SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
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14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
ADVANCED MICRO DEVICES, INC.
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[LOGO OF ADVANCED MICRO DEVICES]
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
We will hold the Annual Meeting of Stockholders of Advanced Micro Devices,
Inc. at the St. Regis Hotel, 2 East 55th Street, New York, New York 10022, on
Thursday, April 25, 2002. The meeting will start at 10:00 a.m. local time. At
the meeting, we will:
. Elect eight directors,
. Seek your ratification of the appointment of Ernst & Young LLP as our
independent auditors for the current fiscal year,
. Seek your approval of amendments to the Advanced Micro Devices, Inc. 1996
Stock Incentive Plan, and
. Transact any other business that properly comes before the meeting.
By Order of the Board of Directors,
THOMAS M. McCOY
Secretary
Sunnyvale, California
March 8, 2002
YOUR VOTE IS IMPORTANT.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, WE URGE YOU TO COMPLETE, SIGN
AND DATE THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENVELOPE
PROVIDED. RETURNING YOUR PROXY CARD WILL ENSURE THAT YOUR
VOTE IS COUNTED IF YOU LATER DECIDE NOT TO ATTEND THE MEETING.
TABLE OF CONTENTS
Page
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QUESTIONS AND ANSWERS............................................. 1
ITEM 1--ELECTION OF DIRECTORS..................................... 4
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS................. 6
DIRECTORS' COMPENSATION AND BENEFITS.............................. 7
PRINCIPAL STOCKHOLDERS............................................ 8
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS............ 9
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE........... 10
EXECUTIVE COMPENSATION............................................ 10
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.................... 17
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION..... 17
BOARD AUDIT COMMITTEE REPORT...................................... 21
PERFORMANCE GRAPH................................................. 22
ITEM 2--RATIFICATION OF INDEPENDENT AUDITORS...................... 23
ITEM 3--APPROVAL OF AMENDMENTS TO THE ADVANCED MICRO DEVICES, INC.
1996 STOCK INCENTIVE PLAN.................................. 23
ANNUAL REPORT AND FINANCIAL STATEMENTS............................ 27
ADVANCED MICRO DEVICES, INC.
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PROXY STATEMENT
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2002 ANNUAL MEETING OF STOCKHOLDERS
QUESTIONS AND ANSWERS
1. Q: WHO IS SOLICITING MY VOTE?
A: This proxy solicitation is being made by the Board of Directors of
Advanced Micro Devices, Inc. We have retained MacKenzie Partners, Inc.,
professional proxy solicitors, to assist us with this proxy solicitation.
2. Q: WHEN WAS THIS PROXY STATEMENT MAILED TO STOCKHOLDERS?
A: This proxy statement was first mailed to stockholders on or about March
19, 2002.
3. Q: WHAT MAY I VOTE ON?
A: You may vote on:
. The election of directors to serve on our Board of Directors,
. The appointment of our independent auditors for the current fiscal
year, and
. The amendments to the Advanced Micro Devices, Inc. 1996 Stock
Incentive Plan (the 1996 Plan).
4. Q: HOW DOES THE BOARD RECOMMEND I VOTE ON THE PROPOSALS?
A: The Board recommends that you vote:
. FOR each of the director nominees,
. FOR the appointment of Ernst & Young LLP as our independent auditors
for the current fiscal year, and
. FOR the amendments to the 1996 Plan.
5. Q: WHO IS ENTITLED TO VOTE?
A: Stockholders as of the close of business on February 25, 2002 (the
Record Date) are entitled to vote at the Annual Meeting. On the Record
Date, approximately 341,243,469 shares of our common stock were
outstanding. Every stockholder is entitled to one vote for each share of
common stock held. A list of these stockholders is kept at the offices
of our transfer agent, EquiServe Trust Company, N.A. (EquiServe), c/o
STARS, 100 William Street-Galleria, New York, New York, 10038.
6. Q: HOW DO I VOTE BY MAIL?
A: If you complete and properly sign each proxy card you receive and return
it in the prepaid envelope to us, it will be voted by one of the
individuals indicated on the card (your "proxy") as you direct. If you
1
return your signed proxy card but do not mark the boxes showing how you
wish to vote, your shares will be voted FOR the election of the director
nominees, FOR the ratification of the appointment of our auditors and
FOR the approval of the amendments to the 1996 Plan.
7. Q: CAN I VOTE BY TELEPHONE OR ELECTRONICALLY?
A: If you live in the United States or Canada, you may submit your proxy by
following the Vote by Telephone instructions on the proxy card. If you
have Internet access, you may submit your proxy from any location in the
world by following the Vote by Internet instructions on the proxy card.
8. Q: CAN I VOTE AT THE MEETING?
A. Yes. If you wish to vote your shares in person at the Annual Meeting and
they are held by your broker (held in "street name"), you must bring a
letter from the broker to the meeting showing that you were the direct
or indirect ("beneficial") owner of the shares on February 25, 2002.
9. Q: CAN I CHANGE MY VOTE AFTER I RETURN MY PROXY CARD OR AFTER I HAVE
VOTED BY TELEPHONE OR ELECTRONICALLY?
A. Yes. You may revoke your proxy at any time before it is exercised by:
. Sending in another proxy with a later date by mail, telephone or over
the Internet,
. Notifying our Corporate Secretary in writing before the Annual Meeting
that you wish to revoke your proxy, or
. Voting in person at the Annual Meeting.
10. Q: HOW DO I VOTE MY SHARES IF THEY ARE HELD IN STREET NAME?
A: If your shares are held by your broker, in "street name," you will
receive a form from your broker seeking instruction as to how your
shares should be voted. If you do not instruct your broker how to vote,
your broker will vote your shares at its discretion.
11. Q: WHAT IS A "QUORUM"?
A: A "quorum" is a majority of the outstanding shares. They may be present
at the Annual Meeting or represented by proxy. There must be a quorum
for the Annual Meeting to be held. If you submit a properly executed
proxy card, even if you abstain from voting, you will be considered part
of the quorum.
12. Q: HOW ARE MATTERS PASSED OR DEFEATED?
A: The eight director nominees receiving the highest number of affirmative
votes will be elected. A properly executed proxy marked "WITHHOLD
AUTHORITY" with respect to the election of one or more directors will
not be voted with respect to the director or directors indicated,
although it will be counted for purposes of determining whether there is
a quorum. All the other matters must receive affirmative votes from more
than 50% of the shares that are voted to be adopted. An abstention has
the same effect as a vote AGAINST a proposal.
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13. Q: WHO WILL COUNT THE VOTES?
A: Proxies will be tabulated by ADP-ICS, Inc.
14. Q: IS MY VOTE CONFIDENTIAL?
A: Proxy cards, ballots and voting tabulations that identify individual
stockholders are mailed or returned directly to ADP-ICS, and handled in
a manner that protects your voting privacy. Your vote will not be
disclosed except: (1) as needed to permit ADP-ICS to tabulate and
certify the vote, and (2) as required by law. However, comments written
on the proxy card may be forwarded to management. In that case, your
identity may not be kept confidential.
15. Q: WHO CAN ATTEND THE ANNUAL MEETING?
A: Only stockholders as of the close of business on February 25, 2002,
holders of proxies for those stockholders and other persons invited by
us can attend.
16. Q: HOW WILL VOTING ON ANY BUSINESS NOT DESCRIBED ON THE NOTICE OF ANNUAL
MEETING BE CONDUCTED?
A: We do not know of any business to be considered at the Annual Meeting
other than the proposals described in this proxy statement. If any other
business is presented at the Annual Meeting, your signed proxy card
gives authority to W. J. Sanders III, our Chief Executive Officer, or
Thomas M. McCoy, our Senior Vice President, General Counsel and
Secretary, to vote on such matters at their discretion.
17. Q: WHEN ARE THE STOCKHOLDER PROPOSALS FOR THE 2003 ANNUAL MEETING DUE?
A: All stockholder proposals to be considered for inclusion in next year's
proxy statement must be submitted in writing to Thomas M. McCoy,
Secretary, Advanced Micro Devices, Inc., One AMD Place, Sunnyvale,
California 94088 on or before November 19, 2002. In addition, our bylaws
provide for the timing and content of the notice which stockholders must
provide to Mr. McCoy, Secretary, for the nomination of directors or
other proposals to be properly presented at a stockholders meeting.
Pursuant to these provisions, notice of any nomination or proposal must
be received by us not less than 60 nor more than 90 days before the
first anniversary of the preceding year's annual meeting; however, in
the event that the date of the annual meeting is not within 30 days
before or after the anniversary date, to be timely, the notice by the
stockholder must be not later than the close of business on the tenth
day following the day on which the first public announcement of the date
of the annual meeting was made or the notice of the meeting was mailed,
whichever occurs first.
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ITEM 1--ELECTION OF DIRECTORS
Eight directors will be elected at the Annual Meeting. All directors are
elected annually and serve a one-year term until the next Annual Meeting.
The Nominating Committee of the Board of Directors selected, and the Board
of Directors accepted, the following eight persons as nominees for election to
the Board: Mr. W. J. Sanders III, Dr. Hector de J. Ruiz, Dr. Friedrich Baur,
Mr. Charles M. Blalack, Dr. R. Gene Brown, Mr. Robert B. Palmer, Mr. Joe L.
Roby and Dr. Leonard M. Silverman. All of the nominees are currently directors
of AMD.
The Board of Directors expects all nominees named below to be available for
election. If a nominee declines or is unable to act as a director, your proxy
may vote for any substitute nominee proposed by the Board. Your proxy will vote
FOR the election of these nominees, unless you instruct otherwise.
The experience and background of each of the nominees follows.
W. J. Sanders III--Mr. Sanders, 65, has been a director since 1969. Mr.
Sanders is our Chairman of the Board and Chief Executive Officer. Mr. Sanders
has held these offices since he co-founded AMD in 1969. Mr. Sanders will retire
as the Chief Executive Officer of AMD on April 25, 2002; if re-elected, Mr.
Sanders will serve as Chairman of the Board through December 27, 2003.
Dr. Hector de J. Ruiz--Dr. Ruiz, 56, has been a director since 2000. Dr.
Ruiz will be appointed as our Chief Executive Officer on April 25, 2002. Dr.
Ruiz joined AMD as President and Chief Operating Officer in January 2000.
Before joining AMD, Dr. Ruiz served as President of the Motorola, Inc.
Semiconductor Products Sector since 1997. From 1991 to 1995, Dr. Ruiz was
Senior Vice President and General Manager of Motorola's paging and messaging
businesses, and in 1996 became Executive Vice President and General Manager of
those businesses. Dr. Ruiz joined Motorola in 1977, and from 1977 to 1991, he
held various executive positions in Motorola's Semiconductor Products Sector.
Before joining Motorola, Dr. Ruiz worked at Texas Instruments, Inc. from 1972
to 1977. Dr. Ruiz is a member of the Board of Directors of Eastman Kodak
Company.
Dr. Friedrich Baur--Dr. Baur, 74, has been a director since 1994. Dr. Baur
has been President and Managing Partner of MST Beteiligungs und
Unternehmensberatungs GmbH, a German consulting firm, since 1990. Beginning in
1953, Dr. Baur held a variety of positions of increasing responsibility with
Siemens AG, retiring in 1982 as Executive Vice President and a Managing
Director. He also represented Siemens AG on the Board of Directors of AMD from
1978 until 1982. From 1982 to 1990, Dr. Baur was Chairman of the Board of
Zahnradfabrik Friedrichshafen AG.
Charles M. Blalack--Mr. Blalack, 75, has been a director since 1989. Mr.
Blalack is Chairman of the Board and Chief Executive Officer of Blalack and
Company, a registered investment advisor, and has been since 1969. From 1970
until 1991, Mr. Blalack was Chief Executive Officer of Blalack-Loop, Inc., an
investment banking firm and member of the National Association of Securities
Dealers. 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 AMD in 1987.
Dr. R. Gene Brown--Dr. Brown, 69, has been a director since 1969. Dr. Brown
is an independent private investor and financial management consultant and has
been since 2000. He was a director of Hagler Bailly, Inc., a consulting firm,
from 1998 to 2000. Dr. Brown was a non-employee Managing Director of Putnam,
Hayes & Bartlett, Inc., an economic and management consulting firm, from 1975
to 1998, when it was acquired by Hagler Bailly, Inc. 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, Dr. Brown was President of Berkeley BioEngineering.
4
Robert B. Palmer--Mr. Palmer, 61, has been a director since 1999. Mr. Palmer
was the Chairman and Chief Executive Officer of Digital Equipment Corporation
(Digital) from 1995 to 1998. Mr. Palmer retired in 1998. Mr. Palmer was
appointed Chief Executive Officer and President of Digital in October 1992.
From 1985 to 1992, Mr. Palmer served in various executive positions at Digital.
Before Digital, Mr. Palmer was Executive Vice President of Semiconductor
Operations at United Technologies Corporation (UTC), joining UTC in 1980 when
it acquired Mostek Corporation, where he was a member of the founding team in
1969. Mr. Palmer is on the Board of Trustees of the Cooper Institute for
Aerobic Research, a non-profit preventative medicine research and education
organization.
Joe L. Roby--Mr. Roby, 62, has been a director since 1991. Mr. Roby is the
Chairman Emeritus and Senior Advisor of the Executive Board of Credit Suisse
First Boston (CSFB) and has been since December 2001. Mr. Roby was the Chairman
of the Executive Board of CSFB from 2000 until December 2001. Before Donaldson,
Lufkin & Jenrette, Inc. (DLJ) was acquired by CSFB in 2000, Mr. Roby was
President, Chief Executive Officer and a director of DLJ. Mr. Roby was 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 subsidiary of DLJ, a position he had held
from 1989 until 1995. Mr. Roby is a member of the Board of Directors of Apogent
Technologies.
Dr. Leonard M. Silverman--Dr. Silverman, 62, has been a director since 1994.
Dr. Silverman was Dean of the School of Engineering of the University of
Southern California from 1984 until June 2001. He is currently a Professor of
Electrical Engineering at the same institution. He was elected to the National
Academy of Engineering in 1988 and is a Fellow of the Institute of Electrical
and Electronic Engineers. Dr. Silverman is a member of the Board of Directors
of Diodes, Inc.
Your Board of Directors unanimously recommends that you vote "FOR" the
proposed slate of directors for the current year. Unless you indicate
otherwise, your proxy will vote "FOR" the proposed nominees.
5
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors held seven (7) regularly scheduled and special
meetings during the 2001 fiscal year. All Directors attended at least 75% of
the meetings of the Board of Directors and of the committees on which they
served during 2001. The Board has Audit, Nominating and Compensation
Committees. The members of the committees are appointed by the Board annually.
Audit Committee. The Audit Committee consists of Dr. R. Gene Brown, as
Chair, Mr. Robert B. Palmer and Mr. Charles M. Blalack, each a non-employee
director. The Audit Committee held nine (9) meetings during 2001. The Audit
Committee reviews our accounting policies, internal controls, financial
reporting practices, contingent risks and risk management strategies and plans,
including litigation issues, and the services and fees of our independent
auditors. In connection with these reviews, the Audit Committee meets alone
with our financial and legal personnel, and with our independent auditors, who
have free access to the Audit Committee at any time. The director of our
Internal Control Department reports to the Chair of the Audit Committee and to
our Chief Financial Officer and serves a staff function for the Audit
Committee. The Audit Committee recommends the selection of the independent
auditors to serve the following year in examining our accounts. The Audit
Committee also annually reviews the independence of the independent auditors as
a factor in these recommendations.
Nominating Committee. The Nominating Committee consists of Mr. W. J.
Sanders III, as Chair, Mr. Charles M. Blalack, Dr. R. Gene Brown, Mr. Robert B.
Palmer and Mr. Joe L. Roby. The Nominating Committee met once during 2002 to
consider nominees for the 2002 Annual Meeting. If you wish to submit names of
prospective nominees for consideration by the Nominating Committee you should
do so in writing to our Corporate Secretary. Nomination procedures are
discussed in greater detail in our bylaws, which will be provided to you upon
written request.
Compensation Committee. The Compensation Committee consists of Mr. Charles
M. Blalack, as Chair, Dr. R. Gene Brown and Dr. Leonard M. Silverman, each a
non-employee director. The Compensation Committee recommends to the Board
proposed equity incentive plans, determines equity compensation for the Chief
Executive Officer and other executive officers, provides oversight of the
salaries of executive officers as determined by the Chief Executive Officer,
adopts executive bonus plans, grants equity awards and oversees the award of
bonuses to executives and certain other employees. The Chief Executive Officer
and Senior Vice President, Human Resources make recommendations to the
Compensation Committee on the equity compensation of executive officers other
than themselves. During 2001, the Compensation Committee met twelve (12) times.
6
DIRECTORS' COMPENSATION AND BENEFITS
In 2001, we paid each director who was not an employee of AMD an annual fee
of $28,750. Before April 26, 2001, we paid each non-employee director 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.
Effective on April 26, 2001, we paid each non-employee director an annual fee
of $30,000, a fee of $2,000 for attendance at each regular or special meeting
of the Board and a fee of $1,200 for attendance at each meeting of each
committee on which they served. In addition, in 2001 we paid the Chair of the
Audit Committee an annual fee of $20,000 for service in that capacity, and we
paid the Chair of the Compensation Committee an annual fee of $10,000 for
service in that capacity. We also reimbursed reasonable out-of-pocket expenses
incurred by directors in connection with attending meetings and performing
other Board-related services for AMD, and, on occasion, travel expenses of
their spouses.
Under a non-discretionary formula approved by the stockholders, we grant
initial options to purchase 30,000 shares of common stock to non-employee
directors on their first election to the Board. These first options are granted
and vest as follows:
Number
Grant Date of Shares Vesting
---------- --------- -------
April 30, year of first election... 7,500 2,500--April 30, year following grant; balance--monthly over the next two years
July 31, year of first election.... 7,500 2,500--April 30, year following grant; balance--monthly over the next two years
October 31, year of first election. 7,500 2,500--April 30, year following grant; balance--monthly over the next two years
December 15, year of first election 7,500 2,500--April 30, year following grant; balance--monthly over the next two years
If the Director remains on the Board, we automatically grant annual
supplemental options to purchase 12,000 shares of common stock on each
re-election. These annual options are granted and vest as follows:
Number
Grant Date of Shares Vesting
---------- --------- -------
April 30, year of re-election... 3,000 1,000--April 30, year following grant; balance--monthly over the next two years
July 31, year of re-election.... 3,000 1,000--April 30, year following grant; balance--monthly over the next two years
October 31, year of re-election. 3,000 1,000--April 30, year following grant; balance--monthly over the next two years
December 15, year of re-election 3,000 1,000--April 30, year following grant; balance--monthly over the next two years
The options vest only if the director is serving on the Board on the vesting
date. The exercise price of each option is the fair market value on the date of
grant. The options expire on the earlier of ten years plus one day from the
grant date or twelve months (for options granted before April 26, 2001) or
twenty four months (for options granted after April 26, 2001) following
termination of a director's service on the Board.
In January 2002, the Board adopted amendments to the 1996 Stock Incentive
Plan (the 1996 Plan), subject to stockholder approval. These amendments
increase the number of options granted initially to 50,000 shares and increase
the number of options granted annually to 25,000 shares. These additional
options will be granted only if stockholders approve the proposed amendments to
the 1996 Plan.
Any non-employee director may elect to defer receipt of all or a portion of
his annual fees and meeting fees, but may not defer less than $5,000. We credit
deferred amounts plus interest to an account for record-keeping purposes, and
we pay cash payments in a lump sum 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 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 based on the
annual dividend interest rate for the individual insurance policy on the
director's life. In the event of the director's death, his beneficiary will
receive the value of his account plus, in certain cases, a supplemental death
benefit of up to ten times the average annual amount of his deferred fees.
During 2001, Dr. Brown deferred fees in the amount of $20,000 pursuant to this
program. In addition, in lieu of his annual fee, Dr. Brown used an automobile
provided by us, valued at $24,374, which is taxable to him. We also provided
Dr. Brown with family medical and dental insurance benefits, which are valued
at $3,728 and are also taxable to him.
7
PRINCIPAL STOCKHOLDERS
The following table shows each person or entity we know to be the beneficial
owner of more than five percent of our common stock as of February 25, 2002.
Percent of
Name and Address of Beneficial Owner Amount and Nature of Beneficial Ownership Class
------------------------------------ ----------------------------------------- ----------
FMR Corporation/(1)/............... 26,167,443 7.7%
82 Devonshire Street (sole dispositive power as to all shares and
Boston, Massachusetts 02109 sole voting power as to 2,864,063 shares)
--------
(1) This information is based on Schedule 13G filed with the Securities and
Exchange Commission on February 13, 2002 by FMR Corporation (FMR). Fidelity
Management & Research Company (Fidelity), a wholly owned subsidiary of FMR,
is an investment advisor and the beneficial owner of 23,275,180 shares or
6.849% of our common stock. Fidelity Management Trust Company (Fidelity
Trust), a wholly owned subsidiary of FMR, is a bank and the beneficial
owner of 1,953,163 shares or 0.575% of our common stock. Fidelity and
Fidelity Trust are located at the same address as FMR. Fidelity
International Limited (FIL), Pembroke Hall, 42 Crowlane, Hamilton, Bermuda,
provides investment advisory and management services to non-U.S. investment
companies and certain institutional investors. FIL is the beneficial owner
of 939,100 shares or 0.276% of our common stock. FIL has sole power to vote
and the sole power to dispose of 939,100 shares of our common stock.
8
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The table below shows the number of shares of our common stock beneficially
owned as of February 25, 2002, by our directors, by the nominees for election
as directors, by each of our executive officers listed in the Summary
Compensation Table below, and by all of our 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 provided by the individuals.
Amount and Nature of Percent of
Name Beneficial Ownership/(1)/ Class
---- ------------------------ ----------
W. J. Sanders III............................................... 3,534,912/(2)/ 1.04%
Dr. Hector de J. Ruiz........................................... 1,004,000/(3)/ *
Dr. Friedrich Baur.............................................. 7,347/(4)/ *
Charles M. Blalack.............................................. 42,000/(5)/ *
Dr. R. Gene Brown............................................... 100,448/(6)/ *
Robert B. Palmer................................................ 25,000/(7)/ *
Joe L. Roby..................................................... 99,600/(8)/ *
Dr. Leonard M. Silverman........................................ 46,667/(9)/ *
Walid Maghribi/(10)/............................................ 315,838/(11)/ *
Robert R. Herb/(12)/............................................ 416,675/(13)/ *
Thomas M. McCoy/(14)/........................................... 370,212/(15)/ *
All directors and executive officers as a group (16 persons).... 7,707,995/(16)/ 2.26%
--------
* Less than one percent
(1) Some of the individuals may share voting power with regard to the listed
shares with their spouses.
(2) Includes 3,300,000 shares subject to options that are exercisable on
February 25, 2002 or become exercisable within 60 days thereafter.
Includes 3,000 shares owned by Mr. Sanders' minor daughter, as to which
Mr. Sanders disclaims beneficial ownership.
(3) Includes 1,000,000 shares subject to options that are exercisable on
February 25, 2002 or become exercisable within 60 days thereafter.
(4) Includes 3,332 shares subject to options that are exercisable on February
25, 2002 or become exercisable within 60 days thereafter.
(5) Includes 38,000 shares subject to options that are exercisable on February
25, 2002 or become exercisable within 60 days thereafter.
(6) Includes 50,000 shares subject to options that are exercisable on February
25, 2002 or become exercisable within 60 days thereafter.
(7) Includes 21,000 shares subject to options that are exercisable on February
25, 2002 or become exercisable within 60 days thereafter.
(8) Includes 50,000 shares subject to options that are exercisable on February
25, 2002 or become exercisable within 60 days thereafter.
(9) Consists of 46,667 shares subject to options that are exercisable on
February 25, 2002 or become exercisable within 60 days thereafter.
(10) Mr. Maghribi, 49, was the Senior Vice President, President, Memory Group
of AMD until he resigned March 1, 2002.
(11) Consists of 315,838 shares subject to options that are exercisable on
February 25, 2002 or become exercisable within 60 days thereafter. Mr.
Maghribi's unvested options were cancelled upon his resignation on March
1, 2002.
(12) Mr. Herb, 40, is Executive Vice President and Chief Sales and Marketing
Officer of AMD.
(13) Consists of 416,675 shares subject to options that are exercisable on
February 25, 2002 or become exercisable within 60 days thereafter.
(14) Mr. McCoy, 51, is Senior Vice President, General Counsel and Secretary of
AMD.
(15) Includes 363,332 shares subject to options that are exercisable on
February 25, 2002 or become exercisable within 60 days thereafter.
(16) Includes 7,255,766 shares subject to options that are exercisable on
February 25, 2002 or become exercisable within 60 days thereafter.
9
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
our directors, our Section 16 officers and any persons holding more than ten
percent of our common stock to report to the Securities and Exchange Commission
and the New York Stock Exchange their initial ownership of our stock and any
changes in that ownership. No person holds more than ten percent of our common
stock. We believe that during fiscal year 2001, our directors and Section 16
officers filed all Section 16(a) reports on a timely basis, with the exception
of Mr. Daryl Ostrander, who timely filed one report reporting a sale, but
inadvertently under-reported the number of shares sold by two hundred (200)
shares. An amended Form 4 has been filed with the Commission. In making the
above statements, we have relied upon the written representations of our
directors and Section 16 officers.
EXECUTIVE COMPENSATION
The following table shows compensation information for our Chief Executive
Officer and our four other most highly paid executive officers as of the end of
our last fiscal year.
Summary Compensation Table (1999-2001)
Long-Term Compensation
Annual Compensation Awards
------------------------------------------------ -------------------------
(a) (b) (c) (d) (e) (g) (i)
--- --- --- --- --- --- ---
Securities
Other Annual Underlying All Other
Name and Principal Position Year Salary Bonus/(1)/ Compensation Options/(2)/ Compensation/(3)/
--------------------------- ---- ---------- ---------- ------------ ----------- ----------------
W. J. Sanders III................ 2001 $1,000,000 $1,217,412/(4)/ $ 542,592/(5)/ 0 $ 743,344
Chairman and Chief 2000 $1,000,000 $5,143,236/(4)/ $ 417,284/(5)/ 1,200,000 $ 627,377
Executive Officer 1999 $1,000,000 $2,000,000 $ 257,719/(5)/ 0 $ 541,777
Hector de J. Ruiz................ 2001 $ 775,962 $ 19,337 $2,411,257/(6)/ 500,000 $3,251,108/(7)/
President and Chief 2000 $ 752,915/(8)/ $3,160,429 $ 0 2,000,000 $ 32,921
Operating Officer 1999 -- -- -- -- --
Walid Maghribi................... 2001 $ 512,693 $1,012,208 $ 0 185,000 $ 56,677
Former President, Memory 2000 $ 424,615 $2,560,354 $ 0 200,000 $ 45,937
Group 1999 $ 396,634 $1,125,000 $ 0 129,000 $ 14,647
Robert R. Herb................... 2001 $ 556,110 $ 848,539 $ 0 200,000 $ 39,964
Executive Vice President and 2000 $ 570,195 $2,692,239 $ 0 300,000 $ 53,054
Chief Sales and Marketing 1999 $ 393,750 $ 512,813 $ 0 300,000 $ 15,253
Officer
Thomas M. McCoy.................. 2001 $ 606,747/(9)/ $ 86,153 $ 0 225,000 $ 37,488
Senior Vice President, 2000 $ 592,542/(9)/ $ 452,737 $ 0 225,000 $ 52,450
General Counsel and Secretary 1999 $ 418,000/(9)/ $ 226,000 $ 0 225,000 $ 12,247
--------
(1) Includes cash profit sharing in the following amounts for Mr. Sanders, Dr.
Ruiz, Mr. Maghribi, Mr. Herb and Mr. McCoy: for 2001, $30,672, $19,337,
$12,208, $13,859 and $10,386; for 2000, $143,236, $67,059, $53,354, $71,735
and $49,933; for 1999, none.
(2) Share numbers have been restated to reflect a two-for-one stock split on
August 21, 2000.
(3) Includes for 2001, 2000 and 1999, for Mr. Sanders, pursuant to his
employment agreement, $400,000 in deferred retirement compensation for each
year and $203,477, $141,818 and $93,697 as a deferred cost of living salary
adjustment. Includes for 2001 for Mr. Sanders, Dr. Ruiz, Mr. Maghribi, Mr.
Herb, and Mr. McCoy, our matching contributions to our 401(K) Plan in the
amount of $5,100 per individual; our
10
matching contributions to the deferred compensation program in the amounts
of $27,715, $0, $9,730, $11,569 and $7,392; inputed income from the term
life insurance provided by us in the amounts of $4,641, $4,198, $1,203,
$873 and $1,176; and premiums paid by us for individual insurance policies
and group term life in the amounts of $26,282, $31,430, $5,177, $10,453 and
$13,440; deferred profit sharing in the amounts of $4,868, $5,215, $4,868,
$4,868 and $4,868; and our Excess 415 (nonqualified deferred compensation)
Plan in the amounts of $5,512, $5,165, $5,512, $5,512 and $5,512. Mr.
Sanders, Mr. Maghribi and Mr. Herb received a one-time cash payout due to
the cancellation of our Excess 415 Plan in the amounts of $65,749, $25,087
and $1,589. Includes for 2000 for Mr. Sanders, Dr. Ruiz, Mr. Maghribi, Mr.
Herb and Mr. McCoy, our matching contributions to our 401(K) Plan in the
amount of $4,800 per individual; our matching contributions to the deferred
compensation program in the amounts of $24,900, $0, $7,920, $11,025 and
$7,113; imputed income from the term life insurance provided by us in the
amounts of $4,360, $2,218, $990, $829 and $1,050; premiums paid by us for
individual insurance policies in the amount of $26,282, $6,580, $7,010,
$11,183 and $14,269; deferred profit sharing in the amount of $19,705,
$14,158, $19,705, $19,705 and $19,705; and our Excess 415 Plan in the
amounts of $5,512, $5,165, $5,512, $5,512 and $5,512. Includes for 1999 for
Mr. Sanders, Mr. Maghribi, Mr. Herb and Mr. McCoy, our matching
contributions to our 401(k) Plan in the amounts of $2,400, $2,800, $2,800
and $2,400, our matching contributions to the deferred compensation program
in the amounts of $15,518, $4,031, $4,383 and $0, imputed income from term
life insurance in the amounts of $3,880, $806, $611 and $886 and premiums
paid for individual insurance policies in the amount of $26,282, $7,010,
$7,459 and $8,962.
(4) Mr. Sanders earned a bonus of $6,186,740 for 2000. Mr. Sanders' bonus is
capped at $5 million and the remainder is carried forward for three years
if the cap is not reached in any of those years (the Unpaid Contingent
Bonus). If the Unpaid Contingent Bonus is not paid, it is forfeited. For
2000, Mr. Sanders was paid a bonus of $5 million. For 2001, Mr. Sanders was
paid the Unpaid Contingent Bonus of $1,186,740 from the bonus earned in
2000.
(5) Includes for 2001, 2000 and 1999, $195,138, $129,645 and $115,298, of
in-kind compensation in the form of company provided vehicles. Includes for
1999, $79,754, reflecting the cost of providing physical security services.
Includes for 2001, $167,658 of in-kind compensation in the form of use of
the company airplane.
(6) Includes $2,340,583 reflecting a tax gross-up.
(7) Includes $3,200,000 reflecting the amount deposited in a trust account for
retirement purposes.
(8) Includes $46,182 for interest forgiveness on a loan to Dr. Ruiz.
(9) Includes for 2001 and 2000, supplemental compensation of $190,000 and
$195,000. Includes for 1999, $20,000 for loan forgiveness and supplemental
compensation of $38,000.
11
2001 OPTION GRANTS
Number of % of Total
Securities Options Potential Realizable Value
Underlying Granted to Exercise at Assumed Annual Rates
Options Employees in Price Per Expiration of Stock Price Appreciation
Name Granted/(1)/ Fiscal Year Share Date For Option Term/(2)/
---- ----------- ------------ --------- ---------- -------------------------------------
0% 5% 10%
--------- ---------- ----------
W. J. Sanders III... 0 N/A N/A N/A N/A N/A N/A
Hector de J. Ruiz... 125,000 0.89 $26.90 4/25/2011 $ 0 $2,114,658 $5,358,959
125,000 0.89 $21.08 7/19/2011 $(442,500)/(3)/ $ 936,351 $3,051,780
125,000 0.89 $ 9.56 10/29/2011 $ 0 $ 751,529 $1,904,522
125,000 0.89 $14.15 11/26/2011 $ 0 $1,112,357 $2,818,932
Walid Maghribi...... 27,500 0.20 $26.90 4/25/2011 $ 0 $ 465,225 $1,178,971
27,500 0.20 $17.54 7/19/2011 $ 0 $ 303,347 $ 768,742
27,500 0.20 $ 9.56 10/29/2011 $ 0 $ 165,336 $ 418,995
75,000 0.53 $12.40 11/8/2011 $ 0 $ 584,872 $1,482,180
27,500 0.20 $14.15 11/26/2011 $ 0 $ 244,719 $ 620,165
Robert R. Herb...... 25,000 0.18 $26.90 4/25/2011 $ 0 $ 422,932 $1,071,792
25,000 0.18 $21.08 7/19/2011 $ (88,500)/(3)/ $ 187,270 $ 610,356
25,000 0.18 $ 9.56 10/29/2011 $ 0 $ 150,306 $ 380,904
100,000 0.71 $12.40 11/8/2011 $ 0 $ 779,829 $1,976,241
25,000 0.18 $14.15 11/26/2011 $ 0 $ 222,471 $ 563,786
Thomas M. McCoy..... 6,250 0.04 $26.90 4/25/2011 $ 0 $ 105,733 $ 267,948
6,250 0.04 $17.54 7/19/2011 $ 0 $ 68,943 $ 174,714
6,250 0.04 $ 9.56 10/29/2011 $ 0 $ 37,576 $ 95,226
150,000 1.07 $10.26 10/25/2011 $ 0 $ 967,869 $2,452,770
50,000 0.36 $12.40 11/8/2011 $ 0 $ 389,915 $ 988,120
6,250 0.04 $14.15 11/26/2011 $ 0 $ 55,618 $ 140,947
--------
(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 previously
owned shares. Withholding taxes due on exercise may be paid in cash, with
previously owned shares, or by having shares withheld. Except as provided
in any employment agreement or changes in control agreement, the options
vest only if the executive is employed by us on the vesting date. Each
grant to Dr. Ruiz vests in increments of 62,500 shares on April 25, 2005
and 2006. Mr. Maghribi's 2001 option grants were cancelled upon his
resignation on March 1, 2002. Mr. Herb's grants of 25,000 each, for a total
of 100,000 shares, vest in increments of 8,335 shares each, for a total of
33,340 shares on April 25, 2002, and the remaining 66,660 shares vest
monthly until April 25, 2004. Mr. Herb's grant of 100,000 shares vests in
increments of 50,000 shares on November 8, 2002 and 2003. Mr. McCoy's
grants of 6,250 shares each, for a total of 25,000 shares, vest in
increments of 2,083 shares each, for a total of 8,332 shares on April 25,
2002, and the remaining 16,668 shares vest monthly until April 25, 2004.
Mr. McCoy's grant of 150,000 shares vests in increments of 50,000 shares on
October 25, 2004, 2005 and 2006; however, the vesting may be accelerated
provided certain performance terms are met. Mr. McCoy's grant of
50,000 shares vests in increments of 25,000 shares on November 8, 2002 and
2003. Upon an optionee's 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 AMD as that
term is defined under our stock incentive plans or in accordance with an
optionee's management continuity agreement. For additional information, see
the discussion under, "Employment Agreements," and "Change in Control
Agreements."
12
(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 our estimate or projection of future prices
of our common stock.
(3) A negative value amount results when the exercise price is greater than the
fair market value price on the date of grant.
AGGREGATED OPTION EXERCISES IN 2001
AND FISCAL YEAR-END OPTION VALUES
Number of Securities Value of Unexercised
Number Underlying Unexercised In-The-Money
of Shares Options at 12/31/01 Options at 12/31/01/(1)/
Acquired on Value -------------------------- --------------------------
Name Exercise Realized/(1)/ (Exercisable) (Unexercisable) (Exercisable) (Unexercisable)
---- ----------- ------------ ------------- --------------- ------------- ---------------
W. J. Sanders III....... 400,000 $9,310,770 3,300,000 500,000 $20,976,000 $ 0
Hector de J. Ruiz....... 0 $ 0 500,000 2,000,000 $ 0 $1,131,250
Walid Maghribi.......... 113,750 $2,685,472 265,833 371,667/(2)/ $ 957,635 $ 830,575/(2)/
Robert R. Herb.......... 197,262 $4,060,952 283,335 766,667 $ 1,457,501 $2,831,250
Thomas M. McCoy......... 75,000 $1,527,485 342,500 412,500 $ 864,250 $1,173,562
--------
(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.
(2) Mr. Maghribi's unvested options were cancelled upon his resignation on
March 1, 2002.
Employment Agreements
Chairman's Employment Agreement. In November 2000, we entered into an
amended and restated employment agreement with Mr. Sanders that provides for
his tenure as Chief Executive Officer through this annual stockholder meeting
and as Chairman through December 27, 2003. The 2000 agreement provides for
annual base compensation to Mr. Sanders of $1 million through this annual
stockholder meeting, $750,000 for the remainder of 2002 and $600,000 in 2003,
with certain deferred adjustments for cost of living increases from 1996. The
2000 agreement also provides for an annual incentive bonus equal to 0.6% of our
adjusted operating profit (as defined in the agreement) in excess of 20% of
adjusted operating profits for the preceding year for each year through 2002
and an incentive bonus of 0.2% of our adjusted operating profit in excess of
20% of adjusted operating profits for the preceding year for 2003. The annual
bonus payment is capped at $5 million, with any excess carried over for three
years if the cap is not reached in any of those years. Mr. Sanders is also
eligible to receive discretionary bonuses, in amounts determined by the
Compensation Committee. Under this agreement, we granted Mr. Sanders an option
in 2000 to purchase 1,200,000 shares of our common stock with an exercise price
equal to the fair market value of our common stock on the date of the grant
($23.75) with time-based vesting criteria. 700,000 of these shares were vested
as of February 25, 2002. If vested, this option may be exercised after
termination of employment for a period of: (i) five years after resignation or
retirement, or on death or disability, or after a termination of employment
other than "for good cause" or a constructive termination of employment, and
(ii) thirty days after a termination "for good cause" (as defined in the
agreement).
If we terminate or constructively terminate Mr. Sanders' employment other
than "for good cause," Mr. Sanders will receive his salary and bonus for the
remaining term of the agreement and all of his unvested options will vest. Mr.
Sanders will receive a portion of these benefits if his employment terminates
by reason of death or disability.
13
If Mr. Sanders' employment terminates following a change in control (as
defined in the agreement and described on p. 16, below), he will receive:
. The greater of the salary payable for the remaining term of the agreement
or three times his current base salary,
. A bonus payment equal to the greater of the average of the two highest
annual bonuses paid during the past five years or the formula bonus
amounts for the year in which the termination occurred and the following
year, plus any amounts carried-over from previous years,
. Vesting of all stock-based awards, and
. An additional payment to reimburse him for federal excise taxes (and taxes
on those taxes).
Under the 2000 agreement, we accrued $400,000 per year (with 9% interest) in
deferred retirement compensation, which was payable to Mr. Sanders as of
September 12, 2001. This $2 million (plus interest) together with the deferred
cost of living adjustments on his salary will be paid to Mr. Sanders in a
manner that ensures that it is deductible under Section 162(m) of the Internal
Revenue Code. Following the termination or constructive termination of Mr.
Sanders' employment by us other than for good cause, or upon a change in
control, retirement deferrals will accelerate. Mr. Sanders will be entitled to
health benefits for his life (and the life of his wife and until his children
reach age 21, together with any necessary tax gross-up), following his
termination by us, his retirement or his death or disability. Mr. Sanders will
then be entitled to the use of a comparable office and secretarial services, an
automobile and security driver, up to $25,000 each year for financial and
estate planning services and continued access to our facilities and services,
including our aircraft (subject to the approval of our chief executive
officer), until December 31, 2008.
President and Chief Executive Officer's Employment Agreement. Effective
January 31, 2002 (the Effective Date), we entered into an employment agreement
with Dr. Ruiz that provides for his tenure as Chief Executive Officer and also,
initially, President, through April 26, 2007, subject to automatic renewal for
one year periods unless we notify Dr. Ruiz that it will not renew. This
employment agreement supersedes our former agreement with Dr. Ruiz relating to
his employment as President and Chief Operating Officer. The agreement provides
for an initial annual base compensation to Dr. Ruiz of $950,000. The agreement
also provides for an annual incentive bonus equal to 0.4% of our adjusted
operating profits (as defined in the agreement) in excess of 20% of adjusted
operating profits for the preceding year. The annual bonus payment is capped at
$5 million with any excess carried over for three years. Dr. Ruiz is also
eligible to receive discretionary bonuses, in amounts determined by the
Compensation Committee, and participate in our other benefit plans.
Dr. Ruiz will be reimbursed by us for any income taxes payable to the State
of California in connection with income attributable to payments or benefits
under the agreement and the exercise of any stock option granted by us. In
addition, we will reimburse Dr. Ruiz for any federal and state income taxes
payable with respect to this reimbursement. Total payments made will not exceed
$400,000 per year (or $800,000 per year in the case of termination without
cause (or constructive termination) in connection with a change in control).
Any unused amount will be carried forward and added to the availability of tax
reimbursements, if any, for any of the next three years.
Under the employment agreement, we granted Dr. Ruiz an option to purchase
600,000 shares of our common stock with an exercise price equal to the fair
market value on the date of grant ($16.05) which will vest as to 100,000 shares
on October 15, 2002, 150,000 shares on October 15, 2003 and 2004, 100,000
shares on October 15, 2005 and 50,000 shares on June 19, 2006 and October 15,
2006. Additionally, we granted Dr. Ruiz an option to purchase 600,000 shares of
our common stock with an exercise price equal to the fair market value on the
date of grant ($16.05) which will vest upon attainment of certain
performance-based criteria, provided that, if the performance-based criteria
are not satisfied, these options will vest as to 300,000 shares on October 31,
2007 and on October 31, 2008. Options granted under this agreement are New
Options. If vested, the New Options and all other options held by Dr. Ruiz with
an exercise price on the Effective Date of the agreement
14
equal to or greater than the fair market value of our common stock on the
Effective Date (the Prior Options) may be exercised after termination of
employment for a period of: (i) five years in the case of a termination for
death or disability, retirement, termination without cause or constructive
termination on or following a change in control, and (ii) two years in the case
of a constructive termination or a termination without cause prior to a change
in control.
If we terminate Dr. Ruiz without cause (or constructively terminate Dr.
Ruiz) prior to a change in control, generally Dr. Ruiz will receive his annual
base salary and prorated annual bonus through the date of termination and an
amount equal to the sum of two times his annual base salary plus his highest
bonus during the last three years. Dr. Ruiz will receive any bonus amounts
carried forward from the previous three years. Dr. Ruiz, his spouse and any
eligible dependents will be provided with health benefits for twenty-four (24)
months. Dr. Ruiz also will be entitled to the California tax reimbursement. In
addition, all of Dr. Ruiz' New Options and Prior Options will vest and become
fully exercisable and all restrictions on any other awards granted after the
Effective Date (the New Awards) will lapse and such awards will become
nonforfeitable. Dr. Ruiz will be entitled to an accrued a "Retirement Benefit"
which will be equal to (A) a service-related percentage (the Accrual
Percentage) of the average of Dr. Ruiz' annual base salary for the three (3)
years in which such amount was highest within the last ten (10) years of
Dr. Ruiz' employment with us less (B) benefits payable to Dr. Ruiz pursuant to
any retirement plan we adopt in which Dr. Ruiz participates. The Retirement
Benefit Accrual Percentage is four percent (4%) for each of the first ten full
years of service with us.
If we terminate Dr. Ruiz without cause (or constructively terminate Dr.
Ruiz) on or following a change in control, Dr. Ruiz will receive payment in an
amount equal to the sum of three times his annual base salary plus his highest
bonus during the last three years. Dr. Ruiz will receive any bonus amounts
carried forward from the previous three years. We will provide health benefits
for the life of Dr. Ruiz and his spouse. Dr. Ruiz will be entitled to the
California tax reimbursement. In addition, all of Dr. Ruiz' unvested options
will vest and become fully exercisable and all restrictions on any other awards
will lapse and such awards will become nonforfeitable. Dr. Ruiz also will be
entitled to the accrued Retirement Benefit and will be credited with additional
service through April 26, 2007, or two additional years of service credit, if
more. Dr. Ruiz will also receive an additional payment to reimburse him for
federal excise taxes (and taxes on those taxes, if any are payable).
If we do not renew Dr. Ruiz' employment agreement after expiration of its
initial five year term or at the end of any one-year renewal term, generally
Dr. Ruiz will receive his annual base salary and prorated annual bonus through
the date of termination and, additionally, an amount equal to the sum of two
times his annual base salary. Dr. Ruiz will receive any bonus amounts carried
forward from the previous three years. Dr. Ruiz, his spouse and any eligible
dependents will be provided with health benefits for twenty-four (24) months.
Dr. Ruiz will be entitled to the California tax reimbursement. In addition, all
of Dr. Ruiz' unvested New Options, Prior Options and New Awards will vest. Dr.
Ruiz will be entitled to the accrued Retirement Benefit.
In the event of Dr. Ruiz' retirement, Dr. Ruiz will receive the accrued
Retirement Benefit. We will provide health benefits for the life of Dr. Ruiz
and his spouse. Dr. Ruiz will be entitled to the California tax reimbursement.
In addition, all of Dr. Ruiz' unvested New Options, Prior Options and New
Awards will vest.
In the event Dr. Ruiz' employment is terminated due to his death or
disability, Dr. Ruiz or his beneficiary will be entitled to the accrued
Retirement Benefit. We will provide health benefits for the life of Dr. Ruiz
and his spouse. Dr. Ruiz will be entitled to the California tax reimbursement.
In addition, all of Dr. Ruiz' unvested New Options, Prior Options and New
Awards that would have become vested within twenty-four (24) months of the date
of Dr. Ruiz' employment shall vest and become fully exercisable.
15
Change in Control Arrangements
Management Continuity Agreements. We have entered into management
continuity agreements with each of our executive officers, except Mr. Sanders
and Dr. Ruiz, designed to ensure their continued services in the event of a
change in control. Mr. Sanders' and Dr. Ruiz' employment agreements address a
change in control. Mr. Sanders' and Dr. Ruiz' employment agreements are
discussed above in the section entitled, "Employment Agreements," beginning on
p. 13.
For purposes of Mr. Sanders' and Dr. Ruiz' employment agreements and the
management continuity 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, as amended. A change in control is conclusively presumed to have occurred
on:
. Acquisition by any person, other than AMD, or any employee benefit plan of
ours, of beneficial ownership of more than 20% (35% in the case of Mr.
Sanders' employment agreement and in the case of Mr. Herb's management
continuity agreement) of the combined voting power of our then outstanding
securities. In Dr. Ruiz' employment agreement, the 20% threshold excludes
securities acquired directly from AMD. Dr. Ruiz' agreement also includes a
35% threshold as an additional presumed change of control event.
. A change of the majority of the Board of Directors during any two
consecutive years, unless certain conditions of Board approval are met.
. A determination by certain members of the Board of Directors within one
year after an event that such event constitutes a change in control.
The management continuity agreements provide that, in the event of a change
in control, we will reimburse the executive officer for any federal excise
taxes (and taxes on those taxes) payable as a result of benefits received from
us. The management continuity agreements provide that, if within two years
after a change in control the executive officer's employment is terminated by
us or the executive officer is constructively discharged, the executive officer
will receive:
. 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,
. Payment of his accrued bonus,
. Twelve months' continuation of other incidental benefits, and
. Full and immediate vesting of all unvested stock options, SARs and
restricted stock awards.
Mr. Herb's management continuity agreement provides that he will receive
these benefits upon termination of his employment by him or us following a
change in control.
Vesting of Stock Options. All stock options granted and restricted stock
awarded under our stock incentive plans become fully vested on termination of
employment (other than for misconduct) or constructive termination within one
year following a change in control, as defined in the plans.
16
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Roby, director, is the Chairman Emeritus and Senior Advisor of the
Executive Board of Credit Suisse First Boston (CSFB). In 2002, CSFB provided
investment banking services to us.
In June 2001, we loaned two million dollars ($2,000,000) to Dr. Ruiz
pursuant to a promissory note secured by a deed of trust on real property. The
loan bears interest at 5.02% and is payable in full in June 2006. The largest
amount owed by Dr. Ruiz during 2001 was $2,052,383.
Notwithstanding anything to the contrary set forth in any of our 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 reports and
the Performance Graph on page 22 will not be incorporated by reference into any
such filings, nor will 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 2001, the Compensation Committee of AMD's Board of Directors
consisted of Mr. Blalack, as Chair, Dr. Brown and Dr. Silverman. The members of
the Compensation Committee are independent non-employee, non-affiliated
directors.
The Committee has overall responsibility for AMD's executive compensation
policies and practices. The Committee's functions include:
. Determining the compensation of the Chief Executive Officer of AMD,
. 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 and the Senior Vice President, Human Resources of AMD, and
. Granting awards to executive officers and, depending on the size of the
award, to other employees under AMD's equity incentive plans.
Certain officers of AMD, outside counsel and consultants typically attend
meetings of the Committee. No officer of AMD is present during discussions or
deliberations regarding that officer's own compensation. The Committee
administers AMD's 2000 Stock Incentive Plan, 1998 Stock Incentive Plan, 1996
Executive Incentive Plan, 1996 Stock Incentive Plan, and 1995 Stock Plan of
NexGen, Inc.
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. Our 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
our stockholders. Our 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 other
equity incentives.
17
When establishing salaries, bonus levels, and stock or equity awards for
executive officers, the Committee considers the individual's role, leadership
responsibilities and performance during the past year, and the amount of
compensation paid to executive officers in similar positions at companies that
compete with us for executives. The Committee has retained an outside
compensation consultant to make periodic reviews of competitive data obtained
from other independent consultants. The Committee's determinations take into
account our outside compensation consultant's reviews and the compensation
practices of those high technology companies that compete with us for executive
talent and have annual revenues generally in excess of $1 billion. Most of
these companies are included in the SP Information Tech Index used in the
performance graph appearing in this proxy statement.
Because we want to attract and retain top-caliber employees, we typically
set base salary targets at or above the average 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 us for executives, not all of which may 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
SP 500 Information Tech Index because we compete with them for executives,
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 in years in which we achieve superior results, and
with compensation below the average of amounts paid to similar executives in
years in which we fail to achieve superior results. However, the Committee also
makes discretionary and subjective determinations of appropriate compensation
amounts to reflect, for example, our 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 2001
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 continuation of our long-term profit performance.
Base Salary. The Company entered into an amended and restated agreement
with Mr. Sanders effective November 3, 2000. Under the 2000 agreement, Mr.
Sanders received a 5.4% increase to his base salary of $1 million as a cost of
living adjustment in 2001. This 5.4% will be deferred. The 2000 agreement is
discussed in detail above in the section entitled, "Employment Agreements" on
p. 13.
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, he considers
individual and corporate performance, levels of responsibility and competitive
pay practices. These factors vary from individual to individual, and the Chief
Executive Officer does not assign relative weight or priority to any one factor.
Annual Cash Bonus Incentives. Annual cash bonus incentives allow us to
communicate key corporate goals to all employees and reward employees for
achieving those goals each fiscal year. As one example of these incentives, we
allocate up to 10% of operating profits to a worldwide profit sharing program
in which all employees participated. Generally, we pay a portion of this
allocation in cash and contribute a portion to a tax-qualified deferred profit
sharing plan for U.S. employees.
All senior executives with titles of vice president and above, other than
Mr. Sanders and Dr. Ruiz, were eligible in 2001 for formula-based bonus awards
under the Vice President Incentive Program, a 1996 Executive
18
Incentive Plan (Incentive Plan) program. The Vice President Incentive Program
has a short-term component and a long-term component. The amount payable under
the short-term component of the Vice President Incentive Program ranges from 0%
to 100% of base salary depending on the executive's level of responsibility.
Under the short-term component, a minimum of 75% of the targeted bonus is based
on the achievement of predetermined corporate operating income and economic
value added improvement goals beyond threshold levels of performance in
combination with the sales and profit success of our product lines. The
remainder of the short-term component is based on the executive's achievement
of various group, division and individual goals developed by the executive's
manager. Bonuses under the long-term component of the Vice President Incentive
Program are based on AMD's three-year average return on equity relative to that
of the S&P 500 Index, and on AMD's three-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, we 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 60% of base salary. During 2001, eligible executives
earned a bonus award that averaged 10.64% of base salary under the Vice
President Incentive Program.
For 2001, Mr. Sanders did not receive a formula-based annual incentive bonus
under the Incentive Plan. Mr. Sanders' annual bonus is capped at $5 million.
Any amount exceeding the cap is carried forward for three years and added to
the bonus for any following year where the annual bonus does not exceed the $5
million cap. Mr. Sanders earned a bonus of $6,186,740 for 2000; therefore, $5
million was paid to him for 2000 and $1,186,740 was paid to him for 2001.
Dr. Ruiz' employment agreement related to his employment as President and
Chief Operating Officer, effective through January 31, 2002, provided for an
annual incentive bonus payable under the Incentive Plan equal to 0.3% of the
Company's adjusted operating profit in excess of 20% of the Company's adjusted
operating profit for the previous year. For 2001, Dr. Ruiz did not receive a
formula-based annual incentive bonus under the Incentive Plan.
Equity Incentive Awards. A fundamental tenet of AMD's compensation policy
is that significant equity participation creates a vital long-term partnership
between executive officers and other stockholders. As of February 25, 2002,
executive officers of AMD owned an aggregate of 337,166 shares of common stock
(including restricted shares) and had the right to acquire an additional
7,046,767 shares of common stock upon the exercise of employee stock options
which are exercisable by April 26, 2002. These interests, exclusive of other
outstanding options, represented in the aggregate 2.16% of AMD's outstanding
capital stock on February 25, 2002. We intend to continue our strategy of
encouraging our executive officers to become stockholders.
The number of shares of common stock subject to option grants or restricted
stock awards is based on AMD's business plans, the executive's level of
corporate responsibility, individual performance, historical award data, and
competitive practices of high technology companies that compete with us for
executives, with annual revenues generally in excess of $1 billion and
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
2001, executive officers received options to purchase a total of 1,700,250
shares of common stock.
AMD entered into Mr. Sanders' 2000 employment agreement as an inducement for
Mr. Sanders to remain as Chairman and Chief Executive Office through the 2002
Annual Stockholders Meeting, and as Chairman through 2003. As discussed in
detail above in the section entitled, "Employment Agreements" on p. 13, the
Committee, which had the responsibility for negotiating the 2000 agreement,
believes Mr. Sanders is uniquely qualified to protect and enhance the best
interests of AMD and its stockholders during his transition from the Chairman
and Chief Executive Officer position to Chairman. The Committee believed that
entering into the 2000
19
agreement and providing an additional equity incentive to Mr. Sanders would be
of great value to AMD and its stockholders.
AMD awarded Dr. Ruiz options for 1,200,000 shares at $16.05 per share, the
fair market value on the date of grant as an incentive for Dr. Ruiz to enter
into his 2002 employment agreement. These options vest 100,000 shares on
October 15, 2002, 150,000 shares on October 15, 2003 and 2004, 100,000 shares
on October 15, 2005 and 50,000 shares on June 19, 2006 and October 15,
2006--provided Dr. Ruiz is providing services to AMD on the vesting date. The
remaining 600,000 shares vest upon attainment of performance-based criteria,
or, if not attained, 300,000 shares on October 31, 2007 and October 31, 2008.
Before deciding to grant these options to Dr. Ruiz, the Committee consulted
all other members of the Board of Directors, members of senior management, our
independent compensation consultant and our independent legal counsel. In its
deliberations, the Committee considered the succession plan for the CEO and
other members of senior management, AMD's long-term strategic plan, and the
desire to secure Dr. Ruiz' active leadership through 2007 and beyond.
Tax Policy. Section 162(m) of the Internal Revenue 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. AMD 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, a portion of the
options granted to Mr. Sanders discussed above and certain compensation paid by
AMD in the future may not be fully 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 and policies described above, a significant portion of AMD'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 AMD. The Committee remains committed to this policy, recognizing the
competitive market for talented executives and that the cyclical nature of
AMD's business may result in highly variable compensation for a particular time
period. The Committee believes that long-term stockholder value was enhanced by
the corporate and individual performance achievements of AMD's executives.
COMPENSATION COMMITTEE
Charles M. Blalack
R. Gene Brown
Leonard M. Silverman
20
BOARD AUDIT COMMITTEE REPORT
The Board has appointed an Audit Committee consisting of three directors.
Each of the members of the Audit Committee is "independent" as defined under
the New York Stock Exchange's listing standards and is financially literate as
that qualification is interpreted by the Board. In addition, at least one
member of the Audit Committee has accounting or related financial management
expertise, as the Board interprets that qualification. The Board has adopted a
written charter, which was amended on August 16, 2001, with respect to the
Audit Committee's roles and responsibilities. A copy of the amended charter is
attached as Exhibit A to this proxy statement.
The Audit Committee oversees AMD's internal and independent auditors and
assists the Board in fulfilling its oversight responsibilities on matters
relating to accounting, financial reporting, internal controls and auditing by
meeting regularly with the independent auditors, internal auditing and
financial management personnel. Management is responsible for preparing the
Company's financial statements. The independent auditors are responsible for
expressing an opinion on conformity of the Company's audited financial
statements to generally accepted accounting principles.
In fulfilling its oversight responsibilities, the Audit Committee reviewed
and discussed the Company's financial statements for the fiscal year ended
December 30, 2001 with AMD management and Ernst & Young LLP, our independent
auditors. The Audit Committee also discussed with Ernst & Young LLP the matters
required to be discussed by Statement on Auditing Standards No. 61
(Communications with Audit Committees, as amended by Statement on Auditing
Standards No. 90 (Audit Committee Communications)). This included a discussion
of the independent auditors' judgments as to the quality, not just the
acceptability, of the Company's accounting principles, and such other matters
that generally accepted auditing standards require to be discussed with the
Audit Committee. The Audit Committee also received the written disclosures and
the letter from Ernst & Young LLP required by Independence Standards Board
Standard No. 1 (Independence Discussion with Audit Committees) and the Audit
Committee discussed the independence of Ernst & Young LLP with that firm.
Based on the Audit Committee's review and discussions noted above, the Audit
Committee recommended to the Board, and the Board approved, the audited
financial statements be included in the Company's Annual Report on Form 10-K
for the fiscal year ended December 30, 2001 for filing with the Securities and
Exchange Commission.
The Audit Committee and the Board also have recommended, subject to
stockholder approval, the selection of Ernst & Young LLP as AMD's independent
auditors for fiscal 2002.
AUDIT COMMITTEE
R. Gene Brown
Charles M. Blalack
Robert B. Palmer
21
PERFORMANCE GRAPH
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
ADVANCED MICRO DEVICES, S&P 500 INDEX AND
SP 500 INFORMATION TECH INDEX
The following graph shows a five-year comparison of cumulative total return
on our common stock, the S&P 500 Index and the SP 500 Information Tech Index
from December 31, 1996 through December 31, 2001. The past performance of our
common stock is no indication of future performance.
[TOTAL SHAREHOLDER RETURNS GRAPH]
This graph was plotted using the following data:
Year ending December 31,
--------------------------------------------
1996 1997 1998 1999 2000 2001
---- ------- ------- ------- ------- -------
AMD.......................... $100 $ 68.93 $112.62 $112.38 $107.28 $123.18
S&P 500 Index................ $100 $133.36 $171.48 $207.56 $188.66 $166.24
SP 500 Information Tech/(1)/. $100 $128.54 $228.97 $409.24 $241.87 $179.29
--------
(1) The SP 500 Information Technology Index is the corresponding index to the
Technology-500 Index following Standard & Poors index reclassification.
22
ITEM 2--RATIFICATION OF INDEPENDENT AUDITORS
Unless you indicate otherwise, your proxy will vote FOR the ratification of
the appointment of Ernst & Young LLP as our independent auditors for the
current year. Ernst & Young LLP has been our independent auditors since our
incorporation in 1969.
The Audit Committee meets with Ernst & Young LLP several times a year. 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 and will have an opportunity to make a statement if he or she so
desires. He or she will also be available to respond to appropriate questions
from stockholders.
Audit Fees
Audit services of Ernst & Young LLP during the 2001 fiscal year included the
examination of our consolidated financial statements and services related to
filings with the Securities and Exchange Commission (SEC) and other regulatory
bodies. Fees for the 2001 annual audit were $1.3 million.
All Other Fees
All other fees were $0.9 million, including audit related services of $0.7
million and non-audit services of $0.2 million. Audit related services
generally include fees for statutory audits, accounting consultations, employee
benefit plan audits and assistance with registration statement filings with the
SEC. Non-audit services are comprised of tax consultation services.
Your Board of Directors unanimously recommends that you vote "FOR" the
ratification of the appointment of Ernst & Young LLP as our independent
auditors for the current year. Unless you indicate otherwise, your proxy will
vote "FOR" ratification.
ITEM 3--APPROVAL OF AMENDMENTS TO THE ADVANCED MICRO DEVICES, INC. 1996 STOCK
INCENTIVE PLAN
Our stockholders are also being asked to approve amendments to the Advanced
Micro Devices, Inc. 1996 Stock Incentive Plan (the 1996 Plan) to (i) increase
the number of stock options awarded to non-employee members of the Board of
Directors (Outside Directors) and (ii) to change the aggregate number of shares
that any participant is eligible to receive in any calendar year as option
grants under the 1996 Plan.
These amendments will increase the total number of shares granted upon
initial election of an Outside Director to the Board (the First Option) from
30,000 to 50,000, to be granted as follows:
Number
Grant Date of Shares Vesting
---------- --------- -------
April 30, year of first election... 12,500 4,166--April 30, year following grant; balance--monthly over the next two years
July 31, year of first election.... 12,500 4,166--April 30, year following grant; balance--monthly over the next two years
October 31, year of first election. 12,500 4,166--April 30, year following grant; balance--monthly over the next two years
December 15, year of first election 12,500 4,166--April 30, year following grant; balance--monthly over the next two years
23
This amendment will also increase the total number of shares granted
automatically to Outside Directors upon re-election to the Board (the Annual
Option) from a total of 12,000 options to 25,000 options to be granted as
follows:
Number
Grant Date of Shares Vesting
---------- --------- -------
April 30, year of re-election... 6,250 2,083--April 30, year following grant; balance--monthly over the next two years
July 31, year of re-election.... 6,250 2,083--April 30, year following grant; balance--monthly over the next two years
October 31, year of re-election. 6,250 2,083--April 30, year following grant; balance--monthly over the next two years
December 15, year of re-election 6,250 2,083--April 30, year following grant; balance--monthly over the next two years
These amendments will also provide that no participant will be eligible to
receive more than 2,000,000 shares in any calendar year pursuant to options
granted under the 1996 Plan, other than our new employees or affiliates
(including new employees who are also our officers, directors or affiliates),
who are eligible to receive up to a maximum of 3,000,000 shares in the calendar
year in which they begin their employment. The amendment provides that this
limit will automatically be adjusted to take account of stock splits, stock
dividends and corporate transactions. Before this amendment, the 1996 Plan
provided that the number of shares which would be granted to any individual
could not exceed 4,000,000 shares over the full ten-year life of the 1996 Plan.
The purpose of the 1996 Plan is to enable us to recruit and retain capable
employees, consultants and directors for the successful conduct of our 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 our successful operation and management. The 1996 Plan is
intended to enable us to attract qualified personnel in a highly competitive
labor market. We intend future increases in the value of securities granted
under the 1996 Plan to form part of the compensation for services to be
rendered by these persons in the future.
The stockholders approved the 1996 Plan on April 24, 1996 with an effective
date of February 7, 1996. Our Board of Directors approved amendments to the
1996 Plan in October 1996, April 1998, March 2000 and March 2001. The
stockholders approved these amendments on April 24, 1997, April 30, 1998, April
27, 2000 and April 26, 2001. Our Board of Directors approved the proposed
amendments to the 1996 Plan on January 31, 2002, to be voted on at the 2002
Annual Meeting of Stockholders. A summary of the 1996 Plan follows.
Summary Description of the 1996 Plan
Number of shares subject to the 1996 Plan. The 1996 Plan reserves for
issuance up to 42,900,000 shares of AMD common stock pursuant to the exercise
of options granted under the plan. The number of shares is subject to
adjustment for any future stock dividends, splits, mergers, combinations, or
other changes in capitalization as described in the 1996 Plan. The closing
price of our common stock on the New York Stock Exchange on February 25, 2002
was $13.57 per share.
Administration and Duration of the 1996 Plan. Authority to administer the
1996 Plan and to grant awards rests with the Board of Directors. The Board has
delegated its authority to grant awards to any employee (including officers who
are members of the Board) to the Compensation Committee. The Board has also
delegated authority to senior management to grant awards up to 50,000 shares
per year to any employee who is not also an officer or member of the Board.
The 1996 Plan will terminate on February 7, 2006, but the Board retains the
right to suspend, terminate or amend the 1996 Plan at any time. On termination
of the 1996 Plan, outstanding awards remain in effect until they expire by
their terms, are forfeited or otherwise terminate.
Eligibility for Participation. Options may be granted under the 1996 Plan
to our key full- or part-time employees, officers, consultants and advisors. As
of February 25, 2002, approximately 4,100 persons were eligible to receive
options under the 1996 Plan. 7,450,134 shares had been issued upon the exercise
of options
24
under the 1996 Plan, and 29,084,962 shares were subject to outstanding options
under the 1996 Plan. As of February 25, 2002, 6,364,904 shares were available
for future option grants under the 1996 Plan.
Over the term of the 1996 Plan through February 25, 2002, the following
executive officers have been granted the following options to purchase shares
under the 1996 Plan: Mr. Sanders, 4,000,000 shares; Dr. Ruiz, 3,200,000 shares;
Mr. Herb, 724,000 shares; Dr. Siegle, 577,500 shares; and Mr. McCoy, 850,000
shares. During this period, our executive officers as a group have been granted
options to purchase an aggregate of 11,887,250 shares, and all employees as a
group (excluding executive officers) have been granted options to purchase an
aggregate of 34,017,562 shares under the 1996 Plan. During this period, our
current directors as a group (excluding executive officers) have been granted
options to purchase 342,000 shares under the 1996 Plan.
Terms of Options. Options granted to employees may be either incentive
stock options (ISOs) which satisfy the requirements of Code Section 422 or
nonstatutory options (NSOs) which are not intended to satisfy such
requirements. Options granted to Outside Directors, consultants and advisors
may only be NSOs.
The exercise price of options granted under the 1996 Plan may not be less
than the fair market value of our common stock on the date of grant. Payment of
the exercise price may be made in cash, by certified check, promissory note,
other shares of our 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. We did not grant any ISOs in 2001.
Options granted to employees generally are made exercisable in one
installment of 25 percent and monthly for the three years thereafter, although
the actual date of exercise may be modified by the Board or its delegate so
long as the option holder's interest is not diminished without his/her consent.
Options may be made exercisable only under the conditions of 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, the 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 depending on
employee's age and length of employment with us or a longer period may 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 its term. An option may
be exercised by the optionee or his/her guardian or legal representative.
Outside Director Option Program. If these amendments are approved by
stockholders, an Outside Director who has not previously been elected or
appointed as a member of the Board will be granted a First Option as follows:
Number
Grant Date of Shares Vesting
---------- --------- -------
April 30, year of first election... 12,500 4,166--April 30, year following grant; balance--monthly over the next two years
July 31, year of first election.... 12,500 4,166--April 30, year following grant; balance--monthly over the next two years
October 31, year of first election. 12,500 4,166--April 30, year following grant; balance--monthly over the next two years
December 15, year of first election 12,500 4,166--April 30, year following grant; balance--monthly over the next two years
Upon re-election to the Board, an Outside Director will automatically be
granted an Annual Option as follows:
Number
Grant Date of Shares Vesting
---------- --------- -------
April 30, year of re-election... 6,250 2,083--April 30, year following grant; balance--monthly over the next two years
July 31, year of re-election.... 6,250 2,083--April 30, year following grant; balance--monthly over the next two years
October 31, year of re-election. 6,250 2,083--April 30, year following grant; balance--monthly over the next two years
December 15, year of re-election 6,250 2,083--April 30, year following grant; balance--monthly over the next two years
25
These new options may be exercised for up to two years following termination of
their service on the Board to the extent the options are vested on the date of
termination. Options which are not vested on the date of termination are
canceled. Options held by Outside Directors will become fully vested for
exercise upon a change of control. See the section entitled, "Acceleration in
Connection with a Change of Control" below.
Acceleration in Connection with a Change of Control. If a participant's
employment is terminated for any reason other than for cause (or, with respect
to certain participants who are executive officers as defined in the 1996 Plan,
there is a constructive termination of their employment) within one year after
a change of control, all options held by that 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 our 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 we are not the surviving entity, or a liquidation of the
Company or sale of substantially all of our assets. The 1996 Plan change of
control provisions are not applicable to options granted to Mr. Sanders or Dr.
Ruiz.
Plan Benefits Table. The following table shows in the aggregate the Annual
Options that will be granted to Outside Directors under the 1996 Plan in 2002,
if these amendments are approved by the stockholders. Since all current Outside
Directors are incumbent directors, no Outside Director who is elected at the
2002 Annual Meeting of Stockholders will receive a First Option. Because future
awards to our executive officers and employees are discretionary and cannot be
determined at this time, the table does not reflect any of those awards.
Number
Name and Position Exercise Price (Per Share) of Shares
----------------- -------------------------- ---------
All current directors who are not Fair market value on date of grant 150,000
executive officers as a group (6
persons)
Federal Tax Consequences-Nonstatuatory 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 us withhold shares from the shares otherwise due
or by delivering a sufficient number of previously owned shares of our common
stock to us. 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 shares are otherwise disposed of or sold.
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 before the sale or other disposition of the
shares, then a disqualifying disposition will result.
Upon a qualifying disposition of the shares, the optionee will recognize
long-term capital gain in an amount equal to the excess of (i) the amount
realized upon the sale or other disposition over (ii) the option price paid for
the shares. If there is a disqualifying disposition of the shares, then the
excess of (i) the fair market value of the shares on the later of the date of
vesting or the date of exercise (or, if lower, the fair market value of the
shares on
26
the date of disposition) over (ii) the option price paid will be taxable as
ordinary income. Any additional gain recognized upon the disposition will be a
capital gain, and that gain will be short-term if the shares have been held for
one year or less following exercise of the option and long-term if the shares
have been held for more than one year following exercise of the option.
Alternative Minimum Tax. The difference between the fair market value of
shares subject to an ISO on the date of exercise and the exercise price of the
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 ISO on the date of exercise and
the exercise price) and reducing this amount by the applicable exemption amount
($49,000 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 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 the shares.
Deduction to the Company. We 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 our
taxable year in which occurs the last day of the calendar year in which the
optionee recognizes ordinary income in connection with the exercise.
If the optionee makes a disqualifying disposition of the shares purchased on
exercise of an ISO, then we will be entitled to an income tax deduction for the
taxable year in which the disposition occurs, equal to the amount which is
taxable to the employee as ordinary income. In no other instance will we be
allowed a deduction with respect to the optionee's disposition of the shares
purchased upon exercise of an ISO.
2000 Stock Incentive Plan. In October 2001, upon the recommendation of the
Compensation Committee, the Board of Directors authorized options for an
additional fourteen million shares to be granted at fair market value on the
date of grant pursuant to the Advanced Micro Devices, Inc. 2000 Stock Incentive
Plan (the 2000 Plan). Officers and directors are not eligible under the 2000
Plan to receive more than 45 percent of all options granted under the 2000
Plan, and employees who are not officers and directors must receive more than
50 percent of the shares available for grant under the 2000 Plan. As of
February 25, 2002, 12,286,831 options were granted under the 2000 Plan, 2.04
percent of which were granted to our corporate officers. No options have been
granted under the 2000 Plan to outside directors.
Your Board of Directors unanimously recommends that you vote "FOR" approval
of the amendments to the 1996 Plan. Unless you indicate otherwise, your proxy
will vote "FOR" approval.
ANNUAL REPORT AND FINANCIAL STATEMENTS
Our 2001 Annual Report, which includes our audited financial statements for
the fiscal year ended December 30, 2001, has accompanied or preceded this proxy
statement. We will provide, without charge, upon your written request, a copy
of our most recent Annual Report on Form 10-K, as filed with the Securities and
Exchange Commission. Requests should be directed to our Corporate Secretary at
Advanced Micro Devices, Inc., One AMD Place, P.O. Box 3453, Sunnyvale,
California 94088-3453.
AMD, the AMD Arrow logo and combinations thereof and Advanced Micro Devices
are either registered trademarks or trademarks of Advanced Micro Devices, Inc.
27
EXHIBIT A
Advanced Micro Devices, Inc.
Audit Committee of the Board of Directors
Charter
The Audit Committee of the Board of Directors assists the Board in
fulfilling its responsibilities to the shareholders and the investment
community relating to overseeing and monitoring the integrity of the corporate
accounting, auditing and reporting practices of the Company. The Audit
Committee shall be composed of at least three directors all of whom are
financially literate (generally knowledgeable in financial and auditing
matters), and at least one of whom has accounting or related financial
management expertise. Members of the Audit Committee shall be free of any
relationship to the Company that may interfere with the exercise of their
independent judgement. The Audit Committee is expected to maintain free and
open communication with the independent auditors, internal auditors and the
management of the Company. The Audit Committee will investigate any matter
brought to its attention within the scope of its duties, with the power to
retain outside counsel or other experts for this purpose. The Committee's
activities shall have a Chairperson, and shall meet at least four times
annually. This charter will be reviewed and reassessed annually.
Responsibilities
The Audit Committee's responsibilities include:
. Reviewing and recommending to the Board the selection and retention of the
independent auditors that audit the financial statements of the Company.
The Committee will ensure that the independent auditors have a clear
understanding that they are ultimately accountable to the Board and the
Committee. The Committee will review the independent auditor's written
communication delineating their relationships and professional services
and will take appropriate action to ensure the continuing independence of
the auditors. The Committee will provide the opportunity, at least
annually, for the internal and independent auditors to meet with the
members of the Committee without members of management present.
. Meeting with the independent auditors and financial management of the
Company to review the scope of the proposed audit, timely quarterly
reviews, the audit procedures to be utilized and the adequacy of the
independent auditor's compensation. At the conclusion of the annual audit,
the Committee will review any comments or recommendations of the
independent auditors.
. Reviewing with management and the independent auditors the Company's
interim financial statements before the filing of the Company's quarterly
report on Form 10-Q. Also, the Committee shall discuss the results of the
quarterly review and any other matters required to be communicated by the
independent auditors under generally accepted auditing standards.
. Reviewing with the independent auditors, the Company's internal auditor
and financial and accounting personnel, the adequacy and effectiveness of
the accounting and financial controls of the Company.
. Reviewing and concurring with the appointment, termination or replacement
of the director of internal audit and control, who reports to the Chairman
of the Audit Committee and the Chief Financial Officer. The Committee will
review the internal audit function, including the proposed audit plans and
the coordination of those plans with the independent auditors. The
Committee will review progress reports on and results from internal audit
activities.
. At least annually, submitting a signed report for inclusion in the
Company's proxy materials with respect to the Committee and its
functioning, as required by applicable SEC rules.
. Reviewing reports received from outside auditors under any applicable
auditing standard and reports received from regulators, and other legal
and regulatory matters that may have a material effect on the financial
statements or related Company compliance policies.
1
. Inquiring of management, the internal auditor, and the independent
auditors about significant risks or exposures. The Committee will assess
the steps management has taken to minimize such risks to the Company.
. Reviewing accounting and financial human resources and succession planning
within the Company.
. Reporting on the meetings of the Audit Committee to the full Board of
Directors.
2
AMD-25690A
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
2
on the composite tape on the day as of which such determination is being made
or, if there was no sale of Shares reported on the composite tape on such day,
on the most recently preceding day on which there was such a sale, or (ii) if
the Shares are not listed or admitted to trading on the New York Stock Exchange
on the day as of which the determination is made, the amount determined by the
Board or its delegate to be the fair market value of a Share on such day.
(i) "Insider" The term "Insider" means an officer or director of the
Company or any other person whose transactions in the Company's Common Stock are
subject to Section 16 of the Exchange Act.
(j) "ISO" The term "ISO" shall mean a stock option described in Section
422(b) of the Code.
(k) "NSO" The term "NSO" shall mean a nonstatutory stock option not
described in Section 422(b) of the Code.
(l) "Option" The term "Option" shall mean (except as herein otherwise
provided) a stock option granted under this Plan.
(m) "Outside Director" The term "Outside Director" shall mean a member of
the Board of Directors of the Company who is not also an employee of the Company
or an Affiliate.
(n) "Participant" The term "Participant" shall mean any person who holds an
Option or Restricted Stock Award granted under this Plan.
(o) "Plan" The term "Plan" shall mean this Advanced Micro Devices, Inc.
1996 Stock Incentive Plan, as amended from time to time.
(p) "Shares" The term "Shares" shall mean shares of Common Stock of the
Company and any shares of stock or other securities received as a result of the
adjustments provided for in Section 11 of this Plan.
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
3
Option within which all or portions of each Option may be exercised (which
at the discretion of the Board of its delegate may be accelerated.)
(3) To prescribe the terms and provisions of each Option granted
(which need not be identical) and the form of written instrument that shall
constitute the Option agreement.
(4) To take appropriate action to amend any Option hereunder,
including to amend the vesting schedule of any outstanding Option, or to
cause any Option granted hereunder to cease to be an ISO, provided that no
such action adverse to a Participant's interest may be taken by the Board
or its delegate without the written consent of the affected Participant.
(5) To determine whether and under what circumstances an Option may be
settled in cash or Shares.
(c) The Board or its delegate shall also have the power, subject to and
within the limits of the express provisions of this Plan:
(1) To construe and interpret the Plan and Options granted under the
Plan, and to establish, amend and revoke rules and regulations for
administration of the Plan. The Board or its delegate, in the exercise of
this power, shall generally determine all questions of policy and
expediency that may arise and may correct any defect, omission or
inconsistency in the Plan or in any Option agreement in a manner and to the
extent it shall deem necessary or expedient to make the Plan fully
effective.
(2) Generally, to exercise such powers and to perform such acts as are
deemed necessary or expedient to promote the best interests of the Company.
(d) The Board may, by resolution, delegate administration of the Plan
(including, without limitation, the Board's powers under Sections 3(b) and (c)
above), under either or both of the following:
(1) with respect to the participation of or granting of Options to an
employee, consultant or advisor who is not an Insider, to a committee of
one or more members of the Board, whether or not such members of the Board
are Disinterested Directors;
(2) with respect to matters other than the selection for participation
in the Plan, substantive decisions concerning the timing, pricing, amount
or other material term of an Option, to a committee of one or more members
of the Board, whether or not such members of the Board are Disinterested
Directors, or to one or more Insiders.
(e) Unless each member of the Board is a Disinterested Director, the Board
shall, by resolution, delegate administration of the Plan with respect to the
participation in the Plan of employees who are Insiders, including its powers to
select such employees for participation in the Plan, to make substantive
decisions concerning the timing, pricing, amount or any other material term of
an Option, to a committee of two or more Disinterested Directors who are also
4
"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.
(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 42,900,000 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
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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, however, that no Participant will be eligible
--------
to receive more than 2,000,000 Shares in any calendar year under the Plan
pursuant to the grant of Options hereunder, other than new employees of the
Company or an Affiliate of the Company (including new employees who are also
officers and directors of the Company or an Affiliate of the Company), who are
eligible to receive up to a maximum of 3,000,000 Shares in the calendar year in
which they commence their employment.
5
6. STOCK OPTIONS -- GENERAL PROVISIONS
(a) Except for automatic grants of Options to Outside Directors under
Section 8 hereof, each Option granted pursuant to the Plan may, at the
discretion of the Board, be granted either as an ISO or as an NSO. No Option may
be granted alternatively as an ISO and as an NSO.
(b) To the extent that the aggregate exercise price for ISOs which are
exercisable for the first time by a Participant during any calendar year (under
this Plan or any other plans of the Company or its subsidiaries or parent (as
such terms are defined in Section 424 of the Code) exceeds $100,000, such
Options shall be treated as NSOs.
(c) No ISO may be granted to a person who, at the time of grant, owns stock
possessing more than 10% of the total combined voting power of the Company or
any of its subsidiaries or parent (as such terms are defined in Section 424 of
the Code) unless the exercise price is at least 110% of the Fair Market Value
per Share of the stock subject to the Option and the term of the Option does not
exceed five (5) years from the date such ISO is granted.
(d) Notwithstanding any other provision in this Plan, no term of this Plan
relating to ISOs will be interpreted, amended or altered, nor will any
discretion or authority granted under this Plan be exercised, so as to
disqualify this Plan under Section 422 of the Code or, without the consent of
the Participant affected, to disqualify an ISO under Section 422 of the Code.
7. TERMS OF OPTION AGREEMENT
Except as otherwise required by the terms of Section 8 hereof, each Option
agreement shall be in such form and shall contain such terms and conditions as
the Board from time to time shall deem appropriate, subject to the following
limitations:
(a) The term of any NSO shall not be greater than ten (10) years and one
day from the date it was granted. The term of any ISO shall not be greater than
ten (10) years from the date it was granted.
(b) The exercise price of each ISO shall be not less than the Fair Market
Value per Share of the stock subject to the Option on the date the Option is
granted. NSOs may be granted at an exercise price that is not less than Fair
Market Value per Share of the Shares at the time an NSO is granted.
(c) Unless otherwise specified in the Option agreement, no Option shall be
transferable otherwise than by will, pursuant to the laws of descent and
distribution or pursuant to a qualified domestic relations order as defined by
the Code or Title I of the Employee Retirement Income Security Act, or the rules
thereunder, or as otherwise permitted by regulations and interpretations under
Section 16 of the Exchange Act.
(d) Except as otherwise provided in paragraph (e) of this Section 7 or in a
Participant's employment agreement, the rights of a Participant (other than an
Outside Director) to exercise an Option shall be limited as follows:
6
(1) DEATH OR DISABILITY: If a Participant's service is terminated by
death or disability, then the Participant or the Participant's estate, or
such other person as may hold the Option, as the case may be, shall have
the right for a period of twelve (12) months following the date of death or
disability, or for such other period as the Board may fix, to exercise the
Option to the extent the Participant was entitled to exercise such Option
on the date of his death or disability, or to such extent as may otherwise
be specified by the Board (which may so specify after the date of his death
or disability but before expiration of the Option), provided the actual
date of exercise is in no event after the expiration of the term of the
Option. A Participant's estate shall mean his legal representative or any
person who acquires the right to exercise an Option by reason of the
Participant's death or disability.
(2) MISCONDUCT: If a Participant is determined by the Board to have
committed an act of theft, embezzlement, fraud, dishonesty, a breach of
fiduciary duty to the Company (or Affiliate), or deliberate disregard of
the rules of the Company (or Affiliate), or if a Participant makes any
unauthorized disclosure of any of the trade secrets or confidential
information of the Company (or Affiliate), engages in any conduct which
constitutes unfair competition with the Company (or Affiliate), induces any
customer of the Company (or Affiliate) to break any contract with the
Company (or Affiliate), or induces any principal for whom the Company (or
Affiliate) acts as agent to terminate such agency relationship, 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
7
director, employee, consultant or advisor to the Company or an Affiliate;
(ii) sick leave; (iii) military leave; (iv) any other leave of absence
approved by the Board, provided such leave is for a period of not more than
90 days, unless reemployment upon the expiration of such leave is
guaranteed by contract or statute, or unless provided otherwise pursuant to
formal policy adopted from time to time by the Company and issued and
promulgated to employees in writing; or (v) in the case of transfer between
locations of the Company or between the Company or its Affiliates. In the
case of any employee on an approved leave of absence, the Board may make
such provisions respecting suspension of vesting of the Option while on
leave from the employ of the Company or an Affiliate as it may deem
appropriate, except that in no event shall an Option be exercised after the
expiration of the term set forth in the Option.
(e) 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 therefore; provided that any such
--------
action may not, without the written consent of a Participant, impair any such
Participant's rights under any Option previously granted.
8. AUTOMATIC GRANTS TO OUTSIDE DIRECTORS
(a) Each Outside Director shall be granted an Option to purchase 12,500
Shares under the Plan (the "First Option") on April 30, July 31, October 31 and
December 15 or the first business day following such date, in the year that 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 April 30, July 31, October
31 and December 15 or the first business day following such date, each Outside
Director reported as being elected at the annual meeting of the Company's
stockholders shall be granted an additional Option to purchase 6,250 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.
8
All Options granted to Outside Directors shall be subject to the following terms
and conditions of this Section 8.
(b) All Options granted to Outside Directors pursuant to the Plan shall be
NSOs.
(c) The consideration to be paid for the Shares to be issued upon exercise
of an Option, including the method of payment, may consist entirely of (i) cash,
(ii) certified or cashier's check, (iii) other Shares which (x) either have been
owned by the Participant for more than six months on the date of surrender or
were not acquired, directly or indirectly, from the Company, and (y) have a Fair
Market Value per Share on the date of surrender equal to the aggregate exercise
price of the Shares as to which said Option shall be exercised, (iv) delivery of
a properly executed exercise notice together with irrevocable instructions to a
broker to promptly deliver to the Company the amount of sale or loan proceeds
required to pay the exercise price, or (v) any combination of the foregoing
methods of payment.
(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
according to the following schedule: one-third on April 30 of the calendar year
following the date of grant; the remaining two-thirds vest in monthly increments
thereafter, through April 30 of the third calendar year following the date of
grant. Each Annual Option shall vest and become exercisable according to the
following schedule: one-third on April 30 of the calendar year following the
date of grant; the remaining two-thirds vest in monthly increments thereafter,
through April 30 of the third calendar year 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 twenty-four 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
9. PAYMENTS AND LOANS UPON EXERCISE OF OPTIONS
With respect to Options other than Options granted to Outside Directors
pursuant to Section 8, the following provisions shall apply:
(a) The consideration to be paid for the Shares to be issued upon exercise
of an Option, including the method of payment, shall be determined by the Board
or its delegate (and, in the case of an ISO, shall be determined at the time of
grant) and may consist entirely of (i) cash, (ii) certified or cashier's check,
(iii) promissory note, (iv) other Shares which (x) either have been owned by the
Participant for more than six months on the date of surrender or were not
acquired, directly or indirectly, from the Company, and (y) have a Fair Market
Value per Share on the date of surrender equal to the aggregate exercise price
of the Shares as to which said Option shall be exercised, (v) delivery of a
properly executed exercise notice together with irrevocable instructions to a
broker to promptly deliver to the Company the amount of sale or loan proceeds
required to pay the exercise price, or (vi) any combination of the foregoing
methods of payment. Any promissory note shall be a full recourse promissory note
having such terms as may be approved by the Board and bearing interest at a rate
sufficient to avoid imputation of income under Sections 483, 1274 or 7872 of the
Code; provided that Participants who are not employees or directors of the
--------
Company will not be entitled to purchase Shares with a promissory note unless
the note is adequately secured by collateral other than the Shares; provided
--------
further, that the portion of the exercise price equal to the par value, if any,
-------
of the Shares must be paid in cash;
(b) The Company may make loans or guarantee loans made by an appropriate
financial institution to individual Participants, including Insiders, on such
terms as may be approved by the Board for the purpose of financing the exercise
of Options granted under the Plan and the payment of any taxes that may be due
by reason of such exercise.
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.
10
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. In addition, the Board will make
appropriate adjustment to the Share limitations set forth in Section 5 above.
Outstanding Options shall also be automatically converted as to price and other
terms if necessary to reflect the foregoing events. No right to purchase
fractional Shares shall result from any adjustment in Options pursuant to this
Section 11. In case of any such adjustment, the Shares subject to the Option
shall be rounded down to the nearest whole Share. Notice of any adjustment shall
be given by the Company to each holder of any Option which shall have been so
adjusted and such adjustment (whether or not such notice is given) shall be
effective and binding for all purposes of the Plan.
12. PRIVILEGES OF STOCK OWNERSHIP
No Participant will have any rights of a stockholder with respect to any
Shares until the Shares are issued to the Participant. After Shares are issued
to the Participant, the Participant will be a stockholder and have all the
rights of a stockholder with respect to such Shares, including the right to vote
and receive all dividends or other distributions made or paid with respect to
such Shares.
13. EXCHANGE AND BUYOUT OF AWARDS; RULE 16b-3
The Board or its delegate may, at any time or from time to time, authorize
the Company, with the consent of the respective Participants, to issue new
Options in exchange for the surrender and cancellation of any or all outstanding
Options, except as otherwise provided in Section 7(i) with respect to Insiders.
The Board or its delegate may at any time buy from a Participant an Option
previously granted with payment in cash, Shares or other consideration, based on
such terms and conditions as the Board or its delegate and the Participant may
agree. Grants of Options to Insiders are intended to comply with the applicable
provisions of Rule 16b-3 and such Options shall contain such additional
conditions or restrictions, if any, as may be required by Rule 16b-3 to be in
the written agreement relating to such Options in order to qualify for the
maximum exemption from Section 16 of the Exchange Act with respect to Plan
transactions.
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
11
exercised prior to the initial stockholder approval of this Plan. In the event
that stockholder approval is not obtained within the time period provided
herein, all Options granted hereunder will be canceled. So long as Insiders are
Participants, the Company will comply with the requirements of Rule 16b-3 with
respect to stockholder approval.
15. AMENDMENT OF THE PLAN
(a) The Board at any time, and from time to time, may amend the Plan;
provided that, except as provided in Section 11 (relating to adjustments upon
--------
changes in capitalization), no amendment for which stockholder approval is
required shall be effective unless such approval is obtained within the required
time period. Whether stockholder approval is required shall be determined by the
Board.
(b) It is expressly contemplated that the Board may, without seeking
approval of the Company's stockholders, amend the Plan in any respect necessary
to provide the Company's employees with the maximum benefits provided or to be
provided under Section 422 of the Code or Section 16 of the Exchange Act and the
regulations promulgated thereunder and/or to bring the Plan or Options granted
under it into compliance therewith.
(c) Rights and obligations under any Option granted before any amendment of
the Plan shall not be altered or impaired by amendment of the Plan, except with
the consent of the person who holds the Option, which consent may be obtained in
any manner that the Board or its delegate deems appropriate.
(d) To the extent required by Rule 16b-3, the Board may not amend the
provisions of Section 8 hereof more than once every six months, other than to
comport with changes in the Code, the Employee Retirement Income Security Act,
or the rules thereunder.
16. REGISTRATION, LISTING, QUALIFICATION, APPROVAL OF STOCK AND OPTIONS
An award under this Plan will not be effective unless such award is in
compliance with all applicable federal and state securities laws, rules and
regulations of any governmental body, and the requirements of any stock exchange
or automated quotation system upon which the Shares may then be listed or
quoted, as they are in effect on the date of grant of the award and also on the
date of exercise or other issuance. Notwithstanding any other provision in this
Plan, the Company will have no obligation to issue or deliver certificates for
Shares under this Plan prior to: (a) obtaining any approvals from governmental
agencies that the Company determines are necessary or advisable; and/or (b)
completion of any registration or other qualification of such Shares under any
state or federal law or ruling of any governmental body that the Company
determines to be necessary or advisable. The Company will be under no obligation
to register the Shares with the Securities and Exchange Commission or to effect
compliance with the registration, qualification or listing requirements of any
state securities laws, stock exchange or automated quotation system, and the
Company will have no liability for any inability or failure to do so.
12
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.
13
[LOGO OF AMD]
EQUISERVE
P.O. BOX 43004
PROVIDENCE, RI 02940-3004
VOTE BY INTERNET - www.proxyvote.com
-----------------
Use the Internet to transmit your voting instructions and for electronic
delivery of information up until 11:59 P.M. Eastern Time the day before the
cut-off date or meeting date. Have your proxy card in hand when you access the
web site. You will be prompted to enter your 12-digit Control Number which is
located below to obtain your records and to create an electronic voting
instruction form.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up to 11:59
P.M. Eastern Time the day before the cut-off date or meeting date. Have your
proxy card in hand when you call. You will be prompted to enter your 12-digit
Control Number which is located below and then follow the simple instructions
the Vote Voice provides you.
VOTE BY MAIL
Mark, sign, and date your proxy card and return it in the postage-paid envelope
we have provided or return it to Advanced Micro Devices, c/o ADP, 51 Mercedes
Way, Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
AMCRO1 KEEP THIS PORTION FOR YOUR RECORDS
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DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
________________________________________________________________________________
ADVANCED MICRO DEVICES, INC.
The Board of Directors recommends a vote FOR Items 1, 2 and 3.
Nominees for Directors:
1. 01) W.J. Sanders III,
02) Hector de J. Ruiz,
03) Charles M. Blalack,
04) R. Gene Brown,
05) Robert B. Palmer,
06) Joe L. Roby,
07) Friedrich Baur,
08) Leonard Silverman
For All [_]
Withhold All [_]
For All Except [_]
To withhold authority to vote, mark "For All Except" and write the nominee's
number on the line below.
_____________________________________________
Vote on Proposals
2. Ratification of appointment of independent auditors.
For [_]
Against [_]
Abstain [_]
3. Approval of amendments to the 1996 Stock Incentive Plan.
For [_]
Against [_]
Abstain [_]
Unless otherwise specified, this proxy will be voted FOR the listed nominees for
Directors, FOR Ratification of Ernst & Young LLP as the Company's independent
auditors and FOR Approval of the amendments to the 1996 Stock Incentive Plan.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
POSTAGE PRE-PAID ENVELOPE.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT RIGHT [_]
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 (PLEASE SIGN WITHIN BOX) Date
______________________________________ _________________
______________________________________ _________________
Signature (Joint Owners) Date
________________________________________________________________________________
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 25,
2002, at the St. Regis Hotel at 2 East 55th Street, New York, New York. Detailed
information regarding the business to be transacted at the meeting is contained
in the accompanying Notice of Annual Meeting and Proxy Statement.
Regardless of whether or not you plan to attend the meeting, it is important
that your shares be voted. Accordingly, we ask that you either vote by telephone
------
or by the Internet or sign and return your proxy card as soon as possible in the
-- --
envelope provided.
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________________________________________________________________________________
PROXY
ADVANCED MICRO DEVICES, INC.
Annual Meeting of Stockholders - April 25, 2002
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 Meetings, receipt of
which is hereby acknowledged, and according to their discretion, on all matters
that may be properly presented for action at the Annual Meeting of Stockholders
of Advanced Micro Devices, Inc. to be held on Thursday, April 25, 2002, 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 appointment of independent
auditors and FOR the amendments to the 1996 Stock Incentive Plan, and in the
discretion of the proxyholders, on other matters which may properly be presented
at the meeting. The undersigned may revoke this proxy at any time prior to its
exercise or may attend the meeting and vote in person.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
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SEE REVERSE SIDE SEE REVERSE SIDE
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________________________________________________________________________________