Intel and AMD has just announced a comprehensive agreement to end all outstanding legal disputes between the companies, including antitrust litigation and patent cross license disputes.

Under terms of the agreement, Intel will pay AMD $1.25 billion and agree to abide by a set of business practice provisions. As a result, AMD will drop all pending litigation including the case in U.S. District Court in Delaware and two cases pending in Japan, and also withdraw all of its regulatory complaints worldwide.

Moreover, from now on, AMD will be able to manufacture its x86 microprocessors on any factory and those production facilities do not have to be qualified as AMD’s subsidiaries.

In a joint statement the two companies commented: “While the relationship between the two companies has been difficult in the past, this agreement ends the legal disputes and enables the companies to focus all of our efforts on product innovation and development.”

Intel has later adjusted its fourth-quarter financial expectations to reflect the impact of the $1.25 billion settlement payment. Intel now expects spending in the fourth quarter to be approximately $4.2 billion, up from $2.9 billion. In addition, the effective tax rate is expected to be about 20%, down from 26%. All other expectations are unchanged.