SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Advanced Micro Devices, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Notes:
ADVANCED MICRO DEVICES, INC.
ONE AMD PLACE
P.O. BOX 3453
SUNNYVALE, CALIFORNIA 94088-3453
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
THURSDAY, APRIL 25, 1996
----------------
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
April 25, 1996, 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 approve the 1996 Stock Incentive Plan.
4. To approve the 1996 Executive Incentive Plan.
5. 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.
6. To transact such other business as may properly come before the meeting.
Only stockholders of record at the close of business on February 26, 1996,
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 21, 1996
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
APRIL 25, 1996
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
April 25, 1996, and at any adjournment or postponement thereof. Only holders of
the Corporation's common stock of record on February 26, 1996, 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 133,337,618 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 who 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, FOR approval of the 1996 Stock Incentive Plan, FOR approval of the
1996 Executive Incentive Plan, AGAINST the stockholder proposal set forth in
the Notice of Annual Meeting of Stockholders if it 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 21, 1996. 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 $8,000 plus normal out-of-pocket expenses for its assistance
in soliciting proxies, for an anticipated total cost of approximately $30,000.
1
PRINCIPAL STOCKHOLDERS
The following table shows the name, address, number of shares held, and
percentage of shares held as of February 26, 1996, 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
---------------- ----------------------------------- --------
Vanguard/Windsor Fund, Inc. 9,010,400(/2/) (shared 6.76%
P.O. Box 2600 dispositive power and sole
Valley Forge, PA 19482 voting power as to all shares)
The Capital Group Companies, Inc. 9,271,100(/3/) (sole 6.95%(/4/)
333 South Hope Street dispositive power as to all
Los Angeles, CA 90071 shares; sole voting power as to
1,662,800 of such shares)
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(1) The information contained herein is based on information reported by such
entities as of December 31, 1995, in their most recent Schedule 13G filed
with the SEC under the Securities Exchange Act of 1934, as amended.
(2) Information obtained from Amendment No. 2 to the statement on Schedule 13G
filed on February 2, 1996 by Vanguard/Winsdor Fund, Inc., an investment
advisory client of Wellington Management Company ("Wellington"), and from
Amendment No. 2 to the statement on Schedule 13G filed February 8, 1996 by
Wellington. Wellington, located at 75 State Street, Boston, MA 02109, is
deemed the beneficial owner of 9,950,500 shares, representing 7.46% of the
Corporation's common stock. Of the 9,950,500 shares owned by Wellington,
they retain dispositive power as to all shares and shared voting power as
to 880,100 shares. The 9,950,500 shares owned by Wellington includes the
9,010,400 shares beneficially owned by Vanguard/Windsor Fund, Inc.
(3) Information obtained from Amendment No. 6 to the joint statement on
Schedule 13G filed February 9, 1996 by The Capital Group Companies, Inc.
and Capital Research and Management Co., a registered investment advisor
and a wholly owned subsidiary of The Capital Group Companies, Inc. The
number of shares shown for The Capital Group Companies, Inc. includes
7,283,000 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.
(4) The aggregate percentage of outstanding shares beneficially owned by The
Capital Group Companies, Inc. includes 5.46% beneficially owned by Capital
Research and Management Co.
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 at the 1996 Annual Meeting of
Stockholders 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, Richard Previte, S. Atiq Raza, Joe L. Roby, and
Dr. Leonard Silverman. All of the nominees are incumbent directors. Anthony B.
Holbrook, Vice Chairman of the Board since 1990 and former Chief Technical
Officer of the Corporation, has decided not to stand for re-election as a
director at the 1996 Annual Meeting of Stockholders. 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.
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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 a Director of Donaldson, Lufkin & Jenrette, Inc. a company
with a class of securities registered pursuant to Section 12 of the Securities
Exchange Act of 1934, and the parent company of Donaldson, Lufkin & Jenrette
Securities Corporation.
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 was 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 GranCare, Inc.
Dr. R. Gene Brown--Dr. Brown is a private investor and management consultant.
Dr. Brown is also a Managing Director 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.
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, Chief Financial Officer and Treasurer of the Corporation from
shortly after its founding in 1969 until 1989, and Chief Administrative Officer
and Secretary of the Corporation from 1986 to 1989.
S. Atiq Raza--Mr. Raza is Corporate Vice President and Chief Technical
Officer of Advanced Micro Devices, Inc. Prior to joining the Corporation, Mr.
Raza was the Chairman, Chief Executive Officer, President and Secretary of
NexGen, Inc. ("NexGen") and held those positions from 1991 until it was
acquired by the Corporation on January 17, 1996. From September 1988 until
January 1991, Mr. Raza served as NexGen's Executive Vice President responsible
for engineering, marketing and prototype manufacturing. He was a member of
NexGen's Board of Directors since August 1989 and was elected Chairman of the
Board in May 1994. In addition, Mr. Raza became a member of the Board of
Directors of Paradigm Technology, Inc. in December 1995.
Joe L. Roby--Mr. Roby is the President, Chief Operating Officer and a
director of Donaldson, Lufkin & Jenrette, Inc. ("DLJ"), a diversified financial
services company and the parent company of Donaldson, Lufkin & Jenrette
Securities Corporation. Mr. Roby has been a member of the Board of Directors of
DLJ since 1989. He was appointed President of DLJ in February 1996. Prior to
his appointment as the Chief Operating Officer of DLJ in November 1995, Mr.
Roby was the Chairman of the Banking Group of Donaldson, Lufkin & Jenrette
Securities Corporation, a position he had held since 1989. In addition, Mr.
Roby is a member of the Board of Directors of Sybron International Corporation.
Dr. Leonard M. 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.
Dr. Silverman is also a member of the Board of Directors of Diodes, Inc.
3
STOCK OWNERSHIP TABLE
The table below indicates the number of shares of the Corporation's common
stock beneficially owned as of February 26, 1996, 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 26, 1996(/1/) OF CLASS
---- --- -------- ------------------------- --------
W. J. Sanders III........... 59 1969 1,270,411/(2)/ *
Dr. Friedrich Baur.......... 68 1994/(3)/ 4,800/(4)/ *
Charles M. Blalack.......... 69 1989 15,000/(5)/ *
Dr. R. Gene Brown........... 63 1969 42,910/(6)/ *
Anthony B. Holbrook......... 56 1987 348,609/(7)/ *
Richard Previte............. 61 1990 393,212/(8)/ *
S. Atiq Raza................ 47 1996 669,051/(9)/ *
Joe L. Roby................. 56 1991 27,800/(10)/ *
Dr. Leonard M. Silverman.... 56 1994 4,800/(11)/ *
Marvin D. Burkett/(12)/..... 53 N/A 248,784/(13)/ *
Eugene D. Conner/(14)/...... 52 N/A 319,199/(15)/ *
Stephen J. Zelencik/(16)/... 61 N/A 159,654/(17)/ *
All directors and executive
officers as a group/(14)/.. N/A 3,622,507/(18)/ 2.26%
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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)/ Includes 1,000,000 shares subject to options that are exercisable on
February 26, 1996, 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.
/(3)/ Dr. Baur was previously a member of the Board of Directors, from 1978
until 1982.
/(4)/ Includes 4,800 shares subject to options that are exercisable on February
26, 1996, or become exercisable within sixty (60) days thereafter.
/(5)/ Includes 15,000 shares subject to options that are exercisable on
February 26, 1996, or become exercisable within sixty (60) days
thereafter.
/(6)/ Includes 11,000 shares subject to options that are exercisable on
February 26, 1996, or become exercisable within sixty (60) days
thereafter.
/(7)/ Includes 272,862 shares subject to options that are exercisable on
February 26, 1996, or become exercisable within sixty (60) days
thereafter.
/(8)/ Includes 245,550 shares subject to options that are exercisable on
February 26, 1996, or become exercisable within sixty (60) days
thereafter.
/(9)/ Includes 655,499 shares subject to options that are exercisable on
February 26, 1996, or become exercisable within sixty (60) days
thereafter.
/(10)/ Includes 15,000 shares subject to options that are exercisable on
February 26, 1996, or become exercisable within sixty (60) days
thereafter.
/(11)/ Includes 4,800 shares subject to options that are exercisable on February
26, 1996, or become exercisable within sixty (60) days thereafter.
/(12)/ Mr. Burkett is Senior Vice President, Chief Financial and Administrative
Officer and Treasurer of Advanced Micro Devices, Inc.
/(13)/ Includes 248,784 shares subject to options that are exercisable on
February 26, 1996, or become exercisable within sixty (60) days
thereafter.
/(14)/ Mr. Conner is Senior Vice President, Operations of Advanced Micro
Devices, Inc.
/(15)/ Includes 309,264 shares subject to options that are exercisable on
February 26, 1996, or become exercisable within sixty (60) days
thereafter.
/(16)/ Mr. Zelencik is Senior Vice President and Chief Marketing Executive of
Advanced Micro Devices, Inc.
/(17)/ Includes 123,125 shares subject to options that are exercisable on
February 26, 1996, or become exercisable within sixty (60) days
thereafter.
/(18)/ Includes 3,068,544 shares subject to options that are exercisable on
February 26, 1996, or become exercisable within sixty (60) days
thereafter.
4
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors held seven regularly scheduled or special meetings
during the fiscal year ended December 31, 1995 (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 1995 to consider nominees for the 1995 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. Effective after the 1996
Annual Meeting of Stockholders, the Compensation Committee will be comprised of
Mr. Blalack and Dr. Brown. 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 approves 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 1995, the Compensation Committee
met nine times. The Board has also delegated to Mr. Sanders, acting as the sole
member of the Employee Stock Committee of the Board, the authority to grant
stock options 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 thirty-seven 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
5
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.
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 shares 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. Similar provisions for non-employee Directors
are contained in the 1996 Stock Incentive Plan which, if approved by the
stockholders (see Proposal No. 3), will be in effect in place of the 1992 Stock
Incentive Plan.
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 1995, 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 $20,000 in lieu of his annual fee for acting as Chairman of the Audit
Committee. Dr. Brown also received family medical and dental insurance coverage
from the Corporation at a cost of $5,371.
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 15 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
6
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.
Decisions concerning specific 1995 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 1995 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,
unless extended by Mr. Sanders for a period of one year. 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 1995, after taking the foregoing factors into account, the Committee
approved a 2.8% increase to Mr. Sanders' base salary for a total base salary of
$978,887. 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 the Chief
Executive Officer does not assign relative weight or priority to any one
factor.
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
7
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.
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 (the "Unpaid
Contingent Bonus") is carried forward and added to the award for any of the
next three fiscal years and then lapses. Any previously unpaid carried forward
amount is 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
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 a bonus agreement entered into in 1992, Mr. Previte
is eligible for and received an annual incentive bonus similar to Mr. Sanders'
bonus, but based on 0.3% of adjusted operating profits.
All senior executives with titles of vice president and above, other than Mr.
Sanders and Mr. Previte, were eligible for and earned awards under the
Executive Bonus Plan for 1995. The Corporation adopted a revised Executive
Bonus Plan in 1994. All 1995 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 1995, 80% 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 20% 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 1995, all eligible and participating executive officers earned
less than target 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. At the 1996 Annual Meeting of
Stockholders, the stockholders are being asked to approve the 1996 Executive
Incentive Plan so that incentive compensation paid will continue to be
deductible.
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 1995, all eligible and
participating executives (which does not include Messrs. Sanders and Previte)
earned an award under the long-term component of the Executive Bonus Plan that
was significantly below the maximum.
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. 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. At the 1996 Annual Meeting of
Stockholders, the stockholders are being asked to approve the 1996 Stock
Incentive Plan so that the Corporation may continue to grant options consistent
with the Committee's compensation philosophy.
8
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.
Options granted generally become exercisable after continued employment for a
period of six months to four years. The Committee granted options in 1995 to
the executives named in the Option/SAR Grant Table of the Proxy Statement.
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. No restricted stock awards were granted to employees named in
the Summary Compensation Table in 1995.
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. In 1995, the average quarterly stock price for the
quarter ended April 2, 1995, exceeded the targeted stock price. Therefore, on
April 4, 1995, the Committee declared that 30,000 of the shares awarded to Mr.
Previte vested. If the Corporation's average quarterly stock price in 1996,
1997 or 1998 meets or exceeds the targeted quarterly stock price, then
restrictions on additional shares will be lifted. 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 certain changes 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.
9
Tax Policy
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. To this end, the Corporation is seeking
stockholder approval of the 1996 Executive Incentive Plan and the 1996 Stock
Incentive Plan which are designed to comply with the deductibility requirements
of Section 162(m).
With respect to compensation arrangements outside of the 1996 Executive
Incentive Plan, 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 stock option grants and performance-based restricted stock awards in
a manner that ensures the tax deductibility of such amounts. However, under
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 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
10
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Compensation Committee in 1995 and through the
Corporation's 1996 Annual Meeting 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. After the Corporation's 1996 Annual Meeting, the
members of the Compensation Committee will be Mr. Blalack and Dr. Brown.
Mr. Roby is the President, Chief Operating Officer and a director of
Donaldson, Lufkin & Jenrette, Inc. ("DLJ"). Over the past twenty years,
Donaldson, Lufkin & Jenrette Securities Corporation, a wholly owned subsidiary
of DLJ, has 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 has
also recently acted as the Corporation's financial advisor in connection with
various matters, including the Corporation's acquisition of NexGen. Donaldson,
Lufkin & Jenrette Securities Corporation may provide investment banking
services to the Corporation again during 1996.
W. J. Sanders III, the Corporation's Chief Executive Officer and Chairman of
the Board, became a member of the Board of Directors of Donaldson, Lufkin &
Jenrette, Inc. in November 1995. Mr. Sanders was an advisory director of
Donaldson, Lufkin & Jenrette, Inc. from February 1985 to November 1995.
EXECUTIVE COMPENSATION
The following table shows for the three fiscal years ended December 31, 1995,
the compensation paid by the Corporation and its subsidiaries to the
Corporation's Chief Executive Officer and to the four other most highly paid
executive officers whose aggregate salary and bonus compensation exceeded
$100,000.
SUMMARY COMPENSATION TABLE (1993-1995)
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....... 1995 $978,887 $2,026,961/(4)/ $278,704/(5)/ $ 0 0 $34,923
Chairman and Chief 1994 $952,225 $3,573,261/(6)/ $315,578/(7)/ $1,597,200 200,000 $51,648
Executive Officer 1993 $929,000 $2,141,618/(8)/ $141,000/(9)/ $ 0 0 $40,926
Richard Previte......... 1995 $660,495 $1,358,757/(10)/ $ 0 $ 0 100,000 $29,060
President and Chief 1994 $606,250 $1,801,952/(11)/ $ 0 $3,194,000 152,500 $46,592
Operating Officer 1993 $543,125 $1,073,888 $ 0 $ 0 25,000 $33,796
Stephen J. Zelencik..... 1995 $403,978 $ 444,432 $ 0 $ 0 50,000 $20,890
Senior Vice President 1994 $364,022 $ 599,069 $ 0 $ 0 72,125 $41,467
and Chief Marketing 1993 $334,593 $ 326,252 $ 0 $ 0 12,500 $31,882
Executive
Marvin D. Burkett....... 1995 $373,154 $ 319,743 $ 0 $ 0 50,000 $21,718
Senior Vice President 1994 $348,750 $ 513,379 $ 0 $ 0 75,000 $40,443
Chief Financial and 1993 $310,499 $ 271,935 $ 0 $ 0 12,500 $30,657
Administrative Officer
and Treasurer
Eugene D. Conner........ 1995 $362,789 $ 318,212 $ 0 $ 0 50,000 $21,297
Senior Vice President, 1994 $342,000 $ 499,425 $ 0 $ 0 75,000 $38,542
Operations 1993 $313,501 $ 287,401 $ 0 $ 0 12,500 $28,824
11
- --------
/(1)/ For the named persons, includes cash profit sharing in the following
amounts for Messrs. Sanders, Previte, Zelencik, Burkett and Conner,
respectively: for 1995, $69,187, $46,157, $28,009, $26,264 and $25,535;
for 1994, $90,711, $60,677, $36,445, $34,903 and $34,240; for 1993,
$60,200, $34,879, $21,489, $19,935 and $20,128.
/(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 31, 1995, were as follows: for Mr.
Sanders, 120,000 shares valued at $1,980,000; for Mr. Previte, 90,000
shares valued at $1,485,000; 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 29, 1995 ($16.50), 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 120,000 restricted shares held by Mr.
Sanders at year-end, 60,000 shares vested 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. In April 1995, 30,000 restricted shares awarded to
Mr. Previte vested because the quarterly stock price for the quarter ended
April 2, 1995, exceeded the targeted stock price. The remaining restricted
shares awarded to Mr. Previte will 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 1996 and ending with the last
quarter of 1998. If the targets for 1996 through the last quarter of 1998
are 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 from the grant date in the price of the
Corporation's common stock which equals or exceeds the historical
performance of the S&P 500 Index. Vesting of all of Mr. Sanders' remaining
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 $15,115, the Corporation's
matching contributions to the Corporation's 401(k) Plan in the amount of
$2,250, and on behalf of Messrs. Sanders, Previte, Zelencik, Burkett and
Conner, the Corporation's contributions to the Corporation's Excess 415
Plan (nonqualified deferred compensation) in the amounts of $0, $0, $0, $0
and $0, respectively, the Corporation's matching contributions to the
Executive Savings Plan in the amounts of $12,038, $5,836, $0, $2,407 and
$2,278 respectively, and the amount of premiums paid by the Corporation
for term life insurance in the amounts of $5,520, $5,859, $3,525, $1,946
and $1,654, respectively.
The Corporation has purchased individual insurance policies for Messrs.
Sanders, Previte, 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"), the Corporation may pay the 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 and Zelencik exceeded
the balance of the deferred compensation and interest credited to their
accounts under the Plan by a maximum of approximately $29,193, $10,489,
and $9,074, respectively, during 1995. (The cash surrender value of the
life insurance policies of Messrs. Burkett and Conner did not exceed the
balance credited to their accounts.) Thus, if the rights of Messrs.
Sanders, Previte and Zelencik in their life insurance policies had become
unencumbered in 1995, they would have received benefits which would have
exceeded their benefits payable under the Plan by the foregoing amounts.
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 $1,957,774 was paid out with respect to fiscal year
1995. In addition, a balance of $802,766, the Unpaid Contingent Bonus, was
carried over from 1995 for payment with respect to fiscal year 1996 or
1997, if Mr. Sanders' bonus for any such year does not exceed the maximum
amount. (Payment with respect to fiscal year 1997 may only occur if Mr.
Sanders extends
12
his employment agreement to December 31, 1997.) In no event will the
combination of the bonus determined in any fiscal year plus the Unpaid
Contingent Bonus carried over from prior years exceed the maximum bonus
amount. If the Unpaid Contingent Bonus is not paid within such time, it
is forfeited. For example, $74,976, the Unpaid Contingent Bonus earned in
1992 and carried forward for potential payment in fiscal years 1993
through 1995, is no longer available for payment to Mr. Sanders.
/(5)/ Includes $98,310 of in-kind compensation in the form of the use of
company-provided vehicles and drivers, $123,319, the cost to AMD of
providing physical security services, and cash payments for tax gross-ups
in the amount of $44,622.
/(6)/ A maximum amount of $1,904,450 was paid out with respect to fiscal year
1994, with a balance of $1,578,100, the Unpaid Contingent Bonus, carried
over for payment with respect to fiscal year 1995, 1996 or 1997 (if Mr.
Sanders extends his employment agreement to December 31, 1997). Both the
maximum amount and the Unpaid Contingent Bonus are included in the
Summary Compensation Table.
/(7)/ Includes $93,206 of in-kind compensation in the form of the use of
company-provided vehicles and drivers, $181,556, the cost to AMD of
providing physical security services, and cash payments for tax gross-ups
in the amount of $39,416.
/(8)/ A maximum amount of $1,854,837 was paid out with respect to fiscal year
1993, with a balance of $226,580, the Unpaid Contigent Bonus, carried
over for payment with respect to fiscal year 1994, 1995 or 1996. Both the
maximum amount and the Unpaid Contingent Bonus are included in the
Summary Compensation Table.
/(9)/ 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 of $38,663.
/(10)/ A maximum amount of $1,312,600 was paid out with respect to fiscal year
1995. In addition, a balance of $67,670, the Unpaid Contingent Bonus, was
carried over from 1995 for payment with respect to fiscal year 1996, 1997
or 1998, if Mr. Previte's bonus for any such year does not exceed the
maximum amount. In no event will the combination of the bonus determined
in any fiscal year plus the Unpaid Contingent Bonus carried over from
prior years exceed the maximum bonus amount. If the Unpaid Contingent
Bonus is not paid within such time, it is forfeited.
/(11)/ A maximum amount of $1,250,000 was paid out with respect to fiscal year
1994, with a balance of $491,275, the Unpaid Contingent Bonus, carried
over for payment with respect to fiscal year 1995, 1996 or 1997. Both the
maximum amount and the Unpaid Contingent Bonus are included in the
Summary Compensation Table.
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)
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO
OPTIONS/SARS EMPLOYEES IN EXERCISE PRICE EXPIRATION
NAME GRANTED/(1)/ FISCAL YEAR PER SHARE DATE 5% 10%
---- ------------ ------------ -------------- ---------- ------------ ------------
W. J. Sanders III....... 0 0.00% -- -- -- --
Richard Previte......... 100,000 3.83% $35.38 5/8/05 $ 2,225,029 $5,638,660
Stephen J. Zelencik..... 50,000 1.91% $35.38 5/8/05 $ 1,112,514 $2,819,330
Marvin D. Burkett....... 50,000 1.91% $35.38 5/8/05 $ 1,112,514 $2,819,330
Eugene D. Conner........ 50,000 1.91% $35.38 5/8/05 $ 1,112,514 $2,819,330
- --------
/(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. 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. All options become
cumulatively exercisable in two equal installments on July 10, 1996 and
July 10, 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. 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 1995.
13
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 12/31/95 OPTIONS/SARS AT 12/31/95/(1)/
ACQUIRED ON VALUE ----------------------------- -----------------------------
NAME EXERCISE REALIZED/(1)/ (EXERCISABLE) (UNEXERCISABLE) (EXERCISABLE) (UNEXERCISABLE)
---- ----------- ------------- ------------- --------------- ------------- ---------------
W. J. Sanders III....... 0 $ 0 800,000 400,000 $6,950,000 $700,000
Richard Previte......... 88,750 $1,990,793 245,550 200,000 $ 356,841 $ 0
Stephen J. Zelencik..... 0 $ 0 123,125 100,000 $ 172,275 $ 0
Marvin D. Burkett....... 25,000 $ 737,500 248,784 100,000 $1,367,070 $ 0
Eugene D. Conner........ 0 $ 0 309,264 100,000 $2,107,950 $ 0
- --------
/(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.
14
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 S&P 500 Composite Index, and the S&P
High Technology Composite Index.
(CHART)
The chart above assumes $100 invested on December 31, 1990, in Advanced Micro
Devices, Inc. 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 DECEMBER 31
--------------------------------------------
1990 1991 1992 1993 1994 1995
---- ------- ------- ------- ------- -------
AMD................................ $100 $358.97 $371.79 $364.10 $510.26 $338.56
S&P 500............................ $100 $130.47 $140.41 $154.56 $156.60 $215.45
S&P High Technology................ $100 $114.08 $118.79 $146.13 $170.31 $245.32
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 $978,887. This amount may be increased (but not
reduced) by the Board of Directors or its delegate. In accordance with Mr.
Sanders' contract, his 1994 base salary of $952,225 was increased to $978,887.
This 2.8% increase was equal to the cost of living increase as permitted by
regulations under Section 162(m) of the Code. Additional 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
15
his annual base salary. The amount of the annual incentive bonus which exceeds
the maximum bonus payable in a particular year (the "Unpaid Contingent 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 Unpaid Contingent Bonus does not cause the
bonus otherwise payable to exceed the maximum incentive bonus payable in that
year. If the Unpaid Contingent 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, adjusted for any pretax gain or loss
from any joint ventures and 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 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 Unpaid Contingent 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 any 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
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
16
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
for good cause 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 Unpaid Contingent 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 beneficiary will be entitled to a portion of the death
benefit described in that footnote.
Bonus Agreements. In 1992, the Corporation entered into a bonus agreement
with Mr. Previte. Under the terms of the agreement, Mr. Previte receives 0.3%
of adjusted operating profits of the Corporation up to an annual maximum. Any
amount in excess of the maximum is carried over as an Unpaid Contingent Bonus,
similar to that under Mr. Sanders' employment agreement. If the Unpaid
Contingent Bonus is not payable within the specified time, it is forfeited.
"Adjusted operating profits" are treated in the same manner as under Mr.
Sanders' employment agreement.
Deferred Compensation Elections. Messrs. Sanders, Previte, 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 cannot 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 investment funds in which his deferred compensation will be deemed to
be invested. The Corporation selects the actual commercially available
investment 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.
17
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, 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 a 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 August 27, 1994, Mr. Holbrook resigned from his
position as Chief Technical Officer of the Corporation, a position he held
since 1990, but continues to serve as Vice Chairman of the Board of Directors
until his term expires at the 1996 Annual Meeting of Stockholders. 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. This agreement was extended through
April 25, 1996. Mr. Holbrook is compensated at the bi-weekly rate of $5,592.
Mr. Holbrook's stock options continue to vest as a part-time employee. 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
18
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 Section 162(m) must be reduced by payments which are
considered "excess parachute payments" under Section 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 in 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, 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 surrender value of the policy.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Dr. Friedrich Baur, a nominee for director of the Corporation, is a 50% owner
of MST Beteiligungs und Unternehmensberatungs GmbH, a corporation formed under
the laws of the Federal Republic of
19
Germany ("MST Group"). MST Group owns 24.5% of MST Communications GmbH, also a
corporation formed under the laws of the Federal Republic of Germany ("MST
Communications"). MST Communications entered into a contract with the Saxony
State Ministry for Economics and Labor commencing October 1, 1994, and
terminating December 31, 1997, under which it receives a grant in return for
advising authorities in the State of Saxony, the Federal Republic of Germany,
regarding the production of microprocessors by the Corporation using .35
micron technology in the State of Saxony. MST Communications also advises the
Saxony State Ministry for Economics and Labor as well as Saxony industrial
companies and institutions regarding projects in the fields of multimedia
development, lightweight vehicle manufacturing, environmental remediation and
recycling facilities. Assuming an exchange rate of DM 1.45 to $1.00, under the
contract, MST Communications has received $154,479 through December 31, 1995,
and is expected to receive $55,172 and $52,414 in 1996 and 1997, respectively.
The contract provides that MST Communications must incur expenditures of at
least $393,104 during the contract term in order to qualify for grant
payments. The contract provides that the monies due to MST Communications in
1997 will not be paid in the event that the Corporation decides not to
continue with construction of a wafer fabrication facility in Dresden. The
Corporation announced in December 1995 that it intended to construct a
submicron wafer fabrication facility and design center in Dresden, Germany at
an estimated cost of approximately $1.5 billion over the next five years
before government financing. Groundbreaking for the new facility is scheduled
for the end of 1996. The governments of the Federal Republic of Germany and
the State of Saxony will provide substantial financial assistance to the
Corporation through grants and allowances, loan guarantees and loan interest
subsidies. The Corporation has commitments to make cash investments and loans
aggregating $350 million over the next four years in connection with this
facility, including $75 million in 1996.
Prior to AMD's acquisition of NexGen on January 17, 1996, and in connection
with Mr. S. Atiq Raza's employment by NexGen in September 1988, NexGen made
two loans, evidenced by two promissory notes, to him of $50,000 each, bearing
interest at 9% per annum, with interest payable semi-annually, and principal
due October 17, 1989, and October 17, 1998, respectively. In February 1990, in
recognition of Mr. Raza's continued service to NexGen, NexGen and Mr. Raza
entered into an agreement to extend the maturity date of the note due in 1989
and to reduce the interest rate thereon to 7.98%. In addition, the interest
rate on the note due in 1998 was reduced to 8.12%. In February 1992, in
recognition of Mr. Raza's continued service to NexGen, NexGen agreed to extend
the maturity date on the $50,000 note originally due in 1989 to October 17,
1996, to reduce the interest rate thereon to 7.07%, and to pay Mr. Raza a
bonus on October 17, 1996, equal to all interest accrued on the note while Mr.
Raza was an employee. Such bonus is to be paid in the form of cancellation of
indebtedness on the note. AMD assumed these arrangements as a result of its
acquisition of NexGen. The largest aggregate amount outstanding under such
loans as of February 26, 1996 was $128,874.
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 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 1995.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE PROPOSED
SLATE OF DIRECTORS FOR THE CURRENT YEAR. UNLESS MARKED TO THE CONTRARY,
PROXIES RECEIVED WILL BE VOTED "FOR" THE PROPOSED NOMINEES.
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 have been
the Corporation's independent auditors since its incorporation in 1969.
20
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
Committee examines the effect that the performance of non-audit services may
have upon the independence of the auditors.
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.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE RATIFICATION
OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE INDEPENDENT AUDITORS FOR THE
CURRENT YEAR. UNLESS MARKED TO THE CONTRARY, PROXIES RECEIVED WILL BE VOTED
"FOR" RATIFICATION.
PROPOSAL NO. 3--APPROVAL OF ADVANCED MICRO DEVICES, INC. 1996 STOCK INCENTIVE
PLAN
The Corporation's stockholders are also being asked to approve the Advanced
Micro Devices, Inc. 1996 Stock Incentive Plan (the "AMD 1996 Stock Plan") and
the reservation of 6,500,000 shares of AMD authorized common stock for issuance
thereunder. The AMD 1996 Stock Plan is the successor equity incentive plan to
the Advanced Micro Devices, Inc. 1992 Stock Incentive Plan. As of February 26,
1996, there are approximately 1,864,700 shares of AMD common stock available
for issuance under the Corporation's current option plans, which are
insufficient to fulfill the Corporation's compensation objectives. Options will
continue to be granted under current plans until the shares available for
issuance thereunder are exhausted or until the plans expire. If the
Corporation's stockholders approve the AMD 1996 Stock Plan, under which non-
employee Directors will automatically receive options pursuant to the plan's
formula grant provisions, similar provisions for non-employee Directors
contained in the 1992 Incentive Plan will be discontinued immediately.
Equity incentives have continually been a significant component of
compensation for a broad range of the Corporation's employees. This practice
has enabled the Corporation to attract and retain the talent which it continues
to require. By linking key employees' compensation to corporate performance,
the employees' reward is directly related to the Corporation's success. The
Corporation believes the use of equity incentives increases employee motivation
to improve stockholder value.
The purpose of the AMD 1996 Stock Plan is to enable the Corporation and its
affiliates to recruit and retain capable employees for the successful conduct
of its business and to provide an additional incentive to officers and other
eligible key employees, consultants and advisors and non-employee directors
("Outside Directors") upon whom rest major responsibilities for the successful
operation and management of the Corporation and its affiliates. The AMD 1996
Stock Plan is intended to enable the Corporation to attract qualified personnel
in a highly competitive labor market. The Corporation intends future increases
in the value of securities granted under the AMD 1996 Stock Plan to form part
of the compensation for services to be rendered by such persons in the future.
The Board of Directors adopted the AMD 1996 Stock Plan effective February 7,
1996, subject to stockholder approval. Below is a summary of the principal
provisions of the AMD 1996 Stock Plan and its operation. A copy of the AMD 1996
Stock Plan is set forth in full in Appendix A to the Proxy Statement, and the
following description of the AMD 1996 Stock Plan is qualified in its entirety
by reference to that Appendix.
21
SUMMARY DESCRIPTION OF THE AMD 1996 STOCK PLAN
Number of Shares Subject to the AMD 1996 Stock Plan. The AMD 1996 Stock Plan
reserves for issuance up to 6,500,000 shares of AMD common stock pursuant to
the exercise of options granted under such plan. The number of shares is
subject to adjustment for any future stock dividends, splits, mergers,
combinations, or other changes in capitalization as described in the AMD 1996
Stock Plan. The market value of the Corporation's common stock on the New York
Stock Exchange as of February 26, 1996, was $19.75 per share.
In order to comply with the requirements for deductibility under Section
162(m) of the Code the maximum number of shares which may be granted to an
individual under the AMD 1996 Stock Plan during the full ten-year term of the
AMD 1996 Stock Plan is 2,000,000 shares.
Administration and Duration of the AMD 1996 Stock Plan. Authority to
administer the AMD 1996 Stock Plan and to grant awards rests with the Board of
Directors. The Board has delegated its authority to grant awards to any
employee (including officers who are members of the Board) to the Compensation
Committee. The Board has also delegated authority to Mr. Sanders, acting as the
sole member of the Employee Stock Committee of the Board, to grant awards
covering up to 25,000 shares per year to any employee who is not also an
officer or member of the Board.
The AMD 1996 Stock Plan will terminate on February 7, 2006, but the Board
retains the right to suspend, terminate or amend the plan at any time. On
termination of the plan, outstanding awards remain in effect until they expire
by their terms, are forfeited or otherwise terminate.
Eligibility for Participation. Options may be granted under the AMD 1996
Stock Plan by the appropriate administrative committee of the Board to key full
or part-time employees, officers, consultants and advisors of the Corporation
and its affiliates. Management estimates that as many as 3,100 of its present
employees are currently eligible to receive awards under the AMD 1996 Stock
Plan. However, depending upon numerous factors, awards may be granted to a
significantly larger or smaller number of employees. Management is not able to
estimate the number of consultants and advisors that may be eligible to receive
awards under the AMD 1996 Stock Plan. Outside Directors are also eligible for
the grant of options pursuant to the nondiscretionary provisions of the AMD
1996 Stock Plan. Assuming all nominees are elected at the 1996 Annual Meeting
of Stockholders, there will be five Outside Directors eligible to receive
options under the AMD 1996 Stock Plan.
Terms of Options. Options granted to employees may be either incentive stock
options ("ISOs") which satisfy the requirements of Code Section 422 or
nonstatutory options ("NSOs") which are not intended to satisfy such
requirements. Options granted to Outside Directors, consultants and advisors
may only be NSOs.
The option exercise price of ISOs may not be less than the fair market value
of the Corporation's common stock on the date of grant of the ISO. The option
exercise price of NSOs may not be less than 100% of the fair market value of
the Corporation's common stock on the date of grant of the NSO. Payment of the
exercise price may be made in cash, by certified check, promissory note, other
shares of the Corporation's common stock, or through a same day sale program.
In addition, the Board may authorize loans and loan guarantees for the exercise
price. The term of an ISO may not exceed ten years. The term of an NSO may not
exceed ten years plus one day.
Options granted to employees generally are made cumulatively exercisable in
annual installments, although the actual dates of exercise may be modified by
the Board or its delegate so long as the option holder's interest is not
thereby diminished without the option holder's consent. Options may be made
exercisable only under such conditions as the Board or its delegate may
establish, such as if the optionee remains employed until a specified date, or
if specified performance goals have been met. If an optionee's employment
terminates because of misconduct, such option terminates immediately. If an
optionee's employment terminates for any reason other than misconduct, the
option remains exercisable for a fixed period of three months (twelve months
where employment has terminated because of death or disability) or a
22
longer period to be fixed by the Board or its delegate up to the remainder of
the option's term. In no case may an option be exercised after the expiration
of the option term. An option may be exercised by the optionee or his guardian
or legal representative.
Outside Director Option Program. An Outside Director who has not previously
been elected or appointed as a member of the Board will be granted an initial
option for 12,000 shares on his or her election or appointment (a "First
Option"). First Options vest in increments of 4,800, 3,600, 2,400, and 1,200 on
July 15 of the first, second, third and fourth calendar year following grant.
On the first business day coincident with or following each annual meeting of
the Corporation's stockholders at which an Outside Director is re-elected, he
or she will automatically receive an additional option for 3,000 shares (an
"Annual Option"), vesting in three increments of 1,000 shares on each July 15
of the second, third and fourth calendar year following re-election. Options
held by Outside Directors may be exercised for up to twelve months following
termination of their service on the Board to the extent the Options are vested
on the date of termination. Options which are not vested on the date of
termination are canceled. Options held by Outside Directors will become fully
vested for exercise upon a Change of Control. See the section entitled
"Acceleration in Connection with a Change of Control" below.
Acceleration in Connection with a Change of Control. If a participant's
employment is terminated for any reason other than for cause (or, with respect
to certain participants who are executive officers of the Corporation as
defined in the AMD 1996 Stock Plan, there is a constructive termination of
their employment) within one year after a Change of Control, all options held
by such a participant become fully vested. A constructive termination occurs if
the participant resigns because of a diminution or adverse change in his or her
conditions of employment. Options held by Outside Directors become fully vested
upon a Change of Control without regard to termination of their service as a
director. In general, a "Change of Control" will be deemed to have occurred
upon the acquisition of more than 20% of either the then outstanding shares of
AMD common stock or the combined voting power of the Corporation's then
outstanding securities, a change in two-thirds of the Board of Directors over a
two-year period, certain mergers or corporate transactions in which the
Corporation is not the surviving entity, or a liquidation of the Corporation or
a sale of substantially all of the Corporation's assets.
New Plan Benefits Table. The following table shows in the aggregate the
Annual Options that will be granted to Outside Directors under the AMD 1996
Stock Plan if the stockholders approve the AMD 1996 Stock Plan. Since all
current Outside Directors are incumbent directors, no Outside Director who is
elected at the 1996 Annual Meeting of Stockholders will receive a First Option.
Because future awards to executive officers and employees of the Corporation
are discretionary and cannot be determined at this time, the table does not
reflect any such awards.
EXERCISE PRICE
NAME AND POSITION (PER SHARE) NUMBER OF SHARES
----------------- -------------- ----------------
All current directors/(1)/ who are not
executive officers as a group Fair market value
(5 persons)............................. on date of grant 15,000
- --------
/(1)/ Excluding Mr. Holbrook who is not standing for re-election as a director
at the 1996 Annual Meeting of Stockholders.
Federal Tax Consequences--Nonstatutory Options. No taxable income is
recognized by an optionee upon the grant of an NSO. The optionee generally will
recognize ordinary income in the year in which the option is exercised equal to
the excess of the fair market value of the purchased shares at the date of
exercise over the exercise price, and the optionee will be required to satisfy
the tax withholding requirements applicable to such income which the optionee
may elect to satisfy by having the Corporation withhold shares from the shares
otherwise due or by delivering a sufficient number of previously owned shares
of the Corporation's common stock to the Corporation. On ultimate sale of the
shares, the optionee will generally recognize as capital gain or loss the
difference between the fair market value on the date of exercise and the
ultimate sales price.
23
Incentive Stock Options. No taxable income is recognized by the optionee at
the time of the grant of an ISO and, except in determining alternative minimum
tax, no taxable income is recognized at the time the ISO is exercised. The
optionee will, however, recognize taxable income or loss in the year in which
the purchased shares are sold or otherwise made the subject of disposition.
For federal tax purposes, dispositions of ISOs are divided into two
categories: qualifying and disqualifying. The optionee will make a qualifying
disposition of the purchased shares if the sale or other taxable disposition of
such shares is made more than two years after the grant date of the option and
more than one year after the exercise date. If the optionee fails to satisfy
either of these two holding periods prior to the sale or other disposition of
the purchased shares, then a disqualifying disposition will result.
Upon a qualifying disposition of the shares, the optionee generally will
recognize long-term capital gain in an amount equal to the excess of (i) the
amount realized upon the sale or other disposition over (ii) the option price
paid for the shares. If there is a disqualifying disposition of the shares,
then the excess of (i) the fair market value of the shares at the date of
exercise (or, if lower, the fair market value of the shares on the date of
disposition) over (ii) the option price paid therefor will be taxable as
ordinary income. Any additional gain recognized upon the disposition will be a
capital gain, and such gain will be long-term if the shares have been held for
more than one year following exercise of the option.
Alternative Minimum Tax. The difference between the fair market value of
shares subject to an ISO on the date of exercise and the exercise price of such
shares is an adjustment to income for purposes of the alternative minimum tax
(the "AMT"). The AMT (imposed to the extent it exceeds the taxpayer's regular
tax) is 26% of an individual taxpayer's alternative minimum taxable income (28%
in the case of alternative minimum taxable income in excess of $175,000).
Alternative minimum taxable income is determined by adjusting regular taxable
income for certain items, increasing that income by certain tax preference
items (including the difference between the fair market value of the shares
subject to the ISO on the date of exercise and the exercise price) and reducing
this amount by the applicable exemption amount ($45,000 in case of a joint
return, subject to reduction under certain circumstances). If a disqualifying
disposition of the shares subject to an ISO occurs in the same calendar year as
exercise of the ISO, there is no AMT adjustment with respect to those shares.
Also, upon a sale of such shares that is a qualifying disposition, alternative
minimum taxable income is reduced in the year of sale by the excess of the fair
market value of the shares subject to the ISO at exercise over the amount paid
for such shares.
Deduction to the Corporation. The Corporation will be entitled to an income
tax deduction equal to the amount of ordinary income recognized by the optionee
in connection with the exercise of an NSO. The deduction generally will be
allowed for the taxable year of the Corporation in which occurs the last day of
the calendar year in which the optionee recognizes ordinary income in
connection with such exercise.
If the optionee makes a disqualifying disposition of the shares purchased on
exercise of an ISO, then the Corporation will be entitled to an income tax
deduction for the taxable year in which such disposition occurs, equal to the
amount which is taxable to the employee as ordinary income. In no other
instance will the Corporation be allowed a deduction with respect to the
optionee's disposition of the shares purchased upon exercise of an ISO.
Under Section 162(m) of the Code, the Corporation is not entitled to a
deduction for certain executive compensation in excess of $1,000,000. This
limitation applies to compensation paid to the Corporation's Chief Executive
Officer and to each of its next four most highly compensated executive
officers. Amounts treated as compensation pursuant to the exercise of stock
options are subject to the deduction limit, unless the option exercise price is
at least equal to the fair market value of the underlying stock on the date of
grant. In addition, the grant of options must be made by a committee of at
least two "outside directors" as defined under Code Section 162(m). Awards
granted under the AMD 1996 Stock Plan are intended to qualify for full
deductibility.
24
REQUIRED VOTE
An affirmative vote of the holders of a majority of the shares of AMD common
stock present in person or represented by proxy and entitled to vote on the AMD
1996 Stock Plan is required for approval. Abstentions will be counted for
purposes of determining the number of shares present and entitled to vote and
will have the effect of a vote against the AMD 1996 Stock Plan. Broker non-
votes, if any, will not be counted in determining the number of shares present
and entitled to vote on the 1996 Stock Plan.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL OF THE
AMD 1996 STOCK INCENTIVE PLAN. UNLESS MARKED TO THE CONTRARY, PROXIES RECEIVED
WILL BE VOTED "FOR" APPROVAL.
PROPOSAL NO. 4--APPROVAL OF ADVANCED MICRO DEVICES, INC.--1996 EXECUTIVE
INCENTIVE PLAN
The Corporation's stockholders are being asked to approve the Advanced Micro
Devices, Inc. 1996 Executive Incentive Plan (the "Executive Incentive Plan").
The Board adopted the Executive Incentive Plan effective February 7, 1996,
subject to stockholder approval.
The Corporation has had a longstanding practice of linking key employees'
compensation to corporate performance. This increases employee motivation to
improve stockholder value--the employee's reward is directly related to the
Corporation's success. A performance-based incentive plan rewards key employees
for achieving objectives for the financial performance of the Corporation and
its business units. The purposes of the Executive Incentive Plan are to
motivate key employees to improve stockholder value by linking a portion of
their cash compensation to the Corporation's financial performance, reward key
employees for improving the Corporation's financial performance and help
attract and retain key employees.
Under Section 162(m) of the Code, the federal income tax deductibility of
compensation paid to the Corporation's Chief Executive Officer and to each of
its next four most highly compensated executive officers may be limited to the
extent that it exceeds $1,000,000 in any one year. The Corporation can deduct
compensation in excess of that amount if it qualifies as "performance-based
compensation" under Section 162(m) of the Code. For compensation paid under the
Executive Incentive Plan to qualify as "performance based compensation," the
Executive Incentive Plan must be approved by stockholders. The Executive
Incentive Plan is intended to permit the Corporation to pay incentive
compensation which qualifies as performance-based compensation, thereby
permitting the Corporation to continue to receive a federal income tax
deduction for the payment of such incentive compensation.
Below is a summary of the principal provisions of the Executive Incentive
Plan. A copy of the Executive Incentive Plan is set forth in full in Appendix B
to the Proxy Statement and the following description of the Executive Incentive
Plan is qualified in its entirety by reference to that Appendix.
SUMMARY DESCRIPTION OF THE EXECUTIVE INCENTIVE PLAN
The Executive Incentive Plan will be administered by the Compensation
Committee. The members of the Compensation Committee must qualify as "outside
directors" under Section 162(m) in order for cash awards under the Executive
Incentive Plan to qualify as deductible performance-based compensation under
Section 162(m). Subject to the terms of the Executive Incentive Plan, the
Compensation Committee has the sole discretion to determine the key employees
who shall be granted awards, and the amounts, terms and conditions of each
award. During any fiscal year of the Corporation, no participant may receive an
award of more than $5,000,000.
In selecting participants for the Executive Incentive Plan, the Compensation
Committee will choose key employees of the Corporation and its affiliates who
are likely to have a significant effect on the Corporation's success. The
actual number of employees who will receive awards under the Executive
Incentive Plan cannot be determined because eligibility for participation is in
the discretion of the Compensation Committee. However, for calendar year 1995,
there were currently 33 employees approved for participation in the prior AMD
Bonus Plan. Participation in future years will be in the discretion of the
Compensation Committee,
25
but it currently is expected that a similar number of employees will
participate in each such year. It is not expected that AMD's Chief Executive
Officer or Chief Operating Officer will participate in the Executive Incentive
Plan because of pre-existing contractual incentive compensation arrangements,
at least until such arrangements have expired or otherwise terminated. These
arrangements are more fully described in the section entitled "Compensation
Agreements" of the Proxy Statement.
Under the Executive Incentive Plan, the Compensation Committee will determine
the fiscal year or other performance period for measuring actual performance
("performance period"). The Compensation Committee will establish (a) the
performance goals which are to be monitored during the performance period and
the target level of performance for each business criterion and (b) a formula
for calculating a participant's award depending on how actual performance
compared to the pre-established performance goals. Performance goals may be
based on business criteria including: return on net assets, net income,
earnings per share, return on equity, return on investment, market share,
operating income, strategic positioning programs, cash flow, stockholder
return, revenue, new product releases and revenue growth.
The Compensation Committee may set performance periods and performance goals
which differ from participant to participant. For example, the Compensation
Committee may choose performance goals based on either Corporation-wide or
business unit results, as deemed appropriate in light of the participant's
specific responsibilities. For purposes of qualifying awards as performance-
based compensation under Section 162(m), the Compensation Committee may (but is
not required to) specify performance goals for the Corporation and/or one of
its business units.
After the end of each performance period, a determination will be made as to
the extent to which the performance goals applicable to each participant were
achieved or exceeded. The actual award (if any) for each participant will be
determined by the level of actual performance which was achieved. However, the
Compensation Committee retains discretion to eliminate or reduce the actual
award payable to any participant below that which otherwise would be payable
under the applicable formula. Awards under the Executive Incentive Plan
generally will be payable in cash after the end of the performance period
during which the award was earned.
Given that payments under the Executive Incentive Plan are determined by
comparing actual performance to the performance goals established by the
Compensation Committee, it is not possible to conclusively state the amount of
benefits which will be paid under the Executive Incentive Plan for any
performance period. The following table sets forth the awards that would have
been earned by each of the following persons and groups if the Executive
Incentive Plan had been in effect for 1995. Because the 1996 performance goals
have not yet been established, the amounts in this table have been calculated
by applying the performance goals that were adopted by the Compensation
Committee for fiscal year 1995 under the Corporation's current bonus plan based
on 1995 results.
PROJECTED DOLLAR VALUE
NAME AND POSITION BASED ON 1995 OBJECTIVES
----------------- ------------------------
Stephen J. Zelencik, .................................. $ 341,423
Sr. Vice President and
Chief Marketing Executive
Marvin D. Burkett, .................................... $ 293,479
Sr. Vice President and
Chief Financial and
Administrative Officer and Treasurer
Eugene D. Conner, ..................................... $ 292,677
Sr. Vice President, Operations
All current executive officers as a group.............. $1,339,876
26
The Compensation Committee may amend or terminate the Executive Incentive
Plan at any time and for any reason. As required or appropriate, in order to
continue the plan's qualification under Section 162(m), material amendments to
the Executive Incentive Plan will be subject to stockholder approval.
As discussed above, under Code Section 162(m), AMD is not entitled to a
deduction for certain executive compensation in excess of $1,000,000. The
Corporation can, however, deduct compensation in excess of that amount if it
qualifies as "performance-based compensation" under Section 162(m) of the Code.
If the stockholders approve the Executive Incentive Plan, the compensation
payable under the Executive Incentive Plan is expected to qualify as
"performance-based compensation" and be fully deductible by the Corporation.
REQUIRED VOTE
An affirmative vote of the majority of the shares of AMD's common stock
present in person or represented by proxy and entitled to vote on the Executive
Incentive Plan is required for approval. Abstentions will be counted for
purposes of determining the number of shares present and entitled to vote and
will have the effect of a vote against the Executive Incentive Plan. Broker
non-votes, if any, will not be counted in determining the number of shares
present and entitled to vote on the Executive Incentive Plan.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL OF THE
1996 EXECUTIVE INCENTIVE PLAN. UNLESS MARKED TO THE CONTRARY, PROXIES RECEIVED
WILL BE VOTED "FOR" APPROVAL.
PROPOSAL NO. 5--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 October 27,
1995 , that it is the beneficial owner of 257,050 shares of the Corporation's
common stock as of September 5, 1995, and that it intends to offer the
following proposal for consideration and approval at the 1996 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,
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) is not remunerated by
the company for personal services (consisting of legal, accounting, investment
banking, and management consulting
27
services (whether or not as an employee) for a corporation, division, or
similar organization that actually provides the personal services, nor an
entity from which the company derives more than 50 percent of its gross
revenues); (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) is not part of an interlocking directorate in
which the CEO or other executive officers of the corporation serves on the
board of another corporation that employs the director. 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, 1994 and 1995.
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 proposal was defeated again at the 1995 annual meeting--of
the shares voted (including abstentions), 79.8 % were AGAINST, only 16.8% were
in favor, and 3.4% 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. The Board believes that Mr. Sanders 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, and Mr. Joe L.
Roby. Mr. Sanders has guided the Corporation for over twenty-five (25) years
and is widely recognized as an industry leader. Both Messrs. Sanders' and
Roby's 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 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
28
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.
REQUIRED VOTE
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. Abstentions will be counted for purposes of
determining the number of shares present and entitled to vote on the proposal
and will have the effect of a vote against the proposal. Broker non-votes will
not be counted in determining the number of shares entitled to vote on the
proposal.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE AGAINST THIS PROPOSAL.
ANNUAL REPORT AND FINANCIAL STATEMENTS
The 1995 Annual Report of the Corporation, which includes its audited
financial statements for the fiscal year ended December 31, 1995, 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 1997 Annual Meeting must be
received by the Secretary of the Corporation not later than November 22, 1996
to be included in the 1997 Proxy Statement.
AMD, the AMD logo and combinations thereof are trademarks of Advanced Micro
Devices, Inc.
29
APPENDIX A
ADVANCED MICRO DEVICES, INC. 1996 STOCK INCENTIVE PLAN
1. PURPOSE
The purpose of this Plan is to encourage key personnel, Outside Directors and
advisors whose long-term service is considered essential to the Company's
continued progress, to remain in the service of the Company or its Affiliates.
By means of the Plan, the Company also seeks to attract new key employees,
Outside Directors and advisors whose future services are necessary for the
continued improvement of operations. The Company intends future increases in
the value of securities granted under this Plan to form part of the
compensation for services to be rendered by such persons in the future. It is
intended that this purpose will be effected through the granting of Options.
2. DEFINITIONS
The terms defined in this Section 2 shall have the respective meanings set
forth herein, unless the context otherwise requires.
(a) "AFFILIATE" The term "Affiliate" shall mean any corporation, partnership,
joint venture or other entity in which the Company holds an equity, profits or
voting interest of thirty percent (30%) or more.
(b) "BOARD" The term "Board" shall mean the Company's Board of Directors or
its delegate as set forth in Sections 3(d) and 3(e) below.
(c) "CHANGE OF CONTROL" The term "Change of Control" shall be deemed to mean
any of the following events: (i) any "person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act is or becomes the beneficial owner (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company (not including in the securities beneficially owned
by such person any securities acquired directly from the Company or any of its
Affiliates) representing more than 20% of either the then outstanding shares of
the Common Stock of the Company or the combined voting power of the Company's
then outstanding voting securities; (ii) during any period of two consecutive
years, individuals who at the beginning of such period constituted the Board
and any new director (other than a director designated by a person who has
entered into an agreement or arrangement with the Company to effect a
transaction described in clause (i) or (ii) of this sentence) whose
appointment, election, or nomination for election by the Company's
stockholders, was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at the beginning of
the period or whose appointment, election or nomination for election was
previously so approved, cease for any reason to constitute a majority of the
Board; or (iii) there is consummated a merger or consolidation of the Company
or subsidiary thereof with or into any other corporation, other than a merger
or consolidation which would result in the holders of the voting securities of
the Company outstanding immediately prior thereto holding securities which
represent immediately after such merger or consolidation more than 50% of the
combined voting power of the voting securities of either the Company or the
other entity which survives such merger or consolidation or the parent of the
entity which survives such merger or consolidation; or (iv) the stockholders of
the Company approve a plan of complete liquidation of the Company or there is
consummated the sale or disposition by the Company of all or substantially all
of the Company's assets, other than a sale or disposition by the Company of all
or substantially all of the Company's assets to an entity, at least 80% of the
combined voting power of the voting securities of which are owned by persons in
substantially the same proportions as their ownership of the Company
immediately prior to such sale. Notwithstanding the foregoing (i) no "Change of
Control" shall be deemed to have occurred if there is consummated any
transaction or series of integrated transactions immediately following which
the record holders of the Common Stock of the Company immediately prior to such
transaction or series of transactions continue to have substantially the same
proportionate ownership in an entity which owns all or substantially all of the
assets of the Company immediately prior to such transaction or series of
transactions and (ii) "Change of Control" shall exclude the acquisition of
securities representing more than 20% of either the then outstanding shares of
the Common Stock of the Company or
the combined voting power of the Company's then outstanding voting securities
by the Company or any of its wholly owned subsidiaries, or any trustee or other
fiduciary holding securities of the Company under an employee benefit plan now
or hereafter established by the Company.
(d) "CODE" The term "Code" shall mean the Internal Revenue Code of 1986, as
amended to date and as it may be amended from time to time.
(e) "COMPANY" The term "Company" shall mean Advanced Micro Devices, Inc., a
Delaware corporation.
(f) "CONSTRUCTIVE TERMINATION" The term "Constructive Termination" shall mean
a resignation by a Participant who has been elected by the Board as a corporate
officer of the Company due to diminution or adverse change in the circumstances
of such Participant's employment with the Company, as determined in good faith
by the Participant; including, without limitation, reporting relationships, job
description, duties, responsibilities, compensation, perquisites, office or
location of employment. Constructive Termination shall be communicated by
written notice to the Company, and such termination shall be deemed to occur on
the date such notice is delivered to the Company.
(g) "DISINTERESTED DIRECTOR" The term "Disinterested Director" shall mean a
member of the Board who has not, during the one year prior to service as an
administrator of the Plan, or during such service, been granted or awarded
equity securities of the Company pursuant to this Plan (except for automatic
grants of options to Outside Directors pursuant to Section 8 hereof) or any
other plan of the Company or any of its Affiliates.
(h) "FAIR MARKET VALUE PER SHARE" The term "Fair Market Value per Share"
shall mean as of any day (i) the closing price for Shares on the New York Stock
Exchange as reported on the composite tape on the day as of which such
determination is being made or, if there was no sale of Shares reported on the
composite tape on such day, on the most recently preceding day on which there
was such a sale, or (ii) if the Shares are not listed or admitted to trading on
the New York Stock Exchange on the day as of which the determination is made,
the amount determined by the Board or its delegate to be the fair market value
of a Share on such day.
(i) "INSIDER" The term "Insider" means an officer or director of the Company
or any other person whose transactions in the Company's Common Stock are
subject to Section 16 of the Exchange Act.
(j) "ISO" The term "ISO" shall mean a stock option described in Section
422(b) of the Code.
(k) "NSO" The term "NSO" shall mean a nonstatutory stock option not described
in Section 422(b) of the Code.
(l) "OPTION" The term "Option" shall mean (except as herein otherwise
provided) a stock option granted under this Plan.
(m) "OUTSIDE DIRECTOR" The term "Outside Director" shall mean a member of the
Board of Directors of the Company who is not also an employee of the Company or
an Affiliate.
(n) "PARTICIPANT" The term "Participant" shall mean any person who holds an
Option or Restricted Stock Award granted under this Plan.
(o) "PLAN" The term "Plan" shall mean this Advanced Micro Devices, Inc. 1996
Stock Incentive Plan, as amended from time to time.
(p) "SHARES" The term "Shares" shall mean shares of Common Stock of the
Company and any shares of stock or other securities received as a result of the
adjustments provided for in Section 11 of this Plan.
2
3. ADMINISTRATION
(a) The Board, whose authority shall be plenary, shall administer the Plan
and may delegate part or all of its administrative powers with respect to part
or all of the Plan pursuant to Section 3(d); provided, however, that the Board
shall delegate administration of the Plan to the extent required by Section
3(e).
(b) Except for automatic grants of Options to Outside Directors pursuant to
Section 8 hereof, the Board or its delegate shall have the power, subject to
and within the limits of the express provisions of the Plan:
(1) To grant Options pursuant to the Plan.
(2) To determine from time to time which of the eligible persons shall be
granted Options under the Plan, the number of Shares for which each Option
shall be granted, the term of each granted Option and the time or times
during the term of each Option within which all or portions of each Option
may be exercised (which at the discretion of the Board of its delegate may
be accelerated.)
(3) To prescribe the terms and provisions of each Option granted (which
need not be identical) and the form of written instrument that shall
constitute the Option agreement.
(4) To take appropriate action to amend any Option hereunder, including
to amend the vesting schedule of any outstanding Option, or to cause any
Option granted hereunder to cease to be an ISO, provided that no such
action adverse to a Participant's interest may be taken by the Board or its
delegate without the written consent of the affected Participant.
(5) To determine whether and under what circumstances an Option may be
settled in cash or Shares.
(c) The Board or its delegate shall also have the power, subject to and
within the limits of the express provisions of this Plan:
(1) To construe and interpret the Plan and Options granted under the
Plan, and to establish, amend and revoke rules and regulations for
administration of the Plan. The Board or its delegate, in the exercise of
this power, shall generally determine all questions of policy and
expediency that may arise and may correct any defect, omission or
inconsistency in the Plan or in any Option agreement in a manner and to the
extent it shall deem necessary or expedient to make the Plan fully
effective.
(2) Generally, to exercise such powers and to perform such acts as are
deemed necessary or expedient to promote the best interests of the Company.
(d) The Board may, by resolution, delegate administration of the Plan
(including, without limitation, the Board's powers under Sections 3(b) and (c)
above), under either or both of the following:
(1) with respect to the participation of or granting of Options to an
employee, consultant or advisor who is not an Insider, to a committee of
one or more members of the Board, whether or not such members of the Board
are Disinterested Directors;
(2) with respect to matters other than the selection for participation in
the Plan, substantive decisions concerning the timing, pricing, amount or
other material term of an Option, to a committee of one or more members of
the Board, whether or not such members of the Board are Disinterested
Directors, or to one or more Insiders.
(e) Unless each member of the Board is a Disinterested Director, the Board
shall, by resolution, delegate administration of the Plan with respect to the
participation in the Plan of employees who are Insiders, including its powers
to select such employees for participation in the Plan, to make substantive
decisions concerning the timing, pricing, amount or any other material term of
an Option, to a committee of two or more Disinterested Directors who are also
"outside directors" within the meaning of Section 162(m) of the Code. Any
committee to which administration of the Plan is so delegated pursuant to this
Section 3(e) may also administer the Plan with respect to an employee described
in Section 3(d)(1) above.
3
(f) Except as required by Section 3(e) above, the Board shall have complete
discretion to determine the composition, structure, form, term and operations
of any committee established to administer the Plan. If administration is
delegated to a committee, unless the Board otherwise provides, the committee
shall have, with respect to the administration of the Plan, all of the powers
and discretion theretofore possessed by the Board and delegable to such
committee, subject to any constraints which may be adopted by the Board from
time to time and which are not inconsistent with the provisions of the Plan.
The Board at any time may revest in the Board any of its administrative powers
under the Plan, except under circumstances where a committee is required to
administer the Plan under Section 3(e) above.
(g) The determinations of the Board or its delegate shall be conclusive and
binding on all persons having any interest in this Plan or in any awards
granted hereunder.
4. SHARES SUBJECT TO PLAN
Subject to the provisions of Section 11 (relating to adjustments upon changes
in capitalization), the Shares which may be available for issuance under the
Plan shall not exceed in the aggregate 6,500,000 Shares of the Company's
authorized Common Stock and may be unissued Shares or reacquired Shares or
Shares bought on the market for the purposes of issuance under the Plan. If any
Options granted under the Plan shall for any reason be forfeited or canceled,
terminate or expire, the Shares subject to such Options shall be available
again for the purposes of the Plan. Shares which are delivered or withheld from
the Shares otherwise due on exercise of an Option shall become available for
future awards under the Plan. Shares that have actually been issued under the
Plan, upon exercise of an Option shall not in any event be returned to the Plan
and shall not become available for future awards under the Plan.
5. ELIGIBILITY
Options may be granted only to full or part-time employees, officers,
directors, consultants and advisors of the Company and/or of any Affiliate;
provided such consultants and advisors render bona fide services not in
connection with the offer and sale of securities in a capital-raising
transaction. Outside Directors shall not be eligible for the benefits of the
Plan, except as provided in Section 8 hereof. Any Participant may hold more
than one Option at any time; provided that the maximum number of shares which
are subject to Options granted to any individual shall not exceed in the
aggregate two million (2,000,000) Shares over the full ten-year life of the
Plan.
6. STOCK OPTIONS--GENERAL PROVISIONS
(a) Except for automatic grants of Options to Outside Directors under Section
8 hereof, each Option granted pursuant to the Plan may, at the discretion of
the Board, be granted either as an ISO or as an NSO. No Option may be granted
alternatively as an ISO and as an NSO.
(b) To the extent that the aggregate exercise price for ISOs which are
exercisable for the first time by a Participant during any calendar year (under
this Plan or any other plans of the Company or its subsidiaries or parent (as
such terms are defined in Section 424 of the Code)) exceeds $100,000, such
Options shall be treated as NSOs.
(c) No ISO may be granted to a person who, at the time of grant, owns stock
possessing more than 10% of the total combined voting power of the Company or
any of its subsidiaries or parent (as such terms are defined in Section 424 of
the Code) unless the exercise price is at least 110% of the Fair Market Value
per Share of the stock subject to the Option and the term of the Option does
not exceed five (5) years from the date such ISO is granted.
(d) Notwithstanding any other provision in this Plan, no term of this Plan
relating to ISOs will be interpreted, amended or altered, nor will any
discretion or authority granted under this Plan be exercised, so as to
disqualify this Plan under Section 422 of the Code or, without the consent of
the Participant affected, to disqualify an ISO under Section 422 of the Code.
4
7. TERMS OF OPTION AGREEMENT
Except as otherwise required by the terms of Section 8 hereof, each Option
agreement shall be in such form and shall contain such terms and conditions as
the Board from time to time shall deem appropriate, subject to the following
limitations:
(a) The term of any NSO shall not be greater than ten (10) years and one day
from the date it was granted. The term of any ISO shall not be greater than ten
(10) years from the date it was granted.
(b) The exercise price of each ISO shall be not less than the Fair Market
Value per Share of the stock subject to the Option on the date the Option is
granted. NSOs may be granted at an exercise price that is not less than Fair
Market Value per Share of the Shares at the time an NSO is granted.
(c) Unless otherwise specified in the Option agreement, no Option shall be
transferable otherwise than by will, pursuant to the laws of descent and
distribution or pursuant to a qualified domestic relations order as defined by
the Code or Title I of the Employee Retirement Income Security Act, or the
rules thereunder, or as otherwise permitted by regulations and interpretations
under Section 16 of the Exchange Act.
(d) Except as otherwise provided in paragraph (e) of this Section 7, the
rights of a Participant (other than an Outside Director) to exercise an Option
shall be limited as follows:
(1) DEATH OR DISABILITY: If a Participant's service is terminated by
death or disability, then the Participant or the Participant's estate, or
such other person as may hold the Option, as the case may be, shall have
the right for a period of twelve (12) months following the date of death or
disability, or for such other period as the Board may fix, to exercise the
Option to the extent the Participant was entitled to exercise such Option
on the date of his death or disability, or to such extent as may otherwise
be specified by the Board (which may so specify after the date of his death
or disability but before expiration of the Option), provided the actual
date of exercise is in no event after the expiration of the term of the
Option. A Participant's estate shall mean his legal representative or any
person who acquires the right to exercise an Option by reason of the
Participant's death or disability.
(2) MISCONDUCT: If a Participant is determined by the Board to have
committed an act of theft, embezzlement, fraud, dishonesty, a breach of
fiduciary duty to the Company (or Affiliate), or deliberate disregard of
the rules of the Company (or Affiliate), or if a Participant makes any
unauthorized disclosure of any of the trade secrets or confidential
information of the Company (or Affiliate), engages in any conduct which
constitutes unfair competition with the Company (or Affiliate), induces any
customer of the Company (or Affiliate) to break any contract with the
Company (or Affiliate), or induces any principal for whom the Company (or
Affiliate) acts as agent to terminate such agency relationship, neither the
Participant, the Participant's estate nor such other person who may then
hold the Option shall be entitled to exercise any Option with respect to
any Shares whatsoever, after termination of service, whether or not after
termination of service the Participant may receive payment from the Company
(or Affiliate) for vacation pay, for services rendered prior to
termination, for services rendered for the day on which termination occurs,
for salary in lieu of notice, or for any other benefits. In making such
determination, the Board shall give the Participant an opportunity to
present to the Board evidence on his behalf. For the purpose of this
paragraph, termination of service shall be deemed to occur on the date when
the Company dispatches notice or advice to the Participant that his service
is terminated.
(3) TERMINATION FOR OTHER REASONS: If a Participant's service is
terminated for any reason other than those mentioned above under "DEATH OR
DISABILITY" or "MISCONDUCT," the Participant, the Participant's estate, or
such other person who may then hold the Option may, within three months
following such termination, or within such longer period as the Board may
fix, exercise the Option to the extent such Option was exercisable by the
Participant on the date of termination of his employment or service, or to
the extent otherwise specified by the Board (which may so specify after the
date of the termination but before expiration of the Option) provided the
date of exercise is in no event after the expiration of the term of the
Option.
5
(4) EVENTS NOT DEEMED TERMINATIONS: The service relationship shall not be
considered interrupted in the case of (i) a Participant who intends to
continue to provide services as a director, employee, consultant or advisor
to the Company or an Affiliate; (ii) sick leave; (iii) military leave; (iv)
any other leave of absence approved by the Board, provided such leave is
for a period of not more than 90 days, unless reemployment upon the
expiration of such leave is guaranteed by contract or statute, or unless
provided otherwise pursuant to formal policy adopted from time to time by
the Company and issued and promulgated to employees in writing; or (v) in
the case of transfer between locations of the Company or between the
Company or its Affiliates. In the case of any employee on an approved leave
of absence, the Board may make such provisions respecting suspension of
vesting of the Option while on leave from the employ of the Company or an
Affiliate as it may deem appropriate, except that in no event shall an
Option be exercised after the expiration of the term set forth in the
Option.
(e) If any Participant's employment is terminated by the Company for any
reason other than for Misconduct or, if applicable, by Constructive
Termination, within one year after a Change of Control has occurred, then all
Options held by such Participant shall become fully vested for exercise upon
the date of termination, irrespective of the vesting provisions of the
Participant's Option agreement. For purposes of this subsection (e), the term
"Change of Control" shall have the meaning assigned by this Plan, unless a
different meaning is defined in an individual Participant's Option agreement.
(f) Options may also contain such other provisions, which shall not be
inconsistent with any of the foregoing terms, as the Board or its delegate
shall deem appropriate.
(g) The Board may modify, extend or renew outstanding Options and authorize
the grant of new Options in substitution therefor; provided that any such
action may not, without the written consent of a Participant, impair any such
Participant's rights under any Option previously granted.
8. AUTOMATIC GRANTS TO OUTSIDE DIRECTORS
(a) Each Outside Director shall be granted an Option to purchase 12,000
Shares under the Plan (the "FIRST OPTION") on the date such Outside Director is
first elected or appointed as a member of the Board; provided that an Outside
Director who has previously been elected as a member of the Board on the
Effective Date set forth in Section 14 below shall not be granted a First
Option under the Plan. Thereafter, on the first business day coincident with or
following each annual meeting of the Company's stockholders, each Outside
Director reported as being elected shall be granted an additional Option to
purchase 3,000 Shares under the Plan (the "ANNUAL OPTION"). Further, subject to
the right of any Outside Director who has not previously been elected as a
member of the Board to receive a First Option, if there are insufficient Shares
available under the Plan for each Outside Director who is eligible to receive
an Annual Option (as adjusted) in any year, the number of Shares subject to
each Annual Option in such year shall equal the total number of available
Shares then remaining under the Plan divided by the number of Outside Directors
who are eligible to receive an Annual Option on such date, as rounded down to
avoid fractional Shares. All Options granted to Outside Directors shall be
subject to the following terms and conditions of this Section 8.
(b) All Options granted to Outside Directors pursuant to the Plan shall be
NSOs.
(c) The consideration to be paid for the Shares to be issued upon exercise of
an Option, including the method of payment, may consist entirely of (i) cash,
(ii) certified or cashier's check, (iii) other Shares which (x) either have
been owned by the Participant for more than six months on the date of surrender
or were not acquired, directly or indirectly, from the Company, and (y) have a
Fair Market Value per Share on the date of surrender equal to the aggregate
exercise price of the Shares as to which said Option shall be exercised, (iv)
delivery of a properly executed exercise notice together with irrevocable
instructions to a broker to promptly deliver to the Company the amount of sale
or loan proceeds required to pay the exercise price, or (v) any combination of
the foregoing methods of payment.
6
(d) Each Option granted to an Outside Director shall be for a term of ten
years plus one day. Each First Option shall vest and become exercisable on July
15 of subsequent calendar years, according to the following schedule: 4,800
shares in the first calendar year following the date of grant; 3,600 shares in
the second such calendar year; 2,400 shares in the third such calendar year;
and 1,200 shares in the fourth such calendar year. Each Annual Option shall
vest and become exercisable on July 15 of subsequent calendar years according
to the following schedule: in equal installments of 1,000 shares each in the
second, third and fourth calendar years following the date of grant. Any Shares
acquired by an Outside Director upon exercise of an Option shall not be freely
transferable until six months after the date stockholder approval referred to
in Section 14 hereof is obtained.
(e) If an Outside Director's tenure on the Board is terminated for any
reason, then the Outside Director or the Outside Director's estate, as the case
may be, shall have the right for a period of twelve months following the date
such tenure is terminated to exercise the Option to the extent the Outside
Director was entitled to exercise such Option on the date the Outside
Director's tenure terminated; provided the actual date of exercise is in no
event after the expiration of the term of the Option. An Outside Director's
"estate" shall mean the Outside Director's legal representative or any person
who acquires the right to exercise an Option by reason of the Outside
Director's death or disability.
(f) Upon a Change of Control, all Options held by an Outside Director shall
become fully vested and exercisable upon such Change of Control, irrespective
of any other provisions of the Outside Director's Option agreement.
(g) The automatic grants to Outside Directors pursuant to this Section 8
shall not be subject to the discretion of any person. The other provisions of
this Plan shall apply to the Options granted automatically pursuant to this
Section 8, except to the extent such other provisions are inconsistent with
this Section 8.
9. PAYMENTS AND LOANS UPON EXERCISE OF OPTIONS
With respect to Options other than Options granted to Outside Directors
pursuant to Section 8, the following provisions shall apply:
(a) The consideration to be paid for the Shares to be issued upon exercise of
an Option, including the method of payment, shall be determined by the Board or
its delegate (and, in the case of an ISO, shall be determined at the time of
grant) and may consist entirely of (i) cash, (ii) certified or cashier's check,
(iii) promissory note, (iv) other Shares which (x) either have been owned by
the Participant for more than six months on the date of surrender or were not
acquired, directly or indirectly, from the Company, and (y) have a Fair Market
Value per Share on the date of surrender equal to the aggregate exercise price
of the Shares as to which said Option shall be exercised, (v) delivery of a
properly executed exercise notice together with irrevocable instructions to a
broker to promptly deliver to the Company the amount of sale or loan proceeds
required to pay the exercise price, or (vi) any combination of the foregoing
methods of payment. Any promissory note shall be a full recourse promissory
note having such terms as may be approved by the Board and bearing interest at
a rate sufficient to avoid imputation of income under Sections 483, 1274 or
7872 of the Code; provided that Participants who are not employees or directors
of the Company will not be entitled to purchase Shares with a promissory note
unless the note is adequately secured by collateral other than the Shares;
provided further, that the portion of the exercise price equal to the par
value, if any, of the Shares must be paid in cash;
(b) The Company may make loans or guarantee loans made by an appropriate
financial institution to individual Participants, including Insiders, on such
terms as may be approved by the Board for the purpose of financing the exercise
of Options granted under the Plan and the payment of any taxes that may be due
by reason of such exercise.
7
10. TAX WITHHOLDING
(a) Where, in the opinion of counsel to the Company, the Company has or will
have an obligation to withhold federal, state or local taxes relating to the
exercise of any Option, the Board may in its discretion require that such tax
obligation be satisfied in a manner satisfactory to the Company. With respect
to the exercise of an Option, the Company may require the payment of such taxes
before Shares deliverable pursuant to such exercise are transferred to the
holder of the Option.
(b) With respect to the exercise of an Option, a Participant may elect (a
"WITHHOLDING ELECTION") to pay his minimum statutory withholding tax obligation
by the withholding of Shares from the total number of Shares deliverable
pursuant to the exercise of such Option, or by delivering to the Company a
sufficient number of previously acquired Shares, and may elect to have
additional taxes paid by the delivery of previously acquired Shares, in each
case in accordance with rules and procedures established by the Board.
Previously owned Shares delivered in payment for such additional taxes must
have been owned for at least six months prior to the delivery or must not have
been acquired directly or indirectly from the Company and may be subject to
such other conditions as the Board may require. The value of Shares withheld or
delivered shall be the Fair Market Value per Share on the date the Option
becomes taxable. All Withholding Elections are subject to the approval of the
Board and must be made in compliance with rules and procedures established by
the Board.
11. ADJUSTMENTS OF AND CHANGES IN CAPITALIZATION
If there is any change in the Common Stock of the Company by reason of any
stock dividend, stock split, spin-off, split up, merger, consolidation,
recapitalization, reclassification, combination or exchange of Shares, or any
other similar corporate event, then the Board shall make appropriate
adjustments to the number of Shares theretofore appropriated or thereafter
subject or which may become subject to an Option under the Plan. Outstanding
Options shall also be automatically converted as to price and other terms if
necessary to reflect the foregoing events. No right to purchase fractional
Shares shall result from any adjustment in Options pursuant to this Section 11.
In case of any such adjustment, the Shares subject to the Option shall be
rounded down to the nearest whole Share. Notice of any adjustment shall be
given by the Company to each holder of any Option which shall have been so
adjusted and such adjustment (whether or not such notice is given) shall be
effective and binding for all purposes of the Plan.
12. PRIVILEGES OF STOCK OWNERSHIP
No Participant will have any rights of a stockholder with respect to any
Shares until the Shares are issued to the Participant. After Shares are issued
to the Participant, the Participant will be a stockholder and have all the
rights of a stockholder with respect to such Shares, including the right to
vote and receive all dividends or other distributions made or paid with respect
to such Shares.
13. EXCHANGE AND BUYOUT OF AWARDS; RULE 16b-3
The Board or its delegate may, at any time or from time to time, authorize
the Company, with the consent of the respective Participants, to issue new
Options in exchange for the surrender and cancellation of any or all
outstanding Options, except as otherwise provided in Section 7(i) with respect
to Insiders. The Board or its delegate may at any time buy from a Participant
an Option previously granted with payment in cash, Shares or other
consideration, based on such terms and conditions as the Board or its delegate
and the Participant may agree. Grants of Options to Insiders are intended to
comply with the applicable provisions of Rule 16b-3 and such Options shall
contain such additional conditions or restrictions, if any, as may be required
by Rule 16b-3 to be in the written agreement relating to such Options in order
to qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
8
14. EFFECTIVE DATE OF THE PLAN
This Plan will become effective when adopted by the Board (the "EFFECTIVE
DATE"). This Plan must be approved by the stockholders of the Company,
consistent with applicable laws, within twelve (12) months before or after the
Effective Date. Upon the Effective Date, the Board or its delegate may grant
Options pursuant to this Plan; provided that no Option may be exercised prior
to the initial stockholder approval of this Plan. In the event that stockholder
approval is not obtained within the time period provided herein, all Options
granted hereunder will be canceled. So long as Insiders are Participants, the
Company will comply with the requirements of Rule 16b-3 with respect to
stockholder approval.
15. AMENDMENT OF THE PLAN
(a) The Board at any time, and from time to time, may amend the Plan;
provided that, except as provided in Section 11 (relating to adjustments upon
changes in capitalization), no amendment for which stockholder approval is
required shall be effective unless such approval is obtained within the
required time period. Whether stockholder approval is required shall be
determined by the Board.
(b) It is expressly contemplated that the Board may, without seeking approval
of the Company's stockholders, amend the Plan in any respect necessary to
provide the Company's employees with the maximum benefits provided or to be
provided under Section 422 of the Code or Section 16 of the Exchange Act and
the regulations promulgated thereunder and/or to bring the Plan or Options
granted under it into compliance therewith.
(c) Rights and obligations under any Option granted before any amendment of
the Plan shall not be altered or impaired by amendment of the Plan, except with
the consent of the person who holds the Option, which consent may be obtained
in any manner that the Board or its delegate deems appropriate.
(d) To the extent required by Rule 16b-3, the Board may not amend the
provisions of Section 8 hereof more than once every six months, other than to
comport with changes in the Code, the Employee Retirement Income Security Act,
or the rules thereunder.
16. REGISTRATION, LISTING, QUALIFICATION, APPROVAL OF STOCK AND OPTIONS
An award under this Plan will not be effective unless such award is in
compliance with all applicable federal and state securities laws, rules and
regulations of any governmental body, and the requirements of any stock
exchange or automated quotation system upon which the Shares may then be listed
or quoted, as they are in effect on the date of grant of the award and also on
the date of exercise or other issuance. Notwithstanding any other provision in
this Plan, the Company will have no obligation to issue or deliver certificates
for Shares under this Plan prior to: (a) obtaining any approvals from
governmental agencies that the Company determines are necessary or advisable;
and/or (b) completion of any registration or other qualification of such Shares
under any state or federal law or ruling of any governmental body that the
Company determines to be necessary or advisable. The Company will be under no
obligation to register the Shares with the Securities and Exchange Commission
or to effect compliance with the registration, qualification or listing
requirements of any state securities laws, stock exchange or automated
quotation system, and the Company will have no liability for any inability or
failure to do so.
17. NO RIGHT TO EMPLOYMENT
Nothing in this Plan or in any Option shall be deemed to confer on any
employee any right to continue in the employ of the Company or any Affiliate or
to limit the rights of the Company or its Affiliates, which are hereby
expressly reserved, to discharge an employee at any time, with or without
cause, or to adjust the compensation of any employee.
18. MISCELLANEOUS
The use of any masculine pronoun or similar term is intended to be without
legal significance as to gender.
9
APPENDIX B
ADVANCED MICRO DEVICES, INC.
EXECUTIVE INCENTIVE PLAN
FEBRUARY, 1996
1. PURPOSES
The purposes of the Advanced Micro Devices, Inc. (AMD) Executive Incentive Plan
are to motivate the Company's key employees to improve stockholder value by
linking a portion of their cash compensation to the Company's financial
performance, reward key employees for improving the Company's financial
performance, and help attract and retain key employees.
2. DEFINITIONS
A. "Award" means any cash incentive payment made under the Plan.
B. "Code" means the Internal Revenue Code of 1986, as amended.
C. "Committee" means the Compensation Committee of AMD's Board of Directors,
or such other committee designated by that Board of Directors, which is
authorized to administer the Plan under Section 3 hereof. The Committee
shall be comprised solely of directors who are outside directors under
Section 162(m) of the Code.
D. "Company" means AMD and any corporation or other business entity of which
AMD (i) directly or indirectly has an ownership interest of 50% or more,
or (ii) has a right to elect or appoint 50% or more of the board of
directors or other governing body.
E. "Key Employee" means any employee of the Company whose performance the
Committee determines can have a significant effect on the success of the
Company.
F. "Participant" means any Key Employee to whom an Award is granted under the
Plan.
G. "Plan" means this Plan, which shall be known as the AMD Executive Incentive
Plan.
3. ADMINISTRATION
A. The Plan shall be administered by the Committee. The Committee shall have
the authority to:
(i) interpret and determine all questions of policy and expediency pertaining to
the Plan;
(ii) adopt such rules, regulations, agreements and instruments as it deems necessary
for its proper administration;
(iii) select Key Employees to receive Awards;
(iv) determine the terms of Awards;
(v) determine amounts subject to Awards (within the limits prescribed in the Plan);
(vi) determine whether Awards will be granted in replacement of or as alternatives
to any other incentive or compensation plan of the Company or an acquired
business unit;
(vii) grant waivers of Plan or Award conditions (other than Awards intended to
qualify under Section 162(m) of the Code);
(viii) accelerate the payment of Awards (but with respect to Awards intended to
qualify under Section 162(m) of the Code, only as permitted under that
Section);
(ix) correct any defect, supply any omission, or reconcile any inconsistency in the
Plan, any Award or any Award notice;
(x) take any and all other actions it deems necessary or advisable for the proper
administration of the Plan;
(xi) adopt such Plan procedures, regulations, subplans and the like as it deems are
necessary to enable Key Employees to receive Awards; and
(xii) amend the Plan at any time and from time to time, provided however that no
amendment to the Plan shall be effective unless approved by the Company's
stockholders, to the extent such stockholder approval is required under Section
162(m) of the Code with respect to Awards which are intended to qualify under
that Section.
B. The Committee may delegate its authority to grant and administer Awards to
a separate committee; however, only the Committee may grant and administer
Awards which are intended to qualify as performance-based compensation
under Section 162(m) of the Code.
4. ELIGIBILITY
Only Key Employees as designated by the Committee are eligible to become
Participants in the Plan.
5. PERFORMANCE GOALS
A. The Committee shall establish performance goals applicable to a particular
fiscal year (or performance period) prior to its start, provided, however,
that such goals may be established after the start of the fiscal year (or
performance period) but while the outcome of the performance goal is
substantially uncertain if such a method of establishing performance goals
is permitted under proposed or final regulations issued under Code Section
162(m).
B. Each performance goal applicable to a fiscal year shall identify one or
more business criteria of the Company and/or any business unit that are to
be monitored during the fiscal year (or performance period), such as:
. Net income . Stockholder return
. Earnings per share . Revenue
. Return on investment . Revenue growth
. Operating income . Market share
. Strategic positioning programs . Return on net assets
. Cash flow . Return on equity
. New product releases
C. The Committee shall determine the target level of performance that must be
achieved with respect to each criterion that is identified in a
performance goal in order for a performance goal to be treated as
attained.
D. The Committee may base performance goals on one or more of the foregoing
business criteria. In the event performance goals are based on more than
one business criterion, the Committee may determine to make Awards upon
attainment of the performance goal relating to any one or more of such
criteria, provided the performance goals, when established, are stated as
alternatives to one another at the time the performance goal is
established.
6. AWARDS
A. Awards may be made on the basis of Company and/or business unit
performance goals and formulas determined by the Committee. During any
fiscal year of the Company, no Participant shall receive an Award of more
$5,000,000.
B. The Committee, in its discretion, may reduce or eliminate a Participant's
Award at any time before it is paid, whether or not calculated on the
basis of pre-established performance goals or formulas.
2
C. The payment of an Award requires that the Participant be on the Company's
payroll as of the last day of the fiscal year (or performance period). The
Committee may make exceptions to this requirement in the case of
retirement, death or disability, as determined by the Committee in its
sole discretion.
D. The Company shall withhold all applicable federal, state, local and
foreign taxes required by law to be paid or withheld relating to the
receipt or payment of any Award.
E. At the discretion of the Committee, payment of an Award or any portion
thereof may be deferred until a time established by the Committee.
Deferrals shall be unfunded and shall be made in accordance with
guidelines established by the Committee to ensure that such deferrals
comply with applicable requirements of the Code and its regulations.
Deferrals shall be initiated by the delivery of a written, irrevocable
election by the Participant to the Committee or its nominee. Such election
shall be made prior to the date specified by the Committee. The Committee
may also credit earnings on cash payments that are deferred and set the
rates of such interest.
7. GENERAL
A. The Plan shall become effective as of January 1, 1996, subject to
stockholder approval of the Plan prior to January 1, 1996 or within twelve
months thereafter.
B. Any rights of a Participant under the Plan shall not be assignable by such
Participant, by operation of law or otherwise, except by will or the laws
of descent and distribution. No Participant may create a lien on any funds
or rights to which he or she may have an interest under the Plan, or which
is held by the Company for the account of the Participant under the Plan.
C. Participation in the Plan shall not give any Key Employee any right to
remain in the employ of the Company. Further, the adoption of this Plan
shall not be deemed to give any Key Employee or other individual the right
to be selected as a Participant or to be granted an Award.
D. To the extent any person acquires a right to receive payments from the
Company under this Plan, such rights shall be no greater than the rights
of an unsecured creditor of the Company.
E. The Plan shall be governed by and construed in accordance with the laws of
the State of California.
F. The Board may amend or terminate the Plan (i) at any time and for any
reason subject to stockholder approval and (ii) at any time and for any
reason if and to the extent the Plan's qualification under Section 162(m)
of the Code would not be adversely affected.
3
AMD-90276
DETACH HERE AMD 2
PROXY
ADVANCED MICRO DEVICES, INC.
ANNUAL MEETING OF STOCKHOLDERS - APRIL 25, 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints W. J. SANDERS III and THOMAS M. MCCOY and each of
them as proxies for the undersigned, with full power of substitution to
represent and to vote all the stock of the undersigned on the following 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 Thursday, April 25,
1996, 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 the ratification of the
appointment of independent auditors, FOR the 1996 Stock Incentive Plan, FOR the
1996 Executive Incentive Plan, 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
----------------
DETACH HERE AMD 3
[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 ERNST & YOUNG LLP AS THE CORPORATION'S
INDEPENDENT AUDITORS, FOR APPROVAL OF THE 1996 STOCK INCENTIVE PLAN, FOR
APPROVAL OF THE 1996 EXECUTIVE INCENTIVE PLAN AND AGAINST THE STOCKHOLDER
PROPOSAL REGARDING THE NOMINATING COMMITTEE.
- --------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR Items 1, 2, 3 and 4.
- --------------------------------------------------------------------------------
Nominees for Directors
W. J. Sanders III, Friedrich Baur, Charles M. Blalack, R. Gene Brown,
Richard Previte, S. Atiq Raza, Joe L. Roby, Leonard M. Silverman
1. Election of directors.
FOR WITHHELD
[_] [_]
- --------------------------------------------------------------------------------
[Instruction: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided above.]
2. Ratification of the appointment of independent auditors.
FOR AGAINST ABSTAIN
[_] [_] [_]
3. Approval of the 1996 Stock Incentive Plan.
FOR AGAINST ABSTAIN
[_] [_] [_]
4. Approval of the 1996 Executive Incentive Plan.
FOR AGAINST ABSTAIN
[_] [_] [_]
- --------------------------------------------------------------------------------
The Board of Directors recommends a vote AGAINST Item 5.
- --------------------------------------------------------------------------------
5. Stockholder proposal concerning the Nominating Committee.
FOR AGAINST ABSTAIN
[_] [_] [_]
- --------------------------------------------------------------------------------
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [_]
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
POSTAGE PRE-PAID ENVELOPE.
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.
Signature: _________________________________________ Date: _____________________
Signature: _________________________________________ Date: _____________________