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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))
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[_] 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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Notes:
[LOGO]
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 30, 1998
----------------
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 30, 1998, at 10:00 AM for the following purposes:
. To elect eight directors.
. To ratify the appointment of Ernst & Young LLP as independent auditors
for the Company for the current year.
. To approve an increase in the number of shares authorized to be issued
under the Advanced Micro Devices, Inc. 1996 Stock Incentive Plan (the
Plan) by 3,700,000 shares and to amend the Plan to allow the grant of
800,000 nonstatutory options at an exercise price of no less than fifty
percent (50%) of fair market value on the date of grant.
. If properly presented, to consider two shareholder proposals, each of
which is opposed by the Board of Directors.
. To transact such other business as may properly come before the meeting.
Only stockholders of record at the close of business on March 2, 1998, 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 25, 1998
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 30, 1998
The enclosed proxy is solicited on behalf of the Board of Directors of
Advanced Micro Devices, Inc. (the Company 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 30, 1998,
and at any adjournment or postponement thereof. Only holders of record of the
Company's common stock on March 2, 1998, will be entitled to notice of and to
vote at the Annual Meeting or at any adjournment or postponement thereof.
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 142,664,000 shares of the Company'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) are represented at
the Annual Meeting but 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 Company 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 increase in number of shares authorized for issuance
under the 1996 Stock Incentive Plan and amendment of the Plan, AGAINST any of
the stockholder proposals set forth in the Notice of Annual Meeting of
Stockholders which are properly presented by the proponents or the proponents'
qualified representative for action at the meeting, and according to the
discretion of the proxyholders on any other matters that properly come before
the meeting.
This Proxy Statement and the accompanying proxy were first sent to
stockholders on approximately March 25, 1998. The Company is paying for the
cost of this solicitation. The Company 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
Company's directors and officers, without additional compensation. The Company
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 Company expects to pay the solicitor a fee of approximately
$7,000, and normal out-of-pocket expenses for its assistance in soliciting
proxies.
PRINCIPAL STOCKHOLDERS
The following table shows the name, address, number of shares held, and
percentage of shares held as of February 25, 1998, by each person or entity
known to the Company to be the beneficial owner of more than five percent (5%)
of the Company's common stock.
NAME AND ADDRESS OF PERCENT
BENEFICIAL OWNER AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP OF CLASS
------------------- ------------------------------------------- --------
Wellington Management
Company LLP............ 19,846,740(/1/) 13.91%
75 State Street (shared dispositive power as to all shares;
Boston, MA 02109 shared voting power as to 3,653,385 of such
shares)
The Capital Group
Companies, Inc......... 15,709,350(/2/) 11.01%(3)
333 South Hope Street (sole dispositive power as to all shares;
Los Angeles, CA 90071 sole voting power as to 2,690,100 of such
shares)
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(1) This information is based on Amendment No. 5 to the statement on Schedule
13G filed with the Securities and Exchange Commission on February 11,
1998, by Wellington Management Company LLP (Wellington). The 19,846,740
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 13,923,300 shares (sole voting power and shared
dispositive power as to all shares), representing 9.76% of the Company's
common stock. This information was obtained from Amendment No. 4 to the
statement on Schedule 13G filed on February 9, 1998 by Vanguard/Windsor
Fund, Inc. No client of Wellington other than Vanguard/Windsor Fund, Inc.
owns more than five percent of the Company's common stock.
(2) This information is based on Amendment No. 9 to the joint statement on
Schedule 13G filed with the Securities and Exchange Commission on February
11, 1998, 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 11,740,250 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, CA 90071.
(3) The aggregate percentage of outstanding shares beneficially owned by The
Capital Group Companies, Inc. includes 8.23% beneficially owned by Capital
Research and Management Co.
ITEM 1--ELECTION OF DIRECTORS
Pursuant to the Bylaws of the Company, the authorized number of directors to
be elected at the 1998 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 M. 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 any
properly executed and returned proxy will be voted FOR the election of these
nominees, unless authority to vote for one or more nominees is withheld.
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The experience and background of each of the nominees are set forth below.
W.J. Sanders III--Mr. Sanders, 61, is Chairman of the Board and Chief
Executive Officer of Advanced Micro Devices, Inc. Mr. Sanders co-founded the
Company 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, 70, 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, 71, 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 1970,
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 Company in 1987.
Dr. R. Gene Brown--Dr. Brown, 65, is a private investor and financial and
management consultant. Dr. Brown is also a non-employee Managing Director of
Putnam, Hayes & Bartlett, Inc., an economic and management consulting firm.
From 1961 to 1968, Dr. Brown was a full-time professor in the graduate schools
of business at Harvard University, and 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, 63, is President, Chief Operating Officer and
Member of the Office of the CEO 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 Company from shortly after its founding in 1969 until 1989,
and Chief Administrative Officer and Secretary of the Company from 1986 to
1989.
S. Atiq Raza--Mr. Raza, 49, is Executive Vice President, Chief Technical
Officer and Member of the Office of the CEO of Advanced Micro Devices, Inc.
Mr. Raza became Senior Vice President and Chief Technical Officer of AMD
following the acquisition of NexGen, Inc. (NexGen) by the Company on January
17, 1996, and became an Executive Vice President and Member of the Office of
the CEO in 1997. Prior to joining the Company, 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, 58, is the President, Chief Executive 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 and
Chief Executive Officer in February 1998. Mr. Roby served as the Chief
Operating Officer of DLJ from November 1995 until February 1998. Previously,
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, 58, 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
3
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. and Netter Digital Entertainment, Inc.
STOCK OWNERSHIP TABLE
The table below indicates the number of shares of the Company's common stock
beneficially owned as of February 25, 1998, 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 SINCE BENEFICIAL OWNERSHIP(1) OF CLASS
---- -------- ------------------------- --------
W. J. Sanders III.......... 1969 1,988,247(2) 1.36%
Dr. Friedrich Baur......... 1994(3) 1,000(4) *
Charles M. Blalack......... 1989 23,000(5) *
Dr. R. Gene Brown.......... 1969 40,224(6) *
Richard Previte............ 1990 610,425(7) *
S. Atiq Raza............... 1996 72,759(8) *
Joe L. Roby................ 1991 33,800(9) *
Dr. Leonard M. Silverman... 1994 11,800(10) *
Eugene D. Conner(11)....... N/A 418,852(12) *
Stephen Zelencik(13)....... N/A 256,527(14) *
All directors and executive
officers as a group
(13 persons).............. N/A 4,214,348(15) 2.88%
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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 1,775,000 shares subject to options that are exercisable on
February 25, 1998, 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 1,000 shares subject to options that are exercisable on February
25, 1998, or become exercisable within sixty (60) days thereafter.
(5) Includes 21,000 shares subject to options that are exercisable on
February 25, 1998, or become exercisable within sixty (60) days
thereafter.
(6) Includes 13,000 shares subject to options that are exercisable on
February 25, 1998, or become exercisable within sixty (60) days
thereafter.
(7) Includes 445,550 shares subject to options that are exercisable on
February 25, 1998, or become exercisable within sixty (60) days
thereafter.
(8) Includes 48,750 shares subject to options that are exercisable on
February 25, 1998, or become exercisable within sixty (60) days
thereafter.
(9) Includes 21,000 shares subject to options that are exercisable on
February 25, 1998, or become exercisable within sixty (60) days
thereafter.
(10) Includes 11,800 shares subject to options that are exercisable on
February 25, 1998, or become exercisable within sixty (60) days
thereafter.
(11) Mr. Conner, 54, is Executive Vice President, Operations and Member of the
Office of the CEO of the Company.
(12) Includes 379,264 shares subject to options that are exercisable on
February 25, 1998, or become exercisable within sixty (60) days
thereafter.
4
(13) Mr. Zelencik, 63, is Senior Vice President, Chief Marketing Executive of
the Company.
(14) Includes 223,125 shares subject to options that are exercisable on
February 25, 1998, or become exercisable within sixty (60) days
thereafter.
(15) Includes 3,596,733 shares subject to options that are exercisable on
February 25, 1998, or become exercisable within sixty (60) days
thereafter.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors held seven (7) regularly scheduled or special
meetings during the fiscal year ended December 28, 1997 (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
Company has standing Audit, Nominating and Compensation Committees of the
Board of Directors.
Audit Committee. The Audit Committee, which during the Fiscal Year consisted
of Dr. R. Gene Brown, as Chairman, Mr. Joe L. Roby and Mr. Charles M. Blalack,
all non-employee directors, held three (3) meetings during the Fiscal Year.
Members are appointed annually by the full Board. The functions of the Audit
Committee include the review of the Company'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 Company financial and legal personnel, and with the independent
auditors who have free access to the Audit Committee at any time. The director
of the Company'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 Company. 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. Members are appointed annually by the full Board. The Nominating
Committee met once during 1997 to consider nominees for the 1997 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 Company in accordance with the Bylaws of the Company.
Compensation Committee. The Compensation Committee (the Committee) is
currently comprised of Mr. Charles M. Blalack, as Chairman, Dr. R. Gene Brown
and Dr. Leonard M. Silverman. Dr. Silverman became a member of the Committee
in April of 1997. 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 Company
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 Company. During 1997, the Committee met thirteen (13) times.
The Board has 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 eighty-six (86) times during the Fiscal Year.
Directors' Fees and Expenses. In 1997, directors who were not employees of
the Company individually received an annual fee of $25,000, a fee of $1,500
for attendance at each regular or special meeting of the Board, and a fee of
$1,000 for attendance at each meeting of each committee (other than the
Nominating Committee) on which they served. 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
5
service in that capacity. No additional amounts are paid for special
assignments. The Company also reimburses reasonable out-of-pocket expenses
incurred by directors performing services for the Company, and, on occasion,
travel expenses of their spouses.
Pursuant to a nondiscretionary formula set forth in the 1996 Stock Incentive
Plan, non-employee directors also currently receive stock options covering
15,000 shares on their initial election to the Board (the First Option), and
automatically receive supplemental options covering 5,000 shares on each
subsequent re-election (the Annual Option). The First Option vests 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
vests in increments of 1,667, 1,667 and 1,666 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.
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 1997, Dr. Brown
deferred fees in the amount of $20,000 pursuant to this program. In addition,
in lieu of his annual fee, Dr. Brown received the use of an automobile
provided by the Company, a value taxable to him at $26,053. Dr. Brown also
received family medical and dental insurance coverage from the Company at a
value of $2,385.
Notwithstanding anything to the contrary set forth in any of the Company'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 Graphs on page 12 and 13 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.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
During 1997, the Compensation Committee (the Committee) of the Company's
Board of Directors consisted of Mr. Blalack (Chairman), Dr. Brown and Dr.
Silverman. Dr. Silverman became a member of the Committee in April of 1997. No
member of the Committee during 1997 was an employee of the Company or any of
its subsidiaries. Each member meets the definition of "non-employee director"
under Rule 16b-3 of the Securities Exchange Act of 1934, as amended, and is an
"outside director" within the meaning of Section 162(m) of the Internal
Revenue Code of 1986, as amended (the Code).
The Committee has overall responsibility for the Company's executive
compensation policies and practices. The Committee's functions include:
. Determining the compensation of the Chief Executive Officer of the
Company.
. Reviewing and approving all other executive officers' compensation,
including salary and payments under the annual executive bonus plans, in
each case based in part upon the recommendation of the Chief Executive
Officer of the Company.
. Granting awards to executive officers under the Company's stock option
incentive plans.
6
Certain officers of the Company, outside counsel and consultants typically
attend meetings of the Committee. No officer of the Company is present during
discussions or deliberations regarding that officer's own compensation. The
Committee administers the Company'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 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. The Company's compensation
policies are designed to address a number of objectives, and to both reward
financial performance and motivate executive officers to achieve significant
returns for stockholders. The Company's policies rely on two principles.
First, a large portion of executive officers' cash compensation should be at
risk and vary depending upon meeting stated financial objectives. Second, a
significant portion of executive officers' total compensation should be in the
form of stock and equity incentives.
When establishing salaries, bonus levels, and stock or equity awards for
executive officers, the Committee considers the individual's role,
responsibilities and performance during the past year, and the amount of
compensation paid to executive officers in similar positions of comparable
companies. The Committee has retained an outside compensation consultant to
make periodic reviews of competitive data obtained from independent
consultants. The Committee's determinations take into account the independent
consultant's reviews and the 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 Technology-500 Index used in the
performance graph appearing in this Proxy Statement.
The Company endeavors to attract and retain top-caliber employees, and
therefore sets base salary at or above the median for this group of companies.
Companies outside the semiconductor industry are selected for inclusion in
this review based upon the extent to which they satisfy a list of selection
criteria, which includes size, growth rates, similar financial performance,
leadership status in their industry, reputation for innovation, and the extent
to which they compete with the Company for executives, not all of which will
be satisfied in any particular case. The Committee has instructed its
compensation consultant to include in its review companies other than those
included in the Technology-500 Index because the Company competes for
executives from outside the semiconductor industry, depending upon the
specific skills required for the position.
The Committee uses comparative data to set compensation targets that will
provide executive officers with compensation that exceeds the average amounts
paid to similar executives of comparable companies in years in which the
Company achieves superior performance, and with compensation below the average
of amounts paid to similar executives of comparable companies in years in
which the Company fails to achieve superior performance. However, the
Committee also makes discretionary and subjective determinations of
appropriate compensation amounts to reflect, for example, the Company's
philosophy of compensating executives for the success they achieve in managing
specific enterprises. The Committee places considerable weight upon the
recommendations of the Chief Executive Officer in the case of other executive
officers. While decisions concerning specific 1997 salaries, bonus levels, and
stock or equity awards for individual executive officers were made within this
broad framework, and in light of each executive officer's level of
responsibility, performance, and competitive pay position, the awards were
ultimately based upon the Committee's judgment regarding the individual
executive officer's performance, taking account of whether each particular
payment or award would provide an appropriate reward and incentive for his
contribution to the Company's long-term profit performance.
Base Salary. 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
7
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 recognition of Mr. Sanders' service and contribution to the continued
success of the Company and to ensure his continued service as Chairman and
Chief Executive Officer, the Company entered into an employment agreement with
him effective September 29, 1996 (the Agreement). Under Mr. Sanders'
Agreement, the Committee approved a 2.3 percent increase to Mr. Sanders' base
salary for 1997 as a cost of living adjustment. This 2.3 percent adjustment
will be deferred until a deduction for federal income tax purposes will be
allowed for its payment, or March 31, 2004, if earlier. Mr. Sanders was paid a
base salary of $1,000,000 for 1997. The Agreement is discussed in detail below
in the section entitled "Employment Agreements, Compensation Agreements and
Change of Control Arrangements" on p. 13.
Annual Cash Bonus Incentives. Annual cash bonus incentives allow the Company
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 Company 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, Mr. Previte and Mr. Raza, were eligible in 1997 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 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 Company'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 Company's 3-year average return on
equity (ROE) relative to that of the S&P 500 Index, and on the Company'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 Company 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. In fiscal 1997, none of the eligible and participating
executives earned an award under the Executive Bonus Plan.
Mr. Sanders' 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 Company for each fiscal year through 2001 in excess of twenty percent
(20%) of adjusted operating profits for the immediately preceding fiscal year,
not to exceed $5,000,000. Any amount exceeding the maximum annual award (the
Unpaid Contingent Bonus) is carried forward and added to the bonus determined
for each specified future period (subject to the $5,000,000 limit in each of
those years). The Agreement provides that a discretionary bonus may also be
awarded by the Compensation Committee of the Board, based on the Committee's
assessment of Mr. Sanders' performance.
In fiscal 1997, no incentive bonus was earned by Mr. Sanders. However, a
payment of $607,446 was made to Mr. Sanders from the Unpaid Contingent Bonus
amount carried over from 1995 pursuant to the terms of the Agreement. (See
"Employment Agreements, Compensation Agreements and Change of Control
Arrangements" on page 13.) In fiscal 1997, no discretionary bonus was paid to
Mr. Sanders.
Equity Incentive Awards. A fundamental tenet of the Company's compensation
policy is that significant equity participation creates a vital long-term
partnership between executive officers and other stockholders. As of February
25, 1998, executive officers of the Company owned an aggregate of 575,591
shares (including restricted shares) and had the right to acquire an
additional 3,528,933 shares upon the exercise of employee stock options which
are exercisable by April 26, 1998. These interests, exclusive of other
outstanding options,
8
represented in the aggregate 2.81% of the outstanding capital stock of the
Company on February 25, 1998. The Company intends to continue its strategy of
encouraging its executive officers to become stockholders.
The number of shares subject to option grants or restricted stock awards is
based on the Company's business plans, the executive's level of corporate
responsibility, individual performance, historical award data, and competitive
practices of high technology and other comparable companies with annual
revenues generally in excess of $1 billion satisfying the other criteria set
forth above. In making these grants, 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 whether an executive has
exercised previously granted options. During fiscal 1997, executive officers
received options for 415,000 shares and no shares of restricted stock. Mr.
Sanders did not receive any equity awards in fiscal 1997.
Tax Policy. Section 162(m) of the Code limits deductions for certain
executive compensation in excess of $1 million. Certain types of compensation
are deductible only if performance criteria are specified in detail and are
contingent on stockholder approval of the compensation arrangement. The
Company 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 Company 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 Company'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 Company. The Committee remains committed to this policy, recognizing
the competitive market for talented executives and that the cyclical nature of
the Company's business may result in highly variable compensation for a
particular time period.
Charles M. Blalack
R. Gene Brown
Leonard M. Silverman
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Compensation Committee through the Company's 1998
Annual Meeting are Mr. Blalack, Dr. Brown and Dr. Silverman. 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 Executive 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 Company. In 1997,
Donaldson, Lufkin & Jenrette Securities Corporation provided services to the
Company and may provide services to the Company during 1998.
Mr. Sanders, the Company's Chief Executive Officer and Chairman of the
Board, became a member of the Board of Directors of DLJ in November 1995. Mr.
Sanders was an advisory director of DLJ from February 1985 to November 1995.
9
EXECUTIVE COMPENSATION
The following table shows for the three fiscal years ended December 28,
1997, the compensation paid by the Company and its subsidiaries to the
Company'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 (1995-1997)
ANNUAL COMPENSATION LONG-TERM COMPENSATION AWARDS
----------------------------------------------- -----------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (i)
RESTRICTED SECURITIES
NAME AND PRINCIPAL OTHER ANNUAL STOCK UNDERLYING ALL OTHER
POSITION YEAR SALARY BONUS(1) COMPENSATION AWARDS OPTIONS/SARS(2) COMPENSATION(3)
------------------ ---- ---------- ---------- ------------ ---------- ----------------- -----------------
W. J. Sanders III... 1997 $1,000,000 $ 617,817(4) $256,928(5) $ 0 0 $472,812
Chairman and Chief 1996 $1,038,461 $2,000,000(4) $217,818(5) $ 0 2,500,000 $ 49,454
Executive Officer 1995 $ 978,887 $2,026,961(4) $278,704(5) $ 0 0 $ 34,923
Richard Previte..... 1997 $ 757,477 $ 8,068(6) $ 0 $ 0 100,000 $ 30,843
President, Chief 1996 $ 709,312 $ 558,945(6) $ 0 $882,296(7) 145,267 $ 38,429
Operating Officer
and 1995 $ 660,495 $1,358,757(6) $ 0 $ 0 100,000 $ 29,060
Member of the
Office
of the CEO
S. Atiq Raza........ 1997 $ 456,731 $ 4,473 $ 0 $ 0 75,000 $ 12,537
Executive Vice
President, 1996 $ 306,350 $ 330,693(8) $ 0 $533,346(9) 250,132 $ 7,100
Chief Technical
Officer 1995 $ 0 $ 0 $ 0 $ 0 0 $ 0
and Member of the
Office of the CEO
Eugene D. Conner.... 1997 $ 436,923 $ 4,304 $ 0 $ 0 50,000 $ 18,753
Executive Vice
President, 1996 $ 406,635 $ 100,000 $ 0 $441,172(10) 72,632 $ 15,975
Operations and
Member 1995 $ 362,789 $ 324,718(11) $ 0 $ 0 50,000 $ 21,297
of the Office of
the CEO
Stephen Zelencik.... 1997 $ 426,115 $ 4,384 $ 0 $ 0 50,000 $ 29,313
Senior Vice
President, 1996 $ 426,676 $ 0 $ 0 $441,172(10) 72,632 $ 25,253
Chief Marketing
Executive 1995 $ 403,978 $ 451,420(11) $ 0 $ 0 50,000 $ 20,890
- --------
(1) Includes cash profit sharing in the following amounts for Messrs.
Sanders, Previte, Raza, Conner and Zelencik, respectively: for 1997,
$10,371, $8,068, $4,473, $4,304 and $4,384; for 1995, $69,187, $46,157,
$0, $25,535 and $28,009. No cash profit sharing was paid for 1996.
(2) No SARs were awarded in 1997, 1996 or 1995.
(3) Includes for 1997 for Mr. Sanders, pursuant to his Agreement, $400,000 in
deferred retirement compensation and $23,000 as a deferred cost of living
salary adjustment. Includes for 1997 for Messrs. Sanders, Previte, Raza,
Conner and Zelencik, the Company's matching contributions to the
Company's 401(k) Plan in the amounts of $2,250, $2,250, $2,250, $2,250
and $2,250, respectively; the Company's matching contributions to the
Executive Savings Plan (the ESP) in the amounts of $12,600, $0, $0,
$4,219 and $3,988, respectively; imputed income from the term life
insurance provided by the Company in the amounts of $8,680, $5,352,
$1,458, $1,932 and $3,444, respectively; and premiums paid by the Company
for individual insurance policies in the amount of $26,282, $23,241,
$8,829, $10,352 and $19,631, respectively. Includes for 1996, the
premiums paid by the Company for individual life insurance policies as
set out in footnote 3 to the Summary Compensation Table in the Company's
Proxy Statement dated March 20, 1997.
(4) No bonus was earned for 1997 or 1996. In 1997, pursuant to the terms of
Mr. Sanders' employment agreement, $607,446 was paid from the Unpaid
Contingent Bonus from 1995. No additional carryover amount currently
exists. For 1996, a bonus amount of $2,000,000 was paid from the Unpaid
Contingent Bonus carried forward from 1993, 1994 and 1995. For 1995, the
maximum bonus amount of $1,957,774 was paid, with an Unpaid Contingent
Bonus amount of $802,766 carried over and paid in 1996 and 1997, because
Mr. Sanders' bonus for those years did not exceed the maximum amount.
(5) Includes for 1997, 1996 and 1995, $104,178, $104,089 and $98,310,
respectively, of in-kind compensation in the form of company provided
vehicles; and $78,176, $62,864 and $123,319, respectively, reflecting the
cost to AMD of providing physical security services.
(6) No bonus was earned for 1997 or 1996. For 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. For 1995, the
maximum bonus amount of $1,312,600 was paid, with an Unpaid Contingent
Bonus amount of $67,670 carried over and paid in 1996, because Mr.
Previte's bonus for 1996 did not exceed the maximum amount.
(7) The total number of restricted shares held by Mr. Previte and their
aggregate value at December 28, 1997 were 84,733 shares valued at
$1,487,064. The value is based on the closing sales price of AMD common
stock on December 26, 1997 ($17.56), and is net of consideration paid for
the stock. The dollar value of the restricted stock appearing in the
table with respect to 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 1996 award vests if certain
stock targets and employment related conditions are met. The stock
targets for the 1996 award were met in 1997. 27,367 of the restricted
shares vested in January of 1998. If Mr. Previte is employed on January
19, 1999, 13,683 of the restricted shares will vest. If Mr. Previte is
employed on January 19, 2000, 13,683 of the restricted shares will vest.
(8) Includes $30,693 paid in the form of cancellation of indebtedness on a
note for interest accrued to October 17, 1996.
10
(9) The total number of restricted shares held by Mr. Raza and their
aggregate value at December 28, 1997 were 29,868 shares valued at
$524,183. The value is based on the closing sales price of AMD common
stock on December 26, 1997 ($17.56), and is net of consideration paid for
the stock. The dollar value of the restricted stock appearing in the
table with respect to 1996 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. 2,500 of the performance restricted shares awarded in April of
1996 vested in January of 1997; the performance conditions for the other
2,500 shares awarded in April of 1996 were not met and the award did not
vest in January of 1998. The October 1996 award vests if certain stock
targets and employment related conditions are met. The stock targets for
the October 1996 award were met in 1997. 13,683 of the restricted shares
vested in January of 1998. If Mr. Raza is employed on January 19, 1999,
6,843 of the restricted shares will vest. If Mr. Raza is employed on
January 19, 2000, 6,842 of the restricted shares will vest.
(10) The total number of restricted shares held by the executive and the
aggregate value at December 28, 1997 were 27,368 shares valued at
$480,308. The value is based on the closing sales price of AMD common
stock on December 26, 1997 ($17.56), and is net of consideration paid for
the stock. The dollar value of the restricted stock appearing in the
table with respect 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 1996 award vests if certain stock
price targets and employment related conditions are met. The stock price
targets for the 1996 award were met in 1997. 13,683 of the restricted
shares vested in January of 1998. If the executive is employed on January
19, 1999, 6,843 of the restricted shares will vest. If the executive is
employed on January 19, 2000, 6,842 of the restricted shares will vest.
(11) Includes for Messrs. Conner and Zelencik, $6,506 and $6,988,
respectively, paid as a correction to the long-term portion of the
bonuses paid under the Executive Bonus Plan for 1995.
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
UNDERLYING GRANTED TO EXERCISE
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED(1) FISCAL YEAR PER SHARE DATE 0% 5% 10%
---- ------------ ------------ --------- ---------- ---------------- -----------
W. J. Sanders III....... 0 0 N/A N/A $ 0 $ 0 $ 0
Richard Previte......... 100,000 3.00% $37.50 04/23/07 $ 0 $ 2,358,355 $ 5,976,534
S. Atiq Raza............ 75,000 2.25% $37.50 04/23/07 $ 0 $ 1,768,766 $ 4,482,401
Eugene D. Conner........ 50,000 1.50% $37.50 04/23/07 $ 0 $ 1,179,177 $ 2,988,267
Stephen Zelencik........ 50,000 1.50% $37.50 04/23/07 $ 0 $ 1,179,177 $ 2,988,267
- --------
(1) For all 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 Company or in accordance with
an optionee's management continuity agreement. See the discussion under
"Employment Agreements, Compensation Agreements and Change in Control
Arrangements." No stock appreciation rights (SARs) were granted to the
executive officers listed in the table during 1997.
(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 Company's estimate or projection of
future prices of the Company's common stock.
AGGREGATED OPTION/SAR EXERCISES IN THE LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
(a) (b) (c) (d) (e)
NUMBER OF SECURITIES VALUE OF UNEXERCISED
NUMBER UNDERLYING UNEXERCISED IN-THE-MONEY
OF SHARES OPTIONS/SARS AT 12/31/97 OPTIONS/SARS AT 12/31/97(1)
ACQUIRED ON VALUE ----------------------------- -----------------------------
NAME EXERCISE REALIZED(1) (EXERCISABLE) (UNEXERCISABLE) (EXERCISABLE) (UNEXERCISABLE)
---- ----------- ------------- ------------- --------------- ------------- ---------------
W. J. Sanders III....... 500,000 $15,855,280 1,775,000 1,425,000 $5,300,750 $4,004,250
Richard Previte......... 0 $ 0 445,550 245,267 $ 534,974 $ 794,436
S. Atiq Raza............ 179,000 $ 5,998,796 22,000 274,132 $ 0 $ 547,192
Eugene D. Conner........ 30,000 $ 888,900 379,264 122,632 $1,996,720 $ 397,192
Stephen Zelencik........ 0 $ 0 223,125 122,632 $ 266,085 $ 397,192
- --------
(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.
11
COMPARISON OF FIVE-YEAR AND SEVEN-YEAR CUMULATIVE TOTAL RETURN
ADVANCED MICRO DEVICES, S&P 500 INDEX AND
TECHNOLOGY-500 INDEX
The following two graphs show a five-year and seven-year comparison of
cumulative total return on common stock for the Company, the S&P 500 Index,
and the Technology-500 Index from December 31, 1992 through December 31, 1997,
and from December 31, 1990 through December 31, 1997. The past performance of
the Company's common stock is no indication of future performance.
[LOGO]
The first graph was plotted using the following data:
YEAR ENDING DECEMBER 31
--------------------------------------------
1992 1993 1994 1995 1996 1997
---- ------- ------- ------- ------- -------
AMD................................ $100 $ 97.73 $137.24 $ 91.06 $142.11 $ 97.96
Technology-500..................... $100 $123.01 $143.37 $206.51 $292.98 $369.43
S&P 500............................ $100 $110.08 $111.53 $153.45 $188.68 $251.63
12
[LOGO]
The second graph was plotted using the following data:
YEAR ENDING DECEMBER 31
------------------------------------------------------------
1990 1991 1992 1993 1994 1995 1996 1997
---- ------- ------- ------- ------- ------- ------- -------
AMD............... $100 $358.97 $371.79 $364.10 $510.26 $338.56 $528.35 $364.20
Technology-500.... $100 $114.08 $118.79 $146.13 $170.31 $245.32 $348.04 $438.85
S&P 500........... $100 $130.47 $140.41 $154.56 $156.60 $215.45 $264.91 $353.30
The charts above assume $100 invested on, respectively, December 31, 1992,
and December 31, 1990, in Advanced Micro Devices, Inc. common stock, S&P 500
Index and Technology-500 Index, and the reinvestment of dividends (although
dividends have not been declared on the Company's stock). Historical returns
are not necessarily indicative of future performance.
EMPLOYMENT AGREEMENTS, COMPENSATION AGREEMENTS AND CHANGE OF CONTROL
ARRANGEMENTS
Chairman's Employment Agreement. In 1996, the Company entered into an
amended and restated employment agreement with Mr. Sanders, the term of which
is September 1, 1996 through December 31, 2003 (the Agreement). The 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 Company 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 Agreement, the annual bonus payment may not
exceed $5,000,000. Any excess amount of an annual incentive bonus over
$5,000,000 (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
13
these purposes constitute the Company's operating income as reported on the
Company'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.
In 1996, Mr. Sanders received an option grant for 2,500,000 shares under the
Agreement. The Compensation Committee expects that no further stock option
awards will be granted to Mr. Sanders over the term of the 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 Company'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. Vested 1996
options may be exercised after termination of employment no later than: 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 Company "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 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 Company 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 Company), the
Company 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 Company 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 Company within
such periods.
Under the Agreement, the Company 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 Company 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 Company'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 Company is obligated to guarantee
repayment of such loans up to $3,500,000 for a period ending 180 days after
termination of service.
14
Mr. Sanders is entitled to receive certain benefits upon his disability (as
that term is defined in the Agreement) and upon his death while employed by
the Company. Mr. Sanders is also entitled to receive such other benefits of
employment with the Company as are generally available to members of the
Company'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 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 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
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 Company on that policy.
Pursuant to the Agreement, the Company 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 Company 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 Company 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 Company (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 Company or any employee benefit plan
of the Company) of beneficial ownership of more than 20% of the combined
voting power of the Company'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
15
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 Company 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 Company. 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 Company 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 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 Company
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
Agreement, and is superseded by the 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' Agreement,
all options and associated limited stock appreciation rights (LSARs) granted
to officers of the Company shall become exercisable upon the occurrence of any
change in the beneficial ownership of any quantity of shares of common stock
of the Company (where the purpose for the acquisition of such beneficial
ownership is other than passive investment), that would effect a Change in
Control of the Company 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 Company's Board of Directors. A Change in Control shall be
conclusively deemed to have occurred if any person (other than the Company,
any employee benefit plan, trustee or custodian therefor) is or becomes the
beneficial owner, directly or indirectly, of securities of the Company
representing more than 20% of the combined voting power of the Company's then
outstanding securities. Under the Company'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
Company's common stock (other than one made by the Company); 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, the 1995 Stock Plan
of NexGen, Inc. 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 Company for a share of the Company'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 Company'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
Company 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 Company
are acquired by another company 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 Company prior to the transaction
retain a majority interest in the surviving company. 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 Company will vest in accordance with the terms of such agreements in
connection with a Change in Control of the Company as defined in such
agreements. The restricted shares are subject to
16
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 Company for a share of the Company'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 Company'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
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%. The largest amount due under the loans during 1997 was $142,048, and
the aggregate amount outstanding under the loans as of February 25, 1998 was
$143,360.
In March of 1997, Mr. Thomas M. McCoy, Vice President, General Counsel and
Secretary, borrowed $450,000 from the Company 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. Mr. McCoy borrowed an additional $50,000
in April of 1997 with identical terms. The largest amount due under the loans
during 1997 was $529,764, and the aggregate amount outstanding under the loans
as of February 25, 1998 was $506,267.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Section 16(a) of the Securities and Exchange Act of 1934, as amended,
the Company's directors, executive officers, and any persons holding more than
ten percent of the Company's common stock are required to report to the
Securities and Exchange Commission and the New York Stock Exchange their
initial ownership of the Company's stock and any subsequent changes in that
ownership. The Company believes that during fiscal year 1997, its officers,
directors and holders of more than 10% of the Company's common stock filed all
Section 16(a) reports on a timely basis. In making this statement, the Company
has relied upon the written representations of its directors and officers.
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.
ITEM 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 Company for the current year. Ernst & Young LLP has been the
Company'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 Company and
services related to filings with the Securities and Exchange Commission and
other regulatory bodies.
The Audit Committee of the Company 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.
17
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.
ITEM 3--APPROVAL OF THE INCREASE IN NUMBER OF SHARES AUTHORIZED FOR ISSUANCE
UNDER THE ADVANCED MICRO DEVICES, INC. 1996 STOCK INCENTIVE PLAN AND TO AMEND
THE PLAN TO ALLOW THE GRANT OF NONSTATUTORY OPTIONS AT AN EXERCISE PRICE OF NO
LESS THAN FIFTY PERCENT (50%) OF FAIR MARKET VALUE ON THE DATE OF GRANT.
The Company's stockholders are also being asked to approve an amendment to
the Advanced Micro Devices, Inc. 1996 Stock Incentive Plan (the Plan) to
increase the number of shares authorized for issuance under the Plan and to
amend the Plan to allow for the grant of nonstatutory options (NSOs) at an
exercise price of no less than 50% of the fair market value of the Company's
common stock on the date of grant of the NSO. The purpose of this amendment is
to provide the Company with an additional 3,700,000 shares of common stock
that can be awarded to employees, consultants and advisors of the Company.
800,000 of these options may have an exercise price of no less than 50% of the
fair market value of the Company's common stock on the date of the grant.
Management believes that these amendments are in the best interests of the
Company because of the need to provide equity incentives to attract and retain
quality employees and remain competitive in the industry.
The purpose of the Plan is to enable the Company 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
Company and its affiliates. The Plan is intended to enable the Company to
attract qualified personnel in a highly competitive labor market. The Company
intends future increases in the value of securities granted under the Plan to
form part of the compensation for services to be rendered by such persons in
the future.
The Stockholders approved the Plan on April 24, 1996 with an effective date
of February 7, 1996. The Board of Directors approved an amendment to the Plan
in October of 1996. The Stockholders approved the amendment to the Plan on
April 24, 1997. Below is a summary of the principal provisions of the Plan and
its operation.
SUMMARY DESCRIPTION OF THE PLAN
Number of Shares Subject to the Plan. The Plan reserves for issuance up to
6,500,000 shares of AMD common stock pursuant to the exercise of options
granted under such plan. If the Stockholders approve the amendment, an
additional 3,700,000 shares may be issued pursuant to the exercise of options
granted under the Plan, 800,000 of which may have an exercise price of no less
than 50% of the fair market value of the Company's common stock on the date of
grant. 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 Plan. The market value of the Company's common stock on
the New York Stock Exchange as of February 25, 1998 was $21.75 per share.
Administration and Duration of the Plan. Authority to administer the 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 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 Plan by the
appropriate administrative committee of the Board to key full- or part-time
employees, officers, consultants and advisors of the Company
18
and its affiliates. The maximum number of shares that may be granted to an
individual under the Plan is 2,000,000. As of February 25, 1998, approximately
2,858 persons were eligible to receive options under the Plan, 58,898 shares
had been issued upon the exercise of options under the Plan, and 6,254,119
shares were subject to outstanding options under the Plan. As of February 25,
1998, 186,983 shares were available for future option grants.
Over the term of the Plan through February 25, 1998, the following executive
officers have been granted the following options to purchase shares under the
Plan: Mr. Sanders, 2,000,000 shares; Mr. Previte, 200,000 shares; Mr. Raza,
240,000 shares; Mr. Conner, 100,000 shares; Mr. Zelencik, 100,000 shares.
During this period, the Company's executive officers as a group have been
granted options to purchase an aggregate of 2,905,000 shares, and all
employees as a group (excluding executive officers) have been granted options
to purchase an aggregate of 3,757,475 shares under the Plan. During this
period, the Company's current directors as a group (excluding executive
officers) have been granted options to purchase 40,000 shares under the 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 Company'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 Company's common stock on the date of grant of the NSO; provided that, if
the Stockholders approve the amendment, 800,000 of these options may have an
exercise price of no less than 50% of the fair market value of the Company'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
Company'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 Company did not grant any ISOs in 1997.
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
in the case of vice presidents or 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. An Outside Director who has not previously
been elected or appointed as a member of the Board will be granted a First
Option for 15,000 shares on his or her election or appointment. First Options
vest in increments of 6,000, 4,500, 3,000 and 1,500 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 Company's
stockholders at which an Outside Director is re-elected, he or she will
automatically receive an Annual Option for 5,000 shares, vesting in three
increments of 1,667, 1,667 and 1,666 shares on each July 15 of the second,
third and fourth calendar year following re-election. Options held by Outside
Directors may be exercised for up to twelve months following termination of
their service on the Board to the extent the Options are vested on the date of
termination. Options which are not vested on the date of termination are
canceled. Options held by Outside Directors will become fully vested for
exercise upon a Change of Control. See the section entitled "Acceleration in
Connection with a Change of Control" below.
19
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 Company as defined
in the 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 Company'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
Company is not the surviving entity, or a liquidation of the Company or a sale
of substantially all of the Company's assets. The Plan Change of Control
provisions are not applicable to options granted to Mr. Sanders in 1996.
Plan Benefits Table. The following table shows in the aggregate the Annual
Options that will be granted to Outside Directors under the Plan in 1998.
Since all current Outside Directors are incumbent directors, no Outside
Director who is elected at the 1998 Annual Meeting of Stockholders will
receive a First Option. Because future awards to executive officers and
employees of the Company are discretionary and cannot be determined at this
time, the table does not reflect any such awards.
NAME AND POSITION EXERCISE PRICE (PER SHARE) NUMBER OF SHARES
----------------- -------------------------- ----------------
All current directors who
are not executive officers Fair market value on date of
as a group (5 persons).... 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 Company withhold shares from the
shares otherwise due or by delivering a sufficient number of previously owned
shares of the Company's common stock to the Company. 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 will recognize
mid-term capital gain or 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 mid-term if the shares have been held
for more than one year following exercise of the option and long-term if the
shares have been held for more than eighteen months following exercise of the
option.
20
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% on the portion of an individual taxpayer's alternative
minimum taxable income that would otherwise be ordinary income (28% in the
case of alternative minimum taxable income in excess of $175,000). A maximum
20% AMT rate applies to the portion of alternative minimum taxable income that
would otherwise be treated as net capital gain. Alternative minimum taxable
income is determined by adjusting regular taxable income for certain items,
increasing that income by certain tax preference items (including the
difference between the fair market value of the shares subject to the ISO on
the date of exercise and the exercise price) and reducing this amount by the
applicable exemption amount ($45,000 in case of a joint return, subject to
reduction under certain circumstances). If a disqualifying disposition of the
shares subject to an ISO occurs in the same calendar year as exercise of the
ISO, there is no AMT adjustment with respect to those shares. Also, upon a
sale of such shares that is a qualifying disposition, alternative minimum
taxable income is reduced in the year of sale by the excess of the fair market
value of the shares subject to the ISO at exercise over the amount paid for
such shares.
Deduction to the Company. The Company 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 Company 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 Company 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 Company 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 Company is not entitled to a deduction
for certain executive compensation in excess of $1,000,000. This limitation
applies to compensation paid to the Company'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 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
amendments to the 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 Plan. Broker
non-votes, if any, will not be counted in determining the number of shares
present and entitled to vote on the amendments to the Plan.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL OF THE
AMENDMENTS TO THE AMD 1996 STOCK INCENTIVE PLAN. UNLESS MARKED TO THE
CONTRARY, PROXIES RECEIVED WILL BE VOTED "FOR" APPROVAL.
ITEM 4--STOCKHOLDER PROPOSALS
The Company has been notified that two stockholders of the Company intend to
present the proposals set forth below for consideration at the 1998 Annual
Meeting. The name, address and stock ownership of each of the stockholder
proponents will be furnished by the Secretary of the Company to any person,
orally or in writing, as requested, promptly upon receipt of any oral or
written request therefor.
THE BOARD OF DIRECTORS OPPOSES EACH OF THE FOLLOWING STOCKHOLDER PROPOSALS
FOR THE REASONS STATED AFTER EACH PROPOSAL.
21
PROPOSAL NO. 1--BOARD CHAIRPERSON.
"RESOLVED, that the stockholders of Advanced Micro Devices, Inc., (the
"Company") recommend that the Board of Directors take steps necessary to amend
to Company's bylaws to require that the Board's Chairperson be an Independent
Director. For purposes of this proposal, the stockholders further recommend
that the term "Independent Director" means a director who: (i) has not been
employed by the Company in an executive capacity within the last five years;
(ii) is not, and is not affiliated with a company that is, an advisor or
consultant to the Company; (iii) is not affiliated with a significant customer
or supplier of the Company; (iv) has no personal services contract(s) with the
Company or its senior management; or (v) is not affiliated with a not-for-
profit entity that receives significant contributions from the Company; (vi)
within the last five years, has not had any business relationship with the
Company (other than service as a director) for which the Company has been
required to make disclosure under Regulation S-K of the Securities and
Exchange Commission; (vii) is not employed by a public company at which an
executive officer of the Company serves as a director; (viii) has not had a
relationship described in (i) through (vii) above with any affiliate of the
Company; and (ix) is not a member of the immediate family of any person
described in (i) through (viii) above.
"SUPPORTING STATEMENT
"How important is the Board of Directors? As a trust fund with approximately
1,049,000 participants, and as owner of some 504,000 shares of the Company's
stock, we believe that the Board--and most particularly its Chairperson--is of
paramount importance. This is why we are sponsoring this proposal which urges
the Board to amend the Company's bylaws so that the Board's leader will be a
person who is independent of the Company and its officers. Through this
proposal, we seek to promote strong, objective leadership on the Board.
"A Board of Directors must formulate corporate policies and monitor
management's implementations of those policies. The Chairperson is responsible
for leading the Board in these tasks, and ensuring that directors are given
the information necessary to perform their duties. In our view, when the
Board's Chairperson is also an officer, employee or otherwise closely related
to the Company's management, it is difficult to objectively perform this
monitoring and evaluation function. We believe that an independent Chairperson
would best ensure that the interests of stockholders are served, rather than
the interests of management.
"The benefits of independent directors are generally well accepted. The New
York Stock Exchange, for example, requires that at least two members of the
board of a listed company, and all members of the company's audit committee,
must meet the Exchange's standards of independence. The Investment Company Act
of 1940 (the law that governs the activities of investment companies) also
includes an independent director provision, generally requiring investment
company boards to be comprised of at least 40 percent "disinterested"
directors.
"Help us send a message to this Board and its Chairperson. Please VOTE FOR
THIS PROPOSAL."
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE ABOVE PROPOSAL FOR THE
FOLLOWING REASONS:
The Company competes in a volatile industry where long-term success depends
critically on strategic vision and strong, experienced leadership. The Board
of Directors believes that the Company and its shareholders are best served by
a structure in which the Company's Chief Executive Officer also serves as the
Board's Chairman. The Board thus believes that the CEO should exercise
leadership in setting the agenda and priorities for the Board and for
management, and should serve as the principal bridge between the Board and
management. This structure ensures that management and the Board act together
with common strategic vision and purpose.
The Board believes its independence is not compromised by having a single
person serve as Chairman and CEO. The functions of the Board are carried out
at the full Board and Board committee levels. Each of the directors is a full
and equal participant in the major strategic and policy decisions of the
Company. The insight, advice, and counsel that each non-employee director
makes available to the Company is not likely to differ in any respect should
one of those directors be the Chairman.
22
The Board also believes the responsibilities of the Compensation Committee
of the Board, which is composed of all non-employee directors, makes a non-
executive chairman unnecessary. The Compensation Committee reviews and
approves the compensation for all elected officers. The Chairman and CEO is
not a member of this committee. This supports objectivity of the Board when it
reviews performance and compensation matters. The Audit Committee also
consists solely of non-employee directors and provides a direct channel of
communication between the Board and the Company's independent auditors.
Additionally, the Company fully complies with the New York Stock Exchange
requirements and standards of independence, and the Board believes that no
meaningful additional measure of independence would be provided by a non-
executive Chairman. In fact, in the Board's view, the separation of offices
would undermine the effectiveness of the CEO and could create difficulty in
recruiting qualified CEOs to the Company.
Finally, implementation of the proposal would deprive the Company and its
shareholders of the leadership of one of the most experienced industry
executives, W. J. Sanders III, who has lead the Company successfully from a
Silicon Valley start-up business to a multibillion dollar, worldwide
enterprise. Implementation of the proposal would cause the Company to breach
its 1996 employment agreement with Mr. Sanders, which provides that he will
serve as both chairman and CEO through the five-year term of the agreement.
For the reasons set forth above, the Board believes that the interests of
the Company and its stockholders are best served at this time by the
experience and consistent direction and strategic vision afforded by a single
full-time individual serving as Chairman and CEO.
ACCORDINGLY, YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS VOTE "AGAINST" THIS STOCKHOLDER PROPOSAL.
PROPOSAL NO. 2--COMPENSATION COMMITTEE.
"The stockholders urge that the Board of Directors adopt a policy that no
board member shall serve on the Compensation Committee if he or she is not an
independent director. For these purposes, the Board should adopt the following
definition of independence to mean a director who:
. is not employed by the Company or an affiliate in an executive capacity;
. is not a member of a corporation or firm that is one of the Company's
paid advisers or consultants;
. is not employed by a significant customer or supplier to the Company;
. has no personal services contract with the Company or one of its
affiliates;
. is not employed by a foundation or university that receives grants or
endowments from the Company;
. is not a relative of an executive of the Company or one if its
affiliates;
. is not part of an interlocking directorate in which the CEO or other
executive officer of the Company serves on the board of another
corporation that employs the director;
. and does not have any personal, financial and/or professional
relationships with the CEO or other executive officer that would
interfere with the exercise of independent judgement by such director.
"SUPPORTING STATEMENT
"The purpose of this proposal is to incorporate within the Compensation
Committee a standard of independence that will permit objective decision
making on compensation issues at AMD. While AMD does require that directors
meet a minimal standard of independence to serve on the committee, this
standard is not sufficient to ensure that a director is free of relationships
that could diminish his or her independent judgement.
23
"For example, up until April 1996, Joe L. Roby--the President and Chief
Operating Officer of Donaldson, Lufkin & Jenrette (DLJ)--served on the
Compensation Committee. Over the last twenty years, DLJ has provided
substantial investment banking services to AMD. In addition, CEO W. J. Sanders
III serves on the board of DLJ. These relationships may have compromised Mr.
Roby's independent judgement when determining Mr. Sanders' compensation
package.
"In addition, Dr. R. Gene Brown--the Managing Director of Putnam, Hayes &
Bartlett and a member of the compensation committee--may have undisclosed ties
to AMD that compromise his independence. According to a June 28, 1995 article
in The Reporter, Brown's firm played an "active role" in litigation on behalf
of AMD. According to The Reporter, Brown "would steer work to his colleagues
at Putnam, Hayes" during the litigation. AMD proxy statements (since 1993) do
not disclose any fees paid to Brown or Putnam, Hayes & Bartlett.
"These relationships present the appearance of a significant conflict of
interest. Stockholders would be best served if members of the Committee are
truly independent. This is especially important in light of the large
compensation packages awarded to executive officers of AMD, and the negative
publicity these packages have created for the Company. For example, Graef
Crystal, an executive compensation expert, has characterized Mr. Sanders'
compensation package as "picking [the] Company's shareholders' collective
pocket." A truly independent compensation committee would help remove this
perception.
"WE URGE STOCKHOLDERS TO VOTE FOR THIS RESOLUTION"
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE ABOVE PROPOSAL FOR THE
FOLLOWING REASONS:
The independence of the Compensation Committee of the Board of Directors has
been carefully reviewed, and the Board of Directors believes that the
proponent's proposed definition of an "independent director" would be unduly
limiting and would unnecessarily circumscribe the ability of the company to
secure prominent, successful and capable individuals to serve as members of
its Compensation Committee. For example, under the proposal's definition, if
the Company were to provide even modest monetary support to a university
professor conducting research, the entire faculty and administrative personnel
at that university would be deemed to be "non-independent." Moreover, the
proposal would exclude anyone who is employed by a "significant customer" of
the Company. Given the breadth of the Company's products and services and the
uncertainty as to the definition of "significant," this approach could
eliminate many well-qualified Board candidates who have no truly material
personal or professional relationship with the Company. The Company has
consistently sought and secured qualified business, academic and community
leaders to serve on its Board of Directors and the Board's Compensation
Committee.
The Securities and Exchange Commission (the SEC) has adopted a comprehensive
set of rules and regulations governing disclosure of Board and Executive
compensation and relationships. In accordance with the SEC rules, the Company
has disclosed that Mr. Sanders became a director of Donaldson, Lufkin &
Jenrette in 1995, and that Mr. Roby ceased his service on the Compensation
Committee in April of 1996. Mr. Roby was not a member of the Compensation
Committee when the 1996 employment agreement with Mr. Sanders was negotiated
and entered into. In addition, the Company has reported that Dr. Brown's
primary occupation is private investor and management and financial
consultant. In addition, he serves as a non-employee Managing Director of
Putnam, Hayes & Bartlett (PHB). Dr. Brown receives no monetary remuneration
from PHB. Dr. Brown has not provided personal services to the Company other
than as a member of the Board of Directors. Consequently, no disclosure of
fees paid to PHB by the Company was appropriate or required. The article
referred to in proponent's statement of support for this proposal regarding
Dr. Brown is inaccurate.
The Board believes that the current members of the Compensation Committee
are "independent" and that it would be unduly limited by the proponent's
proposed definition of an "independent director."
ACCORDINGLY, YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS VOTE "AGAINST" THIS STOCKHOLDER PROPOSAL.
24
REQUIRED VOTE
To be adopted, these stockholder proposals must be approved by the
affirmative vote of a majority of the shares present in person or represented
by proxy and entitled to vote on the matter. Shares with respect to which the
holders have abstained from voting on the proposal will be counted for
purposes of determining the number of shares entitled to vote on the
proposals. "Broker non-votes" will not be counted in determining the number of
shares entitled to vote on the proposals. Unless marked to the contrary,
proxies received will be voted "AGAINST" these proposals.
ANNUAL REPORT AND FINANCIAL STATEMENTS
The 1997 Annual Report of the Company, which includes its audited financial
statements for the fiscal year ended December 28, 1997, has accompanied or
preceded this Proxy Statement.
Subject to Securities and Exchange Commission regulations, proposals of
stockholders intended to be presented at the 1999 Annual Meeting must be
received by the Secretary of the Company not later than November 20, 1998 to
be included in the 1999 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.
25
AMD-90297
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 10,200,000 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.
Notwithstanding the foregoing, NSO's to purchase up to 800,000 shares, subject
to adjustment pursuant to Section 11, may be granted at an exercise price that
is not less than 50% of the Fair Market Value per Share.
(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
be specified by the Board (which may so specify after the date of his death
or disability but before expiration of the Option), provided the actual
date of exercise is in no event after
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 15,000
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 5,000 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: 6,000
shares in the first calendar year following the date of grant; 4,500 shares in
the second such calendar year; 3,000 shares in the third such calendar year; and
1,500 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 increments of 1,667, 1,667 and 1,666 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
PROXY
ADVANCED MICRO DEVICES, INC.
ANNUAL MEETING OF STOCKHOLDERS - APRIL 30, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints W.J. SANDERS III and THOMAS M. MCCOY and each of
them as proxies for the undersigned, with full power of substitution to
represent and to vote all the stock of the undersigned on the following
matters as described in the Proxy Statement accompanying the Notice of
Meeting, receipt of which is hereby acknowledged, and according to their
discretion on all other matters that may be properly presented for action at
the Annual Meeting of Stockholders of Advanced Micro Devices, Inc. to be held
on Thursday, April 30, 1998, 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 amendments to
the 1996 Stock Incentive Plan, and AGAINST the stockholder proposals
(proposals 4 and 5 on your proxy), 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 SEE REVERSE
SIDE CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE SIDE
[AMD LOGO APPEARS HERE]
One AMD Place
Sunnyvale, CA 94088
(408) 732-2400
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 30,
1998, 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.
Please mark
[X] 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 AMENDMENTS TO THE 1996 STOCK INCENTIVE
PLAN, AND AGAINST THE STOCKHOLDER PROPOSALS (PROPOSALS 4 AND 5 ON THIS PROXY).
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2 AND 3 AND A VOTE AGAINST
ITEMS 4 AND 5.
NOMINEES OF DIRECTORS:
W.J. Sanders III, Friedrich Baur, Charles M. Blalack, R. Gene Brown, Richard
Previte, S. Atlq Raza, Joe L. Roby, Leonard Silverman
1. Election of FOR WITHHELD
directors. [_] ALL [_] FROM ALL
NOMINEES NOMINEES
[_]
-------------------------------------------
For all nominees except as noted above
FOR AGAINST ABSTAIN
2. Ratification of appointment of [_] [_] [_]
independent auditors.
3. Amendments to the 1996 Stock [_] [_] [_]
Incentive Plan.
4. Stockholder proposal regarding [_] [_] [_]
the Board Chairperson.
5. Stockholder proposal regarding [_] [_] [_]
the Compensation Committee
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [_]
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
POSTAGE PRE-PAID ENVELOPE.
Please sign exactly as the name or names appear in this proxy. If the stock is
issued in the name of two or more persons, all of them should sign the proxy. A
proxy executed by a corporation should be signed in its name by an authorized
officer. Executors, administrators and trustees so indicate when signing.
Signature_________________ Date______ Signature___________________ Date______