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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Advanced Micro Devices, Inc.
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(Name of Registrant as Specified In Its Charter)
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[LOGO OF AMD APPEARS HERE]
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 24, 1997
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The Annual Meeting of Stockholders of Advanced Micro Devices, Inc. will be
held at the St. Regis Hotel, 2 East 55th Street, New York, New York 10022, on
April 24, 1997, 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 amend the Advanced Micro Devices, Inc. 1996 Stock Incentive Plan to
increase the number of stock options awarded to non-employee directors.
4. To amend the Advanced Micro Devices, Inc. 1991 Stock Purchase Plan to
increase the number of shares of AMD common stock issuable thereunder
from 3,600,000 to 5,100,000.
5. To transact such other business as may properly come before the meeting.
Only stockholders of record at the close of business on February 25, 1997,
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 transfer
agent for Advanced Micro Devices, Inc., Boston EquiServe LLP, 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 20, 1997
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 24, 1997
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 24,
1997, and at any adjournment or postponement thereof. Only holders of the
Corporation's common stock of record on February 25, 1997, 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 138,952,155 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 at the Annual Meeting. "Broker
non-votes" occur when shares held by brokers (or nominees) cannot, under the
New York Stock Exchange rules, be voted on a particular matter, because the
broker lacked instructions on how to vote 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, if applicable.
Any person signing a proxy in the form accompanying this Proxy Statement has
the power to revoke it prior to its exercise. A proxy may be revoked with the
Secretary of the Corporation prior to the meeting by filing either a writing
revoking it or another executed proxy bearing a later date. A proxy may also
be revoked by attending the meeting and electing to vote in person. Please
note, however, that if a stockholder's shares are held of record by a broker,
bank or other nominee, the stockholder must bring to the meeting a letter from
the broker, bank or other nominee confirming that stockholder's beneficial
ownership status, in order to be able 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 the amendment to the 1996 Stock Incentive Plan, FOR the
amendment to the 1991 Stock Purchase Plan 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 20, 1997. The Corporation is paying for
the cost of this solicitation. 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 in person, or by telephone, or in writing 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 in person, by telephone, in writing, or by
any other means of communication. The Corporation expects to pay the solicitor
a fee of approximately $7,000, and normal out-of-pocket expenses for its
assistance in soliciting proxies.
1
PRINCIPAL STOCKHOLDERS
The following table shows the name, address, number of shares held, and
percentage of shares held as of February 25, 1997, 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.
NAME AND ADDRESS OF PERCENT
BENEFICIAL OWNER AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP OF CLASS
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Wellington Management 12.44%
Company LLP 17,279,800(/1/)
75 State Street (shared dispositive power as to all shares;
Boston, MA 02109 shared voting power as to 2,284,160 of such shares)
The Capital Group 8.43%(/3/)
Companies, Inc. 11,715,200(/2/)
333 South Hope Street (sole dispositive power as to all shares;
Los Angeles, CA 90071 sole voting power as to 2,550,600 of such shares)
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(1) This information is based on Amendment No. 4 to the statement on Schedule
13G filed with the Securities and Exchange Commission on February 13, 1997
by Wellington Management Company LLP (Wellington). The 17,279,800 shares
are owned by a variety of investment advisory clients. Vanguard/Windsor
Fund, Inc., one of Wellington's clients, P.O. Box 2600, Malvern, PA 19355,
owns 12,986,300 shares (sole voting power and shared dispositive power as
to all shares), representing 9.35% of the Corporation's common stock. This
information was obtained from Amendment No. 3 to the statement on Schedule
13G filed on February 7, 1997 by Vanguard/Windsor Fund, Inc. No client
other than Vanguard/Windsor Fund, Inc. owns more than five percent of the
Corporation's common stock.
(2) This information is based on Amendment No. 7 to the joint statement on
Schedule 13G filed with the Securities and Exchange Commission on February
12, 1997 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 8,203,600 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.
(3) The aggregate percentage of outstanding shares beneficially owned by The
Capital Group Companies, Inc. includes 5.90% beneficially owned by Capital
Research and Management Co.
PROPOSAL NO. 1--ELECTION OF DIRECTORS
Pursuant to the Bylaws of the Corporation, the authorized number of
directors to be elected at the 1997 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: Mr. W. J. Sanders III, Dr. Friedrich Baur, Mr. Charles
M. Blalack, Dr. R. Gene Brown, Mr. Richard Previte, Mr. S. Atiq Raza, Mr. Joe
L. Roby, and Dr. Leonard Silverman. All of the nominees are incumbent
directors. If any of the nominees should decline or be unable to act as a
director, the shares may be voted for such substitute nominees as the
proxyholders may in their discretion determine. Shares represented by the
enclosed proxy will be voted FOR the election of these nominees, unless
authority to vote for one or more nominees is withheld.
2
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., 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 AG 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.
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
National Association of Securities Dealers, Inc. (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 New York Stock Exchange. 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 University, 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 became Senior Vice President and Chief Technical
Officer of Advanced Micro Devices, Inc. following the acquisition of NexGen,
Inc. (NexGen) by the Corporation on January 17, 1996. Prior to joining the
Corporation, Mr. Raza was the Chairman, Chief Executive Officer, President and
Secretary of NexGen and held those positions since 1991. From September 1988
until January 1991, Mr. Raza served as Executive Vice President of NexGen,
responsible for engineering, marketing and prototype manufacturing. He was a
member of the Board of Directors of NexGen since August 1989 and was elected
Chairman of the Board in May 1994.
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
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 25, 1997, by 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
DIRECTOR AMOUNT AND NATURE OF PERCENT
NAME AGE SINCE BENEFICIAL OWNERSHIP(/1/) OF CLASS
---- --- -------- ------------------------- --------
W. J. Sanders III........... 60 1969 1,515,711(/2/) 1.07%
Dr. Friedrich Baur.......... 69 1994(/3/) 8,400(/4/) *
Charles M. Blalack.......... 70 1989 18,000(/5/) *
Dr. R. Gene Brown........... 64 1969 45,910(/6/) *
Anthony B. Holbrook(/7/).... 57 1987 348,609(/8/) *
Richard Previte............. 62 1990 525,945(/9/) *
S. Atiq Raza................ 48 1996 824,213(/1//0/) *
Joe L. Roby................. 57 1991 30,800(/1//1/) *
Dr. Leonard M. Silverman.... 57 1994 8,400(/1//2/) *
Marvin D. Burkett(/1//3/)... 55 N/A 326,152(/1//4/) *
Eugene D. Conner(/1//5/).... 53 N/A 366,567(/1//6/) *
All directors and executive
officers as a group (14
persons).................... -- N/A 4,616,441(/1//7/) 3.25%
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*Less than one percent (1%)
(1) Some of the individuals may share voting power with regard to the shares
listed herein with their spouses.
(2) Includes 1,250,000 shares subject to options that are exercisable on
February 25, 1997, 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 8,400 shares subject to options that are exercisable on February
25, 1997, or become exercisable within sixty (60) days thereafter.
(5) Includes 18,000 shares subject to options that are exercisable on
February 25, 1997, or become exercisable within sixty (60) days
thereafter.
(6) Includes 14,000 shares subject to options that are exercisable on
February 25, 1997, or become exercisable within sixty (60) days
thereafter.
(7) Mr. Holbrook served as Vice Chairman of the Board of Directors until his
term expired on April 25, 1996.
(8) Includes 272,862 shares subject to options that are exercisable on
February 25, 1997, or become exercisable within sixty (60) days
thereafter.
(9) Includes 345,550 shares subject to options that are exercisable on
February 25, 1997, or become exercisable within sixty (60) days
thereafter.
(10) Includes 179,000 shares subject to options that are exercisable on
February 25, 1997, or become exercisable within sixty (60) days
thereafter.
(11) Includes 18,000 shares subject to options that are exercisable on
February 25, 1997, or become exercisable within sixty (60) days
thereafter.
(12) Includes 8,400 shares subject to options that are exercisable on February
25, 1997, or become exercisable within sixty (60) days thereafter.
(13) Mr. Burkett is Senior Vice President, Chief Financial and Administrative
Officer and Treasurer of the Corporation.
(14) Includes 298,784 shares subject to options that are exercisable on
February 25, 1997, or become exercisable within sixty (60) days
thereafter.
(15) Mr. Conner is Senior Vice President, Operations of the Corporation.
(16) Includes 329,264 shares subject to options that are exercisable on
February 25, 1997, or become exercisable within sixty (60) days
thereafter.
(17) Includes 3,203,845 shares subject to options that are exercisable on
February 25, 1997, or become exercisable within sixty (60) days
thereafter.
4
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors held eight (8) regularly scheduled or special
meetings during the fiscal year ended December 29, 1996 (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
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of Dr. R. Gene Brown as Chairman, Mr. Joe L. Roby and Mr. Charles M. Blalack,
all non-employee directors, held four (4) 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 Audit Committee at any time. The director
of the Corporation's Internal Control Department reports directly to the
Chairman of the Audit Committee and serves a staff function for the Audit
Committee. The Audit 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 Audit 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. The Nominating Committee met once during 1996 to consider nominees
for the 1996 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 (the Committee) is
----------------------
currently comprised of Mr. Charles M. Blalack as Chairman and Dr. R. Gene
Brown. Mr. Joe L. Roby was a member of the Compensation Committee until April
25, 1996. 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 1996, the Committee met thirty-six (36) times, with
the majority of these meetings devoted to the negotiation and execution of a
new employment agreement with Mr. Sanders. (See "Employment Agreements,
Compensation Agreements and Change of Control Agreements" on page 16.) 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 to 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 seventy-seven (77) times during the Fiscal Year.
Directors' Fees and Expenses. In 1996, directors who were not employees of
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the Corporation individually received an annual fee of $20,000, a fee of
$1,000 for attendance at each regular or special meeting of the Board, and a
fee of $500 for attendance at each meeting of each committee (other than the
Nominating Committee) on which they served. Effective January 1, 1997, these
fees were increased to $25,000, $1,500 and $1,000, respectively. In addition,
the Chairman of the Audit Committee receives an annual fee of $20,000 for
service in that capacity, and the Chairman of the Compensation Committee
receives an annual fee of $4,000 for service 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, on occasion, travel expenses of their spouses.
5
Pursuant to a nondiscretionary formula set forth in the 1996 Stock Incentive
Plan, non-employee directors also currently 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 plus one day from the grant date or twelve
months following termination of a director's service on the Board. On December
11, 1996, the Board adopted amendments to the 1996 Stock Incentive Plan to
increase the First Option to 15,000 shares and the Annual Option to 5,000
shares, subject to stockholder approval. (See Proposal No. 3 below.) The First
Option would vest in increments of 6,000, 4,500, 3,000 and 1,500 shares on
July 15 of the first, second, third and fourth calendar years following
election. Each Annual Option would vest in increments of 1,667, 1,667 and
1,666 shares on July 15 of the second, third and fourth calendar years
following re-election. These options will be granted only if the proposed
amendment to the 1996 Stock Incentive Plan is approved by stockholders.
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 would 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 1996, 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 value of $11,615.
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) of the Board of Directors of the
Corporation 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, awards
restricted stock to executives, and makes recommendations as to compensation
of outside members of the Board of Directors. The Committee is currently
composed of two non-employee directors, Mr. Blalack (Chairman) and Dr. Brown.
Mr. Roby was a member of the Committee until the Corporation's 1996 Annual
Meeting. Certain officers of the Corporation, outside counsel and consultants
typically attend meetings of the Committee. No officer of the Corporation is
present during discussions or deliberations regarding that officer's own
compensation. The Committee administers the Corporation's 1996 Executive
Incentive Plan, 1996 Stock Incentive Plan, 1995 Stock Plan of NexGen, Inc.,
1992 Stock Incentive Plan and the 1987 Restricted Stock Award Plan.
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
6
corporate performance and compensation which will attract and retain top
caliber employees, the Committee's compensation philosophy is to provide total
compensation opportunities that are highly competitive with the pay practices
of other industry-leading companies. This is accomplished through a
combination of cash incentives and equity incentives which are granted to a
broad range of the Corporation's employees. This closely aligns employee
interests with those of the Corporation's stockholders. This alignment is
evident in the executive compensation program, which is designed to:
. Strengthen the relationship between pay and stockholder value by
focusing on variable compensation, such as annual and long-term
performance incentives and executive ownership of shares, using stock
options and other programs.
. Enhance the Corporation's ability to attract, encourage and retain
exceptionally knowledgeable and experienced executives.
. Balance short-term and long-term business goals.
Decisions concerning specific 1996 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 1996 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 were 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 was scheduled to
expire on December 31, 1996 (the 1991 Agreement). Under Mr. Sanders' 1991
Agreement, the Committee approved a 2.2% increase to Mr. Sanders' base salary
for a total 1996 base salary of $1,000,000 per annum. The Corporation entered
into an amended and restated agreement with Mr. Sanders effective September
29, 1996 (the 1996 Agreement). The 1996 Agreement is discussed in detail below
in the section entitled "Employment Agreements, Compensation Agreements and
Change of Control Agreements" on p. 16.
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 comparable 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 this 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 Cash Bonus Incentives. Annual cash bonus incentives allow the
----------------------------
Corporation to communicate key corporate goals to all employees and reward
employees for achieving those goals each fiscal year. As one example of these
incentives, the Corporation allocates up to ten percent of operating profits
to a profit sharing program in which all domestic and U.S. expatriate
employees participate. A portion of this allocation is paid in cash and a
portion is contributed to a tax qualified deferred retirement plan.
All senior executives with titles of vice president and above, other than
Mr. Sanders and Mr. Previte, were eligible in 1996 for bonus awards under the
Executive Bonus Plan. The Executive Bonus Plan has a short-term component and
a long-term component. The amount payable under the short-term component of
the Executive
7
Bonus Plan ranges from 0% to 100% of base salary depending on the executive's
level of responsibility. Under the short-term component, 80% of the targeted
bonus is 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 is based on the
executive's achievement of various group and division goals developed by the
executive's manager. Bonuses under the long-term component of the Executive
Bonus Plan are 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.
During 1996, none of the eligible and participating executives earned an
award under the Executive Bonus Plan. Certain executives received performance
related special bonuses.
Mr. Sanders' 1991 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. Any Unpaid Contingent Bonus that does not become payable within
the next three years is forfeited. The 1991 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.
In fiscal 1996, no incentive bonus was earned by Mr. Sanders. A payment of
$2,000,000 was made to Mr. Sanders in January of 1997 from the Unpaid
Contingent Bonus amount carried over from 1993, 1994 and 1995. Pursuant to the
terms of the 1996 Agreement with Mr. Sanders, $607,446 was carried over for
potential payment in fiscal 1997 or 1998. (See "Employment Agreements,
Compensation Agreements and Change of Control Agreements" on page 16.) This
carryover will be permitted provided the Company has operating profits for two
successive quarters in 1997 or 1998.
Equity Incentive Awards. The Committee has the authority to administer and
-----------------------
grant stock options to key employees pursuant to the Corporation's stock
option plans, and to award shares of restricted stock to selected employees
pursuant to the Corporation's 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.
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 and other industry-leading companies with annual
revenues generally in excess of $1 billion. 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.
Mr. Sanders' 1996 Agreement was entered into by the Corporation as an
inducement for Mr. Sanders to remain as Chairman and Chief Executive Officer
through December 31, 2001 and as Chairman through December 31, 2002. As
discussed in detail below in the section entitled "Employment Agreements,
Compensation Agreements and Change of Control Agreements" on page 16, the
Committee, which had
8
responsibility for negotiating the 1996 Agreement, believes that Mr. Sanders
is uniquely qualified to protect and enhance the best interests of the
Corporation and its stockholders and that entering into the 1996 Agreement and
providing a significant long-term equity incentive to Mr. Sanders would be of
great value to the Corporation and the long-term interest of its stockholders.
On this basis, pursuant to the 1996 Agreement, on September 29, 1996 the
Corporation awarded Mr. Sanders options for 2,500,000 shares at $14.75, the
fair market value on the date of the grant. Options for 1,250,000 shares are
performance- and time-based. The performance element of the options provides
for a scheduled accelerated vesting should the Corporation's average stock
price attain or exceed certain milestones for a rolling three month period.
The milestone stock prices are $26.00, $31.00, $37.50, $45.00 and $54.00 per
share for 1997 through 2001, respectively. In order for all of the options to
vest on a performance-accelerated basis, the aggregate market value of all
common stock outstanding as of September 29, 1996 would have to increase from
approximately $2.0 billion to $7.3 billion.
If the performance-based options do not vest on an accelerated basis, they
will vest on a time-based schedule provided that Mr. Sanders is employed on
the applicable vesting date. They vest at the rate of 0% in 1997 and 1998, 10%
(125,000 shares) on November 15, 1999, 15% (187,500) on November 15, 2000, 20%
(250,000 shares) on November 15, 2001, 20% (250,000 shares) on November 15,
2002 and 35% (437,500 shares) on November 15, 2003, if Mr. Sanders is employed
on those dates. Options to purchase the remaining 1,250,000 shares vest on a
time-based schedule at the rate of 325,000 shares per year on November 15,
1997 and 1998, and 200,000 shares per year on November 15, 1999, 2000 and
2001, if Mr. Sanders is employed on the applicable vesting date.
In granting these stock option awards, the Committee considered the
importance of motivating Mr. Sanders to continue his employment with the
Corporation through 2003. The Committee believes that Mr. Sanders' leadership
is particularly important to the Corporation implementing its long-term
business strategies as it increases the development of proprietary products
and strategic alliances. The Committee granted the options to Mr. Sanders
after considering data provided by an independent compensation consultant
relating to the competitive practices of high technology and other industry-
leading companies with annual revenues generally in excess of $1 billion.
1996 Option Repricing Program for Non-Executive Officers. In 1996, to
--------------------------------------------------------
respond to the substantial increase in competitive attempts to recruit
employees essential to the Corporation's success, the Committee elected to
reprice non-executive officer options. Competition for skilled engineers and
other key employees in the semiconductor industry is intense and the use of
significant stock options for retention and motivation of such personnel is
pervasive in the high technology industries. The Committee believes that stock
options are a critical component of the compensation offered by the
Corporation to promote long-term retention of key employees, motivate high
levels of performance and recognize employee contributions to the success of
the Corporation. The market price of the Corporation's common stock decreased
substantially from a high of $39.25 in the second quarter of 1995 to a low of
$10.62 in the third quarter of 1996. In light of this substantial decline in
the market price, the Committee believed that the large numbers of outstanding
stock options with an exercise price in excess of the actual market price were
no longer an effective tool to encourage employee retention or to motivate
high levels of performance. As a result, on July 10, 1996, the Committee
approved an option repricing program. Executive officers were excluded from
this repricing program.
All employees except executive officers were eligible to participate under
the program. Eligible optionees were permitted to exchange all outstanding
options that were granted under certain of the Corporation's stock option
plans, whether vested or unvested, with exercise prices that were greater than
the closing price on the New York Stock Exchange on July 15, 1996 on a one-
for-one basis for new options at an exercise price equal to the closing price
on the New York Stock Exchange for such Common Stock on July 15, 1996;
provided that (i) the vesting schedule and exercise period for each
installment of any new options was extended by one year, with no new options
vesting earlier than July 15, 1997, subject to any condition being waived by
the Chief Executive Officer of the
9
Corporation in the case of involuntary terminations or negotiated separation
arrangements, (ii) any optionee who dies or becomes disabled vests in that
portion of the new options that would have vested in the calendar year of such
death or disability, (iii) the maximum option term of any new options was equal
in length to the maximum option term remaining under the respective outstanding
options extended by one year, and (iv) the exchange ratio for vice presidents
(excluding executive officers) was four outstanding options to three new
options.
Tax Policy. Section 162(m) of the Internal Revenue Code (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.
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
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Compensation Committee through the Corporation's
1997 Annual Meeting are Mr. Blalack and Dr. Brown. Mr. Roby was a member of
the Compensation Committee until the Corporation's 1996 Annual Meeting. 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 make determinations concerning the cash
compensation of executives other than himself, but usually makes such
determinations in consultation with the Compensation Committee.
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 1996,
DLJ acted as the Corporation's financial advisor in connection with various
matters, including the Corporation's acquisition of NexGen, and acted as an
underwriter in the sale of the Corporation's 11% Senior Secured Notes due
2003. Donaldson, Lufkin & Jenrettte Securities Corporation will provide
services to the Corporation during 1997.
Mr. Sanders, 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.
10
EXECUTIVE COMPENSATION
The following table shows for the three fiscal years ended December 29,
1996, 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 (1994-1996)
ANNUAL COMPENSATION LONG-TERM COMPENSATION AWARDS
------------------------------------------------ -------------------------------------------------
(A) (B) (C) (D) (E) (F) (G) (H)
RESTRICTED SECURITIES
NAME AND PRINCIPAL OTHER ANNUAL STOCK UNDERLYING ALL OTHER
POSITION YEAR SALARY(/1/) BONUS(/2/) COMPENSATION AWARDS OPTIONS/SARS COMPENSATION(/3/)
------------------ ---- ----------- ---------- ------------ ---------- ------------ -----------------
W. J. Sanders III..... 1996 $1,038,461 $2,000,000(/4/) $217,818(/5/) $ 0 2,500,000 $23,172
Chairman and Chief 1995 $ 978,887 $2,026,961(/4/) $278,704(/5/) $ 0 0 $34,923
Executive Officer 1994 $ 952,225 $1,995,161(/4/) $315,578(/5/) $1,597,200(/6/) 200,000 $51,648
Richard Previte....... 1996 $ 709,312 $ 558,945(/7/) $ 0 $ 882,296(/8/) 145,267 $15,188
President and Chief 1995 $ 660,495 $1,358,757(/7/) $ 0 $ 0 100,000 $29,060
Operating Officer 1994 $ 606,250 $1,310,677(/7/) $ 0 $3,194,400(/8/) 152,500 $46,592
S. Atiq Raza.......... 1996 $ 306,350 $ 330,693(/9/) $ 0 $ 533,346(/1//0/) 250,132 $ 2,230
Senior Vice 1995 $ 0 $ 0 $ 0 $ 0 0 $ 0
President and 1994 $ 0 $ 0 $ 0 $ 0 0 $ 0
Chief Technical
Officer
Marvin D. Burkett..... 1996 $ 411,462 $ 100,000 $ 0 $ 441,172(/1//1/) 72,632 $ 7,670
Senior Vice 1995 $ 373,154 $ 326,434(/1//2/) $ 0 $ 0 50,000 $21,718
President, 1994 $ 348,750 $ 513,379 $ 0 $ 0 75,000 $40,443
Chief Financial and
Administrative
Officer
and Treasurer
Eugene D. Conner...... 1996 $ 406,635 $ 100,000 $ 0 $ 441,172(/1//1/) 72,632 $ 7,349
Senior Vice 1995 $ 362,789 $ 324,718(/1//2/) $ 0 $ 0 50,000 $21,297
President, 1994 $ 342,000 $ 499,425 $ 0 $ 0 75,000 $38,542
Operations
- --------
(1) Salaries for 1996 reflect 54 weeks of pay.
(2) Includes cash profit sharing in the following amounts for Messrs.
Sanders, Previte, Burkett and Conner, respectively: for 1995, $69,187,
$46,157, $26,264 and $25,535; for 1994, $90,711, $60,677, $34,903 and
$34,240. No cash profit sharing was paid for 1996.
(3) Includes, for the most recent fiscal year for Messrs. Sanders, Previte,
Raza, Burkett and Conner, the Corporation's matching contributions to the
Corporation's 401(k) Plan in the amounts of $2,250, $2,250, $1,288,
$2,250 and $2,250, respectively; the Corporation's matching contributions
to the Executive Savings Plan (the ESP) in the amounts of $12,750,
$7,898, $0, $3,666 and $3,587, respectively; imputed income from the term
life insurance provided by the Corporation in the amounts of $8,172,
$5,040, $942, $ 1,754 and $1,512, respectively; and premiums paid by the
Corporation for individual insurance policies in the amount of $26,282,
$23,241, $4,870, $10,820 and $8,626, respectively.
(4) No bonus was earned for fiscal year 1996. For fiscal year 1995, the
maximum bonus amount of $1,957,774 was paid, with an Unpaid Contingent
Bonus amount of $802,766 carried over for potential payment in 1996 or
1997, if Mr. Sanders' bonus for any such year does not exceed the maximum
amount. For fiscal year 1994, the maximum bonus amount of $1,904,450 was
paid, with an Unpaid Contingent Bonus amount of $1,578,100 carried over
for potential payment in 1995, 1996 or 1997. For fiscal year 1996, a
bonus amount of $2,000,000 was paid from the Unpaid Contingent Bonus
carried forward from 1993, 1994 and 1995. Pursuant to the terms of Mr.
Sanders' 1996 Agreement, $607,446 of the Unpaid Contingent Bonus from
1995 was carried over for potential payment in fiscal year 1997 or 1998.
If the Unpaid Contingent Bonus is not paid within such time, it is
forfeited.
(5) Includes for fiscal years 1996, 1995 and 1994, $104,089, $98,310 and
$93,206, respectively, of in-kind compensation in the form of company
provided vehicles; $62,864, $123,319 and $181,556, respectively,
reflecting the cost to AMD of providing physical security services; and,
$50,865, $44,622 and $39,416, respectively, for cash payments for tax
gross-ups.
(6) 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, and is net of consideration paid for the
stock. The total number of restricted shares held by Mr. Sanders and
their aggregate value at December 27, 1996 were 60,000 shares valued at
$1,567,200. The value is based on the closing sales price of AMD common
stock on December 27, 1996 ($26.13) and is net of consideration paid for
the stock. The 60,000 restricted
11
shares held by Mr. Sanders 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 restricted stock.
(7) No bonus was earned for fiscal year 1996. For fiscal year 1995, the
maximum bonus amount of $1,312,600 was paid, with an Unpaid Contingent
Bonus amount of $67,670 carried over for potential payment in 1996, 1997
or 1998, if Mr. Previte's bonus for any such year does not exceed the
maximum amount. For fiscal year 1994, the maximum bonus amount of
$1,250,000 was paid, with an Unpaid Contingent Bonus amount of $491,275
carried over for potential payment in 1995, 1996 or 1997. For fiscal year
1996, a bonus amount of $558,945 was paid from the Unpaid Contingent
Bonus carried forward from 1994 and 1995. No additional carryover amount
exists.
(8) The total number of restricted shares held by Mr. Previte and their
aggregate value at December 27, 1996 were 144,733 shares valued at
$3,780,426. The value is based on the closing sales price of AMD common
stock on December 27, 1996 ($26.13) and is net of consideration paid for
the stock. The dollar value of the restricted stock appearing in the
table with respect to fiscal year 1996 is based on the closing sales
price of AMD common stock on October 11, 1996 ($16.13), the date of the
award, and is net of consideration paid for the stock. The dollar value
of the restricted stock appearing in the table for fiscal year 1994 is
based on the closing sales price of AMD common stock on August 5, 1994
($26.63), the date of the award, and is net of consideration paid for the
stock. If Mr. Previte is employed on December 31, 1997, and the targeted
stock prices for 1997 or any following year ending through December 31,
2001 are met, 27,367 of the restricted shares will vest. If Mr. Previte
is employed on December 31, 1998, and the targeted stock prices for 1998
or any following year ending December 31, 2001 are met, 13,683 of the
restricted shares will vest. If Mr. Previte is employed on December 31,
1999, and the targeted stock prices for 1999 or any following year ending
December 31, 2001 are met, 13,683 of the restricted shares will vest. The
stock price targets for 1997 through 2001 are $26.00, $31.00, $37.50,
$37.50 and $37.50, respectively. 90,000 restricted shares will vest, if
at all, upon achievement of targeted average quarterly stock prices at a
rate of 30,000 shares per year ending with the last quarter of 1998.
(9) Includes $30,693 paid in the form of cancellation of indebtedness on a
note for interest accrued to October 17, 1996.
(10) The total number of restricted shares held by Mr. Raza and their
aggregate value at December 27, 1996 were 32,368 shares valued at
$845,452. The value is based on the closing sales price of AMD common
stock on December 27, 1996 ($26.13) and is net of consideration paid for
the stock. The dollar value of the restricted stock appearing in the
table is based on the closing sales price of AMD common stock on the date
of the awards, April 24, 1996 ($18.38) and October 11, 1996 ($16.13), and
is net of consideration paid for the stock. 5,000 performance restricted
shares vest in two equal installments in January of 1997 and 1998, if
product development and revenue goals are met. In January of 1997, 2,500
of these performance restricted shares vested. If Mr. Raza is employed on
December 31, 1997, and the targeted stock prices for 1997 or any
following year ending December 31, 2001 are met, 13,683 of the restricted
shares will vest. If Mr. Raza is employed on December 31, 1998, and the
targeted stock prices for 1998 or any following year ending December 31,
2001 are met, 6,843 of the restricted shares will vest. If Mr. Raza is
employed on December 31, 1999, and the targeted stock prices for 1999 or
any following year ending December 31, 2001 are met, 6,842 of the
restricted shares will vest. The stock price targets for 1997 through
2001 are $26.00, $31.00, $37.50, $37.50 and $37.50, respectively.
(11) The total number of restricted shares held by the executive and the
aggregate value at December 27, 1996 were 27,368 shares valued at
$714,852. The value is based on the closing sales price of AMD common
stock on December 27, 1996 ($26.13) and is net of consideration paid for
the stock. The dollar value of the restricted stock appearing in the
table is based on the closing sales price of AMD common stock on October
11, 1996 ($16.13), the date of the award, and is net of consideration
paid for the stock. If the executive is employed on December 31, 1997,
and the targeted stock prices for 1997 or any following year ending
December 31, 2001 are met, 13,683 of the restricted shares will vest. If
the executive is employed on December 31, 1998, and the targeted stock
prices for 1998 or any following year ending December 31, 2001 are met,
6,843 of the restricted shares will vest. If the executive is employed on
December 31, 1999, and the targeted stock prices for 1999 or any
following year ending December 31, 2001 are met, 6,842 of the restricted
shares will vest. The stock price targets for 1997 through 2001 are
$26.00, $31.00, $37.50, $37.50 and $37.50, respectively.
(12) Includes for Messrs. Burkett and Conner, $6,691 and $6,506, respectively,
paid as a correction to the long-term portion of the bonuses paid under
the Executive Bonus Plan for 1995.
12
OPTION/SAR GRANTS IN THE LAST FISCAL YEAR
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF STOCK PRICE
APPRECIATION FOR OPTION TERM(/2/)
----------------------------------------------
(A) (B) (C) (D) (E) (F) (G) (H)
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS EXERCISE
UNDERLYING GRANTED TO PRICE
OPTIONS/SARS EMPLOYEES IN PER EXPIRATION
NAME GRANTED(/1/) FISCAL YEAR SHARE DATE 0% 5% 10%
---- ------------ ------------ -------- ---------- ---------- ------------ ------------
W. J. Sanders III.... 1,250,000 11.12% $14.75 09/29/06 $ 0 $ 11,595,245 $ 29,384,627
750,000 6.67% $14.75 09/29/06 $ 0 $ 6,957,147 $ 17,630,776
500,000 4.45% $14.75 09/29/06 $ 0 $ 4,638,098 $ 11,753,851
Richard Previte...... 100,000(/3/) .89% $18.75 04/25/06 $ 0 $ 1,179,177 $ 2,988,267
45,267(/4/) .40% $ .01 10/12/06 $ 729,704 $ 1,188,896 $ 1,893,386
S. Atiq Raza......... 22,500(/5/) .20% $20.13 02/08/06 $ 0 $ 284,842 $ 721,846
40,000(/5/) .36% $10.06 02/08/06 $ 402,800 $ 909,186 $ 1,686,081
30,000(/3/) .27% $18.75 04/25/06 $ 0 $ 353,753 $ 896,480
22,632(/4/) .20% $ .01 10/12/06 $ 364,828 $ 594,408 $ 946,630
135,000(/5/) 1.20% $24.25 12/01/06 $ 0 $ 2,058,844 $ 5,217,514
Marvin D. Burkett.... 50,000(/3/) .44% $18.75 04/25/06 $ 0 $ 589,589 $ 1,494,134
22,632(/4/) .20% $ .01 10/12/06 $ 364,828 $ 594,408 $ 946,630
Eugene D. Conner..... 50,000(/3/) .44% $18.75 04/25/06 $ 0 $ 589,589 $ 1,494,134
22,632(/4/) .20% $ .01 10/12/06 $ 364,828 $ 594,408 $ 946,630
All Optionees........ 11,245,218(/7/) 100% ---- ---- $9,703,498(/6/) $104,481,961(/6/) $248,567,374(/6/)
- --------
(1) For a description of Mr. Sanders' options, see "Employment Agreements,
Compensation Agreements and Change of Control Agreements," p. 16. For all
other optionees: Each option has a ten-year term. Each option is subject
to earlier termination upon the optionee's termination of employment,
death or disability. 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. Upon an optionees' termination
of employment, options may be exercised only to the extent exercisable on
the date of such termination of employment. Upon an optionee's death or
disability, certain options that vest during the year of death or
disability may become exercisable. 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 "Employment Agreements, Compensation Agreements and Change in
Control Agreements." No stock appreciation rights (SARs) were granted to
the executive officers listed in the table during 1996.
(2) The 0%, 5% and 10% assumed rates of annual compound stock price
appreciation are mandated by rules of the Securities and Exchange
Commission and do not represent the Corporation's estimate or projection
of future prices of the Corporation's common stock.
(3) All options become cumulatively exercisable in two equal installments on
July 10, 1998 and July 10, 1999.
(4) Vesting of these options is conditioned upon performance milestones being
attained and the optionee being employed on certain dates. The performance
milestones are $26.00, $31.00, $37.50, $37.50 and $37.50 per share for
each of 1997, 1998, 1999, 2000 and 2001, respectively. Performance
milestones will be satisfied if the performance milestones for a later
year are attained in an earlier year, but only if the optionee is employed
at the end of such later year.
(5) The options for 22,500 shares become exercisable as follows: 9,000 shares
on February 8, 1997, 6,750 shares on February 8, 1988, 4,500 shares on
February 8, 1999 and 2,250 shares on February 8, 2000. The options for
40,000 shares become excercisable in two equal installments on January 15,
1997 and January 15, 1998. The options for 135,000 shares become
exercisable as follows: 22,000 shares on November 30, 1997, 38,000 shares
on November 30, 1998, 68,000 shares on November 30, 1999 and 7,000 shares
on November 30, 2000.
(6) Based on the number of shares outstanding at December 29, 1996.
(7) Includes additional grants for the repricing of options for employees
other than executive officers.
13
AGGREGATED OPTION/SAR EXERCISES IN THE LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
(A) (B) (E)
NUMBER (D) VALUE OF UNEXERCISED
OF NUMBER OF SECURITIES IN-THE-MONEY
SHARES UNDERLYING UNEXERCISED OPTIONS/SARS AT
ACQUIRED (C) OPTIONS/SARS AT 12/31/96 12/31/96(/1/)
ON VALUE ---------------------------- ----------------------------
NAME EXERCISE REALIZED(/1/) (EXERCISABLE) (UNEXERCISABLE) (EXERCISABLE) (UNEXERCISABLE)
---- -------- ------------- ------------ -------------- ------------ --------------
W. J. Sanders III....... 0 $ 0 1,000,000 2,700,000 $17,280,000 $28,450,000
Richard Previte......... 0 $ 0 345,550 245,267 $ 1,975,163 $ 1,920,374
S. Atiq Raza............ 598,000 $7,759,340 117,666 282,466 $ 2,879,898 $ 2,598,350
Marvin D. Burkett....... 0 $ 0 298,784 122,632 $ 3,401,735 $ 960,148
Eugene D. Conner........ 0 $ 0 359,264 122,632 $ 4,725,037 $ 960,148
- --------
(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 options/SARs.
14
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
ADVANCED MICRO DEVICES, S&P 500 COMPOSITE INDEX AND
TECHNOLOGY-500 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
Technology-500 Index from December 31, 1991 through December 31, 1996. The
past performance of the Corporation's common stock is no indication of future
performance.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
ADVANCED MICRO DEVICES, S&P 500 COMPOSITE INDEX AND
TECHNOLOGY-500 INDEX
PERFORMANCE GRAPH APPEARS HERE
Measurement Period S&P S&P High
(Fiscal Year Covered) AMD 500 Technology
- ------------------- ---------- --------- ----------
Measurement Pt-12/31/91 $100 $100 $100
FYE 12/31/92 $103.57 $104.13 $107.62
FYE 12/31/93 $101.43 $128.09 $118.46
FYE 12/31/94 $142.14 $149.29 $120.03
FYE 12/31/95 $ 94.31 $215.04 $165.13
FYE 12/31/96 $147.18 $305.07 $203.05
The chart above assumes $100 invested on December 31, 1991, in Advanced
Micro Devices, Inc. common stock, S&P 500 Composite Index and Technology-500
Index, and the reinvestment of dividends (although dividends have not been
declared on the Corporation's stock). Historical returns are not necessarily
indicative of future performance. The graph was plotted using the following
data:
YEAR ENDING DECEMBER 31
--------------------------------------------
1991 1992 1993 1994 1995 1996
---- ------- ------- ------- ------- -------
AMD................................ $100 $103.57 $101.43 $142.14 $ 94.31 $147.18
Technology-500..................... $100 $104.13 $128.09 $149.29 $215.04 $305.07
S&P 500............................ $100 $107.62 $118.46 $120.03 $165.13 $203.05
15
EMPLOYMENT AGREEMENTS, COMPENSATION AGREEMENTS AND CHANGE OF CONTROL
AGREEMENTS
Chairman's Employment Agreement. As discussed in the Compensation Committee
-------------------------------
Report above, the Corporation has entered into an amended and restated
employment agreement with Mr. Sanders, the term of which is September 1, 1996
through December 31, 2003 (the 1996 Agreement). The 1996 Agreement was entered
------------------
into as an inducement for Mr. Sanders to remain as Chairman and Chief
Executive Officer through December 31, 2001 and as Chairman through December
31, 2002. In 2003, Mr. Sanders may serve as Vice Chairman or in some mutually
acceptable executive capacity.
The 1996 Agreement provides for annual base compensation to Mr. Sanders of
no less than $1,000,000 through 2001, $500,000 in 2002 and $350,000 in 2003.
Base compensation for periods prior to 2003 will be adjusted for cost of
living increases. Cost of living adjustments for periods prior to 2002 will be
deferred (with interest) until a deduction for federal income tax purposes
will be allowed for their payment or March 31, 2004, if earlier.
Incentive compensation takes the form of an annual incentive bonus and stock
options. The annual incentive bonus equals 0.6% of the adjusted operating
profits of the Corporation for each respective fiscal year through 2001 in
excess of twenty percent (20%) of adjusted operating profits for the
immediately preceding fiscal year. Under the 1996 Agreement the annual bonus
payment may not exceed $5,000,000. Any excess amount of an annual incentive
bonus over $5,000,000, plus any carryover bonus amounts under the 1991
Agreement (together, the Unpaid Contingent Bonus) will be added to the bonus
determined for each specified future period (subject to the $5,000,000 limit
in each of those years). "Adjusted operating profits" for these purposes
constitute the Corporation's operating income as reported on the Corporation's
financial statements, adjusted for any pretax gain or loss from certain joint
ventures and increased by any expenses accrued for profit sharing plan
contributions and Executive Bonus Plan bonuses. Mr. Sanders is also eligible
to receive a discretionary bonus, in an amount determined by the Compensation
Committee of the Board, based on the Committee's assessment of his
performance.
Mr. Sanders received an option grant for 2,500,000 shares under the 1996
Agreement. The Compensation Committee expects that no further stock option
awards will be granted to Mr. Sanders over the term of the 1996 Agreement,
except in unusual circumstances. Options for 1,250,000 shares are performance-
and time-based. The performance element of the options provides for a
scheduled accelerated vesting should the Corporation's average stock price
attain or exceed certain milestones for a rolling three month period. The
milestone stock prices are $26.00, $31.00, $37.50, $45.00 and $54.00 per share
for 1997 through 2001, respectively. If the highest milestone applicable to a
year is met, options for 250,000 shares applicable to that year will vest.
(Achieving lower stock price milestones results in the acceleration of lesser
percentages of the stock.) Performance-accelerated vesting will occur early if
the performance milestones for a later year are attained in an earlier year.
If the performance-based options do not vest on an accelerated basis, they
will vest on a time-based schedule provided that Mr. Sanders is employed on
the applicable vesting date. They vest at the rate of 0% in 1997 and 1998, 10%
(125,000 shares) on November 15, 1999, 15% (187,500) on November 15, 2000, 20%
(250,000 shares) on November 15, 2001, 20% (250,000 shares) on November 15,
2002 and 35% (437,500 shares) on November 15, 2003, if Mr. Sanders is employed
on those dates. Options to purchase the remaining 1,250,000 shares vest on a
time-based schedule at the rate of 325,000 shares per year on November 15,
1997 and 1998, and 200,000 shares per year on November 15, 1999, 2000 and
2001, if Mr. Sanders is employed on the applicable vesting date.
These 1996 options may be exercised after termination of employment as
follows: five years after retirement as Chief Executive Officer; three years
after death or disability; one year after a voluntary resignation of
employment other than for defined reasons; thirty days after a termination by
the Corporation "for cause"; and, with respect to any other termination of
employment, two years after such termination in the case of options that
vested prior to termination of employment and one year after the later of
termination of service or the vesting
16
date in the case of options that vest only upon or following termination of
employment. All of the 1996 options will expire on September 29, 2006, if not
earlier exercised or terminated.
If the Corporation terminates Mr. Sanders' employment other than "for cause"
or constructively terminates Mr. Sanders' employment (including 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 of the Corporation),
the Corporation is obligated to pay Mr. Sanders his annual base salary through
the later to occur of December 31, 2002 or one year from the date of
termination of employment. In such circumstances, the Corporation is obligated
to pay Mr. Sanders' incentive compensation for the fiscal year during which
such termination occurs and for the following fiscal year, plus the amount of
any Unpaid Contingent Bonus then remaining unpaid. In addition, all time-based
options will vest and performance-accelerated vesting options may vest for the
year of termination or constructive termination and for the year following
termination, if the performance milestones are attained by the Corporation
within such periods.
Under the 1996 Agreement, the Corporation is obligated to guarantee the
repayment of any loan (including interest) obtained by Mr. Sanders for the
purpose of exercising options or warrants to purchase stock of the Corporation
up to the lesser of: (a) the exercise price of the options plus taxes paid by
Mr. Sanders by reason of the exercise, or (b) three and one-half million
dollars ($3,500,000). The Corporation's obligation to guarantee such loans
continues for a period of two years after the applicable event. If Mr. Sanders
enters into loan agreements for any other reason, the Corporation is obligated
to guarantee repayment of such loans up to $3,500,000 for a period ending 180
days after termination of service.
Mr. Sanders is also entitled to receive certain benefits upon his disability
(as that term is defined in the 1996 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. For ten years following any
termination, disability, termination without cause or such other event, Mr.
Sanders will receive health and welfare benefits comparable to those he was
receiving and reimbursements for all income taxes due on the receipt of such
benefits.
In the event that Mr. Sanders terminates his employment following a change
in control, Mr. Sanders will receive the greater of the salary payable for the
remaining term of the 1996 Agreement or three times base salary, bonus
payments equal to the average of the two highest annual bonuses paid during
the last five calendar years immediately prior to the change of control (plus,
as soon as can be determined, any excess over such amount of the sum of the
bonuses which would otherwise have been payable to Mr. Sanders for the year in
which the termination occurred and the following year), vesting of all time-
based options and vesting of time-based performance-accelerated options if the
performance milestones are satisfied on the basis of the acquisition price or
such options otherwise would have vested in the year of such change in
control. Mr. Sanders will also be entitled to an additional payment necessary
to reimburse him for any federal excise tax imposed on him 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 reason of his disability or
death, he or his estate is entitled to his full base salary under the 1996
Agreement through 2001, the incentive compensation for the fiscal year in
which such termination occurred and for the following fiscal year, the amount
of any Unpaid Contingent Bonus then remaining unpaid and, in the case of
death, an additional year's salary. Any time-based options Mr. Sanders has
been granted that would otherwise vest within two years following termination
will vest, and all time-based performance-accelerated options which otherwise
would have vested prior to the end of the fiscal year following the death or
disability will vest if the performance milestones are met as described above.
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.
17
Pursuant to the 1996 Agreement, the Corporation will accrue an additional
$400,000 per year in deferred retirement compensation for five years, payable
to Mr. Sanders only if he is Chief Executive Officer on September 12, 2001.
Accrued amounts will be credited with interest at the rate of 9% per annum.
The payment of $2,000,000 plus interest will be made to Mr. Sanders following
his termination in a manner that ensures that the retirement payments will be
deductible under Section 162(m) of the Code. If Mr. Sanders terminates his
employment by reason of a change of control or because of a constructive
termination or the Corporation terminates Mr. Sanders' employment (other than
"for cause"), all retirement deferrals will immediately accelerate and will be
payable following termination in a manner that ensures that the retirement
payments will be deductible under Section 162(m). Upon death or disability
before December 31, 2001, a prorated amount will be payable to Mr. Sanders or
his estate following his death or disability.
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 a
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, except for
awards under the 1996 Agreement, all stock options and stock appreciation
rights that he 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. Mr. Sanders'
management continuity agreement does not apply to amounts payable to or awards
under the 1996 Agreement, and is superseded by the 1996 Agreement with respect
to such amounts or awards.
Vesting of Stock Options, Limited Stock Appreciation Rights and Restricted
--------------------------------------------------------------------------
Stock. Except with respect to options and awards under Mr. Sanders' 1996
- -----
Agreement, 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,
18
trustee or custodian therefor) is or becomes the beneficial owner, directly or
indirectly, of securities of the Corporation representing more than 20% 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, the 1992 Stock Incentive Plan and the 1996 Stock Incentive
Plan become fully vested on termination of employment within one year
following a Change in Control as defined in that plan. The options will be
subject to accelerated vesting if a change of control occurs (as defined under
the terms of the executive's management continuity agreement) and either the
consideration to be paid to stockholders of the Corporation for a share of the
Corporation's common stock is equal to or in excess of the stock price target,
which if attained, would otherwise result in the vesting of the stock, or the
closing price of the Corporation's common stock on the day thirty days before
or after the change of control is equal to or in excess of such stock price
target.
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 1994 restricted stock award agreements provide that their restricted
stock will vest if more than 20% 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. The restricted shares are subject
to accelerated vesting if a change of control occurs (as defined under the
terms of the executive's management continuity agreement) and either (a)
consideration paid to stockholders of the Corporation for a share of the
Corporation's common stock equals or exceeds the stock price target, which if
attained, would otherwise result in the vesting of the stock, or (b) the
closing price of the Corporation's common stock on the day thirty days before
or after the change of control is equal to or in excess of such stock price
target.
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 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 or others using .35 micron or smaller technology in the
State of Saxony. MST Group also advises the Saxony State Ministry for
Economics and Labor as well as Saxony industrial companies and institutions
regarding other semi-conductor matters and projects in the fields of
multimedia development, lightweight vehicle manufacturing, environmental
remediation and recycling facilities. Assuming an exchange rate of DM1.55 to
$1.00, under the contract, MST Communications has received $144,513 in 1995
and $51,613 in 1996. The contract was renegotiated in 1996 and no grant
payment is to be made in 1997. The Corporation broke ground in 1996 for the
construction of 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. 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 equity investments and
loans aggregating approximately $350 million over the next four years in
connection with this facility, including $75 million paid in 1996.
19
In connection with Mr. S. Atiq Raza's initial and continued employment by
NexGen, NexGen made two loans to him which were assumed by AMD upon its
acquisition of NexGen. The two loans are each in the principal amount of
$50,000, are currently due on October 17, 1998 and bear interest at 7.07% and
8.12%. As originally agreed by NexGen, a bonus was paid to Mr. Raza in the
form of cancellation of indebtedness on one of the notes for interest accrued
to October 17, 1996. The largest amount due under the loans during 1996 was
$129,380, and the aggregate amount outstanding under the loans as of February
25, 1997 was $129,851.
In March of 1997, Mr. Thomas M. McCoy borrowed $450,000 from the Corporation
pursuant to a promissory note bearing interest at 7.5%, payable in March 1999,
secured by a pledge of stock and a deed of trust on real property.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Section 16 of the Securities and Exchange Act of 1934, as amended, 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 1996. During 1995, Mr.
Thomas M. McCoy timely reported a transaction but inadvertently included only
a portion of the restricted shares granted. This was corrected by reporting
the full amount of restricted shares granted in an amended Form 5 for 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 has been
the Corporation's independent auditors since its incorporation in 1969.
Audit services of Ernst & Young LLP during the Fiscal Year included the
examination of the consolidated financial statements of the Corporation and
services related to filings with the Securities and Exchange Commission and
other regulatory bodies.
The Audit Committee of the Corporation meets with Ernst & Young LLP on an
annual or more frequent basis. At such times, the Audit Committee reviews both
audit and non-audit services performed by Ernst & Young LLP for the preceding
year, as well as the fees charged for such services. Among other things, the
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.
20
PROPOSAL NO. 3--APPROVAL OF THE AMENDMENT TO THE ADVANCED MICRO DEVICES, INC.
1996 STOCK INCENTIVE PLAN
The Corporation's stockholders are also being asked to approve an amendment
to the Advanced Micro Devices, Inc. 1996 Stock Incentive Plan (the 1996 Plan)
to increase the number of stock options awarded to each member of the Board of
Directors who is not also an employee of the Corporation (Outside Director).
Pursuant to a nondiscretionary formula set forth in the 1996 Plan, Outside
Directors 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 re-election (the Annual
Option). Stock options for Outside Directors were first approved and awarded
in 1991 in these amounts. This proposed amendment will increase the First
Option to 15,000 shares and the Annual Option to 5,000 shares.
The purpose of the 1996 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 Outside Directors upon whom rest
major responsibilities for the successful operation and management of the
Corporation and its affiliates. The 1996 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 1996 Plan to form part of the compensation for services to
be rendered by such persons in the future.
The Stockholders approved the 1996 Plan on April 24, 1996 with an effective
date of February 7, 1996 and the Board of Directors amended the 1996 Plan in
October of 1996. Below is a summary of the principal provisions of the 1996
Plan and its operation.
SUMMARY DESCRIPTION OF THE 1996 PLAN
Number of Shares Subject to the 1996 Plan. The 1996 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 1996 Plan. The market
value of the Corporation's common stock on the New York Stock Exchange as of
February 25, 1997 was $36.63 per share.
Administration and Duration of the 1996 Plan. Authority to administer the
--------------------------------------------
1996 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 1996 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 1996 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. The maximum number of shares that may be granted to an individual
under the 1996 Plan is 2,000,000. As of February 25, 1997, approximately 2,970
persons were eligible to receive options under the 1996 Plan, no shares had
been issued upon the exercise of options under the 1996 Plan and 4,075,948
shares were subject to outstanding options under the 1996 Plan. As of February
25, 1997, 2,424,052 shares were available for future option grants.
Over the term of the 1996 Plan through February 25, 1997, the following
executive officers have been granted the following options to purchase shares
under the 1996 plan: Mr. Sanders, 2,000,000 shares; Mr. Previte, 100,000
shares; Mr. Raza, 165,000 shares; Mr. Burkett, 50,000 shares; Mr. Conner,
50,000 shares. During this period, the Corporation's executive officers as a
group have been granted options to purchase an aggregate of 2,390,000 shares,
and all employees as a group (excluding executive officers) have been granted
21
options to purchase an aggregate of 1,788,933 shares under the 1996 Plan.
During this period, the Corporation's current directors as a group (excluding
executive officers) have been granted options to purchase 15,000 shares under
the 1996 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. The Corporation did not grant any
ISOs in 1996.
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 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. Under the Plan as originally adopted, an
-------------------------------
Outside Director who has not previously been elected or appointed as a member
of the Board will be granted a First Option for 12,000 shares on his or her
election or appointment. 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 Annual Option
for 3,000 shares, vesting in three increments of 1,000 shares on each July 15
of the second, third and fourth calendar year following re-election. The
proposed amendment to the 1996 Plan will increase the First Option to 15,000
shares, vesting in increments of 6,000, 4,500, 3,000 and 1,500 shares on July
15 of the first, second, third and fourth calendar year following grant; and
will increase the Annual Option to 5,000 shares, vesting in increments of
1,667, 1,667 and 1,666 shares on July 15 of the second, third and fourth
calendar years 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 1996 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
22
entity, or a liquidation of the Corporation or a sale of substantially all of
the Corporation's assets. The 1996 Plan Change of Control provisions are not
applicable to options granted to Mr. Sanders in 1996.
New Plan Benefits Table. The following table shows in the aggregate the
-----------------------
Annual Options that will be granted to Outside Directors under the 1996 Plan
in 1997 if the stockholders approve the amendments to the 1996 Plan. Since all
current Outside Directors are incumbent directors, no Outside Director who is
elected at the 1997 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.
NUMBER OF
NAME AND POSITION EXERCISE PRICE (PER SHARE) SHARES
----------------- -------------------------- ---------
All current directors who are
not executive
officers as a group (5
persons)..................... Fair market value on date of grant 25,000
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.
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
23
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 1996 Plan are intended to qualify for full deductibility.
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
amendment to the 1996 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 amendment to the 1996
Plan. Broker non-votes, if any, will not be counted in determining the number
of shares present and entitled to vote on the amendment to the 1996 Plan.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL OF THE
AMENDMENT TO THE AMD 1996 STOCK INCENTIVE PLAN. UNLESS MARKED TO THE CONTRARY,
PROXIES RECEIVED WILL BE VOTED "FOR" APPROVAL.
PROPOSAL NO. 4--APPROVAL OF THE AMENDMENT TO THE ADVANCED MICRO DEVICES, INC.
1991 STOCK PURCHASE PLAN
In February 1991, the AMD Board of Directors adopted the 1991 Stock Purchase
Plan (the SPP) that authorized two million five hundred thousand (2,500,000)
shares to be issued to employees. The SPP was approved by AMD stockholders at
the 1991 annual meeting. An amendment to the SPP increasing the number of
shares issuable to 3,600,000 was proposed and adopted by the stockholders at
the Special Meeting of Stockholders on January 16, 1996. As of February 25,
1997, there are only 303,522 shares of AMD common stock remaining available
for issuance under the SPP. The Corporation's stockholders are being asked to
approve an amendment to the SPP to increase the number of shares authorized to
be issued thereunder to five million one hundred thousand (5,100,000). The
essential features of the SPP, as proposed to be amended, are outlined below.
SUMMARY DESCRIPTION OF THE SPP AS AMENDED
Purpose. The purpose of the SPP, which is intended to qualify under Section
-------
423 of the Code, is to provide employees (including officers) of AMD and
participating subsidiaries with an opportunity to purchase AMD common stock
through payroll deductions. The Board of Directors believes that equity
participation in the SPP provides employees at all levels with a greater
incentive to contribute to the success of AMD.
24
Administration. The SPP is administered by the Board of Directors or a
--------------
committee appointed by the Board. Offerings under the SPP have a duration of
three months and commence on the first business day on or after February 1,
May 1, August 1 and November 1 of each year, unless otherwise specified by the
Board of Directors.
Eligibility and Participation. Any employee who is customarily employed for
-----------------------------
at least 20 hours per week and more than five months per calendar year by AMD
or its participating subsidiaries is eligible to participate in the SPP.
Employees become participants in the SPP by delivering to AMD a subscription
agreement within a specified period of time prior to the commencement of each
offering period.
No employee who owns 5% or more of the total combined voting power or value
of all classes of shares of stock of AMD or its subsidiaries (including shares
which may be purchased under the SPP or pursuant to any other options) is
permitted to purchase shares under the SPP. In addition, no employee is
entitled to purchase more than $25,000 worth of shares under the SPP (in any
calendar year) based on the fair market value of the shares at the time the
option is granted.
AMD estimates approximately 6,700 of its current employees are eligible to
participate in the SPP. AMD is not presently able to determine the amount of
benefits which may be received by employees under the SPP.
Payroll Deductions. The purchase price of the shares is accumulated by
------------------
payroll deductions over each offering period. The deductions may not be
greater than ten percent (10%) of a participant's compensation, nor less than
a minimum established by the Board or its delegate. Compensation, for purposes
of the SPP, includes salary, shift deferential, lead pay and overtime, but
excludes bonuses, special awards, 50% of commissions, income attributable to
option exercises, reimbursements and allowances. A participant may increase or
decrease his rate of payroll deductions once during each offering period.
All payroll deductions of a participant are credited to his account under
the SPP and are deposited with the general funds of AMD. Such funds may be
used for any corporate purpose. No charges for administrative or other costs
may be made by AMD against the payroll deductions.
Purchase Price. The price at which shares are sold under the SPP is the
--------------
lower of 85% of the fair market value of the AMD common stock at the beginning
of the offering period, or 85% of the fair market value of the AMD common
stock as of the end of such period.
Number of Shares. As amended, the SPP authorizes 5,100,000 shares of AMD
----------------
common stock for issuance thereunder, subject to stockholder approval.
At the beginning of an offering period, each participant is granted an
option to purchase up to that number of shares equal to thirty percent (30%)
of the participant's eligible compensation for the preceding offering period
divided by 85% of the fair market value of a share of AMD common stock at the
beginning of the offering period. Unless the employee's participation is
discontinued, his option for the purchase of shares will be exercised
automatically at the end of the offering period at the applicable price. To
the extent an employee's payroll deductions exceed the amount required to
purchase the shares subject to option, such excess amount is refunded to the
employee at the end of the offering period. To the extent that an employee's
payroll deductions are insufficient to exercise the full number of shares
subject to option, the remaining portion of the option expires unexercised.
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 SPP. The market value of the Corporation's common stock on the New York
Stock Exchange as of February 25, 1997 was $36.63 per share.
Withdrawal from the SPP. A participant may terminate his or her interest in
-----------------------
a given offering by withdrawing all, but not less than all, of the accumulated
payroll deductions credited to such participant's account at any time prior to
the end of the offering period. The withdrawal of accumulated payroll
deductions automatically terminates the employee's interest in that offering.
As soon as practicable after such withdrawal,
25
the payroll deductions credited to a participant's account are returned to the
participant without interest. A participant's withdrawal from an offering does
not have any effect upon such participant's eligibility to participate in
subsequent offerings under the SPP.
Termination of Employment. Termination of a participant's employment for any
-------------------------
reason, including retirement or death or the failure to remain in the
continuous employ of AMD for at least 20 hours per week (except for certain
leaves of absence), cancels his or her participation in the SPP immediately.
In such event, the payroll deductions credited to the participant's account
will be returned to the participant, or in the case of death, to the person or
persons entitled thereto, without interest.
Changes in Capitalization. In the event of any stock dividend, stock split,
-------------------------
spin-off, recapitalization, merger, consolidation, exchange of shares or other
change in capitalization, the number of shares then subject to option and the
number of authorized shares remaining available to be sold shall be increased
or decreased appropriately, with such other adjustment as may be deemed
necessary or equitable by the Board, including adjustments to the price per
share.
Transferability. No rights or accumulated payroll deductions of an employee
---------------
under the SPP may be pledged, assigned or transferred for any reason and any
such attempt may be treated by AMD as an election to withdraw from the SPP.
Amendment and Termination of the Plan. The Board of Directors may at any
-------------------------------------
time amend or terminate the SPP, except that such termination cannot affect
options previously granted nor may any amendment make any change in an
existing option which adversely affects the rights of any participant without
the participant's consent. No amendment may be made to the SPP without prior
or subsequent stockholder approval, if stockholder approval would be required
to meet the requirements of Section 423 of the Code or to satisfy the
requirements of a stock exchange on which AMD shares are listed.
FEDERAL INCOME TAX CONSEQUENCES
The SPP, and the right of participants to make purchases thereunder, is
intended to qualify as an "employee stock purchase plan" under the provisions
of Section 423 of the Code. Under these provisions, no income will be taxable
to a participant at the time of grant of the option or purchase of shares. AMD
will be entitled to a deduction for amounts taxed as ordinary income to a
participant only to the extent that ordinary income must be reported upon
disposition of shares by the participant before the expiration of the holding
period described below. A participant may become liable for tax upon
disposition of the shares acquired, as summarized below.
1. If the shares are sold or disposed of (including by way of gift) at least
two years after the date of the beginning of the offering period the
participant will recognize ordinary income in an amount equal to the lesser of
(a) the excess of the value of the shares at the time of such disposition over
the purchase price of the shares or (b) 15% of the value of the shares at the
beginning of the offering period. Any further gain upon such disposition will
be treated as long-term capital gain. If the sale price is less than the
purchase price, there is no ordinary income and the participant has a capital
loss for the difference.
2. If the shares are sold or disposed of (including by way of gift or
exchange in connection with the exercise of an incentive stock option) before
the expiration of the two-year holding period described above, the excess of
the value of the shares on the date of purchase over the purchase price will
be treated as ordinary income to the participant. This amount will constitute
ordinary income in the year of sale or other disposition even if no gain is
realized on the sale or other disposition. A capital loss will be recognized
if the sale price is lower than the value of the shares on the date of
purchase but any such loss will not affect the ordinary income recognized upon
the disposition.
26
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
amendment to the SPP 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 amendment to the SPP. Broker non-
votes, if any, will not be counted in determining the number of shares present
and entitled to vote on the amendment to the SPP.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL OF THE
AMENDMENT TO THE SPP. UNLESS MARKED TO THE CONTRARY, PROXIES RECEIVED WILL BE
VOTED "FOR" APPROVAL.
ANNUAL REPORT AND FINANCIAL STATEMENTS
THE 1996 ANNUAL REPORT OF THE CORPORATION, WHICH INCLUDES ITS AUDITED
FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996, 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 1998 Annual Meeting must be
received by the Secretary of the Corporation not later than November 20, 1997
to be included in the 1998 Proxy Statement.
AMD, the AMD logo and combinations thereof, Advanced Micro Devices and
NexGen are either registered trademarks or trademarks of Advanced Micro
Devices, Inc.
AMD-90285
27
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" Unless otherwise defined in a Participant's
employment agreement, 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) unless otherwise provided in a Participant's
employment agreement, 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) unless otherwise provided in a
Participant's employment agreement, "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
2
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.
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
(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.
4
(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 6,665,000 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
5
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.
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 or in a
Participant's employment agreement, 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
by 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
6
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 on 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, then,
unless otherwise provided in a Participant's employment agreement, 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, unless otherwise provided in a Participant's employment
agreement, 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.
(4) EVENTS NOT DEEMED TERMINATIONS: Unless otherwise provided in a
Participant's employment agreement, 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
7
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) Unless otherwise provided in a Participant's employment agreement, 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 or employment 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
8
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.
(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
9
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.
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 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
10
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.
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
11
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.
12
1991 STOCK PURCHASE PLAN
The following constitutes the provisions of the Advanced Micro Devices,
Inc. 1991 Stock Purchase Plan (herein called the "Plan"). As used herein the
terms "Corporation" and "AMD" refer to Advanced Micro Devices, Inc. and, where
appropriate, any Participating Subsidiary of Advanced Micro Devices, Inc.
1. Purpose. The purpose of the Plan is to foster continued cordial
-------
employee relations by providing employees of the Corporation and Participating
Subsidiaries with an opportunity to purchase Common Stock of the Corporation
through payroll deductions. It is the intention of the Corporation that the
Plan qualify as an "employee stock purchase plan" under Section 423 of the
Internal Revenue Code of 1986, as amended (the "Code"). The provisions of the
Plan shall be construed so as to extend and limit participation in a manner
consistent with the requirements of that section of the Code and the regulations
promulgated thereunder.
2. Definitions.
-----------
(a) "Board" means the Board of Directors of the Corporation.
(b) "Business Day" means a day on which AMD Common Stock is publicly
traded.
(c) "Committee" means the committee designated by the Board to
administer this Plan.
(d) "Compensation" means salaries, overtime, shift differential and
lead pay. Bonuses, special awards, sales commissions, cash profit sharing,
income attributable to the exercise of a compensatory stock option or warrant
and reimbursements and allowances are excluded.
(e) "Employee" means any person, including an officer, customarily
employed for at least twenty (20) hours per week and more than five (5) months
in a calendar year by the Corporation or its Participating Subsidiaries.
(f) "Participating Subsidiary" means any subsidiary (determined by
reference to Section 425 of the Code) designated by the Board to be a
participating subsidiary.
(g) "Offering Period" shall have meaning assigned by paragraph 4.
(h) "Option Grant Date" means the first Business Day of each Offering
Period of the Plan.
(i) "Purchase Date" means the last Business Day of each Offering
Period of the Plan.
3. Eligibility. Any Employee who shall be employed by the Corporation or
-----------
its Participating Subsidiaries on the first day of an Offering Period, shall be
eligible to participate in such Offering Period under the Plan, subject to the
requirements of paragraph 5 and the limitations imposed by Section 423(b) of the
Code.
4. Offering period. Absent action by the Board, each Offering Period
---------------
shall extend for three calendar months commencing on the first Business Day on
or after February 1, May 1, August 1 and November 1 of each year and ending on
the last Business Day of the third month. The initial Offering Period under
this plan shall be a four-month period commencing on April 1, 1991 and ending on
July 31, 1991.
5. Participation.
-------------
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement authorizing payroll deduction on the form
provided by the Corporation and filing it with the designated Corporation office
not later than the 15th day of the month prior to a new Offering Period;
provided that participants who go on a leave of absence are subject to the
special rules set forth in paragraph 10(c) hereof; and provided further that an
Employee who commences employment in the month prior to a new Offering Period
may complete a subscription agreement on the date he commences employment. An
Employee who becomes eligible to participate in the Plan after an Option Grant
Date may not participate until the next Offering Period.
(b) Payroll deductions for a participant shall commence with the first
payroll following the Option Grant Date and shall end with the Purchase Date of
the offering, unless sooner terminated by the participant as provided in
paragraph 10, or by the Corporation.
6. Payroll Deductions.
------------------
(a) At the time a participant files his subscription agreement, he
shall elect to have payroll deductions made on each payday during the Offering
Period at a rate not exceeding ten percent (10%) of the Compensation which he
would otherwise receive on such payday, provided that the aggregate of such
payroll deductions during the Offering Period shall not exceed ten percent (10%)
of the aggregate compensation which he would otherwise have received during said
Offering Period. The Committee shall determine whether the amount to be
deducted from each paycheck is to be designated as a specific dollar amount, or
as a percentage of the eligible Compensation being paid on such pay day, or as
either, and may also establish a minimum percentage or amount for such payroll
deductions.
2
(b) All payroll deductions authorized by a participant shall be
credited to his account under the Plan. A participant may not make any
additional payments into such account.
(c) A participant may discontinue his participation in the Plan as
provided in paragraph 10, and may decrease or increase the rate of his payroll
deductions a maximum of once during the Offering Period by completing and filing
with the Corporation a new authorization for payroll deduction. The change in
rate shall become effective no later than fifteen (15) days after the
Corporation's receipt of the new authorization.
7. Grant of Option
---------------
(a) On each Option Grant Date, each participant in the Plan shall be
granted an option to purchase (at the per share option price) the number of
shares of the Corporation's Common Stock determined by dividing: (i) thirty
percent (30%) of the participant's Pay by (ii) eighty-five percent (85%) of the
fair market value of a share of the Corporation's Common Stock on such Option
Grant Date; but in no event shall such number be greater than the amount
permitted under Section 7(b) of this Plan. Fair market value of a share of the
Corporation's Common Stock shall be determined as provided in Section 7(c)
herein. In calculating under this section the number of shares subject to
option for the next Offering Period, and for purposes of calculating the
foregoing limit, Pay for a current Offering Period shall mean: (1) Five Hundred
Seventy (570) times the sum of (a) the participant's hourly wage rate in effect
on the first day of the current Offering Period plus (b) the Participant's
average hourly overtime for the preceding Offering Period; plus (2) the amount
of Compensation deferred from a prior Offering Period and which will be paid to
the participant during the current Offering Period.
(b) Exceptions. Any provisions of the Plan to the contrary
----------
notwithstanding, any option granted to an Employee shall be limited so that:
(i) immediately after the grant, such employee would not own
stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of stock of the Corporation or of
any subsidiary of the Corporation (including stock which the employee
may purchase under outstanding options and stock, the ownership of
which is attributed to the employee under Section 424 (d) of the
Code), and
(ii) the Employee's rights to purchase shares under all employee
stock purchase plans of the Corporation and its subsidiaries shall not
accrue (i.e., become exercisable) at a rate which exceeds twenty-five
thousand dollars ($25,000) of fair market value of such shares
(determined at the time such option is granted) for each calendar year
in which such option is outstanding at any time.
3
(c) The option price per share of such shares shall be the lower of:
(i) 85% of the fair market value of a share of the Corporation's Common Stock at
the Option Grant Date; or (ii) 85% of the fair market value of a share of the
Corporation's Common Stock at the Purchase Date. The fair market value of the
Corporation's Common Stock on said dates shall be the closing price on the New
York Stock Exchange for such date, or if no sale is made on such date, the
corresponding closing price on the first preceding date on which the
Corporation's Common Stock was sold.
(d) Any excess contributions remaining in the Employee's account
after the purchase of the shares on the Purchase Date will be returned to the
employee, or may be credited against future payroll deductions.
8. Exercise of Option. Unless a participant withdraws from the Plan as
------------------
provided in paragraph 10, his option for the purchase of shares will be
exercised automatically for the number of whole shares which the accumulated
payroll deductions in his account could purchase at the applicable option price
on the Purchase Date. During his lifetime, a participant's option to purchase
shares hereunder is exercisable only by him. Options granted with respect to
the initial Offering Period of April 1, 1991 through July 31, 1991 shall not be
exercisable unless stockholders approve this Plan prior to February 12, 1992.
9. Delivery. As promptly as practicable after the Purchase Date of each
--------
offering, the Corporation shall arrange the delivery to each participant, as
appropriate, of a certificate representing the number of whole shares purchased
on exercise of his option.
10. Withdrawal; Termination of Employment.
-------------------------------------
(a) A participant may withdraw all, but not less than all, the
payroll deductions credited to his account under the Plan at any time prior to
the Purchase Date by giving written notice to the Corporation on a form provided
for such purpose. All of the participant's payroll deductions credited to his
account will be paid to him promptly after receipt of his notice of withdrawal,
his option for the current period will be automatically cancelled, and no
further payroll deductions for the purchase of shares will be made during the
Offering Period.
(b) Upon termination of the participant's employment for any reason,
including retirement, permanent disability or death, the payroll deductions
credited to his account will be returned to him or, in the case of his death, to
the person or persons entitled thereto under paragraph 14, and his option will
be automatically cancelled.
(c) In the event an Employee fails to remain in the continuous employ
of the Corporation or its subsidiaries for customarily at least twenty (20)
hours per week during an Offering Period, he will be deemed to have elected to
withdraw from the Plan
4
and the payroll deductions credited to his account will be returned to him and
his option cancelled; provided that a participant who goes on an unpaid leave of
absence shall be permitted to remain in the Plan with respect to an Offering
Period which commenced prior to the beginning of such leave of absence. If such
participant is not guaranteed reemployment by contract or statute and the leave
of absence extends beyond 90 days, such participant shall be deemed to have
terminated employment on the 91st day of such leave of absence. Payroll
deductions for a participant who has been on an unpaid leave of absence will
resume at the same rate as in effect prior to such leave upon return to work
unless changed by such participant or unless the participant has been on an
unpaid leave of absence either throughout an entire Offering Period or for more
than ninety (90) days, in which cases the participant shall not be permitted to
re-enter the Plan until a subscription agreement is filed with respect to a
subsequent Offering Period which commences after such participant has returned
to work from the unpaid leave of absence.
(d) A participant's withdrawal from an offering will not have any
effect upon his eligibility to participate in a succeeding offering or in any
similar plan which may hereafter be adopted by the Corporation.
(e) Any other provision of the Plan notwithstanding, an Employee who
is subject to Section 16 of the Securities Exchange Act of 1934 shall not resume
contributions under the Plan for a period of at least six months after
discontinuing his or her contributions. This subsection (e) shall be applicable
only to the extent required by Rule 16b-3 (or its successor) under the
Securities Exchange Act of 1934.
11. No Interest. No interest shall accrue on the payroll deductions of a
-----------
participant in the Plan.
12. Stock.
-----
(a) The maximum number of shares of the Corporation's Common Stock
which may be sold pursuant to options exercised under the Plan shall be
5,100,000 shares, subject to adjustment upon changes in capitalization of the
Corporation as provided in paragraph 18. The shares to be sold to participants
in the Plan may be, at the election of the Corporation, either treasury shares
or shares authorized but unissued. In addition, the officers of the Corporation
are authorized to acquire shares of the Corporation's Common Stock in the open
market for resale under this Plan. If the total number of shares which would
otherwise be subject to options granted pursuant to paragraph 7(a) hereof at the
Option Grant Date exceeds the number of shares then available under the Plan
(after deduction of all shares for which options have been exercised or are then
outstanding), the Corporation shall make a pro rata allocation of the shares
remaining available for option grant in as uniform and equitable a manner as is
practicable. In such event, the Corporation may reduce the rate of payroll
deductions as appropriate.
5
(b) The participant will have no interest or voting right in shares
covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan will be
registered in the name of the participant.
13. Administration.
--------------
(a) The Plan shall be administered by the Board or a committee
appointed by the Board (the "Committee"). The Board may from time to time
remove members from or add members to the Committee. Vacancies on the
Committee, however caused, shall be filled by the Board. Acts taken or approved
by a majority of the Committee at which a quorum is present, or acts approved in
writing by all members of the Committee, shall be the valid acts of the
Committee. The Plan shall be administered in a manner that assures all
participants the same rights and privileges.
(b) The administration, interpretation or application of the Plan by
the Board or its Committee shall be final, conclusive and binding upon all
participants. Members of the Board or its Committee who are eligible Employees
are permitted to participate in the Plan.
(c) No member of the Board or its Committee shall be liable for any
action or determination made in good faith with respect to the Plan or any
option granted under it. In addition to such other rights of indemnification as
they may have as directors or as members of the Committee, the members of the
Committee shall be indemnified by the Corporation against the reasonable
expenses, including attorney's fees actually and necessarily incurred in
connection with the defense of any action, suit or proceeding, or in connection
with any appeal therein, to which they or any of them may be a party by reason
of any action taken or failure to act under or in connection with the Plan or
any option granted thereunder, and against all amounts paid by them in
settlement thereof (provided such settlement is approved by independent legal
counsel selected by the Corporation) or paid by them in satisfaction of a
judgment in any such action, suit or proceeding, except in relation to matters
as to which it shall be adjudged in such action, suit or proceeding that such
Committee member is liable for negligence or misconduct in the performance of
his duties; provided that within sixty (60) days after institution of any such
action, suit or proceeding the Committee member seeking indemnification shall in
writing offer the Corporation the opportunity, as its own expense, to handle and
defend the same.
(d) All costs and expenses incurred in administering the Plan shall
be paid by the Corporation. The Board or the Committee, if any is appointed, may
request advice or assistance or employ such other persons as are necessary for
proper administration of the Plan.
6
14. Designation of Beneficiary.
--------------------------
(a) A participant may file a written designation of a beneficiary who
is to receive any shares and cash, if any, from the participant's account under
the Plan in the event of such participant's death subsequent to the Purchase
Date but prior to delivery to him of such shares and cash. In addition, a
participant may file a written designation of a beneficiary who is to receive
any cash from the participant's account under the Plan in the event of such
participant's death prior to the Purchase Date.
(b) Such designation of beneficiary may be changed by the participant
at any time by written notice. In the event of the death of a participant in
the absence of a valid designation of a beneficiary who is living at the time of
such participant's death, the Corporation shall deliver such shares and/or cash
in accordance with the participant's designation of beneficiaries under the
Advanced Micro Devices Deferred Profit Sharing Plan; or, in the absence of such
designation, to the executor or administrator of the estate of the participant;
or if no such executor or administrator has been appointed (to the knowledge of
the Corporation), the Corporation, in its discretion, may deliver such shares
and/or cash to the spouse or to any one or more dependents or relatives of the
participant; or if no spouse, dependent or relative is known to the Corporation,
then to such other person as the Corporation may designate.
15. Transferability. Neither payroll deduction credited to a
---------------
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution, or as provided in paragraph 14 hereof) by the participant. Any
such attempt at assignment, transfer, pledge or other disposition, shall be void
and without effect, except that the Corporation may treat such act as an
election to withdraw funds in accordance with paragraph 10.
16. Use of Funds. All payroll deductions received or held by the
------------
Corporation under the Plan may be used by the Corporation for any corporate
purpose, and the Corporation shall not be obligated to segregate such payroll
deductions.
17. Statements. Statements of account will be given to participating
----------
employees promptly following each Purchase Date, which statements will set forth
the amounts of payroll deductions, the per share purchase price, the number of
shares purchased and any excess contributions.
18. Changes in Capitalization. In the event of any stock dividend, stock
-------------------------
split, spin-off, recapitalization, merger, consolidation, exchange of shares or
the like, the number of shares then subject to option and the number of
authorized shares remaining available to be sold shall be increased or decreased
appropriately, with such other adjustment as may be deemed necessary or
equitable by the Board.
7
19. Amendment. The Board of Directors may at any time amend the Plan. No
---------
such amendment may make any change in any option previously granted which
adversely affects the rights of any participant without such participant's
consent. No amendment for which shareholder 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 Committee
and consistent with the rules of the Securities Exchange Commission Rule 16-b
(or its successor), the Code or the stock exchange(s) on which the Corporation's
shares are listed, as such rules are in effect at the time the plan amendment
becomes effective.
20. Termination. The Board of Directors of Advanced Micro Devices, Inc.
-----------
may at any time terminate the Plan. No such termination will affect options
previously granted. Unless sooner terminated by the Board, this Plan shall
terminate February 1, 2001.
21. Notices. All notices or other communications by a participant to the
-------
Corporation in connection with the Plan shall be deemed to have been duly given
when received in the form specified by the Corporation at the location, or by
the person, designated by the Corporation for the receipt thereof.
22. Government and Other Regulations. The Plan, and the grant and
--------------------------------
exercise of the rights to purchase shares hereunder, and the Corporation's
obligation to sell and deliver shares upon the exercise of rights to purchase
shares, shall be subject to all applicable federal, state and foreign laws,
rules and regulations, and to such approvals by any regulatory or government
agency as may, in the opinion of counsel for the Corporation, be required. Any
amendments requiring stockholder approval shall take effect only subject to such
approval.
23. Applicable Law. The interpretation, performance and enforcement of
--------------
this Plan shall be governed by the laws of the State of California.
8
DETACH HERE AMD 2
ADVANCED MICRO DEVICES, INC.
ANNUAL MEETING OF STOCKHOLDERS - APRIL 24, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
P The undersigned appoints W. J. SANDERS III and THOMAS M. MCCOY
and each of them as proxies for the undersigned, with full power of
R substitution to represent and to vote all the stock of the undersigned
on the following matters as described in the Proxy Statement
O accompanying the Notice of Meeting, receipt of which is hereby
acknowledged, and according to their discretion on all other matters
X that may be properly presented for action at the Annual Meeting of
Stockholders of Advanced Micro Devices, Inc. to be held on Thursday,
Y April 24, 1997, 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
AMENDMENT TO THE 1996 STOCK INCENTIVE PLAN, FOR THE AMENDMENT TO THE
1991 STOCK PURCHASE PLAN, 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.
SEE REVERSE
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
You are cordially invited to attend the Annual Meeting of Stockholders of
Advanced Micro Devices, Inc. to be held at 10:00 a.m. on Thursday, April 24,
1997, at the St. Regis Hotel at 2 East 55th Street, New York, New York. Detailed
information as to the business to be transacted at the meeting is contained in
the accompanying Notice of Annual Meeting and Proxy Statement.
Regardless of whether you plan to attend the meeting, it is important that your
shares be voted. Accordingly, we ask that you sign and return your proxy as soon
as possible in the envelope provided.
DETACH HERE AMD 4
[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 AMENDMENT TO THE 1996 STOCK INCENTIVE
PLAN, AND FOR THE AMENDMENT TO THE 1991 STOCK PURCHASE PLAN.
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 Silverman
FOR WITHHELD
1. Election of directors [_] [_]
(Instruction: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided above.)
FOR AGAINST ABSTAIN
2. Ratification of appointment of independent auditors. [_] [_] [_]
3. Approval of the amendment to the 1996 Stock Incentive
Plan. [_] [_] [_]
4. Approval of the amendment to the 1991 Stock Purchase
Plan. [_] [_] [_]
MARK HERE
FOR ADDRESS
CHANGE AND
NOTIFICATION [_]
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 pesons, 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_______