EXECUTIVE BONUS PLAN, AS AMENDED.
Published on March 7, 1995
EXHIBIT 10.16
ADVANCED MICRO DEVICES, INC.
EXECUTIVE BONUS PLAN
Personal and Confidential
AMD EXECUTIVE BONUS PLAN
================================================================================
TABLE OF CONTENTS
- 2 -
AMD EXECUTIVE BONUS PLAN
================================================================================
I. PURPOSE
The Executive Bonus Program (EBP) provides an incentive for AMD's Vice
Presidents and the Officer Staff to maximize short- and long-term financial
and sales performance.
II. OVERVIEW
o The EBP has two separate elements: the Short-Term Performance Plan
(STPP) which provides an annual incentive, and the Long-Term Performance
Plan (LTPP) which rewards sustained Corporate performance over a three-
year period.
o The STPP motivates participants to exceed Corporate Operating Income and
selected Division objectives. Executives are assigned to different tiers
of the STPP (with varying award targets and maximums) depending upon
their roles.
o The LTPP measures AMD's 3-year performance on Return on Equity (ROE) and
sales growth relative to the external marketplace.
o Expressed as percents of base salary, target and maximum awards for the
EBP are as follows:
o Calculations of STPP bonuses use the participant's annualized base
salary as of December 31 of the plan year. For LTPP bonuses, the
participant's annualized base salary as of December 31 of Plan Year 3 is
used. The base salary amount is modified subject to the proration
provisions as described in section VI., EBP Administration.
- 3 -
AMD EXECUTIVE BONUS PLAN
================================================================================
o The EBP is funded by a maximum of 3 percent of AMD's reported Operating
Income.
III. SHORT TERM PERFORMANCE PLAN (STPP)
The STPP bonus is earned by achieving specific levels of Corporate
performance against reported Operating Income. In addition, a portion of
the STPP is based on the achievement of Division performance objectives as
established by the Office of the CEO.
STPP awards vary depending on actual performance against planned Operating
Income and Division objectives. Target awards are earned when planned
objectives are achieved. If Operating Income and Division performance
objectives are exceeded, then awards up to the maximum may be earned.
Conversely, in poor performance years, STPP payouts will be greatly reduced
or eliminated.
STPP PLAN PARAMETERS:
o The Corporate portion makes up a minimum of 80% of the STPP payout,
while the Division portion comprises no more than 20% of the STPP
payout.
o For any payout to occur on the Corporate portion of the STPP, the
current year's actual Operating Income must be greater than 25% of the
prior year's reported Operating Income (the "threshold"), and in no case
be less than $0. The Office of the CEO retains discretion on payouts of
the Division performance portion of the STPP.
- 4 -
AMD EXECUTIVE BONUS PLAN
================================================================================
A. STPP CORPORATE PERFORMANCE CALCULATION:
First a target multiplier (ranging from 0 to 2) is calculated based on
actual Operating Income against planned Operating Income.
Then the actual STPP bonus amount for the Corporate portion of the
plan is calculated as follows:
Target Multiplier x Target % x Base Salary = STPP Corporate Bonus Award
Awards for the Corporate portion of the STPP are earned as follows:
o When actual Operating Income is equal to planned Operating Income,
the target award is generated.
o When actual Operating Income is 125% or more than planned Operating
Income, the maximum award is generated.
o When actual Operating Income is less than the threshold (or $0), no
bonus is generated.
The annual STPP threshold, Operating Income goal, and target multiplier
formulas are generated and communicated to the participants each year.
B. STPP DIVISION PERFORMANCE CALCULATION
The Division performance objectives are determined annually by the
appropriate member of the Office of the CEO. The target and maximum
payout amounts for the Division performance portion will not exceed 20%
of the total STPP bonus.
Specifics of the Division portion are communicated to participants each
year, along with the objectives for the Corporate portion of the STPP.
- 5 -
AMD EXECUTIVE BONUS PLAN
================================================================================
IV. LONG-TERM PERFORMANCE PLAN (LTPP)
The LTPP has a target bonus of 30% of base salary and a maximum
opportunity of 60% for all participants. It is based on sustained
Corporate performance on both financial and sales growth measures relative
to AMD's competitive marketplace over a rolling three-year period.
The actual LTPP bonus as a percent of salary is the product of two
multipliers (the Financial Performance Multiplier and the Sales
Performance Multiplier) times the 30% target payout. The multipliers are
derived from a Financial Performance Delta and a Sales Performance Delta,
both representing comparisons against the external marketplace. Their
derivations are described as follows:
A. Financial Performance Delta is the difference between AMD's Return
on Equity, ROE (AMD), over a three-year period and the three-year
average Return on Equity for the Standard and Poor's 500, ROE (S&P),
for the same period.
The Financial Performance Delta is calculated as follows:
3-Year ROE (AMD) - 3-Year ROE (S&P) = Financial Performance Delta
Three-year ROE (AMD) is calculated by dividing AMD's total Net Income
(N.I.) earned over the three-year period (Year 1 through Year 3) by the
sum of AMD's average annual Shareholders' Equity (S.E.) over the same
period. Average annual S.E. is the simple average of the year-beginning
and year-ending S.E.
Three-year ROE (S&P) is calculated by averaging ROE reported for the S&P
500 for the period (Year 1 through Year 3):
3-Year ROE (S&P) = ROE Year 1 + ROE Year 2 + ROE Year 3
------------------------------------
3
- 6 -
AMD EXECUTIVE BONUS PLAN
================================================================================
The Financial Performance Multiplier is derived from the equations shown
below.
B. Sales Performance Delta is the difference between AMD's three-year sales
growth and the three-year semiconductor industry sales growth, as published
by Worldwide Semiconductor Trade Statistics (WSTS). Three-year Sales Growth
for both AMD and the semiconductor industry is determined as follows:
3-Year Sales Growth = Year 3 Sales - Year 0 Sales x 100
---------------------------
Year 0 Sales
The percentage point difference (Sales Performance Delta) between AMD Sales
Growth and WSTS Sales Growth is then computed.
When the Delta is known, the Sales Performance Multiplier is then
determined using the following equations.
C. The Total LTPP Bonus as a percent of salary is calculated as follows:
Financial Performance Multiplier x Sales Performance Multiplier
x Target Percent = LTPP Bonus as a Percent of Salary
- 7 -
AMD EXECUTIVE BONUS PLAN
================================================================================
V. TIMING OF PAYOUTS
All awards earned under the STPP and LTPP are paid out by the end of Q1,
following the close of the fiscal year.
VI. EBP ADMINISTRATION
o For the STPP, individuals who participate for less than the full plan
year (fiscal year) have their awards prorated to reflect their actual
participation period. For the LTPP, executives with less than one year
of participation are ineligible to receive an award. During subsequent
fiscal years, LTPP awards are prorated based on the actual number of
fiscal months in the plan relative to 36 months of participation,
subject to the provision below.
o Participants must be full-time, active employees at the time of the
bonus distribution to qualify for a bonus award. In case of retirement,
death, or disability, award amounts are prorated for the fiscal year
only if participants were on active employment status for less than six
months. If participants were on active status for six months or more,
they receive the payout for the whole year.
o The EBP is funded by no more than 3 percent of reported Operating
Income. If the calculated EBP payouts exceed that figure, awards are
adjusted downward to stay within this funding limit.
o There is no vested entitlement to any bonuses as described above.
Payment of any bonuses are made at the sole discretion of the Office of
the CEO.
o AMD reserves the right to modify or terminate the plan or participation
of any individual at its sole discretion.
- 8 -
AMD EXECUTIVE BONUS PLAN
================================================================================
VII. FINANCIAL TERMS EXPLAINED
o Reported Operating Income is total Operating Income as reported on
external financial statements.
o Return on Equity (ROE) is calculated by dividing Net Income for the
period by average Shareholders' Equity (i.e., the average of the fiscal
year's beginning and ending Shareholders' Equity). For the purposes of
the LTPP, ROE for AMD will be calculated over a three-year period as
described in Section IV. A.
"Net Income" is income after all expenses, including those not shown on
the internal (product line) P&L. Expenses shown on the P&L are operating
expenses (the costs of operating the business), interest expenses (the
costs of financing the business), and income taxes. Besides these P&L
expenses, profit sharing, bonus accruals, and foreign exchange gain/loss
expenses are included in the calculation of Net Income. Thus, reported
Net Income is income that is available to shareholders, which the
company can pay out in dividends or reinvest on their behalf. The
denominator, Shareholder Equity, is the book value of the shareholders'
investment in the company.
o The Standard and Poor's 500 (S&P 500) is a composite of 500 companies
chosen by Standard and Poor's Corporation because they tend to be
leaders in important industries within the U.S. economy. It consists of
400 industrial, 40 financial, 40 public utilities, and 20 transportation
companies. In addition to being used to measure AMD's Financial
performance for the LTPP, the S&P 500 is the comparator group used in
analyzing AMD's performance in the annual report and proxy statement.
o Worldwide Semiconductor Trade Statistics (WSTS), Inc. collects,
consolidates and publishes data (such as shipments and bookings) on a
monthly basis from the vast majority of semiconductor companies
worldwide. WSTS data are widely accepted benchmarks for performance
throughout the industry. The data used for EBP purposes are worldwide
semiconductor sales figures.
- 9 -