SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
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COMMISSION ONLY (AS PERMITTED BY
[X] Definitive Proxy Statement RULE 14A-6(E)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
Advanced Micro Devices, Inc.
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(Name of Registrant as Specified In Its Charter)
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Notes:
ADVANCED MICRO DEVICES, INC. [LOGO OF ADVANCED
ONE AMD PLACE MICRO DEVICES, INC.
P.O. BOX 3453 APPEARS HERE]
SUNNYVALE, CALIFORNIA 94088-3453
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TUESDAY, MAY 9, 1995
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The Annual Meeting of Stockholders of Advanced Micro Devices, Inc., will be
held at the St. Regis Hotel, 2 East 55th Street, New York, New York 10022, on
May 9, 1995, at 10:00 AM for the following purposes:
1. To elect eight directors.
2. To ratify the appointment of Ernst & Young LLP as independent auditors
for the Corporation for the current year.
3. To consider and act on a stockholder proposal concerning the Nominating
Committee of the Board of Directors, as set forth in the proxy
statement, if such proposal is properly brought before the meeting.
4. To transact such other business as may properly come before the meeting.
Only stockholders of record at the close of business on March 10, 1995, are
entitled to vote at this meeting and any adjournment or postponement thereof. A
list of such stockholders is kept at the offices of the Corporation's transfer
agent, The First National Bank of Boston, BancBoston Trust Company of New York,
One Exchange Plaza, 55 Broadway, 3rd Floor, New York, New York. The meeting
will be open to stockholders of record, proxyholders, and others by invitation
only. Beneficial owners of shares held by a broker or nominee must present
proof of such ownership to attend the meeting.
By Order of the Board of Directors,
Thomas M. McCoy
Secretary
Sunnyvale, California
March 31, 1995
PLEASE USE THE ENCLOSED STAMPED ENVELOPE TO RETURN YOUR PROXY. RETURNING YOUR
PROXY WILL NOT PREVENT YOU FROM VOTING IN PERSON AT THE ANNUAL MEETING. YOUR
PROMPT RESPONSE WILL HELP YOUR COMPANY ASSURE A QUORUM AND AVOID ADDITIONAL
EXPENSE FOR PROXY SOLICITATION.
ADVANCED MICRO DEVICES, INC.
ONE AMD PLACE
P.O. BOX 3453
SUNNYVALE, CALIFORNIA 94088-3453
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PROXY STATEMENT
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ANNUAL MEETING OF STOCKHOLDERS
MAY 9, 1995
The enclosed proxy is solicited on behalf of the Board of Directors of
Advanced Micro Devices, Inc. (the "Corporation" or "AMD"), a Delaware
corporation, for use at the Annual Meeting of Stockholders to be held at 10:00
AM at the St. Regis Hotel, 2 East 55th Street, New York, New York 10022, on
May 9, 1995, and at any adjournment or postponement thereof. Only holders of
the Corporation's Common Stock of record on March 10, 1995, will be entitled to
vote. Holders of Common Stock are entitled to one vote for each share held.
There is no cumulative voting. At the close of business on the record date,
there were approximately 97,621,755 shares of the Corporation's Common Stock
outstanding.
The presence in person or by proxy of a majority of the shares entitled to
vote is necessary to constitute a quorum at the Annual Meeting of Stockholders.
Abstentions and broker non-votes will be counted for purposes of determining
the presence or absence of a quorum. "Broker non-votes" are shares held by
brokers or nominees which are present in person or represented by proxy, but
which are not voted on a particular matter, because under applicable rules of
the New York Stock Exchange, the broker cannot vote on the matter in the
absence of instructions from the beneficial owner. The effect of abstentions
and broker non-votes on the calculation of the required vote on specific
proposals to be brought before the Annual Meeting of Stockholders is discussed
under each proposal, where applicable.
Any person giving a proxy in the form accompanying this Proxy Statement has
the power to revoke it prior to its exercise. A proxy may be revoked by filing
an instrument revoking it or a duly executed proxy bearing a later date with
the Secretary of the Corporation prior to the meeting, or by attending the
meeting and electing to vote in person.
The shares represented by a duly executed and unrevoked proxy in the form
accompanying this Proxy Statement will be voted in accordance with the
specifications contained therein. In the absence of specifications, a proxy
will be voted FOR the nominees for director named herein, FOR the ratification
of auditors, AGAINST the stockholder proposal set forth in the Notice of Annual
Meeting of Stockholders which is properly presented by the proponent or the
proponent's qualified representative for action at the meeting, and according
to the discretion of the proxyholders on any other matters that properly come
before the meeting.
This Proxy Statement and the accompanying proxy were first sent to
stockholders on approximately March 31, 1995. The cost of this solicitation is
being borne by the Corporation. The Corporation may reimburse brokerage firms
and other persons representing beneficial owners of shares for their expenses
in forwarding solicitation material to such beneficial owners. Proxies may also
be solicited personally or by telephone, facsimile or telegram, by certain of
the Corporation's directors and officers, without additional compensation. The
Corporation has retained Georgeson & Company, Inc., professional proxy
solicitors, to assist in the soliciting of proxies. Employees of the soliciting
firm may solicit proxies personally, by telephone, facsimile and telegram, and
by any other means of communication. The Corporation expects to pay the
solicitor a fee of $7,000 plus normal out-of-pocket expenses for its assistance
in soliciting proxies, for an anticipated total cost of approximately $25,000.
1
PRINCIPAL STOCKHOLDERS
The following table shows the name, address, number of shares held, and
percentage of shares held as of February 27, 1995, by each person or entity
known to the Corporation to be the beneficial owner of more than five percent
(5%) of the Corporation's Common Stock.
PERCENT
NAME AND ADDRESS AMOUNT AND NATURE OF OWNERSHIP(/1/) OF CLASS(/2/)
---------------- ----------------------------------- -------------
FMR Corp. 13,914,476(/3/) (sole 14.5%(/4/)
82 Devonshire Street dispositive power as to
Boston, MA 02109 13,913,976 shares; sole voting
power as to 403,816 of such
shares and shared voting power
as to 500 of such shares)
The Capital Group Companies, Inc. 11,894,660(/5/) (sole 12.4%(/6/)
333 South Hope St. dispositive power as to all
Los Angeles, CA 90071 shares; sole voting power as
to 3,145,250 of such shares)
Wellington Management Company 8,342,447(/7/) (shared 8.7%(/8/)
75 State Street dispositive power as to all
Boston, MA 02109 shares; shared voting power as
to 688,560 of such shares)
Vanguard/Windsor Fund, Inc. 7,010,400(/7/) (shared 7.31%(/8/)
P.O. Box 2600 dispositive power and sole
Valley Forge, PA 19482 voting power)
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(1) The information contained herein is based on information reported by such
entities as of December 31, 1994, in their most recent 13G Schedule filed
with the SEC under the Securities Exchange Act of 1934, as amended.
(2) On February 10, 1995, the Corporation called its outstanding Depositary
Convertible Exchangeable Preferred Shares for redemption on March 13,
1995, after the record date for the Annual Meeting of Stockholders. The
Depositary Convertible Exchangeable Preferred Shares are convertible into
Common Stock on or before the redemption date. Except for shares of Common
Stock issuable upon conversion of Depositary Convertible Exchangeable
Preferred Shares which may be beneficially owned by persons referred to in
the table above, the percentages shown in the table have been calculated
without respect to shares of Common Stock which may be issued upon
conversion after February 27, 1995.
(3) Information obtained from Amendment No. 1 to the joint statement on
Schedule 13G filed February 9, 1995, by FMR Corp. and Edward C. Johnson
3d, Chairman of FMR Corp. The number of shares reported as beneficially
owned by FMR Corp. and Mr. Johnson includes 19,870 shares of Common Stock
issuable upon conversion of 10,000 Depositary Convertible Exchangeable
Preferred Shares and 13,333,760 shares beneficially owned by Fidelity
Management & Research Company, a registered investment adviser and a
wholly owned subsidiary of FMR Corp., as a result of acting as investment
adviser to several investment companies (the "Funds") one of which,
Fidelity Magellan Fund, owns 9,522,000 shares. The principal business
office of Mr. Johnson, Fidelity Management & Research Company and Fidelity
Magellan Fund is 82 Devonshire Street, Boston, Massachusetts, 02109.
Edward C. Johnson 3d, FMR Corp. (through its control of Fidelity
Management & Research Company) and the Funds each has sole power to
dispose of the 13,333,760 shares owned by the Funds. The power to vote
these shares resides with the Funds' Boards of Trustees. Fidelity
Management & Research Company carries out the voting of these shares under
written guidelines established by the Funds' Boards of Trustees. Fidelity
Management Trust Company, a wholly owned subsidiary of FMR Corp., is the
beneficial owner of 513,416 shares as a result of serving as investment
manager of institutional accounts. Edward C. Johnson 3d and FMR Corp.
(through its control of Fidelity Management Trust Company) has sole
dispositive power over 513,416 shares and sole power to vote or to direct
the voting of 336,516 shares, and no power to vote or direct the voting of
176,900 shares owned by the institutional accounts.
(4) The aggregate percentage of outstanding shares beneficially owned by FMR
Corp. includes 13.9% beneficially owned by Fidelity Management & Research
Company. The percentage beneficially owned by Fidelity Management &
Research Company includes 10% beneficially owned by Fidelity Magellan
Fund.
(5) Information obtained from Amendment No. 5 to the joint statement on
Schedule 13G filed February 6, 1995, by The Capital Group Companies, Inc.
and Capital Research and Management Co., a registered investment adviser
and a wholly owned subsidiary of The Capital Group Companies, Inc. The
number of shares shown for The Capital Group Companies, Inc. includes
6,645,000 shares beneficially owned by Capital Research and Management Co.
which reports that it has sole dispositive power as to such shares. The
Capital Group Companies, Inc. is deemed to be the beneficial owner with
respect to shares held by various institutional accounts over which
various operating subsidiaries of The Capital Group Companies, Inc.,
including Capital Research and Management Co., exercise investment
discretion. The principal business office of Capital Research and
Management Co. is 333 South Hope Street, Los Angeles, California 90071.
(6) The aggregate percentage of outstanding shares beneficially owned by The
Capital Group Companies, Inc. includes 6.93% beneficially owned by Capital
Research and Management Co.
2
(7) Information obtained from Amendment No. 1 to the statement on Schedule 13G
filed January 24, 1995 by Wellington Management Company and from Amendment
No. 1 to the statement on Schedule 13G filed on February 10, 1995 by
Vanguard/Winsdor Fund, an investment advisory client of Wellington
Management Company. The number of shares shown for Wellington Management
Company includes 7,010,400 shares beneficially owned by Vanguard/Windsor
Fund, Inc.
(8) The aggregate percentage of outstanding shares beneficially owned by
Wellington Management Company includes 7.31% beneficially owned by
Vanguard/Windsor Fund, Inc.
PROPOSAL NO. 1--ELECTION OF DIRECTORS
As set by the Board of Directors pursuant to the Bylaws of the Corporation,
the authorized number of directors to be elected is eight. Directors will hold
office from the time of their election until the next Annual Meeting of
Stockholders and until successors are elected and qualified. The eight
nominees receiving the highest number of affirmative votes of the shares
present in person or represented by proxy and entitled to vote for them, shall
be elected as directors. Only votes cast FOR a nominee will be counted in
determining whether that nominee has been elected as director. Stockholders
may withhold authority from the proxyholders to vote for the entire slate as
nominated or, by writing the name of an individual nominee in the space
provided on the proxy card, withhold the authority to vote for any individual
nominee. Instructions on the accompanying proxy card to withhold authority to
vote for one or more of the nominees will result in such nominees receiving
fewer votes.
The following eight persons have been selected by the Nominating Committee
of the Board of Directors and have been accepted by the Board as nominees for
election to the Board: W. J. Sanders III, Dr. Friedrich Baur, Charles M.
Blalack, Dr. R. Gene Brown, Anthony B. Holbrook, Richard Previte,Joe L. Roby,
and Dr. Leonard Silverman. All of the nominees are incumbent directors. If any
of the nominees should decline or be unable to act as a director, the shares
may be voted for such substitute nominees as the proxyholders may in their
discretion determine. Shares represented by the enclosed proxy will be voted
FOR the election of these nominees, unless authority to vote for one or more
nominees is withheld.
The experience and background of each of the nominees are set forth below.
W. J. Sanders III--Mr. Sanders is Chairman of the Board and Chief Executive
Officer of Advanced Micro Devices, Inc. Mr. Sanders co-founded the Corporation
in 1969. He is also an Advisory Director of Donaldson, Lufkin & Jenrette, Inc.
Dr. Friedrich Baur--Dr. Baur has been President and Managing Partner of MST
Beteiligungs und Unternehmensberatungs GmbH, a German consulting firm, since
1990. Beginning in 1953, Dr. Baur held a variety of positions of increasing
responsibility with Siemens AG, retiring in 1982 as Executive Vice President
and a Managing Director. He also represented Siemens on the Board of Directors
of Advanced Micro Devices, Inc. from 1978 until 1982. From 1982 to 1990, Dr.
Baur was Chairman of the Board of Zahnradfabrik Friedrichshafen AG, a publicly
traded German company.
Charles M. Blalack--Mr. Blalack is Chairman of the Board and Chief Executive
Officer of Blalack and Company, an investment banking firm and a member of the
NASD. From 1970 until 1991, Mr. Blalack was Chief Executive Officer of
Blalack-Loop, Inc., also an investment banking firm and member of the NASD.
Prior to that, he was founder, chairman and chief executive officer of BW &
Associates, an investment banking firm and member of the NYSE. Mr. Blalack had
been a member of the Board of Directors of Monolithic Memories, Inc. until it
was acquired by the Corporation in 1987. Mr. Blalack is currently a member of
the Board of Directors of GrandCare, Inc.
Dr. R. Gene Brown--Dr. Brown is a private investor and management
consultant. Dr. Brown is also a senior advisor of Putnam, Hayes & Bartlett,
Inc., an economic consulting firm. From 1961 to 1968, Dr. Brown was a full-
time professor in the graduate schools of business at Harvard, then Stanford
University. From 1968 to 1974, Dr. Brown was Vice President of Corporate
Development for Syntex Corporation, and from 1974 to 1976, President of
Berkeley BioEngineering.
3
Anthony B. Holbrook--Mr. Holbrook is Vice Chairman of the Board of Directors.
From 1990 until August 27, 1994, Mr. Holbrook was the Chief Technical Officer
of the Corporation. Prior to his election as Vice Chairman in 1990, Mr.
Holbrook was President from 1986 to 1990 and Chief Operating Officer from 1986
to 1989. Mr. Holbrook was Executive Vice President and Chief Operating Officer
from 1982 to 1986. Mr. Holbrook currently advises the Corporation on various
matters.
Richard Previte--Mr. Previte is President and Chief Operating Officer of
Advanced Micro Devices, Inc. Prior to his election as President in 1990, Mr.
Previte served as Executive Vice President and Chief Operating Officer from
1989 to 1990, had been Chief Financial Officer and Treasurer of the Corporation
from shortly after its founding in 1969 until 1989, and had been Chief
Administrative Officer and Secretary of the Corporation from 1986 to 1989.
Joe L. Roby--Mr. Roby is a Managing Director and Chairman of the Banking
Group of Donaldson, Lufkin & Jenrette Securities Corporation. Mr. Roby is also
a Managing Director and member of the Board of Directors of Donaldson, Lufkin &
Jenrette, Inc. Donaldson, Lufkin & Jenrette Securities Corporation is a
securities brokerage and investment banking firm, and is a wholly owned
subsidiary of Donaldson, Lufkin & Jenrette, Inc., which is a wholly owned
subsidiary of The Equitable Companies Incorporated ("The Equitable"). The
Equitable is a financial institution providing insurance and other financial
services. In addition, Mr. Roby is a member of the Board of Directors of Sybron
International Corporation.
Dr. Leonard Silverman--Dr. Silverman is Dean of the School of Engineering of
the University of Southern California, and has held that position since 1984.
He was elected to the National Academy of Engineering in 1988, and is a Fellow
of the Institute of Electrical and Electronic Engineers. Dr. Silverman also
served on the Board of Directors of Tandon Corporation from 1988 to 1993.
4
STOCK OWNERSHIP TABLE
The table below indicates the number of shares of the Corporation's Common
Stock beneficially owned as of February 27, 1995, by current directors, the
nominees recommended by the Nominating Committee and nominated by the Board of
Directors for election as directors, by each of the executive officers listed
in the Summary Compensation Table, and by all directors and executive officers
as a group. Except as otherwise indicated, each person has sole investment and
voting powers with respect to the shares shown as beneficially owned.
Ownership information is based upon information furnished by the respective
individuals.
DIRECTORS, NOMINEES AND NAMED EXECUTIVE OFFICERS
COMMON STOCK BENEFICIALLY
DIRECTOR OWNED AS PERCENT
NAME AGE SINCE OF FEBRUARY 27, 1995(/1/) OF CLASS(/2/)
---- --- -------- ------------------------- -------------
W. J. Sanders III....... 58 1969 1,121,411(/3/) 1.10%
Dr. Friedrich Baur...... 67 1994(/4/) 0 N/A
Charles M. Blalack...... 68 1989 11,800(/5/) *
Dr. R. Gene Brown....... 62 1969 43,185(/6/) *
Anthony B. Holbrook..... 55 1987 398,608(/7/) *
Richard Previte......... 60 1990 370,693(/8/) *
Joe L. Roby............. 55 1991 24,600(/9/) *
Dr. Leonard Silverman... 55 1994 0 N/A
Stephen J.
Zelencik(/10/)......... 60 N/A 109,602(/11/) *
Eugene D. Conner(/12/).. 51 N/A 269,299(/13/) *
Marvin D. Burkett(/14/). 52 N/A 223,784(/15/) *
All directors and
executive officers as a
group(/13/)............ -- N/A 2,741,568(/16/) 2.69%
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* Less than one percent (1%)
(1) Some of the individuals listed herein may share voting power with regard
to the shares listed herein with their spouses.
(2) On February 10, 1995, the Corporation called its outstanding Depositary
Convertible Exchangeable Preferred Shares for redemption on March 13,
1995, after the record date for the Annual Meeting of Stockholders. The
Depositary Convertible Exchangeable Preferred Shares are convertible into
Common Stock on or before the redemption date. Except for 21,860 shares
of Common Stock issuable upon conversion of 11,000 Depositary Convertible
Exchangeable Preferred Shares held by directors and executive officers as
a group, the percentages shown in the table have been calculated without
respect to shares of Common Stock which may be issued upon conversion
after February 27, 1995.
(3) Includes 800,000 shares subject to options that are exercisable on
February 27, 1995, or become exercisable within sixty (60) days
thereafter. Excludes any shares which may be owned by Mr. Sanders' wife,
as to which Mr. Sanders disclaims beneficial ownership.
(4) Dr. Baur was previously a member of the Board of Directors, from 1978
until 1982.
(5) Includes 11,800 shares subject to options that are exercisable on
February 27, 1995, or become exercisable within sixty (60) days
thereafter.
(6) Includes 11,800 shares subject to options that are exercisable on
February 27, 1995, or become exercisable within sixty (60) days
thereafter, and 21,860 shares issuable on conversion of Depositary
Convertible Exchangeable Preferred Shares. Dr. Brown holds 11,000 shares
of the Corporation's Depositary Convertible Exchangeable Preferred
Shares, amounting to less than one percent (1%) of the total number of
such shares outstanding.
(7) Includes 322,862 shares subject to options that are exercisable on
February 27, 1995, or become exercisable within sixty (60) days
thereafter.
(8) Includes 212,400 shares subject to options that are exercisable on
February 27, 1995, or become exercisable within sixty (60) days
thereafter.
(9) Includes 11,800 shares subject to options that are exercisable on
February 27, 1995, or become exercisable within sixty (60) days
thereafter.
(10) Mr. Zelencik is Senior Vice President and Chief Marketing Executive of
Advanced Micro Devices, Inc.
(11) Includes 73,125 shares subject to options that are exercisable on
February 27, 1995, or become exercisable within sixty (60) days
thereafter.
(12) Mr. Conner is Senior Vice President, Operations, of Advanced Micro
Devices, Inc.
(13) Includes 259,264 shares subject to options that are exercisable on
February 27, 1995, or become exercisable within sixty (60) days
thereafter.
(14) Mr. Burkett is Senior Vice President, Chief Financial and Administrative
Officer and Treasurer of Advanced Micro Devices, Inc.
(15) Includes 223,784 shares subject to options that are exercisable on
February 27, 1995, or become exercisable within sixty (60) days
thereafter.
(16) Includes 2,095,295 shares subject to options that are exercisable on
February 27, 1995, or become exercisable within sixty (60) days
thereafter, and 21,860 shares issuable on conversion of Depositary
Convertible Exchangeable Preferred Shares. All directors and executive
officers as a group hold 11,000 Depositary Convertible Exchangeable
Preferred Shares, amounting to less than one percent (1%) of the total
number of such shares outstanding. Excludes 13,984 shares beneficially
owned by Larry Carter, who resigned as Vice President and Controller on
January 20, 1995.
5
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors held five regularly scheduled or special meetings
during the fiscal year ended December 25, 1994 (the "Fiscal Year"). Each
current member of the Board of Directors nominated for election attended at
least 75% of the aggregate of the total number of meetings of the Board of
Directors and of the committees on which he served during the Fiscal Year. The
Corporation has standing Audit, Nominating and Compensation Committees of the
Board of Directors.
Audit Committee
The Audit Committee, which during the Fiscal Year consisted of Dr. R. Gene
Brown as Chairman, Mr. Joe L. Roby and Mr. Charles M. Blalack, all non-employee
directors, held three meetings during the Fiscal Year. Members are appointed
annually by the full Board. The functions of the Audit Committee include the
review of the Corporation's accounting policies, internal controls, financial
reporting practices, and the services and fees of independent auditors. In
connection with these reviews it meets alone with appropriate Corporation
financial and legal personnel and with the independent auditors who have free
access to the Committee at any time. The Corporation's Internal Control
Department, whose director reports directly to the Chairman of the Audit
Committee, serves a staff function for the Committee. The Committee recommends
to the Board for its approval and for ratification by the stockholders the
engagement of the independent auditors to serve the following year in examining
the accounts of the Corporation. The Committee also annually reviews the
independence of the independent auditors as a factor in these recommendations.
Nominating Committee
The Nominating Committee is comprised of Mr. W. J. Sanders III as Chairman,
Mr. Joe L. Roby, Mr. Charles M. Blalack, and Dr. R. Gene Brown. This Committee
met once during 1994 to consider nominees for the 1994 annual meeting.
Stockholders who wish to submit names of prospective nominees for consideration
by the Nominating Committee should do so in writing to the Secretary of the
Corporation in accordance with the Bylaws of the Corporation.
Compensation Committee
The Compensation Committee is currently comprised of Mr. Charles M. Blalack
as Chairman, Dr. R. Gene Brown and Mr. Joe L. Roby. Members are appointed
annually by the full Board. The Committee reviews, in consultation with
management, existing and proposed compensation plans, programs and arrangements
both for officers of the Corporation and for certain non-officer employees. In
consultation with the Committee, the Chief Executive Officer reviews and
determines salaries for other executive officers. The Compensation Committee,
upon recommendations of management, also grants stock options and stock
appreciation rights and awards restricted stock to key employees, including
officers and members of the Board who are employees of the Corporation. During
1994, the Compensation Committee met eight times. The Board has also delegated
to Mr. Sanders, acting as the Employee Stock Committee of the Board the
authority to grant stock options and stock appreciation rights and award
restricted stock in amounts up to 25,000 shares per employee per year and
otherwise to administer the plans with respect to employees who are not also
members of the Board or officers. The Employee Stock Committee took action
twenty-four times during the Fiscal Year.
Directors' Fees and Expenses
Directors who are not employees of the Corporation individually receive an
annual fee of $20,000, a fee of $1,000 for attendance at each regular or
special nontelephonic meeting of the Board, and a fee of $500 for attendance at
each nontelephonic meeting of each committee (other than the Nominating
Committee) on which they serve. In addition, the Chairman of the Audit
Committee receives an annual fee of $20,000 for services in that capacity, and
the Chairman of the Compensation Committee receives an annual fee of $4,000 for
services in that capacity. No additional amounts are paid for special
assignments. The Corporation also reimburses reasonable out-of-pocket expenses
incurred by Directors performing services for the Corporation, including travel
expenses of their spouses.
6
Pursuant to a nondiscretionary formula set forth in the 1992 Stock Incentive
Plan, non-employee Directors also receive stock options covering 12,000 shares
on their initial election to the Board (the "First Option"), and automatically
receive supplemental options covering 3,000 shares on each subsequent re-
election (the "Annual Option"). The First Option vests in increments of 4,800,
3,600, 2,400 and 1,200 on July 15 of the first, second, third and fourth
calendar years following election. Each Annual Option vests in increments of
1,000 shares each on July 15 of the second, third and fourth calendar years
following re-election. Each such option is granted with an exercise price at
fair market value on the date of grant. These options expire on the earlier of
ten years from the grant date or twelve months following termination of the
Director's service on the Board.
Any non-employee Director may elect to defer receipt of all or a portion of
his annual fees and meeting fees, but not less than $5,000. Deferred amounts
plus interest are credited to an account for recordkeeping purposes and are
payable in a lump sum cash payment or in installments over a period of years,
as elected by the Director. Except in the case of the Director's death or
disability, payments commence upon the latest of the Director's tenth
anniversary of his first deferral, age 55, or upon retirement from the Board,
but in no event later than age 70. The aggregate amount of retirement payments
equals the Director's deferred fees plus the accumulation of interest. In the
event of the Director's death, his beneficiary will receive the value of his
account plus, in certain cases, a supplemental death benefit of up to ten times
the average annual amount of his deferred fees. During 1994, Dr. Brown deferred
fees in the amount of $20,000 pursuant to this program. In addition, Dr. Brown
received the use of an automobile provided by the Corporation, a value taxable
to him at $19,069 in lieu of his annual fee for acting as Chairman of the Audit
Committee.
Notwithstanding anything to the contrary set forth in any of the
Corporation's previous filings under the Securities Act of 1933, as amended, or
the Securities Exchange Act of 1934, as amended, that might incorporate future
filings, including this Proxy Statement, in whole or in part, the following
report and the Performance Graph on page 16 shall not be incorporated by
reference into any such filings, nor shall they be deemed to be soliciting
material or deemed filed with the Securities and Exchange Commission under the
Securities Act of 1933, as amended, or under the Securities Exchange Act of
1934, as amended.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee (the "Committee") sets the compensation of the
Chief Executive Officer, reviews the design, administration and effectiveness
of compensation programs for other key executives, grants stock options and
stock appreciation rights, and awards restricted stock to executives.
Compensation Philosophy and Policies
The Committee believes that long-term corporate success, defined as sustained
profitable growth, is best achieved in an environment in which employees have
the opportunity to be innovative, and are rewarded appropriately for that
innovation. In order to provide a direct link between corporate performance and
compensation which will attract and retain top caliber employees, the
Committee's compensation philosophy is to provide total compensation
opportunities that are highly competitive with the pay practices of other
industry-leading companies. This is accomplished through a combination of cash
incentives and equity incentives which are granted to a broad range of the
Corporation's employees. This closely aligns employee interests with those of
the Corporation's stockholders. This alignment is evident in the executive
compensation program, which is designed to:
. Strengthen the relationship between pay and stockholder value by
focusing on variable compensation, such as annual and long-term
performance incentives, and executive ownership of shares, using stock
options and other programs.
. Enhance the Corporation's ability to attract, encourage and retain
exceptionally knowledgeable and experienced executives.
. Balance short-term and long-term business goals.
7
Decisions concerning specific 1994 compensation elements for individual
executive officers, including the Chief Executive Officer, were made within
this broad framework and in light of each executive officer's level of
responsibility, performance, and competitive pay position. In all cases, the
Committee's specific decisions involving 1994 executive officer compensation
were ultimately based upon the Committee's judgment regarding the individual
executive officer's performance, whether each particular payment or award would
provide an appropriate reward and incentive for his contribution to the
continuation of the Corporation's long-term profit performance and whether such
compensation decisions are in the best interests of the stockholders.
Base Salary
In recognition of Mr. Sanders' service and contribution to the continued
success of the Corporation and to ensure his continued service as Chairman and
Chief Executive Officer, the Corporation entered into an employment agreement
with him effective July 1, 1991, which continues through December 31, 1996. Mr.
Sanders' agreement provides that his base salary will be reviewed annually by
the Board of Directors or its delegate (currently the Committee), and increased
if performance and competitive practices so warrant. In reviewing the Chief
Executive Officer's base salary the Committee considers in its discretion such
factors as individual performance (leadership, industry activities and
strategic positioning), corporate performance (sales growth, profitability,
return on equity, and maintaining a competitive advantage), and competitive pay
practices. The Committee balances the foregoing factors and does not assign
relative priority or weight to any one factor.
In 1994, the Committee approved a 2.5% increase to Mr. Sanders' base salary
for a total base salary of $952,225. The Committee decided to limit the
increase in his base salary to the cost of living increase permitted under
Section 162(m) of the Internal Revenue Code (the "Code") as discussed below.
In consultation with members of the Committee, the Chief Executive Officer
reviews annually every other executive officer's base salary, including those
officers who are also directors. When reviewing base salaries, individual and
corporate performance, levels of responsibility and competitive pay practices
are considered. Such factors vary from individual to individual and do not have
any relative weight.
In analyzing competitive pay practices, the Committee has reviewed
compensation practices of certain high technology companies with annual
revenues generally in excess of $1 billion. Most of these companies are
included in the S & P High Technology Composite Index used in the performance
graph appearing in the Corporation's Proxy Statement. The Corporation endeavors
to attract and retain top caliber employees, and therefore sets base salary at
or above the median for this group of companies.
Annual Incentives
Annual incentive opportunities allow the Corporation to communicate key
corporate goals to all employees and reward employees for achieving those goals
each fiscal year. As one example of these incentives, the Corporation allocates
up to ten percent of operating profits to a profit sharing program in which all
domestic and U.S. expatriate employees participate. A portion of this
allocation is paid in cash and a portion is contributed to a tax qualified
deferred retirement plan. In 1994 the Corporation achieved record operating
profits and accordingly the Corporation made a record distribution of profit
sharing to employees.
Mr. Sanders' employment agreement provides for a formula-based annual
incentive bonus payable in an amount equal to 0.6% of the annual adjusted
operating profits of the Corporation, not to exceed 200% of Mr. Sanders' annual
base salary. Any amount exceeding the maximum annual award is added to the
award determined for any of the next three fiscal years and then lapses, with
any carried forward amount forfeited at the end of the term of the agreement.
The employment agreement provides that a discretionary bonus may also be
awarded by the Board or its delegate (currently the Committee) for unique
performance achievements
8
which, among other things, include Mr. Sanders' contribution to the
accomplishment of the Corporation's long-range business goals, the success of
various corporate strategies and unique services rendered in connection with
the maintenance of or increase in stockholder value of the Corporation. The
additional discretionary bonus is not capped, nor is it carried forward from
year to year. Pursuant to bonus agreements entered into in 1992, Mr. Previte
and Mr. Holbrook are also eligible for and received annual incentive bonuses
similar to Mr. Sanders' bonus, but based on 0.3% and 0.15% of adjusted
operating profits, respectively.
All senior executives with titles of vice president and above, other than Mr.
Sanders, Mr. Previte and Mr. Holbrook, were eligible for and earned awards
under the Executive Bonus Plan for 1994. The Corporation adopted a revised
Executive Bonus Plan in 1994. All 1994 bonuses were paid under the revised
plan. The plan has a short-term component and a long-term component discussed
below. The amount payable under the short-term component of the Executive Bonus
Plan ranges from 0% to 100% of base salary depending on the executive's level
of responsibility. For 1994, 90% of the targeted bonus under the short-term
component was based on the Corporation's achievement of predetermined operating
income goals beyond a threshold level of operating income. The remaining 10% of
the targeted bonus under the short-term component was based on the executive's
achievement of various group and division goals developed by the executive's
manager. During 1994, all eligible and participating executive officers earned
maximum amounts under the corporate performance portion of the short-term
component. The extent to which executives earned awards under the portion of
the short-term component which is based on the achievement of group or division
goals varied by individual.
Long-Term Incentives
Bonuses under the long-term component of the Executive Bonus Plan were based
on the Corporation's 3-year average return on equity (ROE) relative to that of
the S&P 500 Index, and on the Corporation's 3-year sales growth relative to
that of the semiconductor industry, as published by Worldwide Semiconductor
Trade Statistics (WSTS). In order for an award to be paid under the long-term
component, the Corporation must achieve a threshold level of performance
relative to the S&P 500 and WSTS indexes, which is established by management,
approved by the Committee and reviewed by the Board. The maximum amount payable
under the long-term component is up to 60% of base salary depending on the
executive's level of responsibility. During 1994, all eligible and
participating executives (which does not include Messrs. Sanders, Previte and
Holbrook) earned an award under the long-term component of the Executive Bonus
Plan that was significantly below the maximum due to the Corporation's sales
performance relative to WSTS.
The Committee has the authority to administer and grant stock options to key
employees pursuant to the 1992 Stock Incentive Plan and other stock option
plans, and to award shares of restricted stock to selected employees pursuant
to the 1987 Restricted Stock Award Plan. Options granted generally become
exercisable after continued employment for a period of six months to five
years. Restricted stock awarded generally becomes freely transferable after
continued employment for a period of six months to five years. Restricted stock
awards to employees named in the Summary Compensation Table are performance
based as a means of preserving tax deductibility under Section 162(m) of the
Code as discussed below.
Grants and awards under these stock plans provide an immediate and direct
link to stockholder interests. The Corporation and its stockholders benefit
from the increased employee morale and productivity that the Corporation
believes are associated with these grants and awards, as well as the ability to
retain key employees through the vesting provisions of the grants and awards.
The number of shares subject to option grants or restricted stock awards is
based on the Corporation's business plans, the executive's level of corporate
responsibility, individual performance, historical award data, and competitive
practices of high technology companies with annual revenues generally in excess
of $1 billion and other industry-leading companies. In making these grants and
awards the Committee exercises its discretion and does not assign any relative
weight to one or more of these factors. Further, the Committee generally does
not consider either the number of unrestricted shares, restricted shares or
options the executive holds, or whether an executive has exercised previously
granted options.
9
In 1994, the Committee awarded 60,000 shares of performance based restricted
stock to Mr. Sanders. The restricted stock awarded to Mr. Sanders will vest, if
at all, only upon the achievement of targeted average quarterly stock prices of
the Corporation's Common Stock beginning in the last quarter of 1996. For
example, if the Corporation's average quarterly stock price in the fourth
quarter of 1996 meets or exceeds the target quarterly stock price, then
restrictions on the shares will be lifted. If the quarterly stock price does
not meet or exceed the target, then the restrictions on the shares will be
lifted if the quarterly stock price target is met in any succeeding quarter
through the last quarter of 1998. If none of the quarterly stock price targets
are achieved by the last quarter of 1998, Mr. Sanders will forfeit all the
performance based restricted stock then remaining.
In 1994, the Committee also awarded 120,000 shares of performance based
restricted stock to Mr. Previte. The restricted stock will vest, if at all, at
the rate of 30,000 shares per year only upon the achievement of targeted
average quarterly stock prices of the Corporation's Common Stock beginning in
the first quarter of 1995. For example, if the Corporation's average quarterly
stock price in the first quarter of 1995 meets or exceeds the target quarterly
stock price, then restrictions on 30,000 shares will be lifted. If the
quarterly stock price does not meet or exceed the target, then the restrictions
will be lifted if the target is met in any succeeding quarter. If the targeted
goals are not achieved by the last quarter of 1998, Mr. Previte will forfeit
any remaining shares of restricted stock which have not yet vested.
The terms of the restricted stock awards to Mr. Sanders and Mr. Previte each
provide that if the officer's employment with the Corporation is terminated
before the performance goals are met, he will forfeit any performance based
restricted stock then remaining. If termination of employment is due to the
officer's death or disability, the officer or his qualified representative will
be entitled to receive unrestricted stock if the performance goals are met
within twelve months after the officer's death or disability. The restrictions
on the performance based restricted stock awarded to Messrs. Sanders and
Previte will also be lifted in connection with a change in control of the
Corporation. For more information, please see the discussion in the Proxy
Statement under the heading "Change in Control Arrangements."
The quarterly stock price targets which must be met before the restrictions
on the restricted stock awarded to Messrs. Sanders and Previte will be lifted
were determined by management with the assistance of an independent
compensation consultant and were approved by the Committee. The quarterly stock
price targets were calculated to reflect a 15% increase compounded annually in
the price of the Corporation's Common Stock which equals or exceeds the
historical performance of the S&P 500 Index. Tying the vesting of the
performance based restricted stock to increases in the average quarterly stock
prices of the Corporation's Common Stock, directly links Messrs. Sanders' and
Previte's compensation and the performance of the Corporation's Common Stock.
The awards will provide an incentive paid only if all stockholders benefit
through an increased stock price.
In 1994, the Committee also granted Mr. Sanders and Mr. Previte stock options
to purchase 200,000 shares and 152,500 shares, respectively, of the
Corporation's Common Stock at an exercise price of $26.88 per share which was
equal to the closing sales price of the Common Stock on the New York Stock
Exchange on April 27, 1994, the date of grant. Mr. Sanders' options become
exercisable on January 15, 1997, subject to accelerated vesting on termination
of his employment by the Corporation (other than for theft, misappropriation or
conversion of corporate funds), or if the Corporation constructively terminates
him, or due to his death or disability, as provided in his employment
agreement. For more information, please see the discussion of Mr. Sanders'
employment agreement in the Proxy Statement under the heading "Compensation
Agreements." Mr. Previte's options become exercisable as to 52,500 shares on
July 25, 1995, as to an additional 50,000 shares on July 15, 1996, and as to an
additional 50,000 shares on July 15, 1997. If Mr. Previte's employment is
terminated for any reason other than misconduct, his options will expire twelve
months after the date of termination and will be exercisable only to the extent
the options were exercisable on the date of termination. If Mr. Previte is
terminated for misconduct, the options will terminate immediately. The options
awarded to Messrs. Sanders and Previte are also subject to accelerated vesting
in
10
connection with a change in control of the Corporation and in accordance with
their management continuity agreements. For more information, please see the
discussion in the Proxy Statement under the heading "Change in Control
Arrangements."
In structuring Mr. Sanders' option grant and restricted stock award, the
Committee considered that Mr. Sanders' employment agreement is to expire
December 31, 1996, unless he extends the term to December 31, 1997, by giving
notice on or before October 15, 1996. The Committee believes that, because the
earliest date on which the option to purchase shares will become exercisable is
January 15, 1997 (such exercise date being tied to his continued employment
through January 15, 1997), and the latest date on which the performance based
restricted stock award can vest (if at all) will immediately follow the last
quarter of 1998, the timing of the vesting provisions of the options and the
restricted stock provide an incentive for Mr. Sanders to renew his employment
agreement and continue as the Chief Executive Officer after December 31, 1996.
The Committee believes that this is critical to the Corporation. Mr. Sanders'
leadership is particularly important for the Corporation to implement its long-
range business strategies as it moves toward development of proprietary
products, commitment to building strategic alliances, and expansion of
manufacturing capabilities.
The Committee determined the number of options and shares of performance
based restricted stock to award Mr. Sanders and Mr. Previte after considering
research provided by an independent compensation consultant about the
competitive practices of high technology companies with annual revenues
generally in excess of $1 billion and other industry-leading companies. The
number of shares underlying Messrs. Sanders' and Previte's grants and awards
were among the highest number of shares awarded to similarly situated
executives in these companies.
The Committee believes that the awards to Messrs. Sanders and Previte are in
the best long-term interests of the Corporation and its stockholders. The
Committee's determination to make these awards was based primarily upon an
assessment of the Corporation's overall performance and the Corporation's
future objectives and challenges. In assessing the Corporation's overall
performance, the Committee considered continued increases in the Corporation's
earnings per share and productivity in a period of intensified competition and
protracted litigation. The Committee also considered Mr. Sanders' and Mr.
Previte's strong knowledge of the industry and their unique qualifications in
leading the Corporation to its next stage of growth. No single factor carried
more relative weight than any other factor. The Committee believes that the
long-term value of the Corporation will be enhanced if Messrs. Sanders and
Previte continue to provide the leadership and vision that they have provided
throughout their respective tenures.
Tax Policy
Recently enacted Section 162(m) of the Code limits deductions for certain
executive compensation in excess of $1 million. Certain types of compensation
are deductible only if performance criteria are specified in detail and are
contingent on stockholder approval of the compensation arrangement. The
Corporation has endeavored to structure its compensation plans to achieve
maximum deductibility under Section 162(m) with minimal sacrifices in
flexibility and corporate objectives.
With respect to non-equity compensation arrangements, the Committee has
reviewed the terms of those arrangements most likely to be subject to Section
162(m). The Committee believes that the Corporation can claim full
deductibility of amounts paid under existing executive compensation
arrangements.
With respect to its equity compensation arrangements, the Committee has
structured the stock option and performance based restricted stock arrangements
with Messrs. Sanders and Previte in a manner that ensures the tax deductibility
of such amounts. However, under proposed Section 162(m) regulations, if the
performance based restricted stock awarded to Messrs. Sanders and Previte vests
in connection with a change in control of the Corporation before the
performance goals are met, then the compensation attributable to such awards
may not be deductible by the Corporation. While the Committee will consider
deductibility
11
under Section 162(m) with respect to future compensation arrangements with
executive officers, deductibility will not be the sole factor used in
ascertaining appropriate levels or modes of compensation. Since corporate
objectives may not always be consistent with the requirements for full
deductibility, it is conceivable that the Corporation may enter into
compensation arrangements in the future under which payments are not deductible
under Section 162(m).
Conclusion
The Committee believes that long-term stockholder value is enhanced by
corporate and individual performance achievements. Through the plans described
above, a significant portion of the Corporation's executive compensation is
based on corporate and individual performance, as well as competitive pay
practices. The Committee believes equity compensation, in the form of stock
options and restricted stock, is vital to the long-term success of the
Corporation. The Committee remains committed to this policy, recognizing the
competitive market for talented executives and that the cyclical nature of the
Corporation's business may result in highly variable compensation for a
particular time period.
Charles M. Blalack
R. Gene Brown
Joe L. Roby
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Compensation Committee are Mr. Charles M. Blalack,
Dr. R. Gene Brown, and Mr. Joe L. Roby. Mr. Sanders is the sole member of the
Employee Stock Committee, which grants stock options and awards restricted
stock to employees who are not also officers. Mr. Sanders has the authority to
act alone in making determinations concerning the compensation of executives
other than himself, but often makes such determinations in consultation with
the Compensation Committee.
Mr. Roby is a Managing Director and Chairman of the Banking Group of
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), a firm which has
recently provided investment banking services to the Corporation. In exchange
for the payment of a fee, DLJ acted as a standby purchaser in connection with
the Corporation's call for redemption on March 13, 1995, of the Corporation's
Depositary Convertible Exchangeable Preferred Shares. DLJ may provide
investment banking services to the Corporation again during 1995.
12
EXECUTIVE COMPENSATION
The following table shows for the three fiscal years ended December 25,
1994, the compensation paid by the Corporation and its subsidiaries to the
Corporation's Chief Executive Officer, to the four other most highly paid
executive officers whose aggregate salary and bonus compensation exceeded
$100,000, and to a former executive officer, Mr. Holbrook, who would have been
included in the group of the four most highly paid executive officers if he
had remained an executive through year-end.
SUMMARY COMPENSATION TABLE (1992-1994)
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
----------------------------------------------------- ------------------------------
(A) (B) (C) (D) (E) (F) (G) (I)
SECURITIES
NAME AND OTHER ANNUAL RESTRICTED UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS(/1/) COMPENSATION STOCK AWARDS(/2/) OPTIONS/SARS COMPENSATION(/3/)
------------------ ---- -------- ---------- ------------ ----------------- ------------ -----------------
W. J. Sanders III. 1994 $952,225 $3,573,261(/4/) $134,022(/5/) $1,597,200 200,000 $51,648
Chairman and
Chief 1993 $929,000 $2,141,618(/6/) $141,000(/7/) $ 0 0 $40,926
Executive Officer 1992 $874,999 $1,934,988(/8/) $150,929(/9/) $ 0 0 $24,872
Richard Previte... 1994 $606,250 $1,801,952(/1//0/) $ 0 $3,194,000 152,500 $46,592
President and
Chief 1993 $543,125 $1,073,888 $ 0 $ 0 25,000 $33,796
Operating Officer 1992 $510,625 $ 981,842 $ 0 $ 0 0 $24,872
Anthony B.
Holbrook(/1//1/). 1994 $370,633(/1//2/) $ 908,190 $ 0 $ 0 65,000 $41,196
Vice Chairman 1993 $440,937 $ 547,834 $ 0 $ 0 12,500 $32,432
1992 $425,000 $ 504,310 $ 0 $ 0 0 $23,576
Stephen J.
Zelencik......... 1994 $364,022 $ 599,069 $ 0 $ 0 72,125 $41,467
Sr. Vice
President and 1993 $334,593 $ 326,252 $ 0 $ 0 12,500 $31,882
Chief Marketing 1992 $316,875 $ 315,440 $ 0 $ 0 0 $24,872
Executive
Marvin D. Burkett. 1994 $348,750 $ 513,379 $ 0 $ 0 75,000 $40,443
Senior Vice
President 1993 $310,499 $ 271,935 $ 0 $ 0 12,500 $30,657
Chief Financial 1992 $292,749 $ 261,362 $ 0 $ 0 0 $23,576
and
Administrative
Officer and
Treasurer
Eugene D. Conner.. 1994 $342,000 $ 499,425 $ 0 $ 0 75,000 $38,542
Sr. Vice
President, 1993 $313,501 $ 287,401 $ 0 $ 0 12,500 $28,824
Operations 1992 $285,052 $ 263,213 $ 0 $ 0 94,300 $22,664
--------
(1) For the named persons, includes cash profit sharing in the following
amounts for Messrs. Sanders, Previte, Holbrook, Zelencik, Burkett and
Conner, respectively: for 1994, $90,711, $60,677, $37,552, $36,445,
$34,903 and $34,240; for 1993, $60,200, $34,879, $28,319, $21,489, $19,935
and $20,128; for 1992, $60,012, $37,328, $32,053, $25,190, $23,762 and
$23,213.
(2) The dollar value of the restricted stock appearing in the table is based
on the closing sales price of AMD Common Stock on August 5, 1994 ($26.63),
the date of the award. The total number of restricted shares held, and
their aggregate value, at December 25, 1994, were as follows: for Mr.
Sanders, 180,000 shares valued at $4,118,400; for Mr. Previte, 120,000
shares valued at $2,745,600; and for the four other persons listed on the
table, none. The value is based on the closing sales price of AMD Common
Stock on December 23, 1994 ($22.88), and does not reflect the diminution
in value resulting from the restrictions placed on such shares. Mr.
Sanders and Mr. Previte have voting and dividend rights with respect to
the restricted shares. Of the 180,000 restricted shares held by Mr.
Sanders at year-end, 60,000 shares vested in January 1995, 60,000 shares
are scheduled to vest in January 1996, and the remaining 60,000 restricted
shares will vest, if at all, upon achievement of targeted average
quarterly stock prices beginning in the last quarter of 1996. If the
applicable target for the last quarter of 1998 is not met, Mr. Sanders
will forfeit the 60,000 shares of performance based restricted stock
awarded in 1994. The restricted shares awarded to Mr. Previte will also
vest, if at all, upon achievement of targeted average quarterly stock
prices at a rate of 30,000 shares per year beginning with the first
quarter of 1995 and ending with the last quarter of 1998. As of the date
of the printing of this Proxy Statement, it appears likely that the
average quarterly stock price target for the first quarter of 1995 will be
achieved. If the target for the last quarter of 1998 is not met, Mr.
Previte will forfeit any restricted shares then remaining. The quarterly
stock price targets which must be met before the restrictions on the
restricted stock awarded to Messrs. Sanders and Previte will be lifted
were determined with the assistance of an independent compensation
consultant and were approved by the Committee. The quarterly stock price
targets were calculated to reflect a 15% increase compounded annually in
the price of the Corporation's Common Stock which equals or exceeds the
historical performance of the S&P 500 Index. Vesting of 60,000 restricted
shares held by Mr. Sanders which are
13
scheduled to vest in January 1996 (and which are not performance based), is
subject to acceleration upon his termination of employment under the terms
of his employment agreement. Vesting of all of Mr. Sanders' restricted
shares is subject to acceleration under the terms of his management
continuity agreement upon a change in control of the Corporation. Vesting
of Mr. Previte's restricted shares is also subject to acceleration under
the terms of his management continuity agreement upon termination of his
employment with the Corporation following a change in control of the
Corporation. In addition, vesting of all restricted stock held by Messrs.
Sanders and Previte is subject to acceleration if more than 50% of the
outstanding equity or assets of the Corporation are acquired by another
corporation pursuant to merger, sale of substantially all the assets,
tender offer or other business combination, other than a transaction in
which the stockholders of the Corporation prior to the transaction retain a
majority interest in the surviving corporation.
(3) Includes, for the most recent fiscal year and for each of the named
persons, the Corporation's contributions to the Corporation's tax-
qualified profit sharing plan in the amount of $17,223, the Corporation's
matching contributions to the Corporation's 401(k) Plan in the amount of
$3,538, and on behalf of Messrs. Sanders, Previte, Holbrook, Zelencik,
Burkett and Conner, the Corporation's contributions to the Corporation's
Excess 415 Plan (nonqualified deferred compensation) in the amounts of
$16,571, $16,571, $16,571, $16,571, $16,537 and $16,571, respectively,
the Corporation's matching contributions to the Executive Savings Plan in
the amounts of $10,068, $4,940, $2,022, $1,560, $1,694, and 0,
respectively, and the amount of premiums paid by the Corporation for term
life insurance in the amounts of $4,248, $4,320, $1,842, $2,575, $1,452
and $1,210, respectively.
The Corporation has purchased individual insurance policies for Messrs.
Sanders, Previte, Holbrook, Zelencik, Burkett and Conner. The Corporation
has agreed to continue to pay premiums on each policy for each year in an
amount sufficient to maintain a death benefit of at least three times the
executive officer's base salary, subject to a limit of $2,000,000, plus,
for each year in which the executive officer defers compensation under the
Executive Savings Plan (the "Plan"), an amount equal to such deferrals. The
executive officer will become entitled to fully exercise his ownership
rights in the policy free of the security interest in the policy granted to
the Corporation only if he continues employment with the Corporation until
the date set forth in the agreement, becomes totally disabled, is
terminated without cause or terminates employment following a change in
control under certain conditions, or if the Corporation fails to pay the
required premiums on the policy. If an executive officer's rights in his
policy become unencumbered, his benefits under the Plan will be reduced by
an amount equal to the cash surrender value of the policy. If the executive
officer terminates employment before his rights in the policy become
unencumbered, the Corporation will be entitled to receive an amount equal
to the cash surrender value of the policy. If the executive officer dies
while employed by the Corporation and before his rights in the policy
become unencumbered, the executive officer's beneficiary will be entitled
to receive a portion of the policy's death benefit equal to three times the
executive officer's base salary, subject to a limit of $2,000,000. The
value of the premium attributable to this term insurance provided under
each policy has been included in the amounts described above.
The cash surrender value of the life insurance policies of Messrs. Sanders,
Previte, Holbrook, Zelencik and Burkett exceeded the balance of the
deferred compensation and interest credited to their accounts under the
Plan by a maximum of approximately $20,553, $12,823, $12,231, $7,892 and
$6,974, respectively, during 1994. Thus, if the rights of Messrs. Sanders,
Previte, Holbrook, Zelencik and Burkett in their life insurance policies
had become unencumbered in 1994, they would have received benefits which
would have exceeded their benefits payable under the Plan by the foregoing
amounts. Mr. Conner did not participate in the Plan for 1994. For more
information concerning the Plan and life insurance arrangements for the
named executive officers, please see the respective discussions under the
section entitled "Compensation Agreements."
(4) A maximum amount of $1,904,450 was paid out with respect to fiscal year
1994, with a balance of $1,578,100 carried over for payment with respect
to fiscal year 1995, 1996 or 1997 (if Mr. Sanders extends his employment
agreement to December 31, 1997).
(5) Includes $93,206 of in-kind compensation in the form of the use of
company-provided vehicles and drivers, and cash payments for tax gross-
ups in the amount of $39,416.
(6) A maximum amount of $1,854,837 was paid out with respect to fiscal year
1993, with a balance of $226,580 carried over for payment with respect to
fiscal year 1994, 1995 or 1996.
(7) Includes $94,937 of in-kind compensation in the form of the use of
company-provided vehicles and drivers, and cash payments for tax gross-
ups in the amount $38,663.
(8) A maximum amount of $1,800,000 was paid out for fiscal year 1992, and the
balance of $74,976 was carried over for payment with respect to fiscal
year 1993, 1994 or 1995.
(9) Includes $94,932 of in-kind compensation, in the form of the use of
company-provided vehicles and drivers, and cash payments for tax gross-
ups in the amount $48,497.
(10) A maximum amount of $1,250,000 was paid out with respect to fiscal year
1994, with a balance of $491,275 carried over for payment with respect to
fiscal year 1995, 1996 or 1997.
(11) Mr. Holbrook resigned his position as Chief Technical Officer of the
Corporation effective August 27, 1994, although he will remain a part-
time employee through July 31, 1995. He continues to serve as Vice
Chairman of the Board.
(12) Includes $47,532 paid under the terms of an agreement with the
Corporation pursuant to which Mr. Holbrook has continued to render
services to the Corporation. See the discussion under the section
entitled "Compensation Agreements-Other Agreements."
14
OPTION/SAR GRANTS IN THE LAST FISCAL YEAR
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE APPRECIATION
FOR OPTION TERM
-------------------------
(A) (B) (C) (D) (E) (F) (G)
% OF TOTAL
NUMBER OF SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO
OPTIONS/SARS EMPLOYEES IN EXERCISE PRICE EXPIRATION
NAME GRANTED(/1/) FISCAL YEAR PER SHARE DATE 0% 5% 10%
---- -------------------- ------------ -------------- ---------- --- ------------ ------------
W. J. Sanders III....... 200,000 7.17% $26.88 4/27/04 $ 0 $ 3,380,938 $ 8,567,959
Richard Previte......... 152,500 5.47% $26.88 4/27/04 $ 0 $ 2,577,965 $ 6,533,069
Anthony B. Holbrook..... 65,000 2.33% $26.88 4/27/04 $ 0 $ 1,098,805 $ 2,784,587
Stephen J. Zelencik..... 72,125 2.59% $26.88 4/27/04 $ 0 $ 1,219,251 $ 3,089,820
Marvin D. Burkett....... 75,000 2.69% $26.88 4/27/04 $ 0 $ 1,267,852 $ 3,212,985
Eugene D. Conner........ 75,000 2.69% $26.88 4/27/04 $ 0 $ 1,267,852 $ 3,212,985
--------
(1) Each option has a ten year term. Each option is subject to earlier
termination upon the optionee's termination of employment, death or
disability as provided in the 1992 Stock Incentive Plan and the optionee's
option agreement, except that Mr. Sanders' options will remain exercisable
for the remainder of the ten year term, as provided in his employment
agreement. The exercise price may be paid in cash or in shares.
Withholding taxes due on exercise may be paid in cash, with previously
owned shares, or by having shares withheld. Except for the options granted
to Mr. Sanders, all options become cumulatively exercisable in three
approximately equal installments on July 25, 1995, July 15, 1996, and July
15, 1997. Mr. Sanders' options become exercisable in a single increment on
January 15, 1997. Upon an optionees' termination of employment, death or
disability, options may be exercised only to the extent exercisable on the
date of such termination of employment, death or disability, except that
upon termination of Mr. Sanders' employment in the circumstances described
in his employment agreement his options become fully exercisable. However,
if termination of Mr. Sanders' employment is due to his death or
disability, only his options which would have become exercisable in the
two year period following such termination will become exercisable as of
the date of such termination, as provided in his employment agreement.
Options may also become fully exercisable upon a change in control of the
Corporation or in accordance with an optionee's management continuity
agreement. See the discussion under "Compensation Agreements" and "Change
in Control Arrangements." No stock appreciation rights ("SARs") were
granted to the executive officers listed in the table during 1994.
AGGREGATED OPTION/SAR EXERCISES IN THE LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
(A) (B) (C) (D) (E)
NUMBER OF SECURITIES VALUE OF UNEXERCISED
NUMBER OF UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/SARS AT 12/25/94 OPTIONS/SARS AT 12/25/94(/1/)
ACQUIRED ON VALUE ----------------------------- -----------------------------
NAME EXERCISE REALIZED(/1/) (EXERCISABLE) (UNEXERCISABLE) (EXERCISABLE) (UNEXERCISABLE)
---- ----------- ------------- ------------- --------------- ------------- ---------------
W. J. Sanders III....... 200,496 $4,176,054 600,000 600,000 $10,075,000 $3,950,000
Richard Previte......... 0 $ 0 234,300 200,000 $ 2,148,326 $ 222,188
Anthony B. Holbrook..... 100,000 $2,232,189 322,862 100,000 $ 5,392,293 $ 222,188
Stephen J. Zelencik..... 61,500 $1,187,719 73,125 100,000 $ 584,634 $ 151,828
Marvin D. Burkett....... 0 $ 0 223,784 100,000 $ 3,056,193 $ 123,438
Eugene D. Conner........ 0 $ 0 259,264 100,000 $ 3,717,008 $ 123,438
--------
(1) Value for these purposes is based solely on the difference between market
value of underlying shares on the applicable date (i.e. date of exercise
or fiscal year-end) and the exercise price of ("In-the-Money")
options/SARs.
15
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
ADVANCED MICRO DEVICES, S&P 500 COMPOSITE INDEX AND
S&P HIGH TECHNOLOGY COMPOSITE INDEX
The following graph shows a five-year comparison of cumulative total return
on Common Stock for the Corporation, the Standard & Poor's 500 Composite
Index, and the Standard & Poor's High Technology Composite Index.
(CHART)
The chart above assumes $100 invested on December 31, 1989, in Advanced
Micro Devices Common Stock, S&P 500 Composite Index and S&P High Technology
Composite Index, and the reinvestment of dividends. The graph was plotted
using the following data:
YEAR ENDING
--------------------------------------------
1989 1990 1991 1992 1993 1994
---- ------- ------- ------- ------- -------
AMD................................ $100 $ 61.90 $222.22 $230.16 $225.40 $315.87
S&P 500............................ $100 $ 96.89 $126.42 $136.05 $149.76 $151.79
S&P High Technology................ $100 $102.12 $116.50 $121.31 $149.22 $173.48
COMPENSATION AGREEMENTS
Chairman's Employment Agreement. The Corporation has an employment agreement
with Mr. Sanders, the term of which commenced July 1, 1991, and continues
until December 31, 1996, unless terminated prior to that time by a majority
vote of the full Board of Directors. Mr. Sanders may extend the term of the
employment agreement for an additional one-year period upon written notice to
the Corporation given no later than October 15, 1996. Mr. Sanders' annual base
compensation is currently $952,225. This amount may be increased (but not
reduced) by the Board of Directors or its delegate. In accordance with Mr.
Sanders' contract, his 1993 base salary of $929,000 was increased to $952,225.
This 2.5% increase was equal to the cost of living increase as permitted by
proposed regulations under Section 162(m) of the Code. Additional
16
incentive compensation is payable in the form of an annual incentive bonus
equal to 0.6% of the adjusted operating profits of the Corporation. However,
such annual bonus may not be greater than 200% of his annual base salary. The
amount of the annual incentive bonus which exceeds the maximum bonus payable in
a particular year (the "Excess Bonus"), if any, shall be added to the bonus
determined for any of the next three fiscal years (or such shorter number of
fiscal years then remaining in the term), provided that the addition of the
Excess Bonus does not cause the bonus otherwise payable to exceed the maximum
incentive bonus payable in that year. If the Excess Bonus is not paid within
such period it will not be paid in any subsequent year. "Adjusted operating
profits" are deemed for these purposes to constitute the Corporation's
operating income as reported on the Corporation's financial statements,
increased by any expenses accrued for profit sharing plan contributions,
bonuses under the Corporation's Executive Bonus Plan, the bonuses to the
Corporation's Chief Operating Officer and Chief Technical Officer, and the
bonus payable to Mr. Sanders. Mr. Sanders may also receive a discretionary
bonus, not subject to the 200% of base salary limitation, in an amount (if any)
fixed by the Board, based on the Board's assessment of his performance during
the period for which the bonus is payable.
Under the employment agreement, the Corporation is obligated to guarantee the
repayment of any loan obtained by Mr. Sanders for the purpose of exercising
options or warrants to purchase stock of the Corporation, and to pay the
interest on any such loan. The Corporation's obligation to guarantee such loans
and pay interest thereon continues for a period of 13 months following the date
of the event that causes Mr. Sanders to incur tax liability by virtue of having
exercised options or warrants to purchase stock of the Corporation. The amount
of any such guarantee and the amount on which interest will be paid is limited
to the exercise price of the options and warrants plus taxes paid by Mr.
Sanders from exercise through such 13-month period by reason of the exercise.
The Corporation may also limit such guarantee obligations in order to comply
with state and federal law or to comply with financial covenants imposed by the
Corporation's lenders. Mr. Sanders is also entitled to receive certain benefits
upon his disability (as that term is defined in the employment agreement) and
upon his death while employed by the Corporation. Mr. Sanders is also entitled
to receive such other benefits of employment with the Corporation as are
generally available to members of the Corporation's management.
If the Corporation terminates Mr. Sanders' employment (for reasons other than
theft, misappropriation or conversion of corporate funds) or constructively
terminates Mr. Sanders which includes re-assigning him to lesser duties,
reducing or limiting his compensation or benefits, removing him from his
responsibilities other than for good cause, requiring him to relocate or
transfer his principal place of residence, or not electing or retaining him as
Chairman and Chief Executive Officer and a Director of the Corporation, the
Corporation is nevertheless obligated to pay Mr. Sanders his annual base salary
(at the annual rate in effect as of the date of the event triggering the
payment) for the unexpired balance of the term of the agreement, but no less
than one full year's base salary at such rate. In such circumstances, the
Corporation would also be obligated to pay Mr. Sanders the incentive
compensation to which he would have been entitled for the fiscal year during
which such termination or other event takes place and for the following fiscal
year, plus the amount of any Excess Bonus then remaining unpaid. In addition,
under such circumstances, any options which Mr. Sanders holds on stock of the
Corporation will become fully exercisable for the remainder of the ten year
term, and the restrictions on any shares of restricted stock of the Corporation
which Mr. Sanders may then hold will lapse. This accelerated vesting provision
does not apply to the performance based restricted stock awarded in 1994. Mr.
Sanders will also be entitled to receive all benefits due him under the
Corporation's tax-qualified employee benefit plans and any supplementary plans
as well as the unvested company contributions. He will also have the right to
be paid his legal fees for contesting any portion of the employment agreement
including termination or in connection with any tax audit seeking to assess an
excise tax on the payments under the agreement. Mr. Sanders will also be
entitled to receive, for five years following termination or such other event,
health and welfare benefits comparable to those he was receiving,
reimbursements for all income taxes due on the receipt of such benefits, the
use of a Corporation automobile, up to $25,000 each year for expenses incurred
for estate, tax and financial planning, and an office and secretarial services
equivalent to those provided Mr. Sanders while he was Chairman and Chief
Executive Officer. For at least six years following
17
termination or such other event, Mr. Sanders will be indemnified by the
Corporation to the same extent as prior thereto and be provided with director's
and officer's fiduciary and professional liability insurance equivalent to the
insurance carried by the Corporation while he was Chairman and Chief Executive
Officer. Mr. Sanders is also entitled to receive an amount from the Corporation
necessary to reimburse Mr. Sanders for any federal excise tax imposed on Mr.
Sanders by reason of his receipt of payments under his employment agreement or
otherwise, so that he will be placed in the same after-tax position as he would
have been in had no such tax been imposed.
If Mr. Sanders' employment is terminated by the Corporation for good cause,
as defined in the employment agreement, or cause as defined in the California
Labor Code (other than as a result of certain actions by the Corporation), or
Mr. Sanders voluntarily terminates his employment, the Corporation has the
right to retain Mr. Sanders as a consultant for 12 months thereafter, but in no
event beyond the unexpired balance of the term of his employment agreement, at
a rate of compensation equal to that then in effect pursuant to the employment
agreement. While so retained, Mr. Sanders is prohibited from being associated
with any competitive business. If the Corporation does not exercise this right,
Mr. Sanders' right to compensation ceases upon his resignation or termination
as described above.
If Mr. Sanders' employment is terminated by reason of his disability or
death, he or his estate is entitled to his full base salary under the agreement
for the unexpired balance of its term, plus the incentive compensation for the
fiscal year in which such termination occurred and for the following fiscal
year, plus the amount of any Excess Bonus then remaining unpaid. In addition,
the restrictions on any restricted stock of the Corporation which Mr. Sanders
holds will lapse. This accelerated vesting provision does not apply to the
performance based restricted stock awarded in 1994. In addition, any options
Mr. Sanders holds to purchase the Corporation's stock which would have become
vested within two years from the date of termination will become fully vested
for the remainder of the ten year term. In the event of Mr. Sanders' death, the
Corporation must pay to his designated representative, his personal
representative or his estate as a death benefit, compensation for a period of
12 months after his death at the same monthly rate of compensation which
prevailed during the month of his death. In addition, his beneficiaries will be
entitled to receive that portion of the death benefit payable under a
$1,000,000 face amount policy which exceeds the aggregate premiums paid by the
Corporation on that policy. Further, if his death occurs before his rights in
the policy described in footnote 3 to the Summary Compensation Table become
unencumbered, his beneficiaries will be entitled to the death benefit described
in that footnote.
Bonus Agreements. In 1992, the Corporation entered into separate bonus
agreements with Mr. Previte and Mr. Holbrook. Under the terms of the
agreements, Mr. Previte receives 0.3% of adjusted operating profits of the
Corporation and Mr. Holbrook receives 0.15% of adjusted operating profits up to
an annual maximum and carryover amount similar to that under Mr. Sanders'
employment agreement. "Adjusted operating profits" are treated in the same
manner as under Mr. Sanders' employment agreement.
Deferred Compensation Elections. Messrs. Sanders, Previte, Holbrook,
Zelencik, Burkett and Conner have filed elections to defer compensation under
the Advanced Micro Devices Executive Savings Plan (the "Plan"). The Plan is an
unfunded, nonqualified plan of deferred compensation. Under the Plan, a
participant may elect to defer up to 50% of salary and 100% of any bonus. The
Corporation has established bookkeeping accounts to record the amounts of
deferrals under the Plan, plus any gains or losses, as described below. In
addition, the Corporation "matches" the salary deferrals by crediting each
participant's account with an amount equal to 50% of the salary deferred by
that participant, such "matching contribution' not to exceed 1.5% of the
executive's salary in excess of the maximum recognizable compensation allowed
under Section 401(a)(17) of the Code. While a participant is employed by the
Corporation, he may select one or more types of mutual funds in which his
deferred compensation will be deemed to be invested. The Corporation selects
the actual commercially available mutual funds to be used in determining the
amount of earnings or losses to be credited to a participant's account. The
amounts credited to a participant's accounts are paid following termination of
his employment in either a lump sum or substantially equal annual installments
over three to ten years. The amount of benefits payable under the Plan will be
offset by the cash surrender value of the life insurance policies referred to
below if the participant's ownership rights in the policy become unencumbered
as a result of the occurrence of one of the events outlined in footnote 3 to
the Summary Compensation Table.
18
Life Insurance Agreements. As described more fully in footnote 3 to the
Summary Compensation Table, the Corporation has purchased individual life
insurance policies for Messrs. Sanders, Previte, Holbrook, Zelencik, Burkett
and Conner, and has agreed to make certain premium payments on such policies.
Each executive will be entitled to exercise his ownership rights in the policy
free of the security interest granted to the Corporation upon the occurrence of
one of the events described in the footnote. If an executive's rights in his
policy become unencumbered, his benefits under the Advanced Micro Devices
Executive Savings Plan will be reduced by an amount equal to the cash surrender
value of the policy. If the executive terminates employment before his rights
in the policy become unencumbered, the Corporation will be entitled to receive
an amount equal to the cash surrender value of the policy. If the executive
dies while employed by the Corporation and before his rights in the policy
become unencumbered, his beneficiary will be entitled to receive the portion of
the policy's death benefit equal to three times the executive's salary, subject
to a limitation of $2,000,000.
Other Agreements. Effective on August 27, 1994, Mr. Holbrook resigned from
his position as Chief Technical Officer of the Corporation, a position he held
since 1990. He continues to serve as Vice Chairman of the Board of Directors.
The Corporation and Mr. Holbrook entered into an agreement pursuant to which Mr
Holbrook agreed to become a part-time employee of the Corporation, devoting up
to thirty-five hours per month to advise the Corporation with respect to
various matters, through July 31, 1995. Mr. Holbrook will be compensated at the
bi-weekly rate of $5,592. Mr. Holbrook's stock options continue to vest as a
part-time employee and he remains eligible to receive his annual bonus as
described above. He continues to be eligible to participate in certain of the
Corporation's employee benefit plans including the profit sharing and 401(k)
plans.
CHANGE IN CONTROL ARRANGEMENTS
Management Continuity Agreements. The Corporation has entered into management
continuity agreements with each of its executive officers named in the Summary
Compensation Table, designed to ensure their continued services in the event of
a Change in Control. Except for Mr. Sanders' management continuity agreement,
all the agreements provide that benefits are payable only if the executive
officer's employment is terminated by the Corporation (including a constructive
discharge) within two years following a Change in Control. For purposes of the
agreements, a Change in Control includes any change of a nature which would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A promulgated under the Securities Exchange Act of 1934. A Change in Control
is conclusively presumed to have occurred on (1) acquisition by any person
(other than the Corporation or any employee benefit plan of the Corporation) of
beneficial ownership of more than 20% of the combined voting power of the
Corporation's then outstanding securities; (2) a change of the majority of the
Board of Directors during any two consecutive years, unless certain conditions
of Board approval are met; or (3) certain members of the Board determine within
one year after an event that such event constitutes a Change in Control.
All of the management continuity agreements provide that, in the event of a
Change in Control, the Corporation will reimburse each executive officer who
has signed a management continuity agreement for any federal excise tax payable
as a result of benefits received from the Corporation. Other than Mr. Sanders'
agreement, the agreements provide that, if within two years after the Change in
Control the executive officer's employment is terminated by the Corporation or
the executive officer is constructively discharged, the executive officer will
receive: (1) a severance benefit equal to three times the sum of his rate of
base compensation plus the average of his two highest bonuses in the last five
years; (2) payment of his accrued bonus; (3) twelve months' continuation of
other incidental benefits; and (4) full and immediate vesting of all unvested
stock options, stock appreciation rights and restricted stock awards.
Mr. Sanders' management continuity agreement provides that not more than ten
business days after a Change in Control, he is entitled to receive an amount
equal to three times his annual base compensation plus the average of his two
highest bonuses in the last five years, whether or not his employment by the
19
Corporation is terminated. In addition, all stock options and stock
appreciation rights that Mr. Sanders holds will become fully vested on the
occurrence of a Change in Control and the restrictions on any shares of
restricted stock of the Corporation which he may hold will lapse as of such
date. The deductibility limitation of $1 million for certain executive
compensation under (S)162(m) must be reduced by payments which are considered
"excess parachute payments" under (S)280G of the Code. Some of the payments
made under the management continuity agreements may be considered "excess
parachute payments" and, if so characterized, could increase the portion of the
compensation paid to the affected executive which the Corporation could not
deduct.
Vesting of Stock Options, Limited Stock Appreciation Rights and Restricted
Stock. All options and associated limited stock appreciation rights ("LSARs")
granted to officers of the Corporation shall become exercisable upon the
occurrence of any change in the beneficial ownership of any quantity of shares
of Common Stock of the Corporation (where the purpose for the acquisition of
such beneficial ownership is other than passive investment), that would effect
a "change in control" of the Corporation of a nature that would be required to
be reported in response to Item 6(e) of Schedule 14A of Regulation 14A
promulgated under the Securities Exchange Act of 1934, other than a change that
has been approved in advance by the Corporation's Board of Directors. A change
in control shall be conclusively deemed to have occurred if any person (other
than the Corporation, any employee benefit plan, trustee or custodian therefor)
is or becomes the beneficial owner, directly or indirectly, of securities of
the Corporation representing more than 50% of the combined voting power of the
Corporation's then outstanding securities. Under the Corporation's 1980 and
1986 stock appreciation rights plans, outstanding LSARs may be exercised for
cash during a thirty day period following the expiration date of any tender or
exchange offer for the Corporation's Common Stock (other than one made by the
Corporation); provided the offeror acquires shares pursuant to its offer and
owns thereafter more than 25% of the outstanding Common Stock. In addition, all
options granted under the 1982 Stock Option Plan and the 1992 Stock Incentive
Plan become fully vested on termination of employment within one year following
a change in control as defined in that plan.
Restricted stock awarded under the 1987 Restricted Stock Award Plan, if
provided for in the individual restricted stock award agreement, will be
subject to accelerated vesting in connection with a change in control of the
Corporation as defined in the particular agreement. Messrs. Sanders' and
Previte's restricted stock award agreements provide that their restricted stock
will vest if more than 50% of the outstanding equity or assets of the
Corporation are acquired by another corporation pursuant to merger, sale of
substantially all the assets, tender offer or other business combination, other
than a transaction in which the stockholders of the Corporation prior to the
transaction retain a majority interest in the surviving corporation. Further,
as described above, stock options, stock appreciation rights and restricted
stock held by executive officers who have entered into management continuity
agreements with the Corporation will vest in accordance with the terms of such
agreements in connection with a change of control of the Corporation as defined
in such agreements.
Life Insurance Agreements. The life insurance agreements described in
footnote 3 to the Summary Compensation Table provide that Messrs. Sanders,
Previte, Holbrook, Zelencik, Burkett and Conner will become entitled to fully
exercise their rights in their life insurance policies free of the security
interest granted to the Corporation if they are terminated without cause at any
time or if they are constructively discharged within six months prior to or
thirty-six months following a "change in control" of the Corporation. For this
purpose, "change in control" has the same meaning as defined under the
management continuity agreements described above. However, if an executive's
rights in his policy become unencumbered under these circumstances, his
benefits under the Advanced Micro Devices Executive Savings Plan will be
reduced by an amount equal to the cash surrendered value of the policy.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Under the securities laws of the United States, the Corporation's directors,
executive officers, and any persons holding more than ten percent of the
Corporation's Common Stock are required to report, to the
20
Securities and Exchange Commission and to the New York Stock Exchange, their
initial ownership of the Corporation's stock and any subsequent changes in that
ownership. Specific due dates for these reports have been established, and the
Corporation is required to disclose in this Proxy Statement any failure to file
these reports on a timely basis. To the Corporation's knowledge, all of these
requirements were satisfied in 1994.
TRANSACTIONS WITH MANAGEMENT
During 1992 the Corporation loaned $120,000 to Larry Carter in connection
with his accepting employment with the Corporation as Vice President and
Controller and prior to his election as an officer. Under the terms of his
unsecured interest-free loan, Mr. Carter repaid $40,000 in 1993 and $40,000 in
1994. Mr. Carter resigned from his position with the Corporation on January 20,
1995. He paid the remaining principal of $40,000 following his resignation.
PROPOSAL NO.2--RATIFICATION OF INDEPENDENT AUDITORS
Unless marked to the contrary, proxies received will be voted FOR the
ratification of the appointment of Ernst & Young LLP as the independent
auditors for the Corporation for the current year. Ernst & Young LLP or its
predecessor, Arthur Young and Company, have been the Corporation's independent
auditors since its incorporation in 1969.
Audit services of Ernst & Young LLP during the Fiscal Year included the
examination of the consolidated financial statements of the Corporation and
services related to filings with the Securities and Exchange Commission and
other regulatory bodies.
The Audit Committee of the Corporation meets with Ernst & Young LLP on an
annual or more frequent basis. At such times, the Audit Committee reviews both
audit and non-audit services performed by Ernst & Young LLP for the preceding
year, as well as the fees charged for such services. Among other things, the
effect that the performance of non-audit services may have upon the
independence of the auditors is examined.
A representative of Ernst & Young LLP is expected to be present at the Annual
Meeting of Stockholders and will have an opportunity to make a statement if he
or she so desires. Moreover, he or she will be available to respond to
appropriate questions from the stockholders.
PROPOSAL NO. 3--STOCKHOLDER PROPOSAL CONCERNING THE NOMINATING COMMITTEE
The New York City Employees' Retirement System ("Proponent"), 1 Centre
Street, New York, New York 10007-2341, notified the Corporation on November 18,
1994, that it is the beneficial owner of 267,050 shares of the Corporation's
Common Stock as of August 29, 1994, and that it intends to offer the following
proposal for consideration and approval at the Annual Meeting of Stockholders.
PROPOSAL AND PROPONENT'S STATEMENT OF SUPPORT
WHEREAS, the board of directors is meant to be an independent body elected by
shareholders and charged by law and shareholders with the duty, authority and
responsibility to formulate and direct corporate policies, and
WHEREAS, this company has provided that the board may designate from among
its members one or more committees, each of which, to the extent allowed, shall
have certain designated authority, and
WHEREAS, we believe that directors independent of management are best
qualified to act in the interest of shareholders and can take steps necessary
to seek, nominate and present new directors to shareholders, and
WHEREAS, we believe the selection of new directors is an area in which inside
directors may have a conflict of interest with shareholders, and
WHEREAS, we believe that an increased role for the independent directors
would help our company improve its long-term financial condition, stock
performance and ability to compete,
21
NOW THEREFORE BE IT RESOLVED, THAT: the shareholders request the company
establish a Nominating Committee to recommend candidates to stand for election
to the board of directors. The Committee shall be composed solely of
independent directors. For these purposes, an independent director is one who:
(1) has not been employed by the company, or an affiliate, in an executive
capacity within the last five years; (2) is not, and has not been, a member of
a company that is one of this company's paid advisors or consultants; (3) is
not employed by a significant customer or supplier; (4) does not and did not
have a personal services contract with the company; (5) is not employed by a
tax-exempt organization that receives significant contributions from the
company; (6) is not a relative of the management of the company; (7) has not
had any business relationship that would be required to be disclosed under
Regulation S-K. The Committee's responsibilities shall include establishing
procedures for the nominating process and developing for board approval the
criteria for nomination.
As long-term shareholders we are concerned about our company's prospects for
profitable growth. This proposal is intended to strengthen the process by which
nominees are selected. We believe that this will strengthen the board of
directors in its role of advising, overseeing and evaluating management.
We urge you to vote FOR this proposal.
THE CORPORATION'S STATEMENT IN OPPOSITION
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
The proponent submitted nearly identical proposals in 1993 and 1994. The
proposal was defeated by a margin of almost four to one at the Corporation's
1993 annual meeting -- of the shares voted (including abstentions), 77% were
AGAINST, 20% were in favor, and 3% abstained. The proposal was also defeated by
a large margin at the 1994 annual meeting -- of the shares voted (including
abstentions), 84.7% were AGAINST, only 13.6% were in favor, and 1.65%
abstained.
The Committee consists of a supermajority (75%) of directors who are neither
officers nor employees of the Corporation or any of its subsidiaries, nor
affiliates of the Corporation. Further, none of the non-employee directors on
the Nominating Committee have a relationship that, in the Board's opinion,
would interfere with the exercise of independent judgment. Therefore, the Board
believes that the non-employee directors on the Nominating Committee are
"independent" within the customary definition of that term as used by publicly
traded companies. Only one member of the Nominating Committee -- founder and
Chairman of the Board of Directors, W. J. Sanders III -- is also an employee of
the Corporation. Independent directors now constitute a 75% supermajority of
the Nominating Committee members, thus Mr. Sanders' relative voting power has
been decreased. The Board believes he is an indispensable committee member
because of his advice, experience and valuable industry contacts.
The Board of Directors believes that the current Nominating Committee best
serves the interests of the Corporation and its stockholders. If this
stockholder proposal is adopted and if the Board restructures the Nominating
Committee as requested, the Nominating Committee would lose the valuable advice
of the Corporation's founder and chairman, W. J. Sanders III. Mr. Sanders has
guided the Corporation for over twenty-five (25) years, creating the 5th
largest U.S. semiconductor company. He is widely recognized as an industry
leader, and his experience and contacts are invaluable in identifying
candidates for director and assessing each candidate's potential contribution
to the Board.
The Directors believe that to restructure the Nominating Committee in the
manner requested in the stockholder proposal would improperly interfere with
the Board's ability to review and share information on prospective nominees. In
the Board's view, the definition of independence contained in the proposal is
unreasonably restrictive and unduly disqualifies capable persons from being
able to serve on the Committee. Among other things, it would exclude persons
with past business relationships with the Corporation which have ended, and
persons with present business relationships with the Corporation which are
immaterial. The
22
Board believes that the persons best suited to evaluate potential new directors
are persons close to the industry who understand its dynamics. The proposal
could also interfere directly with the Corporation's ability to manage
effectively its business. For example, joint venture and cooperative technology
relationships are an important part of doing business in the semiconductor
industry. In some cases, such strategic partners seek a seat on each other's
Board of Directors. Under the proposal, the director representing such a
strategic partner would be unable to serve on the Nominating Committee.
The Board believes that the important issue is not whether "independent"
directors should participate in the decision-making process, but rather how the
mixture of management and "independent" directors should be determined. The
Board believes the flexible approach currently followed allows the Corporation
to maximize the respective contributions of the Corporation's management and
non-employee directors.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
To be adopted, this stockholder proposal must be approved by the affirmative
vote of a majority of the shares present in person or represented by proxy and
entitled to vote on the matter. Shares with respect to which the holders have
abstained from voting on the proposal will be counted for purposes of
determining the number of shares entitled to vote on the proposal. "Broker non-
votes" will not be counted in determining the number of shares entitled to vote
on the proposal. Unless marked to the contrary, proxies received will be voted
"AGAINST" the proposal.
ANNUAL REPORT AND FINANCIAL STATEMENTS
The 1994 Annual Report of the Corporation, which includes its audited
financial statements for the fiscal year ended December 25, 1994, has
accompanied or preceded this Proxy Statement.
STOCKHOLDER PROPOSALS
Subject to Securities and Exchange Commission regulations, proposals of
stockholders intended to be presented at the 1996 Annual Meeting must be
received by the Secretary of the Corporation not later than December 1, 1995 to
be included in the 1996 Proxy Statement.
23
AMD-90234
ADVANCED MICRO DEVICES, INC.
Annual Meeting of Stockholders - May 9, 1995
This Proxy is solicited on behalf of the Board of Directors
P
R The undersigned appoints W. J. SANDERS III and THOMAS M. MCCOY and each
O of them as proxies for the undersigned, with full power of substitution to
X represent and to vote all the stock of the undersigned on the following
Y matters as described in the Proxy Statement accompanying the Notice of
Meeting, receipt of which is hereby acknowledged, and according to their
discretion on all other matters that may be properly presented for action at
the Annual Meeting of Stockholders of Advanced Micro Devices, Inc. to be
held on Tuesday, May 9, 1995, and at any adjournment(s) or postponement(s)
thereof. If properly executed, this proxy shall be voted in accordance with
the instructions given. To the extent no directions are given on a proposal,
the proxyholders will vote FOR the nominees listed on the reverse side, FOR
ratification of the appointment of independent auditors, AGAINST the
stockholder proposal concerning the Nominating Committee, and in the
discretion of the proxyholders on other matters which may properly be
presented at the meeting. The undersigned may revoke this proxy at any time
prior to its exercise or may attend the meeting and vote in person.
---------------
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE
---------------
[X] Please mark
votes as in
this example.
UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR THE LISTED NOMINEES FOR
DIRECTORS, FOR RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE
CORPORATION'S INDEPENDENT AUDITORS AND AGAINST THE STOCKHOLDER PROPOSAL
REGARDING THE NOMINATING COMMITTEE.
--------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR election of Directors and Item 2.
--------------------------------------------------------------------------------
Nominees for Directors:
W. J. Sanders III, Friedrich Baur, Charles M.
Blalack, R. Gene Brown, Anthony B. Holbrook,
Richard Previte, Joe L. Roby, Leonard Silverman
FOR WITHHELD
1. Election of [_] [_]
directors
FOR AGAINST ABSTAIN
2. Ratification of the
appointment of in- [_] [_] [_]
dependent auditors
--------------------------------------------------------------------------------
The Board of Directors recommends a vote
AGAINST Item 3 (stockholder proposal).
--------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
3. Stockholder proposal
concerning the [_] [_] [_]
Nominating Committee.
----------------------------------------------------------------
(Instruction: To withhold authority to vote for any individual
nominee, write that nominee's name on the space provided above.)
MARK HERE [_]
FOR ADDRESS
CHANGE AND
NOTE AT LEFT
Please sign exactly as the name or names
appear in this proxy. If the stock is
issued in the name of two or more persons,
all of them should sign the proxy. A proxy
executed by a corporation should be signed
in its name by an authorized officer.
Executors, administrators and trustees
so indicate when signing.
PLEASE MARK, SIGN, DATE AND RETURN
THIS PROXY CARD PROMPTLY USING THE Signature: ___________________ Date________
ENCLOSED POSTAGE PRE-PAID ENVELOPE.
Signature: ___________________ Date________