GTAT receives 3rd Prepayment from Apple for Sapphire Plant Ramp Up

Posted: April 23, 2014 by mattmargolis24 in Mesa Sapphire Plant
Tags: , , , , , , ,

According to GTAT’s latest SEC filing on 4/22/14, GT has received the 3rd prepayment from Apple, which leaves just one prepayment remaining. The final prepayment from Apple is expected to be received based on the agreed upon date in the prepayment agreement, which is not currently available to the public.

The Company and Apple entered into a Master Development and Supply Agreement and related Statement of Work (or the “MDSA”), pursuant to which we will supply sapphire material to Apple. In connection with this supply arrangement, we also entered into a Prepayment Agreement with Apple pursuant to which we will receive $578 million (the “Prepayment Amount”), in four separate installments, as payment in advance for the purchase of sapphire goods, of which $225 million was received in Fiscal 2013 and the second and third installment were received in 2014.

The expanded sapphire material operations are expected to generate a more stable revenue stream than the capital equipment business. This factor is expected to be beneficial to the long-term prospects and long-term value of the Company.

In order to prepare to meet the sapphire material supply obligations under the MDSA, management made a strategic decision to allocate much of its sapphire and other resources to the establishment of our expanded sapphire material operations. These decisions had a negative impact on the financial results for Fiscal 2013 as short-term revenue opportunities from equipment sales for the second-half of Fiscal 2013 had to be delayed in order to prepare to meet the sapphire material obligations to Apple. The Company’s Board of Directors supported this strategic decision of management and believes it will result in a more sustainable and value generating company.

The details available regarding the timing of prepayments between GTAT and Apple are below:

2. Prepayment.

(a) Subject to Sections 2(c) and (d) below, and provided that, at the time for each payment (i) no Trigger Event (as defined below) has occurred and (ii) there are no ongoing disputes under the Facility Lease Agreement which have a material impact on the use of the manufacturing facility to be located in Mesa, AZ that Apple is purchasing and developing (the “Mesa Facility”) for its intended purpose, Apple will make the Prepayment by remitting funds to an account designated by GTAT as follows (the “Milestone Payments”):

· $[***] within [***] Business Days after execution of all of the Transaction Documents;
· $[***] by close of business on [***];

[***] Portions of this exhibit have been redacted pursuant to a confidential treatment request. An unredacted version of this exhibit has been filed separately with the Commission

· $[***] by close of business on [***];
· $[***] by close of business on [***].

(b) The Prepayment proceeds shall be used exclusively to [***].

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Comments
  1. Barry Fitzgerald says:

    Matt – Is there any indication that there are terms where GTAT gets “progress” payments based on milestones or are these payments automatic?

    Like

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