, bonuses and commissions, and hereby expressly authorizes such deduction(s).
|
5.
|
Acknowledgements and Integration.
Employee understands he/she has the right to discuss this Agreement with any individual, and that to the extent desired, he/she has availed himself/herself of this opportunity. Employee further acknowledges that he/she has carefully read and fully understands the provisions of this Agreement, and that he/she is voluntarily entering into it without any duress or pressure from AMD. Employee also understands and acknowledges that this Agreement is the entire agreement between him/her and AMD with respect to this subject matter, and Employee acknowledges that AMD has not made any other statements, promises or commitments of any kind (written or oral) to cause Employee to agree to the terms of this Agreement.
|
6.
|
Severability.
The Parties agree that should any provision of this Agreement be declared or determined by any court to be illegal, invalid or unenforceable, the remainder of the Agreement shall nonetheless remain binding and enforceable and the illegal, invalid or unenforceable provision(s) shall be modified only so much as necessary to comply with applicable law.
|
Date: May 1, 2019
|
|
|
|
/s/Lisa T. Su
|
|
|
Lisa T. Su
President and Chief Executive Officer
(Principal Executive Officer)
|
|
|
Date: May 1, 2019
|
|
|
|
/s/Devinder Kumar
|
|
|
Devinder Kumar
Senior Vice President,
Chief Financial Officer and Treasurer
(Principal Financial Officer)
|
|
|
(i.)
|
the Quarterly Report on Form 10-Q of the Company for the period ended March 30, 2019 (the "Report") fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
|
(ii.)
|
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date: May 1, 2019
|
|
|
|
/s/
Lisa T. Su
|
|
|
Lisa T. Su
President and Chief Executive Officer
(Principal Executive Officer)
|
|
|
(i.)
|
the Quarterly Report on Form 10-Q of the Company for the period ended March 30, 2019 (the "Report") fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
|
(ii.)
|
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date: May 1, 2019
|
|
|
|
/s/ Devinder Kumar
|
|
|
Devinder Kumar
Senior Vice President,
Chief Financial Officer and Treasurer
(Principal Financial Officer)
|
|
|