10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 26, 2005

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission File Number 001-07882

ADVANCED MICRO DEVICES, INC.

(Exact name of registrant as specified in its charter)

Delaware	94-1692300
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

One AMD Place Sunnyvale, California	94088
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (408) 749-4000

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-12 of the Exchange Act).    Yes  x    No  ¨

Indicate the number of shares outstanding of the registrant’s common stock, $0.01 par value, as of August 1, 2005: 398,357,368.

INDEX

			Page No.
Part I.	Financial Information		3
	Item 1.	Financial Statements	3
		Condensed Consolidated Statements of Operations – Quarters and six months ended June 26, 2005 (unaudited) and June 27, 2004 (unaudited)	3
		Condensed Consolidated Balance Sheets – June 26, 2005 (unaudited) and December 26, 2004	4
		Condensed Consolidated Statements of Cash Flows – Six months ended June 26, 2005 (unaudited) and June 27, 2004 (unaudited)	5
		Notes to Condensed Consolidated Financial Statements (unaudited)	6
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	63
	Item 4.	Controls and Procedures	63
Part II.	Other Information		64
	Item 1.	Legal Proceedings	64
	Item 4.	Submission of Matters to a Vote of Security Holders	65
	Item 5.	Other Information	66
	Item 6.	Exhibits	66
	Signature		67

2

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Financial Statements

Condensed Consolidated Statements of Operations

(Unaudited)

	Quarter Ended						Six Months Ended
	June 26, 2005			June 27, 2004			June 26, 2005			June 27, 2004
	(In thousands except per share amounts)
Net sales	$	1,037,737		$	956,288		$	2,056,506		$	1,888,139
Net sales to related party (see Note 3)		222,181			305,549			430,040			610,131
Total net sales		1,259,918			1,261,837			2,486,546			2,498,270
Expenses:
Cost of sales		765,954			783,069			1,573,403			1,551,909
Research and development		272,584			224,821			525,706			450,911
Marketing, general and administrative		228,511			178,993			440,225			359,210
Restructuring and other special charges, net		—			2,514			—			2,514
		1,267,049			1,189,397			2,539,334			2,364,544
Operating income (loss)		(7,131	)		72,440			(52,788	)		133,726
Interest income and other, net		3,098			(2,203	)		7,072			8,778
Interest expense		(25,653	)		(27,956	)		(49,898	)		(58,110	)
Income (loss) before minority interest and income taxes		(29,686	)		42,281			(95,614	)		84,394
Minority interest in net loss (income) of subsidiaries		37,905			(6,527	)		84,758			(1,176	)
Income (loss) before income taxes		8,219			35,754			(10,856	)		83,218
(Benefit) provision for income taxes		(3,100	)		3,574			(4,752	)		5,947
Net income (loss)	$	11,319		$	32,180		$	(6,104	)	$	77,271
Net income (loss) per common share:
Basic	$	0.03		$	0.09		$	(0.02	)	$	0.22
Diluted	$	0.03		$	0.09		$	(0.02	)	$	0.21
Shares used in per share calculation:
Basic		395,414			353,655			394,245			352,491
Diluted		405,739			420,053			394,245			419,008

See accompanying notes.

3

Condensed Consolidated Balance Sheets

	June 26, 2005			December 26, 2004*
	(Unaudited)
	(In thousands except par value and share amounts)
ASSETS
Current assets:
Cash and cash equivalents	$	711,221		$	918,377
Short-term investments		508,843			277,182
Total cash and cash equivalents and short-term investments		1,220,064			1,195,559
Accounts receivable		569,089			564,538
Accounts receivable from related party (see Note 3 and Note 12)		180,242			172,871
Allowance for doubtful accounts		(13,644	)		(17,837	)
Total accounts receivable, net		735,687			719,572
Inventories:
Raw materials		40,824			63,875
Work-in-process		659,152			571,651
Finished goods		211,187			239,264
Total inventories		911,163			874,790
Deferred income taxes		71,656			87,836
Prepaid expenses and other current assets		309,491			350,240
Total current assets		3,248,061			3,227,997
Property, plant and equipment:
Land		56,121			64,401
Buildings and leasehold improvements		2,372,319			2,462,965
Equipment		7,758,458			7,920,517
Construction in progress		1,005,653			589,700
Total property, plant and equipment		11,192,551			11,037,583
Accumulated depreciation and amortization		(7,047,068	)		(6,803,776	)
Property, plant and equipment, net		4,145,483			4,233,807
Other assets		379,018			382,406
Total assets	$	7,772,562		$	7,844,210
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Notes payable to bank under revolving loan	$	50,412		$	—
Accounts payable		726,056			636,229
Accounts payable to related party (see Note 3)		31,218			18,894
Accrued compensation and benefits		163,063			191,431
Accrued liabilities		454,221			437,161
Accrued royalties to related party (see Note 3)		7,375			8,180
Restructuring accruals, current portion		20,077			18,997
Income taxes payable		17,971			47,145
Deferred income on shipments to distributors		148,625			141,738
Current portion of long-term debt and capital lease obligations		224,233			220,828
Current portion of long-term debt payable to related party (see Note 3)		30,000			10,000
Other current liabilities		124,433			115,773
Total current liabilities		1,997,684			1,846,376
Deferred income taxes		68,131			104,246
Long-term debt and capital lease obligations, less current portion		1,581,584			1,598,268
Long-term debt payable to related party (see Note 3)		10,000			30,000
Other long-term liabilities		462,314			414,626
Minority interest		806,240			840,641
Commitments and contingencies
Stockholders’ equity:
Capital stock:
Common stock, par value $0.01; 750,000,000 shares authorized; shares issued: 403,020,914 on June 26, 2005 and 398,505,543 on December 26, 2004; shares outstanding: 396,332,500 on June 26, 2005 and 391,738,648 on December 26, 2004		3,963			3,917
Capital in excess of par value		2,460,515			2,407,770
Treasury stock, at cost (6,688,414 shares on June 26, 2005 and 6,766,895 shares on December 26, 2004)		(90,176	)		(91,101	)
Retained earnings		302,208			308,497
Accumulated other comprehensive income		170,099			380,970
Total stockholders’ equity		2,846,609			3,010,053
Total liabilities and stockholders’ equity	$	7,772,562		$	7,844,210

* Amounts as of December 26, 2004 were derived from the December 26, 2004 audited financial statements.

See accompanying notes.

4

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Six Months Ended
	June 26, 2005			June 27, 2004
	(In thousands)
Cash flows from operating activities:
Net income (loss)	$	(6,104	)	$	77,271
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Minority interest in net income (loss) of subsidiaries		(84,758	)		1,175
Depreciation		624,400			568,123
Amortization		26,936			22,250
Provision (reduction in provision) for doubtful accounts		(4,193	)		991
Benefit for deferred income taxes		(20,550	)		(5,322	)
Restructuring and other special charges, net		—			2,514
Foreign grant and subsidy income		(54,904	)		(40,033	)
Net loss on disposal of property, plant and equipment		1,297			1,914
Net gain realized on sale of available-for-sale securities		—			(7,188	)
Compensation recognized under employee stock plans		466			607
Recognition of deferred gain on sale of building		(840	)		(841	)
Tax benefit on minority interest in net loss of subsidiaries		9,756			1,356
Changes in operating assets and liabilities:
Increase in accounts receivable		(4,551	)		(69,362	)
Increase in accounts receivable from related party		(7,371	)		(61,145	)
Increase in inventories		(35,335	)		(31,368	)
(Increase) decrease in prepaid expenses and other current assets		(9,978	)		31,320
(Increase) decrease in other assets		(8,091	)		11,909
Decrease in income taxes payable		(29,174	)		(26,810	)
Refund of customer deposits under long-term purchase agreements		(17,500	)		(20,500	)
Net increase in payables and accrued liabilities		125,465			9,014
Increase (decrease) in accounts payable to related party		12,324			(7,666	)
Increase (decrease) in accrued royalties to related party		(805	)		2,729
Net cash provided by operating activities		516,490			460,938
Cash flows from investing activities:
Purchases of property, plant and equipment		(821,737	)		(563,010	)
Proceeds from sale of property, plant and equipment		5,789			7,217
Purchases of available-for-sale securities		(541,688	)		(172,586	)
Proceeds from sale and maturity of available-for-sale securities		309,939			68,575
Other		(9,125	)		—
Net cash used in investing activities		(1,056,822	)		(659,804	)
Cash flows from financing activities:
Proceeds from borrowings		36,267			22,457
Borrowings under revolving loan		50,528			—
Repayments of debt and capital lease obligations		(100,490	)		(160,868	)
Proceeds from foreign grants and subsidies		159,932			20
Proceeds from sale leaseback transactions		78,145			27,614
Proceeds from limited partners’ contribution		54,401			—
Proceeds from issuance of stock		53,065			44,681
Net cash provided by (used in) financing activities		331,848			(66,096	)
Effect of exchange rate changes on cash and cash equivalents		1,328			(4,971	)
Net decrease in cash and cash equivalents		(207,156	)		(269,933	)
Cash and cash equivalents at beginning of period		918,377			968,183
Cash and cash equivalents at end of period	$	711,221		$	698,250
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest, net of amounts capitalized	$	38,634		$	41,810
Income taxes	$	31,873		$	26,532
Non-cash financing activities
Equipment sale leaseback transaction	$	78,145		$	27,451

See accompanying notes.

5

ADVANCED MICRO DEVICES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

June 26, 2005

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Advanced Micro Devices, Inc. (the Company or AMD) have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. The results of operations for the interim periods shown in this report are not necessarily indicative of results to be expected for the full fiscal year ending December 25, 2005. In the opinion of the Company’s management, the information contained herein reflects all adjustments necessary to make the results of operations for the interim periods a fair statement of such operations. All such adjustments are of a normal recurring nature. The unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended December 26, 2004.

The Company uses a 52- to 53-week fiscal year ending on the last Sunday in December. The quarters and six months ended June 26, 2005 and June 27, 2004 each consisted of 13 weeks and 26 weeks. Certain prior period amounts have been reclassified to conform to the current period presentation.

2. Stock-Based Incentive Compensation Plans

The Company has elected to use the intrinsic value method under Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (APB 25), as permitted by Statement of Financial Accounting Standard No. 123, “Accounting for Stock-Based Compensation” (SFAS 123), subsequently amended by SFAS 148, “Accounting for Stock-Based Compensation— Transition and Disclosure” to account for stock options issued to its employees under its 2004 Equity Incentive Plan and its prior stock option plans and amortizes deferred compensation, if any, ratably over the vesting period of the options. Compensation expense resulting from the issuance of fixed term stock option awards is measured as the difference between the exercise price of the option and the fair market value of the underlying share of common stock subject to the option on the award’s grant date. The Company also makes pro forma fair value disclosures required by SFAS 123 which reflect the impact on net income (loss) and net income (loss) per share had the Company applied the fair value method of accounting for its stock-based awards to employees. The Company estimates the fair value of its stock-based awards to employees using a Black-Scholes option pricing model. The pro forma effects on net income (loss) and net income (loss) per share are as follows for the quarters and six months ended June 26, 2005 and June 27, 2004.

	Quarter Ended						Six Months Ended
	June 26, 2005			June 27, 2004			June 26, 2005			June 27, 2004
	(In thousands except per share amounts)
Net income (loss) - as reported	$	11,319		$	32,180		$	(6,104	)	$	77,271
Plus: compensation expense recorded under APB 25		313			265			456			596
Less: SFAS 123 compensation expenses		(72,320	)		(40,195	)		(98,520	)		(105,923	)
Net income (loss) - pro forma	$	(60,688	)	$	(7,750	)	$	(104,168	)	$	(28,056	)
Basic net income (loss) per share—as reported	$	0.03		$	0.09		$	(0.02	)	$	0.22
Diluted net income (loss) per share—as reported	$	0.03		$	0.09		$	(0.02	)	$	0.21
Basic net income (loss) per share—pro forma	$	(0.15	)	$	(0.02	)	$	(0.26	)	$	(0.08	)
Diluted net income (loss) per share—pro forma	$	(0.15	)	$	(0.02	)	$	(0.26	)	$	(0.08	)

6

On April 27, 2005, the Company accelerated the vesting of all employee stock options outstanding under the Company’s 2004 Equity Incentive Plan and the Company’s prior equity compensation plans that had exercise prices per share higher than the closing price of the Company’s common stock on April 27, 2005, which was $14.51. Options to purchase approximately 12 million shares of the Company’s common stock became exercisable immediately. Options held by non-employee directors were not included in the vesting acceleration. In connection with the modification of the terms of these options to accelerate their vesting, approximately $65 million was recorded as non-cash compensation expense on a pro forma basis in accordance with SFAS 123, and this amount is included in the pro forma table above for the quarter and six months ended June 26, 2005. Because the exercise price of all the modified options was greater than the market price of the Company’s underlying common stock on the date of their modification, no compensation expense was recorded in accordance with APB 25.

The primary purpose for modifying the terms of these options to accelerate their vesting was to eliminate the need to recognize remaining unrecognized non-cash compensation expense in the Company’s statement of operations associated with these options as measured under Financial Accounting Standards Board Statement of Financial Accounting Standards No. 123 (Revised 2004), Share-Based Payment (“SFAS 123R”). SFAS 123R is required to be adopted by the Company effective the beginning of the first quarter of 2006 and will require that compensation expense associated with stock options be recognized in the statement of operations, rather than only being disclosed in a pro forma footnote in the Company’s consolidated financial statements.

The Company is currently evaluating the requirements of SFAS 123R and does not plan to adopt the new accounting standard prior to its required effective date. Although the effect of the adoption of SFAS 123R has not yet been determined, the Company expects that the adoption of SFAS 123R will have a material effect on its financial statements.

3. Related-Party Transactions

Fujitsu became a related party of the Company effective June 30, 2003 as a result of its 40 percent ownership interest in Spansion LLC, the Company’s majority-owned consolidated subsidiary. The following tables present the significant transactions between the Company and Fujitsu, directly and through its subsidiaries, including Spansion LLC and certain of Spansion’s subsidiaries, and balances receivable from or payable to Fujitsu as of, and for the periods, presented:

	Quarter Ended				Six Months Ended
	June 26, 2005		June 27, 2004		June 26, 2005		June 27, 2004
	(In thousands)				(In thousands)
Net sales to Fujitsu	$	222,181	$	305,549	$	430,040	$	610,131
Royalty fees due to Fujitsu		3,853		5,855		7,375		9,925
Service fees due to Fujitsu		5,654		8,127		11,385		16,796
Other purchases of goods and services from Fujitsu		16,139		15,513		32,696		31,257
Purchases of manufacturing services from Fujitsu		8,687		21,614		19,256		44,414
Commercial die purchases from Fujitsu		21,791		51,520		40,983		79,955
Cost of employees seconded from Fujitsu		4,284		3,308		6,923		6,533
Rental expense payments to Fujitsu		540		527		1,140		1,091

	As of
	June 26, 2005		December 26, 2004
	(In thousands)
Accounts receivable from Fujitsu (see Note 12)	$	180,242	$	172,871
Accounts payable to Fujitsu		31,218		18,894
Accrued royalties to Fujitsu		7,375		8,180
Notes payable to Fujitsu		40,000		40,000

7

Effective April 1, 2005, Spansion and Fujitsu amended the Fujitsu Distribution Agreement to reduce the distribution margin earned by Fujitsu on the sale of Spansion Flash memory products from a margin of generally 6.5 percent to a margin of generally 4.3 percent. The distribution margin is accounted for as a reduction to net sales. Accordingly, the decrease in the distribution margin resulted in an increase to the line item, net sales to Fujitsu. Previously, Spansion and Fujitsu amended the Fujitsu Distribution Agreement to reduce the distribution margin from 7 percent to 6.5 percent, effective as of December 27, 2004.

The royalty payable to Fujitsu represents the payments made by Spansion LLC to Fujitsu for the use of specified intellectual property of Fujitsu.

The service fees to Fujitsu represent amounts paid by Spansion LLC in exchange for services provided by Fujitsu, including information technology, research and development, quality assurance, insurance procurement, facilities, environmental and human resources services. These services are provided primarily to Spansion Japan Limited, Spansion LLC’s wholly owned subsidiary (Spansion Japan).

Other purchases of goods and services primarily relate to purchases of power supply from Fujitsu. Fujitsu also provides manufacturing test and assembly services to Spansion LLC on a contract basis. In addition, Spansion LLC purchases commercial die from Fujitsu, which are packaged together with Spansion Flash memory products.

As of June 26, 2005, Fujitsu seconded certain employees to Spansion Japan. Spansion LLC paid the employees seconded from Fujitsu directly.

In addition to the above transactions with Fujitsu, certain of Spansion Japan’s employees are enrolled in either a defined benefit pension plan or a lump-sum retirement benefit plan sponsored by Fujitsu, or both. By agreement with Fujitsu, Spansion is required to fund those proportional benefit obligations attributable to the employees of Spansion Japan enrolled in these plans as of June 30, 2003. The amount of pension cost and the unfunded pension liability related to these employees are not material to the Company’s consolidated financial statements. For the six-month period ended June 26, 2005, the Company recorded pension cost of approximately $3 million, and as of June 26, 2005, the Company recorded a pension benefit obligation liability of approximately $24 million. Although the Company believes that the estimates and assumptions it has used to record the pension cost and the related pension liability are reasonable, the actual amounts recorded could change when a full actuarial valuation is completed. The Company expects that a full actuarial valuation will be completed by the end of 2005 when the withdrawal from the plans discussed below occurs.

Through agreement with Fujitsu, Spansion Japan will withdraw from the plans by no later than the end of 2005 and assume the pension obligation associated with its own employees. In connection with the withdrawal, Fujitsu will assign a portion of the pension assets to Spansion Japan based on the relative portion of Spansion Japan’s pension benefit obligation to the total pension benefit obligation of the Fujitsu plans.

Historically, the Fujitsu pension plans included a substitutional portion, which is based on the pay-related part of old-age pension benefits prescribed by the Japan Welfare Pension Insurance Law (JWPIL) and is similar to social security benefits in the United States. In 2001, the JWPIL was amended to allow employers to transfer the substitutional portion of employer pension plans back to the Japanese government. Fujitsu has announced that they will separate the substitutional portion from the Fujitsu pension plans and transfer the obligation and related plan assets to the Japanese government. The Company expects that the transfer of assets and liabilities by Fujitsu to the Japanese government will be completed later this year. Spansion Japan plans to establish its separate pension plan immediately following this transfer and believes that this transfer will reduce the amount of assets and liabilities that would otherwise be transferred to Spansion Japan from the Fujitsu pension plans. The Company does not have sufficient data at this time to quantify the impact of the pending transfer.

8

4. Financial Instruments

The following is a summary of the available-for-sale securities held by the Company as of June 26, 2005:

	Amortized Cost		Gross unrealized gains		Gross unrealized losses		Fair Market Value
	(In thousands)
Cash equivalents:
Commercial paper	$	365,866	$	—	$	—	$	365,866
Money market funds		36,013		—		—		36,013
Time deposits		172,879		—		—		172,879
Total cash equivalents	$	574,758	$	—	$	—	$	574,758
Short-term investments:
Auction rate preferred stocks	$	336,875	$	—	$	—	$	336,875
Commercial paper		135,017		—		—		135,017
Federal agency notes		36,951		—		—		36,951
Total short-term investments	$	508,843	$	—	$	—	$	508,843
Long-term investments:
Equity investments	$	3,942	$	2,626	$	—	$	6,568
Total long-term investments (included in other assets)	$	3,942	$	2,626	$	—	$	6,568
Grand Total	$	1,087,543	$	2,626	$	—	$	1,090,169

Long-term equity investments consist of marketable equity securities that, while available for sale, the Company does not intend to use to fund current operations.

The Company did not realize any gain or loss from the sale of available-for-sale securities in the first six months of 2005 compared to a net gain of approximately $7 million in the first six months of 2004.

At June 26, 2005 and December 26, 2004, the Company had approximately $13 million and $14 million of investments classified as held to maturity, consisting of commercial paper and treasury notes used for long-term workers’ compensation and leasehold deposits, which are classified as other long-term assets. The fair market value of these investments approximated their cost at June 26, 2005 and December 26, 2004.

9

5. Net Income (Loss) Per Common Share

Basic net income (loss) per common share is computed using the weighted-average number of common shares outstanding. Diluted net income (loss) per common share is computed using the weighted-average number of common shares outstanding plus any potential dilutive securities, if dilutive. Potential dilutive securities include stock options and shares issuable upon the conversion of convertible debt. The following table sets forth the components of basic and diluted income (loss) per common share:

	Quarter Ended					Six Months Ended
	June 26, 2005		June 27, 2004			June 26, 2005			June 27, 2004
	(In thousands except per share data)
Numerator:
Numerator for basic income (loss) per common share	$	11,319	$	32,180		$	(6,104	)	$	77,271
Effect of assumed conversion of 4.50% convertible notes:
Interest expense, net of tax		—		4,912			—			10,027
Profit sharing expense adjustment, net of tax		—		(492	)		—			(1,002	)
Numerator for diluted income (loss) per common share	$	11,319	$	36,600		$	(6,104	)	$	86,296
Denominator:
Denominator for basic income (loss) per share - weighted-average shares		395,414		353,655			394,245			352,491
Effect of dilutive securities:
Employee stock options		10,325		11,785			—			11,904
4.50% convertible notes		—		54,613			—			54,613
Dilutive potential common shares		10,325		66,398			—			66,517
Denominator for diluted income (loss) per common share - adjusted weighted-average shares		405,739		420,053			394,245			419,008
Net income (loss) per common share:
Basic	$	0.03	$	0.09		$	(0.02	)	$	0.22
Diluted	$	0.03	$	0.09		$	(0.02	)	$	0.21

Potential dilutive common shares totaling approximately 49 million and 21 million for the quarters ended June 26, 2005 and June 27, 2004 and 59 million and 21 million for the six months ended June 26, 2005 and June 27, 2004 were not included in the net income (loss) per common share calculation, as their inclusion would have been anti-dilutive.

6. Segment Reporting

Management, including the Chief Operating Decision Maker (CODM), who is the Company’s chief executive officer, reviews and assesses operating performance using segment revenues and operating income before interest, taxes and minority interest. These performance measures include the allocation of expenses to the operating segments based on management’s judgment.

The Company’s reportable segments include the Computation Products Group, which includes microprocessor products for desktop and mobile PCs, servers and workstations and chipset products, the Memory Products Group, which includes Flash memory products, and the Personal Connectivity Solutions Group, which includes primarily low-power, high-performance x86 and MIPS^® architecture-based embedded microprocessors. In addition to these three reportable segments, the Company also has the All Other category, which is not a reportable segment and includes certain operating expenses and credits that are not allocated to the operating segments because the CODM does not consider them in evaluating the operating performance of the Company’s business segments.

Prior period segment information has been reclassified to conform to the current period presentation.

10

The following table is a summary of net sales and operating income (loss) by segment with reconciliations to net income (loss) for the quarters and six months ended June 26, 2005 and June 27, 2004:

	Quarter Ended						Six Months Ended
	June 26, 2005			June 27, 2004			June 26, 2005			June 27, 2004
	(In thousands)
Computation Products Group
Net sales	$	767,197		$	554,148		$	1,516,798		$	1,125,249
Operating income (loss)		110,209			57,504			201,715			124,787
Memory Products Group
Net sales		462,367			673,259			909,723			1,300,977
Operating income (loss)		(89,505	)		45,163			(199,349	)		58,975
Personal Connectivity Solutions Group
Net sales		30,354			34,430			60,025			72,044
Operating income (loss)		(14,336	)		(14,028	)		(31,427	)		(21,094	)
All Other
Net sales		—			—			—			—
Operating income (loss)		(13,499	)		(16,199	)		(23,727	)		(28,942	)
Total
Net sales		1,259,918			1,261,837			2,486,546			2,498,270
Operating income (loss)		(7,131	)		72,440			(52,788	)		133,726
Interest income and other, net		3,098			(2,203	)		7,072			8,778
Interest expense		(25,653	)		(27,956	)		(49,898	)		(58,110	)
Minority interest in net loss (income) of subsidiaries		37,905			(6,527	)		84,758			(1,176	)
Provision (benefit) for income taxes		(3,100	)		3,574			4,752			(5,947	)
Net income (loss)	$	11,319		$	32,180		$	(6,104	)	$	77,271

7. Comprehensive Income (Loss)

The total comprehensive loss for the quarter and six months ended June 26, 2005 was $106 million and $217 million. The total comprehensive income for the quarter and six months ended June 27, 2004 was $44 million and $36 million. The total comprehensive loss during 2005 was primarily as a result of the net change in cumulative translation adjustments due to strengthening of the U.S. dollar against the European euro and the Japanese yen.

8. Guarantees

The Company accounts for and discloses guarantees in accordance with FIN 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.”

Guarantees of Indebtedness Recorded on the Company’s Unaudited Condensed Consolidated Balance Sheet

The following table summarizes the principal guarantees outstanding as of June 26, 2005 related to underlying liabilities that are already recorded on the Company’s unaudited condensed consolidated balance sheet as of June 26, 2005 and their expected expiration dates by year. No incremental liabilities are recorded on the Company’s unaudited consolidated balance sheet for these guarantees.

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	Amounts Guaranteed(1)		2005		2006		2007		2008		2009		2010 and Beyond
	(In thousands)
July 2003 Spansion term loan guarantee	$	18,509	$	8,250	$	10,259	$	—	$	—	$	—	$	—
Spansion Japan term loan guarantee		59,395		13,199		26,398		19,798		—		—		—
Spansion capital lease guarantees		61,616		24,723		33,616		3,277		—		—		—
Repurchase Obligations to Fab 36 partners(2)		144,734		14,234		32,625		32,625		32,625		32,625		—
Total guarantees	$	284,254	$	60,406	$	102,898	$	55,700	$	32,625	$	32,625	$	—

⁽¹⁾ Amounts represent the principal amount of the underlying obligations guaranteed and are exclusive of obligations for interest, fees and expenses.

⁽²⁾ This amount represents the silent partnership contributions received by AMD Fab 36 KG, a wholly owned subsidiary of AMD, as of June 26, 2005 from the unaffiliated limited partners under the Fab 36 partnership agreements. AMD Fab 36 Holding and AMD Fab 36 Admin are required to repurchase up to $169 million of the partners’ silent partnership contribution in annual installments beginning one year after the partner has contributed the full amount required under the partnership agreements. The Company guaranteed these obligations. As of June 26, 2005, Fab 36 Beteiligungs had contributed the full amount required under the partnership agreements, but Leipziger Messe had not contributed the full amount in accordance with the partnership agreements. Therefore, the condition precedent to the Company’s repurchase obligations with respect to Leipziger Messe’s silent partnership contribution had not been met. For purposes of this table, the Company assumed that Leipziger Messe will have contributed the full amount by December 2005.

July 2003 Spansion Term Loan Guarantee

Under the July 2003 Spansion Term Loan, as amended, amounts borrowed bear interest at a variable rate of LIBOR plus four percent, which was 7.09 percent at June 26, 2005. Repayment occurs in, consecutive, quarterly principal and interest installments ending in June 2006. As of June 26, 2005, $31 million was outstanding under the July 2003 Spansion Term Loan, of which 60 percent was guaranteed by the Company and 40 percent was guaranteed by Fujitsu. Spansion LLC granted a security interest in certain property, plant and equipment as security under the July 2003 Spansion Term Loan. In addition, as security for its guarantee obligations, the Company granted a security interest in certain of its assets, including its accounts receivable, inventory, general intangibles (excluding intellectual property) and the related proceeds.

Spansion Japan Term Loan Guarantee

In September 2003, the third-party loans of Fujitsu AMD Semiconductor Limited, the previous manufacturing joint venture between AMD and Fujitsu, or the Manufacturing Joint Venture, were refinanced from the proceeds of a term loan entered into between Spansion Japan, which owns the assets of the Manufacturing Joint Venture, and a Japanese financial institution. Under the agreement, the amounts borrowed bear an interest rate of TIBOR plus a spread that is determined by Fujitsu’s current debt rating and Spansion Japan’s non-consolidated net asset value as of the last day of its fiscal year. The interest rate was 0.99 percent as of June 26, 2005. Repayment occurs in equal, consecutive, quarterly principal installments ending in June 2007. As of June 26, 2005, $99 million was outstanding under this term loan agreement. Fujitsu guaranteed 100 percent of the amounts outstanding under this facility. The Company agreed to reimburse Fujitsu up to 60 percent of amounts paid by Fujitsu under its guarantee of this loan. In addition, Spansion Japan’s assets are pledged to Fujitsu as security for the loan.

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Spansion Capital Lease Guarantees

The Company has guaranteed certain capital lease obligations of Spansion LLC and its subsidiaries totaling approximately $62 million as of June 26, 2005. The amount of the guarantees will be reduced by the actual amount of lease payments paid by Spansion LLC over the terms of the leases.

Fab 36 Term Loan Guarantee

Pursuant to the terms of the partnership agreements, AMD Fab 36 Holding and AMD Fab 36 Admin are obligated to repurchase up to $169 million of Leipziger Messe’s and Fab 36 Beteiligungs’ silent partnership contributions over time. Specifically, AMD Fab 36 Holding and AMD Fab 36 Admin are required to repurchase $97 million of Leipziger Messe’s silent partnership contributions in four installments of approximately $24 million each, commencing one year after Leipziger Messe has completed its aggregate partnership contributions, and Fab 36 Beteiligungs’ silent partnership interest of $73 million in annual 20 percent installments commencing in October 2005. AMD has guaranteed these obligations.

Guarantees of Indebtedness Not Recorded on the Company’s Unaudited Condensed Consolidated Balance Sheet

The following table summarizes the principal guarantees outstanding as of June 26, 2005, for which the related underlying liabilities are not recorded on the Company’s unaudited condensed consolidated balance sheet as of June 26, 2005 and their expected expiration dates.

	AmountsGuaranteed(1)		2005		2006		2007		2008		2009		2010 and Beyond
	(in thousands)
Spansion LLC operating lease guarantees	$	16,080	$	4,997	$	8,008	$	2,050	$	1,025	$	—	$	—
AMTC revolving loan guarantee		38,667		—		—		38,667		—		—		—
AMTC rental guarantee(2)		125,388		—		—		—		—		—		125,388
Other		4,362		907		3,455		—		—		—		—
Total guarantees	$	184,497	$	5,904	$	11,463	$	40,717	$	1,025	$	—	$	125,388

⁽¹⁾ Amounts represent the principal amount of the underlying obligations guaranteed and are exclusive of obligations for interest, fees and expenses.

⁽²⁾ Amount of the guarantee diminishes as the rent is paid.

Spansion LLC Operating Lease Guarantees

The Company has guaranteed certain operating leases entered into by Spansion LLC and its subsidiaries totaling approximately $16 million as of June 26, 2005. The amounts guaranteed are reduced by the actual amount of lease payments paid by Spansion LLC over the lease terms. No liability has been recognized for this guarantee under the provisions of FIN 45 because the guarantee is for a subsidiary’s performance obligations.

Advanced Mask Technology Center and Maskhouse Building Administration Guarantees

The Advanced Mask Technology Center GmbH & Co. KG (AMTC) and Maskhouse Building Administration GmbH & Co., KG (BAC) are joint ventures formed by AMD, Infineon Technologies AG and DuPont Photomasks, Inc. for the purpose of constructing and operating an advanced photomask facility in Dresden, Germany. In April 2005 DuPont Photomasks, Inc. was acquired by Toppan Printing Co., Ltd. and became a wholly owned subsidiary of Toppan, named Toppan Photomasks, Inc. To finance the project, BAC and AMTC entered into a $145 million revolving credit facility and a $91 million term loan in December 2002. Also in December 2002, in order to occupy the photomask facility, AMTC entered into a rental agreement with BAC. With regard to these commitments by

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BAC and AMTC, as of June 26, 2005, the Company guaranteed up to approximately $39 million plus interest and expenses under the revolving loan, and up to approximately $18 million, initially, under the rental agreement. The obligations under the rental agreement guarantee diminish over time through 2011 as the term loan is repaid. However, under certain circumstances of default by the other tenant of the photomask facility under its rental agreement with BAC and certain circumstances of default by more than one joint venture partner under its rental agreement guarantee obligations, the maximum potential amount of the Company’s obligations under the rental agreement guarantee is approximately $125 million. As of June 26, 2005, $83 million was drawn under the revolving credit facility, and $65 million was drawn under the term loan. The Company has not recorded any liability in its consolidated financial statements associated with the guarantees because they were issued prior to December 31, 2002, the effective date of FIN 45.

Warranties and Indemnities

The Company offers a three-year limited warranty to end users for certain of its boxed microprocessor products and generally offers a one-year limited warranty only to direct purchasers for all other products. Under limited circumstances, the Company may offer an extended limited warranty to direct purchasers of Flash memory products or of microprocessor products that are intended for systems targeted at the commercial and embedded end markets.

Changes in the Company’s liability for product warranty during the six months ended June 26, 2005 and June 27, 2004 were as follows:

	Six Months Ended
	June 26, 2005			June 27, 2004
	(In thousands)
Balance, beginning of period	$	22,043		$	24,668
New warranties issued during the period		18,834			21,111
Settlements during the period		(19,565	)		(8,257	)
Changes in liability for pre-existing warranties during the period, including expirations		(651	)		(10,064	)
Balance, end of period	$	20,661		$	27,458

In addition to product warranties, the Company, from time to time in its normal course of business, indemnifies other parties with whom it enters into contractual relationships, including customers, lessors and parties to other transactions with the Company, with respect to certain matters. The Company has agreed to hold the other party harmless against specified losses, such as those arising from a breach of representations or covenants, third-party claims that the Company’s products when used for their intended purpose(s) infringe the intellectual property rights of a third party or other claims made against certain parties. It is not possible to determine the maximum potential amount of liability under these indemnification obligations due to the limited history of indemnification claims and the unique facts and circumstances that are likely to be involved in each particular claim and indemnification provision. Historically, payments made by the Company under these obligations have not been material.

9. Restructuring and Other Special Charges

2002 Restructuring Plan

In December 2002, the Company began implementing a restructuring plan (the 2002 Restructuring Plan) to further align its cost structure to the industry conditions at that time, including weak customer demand and industry-wide excess inventory.

With the exception of the facility exit costs consisting primarily of remaining lease payments on abandoned facilities, net of estimated sublease income, which are payable through 2011, the Company has completed the

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activities associated with the 2002 Restructuring Plan. As a result of the 2002 Restructuring Plan, 1,786 employees had been terminated pursuant to the 2002 Restructuring Plan resulting in cumulative cash payments of approximately $60 million in severance and employee benefit costs.

The following table summarizes activities under the 2002 Restructuring Plan from December 26, 2004 through June 26, 2005:

	Exit Costs
	(In thousands)
Accruals at December 26, 2004	$	105,676
First quarter 2005 cash payments		(5,243	)
Accruals at March 27, 2005	$	100,433
Second quarter 2005 cash payments		(5,338	)
Accruals at June 26, 2005	$	95,095

As of June 26, 2005 and December 26, 2004, $75 million and $87 million of the total restructuring accruals of $95 million and $106 million were included in Other Liabilities (long-term) on the consolidated balance sheets. (See Note 10.)

10. Other Long-Term Liabilities

The Company’s other long-term liabilities at June 26, 2005 and December 26, 2004 consisted of:

	June 26, 2005		December 26, 2004
	(in thousands)
Fab 30/Fab 36 deferred grants and subsidies	$	304,940	$	274,150
Restructuring accrual (see Note 9)		75,019		86,680
Spansion LLC pension liability (see Note 3)		24,495		25,890
Deferred gain on sale leaseback of building		20,967		21,807
Other		36,893		6,099
	$	462,314	$	414,626

11. Spansion LLC - Proposed Initial Public Offering

On April 13, 2005, Spansion filed a registration statement with the Securities and Exchange Commission for a proposed initial public offering of its Class A common stock. The number of shares to be offered and the estimated price range for the common stock have not been determined. The Company does not know when, or if, an initial public offering will occur.

In the event the proposed initial public offering is consummated, Spansion would receive the net proceeds from the offering, and the Company’s ownership in Spansion would be reduced from its current ownership interest of 60 percent. At this time, the Company does not have enough information to quantify the potential financial impact of the proposed initial public offering, but the Company expects that it would have a material effect on the Company’s financial condition and results of operations, including the following:

• The Company expects that its aggregate ownership interest in Spansion would be less than 50 percent and that it would no longer consolidate Spansion’s results of operations and financial position in its consolidated financial statements;

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• To the extent that Spansion’s employees continue to hold unvested options to purchase AMD common stock, the Company would be required to account for these unvested options at then-current fair value each reporting period until the options are fully vested because Spansion’s employees would no longer be considered employees of the “consolidated group;”

• As of June 26, 2005, the Company guaranteed certain indebtedness of Spansion and its subsidiaries totaling approximately $156 million. Of this amount, approximately $140 million relates to underlying liabilities that are already recorded on the Company’s unaudited condensed consolidated balance sheet, and no incremental liabilities are recorded for these guarantees because these guarantees are for the Company’s majority-owned subsidiary. However, because the Company expects that it would no longer consolidate Spansion’s results of operations and financial position, the Company would be required to record on its consolidated financial statements the fair value of those guarantees that were entered into or amended subsequent to December 31, 2002, the effective date of FIN 45. At this time, the Company does not have enough information to evaluate the fair value of these guarantees; and

• Depending on the valuation of Spansion’s Class A common stock and the carrying value of the Company’s interest in Spansion at the time of the initial public offering, the Company would realize either a gain or a loss upon the initial public offering, reflecting the reduction of its ownership interest in Spansion. The gain or loss would be calculated as the difference between Spansion’s book value per share before and after the initial public offering multiplied by the number of shares owned by the Company.

Completion of the proposed initial public offering is subject to many conditions, including the approval of the Company and Fujitsu as members of Spansion, the final approval of the Spansion Board of Managers, market conditions and governmental approvals. Market conditions and other factors could result in, among other things, a delay in or withdrawal of the initial public offering or pursuit of alternative transactions.

Concurrent with and as a condition to consummating the proposed initial public offering, Spansion also currently intends to consummate a debt offering pursuant to which it would issue notes and apply the net proceeds from the sale of the notes to repay a portion of its outstanding indebtedness. To the extent that such repaid indebtedness was guaranteed by the Company or Fujitsu, the amount of Spansion debt guaranteed by the Company and Fujitsu would be reduced accordingly. Spansion has not determined the aggregate principal amount of the notes or the terms upon which the notes would be issued.

12. Spansion Japan Revolving Loan Agreement

On June 24, 2005, Spansion Japan borrowed approximately $50 million under tranche A of its outstanding Spansion Japan Revolving Loan. This amount bears interest at the rate of 0.63 percent and must be repaid by September 26, 2005. The amount is reflected as Notes Payable on the condensed consolidated balance sheet.

As security for amounts outstanding under this revolving facility, Spansion Japan pledged its accounts receivable from Fujitsu. The accounts receivable are held in trust pursuant to the terms of a trust agreement. Under the trust agreement, Spansion Japan is required to maintain the value of its accounts receivable at specified thresholds (as defined by the trust agreement), based upon the amounts outstanding under tranche A and tranche B. The trustee collects payments from Fujitsu into a separate trust account and releases these amounts to Spansion Japan less the specified threshold amounts that are required to be maintained.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Statement Regarding Forward-Looking Statements

The statements in this report include forward-looking statements. These forward-looking statements are based on current expectations and beliefs and involve numerous risks and uncertainties that could cause actual results to differ materially from expectations. These forward-looking statements should not be relied upon as predictions of future events as we cannot assure you that the events or circumstances reflected in these statements will be achieved or will occur. You can identify forward-looking statements by the use of forward-looking terminology including “believes,” “expects,” “may,” “will,” “should,” “seeks,” “intends,” “plans,” “pro forma,” “estimates,” or “anticipates” or the negative of these words and phrases or other variations of these words and phrases or comparable terminology. The forward-looking statements relate to, among other things: the potential initial public offering of Spansion’s Class A common stock; our sales, operating results and anticipated cash flows; capital expenditures; research and development expenses; marketing, general and administrative expenses; the development and timing of the introduction of new products and technologies, including the ORNAND architecture; Spansion’s ability to implement 300-millimeter wafer manufacturing capacity; continued customer and market acceptance of our microprocessor products; continued customer and market acceptance of Spansion^™ Flash memory products based on MirrorBit^™ and floating gate technology, including the ORNAND architecture; our ability to remain competitive and maintain or increase our market position; our ability to maintain and develop key relationships with our existing and new customers; the ability to produce our microprocessor and Flash memory products in the volumes and mix required by the market, either in our own facilities or at foundries; our ability to maintain the level of investment in research and development and capacity that is required to remain competitive; our ability to transition to advanced manufacturing process technologies, including 65-nanometer for microprocessors and 90-nanometer for Flash memory, in a timely and effective way; our ability to achieve cost reductions in the amounts and in the timeframes anticipated; the timing of our process technology transitions in our wafer fabrication facilities, including Fab 36; and our ability to gain market share in high-growth global markets such as China, Latin America, India and Eastern Europe.

The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included in this report and our audited consolidated financial statements and related notes as of December 26, 2004 and December 28, 2003, and for each of the three years in the period ended December 26, 2004 as filed in our Annual Report on Form 10-K for the year ended December 26, 2004. Certain prior period amounts have been reclassified to conform to the current period presentation.

AMD, the AMD Arrow logo, AMD Athlon, AMD Opteron, AMD Sempron, AMD Turion and AMD Geode are trademarks of Advanced Micro Devices, Inc. Spansion and MirrorBit are trademarks of Spansion LLC. Microsoft and Windows are registered trademarks of Microsoft Corporation in the United States and/or other jurisdictions. MIPS is a registered trademark of MIPS Technologies, Inc. in the United States and/or other jurisdictions. Other names are for informational purposes only and used to identify companies and products and may be trademarks of their respective owners.

Overview

We design, manufacture and market industry-standard digital integrated circuits, or ICs, that are used in diverse product applications such as desktop and mobile personal computers, or PCs, workstations, servers, communications equipment, such as mobile phones, and automotive and consumer electronics. Our products consist primarily of microprocessors and Flash memory devices. We also sell embedded microprocessors for personal connectivity devices and other consumer markets.

We review and assess operating performance using segment revenues and operating income before interest, taxes and minority interest. These performance measures include the allocation of expenses to the operating segments based on management judgment.

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We have three reportable business segments:

• the Computation Products segment, which includes microprocessor products for desktop and mobile PCs, servers and workstations and chipset products;

• the Memory Products segment, which includes Spansion Flash memory products; and

• the Personal Connectivity Solutions segment, which includes primarily low-power, high- performance x86 and MIPS architecture-based embedded microprocessors.

In addition to our reportable segments, we also have the All Other category that is not a reportable segment. It includes certain operating expenses and credits that are not allocated to the operating segments because our Chief Executive Officer, who is our Chief Operating Decision Maker, does not consider these operating expenses and credits in evaluating the operating performance of our business segments.

Prior period segment information has been reclassified to conform to the current period presentation.

During the second quarter of 2005, we continued to improve our performance in the Computation Products segment. Computation Products net sales increased two percent compared to the first quarter of 2005 and 38 percent compared to the second quarter of 2004 primarily due to increased demand for our AMD64-based processors.

In Memory Products, we experienced an increase of three percent in net sales compared to the first quarter of 2005, but net sales decreased 31 percent compared to the second quarter of 2004.We also continued to experience significant operating losses in our Memory Products segment because of the competitive Flash memory market. Memory Products net sales increased moderately compared to the first quarter of 2005 due in part to increased unit shipments. In addition, sales of Spansion Flash memory products based on MirrorBit technology increased from the previous quarter to more than 20 percent of total Memory Products net sales, and we experienced increased demand for second-generation MirrorBit products on 110-nanometer technology. However, average selling prices for Spansion Flash memory products decreased eight percent compared to the first quarter of 2005 and 35 percent compared to the second quarter of 2004 as a result of adverse market conditions.

In the near term, we believe critical success factors for AMD include our ability to:

• continue to increase market acceptance of our AMD64 technology, particularly our AMD Opteron and AMD Turion processors;

• strengthen our relationships with key customers and establish relationships with new customers that are industry leaders in their markets;

• successfully develop and transition to the latest manufacturing process technologies, including 65-n65-nanometers for our microprocessors and 90-nanometers for our Flash memory products;

• begin production at Fab 36 and at a foundry on a timely basis;

• develop and introduce new products on a timely basis and achieve efficient and timely volume production of these products;

• control costs;

• increase the adoption of products incorporating MirrorBit technology; and

• expand our participation in high-growth global markets, including China, Eastern Europe, India and Latin America.

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We intend the discussion of our financial condition and results of operations that follows, including results of operations by reportable segment, to provide information that will assist you in understanding our financial statements, the changes in certain key items in those financial statements from quarter to quarter, the primary factors that resulted in those changes, and how certain accounting principles, policies and estimates affect our financial statements.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which we have prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts in our consolidated financial statements. We evaluate our estimates on an on-going basis, including those related to our revenue reserves, inventories, asset impairments, restructuring charges, and income taxes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Although actual results have historically been materially consistent with management’s expectations, the actual results may differ from these estimates or our estimates may be affected by different assumptions or conditions.

Management believes there have been no significant changes during the quarter ended June 26, 2005 to the items that we disclosed as our critical accounting policies and estimates in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended December 26, 2004.

RESULTS OF OPERATIONS

We use a 52- to 53-week fiscal year ending on the last Sunday in December. The quarters ended June 26, 2005, March 27, 2005 and June 27, 2004 each included 13 weeks.

The following is a summary of our net sales and operating income (loss) by segment and category for the periods presented below:

	Quarter Ended									Six Months Ended
	June 26, 2005			March 27, 2005			June 27, 2004			June 26, 2005			June 27, 2004
	(in millions)
Net sales
Computation Products Group	$	767		$	750		$	554		$	1,517		$	1,125
Memory Products Group		463			447			673			910			1,301
Personal Connectivity Solutions Group		30			30			35			60			72
All Other		—			—			—			—			—
Total Net Sales	$	1,260		$	1,227		$	1,262		$	2,487		$	2,498
Operating income (loss)
Computation Products Group	$	110		$	92		$	57		$	202		$	125
Memory Products Group		(90	)		(110	)		45			(200	)		59
Personal Connectivity Solutions Group		(14	)		(17	)		(14	)		(31	)		(21	)
All Other		(13	)		(11	)		(16	)		(24	)		(29	)
Total Operating Income (Loss)	$	(7	)	$	(46	)	$	72		$	(53	)	$	134

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Computation Products Group

Computation Products Group (CPG) net sales of $767 million in the second quarter of 2005 increased two percent compared to net sales of $750 million in the first quarter of 2005. The increase in net sales was attributable to a six percent increase in average selling prices, partially offset by a four percent decrease in unit shipments. Average selling prices increased due to increased demand for our AMD64-based server and mobile processors, including our new dual-core AMD Opteron processors, which we introduced in April 2005, and our AMD Turion processors, which we introduced in March 2005.

Computation Products Group net sales of $767 million in the second quarter of 2005 increased 38 percent compared to net sales of $554 million in the second quarter of 2004 as a result of a 14 percent increase in average selling prices and a 22 percent increase in unit shipments. Average selling prices and unit shipments increased due to greater demand for our AMD64-based processors, including our dual-core AMD Opteron processors, our AMD Turion processors, and our AMD Sempron processors, which we introduced in July 2004.

Computation Products Group net sales of $1,517 million in the first six months of 2005 increased 35 percent compared to net sales of $1,125 million in the first six months of 2004 as a result of a nine percent increase in average selling prices and a 25 percent increase in unit shipments. Average selling prices and unit shipments increased due to greater demand across all geographic regions.

Computation Products Group operating income of $110 million in the second quarter of 2005 improved by $18 million from operating income of $92 million in the first quarter of 2005, primarily as a result of an increase in average selling prices of six percent, partially offset by an increase in research and development expenses of $18 million due primarily to higher start up costs for our 300-millimeter wafer fabrication facility in Dresden, Germany, which we refer to as Fab 36.

Computation Products Group operating income of $110 million in the second quarter of 2005 improved by $53 million compared to operating income of $57 million in the second quarter of 2004, primarily as a result of increased demand for our AMD64-based processors, which contributed to the 14 percent increase in average selling prices and the 22 percent increase in unit shipments referenced above.

Computation Products Group operating income of $202 million in the first six months of 2005 improved by $77 million compared to operating income of $125 million in the first six months of 2004, primarily as a result of increased demand for our AMD64-based processors, which contributed to a nine percent increase in average selling prices.

Memory Products Group

Memory Products Group net sales of $463 million in the second quarter of 2005 increased three percent compared to net sales of $447 million in the first quarter of 2005. The increase in net sales was primarily attributable to an increase of 12 percent in unit shipments and a reduction from generally 6.5 percent to generally 4.3 percent in the distribution margin payable by Spansion to Fujitsu under the Fujitsu Distribution Agreement, which added approximately $4 million to Memory Products net sales in the second quarter of 2005, partially offset by a decrease of eight percent in average selling prices. The distribution margin earned by Fujitsu on the sale of Spansion Flash memory products was reduced from a margin of generally 6.5 percent to a margin of generally 4.3 percent as of April 1, 2005. Unit shipments increased due to increased demand. Average selling prices decreased as a result of adverse market conditions.

Memory Products Group net sales of $463 million in the second quarter of 2005 decreased 31 percent compared to net sales of $673 million in the second quarter of 2004. The decrease in net sales was primarily attributable to a 35 percent decrease in average selling prices, partially offset by an increase of five percent in unit shipments. The decrease in net sales was also mitigated by a decrease in the distribution margin payable by Spansion to Fujitsu under the Fujitsu Distribution Agreement, which added approximately $5 million to Memory Products net sales in the second quarter of 2005. The distribution margin earned by Fujitsu on the sale of Spansion Flash memory products was reduced from a margin of generally seven percent to a margin of generally 6.5 percent as of December 27, 2004. The distribution margin was subsequently reduced further from generally 6.5 percent to generally 4.3 percent as of April 1, 2005. Average selling prices decreased from the second quarter of 2004 as a result of adverse market conditions.

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Memory Products Group net sales of $910 million in the first six months of 2005 decreased 30 percent compared to net sales of $1.3 billion in the first six months of 2004. The decrease in net sales was primarily attributable to a 32 percent decrease in average selling prices, partially offset by an increase of three percent in unit shipments. Average selling prices decreased from the first six months of 2004 as a result of adverse market conditions. The decrease in net sales for the period was mitigated by the reduction in the distribution margin payable by Spansion to Fujitsu under the Fujitsu Distribution Agreement in the first quarter of 2005, which added approximately $1 million to Memory Products net sales and the further reduction in the distribution margin payable by Spansion to Fujitsu in the second quarter of 2005, which added approximately $5 million to Memory Products net sales. The distribution margin payable in the first quarter of 2005 was generally 6.5 percent while the distribution margin payable in the first quarter of 2004 was generally seven percent. The distribution margin payable in the second quarter of 2005 was generally 4.3 percent while the distribution margin payable in the second quarter of 2004 was generally seven percent.

Memory Products Group operating loss of $90 million in the second quarter of 2005 decreased by $20 million compared to operating loss of $110 million in the first quarter of 2005. The decrease in operating loss was due primarily to the 12 percent increase in unit shipments discussed above, partially offset by the eight percent decrease in average selling prices discussed above. In addition, the decrease in the distribution margin payable to Fujitsu described above added approximately $4 million to Memory Products operating income in the second quarter of 2005.

Memory Products Group operating loss in the second quarter of 2005 was $90 million compared to operating income of $45 million in the second quarter of 2004. The decline in operating results compared to the second quarter of 2004 was due primarily to a decrease of average selling prices of 35 percent partially offset by an increase of five percent in unit shipments and the reduction in the distribution margin payable to Fujitsu described above.

Memory Products Group operating loss in the first six months of 2005 was $200 million compared to operating income of $59 million in the first six months of 2004. The decline in operating results was primarily due to a decrease in average selling prices of 32 percent partially offset by the reductions in the distribution margin payable to Fujitsu set forth above.

Personal Connectivity Solutions Group

Personal Connectivity Solutions Group net sales of $30 million in the second quarter of 2005 were flat compared to the first quarter of 2005. Increased sales of embedded processors and MIPS products were offset by decreased sales of networking products.

Personal Connectivity Solutions Group net sales of $30 million in the second quarter of 2005 decreased 12 percent compared to net sales of $35 million in the second quarter of 2004. The decrease in net sales was primarily attributable to a decrease in sales of AMD Geode^TM microprocessors and networking products.

Personal Connectivity Solutions Group net sales of $60 million in the first six months of 2005 decreased 17 percent compared to net sales of $72 million in the first six months of 2004. The decrease in net sales was primarily attributable to a decrease in sales of AMD Geode microprocessors and certain “end of life” embedded and networking products.

Personal Connectivity Solutions Group operating loss of $14 million in the second quarter of 2005 decreased by $3 million compared to an operating loss of $17 million in the first quarter of 2005. The decrease in operating loss was primarily due to increased sales of higher margin products.

Personal Connectivity Solutions Group operating loss of $14 million in the second quarter of 2005 was flat compared to the second quarter of 2004.

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Personal Connectivity Solutions Group operating loss of $31 million in the first six months of 2005 increased compared to $21 million in the first six months of 2004 primarily due to the decrease in net sales described above.

All Other Category

All Other operating loss of $13 million in the second quarter of 2005 increased by $2 million compared to the first quarter of 2005 primarily due to increased corporate branding expenses in the second quarter of 2005.

All Other operating loss of $13 million in the second quarter of 2005 decreased by $3 million compared to an operating loss of $16 million in the second quarter of 2004, primarily due to the absence of restructuring charges in the second quarter of 2005.

All Other operating loss of $24 million in the first six months of 2005 decreased from $29 million in the first six months of 2004 primarily due to the absence of restructuring charges in the first six months of 2005.

Comparison of Gross Margin; Expenses; Interest Income and Other, Net; Interest Expense and Taxes

The following is a summary of certain consolidated statement of operations data for the periods indicated:

	Quarter Ended									Six Months Ended
	June 26, 2005			March 27, 2005			June 27, 2004			June 26, 2005			June 27, 2004
	(in millions except for percentages)
Cost of sales	$	766		$	807		$	783		$	1,573		$	1,552
Gross margin percentage		39	%		34	%		38	%		37	%		38	%
Research and development	$	273		$	253		$	225		$	526		$	451
Marketing, general and administrative		229			212			179			441			359
Restructuring and other special charges (recoveries), net		—			—			3			—			3
Interest income and other, net		3			4			(2	)		7			9
Interest expense		26			24			28			50			58
Income tax provision (benefit)		(3	)		(2	)		4			(5	)		6

Gross Margin

Gross margin of 39 percent in the second quarter of 2005 improved from 34 percent in the first quarter of 2005 and was relatively flat compared to 38 percent in the second quarter of 2004. The improvement in gross margin from the first quarter of 2005 was primarily due to an increase in average selling prices of six percent for our microprocessor products and the 12 percent increase in unit shipments of our Flash memory products, partially offset by an eight percent decrease in average selling prices for our Flash memory products. Gross margin of 37 percent in the first six months of 2005 was relatively flat compared to 38 percent in the first six months of 2004.

We record grants and allowances that we receive from the State of Saxony and the Federal Republic of Germany for Fab 30 or Fab 36, and we recorded the interest subsidies we received for Fab 30, as long-term liabilities on our financial statements. We amortize these amounts as they are earned as a reduction to operating expenses. We record the amortization of the production related grants and allowances as a credit to cost of sales. The credit to cost of sales totaled $18 million in the second quarter of 2005, $18 million in the first quarter of 2005 and $17 million in the second quarter of 2004. The credit to cost of sales totaled $36 million in the first six months of 2005 and $31 million in the first six months of 2004. The fluctuations in the recognition of these credits have not significantly impacted our gross margins.

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We are currently capitalizing construction and facilitization costs related to Fab 36. Once Fab 36 begins producing revenue-generating products, which we anticipate will be in the first quarter of 2006, we will begin depreciating these costs to cost of sales.

Expenses

Research and development expenses of $273 million in the second quarter of 2005 increased eight percent compared to $253 million in the first quarter of 2005 and increased 21 percent compared to $225 million in the second quarter of 2004. Research and development expenses of $526 million in the first six months of 2005 increased 17 percent compared to $451 million in the first six months of 2004. Research and development expenses in the second quarter of 2005 increased from the first quarter of 2005 and second quarter of 2004 primarily due to start-up costs associated with the Fab 36 project. Research and development expenses in the first six months of 2005 increased from the first six months of 2004 primarily due to product engineering costs for new generations of our microprocessors and start-up costs associated with the Fab 36 project, which increased by approximately $42 million.

From time to time, we also apply for and obtain subsidies from the State of Saxony, the Federal Republic of Germany and the European Union for certain research and development projects. We record the amortization of the research and development related grants and allowances as well as the research and development subsidies as a reduction of research and development expenses when all conditions and requirements set forth in the subsidy grant are met. The credit to research and development expenses was $7 million in the second quarter of 2005, $14 million in the first quarter of 2005 and $4 million in the second quarter of 2004. The credit to research and development expenses totaled $21 million in the first six months of 2005 and $10 million in the first six months of 2004.

Marketing, general and administrative expenses of $229 million in the second quarter of 2005 increased eight percent compared with the first quarter of 2005 and increased 28 percent compared with the second quarter of 2004. The increases were primarily due to higher investments in corporate sponsorships and an increase in marketing development funds, which we provide to our customers under our market development programs, to support the increased demand for our microprocessor products. Marketing, general and administrative expenses of $441 million in the first six months of 2005 increased 23 percent compared to $359 million in the first six months of 2004. This increase was also primarily due to higher investments in corporate sponsorships and an increase in marketing development funds.

Effects of Our 2002 Restructuring Plan

In December 2002, we began implementing the 2002 Restructuring Plan to further align our cost structure to the industry conditions at that time, including weak customer demand and industry-wide excess inventory

With the exception of the facility exit costs consisting primarily of remaining lease payments on abandoned facilities, net of estimated sublease income, which are payable through 2011, we have completed the activities associated with the 2002 Restructuring Plan. As a result of the 2002 Restructuring Plan, 1,786 employees had been terminated resulting in cumulative cash payments of approximately $60 million in severance and employee benefit costs.

The following table summarizes activities under the 2002 Restructuring Plan from December 26, 2004 through June 26, 2005:

	Exit Costs
	(In thousands)
Accruals at December 26, 2004	$	105,676
First quarter 2005 cash payments		(5,243	)
Accruals at March 27, 2005	$	100,433
Second quarter 2005 cash payments		(5,338	)
Accruals at June 26, 2005	$	95,095

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Interest Income and Other, Net

Interest income and other, net, of approximately $3 million in the second quarter of 2005 decreased from $4 million in the first quarter of 2005 and improved from a net expense of $2 million in the second quarter of 2004. Interest income from our cash and investments in the second quarter of 2005 was approximately $7 million and was relatively flat compared with the first quarter of 2005 and increased by approximately $4 million from the second quarter of 2004 primarily as a result of higher interest rates and higher average investment balances.

Interest income and other, net, in the second quarter of 2005 included an expense of approximately $4 million for quarterly commitment fees payable to the lenders under the Fab 36 Loan Agreements. Interest income and other, net, in the second quarter of 2004 included a loss of approximately $6 million as a result of the mark-to-market of certain of our foreign currency forward contracts that we entered into as economic hedges for our then-forecasted capital contributions to AMD Fab 36 KG, which did not qualify as accounting hedges.

Interest income and other, net, in the first six months of 2005 of $7 million decreased from $9 million in the first six months of 2004. Interest income from our cash and investments in the first six months of 2005 was $14 million compared with $7 million in the first six months of 2004 primarily as a result of higher interest rates and higher average investment balances. Interest income and other, net, in the first six months of 2004 included a gain of $7 million from sales of third-party securities that we held as equity investments, offset by the $6 million loss in connection with our foreign currency forward contracts referenced above.

Interest Expense

Interest expense of $26 million in the second quarter of 2005 increased from $24 million in the first quarter of 2005 primarily due to an additional $1.6 million of interest expense that was capitalized rather than recognized as expense in the first quarter of 2005 in connection with our Fab 36 project. Interest expense of $26 million in the second quarter of 2005 decreased from $28 million in the second quarter of 2004 due to an additional $5 million of interest expense that was capitalized rather than recognized as expense in the second quarter of 2005 in connection with our Fab 36 project. Interest expense of $50 million in the first six months of 2005 decreased from $58 million in the first six months of 2004 for the following reasons: we capitalized an additional $13 million of interest expense in the first six months of 2005 in connection with our Fab 36 project, the absence of interest expense of approximately $16 million in connection with our previous term loan for Fab 30, which we prepaid in November 2004, and the reduction of interest expense of approximately $5 million because of the exchange of $201 million of our 4.50% Notes for our common stock during the fourth quarter of 2004, offset by interest expense of $24 million incurred on the 7.75% Senior Notes due 2012 that we sold in October 2004.

Income Taxes

We recorded income tax benefits of approximately $3 million, or 38 percent of pre-tax income, in the second quarter of 2005 and $2 million, or 9 percent of pre-tax loss, in the first quarter of 2005 and an income tax provision of approximately $4 million, or 10 percent of pre-tax income, in the second quarter of 2004. The income tax benefits recorded in the first and second quarters of 2005 were primarily for foreign tax benefits on losses by certain foreign subsidiaries. The income tax provision recorded in the second quarter of 2004 was primarily for taxes due on income generated by certain foreign subsidiaries. For 2005, the effective tax rate method was used for all taxable subsidiaries except Spansion Japan. Spansion Japan used the cut-off method for 2005. Use of the cut-off method for Spansion Japan resulted in a larger credit provision as a result of reductions in deferred tax liabilities during the second quarter of 2005. For 2004, the effective tax rate method was used by all material subsidiaries.

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The effective tax benefit rate for the six months ended June 26, 2005 was approximately 44 percent. The $5 million tax benefit for the six months ended June 26, 2005 was primarily for foreign tax benefits on losses by certain foreign subsidiaries. The effective tax rate for the six months ended June 24, 2004 was approximately 7 percent. The $6 million tax provision for the six months ended June 27, 2004 was primarily for taxes due on income generated by certain foreign subsidiaries.

Other Items

Foreign Operations

International net sales were 76 percent of total net sales in the second quarter of 2005, 78 percent in the first quarter of 2005 and 80 percent in the second quarter of 2004. During the second quarter of 2005, approximately 16 percent of our net sales were denominated in currencies other than the U.S. dollar, primarily the Japanese yen, as compared to 17 percent during the first quarter of 2005 and 28 percent during the second quarter of 2004. Sales denominated in foreign currencies consist primarily of sales by Spansion to Fujitsu, which are denominated in yen.

As a result of our foreign operations, we have net sales, costs, assets and liabilities that are denominated in foreign currencies. For example:

• a significant portion of our manufacturing costs for our microprocessor products is denominated in euro while sales of those products are denominated primarily in U.S. dollars;

• certain manufacturing costs for our Spansion Flash memory products are denominated in yen;

• certain manufacturing costs for both our Spansion Flash memory products and our microprocessor products are denominated in Chinese yuan renminbi as well as other foreign currencies such as the Thai baht and the Singapore dollar;

• certain of our fixed asset purchases are denominated in euro and yen;

• sales of our Flash memory products in Japan are denominated in yen; and

• a significant amount of costs of our Fab 36 project is denominated in euro.

As a consequence, movements in exchange rates could cause our expenses to increase as a percentage of net sales, affecting our profitability and cash flows. We use foreign currency forward and option contracts to reduce our exposure to currency fluctuations. The objective of these contracts is to minimize the impact of foreign currency exchange rate movements on our operating results. The net impact on our operating results from changes in foreign currency rates individually and in the aggregate has not been material, principally as a result of our foreign currency forward contracts and option contracts referenced above.

Stock Option Acceleration

On April 27, 2005, we accelerated the vesting of all employee stock options outstanding under our 2004 Equity Incentive Plan and our prior equity compensation plans that had exercise prices per share higher than the closing price of our common stock on April 27, 2005, which was $14.51. Options to purchase approximately 12 million shares of our common stock became exercisable immediately. Options held by non-employee directors were not included in the vesting acceleration.

The primary purpose for modifying the terms of these options to accelerate their vesting was to eliminate the need to recognize remaining unrecognized non-cash compensation expense in our statement of operations associated with these options as measured under Financial Accounting Standards Board Statement of Financial Accounting Standards No. 123 (Revised 2004), Share-Based Payment (“SFAS 123R”). We are required to adopt SFAS 123R effective as of the beginning of the first quarter of 2006. At that time we will be required to recognize the compensation expense associated with stock options in the statement of operations, rather than only disclosing such amount in a pro forma footnote in our consolidated financial statements. .

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We are currently evaluating the requirements of SFAS 123R and do not plan to adopt the new accounting standard prior to its required effective date. Although we are still evaluating the effect of SFAS 123R on us, we expect that the adoption of SFAS 123R will have a material effect on our financial statements.

FINANCIAL CONDITION

We have a substantial amount of indebtedness. As of June 26, 2005, we had consolidated debt of approximately $1.9 billion.

Our cash, cash equivalents and short-term investments at June 26, 2005 totaled approximately $1.2 billion, which included approximately $171 million in cash, cash equivalents and short-term investments held by Spansion. Spansion’s operating agreement governs its ability to use this cash balance for operations or to distribute it to us and Fujitsu. Pursuant to the operating agreement, and subject to restrictions contained in third-party loan agreements, Spansion must first distribute any cash balance to us and Fujitsu in an amount sufficient to cover each party’s estimated tax liability, if any, related to Spansion’s taxable income for each fiscal year. Any remaining cash balance after the tax liability distribution would be used by Spansion to fund its operations in accordance with its budget. If any cash remains, it must be used to repay Spansion’s outstanding debt to us and Fujitsu. Any remaining cash after these distributions is distributed at the discretion of Spansion’s Board of Managers to us and Fujitsu, pro rata, based on each party’s membership interest at the time of distribution, which currently is 60 percent for AMD and 40 percent for Fujitsu.

Net Cash Provided by Operating Activities

Net cash provided by operating activities in the first six months of 2005 was approximately $516 million. Our net loss for the period was adjusted for non-cash charges, which were primarily depreciation and amortization. Inventory increased in the first six months of 2005 by approximately $35 million in anticipation of increased demand for our AMD64-based processors during the second half of 2005. Accounts payable and accrued liabilities increased in the first six months of 2005 primarily due to purchases of equipment for Fab 36.

Net cash provided by operating activities in the first six months of 2004 was approximately $461 million. Our net income for the period was adjusted for non-cash charges, which were primarily depreciation and amortization. The net changes in payables and accrued liabilities in the first six months of 2004 included refunds of approximately $21 million of customer deposits under long-term purchase agreements and $27 million in royalty payments under a cross-license agreement. In addition, inventories increased in the first six months of 2004 by approximately $31 million in anticipation of increased seasonal demand during the second half of 2004. Substantially all of the increase in inventories was related to AMD64-based processors.

Net Cash Used in Investing Activities

Net cash used in investing activities was $1,057 million in the first six months of 2005. Cash was used primarily to purchase short-term investments and property, plant and equipment, including approximately $485 million for completing the construction and continuing with the facilitization of Fab 36.

Net cash used in investing activities was $660 million in the first six months of 2004. Cash was used primarily to purchase short-term investments and property, plant and equipment, including approximately $173 million for the continuing construction of Fab 36.

Net Cash Provided by (Used in) Financing Activities

Net cash provided by financing activities was $332 million in the first six months of 2005, primarily from capital investment grants and allowances from the Federal Republic of Germany and the State of Saxony for the Fab 36 project, proceeds from an equipment sale leaseback transaction, proceeds from amounts borrowed pursuant to the Spansion Japan Revolving Loan Agreement, sale of stock under our Employee Stock Purchase Plan and upon employee stock option exercises, partially offset by payments on outstanding debt and capital lease obligations.

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Net cash used by financing activities was $66 million in the first six months of 2004, primarily for payments on debt and capital lease obligations, offset by proceeds from amounts borrowed by our subsidiaries under short-term loans, an equipment sale leaseback transaction, sale of stock under our Employee Stock Purchase Plan and upon employee stock option exercises.

Liquidity

We believe that cash flows from operations and current cash balances, together with currently available credit facilities (see “Revolving Credit Facilities,” below) and external financing, will be sufficient to fund operations and currently planned capital investments in the short-term and long-term. We also believe we have sufficient financing arrangements in place to fund the Fab 36 project through 2007. See “Fab 36 Term Loan and Guarantee and Fab 36 Partnership Agreements,” below. Should additional funding be required, such as to meet payment obligations of our long-term debt when due, we may need to raise the required funds through bank borrowings, or from issuances of additional debt or equity securities, which may be issued from time to time under an effective registration statement, through the issuance of securities in a transaction exempt from registration under the Securities Act of 1933 or a combination of one or more of the foregoing. We believe that, in the event of such requirements, we will be able to access the capital markets on terms and in amounts adequate to meet our objectives. However, given the possibility of changes in market conditions or other occurrences, we cannot be certain that such funding will be available in quantities or on terms favorable to us.

Revolving Credit Facilities

AMD Revolving Credit Facility

Our revolving credit facility provides for a secured revolving line of credit of up to $100 million that expires in July 2007. We can borrow, subject to amounts set aside by the lenders, up to 85 percent of our eligible accounts receivable from OEMs and 50 percent of our eligible accounts receivable from distributors. As of June 26, 2005, no borrowings were outstanding under our revolving credit facility.

Pursuant to the terms of our revolving credit facility, we have to comply with, among other things, the following financial covenants if our net domestic cash (as defined in our revolving credit facility) declines below $125 million:

• restrictions on our ability to pay cash dividends on our common stock;

• maintain an adjusted tangible net worth (as defined in our revolving credit facility) as follows:

Measurement Date	Amount
	(in millions)
Last day of each fiscal quarter in 2005	$	1,850
Last day of each fiscal quarter thereafter	$	2,000

• achieve EBITDA (earnings before interest, taxes, depreciation and amortization) of $1,050 million, measured at the end of each fiscal quarter on a rolling four-fiscal quarter basis.

As of June 26, 2005, net domestic cash, as defined, totaled $846 million and the preceding financial covenants were not applicable. Our obligations under our revolving credit facility are secured by all of our accounts receivable, inventory, general intangibles (excluding intellectual property) and the related proceeds, excluding Spansion’s accounts receivable, inventory and general intangibles.

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Spansion Japan Revolving Loan Agreement

In March 2004, Spansion Japan, a subsidiary of Spansion, entered into a revolving credit facility agreement with certain Japanese financial institutions. On March 25, 2005, Spansion Japan amended this agreement and renewed it for an additional one-year period under substantially the same terms. The revolving facility, which is comprised of two tranches, provides for an aggregate loan amount of up to 15 billion yen (approximately $137 million as of June 26, 2005). Tranche A provides for an aggregate amount of up to six billion yen (approximately $55 million as of June 26, 2005) and tranche B provides for an aggregate amount of up to nine billion yen (approximately $82 million as of June 26, 2005). Spansion Japan can draw under the facility until March 24, 2006. However, as described in more detail below, the total amount that Spansion Japan can draw is limited based on the value of Spansion Japan’s accounts receivable from Fujitsu, which are pledged as security to the lenders.

Amounts borrowed under tranche A bear interest at a rate equal to the Tokyo Interbank Offered Rate, or TIBOR, plus 0.55 percent. Amounts borrowed under tranche B bear interest at a rate of TIBOR plus 1.2 percent. Spansion Japan must first fully draw under tranche A prior to drawing amounts under tranche B. Borrowings must be used for working capital purposes and must be repaid no later than April 24, 2006.

As of June 26, 2005, $50 million was outstanding under tranche A and no amount was outstanding under tranche B. The amount outstanding under tranche A bears interest at a rate of 0.63 percent and must be repaid by September 26, 2005.

Pursuant to the terms of the revolving facility credit agreement, Spansion Japan is not permitted to make distributions, including declaring any dividends other than those to be declared after the end of each fiscal quarter and is required to comply with the following financial covenants under accounting principles generally accepted in Japan:

• ensure that assets exceed liabilities as of the end of each fiscal year and each six-month (mid-year) period;

• maintain an adjusted tangible net worth (as defined in the agreement) at an amount not less than 60 billion yen (approximately $550 million as of June 26, 2005) as of the last day of each fiscal quarter;

• maintain total net income plus depreciation of 21.125 billion yen (approximately $194 million as of June 26, 2005) as of the last day of fiscal year 2005; and

• ensure that as of each of the last day of the third and fourth quarter of fiscal 2005, the ratio of (a) net income plus depreciation to (b) the sum of interest expenses plus the amount of scheduled debt repayments plus maintenance capital expenditures for its facilities located in Aizu-Wakamatsu, Japan, for such period, is not less than 120 percent.

In addition, Spansion Japan cannot, without the consent of the majority lenders (as defined in the agreement), enter into any consolidation or merger, or transfer, lease or otherwise dispose of all or substantially all of its assets or business, or remove any equipment from its Aizu-Wakamatsu facilities or transfer or otherwise dispose of these facilities, in a manner that may substantially affect Spansion Japan’s ability to make repayments under this agreement. Spansion Japan cannot obtain any loans from a third party or provide a guarantee or any loans to a third party that may substantially affect Spansion Japan’s ability to make repayments under this agreement.

As of June 26, 2005, Spansion Japan was in compliance with these covenants.

In addition, if Spansion Japan’s minimum cash balance is less than one billion yen (approximately $9 million as of June 26, 2005), Spansion Japan is prohibited from:

• subject to ordinary course of business and certain other exceptions, entering into any merger, reorganization or consolidation, or transferring, leasing or otherwise disposing of all or any part of its assets, or entering into any agreement concerning such transactions;

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• making certain distributions, including declaring any dividends other than those to be declared after the end of each fiscal quarter, and redeeming, repurchasing, retiring or otherwise acquiring its capital stock or any option for such capital stock; or

• changing its capital structure (including capital reduction) in a way that may substantially affect Spansion Japan’s ability to meet its obligations under the agreement.

Because during the term of this agreement Spansion Japan has maintained a cash balance that has been greater than one billion yen, these covenants have not been applicable.

As security for amounts outstanding under the revolving facility, Spansion Japan pledged its accounts receivable from Fujitsu. The accounts receivable are held in trust pursuant to the terms of a trust agreement. Under the trust agreement, Spansion Japan is required to maintain the value of its accounts receivable at specified thresholds (as defined by the trust agreement), based upon the amounts outstanding under tranche A and tranche B. The trustee collects payments from Fujitsu into a separate trust account and releases these amounts to Spansion Japan, subject to the specified threshold amounts required to be maintained by Spansion Japan. At any time when the accounts receivable balance in the trust account is less than the required threshold amount, Spansion Japan is required to do one of the following to cure the shortfall:

• provide additional cash to the trust; or

• repay a specified portion of the outstanding loans.

Amounts outstanding under the revolving credit facility may be accelerated and become due and payable on demand upon the occurrence of specified events with respect to Spansion Japan, including: filings or proceedings in bankruptcy, failure to pay any obligations under the revolving credit facility that have become due, failure to pay other third-party indebtedness where such debt exceeds 200 million yen (approximately $1.8 million as of June 26, 2005), or if the value of the accounts receivable from Fujitsu held in trust is below the required thresholds and such shortfall is not remedied within three business days. In addition, amounts outstanding under the revolving credit facility may become automatically due and payable upon the occurrence of specified events with respect to Fujitsu including: suspension of any payment by Fujitsu, filings or proceedings in bankruptcy or corporate reorganization, failure of any check or note issued by Fujitsu to clear for payment, default by Fujitsu with respect to payments to Spansion Japan or other obligations under the distribution agreement with us, and default by Fujitsu with respect to other third-party indebtedness where such debt exceeds 1.0 billion yen (approximately $9 million as of June 26, 2005). As of June 26, 2005, the amount of accounts receivable held in trust was approximately $162 million.

Because borrowings under the Spansion Japan revolving loan agreement are denominated in yen, the U.S. dollar amounts stated above are subject to change based on applicable exchange rates. We used the exchange rate as of June 26, 2005 of 109.1 yen to one U.S. dollar to translate the amounts denominated in yen into U.S. dollars.

Contractual Cash Obligations and Guarantees

The following table summarizes our principal contractual cash obligations as of June 26, 2005, and is supplemented by the discussion following the table.

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Principal contractual cash obligations as of June 26, 2005 were:

	Total		2005		2006		2007		2008		2009		2010 and beyond
	(in thousands)
4.75% Debentures	$	500,000	$	—	$	—	$	—	$	—	$	—	$	500,000
4.50% Notes		201,500		—		—		201,500		—		—		—
7.75% Notes		600,000		—		—		—		—		—		600,000
Repurchase Obligations to Fab 36 Partners (1)		144,734		14,234		32,625		32,625		32,625		32,625		—
July 2003 Spansion Term Loan		30,849		13,750		17,099		—		—		—		—
Spansion Japan Term Loan		98,991		21,998		43,996		32,997		—		—		—
Spansion Japan Revolving Loan		50,412		50,412		—		—		—		—		—
Fujitsu Cash Note		40,000		10,000		30,000		—		—		—		—
AMD Penang Term Loan		5,566		759		1,518		1,518		1,518		253		—
Spansion China Loan		28,131		28,131		—		—		—		—		—
Capital Lease Obligations		196,044		56,072		93,600		46,154		218		—		—
Other Long-term Liabilities		18,877		—		3,191		3,997		3,997		2,064		5,627
Operating Leases (2)		409,069		37,951		68,154		55,349		46,621		38,595		162,399
Unconditional Purchase Commitments (2)(3)		1,277,091		117,139		304,557		296,130		177,219		42,061		339,985
Total principal contractual cash obligations	$	3,601,264	$	350,446	$	594,740	$	670,270	$	262,198	$	115,598	$	1,608,011

⁽¹⁾ This amount represents the silent partnership contributions received by our subsidiary AMD Fab 36 Limited Liability Company & Co. KG, or AMD Fab 36 KG, as of June 26, 2005 from the unaffiliated limited partners, Fab 36 Beteiligungs and Leipziger Messe, under the Fab 36 partnership agreements. AMD Fab 36 Holding GmbH, our wholly owned subsidiary that owns substantially all of our limited partnership interest in AMD Fab 36 KG, and AMD Fab 36 Admin GmbH, our indirect wholly owned subsidiary that owns the remainder of our limited partnership interest in AMD Fab 36 KG, are required to repurchase up to $169 million of the unaffiliated limited partners’ silent partnership contributions in annual installments beginning one year after the partner has contributed the full amount required under the partnership agreements. As of June 26, 2005, Fab 36 Beteiligungs had contributed the full amount required under the partnership agreements, but Leipziger Messe had not contributed the full amount in accordance with the partnership agreements. Therefore, the condition precedent to our repurchase obligations with respect to Leipziger Messe’s silent partnership contribution had not been met. For purposes of this table, we assumed that Leipziger Messe will have contributed the full amount by December 2005. See “Fab 36 Term Loan and Guarantee and Fab 36 Partnership Agreements,” below.

⁽²⁾ Lease and purchase obligations that are cancelable upon notice and without significant penalties are not included in the amounts above.

⁽³⁾ We have unconditional purchase commitments for goods and services where payments are based, in part, on the volume or the types of services we require. In those cases, where determinable, we only included the minimum volume or purchase commitment in the table above.

4.75% Convertible Senior Debentures Due 2022

On January 29, 2002 we issued $500 million of our 4.75% Convertible Senior Debentures due 2022 (the 4.75% Debentures) in a private offering pursuant to Rule 144A and Regulation S of the Securities Act.

The interest rate payable on the 4.75% Debentures will reset on August 1, 2008, August 1, 2011 and August 1, 2016 to a rate equal to the interest rate payable 120 days prior to the reset dates on 5-year U.S. Treasury Notes, plus 43 basis points. The interest rate cannot be less than 4.75 percent and cannot exceed 6.75 percent. Holders have the right to require us to repurchase all or a portion of our 4.75% Debentures on February 1, 2009, February 1, 2012, and February 1, 2017. The holders of the 4.75% Debentures also have the ability to require us to repurchase the 4.75% Debentures in the event that we undergo specified fundamental changes, including a change of control. In each such case, the redemption or repurchase price would be 100 percent of the principal amount of the 4.75% Debentures plus accrued and unpaid interest. The 4.75% Debentures are convertible by the holders into our common stock at a conversion price of $23.38 per share at any time. At this conversion price, each $1,000 principal amount of the 4.75% Debentures will be convertible into approximately 43 shares of our common stock. Issuance costs incurred in the amount of approximately $14 million are amortized ratably, which approximates the effective interest method, over the term of the 4.75% Debentures, as interest expense.

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Since February 5, 2005, the 4.75% Debentures have been redeemable by us for cash at our option at specified prices expressed as a percentage of the outstanding principal amount plus accrued and unpaid interest, provided that we may not redeem the 4.75% Debentures prior to February 5, 2006, unless the last reported sale price of our common stock is at least 130 percent of the then-effective conversion price for at least 20 trading days within a period of 30 consecutive trading days ending within five trading days of the date of the redemption notice. As of June 26, 2005, we would not have been able to redeem the 4.75% Debentures because the requirement set forth above was not met.

The redemption prices for the specified periods are as follows:

Period	Price as a Percentage of Principal Amount
Beginning on February 5, 2005 through February 4, 2006	102.375	%
Beginning on February 5, 2006 through February 4, 2007	101.583	%
Beginning on February 5, 2007 through February 4, 2008	100.792	%
Beginning on February 5, 2008	100.000	%

We may elect to purchase or otherwise retire our 4.75% Debentures with cash, stock or other assets from time to time in open market or privately negotiated transactions, either directly or through intermediaries, or by tender offer when we believe that market conditions are favorable to do so. Such purchases may have a material effect on our liquidity, financial condition and results of operations.

4.50% Convertible Senior Notes Due 2007

On November 25, 2002, we issued $402.5 million of 4.50% Convertible Senior Notes due 2007 (the 4.50% Notes) in a registered offering. During the fourth quarter of 2004, we exchanged an aggregate of $201 million of these 4.50% Notes for 29,391,261 shares of our common stock. Accordingly, as of June 26, 2005, $201.5 million of our 4.50% Notes were outstanding. Interest on the 4.50% Notes is payable semiannually in arrears on June 1 and December 1 of each year, beginning June 1, 2003. Beginning on December 4, 2005, the remaining 4.50% Notes will be redeemable by us at our option for cash at specified prices expressed as a percentage of the outstanding principal amount plus accrued and unpaid interest, provided that we may not redeem the 4.50% Notes unless the last reported sale price of our common stock is at least 150 percent of the then-effective conversion price for at least 20 trading days within a period of 30 trading days ending within five trading days of the date of the redemption notice.

The redemption prices for the specified periods are as follows:

Period	Price as a Percentage of Principal Amount
Beginning on December 4, 2005 through November 30, 2006	101.800	%
Beginning on December 1, 2006 through November 30, 2007	100.900	%
On December 1, 2007	100.000	%

The remaining 4.50% Notes are convertible at the option of the holder at any time prior to the close of business on the business day immediately preceding the maturity date of December 1, 2007, unless previously redeemed or repurchased, into shares of common stock at a conversion price of $7.37 per share, subject to adjustment in certain circumstances. At this conversion price, each $1,000 principal amount of the remaining 4.50% Notes will be convertible into approximately 135 shares of our common stock. Approximately $6 million of the original issuance costs associated with the remaining 4.50% Notes continue to be amortized ratably over the term of the 4.50% Notes, as interest expense, approximating the effective interest method.

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Holders have the right to require us to repurchase all or a portion of our remaining 4.50% Notes in the event that we undergo specified fundamental changes, including a change of control. In each such case, the redemption or repurchase price would be 100 percent of the principal amount of the 4.50% Notes plus accrued and unpaid interest.

We may elect to purchase or otherwise retire the remainder of our 4.50% Notes with cash, stock or other assets from time to time in open market or privately negotiated transactions, either directly or through intermediaries, or by tender offer when we believe that market conditions are favorable to do so. Such purchases may have a material effect on our liquidity, financial condition and results of operations.

7.75% Senior Notes Due 2012

On October 29, 2004, we issued $600 million of 7.75% Senior 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 publicly registered notes (the 7.75% Notes) are registered under the Securities Act of 1933 and, therefore, do not contain legends restricting their transfer.

The 7.75% Notes mature on November 1, 2012. Interest on the 7.75% Notes is payable semiannually in arrears on May 1 and November 1, beginning May 1, 2005. Prior to November 1, 2008, we may redeem some or all of the 7.75% Notes at a price equal to 100% of the principal amount plus accrued and unpaid interest plus a “make-whole” premium, as defined in the agreement. Thereafter, we may redeem the 7.75% Notes for cash at the following specified prices plus accrued and unpaid interest:

Period	Price as Percentage of Principal Amount
Beginning on November 1, 2008 through October 31, 2009	103.875	%
Beginning on November 1, 2009 through October 31, 2010	101.938	%
Beginning on November 1, 2010	100.000	%

In addition, on or prior to November 1, 2007, we may redeem up to 35 percent of the 7.75% Notes with the proceeds of certain sales of our equity securities at 107.75 percent of the principal amount thereof, plus accrued and unpaid interest.

Holders have the right to require us to repurchase all or a portion of our 7.75% Notes in the event that we undergo a change of control, as defined in the indenture governing the 7.75% Notes at a repurchase price of 101% of the principal amount plus accrued and unpaid interest.

The indenture governing the 7.75% Notes contains certain covenants that limit, among other things, our ability and the ability of our restricted subsidiaries, which include all of our subsidiaries except Spansion and its subsidiaries, from:

• incurring additional indebtedness;

• paying dividends and making other restricted payments;

• making certain investments, including investments in our unrestricted subsidiaries;

• creating or permitting certain liens;

• creating or permitting restrictions on the ability of the restricted subsidiaries to pay dividends or make other distributions to us;

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• using the proceeds from sales of assets;

• entering into certain types of transactions with affiliates; and

• consolidating or merging or selling our assets as an entirety or substantially as an entirety.

Issuance costs incurred in connection with this transaction in the amount of approximately $13 million are being amortized ratably over the term of the 7.75% Notes as interest expense, approximating the effective interest method.

We may elect to purchase or otherwise retire our 7.75% Notes with cash, stock or other assets from time to time in open market or privately negotiated transactions, either directly or through intermediaries, or by tender offer when we believe that market conditions are favorable to do so. Such purchases may have a material effect on our liquidity, financial condition and results of operations.

Fab 36 Term Loan and Guarantee and Fab 36 Partnership Agreements

We are facilitizing Fab 36, which is located adjacent to Fab 30. Fab 36 is owned by a German limited partnership named AMD Fab 36 Limited Liability Company & Co. KG, or AMD Fab 36 KG. We control the management of AMD Fab 36 KG through a wholly owned Delaware subsidiary, AMD Fab 36 LLC, which is a general partner of AMD Fab 36 KG. AMD Fab 36 KG is our indirect consolidated subsidiary. We expect that Fab 36 will produce future generations of our microprocessor products, and that it will be in production in the first quarter of 2006.

AMD, Leipziger Messe GmbH, a nominee of the State of Saxony, Fab 36 Beteiligungs GmbH & Co. KG, an investment consortium arranged by M+W Zander Facility Engineering GmbH, the general contractor for the project, and a consortium of banks are providing financing for the project. Leipziger Messe and Fab 36 Beteiligungs are limited partners in AMD Fab 36 KG. We also anticipate receiving up to approximately $656 million in grants and allowances from federal and state German authorities for the Fab 36 project, depending on the level of capital investments by AMD Fab 36. We expect that capital expenditures for Fab 36, from commencement of the project through 2007, will be approximately $2.5 billion in the aggregate.

The funding to construct and facilitize Fab 36 consists of:

• equity contributions from us of a total of approximately $707 million under the partnership agreements, of which approximately $212 million remains to be contributed as of June 26, 2005; revolving loans from us of up to approximately $906 million, and guarantees from us for amounts owed by AMD Fab 36 KG and its affiliates to the lenders and unaffiliated limited partners;

• investments of up to a total of approximately $387 million from Leipziger Messe and Fab 36 Beteiligungs, of which $59 million remains to be invested as of June 26, 2005;

• loans of up to approximately $846 million from a consortium of banks;

• up to approximately $656 million of subsidies consisting of grants and allowances, from the Federal Republic of Germany and the State of Saxony, depending on the level of capital investments by AMD Fab 36, of which $196 million of cash has been received as of June 26, 2005; and

• a loan guarantee from the Federal Republic of Germany and the State of Saxony of 80 percent of the losses sustained by the lenders referenced above after foreclosure on all other security.

As of June 26, 2005, we had contributed $495 million of equity in AMD Fab 36 KG and no loans were outstanding. These amounts have been eliminated in our consolidated financial statements.

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On April 21, 2004, AMD, AMD Fab 36 KG, AMD Fab 36 LLC, AMD Fab 36 Holding GmbH, our wholly owned subsidiary that owns substantially all of our limited partnership interest in AMD Fab 36 KG, and AMD Fab 36 Admin GmbH, our indirect wholly owned subsidiary that owns the remainder of our limited partnership interest in AMD Fab 36 KG, (collectively referred to as the AMD companies) entered into a series of agreements (the partnership agreements) with the unaffiliated limited partners of AMD Fab 36 KG, Leipziger Messe and Fab 36 Beteiligungs, relating to the rights and obligations with respect to their capital contributions in AMD Fab 36 KG. The partnership has been established for an indefinite period of time. A partner may terminate its participation in the partnership by giving twelve months advance notice to the other partners. The termination becomes effective at the end of the year following the year during which the notice is given. However, other than for good cause, a partner’s termination would not be effective before December 31, 2015.

Also on April 21, 2004, AMD Fab 36 KG entered into a term loan agreement and other related agreements (the Fab 36 Loan Agreements) with a consortium of banks led by Dresdner Bank AG, a German financial institution, to finance the purchase of equipment and tools required to operate Fab 36. The consortium of banks agreed to make available up to $846 million in loans to AMD Fab 36 KG upon its achievement of specified milestones, including attainment of “technical completion” at Fab 36, which requires certification by the banks’ technical advisor that AMD Fab 36 KG has a wafer fabrication process suitable for high-volume production of advanced microprocessors and has achieved specified levels of average wafer starts per week and average wafer yields, as well as cumulative capital expenditures of approximately $1.2 billion. We currently anticipate that AMD Fab 36 KG will attain these milestones and first be able to draw on the loans in 2006. The amounts borrowed under the Fab 36 Loan Agreements are repayable in quarterly installments commencing in September 2007 and terminating in March 2011.

AMD Fab 36 KG pledged substantially all of its current and future assets as security under the Fab 36 Loan Agreements, we pledged our equity interest in AMD Fab 36 Holding and AMD Fab 36 LLC, AMD Fab 36 Holding pledged its equity interest in AMD Fab 36 Admin and its partnership interest in AMD Fab 36 KG, and AMD Fab 36 Admin and AMD Fab 36 LLC pledged all of their partnership interests in AMD Fab 36 KG. We guaranteed the obligations of AMD Fab 36 KG to the lenders under the Fab 36 Loan Agreements. We also guaranteed repayment of grants and allowances by AMD Fab 36 KG, should such repayment be required pursuant to the terms of the subsidies provided by the federal and state German authorities.

Pursuant to the terms of the guarantee between us and the lenders, we have to comply with specified adjusted tangible net worth and EBITDA financial covenants if the sum of our and our subsidiaries’ cash, cash equivalents and short-term investments, less the amount outstanding under any third-party revolving credit facility or term loan agreement with an original maturity date for amounts borrowed of up to one year (group consolidated cash), declines below the following amounts:

Amount (in thousands)		if Moody’s Rating is at least		if Standard & Poor’s Rating is at least
$	500,000	B1 or lower	and	B+ or lower
	425,000	Ba3	and	BB-
	400,000	Ba2	and	BB
	350,000	Ba1	and	BB+
	300,000	Baa3 or better	and	BBB-or better

As of June 26, 2005, group consolidated cash was greater than $500 million, and therefore, the preceding financial covenants were not applicable.

The partnership agreements set forth each limited partner’s aggregate capital contribution to AMD Fab 36 KG and the milestones for such contributions. Pursuant to the terms of the partnership agreements, AMD, through AMD Fab 36 Holding and AMD Fab 36 Admin, agreed to provide an aggregate of $707 million, of which approximately $212 million remains to be contributed as of June 26, 2005, Leipziger Messe agreed to provide an aggregate of $242

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million and Fab 36 Beteiligungs agreed to provide an aggregate of $145 million. The capital contributions of Leipziger Messe and Fab 36 Beteiligungs are comprised of limited partnership contributions and silent partnership contributions, collectively referred to as the partnership contributions or interests. These contributions are due at various dates upon the achievement of milestones relating to the construction and operation of Fab 36.

The partnership agreements also specify that the unaffiliated limited partners will receive a guaranteed rate of return of between 11 percent and 13 percent per annum on their total partnership contributions depending upon the monthly wafer output of Fab 36. We guaranteed these payments by AMD Fab 36 KG.

In April 2005, we amended the partnership agreements in order to restructure the proportion of Leipziger Messe’s silent partnership and limited partnership contributions. Although the total aggregate amount that Leipziger Messe has agreed to provide remained unchanged, the portion of its contribution that constitutes limited partnership interests was reduced by approximately $60 million while the portion of its contribution that constitutes silent partnership interests was increased by a corresponding amount. In this report, we refer to this additional silent partnership contribution as the New Silent Partnership Amount.

Pursuant to the terms of the partnership agreements and subject to the prior consent of the Federal Republic of Germany and the State of Saxony, AMD Fab 36 Holding and AMD Fab 36 Admin have a call option over the partnership interests held by Leipziger Messe and Fab 36 Beteiligungs, first exercisable three and one-half years after the relevant partner has completed its capital contribution and every three years thereafter. Also, commencing five years after completion of the relevant partner’s capital contribution, Leipziger Messe and Fab 36 Beteiligungs each have the right to sell their partnership interest to third parties (other than competitors), subject to a right of first refusal held by AMD Fab 36 Holding and AMD Fab 36 Admin, or to put their partnership interest to AMD Fab 36 Holding and AMD Fab 36 Admin. The put option is thereafter exercisable every three years. Leipziger Messe and Fab 36 Beteiligungs also have a put option in the event they are outvoted at AMD Fab 36 KG partners’ meetings with respect to certain specified matters such as increases in the partners’ capital contributions beyond those required by the partnership agreements, investments significantly in excess of the business plan, or certain dispositions of the limited partnership interests of AMD Fab 36 Holding and AMD Fab 36 Admin. The purchase price under the put option is the partner’s capital account balance plus accumulated or accrued profits due to such limited partner. The purchase price under the call option is the same amount, plus a premium of $4.2 million to Leipziger Messe and a premium of $2.5 million to Fab 36 Beteiligungs. The right of first refusal price is the lower of the put option price or the price offered by the third party that triggered the right. We guaranteed the payments under the put options.

In addition, AMD Fab 36 Holding and AMD Fab 36 Admin are obligated to repurchase Leipziger Messe’s and Fab 36 Beteiligungs’ silent partnership contributions over time. This mandatory repurchase obligation does not apply to the New Silent Partnership Amount. Specifically, AMD Fab 36 Holding and AMD Fab 36 Admin are required to repurchase approximately $97 million of Leipziger Messe’s silent partnership contributions in four installments of approximately $24 million each, commencing one year after Leipziger Messe has completed its aggregate partnership contributions, and Fab 36 Beteiligungs’ silent partnership contributions of approximately $73 million in annual 20 percent installments commencing in October 2005.

For accounting and financial reporting purposes under United States generally accepted accounting principles, we classified the portion of the silent partnership contribution that is mandatorily redeemable as debt, based on its fair value because of the mandatory redemption features described in the prior paragraph. Each accounting period, we increase the carrying value of this debt towards our ultimate redemption value of the silent partnership contributions by the guaranteed annual rate of return of between 11 percent to 13 percent. We classify this periodic accretion to redemption value as interest expense.

The limited partnership contributions that AMD Fab 36 KG expects to receive from Leipziger Messe and Fab 36 Beteiligungs and the New Silent Partnership Portion described above are not mandatorily redeemable, but rather are subject to redemption outside of the control of AMD Fab 36 Holding and AMD Fab 36 Admin. Upon consolidation, we initially record these contributions as minority interest, based on their fair value. Each accounting period, we increase the carrying value of this minority interest toward our ultimate redemption value of these contributions by

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the guaranteed rate of return of between 11 percent and 13 percent. We classify this periodic accretion of redemption value as an additional minority interest allocation. No separate accounting is required for the put and call options because they are not freestanding instruments and not considered derivatives under SFAS 133, Accounting for Derivative Instruments and Hedging Activities.

As of June 26, 2005, AMD Fab 36 KG received $145 million of silent partnership contributions and $183 million of limited partnership contributions, which includes a New Silent Partnership Amount of $48 million, from the unaffiliated limited partners. These contributions were recorded as debt and minority interest, respectively, in the accompanying consolidated balance sheet.

In addition to support from us and the consortium of banks referred to above, the Federal Republic of Germany and the State of Saxony have agreed to support the Fab 36 project in the form of:

• a loan guarantee equal to 80 percent of the losses sustained by the lenders after foreclosure on all other security; and

• subsidies consisting of grants and allowances of up to approximately $656 million, depending on the level of capital investments by AMD Fab 36.

In connection with the receipt of subsidies for the Fab 36 project, AMD Fab 36 KG is required to attain a certain employee headcount by December 2007 and maintain this headcount through December 2012. We record the subsidies as long-term liabilities on our financial statements and amortize them to operations ratably starting from December 2004 through December 2012. Currently, we amortize these amounts as a reduction to research and development expenses. At such time as Fab 36 begins to producing revenue-generating products, which we expect to be in the first quarter of 2006, we will amortize these amounts as a reduction to cost of sales. 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 June 26, 2005, AMD Fab 36 KG received cash allowances of $66 million for investments made in 2003 and 2004 as well as cash grants of $130 million consisting of both grants for investments made in 2003 and 2004 and a prepayment for investments planned in 2005 and the first half of 2006.

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:

• failure of any limited partner to make contributions to AMD Fab 36 KG as required under the partnership agreements or 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;

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• 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 minimum tangible net worth, minimum interest cover ratio, loan to fixed asset value ratio and 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 Loan Agreements. In addition, the occurrence of a default under these agreements could result in a cross-default under our loan agreements, including the indentures governing our 4.75% Debentures, 4.50% Notes and 7.75% Notes. We cannot assure you 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.

Generally, the amounts under the Fab 36 Loan Agreements and the partnership agreements are denominated in euros. We report these amounts in U.S. dollars, which are subject to change based on applicable exchange rates. We used the exchange rate at June 26, 2005, of 0.828 euro to one U.S. dollar, to translate the amounts denominated in euros into U.S. dollars. However, with respect to amounts of limited partnership and other equity contributions, investment grants, allowances and subsidies received by AMD Fab 36 KG through June 26, 2005, we used the historical exchange rates that were in effect at the time AMD Fab 36 KG received these amounts to convert amounts denominated in euros into U.S. dollars.

July 2003 Spansion Term Loan and Guarantee

Under the July 2003 Spansion Term Loan, as amended, amounts borrowed bear interest at a variable rate of LIBOR plus four percent, which was 7.09 percent at June 26, 2005. Repayment occurs in consecutive, quarterly principal and interest installments ending in June 2006. As of June 26, 2005, approximately $31 million was outstanding under the July 2003 Spansion Term Loan, of which 60 percent is guaranteed by us and 40 percent is guaranteed by Fujitsu. Spansion granted a security interest in certain property, plant and equipment as security under the July 2003 Spansion Term Loan. In addition, as security for our guarantee obligations, we granted a security interest in certain of our assets, including our accounts receivable, inventory, general intangibles (excluding intellectual property) and the related proceeds.

In June 2005, Spansion amended the July 2003 Spansion Term Loan to amend its reporting obligations, eliminate the requirement that it maintain a specified net domestic cash balance and decrease the net worldwide cash balance required to be maintained in order for Spansion to avoid being subject to the enhanced covenants described below. Pursuant to the agreement as amended, Spansion would enter into an enhanced covenant period if its net worldwide cash balance (as defined) as of the last day of any fiscal quarter is below the amount then outstanding under the agreement plus $6 million, which would have been $37 million as of June 26, 2005. As of June 26, 2005, Spansion’s net worldwide cash balance was $171 million, and therefore Spansion was not required to comply with the financial covenants set forth below.

During an enhanced covenant period, Spansion is, among other things, restricted in its ability to pay cash dividends. In addition, during an enhanced covenant period, Spansion is also required to comply with the following financial covenants:

• refrain from entering into any merger transaction, reorganization or consolidation;

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• refrain from the transfer, sale, assignment, lease or disposition of our property except for sales of certain inventory and equipment in the ordinary course of business and the sale of certain assets that do not exceed certain threshold amounts;

• maintain an adjusted tangible net worth (as defined in the July 2003 Spansion Term Loan) of not less than $850 million as of the last day of each fiscal quarter;

• achieve EBITDA according to the following schedule:

Period	Amount
	(in thousands)
For each of the four quarters ending in 2005	$	640,000
For each of the four quarters ending in 2006	$	800,000

• maintain a fixed charge coverage ratio (as defined in the July 2003 Spansion Term Loan) according to the following schedule:

Period	Ratio
Fiscal 2005	1.0 to 1.00
Fiscal 2006	0.9 to 1.00

Amounts outstanding under the July 2003 Spansion Term Loan may be accelerated and become due and payable upon the occurrence of an event of default. An event of default would occur if Spansion does not meet various obligations or if various events occur. These include, among other things, any failure to pay loan amounts when due, a breach of any representation or warranty made under the agreement, the filing of voluntary bankruptcy proceedings, the dissolution, winding-up or liquidation of Spansion, and the expropriation or condemnation of Spansion’s property by any legal authority.

Spansion Japan Term Loan and Guarantee

In September 2003, the third-party loans of Fujitsu AMD Semiconductor Limited, the previous manufacturing venture between us and Fujitsu which we refer to as the Manufacturing Joint Venture, were refinanced from the proceeds of a term loan entered into between Spansion Japan, which owns the assets of the Manufacturing Joint Venture, and a Japanese financial institution. Under the agreement, the amounts borrowed bear an interest rate of TIBOR plus a spread that is determined by Fujitsu’s current debt rating and Spansion Japan’s non-consolidated net asset value as of the last day of its fiscal year. The interest rate was 0.99 percent as of June 26, 2005. Repayment occurs in equal, consecutive, quarterly principal installments ending in June 2007. As of June 26, 2005, $99 million was outstanding under this term loan agreement. Fujitsu guaranteed 100 percent of the amounts outstanding under this facility. We agreed to reimburse Fujitsu up to 60 percent of the amount paid by Fujitsu under its guarantee. In addition, Spansion Japan’s assets are pledged to Fujitsu as security for the loan. The net book value of the pledged assets as of June 26, 2005 was approximately $297 million.

Under this loan agreement, Spansion Japan is prevented from making distributions or dividends in certain situations. In addition, Spansion Japan is required to comply with the following financial covenants under accounting principles generally accepted in Japan:

• ensure that assets exceed liabilities as of the end of each fiscal year and each six-month period during such fiscal year;

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• maintain an adjusted tangible net worth (as defined in the loan agreement), as of the last day of each fiscal quarter, of not less than 60 billion yen (approximately $550 million based on the exchange rate as of June 26, 2005);

• maintain total net income plus depreciation, as of the last day of each fiscal period, as follows:

Period	Amount
	(in thousands)
Fiscal 2005	$	204,000
Fiscal 2006	$	188,000

• ensure that as of the last day of any fiscal quarter, the ratio of (a) net income plus depreciation to (b) the sum of (i) interest expense for such period plus (ii) scheduled amortization of debt for borrowed money (as defined in the loan agreement) for such period, including lease rentals plus (iii) maintenance capital expenditures for Spansion Japan’s existing and after acquired real property and improvements at its manufacturing facilities located in Aizu-Wakamatsu, Japan, is not less than 120 percent.

In addition, Spansion Japan is subject to other covenants, including those that are applicable when Spansion Japan’s minimum cash balance is less than one billion yen and events of default that would cause all of the amounts outstanding under this agreement to become immediately due and payable that are substantially similar to the covenants and events of default in the Spansion Japan Revolving Loan Agreement described above.

As of June 26, 2005, Spansion Japan was in compliance with these covenants.

Because most amounts under the Spansion Japan Term Loan are denominated in yen, the U.S. dollar amounts are subject to change based on applicable exchange rates. We used the exchange rate as of June 26, 2005 of 109.1 yen to one U.S. dollar to translate the amounts denominated in yen into U.S. dollars.

Fujitsu Cash Note

In connection with the Spansion reorganization in June 2003, Fujitsu loaned Spansion $40 million pursuant to the terms of an unsecured promissory note. Payments are comprised of four equal principal payments due on September 30, 2005, December 31, 2005, March 31, 2006 and June 30, 2006. The note bears interest at LIBOR plus four percent, to be paid quarterly. The interest rate cannot exceed seven percent. The interest rate adjusts each calendar quarter based on the LIBOR rate. All amounts outstanding under this note become due and payable upon the occurrence of a payment default. As of June 26, 2005, the interest rate was seven percent and the remaining principal balance on this note was $40 million. The proceeds from this note were used to fund Spansion’s working capital needs.

AMD Penang Term Loan

On January 29, 2004, our subsidiary in Malaysia, AMD Export Sdn. Bhd., or AMD Penang, entered into a term loan agreement with a local financial institution. Under the terms of the loan agreement, AMD Penang was eligible to borrow up to 30 million Malaysian Ringgit (approximately $8 million as of June 26, 2005). The loan bears a fixed annual interest rate of 5.9 percent and is payable in equal, consecutive, monthly principal and interest installments through February 2009. The total amount outstanding as of June 26, 2005 was approximately $6 million.

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Spansion China Loan

During the second quarter of 2004, Spansion (China) Limited, a subsidiary of Spansion, entered into two revolving loan agreements with a local financial institution. Under the terms of the revolving foreign exchange loan agreement, Spansion China could borrow in U.S. dollars up to an amount of $18 million. Under the terms of the revolving Renminbi (RMB) loan agreement, Spansion China could borrow up to RMB 120 million (approximately $14.5 million as of June 26, 2005). The interest rate on the U.S. dollar denominated loans is LIBOR plus one percent and the interest rate on the RMB denominated loans is fixed at 4.779 percent. The maximum term of each loan is 12 months from the date of each draw-down. As of June 26, 2005, Spansion China had $12 million outstanding on the RMB denominated loans and $16 million on the USD denominated loans. These amounts must be repaid by December 2005. These loans are secured by Spansion China’s assembly and test facility and its land use rights.

Capital Lease Obligations

As of June 26, 2005, we had aggregate outstanding capital lease obligations of approximately $196 million. Obligations under these lease agreements are collateralized by the assets leased and are payable through 2008. Leased assets consist principally of machinery and equipment. We guaranteed approximately $62 million of Spansion’s and its subsidiaries’ aggregate outstanding capital lease obligations as of June 26, 2005.

Operating Leases

We lease certain of our facilities, including our executive offices in Sunnyvale, California, and in some jurisdictions we lease the land on which these facilities are built, under non-cancelable lease agreements that expire at various dates through 2021. We lease certain of our manufacturing and office equipment for terms ranging from one to five years. Total future non-cancelable lease obligations as of June 26, 2005, were approximately $409 million, of which $99 million was recorded as a liability for certain facilities that were included in our 2002 Restructuring Plan.

Unconditional Purchase Commitments

Total non-cancelable purchase commitments as of June 26, 2005, were approximately $1.3 billion for periods through 2020. These purchase commitments include approximately $498 million related to contractual obligations to purchase energy and gas for Fab 30 and Fab 36, $370 million in purchase commitments for wafers for Fab 30 and Fab 36 and up to $230 million representing future payments to IBM pursuant to our joint development agreement. As IBM’s services are being performed ratably over the life of the agreement, we expense the payments as incurred. Our non-cancelable purchase commitments also include approximately $14 million to M+W Zander for the design and construction of Fab 36 and other related services. These payments are made to M+W Zander as services are performed. In addition, unconditional purchase commitments also include approximately $56 million for software maintenance agreements that require periodic payments through 2009. As a result, we have not recorded any liabilities relating to the software maintenance agreements. The remaining commitments primarily consist of non-cancelable contractual obligations to purchase raw materials, natural resources and office supplies. Purchase orders for goods and services that are cancelable without significant penalties are not included in the amount set forth in the table above.

Other Long-Term Liabilities

One component of Other Long-Term Liabilities that requires us to make cash payments is a net restructuring accrual of approximately $75 million relating to the net future operating lease payments on certain facilities that were included in our 2002 Restructuring Plan. We will make these payments through 2011. We included these amounts in the operating lease total in the table above. The other components of Other Long-Term Liabilities do not require us to make cash payments and primarily consist of approximately $305 million of deferred grants and subsidies related to the Fab 30 and Fab 36 projects and a $21 million deferred gain as a result of the sale and leaseback of our corporate marketing, general and administrative facility in Sunnyvale, California in 1998.

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Guarantees of Indebtedness Recorded on Our Unaudited Condensed Consolidated Balance Sheet

The following table summarizes the principal guarantees outstanding as of June 26, 2005 related to underlying liabilities that are already recorded on our unaudited condensed consolidated balance sheet as of June 26, 2005 and their expected expiration dates by year. No incremental liabilities are recorded on our unaudited condensed consolidated balance sheet for these guarantees. For more information on these guarantees, see “Contractual Cash Obligations and Guarantees,” above.

	Amounts Guaranteed(1)		2005		2006		2007		2008		2009		2010 and Beyond
	(in thousands)
July 2003 Spansion term loan guarantee	$	18,509	$	8,250	$	10,259	$	—	$	—	$	—	$	—
Spansion Japan term loan guarantee		59,395		13,199		26,398		19,798		—		—		—
Spansion capital lease guarantees		61,616		24,723		33,616		3,277		—		—		—
Repurchase Obligations to Fab 36 partners(2)		144,734		14,234		32,625		32,625		32,625		32,625		—
Total guarantees	$	284,254	$	60,406	$	102,898	$	55,700	$	32,625	$	32,625	$	—

⁽¹⁾ Amounts represent the principal amount of the underlying obligations guaranteed and are exclusive of obligations for interest, fees and expenses.

⁽²⁾ This amount represents the silent partnership contributions received by AMD Fab 36 KG, as of June 26, 2005 from the unaffiliated limited partners under the Fab 36 partnership agreements. AMD Fab 36 Holding and AMD Fab 36 Admin are required to repurchase up to $169 million of the partners’ silent partnership contributions in annual installments beginning one year after the partner has contributed the full amount required under the partnership agreements. We guaranteed these obligations. As of June 26, 2005, Fab 36 Beteiligungs had contributed the full amount required under the partnership agreements, but Leipziger Messe had not contributed the full amount. Therefore, the condition precedent to our repurchase obligations with respect to Leipziger Messe’s silent partnership contribution had not been met. For purposes of this table, we assumed that Leipziger Messe will have contributed the full amount by December 2005.

Guarantees of Indebtedness Not Recorded on Our Unaudited Condensed Consolidated Balance Sheet

The following table summarizes the principal guarantees outstanding as of June 26, 2005 for which the related underlying liabilities are not recorded on our unaudited condensed consolidated balance sheet as of June 26, 2005 and their expected expiration dates:

	Amounts Guaranteed(1)		2005		2006		2007		2008		2009		2010 and Beyond
	(in thousands)
Spansion LLC operating lease guarantees	$	16,080	$	4,997	$	8,008	$	2,050	$	1,025	$	—	$	—
AMTC revolving loan guarantee		38,667		—		—		38,667		—		—		—
AMTC rental guarantee(2)		125,388		—		—		—		—		—		125,388
Other		4,362		907		3,455		—		—		—		—
Total guarantees	$	184,497	$	5,904	$	11,463	$	40,717	$	1,025	$	—	$	125,388

⁽¹⁾ Amounts represent the principal amount of the underlying obligations guaranteed and are exclusive of obligations for interest, fees and expenses.

⁽²⁾ Amount of the guarantee diminishes as the rent is paid.

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Spansion LLC Operating Lease Guarantees

We guaranteed certain operating leases entered into by Spansion and its subsidiaries totaling approximately $16 million as of June 26, 2005. The amounts guaranteed are reduced by the actual amount of lease payments paid by Spansion over the lease terms. No liability has been recognized for these guarantees under the provisions of FIN 45 because the guarantees are for the performance obligations of a subsidiary.

AMTC and BAC Guarantees

The Advanced Mask Technology Center GmbH & Co. KG (AMTC) and Maskhouse Building Administration GmbH & Co., KG (BAC) are joint ventures formed by us, Infineon Technologies AG and DuPont Photomasks, Inc. for the purpose of constructing and operating an advanced photomask facility in Dresden, Germany. In April 2005 DuPont Photomasks, Inc. was acquired by Toppan Printing Co., Ltd. and became a wholly owned subsidiary of Toppan, named Toppan Photomasks, Inc. To finance the project, BAC and AMTC entered into a $145 million revolving credit facility and a $91 million term loan in December 2002. Also in December 2002, in order to occupy the photomask facility, AMTC entered into a rental agreement with BAC. With regard to these commitments by BAC and AMTC, as of June 26, 2005, we guaranteed up to approximately $39 million plus interest and expenses under the revolving loan, and up to approximately $18 million, initially, under the rental agreement. The obligations under the rental agreement guarantee diminish over time through 2011 as the term loan is repaid. However, under certain circumstances of default by the other tenant of the photomask facility under its rental agreement with BAC and certain circumstances of default by more than one joint venture partner under its rental agreement guarantee obligations, the maximum potential amount of our obligations under the rental agreement guarantee is approximately $125 million. As of June 26, 2005, $83 million was drawn under the revolving credit facility, and $65 million was drawn under the term loan. We have not recorded any liability in our consolidated financial statements associated with the guarantees because they were issued prior to December 31, 2002, the effective date of FIN 45.

Other Financial Matters

Spansion LLC

During the four-year period commencing on June 30, 2003, we are obligated to provide Spansion with additional funding to finance operations shortfalls, if any. Generally, Spansion is first required to seek any required financing from external sources, either on a non-recourse basis to us or with guarantees based on our pro-rata ownership interest. However, if such third-party financing is not available, we must provide funding to Spansion equal to our pro-rata ownership interest in Spansion, which is currently 60 percent. At this time, we believe that Spansion will be able to obtain external financing when needed. However, there is no assurance that external financing will be available when needed and currently we cannot estimate the amount of additional funding, if any, that we will be required to provide during this four-year period.

In the event the initial public offering of Spansion is consummated, AMD and Fujitsu will no longer be obligated to provide Spansion with additional funding.

Other

Spansion LLC - Proposed Initial Public Offering

On April 13, 2005, Spansion filed a registration statement with the Securities and Exchange Commission for a proposed initial public offering of its Class A common stock. The number of shares to be offered and the estimated price range for the common stock have not been determined. We do not know when, or if, an initial public offering will occur.

In the event the proposed initial public offering is consummated, Spansion would receive the net proceeds from the offering, and our ownership in Spansion would be reduced from our current ownership of 60 percent. At this time,

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we do not have enough information to quantify the potential financial impact of the proposed initial public offering, but we expect that it would have a material effect on our financial condition and results of operations, including the following:

• We expect that our aggregate ownership interest in Spansion would be less than 50 percent and that we would no longer consolidate Spansion’s results of operations and financial position in our consolidated financial statements;

• To the extent that Spansion’s employees continue to hold unvested options to purchase AMD common stock, we would be required to account for these unvested options at then-current fair value each reporting period until the options are fully vested because Spansion’s employees would no longer be considered employees of the “consolidated group;”

• As of June 26, 2005, we guaranteed certain indebtedness of Spansion and its subsidiaries totaling approximately $156 million. Of this amount, approximately $140 million relates to underlying liabilities that are already recorded on our unaudited condensed consolidated balance sheet, and no incremental liabilities are recorded for these guarantees because these guarantees are for our majority-owned subsidiary. However, because we expect that we would no longer consolidate Spansion’s results of operations and financial position, we would be required to record on our consolidated financial statements the fair value of those guarantees that were entered into or amended subsequent to December 31, 2002, the effective date of FIN 45. At this time, we do not have enough information to evaluate the fair value of these guarantees; and

• Depending on the valuation of Spansion’s Class A common stock and the carrying value of our interest in Spansion at the time of the initial public offering, we would realize either a gain or a loss upon the initial public offering, reflecting the reduction of our ownership interest in Spansion. The gain or loss would be calculated as the difference between Spansion’s book value per share before and after the initial public offering multiplied by the number of shares owned by us.

Completion of the proposed initial public offering is subject to many conditions, including our approval and Fujitsu’s approval as members of Spansion, the final approval of the Spansion Board of Managers, market conditions and governmental approvals. Market conditions and other factors could result in, among other things, a delay in or withdrawal of the initial public offering or pursuit of alternative transactions.

Concurrent with and as a condition to consummating the proposed initial public offering, Spansion also currently intends to consummate a debt offering pursuant to which it would issue notes and apply the net proceeds from the sale of the notes to repay a portion of its outstanding indebtedness. To the extent that such repaid indebtedness was guaranteed by us or Fujitsu, the amount of Spansion debt guaranteed by us and Fujitsu would be reduced accordingly. Spansion has not determined the aggregate principal amount of the notes or the terms upon which the notes would be issued.

Outlook

For the third quarter of 2005, we expect Computation Products net sales to increase compared with the second quarter of 2005, exceeding normal third quarter seasonal patterns.

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In addition, for the third quarter of 2005, we expect marketing, general and administrative expenses and research and development expenses to increase by approximately eight percent in the aggregate, primarily due to the continued ramp of Fab 36 development activities and additional marketing and legal expenses. We continue to expect that capital expenditures for fiscal 2005 will be approximately $1.5 billion.

Supplementary Stock-Based Incentive Compensation Disclosures

Section I. Option Program Description

Our stock option programs are intended to attract, retain and motivate highly qualified employees. On April 29, 2004, our stockholders approved the 2004 Equity Incentive Plan (the 2004 Plan), which had previously been approved by our Board of Directors. Stock options available for grant under our equity compensation plans that were in effect before April 29, 2004, (the Prior Plans), including those that were not approved by our stockholders, were consolidated into the 2004 Plan. As of April 29, 2004, equity awards are made only from the 2004 Plan. Under our Prior Plans key employees generally were, and under the 2004 Plan key employees generally are, granted nonqualified stock options (NSOs) to purchase our common stock. Generally, options vest and become exercisable over a four-year period from the date of grant and expire five to ten years after the date of grant. Any incentive stock options (ISOs) granted under the Prior Plans or the 2004 Plan have exercise prices of not less than 100 percent of the fair market value of the common stock on the date of grant. Exercise prices of NSOs range from $0.01 to the fair market value of the common stock on the date of grant.

Under the 2004 Plan, we can also grant up to a total of 9 million shares where the exercise price is less than the fair market value of our common stock on the date of grant. These types of grants can consist of the following awards:

Restricted Stock. Restricted stock can be granted to any employee or consultant. Restricted stock that vests based on continued service does not fully vest for three years from the date of grant. Restricted stock that vests based on performance does not vest for at least one year from the date of grant.

Restricted Stock Units. Restricted stock units are awards that obligate us to issue a specific number of shares of our common stock in the future if the vesting terms and conditions are satisfied and may be payable in cash or in shares of our common stock. Restricted stock units based on continued service may not vest for three years from the date of grant. Restricted stock units that are performance based may not vest for at least one year from the date of grant.

Discount Stock Options. Discount stock options may be subject to the same requirements and conditions as are applicable to regular NSOs described above except that the fixed exercise price may be granted at up to 85 percent of fair market value on the date of grant, if the discount is in lieu of a portion of salary or cash bonus. Options cannot be exercised until they become vested. Options expire not later than 10 years after the date of grant. We have not granted any discount stock options under the 2004 Plan.

Section II. General Option and Award Information

The following is a summary of stock option activity for the quarter ended June 26, 2005 and fiscal year ended December 26, 2004:

	Six Months Ended June 26, 2005				Year Ended December 26, 2004
	Number of Shares		Weighted- Average Exercise Price		Number of Shares		Weighted- Average Exercise Price
	(in thousands except share price)
Options:
Outstanding at beginning of period	53,684		$	13.58	40,969		$	12.92
Granted	4,690		$	15.91	26,121		$	14.54
Canceled	(697	)	$	14.02	(3,425	)	$	23.20
Exercised	(3,537	)	$	9.04	(9,981	)	$	10.08
Outstanding at end of period	54,140		$	14.05	53,684		$	13.58
Exercisable at end of period	45,215		$	14.51	32,250		$	13.72
Available for grant at beginning of period	23,901				29,613
Available for grant at end of period	19,670				23,901

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In-the-money and out-of-the-money stock option and award information as of June 26, 2005, was as follows:

	Exercisable			Unexercisable			Total
As of End of Quarter	Shares	Weighted Average Exercise Price		Shares	Weighted Average Exercise Price		Shares		Weighted Average Exercise Price
	(in thousands except share price)
In-the-Money	40,163	$	12.96	8,771	N/A	(3)	48,934		$	12.71
Out-of-the-Money(1)	5,052	$	26.89	154	N/A	(3)	5,206		$	26.65
Total Options Outstanding	45,215	$	14.51	8,925	N/A	(3)	54,140	(2)	$	14.05

⁽¹⁾ Out-of-the-money stock options have an exercise price equal to or above $17.17, the closing price of AMD’s common stock, on June 24, 2005, the last trading day of the second quarter of 2005.

⁽²⁾ Includes 107,338 shares outstanding from treasury stock as non-plan grants.

⁽³⁾ Weighted average exercise price information is not available.

Section III. Distribution and Dilutive Effect of Options and Awards

Options and awards granted to employees, including officers, and non-employee directors were as follows:

	YTD 2005		2004		2003
Net grants(1) during the period as % of outstanding shares(2)	1.01	%	5.79	%	-4.87	%
Grants to listed officers(3) during the period as % of total awards granted	10.68	%	3.59	%	11.77	%
Grants to listed officers during the period as % of outstanding shares	0.13	%	0.24	%	0.19	%
Cumulative options and awards held by listed officers as % of total options and awards outstanding	12.43	%	11.94	%	22.90	%

⁽¹⁾ Grants are net of canceled awards.

⁽²⁾ Outstanding shares as of June 26, 2005, December 26, 2004 and December 28, 2003.

⁽³⁾ The “listed officers” are those executive officers listed in the summary compensation table in our proxy statements for our annual meeting of stockholders held in 2005, 2004 and 2003.

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Section IV. Executive Options and Awards

Options and awards granted to listed officers for the quarter ended June 26, 2005 were as follows:

	2005 Option and Award Grants						Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Option Term
Name (1)	Number of Securities Underlying Awards Per Grant	Percent of Total Awards Granted to Employees as of June 26, 2005		Exercise Price Per Share		Expiration Date	5%		10%
Hector de J. Ruiz	125,000	2.75	%	$	16.66	2/3/2012	$	847,787	$	1,975,703
Hector de J. Ruiz	125,000	2.75	%	$	14.16	4/28/2012	$	720,568	$	1,679,229
Henri Richard	31,250	0.69	%	$	16.66	2/3/2012	$	211,947	$	493,926
Henri Richard	16,250	0.36	%	$	14.16	4/28/2012	$	93,673	$	218,299
Henri Richard	37,500	N/A		$	0.01	N/A		N/A		N/A
Robert Rivet	31,250	0.69	%	$	16.66	2/3/2012	$	211,947	$	493,926
Robert Rivet	30,000	0.66	%	$	14.16	4/28/2012	$	172,936	$	403,015
Derrick R. Meyer	37,500	0.82	%	$	16.66	2/3/2012	$	254,336	$	592,711
Derrick R. Meyer	37,500	0.82	%	$	14.16	4/28/2012	$	216,170	$	503,769
Iain Morris	12,500	0.27	%	$	16.66	2/3/2012	$	84,779	$	197,570
Iain Morris	17,500	0.38	%	$	14.16	4/28/2012	$	100,879	$	235,092

⁽¹⁾ The “listed officers” are those executive officers listed in the summary compensation table in our proxy statement for our annual meeting of stockholders held on April 28, 2005.

Option exercises during the quarter ended June 26, 2005 and option values for listed officers for this period were as follows:

Name(1)	Shares Acquired on Exercise	Value Realized(2)		Number of Securities Underlying Unexercised Options at June 26, 2005		Values of Unexercised In-the Money Options at June 26, 2005
				Exercisable	Unexercisable	Exercisable		Unexercisable
Hector de J. Ruiz	145,837	$	1,557,540	4,193,070	486,093	$	3,767,672	$	2,591,833
Henri Richard	—	$	—	245,357	70,893	$	719,829	$	369,896
Robert Rivet	25,000	$	204,800	665,975	189,025	$	2,314,828	$	1,146,035
Derrick R. Meyer	—	$	—	607,306	116,144	$	2,409,095	$	593,380
Iain Morris	—	$	—	54,028	63,472	$	123,128	$	207,172

⁽¹⁾ The “listed officers” are those executive officers listed in the summary compensation table in our proxy statement for our annual meeting of stockholders held on April 28, 2005.

⁽²⁾ Value for these purposes is based solely on the difference between market value of underlying shares on the applicable date, which is either the date of exercise or fiscal year-end, and exercise price of options.

Section V. Equity Compensation Plan Information

The number of shares issuable upon exercise of outstanding options granted to employees and non-employee directors, as well as the number of shares remaining available for future issuance under our 2004 Plan as of June 26, 2005, are summarized in the following table:

	Six Months Ended June 26, 2005
Plan category	Number of Securities to be Issued Upon Exercise of Outstanding Options (a)		Weighted-Average Exercise Price of Outstanding Options (b)		Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (c)
	(in thousands except share price)
Equity compensation plans approved by stockholders	34,572		$	15.26	19,670
Equity compensation plans not approved by stockholders	19,568	(1)	$	11.92	—
TOTAL	54,140				19,670

⁽¹⁾ Includes 107,338 shares granted from treasury stock as non-plan grants.

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Risk Factors

If we cannot generate sufficient operating cash flow or obtain external financing, we may be unable to make all of our planned capital expenditures or fulfill our obligations.

In the second half of 2005, we plan to make approximately $680 million in capital expenditures. Our ability to fund capital expenditures in accordance with our business plan depends on generating sufficient cash flow from operations and the availability of external financing.

Moreover, as of June 26, 2005, under the partnership agreement for AMD Fab 36 KG, our German subsidiaries, AMD Fab 36 Holding and AMD Fab 36 Admin were obligated to invest approximately $212 million into AMD Fab 36 KG. In addition, under the revolving credit agreement among AMD, AMD Fab 36 Holding and AMD Fab 36 KG, we or AMD Fab 36 Holding are required to provide up to approximately $906 million to AMD Fab 36 KG. Loans provided to AMD Fab 36 KG under this revolving credit agreement are unsecured and subordinated to the rights of the consortium of banks that will also be providing financing to AMD Fab 36 KG.

We are also obligated through June 30, 2007 to provide Spansion with additional funding to finance operational cash flow needs. Generally, Spansion must seek any required financing from external sources. However, if third-party financing is not available, either on a non-recourse basis to us or with guarantees based on our pro rata ownership interest, we must provide funding to Spansion equal to our pro rata ownership interest in Spansion, which is currently 60 percent. An inability to meet our funding obligations for Spansion could, among other things, result in additional equity in Spansion being issued to Fujitsu or third parties, which would reduce our ownership in and control over Spansion.

Our capital expenditures, together with ongoing operating expenses, will be a substantial drain on our cash flow and may decrease our cash balances. The timing and amount of our capital requirements cannot be precisely determined at this time and will depend on a number of factors, including demand for products, product mix, changes in semiconductor industry conditions and market competition. We regularly assess markets for external financing opportunities, including debt and equity. Additional debt or equity financing may not be available when needed or, if available, may not be available on satisfactory terms. Our inability to obtain needed debt and/ or equity financing or to generate sufficient cash from operations may require us to abandon projects or curtail capital expenditures. If we curtail capital expenditures or abandon projects, we could be materially adversely affected. For example, if we abandon the Fab 36 project, we will have to write off related costs that we capitalized and we will be required to continue to make payments or otherwise be liable pursuant to then-existing contracts that we cannot terminate at will or without significant penalties.

We have a substantial amount of indebtedness that could adversely affect our financial position.

As of June 26, 2005, we had consolidated debt of approximately $1.9 billion. In addition, we guaranteed approximately $184 million of obligations, which are not reflected on our balance sheet. Our substantial indebtedness may:

• make it difficult for us to satisfy our financial obligations, including making scheduled principal and interest payments;

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• 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;

• require us to use a substantial portion of our cash flow from operations to make debt service payments;

• limit our flexibility to plan for, or react to, changes in our business and industry;

• place us at a competitive disadvantage compared to our less leveraged competitors; and

• increase our vulnerability to the impact of adverse economic and industry conditions.

We and our subsidiaries may be able to incur substantially more debt, including secured debt, in the future.

Subject to the restrictions in the agreements governing our existing indebtedness, we and our subsidiaries may incur significant additional debt, including secured debt, in the future. In particular, as of June 26, 2005, we and our subsidiaries would have had the following additional borrowings available:

• Up to $100 million under our revolving credit facility. Amounts borrowed under this facility are secured by all of our accounts receivable, inventory, general intangibles (excluding intellectual property) and the related proceeds, excluding Spansion’s accounts receivable, inventory and general intangibles.

• Spansion Japan had up to 10 billion yen (approximately $87 million as of June 26, 2005) available under a revolving credit facility.

• AMD Fab 36 KG will have the ability, subject to achieving certain milestones, to borrow up to $846 million (based on an exchange rate of 0.828 euro to one U.S. dollar as of June 26, 2005) from a consortium of banks under the Fab 36 Loan Agreements during 2006 and 2007.

Although the terms of the agreements governing our existing indebtedness contain restrictions on the incurrence of additional debt, these restrictions are subject to a number of important exceptions, and debt incurred in compliance with these restrictions could be substantial.

We may not be able to generate sufficient cash to service our debt obligations.

Our ability to make payments on and to refinance our debt, or our guarantees of other parties’ debts, will depend on our financial and operating performance, which may fluctuate significantly from quarter to quarter, and is subject to prevailing economic conditions and financial, business and other factors, many of which are beyond our control. We cannot assure you that we will continue to generate sufficient cash flow or that we will be able to borrow funds in amounts sufficient to enable us to service our debt, or to meet our working capital and capital expenditure requirements. If we are not able to generate sufficient cash flow from operations or to borrow sufficient funds to service our debt due to borrowing base restrictions or otherwise, we may be required to sell assets or equity, reduce capital expenditures, refinance all or a portion of our existing debt or obtain additional financing. We cannot assure you that we will be able to refinance our debt, sell assets or equity or borrow more funds on terms acceptable to us, if at all.

Our debt instruments impose restrictions on us that may adversely affect our ability to operate our business.

The indenture governing our 7.75% Notes contains various covenants that limit our ability to:

• incur additional indebtedness;

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• pay dividends and make other restricted payments;

• make certain investments, including investments in our unrestricted subsidiaries (which consists of Spansion and its subsidiaries);

• create or permit certain liens;

• create or permit restrictions on the ability of certain restricted subsidiaries to pay dividends or make other distributions to us;

• use the proceeds from sales of assets;

• enter into certain types of transactions with affiliates; and

• consolidate or merge or sell our assets as an entirety or substantially as an entirety.

In addition:

• The Fab 36 Loan Agreements contain restrictive covenants, including a prohibition on the ability of AMD Fab 36 KG and its affiliated limited partners to pay us dividends and other payments, and also require us to maintain specified financial ratios when group consolidated cash is below specified amounts.

• Our revolving credit facility contains restrictive covenants, including a prohibition on our ability to pay dividends, and also requires us to maintain specified financial ratios and satisfy other financial condition tests when our net domestic cash is below specified amounts.

• The July 2003 Spansion Term Loan, as amended, contains restrictive covenants, including a prohibition on Spansion’s ability to pay dividends and also requires Spansion to maintain specified financial ratios and satisfy other financial condition tests when its net worldwide cash is below specified amounts.

Our ability to satisfy the covenants, financial ratios and tests of our debt instruments can be affected by events beyond our control. We cannot assure you that we will meet those requirements. A breach of any of these covenants, financial ratios or tests could result in a default under the applicable agreement.

In addition, our agreements contain cross-default provisions whereby a default under one agreement would likely result in cross default under agreements covering other borrowings. For example, the occurrence of a default with respect to any indebtedness that results in acceleration of the maturity date or any failure to repay debt when due in an amount in excess of $50 million would cause a cross default under the indenture governing our 7.75% Notes. Similarly, a default with respect to any indebtedness in excess of $25 million would cause a cross-default under the indentures governing our 4.75% Debentures and 4.50% Notes. The occurrence of a default under any of these borrowing arrangements would permit the applicable lenders or note holders to declare all amounts outstanding under those borrowing arrangements to be immediately due and payable and would permit the lenders to terminate all commitments to extend further credit. If we were unable to repay those amounts, the lenders could proceed against any collateral granted to them to secure that indebtedness. If the lenders under any of the credit facilities or the note holders or the trustee under the indentures governing our 4.75% Debentures, 4.50% Notes and 7.75% Notes accelerate the repayment of borrowings, we cannot assure you that we will have sufficient assets to repay those borrowings and our other indebtedness.

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We must achieve further market acceptance of our 64-bit technology, AMD64, or we will be materially adversely affected.

Our AMD Opteron processors are critical to our strategy of increasing market share in the server category of the microprocessor market. Similarly, our AMD Turion processors are critical to our strategy of increasing market share in the mobile category of the microprocessor market, and particularly the “thin and light” category. Accordingly, we are making substantial investments in our roadmaps and our platforms for our processors for mobile and server computers. Increasing market acceptance of these processors, our AMD Athlon 64 processors for desktops and the AMD64 technology on which they are based is subject to risks and uncertainties including:

• the continued support of operating system and application program providers for our 64-bit instruction set, including timely development of 64-bit applications;

• our ability to produce these processors in a timely manner on advanced process technologies, in the volume and with the performance and feature set required by customers; and

• the availability, performance and feature set of motherboards, memory and chipsets designed for these processors.

If we are unable to achieve further market acceptance of our AMD64 technology, we would be materially adversely affected.

We cannot be certain that our substantial investments in research and development of process technologies will lead to timely improvements in technology and equipment used to fabricate our products or that we will have sufficient resources to invest in the level of research and development that is required to remain competitive.

We make substantial investments in research and development for process technologies in an effort to design and manufacture leading-edge microprocessors. We cannot be certain that we will be able to develop, or obtain or successfully implement leading-edge process technologies needed to manufacture future generations of our products profitably or on a timely basis. Furthermore, we cannot assure you that we will have sufficient resources to maintain the level of investment in research and development that is required for us to remain competitive.

For example, we have a joint development agreement with IBM, pursuant to which we work together to develop new process technologies. We anticipate that from June 26, 2005 through December 2008, we would pay fees to IBM of between approximately $200 million and $230 million in connection with joint development projects. In addition, from the beginning of 2002 through June 26, 2005, we paid approximately $290 million to IBM in connection with agreements and services related to license grants and research and development activities.

If this agreement were to be terminated, we would either have to resume certain research and development activities internally or find an alternative partner. In either case, our research and development costs could increase, and we could experience delays or other setbacks in the development of new process technologies, any of which would materially adversely affect us. Moreover, the successful and timely development and implementation of silicon-on-insulator technology and the achievement of other milestones set forth in the joint development agreement are critical to our ability to timely commence manufacturing at Fab 36 using 65-nanometer process technology.

The semiconductor industry is highly cyclical and has experienced severe downturns that materially adversely affected, and may in the future materially adversely affect, our business.

The semiconductor industry is highly cyclical and has experienced significant downturns, often in connection with constant and rapid technological change, wide fluctuations in supply and demand, continuous new product introductions, price erosion and declines in general economic conditions. Our historical financial results have also been subject to substantial fluctuations. Our financial performance has been, and may in the future be, negatively affected by these downturns. We incurred substantial losses in recent downturns, due to:

• the cyclical nature of supply/demand imbalances in the semiconductor industry;

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• a decline in demand for end-user products that incorporate our semiconductors;

• excess inventory levels in the channels of distribution, including our customers;

• excess production capacity; and

• substantial declines in average selling prices, most recently for our Spansion Flash memory products.

For example, in 2001 and 2002, we implemented restructuring plans due to weak customer demand associated with the downturn in the semiconductor industry. Similarly, in the fourth quarter of 2004 and the first and second quarters of 2005, declining average selling prices contributed to lower than expected Memory Products net sales. If these conditions in the semiconductor industry occur, we would be materially adversely affected.

The demand for our products depends in part on continued growth in the industries and geographies into which they are sold. A market decline in any of these industries would have a material adverse effect on our results of operations.

The Computation Products segment of our business is dependent upon the market for computers, including mobile and desktop PCs, and servers. Industry-wide fluctuations in the computer marketplace have materially adversely affected us in the past and may materially adversely affect us in the future. Depending on the growth rate of computers sold, sales of our microprocessors may not grow and may even decrease. If demand for computers is below our expectations, we could be materially adversely affected. In addition, potential market share increases by customers who exclusively purchase microprocessors from Intel Corp., such as Dell, Inc., could further materially adversely affect us.

The Memory Products segment of our business is dependent to a large degree upon demand for mobile telephones, consumer electronics such as set top boxes and DVD players, automotive electronics, industrial electronics such as networking equipment, and PC peripheral equipment such as printers. Sales of Spansion products also depend on OEMs including increasing amounts of NOR Flash memory content in their products. In fiscal 2004, demand from the wireless category of the Flash memory market drove a substantial portion of sales for the Memory Products segment. If demand for these products, or NOR Flash memory content in these products, is below our expectations, or if the functionality of successive generations of these products does not require increasing NOR Flash memory density, we would be materially adversely affected.

The growth of our business is also dependent on continued demand for our products from high-growth global markets. In the first half of 2005, sales of our products to high-growth markets such as China, Latin America, Eastern Europe and India increased compared with the first half of 2004, and these markets are an important area of growth for us. If demand from these markets is below our expectations, sales of our products may not grow, and may even decrease, which would have a material adverse effect on us.

Intense competition in the microprocessor and Flash memory markets could materially adversely affect us.

With respect to our microprocessor products, our competitor is Intel Corp. Microprocessor products compete on performance, quality, reliability, cost, selling price, adherence to industry standards, software and hardware compatibility, marketing and distribution capability, brand recognition and availability. After a product is introduced, costs and average selling prices normally decrease over time as production efficiency improves, and successive generations of products are developed and introduced for sale.

Our principal competitors in the Flash memory market are Intel Corp., Samsung Electronics Co., Ltd., STMicroelectronics, Silicon Storage Technology, Inc., Macronix International Co., Ltd., Toshiba Corporation, Sharp Electronics Corp. and Renesas Technology Corp. The basis of competition in the Flash memory market is cost, selling price, performance, quality and customer relationships. In particular, in the past, our competitors have aggressively priced their products in order to increase market share, which resulted in decreased average selling prices for our products and adversely impacted our results of operations. In addition, recent capital investments by competitors have resulted in substantial industry manufacturing capacity, which may further contribute to a competitive pricing environment.

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Also, we and certain of our competitors have licensed Flash memory technology called NROM technology from a third party. NROM technology has similar characteristics to our MirrorBit technology which may allow these competitors to develop new Flash memory technology that is competitive with our MirrorBit technology.

We may not be able to compete effectively if we fail to reduce our manufacturing costs and develop, introduce and sell on a timely basis, new products or enhanced versions of existing products at competitive prices.

Intel Corporation’s dominance of the microprocessor market, its position in the Flash memory market and its business practices may limit our ability to compete effectively.

Intel has dominated the market for microprocessors used in desktop and mobile PCs for many years. Intel is also a dominant competitor in the server category of the microprocessor market and a significant competitor in the Flash memory market. Intel’s significant financial resources enable it to market its products aggressively, to target our customers and our channel partners with special incentives, and to discipline customers who do business with us. These aggressive activities can result in lower unit sales and average selling prices for our products, particularly microprocessors and Flash memory products, and adversely affect our margins and profitability. As long as Intel remains in this dominant position, we may be materially adversely affected by Intel’s:

• business practices, including pricing and allocation strategies and actions, such as aggressive pricing for Flash memory products and microprocessors to increase market share;

• product mix and introduction schedules;

• product bundling, marketing and merchandising strategies;

• exclusivity payments to its current and potential customers;

• control over industry standards, PC manufacturers and other PC industry participants, including motherboard, memory, chipset and basic input/output system, or BIOS, suppliers; and

• strong brand, and marketing and advertising expenditures in support of the brand.

For example, with respect to the microprocessor market, Intel exerts substantial influence over PC manufacturers and their channels of distribution through the “Intel Inside” brand program and other marketing programs. Because of its dominant position in the microprocessor market, Intel has been able to control x86 microprocessor and PC system standards and dictate the type of products the microprocessor market requires of Intel’s competitors. Intel also dominates the PC system platform, which includes core logic chipsets, graphics chips, motherboards and other components necessary to assemble a PC system. As a result, PC OEMs are highly dependent on Intel, less innovative on their own and, to a large extent, are distributors of Intel technology. Additionally, Intel is able to drive de facto standards for x86 microprocessors that could cause us and other companies to have delayed access to such standards.

We expect Intel to maintain its dominant position in the microprocessor market, to continue to be a significant competitor in the Flash memory market and to continue to invest heavily in research and development, new manufacturing facilities and other technology companies. Intel has substantially greater financial resources than we do and accordingly spends substantially greater amounts on research and development and production capacity than we do. Moreover, Intel currently manufactures certain of its microprocessor products on 300-millimeter wafers whereas we expect to begin to manufacture revenue-generating products on 300-millimeter wafers in the first quarter of 2006. We also

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expect Intel to ship products manufactured using 65-nanometer process technology before we do. To the extent Intel manufactures its microprocessor products on larger wafers and smaller process technologies earlier than we do, we may be more vulnerable to Intel’s aggressive marketing and pricing strategies for microprocessor products, which may result in market share gains for Intel. Intel’s dominant position in the microprocessor market, its existing relationships with top-tier OEMs and its aggressive marketing and pricing strategies could result in lower unit sales and average selling prices for our products, which could have a material adverse effect on us.

We depend on third-party companies for the design and manufacture of core-logic chipsets, graphics chips, motherboards, BIOS software and other components.

Our microprocessors are not designed to function with motherboards and chipsets designed to work with Intel microprocessors because our patent-cross license agreement with Intel does not extend to Intel’s proprietary bus interface protocol. Accordingly, we depend on third-party companies for the design and manufacture of core-logic chipsets, graphics chips, motherboards, BIOS software and other components that support our microprocessor offerings. In recent years, many of these third-party designers and manufacturers have lost significant market share to Intel or exited the business. If we are unable to secure sufficient support for our microprocessor products from these designers and manufacturers, our business would be materially adversely affected.

If we are ultimately unsuccessful in any of our antitrust lawsuits against Intel, our business may be materially adversely affected.

On June 27, 2005, we filed an antitrust complaint against Intel Corporation and Intel’s Japanese subsidiary, Intel Kabushiki Kaisha, collectively, Intel, in the United States District Court for the District of Delaware under Section 2 of the Sherman Antitrust Act, Sections 4 and 16 of the Clayton Act, and the California Business and Professions Code. Our complaint alleges that Intel has unlawfully maintained a monopoly in the x86 microprocessor market by engaging in anti-competitive financial and exclusionary business practices that in effect limit the ability and/or incentive of Intel’s customers’ in dealing with AMD. Also, on June 30, 2005, our subsidiary in Japan, AMD Japan K.K., filed an action in Japan against Intel K.K. in the Tokyo High Court and the Tokyo District Court for damages arising from violations of Japan’s Antimonopoly Act.

If our antitrust lawsuits against Intel are ultimately unsuccessful, our business, including our ability to increase market share in the microprocessor market, could be materially adversely affected. For additional information regarding our antitrust lawsuits against Intel, see Item 1 “Legal Proceedings” in Part II of this report.

The loss of a significant customer may have a material adverse effect on us.

Collectively, our top five OEM and distributor customers (including Fujitsu) accounted for approximately 45 percent of our total gross revenues in the second quarter of 2005. Excluding Fujitsu, our top five OEM and distributor customers accounted for approximately 30 percent of our total gross revenues in the second quarter of 2005. In addition, sales of Spansion Flash memory products in the wireless market have historically been concentrated in a limited group of customers. If one of these customers decided to stop buying our products, or if one of these customers were materially to reduce its operations or its demand for our products, we would be materially adversely affected.

If Spansion’s cost reduction efforts are not effective, we could be materially adversely affected.

The operating loss for our Memory Products segment was approximately $200 million for the first six months of 2005. As a result, Spansion is undertaking a number of actions in an effort to significantly reduce its expenses. These actions include streamlining operations and continuing to align manufacturing utilization to the level of demand for Spansion Flash memory products. We cannot assure you that any of these actions will occur as anticipated or at all, or that Spansion will be able to achieve significant cost reductions. If Spansion’s cost reduction efforts are unsuccessful, we could be materially adversely affected.

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If we fail to keep pace with new product designs and improvements or if we pursue technologies that do not become commercially accepted, customers may not buy our products and we may be adversely affected.

Our success depends to a significant extent on the development, qualification, implementation and acceptance of new product designs and improvements that provide value to our customers. Our ability to develop and qualify new products and related technologies to meet evolving industry requirements, at prices acceptable to our customers and on a timely basis are significant factors in determining our competitiveness in our target markets. If we are delayed in developing or qualifying new products or technologies, we could be materially adversely affected. For example, during the second half of 2004 and the first half of 2005 we experienced a delay in qualifying and introducing a new Spansion Flash memory product based on MirrorBit technology for wireless applications. The delay was due to our having to re-design the product in order to achieve higher performance specifications under all temperature conditions. Although we introduced a version of this product in the first quarter of 2005 and a higher performance version of this product in the second quarter of 2005, the delay contributed to lower than anticipated Memory Products net sales and caused us to lose market share in the wireless category of the Flash memory market. We are also in the process of transitioning a majority of our Flash memory products from floating gate technology to MirrorBit technology. If we experience any substantial difficulty with this transition, we would be materially adversely affected.

A lack of market acceptance of MirrorBit technology could have a material adverse effect on us.

Market acceptance of products based on our MirrorBit technology is a critical factor impacting our ability to increase revenues and market share as well as to enter new markets. MirrorBit technology enables a memory cell architecture that enables Flash memory products to store two bits of data in a single memory cell thereby doubling the density or storage capacity of each memory cell. If adoption of our MirrorBit technology occurs at a slower rate than we anticipate, our ability to compete will be reduced, and we would be materially adversely affected. For example, in the first quarter of 2005 we introduced a new Spansion Flash memory product based on second-generation MirrorBit technology for wireless applications and in the second quarter of 2005 we introduced a higher performance version of this product. If we do not achieve market acceptance of this product and subsequent versions, we would be materially adversely affected.

Spansion Flash memory products are based on NOR architecture, and a significant market shift to NAND architecture could materially adversely affect us.

Flash memory products are generally based either on NOR architecture or NAND architecture. To date, our Flash memory products have been based on NOR architecture, which are typically produced at a higher cost-per-bit than NAND-based products. We do not currently manufacture products based on NAND architecture. During 2003 and 2004, industry sales of NAND-based products grew at higher rates than sales of NOR-based products, resulting in NAND vendors in aggregate gaining a greater share of the overall Flash memory market and NOR vendors in aggregate losing overall market share. This trend continued in the first and second quarters of fiscal 2005. Moreover, the removable storage category of the Flash memory market, which is currently the second largest category after wireless, and is predominantly served by NAND vendors, is expected to be the fastest growing portion of the Flash memory market for the foreseeable future. As mobile phones and other consumer electronics become more advanced, they will require higher density Flash memory to meet the increased data storage requirements associated with music downloads, photos and videos. Because storage requirements will increase to accommodate data-intensive applications, OEMs may increasingly choose NAND-based products over NOR-based products for their applications. Moreover, some NAND vendors are manufacturing on 300-millimeter wafers or are utilizing more advanced manufacturing process technologies than we are today, which result in an ability to offer products with a lower cost-per bit at a given product density. If NAND vendors continue to increase their share of the Flash memory market, our market share may decrease, which would materially adversely affect us.

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If we fail to successfully develop products based on our new ORNAND architecture, or if there is a lack of market acceptance of products based on our ORNAND architecture, our future operating results would be materially adversely affected.

As mobile phones become more advanced, they will require higher density Flash memory to meet increased data storage requirements. We intend to position ourselves to address the increasing demand for higher density Flash memory within the wireless category of the Flash memory market by offering products based on our ORNAND architecture, which we are currently developing. The success of our ORNAND architecture requires that we timely and cost effectively develop, manufacture and market ORNAND-based products that are competitive with NAND-based Flash memory products in the wireless category of the Flash memory market. We expect to begin commercial shipments of ORNAND-based products to customers in 2006. However, if we fail to develop and commercialize our ORNAND architecture on a timely basis or if our ORNAND-based products fail to achieve acceptance in the wireless market, our future operating results would be materially adversely affected.

If we are unable to timely and efficiently implement 300-millimeter wafer capacity for the manufacture of our Spansion Flash memory products, our business, results of operations or financial condition could be materially adversely affected.

We intend to implement manufacturing capacity on 300-millimeter wafers for our Spansion Flash memory products in 2007. The timing for implementing 300-millimeter capacity will depend in part on the demand for our Flash memory products and our ability to either construct and/or facilitize such a facility or to engage in a relationship with a third party foundry. If we are delayed in having this capacity or are unable to timely and efficiently ramp production on 300-millimeter wafers, we would not achieve anticipated cost savings and capacity associated with this technology and we could be materially adversely affected.

We are required to reach agreement with Fujitsu regarding certain actions of Spansion, and our interests may not be aligned.

We own 60 percent of Spansion while Fujitsu owns the remaining 40 percent. Although we are entitled to appoint a majority of the board of managers, which generally manages the affairs of Spansion, certain actions by Spansion require Fujitsu’s consent for as long as Fujitsu maintains specific levels of ownership in Spansion. In addition, based upon designated thresholds of Fujitsu’s percentage interest in Spansion, certain actions require the affirmative vote of at least a majority of the managers appointed by Fujitsu. These actions, which primarily represent protective rights for Fujitsu as a minority member, include:

• major investments, acquisitions and dispositions of assets, and any public offering of Spansion’s equity interests;

• a merger or consolidation resulting in the transfer of more than 50% of the equity interests;

• settlement of major legal proceedings and other actions;

• approval of certain material contracts between us and Spansion;

• changes to the equity capital structure of the Spansion, including the potential initial public offering of Spansion common stock; and

• winding-up Spansion or one of its material subsidiaries.

There can be no guarantee that our interests and those of Fujitsu will be aligned with respect to such decisions and we may be unable to take steps that we believe are desirable. In addition, a reduction in our percentage interest may result in our inability to appoint a majority of Spansion’s board of managers, which could result in the loss of effective control of Spansion, although the results of operations of Spansion may continue to impact significantly our results of operations and we still may be required to make loans to, and guarantee indebtedness of, Spansion.

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Our operating results are subject to quarterly and seasonal sales patterns.

A substantial portion of our quarterly sales have historically been made in the last month of the quarter. This uneven sales pattern makes prediction of net sales for each financial period difficult and increases the risk of unanticipated variations in quarterly results and financial condition. In addition, our operating results tend to vary seasonally. For example, demand in the retail sector of the PC market is often stronger during the fourth quarter as a result of the winter holiday season. European sales are often weaker during the summer months. Many of the factors that create and affect seasonal trends are beyond our control.

Manufacturing capacity constraints and manufacturing capacity utilization rates may have a material adverse affect on us.

There may be situations in which our manufacturing facilities are inadequate to meet the demand for certain of our products. Our inability to obtain sufficient manufacturing capacity to meet demand, either in our own facilities or through foundry or similar arrangements with third parties, could have a material adverse effect on us. For example, in the first half of fiscal 2004, we were not able to meet demand for certain of our lower density embedded Spansion Flash memory products. We believe this adversely impacted our relationships with customers who received reduced or no allocations of our embedded products and we believe our competitors were able to take advantage of this situation to increase their market share.

In November 2004, we entered into sourcing and manufacturing technology agreements with Chartered Semiconductor Manufacturing whereby Chartered agreed to become an additional manufacturing source of our AMD64-based microprocessors. We expect that Chartered will begin production in 2006. The ability of Chartered to begin production on a timely basis depends on several factors beyond our control, including obtaining the necessary governmental permits to transfer the required technology to Singapore and Chartered’s ability to implement our technology at their facilities on a timely basis. If we cannot obtain sufficient manufacturing capacity to meet demand for our products, either in our own facilities or through foundry or similar arrangements we could be materially adversely affected.

Industry overcapacity could cause us to under-utilize our manufacturing facilities and have a material adverse effect on us.

Semiconductor companies with their own manufacturing facilities and specialist semiconductor foundries, which are subcontractors that manufacture semiconductors designed by others, have added significant capacity in recent years and are expected to continue to do so. In the past, capacity additions sometimes exceeded demand requirements leading to oversupply situations and downturns in the industry. Fluctuations in the growth rate of industry capacity relative to the growth rate in demand for our products contribute to cyclicality in the semiconductor market, which may in the future put pressure on our average selling prices and materially adversely affect us.

It is difficult to predict future growth or decline in the markets we serve, making it very difficult to estimate requirements for production capacity. If our target markets do not grow as we anticipate, we may under-utilize our manufacturing facilities, which may result in write-downs or write-offs of inventories and losses on products whose demand is lower than we anticipate. We intend to migrate the manufacture of our AMD64-based processors from Fab 30 to Fab 36 and Chartered. Accordingly, our ability to fully utilize the capacity of Fab 30 will depend on demand for our low-power embedded microprocessors for the embedded and consumer electronics markets, which historically has not grown in line with the demand for our AMD64-based processors.

In addition, during periods of industry overcapacity, such as was recently experienced by our Memory Products business, customers do not generally order products as far in advance of the scheduled shipment date as they do during periods when our industry is operating closer to capacity, which can exacerbate the difficulty in forecasting capacity requirements. Many of our costs are fixed. Accordingly, during periods in which we under-utilize our manufacturing facilities as a result of reduced demand for certain of our products, our costs cannot be reduced in proportion to the reduced revenues for such a period. When this occurs, our operating results are materially adversely affected. We are substantially increasing our manufacturing capacity by facilitizing Fab 36, transitioning to smaller manufacturing process technologies and larger wafers and making significant capital investments in our existing manufacturing facilities. If the increase in demand for our products is not consistent with our expectations, we may underutilize manufacturing facilities. This has in the past had, and in the future may have, a material adverse effect on us.

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Unless we maintain manufacturing efficiency, our future profitability could be materially adversely affected.

Manufacturing our products involves highly complex processes that require advanced equipment. Our manufacturing efficiency is an important factor in our profitability, and we cannot be sure that we will be able to maintain or increase our manufacturing efficiency to the same extent as our competitors. We continuously modify manufacturing processes in an effort to improve yields and product performance and decrease costs. We may fail to achieve acceptable yields or experience product delivery delays as a result of, among other things, capacity constraints, construction delays, delays in the development of new process technologies, changes in our process technologies, upgrades or expansion of existing facilities, or impurities or other difficulties in the manufacturing process.

Improving our manufacturing efficiency in future periods is dependent on our ability to:

• develop advanced product and process technologies;

• successfully transition to advanced process technologies;

• ramp product and process technology improvements rapidly and effectively to commercial volumes across our facilities; and

• achieve acceptable levels of manufacturing wafer output and yields, which may decrease as we implement more advanced technologies.

During periods when we are implementing new process technologies, manufacturing facilities may not be fully productive. A substantial delay in the technology transitions to smaller process technologies could have a material adverse effect on us, particularly if our competitors transition to more cost effective technologies earlier than we do. Our results of operations would also be adversely affected by the increase in fixed costs and operating expenses related to increases in production capacity if revenues do not increase proportionately.

If we lose Microsoft Corporation’s support for our products, our ability to sell our microprocessors could be materially adversely affected.

Our ability to innovate beyond the x86 instruction set controlled by Intel depends partially on Microsoft designing and developing its operating systems to run on or support our microprocessor products. If Microsoft does not continue to design and develop its operating systems so that they work with our x86 instruction sets, independent software providers may forego designing their software applications to take advantage of our innovations and customers may not purchase PCs with our microprocessors. If we fail to retain the support of Microsoft, our ability to market our microprocessors would be materially adversely affected.

If we are unable to comply with the covenants in the subsidy grant documents that we receive from the State of Saxony, the Federal Republic of Germany and/or the European Union for Fab 30, Fab 36 or other research and development projects we may undertake in Germany, we may forfeit or have to repay our subsidies, which could materially adversely affect us.

We receive capital investment grants and allowances from the State of Saxony and the Federal Republic of Germany for Fab 36. We have also received capital investment grants and allowances as well as interest subsidies from these governmental entities for Fab 30. From time to time, we also apply for and obtain subsidies from the State of Saxony, the Federal Republic of Germany and the European Union for certain research and development projects at Fab 30 and Fab 36. The subsidy grant documents typically contain covenants that must be complied with, and

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noncompliance with the conditions of the grants, allowances and subsidies could result in the forfeiture of all or a portion of any future amounts to be received, as well as the repayment of all or a portion of amounts received to date. If we are unable to comply with all of the covenants in the grant documents, we may be materially adversely affected.

If our microprocessors are not compatible with some or all industry-standard software and hardware, we could be materially adversely affected.

Our microprocessors may not be fully compatible with some or all industry-standard software and hardware. Further, we may be unsuccessful in correcting any such compatibility problems in a timely manner. If our customers are unable to achieve compatibility with software or hardware after our products are shipped in volume, we could be materially adversely affected. In addition, the mere announcement of an incompatibility problem relating to our products could have a material adverse effect on us.

Costs related to defective products could have a material adverse effect on us.

One or more of our products may be found to be defective after the product has been shipped to customers in volume. The cost of product replacements or product returns may be substantial, and our reputation with our customers would be damaged. In addition, we could incur substantial costs to implement modifications to fix defects. Any of these problems could materially adversely affect us.

If essential equipment or materials are not available to manufacture our products, we could be materially adversely affected.

Our manufacturing operations depend upon obtaining deliveries of equipment and adequate supplies of materials on a timely basis. We purchase equipment and materials from a number of suppliers. From time to time, suppliers may extend lead times, limit supply to us or increase prices due to capacity constraints or other factors. Because the equipment that we purchase is complex, it is difficult for us to substitute one supplier for another or one piece of equipment for another. Certain raw materials we use in the manufacture of our products are available from a limited number of suppliers.

For example, we are largely dependent on one supplier for our 200-millimeter and 300-millimeter silicon-on-insulator (SOI) wafers. Although there are alternative sources available, we have not qualified these sources and we do not believe that they currently have sufficient capacity to meet our requirements for SOI wafers. We are also dependent on key chemicals from a limited number of suppliers and rely on a limited number of foreign companies to supply the majority of certain types of IC packages we purchase. Similarly, we purchase commercial non-Flash memory die, such as SRAM and pSRAM, from third-party suppliers and incorporate these die into Spansion MCP products. Our production of Spansion Flash memory products was constrained in first half of fiscal 2004 because of difficulties in procuring adequate supply of pSRAM. Some of these suppliers are also our competitors in the Flash memory market. Interruption of supply or increased demand in the industry could cause shortages and price increases in various essential materials. If we are unable to procure certain of these materials, we may have to reduce our manufacturing operations. Such a reduction has in the past and could in the future have a material adverse effect on us.

Our inability to continue to attract and retain qualified personnel may hinder our product development programs.

Our future success depends upon the continued service of numerous qualified engineering, manufacturing, marketing, sales and executive personnel. If we are not able to continue to attract, retain and motivate qualified personnel necessary for our business, the progress of our product development programs could be hindered, and we could be materially adversely affected.

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We outsource to third parties certain supply-chain logistics functions, including physical distribution of our products, and co-source some information technology services.

We rely on a third-party provider to deliver our products to our customers and to distribute materials for our manufacturing facilities. In addition, we rely on a third-party provider in India to provide certain information technology services to us, including helpdesk support, desktop application services, business and software support applications, server and storage administration, data center operations, database administration, and voice, video and remote access. Our relationships with these providers are governed by fixed term contracts. We cannot guarantee that these providers will fulfill their respective responsibilities in a timely manner in accordance with the contract terms, in which case our internal operations, the distribution of our products to our customers and the distribution of materials for our facilities could be materially adversely affected. Also, we cannot guarantee that our contracts with these third-party providers will be renewed, in which case we would have to transition these functions in-house or secure new providers, which could have a material adverse effect on us.

In addition, we decided to outsource or co-source these functions to third parties primarily to lower our operating expenses and to create a more variable cost structure. However, if the costs related to administration, communication and coordination of these third-party providers are greater than we expect, then we will not realize our anticipated cost savings.

Uncertainties involving the ordering and shipment of, and payment for, our products could materially adversely affect us.

Sales of our products are typically made pursuant to individual purchase orders. We generally do not have long-term supply arrangements with our customers. Generally, our customers may cancel orders 30 days prior to shipment without incurring a significant penalty. We base our inventory levels on customers’ estimates of demand for their products, which are difficult to predict. This difficulty may be compounded when we sell to OEMs indirectly through distributors, as our forecasts for demand are then based on estimates provided by multiple parties. In addition, our customers may change their inventory practices on short notice for any reason. The cancellation or deferral of product orders, the return of previously sold products or overproduction due to failure of anticipated orders to materialize could result in excess or obsolete inventory, which could result in write-downs of inventory. Because market conditions are uncertain, these and other factors could materially adversely affect us.

Our reliance on third-party distributors subjects us to certain risks.

We market and sell our products directly and through third-party distributors pursuant to agreements that can generally be terminated for convenience by either party upon prior notice to the other party. These agreements are non-exclusive and permit our distributors to offer our competitors’ products. Currently, we rely on Fujitsu to act as the sole distributor of Spansion Flash memory products in Japan. In addition, our third party distributors have been a significant factor in our ability to increase sales of our products in certain high growth global markets. Accordingly, we are dependent on our distributors to supplement our direct marketing and sales efforts. If any significant distributor or a substantial number of our distributors terminated their relationship with us or decided to market our competitors’ products over our products, our ability to bring our products to market would be impacted and we would be materially adversely affected.

Additionally, distributors typically maintain an inventory of our products. In most instances, our agreements with distributors protect their inventory of our products against price reductions, as well as provide return rights for any product that we have removed from our price book or that is not more than twelve months older than the manufacturing code date. Some agreements with our distributors also contain standard stock rotation provisions permitting limited levels of product returns. We defer the gross margins on our sales to distributors, resulting from both our deferral of revenue and related product costs, until the applicable products are re-sold by the distributors. However, in the event of an unexpected significant decline in the price of our products, the price protection rights we offer to our distributors would materially adversely affect us because our revenue would decline.

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Our operations in foreign countries are subject to political and economic risks, which could have a material adverse effect on us.

All of our wafer fabrication capacity for microprocessors is located in Germany and a majority of our wafer fabrication capacity for Spansion Flash memory is located in Japan. Nearly all product assembly and final testing of our products is performed at manufacturing facilities in China, Malaysia, Singapore and Thailand and by third parties in Taiwan and Japan. We also depend on foreign foundry suppliers for the production of certain of our embedded microprocessors for personal connectivity devices and we depend on an international joint venture for the manufacture of optical photomasks that we intend to use in the manufacture of our microprocessors. In addition, we have international sales operations and as part of our business strategy, we are continuing to seek expansion of product sales in high growth markets. Our international sales as a percentage of our total consolidated net sales were approximately 76 percent in the second quarter of 2005, 78 percent in the first quarter of 2005 and 80 percent in the second quarter of 2004.

The political and economic risks associated with our operations in foreign countries include, without limitation:

• expropriation;

• changes in a specific country’s or region’s political or economic conditions;

• changes in tax laws; trade protection measures and import or export licensing requirements;

• difficulties in protecting our intellectual property;

• difficulties in achieving headcount reductions

• changes in foreign currency exchange rates;

• restrictions on transfers of funds and other assets of our subsidiaries between jurisdictions;

• changes in freight and interest rates;

• disruption in air transportation between the United States and our overseas facilities; and

• loss or modification of exemptions for taxes and tariffs.

Any conflict or uncertainty in the countries in which we operate, including public health or safety concerns, natural disasters or general economic factors, could have a material adverse effect on our business. Any of the above risks, should they occur, could have a material adverse effect on us.

Worldwide economic and political conditions may adversely affect demand for our products.

Worldwide economic conditions may adversely affect demand for our products. For example, China’s economy has been growing at a fast pace over the past several years, and the Chinese government has recently introduced various measures to slow down the pace of economic growth. We believe some of these measures negatively impacted demand for our Flash memory products in the second half of 2004. If Chinese authorities are not able to stage an orderly slowdown of the economic growth, China’s economy may suffer. If economic conditions decline, whether in China or worldwide, we could be materially adversely affected.

The occurrence and threat of terrorist attacks and the consequences of sustained military action in the Middle East have in the past, and may in the future, adversely affect demand for our products. Terrorist attacks may negatively affect our operations, directly or indirectly, and such attacks or related armed conflicts may directly impact our physical facilities or those of our suppliers or customers. Furthermore, these attacks may make travel and the transportation of our products more difficult and more expensive, which could materially adversely affect us.

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The United States has been and may continue to be involved in armed conflicts that could have a further impact on our sales, and our supply chain. Political and economic instability in some regions of the world may also result and could negatively impact our business. The consequences of armed conflicts are unpredictable, and we may not be able to foresee events that could have a material adverse effect on us.

More generally, any of these events could cause consumer confidence and spending to decrease or result in increased volatility in the United States economy and worldwide financial markets. Any of these occurrences could have a material adverse effect on us and also may result in volatility of the market price for our securities.

Unfavorable currency exchange rate fluctuations could adversely affect us.

As a result of our foreign operations, we have sales, costs, assets and liabilities that are denominated in foreign currencies, primarily the European Union euro and the Japanese yen. For example:

• a significant portion of our manufacturing costs for our microprocessor products is denominated in euro while sales of those products are denominated primarily in U.S. dollars;

• certain manufacturing costs for our Spansion Flash memory products are denominated in yen;

• certain manufacturing costs for both our Spansion Flash memory products and our microprocessor products are denominated in Chinese yuan renminbi as well as other foreign currencies such as the Thai baht and the Singapore dollar;

• some fixed asset purchases are denominated in euro and yen;

• sales of our Flash memory products in Japan are denominated in yen; and

• certain costs of our Fab 36 project are denominated in euro.

As a consequence, movements in exchange rates could cause our U.S. dollar-denominated expenses to increase as a percentage of net sales, affecting our profitability and cash flows. Whenever we believe appropriate, we cover a portion of our foreign currency exchange exposure to protect against fluctuations in currency exchange rates. We determine our total foreign currency exchange exposure using projections of long-term expenditures for items such as equipment and materials used in manufacturing. We cannot assure you that these activities will eliminate foreign exchange rate exposure. Failure to do so could have an adverse effect on our business, financial condition, results of operations and cash flow.

In addition, even where revenues and expenses are matched, we must translate euro and yen denominated results of operations, assets and liabilities for our foreign subsidiaries to U.S. dollars in our consolidated financial statements. Consequently, increases and decreases in the value of the U.S. dollar versus the euro or yen will affect our reported results of operations and the value of our assets and liabilities in our consolidated balance sheet, even if our results of operations or the value of those assets and liabilities has not changed in their original currency. These transactions could significantly affect the comparability of our results between financial periods and/or result in significant changes to the carrying value of our assets, liabilities and shareholders’ equity.

Our inability to effectively control the sales of our products on the gray market could have a material adverse effect on us.

We market and sell our products directly to OEMs and through authorized third-party distributors. From time to time, our products are diverted from our authorized distribution channels and are sold on the “gray market.” Gray market products entering the market result in shadow inventory that is not visible to us, thus making it difficult to forecast demand accurately. Also, when gray market products enter the market, we and our distribution channel compete with heavily discounted products, which adversely affects demand for our products. In addition, our

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inability to control gray marketing activities could result in customer satisfaction issues, because any time products are purchased outside our authorized distribution channel, there is a risk that our customers are buying counterfeit or substandard products, including products that may have been altered, mishandled or damaged, or used products represented as new. Our inability to control sales of our products on the gray market could have a material adverse effect on us.

If we cannot adequately protect our technology or other intellectual property in the United States and abroad, through patents, copyrights, trade secrets, trademarks and other measures, we may lose a competitive advantage and incur significant expenses.

We rely on a combination of protections provided by contracts, including confidentiality and nondisclosure agreements, copyrights, patents, trademarks and common law rights, such as trade secrets, to protect our intellectual property. However, we cannot assure you that we will be able to adequately protect our technology or other intellectual property from third party infringement or from misappropriation in the United States and abroad. Any patent licensed by us or issued to us could be challenged, invalidated or circumvented or rights granted thereunder may not provide a competitive advantage to us. Furthermore, patent applications that we file may not result in issuance of a patent or, if a patent is issued, the patent may not be issued in a form that is advantageous to us. Despite our efforts to protect our intellectual property rights, others may independently develop similar products, duplicate our products or design around our patents and other rights. In addition, it is difficult to monitor compliance with, and enforce, our intellectual property on a worldwide basis in a cost-effective manner. Foreign laws may provide less intellectual property protection than afforded in the United States. If we cannot adequately protect our technology or other intellectual property in the United States and abroad, we would be materially adversely affected.

We may become a party to intellectual property claims or litigation that could cause us to incur substantial costs or pay substantial damages or prohibit us from selling our products.

From time to time, we have been notified that we may be infringing intellectual property rights of others. If any such claims are asserted against us, we may seek to obtain a license under the third party’s intellectual property rights. We cannot assure you that we will be able to obtain all necessary licenses on satisfactory terms, if at all. In the event we cannot obtain a license, we may be prevented from using some technology, which could result in our having to stop the sale of some of our products, increase the costs of selling some of our products, or damage our reputation. We could decide, in the alternative, to resort to litigation to challenge such claims. Such challenges could be extremely expensive and time-consuming and could have a material adverse effect on us. We cannot assure you that litigation related to the intellectual property rights of us and others will always be avoided or successfully concluded.

We are subject to a variety of environmental laws that could result in liabilities.

Our operations and properties are subject to various U.S. and foreign environmental laws and regulations, including those relating to materials used in our products and manufacturing processes, discharge of pollutants into the environment, the treatment, transport, storage and disposal of solid and hazardous wastes, and remediation of contamination. These laws and regulations require us to obtain permits for our operations, including the discharge of air pollutants and wastewater. From time to time, our facilities are subject to investigation by governmental regulators. We cannot assure you that we have been or will be at all times in complete compliance with such laws, regulations and permits. If we violate or fail to comply with any of them, a range of consequences could result, including fines, suspension of production, alteration of manufacturing processes, sales limitations, criminal and civil liabilities or other sanctions. We could also be held liable for any and all consequences arising out of exposure to hazardous materials used, stored, released, disposed of by us or located at or under our facilities or other environmental or natural resource damage.

Certain environmental laws, including the U.S. Comprehensive, Environmental Response, Compensation and Liability Act of 1980, or the Superfund Act, impose strict, joint and several liability on current and previous owners or operators of real property for the cost of removal or remediation of hazardous substances and impose liability for damages to natural resources. These laws often impose liability even if the owner or operator did not know of, or

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was not responsible for, the release of such hazardous substances. These environmental laws also assess liability on persons who arrange for hazardous substances to be sent to disposal or treatment facilities when such facilities are found to be contaminated. Such persons can be responsible for cleanup costs even if they never owned or operated the contaminated facility. Two of our manufacturing sites are, or are located within, a federal Superfund site. Although we have not yet been, we could be named a potentially responsible party at these or other Superfund or other contaminated sites in the future. The costs associated with such sites could be material. In addition, contamination that has not yet been identified could exist at our other facilities.

Environmental laws are complex, change frequently and have tended to become more stringent over time. For example, the European Union recently began imposing stricter requirements regarding reduced lead content in semiconductor packaging. While we have budgeted for foreseeable environmental expenditures, we cannot assure you that environmental laws will not change or become more stringent in the future. Therefore, we cannot assure you that our costs of complying with current and future environmental and health and safety laws, and our liabilities arising from past and future releases of, or exposure to, hazardous substances will not have a material adverse effect on us.

Future litigation proceedings may materially adversely affect us.

From time to time we are a defendant or plaintiff in various legal actions. Litigation can involve complex factual and legal questions and its outcome is uncertain. Any claim that is successfully asserted against us may cause us to pay substantial damages. In addition, future litigation may result in injunctions against future product sales. Even if we were to prevail, any litigation could be costly and time-consuming and would divert the attention of our management and key personnel from our business operations, which could have a material adverse effect on us.

Our worldwide operations could be subject to natural disasters and other business disruptions, which could harm our future revenue and financial condition and increase our costs and expenses.

Our worldwide operations could be subject to natural disasters and other business disruptions, which could harm our future revenue and financial condition and increase our costs and expenses. For example, our corporate headquarters are located near major earthquake fault lines in California and three of our four wafer fabrication facilities for Spansion Flash memory products are located near major earthquake fault lines in Japan. Our assembly and test facilities are located in China, Malaysia, Singapore and Thailand. In the event of a major earthquake, or other natural or manmade disaster, we could experience loss of life of our employees, destruction of facilities or business interruptions, any of which could materially adversely affect us.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Reference is made to Part II, Item 7A, Quantitative and Qualitative Disclosures about Market Risk, in our Annual Report on Form 10-K for the fiscal year ended December 26, 2004. We experienced no significant changes in market risk during the first six months of 2005 except as follows: During the first six months of 2005, the U.S dollar has strengthened against the European euro and Japanese yen. As a result, the cumulative translation adjustment balance has been reduced significantly for the period. Such decrease is primarily due to the translation impact of the functional currency used to account for the net assets of our subsidiaries in Germany and Japan to our reporting currency, which is the U.S. dollar. However, this translation impact does not affect our earnings or our cash flows as this is recorded as a component of stockholders’ equity in our balance sheet. As foreign currencies move relative to the U.S. dollar, we expect to continue to have this translation adjustment impact, which will either increase or decrease our total stockholders’ equity balance. In addition, we cannot give any assurance as to the effect that future changes in foreign currency rates will have on our consolidated financial position, results of operations or cash flows.

ITEM 4. CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management,

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including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As of June 26, 2005, the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level.

There has been no change in our internal control over financial reporting during the fiscal quarter ended June 26, 2005 that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

AMD v. Intel Corporation and Intel Kabushiki Kaisha, Civil Action No. 05-441, in the United States District Court for the District of Delaware.

On June 27, 2005, we filed an antitrust complaint against Intel Corporation and Intel Kabushiki Kaisha, collectively “Intel,” in the United States District Court for the District of Delaware under Section 2 of the Sherman Antitrust Act, Sections 4 and 16 of the Clayton Act, and the California Business and Professions Code. The complaint alleges that Intel has unlawfully maintained a monopoly in the x86 microprocessor market by engaging in anti-competitive financial and exclusionary business practices that in effect limit Intel’s customers’ ability and/or incentive to deal with AMD. The complaint alleges anti-competitive business practices, including:

• Forcing major customers into Intel-exclusive deals in return for outright cash payments, discriminatory pricing or marketing subsidies conditioned on the exclusion of AMD;

• Forcing other major customers into partial exclusivity agreements by conditioning rebates, allowances and market development funds on customers’ agreement to severely limit or forego entirely purchases from AMD;

• Establishing a system of discriminatory and retroactive incentives triggered by purchases at such high levels as to have the intended effect of denying customers the freedom to purchase any significant volume of processors from AMD;

• Establishing and enforcing quotas among key retailers, effectively requiring them to stock overwhelmingly or exclusively computers with Intel microprocessors, and thereby artificially limiting consumer choice;

• Forcing PC makers and technology partners to boycott AMD product launches or promotions;

• Abusing its market power by forcing on the industry technical standards and products that have as their main purpose the handicapping of AMD in the marketplace.

We have requested the following findings and remedies:

• A finding that Intel is wrongfully maintaining its monopoly in the x86 microprocessor market in violation of Section 2 of the Sherman Act and treble damages to AMD in an amount to be proven at trial, pursuant to Section 4 of the Clayton Act, 15 U.S.C. § 15(a);

• A finding that Intel has made secret payments and allowance of rebates and discounts, and that Intel secretly and discriminatorily extended to certain purchasers special services or privileges, all in violation of California Business & Professions Code § 17045, and treble damages for AMD’s resulting lost profits in an amount to be proven at trial;

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• A finding that Intel has intentionally interfered with valuable business relationships of AMD to AMD’s economic detriment and damages to AMD in an amount to be proven at trial for its resulting losses, as well as punitive damages, as permitted by law;

• Injunctive relief prohibiting Intel from engaging in any further conduct unlawful under Section 2 of the Sherman Act or Section 17045 of the California Business and Professions Code;

• An award to AMD of such other, further and different relief as may be necessary or appropriate to restore and maintain competitive conditions in the x86 microprocessor market; and

• An award of attorneys’ fees and costs.

Intel has not yet responded to the complaint.

Other Related Proceedings

On June 30, 2005, our Japanese subsidiary, AMD Japan K.K., or AMD Japan, filed an action in Japan against Intel Corporation’s Japanese subsidiary, Intel Kabushiki Kaisha, or Intel K.K., in the Tokyo High Court and the Tokyo District Court for damages arising from violations of Japan’s Antimonopoly Act.

Through its suit in the Tokyo High Court, AMD Japan seeks US$50 million in damages, following on the Japan Fair Trade Commission’s (JFTC) findings in its March 8, 2005 Recommendation, or the JFTC Recommendation, that Intel K.K. committed violations of Japan’s Antimonopoly Act. The JFTC Recommendation concluded that Intel K.K. interfered with AMD Japan’s business activities by providing large amounts of funds to five Japanese PC manufacturers (NEC, Fujitsu, Toshiba, Sony, and Hitachi) on the condition that they refuse to purchase AMD’s microprocessors. The suit alleges that as a result of these illegal acts, AMD Japan suffered serious damages, losing all of its sales of microprocessors to Toshiba, Sony, and Hitachi, while sales of microprocessors to NEC and Fujitsu also fell precipitously.

Through its suit in the Tokyo District Court, AMD Japan seeks US$55 million in damages for various anticompetitive acts in addition to those covered in the scope of the JFTC Recommendation. The suit alleges that these anticompetitive acts also had the effect of interfering with AMD Japan’s right to engage in normal business and marketing activities.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

AMD’s annual meeting of stockholders was held on April 28, 2005. The following are the results of the voting on the proposals submitted to stockholders at the annual meeting.

Proposal No. 1: Election of Directors. The following individuals were elected as directors:

Name	For	Withheld
Hector de J. Ruiz	330,414,489	5,635,525
W. Michael Barnes	332,072,356	3,977,658
Bruce L. Claflin	321,089,780	14,960,234
H. Paulett Eberhart	331,916,522	4,133,492
David J. Edmondson	331,905,637	4,144,377
Robert B. Palmer	320,603,005	15,447,009
Leonard M. Silverman	319,768,748	16,281,266
Morton L. Topfer	331,988,398	4,061,616

Proposal No. 2: The proposal to ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the current fiscal year was approved.

For: 331,519,279

Against: 2,173,597

Abstain: 2,353,138

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Proposal No. 3: The stockholder proposal to amend our corporate governance documents to provide that director nominees be elected by the affirmative vote of the majority of votes cast at an annual meeting of stockholders was approved.

For: 132,100,035

Against: 92,205,348

Abstain: 3,303,176

ITEM 5. OTHER INFORMATION

On August 3, 2005, we entered into a Retention Payment Agreement with Henri Richard, our Executive Vice President and Chief Sales and Marketing Officer. Per the terms of the agreement, we will pay Mr. Richard a retention payment in the amount of $1,000,000, less required taxes and withholdings. The payment will be paid in a lump sum within 30 days of the date of the agreement. If Mr. Richard’s employment with us terminates within three years of the date of the agreement, Mr. Richard will be required to repay the full amount of the payment less 33.33 percent for each full year of employment completed during the three year period. Mr. Richard’s repayment obligation is not reduced by completion of partial years of employment.

ITEM 6. EXHIBITS.

Exhibits

10.37(a-2)	Second Amendment to Amended and Restated Term Loan Agreement by and among Spansion LLC (f/k/a FASL LLC), General Electric Capital Corporation and the Majority Lenders party thereto, dated as of June 10, 2005.
10.38(a)	First Amendment to Amended and Restated Limited Liability Company Operating Agreement of Spansion LLC dated as of June 30, 2003.
*10.63(a)	2004 Equity Incentive Plan, as amended, April 28, 2005.
*10.64	AMD Executive Investment Account Plan dated as of November 11, 2003.
*10.64(a)	First Amendment to AMD Executive Investment Account Plan dated as of February 24, 2004.
*10.64(b)	Second Amendment to AMD Executive Investment Account Plan dated as of May 25, 2004.
*10.65	Retention Payment Agreement between AMD and Henri Richard dated as of August 3, 2005.
*10.66	Form of AMD Executive Savings Plan.
31.1	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Management contracts and compensatory plans or arrangements in which directors or executive officers are eligible to participate.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	ADVANCED MICRO DEVICES, INC.
Date: August 4, 2005	By:	/s/ ROBERT J. RIVET
		Robert J. Rivet
		Executive Vice President,
		Chief Financial Officer
		Signing on behalf of the registrant and as the principal accounting officer

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EX-10.37(A-2)

Exhibit 10.37(a-2)

SECOND AMENDMENT TO AMENDED AND RESTATED TERM LOAN

AGREEMENT

This SECOND AMENDMENT TO AMENDED AND RESTATED TERM LOAN AGREEMENT, dated as of June 10, 2004 (this “Amendment”), is entered into by and among SPANSION LLC (f/k/a FASL LLC), a Delaware limited liability company (the “Borrower”), GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation, as agent for itself and the lenders from time to time signatory to the Loan Agreement (as defined below), as hereinafter defined (the “Lenders”) (in its capacity as agent for itself and the Lenders, together with its successors or affiliates in such capacity, the “Agent”), and the Majority Lenders party hereto.

WHEREAS, the Borrower has entered into the Amended and Restated Term Loan Agreement, dated as of July 11, 2003 as amended by the First Amendment to Amended and Restated Term Loan Agreement, dated as of March 29, 2004 (as further amended, amended and restated, supplemented, or otherwise modified from time to time, the “Loan Agreement”), by and among the Borrower, the Lenders and the Agent.

WHEREAS, the Borrower seeks to amend certain provisions of the Loan Agreement.

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

Section 1. Definitions; Rules of Interpretation. Capitalized terms used herein shall have the meanings assigned to them in the Loan Agreement, unless otherwise defined herein.

Section 2. Amendments. The Loan Agreement is hereby amended as follows:

(a) Section 1.1 of the Loan Agreement is hereby amended by deleting each of the definitions of “Domestic Cash”, “Net Domestic Cash”, and “Target Cash Level” in its entirety.

(b) The definition of “Target Worldwide Cash Level” in Section 1.1 of the Loan Agreement is amended and restated as follows:

“Target Worldwide Cash Level” means, for any period, the applicable cash level set forth below for such period:

SECOND AMENDMENT (SPANSION)

Period	Amount
Second quarter of Fiscal Year 2005	$	37,250,000
Third quarter of Fiscal Year 2005	$	30,375,000
Fourth quarter of Fiscal Year 2005	$	23,500,000
First quarter of Fiscal Year 2006	$	16,625,000
Second quarter of Fiscal Year 2006	$	9,750,000

(c) The definition of “Enhanced Covenant Period” in Section 1.1 of the Loan Agreement is amended and restated as follows:

“Enhanced Covenant Period” means, for each fiscal quarter of each Fiscal Year, at any time Net Worldwide Cash is less than the Target Worldwide Cash Level as measured on the last day of the prior fiscal quarter.

(d) Section 7.2 of the Loan Agreement is hereby amended by deleting the text in clauses (b) and (d) and inserting the words “Intentionally Omitted”.

(e) Section 7.2(f) of the Loan Agreement is amended and restated in its entirety as follows:

(f) No later than ninety (90) days after the beginning of each Fiscal Year, annual forecasts (to include forecasted consolidated and consolidating balance sheets, statements of income and expenses and statements of cash flow) for the Borrower and its Subsidiaries as at the end of and for each month of such Fiscal Year.

(f) Section 9.19 of the Loan Agreement is amended and restated in its entirety as follows:

9.19 Adjusted Tangible Net Worth. At any time that Net Worldwide Cash is less than the Target Worldwide Cash Level, the Borrower will maintain Adjusted Tangible Net Worth, determined as of the last day of each fiscal quarter, of not less than $850,000,000.

(g) The first sentence of Section 9.20 of the Loan Agreement is amended and restated in its entirety as follows:

9.20 EBITDA. At any time that Net Worldwide Cash is less than the Target Worldwide Cash Level, the Borrower will maintain EBITDA as of the last day of each fiscal period set forth below of not less than the amount set forth below opposite such fiscal period:

2 SECOND AMENDMENT (SPANSION)

(h) Section 9.21 of the Loan Agreement is amended and restated in its entirety as follows:

Section 9.21 Fixed Charge Coverage Ratio. At any time that Net Worldwide Cash is less than the Target Worldwide Cash Level, the Borrower shall not permit, as of the last day of any fiscal quarter, the ratio of (a) EBITDA for the period of the last four fiscal quarters ended on such date to (b) the sum of (i) interest expense for such period plus (ii) scheduled amortization of Debt For Borrowed Money for such period plus (iii) Capital Expenditures for such period, in each case, of the Borrower and its Subsidiaries, as determined on a consolidated basis in accordance with GAAP, to be less than (1) –0.6 to 1.00 for the third fiscal quarter of 2003, (2) 0.2 to 1.00 for the fourth fiscal quarter of 2003, (3) 0.25 to 1.00 for the first fiscal quarter of 2004, (4) 0.4 to 1.0 for the period ending June 2004, (5) 0.8 to 1.00 for the period ending September 2004, (6) 1.0 to 1.00 for the period ending December 2004, (7) 1.0 to 1.00 for the full fiscal year 2005, and (8) 0.9 to 1.00 for the full fiscal year 2006.

Section 3. Conditions to Effectiveness. This Amendment shall become effective upon the satisfaction of all of the following conditions precedent (the date of satisfaction of such conditions being referred to as the “Amendment Effective Date”):

(a) Delivery to the Agent of this Amendment, duly executed and delivered by the Borrower and the Lenders constituting the Majority Lenders.

(b) The representations and warranties set forth in Section 4 of this Amendment shall be true and correct as of the Amendment Effective Date.

(c) The representations and warranties of the Borrower as set forth in the Loan Agreement shall be true and correct in all material respects as of the Amendment Effective Date after giving effect to the amendments contemplated hereby (unless stated to be given as of an earlier date, in which case such representation and warranty shall be true and correct only as of such earlier date); and

(d) As of the Amendment Effective Date, no Event of Default or Default shall have occurred and be continuing after giving effect to this Amendment.

Section 4. The Borrower’s Representations and Warranties. The Borrower represents and warrants to the Agent and each Lender a party hereto as of the date hereof and as of the Amendment Effective Date as follows:

(a) The Borrower has all requisite limited liability company power and authority to enter, execute, deliver and perform this Amendment.

(b) The execution and delivery of this Amendment have been duly authorized by all necessary limited liability company action of the Borrower and has been duly executed and delivered by the Borrower.

3 SECOND AMENDMENT (SPANSION)

(c) As of the Amendment Effective Date, no Event of Default or Default shall have occurred and be continuing after giving effect to this Amendment.

Section 5. Reference to and Effect on the Loan Agreement and the other Loan Documents.

(a) The Loan Agreement and the other Loan Documents are subject to amendments only under the express provisions of Section 2 and shall, as so modified, continue to be in full force and effect and are hereby ratified and confirmed by the Borrower in all respects. Each other Loan Document is and shall continue to be in full force and effect and is hereby ratified and confirmed by the Borrower in all respects.

(b) This Amendment shall be construed as one with the Loan Agreement and the other Loan Documents, and the Loan Agreement and the other Loan Documents shall, where the context requires, be read and construed throughout so as to incorporate this Amendment.

Section 6. Execution in Counterparts; Effectiveness. This Amendment may be executed in any number of counterparts, and by the Agent, each Lender and the Borrower in separate counterparts, each of which shall be an original, but all of which shall together constitute one and the same agreement; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document.

Section 7. Headings. The headings contained in this Amendment are for convenience of reference only, are without substantive meaning and should not be construed to modify, enlarge, or restrict any provision.

Section 8. Severability. The illegality or unenforceability of any provision of this Amendment or any instrument or agreement required hereunder shall not in any way affect or impair the legality or enforceability of the remaining provisions of this Amendment or any instrument or agreement required hereunder.

Section 9. Governing Law. THIS AMENDMENT, AND ANY INSTRUMENT OR AGREEMENT REQUIRED HEREUNDER (TO THE EXTENT NOT EXPRESSLY PROVIDED FOR THEREIN), SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

4 SECOND AMENDMENT (SPANSION)

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective authorized officers as of the day and year first above written.

SPANSION LLC (f/k/a FASL LLC), a Delaware limited liability company
By:	/s/    STEVEN J. GEISER
	Name: Steven J. Geiser
	Title: Chief Financial Officer
LENDERS
GENERAL ELECTRIC CAPITAL CORPORATION, as the Agent for the Lenders and as a Lender
By:	/s/    RAKESH MITAL
	Name: Rakesh Mital
	Title: Chief Risk Officer
BANK OF AMERICA, N.A., as a Lender
By:	/s/    JOHN MCNAMARA
	Name: John McNamara
	Title: Vice President
MERRILL LYNCH CAPITAL, a Division of Merrill Lynch Business Financial Services Inc., as a Lender
By:
	Name:
	Title:

5 SECOND AMENDMENT (SPANSION)

ACKNOWLEDGED AND AGREED
TO BY EACH OF THE UNDERSIGNED
FOR PURPOSES OF THEIR RESPECTIVE
GUARANTY DATED AS OF JULY 11, 2003
ADVANCED MICRO DEVICES, INC.
By:	/s/    CAYE HURSEY
	Name: Caye Hursey
	Title: Treasurer
FUJITSU LIMITED
By:
	Name:
	Title:

6 SECOND AMENDMENT (SPANSION)

EX-10.38(A)

Exhibit 10.38(a)

AMENDMENT TO

AMENDED AND RESTATED

LIMITED LIABILITY COMPANY OPERATING AGREEMENT

OF

SPANSION LLC

THIS AMENDMENT (this “Amendment”) TO AMENDED AND RESTATED LIMITED LIABILITY COMPANY OPERATING AGREEMENT (the “Agreement”) OF SPANSION LLC, a Delaware limited liability company (the “Company”), is made and entered into as of May 20, 2005 (the “Amendment Effective Date”), by and between AMD Investments, Inc., a Delaware corporation (“AMD Member”), and Fujitsu Microelectronics Holding, Inc., a Delaware corporation (“Fujitsu Member” and together with AMD Member, the “Members”).

WITNESSETH:

WHEREAS, in accordance with Section 13.1 of the Agreement, the Members hereby desire to amend certain provisions to the Agreement;

NOW, THEREFORE, in consideration of the foregoing and the respective covenants and agreements set forth in this Amendment and intending to be legally bound hereby, the Members hereby agree as follows:

A. Capitalized terms used herein without definition shall have the meanings ascribed to them in the Agreement.

B. Section 6.4.6 of the Agreement is amended by restating Section 6.4.6 in its entirety as follows:

6.4.6 Any Member who is treated as contributing cash to the Company under Regulation Section 1.1032-3(b) pursuant to an equity incentive plan described in Section 7.16 herein or any similar plan shall be specially allocated an amount of the Company’s corresponding compensation deductions equal to the amount of the deemed cash contribution; provided, that if an income recognition event attributable to an equity incentive plan occurs in respect of an employee of a Company Entity (other than the Company) that is classified as a partnership for United States federal income tax purposes (or as an entity disregarded as separate from a partnership), the Company shall ensure that the Company will be allocated an amount of such Company Entity’s compensation deductions at least equal to the amount of such deemed cash contribution and such compensation deductions (not in excess of the amount of the deemed cash contribution) shall be specially allocated to the contributing Member; and provided further, that if an income recognition event attributable to an equity incentive plan occurs in respect of an employee of a Company Entity that is not classified as a partnership (or as an entity disregarded as separate from a partnership) for United States federal income tax purposes, such contributing Member shall be specially allocated, for the Fiscal Year of the Company which includes the date of such exercise, deductions (which shall consist of a pro rata share of each item of deduction taken into account by the Company in computing Net Profits or Net Losses for such Fiscal Year in accordance with Section 6.1.1 herein) in an amount equal to the amount of the compensation deduction the Company would have had if such employee had been an employee of the Company, but in no event shall such special allocation of deductions with respect to any such employee of any such Company Entity exceed the amount of the contributing Member’s deemed cash contribution pursuant to Regulations Section 1.1032-3(b), determined in accordance

with the principles set forth in the following sentence of this Section 6.4.6 with respect to such income recognition event. A Member shall be treated as contributing cash to the Company under Regulation Section 1.1032-3(b) to the extent (x) the fair market value, as of the date of the employee’s income recognition event with respect to any shares of the Member or its Affiliate purchased by or awarded to such employee pursuant to the equity incentive plan described in Section 7.16 herein or any similar plan, exceeds the sum of (y) the amount of cash (if any) paid or to be paid in accordance with Section 7.16 herein by the Company to a Member or its Affiliate (excluding any portion of such amount that is paid as interest pursuant to Section 7.16.1.1 herein) in consideration for such option, restricted stock, or other form of equity-based compensation, multiplied by a fraction the numerator of which is the number of shares transferred to the employee and the denominator of which is the aggregate number of shares subject to the relevant grant of equity-based compensation and (z) the aggregate exercise or purchase price paid with respect to the number of shares purchased by the employee. For purposes of this Section 6.4.6, a Company Entity that is treated as disregarded from the Company for U.S. federal income tax purposes shall be treated as the Company.

C. Section 7.16 of the Agreement is hereby amended by restating Section 7.16 as follows:

7.16 Equity Incentive Plans

7.16.1 Equity Incentive Plans

7.16.1.1 Stock Options Granted On or Prior to the Later of December 26, 2005 or the Date On Which AMD First Becomes Subject to Financial Accounting Statement 123R (the “Specified Date”). The Company will pay AMD, in cash, the value of stock options granted by AMD to employees of a Company Entity on or prior to the Specified Date in accordance with the terms of this Section 7.16.1.1. The value of such stock options will be calculated using the Black-Scholes valuation method using assumptions mutually agreed to by AMD Member and Fujitsu Member as soon as reasonably practicable following the Launch Date and adjusted thereafter as reasonably necessary and as reasonably agreed to by AMD Member and the Company and, during the 4-Year Period, with the consent of Fujitsu Member, which consent shall not be unreasonably withheld or delayed (the “Black-Scholes Value”). The Black-Scholes Value of such stock options payable by the Company to AMD shall initially be reduced by fifteen (15%) percent (the “Discounted Black-Scholes Value”) to take into account the likelihood that optionees of a Company Entity will forfeit and/or fail to exercise a certain number of the stock options issued by AMD. AMD Member and Fujitsu Member shall meet on or about June 30 each year to consider adjustments to the payments made to AMD for stock options granted by AMD to employees of a Company Entity. Factors for adjustments to such payments to AMD include, but are not limited to, the employee turnover rate at a Company Entity, the accounting and tax treatment of the option grants and payments to AMD and the method for determining the value of the AMD stock options. The Company will pay AMD the Discounted Black-Scholes Value of a stock option in sixteen (16) equal quarterly installments plus interest at the applicable federal rate determined in accordance with Section 1274(d) of the Code. The payment of such quarterly installments shall commence on the last day of the quarter following the quarter in which the stock option was granted.

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7.16.1.2 Stock Options Granted After the Specified Date and All Other Equity Awards.

(a) The Company will pay AMD, in cash, the value of any stock options granted to any employee of a Company Entity after the Specified Date and the value of all other forms of equity-based compensation (including restricted stock and restricted stock units) granted by AMD to employees of a Company Entity in accordance with the terms of this Section 7.16.1.2.

(b) For stock options granted after the Specified Date and for all other equity-based compensation granted by AMD to employees of a Company Entity, the Company will pay AMD, in cash, an amount equal to the amount of the expense recorded on AMD’s quarterly financial statements in accordance with U.S. GAAP with respect to such form of equity-based compensation. In the event that AMD is not required to recognize an expense in its financial statements for a form of equity-based compensation, the purchase price shall be equal to the estimated value of such form of equity-based compensation. Such estimated value shall be calculated using a method that is mutually agreed upon by the Company, Fujitsu Member and AMD Member, which agreement shall not be unreasonably withheld.

(c) Payments required pursuant to this Section 7.16.1.2 shall be made by the Company within thirty days following the filing by AMD of the 10-Q or 10-K (as applicable) for the quarter in which such expenses are reported, in an amount equal to the expense recorded for such fiscal quarter and attributable to awards under this Section 7.16.1.2 which amount shall be adjusted, if necessary, for any expense reversal reflected on AMD’s financial statements by reason of the forfeiture or termination of any such underlying equity compensation (whether granted in an earlier quarter or the same quarter), but in no event shall any such adjustment duplicate an adjustment already taken into account in determining the expense recorded for the quarter on such quarterly financial statement.

(d) AMD Member and Fujitsu Member shall meet on or about June 30 each year to negotiate in good faith as to whether any adjustments to the amount of the payments required to be made by the Company to AMD pursuant to Section 7.16.1.2(b) are appropriate. In considering whether an adjustment is appropriate, the parties shall consider, without limitation, the employee turnover rate at a Company Entity, the accounting and tax treatment of the equity based compensation and the payments to AMD provided under this Section 7.16.1.2 and the method for determining the value of the AMD equity based compensation. The parties may consider any other relevant factors.

7.16.1.3 Grant Considerations. AMD will consult with the HR Council with respect to grants of stock options and other forms of equity based compensation (including restricted stock and restricted stock units) and will consider the following factors when considering such grants:

(a) whether the eligible employee is U.S.-based or Japan-based, it being understood that U.S.-based employees may receive a greater number of options or units of any other form of equity-based compensation than equivalent Japan-based employees, provided, however, that Japan-based executives at the level of Corporate Director and above will be eligible to receive the same number of stock options or units of any other form of equity-based compensation as their U.S.-based counterparts; and

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(b) that all eligible employees on the U.S. payroll at a similar level of employment will have an equitable opportunity to receive option grants or other form of equity-based compensation, regardless of whether the employee previously worked for AMD, FASL (Japan) or Fujitsu;

provided, however, that the actual grant to any employee will reflect such employee’s individual performance.

7.16.2 Merger or Acquisition of the Company or AMD

(a) In the event of any merger, acquisition, consolidation or similar transaction to which the Company is a party (a “Company Transaction”) and in which the AMD stock options or other forms of equity-based compensation issued to Company Entity employees are assumed by a successor entity pursuant to the Company Transaction, the Company shall pay any remaining installments of the agreed-upon purchase price of the options or other forms of equity-based compensation to such successor entity rather than AMD on the same terms and at the same times as set forth in Section 7.16.1.

(b) In the event of any merger, acquisition, consolidation or similar transaction to which AMD is a party (an “AMD Transaction”) and in which the AMD stock options or other forms of equity-based compensation issued to Company Entity employees are assumed by a successor entity pursuant to the AMD Transaction, the Company shall pay any remaining installments of the agreed-upon purchase price of the options or other forms of equity-based compensation to such successor entity rather than AMD on the same terms and at the same times as set forth in Section 7.16.1.

(c) If, in connection with a Company Transaction or an AMD Transaction, the AMD stock options or other forms of equity-based compensation terminate, notwithstanding Section 7.16.1 above, the Company shall not be required to pay any remaining installments of the agreed-upon purchase price of such terminated options or other forms of equity-based compensation to AMD or to any other Person.

D. Miscellaneous.

1. This Amendment is limited as specified and shall not constitute a modification, acceptance or waiver of any other provision of the Agreement.

2. This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same agreement, it being understood that all of the parties need not sign the same counterpart. This Amendment may be executed and delivered by facsimile and upon such delivery the facsimile signature shall be deemed to have the same effect as if the original signature had been delivered to the other party.

3. THIS AMENDMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, UNITED STATES OF AMERICA, AS APPLIED TO AGREEMENTS AMONG DELAWARE RESIDENTS ENTERED INTO AND WHOLLY TO BE PERFORMED WITHIN THE STATE OF DELAWARE (WITHOUT REFERENCE TO ANY CHOICE OR CONFLICTS OF LAWS RULES OR PRINCIPLES THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF ANY OTHER JURISDICTION).

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4. From and after the Amendment Effective Date, all references in the Agreement shall be deemed to be references to the Agreement as modified hereby.

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed as of the Amendment Effective Date.

MEMBERS
AMD INVESTMENTS, INC.
By:	/s/ J. Michael Woollems
Name:	J. Michael Woollems
Title:	Director
FUJITSU MICROELECTRONICS HOLDING, INC.
By:
Name:
Title:

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EX-10.63(A)

Exhibit 10.63

ADVANCED MICRO DEVICES, INC.

2004 EQUITY INCENTIVE PLAN

1. Purposes of the Plan. The purposes of this 2004 Equity Incentive Plan (the “Plan”) are:

• to attract and retain the best available personnel,

• to compete effectively for the best personnel, and

• to promote the success of the Company’s business by motivating Employees, Directors and Consultants to superior performance.

Awards granted under the Plan may be Nonstatutory Stock Options (NSOs), Incentive Stock Options (ISOs), Stock Appreciation Rights (SARs), Restricted Stock, or Restricted Stock Units (RSUs), as determined by the Administrator at the time of grant.

2. Definitions. As used herein, the following definitions shall apply:

(a) “Administrator” means the Board or any of its delegates, including committees, administering the Plan, in accordance with Section 4 of the Plan.

(b) “Affiliate” means any corporation, partnership, joint venture or other entity in which the Company holds an equity, profit or voting interest of thirty percent (30%) or more.

(c) “Applicable Laws” means the requirements relating to the administration of equity compensation plans under U.S. state corporate laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of any foreign country or jurisdiction where Awards are, or will be, granted under the Plan.

(d) “Award” means, individually or collectively, a grant under the Plan of NSOs, ISOs, SARs, Restricted Stock, or RSUs.

(e) “Award Documentation” means any written agreement or documentation published by the Company setting forth the terms and provisions applicable to each Award granted under the Plan. The Award Documentation is subject to the terms and conditions of the Plan.

(f) “Awarded Stock” means the Common Stock subject to an Award.

(g) “Board” means the Board of Directors of the Company or its delegate.

(h) “Change of Control” Unless otherwise defined in Award Documentation or a Participant’s employment agreement, the term “Change of Control” shall mean any of the following events:

(i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company (not including the securities beneficially owned by such person any securities acquired directly from the Company or any of its Affiliates) representing more than 20% of either the then outstanding shares of the Common Stock of the Company or the combined voting power of the Company’s then outstanding voting securities;

(ii) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board and any new director (other than a director designated by a person who has entered into an agreement or arrangement with the Company to effect a transaction described in clause (i) or (ii) of this sentence) whose appointment, election, or nomination for election by the Company’s stockholders, was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose appointment, election or nomination for election was previously so approved, cease for any reason to constitute a majority of the Board;

(iii) there is consummated a merger or consolidation of the Company or subsidiary thereof with or into any other corporation, other than a merger or consolidation which would result in the holders of the voting securities of the Company outstanding immediately prior thereto holding securities which represent immediately after such merger or consolidation more than 50% of the combined voting power of the voting securities of either the Company or the other entity which survives such merger or consolidation or the parent of the entity which survives such merger or consolidation; or

(iv) the stockholders of the Company approve a plan of complete liquidation of the Company or there is consummated the sale or disposition by the Company of all or substantially all of the Company’s assets, other than a sale or disposition by the Company of all or substantially all of the Company’s assets to an entity, at least 80% of the combined voting power of the voting securities of which are owned by persons in substantially the same proportions as their ownership of the Company immediately prior to such sale.

Notwithstanding the foregoing: (y) unless otherwise provided in a Participant’s employment agreement, no “Change of Control” shall be deemed to have occurred if there is consummated any transaction or series of integrated transactions immediately following which the record holders of the Common Stock of the Company immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in an entity which owns all or substantially all of the assets of the Company immediately prior to such transaction or series of transactions and (z) unless otherwise provided in a Participant’s employment agreement, “Change of Control” shall exclude the acquisition of securities representing more than 20% of either the then outstanding shares of the Common Stock of the Company or the combined voting power of the Company’s then outstanding voting securities by the Company or any of its wholly owned

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subsidiaries, or any trustee or other fiduciary holding securities of the Company under an employee benefit plan now or hereafter established by the Company.

(i) “Code” means the Internal Revenue Code of 1986, as amended.

(j) “Committee” means a committee of Directors appointed by the Board in accordance with Section 4 of the Plan.

(k) “Common Stock” means the common stock of the Company.

(l) “Company” means Advanced Micro Devices, Inc., a Delaware corporation.

(m) “Constructive Termination” shall mean a resignation by a Participant who has been selected by the Board as a corporate officer of the Company due to diminution or adverse change in the circumstances of such Participant’s service as such a corporate officer, as determined in good faith by the Participant; including, without limitation, reporting relationships, job description, duties, responsibilities, compensation, perquisites, office or location of employment. Constructive Termination shall be communicated by written notice to the Company (or successor to the Company), and such termination shall be deemed to occur on the date such notice is so delivered.

(n) “Consultant” means any natural person, including an advisor, engaged by the Company or Affiliate to render services to such entity.

(o) “Director” means a member of the Board of Directors of Advanced Micro Devices, Inc.

(p) “Disability” means total and permanent disability as defined in Section 22(e)(3) of the Code.

(q) “Employee” means any person, including Officers and Directors, who is an employee of the Company or any Affiliate. An Employee shall not cease to be treated as an Employee in the case of (i) any leave of absence approved by the Company or (ii) transfers between locations of the Company or between the Company, any Affiliate, or any successor corporation. Neither service as a Director nor payment of a director’s fee by the Company or any Affiliate shall be sufficient to constitute status as an Employee.

(r) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

(s) “Fair Market Value” means, as of any date, the value of Common Stock determined as follows:

(i) If the Common Stock is listed on any established stock exchange or a national market system, including without limitation the New York Stock Exchange, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system for the last market trading day prior to the time of determination, as reported by Bloomberg.com or such other source as the Administrator deems reliable;

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(ii) If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, the Fair Market Value of a Share of Common Stock shall be the mean between the high bid and low asked prices for the Common Stock on the last market trading day prior to the day of determination, as reported by Bloomberg.com or such other source as the Administrator deems reliable; or

(iii) In the absence of an established market for the Common Stock, the Fair Market Value shall be determined in good faith by the Administrator.

(t) “Incentive Stock Option” means an option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder.

(u) “Independent Director” means a Director of the Company who is not also an Employee of the Company and who qualifies as an “outside director” for purposes of Code Section 162(m), and/or as a “Non-Employee Director” for purposes of Section 16(b) of the Exchange Act.

(v) “Misconduct” means a Participant is determined by the Administrator to have:

(i) committed an act of theft, embezzlement, fraud, dishonesty or other criminal act,

(ii) breached a fiduciary duty owed to the Company (or Affiliate),

(iii) deliberately disregarded rules of the Company (or Affiliate),

(iv) made any unauthorized disclosure of any of the trade secrets or confidential information of the Company (or Affiliate),

(v) engaged in any conduct constituting unfair competition with the Company (or Affiliate),

(vi) induced any customer of the Company (or Affiliate) to break any contract with the Company (or Affiliate), or

(vii) induced any principal for whom the Company (or Affiliate) acts as agent to terminate such agency relationship.

(w) “Nonstatutory Stock Option” means an Option not intended to qualify as an Incentive Stock Option.

(x) “Notice of Grant” means a written or electronic notice evidencing certain terms and conditions of an individual Award. The Notice of Grant is part of the Award Documentation.

(y) “Officer” means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.

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(z) “Option” means an NSO or ISO granted pursuant to Section 8 of the Plan.

(aa) “Option Agreement” means an agreement between the Company and a Participant evidencing the terms and conditions of an individual Option grant. The Option Agreement is subject to the terms and conditions of the Plan.

(bb) “Parent” means a “parent corporation,” whether now or hereafter existing, as defined in Section 424(e) of the Code.

(cc) “Participant” means the holder of an outstanding Award granted under the Plan.

(dd) “Performance Goals” means the goal(s) (or combined goal(s)) determined by the Administrator (in its discretion) to be applicable to a Participant with respect to an Award. As determined by the Administrator, the Performance Goals applicable to an Award may provide for a targeted level or levels of achievement relating to annual revenue, cash position, earnings per share, operating cash flow, market share, new product releases, net income, operating income, return on assets, return on equity, return on investment, other financial measures or any other performance related goal that the Administrator deems appropriate. The Performance Goals may differ from Participant to Participant and from Award to Award.

(ee) “Plan” means this Advanced Micro Devices, Inc. 2004 Equity Incentive Plan.

(ff) “Restricted Stock” means shares of Common Stock granted pursuant to Section 11 of the Plan that are subject to vesting, if any, based on continuing as a Service Provider and/or based on Performance Goals.

(gg) “Restricted Stock Unit” or “RSU” means an Award, granted pursuant to Section 12 of the Plan.

(hh) “Rule 16b-3” means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3, as in effect when discretion is being exercised with respect to the Plan.

(ii) “Stock Appreciation Right” or “SAR” means an Award, granted alone or in connection with a related Option that is granted pursuant to Section 10 of the Plan.

(jj) “Section 16(b)” means Section 16(b) of the Exchange Act.

(kk) “Service Provider” means an Employee, Director or Consultant, subject to the limitations in Section 9 of the Plan with regard to Options granted to Outside Directors.

(ll) “Share” means each share of Common Stock reserved under the Plan or subject to an Award, and as adjusted in accordance with Section 15(a) of the Plan.

(mm) “Subsidiary” means a “subsidiary corporation,” whether now or hereafter existing, as defined in Section 424(f) of the Code.

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3. Stock Subject to the Plan.

(a) Reserve. Subject to the provisions of Section 15(a) of the Plan, the maximum aggregate number of Shares that may be issued under the Plan is seventeen million, four hundred thousand (17.4 million) Shares plus: (i) the number of shares of Common Stock reserved under the Company’s the 1995 Stock Plan of NexGen, Inc., 1996 Stock Incentive Plan, the 1998 Stock Incentive Plan and the 2000 Stock Incentive Plan (the “Prior Plans”) that are not subject to outstanding awards under the Prior Plans on the date this Plan is first approved by the Company’s stockholders (the “Effective Date”), and (ii) the number of shares of Common Stock that are released from, or reacquired by the Company from, awards outstanding under the Prior Plans at the Effective Date. Shares reserved under this Plan that correspond to shares of Common Stock covered by part (ii) of the immediately preceding sentence shall not be available for grant and issuance pursuant to this Plan except as such shares of Common Stock cease to be subject to such outstanding awards, or are repurchased at the original issue price by the Company, or are forfeited; provided, however, that in no event shall more than nine (9) million of the Shares issuable under the Plan be granted pursuant to Awards with an exercise price or purchase price that is less than 100% of Fair Market Value on the date of grant. The Shares may be authorized, but unissued, or reacquired Common Stock.

(b) Reissuance. If Shares are: (i) subject to an Award that terminates without such Shares being issued, or (ii) issued pursuant to an Award, but are repurchased at the original issue price by the Company, or (iii) forfeited; then such Shares will again be available for grant and issuance under this Plan. At all times the Company will reserve and keep available the number of Shares necessary to satisfy the requirements of all Awards then vested and outstanding under this Plan. To the extent an Award under the Plan is paid out in cash rather than stock, such cash payment shall not result in reducing the number of Shares available for issuance under the Plan. In no event shall the total number of Shares issued (counting each reissuance of a Share that was previously issued and then forfeited or repurchased by the Company as a separate issuance) under the Plan upon exercise of Awards exceed one hundred eighty (180) million Shares (adjusted in proportion to any adjustments under Section 15(a)) over the term of the Plan.

4. Administration of the Plan.

(a) Procedure.

(i) Section 162(m). To the extent that the Administrator determines it to be desirable to qualify Awards granted hereunder as “performance-based compensation” within the meaning of Section 162(m) of the Code, the transactions contemplated hereunder shall be structured to satisfy the requirements for exemption of “performance-based compensation” under Section 162(m) of the Code and related regulations.

(ii) Rule 16b-3. To the extent that the Administrator determines it to be desirable to qualify transactions hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder shall be structured to satisfy the requirements for exemption under Rule 16b-3.

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(iii) Other Administration. Other than as provided above, the Plan shall be administered by the Administrator in a manner to satisfy Applicable Laws.

(b) Powers of the Administrator. Subject to the provisions of the Plan, including, without limitation Section 17, and in the case of a Board delegate, subject to the specific duties delegated by the Board to such Board delegate, the Administrator shall have the authority, in its discretion:

(i) to determine the Fair Market Value as defined above;

(ii) to select the Service Providers to whom Awards may be granted hereunder;

(iii) to determine the number of shares of Common Stock to be covered by each Award granted hereunder;

(iv) to approve forms of agreement and documentation for use under the Plan;

(v) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any Award granted hereunder. Such terms and conditions include, but are not limited to, the exercise price, the time or times when Options or SARs may be exercised (which may be based on performance criteria), transferability, any vesting acceleration or waiver of forfeiture or repurchase restrictions, and any restriction or limitation regarding any Award or the shares of Common Stock relating thereto, based in each case on such factors as the Administrator, in its sole discretion, shall determine;

(vi) to construe and interpret the terms of the Plan and awards granted pursuant to the Plan;

(vii) to prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans established for the purpose of qualifying for preferred tax treatment under foreign tax laws;

(viii) to modify or amend each Award (subject to Section 17 of the Plan), including the discretionary authority to extend the post-termination exercisability period of Options or SARs longer than is otherwise provided for in the Plan;

(ix) to allow Participants to satisfy withholding tax obligations by electing to have the Company withhold from the Shares or cash to be issued upon exercise or vesting of an Award that number of Shares or cash having a Fair Market Value equal to the amount required to be withheld. The Fair Market Value of any Shares to be withheld shall be determined on the date that the amount of tax to be withheld is to be determined. All elections by a Participant to have Shares or cash withheld for this purpose shall be made in such form and under such conditions as the Administrator may deem necessary or advisable;

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(x) to authorize any person to execute on behalf of the Company any instrument required to effect the grant of an Award previously granted by the Administrator;

(xi) to make all other determinations deemed necessary or advisable for administering the Plan.

(c) Effect of Administrator’s Decision. The Administrator’s decisions, determinations and interpretations shall be final and binding on all Participants.

5. Eligibility. Nonstatutory Stock Options, Restricted Stock, Restricted Stock Units, and Stock Appreciation Rights may be granted to Service Providers. Incentive Stock Options may only be granted to employees of the Company and any Parent or Subsidiary of the Company. Outside Directors shall not be eligible for the benefits of the Plan, except as provided in Section 9 of the Plan.

6. Limitations on Awards.

(a) No Rights as a Service Provider. Neither the Plan nor any Award shall confer upon a Participant any right with respect to continuing their relationship as a Service Provider, nor shall they interfere in any way with the right of the Participant or the right of the Company or any Affiliate to terminate such relationship at any time, with or without cause or to adjust the compensation of any Participant.

(b) Exercise; Rights as a Stockholder; Effect of Exercise.

(i) Any Award granted hereunder shall be exercisable or vest according to the terms of the Plan and at such times and under such conditions as determined by the Administrator and set forth in the Award Documentation, including, without limitation, Participant’s continuous status as a Service Provider and/or Participant’s satisfaction of Performance Goals. An Award may not be exercised for a fraction of a Share. An Award shall be deemed exercised when the Company receives written or electronic notice of exercise (in accordance with the Award Documentation) from the person entitled to exercise the Award The Participant must remit to the Company full payment for the Shares with respect to which the Award is exercised. Full payment may consist of any consideration and method of payment authorized by the Administrator and permitted by the Award Documentation and the Plan. Shares issued upon exercise of an Award shall be issued in the name of the Participant or, if requested by the Participant, in the name of the Participant and Participant’s spouse, or after the death of the Participant in the name of the Participant’s beneficiaries or heirs or as directed by the executor of Participant’s estate under applicable law.

(ii) Until the Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Awarded Stock, notwithstanding the exercise of the Award. The Company shall issue (or cause to be issued) such Shares promptly after the Award is exercised or vests. No adjustment of an Award will be made for

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a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 15(a) of the Plan or specified in such Award’s Award Documentation.

(iii) Exercising an Award in any manner that results in the issuance of Shares shall decrease the number of Shares thereafter available, both for purposes of the Plan and for issuance under the Award, by the number of Shares as to which the Award is exercised.

(c) Misconduct. If a Participant is determined by the Administrator to have committed Misconduct then, unless otherwise provided in a Participant’s agreement for services as a Service Provider, neither the Participant, the Participant’s estate nor such other person who may then hold any Award granted to the Participant shall be entitled to exercise any such Award with respect to any Shares, after termination of status as a Service Provider, whether or not the Participant may receive from the Company (or Affiliate) payment for: vacation pay, services rendered prior to termination, services rendered for the day on which termination occurs, salary in lieu of notice, or any other benefits. In making such determination, the Administrator shall give the Participant an opportunity to present evidence to the Administrator. Unless otherwise provided in a Participant’s agreement for services as a Service Provider, termination of status as a Service Provider shall be deemed to occur on the date when the Company (or Affiliate) dispatches notice or advice to the Participant that status as a Service Provider is terminated.

(d) 162(m) Limitations.

(i) Except in connection with his or her initial service, no Service Provider shall be granted, in any calendar year, Awards covering in the aggregate more than 2,000,000 Shares.

(ii) In connection with his or her initial service, a Service Provider may be granted Awards covering in the aggregate up to 4,000,000 Shares in the first twelve (12) months of such Service Provider’s service, rather than the limit set forth in subsection (i) above.

(iii) The foregoing limitations shall be adjusted proportionately in connection with any change in the Company’s capitalization as described in Section 15(a).

(iv) If an Award is cancelled in the same fiscal year of the Company in which it was granted (other than in connection with a transaction described in Section 15(b), the cancelled Award will be counted against the limits set forth in subsections (i) and (ii) above.

(e) Tax Withholding.

(i) Where, in the opinion of counsel to the Company, the Company has or will have an obligation to withhold foreign, federal, state or local taxes relating to the exercise of any Award, the Administrator may in its discretion require that such tax obligation be satisfied in a manner satisfactory to the Company. With respect to the exercise of an Award, the Company may require the payment of such taxes before Shares deliverable pursuant to such exercise are transferred to the holder of the Award.

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(ii) With respect to the exercise of an Award, a Participant may elect (a “Withholding Election”) to pay the minimum statutory withholding tax obligation by the withholding of Shares from the total number of Shares deliverable pursuant to the exercise of such Award, or by delivering to the Company a sufficient number of previously acquired shares of Common Stock, and may elect to have additional taxes paid by the delivery of previously acquired shares of Common Stock, in each case in accordance with rules and procedures established by the Administrator. Previously owned shares of Common Stock delivered in payment for such additional taxes must have been owned for at least six months prior to the delivery or must not have been acquired directly or indirectly from the Company and may be subject to such other conditions as the Administrator may require. The value of each Share withheld, or share of Common Stock delivered, shall be the Fair Market Value per share of Common Stock on the date the Award becomes taxable. All Withholding Elections are subject to the approval of the Administrator must be made in compliance with rules and procedures established by the Administrator.

7. Term of Plan. The Plan shall become effective upon its adoption by the Board, subject to stockholder approval. It shall continue in effect for a term of ten (10) years unless terminated earlier under Section 17 of the Plan.

8. Options.

(a) Term of Options. The term of each Option shall be not greater than ten (10) years from the date it was granted.

(b) Option Exercise Price and Consideration.

(i) Exercise Price. The per share exercise price for the Shares to be issued pursuant to exercise of an Option shall be determined by the Administrator, subject to the following:

(ii) In the case of an ISO granted to any Employee who, at the time the ISO is granted owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Affiliate, the per Share exercise price shall be no less than 110% of the Fair Market Value per Share on the date of grant.

(iii) In the case of an ISO granted to any Employee other than an Employee described in subsection (ii) immediately above, the per Share price shall be no less than 100% of the Fair Market Value per Share on the date of the grant.

(iv) In the case of a NSO, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant; however, subject to the overall limitation on the number of below fair market value Awards, up to nine (9) million shares may be granted at 85% of fair market value on the date of grant, so long as the discount is granted in lieu of some portion of salary or cash bonus.

(v) The exercise price for the Shares to be issued pursuant to an already granted Option may not be changed without the consent of the Company’s stockholders. This shall include, without limitation, a repricing of the Option as well as an option exchange program whereby the Participant agrees to cancel an existing Option in exchange for an Option, SAR or other Award.

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(c) Form of Consideration. The Administrator shall determine the acceptable form of consideration for exercising an Option, including the method of payment. In the case of an Incentive Stock Option, the Administrator shall determine the acceptable form of consideration at the time of grant. Such consideration, to the extent permitted by Applicable Laws, may consist entirely of:

(i) check;

(ii) other Shares which (A) in the case of Shares acquired upon exercise of an Option, have been owned by the Participant for more than six months on the date of surrender, and (B) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which said Option shall be exercised;

(iii) broker-assisted cashless exercise; or

(iv) any combination of the foregoing methods of payment; or

(v) such other consideration and method of payment for the issuance of Shares to the extent permitted by Applicable Laws.

(d) Termination of Relationship as Service Provider. When a Participant’s status as a Service Provider terminates, other than from Misconduct, death or Disability, the Participant’s Option may be exercised within the period of time specified in the Option Agreement to the extent that the Option is vested on the date of termination or such longer period of time determined by the Administrator (which may so specify after the date of the termination but before expiration of the Option) not to exceed five (5) years (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement). In the absence of a specified period of time in the Plan or the Award Documentation, the Option shall remain exercisable for three (3) months following the date Participant ceased to be a Service Provider. If, on the date of termination, such Participant’s Option is not fully vested, then the unvested Shares shall revert to the Plan. If, after termination, the Participant’s Option is not fully exercised within the time specified, then the unexercised Shares covered by such Option shall revert to the Plan and such Option shall terminate.

(e) Death or Disability of Participant. If a Participant’s status as a Service Provider terminates from death or Disability, then the Participant or the Participant’s estate, or such other person as may hold the Option, as the case may be, shall have the right for a period of twelve (12) months following the date of death or termination of status as a Service Provider for Disability, or for such other period as the Administrator may fix, to exercise the Option to the extent the Participant was entitled to exercise such Option on the date of death or termination of status as a Service Provider for Disability, or to such extent as may otherwise be specified by the Administrator (which may so specify after the date of death or Disability but before expiration of the Option), provided the actual date of exercise is in no event after the expiration of the term of the Option. A Participant’s estate shall mean his legal representative or any person who acquires the right to exercise an Option by reason of the Participant’s death or Disability.

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(f) Events Not Deemed Terminations: Unless otherwise provided in a Participant’s agreement for services as a Service Provider, such Participant’s status as a Service Provider shall not be considered interrupted in the case of: (i) a leave of absence (approved by the Administrator) by a Participant who intends throughout such leave to return to providing services as a Director, Employee, or Consultant; (ii) sick leave; (iii) military leave; (iv) any other leave of absence approved by the Administrator, provided such leave is for a period of not more than ninety (90) days, unless reemployment upon the expiration of such leave is guaranteed by contract or statute, or unless provided otherwise pursuant to formal policy adopted from time to time by the Company and issued and promulgated to employees in writing; or (v) in the case of transfer between locations of the Company or among the Company and its Affiliates. In the case of any Participant on an approved leave of absence, the Administrator may make such provisions respecting suspension of vesting of the Option while on a leave described in subparts (i) through (v) above and/or resumption of vesting on return from such leave as it may deem appropriate, except that in no event shall an Option be exercised after the expiration of the term set forth in the Option.

(g) ISO Rules. The Option Agreement for each ISO shall contain a statement that the Option it documents is an ISO. However, notwithstanding such designation, to the extent that the aggregate Fair Market Value of the Shares with respect to which all ISOs held by a Participant are exercisable for the first time by such Participant during any calendar year exceeds $100,000, such excess Shares shall be treated as Shares subject to an NSO. For purposes of this subsection 8(k), ISOs shall be taken into account in the order in which they were granted. The Fair Market Value of the Shares subject to an ISO shall be determined as of the time the ISO with respect to such Shares is granted.

(h) Buyout Provisions. The Administrator may at any time offer to buy out for a payment in cash or Shares an Option previously granted based on such terms and conditions as the Administrator shall establish and communicate to the Participant at the time that such offer is made.

9. Option Grants to Outside Directors. The automatic grants pursuant to this Section 9 shall not be subject to the discretion of any person and may only be granted to Directors who are not also Employees (“Outside Director”). All grants of Options to Outside Directors pursuant to this Section 9 shall be made strictly in accordance with the following provisions:

(a) Timing and Number. Each Outside Director shall be granted an Option to purchase 12,500 Shares under the Plan (the “First Option”) on April 30, July 31, October 31 and December 15 or the first business day following such date (the Grant Date), in the year that such Outside Director is first elected or appointed as a member of the Board; provided that an Outside Director who has previously been elected as a member of the Board on the Effective Date set forth in Section 14 below shall not be granted a First Option under the Plan. Thereafter, on April 30, July 31, October 31 and December 15 or the first business day following such date, each Outside Director reported as being elected at the annual meeting of the Company’s stockholders shall be granted an additional Option to purchase 6,250 Shares under the Plan (the “Annual Option”). Further, subject to the right of any Outside Director who has not previously been elected as a member of the Board to receive a First Option, if there are insufficient Shares available under the Plan for each Outside Director who is eligible to receive an Annual Option (as adjusted) in any year, the number of Shares subject to each Annual Option in such year shall equal the total number of available Shares then

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remaining under the Plan divided by the number of Outside Directors who are eligible to receive an Annual Option on such date, as rounded down to avoid fractional Shares. All Options granted to Outside Directors shall be subject to the following terms and conditions of this Section 9. All Options granted to Outside Directors pursuant to the Plan shall be NSOs.

(b) Consideration. The consideration to be paid for the Shares to be issued upon exercise of an Option, including the method of payment, may consist entirely of (i) check, (ii) other Shares which (x) either have been owned by the Participant for more than six months on the date of surrender or were not acquired, directly or indirectly, from the Company, and (y) have a Fair Market Value per Share on the date of surrender equal to the aggregate exercise price of the Shares as to which said Option shall be exercised, (iii) delivery of a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver to the Company the amount of sale or loan proceeds required to pay the exercise price, or (iv) any combination of the foregoing methods of payment.

(c) Term and Vesting. Each Option granted to an Outside Director shall be for a term of ten years. Each First Option shall vest and become exercisable according to the following schedule: for Options first granted on April 30, one-third on April 30 of the calendar year following the date of grant; the remaining two-thirds vest in monthly increments thereafter, through April 30 of the third calendar year following the date of grant. Options granted on any other Grant Date following appointment to the Board shall vest and become exercisable one-third on the anniversary of the grant date and the remaining two thirds will vest in monthly increments thereafter for the next two years. Each Annual Option shall vest and become exercisable according to the following schedule: one-third on April 30 of the calendar year following the date of grant; the remaining two-thirds vest in monthly increments thereafter, through April 30 of the third calendar year following the date of grant. Any Shares acquired by an Outside Director upon exercise of an Option shall not be freely transferable until six months after the date stockholder approval referred to in Section 21 is obtained.

(d) Termination of Service as an Outside Director. If an Outside Director’s tenure on the Board is terminated for any reason other than Misconduct, then the Outside Director or the Outside Director’s estate, as the case may be, shall have the right for a period of twenty-four (24) months following the date such tenure is terminated to exercise the Option to the extent the Outside Director was entitled to exercise such Option on the date the Outside Director’s tenure terminated; provided the actual date of exercise is in no event after the expiration of the term of the Option. An Outside Director’s “estate” shall mean the Outside Director’s legal representative or any person who acquires the right to exercise an Option by reason of the Outside Director’s death or disability.

(e) Effect of Change of Control. Upon a Change of Control, all Options held by an Outside Director shall become fully vested and exercisable, irrespective of any other provisions of the Outside Director’s Option Agreement.

(f) Effect of Other Plan Provisions. The other provisions of this Plan shall apply to the Options granted automatically pursuant to this Section 9, except to the extent such other provisions are inconsistent with this Section 9.

(g) Effect of Retirement as Founding Director. Notwithstanding any provision of the Plan to the contrary, all options that were granted under this Plan or any Prior Plans and held by an Outside Director with thirty (30) or more years of service as a director shall vest in full on such Outside Director’s retirement from service as an Outside Director.

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10. Stock Appreciation Rights.

(a) Grant of SARs. Subject to the terms and conditions of the Plan, SARs may be granted to Service Providers at any time and from time to time as shall be determined by the Administrator, in its sole discretion. The Administrator shall have complete discretion to determine the number of SARs granted to any Participant.

(b) Exercise Price and other Terms. The Administrator, subject to the provisions of the Plan, shall have complete discretion to determine the terms and conditions of SARs granted under the Plan; provided, however, that no SAR may have a term of more than ten (10) years from the date of grant. In the case of an SAR, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant. The exercise price for the Shares or cash to be issued pursuant to an already granted SAR may not be changed without the consent of the Company’s stockholders. This shall include, without limitation, a repricing of the SAR as well as an SAR exchange program whereby the Participant agrees to cancel an existing SAR in exchange for an Option, SAR or other Award.

(c) Payment of SAR Amount. Upon exercise of an SAR, a Participant shall be entitled to receive payment from the Company in an amount determined by multiplying:

(i) The difference between the Fair Market Value of a Share on the date of exercise over the exercise price; times

(ii) the number of Shares with respect to which the SAR is exercised.

(d) Payment upon Exercise of SAR. At the discretion of the Administrator, payment for an SAR may be in cash, Shares or a combination thereof.

(e) SAR Agreement. Each SAR grant shall be evidenced by Award Documentation (a “SAR Agreement”) that shall specify the exercise price, the term of the SAR, the conditions of exercise, and such other terms and conditions as the Administrator, in its sole discretion, shall determine.

(f) Expiration of SARs. An SAR granted under the Plan shall expire upon the date determined by the Administrator, in its sole discretion, and set forth in the Award Documentation.

(g) Termination of Relationship as Service Provider. When a Participant’s status as a Service Provider terminates, other than from Misconduct, death or Disability, the Participant’s Stock Appreciation Right may be exercised within the period of time specified in the Stock Appreciation Right Agreement to the extent that the Stock Appreciation Right is vested on the date of termination or such longer period of time determined by the Administrator (which may so specify after the date of the termination but before expiration of the Stock Appreciation Right) not to exceed five (5) years (but in no event later than the expiration of the term of such Stock Appreciation Right as set forth in the Stock Appreciation Right Agreement). In the absence of a specified period of time in the Plan or the Stock Appreciation Right Agreement, the Stock Appreciation Right shall remain exercisable for three (3) months following the date Participant ceased to be a Service Provider. If, on the date of termination, such Participant’s Stock Appreciation Right is not fully vested, then the unvested

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Shares shall revert to the Plan. If, after termination, the Participant’s Stock Appreciation Right is not fully exercised within the time specified, then the unexercised Shares covered by such Stock Appreciation Right shall revert to the Plan and such Stock Appreciation Right shall terminate.

(h) Death or Disability of Participant. If a Participant’s status as a Service Provider terminates from death or Disability, then the Participant or the Participant’s estate, or such other person as may hold the SAR, as the case may be, shall have the right for a period of twelve (12) months following the date of death or termination of status as a Service Provider for Disability, or for such other period as the Administrator may fix, to exercise the SAR to the extent the Participant was entitled to exercise such SAR on the date of death or termination of status as a Service Provider for Disability, or to such extent as may otherwise be specified by the Administrator (which may so specify after the date of death or Disability but before expiration of the SAR), provided the actual date of exercise is in no event after the expiration of the term of the SAR. A Participant’s estate shall mean his legal representative or any person who acquires the right to exercise an SAR by reason of the Participant’s death or Disability.

(i) Events Not Deemed Terminations: Unless otherwise provided in a Participant’s agreement for services as a Service Provider, such Participant’s status as a Service Provider shall not be considered interrupted in the case of: (i) a leave of absence (approved by the Administrator) by a Participant who intends throughout such leave to return to providing services as a Director, Employee, or Consultant; (ii) sick leave; (iii) military leave; (iv) any other leave of absence approved by the Administrator, provided such leave is for a period of not more than ninety (90) days, unless reemployment upon the expiration of such leave is guaranteed by contract or statute, or unless provided otherwise pursuant to formal policy adopted from time to time by the Company and issued and promulgated to employees in writing; or (v) in the case of transfer between locations of the Company or among the Company and its Affiliates. In the case of any Participant on an approved leave of absence, the Administrator may make such provisions respecting suspension of vesting of the Stock Appreciation Right while on a leave described in subparts (i) through (v) above and/or resumption of vesting on return from such leave as it may deem appropriate, except that in no event shall a Stock Appreciation Right be exercised after the expiration of the term set forth in the Stock Appreciation Right.

(j) Buyout Provisions. The Administrator may at any time offer to buy out for a payment in cash or Shares an SAR previously granted based on such terms and conditions as the Administrator shall establish and communicate to the Participant at the time that such offer is made.

11. Restricted Stock.

(a) Grant of Restricted Stock. Subject to the terms and conditions of the Plan, Restricted Stock may be granted to Service Providers at any time and from time to time as shall be determined by the Administrator, in its sole discretion. The Administrator shall have complete discretion to determine (i) the number of Shares subject to a Restricted Stock award granted to any Participant, and (ii) the conditions that must be satisfied, the vesting of which typically will be based on continued provision of services and/or satisfaction of Performance Goals. Restricted Stock that is based only on continued service may not vest in full for at least three years from the date of grant. Restricted Stock that is based on satisfaction of Performance Goals may not vest for at least one year

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from the date of grant. Once the Shares are issued, voting, dividend and other rights as a stockholder shall exist with respect to Restricted Stock.

(b) Other Terms. The Administrator, subject to the provisions of the Plan, shall have complete discretion to determine the terms and conditions, including the purchase price (provided it is at least $0.01 per Share of Restricted Stock to be issued), of Restricted Stock granted under the Plan. Restricted Stock grants shall be subject to the terms, conditions, and restrictions determined by the Administrator at the time the Restricted Stock is granted. Any certificates representing the Restricted Stock shall bear such legends as shall be determined by the Administrator.

(c) Restricted Stock Award Documentation. Each Restricted Stock grant shall be evidenced by Award Documentation (a “Restricted Stock Award Documentation”) that shall specify the purchase price (if any) and such other terms conditions, and restrictions as the Administrator, in its sole discretion, shall determine.

12. Restricted Stock Units.

(a) Grant of Restricted Stock Units. Subject to the terms and conditions of the Plan, Restricted Stock Units may be granted to Service Providers at any time and from time to time as shall be determined by the Administrator, in its sole discretion. The Administrator shall have complete discretion to determine (i) the number of Shares subject to each Restricted Stock Units award, and (ii) the conditions that must be satisfied, the vesting of which typically will be based on continued provision of services and/or satisfaction of Performance Goals. Any Restricted Stock Units award that is based only on continued service may not vest in full for three years from the date of grant. Any Restricted Stock Units award that is based on satisfaction of Performance Goals may not vest for one year from the date of grant. Until the Shares are issued, no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to Restricted Stock Units.

(b) Other Terms. The Administrator, subject to the provisions of the Plan, shall have complete discretion to determine the terms and conditions, including the purchase price (provided it is at least $0.01 per Share to be issued), of Restricted Stock Units granted under the Plan. Restricted Stock Units awards shall be subject to the terms, conditions, and restrictions determined by the Administrator at the time the Restricted Stock Units award is granted. Restricted Stock Units shall be denominated in units with each unit equivalent to one Share for purposes of determining the number of Shares subject to any Restricted Stock Units award.

(c) Restricted Stock Units Agreement. Each Restricted Stock Units grant shall be evidenced by Award Documentation (a “Restricted Stock Units Agreement”) that shall specify the purchase price (at least $0.01 per Share to be issued) and such other terms conditions, and restrictions as the Administrator, in its sole discretion, shall determine. Each Restricted Stock Units Agreement shall be subject to all applicable terms of the Plan and may be subject to any other terms that are not inconsistent with the Plan. A Restricted Stock Units Agreement may provide for dividend equivalent units.

(d) Settlement. Settlement of vested Restricted Stock Units may be made in the form of: (i) cash, (ii) Shares or (iii) any combination, as determined by the Administrator and may be

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settled in a lump sum or in installments. Distribution to a Participant of an amount (or amounts) from settlement of vested Restricted Stock Units may be deferred to a date after settlement as determined by the Administrator. The amount of a deferred distribution may be increased by an interest factor or by dividend equivalents. Until an Award of Restricted Stock Units is settled, the number of such Restricted Stock Units shall be subject to adjustment pursuant to the Plan.

13. Non-Transferability of Awards. Unless determined otherwise by the Administrator, an Award may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the recipient, only by the recipient. If the Administrator makes an Award transferable, the Award Documentation for such Award shall contain such additional terms and conditions as the Administrator deems appropriate.

14. Leaves of Absence. Unless the Administrator provides otherwise or as otherwise required by Applicable Laws, vesting of Awards granted hereunder shall cease commencing on the thirty-first day of any unpaid leave of absence and shall only recommence upon return to active service.

15. Adjustments Upon Changes in Capitalization, Dissolution, Merger or Asset Sale.

(a) Changes in Capitalization. Subject to any required action by the stockholders of the Company, the number of shares of Common Stock covered by each outstanding Award, the number of shares of Common Stock which have been authorized for issuance under the Plan but as to which no Awards have yet been granted or which have been returned to the Plan upon cancellation or expiration of an Award, in each case as set forth in Section 3, as well as the price per share of Common Stock covered by each such outstanding Award and the 162(m) annual share issuance limits under Section 6(d) shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of issued shares of Common Stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt of consideration.” Such adjustment shall be made by the Compensation Committee, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an Award.

(b) Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, the Administrator shall notify each Participant as soon as practicable prior to the effective date of such proposed transaction. The Administrator in its discretion may provide for a Participant to have the right to exercise his or her Award until ten (10) days prior to such transaction as to all of the Awarded Stock covered thereby, including Shares as to which the Award would not otherwise be exercisable. In addition, the Administrator may provide that any Company repurchase option or forfeiture rights applicable to any Award shall lapse 100%, and that any Award vesting shall accelerate 100%, provided the proposed dissolution or liquidation takes place at the time and in

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the manner contemplated. To the extent it has not been previously exercised or vested an Award will terminate immediately prior to the consummation of such proposed action.

(c) Merger or Asset Sale.

(i) Stock Options and SARs. In the event of a merger of the Company with or into another corporation, or the sale of substantially all of the assets of the Company, each outstanding Option and SAR shall be assumed or an equivalent option or SAR substituted by the successor corporation or related corporation. In the event that the successor corporation refuses to assume or substitute for the Option or SAR, the Participant shall fully vest in and have the right to exercise the Option or SAR as to all of the Awarded Stock, including Shares as to which it would not otherwise be vested or exercisable. If an Option or SAR becomes fully vested and exercisable in lieu of assumption or substitution in the event of a merger or sale of assets, the Administrator shall notify the Participant in writing or electronically that the Option or SAR shall be fully vested and exercisable for a period of fifteen (15) days from the date of such notice, and the Option or SAR shall terminate upon the expiration of such period. For the purposes of this subsection, the Option or SAR shall be considered assumed if, following the merger or sale of assets, the Option or SAR confers the right to purchase or receive, for each Share of Awarded Stock subject to the Option or SAR immediately prior to the merger or sale of assets, the consideration (whether stock, cash, or other securities or property) received in the merger or sale of assets by holders of Common Stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the merger or sale of assets is not solely common stock of the successor corporation or related corporation, the Administrator may, with the consent of the successor corporation, provide for the consideration to be received upon the exercise of the Option or SAR, for each Share of Awarded Stock subject to the Option or SAR, to be solely common stock of the successor corporation or related corporation equal in fair market value to the per share consideration received by holders of Common Stock in the merger or sale of assets.

(ii) Restricted Stock and Restricted Stock Units. In the event of a merger of the Company with or into another corporation, or the sale of substantially all of the assets of the Company, repurchase rights on Shares of Restricted Stock, or any consideration into which such Shares of Restricted Stock are converted as part of such merger or sale, may be assigned to the successor corporation or related corporation, and each outstanding RSU shall be assumed or an equivalent award substituted by the successor corporation or related corporation of the successor corporation. If the successor corporation refuses to assume or substitute for such Awards, then Participants shall fully vest in such Awards. If RSUs become fully vested and exercisable in lieu of assumption or substitution in the event of a merger or sale of assets, the Administrator shall notify Participants in writing or electronically that their RSUs shall be fully vested and exercisable for a period of fifteen (15) days from the date of such notice, and such RSUs shall terminate upon the expiration of such period. RSUs shall be considered assumed if, following the merger or sale of assets, such RSUs confer the right to purchase or receive, for each Share subject to such RSUs immediately prior to the merger or sale of assets, the consideration (whether stock, cash, or other securities or property) received in the merger or sale of assets by holders of Common Stock for each share of Common Stock held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the

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outstanding shares of Common Stock); provided, however, that if such consideration received in the merger or sale of assets is not solely common stock of the successor corporation or related corporation, then the Administrator may, with the consent of the successor corporation, provide for the consideration to be received, for each Share subject to such RSUs, to be solely in the form of common stock of the successor corporation or related corporation equal in fair market value to the per share consideration received by holders of Common Stock in the merger or sale of assets.

(d) Change of Control. Unless otherwise provided in a Participant’s agreement for services as an employee of the Company, if, within one year after a Change of Control has occurred, such Participant’s status as an employee of the Company is terminated by the Company (including for this purpose any successor to the Company due to such Change of Control and any employer that is an Affiliate of such successor) for any reason other than for Misconduct or, if applicable, terminated by such Participant as a Constructive Termination, then all Awards held by such Participant shall become fully vested for exercise upon the date of termination of such status, irrespective of the vesting provisions of such Participant’s Award Documentations.

16. Date of Grant. The date of grant of an Award shall be, for all purposes, the date on which the Administrator makes the determination granting such Award, or such other later date as is determined by the Administrator. Notice of the determination shall be provided to each recipient within a reasonable time after the date of such grant.

17. Amendment and Termination of the Plan.

(a) Amendment and Termination. The Board may at any time amend, alter, suspend or terminate the Plan.

(b) Stockholder Approval. The Company shall obtain stockholder approval of any Plan amendment to the extent necessary and desirable to comply with Applicable Laws and shall obtain stockholder approval for any amendment to the Plan to increase the number of shares available under the Plan, to change the class of employees eligible to participate in the Plan or to provide for additional material benefits under the Plan.

(c) Effect of Amendment or Termination. No amendment, alteration, suspension or termination of the Plan shall impair the rights of any Participant, unless mutually agreed otherwise between the Participant and the Administrator, which agreement must be in writing and signed by the Participant and the Company. Termination of the Plan shall not affect the Administrator’s ability to exercise the powers granted to it hereunder with respect to Awards granted under the Plan prior to the date of such termination.

18. Conditions Upon Issuance of Shares.

(a) Legal Compliance. Shares shall not be issued pursuant to the exercise of an Award unless the exercise of the Award or the issuance and delivery of such Shares (or the cash equivalent thereof) shall comply with Applicable Laws and shall be further subject to the approval of counsel for the Company with respect to such compliance. Notwithstanding any other provision in this Plan, the Company will have no obligation to issue or deliver certificates for Shares under this Plan prior to: (a) obtaining any approvals from governmental agencies that the Company determines are necessary or advisable; and/or (b) completion of any registration or other qualification of such Shares under Applicable Laws. The

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Company will be under no obligation to register the Shares with the United States Securities and Exchange Commission or to effect compliance with the registration, qualification or listing requirements of any state securities laws, stock exchange or automated quotation system, and the Company will have no liability for any inability or failure to do so.

(b) Investment Representations. As a condition to the exercise or receipt of an Award, the Company may require the person exercising or receiving such Award to represent and warrant at the time of any such exercise or receipt that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required.

19. Inability to Obtain Authority. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder (or the cash equivalent thereof), shall relieve the Company of any liability in respect of the failure to issue or sell such Shares (or the cash equivalent thereof) as to which such requisite authority shall not have been obtained.

20. Reservation of Shares. The Company, during the term of this Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan.

21. Stockholder Approval. This Plan shall be subject to approval by the stockholders of the Company within twelve (12) months after the date of adoption by the Board. Such stockholder approval shall be obtained in the manner and to the degree required under Applicable Laws.

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EX-10.64

Exhibit 10.64

ADVANCED MICRO DEVICES, INC. EXECUTIVE INVESTMENT ACCOUNT PLAN

TABLE OF CONTENTS

			Page
RECITALS			1
ARTICLE I		TITLE AND DEFINITIONS	1
	1.1	Definitions.	1
ARTICLE II		PARTICIPATION	5
ARTICLE III		DEFERRAL ELECTIONS	5
	3.1	Elections to Defer Compensation.	5
	3.2	Investment Elections.	6
ARTICLE IV		DEFERRAL ACCOUNTS AND TRUST FUNDING	6
	4.1	Deferral Accounts.	6
	4.2	Company Contribution Account.	7
	4.3	Trust Funding.	7
ARTICLE V		VESTING	8
ARTICLE VI		DISTRIBUTIONS	8
	6.1	Distribution of Deferred Compensation and Discretionary Company Contributions Upon Termination of Employment With Company or Death.	8
	6.2	In Service Distribution With Scheduled Withdrawal Date.	9
	6.3	In Service Distribution Without Scheduled Withdrawal Date.	9
	6.4	Inability to Locate Participant.	10
ARTICLE VII		ADMINISTRATION	10
	7.1	Committee.	10
	7.2	Committee Action.	10
	7.3	Powers and Duties of the Committee.	10
	7.4	Construction and Interpretation.	11
	7.5	Compensation, Expenses and Indemnity.	11
	7.6	Quarterly Statements.	12
	7.7	Disputes.	12
ARTICLE VIII		MISCELLANEOUS	13
	8.1	Unsecured General Creditor.	13
	8.2	Restriction Against Assignment.	13
	8.3	Withholding.	13
	8.4	Amendment, Modification, Suspension or Termination.	14
	8.5	Governing Law.	14
	8.6	Receipt or Release.	14
	8.7	Limitation of Rights and Employment Relationship	14
	8.8	Headings.	14
Appendix A

(i)

RECITALS

1. Advanced Micro Devices, Inc. (the “Company”) has an executive deferred compensation plan known as the Advanced Micro Devices Executive Investment Account (the “Plan”) that became effective as of July 1, 2000 as a continuation of a portion of another then existing deferred compensation plan known as the Executive Savings Plan.

2. The Company may enter into an agreement (the “Trust Agreement”) with an independent third party individual or institution, pursuant to which such entity shall serve as trustee (the “Trustee”) under an irrevocable trust (the “Trust”) to be used in connection with the Plan.

3. The Company intends to make contributions to the Trust so that such contributions will be held by the Trustee and invested, reinvested and distributed, all in accordance with the provisions of this Plan and the Trust Agreement.

4. The Company intends that the Trust be a “grantor trust” with the principal and income of the Trust treated as assets and income of the Company, as applicable, for Federal and state income tax purposes.

5. The Company intends that the assets of the Trust shall at all times be subject to the claims of the general creditors of the Company, as provided in the Trust Agreement.

6. The Company intends that the existence of the Trust shall not alter the characterization of the Plan as “unfunded” for purposes of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and shall not be construed to provide income to Plan participants under the Plan prior to actual payment of the vested accrued benefits thereunder.

NOW THEREFORE, the Company hereby establishes the Plan as follows:

ARTICLE I

TITLE AND DEFINITIONS

1.1 Definitions.

Whenever the following words and phrases are used in this Plan, with the first letter capitalized, they shall have the meanings specified below.

(a) “Account” or “Accounts” shall mean all of such accounts as are specifically authorized for inclusion in this Plan.

(b) “Base Salary” shall mean a Participant’s annual base salary, excluding bonus, commissions, incentive and all other remuneration for services rendered to Company and prior to reduction for any salary contributions to a plan established pursuant to Section 125 of the Code or qualified pursuant to Section 401(k) of the Code.

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(c) “Beneficiary” or “Beneficiaries” shall mean the person or persons, including a trustee, personal representative or other fiduciary, last designated in writing by a Participant in accordance with procedures established by the Committee to receive the benefits specified hereunder in the event of the Participant’s death. No beneficiary designation shall become effective until it is filed with the Committee. Any designation shall be revocable at any time through a written instrument filed by the Participant with the Committee with or without the consent of the previous Beneficiary. If there is no such designation or if there is no surviving designated Beneficiary, then the Participant’s surviving spouse shall be the Beneficiary. If there is no surviving spouse to receive any benefits payable in accordance with the preceding sentence, the duly appointed and currently acting personal representative of the Participant’s estate (which shall include either the Participant’s probate estate or living trust) shall be the Beneficiary. In any case where there is no such personal representative of the Participant’s estate duly appointed and acting in that capacity within 90 days after the Participant’s death (or such extended period as the Committee determines is reasonably necessary to allow such personal representative to be appointed, but not to exceed 180 days after the Participant’s death), then Beneficiary shall mean the person or persons who can verify by affidavit or court order to the satisfaction of the Committee that they are legally entitled to receive the benefits specified hereunder. In the event any amount is payable under the Plan to a minor, payment shall not be made to the minor, but instead be paid (a) to that person’s living parent(s) to act as custodian, (b) if that person’s parents are then divorced, and one parent is the sole custodial parent, to such custodial parent, or (c) if no parent of that person is then living, to a custodian selected by the Committee to hold the funds for the minor under the Uniform Transfers or Gifts to Minors Act in effect in the jurisdiction in which the minor resides. If no parent is living and the Committee decides not to select another custodian to hold the funds for the minor, then payment shall be made to the duly appointed and currently acting guardian of the estate for the minor or, if no guardian of the estate for the minor is duly appointed and currently acting within 60 days after the date the amount becomes payable, payment shall be deposited with the court having jurisdiction over the estate of the minor. Payment by Company pursuant to this section of all benefits owed hereunder shall terminate any and all liability of Company.

(d) “Board of Directors “ or “Board” shall mean the Board of Directors of the Company.

(e) “Bonuses” shall mean those incentive and performance bonuses identified by the Committee as qualified for Plan deferrals, as identified in Appendix A to this document, excluding profit sharing, and earned by a Participant on the last day of the respective quarter, semi-annual and annual bonus period, provided a Participant is in the employ of the Company on the last day of the respective bonus period. Bonuses may include sign-on bonuses if an Eligible Employee completes the Initial Election requirements of Article III, Section 3.1(c).

(f) “Code” shall mean the Internal Revenue Code of 1986, as amended.

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(g) “Committee” shall mean the Administrative Committee of Advanced Micro Devices, Inc. (“AMD”), as appointed by the Board to administer the Plan in accordance with Article VII, and/or its agents, designees and vendors.

(h) “Company” shall mean Advanced Micro Devices, Inc.

(i) “Company Contribution Account” shall mean the bookkeeping account maintained by the Company for each Participant that is credited with an amount equal to the Company Discretionary Contribution Amount, if any, and Company Matching Contribution Amount, if any, and earnings and losses on such amounts pursuant to Section 4.2.

(j) “Company Discretionary Contribution Amount” shall mean such discretionary amount if contributed by the Company for each Participant for a Plan Year. Such amount may differ from Participant to Participant both in amount and as a percentage of Compensation.

(k) “Company Matching Contribution Amount” shall mean such amount contributed by the Company for a select group of Participants for a Plan Year.

(l) “Compensation” shall mean annual bonuses, incentive sales commissions, Base Salary and other incentive bonuses identified by the Committee, as set forth in Appendix A, which a Participant earns for services rendered to the Company, excluding profit sharing.

(m) “Deferral Account” shall mean the bookkeeping account maintained by the Committee for each Participant that is credited with amounts equal to (1) the portion of the Participant’s Compensation that he or she elects to defer and (2) earnings and losses pursuant to Section 4.1.

(n) “Distributable Amount” shall mean the balance in the Participant’s Deferral Account and Company Contribution Account.

(o) “Early Distribution” shall mean an election by Participant in accordance with Section 6.2 or 6.3 to receive a withdrawal of amounts from his or her Deferral Account and Company Contribution Account prior to the time at which such Participant would otherwise be entitled to such amounts.

(p) “Effective Date” shall be July 1, 2000.

(q) “Eligible Employee” shall be a Company director or other member of the select group of management or highly compensated United States-based employees as determined by the Committee from year-to-year, in it’s absolute discretion.

(r) “Fund” or “Funds” shall mean one or more of the investment funds selected by the Committee pursuant to Section 3.2(b).

(s) “Initial Election Period” shall mean the 30-day period following the later of the Effective Date, the date an employee becomes an Eligible Employee, and the date an employee is notified in writing (or electronically) by the Committee that he or she is an Eligible Employee.

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(t) “Interest Rate” shall mean, for each Fund, an amount equal to the net gain or loss on the assets of such Fund during each month.

(u) “Participant” shall mean any Eligible Employee who becomes a Participant in this Plan in accordance with Article II. Excluding Section 3.1, a Participant who transfers employment with the Company to a related business entity shall be deemed to be a Participant with the Company for purposes of this Plan. A related business entity shall include a controlled group member company, an affiliated management or service group member company, a subsidiary or joint venture of the Company, or other related business entity as defined in Internal Revenue Code section 414(b)(c)(m), or (n).

(v) “Payment Date” shall mean as soon as administratively feasible following the end of the prior calendar quarter, or following year-end for annual installment payments.

(w) “Plan” shall be the Advanced Micro Devices Executive Investment Account, as set forth herein and with Appendix, now in effect, or as amended from time to time.

(x) “Plan Year” shall mean initially July 1, 2000 until December 31, 2000, and thereafter, each calendar year.

(y) “Scheduled Withdrawal Date” shall mean the distribution date elected by the Participant for an in-service withdrawal of amounts from such Accounts deferred in a given Plan Year, and earnings and losses attributable thereto, as set forth on the election form for such Plan Year.

(z) “Trust” shall mean the Advanced Micro Devices, Inc. Executive Investment Account Trust, once established.

(aa) “Trustee” shall mean the individual or institutional Trustee(s) so designated under the terms of the Trust.

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ARTICLE II

PARTICIPATION

An Eligible Employee shall become a Participant in the Plan by electing to defer a portion of his or her Compensation, pursuant to Section 3.1.

ARTICLE III

DEFERRAL ELECTIONS

3.1 Elections to Defer Compensation.

(a) Initial Election Period. Subject to the provisions of Article II, each Eligible Employee may elect to defer Compensation by filing with the Committee an election that conforms to the requirements of this Section 3.1, on a form or electronic method provided by the Committee, no later than the last day of his or her Initial Election Period.

(b) General Rule. The amount of Compensation that an Eligible Employee may elect to defer is such Compensation earned on or after the time at which the Eligible Employee elects to defer in accordance with Sections 1.1(u) and 3.1(a) and shall be a flat dollar amount or percentage which shall not exceed 50 (fifty) percent of the Eligible Employee’s Base Salary and/or up to 100 (one-hundred) percent of the Eligible Employee’s incentive sales commissions and Bonuses, as may be limited as set forth in Appendix A to this document, provided that the total amount deferred by a Participant shall be limited in any calendar year, if necessary, to satisfy Social Security Tax (including Medicare), income tax and employee benefit plan withholding requirements as determined in the sole and absolute discretion of the Committee.

(c) Duration of Compensation Deferral Election. An Eligible Employee’s initial election to defer Compensation must be prior to the end of his or her Initial Election Period and is to be effective with respect to Compensation received after such deferral election is processed. A Participant may increase, decrease or terminate a deferral election with respect to Compensation for any subsequent calendar quarter by filing a new election prior to the beginning of the next calendar quarter, which election shall be effective on the first day of the next following calendar quarter. In the case of an employee who becomes an Eligible Employee after the Effective Date, such Eligible Employee shall have 30 days from the date he or she receives written or electronic notice from the Committee of becoming an Eligible Employee to make an Initial Election with respect to Compensation.

(d) Elections other than Elections during the Initial Election Period. Subject to the limitations of Section 3.1(b), any Eligible Employee who has terminated a prior Compensation deferral election may elect to again defer Compensation by filing an election, on a form provided by the Committee, to defer Compensation as described in Sections 3.1(b) and 3.1(c) above. An election to defer Compensation must be filed in a timely manner in accordance with Section 3.1(c) above.

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3.2 Investment Elections.

(a) At the time of making the deferral elections described in Section 3.1, the Participant shall designate, on a form provided by the Committee, the types of investment funds in which the Participant’s Account will be deemed to be invested for purposes of determining the amount of earnings to be credited to that Account. In making the designation pursuant to this Section 3.2, the Participant may specify that all or any multiple of his or her Account be deemed to be invested, in whole percentage increments, in one or more of the types of investment funds provided under the Plan as communicated from time to time by the Committee. Effective as of the first of any calendar month, a Participant may change the designation made under this Section 3.2 by filing an election, on a form or electronic method provided by the Committee, with the Committee prior to the end of the prior month. If a Participant fails to elect a type of fund under this Section 3.2, he or she shall be deemed to have elected the Money Market type of investment fund.

(b) Although a Participant may designate the type of investments, the Committee shall not be bound by such designation. The Committee shall select from time to time, in its sole and absolute discretion, commercially available investments of each of the types communicated by the Committee to the Participant pursuant to Section 3.2(a) above to be the Funds. The Interest Rate of each such commercially available investment fund shall be used to determine the amount of earnings or losses to be credited to Participant’s Account under Article IV.

ARTICLE IV

DEFERRAL ACCOUNTS AND TRUST FUNDING

4.1 Deferral Accounts.

The Committee shall establish and maintain a Deferral Account for each Participant under the Plan. Each Participant’s Deferral Account shall be further divided into separate subaccounts (“investment fund subaccounts”), each of which corresponds to an investment fund elected by the Participant pursuant to Section 3.2(a). A Participant’s Deferral Account shall be credited as follows:

(a) As soon as administratively practicable after amounts are withheld and deferred from a Participant’s Compensation, the Committee shall credit the investment fund subaccounts of the Participant’s Deferral Account with an amount equal to Compensation deferred by the Participant in accordance with the Participant’s election under Section 3.2(a); that is, the portion of the Participant’s deferred Compensation that the Participant has elected to be deemed to be invested in a certain type of investment fund shall be credited to the investment fund subaccount corresponding to that investment fund;

(b) Each business day, if valued daily, or each month, if valued monthly, each investment fund subaccount of a Participant’s Deferral Account shall be credited with earnings or losses in an amount equal to that determined by multiplying the balance credited to such investment fund subaccount as of the prior day, if valued daily, or prior month, if valued monthly, plus contributions credited that day to the investment fund subaccount by the Interest

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Rate for the corresponding fund selected by the Company pursuant to Section 3.2(b). Adjustments to the Participant’s Deferral Account crediting rate and/or balance may be made for fees and expenses pertaining to the operation of the Plan and related asset charges.

(c) In the event that a Participant elects for a given Plan Year’s deferral of Compensation to have a Scheduled Withdrawal Date, all amounts attributed to the deferral of Compensation for such Plan Year shall be accounted for in a manner which allows separate accounting for the deferral of Compensation and investment gains and losses associated with such Plan Year’s deferral of Compensation.

4.2 Company Contribution Account.

The Committee shall establish and maintain a Company Contribution Account for each Participant under the Plan. Each Participant’s Company Contribution Account shall be further divided into separate investment fund subaccounts corresponding to the investment fund elected by the Participant pursuant to Section 3.2(a). A Participant’s Company Contribution Account shall be credited as follows:

(a) As soon as administratively practicable after a Company Discretionary Contribution Amount or Company Matching Contribution Amount, the Committee shall credit the investment fund subaccounts of the Participant’s Company Contribution Account with an amount equal to the Company Discretionary Contribution Amount, if any, applicable to that Participant that is the proportion of the Company Discretionary Contribution Amount, if any, or Company Matching Contribution Amount, if any, that the Participant elected to be deemed to be invested in a certain type of investment; and

(b) Each business day if valued daily, or each month, if valued monthly, each investment fund subaccount of a Participant’s Company Contribution Account shall be credited with earnings or losses in an amount equal to that determined by multiplying the balance credited to such investment fund subaccount as of the prior day, if valued daily, or prior month, if valued monthly, plus contributions credited that day to the investment fund subaccount by the Interest Rate for the corresponding Fund selected by the Company pursuant to Section 3.2(b).

4.3 Trust Funding.

The Company may create a Trust with an institutional Trustee. If so created, the Company shall cause the Trust to be funded each year. The Company shall contribute to the Trust an amount equal to (1) the amount deferred by each Participant; (2) the aggregate amount of Company Discretionary Contribution Amounts, if any; and (3) the aggregate amount of Company Matching Contribution Amounts for the Plan Year, if any, less required Distributable Amounts.

Although the principal of the Trust and any earnings thereon shall be held separate and apart from other funds of Company and shall be used exclusively for the uses and purposes of Plan Participants and Beneficiaries as set forth therein, neither the Participants nor their Beneficiaries shall have any preferred claim on, or any beneficial ownership in, any assets of the Trust prior to the time such assets are paid to the Participants or Beneficiaries as benefits and all rights created under this Plan shall be unsecured contractual rights of Plan Participants

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and Beneficiaries against the Company. Any assets held in the Trust will be subject to the claims of Company’s general creditors under federal and state law in the event of insolvency as defined in the Trust agreement.

The assets of the Plan and Trust shall never inure to the benefit of the Company and the same shall be held for the exclusive purpose of providing benefits to Participants and their Beneficiaries and for deferring reasonable expenses of administering the Plan and Trust.

ARTICLE V

VESTING

A Participant shall be 100% vested in his or her Deferral Account, Company Discretionary Contribution Amount, if any, and Company Matching Contribution Amount, if any.

ARTICLE VI

DISTRIBUTIONS

6.1 Distribution of Deferred Compensation and Discretionary Company Contributions Upon Termination of Employment or Death.

(a) Distribution Upon Termination of Employment with the Company. Upon termination of employment with the Company, a Participant’s Distributable Amount shall be paid to the Participant (and after his or her death to his or her Beneficiary) in a lump sum on the Participant’s Payment Date. In the event the Participant has an Account balance of more than $25,000, the Participant may elect to have his or her Account balance paid in substantially equal annual installments over a fixed number of years, no less than three (3) and no more than ten (10) years, beginning on the Participant’s Payment Date. However, such optional form of benefit must be elected by the Participant, on a form provided by and submitted to the Committee, at least one (1) year before the Participant terminates employment with the Company.

A Participant may modify, on a form provided by and submitted to the Committee, the form of benefit that he or she has previously elected, provided such modification form is submitted to the Committee at least one (1) year before the Participant terminates employment with Company.

The Participant’s Account shall continue to be credited with earnings pursuant to Section 4.1 of the Plan until all amounts credited to his or her Account under the Plan have been distributed.

(b) Distribution Upon Death During Employment With the Company. In the case of a Participant who dies while employed by the Company, the Beneficiary shall receive the balance of Participant’s Accounts in a lump sum payment.

(c) Post-Termination Death Benefit. In the event a Participant dies after his or her termination of employment with the Company and still has a vested balance in his or her Account, the vested balance of such Account shall be paid to the Beneficiary, in a lump sum if

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no valid optional benefit election is in effect for the deceased Participant, or in continued annual installments for the remainder of the period in accordance with the election previously made by the Participant.

(d) Continuation of Employment with Related Employer. A Participant, as defined in Section 1.1(u), who transfers employment from the Company to a related business entity shall be deemed not to have terminated employment with the Company for purposes of this Section 6.1.

6.2 In-Service Distribution With Scheduled Withdrawal Date.

In the case of a Participant who has elected a Scheduled Withdrawal Date for a distribution while still in the employ of the Company, such Participant shall receive his or her Distributable Amount, but only with respect to those deferrals of Compensation, vested Matching Contribution Amounts and vested Company Discretionary Contribution Amounts and earnings on such deferrals of Compensation, Matching Contribution Amounts and Company Discretionary Contribution Amounts as shall have been elected by the Participant to be subject to the Scheduled Withdrawal Date in accordance with Section 1.1 (y) of the Plan. A Participant’s Scheduled Withdrawal Date with respect to deferrals of Compensation, Matching Contribution Amounts and Company Discretionary Contribution Amounts deferred in a given Plan Year can be no earlier than one year from the end of the Plan Year for which the deferrals of Compensation, Matching Contribution Amounts and Company Discretionary Contribution Amounts are made. A Participant may extend the Scheduled Withdrawal Date for any Plan Year by so indicating on a form provided by and submitted to the Committee, provided such form is submitted to the Committee at least one year before the Scheduled Withdrawal Date. The Participant shall have the right to twice so modify any Scheduled Withdrawal Date. In the event a Participant terminates employment with Company prior to a Scheduled Withdrawal Date, other than by reason of death, the portion of the Participant’s Account associated with a Scheduled Withdrawal Date, which has not occurred prior to such termination, shall be distributed in a lump sum.

6.3 In-Service Distribution Without Scheduled Withdrawal Date.

A Participant shall be permitted to elect an Early Distribution from his or her Account prior to the Payment Date, subject to the following restrictions:

(a) The election to take an Early Distribution shall be made by filing a form provided by and filed with the Committee.

(b) The amount of the Early Distribution shall equal up to 90% of his or her vested Account balance.

(c) The amount described in subsection (b) above shall be paid in a single cash lump sum as soon as practicable after the end of the calendar month in which the Early Distribution election is made, and based upon the account valuations as of the previous quarter.

(d) If a Participant requests an Early Distribution of his or her entire vested Account, the remaining balance of his or her Account (10% of the Account) shall be permanently

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forfeited and the Company shall have no obligation to the Participant or his or her Beneficiary with respect to such forfeited amount. If a Participant receives an Early Distribution of less than his or her entire vested Account, such Participant shall forfeit 10% of the gross amount to be distributed from the Participant’s Account and the Company shall have no obligation to the Participant or his or her Beneficiary with respect to such forfeited amount.

(e) If a Participant receives an Early Distribution of either all or a part of his or her Account, the Participant will be ineligible to participate in the Plan for at least 12 consecutive months following the date of distribution. Such Participant may resume contributions to the Plan at the beginning of the calendar quarter following the 12 months of ineligibility. All distributions shall be made on a pro rata basis from among a Participant’s Accounts.

6.4 Inability to Locate a Participant.

In the event the Committee is unable to locate a Participant or Beneficiary within two years following the required Payment Date, the amount allocated to the Participant’s Deferral Account shall be forfeited. If, after such forfeiture, the Participant or Beneficiary later claims such benefit, such benefit shall be reinstated without interest or earnings.

ARTICLE VII

ADMINISTRATION

7.1 Committee.

The number of members comprising the Committee shall be determined by the Board, and may from time to time vary. A member of the Committee may resign by delivering a written notice of resignation to the Board. The Board may remove any member by delivering a copy of its resolution of removal to such member. Vacancies in the membership of the Committee shall be filled by the Board.

7.2 Committee Action.

The Committee shall act at meetings by affirmative vote of a majority of its members. Any action permitted to be taken at a meeting may be taken without a meeting if a written consent to the action is signed by a designed member or all members of the Committee. A member of the Committee shall not vote or act upon any matter which relates solely to himself or herself as a Participant. A member or members of the Committee may execute any certificate or other written direction on behalf of the Committee if so authorized in advance by affirmative vote of a majority of the members.

7.3 Powers and Duties of the Committee.

(a) The Committee, on behalf of the Participants and their Beneficiaries, shall enforce the Plan in accordance with its terms, shall be charged with the general administration of the Plan, and shall have all powers necessary to accomplish its purposes, including, but not by way of limitation, the following:

(1) To select the Funds in accordance with Section 3.2(b) hereof;

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(2) To construe and interpret the terms and provisions of this Plan;

(3) To compute and certify to the amount and kind of benefits payable to Participants and their Beneficiaries;

(4) To maintain all records that may be necessary for the administration of the Plan;

(5) To provide for the disclosure of all information and the filing or provision of all reports and statements to Participants, Beneficiaries or governmental agencies as shall be required by law;

(6) To make and publish such rules for the regulation of the Plan and procedures for the administration of the Plan as are not inconsistent with the terms hereof;

(7) To appoint a Plan administrator or any other agent, and to delegate to them such powers and duties in connection with the administration of the Plan as the Committee may from time to time prescribe; and

(8) To take all actions necessary for the administration of the Plan, including determining whether to hold or discontinue any insurance policies in effect for the Plan.

7.4 Construction and Interpretation.

The Committee shall have full discretion to construe and interpret the terms and provisions of this Plan, which interpretations or construction shall be final and binding on all parties, including but not limited to the Company and any Participant or Beneficiary. The Committee shall administer such terms and provisions in a uniform and nondiscriminatory manner and in full accordance with any and all laws applicable to the Plan.

7.5 Compensation, Expenses and Indemnity.

(a) The members of the Committee shall serve without compensation for their services hereunder.

(b) The Committee is authorized at the expense of the Company to employ such legal counsel as it may deem advisable to assist in the performance of its duties hereunder. Expenses and fees in connection with the administration of the Plan shall be paid by the Company.

(c) To the extent permitted by applicable state law, the Company shall indemnify and hold harmless the Committee and each member thereof, the Board, and any delegate of the Committee who is an employee of the Company against any and all expenses, liabilities and claims, including legal fees to defend against such liabilities and claims arising out of their discharge in good faith of responsibilities under or incident to the Plan, other than

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expenses and liabilities arising out of willful misconduct. This indemnity shall not preclude such further indemnities as may be available under insurance purchased by the Company, or provided by the Company under any bylaw, agreement or otherwise, as such indemnities are permitted under state law.

7.6 Quarterly Statements.

Under procedures established by the Committee, a Participant shall receive a statement with respect to such Participant’s Accounts on a frequency of no less than annually.

7.7 Disputes.

(a) Claim.

A person who believes that he or she is being denied a benefit to which he or she is entitled under this Plan (hereinafter referred to as “Claimant”) must file a written request for such benefit with the Committee, setting forth his or her claim. The request must be addressed to the Administrative Committee, c/o AMD Benefits Manager, One AMD Place, PO Box 3453, M/S 181, Sunnyvale, CA 94099.

(b) Claim Decision.

Upon receipt of a claim, the Committee shall advise the Claimant that a reply will be forthcoming within ninety (90) days and shall, in fact, deliver such reply within such period. The Committee may, however, extend the reply period for an additional ninety (90) days for special circumstances.

If the claim is denied in whole or in part, the Committee shall inform the Claimant in writing, using language calculated to be understood by the Claimant, setting forth: (A) the specified reason or reasons for such denial; (B) the specific reference to pertinent provisions of this Plan on which such denial is based; (C) a description of any additional material or information necessary for the Claimant to perfect his or her claim and an explanation of why such material or such information is necessary; (D) appropriate information as to the steps to be taken if the Claimant wishes to submit the claim for appeal; and (E) the time limits for requesting an appeal under subsection (c).

(c) Request For Appeal.

Within ninety (90) days after the receipt by the Claimant of the written opinion described above, the Claimant may request in writing that the Company review the determination of the Committee. Such request must be addressed to the Committee at the address noted in Section 7.7(a) above. The Claimant or his or her duly authorized representative may, but need not, review the pertinent documents and submit issues and comments in writing for consideration by the Company. If the Claimant does not request a review within such ninety (90) day period, he or she shall be barred and estopped from challenging the Committee’s determination.

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(d) Review of Decision.

Within sixty (60) days after the Committee’s receipt of a request for review, (1) the Appeals Committee, as previously appointed by the Committee, shall (i) review the request for review, (ii) after considering all materials presented by the Claimant, decide whether to uphold or reverse the Committee’s decision, and (iii) inform the Committee of its decision; and (2) the Committee will inform the Participant in writing, in a manner calculated to be understood by the Claimant, the decision, setting forth the specific reasons for the decision and containing specific references to the pertinent provisions of this Plan on which the decision is based. If special circumstances require that the sixty (60) day time period be extended, the Committee will so notify the Claimant and will inform the Claimant of the decision as soon as possible, but no later than one hundred twenty (120) days after receipt of the request for review.

ARTICLE VIII

MISCELLANEOUS

8.1 Unsecured General Creditor.

Participants and their Beneficiaries, heirs, successors, and assigns shall have no legal or equitable rights, claims, or interest in any specific property or assets of the Company. No assets of the Company shall be held in any way as collateral security for the fulfilling of the obligations of the Company under this Plan. Any and all of the Company’s assets shall be, and remain, the general unpledged, unrestricted assets of the Company. The Company’s obligation under the Plan shall be merely that of an unfunded and unsecured promise of the Company to pay money in the future, and the rights of the Participants and Beneficiaries shall be no greater than those of unsecured general creditors. It is the intention of the Company that this Plan be unfunded for purposes of the Code and for purposes of Title 1 of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).

8.2 Restriction Against Assignment.

The Company shall pay all amounts payable hereunder only to the person or persons designated by the Plan and not to any other person or corporation. No part of a Participant’s Accounts shall be liable for the debts, contracts, or engagements of any Participant, his or her Beneficiary, or successors in interest, nor shall a Participant’s Accounts be subject to execution by levy, attachment, or garnishment or by any other legal or equitable proceeding, nor shall any such person have any right to alienate, anticipate, sell, transfer, commute, pledge, encumber, or assign any benefits or payments hereunder in any manner whatsoever. If any Participant, Beneficiary or successor in interest is adjudicated bankrupt or purports to anticipate, alienate, sell, transfer, commute, assign, pledge, encumber or charge any distribution or payment from the Plan, voluntarily or involuntarily, the Committee, in its discretion, may cancel such distribution or payment (or any part thereof) to or for the benefit of such Participant, Beneficiary or successor in interest in such manner as the Committee shall direct.

8.3 Withholding.

There shall be deducted from each payment made under the Plan to the Participant (or Beneficiary) all taxes that are required to be withheld by the Company in respect to such payment or this Plan. The Company shall have the right to reduce any payment by the amount of cash sufficient to provide the amount of said taxes.

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8.4 Amendment, Modification, Suspension or Termination.

The Committee may amend, modify, suspend or terminate the Plan in whole or in part, with ratification from the Board where required, except that no amendment, modification, suspension or termination shall have any retroactive effect to reduce any amounts allocated to a Participant’s Accounts. In the event that this Plan is terminated, the amounts allocated to a Participant’s Accounts shall be distributed to the Participant or, in the event of his or her death, his or her Beneficiary, in a lump sum within thirty (30) days after the end of the quarter in which the Plan terminates, or as soon as administratively practicable thereafter.

8.5 Governing Law.

This Plan shall be construed, governed and administered in accordance with the laws of the State of California, except where pre-empted by federal law.

8.6 Receipt or Release.

Any payment to a Participant or the Participant’s Beneficiary in accordance with the provisions of the Plan shall, to the extent thereof, be in full satisfaction of all claims against the Committee and the Company. The Committee may require such Participant or Beneficiary, as a condition precedent to such payment, to execute a receipt and release to such effect.

8.7 Limitation of Rights and Employment Relationship

Neither the establishment of the Plan and Trust, nor any modification thereof, nor the creating of any fund or account, nor the payment of any benefits, shall be construed as giving to any Participant, or Beneficiary or other person any legal or equitable right against the Company or the trustee of the Trust except as provided in the Plan and Trust; and in no event shall the terms of employment of any Employee or Participant be governed, modified, or in any way be affected by the provisions of the Plan or Trust.

8.8 Headings.

Headings and subheadings in this Plan are inserted for convenience of reference only and are not to be considered in the construction of the provisions hereof.

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IN WITNESS WHEREOF, the Company has caused this Plan to be executed by its duly authorized designee(s).

AMD Administrative Committee
By:	/s/ Robert J. Rivet	11/11/03
	Member	Date
By:	/s/ Mike Woollems	11/11/03
	Member	Date
By:	/s/ Kelly Smales	11/11/03
	Member	Date
By:	/s/ Reid Linney	11/11/03
	Member	Date
By:
	Member	Date

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APPENDIX A

Pursuant to Sections 1.1(e) and 3.2 of the Plan, until and unless superseded, bonuses and the percentage limitations on permissible deferrals shall mean:

1. Director Performance Recognition Plan – 100%

2. Vice President Performance Recognition Plan – 100%

EX-10.64(A)

Exhibit 10.64(a)

First Amendment to the

Advanced Micro Devices, Inc. Executive Investment Account Plan

The Advanced Micro Devices, Inc. Executive Investment Account Plan (Plan) shall be amended as follows:

Effective as of November 11, 2003, Appendix A to the Plan shall be amended to add the following additional four plans and percentage limitations.

“3. Director Sales Plan - 100%

  4. Vice President Sales Plan – 100%

  5. Group Success Unit Plan – 100%”

ADVANCED MICRO DEVICES, INC. ADMINISTRATIVE COMMITTEE
By:	/s/ Reid Linney
By:	/s/ Kelly Smales
By:	/s/ Mike Woollems
By:
By:
	Dated: February 24, 2004

1

EX-10.64(B)

Exhibit 10.64(b)

Second Amendment to the

Advanced Micro Devices, Inc. Executive Investment Account Plan

The Advanced Micro Devices, Inc. Executive Investment Account Plan (Plan) shall be amended as follows:

Effective as of November 11, 2003, Appendix A to the Plan shall be amended to add the following additional plans and percentage limitation.

“6. Milestone Achievement Plan – 100%”

ADVANCED MICRO DEVICES, INC. ADMINISTRATIVE COMMITTEE
By:	/s/ Kelly Smales
By:	/s/ Mike Woollems
By:	/s/ Reid Linney
By:
By:
	Dated: May 25, 2004

1

EX-10.65

    Exhibit 10.65

RETENTION PAYMENT AGREEMENT

This Retention Payment Agreement (“Agreement”) is entered into by and between Advanced Micro Devices, Inc. (“Company”) and Henri Richard (“Employee”) (collectively, the “Parties”).

1. Retention Period. Employee agrees that he will not voluntarily terminate his employment with the Company during a three (3) year period beginning August 2, 2005 and ending August 1, 2008 (“Retention Period”).

2. Retention Payment. The Company agrees to provide Employee a Retention Payment of One Million Dollars ($1,000,000), subject to all required taxes and withholdings (“Retention Payment”). The Retention Payment will be paid in a single lump sum within 30 days of this Agreement. The Retention Payment shall not be considered to be a bonus or base compensation for purposes of calculating any severance benefits or benefits due to the Employee following a change of control pursuant to the Management Continuity Agreement dated July 7, 2003 between Employee and the Company.

3. Repayment of Retention Payment. Employee agrees to repay to the Company all or a prorated amount of the Retention Payment, according to the following terms:

(a) Repayment Due to Employment Termination. If Employee’s employment with the Company terminates during the Retention Period, Employee agrees to repay the full amount of the Retention Payment less thirty-three point thirty-three percent (33.33%) for each full year of employment completed during the Retention Period. Employee agrees that repayment obligations under this Agreement are not reduced by completion of partial years of employment. Employee agrees that the any repayment due under this section 3(a) must be repaid by no later than the effective date of Employee’s termination, and that any outstanding balance on such repayment obligation is delinquent and immediately collectable the day following the effective date of termination.

(b) Consent to Offset. Employee agrees that any repayment due the Company under this Agreement may be deducted to the extent permitted by law from any amounts due Employee from the Company at time of termination, including wages, accrued vacation pay, incentive compensation payments, bonuses and commissions, and hereby expressly authorizes such deduction(s).

(c) Repayment Forgiveness. The Company agrees to forgive any repayment due the Company under this Agreement where the Company terminates Employee’s employment due to a Company- or department-wide reduction-in-force. The Company may also, in its sole discretion, forgive any repayment due the Company under this Agreement under circumstances of an extraordinary or unavoidable nature. The Parties agree that Employee’s voluntary termination of his employment, or the Company’s termination of Employee’s employment for any reason other than those stated in this section 3(c), are not conditions requiring forgiveness of any repayment due the Company under this Agreement.

4. No Guarantee of Continued Employment. Nothing in this Agreement guarantees Employee’s employment for any period of time or modifies the at-will nature of Employee’s employment.

5. No Solicitation. Employee’s duties with the Company include access to and use of information relating to the identities, key contacts, preferences, needs and circumstances of customers of the Company, and information relating to the identities, preferences, compensation and circumstances of employees of the Company. Employee acknowledges that he would likely use such information if Employee were to solicit business from the Company’s customers or recruit employees from the Company. For this reason, during Employee’s employment with the Company and for a period of one (1) year following the termination of Employee’s employment (whether voluntary or involuntary) (“Post-Employment Period”), Employee agrees that he will not (i) directly or indirectly solicit the business of any customer of the Company on behalf or for the benefit of any competitive enterprise, or (ii) directly or indirectly solicit, induce or encourage an employee of the Company to leave his or her employment with the Company to work for another employer, without first obtaining the written consent of an Officer of the Company.

6. New Employment. Employee agrees that he will immediately inform the Company of (i) the identity of any new employment, start-up business or self-employment in which Employee engages during the Post-Employment Period, and (ii) Employee’s title, duties and responsibilities in any such engagement. Employee authorizes the Company to provide a copy of this Agreement (redacted to exclude economic terms) to any new employer or other entity or business with which Employee engages during the Post-Employment Period.

Employee agrees that during the Post-Employment Period, Employee will provide such information to the Company as it may request to ensure compliance with this Agreement.

7. Attorneys’ Fees. The Parties agree that in the event of a dispute regarding the interpretation or enforcement of this Agreement, or any provision contained herein, the prevailing party to such dispute (as determined by a judge, jury or arbitrator) is entitled to reimbursement for his/its reasonable attorneys’ fees incurred in connection with such dispute.

8. Acknowledgements. Employee acknowledges that he has the right to discuss this Agreement with any individual, and that to the extent desired, he has availed himself/herself of this opportunity; Employee further acknowledges that he has carefully read and fully understands all the provisions of this Agreement, and that he is voluntarily entering into it without any duress or pressure from AMD.

9. Miscellaneous. No modification of any term of this Agreement shall be valid or binding unless such modification is set forth in a writing signed by both Employee and an Officer of the Company. This Agreement shall not be terminated or altered by changes in duties, compensation or other terms or conditions of Employee’s employment. This Agreement is binding upon both Employee’s heirs, successors and assigns, and the Company’s successors and assigns. The failure by either Employee or the Company to enforce any term of this Agreement at any time or for any period of time shall not be construed as a waiver of such term or the right to later enforce such term. If a court holds any provision of this Agreement invalid, unlawful or unenforceable, such holding shall not affect the remaining provisions of this Agreement, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein.

EMPLOYEE		ADVANCED MICRO DEVICES, INC.
Signature:	/s/    Henri Richard	By:	/s/    Kevin Lyman
Printed Name:	Henri Richard	Printed Name:	Kevin Lyman
Date:	August 3, 2005	Title:	Senior Vice President
		Date:	August 3, 2005

EX-10.66

Exhibit 10.66

ADVANCED MICRO DEVICES

EXECUTIVE SAVINGS PLAN

(Amendment and Restatement Effective as of January 1, 2005)

TABLE OF CONTENTS

		Page
ARTICLE I
TITLE AND DEFINITIONS		1
1.1	Title	1
1.2	Definitions	1
ARTICLE II
PARTICIPATION		4
2.1	Participation	4
ARTICLE III
DEFERRAL ELECTIONS		4
3.1	Elections to Defer Compensation	4
3.2	Investment Elections	5
ARTICLE IV
PARTICIPANT ACCOUNTS		6
4.1	Deferral Account	6
4.2	Company Matching Account	7
ARTICLE V
VESTING		8
5.1	Deferral Account	8
5.2	Company Matching Account	8
ARTICLE VI
DISTRIBUTIONS		8
6.1	Amount and Time of Distribution	8
6.2	Form of Distribution	8
6.3	Termination of Participation	9
ARTICLE VII
ADMINISTRATION		9
7.1	Committee Action	9
7.2	Powers and Duties of the Committee	9
7.3	Construction and Interpretation	10
7.4	Information	10
7.5	Compensation, Expenses and Indemnity	11
7.6	Quarterly Statements	11
ARTICLE VIII
MISCELLANEOUS		11
8.1	Unsecured General Creditor	11
8.2	Restriction Against Assignment	12
8.3	Payment Under Domestic Relations Order	12
8.4	Withholding	14
8.5	Amendment, Modification, Suspension or Termination	14
8.6	Governing Law	14
8.7	Receipt or Release	14
8.8	Headings, etc. Not Part of Agreement	15

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8.9	Limitation on Participants’ Rights	15
ARTICLE IX
BENEFIT OFFSET		15
9.1	Offset for Certain Benefits Payable Under Split - Dollar Life Insurance Policies	15

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ADVANCED MICRO DEVICES

EXECUTIVE SAVINGS PLAN

WHEREAS, ADVANCED MICRO DEVICES, INC. (the “Company”) has established the Advanced Micro Devices Executive Savings Plan (the “Plan”) which originally became effective as of August 1, 1993;

WHEREAS, it is desirable to amend and restate the Plan to incorporate all prior Plan amendments, amend the provisions pertaining to life insurance policies in which the insured is not the Participant and make other clarifying amendments to the Plan;

NOW, THEREFORE, the Plan is hereby amended and restated in its entirety and restated, effective as of December 1, 1998, as follows:

ARTICLE I

TITLE AND DEFINITIONS

1.1 Title.

This Plan shall be known as the Advanced Micro Devices Executive Savings Plan.

1.2 Definitions.

Whenever the following words and phrases are used in this Plan, with the first letter capitalized, they shall have the meanings specified below.

“Account” or “Accounts” shall mean a Participant’s Deferral Account and/or Company Matching Account.

“Beneficiary” means the person or persons, including a trustee, personal representative or other fiduciary, last designated in writing by a Participant and filed with the Committee in accordance with procedures established by the Committee to receive the benefits specified hereunder in the event of the Participant’s death. If there is no valid Beneficiary designation in effect, or if there is no surviving designated Beneficiary, then the Participant’s surviving spouse shall be the Beneficiary. If there is no surviving spouse to receive any benefits payable in accordance with the preceding sentence, the duly appointed and currently acting personal representative of the Participant’s estate (which shall include either the Participant’s probate estate or living trust) shall be the Beneficiary. In any case where there is no such personal representative of the Participant’s estate duly appointed and

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acting in that capacity within 90 days after the Participant’s death (or such extended period as the Committee determines is reasonably necessary to allow such personal representative to be appointed, but not to exceed 180 days after the Participant’s death), then Beneficiary shall mean the person or persons who can verify by affidavit or court order to the satisfaction of the Committee that they are legally entitled to receive the benefit specified hereunder. In the event any amount is payable under the Plan to a minor, payment shall not be made to the minor, but instead be paid (a) to that person’s living parent(s) to act as custodian, (b) if that person’s parents are then divorced, and one parent is the sole custodial parent, to such custodial parent, or (c) if no parent of that person is then living, to a custodian selected by the Committee to hold the funds for the minor under the Uniform Transfers or Gifts to Minors Act in effect in the jurisdiction in which the minor resides. If no parent is living and the Committee decides not to select another custodian to hold the funds for the minor, then payment shall be made to the duly appointed and currently acting guardian of the estate for the minor or, if no guardian of the estate for the minor is duly appointed and currently acting within 60 days after the date the amount becomes payable, payment shall be deposited with the court having jurisdiction over the estate of the minor.

“Board of Directors” or “Board” shall mean the Board of Directors of the Company.

“Bonus” shall mean any incentive compensation, excluding commissions, payable to a Participant in addition to the Participant’s Salary.

“Bonus Election Date” shall mean December 15 or such earlier date as is specified by the Committee and communicated to the Participant with at least thirty (3 0) days’ advance notice.

“Code” shall mean the Internal Revenue Code of 1986, as amended.

“Committee” shall mean the committee that has been appointed by the Board to administer the Plan.

“Company” shall mean Advanced Micro Devices or any successor corporation to Advanced Micro Devices.

“Company Matching Account” shall mean the bookkeeping account maintained by the Committee for each Participant that is credited with an amount equal to 50% of a Participant’s Salary, commissions and Bonus deferrals (subject to certain limitations) and interest pursuant to Section 4.2.

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“Compensation” shall mean the Salary, commissions and Bonus that the Participant is entitled to for services rendered to the Company.

“Deferral Account” shall mean the bookkeeping account maintained by the Committee for each Participant that is credited with amounts equal to (1) the portion of the Participant’s Salary and/or commissions that he elects to defer, (2) the portion of the Participant’s Bonus that he elects to defer, and (3) interest pursuant to Section 4.1.

“Eligible Employee” shall mean each employee of a Participating Company who is at or above the level of director.

“Fiscal Year” shall mean the fiscal year of the Company.

“Fund” or “Funds” shall mean one or more of the mutual funds or contracts selected by the Committee pursuant to Section 3.2(b).

“Initial Election Period” for an Eligible Employee shall mean the 30-day period following the later of July 31, 1993 or the date the employee becomes an Eligible Employee.

“Interest Rate” shall mean, for each Fund, an amount equal to the gross rate of gain or loss on the assets of such Fund during the month (1) reduced by administrative and investment fees charged to investors in such Fund during the month and (2) further reduced by one-twelfth (l/12th) of one percentage point.

“Participant” shall mean any Eligible Employee who elects to defer Compensation in accordance with Section 3.1.

“Participating Company” shall mean the Company and any Company subsidiary or affiliate that the Board designates as being eligible to participate in the Plan.

“Payment Eligibility Date” shall mean the first day of the month following the end of the fiscal quarter following the fiscal quarter in which a Participant terminates employment or dies.

“Plan” shall mean the Advanced Micro Devices Executive Savings Plan set forth herein, now in effect, or as amended from time to time.

“Plan Year” shall mean the 12 consecutive month period beginning on January 1 each year, except that the first Plan Year shall be a short Plan Year beginning on August 1, 1993 and ending on December 31, 1993.

“Salary” shall mean the Participant’s base pay.

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“Tax Adjustment Factor” shall mean a number, determined by the Committee, which is equal to one minus the sum of (1) the highest marginal federal personal income tax rate then in effect and (2) the effective highest marginal state income tax rate in the state in which the Participant resides, net after the effect of the deduction for such state income tax for federal income tax purposes.

ARTICLE II

PARTICIPATION

2.1 Participation.

An Eligible Employee shall become a Participant in the Plan by electing to defer all or a portion of his or her Compensation in accordance with Section 3.1.

ARTICLE III

DEFERRAL ELECTIONS

3.1 Elections to Defer Compensation.

(a) General Rule. The amount of Compensation which an Eligible Employee may elect to defer is as follows:

(1) Any percentage of Salary up to 50%, provided that such Eligible Employee’s Salary is not reduced to an amount less than the Social Security wage base for the plan year; plus

(2) Any percentage or dollar amount of Bonus and commissions up to 100%.

(b) Initial Election. Each Eligible Employee may elect to defer Compensation by filing with the Committee an election, on a form provided by the Committee, no later than the last day of his or her Initial Election Period. An election to defer Compensation during an Initial Election Period shall be irrevocable, except as provided in Sections 3.1(d) and (e), and shall be effective with respect to Salary and commissions earned during the first pay period beginning after the date of the election, and to each Bonus the amount of which first becomes fixed and determinable after the date of the election; provided, however, that the initial election will apply to any Bonus payable for a Fiscal Year, or for a performance period ending with the close of a Fiscal Year, only if such election is made on or before June 3 0 of such Fiscal Year.

(c) Elections other than Elections during the Initial Election Period. Any Eligible Employee who fails to elect to defer Compensation during his or her Initial Election Period may subsequently become a Participant, and any Eligible Employee who has terminated a prior Salary, commissions or Bonus deferral election may elect to again defer Salary, commissions or Bonuses

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or any combination thereof, by filing an appropriate election, on a form provided by the Committee, to defer Compensation. An election to defer Salary and/or commissions must be filed on or before the deadline established by the Committee and will be effective for Salary and/or commissions earned during pay periods beginning after the start of the calendar quarter for which the election is filed. An election to defer a portion of each Bonus for a Fiscal Year must be filed on or before the Bonus Election Date preceding the date the Bonus first becomes fixed and determinable, provided, however, that an election to defer a Bonus for a Fiscal Year, or for a performance period ending with the close of a Fiscal Year, must be made on or before June 30 of such Fiscal Year.

(d) Duration of Salary and/or Commissions Deferral Election. Any Salary and/or commissions deferral election made under paragraph (b) or paragraph (c) of this Section 3.1 shall remain in effect, notwithstanding any change in the Participant’s Salary or commissions, until changed or terminated in accordance with the terms of this paragraph (d); provided, however, that such election shall terminate for Salary or commissions paid while the Participant is not an Eligible Employee. A Participant may increase, decrease or terminate his or her Salary and/or commission deferral election on a quarterly basis by filing a new election with the Committee by the deadline established by the Committee prior to the beginning of the quarter for which the election is effective.

(e) Duration of Bonus Deferral Election. Any Bonus deferral election made under paragraph (b) or paragraph (c) of this Section 3.1 shall be irrevocable and shall apply only to the Bonus or Bonuses payable with respect to services performed during the Fiscal Year or the performance period ending with the close of such Fiscal Year, for which the election is made. For each subsequent Fiscal Year, or performance period ending with the close of any subsequent Fiscal Year, an Eligible Employee may make a new election to defer a percentage of each of his or her Bonuses for that Fiscal Year or performance period. Such election shall be on forms provided by the Committee and shall be made on or before the Bonus Election Date of the Fiscal Year preceding the Fiscal Year in which the Bonus otherwise would be paid. Notwithstanding the foregoing the election to defer a Bonus for a Fiscal Year, or for a performance period ending with the close of a Fiscal Year, must be made on or before June 30 of such Fiscal Year.

3.2 Investment Elections.

(a) At the time of making the deferral elections described in Section 3.1, the Participant shall designate, on a form provided by the Committee, which of the types of mutual funds or contracts the Participant’s Accounts will be deemed to be invested in for purposes of determining the amount of earnings to be credited to those Accounts. In making the designation

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pursuant to this Section 3.2, the Participant may specify that all or any 10% multiple of his or her Accounts be deemed to be invested in one or more of the types of mutual funds or contracts available. Effective as of the beginning of any calendar quarter, a Participant may change the designation made under this Section 3.2 by filing an election prior to the beginning of the quarter in accordance with such rules established by the Committee. If a Participant fails to elect a type of fund under this Section 3.2, he or she shall be deemed to have elected the Fund determined by the Committee to most closely approximate a money market fund.

(b) Although the Participant may designate the type of mutual funds or contracts in paragraph (a) above, the Committee shall select from time to time, in its sole discretion, a commercially available fund or contract of each of the available types to be the Funds. The Interest Rate of each such commercially available fund or contract shall be used to determine the amount of earnings to be credited to Participants’ Accounts under Article IV.

ARTICLE IV

PARTICIPANT ACCOUNTS

4.1 Deferral Account.

The Committee shall establish and maintain a Deferral Account for each Participant under the Plan. Each Participant’s Deferral Account shall be further divided into separate subaccounts (“mutual fund subaccounts”), each of which corresponds to a mutual fund or contract elected by the Participant pursuant to Section 3.2(a). A Participant’s Deferral Account shall be credited as follows:

(a) As of the last day of each month, the Committee shall credit the mutual fund subaccounts of the Participant’s Deferral Account with an amount equal to Salary and/or commissions deferred by the Participant during each pay period ending in that month in accordance with the Participant’s election under Section 3.2(a); that is, the portion of the Participant’s deferred Salary and/or commissions that the Participant has elected to be deemed to be invested in a certain type of mutual fund shall be credited to the mutual fund subaccount corresponding to that mutual fund;

(b) As of the last day of the month in which the Bonus or partial Bonus would have been paid, the Committee shall credit the mutual fund subaccounts of the Participant’s Deferral Account with an amount equal to the portion of the bonus deferred by the Participant for such Fiscal Year in accordance with the Participant’s election under Section 3.2(a); that is, the portion of the Participant’s deferred bonus that the Participant has elected to be deemed to be invested in a particular type of mutual fund shall be credited to the mutual fund subaccount corresponding to that mutual fund; and

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(c) As of the last day of each month, each mutual fund subaccount of a Participant’s Deferral Account shall be credited with earnings in an amount equal to that determined by multiplying the balance credited to such mutual fund subaccount as of the last day of the preceding month by the Interest Rate for the corresponding Fund selected by the Company pursuant to Section 3.2(b).

4.2 Company Matching Account.

The Committee shall establish and maintain a Company Matching Account for each Participant under the Plan. Each Participant’s Company Matching Account shall be further divided into separate mutual fund subaccounts corresponding to the type of mutual fund or contract elected by the Participant pursuant to Section 3.2(a). A Participant’s Company Matching Account shall be credited as follows:

(a) As of the last day of each Plan Year, the Committee shall credit the mutual fund subaccounts of the Participant’s Company Matching Account with an amount equal to 50% of the amount of the Salary, commissions and/or Bonuses deferred by the Participant during each pay period ending in that Plan Year (the “Company Matching Amount”) in accordance with the Participant’s election under Section 3.2(a); that is, the portion of the Company Matching Amount which the Participant elected to be deemed to be invested in a certain type of mutual fund shall be credited to the corresponding mutual fund subaccount. Notwithstanding the foregoing, in no event shall the Company Matching Amount for a Plan Year, when combined with the maximum Company Matching Contribution which the Participant could have received under the Advanced Micro Devices, Inc. Retirement Savings Plan or any other retirement plan qualified under Section 401(a) of the Code maintained by a Participating Company for the same year (assuming deferrals at the maximum permissible rate), exceed 1.5% of the Participant’s aggregate Salary, commissions and Bonuses during such Plan Year.

(b) As of the last day of each month, each mutual fund subaccount of a Participant’s Company Matching Account shall be credited with earnings in an amount equal to that determined by multiplying the balance credited to such mutual fund subaccount as of the last day of the preceding month by the Interest Rate for the corresponding Fund selected by the Company pursuant to Section 3.2(b).

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ARTICLE V

VESTING

5.1 Deferral Account.

A Participant’s Deferral Account shall at all times be 100% vested.

5.2 Company Matching Account.

A Participant’s Company Matching Account shall at all times be 100% vested.

ARTICLE VI

DISTRIBUTIONS

6.1 Amount and Time of Distribution.

Each Participant (or, in the case of his or her death, the Participant’s Beneficiary) shall be entitled to receive a distribution of benefits under this Plan as soon as practicable following his or her Payment Eligibility Date. The amount payable to a Participant shall be the sum of the amounts credited to his or her Deferral Account and Company Matching Account as of his or her Payment Eligibility Date. If a distribution is due to a Participant (or a Participant’s Beneficiary) and, after a reasonable search and a period of three (3) years from the Participant’s Payment Eligibility Date, the Company cannot locate the Participant (or the Participant’s Beneficiary), the Participant’s Accounts shall be forfeited to the Company. If such Participant (or Beneficiary) later files a claim, the Participant’s Accounts shall be reinstated, without any interest or earnings or losses from the date of forfeiture, and the distribution, along with any other distributions which would have been made if the Participant (or Beneficiary) had been located, shall then be made.

6.2 Form of Distribution.

(a) Lump Sum. The form of the distribution of benefits to a Participant (or his or her Beneficiary) shall be a cash lump sum payment.

(b) Installments.

(1) Notwithstanding subsection (a) above, a Participant may elect that his or her benefits be paid in substantially equal annual installments over three to ten years provided that his or her election is filed with the Committee at least two years prior to the date his or her employment with the Company terminates and provided further that the amount of the first annual installment (determined by dividing the account balance by the number of installments elected) would be in an amount at least equal to $20,000.

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(2) The first annual installment shall be paid within 90 days following the end of the Plan Year during which the Participant’s employment with the Participating Company terminates. Subsequent installments shall be paid on the annual anniversaries of the first installment payment.

(3) Notwithstanding anything contained in Sections 4.1(c) or 4.2(b) to the contrary, beginning with the month following the month in which the Participant’s employment with the Participating Company terminates and continuing until all amounts credited to his or her Accounts have been distributed, the Participant’s Accounts will be credited with interest, as of the end of each month, at the rate determined by the Committee from time to time. Such rate shall be either (1) the rate of return of a professionally managed fixed income fund for such month or (2) one-twelfth of the annual prime rate of interest declared by Bank of America, N.A. or Wells Fargo Bank, N.A. and in effect on the first day of such month.

6.3 Termination of Participation.

The Company reserves the unilateral right to terminate or restrict a Participant’s participation at any time, and distribute all amounts due to such Participant.

ARTICLE VII

ADMINISTRATION

7.1 Committee Action.

The Committee shall act at meetings by affirmative vote of a majority of the members of the Committee. Any action permitted to be taken at a meeting may be taken without a meeting if, prior to such action, a written consent to the action is signed by all members of the Committee and such written consent is filed with the minutes of the proceedings of the Committee. A member of the Committee shall not vote or act upon any matter which relates solely to himself or herself as a Participant. The Chairman or any other member or members of the Committee designated by the Chairman may execute any certificate or other written direction on behalf of the Committee.

7.2 Powers and Duties of the Committee.

(a) The Committee, on behalf of the Participants and their Beneficiaries, shall enforce the Plan in accordance with its terms, shall be charged with the general administration of the

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Plan, and shall have all powers necessary to accomplish its purposes, including, but not by way of limitation, the following:

(1) To determine all questions relating to the eligibility of employees to participate;

(2) To select the funds or contracts to be the Funds in accordance with Section 3.2(b) hereof;

(3) To construe and interpret the terms and provisions of this Plan;

(4) To compute and certify to the amount and kind of benefits payable to Participants and their Beneficiaries;

(5) To maintain all records that may be necessary for the administration of the Plan;

(6) To provide for the disclosure of all information and the filing or provision of all reports and statements to Participants, Beneficiaries or governmental agencies as shall be required by law;

(7) To make and publish such rules for the regulation of the Plan and procedures for the administration of the Plan as are not inconsistent with the terms hereof; and

(8) To appoint a plan administrator or, any other agent, and to delegate to them such powers and duties in connection with the administration of the Plan as the Committee may from time to time prescribe.

7.3 Construction and Interpretation.

The Committee shall have full discretion to construe and interpret the terms and provisions of this Plan, which interpretation or construction shall be final and binding on all parties, including but not limited to the Participating Company and any Participant or Beneficiary. The Committee shall administer such terms and provisions in a uniform and nondiscriminatory manner and in full accordance with any and all laws applicable to the Plan.

7.4 Information.

To enable the Committee to perform its functions, the Participating Companies shall supply full and timely information to the Committee on all matters relating to the Compensation of all Participants, their death or other cause of termination, and such other pertinent facts as the Committee may require.

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7.5 Compensation, Expenses and Indemnity.

(a) The members of the Committee shall serve without compensation for their services hereunder.

(b) The Committee is authorized at the expense of the Company to employ such legal counsel as it may deem advisable to assist in the performance of its duties hereunder. Expenses and fees in connection with the administration of the Plan shall be paid by the Company.

(c) To the extent permitted by applicable state law, the Company shall indemnify and save harmless the Committee and each member thereof, the Board of Directors and any delegate of the Committee who is an employee of a Participating Company against any and all expenses, liabilities and claims, including legal fees to defend against such liabilities and claims arising out of their discharge in good faith of responsibilities under or incident to the Plan, other than expenses and liabilities arising out of willful misconduct. This indemnity shall not preclude such further indemnities as may be available under insurance purchased by the Participating Company or provided by the Participating Company under any bylaw, agreement or otherwise, as such indemnities are permitted under state law.

7.6 Quarterly Statements.

Under procedures established by the Committee, a Participant shall receive a statement with respect to such Participant’s Accounts as soon as practicable following the end of each calendar quarter.

ARTICLE VIII

MISCELLANEOUS

8.1 Unsecured General Creditor.

Participants and their Beneficiaries, heirs, successors, and assigns shall have no legal or equitable rights, claims, or interest in any specific property or assets of a Participating Company by virtue of this Plan. No assets of a Participating Company shall be held under any trust, or held in any way as collateral security for the fulfilling of the obligations of the Company under this Plan. Any and all of a Participating Company’s assets shall be, and remain, the general, unpledged, unrestricted assets of such Participating Company. The Company’s obligation under the Plan shall be merely that of an unfunded and unsecured promise of the Company to pay money in the future, and the rights of the Participants and Beneficiaries shall be no greater than those of unsecured general creditors; provided, however, that nothing herein shall limit the rights of the Participants, Beneficiaries or any other party under separate agreements and contracts with the Participating Company.

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8.2 Restriction Against Assignment.

The Company shall pay all amounts payable hereunder only to the person or persons designated by or under the Plan and not to any other person or corporation. Except as otherwise provided in this Section 8.2 or Section 8.3, no part of a Participant’s Accounts shall be liable for the debts, contracts, or engagements of any Participant, his or her Beneficiary, or successors in interest, nor shall a Participant’s Accounts be subject to execution by levy, attachment, or garnishment or by any other legal or equitable proceeding, nor shall any such person have the right to alienate, anticipate, commute, pledge, encumber, or assign any benefits or payments hereunder in any manner whatsoever. Except as otherwise provided in this Section 8.2 or Section 8.3, if any Participant, Beneficiary or successor in interest is adjudicated bankrupt or purports to anticipate, alienate, sell, transfer, assign, pledge, encumber or charge any distribution or payment from the Plan, voluntarily or involuntarily, the Committee, in its discretion, may cancel such distribution or payment (or any part thereof) to or for the benefit of such Participant, Beneficiary or successor in interest in such manner as the Committee shall direct.

Notwithstanding anything herein or in Article VI to the contrary, if prior to a Participant’s Payment Eligibility Date, the Participant’s prospective employer agrees in writing to accept an assignment of the Participant’s interest and Accounts hereunder and to assume all liability therefore on terms acceptable to the Company, then the Participant shall receive no distribution of his interest and Accounts and, instead, the Participant’s interest and Accounts hereunder (and all related liabilities) will be assigned to the Participant’s prospective employer. Following such an assignment and assumption, the Company shall have no liability hereunder to the Participant.

8.3 Payment Under Domestic Relations Order.

The creation, assignment or recognition of a right of a Participant’s spouse or former spouse (“Alternate Payee”) to all or a portion of a Participant’s Accounts pursuant to a state domestic relations order (“DRO”) shall not constitute a violation of Section 8.2 or any other provision of the Plan, provided such order is consistent with the terms of the Plan and approved by the Committee. Notwithstanding the foregoing or any provision of a DRO to contrary, the Alternate Payee’s interest in the Plan shall remain the property of the Company and subject to the claims of its creditors until such time as payments are made to the Alternate Payee in accordance with the terms of the DRO. In all cases, any amount assigned to an Alternate Payee pursuant to a DRO shall be subject to Section 9.1 of the Plan as though such amounts were still credited to the Participant’s Accounts.

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(a) As soon as practicable after the Committee approves a DRO, the Committee may establish a separate bookkeeping account (“DRO Account”) for the Alternate Payee to which shall be transferred the portion of the Participant’s Accounts which are assigned to the Alternate Payee under the DRO. Any such DRO Account shall, to the extent applicable, be established and maintained in accordance with the terms of Article IV and Article V. Except as a DRO may otherwise provide, if a single amount or percentage of such Participant’s Accounts is assigned to a Alternate Payee, the transfer to the DRO Account established for the Alternate Payee shall be made pro rata from such investments as the assets of the Participant’s Accounts are then deemed to be invested.

(b) The Alternate Payee shall be permitted to designate the type of mutual funds or contracts that his or her DRO Account will be deemed to be invested in accordance with the procedures set forth in Section 3.2. If the Alternate Payee fails to elect a type of fund or contract, he or she shall be deemed to have elected the Fund determined by the Committee to most closely approximate a money market fund in accordance with the procedures set forth in Section 3.2.

(c) To the extent provided in the DRO, the Alternate Payee may elect to have his or her DRO Account distributed as follows:

(1) In an immediate lump sum;

(2) At the time and in the form elected by the Alternate Payee pursuant to Article VI, provided however, that the Alternate Payee must commence distribution of the Alternate Payee’s DRO Account no later than the time that the Participant (or the Participant’s Beneficiary, if applicable) commences distribution of his or her Accounts; or

(3) At a time and in a form approved by the Committee, provided however, that the Alternate Payee must commence distribution of the Alternate Payee’s DRO Account no later than the time that the Participant (or the Participant’s Beneficiary, if applicable) commences distribution of his or her Accounts.

(d) If the Alternate Payee dies prior to the time that the Alternate Payee has received all or any portion of the Alternate Payee’s DRO Account, the amounts recorded in such DRO Account may be paid to the beneficiary (“DRO Beneficiary”) designated by the Alternate Payee on forms provided by the Committee. If the Alternate Payee does not make an effective designation of a DRO Beneficiary or if the designated DRO Beneficiary is not living when a distribution is to be made, such amounts shall be paid to the Alternate Payee’s estate, except as a DRO may otherwise provide. Such amounts shall be paid at the time and in the manner permitted under the terms of the Plan and approved by the Committee.

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(e) The Participant’s death prior to the time that the Alternate Payee has received all or any portion of the Alternate Payee’s DRO Account shall not affect the Alternate Payee’s DRO Account. The Alternate Payee shall not be awarded any survivor benefits upon the Participant’s death, unless the Participant designates the Alternate Payee as a Beneficiary in accordance with the terms of the Plan.

(f) The Participant’s Accounts shall be reduced by the amounts assigned to an Alternate Payee pursuant to a DRO; provided, however, that any amounts assigned to an Alternate Payee pursuant to a DRO shall continue to be subject to Section 9.1 as though such amounts were still credited to the Participant’s Accounts.

(g) Notwithstanding any provision of any DRO to the contrary, the Company reserves the unilateral right to terminate or restrict an Alternate Payee’s participation at any time, and distribute all amounts due to such Alternate Payee.

8.4 Withholding.

There shall be deducted from deferred Compensation and Company Matching credits when made and from each payment made under the Plan all taxes which are required to be withheld by the Company. The Company shall have the right to reduce any deferred Compensation, Company Matching credits and any payment by the amount of cash sufficient to provide the amount of said taxes.

8.5 Amendment, Modification, Suspension or Termination.

The Company may amend, modify, suspend or terminate the Plan in whole or in part, except that no amendment, modification, suspension or termination shall reduce any amounts then allocated previously to a Participant’s Accounts. In the event that this Plan is terminated, the amounts credited to a Participant’s Deferral Account and Company Matching Account shall be distributed to the Participant or, in the event of his or her death, to his or her Beneficiary in a lump sum within thirty (30) days following the date of termination.

8.6 Governing Law.

This Plan shall be construed, governed and administered in accordance with the laws of the State of California.

8.7 Receipt or Release.

Any payment to a Participant or the Participant’s Beneficiary in accordance with the provisions of the Plan shall, to the extent thereof, be in full satisfaction of all claims against the Committee and each Participating Company. The Committee may require such Participant or Beneficiary, as a condition precedent to such payment, to execute a receipt and release to such effect.

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8.8 Headings, etc. Not Part of Agreement.

Headings and subheadings in this Plan are inserted for convenience of reference only and are not to be considered in the construction of the provisions hereof.

8.9 Limitation on Participants’ Rights.

Participation in this Plan shall not give any Eligible Employee the right to be retained in a Participating Company’s employ or any right or interest in the Plan other than as herein provided. The Participating Company reserves the right to dismiss any Eligible Employee without any liability for any claim against the Company, except to the extent provided herein.

ARTICLE IX

BENEFIT OFFSET

9.1 Offset for Certain Benefits Payable Under Split-Dollar Life Insurance Policies.

(a) Notwithstanding anything contained herein to the contrary, any benefits payable under this Plan shall be offset by the value of benefits provided by certain life insurance policies as set forth in this Section. Participants in this Plan may own life insurance policies (the “Policy” or “Policies”) purchased on their behalf by the Participating Company. Any such Policy may insure the life of a Participant or the life of another individual. The exercise of ownership rights under these Policies by each Participant is, however, subject to certain conditions (set forth in a “Split-Dollar Life Insurance Agreement” between each Participant and the Participating Company pursuant to which the Participating Company holds a security interest in the Policy) and, if the Participant fails to meet the conditions set forth in the Split-Dollar Life Insurance Agreement, the Participating Company may exercise its security interest in the Policy and cause the Participant to lose certain benefits under the Policy. In the event that a Participant satisfies the conditions specified in Section 5 of the Split-Dollar Life Insurance Agreement, so that the Participant becomes entitled to exercise rights under that section free from the Participating Company’s security interest, or the Participating Company’s security interest is otherwise released, the value of those benefits shall constitute an offset to any benefits otherwise payable under this Plan (provided, however, that any death benefit payable under a Policy on the life of a Participant upon the Participant’s death shall not constitute an offset to the benefits payable under the Plan). This offset (the “First Offset Value”) shall be equal to the value of benefits payable under the Split-Dollar Life Insurance Agreement, that is, the cash surrender value of the Policy. The

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First Offset Value shall then be compared to the Participant’s Accounts, and the amounts credited to the Accounts shall be reduced, but not to less than zero, by the First Offset Value; provided, however, that any portion of the Accounts which is attributable to Compensation deferred during Plan Years in which the Participating Company did not pay additional premiums on the Policy in amounts equal to the amount of Compensation deferred by the Participant under this Plan shall not be reduced by the First Offset Value, and the Committee shall maintain subaccounts of a Participant’s Accounts to the extent necessary to determine that portion of each Account which is subject to offset and the portion which is not subject to offset. The First Offset Value shall first be applied to the Participant’s Company Matching Account and then to the Participant’s Deferral Account.

(b) If the Policy in Section 9.1(a) is not on the life of the Participant and the insured dies prior to distribution of benefits under this Plan, then the value of the benefits received by the Participant or other Beneficiary designated by the Participant under the Policy will offset the Participant’s Accounts under this Plan to the extent provided in this subsection (b). This offset (the “Second Offset Value”) shall be equal to the amount of death benefit payable to the Participant, or other Beneficiary designated by the Participant, divided by the Tax Adjustment Factor. This Second Offset Value shall then be compared to the Participant’s Accounts, and the amounts credited to the Accounts shall be reduced, but not to be less than zero, by the Second Offset Value; provided, however, that any portion of the Accounts which is attributable to Compensation deferred during Plan Years in which the Participating Company did not pay additional premiums on the Policy in amounts equal to the amount of Compensation deferred by the Participant under this Plan shall not be reduced by the Second Offset Value, and the Committee shall maintain subaccounts of a Participant’s Accounts to the extent necessary to determine that portion of each Account which is subject to offset and the portion which is not subject to offset. The Second Offset Value shall first be applied to the Participant’s Company Matching Account and then to the Participant’s Deferral Account.

(c) The reduction described in Section 9.1(a) shall be made as of the date on which the Participant becomes entitled to exercise rights under the Policy free of the Participating Company’s security interest, and the reduction described in Section 9.1(b) shall be made as of the date on which the Participant or designated Beneficiary receives the death proceeds.

(d) In the event of an offset as described herein, any election to receive distribution of the amounts credited to a Participant’s Accounts in the form of installments shall be deemed to be revoked, and any benefits which are or become payable under this Plan after such offset shall be paid in a lump sum as soon as practicable following the Participant’s Payment Eligibility Date.

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IN WITNESS WHEREOF, the Company has caused this amended and restated Plan to be executed by its duly authorized representatives on this 24^th day of August 2005.

ADVANCED MICRO DEVICES, INC.
ADMINISTRATIVE COMMITTEE

By

By

By

By

By

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EX-31.1

Exhibit 31.1

Certification of Chief Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Hector de J. Ruiz, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Advanced Micro Devices, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4. The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the company’s internal control over financial reporting that occurred during the company’s most recent fiscal quarter (the company’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5. The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date: August 4, 2005	/s/    HECTOR DE J. RUIZ
	Hector de J. Ruiz Chairman of the Board, President and Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification of Chief Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Robert J. Rivet, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Advanced Micro Devices, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4. The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the company’s internal control over financial reporting that occurred during the company’s most recent fiscal quarter (the company’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5. The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date: August 4, 2005	/s/    ROBERT J. RIVET
	Robert J. Rivet Executive Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Advanced Micro Devices, Inc. (the “Company”) hereby certifies, to such officer’s knowledge, that:

(i.) the Quarterly Report on Form 10-Q of the Company for the quarterly period ended June 26, 2005 (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: August 4, 2005	/s/    HECTOR DE J. RUIZ
	Hector de J. Ruiz
	Chairman of the Board,
	President and Chief Executive Officer

EX-32.2

Exhibit 32.2

Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Advanced Micro Devices, Inc. (the “Company”) hereby certifies, to such officer’s knowledge, that:

(i.) the Quarterly Report on Form 10-Q of the Company for the quarterly period ended June 26, 2005 (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: August 4, 2005	/s/    ROBERT J. RIVET
	Robert J. Rivet
	Executive Vice President and
	Chief Financial Officer