<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 12, 1995
REGISTRATION NO. 33-64911
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
PRE-EFFECTIVE AMENDMENT NO. 1
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
ADVANCED MICRO DEVICES, INC.
(EXACT NAME OF THE REGISTRANT AS SPECIFIED IN ITS CHARTER)
---------------
DELAWARE 3674 94-1692300
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
ONE AMD PLACE
SUNNYVALE, CALIFORNIA 94088-3453
(408) 732-2400
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
THOMAS M. MCCOY
VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
ADVANCED MICRO DEVICES, INC.
ONE AMD PLACE
SUNNYVALE, CALIFORNIA 94088-3453
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
VICTOR J. BACIGALUPI JORGE DEL CALVO
A. JOHN MURPHY, JR. STANTON D. WONG
WILLIAM T. MANIERRE JO ANN TAORMINA
BRONSON, BRONSON & MCKINNON PILLSBURY MADISON & SUTRO LLP
505 MONTGOMERY STREET 2700 SAND HILL ROAD
SAN FRANCISCO, CALIFORNIA 94111-2514 MENLO PARK, CALIFORNIA 94025-7020
(415) 986-4200 (415) 233-4500
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after the Registration Statement becomes effective and certain
other conditions under the Merger Agreement are met or waived.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
SHOWING THE LOCATION IN THE JOINT PROXY STATEMENT/PROSPECTUS OF THE
INFORMATION REQUIRED BY PART I OF FORM S-4
<TABLE>
<CAPTION>
S-4 ITEM NUMBER AND CAPTION JOINT PROXY STATEMENT/PROSPECTUS
--------------------------- --------------------------------
<C> <S> <C>
A. INFORMATION ABOUT THE
TRANSACTION
1. Forepart of the
Registration Statement
and Outside Front Cover
Page of Prospectus....... Outside Front Cover Page of Joint Proxy
Statement/Prospectus
2. Inside Front and Outside
Back Cover Pages of
Prospectus............... Available Information; Incorporation of
Certain Documents by Reference; Table of
Contents
3. Risk Factors, Ratio of
Earnings to Fixed Charges
and Other Information.... Summary; Risk Factors; Pro Forma Combined
Condensed Financial Statements
4. Terms of the Transaction.. Summary; The Merger; The Merger Agreement
and Related Agreements; Comparison of
Stockholders' Rights
5. Pro Forma Financial
Information.............. Pro Forma Combined Condensed Financial
Statements
6. Material Contracts with
the Company Being
Acquired................. Summary; The Merger; The Merger Agreement
and Related Agreements; The Secured Credit
Agreement
7. Additional Information
Required for Re-Offering
by Persons and Parties
Deemed to be
Underwriters............. *
8. Interests of Named Experts
and Counsel.............. Legal Matters
9. Disclosure of Commission
Position on
Indemnification for
Securities Act
Liabilities.............. *
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect
to S-3 Registrants....... Available Information; Incorporation of
Certain Documents by Reference; Summary;
The Merger; The Merger Agreement and
Related Agreements; Information Concerning
AMD; Pro Forma Combined Condensed
Financial Statements
11. Incorporation of Certain
Information by Reference. Incorporation of Certain Documents by
Reference
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
S-4 ITEM NUMBER AND CAPTION JOINT PROXY STATEMENT/PROSPECTUS
--------------------------- --------------------------------
<C> <S> <C>
12. Information with Respect
to S-2 or S-3
Registrants.............. *
13. Incorporation of Certain
Information by Reference. *
14. Information with Respect
to Registrants Other than
S-3 or S-2 Registrants... *
C. INFORMATION ABOUT THE COMPANY
BEING ACQUIRED
15. Information with Respect
to S-3 Companies......... *
16. Information with Respect
to S-2 or S-3 Companies.. *
17. Information with Respect
to Companies Other Than
S-2 or S-3 Companies..... Summary; Information Concerning NexGen; Pro
Forma Combined Condensed Financial
Statements; Experts; Consolidated
Financial Statements of NexGen
D. VOTING AND MANAGEMENT
INFORMATION
18. Information if Proxies,
Consents or Authorization
are to be Solicited...... Outside Front Cover Page of Joint Proxy
Statement/Prospectus; Summary; Risk
Factors; The Meetings; The Merger; The
Merger Agreement and Related Agreements;
Information Concerning NexGen;
Compensation of Executive Officers and
Directors of AMD; Comparison of
Stockholders' Rights; NexGen Stockholder
Proposals
19. Information if Proxies,
Consents or
Authorizations are not to
be Solicited or in an
Exchange Offer........... *
* Omitted because inapplicable or answer is
negative.
</TABLE>
<PAGE>
ADVANCED MICRO DEVICES, INC.
ONE AMD PLACE
SUNNYVALE, CALIFORNIA 94088
December 14, 1995
To My Fellow Stockholders:
A Special Meeting of Stockholders of Advanced Micro Devices, Inc. ("AMD")
will be held at the Pan Pacific Hotel, 500 Post Street, San Francisco,
California, on January 16, 1996, at 3:00 p.m., local time. At the meeting, you
will be asked to consider and vote upon:
1. A proposal to approve and adopt an Agreement and Plan of Merger among
AMD, AMD Merger Corporation, a wholly owned subsidiary of AMD, and
NexGen, Inc. ("NexGen"), as amended on December 11, 1995, and the
transactions contemplated thereby.
2. A proposal to approve an amendment to the Advanced Micro Devices, Inc.
1991 Stock Purchase Plan (the "AMD SPP") to increase the number of
shares of AMD Common Stock issuable thereunder from 2,500,000 to
3,600,000.
There is also enclosed a Joint Proxy Statement/Prospectus and a proxy card
with return envelope.
After careful consideration, the Board of Directors has voted unanimously
for the merger and believes that the merger is in the best interests of AMD
and its stockholders. The Board therefore recommends that you vote FOR the
merger. Both boards are of the opinion that combining the businesses of AMD
and NexGen will enhance the prospects of each company. The AMD Board of
Directors believes that the merger will benefit AMD through acquisition of
NexGen's product lines and the expanded utilization of AMD's production
facilities, which will enhance AMD's business opportunities. As a result,
AMD's ability to compete in the worldwide semiconductor market will be
strengthened.
The Board of Directors has also unanimously approved, and recommends that
you vote FOR the proposal to amend the AMD SPP.
REGARDLESS OF WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOUR
REPRESENTATION AND VOTE ARE VERY IMPORTANT AND YOUR SHARES SHOULD BE VOTED. I
URGE YOU TO CONSIDER, COMPLETE, DATE AND RETURN THE ENCLOSED PROXY.
W.J. SANDERS III
Chairman and Chief Executive Officer
<PAGE>
NEXGEN, INC.
1623 BUCKEYE DRIVE
MILPITAS, CALIFORNIA 95035
December 14, 1995
Dear Stockholder:
You are cordially invited to attend a Special Meeting of the Stockholders of
NexGen, Inc. ("NexGen") to be held on January 16, 1996, at 3:00 p.m., local
time, at the Crown Sterling Suites, 901 East Calaveras Boulevard, Milpitas,
California.
At this important meeting, you will be asked to consider and vote upon:
1. A proposal to approve and adopt an Agreement and Plan of Merger, dated
as of October 20, 1995, as amended on December 11, 1995, pursuant to which
NexGen will either be merged with a wholly owned subsidiary of Advanced
Micro Devices, Inc. ("AMD"), with the result that NexGen will become a
wholly owned subsidiary of AMD, or will be merged directly into AMD. In the
proposed merger, each outstanding share of common stock of NexGen will be
converted into the right to receive 0.8 of a share of AMD common stock, as
more fully described in the accompanying Joint Proxy Statement/Prospectus.
2. A proposal to amend the 1995 Stock Plan of NexGen to permit options
and stock awards thereunder to be granted to employees of NexGen's parent
corporation or NexGen's successor.
The accompanying Joint Proxy Statement/Prospectus describes in detail the
proposed merger. Please review carefully the information in the attached Joint
Proxy Statement/Prospectus.
THE BOARD OF DIRECTORS OF NEXGEN HAS DETERMINED THAT THE PROPOSED MERGER IS
FAIR TO AND IN THE BEST INTERESTS OF NEXGEN AND ITS STOCKHOLDERS AND
RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE PROPOSED MERGER. The Board of
Directors of NexGen also recommends that you vote FOR approval of the
amendment to the 1995 Stock Plan of NexGen.
Whether or not you plan to attend the meeting in person and regardless of
the number of shares you own, your vote is important. Accordingly, I encourage
you to review carefully the enclosed materials and then please sign, date and
mail the enclosed proxy promptly in the postage-paid envelope that has been
provided to you for your convenience. If you wish to vote in accordance with
the recommendations of the Board of Directors of NexGen, it is not necessary
to specify your choices; you may merely sign, date and return the enclosed
proxy. If you attend the meeting, you may revoke your proxy by voting in
person. Your prompt cooperation is greatly appreciated.
Please do not send in your share certificates at this time. After the
approval of the merger by NexGen stockholders, you will receive a transmittal
form and instructions for the surrender and exchange of your shares.
Sincerely,
S. Atiq Raza
President and Chief Executive
Officer
<PAGE>
ADVANCED MICRO DEVICES, INC.
ONE AMD PLACE
SUNNYVALE, CALIFORNIA 94088
----------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JANUARY 16, 1996
NOTICE IS HEREBY GIVEN that a Special Meeting of the Stockholders of
Advanced Micro Devices, Inc. ("AMD") will be held at the Pan Pacific Hotel,
500 Post Street, San Francisco, California, on January 16, 1996 at 3:00 p.m.,
local time (the "AMD Meeting"), for the following purposes, as more fully
described in the accompanying Joint Proxy Statement/Prospectus:
1. To consider and vote upon a proposal to approve and adopt the Agreement
and Plan of Merger, dated as of October 20, 1995, among AMD, AMD Merger
Corporation, a wholly owned subsidiary of AMD ("AMD Merger"), and
NexGen, Inc. ("NexGen"), as amended on December 11, 1995 (as amended,
the "Merger Agreement"), and the transactions contemplated thereby,
including the merger of NexGen with AMD Merger or with and into AMD (the
"Merger"). On the effective date of the Merger, each outstanding share
of common stock, par value $0.0001 per share, of NexGen will be
converted into the right to receive 0.8 of a share of common stock, par
value $0.01 per share, of AMD. The Merger Agreement and the Merger are
more completely described in the accompanying Joint Proxy
Statement/Prospectus and in the Merger Agreement, a copy of which is
attached as Annex A to the accompanying Joint Proxy
Statement/Prospectus.
2. To consider and vote upon a proposal to approve an amendment to the
Advanced Micro Devices, Inc. 1991 Stock Purchase Plan (the "AMD SPP") to
increase the number of shares of AMD common stock issuable thereunder
from 2,500,000 to 3,600,000.
The Board of Directors has fixed the close of business on November 27, 1995
as the record date for the determination of stockholders entitled to receive
notice of, and to vote at, the AMD Meeting and any adjournment or postponement
thereof.
By order of the Board of Directors.
Thomas M. McCoy
Secretary
IT IS IMPORTANT THAT YOUR SHARES ARE REPRESENTED AT THE AMD MEETING. EVEN IF
YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, SIGN, DATE AND RETURN THE
ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED POSTAGE-PAID RETURN
ENVELOPE. THIS WILL NOT LIMIT YOUR RIGHT TO ATTEND OR VOTE AT THE MEETING.
<PAGE>
NEXGEN, INC.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JANUARY 16, 1996
NOTICE IS HEREBY GIVEN that a Special Meeting of the Stockholders of NexGen,
Inc. ("NexGen") will be held at the Crown Sterling Suites, 901 East Calaveras
Boulevard, Milpitas, California, on January 16, 1996 at 3:00 p.m., local time
(the "NexGen Meeting"), for the following purposes, as more fully described in
the accompanying Joint Proxy Statement/Prospectus:
1. To consider and vote upon a proposal to approve and adopt the
Agreement and Plan of Merger, dated as of October 20, 1995, among
Advanced Micro Devices, Inc. ("AMD"), AMD Merger Corporation, a
wholly owned subsidiary of AMD ("AMD Merger"), and NexGen, as
amended on December 11, 1995 (as amended, the "Merger Agreement"),
and the transactions contemplated thereby, including the merger of
NexGen with AMD Merger or with and into AMD (the "Merger"). On the
effective date of the Merger, each outstanding share of common
stock, par value $0.0001 per share, of NexGen will be converted
into the right to receive 0.8 of a share of common stock, par
value $0.01 per share, of AMD. The Merger is more completely
described in the accompanying Joint Proxy Statement/Prospectus and
in the Merger Agreement, a copy of which is attached as Annex A to
the accompanying Joint Proxy Statement/Prospectus.
2. To consider and vote upon a proposal to amend the 1995 Stock
Plan of NexGen to permit options and stock awards thereunder to be
granted to employees of NexGen's parent corporation or NexGen's
successor.
The Board of Directors has fixed the close of business on November 20, 1995,
as the record date for the determination of stockholders entitled to receive
notice of, and to vote at, the NexGen Meeting and any adjournment or
postponement thereof.
By order of the Board of Directors.
S. Atiq Raza
Secretary
IT IS IMPORTANT THAT YOUR SHARES ARE REPRESENTED AT THE NEXGEN MEETING. EVEN
IF YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, SIGN, DATE AND RETURN THE
ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED POSTAGE-PAID RETURN
ENVELOPE. THIS WILL NOT LIMIT YOUR RIGHT TO ATTEND OR VOTE AT THE MEETING.
<PAGE>
SUBJECT TO COMPLETION, DATED DECEMBER 12, 1995
JOINT PROXY STATEMENT/PROSPECTUS
[LOGO OF ADVANCED MICRO [LOGO OF NEXGEN
DEVICES APPEARS HERE] APPEARS HERE]
ADVANCED MICRO DEVICES, INC. NEXGEN, INC.
ONE AMD PLACE 1623 BUCKEYE DRIVE
SUNNYVALE, CALIFORNIA 94088-3453 MILPITAS, CALIFORNIA 95035
(408) 732-2400 (408) 435-0202
This Joint Proxy Statement/Prospectus is being furnished to stockholders of
Advanced Micro Devices, Inc., a Delaware corporation ("AMD"), and to
stockholders of NexGen, Inc., a Delaware corporation ("NexGen"), in connection
with (i) the solicitation of proxies by the Board of Directors of AMD for use
at a special meeting of stockholders of AMD (the "AMD Meeting"); and (ii) the
solicitation of proxies by the Board of Directors of NexGen for use at a
special meeting of stockholders of NexGen (the "NexGen Meeting"); both such
meetings are to be held on January 16, 1996 and together, including any
adjournments or postponements of the meetings, they are referred to herein as
the "Meetings." At the Meetings, stockholders of AMD and NexGen will be asked
to consider and vote upon a proposal to approve and adopt the Agreement and
Plan of Merger, dated as of October 20, 1995, as amended on December 11, 1995
(the "Merger Agreement"), among AMD, NexGen and AMD Merger Corporation, a
Delaware corporation and a wholly owned subsidiary of AMD ("AMD Merger"). A
copy of the Merger Agreement is attached as Annex A to this Joint Proxy
Statement/Prospectus.
Pursuant to the Merger Agreement, AMD Merger will be merged into NexGen (the
"Merger") and NexGen will become a wholly owned subsidiary of AMD; provided,
however, under certain circumstances, AMD may elect to restructure the form of
the Merger. See "The Merger Agreement and Related Agreements--General Effects
of the Merger." Upon the consummation of the Merger, each share of common
stock, par value $0.0001 per share, of NexGen (the "NexGen Common Stock") will
be converted into the right to receive 0.8 of a share of common stock, par
value $0.01 per share, of AMD (the "AMD Common Stock"). No fractional shares
of AMD Common Stock will be issued in the Merger. Cash will be paid for
fractional shares of AMD Common Stock which NexGen stockholders would
otherwise be entitled to receive.
FOR A DISCUSSION OF CERTAIN RISK FACTORS WHICH STOCKHOLDERS SHOULD CONSIDER
BEFORE VOTING FOR OR AGAINST THE MERGER, SEE "RISK FACTORS" BEGINNING ON PAGE
17.
At the AMD Meeting, stockholders of AMD also will be asked to consider and
vote upon a proposal to approve an amendment to the AMD 1991 Stock Purchase
Plan (the "AMD SPP") to increase the number of shares of AMD Common Stock
issuable thereunder from 2,500,000 to 3,600,000. At the NexGen meeting,
stockholders of NexGen also will be asked to consider and vote upon a proposal
to amend the 1995 Stock Plan of NexGen to permit options and stock awards
thereunder to be granted to employees of NexGen's parent corporation or
NexGen's successor.
This Joint Proxy Statement/Prospectus and the accompanying form of proxy are
first being mailed to AMD and NexGen stockholders on or about December 14,
1995.
On December 11, 1995, the last reported sale price of the AMD Common Stock
on the New York Stock Exchange ("NYSE") was $19.375 per share and the last
reported sale price of the NexGen Common Stock on the Nasdaq National Market
was $15.00 per share.
The Joint Proxy Statement/Prospectus also serves as a Prospectus of AMD
under the Securities Act of 1933, as amended (the "Securities Act"), for the
issuance of up to 33,600,000 shares of AMD Common Stock into which NexGen
Common Stock will be converted upon consummation of the Merger. AMD intends to
register, under the Registration Statement which contains this Joint Proxy
Statement/Prospectus, the resale of AMD Common Stock issued to stockholders of
NexGen who have signed Voting Agreements with AMD and to the holders of
certain warrants of NexGen which will be assumed by AMD.
---------------
THE SECURITIES TO BE ISSUED PURSUANT TO THIS JOINT PROXY
STATEMENT/PROSPECTUS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS JOINT PROXY STATEMENT/ PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------
The date of this Joint Proxy Statement/Prospectus is December 14, 1995.
<PAGE>
All information herein with respect to NexGen has been furnished by NexGen
and all information herein with respect to AMD and AMD Merger has been
furnished by AMD.
No person is authorized to give any information or to make any
representations with respect to the matters described in this Joint Proxy
Statement/Prospectus other than those contained herein or in the documents
incorporated by reference herein. Any information or representations with
respect to such matters not contained herein or therein must not be relied
upon as having been authorized by AMD or NexGen. This Joint Proxy
Statement/Prospectus does not constitute an offer to sell or an offer to buy
any securities or a solicitation of an offer to sell or a solicitation of an
offer to buy any securities or the solicitation of a proxy in any jurisdiction
to any person to whom it is unlawful to make such offer or solicitation in
such jurisdiction. Neither the delivery of this Joint Proxy
Statement/Prospectus nor any distribution of securities hereunder shall, under
any circumstances, create any implication that there has been no change in the
affairs of AMD or NexGen since the date hereof or that the information in this
Joint Proxy Statement/Prospectus or in the documents incorporated by reference
herein is correct as of any time subsequent to the dates hereof or thereof.
AVAILABLE INFORMATION
AMD and NexGen are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith file reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed with the Commission can be inspected
and copied at the public reference facilities maintained by the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, and the Commission's Regional
Offices, Seven World Trade Center, 13th Floor, New York, New York 10048 and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-
2511. Copies of such material can be obtained at prescribed rates from the
Securities and Exchange Commission, Public Reference Section, 450 Fifth
Street, N.W., Washington, D.C. 20549. All outstanding shares of AMD Common
Stock are listed on the NYSE. Reports, proxy material and other information
concerning AMD also may be inspected at the offices of the NYSE, 20 Broad
Street, New York, New York 10005.
AMD has filed with the Commission a Registration Statement on Form S-4
(together with any amendments, the "Registration Statement") under the
Securities Act relating to the shares of AMD Common Stock to be issued to
holders of NexGen Common Stock pursuant to the Merger Agreement. This Joint
Proxy Statement/Prospectus also constitutes the Prospectus of AMD filed as
part of the Registration Statement and does not contain all of the information
set forth in the Registration Statement and the Exhibits thereto. The
Registration Statement and the Exhibits thereto may be inspected and copied,
at prescribed rates, at the public reference facilities maintained by the
Commission at the addresses set forth above.
THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES BY REFERENCE DOCUMENTS
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF THESE
DOCUMENTS (OTHER THAN CERTAIN EXHIBITS TO SUCH DOCUMENTS) ARE AVAILABLE TO
EACH PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM A COPY OF THIS JOINT
PROXY STATEMENT/PROSPECTUS IS DELIVERED WITHOUT CHARGE UPON WRITTEN OR ORAL
REQUEST. REQUESTS SHOULD BE DIRECTED TO ADVANCED MICRO DEVICES, INC., ONE AMD
PLACE, SUNNYVALE, CALIFORNIA 94088-3453 (TELEPHONE: (408) 732-2400) ATTENTION:
ASSISTANT CORPORATE SECRETARY. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS, ANY REQUEST SHOULD BE MADE NO LATER THAN JANUARY 10, 1996.
2
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by AMD with the Commission are incorporated by
reference in this Joint Proxy Statement/Prospectus:
(a) Annual Report on Form 10-K of AMD for the fiscal year ended December
25, 1994, and Amendment No. 1 thereto on Form 10-K/A dated August 7, 1995;
(b) Quarterly Reports on Form 10-Q of AMD for the quarters ended April 2,
1995, July 2, 1995 and October 1, 1995;
(c) Current Reports on Form 8-K of AMD dated December 30, 1994, February
10, 1995, March 13, 1995, April 17, 1995, September 25, 1995, and November
6, 1995; and
(d) The description of AMD Common Stock, $0.01 par value, contained in
AMD's Registration Statement on Form 8-A filed September 14, 1979.
All documents subsequently filed by AMD pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date of this Joint Proxy
Statement/Prospectus and prior to the date of the Meetings shall be deemed to
be incorporated by reference herein and to be a part hereof from the date of
filing thereof. Any statement contained in a document incorporated or deemed
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Joint Proxy Statement/Prospectus to the extent that a
statement contained herein, or in any subsequently filed document that also is
or is deemed to be incorporated by reference herein, modifies or supersedes
such statement. Any such statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of the Joint
Proxy Statement/Prospectus.
TRADEMARKS
AMD, the AMD logo, Am486 and World Network are registered trademarks of AMD.
K86, K86 RISC SUPERSCALAR, AMD-K5 and AMD-K6 are trademarks of AMD.
NexGen, RISC86, Nx586, Nx686, NxVL and NxPCI are trademarks of NexGen.
Microsoft and Windows are registered trademarks of Microsoft Corporation.
Trademarks of other companies are also referred to in this Joint Proxy
Statement/Prospectus.
3
<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
AVAILABLE INFORMATION...................................................... 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................ 3
TRADEMARKS................................................................. 3
SUMMARY.................................................................... 7
Parties to the Merger.................................................... 7
Dates, Times and Places of the Meetings.................................. 8
Purpose of the Meetings.................................................. 8
Stockholders Entitled to Vote............................................ 8
Votes Required........................................................... 8
Risk Factors............................................................. 9
Recent Developments...................................................... 9
Recommendations of the Boards of Directors; Reasons for the Merger....... 10
Opinions of Financial Advisors........................................... 10
Exchange Ratio........................................................... 10
Exchange of NexGen Stock Certificates.................................... 11
Assumption of NexGen Options, Warrants and Convertible Securities........ 11
Conditions to the Merger; Termination and Amendment...................... 11
Certain Federal Income Tax Consequences.................................. 12
Effective Time of the Merger............................................. 12
Accounting Treatment..................................................... 12
No Dissenters' Rights of Appraisal....................................... 12
Management of AMD and NexGen Following the Merger........................ 12
Indemnification.......................................................... 12
Governmental and Regulatory Approvals.................................... 12
The Secured Credit Agreement............................................. 13
Other Agreements......................................................... 13
Market Price Data........................................................ 13
Dividend Policy.......................................................... 14
Selected Historical and Pro Forma Financial Data......................... 14
Comparative Per Share Data............................................... 16
RISK FACTORS............................................................... 17
Risk Factors Relating to the Merger...................................... 17
Risk Factors Relating to AMD............................................. 18
Risk Factors Relating to NexGen.......................................... 23
THE MEETINGS............................................................... 35
General.................................................................. 35
Meetings, Record Dates and Outstanding Shares............................ 35
Proxies, Quorum and Votes Required....................................... 35
Solicitation of Proxies.................................................. 36
THE MERGER................................................................. 37
Background of the Merger................................................. 37
Reasons for the Merger; Recommendations of the Boards of Directors....... 41
Opinions of Financial Advisors........................................... 43
Certain Federal Income Tax Consequences.................................. 51
Interests of Certain Persons in the Merger............................... 51
No Dissenters' Rights of Appraisal....................................... 53
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Regulatory Matters...................................................... 53
Accounting Treatment.................................................... 53
Sales of AMD Common Stock............................................... 53
Certain Litigation Related to the Merger ............................... 54
THE MERGER AGREEMENT AND RELATED AGREEMENTS............................... 55
General Effects of the Merger........................................... 55
Conversion of Securities................................................ 55
Exchange of Certificates................................................ 56
Treatment of NexGen Options, Warrants and Convertible Securities........ 56
Business of AMD Pending the Merger...................................... 57
Business of NexGen Pending the Merger................................... 58
Solicitation of Alternative Transactions................................ 59
Corporate Structure and Related Matters after the Merger................ 60
Indemnification......................................................... 60
Conditions to the Merger................................................ 60
Termination, Amendment and Waiver....................................... 62
Fees and Expenses....................................................... 63
Confidentiality......................................................... 65
Certain Other Agreements................................................ 66
THE SECURED CREDIT AGREEMENT.............................................. 65
Revolving Line of Credit................................................ 66
Interest Rate........................................................... 67
Payments of Principal and Interest...................................... 67
Collateral Security for the Loan........................................ 67
Restriction Against Further Secured Indebtedness........................ 67
INFORMATION CONCERNING AMD................................................ 68
INFORMATION CONCERNING NEXGEN............................................. 69
Business of NexGen...................................................... 69
Price Range of NexGen Common Stock and Dividend Policy.................. 82
Selected Consolidated Financial Data of NexGen.......................... 83
NexGen Management's Discussion and Analysis of Financial Condition and
Results of Operations.................................................. 84
Compensation of Directors............................................... 91
Executive Compensation.................................................. 92
Stock Options........................................................... 93
NexGen Employee Benefit Plans........................................... 94
Certain Relationships and Transactions.................................. 95
Principal Stockholders of NexGen........................................ 96
PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS......................... 98
Pro Forma Combined Condensed Balance Sheet.............................. 99
Pro Forma Combined Condensed Statement of Operations.................... 100
Notes to Pro Forma Combined Condensed Financial Statements.............. 101
DESCRIPTION OF AMD CAPITAL STOCK.......................................... 102
General................................................................. 102
AMD Common Stock........................................................ 102
AMD Serial Preferred Stock.............................................. 102
COMPARISON OF STOCKHOLDERS' RIGHTS........................................ 102
Authorized Capital...................................................... 103
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Action Taken by Written Consent of Stockholders......................... 103
Adoption, Amendment and Repeal of Bylaws................................ 103
Actions Changing the Powers, Preferences and Rights of Stockholders..... 103
Written Ballots in the Election of Directors............................ 104
Nominations to the Board of Directors................................... 104
Conduct of Business at Annual Meetings.................................. 104
Call of Special Meetings of Stockholders................................ 105
Term of Proxies......................................................... 105
Appointment of Inspectors of Election................................... 105
Number of Directors..................................................... 105
EXPERTS................................................................... 105
ACCOUNTANTS' REPRESENTATIVES.............................................. 106
LEGAL MATTERS............................................................. 106
PROPOSAL TO APPROVE AN AMENDMENT TO THE ADVANCED MICRO DEVICES, INC. 1991
STOCK PURCHASE PLAN (TO BE VOTED UPON BY AMD STOCKHOLDERS)............... 106
Summary Description of the AMD SPP, as Amended.......................... 106
Federal Income Tax Consequences......................................... 108
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS OF AMD................... 109
Summary Compensation Table.............................................. 109
Option/SAR Grants in Last Fiscal Year................................... 111
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Option/SAR Values...................................................... 111
Compensation Agreements................................................. 111
Change in Control Arrangements.......................................... 114
Directors' Fees and Expenses............................................ 115
Compensation Committee Interlocks and Insider Participation............. 116
PROPOSAL TO APPROVE AN AMENDMENT TO THE 1995 STOCK PLAN OF NEXGEN, INC.
(TO BE VOTED UPON BY NEXGEN STOCKHOLDERS)................................ 116
Description of the 1995 Stock Plan, as Amended.......................... 117
Federal Income Tax Consequences......................................... 119
NEXGEN STOCKHOLDER PROPOSALS.............................................. 120
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF NEXGEN...................... F-1
ANNEX A--Agreement and Plan of Merger, as Amended
ANNEX B--Opinion of Donaldson, Lufkin & Jenrette Securities Corporation
ANNEX C--Opinion of PaineWebber Incorporated
ANNEX D--Advanced Micro Devices, Inc. 1991 Employee Stock Purchase Plan
(As Proposed to be Amended)
</TABLE>
6
<PAGE>
SUMMARY
The following is a summary of certain information contained elsewhere in this
Joint Proxy Statement/Prospectus concerning AMD, NexGen, the Merger Agreement
and the Merger. This summary is qualified in its entirety by reference to the
full text of this Joint Proxy Statement/Prospectus, the Annexes hereto and the
documents incorporated herein by reference. AMD and NexGen stockholders are
urged to read this Joint Proxy Statement/Prospectus and the accompanying
Annexes in their entirety, and in particular the matters referred to under
"Risk Factors."
PARTIES TO THE MERGER
AMD
AMD designs, develops, manufactures and markets complex monolithic integrated
circuits for use by manufacturers of electronic equipment and systems. Its
products primarily consist of standard items or are made from designs based on
such items, as opposed to custom circuits designed for a single customer. While
a substantial portion of AMD's products are standard items, increasingly many
of its recently developed products are designed for specific applications such
as telecommunications, personal computers, engineering workstations, disk
memory or local area networks. As a service to certain major customers, AMD
modifies portions of these application-specific devices to meet specific
customer needs. The resulting devices are produced in significant volumes for
such customers.
AMD began as an alternate-source manufacturer of integrated circuits
originally developed by other suppliers and has shifted to proprietary products
(i.e., products resulting from AMD's design or technology innovations). AMD
believes that its significant commitment to research and development has
contributed toward AMD becoming a leader in manufacturing and process
technology within the integrated circuit industry.
AMD has focused its product development activities on the three areas of its
business: (1) X86, K86(TM) and other microprocessors and related embedded
processors for personal computers, (2) applications solutions products, and (3)
high-volume commodity products such as programmable logic and non-volatile
memory devices.
Personal computer ("PC") products include microprocessors and related
embedded processors used in computers. AMD's applications solutions products
are focused on networks, voice/data communications (World Network(R)), and on
computer peripherals, computer interfaces and mass storage. High-volume
commodity products include Flash and programmable logic devices ("PLDs"). PLDs
and Flash memory devices are typically produced by more than one manufacturer,
subject to intense competition, and broadly applicable across a wide customer
base. Because most of AMD's products are utilized in personal computers and
related peripherals, AMD's future growth is closely tied to the performance of
the PC industry.
AMD has sales offices worldwide, and has manufacturing or testing facilities
in Sunnyvale, California; Austin, Texas; Bangkok, Thailand; Penang, Malaysia;
Singapore; and Basingstoke, England. In addition, AMD and Fujitsu Ltd. are
parties to a joint venture which owns and operates a Flash memory wafer
fabrication facility in Aizu-Wakamatsu, Japan. AMD's executive offices and
corporate headquarters are located at One AMD Place, Sunnyvale, California
94088-3453, and its telephone number is (408) 732-2400.
AMD Merger is a Delaware corporation that is a wholly owned subsidiary of AMD
organized for the sole purpose of effecting the Merger.
7
<PAGE>
NexGen
NexGen designs, develops and markets high performance processors for
International Business Machines Corporation ("IBM") compatible personal
computers. NexGen began shipping its Nx586 processor to customers in September
1994. NexGen believes that PCs incorporating the Nx586 processor provide
comparable performance to similarly configured systems based on Intel
Corporation's ("Intel") Pentium processor. NexGen's Nx586 processor is based on
NexGen's proprietary microarchitecture, called RISC86, which applies RISC
performance principles to implement the industry standard x86 instruction set
while maintaining binary compatibility with the large installed base of
software and peripherals developed for PCs. NexGen has entered into an
agreement with IBM for the production, manufacture and sale to NexGen of the
Nx586 processor using IBM's submicron CMOS wafer fabrication processes and
advanced package technologies. In addition, NexGen has developed system logic
chipsets and custom motherboards specifically designed to incorporate NexGen's
Nx586 processors. In October 1995, NexGen announced details of the technology
and demonstrated on first silicon its sixth generation processor, the Nx686,
which is being designed with a higher degree of internal parallelism for higher
performance.
NexGen's executive offices and corporate headquarters are located at 1623
Buckeye Drive, Milpitas, California 95035, and its telephone number is (408)
435-0202.
DATES, TIMES AND PLACES OF THE MEETINGS
The AMD Meeting will be held on January 16, 1996 at 3:00 p.m., local time, at
the Pan Pacific Hotel, 500 Post Street, San Francisco, California.
The NexGen Meeting will be held on January 16, 1996 at 3:00 p.m., local time,
at the Crown Sterling Suites, 901 East Calaveras Boulevard, Milpitas,
California.
PURPOSE OF THE MEETINGS
At the AMD Meeting and the NexGen Meeting (the "Meetings"), the AMD and
NexGen stockholders will be asked to consider and vote upon the approval and
adoption of the Merger Agreement (which is included as Annex A to this Joint
Proxy Statement/Prospectus and incorporated herein by reference), pursuant to
which AMD Merger would be merged into NexGen, and NexGen would become a wholly
owned subsidiary of AMD; provided, however, that under certain circumstances,
AMD may elect to restructure the form of the Merger. See "The Merger Agreement
and Related Agreements--General Effects of the Merger."
At the AMD Meeting, the AMD stockholders also will be asked to approve an
amendment to the AMD 1991 Stock Purchase Plan to increase the number of shares
of AMD Common Stock issuable thereunder from 2,500,000 to 3,600,000. At the
NexGen Meeting, the NexGen stockholders will also be asked to approve an
amendment to the 1995 Stock Plan of NexGen to permit options and stock awards
thereunder to be granted to employees of NexGen's parent corporation or
NexGen's successor.
STOCKHOLDERS ENTITLED TO VOTE
AMD has fixed the close of business on November 27, 1995, as the record date
for determining stockholders entitled to vote at the AMD Meeting. At the close
of business on the record date, there were 104,454,737 outstanding shares of
AMD Common Stock.
NexGen has fixed the close of business on November 20, 1995, as the record
date for determining stockholders entitled to vote at the NexGen Meeting. At
the close of business on the record date, there were 33,323,725 outstanding
shares of NexGen Common Stock. See "The Meetings."
VOTES REQUIRED
Approval of the proposal to approve and adopt the Merger Agreement by the
stockholders of AMD is not required under Delaware law or AMD's Certificate of
Incorporation. The Board is seeking approval of the Merger pursuant to the
terms of the Merger Agreement, the requirements of the NYSE and as a matter of
good corporate practice. NYSE rules require that the Merger Agreement be
approved and adopted by a majority of
8
<PAGE>
votes cast at the AMD Meeting, provided that the total vote cast represents
over 50% in interest of all AMD Common Stock entitled to vote. Approval and
adoption of the Merger Agreement is a condition to the obligations of AMD and
NexGen to consummate the Merger. See "The Meetings--Proxies and Votes
Required."
As a group, all executive officers and directors of AMD and their affiliates
owned 603,037 shares, or approximately .057%, of AMD Common Stock outstanding
as of November 27, 1995. No executive officer or director of NexGen or any
affiliate of such executive officer or director beneficially owned any shares
of AMD Common Stock as of such date.
Under Delaware law, the affirmative vote of the holders of a majority of the
outstanding shares of NexGen Common Stock is required to approve the proposal
to approve and adopt the Merger Agreement and transactions contemplated
thereby. Under the Merger Agreement, such approval is a condition to the
obligations of AMD and NexGen to consummate the Merger. See "The Meetings--
Proxies and Votes Required."
As a group, all executive officers and directors of NexGen and their
affiliates owned 4,375,378 shares, or approximately 13.1%, of NexGen Common
Stock outstanding as of November 20, 1995. No executive officer or director of
AMD or any affiliate of any such executive officer or director beneficially
owned any shares of NexGen Common Stock as of such date.
Certain stockholders of NexGen have entered into voting agreements relating
to an aggregate of approximately 12,542,000 shares of NexGen Common Stock, or
approximately 38% of the shares of NexGen Common Stock outstanding on the
record date for the NexGen Meeting, pursuant to which they have (i) agreed to
vote their shares of NexGen Common Stock in favor of the Merger Agreement and
the Merger, (ii) granted irrevocable proxies to AMD to vote such shares
accordingly, and (iii) agreed not to sell their shares prior to the earlier of
(x) the termination of the Merger Agreement or (y) the NexGen Meeting or, in
the case of certain stockholders, the Effective Time, as defined below. See
"The Merger Agreement and Related Agreements--Certain Other Agreements."
Approval of the amendment to the AMD SPP requires the affirmative vote of a
majority of the shares of AMD Common Stock present and entitled to vote on the
proposal at the AMD Meeting. Approval of the amendment to the 1995 Stock Plan
of NexGen requires the affirmative vote of a majority of the shares of NexGen
Common Stock present and entitled to vote on the proposal at the NexGen
Meeting.
RISK FACTORS
AMD and NexGen stockholders should consider carefully the matters set forth
herein under "Risk Factors" as well as the other information contained or
incorporated by reference in this Joint Proxy Statement/Prospectus.
Risks associated with the Merger include the need to integrate operations and
personnel, particularly engineering personnel, of the two companies; the risk
that the AMD-K6 microprocessor (NexGen's Nx686) will not achieve market
acceptance or will not be available in volume in a timely manner; the risk that
AMD's manufacturing facilities may not be compatible with the manufacturing of
NexGen's products without substantial reconfiguration; and the risk that the
dilution caused by the issuance of shares of AMD Common Stock in the Merger
will not be offset by the combined incremental earnings of AMD and NexGen.
RECENT DEVELOPMENTS
On November 3 and 15, 1995, two class action lawsuits were filed, purportedly
on behalf of purchasers of AMD's stock from April 11, 1995, to September 25,
1995, alleging that AMD and various of its officers and directors violated
sections of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated
thereunder by issuing allegedly false and misleading statements concerning the
design, development and production of the AMD-K5. The complaints seek damages
in an unspecified amount. Based upon information presently known to management,
AMD does not believe that the ultimate resolution of these lawsuits will have a
material adverse effect upon the financial condition of AMD.
9
<PAGE>
On November 1, 1995, a purported class action lawsuit was filed against
NexGen, its Board of Directors and a former director of NexGen alleging, among
other things, that the consideration that NexGen stockholders will receive
pursuant to the Merger is inadequate. On December 12, 1995, all parties to the
litigation entered into a Memorandum of Understanding that contemplates the
settlement of the litigation. See "The Merger--Certain Litigation Related to
the Merger."
RECOMMENDATIONS OF THE BOARDS OF DIRECTORS; REASONS FOR THE MERGER
The Boards of Directors of AMD and NexGen each believe that the Merger is in
the best interests of each company and its stockholders. The Boards of
Directors of AMD and NexGen recommend to the stockholders of AMD and NexGen,
respectively, a vote FOR approval and adoption of the Merger Agreement.
The Boards of Directors of AMD and NexGen considered a number of potential
joint benefits resulting from the Merger, including an enhanced ability to
challenge Intel in the market for sixth generation Microsoft Windows-compatible
microprocessors through the combination of NexGen's Nx686 product design with
AMD's manufacturing and marketing capabilities and the ability to have multiple
design teams focused on Microsoft Windows-compatible PC solutions. In addition,
the AMD Board believes that the Merger will benefit AMD and AMD stockholders
through the acquisition of NexGen's product lines and expanded utilization of
AMD's production facilities. The NexGen Board believes the Merger will provide
NexGen with a significant increase in financial, marketing and development
resources and will provide NexGen stockholders with the opportunity to receive,
on a tax-free basis, AMD Common Stock that will enable them to participate in
the opportunities for growth in the combined company after the Merger. Each
Board of Directors recognizes that the potential benefits of the Merger may not
be realized.
For a discussion of the factors considered by the respective Boards of
Directors in reaching their decisions to recommend the Merger, see "The
Merger--Reasons for the Merger; Recommendations of the Boards of Directors."
OPINIONS OF FINANCIAL ADVISORS
On October 20, 1995, and on the date of this Joint Proxy
Statement/Prospectus, Donaldson, Lufkin & Jenrette Securities Corporation
("DLJ"), financial advisor to the Board of Directors of AMD in connection with
the transactions contemplated by the Merger Agreement, delivered its written
opinions to the Board of Directors of AMD that as of those dates, based on the
various considerations set forth in its opinions, the Exchange Ratio (as
defined below) was fair, from a financial point of view, to AMD. The full text
of the DLJ opinion dated the date of this Joint Proxy Statement/Prospectus is
set forth as Annex B to this Joint Proxy Statement/Prospectus and should be
read in its entirety. See "The Merger--Opinions of Financial Advisors."
On October 19, 1995, PaineWebber Incorporated ("PaineWebber"), financial
advisor to Board of Directors of NexGen in connection with the transactions
contemplated by the Merger Agreement, delivered its written opinion to the
Board of Directors of NexGen that as of that date, based on various
considerations set forth in its opinion, the Exchange Ratio was fair, from a
financial point of view, to the stockholders of NexGen. On the date of this
Joint Proxy Statement/Prospectus, PaineWebber reaffirmed, as of such date, the
foregoing opinion. The full text of the PaineWebber opinion dated the date of
this Joint Proxy Statement/Prospectus is set forth as Annex C to this Joint
Proxy Statement/Prospectus and should be read in its entirety. See "The
Merger--Opinions of Financial Advisors."
Neither DLJ nor PaineWebber has a duty to update, revise or reaffirm its
opinions subsequent to the date of this Joint Proxy Statement/Prospectus. It is
a condition of the consummation of the Merger that the written opinions of DLJ
and PaineWebber shall not have been withdrawn as of the Effective Time.
EXCHANGE RATIO
Upon consummation of the Merger, each issued and outstanding share of NexGen
Common Stock will be converted into the right to receive 0.8 of a share of AMD
Common Stock (the "Exchange Ratio"). No fractional
10
<PAGE>
shares of AMD Common Stock will be issued in the Merger. Cash will be paid in
lieu of fractional shares of AMD Common Stock which would otherwise be issued
in the Merger. See "The Merger Agreement and Related Agreements--Conversion of
Securities." Based on the number of outstanding shares of AMD Common Stock and
NexGen Common Stock as of the record date for the Meetings, approximately
26,658,980 shares of AMD Common Stock will be issued to NexGen stockholders in
the Merger (before the elimination of fractional shares), representing 20.3% of
the approximately 131,113,717 shares of AMD Common Stock to be outstanding
after the Merger, assuming no exercise of any AMD or NexGen options or warrants
or conversion of NexGen convertible debt.
EXCHANGE OF NEXGEN STOCK CERTIFICATES
Promptly after consummation of the Merger, The First National Bank of Boston
(the "Exchange Agent") will mail a letter of transmittal with instructions to
all holders of record of NexGen Common Stock as of the consummation of the
Merger for use in exchanging their NexGen stock certificates for certificates
representing shares of AMD Common Stock. CERTIFICATES SHOULD NOT BE SURRENDERED
UNTIL THE LETTER OF TRANSMITTAL IS RECEIVED. A holder of NexGen Common Stock
will not be entitled to any of the rights of a holder of AMD Common Stock until
such holder exchanges the NexGen stock certificate for AMD Common Stock. See
"The Merger Agreement and Related Agreements--Exchange of Certificates."
ASSUMPTION OF NEXGEN OPTIONS, WARRANTS AND CONVERTIBLE SECURITIES
Upon consummation of the Merger, all options to purchase NexGen Common Stock
then outstanding under the 1987 Employee Stock Plan of NexGen and the 1995
Stock Plan of NexGen (together, the "NexGen Options"), all rights to purchase
NexGen Common Stock then outstanding under the 1995 Employee Stock Purchase
Plan of NexGen (the "NexGen ESPP"), all outstanding warrants to purchase NexGen
Common Stock (the "NexGen Warrants") and all outstanding securities convertible
into NexGen Common Stock will be assumed by AMD. At the NexGen Meeting,
stockholders of NexGen also will be asked to consider and vote upon a proposal
to amend the 1995 Stock Plan of NexGen to permit the employees, consultants and
advisors of NexGen, its parent corporation or its successor to be eligible to
participate in the 1995 Stock Plan of NexGen. Assuming that the stockholders of
NexGen approve the proposal to amend the 1995 Stock Plan of NexGen, AMD may
grant options or stock awards with respect to shares of AMD Common Stock to
employees, consultants and advisors of AMD and its subsidiaries including
NexGen after the Effective Time (as defined below) pursuant to the terms of the
1995 Stock Plan of NexGen, as amended. See "The Merger Agreement and Related
Agreements--Treatment of NexGen Options, Warrants and Convertible Securities,"
and "Proposal to Approve an Amendment to the 1995 Stock Plan of NexGen, Inc."
CONDITIONS TO THE MERGER; TERMINATION AND AMENDMENT
Consummation of the Merger is subject to the satisfaction of various
conditions, including approval of the Merger Agreement by the stockholders of
AMD and of NexGen, expiration or termination of the applicable waiting period
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"
which termination occurred on November 29, 1995), the receipt of opinions of
counsel to the effect that the Merger will constitute a tax-free reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, the
availability of pooling of interests accounting treatment, the receipt of
fairness opinions from AMD's and NexGen's financial advisors, the listing of
the AMD Common Stock to be received in the Merger on the NYSE and the absence
of any material adverse change (as defined in the Merger Agreement) in the
business or financial condition of NexGen or AMD. Except as to any condition
the satisfaction of which is required by law, the Boards of Directors of AMD
and NexGen have the authority to waive satisfaction of the respective
conditions to such company's obligation to consummate the Merger. Neither Board
has yet determined whether or not to waive satisfaction of any such conditions.
If the Merger is not consummated, there are certain circumstances under which
NexGen may be obligated to pay AMD a fee of $25.0 million, or either NexGen or
AMD may be obligated to pay to the other a fee of
11
<PAGE>
$15.0 million. If NexGen would otherwise be obligated to pay both such fees,
the Merger Agreement provides that the aggregate fees payable will equal $25.0
million. See "The Merger Agreement and Related Agreements--Fees and Expenses."
The Merger Agreement may be amended by mutual consent of the Boards of
Directors of AMD and NexGen at any time, except that, after approval of the
Merger Agreement by the stockholders, no amendment that would have a material
adverse effect on such stockholders may be made without obtaining the further
approval of the affected stockholders. See "The Merger Agreement and Related
Agreements--Conditions to the Merger" and "--Termination."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The Merger is intended to qualify as a tax-free reorganization for federal
income tax purposes, in which case no gain or loss should generally be
recognized by NexGen stockholders on the exchange of their shares of NexGen
Common Stock for shares of AMD Common Stock, except for gain or loss
attributable for cash received in lieu of fractional shares. Consummation of
the Merger is conditioned upon the receipt by AMD and NexGen of opinions of
their respective counsel substantially to this effect. NexGen stockholders are
urged to consult their own tax advisors regarding all tax consequences of the
Merger. See "The Merger--Certain Federal Income Tax Consequences."
EFFECTIVE TIME OF THE MERGER
The Merger will become effective upon the filing of a Certificate of Merger
with the Secretary of State of the State of Delaware (the "Effective Time").
Assuming all conditions to the Merger are met or waived prior thereto, it is
anticipated that the Effective Time will occur on the date of the Meetings, or
as soon thereafter as is practicable.
ACCOUNTING TREATMENT
The Merger is intended to qualify as a pooling of interests for financial
reporting purposes in accordance with generally accepted accounting principles.
Consummation of the Merger is conditioned upon receipt by AMD of a letter from
Ernst & Young LLP, AMD's independent auditors, regarding that firm's
concurrence with AMD and NexGen managements' conclusions as to the
appropriateness of pooling of interests accounting for the Merger under
Accounting Principles Board Opinion No. 16, if the Merger is closed and
consummated in accordance with the Merger Agreement. See " The Merger--
Accounting Treatment."
NO DISSENTERS' RIGHTS OF APPRAISAL
Under the Delaware General Corporation Law (the "DGCL"), neither AMD nor
NexGen stockholders will be entitled to dissenters' rights of appraisal in
connection with the Merger.
MANAGEMENT OF AMD AND NEXGEN FOLLOWING THE MERGER
The Board of Directors and principal officers of AMD at the Effective Time
will continue in those capacities after the Merger. In addition, S. Atiq Raza
of NexGen will be appointed by the AMD Board of Directors as a member of the
Board of Directors of AMD at the Effective Time. After the Merger, NexGen will
be operated initially as a wholly owned subsidiary of AMD. The Board of
Directors of NexGen will be composed of W. J. Sanders III, Richard Previte and
S. Atiq Raza, all of whom are now senior officers of AMD or NexGen. Certain
officers of NexGen will initially be officers of NexGen at the Effective Time.
See "The Merger--Interest of Certain Persons in the Merger." It is expected
that employees of NexGen, upon consummation of the Merger, will continue to be
employees of NexGen or become employees of AMD.
INDEMNIFICATION
AMD has agreed to preserve the existing rights of the officers and directors
of NexGen to be indemnified under certain circumstances. See "The Merger
Agreement and Related Agreements--Indemnification."
GOVERNMENTAL AND REGULATORY APPROVALS
AMD and NexGen are not aware of any governmental or regulatory requirements
for consummation of the Merger, other than compliance with applicable federal
and state securities laws. See "The Merger--Regulatory Matters."
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<PAGE>
THE SECURED CREDIT AGREEMENT
Concurrently with the execution of the Merger Agreement, AMD and NexGen
executed a Secured Credit Agreement dated October 20, 1995 (as amended on
October 30, 1995, the "Credit Agreement") pursuant to which AMD has agreed to
provide NexGen with a revolving line of credit in the aggregate principal
amount of up to $30.0 million on or before December 31, 1995, up to $50.0
million after December 31, 1995 and on or before March 31, 1996, and up to
$60.0 million after April 1, 1996 and on or before June 30, 1996. The first
drawdown under the line of credit was effected on October 24, 1995, on which
date NexGen borrowed $30.0 million, the maximum amount currently available. All
borrowings under the Credit Agreement bear interest at the Index Rate (as
defined under "The Secured Credit Agreement--Interest Rate") plus 3.5% and are
secured by all tangible and intangible assets of NexGen, but are subordinated
to the existing senior indebtedness of NexGen. The Credit Agreement contains
certain restrictions on NexGen's ability to incur additional senior
indebtedness. All outstanding principal and accrued interest on borrowings
under the Credit Agreement are due and payable on the earliest of (i) the date
which is 12 months after the termination of the Merger Agreement for any
reason, (ii) the date on which any person or entity other than AMD acquires
more than 50% of the outstanding NexGen Common Stock, and (iii) June 30, 1997.
See "The Secured Credit Agreement" and "Information Concerning NexGen--NexGen
Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
OTHER AGREEMENTS
AMD has entered into or will enter into certain agreements with persons
related to NexGen in order to facilitate the transactions contemplated by the
Merger Agreement. These include voting agreements pursuant to which certain
NexGen stockholders agreed to vote their NexGen shares in favor of the Merger,
gave AMD an irrevocable proxy for such purpose and agreed not to sell those
shares prior to the earlier of (i) the termination of the Merger Agreement or
(ii) the NexGen Meeting or the Effective Time, affiliate agreements restricting
the sale of shares of AMD Common Stock acquired by affiliates of NexGen in the
Merger in order to assure compliance with applicable Commission rules governing
affiliate resales and pooling of interests accounting, and no sale agreements
preventing all officers, directors and certain stockholders of NexGen from
selling their shares prior to the Effective Time or termination of the Merger
Agreement. See "The Merger Agreement and Related Agreements--Certain Other
Agreements."
MARKET PRICE DATA
AMD Common Stock is traded principally on the NYSE under the symbol AMD.
NexGen Common Stock has been traded on the Nasdaq National Market since May 25,
1995 under the symbol NXGN. The following table sets forth, for the fiscal
quarter indicated, the high and low closing sale prices of AMD Common Stock, as
reported on the NYSE Composite Transactions Tape, and the high and low sale
prices of NexGen Common Stock, as reported on the Nasdaq National Market. The
fiscal year of AMD ends in December, while the fiscal year of NexGen ends on
June 30.
<TABLE>
<CAPTION>
AMD HIGH LOW
--- ------- -------
<S> <C> <C>
FISCAL YEAR ENDED DECEMBER 26, 1993
First Quarter............................ $24 1/2 $17 1/2
Second Quarter........................... 32 7/8 20 3/8
Third Quarter............................ 32 5/8 21 1/2
Fourth Quarter........................... 30 1/4 17
FISCAL YEAR ENDED DECEMBER 25, 1994
First Quarter............................ 31 3/4 16 3/4
Second Quarter........................... 31 3/4 22 5/8
Third Quarter............................ 31 24
Fourth Quarter........................... 30 1/2 22 1/4
FISCAL YEAR ENDING DECEMBER 31, 1995
First Quarter............................ 35 7/8 23 1/2
Second Quarter........................... 39 1/4 32 1/8
Third Quarter............................ 36 1/2 28
Fourth Quarter (through December 11)..... 28 7/8 19 1/4
</TABLE>
<TABLE>
<CAPTION>
NEXGEN HIGH LOW
------ ------- -------
<S> <C> <C>
FISCAL YEAR ENDED JUNE 30, 1995
Fourth Quarter (from May 25, 1995)....... $31 $20
FISCAL YEAR ENDING JUNE 30, 1996
First Quarter............................ 26 1/2 16 5/8
Second Quarter (through December 11)..... 22 7/8 14 3/4
</TABLE>
13
<PAGE>
On October 20, 1995, the last trading day prior to the announcement by AMD
and NexGen of the terms of the proposed Merger, the closing sale prices of AMD
Common Stock and NexGen Common Stock were $26 1/8 and $21 1/4 per share,
respectively. On December 11, 1995, the closing sale prices of AMD Common Stock
and NexGen Common Stock were $19 3/8 and $15 per share, respectively. Based on
the closing sale prices of AMD Common Stock, the market prices of 0.8 of a
share of AMD Common Stock (the Exchange Ratio) on October 20, 1995 and December
4, 1995 were $20 9/10 and $15 1/2, respectively.
On November 20, 1995, the record date for the NexGen Meeting, NexGen had
approximately 550 holders of record. On November 27, 1995, the record date for
the AMD Meeting, AMD had approximately 10,709 holders of record.
Following the Merger, there will be no further public market for NexGen
Common Stock because NexGen will either become a wholly owned subsidiary of AMD
or be merged into AMD.
DIVIDEND POLICY
Neither AMD nor NexGen has ever paid a dividend on its Common Stock.
Following the Merger, it is expected that the Board of Directors of AMD will
continue this policy in order to retain earnings for investment in the
business. Certain of AMD's debt arrangements restrict payment of cash
dividends.
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
The following selected historical financial information of AMD and NexGen has
been derived from the historical consolidated financial statements, and should
be read in conjunction with such consolidated financial statements and the
notes thereto, which are included in or incorporated by reference in this Joint
Proxy Statement/Prospectus. The selected pro forma financial information of AMD
and NexGen is derived from the unaudited pro forma combined condensed financial
statements and should be read in conjunction with such pro forma statements and
the notes thereto, which are included elsewhere in this Joint Proxy
Statement/Prospectus. Historical and pro forma information for certain periods
are derived from financial statements not included in or incorporated herein by
reference. For pro forma purposes, the NexGen financial data covers the
approximate comparable financial reporting periods used by AMD. No dividends
have been declared or paid on either AMD Common Stock or NexGen Common Stock.
All information shown is in thousands except per share amounts.
The pro forma information is presented for illustrative purposes only and is
not necessarily indicative of the operating results or financial position that
would have occurred if the Merger had been consummated as of the beginning of
the periods indicated, nor necessarily indicative of the future operating
results or financial position of the combined company.
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
---------------------------------------------------------------- ------------------------
DECEMBER 30, DECEMBER 29, DECEMBER 27, DECEMBER 26, DECEMBER 25, SEPTEMBER 25, OCTOBER 1,
1990 1991 1992 1993 1994 1994 1995
------------ ------------ ------------ ------------ ------------ ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
HISTORICAL--AMD
Net sales............... $1,059,242 $1,226,649 $1,514,489 $1,648,280 $2,134,659 $1,589,491 $1,836,695
Operating income (loss). (51,120) 109,160 269,945 305,053 513,139 395,159 317,239
Net income (loss)(2).... (53,552) 145,287 245,011 228,781 305,266 264,507 244,949
Net income (loss) per
share:
Primary................ (0.78) 1.53 2.57 2.30 3.02 2.64 2.33
Fully diluted.......... (0.78) 1.52 2.49 2.24 2.92 2.54 2.29
Total assets at end of
period................. 1,111,692 1,291,758 1,448,095 1,929,231 2,445,702 2,321,919 2,967,407
Long-term debt at end of
period(1).............. 131,307 42,039 19,676 79,504 75,752 80,744 216,378
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
------------------------------------------------ ---------------------------
JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30, SEPTEMBER 30, SEPTEMBER 30,
1991 1992 1993 1994 1995 1994 1995
-------- -------- -------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
HISTORICAL--NEXGEN
Net sales............... $ -- $ -- $ -- $ -- $20,794 $ 7 $16,568
Operating income (loss). (11,475) (11,404) (12,583) (22,661) (44,104) (4,600) (20,694)
Net income (loss)....... (11,412) (12,116) (13,033) (23,708) (45,795) (5,326) (20,468)
Net income (loss) per
share
Primary................ (0.68) (0.69) (0.55) (0.84) (1.82) (0.19) (0.62)
Total assets at end of
period................. 3,957 13,015 4,551 12,615 73,456 12,617 71,402
Long-term debt at end of
period(1).............. 672 6,199 2,537 10,562 -- 16,312 --
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
-------------------------------------- ------------------------
DECEMBER 27, DECEMBER 26, DECEMBER 25, SEPTEMBER 25, OCTOBER 1,
1992 1993 1994 1994 1995
------------ ------------ ------------ ------------- ----------
<S> <C> <C> <C> <C> <C>
PRO FORMA--AMD AND
NEXGEN(4)
Net sales............... $1,514,489 $1,648,280 $2,135,515 $1,589,498 $1,873,201
Operating income........ 258,766 289,860 488,925 376,465 262,561
Net income.............. 233,235 216,589 281,247 246,058 206,982
Net income per share(3):
Primary................ 2.08 1.79 2.18 1.94 1.53
Fully diluted.......... 2.04 1.77 2.14 1.89 1.51
Total assets at end of
period................. 1,458,916 1,947,913 2,474,788 2,334,536 3,038,809
Long-term debt at end of
period(1).............. 23,839 84,775 92,646 97,056 216,378
</TABLE>
- --------
(1) Long-term debt includes noncurrent obligations under capital leases.
(2) The net loss for the year ended December 30, 1990 includes a litigation
judgment charge of $27.7 million. The net income for the year ended
December 25, 1994 includes a litigation settlement charge of $58.0 million.
(3) Shares used to compute pro forma net income per share is calculated by
adding the number of shares used to compute AMD historical net income per
share to the number determined through multiplying the NexGen weighted
average common and common equivalent shares by the Exchange Ratio of 0.8 of
a share of AMD Common Stock for each share of NexGen Common Stock and
common stock equivalents.
(4) The combined company expects to incur charges to operations currently
estimated to be between $9.0 million and $11.0 million, primarily in the
quarter in which the Merger is consummated, to reflect transaction fees and
costs incident to the Merger. An estimated charge, at the midpoint of the
above range, of $10.0 million is reflected in the pro forma combined
condensed balance sheet. The estimated charge is not reflected in the pro
forma combined statement of operations data. The amount of this charge is a
preliminary estimate and is therefore subject to change.
15
<PAGE>
COMPARATIVE PER SHARE DATA
The following table sets forth for AMD and NexGen certain historical per
share data and combined per share data on an unaudited pro forma basis. This
data should be read in conjunction with the selected financial data, the pro
forma combined condensed financial statements and the separate historical
financial statements of AMD and NexGen and notes thereto, included or
incorporated by reference herein.
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
-------------------------------------- ---------------------------
DECEMBER 27, DECEMBER 26, DECEMBER 25, SEPTEMBER 25, OCTOBER 1,
1992 1993 1994 1994 1995
------------ ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
NET INCOME (LOSS) PER
SHARE:
Historical--AMD
Primary................ $ 2.57 $ 2.30 $ 3.02 $ 2.64 $ 2.33
Fully Diluted.......... 2.49 2.24 2.92 2.54 2.29
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
-------------------------------------- ---------------------------
JUNE 30, JUNE 30, JUNE 30, SEPTEMBER 30, SEPTEMBER 30,
1993 1994 1995 1994 1995
------------ ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
Historical--NexGen..... $ (0.55) $ (0.84) $ (1.82) $ (0.69) $(1.80)
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
-------------------------------------- ---------------------------
DECEMBER 27, DECEMBER 26, DECEMBER 25, SEPTEMBER 25, OCTOBER 1,
1992 1993 1994 1994 1995
------------ ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
Primary:
Pro forma--per AMD
share (1)(2)
Net income............. $ 2.08 $ 1.79 $ 2.18 $ 1.94 $ 1.53
Pro forma--per 0.8 AMD
share (3)
Net income............. 1.66 1.43 1.75 1.55 1.22
Fully Diluted:
Pro forma--per AMD
share (1)(2)
Net income............. 2.04 1.77 2.14 1.89 1.51
Pro forma--per 0.8 AMD
share (3)
Net income............. 1.63 1.42 1.71 1.51 1.20
BOOK VALUE PER SHARE
(4):
Historical:
AMD................... $ 9.91 $ 12.76 $ 16.38 $ 15.77 $19.38
NexGen................ (24.81) (30.32) (39.09) (37.97) 0.76
Pro forma:
Per AMD share......... 8.59 10.82 13.56 13.17 15.74
Per 0.8 AMD share..... 6.87 8.66 10.85 10.54 12.59
</TABLE>
- --------
(1) For the purposes of the pro forma combined data, AMD's financial data for
the nine months ended October 1, 1995 and September 25, 1994 and each of
the years ended December 25, 1994, December 26, 1993, and December 27, 1992
have been combined with NexGen's unaudited financial data for the nine-
month periods ended September 30, 1995 and 1994, and for each of the
twelve-month periods ended December 31, 1994, 1993, and 1992.
(2) Pro forma per share amounts are based on end-of-period or average shares
outstanding, as appropriate, adjusted using the Exchange Ratio of 0.8 of a
share of AMD Common Stock for each share of NexGen Common Stock and common
stock equivalents.
(3) The equivalent of NexGen's pro forma share amounts are calculated by
multiplying the combined pro forma per share amounts by the Exchange Ratio
of 0.8 of a share of AMD Common Stock.
(4) Historical book value per share is computed by dividing stockholders'
equity (excluding the liquidation preference of preferred stock) by the
number of common shares outstanding at the end of each period. Pro forma
book value per share is computed by dividing pro forma stockholders' equity
(excluding the liquidation preference of preferred stock) by the pro forma
number of common shares which would have been outstanding had the Merger
been consummated as of each balance sheet date.
16
<PAGE>
RISK FACTORS
The following risk factors should be considered by holders of NexGen Common
Stock in evaluating whether to approve the Merger Agreement and the Merger and
thereby to become holders of AMD Common Stock. These risk factors should also
be considered by holders of AMD Common Stock in evaluating whether to approve
the Merger Agreement and the Merger. These factors should be considered in
conjunction with the other information included and incorporated by reference
in this Joint Proxy Statement/Prospectus.
RISK FACTORS RELATING TO THE MERGER
Integration of Operations. AMD and NexGen have entered into the Merger
Agreement with the expectation that the Merger will result in beneficial
synergies. See "The Merger--Reasons for the Merger; Recommendations of the
Board of Directors." Achieving the anticipated benefits of the Merger will
depend in part upon whether the integration of the two companies' businesses
is accomplished in an efficient and effective manner, and there can be no
assurance that this will occur. The successful combination of companies in the
high technology industry may be more difficult to accomplish than in other
industries. The combination of the two companies will require, among other
matters, integration of AMD's and NexGen's respective engineering personnel
and product offerings, coordination of their sales and marketing and research
and development efforts and implementation of the manufacturing of NexGen's
products in the AMD facilities. There can be no assurance that such
integration will be accomplished smoothly or successfully. The difficulties of
such integration may be increased by the necessity of coordinating
geographically separated organizations. The integration of certain operations
following the Merger will require the dedication of management resources which
may temporarily distract attention from the day-to-day business of the
combined company. The inability of management to integrate the operations of
the two companies successfully could have a material adverse effect on the
business and the results of operations of AMD. In addition, as commonly occurs
with mergers in technology companies, during the pre-merger and integration
phases, aggressive competitors may undertake formal initiatives to attract
customers and to recruit key employees through various incentives.
Dilution. The Merger would result in substantial dilution of the interests
of AMD's current stockholders in AMD and its equity and earnings. Based on the
number of outstanding shares of AMD Common Stock and NexGen Common Stock as of
the record date for the Meetings, approximately 26,658,980 shares of AMD
Common Stock would be issued to NexGen's stockholders in the Merger (before
the elimination of fractional shares), which will represent 20.3% of the
approximately 131,113,717 shares of AMD Common Stock to be outstanding after
the Merger, assuming no exercise of any AMD or NexGen Options or warrants or
convertible debt of NexGen. As of September 30, 1995, there were outstanding
NexGen Options, rights to purchase under the NexGen ESPP, warrants and
convertible debt of NexGen to purchase or acquire an aggregate of
approximately 8,548,863 shares of NexGen Common Stock. Assuming the exercise
of all such NexGen Options and warrants and conversion of such convertible
debt, the shares of AMD Common Stock that would be held by the holders of
NexGen Common Stock, NexGen Options, rights to purchase under the NexGen ESPP
and warrants and convertible debt would represent 24.3% of the approximately
137,952,807 shares of AMD Common Stock outstanding as of the record date for
the AMD Meeting. As NexGen has not been profitable since its inception in 1986
and expects to incur additional operating losses during fiscal 1996 and
possibly longer, the Merger will result in an immediate decrease in the
earnings per share attributable to each share of AMD Common Stock currently
outstanding. The dilution resulting from the Merger could reduce the market
price of AMD Common Stock unless and until earnings growth or other business
synergies sufficient to offset the effect of such issuance can be achieved.
There can be no assurance that such synergies will be achieved.
Fixed Exchange Ratio. As a result of the Merger, each outstanding share of
NexGen Common Stock will be converted into the right to receive 0.8 of a share
of AMD Common Stock. The Merger Agreement does not provide for adjustment of
the Exchange Ratio based on fluctuations in the price of AMD Common Stock.
Accordingly, the value of the consideration to be received by the stockholders
of NexGen upon consummation of the Merger will depend on the market price of
AMD Common Stock at the Effective Time. The closing price for AMD Common Stock
on the NYSE on October 20, 1995, the last trading day prior to the public
announcement of the Merger, was $26 1/8, and on December 11, 1995, the latest
practicable trading day before
17
<PAGE>
the mailing of this Joint Proxy Statement/Prospectus, was $19 3/8. There can
be no assurance that the market price of AMD Common Stock on and after the
Effective Time will not be lower than such prices. See "Summary--Market Price
Data" and "Risk Factors--Risk Factors Relating to AMD--Volatility of Stock
Price."
Distributors and Customers. There can be no assurance that distributors and
present and potential customers of AMD and NexGen will continue their current
buying patterns without regard to the announced Merger. In particular, AMD and
NexGen believe that certain customers may defer purchasing decisions as they
evaluate AMD's future product strategy and consider the aggressive pricing
programs of certain competitors of AMD and NexGen. Any such deferrals could
have a material adverse effect upon the results of operations of AMD or NexGen
or both in the near term and the long term.
IBM and Compaq. NexGen currently relies on IBM for the production of the
Nx586 and its future generation microprocessors. IBM is entitled to terminate
its relationship with NexGen upon a change in control of NexGen. There can be
no assurance that IBM will not terminate its relationship with NexGen upon the
consummation of the Merger. The termination of the relationship would disrupt
the operations of NexGen and would have a material adverse effect on the near-
term business and results of operations of the combined company. NexGen has
granted limited manufacturing rights regarding certain of its present and
future products, including the Nx586 and the Nx686, to IBM and Compaq Computer
Corporation ("Compaq"). IBM and Compaq must pay royalties to NexGen on any
NexGen products produced. Under certain circumstances, Compaq may manufacture
NexGen products or have others manufacture such products for Compaq's own use
but not for resale. IBM may manufacture such products or have others
manufacture such products both for IBM's own use and for resale, but the
volumes of such products produced are subject to limitations. The combined
company will be obligated to provide technical assistance to IBM and Compaq
with respect to the exercise of their manufacturing rights which may divert
the efforts of personnel of the combined company from other matters. The
rights of IBM and Compaq to produce NexGen's products for their own use and
the rights of IBM to produce NexGen products for sale to third parties could
reduce the potential market for NexGen products produced by the combined
company or the profit margin achievable with respect to such products or both.
Transaction and Restructuring Charges. AMD and NexGen expect to incur
charges to operations currently estimated to be between $9.0 million and $11.0
million, primarily in the quarter in which the Merger is consummated, to
reflect transaction fees and costs incident to the Merger. Such fees and costs
include investment banking, legal, accounting, financial printing and other
related charges. These amounts are preliminary estimates and are therefore
subject to change. Additional and unanticipated expenses may be incurred
relating to the integration of the businesses of AMD and NexGen, including the
integration of product lines and distribution and administrative functions.
Although AMD expects that the elimination of duplicative expenses as well as
other efficiencies related to the integration of the businesses may offset
additional expenses over time, there can be no assurance that such net benefit
will be achieved in the near term, or at all.
RISK FACTORS RELATING TO AMD
Dependence on Microprocessor Revenues. A significant portion of AMD's
revenues, profits and margins in 1995 have been derived from AMD's Am486
products. AMD expects Am486 microprocessor revenues, profits and margins in
1996 to be below those of 1995. As the product cycle of fourth generation x86
products is drawing to a close, AMD anticipates that its ability to maintain
or expand its current levels of revenues, profits and margins in the future
will depend upon its success in developing and marketing in a timely manner
its next generation of microprocessor products, the K86 RISC SUPERSCALAR
products. AMD presently expects to begin volume production of its next
generation microprocessor, the AMD-K5, during the second half of 1996. AMD
expects 1996 to be a transitional year in the development of its next
generation of microprocessor products and believes that the product lines of
NexGen to be acquired in the Merger are important to the development and
introduction of K86 products which will follow the AMD-K5. AMD's future
generations of K86 products will face competition not only from x86 products
manufactured by Intel and others but also from products based upon an
increasing number of different architectures which have been developed or are
under development by Hewlett-Packard Company, IBM, Motorola, Inc., Sun
Microsystems, Inc. and other manufacturers of integrated
18
<PAGE>
circuits. No assurance can be given that AMD's K86 products will achieve
market acceptance or be introduced before the average selling prices of
comparable products have materially declined from their initial levels. AMD
has an agreement with Compaq under which AMD supplies Compaq with
microprocessor products, primarily the Am486 product; however, the agreement
does not require Compaq to purchase microprocessor products from AMD. Compaq
has advised AMD that it is reviewing its practice of purchasing
microprocessors from suppliers other than Intel and is in the process of
determining whether it will purchase microprocessors from suppliers other than
Intel in the near term. AMD believes that Compaq will consider the purchase of
AMD's K86 microprocessors when they become available. No assurance can be
given that any purchases will be made or, if they are, that they will not be
terminated by Compaq due to the availability of competing microprocessor
products.
Sixth Generation x86 Product. AMD has announced its intention to bring to
production status NexGen's sixth-generation Nx686 microprocessor in order to
market the product as the AMD-K6 microprocessor, the successor to the AMD-K5
microprocessor. Failure to bring the NexGen Nx686 microprocessor to production
status in a timely manner could have a material adverse effect on AMD's
operating results. AMD has also announced its intention to cease activity on
its own sixth-generation design project in order to devote its related
resources to future microprocessor generations. As a result, if the Merger
were not to occur, AMD could experience significant delays in bringing its own
sixth-generation microprocessor product to production status, which could have
a material adverse effect on AMD's longer term operating results.
New Products and Technological Change. The market for AMD's products
(including the microprocessor product lines of NexGen to be acquired in the
Merger) is characterized by rapid technological developments, evolving
industry standards, changes in customer requirements, frequent new product
introductions and enhancements and short product life cycles. AMD's success
depends in substantial part upon its ability, on a cost-effective and timely
basis, to continue to enhance its existing products and to develop and
introduce new products that take advantage of technological advances. An
unexpected change in one or more of the technologies related to its products
or in market demand for products based on a particular technology could have a
material adverse effect on AMD's results of operations or financial condition.
There can be no assurance that AMD will be able to develop new products
(including product lines of NexGen that will be acquired in the Merger) in a
timely and satisfactory manner to address new industry standards and
technological changes or to respond to new product announcements by others or
that any such new products will achieve market acceptance.
Intense Price Competition. Historically, the semiconductor industry has
experienced rapid technological advances together with substantial price
reductions in maturing products. After a product is introduced, prices
normally decrease over time as production efficiency and competition increase,
and a successive generation of products is developed and introduced for sale.
AMD is currently experiencing pressure on the margins and profitability
associated with its Am486 microprocessor products as a result of aggressive
reductions in the prices of Intel's Pentium products and other comparable 486
products. This pressure is expected to continue in 1996. AMD's future margins
and profitability may continue to be adversely affected by comparable price
reductions by Intel with respect to its future generation x86 products. As a
result of competitive pricing pressures, AMD offers price protection to its
distributors, which may materially adversely affect AMD's operating results
especially when average selling prices are decreased prior to sales of price
protected products by AMD's distributors.
Competition. Numerous firms compete with AMD in the manufacture and sale of
integrated circuits. Some of these firms have resources greater than those of
AMD and do not depend upon integrated circuits as their principal source of
revenues. There is also significant captive production by certain large users
of integrated circuits, such as manufacturers of computers, telecommunications
equipment and consumer electronics. AMD competes for integrated circuit market
share with Intel, Texas Instruments, Motorola, National Semiconductor,
Philips, Nippon Electric Co., SGS-Thomson, Hitachi, Toshiba, Fujitsu Ltd.,
Matsushita, Mitsubishi, Samsung, Hyundai and Siemens, all of whom are actively
attempting to increase their respective and collective worldwide marketshares.
Intel, in particular, has long held a dominant position in the market for
microprocessors used in
19
<PAGE>
PCs. Intel's dominant market position has to date allowed it to set x86
microprocessor performance standards and thus dictate the type of product the
market requires of Intel's competitors. For example, Intel has recently
announced that it is increasing its manufacturing capabilities to increase the
availability of motherboards incorporating its microprocessors. In addition,
Intel's financial strength has enabled it to reduce prices on its
microprocessor products within a short period of time following their
introduction, which reduces the margins and profitability of its competitors
which are forced to reduce prices to maintain competitiveness. Intel has
announced that it will spend substantial sums on research and development and
manufacturing facilities and is currently attempting to consolidate its
dominant position through an intensive advertising campaign designed to
engender brand loyalty to Intel among PC purchasers. As long as Intel remains
in this dominant position, its product introduction schedule and product
pricing strategy may adversely and materially affect AMD's business, operating
results and financial condition.
Fluctuations in Operating Results. AMD expects that its operating results
will be subject to potentially substantial quarterly and other fluctuations
due to a variety of factors, including competitive pricing pressures,
anticipated decreases in unit average selling prices of AMD's products,
fluctuations in manufacturing yields, availability and cost of products from
AMD's suppliers, the gain or loss of significant customers, new product
introductions by AMD or its competitors, changes in the mix of products sold
and in the mix of sales by distribution channels, market acceptance of new or
enhanced versions of AMD's products, seasonal customer demand, the timing of
significant orders, and the timing and extent of product development costs. In
addition, operating results could be adversely affected by general economic
and other conditions affecting the timing of customer orders and capital
spending, a downturn in the market for PCs, and order cancellations or
rescheduling. AMD's customers may change delivery schedules or cancel orders
without significant penalty. Many of the factors listed above are outside of
the control of AMD. These factors are difficult to forecast, and these or
other factors could materially adversely affect AMD's quarterly or annual
operating results.
Industry Standards. Adherence to industry standards is important to AMD's
marketing strategy and product development effort. The establishment of
standards is a function of user acceptance, and such standards are, therefore,
subject to change. The x86 architecture, originally developed by Intel, has
been the leading architecture for PC microprocessors. The acceptance of AMD's
K86 products will depend upon the continued acceptance of the x86 standard and
the continued development of application software programs. There can be no
assurance of the continued acceptance of the x86 standard or that software
developers will continue to develop software compatible with this standard.
Backlog. AMD manufactures and markets a standard line of products.
Consequently, a portion of its sales are made from inventory on a current
basis. Sales are made primarily pursuant to (1) purchase orders for current
delivery of standard items, or (2) agreements covering purchases over a period
of time, which are frequently subject to revision and cancellation. Generally,
in light of current industry practice and experience, AMD does not believe
that such agreements provide meaningful backlog figures or are necessarily
indicative of actual sales for any succeeding period.
Manufacturing Constraints, Interruption and Yields. AMD has entered into a
foundry arrangement with Taiwan Semiconductor Manufacturing Corporation, Ltd.
("TSMC") for production of AMD's Am486 microprocessors. The TSMC arrangement
extends through 1997. AMD has other foundry arrangements with third parties
for the production of other products and may increase its use of such foundry
arrangements in the future. If AMD's new semiconductor fabrication facility in
Austin, Texas, known as Fab 25, is not brought up to full capacity or if AMD
is otherwise unable to generate sufficient manufacturing capabilities in its
own facilities or through foundry or similar arrangements with others, AMD may
not be able to produce sufficient products to meet demand. This could have an
adverse effect on AMD's results of operations. AMD and NexGen anticipate that
NexGen's current products and products under development will eventually be
manufactured by AMD. There can be no assurance that AMD's manufacturing
facilities and processes will be compatible with the manufacturing of NexGen's
products without substantial reconfiguration, the timing of which might
adversely affect the results of AMD's operations and financial condition. See
"--Risk Factors Relating to NexGen--
20
<PAGE>
Dependence on Sole Source Third Party Manufacturers." If any substantial
interruption were to occur with respect to any of AMD's manufacturing
operations, either as a result of a labor dispute, equipment failure or other
cause, there could be a material adverse effect on AMD's results of
operations. AMD's operating results may also be materially adversely affected
by fluctuations in manufacturing yields.
Key Personnel. AMD's future success depends in part upon the continued
service of its key engineering, sales, marketing and executive personnel, and
its ability to identify and hire additional personnel. There is particularly
intense competition for qualified personnel in the engineering design areas of
AMD's activities. There can be no assurance that AMD will be able to continue
to attract and retain qualified personnel necessary for the development of its
products. Loss of the service of, or failure to recruit, key engineering
design personnel could be significantly detrimental to AMD's product
development programs or otherwise have a material adverse effect on AMD's
business and operating results. AMD has an employment agreement with W.J.
Sanders III, its Chairman and Chief Executive Officer, which obligates Mr.
Sanders not to compete with the Company following a termination of his
employment under certain circumstances. See "Compensation of Executive
Officers and Directors of AMD--Compensation Arrangements--Chairman's
Employment Agreement." AMD has no employment or noncompetition agreements with
any of its other officers, directors or key employees, although upon
consummation of the Merger S. Atiq Raza and Vinod Dham will enter into
noncompetition agreements with AMD. See "The Merger--Interests of Certain
Persons in the Merger."
Product Defects; Incompatibility. It is possible that one or more of AMD's
products may be found to be defective after AMD has already shipped in volume,
requiring a product replacement, recall, or a software fix which would cure
such defect but impede performance. Product returns similar to Intel's prior
problems with its Pentium processor could impose substantial costs on AMD and
have a material adverse effect on AMD. For its future generations of K86
microprocessors, AMD intends to obtain Windows and Windows 95 certifications
from Microsoft Corporation ("Microsoft"), Platinum certification from XXCAL, a
testing organization, and other appropriate certifications. While AMD submits
its products to rigorous internal and external testing, there can be no
assurance that AMD's products will be compatible with all standard PC software
or hardware. Any inability of AMD's customers to achieve such compatibility or
compatibility with other software or hardware after AMD's products are shipped
in volume would have a material adverse effect on AMD's business and operating
results. There can be no assurance the AMD will be able to successfully
correct any such compatibility problems that are discovered or that such
corrections will be acceptable to customers or made in a timely manner. In
addition, announcements of a defect in AMD's products or an incompatibility
could have a material adverse effect on AMD.
Personal Computer Marketplace. The market for microprocessors is dependent
upon the market for PCs. From time to time, the PC industry has experienced
significant downturns, often in connection with, or in anticipation of,
declines in general economic conditions. These downturns have been
characterized by diminished product demand, production overcapacity and
resultant accelerated erosion of average selling prices. AMD's business could
be materially and adversely affected by industry-wide fluctuations in the PC
marketplace in the future.
Ability to Access Financing. AMD is currently planning to build a submicron
wafer fabrication facility in Dresden, Germany at an estimated cost of
approximately $1.5 billion. AMD and Fujitsu Ltd. are parties to a joint
venture, known as FASL, which has constructed and is operating a wafer
fabrication facility in Aizu-Wakamatsu, Japan for the manufacture of Flash
memory products. During 1996 the joint venture plans to build a second wafer
fabrication facility at a planned cost of $1.1 billion. The construction is
anticipated to be funded by the joint venture itself and related bank
borrowings by the joint venture, but if FASL is unable to secure the necessary
funds, AMD will be required to contribute cash or guarantee third-party loans
in proportion to its 49.95% interest in the joint venture. The FASL costs are
denominated in Yen and are, therefore, subject to change due to foreign
exchange rate fluctuations. In addition, AMD is required, on an ongoing basis,
to devote substantial capital to research and development and the construction
of manufacturing facilities. There can be no assurance that capital will be
available on terms favorable to AMD and in sufficient amounts to enable AMD to
achieve its desired results.
Essential Manufacturing Materials. Certain of the raw materials used by AMD
in the manufacture of its products are available from a limited number of
suppliers. For example, for several types of the integrated circuit
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packages that are purchased by AMD, as well as by the majority of other
companies in the semiconductor industry, the principal suppliers are Japanese
companies. Shortages could occur in various essential materials due to
interruption of supply or increased demand in the industry. If AMD were unable
to procure certain of such materials from any source, it would be required to
reduce its manufacturing operations, which could have a material adverse
effect upon its results of operations.
Intellectual Property Rights; Potential Litigation. Pursuant to a 1976
agreement, as extended in 1982, AMD and Intel have cross-licensed their
patents to each other. This agreement expires on December 31, 1995. In their
January 11, 1995, settlement agreement relating to numerous litigation matters
between AMD and Intel, the companies agreed to negotiate a new patent cross-
license agreement to be effective January 1, 1996. To date, the parties
continue to negotiate but no agreement has been reached. In addition, AMD has
entered into a number of licenses and cross-licenses with other companies
relating to several of AMD's products. As is common in the semiconductor
industry, from time to time AMD has been notified that it may be infringing
another party's patents or copyrights. While patent and copyright owners in
such instances often express a willingness to resolve the dispute or grant a
license, no assurance can be given that all necessary licenses will be honored
or obtained on satisfactory terms, or that the ultimate resolution of any
material dispute concerning AMD's present or future products will not have a
material adverse impact on AMD's future results of operations or financial
condition. No litigation regarding patents, copyrights or other intellectual
property matters believed by AMD to be material is currently pending or
threatened against AMD.
Environmental Regulations. AMD is subject to a variety of governmental
regulations related to the use, storage, handling, discharge or disposal of
toxic, volatile or otherwise hazardous chemicals used in the manufacturing
process. AMD believes that it is currently in compliance in all material
respects with these regulations and that it has obtained all necessary
environmental permits to conduct its business. Nevertheless, the failure to
comply with present or future regulations could result in fines being imposed
on AMD, suspension of production, alteration of AMD's manufacturing processes
or cessation of operations. Such regulations could require AMD to acquire
expensive remediation equipment or to incur other expenses to comply with
environmental regulations. Any failure by AMD to control the use, disposal or
storage of, or adequately restrict the discharge of, hazardous substances
could subject AMD to future liabilities.
Since 1981, AMD has discovered, investigated and begun remediation of three
sites where releases from underground chemical tanks at its facilities in
Santa Clara County, California adversely affected the groundwater. The
chemicals released into the groundwater were commonly in use in the
semiconductor industry in the wafer fabrication process prior to 1979. At
least one of the released chemicals (which is no longer used by AMD) has been
identified as a probable carcinogen. In 1991, AMD received four Final Site
Clean-up Requirements Orders from the California Regional Water Quality
Control Board, San Francisco Bay Region ("RWQCB") relating to the three sites.
One of the orders named AMD as well as TRW Microwave, Inc. and Philips
Semiconductor (formerly Signetics Corporation); another of the orders named
AMD as well as National Semiconductor Corporation. A notice dated October 3,
1994 was received by AMD from the Department of Ecology of the State of
Washington indicating that the Department had determined the corporation to be
a potentially liable person for the release of hazardous substances on a site
located in Yakima, Washington.
AMD has not yet determined to what extent the costs of any related remedial
actions will be covered by insurance. The three sites in Santa Clara County
are on the National Priorities List (Superfund). If AMD fails to satisfy
federal compliance requirements or inadequately performs the compliance
measures, the government (a) can bring an action to enforce compliance, or (b)
can undertake the desired response actions itself and later bring an action to
recover its costs, and penalties, which is up to three times the costs of
clean-up activities, if appropriate. With regard to certain claims related to
this matter, the statute of limitations has been tolled. AMD has computed and
recorded the estimated environmental liability in accordance with applicable
accounting rules and has not recorded any potential insurance recoveries in
determining the estimated costs of the clean-up. The amount of environmental
charges to earnings has not been material during the last three fiscal years.
AMD believes that the potential liability, if any, in excess of amounts
already accrued with respect to the foregoing environmental matters or any
related litigation will not have a material adverse effect on the financial
condition or results of operations of AMD.
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International Sales. AMD derives a substantial portion of its revenues from
its subsidiaries located in Europe and the Pacific Rim. While most of the
revenue of the subsidiaries is denominated in U.S. Dollars, the majority of
their expense transactions are denominated in foreign currencies. As a result,
AMD's operating results are subject to fluctuations in foreign currency
exchange rates. To reduce the foreign exchange risks associated with
international operations, AMD engages in hedging transactions. There can be no
assurance that fluctuations of foreign exchange rates will not have an adverse
impact on AMD's results of operations.
International Manufacturing. Nearly all product assembly and final testing
of AMD's products are performed at its manufacturing facilities in Penang,
Malaysia; Singapore; and Bangkok, Thailand; or by subcontractors in Asia. A
limited amount of testing of products destined for delivery in Europe is
performed at AMD's facilities in Basingstoke, England. AMD and Fujitsu Ltd.
are parties to FASL which has substantial manufacturing activities in Aizu-
Wakamatsu, Japan. Foreign manufacturing entails political and economic risks,
including political instability, expropriation, currency controls and
fluctuations, changes in freight and interest rates, and exemptions for taxes
and tariffs. For example, if AMD were unable to assemble and test its products
abroad, or if air transportation between the United States and AMD's overseas
facilities were disrupted, there could be a material adverse effect on AMD's
operations.
Domestic and International Economic Conditions. AMD's business is subject to
general economic conditions, both in the United States and abroad. A
significant decline in economic conditions in any significant geographic area
could have a material adverse effect upon the results of AMD's operations and
financial condition.
Earthquake Danger. AMD's corporate headquarters, a portion of its
manufacturing facilities, assembly and research and development activities and
certain other critical business operations are located near major earthquake
faults. AMD's operating results and financial condition could be materially
adversely affected in the event of a major earthquake.
Volatility of Stock Price. Based on the trading history of its stock, AMD
believes factors such as quarterly fluctuations in AMD's financial results,
announcements of new products by AMD or its competitors and general conditions
in the semiconductor industry have caused and are likely to continue to cause
the market price of AMD Common Stock to fluctuate substantially. Technology
company stocks in general have experienced extreme price and volume
fluctuations that often have been unrelated to the operating performance of
the companies. This market volatility may adversely affect the market price of
AMD Common Stock. In addition, an actual or anticipated shortfall in revenue,
gross margins, or earnings from securities analysts' expectations could have
an immediate effect on the trading price of AMD Common Stock in any given
period. See "Summary--Market Price Data."
RISK FACTORS RELATING TO NEXGEN
Uncertainty of Future Revenues and Profitability; Recent Product
Introduction; History of Operating Losses. NexGen was founded in 1986 and did
not commence product shipments until September 1994. No revenue was received
from the commercialization of its products prior to that date. For the fiscal
year ended June 30, 1995, NexGen incurred a net loss of $45.8 million and for
the three months ended September 30, 1995, NexGen incurred an additional net
loss of $20.5 million. As of September 30, 1995, NexGen had an accumulated
deficit of approximately $147.3 million. NexGen has not been profitable since
inception and expects to incur additional operating losses during fiscal 1996
and possibly longer. To date, NexGen has experienced negative gross margins on
its product sales and expects to continue to experience negative gross margins
during fiscal 1996 and possibly longer. In order to achieve profitability,
NexGen must continue to introduce and ship in quantity higher performance
versions of its Nx586 processor and its next generation Nx686 processor to
respond to competition, significantly increase customer orders and sales of
its high performance products and successfully ramp up production at its
third-party manufacturers to satisfy such orders. A key factor in increasing
sales will be NexGen's success in expanding its customer base. NexGen
initially shipped the Nx586 processor with a system logic chipset for the VL
bus and motherboard. In response to the emergence of the PCI bus as an
industry standard for fifth generation processors, NexGen began shipments of
its NxPCI system logic chipsets along with
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PCI-based motherboards and Nx586 processors in July 1995. NexGen believes the
timely availability of NxPCI chipsets and custom motherboards will be a
critical factor in NexGen's ability to successfully increase sales, and there
can be no assurance that NxPCI chipsets and custom motherboards will be
available in such quantities and upon such delivery schedules as NexGen may
require. NexGen currently expects to commence shipments of production volumes
of the Nx686 in the second half of 1996, although there can be no assurance
that shipments will commence in such time frame or that such shipments will be
in significant volumes.
NexGen's target markets for its products are PC OEMs and PC motherboard
manufacturers. To date, NexGen has sold products to small and medium-sized
OEMs. In March 1995, Compaq announced that it intends to use Nx586 processors
in future Compaq products. To date, NexGen has not received any purchase
orders and does not expect to receive revenues from the sale of its products
to Compaq until at least the second half of 1996, if at all. NexGen
understands that Compaq is reviewing its practice of purchasing
microprocessors from suppliers other than Intel and is in the process of
determining whether it will purchase microprocessors from suppliers other than
Intel in the near term. There can be no assurance that Compaq will actually
incorporate and ship the Nx586 in its future products. NexGen markets its
products to other large PC OEMs worldwide. There can be no assurance that
NexGen's products will gain acceptance in the market. The failure of NexGen's
processor products to capture and retain a significant share of the market for
x86 microprocessors would have a material adverse effect on NexGen's operating
results and future prospects. NexGen may never achieve significant revenues or
become profitable. See "Information Concerning NexGen--NexGen Management's
Discussion and Analysis of Financial Conditions and Results of Operations."
From inception to June 30, 1995, NexGen only sold fully populated
motherboards (a Nx586 processor and a system logic chipset incorporated in a
motherboard). In the three months ended September 30, 1995, NexGen sold
processors and system logic chipsets independent of motherboards to a single
customer, Alaris, Inc. ("Alaris"). Such sales constituted approximately 13% of
total sales for such period. NexGen's strategy is to continue to increase the
percentage of total sales represented by processors and chipsets that are sold
independent of motherboards. However, there can be no assurance that such
product mix shift will occur. Any decrease in sales of independent processors
and chipsets, or any failure to increase such sales, will adversely affect
overall gross margins and have a material adverse effect on NexGen's results
of operations.
Dependence on Sole Source Third-Party Manufacturers. NexGen relies on
outside parties for the manufacture of its products. Accordingly, NexGen will
be dependent on the capabilities of these outside parties for the successful
manufacture of its products. To date, NexGen has had limited production
experience with the current manufacturers of its Nx586 processor, system logic
chipsets and motherboards, and no significant production experience with any
other manufacturers. There can be no assurance that these manufacturers will
be able to meet NexGen's product needs in a satisfactory and timely manner.
NexGen's reliance on third-party manufacturers involves a number of additional
risks, including the absence of guaranteed capacity, reduced control over
delivery schedules, production cycle time, production and frequency
performance level yields, quality assurance and costs. For example, for the
three months ended September 30, 1995, finished wafers yielded an unexpectedly
higher proportion of P90 product, a higher negative gross margin product,
relative to P100 product, which contributed to NexGen's overall negative gross
margin and a $3.4 million write-down of inventory to current market value.
Although NexGen believes that these manufacturers would have an economic
incentive to perform such manufacturing for NexGen, the amount and timing of
the manufacturer's resources to be devoted to these activities are not within
the control of NexGen, and there can be no assurance that manufacturing
problems will not occur in the future.
To date, NexGen has entered into an agreement with one manufacturer, IBM,
for the production of the Nx586 and its future generation processor. This
agreement provides limited assurances of deliveries at set minimums for a
limited period of time. To become profitable, NexGen will need to obtain
volumes of Nx586 and future generation products in excess of such minimums.
NexGen expects to ask IBM for additional supply commitments over time as
needed, but there can be no assurance that NexGen will be successful in
obtaining additional supply commitments from IBM. IBM is also the primary
manufacturer for one of NexGen's competitors, Cyrix Corporation ("Cyrix").
NexGen is currently negotiating a revised agreement with IBM, that
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if entered into, would supersede its existing agreement and modify the method
of calculating prices from IBM. There can be no assurance that this revised
agreement will be entered into.
Production of NexGen's Nx586 processor requires the use of advanced
submicron process technology, which is available from only a few sources,
including IBM. There can be no assurance that NexGen will continue to have
access to such technology or to other process technologies that NexGen may
require for future products. In the event IBM is unwilling or unable to meet
NexGen's needs, NexGen believes alternative suppliers could be found. However,
a change in suppliers, whether resulting from the need to access alternative
process technologies, to resolve manufacturing problems at existing suppliers,
or for other reasons, would have a material adverse effect on NexGen's
delivery schedules, business, operating results and financial condition.
NexGen has entered into an agreement with VLSI Technology, Inc. ("VLSI") for
the production of NexGen's PCI system logic chipsets, which are custom
designed for operation with the Nx586. NexGen has a relationship with Alaris,
a privately held U.S. motherboard company, and other motherboard
manufacturers, for the production of custom motherboards designed to work with
NexGen's PCI system logic chipsets and Nx586 processor. NexGen has recently
phased out the sale of VL-based system logic chipsets ("NxVL") and
motherboards and has transitioned to the sale of such products based on the
PCI bus. Purchase of system logic chipsets and custom motherboards under these
agreements are subject to acceptance of individual purchase orders by the
manufacturer. If NexGen is unable to purchase PCI system logic chipsets or
custom motherboards in sufficient volume and on acceptable delivery schedules,
or experiences delays in their development, demand for its Nx586 processor
will be adversely affected since the necessary system logic chipsets and
custom motherboards are not currently available from any other sources.
NexGen is actively seeking to enter into agreements with additional
manufacturers in order to obtain multiple sources for its processors, PCI
system logic chipsets and custom motherboard products but expects that IBM and
VLSI will continue to be the sole manufacturer of its Nx586 processor and PCI
system logic chipsets, respectively, for an indefinite period of time. In
addition, IBM will be initially the sole manufacturer of NexGen's recently
announced Nx686 processor. There can be no assurance that NexGen will be able
to enter into agreements with additional manufacturers or that, if it is able
to enter into such agreements, that those agreements will be on terms
favorable to NexGen. Converting the physical design for NexGen's processor and
system logic products to the design rules of a different fabrication facility
is a difficult task. Each new manufacturer has a different set of design rules
for manufacturing the products, which requires NexGen to generate a new set of
design specifications for each such manufacturer. Additional silicon and
design iterations in excess of NexGen's current plan, if required, may cause
additional delays and may cause NexGen to incur substantial additional costs.
Product positioning and acceptance may be adversely affected by such delays,
particularly if competitors introduce improved or superior products during
such period. There can be no assurance that such additional iterations will
not be required.
In addition, production ramp-up of NexGen's current suppliers, as well as
the qualification process and production ramp-up of any new suppliers, could
take longer than anticipated. NexGen's product introduction schedules, sales,
potential profitability and ability to meet customer demand could be severely
impacted by any failure or delay by any third-party manufacturer to provide
necessary resources and capacity to NexGen or by any other disruption or delay
at any such manufacturer.
In order to obtain an adequate supply of products, NexGen may be required to
enter into various transactions, including granting the right to sell NexGen's
products on an OEM basis (as was the case in the agreements with IBM and
VLSI), equity investments in or loans to third-party manufacturers in exchange
for guaranteed production (as was the case with Alaris), the formation of
joint ventures to own and operate wafer fabrication facilities, the
acquisition or construction of wafer fabrication facilities, the usage of
"take or pay" contracts that commit NexGen to purchase specified quantities of
wafers over extended periods, or commitments for the provision of
semiconductor equipment. NexGen may also have to make prepayments to third-
party manufacturers in order to obtain capacity commitments. Manufacturing
arrangements such as these may require substantial capital investments, which
may require NexGen to seek additional equity or debt financing. There can be
no assurance that such additional financing, if required, will be available
when needed or, if available, will be on satisfactory terms.
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There can be no assurance that NexGen will obtain sufficient sources of
supply of products to meet customer demand in the future. Obtaining sufficient
third-party manufacturing capacity is particularly difficult during periods of
high growth and may become substantially more difficult if NexGen's product
requirements increase significantly. In addition, because NexGen must order
products and build inventory substantially in advance of product shipments,
there is a risk that NexGen will forecast quantity and product mix incorrectly
and, therefore, produce excess or insufficient inventories. Because the
markets for NexGen's products are subject to rapid technological and price
changes, excess inventory may be subject to obsolescence. For example, for the
year ended June 30, 1995, NexGen wrote down the value of its NxVL inventory by
$5.6 million and for the quarter ended September 30, 1995, NexGen wrote down
the value of other existing inventory by $3.4 million. If NexGen forecasts
incorrectly and produces insufficient inventory of particular products, NexGen
may face cancellations from or the loss of customers, who may seek to satisfy
their needs from other suppliers. NexGen's customers may change delivery
schedules or cancel orders without significant penalty. This inventory risk is
heightened because NexGen's customers usually place orders with short lead
times. To the extent NexGen produces excess or insufficient inventories of
particular products, NexGen's operating results could be materially adversely
affected. See "Information Concerning NexGen--NexGen Management's Discussion
and Analysis of Financial Condition and Results of Operations" and "--Business
of NexGen--Manufacturing."
Customer Concentration. NexGen's sales are currently concentrated within a
limited customer base. Three customers, Aquarius Robotron Systems GmbH
("Aquarius"), Alaris and All American Semiconductor, Inc. ("All American"),
accounted for 36%, 34% and 22%, respectively, of sales in the year ended June
30, 1995 and All American, Alaris and Wooyoung Tech. Co. Ltd. ("Wooyoung
Tech."), accounted for 39%, 25% and 17%, respectively, of sales in the three
months ended September 30, 1995. NexGen expects a significant portion of its
future sales to remain concentrated within a limited number of customers.
There can be no assurance that NexGen will be able to retain its major
customers or that such customers will not otherwise cancel or reschedule
orders, or in the event of cancelled orders, that such orders will be replaced
by other sales. In addition, sales to any particular customer may fluctuate
significantly from quarter to quarter. The occurrence of any such events could
have a material adverse effect on NexGen's operating results. See "Information
Concerning NexGen--Business of NexGen--Sales, Marketing and Distribution."
Dependence on Product Development; Risk of Product Development Delays. In
order to compete successfully in the future, NexGen will need to develop
higher performance and cost-reduced versions of its Nx586 processor, and will
also need to develop future generations of products such as the Nx686. NexGen
has experienced significant delays in product development in the past.
NexGen's future products will require significant additional research and
development prior to their commercialization. Further design and silicon
iterations may be necessary to attain competitive performance for future
versions of the Nx586 processor and for any future generation products.
Research and development activities typically preclude definitive statements
as to the time required and costs involved in reaching certain objectives.
Consequently, actual research and development costs could exceed budgeted
amounts and estimated time frames may require extension. Any delays or
additional research costs could have a material adverse effect on NexGen's
business and results of operations. There can be no assurance that any
potential products will be capable of being produced in commercial quantities
on a timely basis at acceptable costs or be successfully marketed.
Custom motherboards with system logic chipsets are required to enable the
Nx586 processor to function properly with other PC hardware. To meet this
requirement, NexGen has designed custom motherboards and system logic chipsets
that are manufactured by third parties and sold to its customers. NexGen has
recently transitioned from its initial VL-bus chipset product to what it
believes will be a more cost-effective chipset solution, which is designed to
operate in conjunction with the PCI bus. In order to compete in the future,
NexGen will need to continue to develop more advanced versions of its chipsets
and motherboards including system logic chipsets operating at higher
performance levels. While NexGen has commenced shipping PCI-based system
chipsets and motherboards with its Nx586 in limited quantities, in the event
that such products fail to function and perform as planned, NexGen will have
to redesign the system logic chipsets and motherboards. Any delays in the
availability of PCI-based system logic chipsets could delay or impede OEM
acceptance of NexGen's Nx586 processor and could have a material adverse
effect on NexGen's business, financial condition and results of operations.
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NexGen's customers have to manufacture and test motherboards incorporating
NexGen's Nx586 processor. Functional failures in its customers' motherboards
or systems may cause delay in the shipment of products incorporating the Nx586
processor or in market acceptance of such products and, consequently, have a
material adverse effect on NexGen. Furthermore, there can be no assurance that
systems incorporating NexGen's Nx586 processor will operate at a competitive
level of performance. In addition, delays in the shipment of its customers'
motherboards or system products due to functional problems or problems related
to regulatory compliance and export licenses may cause delays in production
orders for the Nx586 processor.
The market for x86 microprocessors is subject to rapid technological changes
and has been subject to continuous introductions by Intel of increasingly
higher performance processors. To the extent that NexGen is unable to sell all
of its inventory of older, or lower performance, version processors that have
been surpassed in performance by higher performance versions, NexGen will be
required to record a charge, in the same manner as its charge with respect to
the NxVL inventory. Such charge could have a material adverse effect on
NexGen's results of operations.
Product Defects; Incompatibility. It is possible that one or more of
NexGen's products may be found to be defective after NexGen has already
shipped in volume, requiring a product replacement, recall, or a software fix
which would cure such defect but impede performance. Product returns similar
to Intel's prior problems with its Pentium processor could impose substantial
costs on NexGen and have a material adverse effect on NexGen. The Nx586
processor has received Windows and Windows 95 certifications from Microsoft
and Platinum certification from XXCAL, a testing organization. The Nx586
processor has also been approved by IBM for OS/2 compatibility and passed the
tests supplied by Novell, Inc. ("Novell") for NetWare compatibility. While
NexGen submits its products to rigorous internal and external testing, there
can be no assurance that NexGen's products will be compatible with all
standard PC software or hardware. Notwithstanding the foregoing, any inability
of NexGen's customers to achieve such compatibility or compatibility with
other software or hardware after NexGen's products are shipped in volume would
have a material adverse effect on NexGen's business and operating results.
There can be no assurance that NexGen will be able to successfully correct any
such compatibility problems that are discovered or that such corrections will
be acceptable to customers or made in a timely manner. In addition,
announcements of a defect in NexGen's products or an incompatibility could
have a material adverse effect on NexGen. See "Information Concerning NexGen--
Business of NexGen--Technology" and "--Business of NexGen--Research and
Development."
Fluctuations in Operating Results. NexGen expects that its operating results
will be subject to potentially substantial quarterly and other fluctuations
due to a variety of factors, including competitive pricing pressures,
anticipated decreases in unit average selling prices of NexGen's products,
fluctuations in manufacturing yields, availability and cost of products from
NexGen's suppliers, the gain or loss of significant customers, new product
introductions by NexGen or its competitors, changes in the mix of products
sold and in the mix of sales by distribution channels, market acceptance of
new or enhanced versions of NexGen's products, seasonal customer demand, the
timing of significant orders, and the timing and extent of product development
costs. In addition, operating results could be adversely affected by general
economic and other conditions affecting the timing of customer orders and
capital spending, a downturn in the market for PCs, and order cancellations or
rescheduling. NexGen's customers may change delivery schedules or cancel
orders without significant penalty. Many of the factors listed above are
outside of the control of NexGen. These factors are difficult to forecast, and
these or other factors could materially adversely affect NexGen's quarterly or
annual operating results.
Historically, average selling prices for microprocessors in general, and for
NexGen's products in the time period during which they have been commercially
available, have decreased over the life of particular products. NexGen expects
that the average selling prices of its products will continue to be subject to
significant pricing pressures in the future. Competitive pricing pressures
have in the past and may in the future cause NexGen to offer price protection
to its customers, which will adversely affect NexGen's operating results
especially when average selling prices are decreased prior to sales of price
protected products by NexGen's customers. Such adverse effects occurred in the
first fiscal quarter of fiscal 1996 and NexGen believes such adverse effects
are
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likely to occur in the future. If NexGen is unable to introduce and gain
market acceptance of new products with higher average selling prices or is
unable to obtain products from its suppliers at costs sufficiently reduced to
offset decreases in prices of existing products, NexGen's operating results
would be adversely affected. Additionally, because NexGen is continuing to
increase its operating expenses for personnel and new product development and
for inventory in anticipation of increasing sales levels, NexGen's operating
results would be adversely affected if such sales levels were not achieved. PC
microprocessor systems include, in addition to NexGen's products, a number of
other components that are supplied by third-party manufacturers. Any shortage
of such other components in the future, any increase in the cost of such other
components to NexGen, or any difficulty with such other components' ability to
meet performance requirements, could adversely affect NexGen's business,
operating results and financial condition. Due to the foregoing factors, it is
likely that in some future quarter NexGen's operating results may be below the
expectations of analysts and investors. In such event, the price of NexGen's
Common Stock would likely be materially adversely affected.
Competition. The market for NexGen's products is extremely competitive. In
order to compete effectively in the market for high performance x86
microprocessors, NexGen must develop and introduce on a timely basis
competitive products that embody new technology, meet evolving industry
standards, and achieve levels of performance at prices acceptable to the
market. In particular, the market for microprocessor products has been and
continues to be characterized by intense and increasing price competition,
even for the most advanced microprocessor products. Intel has increasingly
made more frequent and more significant price reductions to stimulate market
demand for its Pentium processors and encourage migration of OEMs and end
users to its latest generation of processors.
NexGen's competitors in the market for x86 microprocessors include Intel,
AMD, Cyrix, IBM, Texas Instruments Incorporated ("Texas Instruments") and
others with substantially greater technical, financial, manufacturing, sales,
marketing, distribution, customer service and support resources, as well as
greater experience and name recognition, than NexGen. Intel, in particular,
has long had a dominant position in the market for microprocessors used in
PCs. Intel's dominant market position has to date allowed it to set x86
microprocessor performance standards and thus dictate the type of product the
market requires of Intel's competitors. NexGen believes that its Nx586
processors, the P133, P120, P100 and P90, compete primarily with the Intel
Pentium, which began shipping in June 1993 and is currently available at 90,
100, 120 and 133 megahertz (abbreviated "MHz"). The P120 and P133 were
introduced in November 1995 and are not yet shipping in volume. It is expected
that later this year Intel will introduce a 150 MHz Pentium and may in the
future introduce faster versions of the Pentium. Intel also introduced its
next generation processor, the Pentium Pro (formerly code-named the P6), in
November 1995, which initially operates at clock rates of up to 200 MHz. AMD
has announced that it intends to begin shipping its fifth generation product,
the AMD-K5, in the second half of 1996 and Cyrix introduced its new
microprocessor product, the 6x86 (formerly code-named the M1), in October
1995. Although NexGen believes that Intel will be its primary competitor, it
is expected that other companies, including AMD, IBM and Cyrix, will offer
competitive products in the near future. IBM, under its manufacturing
agreement with NexGen, has rights to manufacture Nx586 and Nx686 products for
use internally and to sell such products on an OEM basis. Although NexGen
would receive a royalty on the use or sale of such Nx586 and Nx686 processors
by IBM, competition from IBM could materially adversely affect NexGen. IBM has
similar marketing rights under its foundry agreement with Cyrix and has
announced that it will sample the 6x86 in the first quarter of 1996. See
"Information Concerning NexGen--Business of NexGen--Manufacturing." NexGen
expects substantial direct competition, both from existing competitors and
from new market entrants.
Furthermore, Intel has announced it will spend substantial sums on research
and development and manufacturing facilities, and it is currently attempting
to consolidate its dominant market position through an intensive advertising
campaign designed to engender brand loyalty to Intel among PC end-users.
NexGen may encounter difficulties in customer acceptance because it is a new
processor supplier whose identity is not yet well known. Substantial marketing
and promotional costs, possibly in excess of what NexGen can currently afford,
may be required to overcome barriers to customer acceptance. There can be no
assurance that NexGen will be able to overcome such barriers. The failure to
gain customer acceptance of its processor products would
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have a material adverse effect on NexGen. As long as Intel remains in this
dominant position, its product introduction schedule and product pricing will
materially, and at times adversely, affect NexGen's business, operating
results and financial condition.
Faster versions of the Pentium, or even more advanced x86 microprocessors
(such as Intel's Pentium Pro), could have similar or superior performance
characteristics to NexGen's expected products. Because NexGen's Nx586
processor products are not designed to be pin-compatible with the Pentium or
any other x86 microprocessor, OEMs will need to utilize motherboards and
system logic chipsets that have been specifically developed to incorporate
NexGen's processors. Consequently, this may delay and possibly limit OEM
acceptance of the Nx586 and NexGen's future processors. NexGen's Nx686
processor is being designed to be pin-compatible with the Pentium processor.
There can be no assurance that NexGen will have the resources or capability to
compete successfully in the future.
NexGen may also compete with manufacturers producing microprocessors that
are not based upon the x86 and compatible architecture, such as the PowerPC
processor designed by Motorola, Inc. ("Motorola"), IBM and Apple Computer,
Inc. ("Apple") and manufactured by IBM and Motorola, and other RISC-based
systems processors running UNIX and Microsoft Windows NT. In addition, Intel
and Hewlett-Packard Company ("HP") recently announced a partnership to develop
a single computer chip that would run software originally written to run on
x86 microprocessors as well as HP's Personal Architecture RISC workstation
chips. There can be no assurance that systems incorporating RISC processors
will not gain rapid market acceptance. This may increase the number of
competitive processor products and cause a decline in prices. See "Information
Concerning NexGen--Business of NexGen--Competition."
Uncertain Ability to Meet Capital Needs. NexGen is pursuing an aggressive
plan to enhance market share, increase revenue and accelerate new products.
NexGen has historically incurred net losses and negative gross margins on its
products. Although cost reduction programs are being planned to improve
competitiveness, additional capital resources will be required to fund working
capital and operating losses until NexGen becomes cash flow positive. On
October 20, 1995, NexGen announced that it executed the Merger Agreement with
AMD. Concurrently with execution of the Merger Agreement, NexGen and AMD also
executed the Credit Agreement, pursuant to which AMD has agreed to provide
NexGen with a revolving line of credit in the aggregate principal amount of up
to $60.0 million. Borrowings under the Credit Agreement bear interest at the
Index Rate plus 3.5% and are secured by all tangible and intangible assets of
NexGen but are subordinated to NexGen's senior indebtedness. All outstanding
principal and accrued interest on borrowings under the Credit Agreement are
due on the earliest to occur of (i) the date which is 12 months after
termination of the Merger Agreement for any reason, (ii) the date on which any
person or entity other than AMD acquires more than 50% of the outstanding
NexGen Common Stock and (iii) June 30, 1997. There can be no assurance that
the Merger will be consummated or that the Credit Agreement will be sufficient
to satisfy all of NexGen's working capital needs, in which event NexGen will
require additional capital or new bank credit lines to fund its anticipated
growth and, if the Merger is not consummated, to repay the up to $60.0 million
of borrowings, plus accrued interest thereon, incurred under the Credit
Agreement. In the event the Merger is not consummated, management currently
plans to seek equity, convertible debt or debt financing to fund future
capital expenditures and operating expenses, to repay borrowings and interest
thereon incurred under the Credit Agreement, to repay other debts, and to pay
transaction fees and costs associated with the Merger (which are currently
estimated to be approximately $1.0 million in the event the Merger is not
consummated). Management must be successful in securing such financing in
order for NexGen to continue as a going concern. There can be no assurance
that such funding can be obtained or that the terms of such funding will be
acceptable to NexGen, if at all. To the extent the Merger is not consummated
and additional capital is raised through the sale of additional equity or
convertible debt securities, the issuance of such securities could result in
additional dilution to NexGen's stockholders. Moreover, NexGen's cash
requirements may vary materially from those now planned because of results of
research and development, product testing, relationships with manufacturers,
changes in the focus and direction of NexGen's research and development
programs, competitive and technological advances, the level of working capital
required to sustain the planned growth, litigation, operating results,
including the extent and duration of operating losses, and other factors.
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Insufficient funds may require NexGen to delay, scale back or eliminate
certain of its research and product development programs or to license to
third parties potentially valuable product rights or technologies that NexGen
currently plans to commercialize. NexGen has received a commitment letter to
enter into a proposed $10.0 million line of credit with General Bank (the
"Bank"). As proposed, this credit line will be secured by NexGen's trade
receivables and inventory. There can be no assurance that NexGen will enter
into such a line of credit, especially since the Credit Agreement may cause
NexGen not to be in compliance with certain financial ratios that would be
required by the Bank. In addition, NexGen currently owes approximately $2.5
million to ASCII Corporation ("ASCII") and its United States affiliate, ASCII
of America, Inc. ("ASCII of America") under promissory notes (the "ASCII
Notes"), interest and principal on which are due no later than March 1, 1996.
NexGen also owes $10.0 million to Phemus Corporation ("Phemus"), due on June
1, 1996 (the "Phemus Notes"). The ASCII Notes are secured by all of the
tangible and intangible assets of NexGen and the Phemus Notes are secured by a
security interest in such assets. The ASCII Notes and Phemus Notes are senior
to any borrowings under the Credit Agreement. The Credit Agreement also
contains certain restrictions on NexGen's ability to incur additional senior
debt. If the Merger is not consummated, any failure on the part of NexGen to
repay or refinance the amount owed to ASCII and ASCII of America or to repay
or refinance the amounts borrowed from Phemus or AMD would have a material
adverse effect on NexGen's business. Because NexGen has pledged its assets to
ASCII and ASCII of America, Phemus and AMD, and, if the line of credit with
the Bank is entered into, expects to pledge certain assets to the Bank, it may
be more difficult for NexGen to obtain additional financing. Additionally,
such pledges provide ASCII, ASCII of America, Phemus and AMD, and may provide
the Bank, with a priority claim on all of NexGen's assets superior to any
claims of all stockholders of NexGen. See "Information Concerning NexGen--
NexGen Management's Discussion and Analysis of Financial Condition and Results
of Operations--Liquidity and Capital Resources."
Patents and Proprietary Rights; Potential Litigation. NexGen's ability to
compete effectively will depend, in part, on its ability to protect its
intellectual property, including its patents, and on its ability to obtain
patents. There can be no assurance that the steps taken by NexGen to protect
its intellectual property will be adequate to prevent misappropriation or that
others will not develop competitive technologies or products. NexGen's ability
to compete effectively also depends on its ability to operate without
infringing the proprietary rights of others. Competitors may have been issued
patents on, or may obtain additional patents and proprietary rights relating
to, products, technologies or processes competitive with those of NexGen. New
patent applications are continually being filed and pending U.S. applications
are confidential until patents are issued, and thus it is impossible to
ascertain all possible patent infringement problems. There can be no assurance
that NexGen's patent applications will be approved, that NexGen will in the
future develop any proprietary products that are patentable, that issued
patents will provide NexGen with adequate protection for its inventions,
technologies or processes or will not be challenged by third parties, or that
the patents of others will not impair the ability of NexGen to do business.
Furthermore, there can be no assurance that others will not independently
develop products that are similar or superior to NexGen's products or
technologies, duplicate any of NexGen's products or technologies, or design
around any patents issued to NexGen.
NexGen's ability to compete effectively also depends upon unpatented trade
secrets and confidential information. No assurance can be given that others
will not independently develop substantially equivalent proprietary
information and techniques or otherwise gain access to NexGen's trade secrets
and confidential information, that such trade secrets and confidential
information will not be disclosed or that NexGen can effectively protect its
rights to its unpatented trade secrets and confidential information. In an
effort to maintain the confidentiality and ownership of trade secrets and
other confidential information, NexGen requires employees, consultants and
certain collaborators to execute confidentiality and invention assignment
agreements upon commencement of a relationship with NexGen. There can be no
assurance, however, that these agreements will provide meaningful protection
for NexGen's trade secrets or other confidential information in the event of
unauthorized use or disclosure of such information.
Competitors may try to restrict NexGen's ability to sell its processors
through costly and time-consuming litigation. There has been substantial
litigation in the semiconductor industry, brought by semiconductor
manufacturers such as Intel, AMD, AT&T Corp., National Semiconductor
Corporation, Motorola, Texas
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Instruments and others. Intel, in particular, has brought suits seeking
damages and injunctive relief for copyright infringement against AMD and
patent infringement against Chips and Technologies, Inc. ("Chips and
Technologies"), AMD and Cyrix pertaining to their 386 and 486 products and
against ULSI Technology, Inc. ("ULSI"), Cyrix and Chips and Technologies
pertaining to their floating point coprocessors. Intel and AMD have settled
all outstanding intellectual property litigation between them. The effect of
this settlement on the other participants in the x86 microprocessor market is
unclear. Intel also filed a complaint with the United States International
Trade Commission (the "ITC") requesting that the ITC (i) commence an
investigation into whether the importation of PCs by Twinhead International
Corp. ("Twinhead"), a systems manufacturer, containing Cyrix and AMD
microprocessors constitutes an unfair trade practice and (ii) issue an
exclusion order prohibiting, among other things, the entry into the United
States of such PCs. The ITC complaint alleged that the use of non-Intel
microprocessors in combination with external memory in Twinhead's system
violates an Intel patent under certain circumstances. The lawsuits brought by
Intel against Cyrix and ULSI have been decided adversely to Intel on several
grounds, including among others that cross-licenses between Intel and the
companies producing the allegedly infringing product (Texas Instruments and
SGS-Thomson in the case of Cyrix and HP in the case of ULSI) preclude Intel
from enforcing its patent against the alleged infringer. Intel appealed these
decisions, and the appeals were adversely decided against Intel. In addition,
the ITC dismissed the investigation against Twinhead, citing the cross-license
decisions.
Cyrix has entered into a manufacturing agreement with IBM. Consequently,
Intel and Cyrix agreed to litigate in the United States District Court for the
Eastern District of Texas whether IBM is licensed under an Intel patent for
the purpose of manufacturing products primarily designed by Cyrix. IBM, which
has also contracted with NexGen to manufacture NexGen's products, intervened
in the Cyrix action; a trial with respect to this issue resulted in judgment
for IBM. Intel has appealed that judgment. If the licensing issue is
ultimately decided adversely to IBM, the decision could have a material
adverse effect on NexGen, because in such event Intel may be more inclined to
initiate litigation against IBM and NexGen, IBM may be less inclined to
manufacture products for NexGen, and a defense based upon a cross-license
between Intel and IBM may not be effective. Judgments in the litigation
involving Cyrix and IBM are not necessarily binding on Intel regarding IBM's
manufacture of NexGen products or on any other manufacturers engaged by NexGen
as an alternative manufacturing source. Additionally, NexGen may enter into
manufacturing arrangements with entities that do not have a cross-license with
Intel and would therefore not be able to assert a cross-licensing defense in
any litigation brought by Intel.
In March 1995, NexGen settled a dispute with Fujitsu Microelectronics, Inc.
regarding VL system logic chipsets. The settlement did not have a material
adverse effect on NexGen's results of operations.
NexGen is not currently involved in any litigation with respect to patents
or other proprietary rights and NexGen is not aware of any threatened
litigation with respect to such matters. There can be no assurance that any
litigation initiated against NexGen or its customers, regardless of merit,
would not adversely affect NexGen. The legal and other expenses and the
diversion of management time associated with any such litigation could
materially adversely affect NexGen's operating results and financial condition
during the pendency thereof and involve the expenditure of a significant
portion of the net proceeds of this offering. The existence of such litigation
may also delay or impede market acceptance of NexGen's products. A decision
adverse to NexGen in such litigation could result in substantial damages
payable by NexGen, which could have an adverse effect on NexGen, its financial
condition and results of operations, and could support the issuance of an
injunction prohibiting further sales by NexGen of some or all of its products.
Because NexGen relies solely on, and all of its proposed products are based
upon, its Nx586 processor architecture, any such successful challenge by other
parties to NexGen's right to use those designs could potentially render NexGen
insolvent and jeopardize its ability to continue as a viable concern. No
assurance can be given that an outside party will not claim that some or all
of NexGen's technologies, products or proprietary rights infringe on any
patents, copyrights or other proprietary rights of such outside party and
that, if such claim is made, it will not be sustained. NexGen may be required
to obtain licenses to patents or other proprietary rights of third parties. No
assurance can be given that any licenses required under any such patents or
proprietary rights would be made available on terms acceptable
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to NexGen, if at all. In such event, if NexGen does not obtain such licenses,
NexGen could encounter substantial and costly delays in product introductions
while attempting to design around such patents, or could find that the
development, manufacture or sale of products requiring such licenses could be
foreclosed.
Litigation also may be necessary to assert claims of infringement, to
enforce patents issued to NexGen, to protect trade secrets or know-how owned
by NexGen or to determine the scope and validity of the proprietary rights of
others and could result in substantial cost to and diversion of effort by, and
may have a material adverse impact on, NexGen. In addition, there can be no
assurance that these efforts will be successful. See "Information Concerning
NexGen--Business of NexGen--Patents and Proprietary Technology."
Industry Conditions and Technological Changes. NexGen participates in an
industry that is intensely competitive and subject to continuous, rapid
technological change, including evolving industry standards, frequent product
performance improvements and frequent price reductions. Such conditions result
in short product life cycles and require the timely introduction of new
products and substantial expenditures for ongoing research and development
activities. In order to compete successfully in this industry, NexGen must be
able to bring its products to market in a timely fashion and at competitive
prices, continue to enhance and improve its products, and successfully develop
and introduce new products that meet evolving industry standards and that meet
the changing needs of, and are accepted by, end-users. To this end, NexGen has
announced its next generation Nx686 processor and is working to, among other
things, introduce processors with increased operating frequencies, develop
future generation processors, and complete development of a version of the
Nx686 that is pin-compatible with the Pentium processor. There can be no
assurance that NexGen will be able to achieve in a timely manner these
objectives. NexGen is working with IBM to migrate the production of the Nx586
to smaller geometries to increase clock rates and manufacturing yields. There
can be no assurance that this migration will be completed in a timely manner
or that other manufacturing risks will not be realized. See "Business--
Manufacturing." PCs based on high-end x86 microprocessors are increasingly
using system logic chipsets and motherboards that are designed to operate in
conjunction with the PCI bus. NexGen has started shipping its PCI system logic
chipsets in July 1995. NexGen's success is dependent upon the successful
introduction and receipt of volume shipments of these PCI-based products, and
there can be no assurance as to the market acceptance of such products.
Competitive pricing pressures (especially from Intel, AMD, Cyrix or IBM) may
lead to lower margins than expected. There can be no assurance as to future
prices or margins on the sale of high performance microprocessors in general,
and on the sales of the Nx586 processor in particular. Further, since NexGen's
products are sold in conjunction with custom motherboards and system logic
chipsets, the price competitiveness of such collateral products can be
critical to the customer in determining whether to purchase Nx586 processors.
To meet anticipated price decreases and margin pressure, NexGen must maintain
low product costs for its Nx586 processors, system logic chipsets and custom
motherboards. There can be no assurance, however, that NexGen can accomplish
this goal. In the three-month period ended September 30, 1995, NexGen began to
implement a cost reduction program designed to improve its competitiveness by
decreasing the size of its motherboard, pursuing less costly packaging
suppliers and reducing chipset costs through the use of alternative vendors.
There can be no assurance that such program will result in cost benefits, or
that such benefits, if achieved, will be achieved in a timely manner. To date,
NexGen has experienced negative gross margins on its product sales, due, in
part, to competitive pricing pressures which NexGen expects will continue.
Since NexGen relies on third-party manufacturers, NexGen's ability to respond
to price reductions by competitors such as Intel will depend in part on the
ability of such third-party manufacturers to reduce their production costs.
NexGen believes that the PCI-based solution is more cost-effective than the
VL-based solution which has accounted for NexGen's previous sales. The
competitiveness of NexGen's products in the short term is highly dependent on
the successful introduction of this PCI-based solution. Opportunities in
NexGen's industry fluctuate from time to time based upon numerous factors,
including general economic conditions, capital spending levels, the evolution
of industry standards and the timing of introductions of new products. There
can be no assurance that NexGen will not be adversely affected by industry
conditions at the time its products are introduced or thereafter.
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The market for microprocessors is dependent upon the market for PCs. From
time to time, the PC industry has experienced significant downturns, often in
connection with, or in anticipation of, declines in general economic
conditions. These downturns have been characterized by diminished product
demand, production overcapacity and resultant accelerated erosion of average
selling prices. NexGen's business could be materially and adversely affected
by industry-wide fluctuations in the future. More recently, the PC industry
has been consolidating as the larger, more established manufacturers have
become more price aggressive and have been gaining market share at the expense
of other domestic and international manufacturers. If NexGen were to be
unsuccessful in marketing to larger, more established PC manufacturers or to
OEMs supplying such larger PC manufacturers, continued market share gains of
the larger manufacturers could have the effect of reducing demand for NexGen's
products and may adversely affect its operating results. See "Information
Concerning NexGen--Business of NexGen--Sales, Marketing and Distribution."
Management of Growth and Need for Improved MIS System. NexGen has recently
experienced and, with the anticipated ramp-up of NexGen's products, expects to
continue to experience, growth in the number of its employees and the scope of
its operating and financial systems, resulting in increased responsibilities
for NexGen's management. To manage future growth effectively, NexGen will need
to implement and improve its operational, financial and management information
systems, procedures and controls, and expand, train, motivate and manage its
employee base. In particular, NexGen must hire a number of additional
operations and finance personnel and must purchase and implement a more
advanced management information system with a global perspective. NexGen
expects to incur capital expenditures over the next several years to improve
management information systems. NexGen did not incur any capital expenditures
for these purposes during the fiscal year ended June 30, 1995, and currently
estimates that such expenditures over the next several years will in the
aggregate be between $1.0 million and $1.5 million. The amount of such
expenditures will depend on the growth of NexGen's business, operations and
geographic expansion. There can be no assurance that NexGen will be able to
effectively manage such growth, and failure to do so could have a material
adverse effect on NexGen's business and operating results.
International Operations. Export sales, primarily in Europe, represented 43%
of sales for the year ended June 30, 1995. Export sales to Europe and Asia
represented 14% and 20%, respectively, of sales for the three months ended
September 30, 1995. Sales to one customer, Aquarius, located in Germany, and
another customer, Wooyoung Tech., located in Korea, accounted for 36% and 17%
of sales for the year ended June 30, 1995 and for the three months ended
September 30, 1995, respectively. To date, all sales made by NexGen have been
denominated in U.S. dollars and, therefore, NexGen's exposure to foreign
exchange risk has been minimal. NexGen will consider currency hedge contracts
when and if such exposure becomes significant and if management deems it
appropriate to enter into such contracts. While NexGen expects that export
sales will continue to represent a significant portion of sales, export sales
are expected to decrease as a percentage of total sales as NexGen achieves
increased penetration of the U.S. market. NexGen further expects that an
increasing proportion of export sales will, however, be represented by sales
to customers located in Asia and other parts of the world. NexGen does not
currently adhere to a strict practice of requiring orders from customers
located outside of the United States to be supported by letters of credit. A
change in this policy, which may be prompted by business needs such as the
desire to minimize credit risks, may adversely affect potential customers'
willingness to place orders with NexGen. In addition, although NexGen's PCI
logic chipsets are manufactured in the U.S., NexGen has qualified Samsung as a
foundry in Asia, from which NexGen has ordered chipsets on a purchase order
basis. NexGen may in the future qualify additional foundries to manufacture
its chipset products as well as its processors. To date, NexGen has not,
however, entered into any agreements with, or received commitments from, any
foundries other than IBM or VLSI to manufacture processors or chipset
products, respectively. Most potential foundries for semiconductor products in
Asia are located in Japan, Korea, Taiwan or Singapore. Due to its export
sales, NexGen is subject to the risks of conducting business internationally,
including unexpected changes in, or impositions of, legislative or regulatory
requirements, fluctuations in the U.S. dollar, which could increase the sales
price in local currencies of NexGen's products in foreign markets, delays
resulting from difficulty in obtaining export licenses for certain technology,
tariffs and other barriers and restrictions, potentially longer payment
cycles, greater difficulty in accounts receivable collection (which can be
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exacerbated to the extent orders are not supported by letters of credit),
potentially adverse taxes, and the burdens of complying with a variety of
foreign laws. In addition, NexGen is subject to general geopolitical risks,
such as political and economic instability and potential changes in diplomatic
and trade relationships, in connection with its international operations.
Although NexGen has not to date experienced any material adverse effect on its
operations as a result of such regulatory, geopolitical and other factors,
there can be no assurance that such factors will not adversely impact NexGen's
operations in the future or require NexGen to modify its current business
practice. As sales by NexGen increase in various countries in Asia, such as
Taiwan where NexGen has a sales office and where a large number of potential
customers are located, NexGen may become more susceptible to these regulatory
or geopolitical risks. In addition, the laws of certain foreign countries in
which NexGen's products may be sold, including various countries in Asia, may
not protect NexGen's intellectual property rights to the same extent as do the
laws of the United States.
Industry Standards. Adherence to industry standards is important to NexGen's
marketing strategy and product development effort. The establishment of
standards is a function of user acceptance and standards are, therefore,
subject to change. For example, NexGen introduced the initial Nx586 processor
with a VL bus system logic chipset and, in response to the emergence of the
PCI bus as an industry standard for fifth generation microprocessors, has
transitioned to a PCI bus system logic chipset. In the event that NexGen does
not effectively incorporate existing, emerging or evolving standards into its
products, NexGen's business and operating results would be adversely affected.
NexGen believes that the acceptance of its expected products will depend
largely upon the continued acceptance of the x86 standard and the development
of applications software programs. There can be no assurance of the continued
acceptance of the x86 standard or that software developers will continue to
develop software compatible with these operating systems. NexGen has designed
its products to maintain binary compatibility with the large installed base of
software and peripherals developed for the PC and has conducted an extensive
design and internal testing effort over the past five years.
Dependence on Qualified Personnel. NexGen's future success depends in part
on the continued service of its key engineering, sales, marketing and
executive personnel, and its ability to identify and hire additional
personnel. There is intense competition for qualified personnel in the areas
of NexGen's activities and there can be no assurance that NexGen will be able
to continue to attract and retain qualified personnel necessary for the
development of its business. NexGen's anticipated growth and expansion into
areas requiring additional expertise, such as manufacturing, marketing and
distribution, are expected to place increased demands on NexGen's resources.
These activities are expected to require the addition of new management
personnel and the development of additional expertise by existing management
personnel. Loss of the services of, or failure to recruit, key technical and
management personnel could be significantly detrimental to NexGen's product
development programs or otherwise have a material adverse effect on NexGen's
business and operating results. NexGen does not have employment agreements
with any of its employees and does not maintain key person life insurance on
any of its employees.
Effect of Certain Antitakeover Provisions. Certain provisions of NexGen's
Certificate of Incorporation and Bylaws and of Delaware law could discourage
potential acquisition proposals and could delay or prevent a change in control
of NexGen. Such provisions could diminish the opportunities for a stockholder
to participate in tender offers, including tender offers at a price above the
then current market value of the Common Stock. Such provisions may also
inhibit fluctuations in the market price of the Common Stock that could result
from takeover attempts. In addition, the Board of Directors without further
stockholder approval, may issue Preferred Stock that could have the effect of
delaying or preventing a change in control of NexGen. The issuance of such
Preferred Stock could also adversely affect the voting power of the holders of
Common Stock, including the loss of voting control to others. Pursuant to the
terms of the Merger Agreement, NexGen agreed to consider the adoption of a
stockholder rights plan and to adopt such a plan if the NexGen Board of
Directors concludes that such rights plan is in the best interests of NexGen
and its stockholders. On November 20, 1995, the NexGen Board of Directors
adopted such a plan, pursuant to which NexGen distributed to its common
stockholders of record on December 6, 1995 a dividend of share purchase
rights. These rights will cause substantial dilution to a person or group of
persons that attempts to acquire NexGen on terms not approved by the Board of
Directors and may have the effect of deterring hostile takeover attempts,
including attempts that may offer a higher per share consideration than that
offered in the proposed Merger. These rights expire if the Merger is
consummated.
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THE MEETINGS
GENERAL
This Joint Proxy Statement/Prospectus is furnished in connection with the
solicitation by the respective Boards of Directors of AMD and NexGen of
proxies to be voted at the AMD Meeting and the NexGen Meeting, each of which
will be held on January 16, 1996.
At the Meetings, the AMD and NexGen stockholders will consider and vote upon
a proposal to approve and adopt the Merger Agreement and the transactions
contemplated thereby. The description of the principal terms of the Merger
contained herein is qualified in its entirety by reference to the Merger
Agreement, a copy of which is attached to this Joint Proxy
Statement/Prospectus as Annex A and is incorporated herein by this reference.
At the AMD Meeting, the AMD stockholders also will be asked to consider and
vote upon a proposal to approve an amendment to the AMD SPP to increase the
number of shares of AMD Common Stock issuable thereunder from 2,500,000 to
3,600,000. At the NexGen Meeting, the NexGen stockholders also will be asked
to consider and vote upon a proposal to amend the 1995 Stock Plan of NexGen.
MEETINGS, RECORD DATE AND OUTSTANDING SHARES
AMD. The AMD Meeting will be held on January 16, 1996 at 3:00 p.m., local
time, at the Pan Pacific Hotel, 500 Post Street, San Francisco, California.
Only holders of record of AMD Common Stock at the close of business on
November 27, 1995, are entitled to notice of and to vote at the AMD Meeting.
On the AMD record date, there were approximately 10,709 stockholders of
record, and 104,454,737 shares of AMD Common Stock outstanding. Each AMD
stockholder is entitled to one vote for each share held.
NexGen. The NexGen Meeting will be held on January 16, 1996 at 3:00 p.m.,
local time, at the Crown Sterling Suites, 901 East Calaveras Boulevard,
Milpitas, California. Only holders of record of NexGen Common Stock at the
close of business on November 20, 1995, are entitled to notice of and to vote
at the NexGen Meeting. On the NexGen record date, there were approximately 550
NexGen stockholders of record, and 33,323,725 shares of NexGen Common Stock
outstanding. Each NexGen stockholder is entitled to one vote for each share
held.
PROXIES, QUORUM AND VOTES REQUIRED
All proxies that are properly executed and returned, unless revoked prior to
the applicable AMD Meeting or NexGen Meeting, will be voted at the Meetings in
accordance with the instructions indicated thereon. If no direction is
indicated on the proxies, the respective proxies will be voted FOR the Merger
and FOR the approval of the amendment to the 1995 Stock Plan of NexGen at the
NexGen Meeting and FOR the Merger and FOR the approval of the amendment to the
AMD SPP at the AMD Meeting. The managements of AMD and NexGen know of no other
matters to be submitted at the Meetings, other than as specified in each
Notice of Meeting included with this Joint Proxy Statement/Prospectus.
However, if any other business properly comes before one of the Meetings, it
is the intention of the persons named in the relevant proxy to vote in respect
thereof in accordance with their best judgment; provided, however, that such
discretionary authority will only be exercised to the extent permissible under
applicable federal and state securities and corporation laws. The grant of a
proxy will also confer discretionary authority on the persons named in the
respective proxies to vote on matters incident to the conduct of the
respective Meetings. The execution of a proxy will not affect a stockholder's
right to attend the appropriate AMD Meeting or NexGen Meeting and vote in
person. A stockholder who has given a proxy may revoke it at any time before
it is exercised at the applicable AMD Meeting or NexGen Meeting by filing with
the Secretary of the appropriate company a written notice of revocation or a
proxy bearing a later date or by attendance at the appropriate AMD Meeting or
NexGen Meeting and voting in person. Attendance at the applicable AMD Meeting
or NexGen Meeting will not, by itself, revoke a proxy. Abstentions with
respect to any matter submitted to the stockholders for a vote are treated as
shares present or represented and entitled to vote on that matter and thus
have the same effect as negative votes. Shares held of record by a broker
which are present in person or represented by proxy are counted for purposes
of determining a quorum. If, however, under rules applicable to brokers, a
broker does not have discretionary voting authority to vote on any matter at
the Meetings in the absence of instructions from the beneficial owners, then
such shares (although present for quorum purposes) will not be considered
entitled to vote on such matter ("broker nonvotes").
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AMD. The presence, either in person or by properly executed proxy, of the
holders of a majority of the outstanding shares of AMD Common Stock entitled
to vote at the AMD Meeting is necessary to constitute a quorum. Although
Delaware law does not require that the Merger Agreement be submitted for
approval by the AMD stockholders, the rules of the NYSE require such approval
by the holders of a majority of votes cast at the AMD Meeting provided that
the total vote cast represents over 50% of all shares of AMD Common Stock
entitled to vote. Approval by the holders of a majority of the shares of AMD
Common Stock represented at the AMD Meeting is also a condition to the
obligations of AMD and NexGen to consummate the Merger. Broker nonvotes will
not be considered as votes cast. Abstentions will be considered as votes cast
and therefore will have the effect of a vote against the Merger.
Approval of the amendment to the AMD SPP requires the affirmative vote of a
majority of the shares of AMD Common Stock present in person or represented by
proxy and entitled to vote on the proposal. Broker nonvotes will not be
considered as shares entitled to vote on the proposal and will therefore have
no effect on the approval of the proposal.
NexGen. The presence, either in person or by properly executed proxy, of the
holders of a majority of the outstanding shares of NexGen Common Stock
entitled to vote at the NexGen Meeting is necessary to constitute a quorum.
The affirmative vote of a majority of the outstanding shares of NexGen Common
Stock as of the NexGen record date, present in person or represented by proxy,
is required to approve and adopt the Merger Agreement. Approval by the holders
of a majority of the outstanding shares of NexGen Common Stock is also a
condition to the obligations of AMD and NexGen to consummate the Merger.
Broker nonvotes will have the effect of a vote against the Merger.
Certain stockholders of NexGen have entered into voting agreements relating
to an aggregate of 12,542,000 shares of NexGen Common Stock, or approximately
38% of the shares of NexGen Common Stock outstanding on the record date for
the NexGen Meeting, pursuant to which they have (i) agreed to vote their
shares of NexGen Common Stock in favor of the Merger Agreement and the Merger,
(ii) granted irrevocable proxies to AMD to vote such shares accordingly, and
(iii) agreed not to sell their shares prior to the earlier of (x) the
termination of the Merger Agreement or (y) the NexGen Meeting, or in the case
of certain stockholders, the Effective Time. See "The Merger Agreement and
Related Agreements--Certain Other Agreements." These voting agreements do not
address the proposal to approve the amendment to the 1995 Stock Plan of
NexGen. See "Proposal to Approve an Amendment to the 1995 Stock Plan of
NexGen, Inc."
Approval of the amendment to the 1995 Stock Plan of NexGen requires the
affirmative vote of a majority of the shares of NexGen Common Stock present in
person or represented by proxy and entitled to vote on the proposal. Broker
nonvotes will not be considered as shares entitled to vote on the proposal and
therefore will have no effect on the approval of the proposal.
SOLICITATION OF PROXIES
AMD and NexGen will each bear the entire cost of solicitation of proxies
from their respective stockholders and will share the cost of preparation,
assembly, printing and mailing of this Joint Proxy Statement/Prospectus, the
proxy and any additional information furnished to stockholders. Copies of
solicitation material will be furnished to brokerage houses, fiduciaries and
custodians holding in their names shares of AMD or NexGen Common Stock
beneficially owned by others to forward to such beneficial owners. AMD and
NexGen may reimburse persons representing beneficial owners of shares for
their expenses in forwarding solicitation material to such beneficial owners.
Solicitation of proxies by mail may be supplemented by telephone, telegram or
personal solicitation by directors, officers or other regular employees of AMD
or NexGen, as the case may be, who will not receive additional compensation
for such services. In addition, AMD and NexGen have retained Georgeson &
Company Inc. to assist in their solicitation of proxies. That firm will
solicit proxies by mail, telephone, telegram and personal interview. For these
services, Georgeson & Company Inc. will be paid a fee of approximately $8,000
by AMD and approximately $6,000 by NexGen, plus out-of-pocket costs and
expenses.
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THE MERGER
BACKGROUND OF THE MERGER
The terms of the Merger Agreement are the result of arm's-length
negotiations between representatives of AMD and NexGen. The following is a
brief discussion of the events that led to the negotiations, the Merger
Agreement and related transactions.
The possibility of a strategic relationship was first discussed in general
terms in several conversations and meetings in July and August, 1995 between
senior executives of AMD and senior executives and Marshall G. Cox, an outside
director, of NexGen. NexGen, as part of its strategy to reduce its
manufacturing costs, increase its competitiveness in the marketplace, and
expand its resources to enable it to compete effectively, was in the process
of exploring various alternatives to provide it with such additional resources
and capabilities, including strategic business combinations, the sale or
exchange of a portion of NexGen's capital stock, strategic relationships with
foundry partners, joint ventures, and other capital transactions. See
"Information Concerning NexGen--Business of NexGen--Business Strategy" and "--
NexGen Management's Discussion and Analysis of Financial Condition and Results
of Operations."
On August 21, 1995, S. Atiq Raza, Chairman of the Board, President, Chief
Executive Officer and Secretary of NexGen, Vinod Dham, Executive Vice
President and Chief Operating Officer of NexGen, and Mr. Cox, met with W.J.
Sanders III, Chairman of the Board and Chief Executive Officer of AMD, John
Bourgoin, Group Vice President, Microprocessor Products of AMD, and Stephen
Zelencik, Senior Vice President and Chief Marketing Executive of AMD, and
discussed, on a preliminary basis, the possibility of a strategic combination
of the two companies. The representatives of NexGen indicated they believed a
combination with AMD would be beneficial to NexGen because of AMD's
microprocessor development expertise, manufacturing resources and sales
capabilities. The NexGen representatives discussed in general terms the status
of the Nx686 microprocessor development. The representatives of AMD indicated
that, although they were open to a variety of relationships with NexGen,
further investigation was needed to determine whether a possible strategic
combination with NexGen was possible. The AMD representatives discussed in
general terms the process technology and marketing resources of AMD. Following
this discussion, senior management of each company began to explore internally
the desirability and feasibility of a strategic business combination.
On August 28, 1995, NexGen's Board of Directors held a meeting at which Mr.
Raza informed the Board of the status of the discussions with AMD. The Board
discussed in general terms the process technology, and manufacturing,
marketing and capital resources of AMD and authorized Mr. Raza, with the
assistance of Mr. Cox, to proceed with more substantial investigations and
discussions regarding a possible strategic relationship with AMD.
On September 1, 1995, Mr. Cox and Mr. Sanders discussed by telephone AMD's
preliminary interest in proceeding with more substantial investigations and
discussions regarding a possible strategic relationship with NexGen. Mr.
Sanders discussed with Mr. Cox various alternatives to a strategic business
combination, including a licensing arrangement and/or the acquisition of a
minority interest in NexGen. He indicated to Mr. Cox that AMD was evaluating
various strategic alternatives to a combination of the two companies.
Mr. Sanders telephoned Mr. Dham on September 11, 1995 and arranged for a
meeting between the companies' representatives to be held on September 27,
1995.
On September 18, 1995, Dr. Paul R. Low, a director of NexGen, contacted Dr.
William Siegle, Vice President and Chief Scientist of AMD, and indicated
NexGen's interest in a strategic combination with AMD. Dr. Siegle contacted
Mr. Dham on September 21 to arrange a meeting to discuss technical issues
regarding NexGen's microprocessor products. On September 25, 1995, a mutual
Nondisclosure Agreement was executed between the companies. On September 25,
1995, Dr. Siegle and Richard Klein, Director, Logic Technology Development, of
AMD met with Messrs. Raza and Dham and the heads of the Integrated Circuit and
Circuit Development Divisions of NexGen. At the meeting, the parties discussed
the development of both companies' microprocessor products and explored AMD's
ability to manufacture NexGen's microprocessor designs. After
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the September 25 meeting, Dr. Siegle telephoned Dr. Low to determine the
reaction of the NexGen representatives to the September 25, 1995 meeting.
On September 27, Dr. Siegle, Messrs. Sanders, Bourgoin, and Richard Previte,
President and Chief Operating Officer of AMD, met with Messrs. Raza, Dham and
Cox. Computer systems running NexGen's microprocessors, including a prototype
of the Nx686 microprocessor, were demonstrated at the meeting. The meeting
participants discussed NexGen's product development timetables and
manufacturing and sales requirements, as well as AMD's process technology,
manufacturing capacity and marketing and capital resources. The AMD
representatives indicated that they desired further examination of both
companies' microprocessor products and process technology requirements and
that AMD was still examining alternative approaches to an acquisition. Mr.
Raza indicated that AMD representatives would be allowed to examine certain
confidential information of NexGen under the terms of the Nondisclosure
Agreement.
On September 28, Mr. Sanders contacted Joe L. Roby, a Director of AMD and
Managing Director of the Investment Banking Group of DLJ, to discuss a
possible strategic combination with NexGen. On September 29, 1995, Mr. Sanders
met with Dr. Leonard Silverman, an AMD Director, to discuss a possible
strategic combination with NexGen.
Between September 27 and October 3, representatives of AMD, including senior
management, met with representatives of NexGen to conduct a due diligence
review of NexGen's microprocessor products, particularly the Nx686, its
manufacturing requirements, and its microprocessor development methodology and
tools. During this period, NexGen representatives conducted due diligence of
AMD focusing primarily on AMD's process technology and manufacturing capacity.
On October 3, AMD senior management representatives led by Mr. Bourgoin and
Dr. Siegle met with NexGen representatives to discuss microprocessor product
development and process technology and to review design architecture.
As a result of AMD's due diligence investigations of NexGen, which continued
through October 3, 1995, Mr. Sanders and other senior AMD management personnel
concluded on a preliminary basis that a possible strategic merger with NexGen
was the preferable form of a strategic alliance. Mr. Sanders discussed a
possible strategic combination with Anthony Holbrook, Vice Chairman of the
Board of Directors of AMD and its former Chief Technical Officer.
On October 4, 1995, Mr. Sanders telephoned Mr. Raza and indicated AMD's
interest in pursuing a strategic business combination with NexGen, on terms to
be discussed.
During the period prior to October 5, 1995, Mr. Raza held numerous
individual conversations with various members of NexGen's Board of Directors
regarding the status of discussions with AMD. On October 5, 1995, NexGen held
a meeting of its Board of Directors. During the Board meeting, Mr. Raza
informed the NexGen Board as to the status of the discussions with AMD and the
results of due diligence performed to date. Mr. Cox and Dr. Low also described
to the Board their discussions with AMD. The Board again discussed in detail
the potential advantages and disadvantages of a strategic business combination
with AMD. The Board then authorized Mr. Raza to pursue negotiations with AMD
regarding a possible strategic business combination with AMD. The Board
authorized (with James M. Voytko abstaining) the retention of PaineWebber as
NexGen's financial advisor in connection with any potential strategic
combination. Mr. Voytko is a managing director of PaineWebber and PaineWebber
has certain other interests in NexGen that were disclosed to the Board and are
discussed under "--Opinions of Financial Advisors--Opinion of Financial
Advisor to NexGen." After the Board meeting, Mr. Raza telephoned Mr. Sanders
to indicate that NexGen desired to begin negotiations as quickly as possible
about a possible strategic combination. On October 6, 1995, Mr. Raza
telephoned Mr. Sanders and the two principals agreed to meet on October 13,
1995.
On October 10, 1995, Thomas M. McCoy, Vice President, General Counsel and
Secretary of AMD, provided the AMD Board of Directors with a privileged
memorandum to him from Mr. Sanders describing a possible strategic combination
with NexGen. Between October 10 and the morning of October 13, 1995, Mr.
Sanders contacted each of the AMD Board members, except Dr. R. Gene Brown, who
was unavailable, to discuss
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a potential strategic combination with NexGen. In addition, Mr. McCoy also
telephoned Mr. Holbrook and Charles M. Blalack, an AMD Director, to discuss a
potential strategic combination with NexGen.
On October 12, NexGen's Board met and discussed, among other things, the
status of discussions with AMD and financial and legal issues related to a
potential transaction with AMD. Representatives of Pillsbury Madison & Sutro
LLP ("Pillsbury"), NexGen's outside legal counsel, and various members of
NexGen's management also participated in the meeting. Also on October 12,
representatives of Pillsbury and PaineWebber met with members of management to
discuss certain financial and legal issues relating to the proposed
transaction.
On October 13, 1995, Mr. Sanders met with Mr. Raza and discussed the
potential strategic combination of NexGen with AMD. They discussed the
proposed terms of such a merger, including the Exchange Ratio of 0.8 of a
share of AMD Common Stock, or its equivalent, for each share of NexGen Common
Stock, subject in all instances to the approval of the respective Boards of
Directors of their companies. At the end of the day on October 13, 1995, Mr.
Sanders presented a letter to Mr. Raza outlining the principal terms of the
proposed combination for presentation by Mr. Raza at a meeting of the NexGen
Board of Directors scheduled for October 14th. Prior to the delivery of the
letter, Mr. Sanders contacted Dr. Brown and discussed with him the contents of
the letter. In connection with the preparation of the letter, Mr. Sanders and
Marvin Burkett, Senior Vice President, Chief Financial and Administrative
Officer and Treasurer of AMD, had been in contact with Mr. Roby and other
representatives of DLJ to discuss the proposed terms and conditions relating
to the merger described in the letter.
On October 14, 1995, NexGen's Board of Directors met to discuss the proposed
terms and conditions relating to the Merger contained in the letter from AMD.
At the meeting, the Board discussed the proposed terms of the Merger, the
results of NexGen's evaluation of AMD's business and products, NexGen's
current status and capital needs and the possible advantages and disadvantages
of a merger with AMD on the terms proposed. The Board agreed that if
acceptable merger terms, including the provision by AMD of a substantial line
of credit to meet NexGen's short-term cash requirements, could be negotiated
after appropriate further due diligence review of AMD by NexGen's financial
and legal advisors, a merger would be in NexGen's strategic best interests.
The Board was then considering whether to proceed with alternative plans to
pursue financing through the sale of up to $115.0 million of convertible
subordinated notes through an underwritten Rule 144A offering, and therefore
noted the need to obtain from AMD the line of credit as an alternative
thereto. Members of NexGen's management and financial and legal advisors were
present throughout, and participated in the meeting. The Board instructed
management, with the assistance of its financial and legal advisors, to
continue negotiations with AMD and investigate whether or not AMD would be
willing to provide a line of credit of at least $30.0 million to NexGen to
meet its short-term cash requirements.
On October 14, 1995, Mr. Raza telephoned Mr. Sanders and informed him that
the NexGen Board of Directors had approved proceeding with negotiations
regarding the proposed Merger as outlined in the letter of October 13, 1995,
subject to further due diligence, the preparation of documentation of the
transaction, the receipt of a fairness opinion from PaineWebber as to the
fairness of the proposed Exchange Ratio, from a financial point of view, to
the NexGen stockholders, and the provision by AMD of a line of credit of at
least $30.0 million.
On October 15, 1995, NexGen's Board met again and discussed Mr. Raza's
conversation with Mr. Sanders. Members of NexGen's management and financial
and legal advisors were present at the meeting. The Board further discussed
the terms of the proposed transaction and line of credit.
On October 16, 1995, the AMD Board held a telephonic Board meeting.
Representatives of Bronson, Bronson & McKinnon ("Bronson"), AMD's outside
legal counsel, and members of AMD's senior management also participated in the
meeting. At the meeting, AMD's long-term strategy and NexGen's possible
contribution to that strategy were discussed. At the meeting, AMD's
management: (i) reviewed NexGen's business plan, and AMD's and NexGen's
projected revenues and profits for the fiscal years 1995 through 1998; (ii)
presented AMD's existing plans for maintaining and increasing its market share
of its microprocessor products; (iii) presented the results of AMD's
evaluation of NexGen's business and products; and (iv) discussed the terms of
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the proposed merger. The Board agreed that if acceptable merger terms could be
negotiated after appropriate further due diligence review of NexGen, a merger
with NexGen would be strategically in AMD's best interest. The Board
instructed management to continue the negotiations with NexGen. The Board of
Directors also authorized (with Mr. Roby abstaining) the retention of DLJ as
the financial advisor to AMD in connection with the proposed Merger with
NexGen. Mr. Roby abstained from voting because of his relationship with DLJ as
the Managing Director of its Investment Banking Group. The Board also
authorized the officers of AMD to provide a $30.0 million line of credit to
NexGen if the merger negotiations were consummated. Lastly, the AMD Board
appointed a committee composed of Drs. Silverman and Brown, and Messrs.
Blalack, Roby and Sanders to assist management in the on-going negotiations
with NexGen. On October 16, Mr. Sanders telephoned Mr. Raza to discuss the
results of the AMD Board meeting and the schedule for completing the
respective due diligence reviews and completing documentation. On October 16,
1995, a draft of a proposed Agreement and Plan of Merger was provided to
NexGen and its financial and legal advisors. On October 17 and 18, senior
management representatives of AMD and NexGen, along with their financial and
legal advisors, met to discuss the principal terms of the proposed
combination. During that period, representatives of AMD and NexGen continued
their respective due diligence examinations.
On October 18, 1995, the AMD Board committee met telephonically with
representatives of AMD's senior management to discuss the results of the
negotiations as well as the continuing due diligence review of NexGen. The
committee discussed the request of NexGen to increase the proposed line of
credit to $60.0 million. The committee decided to continue negotiations with a
view towards a possible strategic combination and also to continue discussions
regarding the $60.0 million line of credit. AMD representatives, as well as
their legal and financial advisors, met with NexGen and its legal and
financial advisors on October 19 and October 20 to continue negotiating the
terms of the proposed Merger Agreement.
On October 18 and 19, Mr. Sanders and Stanley Winvick, Senior Vice
President, Human Resources of AMD, met with Mr. Raza and Mr. Dham to discuss
the personnel issues created by the potential merger.
On the evening of October 19, 1995, the Board of Directors of NexGen met to
discuss the proposed combination with AMD. At the meeting, management of
NexGen, as well as representatives of Pillsbury and PaineWebber, made
presentations to the Board as to the status of the negotiations, the results
of due diligence evaluations, the principal terms of the proposed Merger and
the benefits and potential risks of the business combination and of entering
into the proposed Merger Agreement and Credit Agreement. NexGen's financial
advisor, PaineWebber, reviewed with the Board its financial analysis of the
proposed Merger and delivered its opinion to the effect that, as of such date,
the proposed Exchange Ratio was fair to the holders of NexGen Common Stock
from a financial point of view. The NexGen Board reviewed and fully discussed
the terms of the proposed Merger Agreement and Credit Agreement and
unanimously (with Mr. Voytko abstaining) approved the Merger Agreement, the
Credit Agreement and the Merger and authorized management to proceed with the
Merger. Mr. Voytko abstained from voting upon the Merger-related matters
because of the previously described interests of PaineWebber in the proposed
Merger but indicated his support for the transactions.
On October 20, 1995, the Board of Directors of AMD met to discuss the
proposed Merger. At the meeting, AMD management, as well as representatives of
Bronson and DLJ, made presentations to the Board as to the status of the
negotiations, the results of the due diligence evaluation, the principal terms
of the proposed merger and the benefits and potential risks of the business
combination. AMD's financial advisor, DLJ, reviewed among other things the
strategic rationale for and certain financial analyses relating to the
proposed merger and delivered its opinion that the exchange ratio was fair to
AMD. The AMD Board unanimously (with Mr. Roby abstaining) approved the Merger
Agreement and the Merger and authorized management to proceed with the Merger.
Mr. Roby abstained from voting upon the Merger related matters because of his
relationship to DLJ but indicated his support for the transactions. The AMD
Board also unanimously approved the extension of the $60.0 million line of
credit to NexGen.
On October 20, 1995, the parties executed the Merger Agreement and the
Credit Agreement following the meeting of the AMD Board of Directors.
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Subsequent to the execution of the Merger Agreement, AMD and NexGen issued a
joint press release announcing the Merger.
REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
Joint Reasons for the Merger. The Boards of Directors of AMD and NexGen, in
reaching their respective conclusions to recommend approval of the proposed
Merger by the stockholders of the respective companies, considered a number of
potential benefits to the combined company of the Merger, including the
following:
. NexGen has introduced the technology of its sixth generation processor,
the Nx686, which if successfully developed will be marketed as the AMD-
K6 microprocessor, the next generation of the AMD K86 SUPERSCALAR
series. The initial microprocessors in that family, the AMD SSA/5-75 and
the AMD-K5, are currently expected to be available in volume production
in the first half and the second half of 1996, respectively.
. AMD's 0.35 micron process technology and manufacturing capacity,
combined with NexGen's sixth generation product design, may enable the
combined company to introduce sooner a sixth generation Microsoft
Windows-compatible microprocessor to compete with those of Intel.
. NexGen's advanced state of development of its sixth generation design
enables AMD to cease activity on its own sixth generation design project
and redirect those resources to future microprocessor generations.
. The combination of NexGen's and AMD's design teams will enable the
combined company to have multiple design teams focused on Microsoft
Windows-compatible PC solutions to close the gap with Intel on future
microprocessor generations.
AMD's Reasons for the Merger; Recommendation of AMD's Board of
Directors. The Board of Directors of AMD unanimously approved the Merger and
Merger Agreement at its meeting held on October 20, 1995. The AMD Board of
Directors believes that consummation of the Merger is in the best interests of
AMD and its stockholders, and in furtherance of its long-term business
strategy and recommends that the stockholders of AMD vote FOR approval and
adoption of the Merger Agreement and the transactions contemplated thereby.
In addition to the anticipated joint benefits described above, the Board of
Directors of AMD considered the following additional factors in reaching its
conclusion to enter into the Merger Agreement and recommend approval of the
Merger: (i) an analysis of the relative value that NexGen might contribute to
the future business and prospects of the combined company including pro forma
historical and projected revenue and earnings contributions; (ii) AMD's and
NexGen's respective businesses, historical financial performance, operations
and products including possible integration of NexGen products into AMD's
current and future microprocessor products; (iii) the anticipated improvement
in the timing and availability of AMD microprocessor products competitive with
those of Intel; (iv) a comparison of the financial terms of comparable merger
and acquisition transactions; (v) the compatibility of the management and the
businesses of AMD and NexGen; (vi) reports from management, financial and
legal advisors on the specific terms of the Merger Agreement and other
documents; (vii) reports from legal advisors of AMD concerning the
intellectual property portfolio of NexGen; (viii) the Board's judgment that
AMD was unlikely to identify an alternate business opportunity that would
provide superior benefits to AMD and its stockholders; (ix) AMD's and NexGen's
historical and projected financial condition and results of operations which
in the judgment of the Board supported the consideration to be paid by AMD in
the Merger; (x) the knowledge and experience of NexGen's key employees; and
(xi) the opinion rendered by DLJ that, as of the date of that opinion, the
Exchange Ratio was fair to AMD from a financial point of view.
The AMD Board also considered negative factors relating to the Merger
including: (i) the risk that the benefits sought in the Merger would not be
fully achieved; (ii) the risk that the Merger would not be consummated; (iii)
the risk associated with integrating NexGen's present and future products with
AMD's products and its manufacturing capabilities; and (iv) the effect of the
public announcement of the Merger on AMD's sales and operating results. The
AMD Board believes that these risks are outweighed by the potential benefits
to be gained by the Merger.
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NexGen's Reasons for the Merger; Recommendation of NexGen's Board of
Directors. The Board of Directors of NexGen believes that the Merger is fair
to and in the best interests of NexGen and its stockholders and recommends
that the stockholders of NexGen vote FOR approval and adoption of the Merger
Agreement and the transactions contemplated thereby. In addition to the
anticipated joint benefits described above, the Board of Directors of NexGen
considered the following additional reasons in reaching its conclusions to
enter into the Merger Agreement and to recommend approval of the Merger:
. Combination with AMD will create a combined company with significantly
greater resources, a more diversified product line, greater
manufacturing, sales and marketing capabilities than those of NexGen
alone and may enable the combined company to compete more effectively
with Intel and other competitors having greater resources than NexGen.
AMD's technical and management resources are also of significant value
and provide the opportunity for significant economies of scale.
. NexGen would benefit from increased access to AMD's large customer base,
increased name recognition and credibility in the marketplace, a broader
and higher level of contact with existing and potential customers,
especially large PC OEMs, and an increase in the level and range of
support that could be provided to customers.
. Recent operating results and the significant competitive pricing
pressures encountered by NexGen in introducing its Nx586 processor to
the market have adversely affected NexGen's capital resources, and the
Credit Agreement provides a needed source of working capital, without
which NexGen would have to seek alternative sources of capital. The
Board considered the risks involved in not entering into the Merger
Agreement and the Credit Agreement, such as those described under "Risk
Factors--Risk Factors Relating to NexGen--Uncertain Ability to Meet
Capital Needs."
. AMD's manufacturing resources and skills will enhance NexGen's ability
to introduce new, higher performance products in a timely manner to
compete with similar performance products expected to be introduced by
Intel and other manufacturers, and enhance NexGen's ability to obtain
manufacturing cost savings critical to achieving positive gross margins
in the face of competitive pricing pressures.
. NexGen will be able to reduce its reliance on sole source third-party
manufacturers through its combination with AMD. NexGen's present
reliance on these manufacturers subjects NexGen to the risks set forth
under "Risk Factors--Risk Factors Relating to NexGen--Dependence on Sole
Source Third Party Manufacturers."
. The Merger will provide NexGen stockholders with the opportunity to
receive, on a tax-free basis, AMD Common Stock that will enable them to
participate in the opportunities for growth in the combined company
after the Merger.
Prior to and at its October 19, 1995 meeting, the NexGen Board received
presentations from, and reviewed the proposed terms and conditions of the
Merger with, NexGen's management and representatives from PaineWebber and
Pillsbury, as discussed above under "--Background of the Merger." The NexGen
Board also considered carefully the opinion rendered by PaineWebber that, as
of the date of such opinion, the Exchange Ratio was fair, from a financial
point of view, to the stockholders of NexGen. See "--Opinions of Financial
Advisors--Opinion of Financial Advisor to NexGen." The NexGen Board also
considered, among other matters, (i) information concerning NexGen's and AMD's
respective businesses, prospects, financial performance and condition,
technology, management and competitive position, (ii) an analysis of the
relative value that NexGen might contribute to the combined company, including
pro forma historical and projected revenue and earnings contributions, (iii)
the current financial market conditions and historical market prices,
volatility and trading information with respect to NexGen Common Stock and AMD
Common Stock, (iv) a comparison of the financial terms of selected recent
merger and acquisition transactions, (v) the consideration to be received by
NexGen stockholders in the Merger and the relationship between the market
value of AMD Common Stock to be issued in exchange for each share of NexGen
Common Stock and NexGen's projected earnings, earnings before interest and
taxes and other measures, (vi) the strength of AMD's intellectual property
portfolio and AMD's perceived ability to protect its intellectual property
rights, (vii) the fact that the structure of the Merger Agreement was not
designed to exclude other bona fide, unsolicited superior acquisition
proposals, as described under "The Merger
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Agreement and Related Agreements--Solicitation of Alternative Transactions,"
(viii) the availability of other strategic alternatives through which similar
or greater long-term value could be achieved for NexGen stockholders, (ix)
that NexGen would be represented on the AMD Board, and (x) information
concerning the status and prospects of NexGen's Nx686 processor, which is
described under "Information Concerning NexGen--Business of NexGen--Products."
The NexGen Board also considered a variety of potentially negative factors
in its deliberations concerning the Merger, including (i) the risk that the
potential benefits of the Merger may not be fully realized, (ii) the risks
associated with integrating NexGen's present and future products with AMD's
products and manufacturing capabilities, (iii) the possibility that the Merger
would not be consummated, (iv) potential effects of the public announcement of
the Merger on AMD's and NexGen's sales and operating results, NexGen's ability
to attract and retain key management, technical and marketing personnel, and
NexGen's vulnerability to an unsolicited takeover bid or other change of
control transactions that may not be as strategically desirable as the Merger,
and (v) the other risks described above under "Risk Factors."
The NexGen Board did not quantify, reach independent conclusions regarding
or otherwise assign relative weights to the individual factors considered in
its deliberations concerning the Merger.
OPINIONS OF FINANCIAL ADVISORS
Opinion of Financial Advisor to AMD
In its role as financial advisor to AMD, DLJ was asked by AMD to render its
opinion to the AMD Board of Directors as to the fairness, from a financial
point of view, to AMD and its stockholders of the consideration to be paid by
AMD to the stockholders of NexGen pursuant to the Merger Agreement. DLJ was
not requested to, and did not, make any recommendation to the AMD Board of
Directors as to the Exchange Ratio to be provided for in the Merger, which
Exchange Ratio was determined through arm's length negotiations between AMD
and NexGen. On October 20, 1995, DLJ delivered its oral opinion which was
subsequently delivered in writing on October 20, 1995. DLJ has confirmed such
opinion by delivery of a written opinion dated as of the date of this Joint
Proxy Statement/Prospectus. In connection with its opinion dated as of the
date of this Joint Proxy Statement/Prospectus (the "DLJ Opinion"), DLJ
performed certain procedures to update certain of its analyses and reviewed
the assumptions on which such analyses were based and the factors considered
in connection therewith.
A COPY OF THE DLJ OPINION IS ATTACHED HERETO AS ANNEX B. AMD STOCKHOLDERS
ARE URGED TO READ THE OPINION IN ITS ENTIRETY FOR ASSUMPTIONS MADE, PROCEDURES
FOLLOWED, OTHER MATTERS CONSIDERED AND LIMITS OF THE REVIEW OF DLJ. THE
SUMMARY OF THE DLJ OPINION SET FORTH IN THIS JOINT PROXY STATEMENT/PROSPECTUS
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH OPINION.
THE DLJ OPINION WAS PREPARED FOR THE AMD BOARD OF DIRECTORS AND IS DIRECTED
ONLY TO THE FAIRNESS TO AMD AS OF OCTOBER 20, 1995, AND THE DATE OF THIS JOINT
PROXY STATEMENT/PROSPECTUS, RESPECTIVELY, FROM A FINANCIAL POINT OF VIEW, OF
THE EXCHANGE RATIO TO BE APPLIED IN THE MERGER PURSUANT TO THE MERGER
AGREEMENT AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER AS TO
HOW TO VOTE AT THE AMD MEETING. SEE ANNEX B HERETO.
The DLJ Opinion does not constitute an opinion as to the price at any time
at which AMD Common Stock will trade. No restriction or limitations were
imposed by the AMD Board of Directors upon DLJ with respect to the
investigations made or the procedures followed by DLJ in rendering its
opinion.
In connection with rendering the DLJ Opinion, DLJ reviewed the Merger
Agreement. DLJ also reviewed financial and other information that was publicly
available or furnished to it by AMD and NexGen, including information provided
during discussions with their respective management teams, consolidated
financial statements and other information of AMD and NexGen. Included in the
information provided during discussions with the respective management teams
were certain financial projections of AMD for the period beginning December
25, 1994, and ending December 27, 1998, assuming (i) AMD completed the Merger
and (ii) assuming a stand alone operating plan for AMD without the Merger. In
addition, DLJ was provided financial information for NexGen for the period
beginning June 30, 1995 and ending December 31, 1996. All financial
information was prepared by the management teams of AMD and NexGen. In
addition, DLJ (i) reviewed prices and
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premiums paid in certain other selected business combinations in the
semiconductor industry and examined premiums paid in a broader universe of
companies; (ii) compared certain financial and securities data of AMD and
NexGen with such data of selected companies whose securities are traded in
public markets; (iii) reviewed the historical stock prices and trading volumes
of AMD Common Stock and NexGen Common Stock; (iv) analyzed the pro forma
financial impact of the Merger on AMD; and (v) compared the relative
contribution of AMD's revenues, gross profits, earnings before interest and
taxes ("EBIT"), and other measures to the combined company with the relative
ownership of the combined company upon giving effect to the Merger versus its
stand alone operating plan. DLJ also discussed the past and current
operations, financial condition and prospects of AMD and NexGen with the
respective managements of AMD and NexGen and conducted such other financial
studies, analyses and investigations as DLJ deemed appropriate for purposes of
rendering its opinion.
In rendering its opinion, DLJ relied upon and assumed the accuracy,
completeness and fairness of all of the financial and other information that
was available to it from public sources, that was provided to DLJ by AMD,
NexGen or their respective representatives, or that was otherwise reviewed by
DLJ. In particular, DLJ relied upon the estimates of the management of AMD of
the operating synergies achievable as a result of the Merger. With respect to
the financial projections supplied to DLJ, DLJ assumed that they were
reasonably prepared and reflected the best currently available estimates and
judgments of the management of AMD as to the future operating and financial
performance of AMD and NexGen. DLJ did not assume any responsibility for
making and did not make any independent evaluation of NexGen's assets or
liabilities or any independent verification of any of the information reviewed
by DLJ. DLJ is not qualified to and did not evaluate the technical
capabilities of NexGen's products or the capabilities of AMD's manufacturing
facilities or process technology to produce NexGen's products in a timely and
cost effective manner. DLJ has relied on AMD's evaluation of such matters. DLJ
has relied as to all legal matters concerning the Merger on advice of counsel
to AMD.
The DLJ Opinion was necessarily based on economic, market, financial and
other conditions as they existed on the date of this Joint Proxy
Statement/Prospectus and on the information made available to DLJ as of such
date and on the review and analyses conducted by DLJ as of such date. It
should be understood that although subsequent developments may hereafter
affect its opinion, DLJ has not been requested to and does not have any
obligation to update, revise, or reaffirm the DLJ Opinion.
The following is a summary of the material factors considered and principal
financial analyses performed by DLJ to arrive at the DLJ Opinion. DLJ
performed certain procedures, including each of the financial analyses
described below, and reviewed with the management teams of AMD and NexGen the
assumptions on which such analyses were based and other factors, including the
current and projected financial results of such companies.
Transaction Analysis. DLJ reviewed publicly available information for 15
selected transactions involving a range of semiconductor companies (the
"Semiconductor Transactions") including: (i) Actel Corp's acquisition of Texas
Instruments' FPGA business; (ii) Hyundai Electronics America Inc.'s
acquisition of NCR Microelectronics; (iii) Flextronics International Ltd.'s
acquisition of nCHIP Inc.; (iv) Altera Corp.'s acquisition of Intel Corp.'s
Programmable Logic business; (v) Cirrus Logic Inc.'s acquisition of PicoPower
Technology Inc.; (vi) Cirrus Logic Inc.'s acquisition of Pacific Communication
Sciences Inc.; (vii) Integrated Circuit Systems Inc.'s acquisition of Avasem
Corp.; (viii) Silicon Graphics Inc.'s acquisition of MIPS Computer Systems
Inc.; (ix) Cirrus Logic Inc.'s acquisition of Acumos Inc.; (x) Xilinx Inc.'s
acquisition of Plus Logic Inc.; (xi) Cirrus Logic Inc.'s acquisition of
Crystal Semiconductor Corp.; (xii) TDK Corp.'s acquisition of Silicon Systems
Inc.; (xiii) Harris Corp.'s acquisition of GE Solid State; (xiv) National
Semiconductor Corp.'s acquisition of Fairchild Semiconductor Corp.; and (xv)
Advanced Micro Devices Inc.'s acquisition of Monolithic Memories Inc. The
Semiconductor Transactions were selected by DLJ because DLJ believed they were
the most representative group of semiconductor transactions which have
occurred. However, none of these transactions were directly comparable in
terms of size or product life cycles.
DLJ reviewed the consideration paid in the Semiconductor Transactions in
terms of the price paid for the common stock ("Equity Purchase Price") plus
total debt less cash and equivalents ("Total Transaction Value") of such
transactions as a multiple of revenues, earnings before interest, taxes,
depreciation and amortization
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("EBITDA") and EBIT for the latest reported twelve months ("LTM") prior to the
announcement of such transactions. Additionally, DLJ reviewed the
consideration paid in such transactions in terms of the Equity Purchase Price
of such transactions as a multiple of net income for the twelve months prior
to the announcement of transactions and as a multiple of book value of equity.
For the Semiconductor Transactions, the analysis of Total Transaction Value
to LTM revenues, EBITDA and EBIT and the Equity Purchase Price to LTM net
income and book value of equity indicated mean values of these transactions of
1.9x, 11.9x, 19.0x, 23.3x and 10.2x, respectively, compared to the implied
multiples for NexGen at the time of the announcement of the transaction (based
upon an October 19, 1995 closing stock price of AMD and an exchange ratio of
0.8) of 41.0x, Not Meaningful ("NM") (due to the negative EBITDA for the LTM),
NM (due to the negative EBIT for the LTM), NM (due to the negative net income
for the LTM) and 36.8x, respectively.
DLJ also determined the percentage premium of the offer prices (represented
by the purchase price per share in cash transactions and the stock price of
the constituent securities times the exchange ratio in the case of stock-for-
stock mergers) over the trading prices one day, one week and one month prior
to the announcement date of 72 acquisition transactions since January 1, 1993.
The average premiums for the transactions for one day, one week and one month
were 33.8%, 38.7%, 42.4%, respectively. The average premiums are 25.3%, 28.8%
and 35.4%, respectively for transactions in which the consideration was stock.
For the proposed transaction, DLJ derived the premium to be paid to the NexGen
stockholders by multiplying the closing stock price of AMD on October 19, 1995
times an exchange ratio of 0.8 and dividing that quantity by NexGen's closing
stock price one day, one week and one month prior to the announcement. The
implied stock price premiums were (3.4%), 1.2% and (2.8%), respectively.
No company or transaction used in the analysis described above was directly
comparable to AMD, NexGen or the proposed transaction. Accordingly, an
analysis of the results of the foregoing was not simply mathematical nor
necessarily precise; rather, it involved complex considerations and judgments
concerning differences in financial and operating characteristics of companies
and other factors that could affect public trading values.
Analysis of Certain Publicly Traded Companies. To provide contextual data
and comparative market information, DLJ compared selected historical share
price and operating and financial ratios for NexGen to the corresponding data
and ratios of the following companies whose securities are publicly traded:
(i) AMD; (ii) Cyrix Corporation; and (iii) Intel. DLJ selected those companies
based upon their industry focus in the semiconductor industry.
Such analysis included, among other things, the ratios of the market
capitalization of the common stock plus long-term debt less cash ("Enterprise
Value") to LTM revenues, EBITDA and EBIT as well as the ratios of the current
stock price to LTM earnings per share ("EPS") and calendar year 1995 and 1996
estimated EPS (as estimated by research analysts and compiled by First Call
(Thomson Financial Services Inc.)
Although DLJ used these companies for comparison purposes, none of such
companies are identical to NexGen. Such analysis indicated that as of December
4, 1995, the mean values of Enterprise Value as a multiple of LTM revenues,
EBITDA and EBIT were 2.3x, 7.4x and 9.8x, respectively, as compared to the
implied multiples for NexGen of 17.8x, NM (due to the negative EBITDA for the
LTM) and NM (due to the negative EBIT for the LTM), respectively. The mean
values of the then-current stock price as a multiple of LTM EPS and estimated
calendar 1995 and 1996 EPS indicated by the analysis were 13.4x, 27.9x and
12.6x, respectively, as compared to the implied multiples for NexGen of NM
(due to the negative EPS for the LTM) and NM (due to projected negative EPS in
1995), and 18.5x, respectively.
Stock Trading History. To provide contextual data and comparative market
data, DLJ examined the history of the trading prices and their relative
relationships for both AMD Common Stock and NexGen Common Stock from May 25,
1995 to the last trading day prior to the announcement of the transaction. The
average, high and low of AMD Common Stock, NexGen Common Stock and their
relative relationship during the above-mentioned period were $33.03, $38.88,
$25.00 and $21.76, $26.50, $16.25 and 0.66, 0.81 and 0.50, respectively.
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Pro Forma Merger Analysis. DLJ analyzed certain pro forma financial effects
resulting from the Merger. In conducting this analysis, DLJ relied upon
certain assumptions described above and financial projections provided by the
management teams of both AMD and NexGen. DLJ analyzed the pro forma financial
effect of combining AMD and NexGen and the incremental revenues and
profitability AMD management believes are achievable upon completion of the
Merger. Such analysis indicated, among other things, that EPS for the pro
forma combined company would be dilutive to AMD in 1996 by $0.40 per share and
accretive to AMD in 1997 and 1998 by $1.15 and $0.77 per share, respectively.
The results of the pro forma combination analysis are not necessarily
indicative of future operating results or financial position.
Contribution Analysis. DLJ analyzed AMD's and NexGen's relative
contributions to the combined entity with respect to revenues, gross profit,
and EBIT. Such analysis was considered in both absolute dollar terms and on a
percentage basis and was made for the two annual periods ending December 29,
1996 and December 28, 1997 for AMD assuming it successfully completes the
Merger operating plan versus its stand alone operating plan. Stockholders of
NexGen Common Stock, as a result of the proposed transaction, will have an
approximate interest of 23% in the pro forma combined entity assuming exercise
of all AMD and NexGen stock options and warrants on a fully diluted basis.
Such contribution analysis indicated that for the fiscal year ending December
29, 1996, the Merger is projected to contribute to revenues, gross profit and
EBIT 1.4%, 1.7%, and NM (losses projected), respectively. For the fiscal year
ending December 28, 1997, the Merger is projected to contribute to revenues,
gross profit and EBIT 25.0%, 31.1% and 67.8%, respectively. The results of
these contribution analyses are not necessarily indicative of the
contributions that the respective businesses may have in the future.
The summary set forth above does not purport to be a complete description of
the analyses performed by DLJ. The preparation of a fairness opinion involves
various determinations as to the most appropriate and relevant methods of
financial analysis and the application of these methods to the particular
circumstances and, therefore, such an opinion is not readily suited to summary
description. The preparation of a fairness opinion does not involve a
mathematical evaluation or weighing of the results of the individual analyses
performed, but requires DLJ to exercise its professional judgment--based on
its experience and expertise--in considering a wide variety of analyses taken
as a whole. Each of the analyses conducted by DLJ was carried out in order to
provide a different perspective on the transaction and add to the total mix of
information available. DLJ did not form a conclusion as to whether any
individual analysis, considered in isolation, supported or failed to support
an opinion as to fairness. Rather, in reaching its conclusion, DLJ considered
the results of the analyses in light of each other and ultimately reached its
opinion based on the results of all analyses taken as a whole. DLJ did not
place particular reliance or weight on individual analysis, but instead
concluded that its analyses, taken as a whole, supported its determination.
Accordingly, notwithstanding the separate factors summarized above, DLJ
believes that its analyses must be considered as a whole and that selected
portions of its analyses and the factors considered by it, without considering
all analyses and factors, may create an incomplete view of the evaluation
process underlying its opinions. In performing its analyses, DLJ made numerous
assumptions with respect to industry performances, business and economic
conditions and other matters. The analyses performed by DLJ are not
necessarily indicative of actual values or future results, which may be
significantly more or less favorable than suggested by such analyses.
The AMD Board of Directors selected DLJ as its financial advisor because it
is a nationally recognized investment banking firm that has substantial
experience in transactions similar to the Merger and is familiar with AMD, its
businesses and the semiconductor industry. Pursuant to the terms of an
engagement letter dated October 13, 1995, AMD paid DLJ $1,250,000 for its
services to date, and agreed to pay DLJ an additional $250,000 for the DLJ
Opinion and $3,250,000 upon consummation of the Merger. AMD also agreed to
reimburse DLJ promptly for all out-of-pocket expenses (including the
reasonable fees and out-of-pocket expenses of counsel) incurred by DLJ in
connection with its engagement, and to indemnify DLJ and certain related
persons against certain liabilities in connection with its engagement,
including liabilities under the federal securities laws. If the Merger is not
consummated, the only fees or compensation due DLJ, other than that which has
previously been paid, would be $250,000 payable with respect to the opinion
dated the date of this Joint Proxy Statement/Prospectus. The terms of the fee
arrangement with DLJ, which DLJ and AMD believe are customary in transactions
of this nature, were negotiated at arms' length between AMD and DLJ, and the
AMD Board of Directors was aware of such arrangement, including the fact that
a significant portion of the aggregate fee payable
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to DLJ is contingent upon consummation of the Merger. In the ordinary course
of business, DLJ may actively trade the securities of both AMD and NexGen for
its own account and for the accounts of its customers and, accordingly, may at
any time hold a long or short position in such securities. DLJ has advised AMD
on several occasions over the past twenty years and has received usual and
customary fees for providing these services. Joe Roby, who was appointed as
the Chief Operating Officer of Donaldson, Lufkin & Jenrette, Inc., the parent
company of DLJ, on November 21, 1995, and who has been a director of the
parent company since 1989, is also a director of AMD and a member of the
Compensation Committee of AMD's Board of Directors. W. J. Sanders III,
Chairman of the Board and Chief Executive Officer of AMD, was appointed a
director of Donaldson, Lufkin & Jenrette, Inc. on November 17, 1995. The
Equitable Life Companies Incorporated of the United States owns approximately
80% of the outstanding shares of Donaldson, Lufkin & Jenrette, Inc.. DLJ, as a
part of its investment banking services, is regularly engaged in the valuation
of businesses and securities in connection with mergers, acquisitions,
underwritings, sales and distribution of listed and unlisted securities,
private placements and valuations for estate, corporate and other purposes.
Opinion of Financial Advisor to NexGen
NexGen retained PaineWebber as its exclusive financial advisor in connection
with any proposed transaction. In connection with such engagement, NexGen
requested PaineWebber to render an opinion as to whether or not the Exchange
Ratio offered by AMD is fair, from a financial point of view, to the holders
of NexGen Common Stock. PaineWebber was not requested to, and did not make any
recommendation to the NexGen Board of Directors as to the Exchange Ratio to be
provided for in the Merger, which Exchange Ratio was determined through arm's
length negotiations between NexGen and AMD.
In connection with the NexGen Board of Directors' consideration of the
Merger Agreement, PaineWebber delivered a written opinion on October 19, 1995,
which was reaffirmed as of the date of this Joint Proxy Statement/Prospectus
(the "PaineWebber Opinion"), to the effect that, as of the date of the
PaineWebber Opinion, based on its review and assumptions and subject to the
limitations summarized below, the Exchange Ratio is fair to the holders of
NexGen Common Stock from a financial point of view. In connection with the
reaffirmation of the PaineWebber Opinion as of the date of this Joint Proxy
Statement/Prospectus, PaineWebber performed certain procedures to update
certain of its analyses and reviewed the assumptions on which such analyses
were based and the factors considered in connection therewith. The PaineWebber
Opinion is directed to the Board of Directors of NexGen and does not
constitute a recommendation to any stockholder of NexGen as to how any such
stockholder should vote on the Merger. The PaineWebber Opinion does not
address the relative merits of the Merger and any other transactions or
business strategies discussed by the Board of Directors of NexGen as
alternatives to the Merger or the decision of the Board of Directors of NexGen
to proceed with the Merger. PaineWebber was not requested or authorized to
solicit, and did not solicit, potential purchasers of NexGen.
NEXGEN STOCKHOLDERS ARE URGED TO READ THE PAINEWEBBER OPINION (A COPY OF
WHICH IS ATTACHED HERETO AS ANNEX C) CAREFULLY AND IN ITS ENTIRETY FOR A
DESCRIPTION OF THE PROCEDURES FOLLOWED AND THE FACTORS CONSIDERED BY
PAINEWEBBER.
In arriving at its opinion, PaineWebber, among other things: (i) reviewed,
among other public information, NexGen's Form 10-K for the fiscal year ended
June 30, 1995, prospectus dated May 24, 1995, and related financial
information for the four fiscal years ended June 30, 1995 and NexGen's Form
10-Q and related unaudited financial information for the three months ended
September 30, 1995; (ii) reviewed, among other public information, AMD's
Annual Reports, Forms 10-K and related financial information for the five
fiscal years ended December 25, 1994 and AMD's Forms 10-Q and the related
unaudited financial information for the six months ended July 2, 1995 and for
the nine months ended October 1, 1995; (iii) reviewed certain information,
including financial forecasts, relating to the business, earnings, cash flow,
assets and prospects of NexGen and AMD, furnished to PaineWebber by NexGen and
AMD, respectively; (iv) conducted discussions with members of senior
management of NexGen and AMD concerning their respective businesses and
prospects; (v) reviewed the historical market prices and trading activity for
NexGen Common Stock and AMD Common Stock and compared such prices and trading
histories with those of certain other publicly traded companies which
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PaineWebber deemed to be relevant; (vi) compared the financial positions and
results of operations of NexGen and AMD with those of certain other publicly
traded companies which PaineWebber deemed to be relevant; (vii) compared the
financial terms of the Merger with the financial terms of certain other
business combinations which PaineWebber deemed to be relevant; (viii) reviewed
the Merger Agreement; (ix) reviewed NexGen's short-term liquidity needs; (x)
reviewed the Credit Agreement; and (xi) reviewed such other financial studies
and analyses and performed such other investigations and took into account such
other matters as PaineWebber deemed necessary, including PaineWebber's
assessment of general economic, market and monetary conditions.
In preparing the PaineWebber Opinion, PaineWebber relied on the accuracy and
completeness of all information that was publicly available, supplied or
otherwise communicated to PaineWebber by NexGen and AMD, and PaineWebber did
not independently verify such information. PaineWebber assumed that the
financial forecasts examined by PaineWebber were reasonably prepared on bases
reflecting the best currently available estimates and good faith judgments of
the management of NexGen and AMD as to the future performance of NexGen and
AMD, respectively. PaineWebber also assumed, with the consent of NexGen, that:
(i) the Merger will be accounted for under the pooling of interests method of
accounting; (ii) the Merger will be a tax-free reorganization; and (iii) any
material liabilities (contingent or otherwise, known or unknown) of NexGen and
AMD are as set forth in the consolidated financial statements of NexGen and
AMD, respectively. PaineWebber has not made an independent evaluation or
appraisal of the assets or liabilities (contingent or otherwise) of NexGen or
AMD, nor has PaineWebber been furnished with any such evaluations or
appraisals. The PaineWebber Opinion is based upon economic, monetary and market
conditions existing on the date it was issued. Furthermore, PaineWebber
expresses no opinion as to the price or trading range at which the shares of
AMD will trade in the future.
The preparation of a fairness opinion involves various determinations as to
the most appropriate and relevant quantitative methods of financial analyses
and the application of those methods to the particular circumstances and,
therefore, such an opinion is not readily susceptible to partial analysis or
summary description. Accordingly, PaineWebber believes that its analysis must
be considered as a whole and that considering any portion of such analysis and
of the factors considered, without considering all analyses and factors, could
create a misleading or incomplete view of the process underlying the
PaineWebber Opinion. In its analyses, PaineWebber made numerous assumptions
with respect to industry performance, general business and economic conditions
and other matters, many of which are beyond the control of NexGen and AMD. Any
estimates contained in these analyses are not necessarily indicative of actual
values or predictive of future results or values, which may be significantly
more or less favorable than as set forth therein. In addition, analyses
relating to the values of businesses do not purport to be appraisals or to
reflect the prices at which businesses may actually be sold. Accordingly, such
analyses and estimates are inherently subject to substantial uncertainty and
neither NexGen nor PaineWebber assume responsibility for the accuracy of such
analyses and estimates. The following paragraphs summarize the significant
quantitative and qualitative analyses performed by PaineWebber in arriving at
the PaineWebber Opinion presented to the NexGen Board of Directors.
Stock Trading History. PaineWebber reviewed the history of the trading prices
and volume for the NexGen Common Stock and the AMD Common Stock, both
separately and in relation to the Standard & Poor's Semiconductor Index. The
Standard & Poor's Semiconductor Index includes seven semiconductor companies
which participate in the same industry as NexGen and AMD. In addition,
PaineWebber reviewed the historical implied exchange ratio between NexGen
Common Stock and AMD Common Stock and compared this to the Exchange Ratio.
PaineWebber noted that the historical implied exchange ratio consistently fell
below the Exchange Ratio. PaineWebber also considered the potential effect on
the trading value of NexGen Common Stock in the absence of short-term
financing.
Selected Comparable Public Companies Analysis. Using publicly available
information, PaineWebber compared selected historical and projected financial,
operating and stock market performance data of NexGen and AMD to the
corresponding data of certain publicly traded companies. These companies
consisted of: (i) for NexGen, (a) selected microprocessor companies including
AMD, Cyrix Corporation and Intel; and (b) selected high growth semiconductor
companies including Adaptec, Inc., Alliance Semiconductor Corporation, Altera
Corporation, C-Cube Microsystems, Cirrus Logic, Inc., S3 Incorporated, and
Xilinx, Inc.; and (ii) for AMD (a) selected microprocessor companies including
Cyrix Corporation and Intel Corporation; and (b) selected high
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growth semiconductor companies including Adaptec, Inc., Altera Corporation,
Atmel Corporation, Cirrus Logic, Inc., Lattice Semiconductor Corporation, and
Xilinx, Inc. PaineWebber noted that both NexGen and AMD operate unique
businesses for which there are no directly comparable companies.
Because NexGen is in the development stage and does not have meaningful
historical revenues or earnings, PaineWebber compared the forward 1996 price
to earnings ("P/E") multiples of NexGen's comparable companies (using First
Call EPS estimates) to the 1996 forward multiples of NexGen based on both
First Call and internal estimates of NexGen's 1996 EPS. Based on this
analysis, PaineWebber derived a range of possible fully diluted equity values
of $15 to $20 per share, which implied a range of exchange ratios between .54x
and .72x. PaineWebber noted that the Exchange Ratio was above the indicated
range.
With respect to AMD and its comparable companies, PaineWebber compared
multiples of LTM revenues, LTM EPS, 1995 expected EPS and 1996 expected EPS as
reported by First Call. PaineWebber noted that AMD's l.lx multiple of LTM
revenues, 9.3x multiple of LTM EPS, 9.5x multiple of 1995 expected EPS and
8.7x multiple of 1996 expected EPS all fell at or below the median of the
comparables (3.9x, 30.0x, 27.1x, and 17.6x, respectively).
Selected Comparable Mergers and Acquisitions Analysis. Using public
information, PaineWebber compared selected financial, operating and stock
market performance data of NexGen with that of certain technology companies
which had significant intellectual property and that have recently filed or
consummated merger or acquisition transactions. These transactions consisted
of Bay Networks, Inc.'s acquisition of Xylogics, Inc., 3Com's acquisition of
Chipcom, Symantec's acquisition of Delrina, Adobe System's acquisition of
Frame Technology, IBM's acquisition of Lotus Development, Microsoft's
withdrawn offer for Intuit and Broderbund's proposed acquisition of The
Learning Co., which has subsequently failed. PaineWebber noted that NexGen's
business is unique and that there are no directly comparable merger or
acquisition transactions.
Because NexGen is in the development stage and does not have meaningful
historical revenues or earnings, PaineWebber compared the two fiscal period
forward P/E multiples of the comparable transactions (using First Call EPS
estimates from the time of the transaction) to the 1996 forward multiples of
NexGen based on both First Call and internal estimates of NexGen's 1996 EPS.
Based on this analysis, PaineWebber derived a range of possible fully diluted
equity values of $18 to $27 per share, which implied a range of exchange
ratios between .65x and .98x. PaineWebber noted that the Exchange Ratio fell
within the indicated range.
Discounted Cash Flow Analysis. PaineWebber analyzed NexGen based on an
unleveraged discounted cash flow analysis of the projected financial
performance of NexGen, which PaineWebber believed provided a useful measure of
the value of an enterprise ignoring the impact of financial leverage through
debt financing. PaineWebber used five-year projected financial statements for
NexGen provided by NexGen. The discounted cash flow analysis determined the
unleveraged after-tax cash flows generated over the five-year period and then
added a terminal value based upon a range of revenue multiples from 1.5x to
3.0x, a range of EBITDA multiples from 7.0x to 8.5x, and a range of EBIT
multiples from 9.0x to 10.5x, all of which were determined based on the
trading levels of shares of companies involved in the design and manufacture
of semiconductors. The unleveraged after-tax cash flows and terminal value
were discounted using a range of discount rates from 40.0% to 60.0%, which
PaineWebber assumed were representative of the risks inherent in an early
stage company engaged in the manufacture and production of microprocessors.
Based on this analysis, PaineWebber derived a range of possible fully diluted
equity values of $15 to $20 per share, which implied a range of exchange
ratios between .54x and .72x. PaineWebber noted that the Exchange Ratio fell
above the indicated range.
Premiums Paid Analysis. Using public information, and based on a per share
closing price of AMD Common Stock of $27.63 on the day before PaineWebber
initially delivered the PaineWebber Opinion, PaineWebber calculated the
premiums which AMD is paying to the stockholders of NexGen one day, one week
and four weeks prior to the day before PaineWebber initially delivered the
PaineWebber Opinion. PaineWebber compared these premiums to the average
premiums paid in 47 completed change of control transactions since January 1,
1994 which had values between $500 million and $1 billion. In addition,
PaineWebber calculated the premiums which AMD is paying to the stockholders of
NexGen one day, one week and four weeks prior to the day before PaineWebber
initially delivered the PaineWebber Opinion using an implied stock price for
NexGen.
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The implied stock price was calculated as NexGen's internal estimates of 1996
EPS multiplied by the 1996 forward EPS multiple implied from the median First
Call estimates. Based on this analysis, PaineWebber derived a range of possible
fully diluted equity values of $19 to $25 per share, which implied a range of
exchange ratios between .69x and .90x. PaineWebber noted that the Exchange
Ratio fell within the indicated range.
Contribution Analysis. PaineWebber reviewed NexGen's historical financial
information for the year ended June 30, 1995 and for the quarter ended
September 30, 1995 and AMD's historical financial information for the year
ended December 25, 1994, and for the three quarters ended October 1, 1995. For
these periods, PaineWebber analyzed the pro forma income statement
contributions of NexGen and AMD to the combined company assuming the Merger was
consummated at the beginning of each period reviewed. Assuming a stock price of
$27.63 per share for AMD, former owners of NexGen would own 23.8% of the
combined company's equity. Based on historical financial information for the
LTM period ended October 1, 1995 NexGen contributed 1.5% of combined company
revenues and had negative contribution to EBITDA, EBIT, net income and net cash
flow (net income plus depreciation and amortization, deferred taxes and certain
other non-cash charges). Based on projected financial information for the
fiscal year ended December 25, 1996 NexGen is expected to contribute to the
combined company 9.5% of revenues and 14.2% of net income. PaineWebber noted
that NexGen's pro forma ownership of the combined company was greater than
NexGen's historical and 1996 projected contributions to the combined company's
operating results.
Dilution Analysis. PaineWebber performed an analysis of the effect of the
Merger on AMD's earnings per share and net cash flow per share for the
projected years ending December 31, 1996 through December 31, 1999, which
assumed that the Merger was consummated on January 1, 1995. PaineWebber
combined the projected operating results of NexGen (based on NexGen's internal
estimates) with the corresponding projected pro forma operating results of AMD
to arrive at the combined company projected net income and cash flow.
PaineWebber divided these results by the pro forma shares outstanding to arrive
at a combined company EPS. PaineWebber then compared the combined company EPS
to AMD's stand-alone EPS to determine the pro forma impact on AMD's EPS. This
analysis, which did not factor in the effects of any synergistic benefits which
may result from the combination of NexGen and AMD, indicated that the pro forma
impact of the Merger was dilutive to AMD's EPS for 1996 and 1997 by 9.2% and
3.7% respectively.
Pursuant to an engagement letter between NexGen and PaineWebber dated October
5, 1995 PaineWebber has earned a fee of $500,000 for its services to date,
including the rendering of the PaineWebber Opinion. In addition, PaineWebber
will receive a fee payable upon completion of the Merger equal to .45% of the
purchase price received by NexGen (approximately $2.9 million based on the
closing price of the AMD Common Stock on December 8, 1995) less the $500,000
paid as provided above, and will be reimbursed for certain of its related
expenses. PaineWebber will not be entitled to any additional fees or
compensation in the event the Merger is not approved or otherwise consummated.
NexGen also agreed, under separate agreement, to indemnify PaineWebber, its
affiliates and each of its directors, officers, agents and employees and each
person, if any, controlling PaineWebber or any of its affiliates against
certain liabilities including liabilities under federal securities laws.
In the past, PaineWebber and its affiliates have provided financial advisory
services and financing services for NexGen and have received fees for the
rendering of these services. PaineWebber may provide financial advisory
services to, and may act as underwriter or placement agent for, the combined
company in the future. In the ordinary course of PaineWebber's business,
PaineWebber may actively trade the securities of NexGen and AMD for its own
account and for the accounts of its customers and accordingly may at any time
hold long or short positions in such securities. Among other securities of
NexGen which PaineWebber may hold for its own account from time to time,
PaineWebber holds warrants relating to approximately 917,225 shares of NexGen
Common Stock which have an average exercise price of approximately $4.61 per
share. In addition, Mr. Voytko, a representative of PaineWebber, is also a
member of the Board of Directors of NexGen.
PaineWebber is a prominent investment banking and financial advisory firm
with experience in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, secondary
distributions of securities, private placements and valuations for corporate
purposes.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes certain material federal income tax
consequences of the Merger to the holders of Common Stock of NexGen. This
discussion does not address all aspects of federal income taxation that may be
relevant to particular stockholders and may not be applicable to all classes of
stockholders including, without limitation those who are not citizens or
residents of the United States or who will acquire AMD Common Stock pursuant to
the exercise or termination of employee stock options or otherwise as
compensation, nor is the effect of any applicable foreign, state, local or
other tax laws considered. This discussion assumes that NexGen stockholders
hold their NexGen Common Stock as capital assets within the meaning of Section
1221 of the Internal Revenue Code of 1986, as amended (the "Code"). EACH
STOCKHOLDER SHOULD CONSULT WITH HIS OR HER OWN TAX ADVISOR AS TO THE PARTICULAR
TAX CONSEQUENCES TO HIM OR HER OF THE MERGER, INCLUDING THE APPLICABILITY AND
EFFECT OF FOREIGN, STATE, LOCAL AND OTHER TAX LAWS.
In the opinion of Bronson, Bronson & McKinnon, counsel to AMD, under current
law the Merger will constitute a tax-free reorganization under Section 368(a)
of the Code, and AMD and NexGen will each be a party to the reorganization
within the meaning of Section 368(b) of the Code. In rendering such opinion,
counsel has relied upon written representations and covenants of AMD and
NexGen. No ruling has been sought from the Internal Revenue Service as to the
federal income tax consequences of the Merger, and the opinion of counsel set
forth below is not binding on the Internal Revenue Service or any court.
As a tax-free reorganization, the Merger will have the following federal
income tax consequences for NexGen, AMD and stockholders of NexGen:
1. No gain or loss will be recognized by holders of NexGen Common Stock
as a result of the exchange of such shares for shares of AMD Common Stock
pursuant to the Merger, except that gain or loss will be recognized on the
receipt of cash, if any, received in lieu of fractional shares. Any cash
received by a stockholder of NexGen in lieu of a fractional share will be
treated as received in exchange for such fractional share and not as a
dividend, and any gain or loss recognized as a result of the receipt of
such cash will be capital gain or loss equal to the difference between the
cash received and the portion of the stockholder's basis in NexGen Common
Stock allocable to such fractional share interest.
2. The aggregate adjusted tax basis of the shares of AMD Common Stock
received by each stockholder of NexGen will equal the aggregate adjusted
tax basis of such stockholder's shares of NexGen Common Stock (reduced by
any amount allocable to fractional share interest for which cash is
received) exchanged in the Merger. The holding period for the shares of AMD
Common Stock received by each stockholder of NexGen will include the
holding period for the shares of NexGen Common Stock of such stockholder
exchanged in the Merger. Stockholders of NexGen who acquired their shares
at different times and prices should consult their own tax advisors as to
the determination of their adjusted tax basis and holding period with
respect to the shares of AMD Common Stock received in the transaction, as
several methods of determination may be available.
3. Neither AMD nor NexGen will recognize gain or loss as a result of the
Merger.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of NexGen's management and Board of Directors have interests
in the Merger in addition to their interests, if any, as stockholders of NexGen
generally.
Options granted under the 1995 Stock Plan of NexGen will automatically become
exercisable in full upon the effectiveness of the Merger. NexGen's officers and
directors hold options granted under the 1995 Stock Plan.
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Each non-employee director of NexGen (Dr. Low and Messrs. Cox, Khosla, Nishi
and Voytko) holds options to purchase 25,000 shares of NexGen Common Stock
that were granted under the 1995 Stock Plan of NexGen with a per share
exercise price of $15.00. NexGen officers Mr. Raza, Anthony S.S. Chan, Mr.
Dham, Dana B. Krelle and David M. Rickey hold options to purchase 200,000,
22,000, 400,000, 50,000 and 160,000 shares of NexGen Common Stock,
respectively, that were granted under the 1995 Stock Plan of NexGen with a per
share exercise price of $7.50, $7.50, $9.00, $7.50 and $7.50, respectively.
These options generally become exercisable over a period of five years but
will automatically become exercisable in full upon the effectiveness of the
Merger.
Following the Merger, the NexGen Board of Directors will consist of W. J.
Sanders III and Richard Previte, designees of AMD, and S. Atiq Raza, the
current Chairman of the Board, President and Chief Executive Officer of
NexGen. Following the Merger, the NexGen officers will consist of S. Atiq
Raza, President and Secretary, and Anthony S.S. Chan, Treasurer. Mr. Chan is
the current Vice President, Finance and Administration, and Chief Financial
Officer of NexGen.
Upon the consummation of the Merger, S. Atiq Raza will become a member of
the Board of Directors of AMD as well as its Corporate Vice President and
Chief Technical Officer. Vinod Dham will become a Vice President of AMD. See
"Information Concerning NexGen--Certain Relationships and Transactions."
All applicable information regarding the election of directors of AMD will
be provided in AMD's proxy statement relating to its 1996 annual meeting of
stockholders.
For a description of certain relationships between officers and directors of
NexGen and AMD, on the one hand, and such companies' financial advisors, on
the other hand, see "Opinions of Financial Advisors."
AMD has agreed to indemnify each officer and director of NexGen upon the
same terms as each such person is entitled to indemnification by NexGen as of
October 20, 1995 and the Effective Time pursuant to the Bylaws of NexGen, the
DGCL or any agreement between NexGen and such persons. NexGen has entered into
separate indemnification agreements with its directors and executive officers
that require NexGen, among other things, to indemnify them against certain
liabilities that may arise by reason of their status or service as directors
or officers and to advance their expenses incurred as a result of any
proceeding against them as to which they could be indemnified.
Upon the consummation of the Merger, Messrs. Raza and Dham will become full
time employees of AMD and each will be granted options under AMD's 1986 Stock
Option Plan to purchase 40,000 shares of AMD's Common Stock at an exercise
price of 50% of the market value of the Common Stock on the date of grant.
Such options will become exercisable in two equal installments on January 15,
1997 and January 15, 1998, and will expire ten years from the date of grant.
In addition, Messrs. Raza and Dham will each be granted options under AMD's
1992 Stock Incentive Plan to purchase 22,500 shares of AMD's Common Stock at
an exercise price equal to the market value of the AMD Common Stock on the
date of grant. Such options will become exercisable in increments of 40%, 30%,
20% and 10%, respectively, on the first through fourth anniversaries of the
date of grant and will expire ten years from the date of grant. Beginning in
1997 Messrs. Raza and Dham will each be eligible for an annual grant of
options to purchase approximately 15,000 shares of AMD Common Stock at an
exercise price equal to the fair market price of AMD Common Stock at the date
of grant. Such options will vest at the rate of at least 25% per year
commencing in 1998. Messrs. Raza and Dham will also each receive 5,000 shares
of performance based restricted stock under AMD's 1987 Restricted Stock Award
Plan, which shares will become freely transferable in two equal installments
on January 15, 1997 and January 15, 1998, subject to the attainment of revenue
goals established for 686 core based microprocessor products for 1996 and
1997. Mr. Raza and Mr. Dham will each be eligible to receive a special one-
time cash bonus equal to their 1996 annual salaries subject to the attainment
of revenue goals established for 686 core based microprocessor products for
1996. Messrs. Raza and Dham will also be eligible to participate in AMD's
benefit programs available for similarly situated AMD executives, including
stock option, bonus, profit sharing and indemnification arrangements.
Upon consummation of the Merger, Messrs. Raza and Dham will enter into non-
competition agreements with AMD under which they will be prohibited from being
associated with any competitive business for a period
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of 12 months following termination of their employment with AMD. During their
respective periods of non-competition, Messrs. Raza and Dham may receive from
AMD compensation at a rate equal to that in effect on the date their employment
terminates and may be required to provide consulting services.
Upon consummation of the Merger, Messrs. Chan, Krelle and Rickey will become
full time employees of AMD and will be eligible for AMD benefits available to
similarly situated AMD employees.
All employees of NexGen who become AMD employees will receive credit for
their years of service at NexGen towards the benefits to be received in
connection with the AMD benefit plans.
NO DISSENTERS' RIGHTS OF APPRAISAL
Neither the holders of AMD Common Stock nor the holders of NexGen Common
Stock will be entitled to exercise dissenters' rights of appraisal under the
DGCL in connection with the Merger.
REGULATORY MATTERS
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR
Act") and the rules promulgated thereunder by the Federal Trade Commission
("FTC"), certain acquisition transactions, including the Merger, may not be
consummated unless certain waiting period requirements have been satisfied. On
November 3, 1995, the Notification and Report Forms required pursuant to the
HSR Act were filed by AMD and NexGen with the Antitrust Division of the United
States Department of Justice and the FTC for review in connection with the
Merger. On November 29, 1995, the parties received notice of early termination
of the applicable waiting period under the HSR Act.
Neither AMD nor NexGen is aware of any other material governmental or
regulatory approvals required for consummation of the Merger.
ACCOUNTING TREATMENT
The Merger is intended to qualify as a pooling of interests for financial
reporting purposes in accordance with generally accepted accounting principles
("GAAP"). Consummation of the Merger is conditioned upon receipt by AMD of a
letter from Ernst & Young LLP, AMD's independent auditors, regarding that
firm's concurrence with AMD and NexGen managements' conclusions as to the
appropriateness of pooling of interests accounting for the Merger under
Accounting Principles Board Opinion No. 16, if the Merger is closed and
consummated in accordance with the Merger Agreement.
SALES OF AMD COMMON STOCK
The shares of AMD Common Stock issuable to NexGen stockholders in connection
with the Merger have been registered under the Securities Act. Such shares will
be freely transferable under the Securities Act; except for shares issued to
persons who may be deemed to be "affiliates" of NexGen within the meaning of
Rule 145 promulgated under the Securities Act. See "The Merger Agreement and
Related Agreements--Certain Other Agreements."
To permit exercises of NexGen Options assumed by AMD and the transfer of
shares of AMD Common Stock to be issued upon such exercises, AMD will file
registration statements under the Securities Act relating to the NexGen Options
and the shares of AMD Common Stock to be issued upon their exercise. In
addition, if the shares of AMD Common Stock issuable under existing AMD stock
option plans are listed on the NYSE or some other exchange, AMD will list the
shares of AMD Common Stock to be issued pursuant to NexGen Options assumed by
AMD on the NYSE or such other exchange.
AMD has agreed to file either a post-effective amendment to the registration
statement containing this Joint Proxy Statement/Prospectus or a new
registration statement with the Commission, relating to the shares of AMD
Common Stock to be received in the Merger by those stockholders of NexGen who
have entered into Voting Agreements, as amended, with AMD. See "The Merger
Agreement and Related Agreements--Certain Other
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Agreements." In addition, AMD intends to file either a post-effective
amendment to the registration statement containing this Joint Proxy
Statement/Prospectus or a new registration statement with the Commission,
relating to the shares of AMD Common Stock issuable pursuant to the exercise
of certain NexGen Warrants assumed by AMD. No such amendment or registration
statement for either the shares of AMD Common Stock to be received by those
stockholders of NexGen who have entered into Voting Agreements, as amended, or
the shares issuable upon exercise of NexGen Warrants assumed by AMD can become
effective until it includes or incorporates by reference restated financial
statements showing combined operations of NexGen and AMD on a consolidated
basis for the three fiscal years most recently ended. The time required to
prepare such financial statements may delay the effectiveness of such
amendments or registration statements. The shares of AMD Common Stock to be
received by those stockholders of NexGen who have entered into Voting
Agreements and the shares issuable upon exercise of NexGen Warrants assumed by
AMD may not be freely transferable under the Securities Act until such
effectiveness.
CERTAIN LITIGATION RELATED TO THE MERGER
On November 1, 1995, two alleged stockholders of NexGen filed suit in the
Superior Court in Santa Clara County, California against NexGen, the Board of
Directors of NexGen and a former director of NexGen. Subsequently, an amended
complaint was filed. The plaintiffs, who purport to represent a class of all
NexGen stockholders, allege that the consideration which NexGen stockholders
would receive pursuant to the Merger, 0.8 of a share of AMD Common Stock for
each share of NexGen Common Stock, is inadequate, and that the defendants have
therefore breached the directors' fiduciary duties to the NexGen stockholders.
The complaint alleges that the Merger consideration is below the fair or
inherent value of NexGen and that the defendants have not considered other
potential purchasers of NexGen or its stock. The complaint further alleges
that there has been inadequate disclosure of material facts concerning the
business and prospects of NexGen as they relate to the Merger. The complaint
seeks an injunction against the Merger, rescission of the Merger, if
consummated, unspecified damages, attorneys' fees and other relief.
On December 12, 1995, all parties to the litigation entered into a
Memorandum of Understanding that contemplates the settlement of the
litigation. Pursuant to the Memorandum of Understanding, the Merger Agreement
was amended to (i) reduce the Topping Fee (as defined under "The Merger
Agreement and Related Agreements--Fees and Expenses") from $28.0 million to
$25.0 million, (ii) provide that no Topping Fee will be payable based on
events occurring after April 30, 1996, rather than June 30, 1996, and (iii)
provide that the latest date on which the Merger can be effected is April 30,
1996, rather than June 30, 1996. The Memorandum of Understanding provides that
NexGen will amend its stockholder rights plan to eliminate the "flip-over"
provision, which currently provides that in the event, after the first date of
public announcement by NexGen or a third party that such third party has
become the beneficial owner of more than 15% of NexGen's stock, NexGen is
involved in a merger or other business combination transaction (whether or not
NexGen is the surviving corporation, but other than the Merger) or 50% or more
of NexGen's assets or earning power are sold (in one transaction or a series
of transactions), proper provision shall be made so that each holder of a
right issued pursuant to such plan (other than the third party at issue) shall
thereafter have the right to receive, upon the exercise thereof at the then
current exercise price, that number of shares of common stock of either
NexGen, in the event that it is the surviving corporation of a merger or
consolidation, or the acquiring company which at the time of such transaction
would have a market value of two times the exercise price. The Memorandum of
Understanding also provides that NexGen will make certain disclosures herein
requested by plaintiffs. These disclosures consist of (i) the expanded
disclosure of the litigation in the preceding paragraph, (ii) modifications to
"The Merger--Background of the Merger" to more fully describe in the fourth
sentence of the paragraph relating to the October 14, 1995 meeting of NexGen's
Board of Directors the financing alternatives considered by the Board, and
(iii) the addition of clause (x) in the second full paragraph under "The
Merger--Reasons for the Merger; Recommendations of the Boards of Directors--
NexGen's Reasons for the Merger; Recommendation of NexGen's Board of
Directors." The Memorandum of Understanding contemplates the preparation,
execution and submission to the court for approval of a stipulation of
settlement of the litigation, pursuant to which the litigation will be
dismissed. Attorneys for the plaintiff class will apply to the court for fees
and expenses to be paid by the defendants in an amount not to exceed $335,000,
payable in NexGen Common Stock or, at NexGen's option, in cash.
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THE MERGER AGREEMENT AND RELATED AGREEMENTS
The following paragraphs summarize, among other things, the material terms of
the Merger Agreement, a copy of which is attached as Annex A to this Joint
Proxy Statement/Prospectus and is incorporated herein by this reference.
AMD and NexGen have also entered into the Credit Agreement which forms an
integral part of the Merger Agreement. A copy of the Credit Agreement, as
amended, is attached to this Joint Proxy Statement/Prospectus as Annex 1 to the
Merger Agreement. See "The Secured Credit Agreement."
GENERAL EFFECTS OF THE MERGER
The Merger Agreement provides that, as soon as practicable after the
respective stockholders of AMD and NexGen have approved the Merger and all
conditions to the Merger have been satisfied or waived, but in no event later
than April 30, 1996, the parties will carry out the procedures specified under
the DGCL for effectuating the Merger, including the filing of a Certificate of
Merger with the Secretary of State of the State of Delaware. The time at which
the Merger becomes effective is referred to as the "Effective Time."
At the Effective Time, AMD Merger will be merged with and into NexGen, which
will continue as the surviving corporation (the "Surviving Corporation")
following the Merger. However, AMD may elect to restructure the Merger so that
either (1) NexGen will be merged with and into AMD, the separate existence of
NexGen will cease, AMD will continue as the Surviving Corporation, and AMD
Merger will not be a constituent corporation of the Merger, or (2) NexGen will
be merged with and into AMD Merger, the separate existence of NexGen will
cease, and AMD Merger will be the Surviving Corporation. AMD's right to elect
any such alternative structure for the Merger is subject to the condition that
the Merger as restructured must qualify as a tax-free reorganization under the
Code.
CONVERSION OF SECURITIES
At the Effective Time, each issued and outstanding share of NexGen Common
Stock will be converted into the right to receive 0.8 of a share (the "Exchange
Ratio") of AMD Common Stock, and each outstanding share of AMD Merger Common
Stock will be converted into one issued and outstanding share of NexGen Common
Stock. If, prior to or at the the Effective Time, AMD consolidates or merges
with or into another corporation (other than a merger in which AMD is a
continuing corporation and which does not result in any reclassification or
change of AMD Common Stock), each issued and outstanding share of NexGen Common
Stock will be converted into the right to receive 0.8 of the kind and amount of
other securities receivable by a holder of one share of AMD Common Stock upon
such consolidation or merger.
AMD has agreed not to undertake, prior to the Effective Time, any
consolidation or merger of AMD with or into another corporation other than a
merger with another corporation in which AMD is a continuing corporation and
which does not result in any reclassification or change of AMD Common Stock,
unless at the time of any such consolidation or merger, to the extent
reasonably deemed necessary by NexGen, AMD or the successor corporation execute
appropriate documentation to insure that (1) each issued and outstanding share
of NexGen Common Stock at the Effective Time will be converted into the right
to receive 0.8 of a share of the kind and amount of shares of stock or other
securities receivable upon such consolidation or merger by a holder of one
share of AMD Common Stock, (2) such securities shall be fully paid and
nonassessable, and (3) each issued and outstanding share of AMD Merger Common
Stock will be converted into one issued and outstanding share of NexGen Common
Stock.
No certificates representing less than one share of AMD Common Stock will be
issued upon the surrender or exchange of certificates representing shares of
NexGen Common Stock. In lieu of issuing any such fractional shares each holder
of NexGen Common Stock will be paid an amount in cash (without interest)
determined by multiplying such fractional interest by the average of the last
reported sales price, regular way, of AMD Common Stock on the NYSE for the
twenty trading days immediately preceding the date on which the Effective Time
occurs.
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EXCHANGE OF CERTIFICATES
Promptly after the Effective Time, AMD will cause to be sent to each holder
of shares of NexGen Common Stock as of the Effective Time a transmittal letter
containing instructions for the surrender of certificates for shares of NexGen
Common Stock in exchange for new certificates representing shares of AMD Common
Stock and cash in payment for any fractional shares resulting from the
exchange. CERTIFICATES SHOULD NOT BE SURRENDERED UNTIL THE LETTER OF
TRANSMITTAL IS RECEIVED AND ONLY IN ACCORDANCE WITH THE INSTRUCTIONS CONTAINED
IN THE LETTER OF TRANSMITTAL. Pending delivery to AMD of NexGen Common Stock
certificates, no dividends or other distributions with respect to the AMD
Common Stock to be issued in the Merger will be paid to the holders of
unsurrendered certificates for NexGen Common Stock. Upon such surrender, such
holders will be paid, without interest, all dividends and other distributions
with respect to AMD Common Stock payable after (and for which the record date
occurs after) the Effective Time, and all dividends and other distributions
with respect to NexGen Common Stock payable after (and for which the record
date occurs before) the Effective Time.
All shares of AMD Common Stock which are received in the Merger in exchange
for shares of NexGen Common Stock which, under agreements with NexGen or its
subsidiaries, are unvested or subject to a repurchase option or other condition
of forfeiture which, by its terms, does not terminate due to the Merger, will
also be unvested or subject to the same repurchase option or other condition,
and the certificates evidencing such shares will be marked with appropriate
legends.
TREATMENT OF NEXGEN OPTIONS, WARRANTS AND CONVERTIBLE SECURITIES
At the Effective Time, AMD will assume all NexGen Options outstanding under
the 1987 Employee Stock Plan of NexGen and the 1995 Stock Plan of NexGen and
all rights to purchase NexGen Common Stock outstanding under the NexGen ESPP.
Each NexGen Option then outstanding and each right to purchase NexGen Common
Stock under the NexGen ESPP then outstanding will be deemed an option or right
to purchase, in place of the NexGen Common Stock previously subject to such
option or right, that number of shares of AMD Common Stock equal to the product
of the number of shares subject to the NexGen Option or right multiplied by the
Exchange Ratio and rounded downward to the nearest whole share, at an exercise
price per share equal to the exercise price per share under the NexGen Option
or right divided by the Exchange Ratio and rounded upward to the nearest whole
cent. As of September 30, 1995, NexGen Options to purchase 4,879,543 shares of
NexGen Common Stock were outstanding and 75,033 shares of NexGen Common Stock
were reserved for issuance under the 1995 Stock Plan of NexGen; rights to
purchase an estimated 42,000 shares of NexGen Common Stock under the NexGen
ESPP to be issued after the end of the current accumulation period were
outstanding and 500,000 shares of NexGen Common Stock were reserved for
issuance under the NexGen ESPP. After the Effective Time AMD may terminate the
NexGen ESPP. To the extent permissible, AMD may also terminate the rights to
purchase AMD Common Stock which will be assumed by AMD at the Effective Time in
which case amounts withheld since January 1, 1996 through the termination date
would be applied to purchase AMD Common Stock on such date. After the Effective
Time, NexGen employees will be able to participate in the AMD SPP in accordance
with the terms of the AMD SPP. See "Proposal to Approve an Amendment to the
Advanced Micro Devices, Inc. 1991 Stock Purchase Plan."
At the NexGen Meeting, stockholders of NexGen also will be asked to consider
and vote upon a proposal to amend the 1995 Stock Plan of NexGen to permit the
employees, consultants and advisors of NexGen, its parent corporation or its
successor to be eligible to participate in the 1995 Stock Plan of NexGen.
Assuming that the NexGen stockholders approve the amendment to the 1995 Stock
Plan of NexGen, AMD may grant options and stock awards with respect to shares
of AMD Common Stock after the Effective Time to employees of AMD and NexGen
pursuant to the terms of the 1995 Stock Plan of NexGen, as amended. After the
Effective Time AMD intends to discontinue the features of the 1995 Stock Plan
of NexGen, as amended, providing for an automatic annual increase in the number
of shares available for awards and providing for the formula grant of options
to non-employee directors. See "Proposal to Approve an Amendment to the 1995
Stock Plan of NexGen, Inc." A vote in favor of the Merger and a vote in favor
of the proposal to amend the 1995 Stock Plan of NexGen
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will be deemed to constitute approval of the assumption and continuation of the
1995 Stock Plan of NexGen, as amended, by AMD. The 1987 Employee Stock Plan of
NexGen has already terminated, although shares subject to outstanding options
or stock awards granted under this plan which are assumed by AMD at the
Effective Time will again become available for award under the 1995 Stock Plan
of NexGen if such outstanding options expire or otherwise terminate unexercised
or if such outstanding stock awards are forfeited or are otherwise reacquired
by AMD.
At the Effective Time, AMD will assume all NexGen Warrants which do not
terminate as a result of the Merger. Each NexGen Warrant will remain
outstanding and will be deemed to be a warrant to purchase, in place of the
shares of NexGen Common Stock previously subject to each such NexGen Warrant,
that number of shares of AMD Common Stock equal to the product of the number of
shares of NexGen Common Stock subject to such Warrant multiplied by the
Exchange Ratio and rounded downward to the nearest whole share. The exercise
price per share will be equal to the exercise price per share under the NexGen
Warrant divided by the Exchange Ratio and rounded upward to the nearest one-
hundredth of one whole cent. As of September 30, 1995, NexGen Warrants to
purchase 3,446,435 shares of NexGen Common Stock were outstanding.
In addition, any right of ASCII existing as of the Effective Time to convert
debt payable by NexGen into NexGen Common Stock will remain effective and be
deemed to be a right to convert such debt into that number of shares of AMD
Common Stock equal to the product of the number of shares of NexGen Common
Stock into which such debt could have been converted prior to the Effective
Time multiplied by the Exchange Ratio and rounded downward to the nearest whole
share. As of September 30, 1995, such debt was convertible into 180,885 shares
of NexGen Common Stock.
BUSINESS OF AMD PENDING THE MERGER
AMD and its subsidiaries and AMD Merger have agreed not to do any of the
following prior to the Effective Time unless NexGen otherwise consents in
writing: (1) declare, set aside, or pay any dividend or make any other
distribution in respect of its capital stock, whether payable in AMD Common
Stock or otherwise, or effect a stock split of its capital stock; (2) undertake
a sale, spinoff or other distribution of all or substantially all of the assets
of AMD or all or substantially all of the assets of AMD associated with the
production of any product or group of products of AMD which represented 10% or
more of the gross revenues of AMD in the fiscal year ended December 25, 1994;
(3) undertake any consolidation or merger of AMD with or into another
corporation other than a merger with another corporation in which AMD is a
continuing corporation and which does not result in any reclassification or
change of AMD Common Stock, unless at the time of any such consolidation or
merger, to the extent reasonably deemed necessary by NexGen, AMD or the
successor corporation, appropriate documentation is executed to insure that
each outstanding share of NexGen Common Stock shall be converted, by virtue of
the merger and without any action on the part of the holder thereof, into the
right to receive 0.8 of the kind and amount of shares of stock or other
securities receivable upon such consolidation or merger by a holder of one
share of AMD Common Stock; (4) aside from any actions contemplated by the
Merger Agreement, take or permit any action relating to AMD which would prevent
the Merger from qualifying for pooling-of-interests accounting treatment in
accordance with GAAP and all rules, regulations and policies of the Commission;
(5) take or permit any action which would prevent the Merger from qualifying as
a tax-free reorganization under Section 368 of the Code or from being eligible
for pooling-of-interests accounting treatment in accordance with GAAP and all
rules, regulations and policies of the Commission, using its best efforts to
prevent any of its officers or directors from taking or permitting any such
action; (6) undertake a course of action inconsistent with the Merger Agreement
or which would prevent any conditions precedent to its obligations under the
Merger Agreement from being satisfied at or prior to the Effective Time; (7)
provide or publish to its stockholders any material which might constitute an
unauthorized "prospectus" within the meaning of the Securities Act; (8) issue
any press release or any public disclosure, either written or oral, of the
transactions contemplated by the Merger Agreement or negotiations related
thereto without the prior knowledge and written consent of NexGen, which
consent will not be unreasonably withheld; provided, however, that no such
consent will be required if AMD has determined in good faith upon written
advice of counsel that it is required under applicable securities laws to make
the disclosure; or (9) violate the terms of the Credit Agreement.
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BUSINESS OF NEXGEN PENDING THE MERGER
Pending consummation of the Merger, NexGen has agreed to (1) conduct its
business only in the ordinary course and to refrain from changing or
introducing any method of management or operations except in the ordinary
course of business and consistent with its prior practices, (2) use its best
efforts to keep intact its business organization and keep available its present
officers, agents and employees as NexGen deems necessary or appropriate to
continue its business as presently conducted, (3) use its best efforts to
preserve the goodwill of its suppliers, customers and others having business
relations with it, and (4) consider and adopt a stockholder rights plan if the
NexGen Board of Directors considers that such a plan is in the best interests
of NexGen and its stockholders. On November 20, 1995, the NexGen Board of
Directors adopted such a plan.
In addition, NexGen and its subsidiaries have agreed not to do any of the
following prior to the Effective Time unless AMD otherwise consents in writing:
(1) purchase, sell or otherwise dispose of any material asset or property, or
mortgage, pledge, subject to a lien or otherwise encumber any of its material
properties or assets, other than in the ordinary course of business consistent
with past practices; (2) except for obligations under existing contracts and
agreements, incur any material contingent liability with respect to the
obligations of any person or entity other than a subsidiary of NexGen; (3) take
or permit any action which would prevent the Merger from qualifying as a tax-
free reorganization under Section 368 of the Code or from being eligible for
pooling of interests accounting treatment in accordance with GAAP and all
rules, regulations and policies of the Commission; (4) amend or incur any
obligation to amend its Certificate of Incorporation or Bylaws, offer to issue
or issue any shares of its capital stock (other than pursuant to presently
outstanding options or warrants), effect any stock split, reverse stock split
or stock dividend, or grant any options, warrants or rights to acquire any
capital stock of NexGen (other than grants of options pursuant to existing
employee benefit programs in a manner which is consistent with past practice),
or accelerate the exercisability or vesting of options or warrants presently
outstanding, except (a) acceleration which occurs automatically pursuant to the
terms of an existing agreement between NexGen and a holder of NexGen Options or
NexGen Warrants and (b) acceleration to prevent any presently outstanding
options or warrants from terminating merely by reason of the Merger, without
possibility of exercise; (5) declare, set aside or pay any dividend or make any
other distribution in respect of NexGen's capital stock, or make any direct or
indirect redemption, purchase or other acquisition of its capital stock (other
than in connection with the repurchase of stock from terminated employees or
the surrender of stock to NexGen for the purpose of a stock-for-stock exercise
of an employee stock option); (6) make any change in the compensation payable
or to become payable to any of its directors, officers or employees (other than
increases in compensation called for by the terms of any outstanding employment
agreement or increases which are consistent with past practice) or enter into
or amend any indemnity, employment or consulting agreements; (7) make any loans
to any of its stockholders, officers, directors or employees or make any change
in its borrowing arrangements; (8) enter into (a) any licensing or
manufacturing contracts or agreements or (b) any sales agent, distributor or
OEM sales contracts or agreements not entered into in the ordinary course of
business; (9) undertake any change in the capital structure of NexGen or of any
NexGen subsidiary or in the operational or management structure of NexGen and
the NexGen subsidiaries as a whole; (10) undertake a course of action
inconsistent with the Merger Agreement or which would prevent any conditions
precedent to its obligations under the Merger Agreement from being satisfied at
or prior to the Effective Time; (11) provide or publish to its stockholders any
material which might constitute an unauthorized "prospectus" within the meaning
of the Securities Act; (12) violate the terms of the Credit Agreement; (13)
issue any press release or any public disclosure, either written or oral, of
the transactions contemplated by the Merger Agreement or negotiations related
thereto without the prior knowledge and written consent of AMD, which consent
shall not be unreasonably withheld; provided, however, that no such consent
will be required if NexGen has determined in good faith upon written advice of
counsel that it is required under applicable securities laws to make the
disclosure; or (14) aside from any actions contemplated by the Merger
Agreement, take or permit any action relating to NexGen which would prevent the
Merger from qualifying for pooling of interests accounting treatment in
accordance with GAAP and all rules, regulations and policies of the Commission.
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SOLICITATION OF ALTERNATIVE TRANSACTIONS
The Merger Agreement provides that NexGen will immediately cease and cause to
be terminated any existing discussions or negotiations with regard to a
business combination or similar transaction with any parties other than AMD and
AMD Merger, and that NexGen will not release any third party from any
confidentiality or standstill agreement to which NexGen is a party. In the
ordinary course of its business, NexGen routinely enters into confidentiality
agreements with persons and entities with which NexGen may do business or seek
to enter into business relationships. As of the date of this Joint Proxy
Statement/Prospectus, NexGen has not entered into any standstill agreements
with any party other than AMD and AMD Merger.
The Merger Agreement further provides that NexGen will not, directly or
indirectly, through any officer, director, employee, representative or agent of
NexGen or any NexGen subsidiaries, solicit or encourage (including by way of
furnishing nonpublic information) the initiation of any inquiries or proposals
regarding any merger, consolidation, sale of substantial assets, sale of shares
of capital stock (including without limitation by way of a tender offer or
similar transactions) involving NexGen or any NexGen subsidiaries (any of the
foregoing inquiries or proposals being referred to herein as an "Acquisition
Proposal").
However, if, after the date of the Merger Agreement, any other entity or
group (a "Third Party") submits to the NexGen Board of Directors an unsolicited
bona fide, written Acquisition Proposal (i) which is not subject to any
financing contingency, and (ii) which the NexGen Board of Directors determines
may constitute a Superior Proposal (as that term is defined below) and (iii)
the NexGen Board of Directors concludes, after receipt of advice from outside
legal counsel to NexGen, that the failure to engage in discussions with the
Third Party concerning such Acquisition Proposal would cause the NexGen Board
of Directors to violate its fiduciary duties to NexGen and its stockholders,
then in such case NexGen may (i) furnish information about its business,
properties, or assets to the Third Party under protection of a confidentiality
agreement substantially the same in its protections to NexGen as the
Confidentiality and Standstill Agreement dated October 16, 1995, between NexGen
and AMD, and (ii) negotiate and participate in discussions and negotiations
with such Third Party. Thereafter, if the NexGen Board of Directors concludes,
after receipt of advice from outside legal counsel to NexGen, that it is under
a duty to take actions reasonably calculated to maximize present stockholder
value, the Board of Directors may approve the solicitation of additional
Acquisition Proposals and furnish such information and have such negotiations
as it deems advisable under the circumstances. A "Superior Proposal" means any
bona fide Acquisition Proposal to merge with NexGen or to acquire, directly or
indirectly, a material equity interest in or a significant amount of voting
securities or assets of NexGen for consideration consisting of cash and/or
securities, and otherwise on terms which the NexGen Board of Directors
determines in the proper exercise of its fiduciary duties (based on the advice
of a financial advisor of nationally recognized reputation including, without
limitation, PaineWebber) to provide greater value to NexGen and its
stockholders than the Merger (or any improved transaction proposed by AMD as
described below).
NexGen must immediately notify AMD after receipt of any Acquisition Proposal
or any request for nonpublic information relating to NexGen or any of its
subsidiaries in connection with an Acquisition Proposal or for access to the
properties, books or records of NexGen or any subsidiary by any person or
entity that informs the Board of Directors of NexGen or such NexGen subsidiary
that it is considering making, or has made, an Acquisition Proposal. Such
notice to AMD must be made orally and in writing and must include a copy of any
writing submitted by such person or entity and must indicate in reasonable
detail the identity of the offeror and the terms and conditions of the
proposal, inquiry or contact. In the event the NexGen Board of Directors
receives an Acquisition Proposal that, based on the advice of outside counsel,
the NexGen Board of Directors is required to consider in the exercise of its
fiduciary obligations and that it determines to be a Superior Proposal, the
NexGen Board of Directors may withdraw or adversely modify its approval or
recommendation of the Merger and recommend any such Superior Proposal at any
time after the fourth business day following delivery of written notice to AMD
(a "Notice of Superior Proposal") advising AMD that the Board of Directors has
received a Superior Proposal, specifying the material terms of the structure of
such Superior Proposal, provided that NexGen may take the foregoing actions
only if the Superior Proposal continues to be a Superior Proposal in light of
any improved transaction proposed by AMD prior to the expiration of the four
business day period following delivery of the Notice of Superior Proposal.
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Under certain circumstances, NexGen is required to pay AMD a fee of $25.0
million if its Board of Directors fails to recommend the Merger to NexGen
stockholders, or solicits or accepts an Acquisition Proposal. See "--
Termination of the Merger" and "--Fees and Expenses" below.
CORPORATE STRUCTURE AND RELATED MATTERS AFTER THE MERGER
Unless AMD elects an alternative structure (see "--General Effects of the
Merger" above), at the Effective Time: (1) AMD Merger will be merged with and
into NexGen, the separate existence of AMD Merger will cease, and NexGen will
be the surviving corporation and a wholly owned subsidiary of AMD, (2) the
Certificate of Incorporation and Bylaws of NexGen, as in effect immediately
prior to the Merger, will be the Certificate of Incorporation and Bylaws of the
Surviving Corporation, (3) the officers of NexGen will be S. Atiq Raza,
President and Secretary, and Anthony S.S. Chan, Treasurer, (4) the directors of
NexGen will be W. J. Sanders III, Richard Previte and S. Atiq Raza, and (5) S.
Atiq Raza will be appointed to the Board of Directors of AMD. Regardless of the
structure, at the Effective Time each issued and outstanding share of NexGen
Common Stock will be converted into the right to receive 0.8 of a share of AMD
Common Stock.
INDEMNIFICATION
AMD has agreed that, upon consummation of the Merger and at all times
thereafter, AMD will indemnify and hold harmless each person who was an officer
or director of NexGen prior to the Effective Time upon the same terms and
conditions as each such person was entitled to be indemnified by NexGen at
October 20, 1995, the date of the Merger Agreement, and as of the Effective
Time, pursuant to the Bylaws of NexGen or any agreement between NexGen and each
such person or as provided by the DGCL. NexGen has entered into separate
indemnification agreements with its directors and executive officers that
require NexGen, among other things, to indemnify them against certain
liabilities that may arise by reason of their status or service as directors or
officers and to advance their expenses incurred as a result of any proceeding
against them as to which they could be indemnified.
In addition, NexGen and AMD have agreed to indemnify one another, their
subsidiaries and each of their officers, directors, employees and agents
against losses, claims, damages or liabilities (including expenses), joint and
several, to which any of them may become subject under the Securities Act, the
Exchange Act, common law, or otherwise, arising out of, or based upon, any
untrue statement or alleged untrue statement of any material fact contained in
the Registration Statement, this Joint Proxy Statement/Prospectus or arising
out of, or based upon, the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading. In connection with such indemnification, AMD and NexGen
will reimburse each such party to be indemnified for any legal or other
expenses reasonably incurred by such party in connection with investigating or
defending any such loss, claim, damage, liability or action. Such
indemnification will be limited, however, to losses, claims, damages or
liabilities (including expenses) arising out of, or based upon, untrue
statements or alleged untrue statements in or omissions or alleged omissions
from the Registration Statement or this Joint Proxy Statement/Prospectus, made
in reliance upon and in conformity with information furnished by or on behalf
of the indemnifying party or its subsidiary specifically for use therein or in
preparation thereof.
CONDITIONS TO THE MERGER
The respective obligations of AMD and NexGen to complete the Merger are
subject to the satisfaction of the following conditions at or before the
Effective Time: (1) no order to restrain, enjoin or otherwise prevent the
Merger or the transactions contemplated by the Merger Agreement shall have been
entered by any court or administrative body and remain in effect; (2) the
Merger Agreement shall not have been terminated by either party; (3) all
material governmental approvals, consents, authorizations or modifications
required to permit the performance by AMD, AMD Merger and NexGen of their
respective obligations under the Merger Agreement and the consummation of all
related transactions shall have been received; (4) all permits, licenses,
consents and approvals necessary under any laws relating to the sale of
securities shall have been issued or given, and all registrations or
registration statements filed under any securities laws relating to the
issuance of AMD Common
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Stock pursuant to the Merger Agreement shall have become effective, and shall
not have been revoked, cancelled, terminated, suspended or made the subject of
any stop order or proceeding therefor; (5) AMD and NexGen shall have made all
required filings under the HSR Act and the required statutory waiting periods
(and any extensions thereof) under such Act shall have expired or terminated
(which termination occurred on November 29, 1995); (6) approval of the Merger
Agreement shall have been obtained by the requisite vote of the outstanding
shares of NexGen and AMD entitled to vote, as required by the DGCL (with
respect to NexGen) and by rules of the NYSE (with respect to AMD), and NexGen
and AMD shall have presented evidence of such approval to each other in form
and content satisfactory to each other and their counsel; (7) if any shares of
AMD Common Stock are listed on the NYSE or another exchange at the Effective
Time, the NYSE or such other exchange shall have authorized the listing, upon
official notice of issuance, on the NYSE or such other exchange, of the shares
of AMD Common Stock to be issued or delivered in connection with the Merger,
and no order suspending trading in AMD's Common Stock shall be in effect as of
the Effective Time.
The separate obligations of AMD and AMD Merger, and of NexGen, are subject to
the satisfaction of certain further conditions at or prior to the Effective
Time as described below.
With respect to AMD and AMD Merger, these conditions include the following:
(1) NexGen shall have complied with and performed in all material respects all
of its covenants contained in the Merger Agreement required to be performed by
it at or prior to the Effective Time; (2) the representations and warranties of
NexGen contained in the Merger Agreement (after taking into account any
supplemental disclosures made by NexGen pursuant to its obligation to promptly
advise AMD in writing of the occurrence of any event which causes its
representations and warranties made in the Merger Agreement or the information
included in its disclosure schedules delivered to AMD pursuant to the Merger
Agreement to be incomplete or inaccurate in any material respect) shall be true
and correct in all material respects as of the Effective Time with the same
effect as though made at the Effective Time; (3) NexGen shall have delivered to
AMD a certificate of its Chief Executive Officer evidencing compliance with the
foregoing conditions (1) and (2); (4) there shall have been no material adverse
change in the business or financial condition of NexGen and the NexGen
subsidiaries taken as a whole, a "material adverse change" (for purposes of
this condition) meaning a material adverse change, other than a decrease in the
reported stock price, which (from the perspective of AMD) results in a
significant diminution of the value of the NexGen business enterprise as a
whole, and which shall cause DLJ to withdraw its written opinion to the Board
of Directors of AMD as required by condition (7) set forth below; (5) AMD shall
have received the Voting Agreements, Affiliate Agreements and No Sale
Agreements (see "--Certain Other Agreements" below) specified by the Merger
Agreement; (6) AMD shall be reasonably satisfied with the employment
arrangements between NexGen and those employees of NexGen whom AMD has
identified to NexGen as key employees and any additional employees of NexGen
whom AMD identifies as key employees prior to the Effective Time; (7) the Board
of Directors of AMD shall have received a written opinion from DLJ, dated the
date of the Merger Agreement and dated on the date on which this Joint Proxy
Statement/Prospectus is first mailed to AMD stockholders, in form and substance
satisfactory to AMD, stating that the consideration to be paid by AMD in the
Merger is fair to the stockholders of AMD from a financial point of view and
such opinion shall not have been withdrawn by the Effective Time; (8) AMD shall
have received from Price Waterhouse LLP, as independent accountants for NexGen,
certain "comfort" letters regarding the financial statements of NexGen included
in the Registration Statement and covering such other matters (including
tables, statistics and other financial information and data included in the
Registration Statement) as AMD may reasonably request consistent with the
Statement on Auditing Standards No. 72 issued by the American Institute of
Certified Public Accountants; (9) AMD shall have received an opinion of
Pillsbury, counsel to NexGen, dated as of the Effective Time, in substantially
the form specified by the Merger Agreement; (10) AMD shall have received
written resignations, effective as of the Effective Time, of each director of
NexGen; (11) AMD shall have received a written opinion of Bronson, counsel for
AMD, in form and substance reasonably satisfactory to it and substantially to
the effect that the Merger will constitute a reorganization within the meaning
of Section 368(a)(1) of the Code; and (12) AMD shall have received a letter
from Ernst & Young LLP, AMD's independent auditors, dated as of the Effective
Time, in form and substance satisfactory to AMD, to the effect that the Merger
will qualify for pooling of interests accounting treatment in accordance with
GAAP and all applicable rules, regulations and policies of the Commission and
the NYSE.
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With respect to NexGen, these conditions include the following: (1) AMD and
AMD Merger shall have performed in all material respects all of the covenants
contained in the Merger Agreement required to be performed by them at or prior
to the Effective Time; (2) the representations and warranties of AMD contained
in the Merger Agreement shall be true and correct in all material respects as
of the Effective Time with the same effect as though made as of the Effective
Time; (3) AMD shall have delivered to NexGen a certificate of its Chief
Executive Officer evidencing compliance with the conditions set forth in
conditions (1) and (2) above; (4) there shall have been no material adverse
change in the business or financial condition of AMD and the AMD subsidiaries
taken as a whole, a "material adverse change" (for the purposes of this
condition) meaning a material adverse change, other than a decrease in the
reported stock price, which (from the perspective of NexGen) results in a
significant diminution of the value of the AMD business enterprise as a whole,
and which shall cause PaineWebber to withdraw its written opinion to the Board
of Directors of NexGen described in condition (6) below; (5) NexGen shall have
received a written opinion of Pillsbury, counsel for NexGen, in form and
substance reasonably satisfactory to it and substantially to the effect that
the Merger will constitute a reorganization within the meaning of Section
368(a)(1) of the Code; (6) the Board of Directors of NexGen shall have received
a written opinion from PaineWebber dated the date of the Merger Agreement and
updated on the date on which this Joint Proxy Statement/Prospectus is first
mailed to NexGen stockholders, in form and substance satisfactory to NexGen,
stating that the terms of the Merger are fair to the stockholders of NexGen
from a financial point of view, and such opinion shall not have been withdrawn
by the Effective Time; and (7) NexGen shall have received an opinion of
Bronson, counsel to AMD, dated the Effective Time, in substantially the form
specified by the Merger Agreement.
TERMINATION, AMENDMENT AND WAIVER
The Merger Agreement may be terminated at any time prior to the Effective
Time, notwithstanding approval thereof by the stockholders either of AMD or of
NexGen or of both: (1) by mutual written consent duly authorized by the Boards
of Directors of AMD and NexGen; (2) by either AMD or NexGen if the Merger is
not consummated by April 30, 1996, provided, however, that such right to
terminate the Merger Agreement will not be available to any party whose failure
to fulfill any obligation under the Merger Agreement is the cause of or results
in the failure of the Merger to occur on or before such date; (3) by either AMD
or NexGen if a court of competent jurisdiction or governmental, regulatory or
administrative agency or commission has issued an order, decree or ruling or
taken any other action having the effect of permanently restraining, enjoining
or otherwise prohibiting the Merger; (4) by AMD or NexGen, if at the NexGen
Meeting (including any adjournment or postponement thereof) the requisite vote
of the stockholders of NexGen is not obtained and, in the case of the
termination of the Merger Agreement for such reason by NexGen, NexGen shall
have paid to AMD all amounts owing by NexGen to AMD as described below (see "--
Fees and Expenses" below); (5) by AMD or NexGen, if at the AMD Meeting
(including any adjournment or postponement thereof), the requisite vote of the
stockholders of AMD is not obtained and, in the case of the termination of the
Merger Agreement for such reason by AMD, AMD shall have paid to NexGen all
amounts owing by AMD to NexGen as described below (see "--Fees and Expenses"
below); (6) by AMD, if a tender offer or exchange offer for 20% or more of the
outstanding shares of NexGen Common Stock is commenced (other than by AMD or an
affiliate of AMD), and within ten (10) business days of such commencement the
Board of Directors of NexGen has not recommended that the stockholders of
NexGen not tender their shares in such tender or exchange offer; (7) by NexGen,
upon a breach of any representation, warranty, covenant or agreement on the
part of AMD set forth in the Merger Agreement, or if any representation or
warranty of AMD has become untrue, in either case such that conditions (1), (2)
and (3) of NexGen's separate obligations set forth above (see "--Conditions to
the Merger") would not be satisfied (a "Terminating AMD Breach"), provided
that, if (i) such Terminating AMD Breach is curable by AMD through the exercise
of its reasonable best efforts and for so long as AMD continues to exercise
such reasonable best efforts, or (ii) such Terminating AMD Breach relates
solely to representations and warranties and does not cause PaineWebber to
withdraw its written opinion to the Board of Directors of NexGen specified
above, then NexGen may not terminate because of such Terminating AMD Breach; or
(8) by AMD, upon breach of any representation, warranty, covenant or agreement
on the part of NexGen set forth in the Merger Agreement, or if any
representation or warranty of NexGen has become untrue, in either case such
that conditions (1), (2) and (3) of AMD's and AMD Merger's separate obligations
set forth above (see "--Conditions to the Merger") would
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not be satisfied (a "Terminating NexGen Breach"), provided that, (i) if such
Terminating NexGen Breach is curable by NexGen through the exercise of its
reasonable best efforts and for so long as NexGen continues to exercise such
reasonable best efforts, or (ii) such Terminating NexGen Breach relates solely
to representations and warranties and does not cause DLJ to withdraw its
written opinion to the Board of Directors of AMD specified above, then AMD may
not terminate because of such Terminating NexGen Breach.
If the Merger Agreement is terminated as described above, it becomes void
except with respect to its provisions regarding confidentiality and the return
of documents, indemnification and the payment of fees and expenses (see "--Fees
and Expenses" below) and there is no liability on the part of any party to any
other party except for payment of any amounts payable as specified below (see
"--Fees and Expenses"), payment of any amounts payable to the prevailing party
in any action at law or suit in equity in relation to the Merger Agreement, and
any damages for a material breach of the Agreement. Any such termination shall
be without prejudice to any other rights or remedies any party may have arising
out of any prior breach of any material representation, warranty or covenant in
the Merger Agreement.
In the event the Merger Agreement is terminated or the Merger is not
consummated for any reason, all written information and documents supplied by
either AMD or AMD Merger to NexGen or by NexGen to either AMD or AMD Merger for
their respective evaluations of the proposed Merger must be promptly returned
to the other party at its request, and the parties will use their best efforts
to cause confidential information to continue to be treated as confidential.
The Merger Agreement may be amended with the approval of the Boards of
Directors of AMD, AMD Merger and NexGen at any time before or after approval by
the stockholders of NexGen or AMD, but, after any such stockholder approval, no
amendment may be made which would have a material adverse effect on the
stockholders of either NexGen or AMD or which changes any of the principal
terms of the Agreement, without the further approval of such stockholders.
At any time prior to the Effective Time, AMD and AMD Merger may extend the
time for the performance by NexGen of any of its obligations or waive
compliance by NexGen with any of its agreements or conditions contained in the
Merger Agreement. NexGen similarly may extend the time for the performance by
AMD and/or AMD Merger of any of their respective obligations or waive
compliance by AMD and/or AMD Merger with any of their respective agreements or
conditions contained in the Merger Agreement.
FEES AND EXPENSES
General. Except as described below, all fees and expenses incurred in
connection with the Merger Agreement and the transactions contemplated by it
are to be paid by the party incurring such expenses, whether or not the Merger
is consummated, provided that AMD and NexGen have agreed to share equally all
fees and expenses other than attorneys' fees, incurred in relation to the
printing and filing of the Joint Proxy Statement/Prospectus (including any
preliminary materials related thereto) and the Registration Statement
(including financial statements and exhibits) and any amendments or supplements
thereto. If the Merger is not consummated, there are certain circumstances,
which are described below, under which NexGen may be obligated to pay AMD a fee
of $25.0 million, or either NexGen or AMD may be obligated to pay to the other
a fee of $15.0 million. If circumstances arise which would otherwise require
NexGen to pay both such fees, the Merger Agreement provides that the aggregate
fees payable will equal $25.0 million.
NexGen Topping Fee. NexGen will be required to pay AMD a fee of $25.0 million
(subject to offset for any amount paid as described under the heading "--Other
NexGen Fee") (a "Topping Fee") upon the earlier to occur of the following
events: (1) the NexGen Board of Directors prior to the vote at the NexGen
Meeting has withdrawn, modified or changed in any manner adverse to AMD its
recommendation of the Merger or resolved to do so, provided, however, that
disclosing to its stockholders in conformance with the securities laws
information regarding a Superior Alternative Transaction (as defined below)
without so withdrawing, changing or modifying its recommendation will not be
deemed to be a breach of this obligation; (2) the NexGen Board of Directors
prior to the vote at the NexGen Meeting has resolved to accept, accepted or
recommended to the
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stockholders of NexGen a Superior Alternative Transaction; (3) the later to
occur of both (a) the entering into an agreement contemplating a Superior
Alternative Transaction or the consummation of a Superior Alternative
Transaction on or before April 30, 1996 and (b) termination of the Merger
Agreement by AMD (i) if a tender offer or exchange offer for 20% or more of the
outstanding shares of NexGen Common Stock is commenced (other than by AMD or an
affiliate of AMD), and within ten business days of such commencement the Board
of Directors of NexGen does not recommend that the stockholders of NexGen not
tender their shares in such tender or exchange offer, or (ii) in the case of a
Terminating NexGen Breach; (4) the later to occur of both (a) the entering into
an agreement contemplating an Alternative Transaction or the consummation of an
Alternative Transaction (as defined below) on or before April 30, 1996 and (b)
termination of this Merger Agreement by AMD or NexGen, if (i) at the NexGen
Meeting (including any adjournment or postponement thereof), the requisite vote
of the stockholders of NexGen is not obtained and (ii) in the case of the
termination by NexGen, NexGen shall have paid to AMD all amounts owing by
NexGen to AMD as a Topping Fee or Other NexGen Fee (as defined below); or (5)
as a result of any material breach by NexGen of the Merger Agreement as a
result of any willful solicitation of an Acquisition Proposal by NexGen's
directors, executive officers, five other key employees identified by AMD
pursuant to the Merger Agreement or the financial advisor or counsel of NexGen.
No Topping Fee is payable by NexGen with respect to any of such events which
occurs after the earlier of (1) April 30, 1996, (2) the termination of the
Merger Agreement by mutual consent of AMD and NexGen, or (3) the termination of
the Merger Agreement by NexGen for any of the following reasons: (a) the Merger
has not been consummated by April 30, 1996, (b) there exists a legal order
permanently restraining, enjoining or otherwise prohibiting the Merger, (c) at
the AMD Meeting (including any adjournment or postponement thereof), the
requisite vote of the stockholders of AMD is not obtained, or (d) there is a
Terminating AMD Breach.
As used above: "Alternative Transaction" means either of: (1) a transaction
pursuant to which any person other than AMD or its affiliates acquires more
than 20% of the outstanding shares of NexGen Common Stock, whether from NexGen
or pursuant to a tender offer or exchange offer or otherwise, provided,
however, that after termination of the Merger Agreement, the issuance of new
equity by NexGen where reasonably necessary to provide continued funding for
NexGen's operations will not be deemed an Alternative Transaction except as
provided in item (3) of this paragraph immediately below; (2) a merger or other
business combination involving NexGen pursuant to which any person other than
AMD or its affiliates acquires more than 20% of the outstanding equity
securities of NexGen or the entity surviving such merger or business
combination; or (3) any other transaction pursuant to which any person other
than AMD or its affiliates acquires control of assets (including for this
purpose the outstanding equity securities of subsidiaries of NexGen, and the
entity surviving any merger or business combination including any of them) of
NexGen or any of the NexGen subsidiaries having a fair market value (as
determined by the Board of Directors of NexGen in good faith) equal to more
than 20% of the fair market value of all the assets of NexGen and the NexGen
subsidiaries, taken as a whole, immediately prior to such transaction.
"Superior Alternative Transaction" means an Alternative Transaction in which
consideration is received by NexGen or its stockholders for NexGen Common Stock
and the consideration for each share of NexGen Common Stock has a greater value
than the consideration for each share of NexGen Common Stock determined as of
the date of the Merger Agreement to be received by stockholders of NexGen
pursuant to the Merger.
Other NexGen Fee. NexGen will be required to pay AMD $15.0 million ("Other
NexGen Fee") upon the earlier to occur of the following events: (1) the
termination of the Merger Agreement by AMD as a result of the failure to
receive the requisite vote for approval of the Merger Agreement and the Merger
by the stockholders of NexGen at the NexGen Meeting; or (2) the termination of
the Merger Agreement by AMD if a tender offer or exchange offer for 20% or more
of the outstanding shares of NexGen Common Stock is commenced (other than by
AMD or an affiliate of AMD), and within ten (10) business days of such
commencement the Board of Directors of NexGen does not recommend that the
stockholders of NexGen not tender their shares in such tender or exchange
offer.
AMD Fee. AMD will be required to pay NexGen $15.0 million (an "AMD Fee") upon
the termination of the Merger Agreement by NexGen as a result of the failure to
receive the requisite vote for approval of the Merger Agreement and the Merger
by the stockholders of AMD at the AMD Meeting.
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CONFIDENTIALITY
If the Merger Agreement is terminated or the Merger is not consummated for
any reason, AMD, AMD Merger and NexGen have agreed that all written information
and documents supplied by either AMD or AMD Merger to NexGen or by NexGen to
either AMD or AMD Merger for their respective evaluations of the proposed
Merger will be promptly returned to the other party at its request, and AMD,
AMD Merger and NexGen each will use its best efforts to cause confidential
information to continue to be treated as confidential. The rights of AMD and
NexGen with respect to information disclosed to the other are set forth in a
Confidentiality and Standstill Agreement entered into prior to the date of the
Merger Agreement (the "Confidentiality Agreement") which will continue in force
and not be affected by the Merger Agreement.
The Confidentiality Agreement in relevant part provides generally that NexGen
and AMD and their representatives, as reciprocal conditions to the furnishing
of confidential information by each to the other, (1) will keep confidential
information supplied by the other and restrict access to the information by
their representatives in the manner specified by the Confidentiality Agreement;
(2) will not disclose to any other person any portion of the confidential
information or any terms of the Merger or the status thereof, (3) if legally
compelled to disclose any such information, will provide prompt written notice
to the other unless legally prohibited, and will delay making such disclosure
to the extent legally permitted in order to permit the other party to seek a
protective order or other remedy against disclosure; (4) in the event such
party is unable to obtain such an order or remedy, will direct its
representatives to disclose only that information which its counsel advises is
legally required to be disclosed; (5) if the Merger does not take place, will
direct its representatives, promptly upon demand by the other party, to return
such information without retaining copies; and (6) for a period of eighteen
months following the date of the Confidentiality Agreement, without the other
party's written consent, and except when preceded by certain acts by third
parties to acquire shares or assets of the other party or to engage in a proxy
contest involving any change in the board of directors of the other party, will
not attempt to acquire shares of the other party, participate in any proxy
solicitation with respect to the other party, or make any public announcement
of such action or communicate with the other party regarding any such action
which would require public announcement.
CERTAIN OTHER AGREEMENTS
Voting Agreements. In connection with the Merger Agreement, AMD and certain
stockholders of NexGen holding in the aggregate approximately 12,542,000 shares
of NexGen Common Stock (or approximately 38% of the shares of NexGen Common
Stock outstanding on the record date for the NexGen Meeting), executed Voting
Agreements, pursuant to which, such stockholders have agreed to vote such
shares of NexGen Common Stock held of record or beneficially owned by such
stockholder in favor of the Merger Agreement and the Merger at the NexGen
meeting. In addition, such stockholders have granted to AMD irrevocable proxies
to vote the shares of such stockholders with respect to the Merger Agreement
and the Merger. Pursuant to the Voting Agreements, such stockholders have also
agreed not to sell, assign, otherwise transfer or encumber any of such
stockholders' shares of NexGen Common Stock prior to the earlier of the NexGen
meeting or the termination of the Merger Agreement or to execute any proxy with
respect to any of such shares or enter into any agreement or other arrangement
relating to the voting of any of such shares if such proxy, agreement or
arrangement would be in any way inconsistent with the proxy given to AMD.
Certain of the stockholders have signed amendments to their Voting Agreements
extending their agreement not to sell or transfer their shares through the
earlier of the Effective Time or the termination of the Merger Agreement.
Affiliate Agreements. The AMD Common Stock to be issued pursuant to the
Merger will be freely transferable under the Securities Act, except for shares
issued to any person who is an "affiliate" of AMD or NexGen within the meanings
of Rules 144 and 145 under the Securities Act. Rules 144 and 145 impose
restrictions on the manner in which affiliates may resell securities and also
on the quantity of securities that such affiliates and others with whom they
might act in concert may resell within any three-month period.
Certain stockholders of NexGen, including each person who was believed by
NexGen or its counsel to be an affiliate of NexGen as of the date of the Merger
Agreement, have entered into affiliate agreements (each an
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"Affiliate Agreement") with AMD providing that each such person will not offer
to sell or otherwise dispose of any AMD Common Stock obtained as a result of
the Merger except in compliance with the Securities Act and the rules and
regulations thereunder. Generally, this will require that such sales be made
pursuant to a registration statement or in accordance with Rule 145(d) under
the Securities Act, which in turn requires that, for specified periods, such
sales be made in compliance with the volume limitations, manner of sale
provisions and current information requirements of Rule 144 under the
Securities Act.
In order to help ensure that the Merger will be treated as a pooling of
interests for accounting and financial reporting purposes, each Affiliate
Agreement also provides that each affiliate who has signed an Affiliate
Agreement will not (i) sell any shares of AMD Common Stock, or (ii) in any way
reduce such affiliate's risk relating to such shares of AMD Common Stock,
until such time after the Effective Time as financial results covering at
least 30 days of the post-Effective Time combined operations of AMD and NexGen
have been, within the meaning of Accounting Series Release Nos. 130 and 135,
as interpreted by Staff Accounting Bulletin Nos. 65 and 76, filed by AMD with
the Commission or published by AMD in an annual report on Form 10-K, a
quarterly report on Form 10-Q, a current report on Form 8-K, a quarterly
earnings report, a press release or other public issuance which includes
combined sales and income of NexGen and AMD.
No Sale Agreements. AMD and all of the officers and directors of NexGen have
executed No Sale Agreements, which, as amended, provide that such officers and
directors will not, prior to the Effective Time or the termination of the
Merger Agreement, whichever is earlier, sell, assign, otherwise transfer or
encumber any of the shares of NexGen Common Stock held of record or
beneficially owned by such individuals.
THE SECURED CREDIT AGREEMENT
Concurrent with the signing of the Merger Agreement, AMD and NexGen entered
into the Secured Credit Agreement dated October 20, 1995. AMD and NexGen also
entered into a First Amendment to Secured Credit Agreement dated October 30,
1995. The Secured Credit Agreement, as amended, is referred to herein as the
"Credit Agreement." Under the terms of the Credit Agreement, AMD has agreed to
make available to NexGen a line of credit in an aggregate principal amount up
to $60.0 million (the "Loan"). The Loan is to be used for general corporate
purposes. The Credit Agreement may only be amended by a writing signed on
behalf of AMD and NexGen.
The following paragraphs summarize the significant provisions of the Credit
Agreement. For a more complete understanding of the Credit Agreement,
reference should be made to the Credit Agreement itself, a copy of which is
attached to this Joint Proxy Statement/Prospectus as Annex 1 to the Merger
Agreement.
REVOLVING LINE OF CREDIT
During the term of the Credit Agreement, AMD has agreed to make advances to
NexGen under a revolving line of credit facility in the maximum aggregate
principal amount of $60.0 million. NexGen has executed and delivered to AMD a
secured promissory note dated October 20, 1995 (the "Secured Promissory
Note"), in said maximum principal amount. NexGen has the right to make
payments in reduction of the outstanding balance of the line of credit at any
time, and any amount of principal repaid by NexGen may be reborrowed within
the limits specified.
The line of credit is available to NexGen as follows: on or before December
31, 1995, advances in an aggregate principal amount not exceeding $30.0
million; after December 31, 1995 and on or before March 31, 1996, advances in
an aggregate principal amount not exceeding $50.0 million; after March 31,
1996 and on or before June 30, 1996, advances in an aggregate principal amount
not exceeding $60.0 million. Any unused portion of the line of credit existing
on June 30, 1996 will be cancelled and no longer available for drawdown.
The first drawdown under the line of credit was effected on October 24,
1995. On that date, AMD advanced $30.0 million to NexGen, representing the
entire availability for the period ending December 31, 1995.
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INTEREST RATE
Each advance under the line of credit will bear interest at a fluctuating
rate per annum equal to the "Index Base Rate," defined as the prime, base or
reference rate ("Index Rate") established from time to time by Bank of America
National Trust and Savings Association, plus 350 basis points (3.50 %). Since
the current Index Rate is 8.75%, the current Index Base Rate is 12.25%.
Interest at the Index Base Rate is calculated daily, and any change in the
Index Base Rate due to a change in the Index Rate is effective on the effective
date of such change in the Index Rate.
PAYMENTS OF PRINCIPAL AND INTEREST
All sums of principal and accrued interest outstanding on the "Maturity Date"
will be due and payable by NexGen on such date.
"Maturity Date" is defined in the Credit Agreement to mean the first to occur
of the following dates: (i) June 30, 1997; (ii) the date which is twelve months
after the date of any termination of the Merger Agreement in accordance with
the provisions of Section 10.1 of the Merger Agreement; and (iii) the date of
the acquisition by any one person or group of persons (other than AMD and its
affiliates) of, or the right to acquire, more than fifty percent of any class
or series of voting securities of NexGen.
COLLATERAL SECURITY FOR THE LOAN
As collateral security for the satisfaction of its obligations under the
Credit Agreement and the Secured Promissory Note, NexGen has entered into a
Security Agreement dated October 20, 1995, with AMD, granting AMD a security
interest in all of the tangible and intangible assets of NexGen, as described
therein. Such collateral includes all chattel paper, instruments, documents,
goods, inventory, contracts, contract rights, accounts, equipment plus general
intangibles including patents, patent applications, inventions, trademarks,
copyrights, all computer programs and software, and all trade secrets and
processes, whether now owned or acquired by NexGen in the future.
The liens granted to AMD to secure the Loan are intended by the parties to be
first and prior liens on the property of NexGen, except for "Permitted Liens."
The Credit Agreement defines "Permitted Liens" as including, in addition to
liens in favor of AMD and any other liens that may be approved by AMD in
writing: (i) liens arising in the ordinary course of business or by operation
of law; (ii) liens in favor of lessors of equipment under equipment lease
agreements signed by NexGen as lessee; (iii) any liens in favor of any
supplier/manufacturer of inventory; (iv) existing liens in favor of ASCII and
ASCII of America; (v) existing liens in favor of Phemus; and (vi) liens with
respect to the inventory and accounts receivable of NexGen, securing a line of
credit with a commercial bank or credit company.
AMD has agreed that the obligations of NexGen under the Credit Agreement, and
the liens granted to AMD pursuant to the Credit Agreement and the Security
Agreement, are subordinate to the prior payment in full of the indebtedness
owing to ASCII, ASCII of America and Phemus (the "Senior Lenders"), and junior
in priority to the existing liens in favor of the Senior Lenders.
RESTRICTION AGAINST FURTHER SECURED INDEBTEDNESS
NexGen has agreed with AMD that, so long as any of the obligations of NexGen
under the Credit Agreement remain outstanding, NexGen will not, either directly
or indirectly, incur or assume any additional indebtedness secured by a lien on
any of its properties or assets, except for Permitted Liens.
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INFORMATION CONCERNING AMD
Advanced Micro Devices, Inc. was incorporated under the laws of the State of
Delaware on May 1, 1969. The mailing address of its executive offices is One
AMD Place, P.O. Box 3453, Sunnyvale, California 94088-3453, and its telephone
number is (408) 732-2400. AMD designs, develops, manufactures and markets
complex monolithic integrated circuits for use by manufacturers of electronic
equipment and systems. Its products primarily consist of standard items or are
made from designs based on such items, as opposed to custom circuits designed
for a single customer. While a substantial portion of AMD's products are
standard items, increasingly many of its recently developed products are
designed for specific applications such as telecommunications, personal
computers, engineering workstations, disk memory or local area networks. As a
service to certain major customers, AMD modifies portions of these application-
specific devices to meet specific customer needs. The resulting devices are
produced in significant volumes for such customers.
AMD began as an alternate-source manufacturer of integrated circuits
originally developed by other suppliers and has shifted to proprietary products
(i.e., products resulting from AMD's design or technology innovations). AMD has
focused its product development activities on the three areas of its
business: (1) X86, K86 and other microprocessors and related embedded
processors for personal computers, (2) applications solutions products, and (3)
high-volume commodity products such as programmable logic and non-volatile
memory devices.
Personal computer ("PC") products include microprocessors and related
embedded processors used in computers. AMD's applications solutions products
are focused on networks, voice/data communications (World Network), and on
computer peripherals, computer interfaces and mass storage. High-volume
commodity products include Flash and programmable logic devices ("PLDs"). PLDs
and Flash memory devices are typically produced by more than one manufacturer,
subject to intense competition, and broadly applicable across a wide customer
base. Because most of AMD's products are utilized in personal computers and
related peripherals, AMD's future growth is closely tied to performance of the
PC industry.
Product design and development, and wafer fabrication activities are
currently conducted at AMD's facilities in California and in Texas. AMD and
Fujitsu Ltd. are parties to a joint venture which has constructed and is
operating a wafer fabrication facility for the manufacture of Flash memory
devices in Aizu-Wakamatsu, Japan. The joint venture plans to build a second
wafer fabrication facility adjacent to the existing facility at a planned cost
of $1.1 billion. A subsidiary of Sony Corporation manufactures bipolar products
for the Corporation in San Antonio, Texas. Nearly all product assembly and
final testing are performed at AMD's manufacturing facilities in Penang,
Malaysia; Singapore; and Bangkok, Thailand, or by subcontractors in Asia. A
limited amount of testing of products destined for delivery in Europe is
performed at AMD's facilities in Basingstoke, England. AMD is currently
planning to construct a submicron wafer fabrication facility at a site yet to
be determined at a cost of approximately $1.5 billion.
AMD markets and sells its products primarily to original equipment
manufacturers (OEMs) of computation and communication equipment. AMD's products
are sold under the AMD(R) trademark. AMD has an agreement with Compaq under
which AMD supplies Compaq with microprocessor products, primarily the Am486
product; however, the agreement does not require Compaq to purchase
microprocessor products from AMD. Compaq has advised AMD that it is reviewing
its practice of purchasing microprocessors from suppliers other than Intel and
is in the process of determining whether it will purchase microprocessors from
suppliers other than Intel in the near term. AMD believes that Compaq will
consider the purchase of AMD's K86 microprocessors when they become available.
No assurance can be given, however, that any purchases will be made or, if they
are, that they will not be terminated by Compaq due to the availability of
competing microprocessor products.
AMD sells to a broad base of customers; no single customer accounted for more
than ten percent of sales during the fiscal year ended December 25, 1994. One
of AMD's distributors accounted for approximately 12 percent of net sales for
the first nine months of 1995. AMD employs a direct sales force through its
principal facilities in Santa Clara County, California, and field offices
throughout the United States and abroad (primarily Europe and the Asia-Pacific
Basin). AMD also sells it products through third-party distributors and
independent
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representatives in both domestic and international markets pursuant to
nonexclusive agreements. The distributors also sell products manufactured by
AMD's competitors, including those products for which AMD is an alternate
source. AMD has established sales subsidiaries that have offices in Belgium,
Canada, China, Finland, France, Germany, Hong Kong, Italy, Japan, Korea,
Scotland, Singapore, Sweden, Switzerland, Taiwan, and the United Kingdom.
Distributors typically maintain an inventory of AMD's products. AMD, pursuant
to its agreements with the distributors, employs procedures which provide
protection to the distributors for their inventory of AMD's products against
price reductions as well as products that are slow moving or have been
discontinued by AMD. These agreements, which may be cancelled by either party
on specified notice, generally contain a provision for the return of AMD's
products to AMD in the event the agreement with the distributor is terminated.
AMD and its subsidiaries have been granted numerous United States patents,
and numerous patent applications are pending in the United States. In certain
cases, AMD has filed corresponding applications in foreign jurisdictions. AMD
expects to file future patent applications in both the United States and abroad
on significant inventions as it deems appropriate. AMD has entered into
numerous cross-licensing and technology exchange agreements under which it both
transfers and receives technology and intellectual property rights. Although
AMD attempts to protect its intellectual property rights through patents,
copyrights, trade secrets and other measures, there can be no assurance that
AMD will be able to protect its technology adequately or that competitors will
not be able to develop similar technology independently. There can be no
assurance that any patent applications that AMD may file will be issued or that
foreign intellectual property laws will adequately protect AMD's intellectual
property rights. There can be no assurance that any patent licensed by or
issued to AMD will not be challenged, invalidated or circumvented or that the
rights granted thereunder will provide competitive advantages to AMD.
Furthermore, there can be no assurance that others will not independently
develop similar products, duplicate AMD's products or design around the patents
licensed by or issued to AMD.
INFORMATION CONCERNING NEXGEN
BUSINESS OF NEXGEN
General
NexGen designs, develops and markets high performance processors for IBM
compatible personal computers. The Company began shipping its Nx586 processor
to customers in September 1994. NexGen believes that PCs incorporating the
Nx586 processor provide comparable performance to similarly configured systems
based on Intel's Pentium processor. NexGen's Nx586 processor is based on
NexGen's proprietary microarchitecture, called RISC86, which applies RISC
performance principles to implement the industry standard x86 instruction set
while maintaining binary compatibility with the large installed base of
software and peripherals developed for PCs. NexGen has entered into an
agreement with IBM for the production, manufacture and sale to NexGen of the
Nx586 processor using IBM's submicron CMOS wafer fabrication process and
advanced package technologies. In addition, NexGen has developed system logic
chipsets and custom motherboards specifically designed to incorporate NexGen's
Nx586 processors. In October 1995 NexGen announced details of the technology
and demonstrated on first silicon, its sixth generation processor, the Nx686,
which is being designed with a higher degree of internal parallelism for higher
performance. NexGen has sold products to small to medium-sized OEMs.
Industry Background
During the last decade, the PC industry has grown rapidly as technological
advances and increased functionality, combined with lower pricing, have made
personal computers valuable and affordable tools for business and personal use.
The large installed base of PCs, together with the popularity of Microsoft's
MS-DOS and Windows operating systems, has resulted in the creation of a
standard environment for PC hardware, software and
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peripherals. Hardware manufacturers and software developers have been able to
introduce and sell products based on a set of common specifications or
"industry standards" for the PC market. The proliferation of software written
for PCs has served to reinforce and support these industry standards.
The microprocessor, an integrated circuit consisting of millions of
transistors, serves as the central processing unit, or "brain," of a PC. The
microprocessor is responsible for controlling data flowing through the PC,
manipulating such data as specified by software running the PC and coordinating
all hardware functions within the system. Developments in circuit design and
very large scale integration process technology, driven by the demand for
higher performance from PCs, have resulted in dramatic advances in
microprocessor performance. Improvements in the performance characteristics of
microprocessors, coupled with decreases in production costs resulting from
advances in design and process technology, have broadened the market for PCs
and increased the demand for microprocessors.
The first PC introduced by IBM in 1981 included an 8088 microprocessor
designed by Intel. Intel subsequently developed and shipped newer generations
of microprocessors, including the 286 in 1984, the 386 in 1986, the 486 in 1989
and the Pentium (its fifth generation processor) in 1993. These
microprocessors, and microprocessors developed by others that run the same
instruction set and software, are commonly referred to as x86 microprocessors.
Improvements in semiconductor manufacturing technology led to a continuous
migration to higher clock rates (measured in MHz). This further increased the
performance of each x86 product family. In addition, each new generation of
these x86 microprocessors delivered increased performance and functionality
while maintaining complete hardware, software and peripheral compatibility for
the PC.
Through a series of licensing and product agreements, Intel encouraged others
to manufacture its earliest x86 microprocessors (8088, 8086 and 286), thereby
accelerating acceptance of the architecture in the marketplace. Intel did not,
however, establish alternative suppliers for the 386 or subsequent
microprocessors. For five years Intel was the sole supplier of 386, and for
three years 486, microprocessors. This situation created significant demand
from PC manufacturers for alternative microprocessor suppliers to provide price
competition and assure availability.
A significant barrier to entry into the PC microprocessor market is the
ability of a microprocessor to run a wide range of PC software applications
without sacrificing performance. A few manufacturers have attempted to
challenge Intel's dominance of the x86 microprocessor market by introducing
products that are binary compatible with x86 software. Since 1991, AMD, Cyrix,
IBM and others have introduced 386 and 486 microprocessors. Faster versions of
the 486 microprocessor have been introduced by AMD, Cyrix and Intel. The non-
Intel x86 microprocessors have achieved significant market acceptance,
particularly in segments of the PC market where they provide price, performance
and availability advantages compared to Intel's products. However, due to the
significant design challenges and costs associated with developing
microprocessors, these competitors have, to date, been unable to introduce
competitive products on the same schedule as Intel.
Intel's response to increased competition in the microprocessor market has
been to continue to introduce new microprocessors with even higher performance,
including the Pentium processor in 1993, and to make more frequent and more
significant price reductions to stimulate market demand and encourage migration
of OEMs and end users to its latest generation of microprocessors. Intel's new
microprocessors have achieved rapid market growth because end-users of PCs
continue to demand software compatible products with the highest performance at
affordable prices. Intel has also aggressively reduced the price of its Pentium
processors and introduced increasingly higher speed versions of its Pentium
processors. Recently Intel started shipping 120 MHz and 133 MHz versions of the
Pentium, while discontinuing its 60 MHz, 66 MHz and 75 MHz versions. A number
of major PC manufacturers have since introduced affordable PC products based on
the available versions of the Pentium.
A number of companies, including MIPS Computer Systems, Inc., a subsidiary of
Silicon Graphics, Inc., and Digital Equipment Corporation ("DEC"), have
attempted to introduce microprocessors for the PC market that were largely
based on RISC architecture which has been widely adopted for workstations.
Because of their RISC architecture, these microprocessors were able to achieve
higher performance than x86 processors using
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standard industry benchmarks. However, these early RISC-based processors have
not achieved widespread acceptance in the PC market because they are not binary
compatible with the large installed base of PC software and therefore required
emulation hardware and software in order to run PC software. More recently,
Apple, IBM and Motorola introduced the PowerPC, a RISC processor, which is also
not x86 binary compatible.
The establishment of hardware and software standards for PCs and the
emergence of numerous PC suppliers has caused the PC industry to be extremely
competitive, with short product life cycles, limited product differentiation
and substantial price competition. To compete more effectively, many PC
suppliers have evolved from fully integrated manufacturers with proprietary
system designs to vendors focused on building brand recognition and
distribution capabilities. Many of these suppliers now rely on third-party
manufacturers for the major subsystems of their PCs, such as the motherboard,
and increasingly are outsourcing the design and manufacture of complete
systems. These third-party suppliers, based primarily in Asia, are focused on
providing PCs and motherboards that incorporate the latest trends in features
and performance at low prices. Increasingly, these suppliers are also supplying
fully configured PC systems through alternative distribution channels.
Historically, these third-party suppliers have at times had difficulty in
obtaining adequate supplies of the highest performance microprocessors, and
consequently may represent a significant source of demand.
NexGen believes that a substantial market opportunity exists for alternative
suppliers to Intel that can introduce high performance processors with complete
x86 binary compatibility to support the large installed base of software for
PCs, particularly if such suppliers can provide a better cost/performance
proposition and can also reduce or eliminate the time between the introduction
of a new Intel processor and their introduction of a new processor of
comparable or superior performance.
Business Strategy
NexGen's strategy is to be a market leader in the design and development of
advanced processors targeted at the high performance segment of the PC market
for mainstream PC users. NexGen's operating strategy seeks to take advantage of
a number of emerging trends in the PC industry, including (i) a focus on the
fast growing high performance segment of the market with increasing emphasis on
multimedia applications, (ii) maintaining compatibility with widely accepted
x86 based PC standards, (iii) accessing the most advanced manufacturing
capabilities available by contracting with third-party manufacturers, (iv)
providing complete motherboard solutions to OEM customers, and (v) utilizing
advanced automated design technologies to lower the cost of design and
accelerate the time to market for future versions of its products.
Develop Processors for the High Performance Segment of the PC Market. NexGen
is focused on developing the most advanced x86 processors for the high
performance segment of the PC market. This segment of the PC market has grown
rapidly as more advanced software applications are introduced and end-users
continue to demand increasingly faster systems. In September 1994, NexGen
commenced shipments of the Nx586, a fifth generation x86 compatible processor,
which NexGen believes provides comparable performance to similarly configured
systems based on the Pentium processor. NexGen is the first company other than
Intel to ship a fifth generation x86 compatible processor and is currently
developing future generations using its proprietary RISC86 microarchitecture,
which it seeks to introduce prior to or soon after Intel's product
introductions.
Maintain Compatibility with PC Industry Standards. NexGen's strategy is to
develop processors that are compatible with the existing PC industry standards.
Although a number of suppliers have attempted to sell RISC-based processors to
the PC marketplace, they have largely been unsuccessful due to a lack of binary
compatibility with the large installed base of existing PC software. More than
50,000 software applications have been developed for the approximately 170
million PCs. NexGen believes that its RISC86 microarchitecture combines many of
the advantages of RISC architecture while maintaining binary compatibility with
PC software, hardware and peripherals.
Establish Strategic Manufacturing Relationships. NexGen has established
strategic relationships with semiconductor manufacturers that possess state-of-
the-art production facilities and process technologies. NexGen
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currently has a manufacturing relationship with IBM that utilizes IBM's 0.5
micron and 0.35 micron CMOS process technologies to manufacture the Nx586
processor. In addition, NexGen has a manufacturing agreement with VLSI with
respect to the PCI system logic chipsets. NexGen is currently in discussions
with additional manufacturers to obtain multiple sources for its processors and
related system products. NexGen believes this strategy allows it to minimize
its capital expenditures while focusing on its design expertise.
Assist OEM Customers to Develop PCs Incorporating the Nx586 and Future
Products. In order to facilitate OEM acceptance of its products and to speed
time to market, NexGen provides motherboard and system design assistance to its
OEM customers. NexGen provides its customers with reference manufacturing kits
and system logic chipsets to simplify the design effort. In addition, NexGen
has formed a customer applications engineering group to support and consult
with its customers.
Develop Future Products Utilizing Advanced Automated Design Technologies.
NexGen is currently developing and plans to introduce future generations of x86
processors. NexGen has developed a sophisticated design database and software
engineering process which it believes will enable it to develop higher
performance versions of its Nx586 processor, as well as future generations of
processors. In October 1995 NexGen announced details of the technology and
demonstrated on first silicon its next generation processor, the Nx686.
NexGen's Nx586 processor architecture is modular in design enabling NexGen's
engineers to develop and enhance the individual elements of the processor.
NexGen believes that the modular nature of its processor architecture may
result in lower cost of design and accelerated time to market for future
versions of its products. The implementation of the foregoing strategy involves
substantial risks, and there can be no assurance that NexGen can develop and
market competitive products in a timely and profitable manner. See "Risk
Factors--Risk Factors Relating to NexGen."
Technology
Microprocessor Architecture. The microprocessor serves as the central
processing unit, or "brain," of a computer by executing instructions to perform
logical and mathematical operations. The goal of microprocessor designers is to
achieve the highest system performance possible. The three key elements in
improving microprocessor performance are (1) increasing the speed ("clock
rate"), (2) decreasing the average number of clock cycles to execute an
instruction, and (3) reducing the number of instructions to perform a given
task.
Clock rate has improved primarily due to advances in semiconductor process
technology. The finer the geometries that can be achieved in the semiconductor
manufacturing process, the greater the speed of the transistors that comprise
the microprocessor. The fastest version of Intel's Pentium processor currently
on the market operates at 133 MHz. In November 1995, Intel introduced its
Pentium Pro processor, which will initially operate at clock rates of up to 200
MHz. NexGen expects that Intel and others will market versions of Pentium and
other processors operating at higher clock rates. See "Risk Factors--Risk
Factors Relating to NexGen--Competition."
In its original x86 design, Intel's microprocessor designers chose an
architectural approach that required a large number of instruction sets and
complex hardware to perform its internal operations. This approach, referred to
as "Complex Instruction Set Computing" or "CISC," has been used by Intel in
each subsequent generation of its x86 microprocessors. The x86 instruction set
consists of a large number of instructions (typically 250 to 400) of uneven
length, and consequently generally requires more than one clock cycle to
execute.
In an effort to achieve higher performance microprocessors, workstation
designers developed an architectural approach that required a small number of
simplified instructions (typically 80 to 130) to perform their internal
operations. This approach, referred to as "Reduced Instruction Set Computing"
or "RISC," reduced both the types and complexity of instructions so that an
instruction could be executed at the rate of one instruction per clock cycle by
creating new instruction sets that included only the most commonly used types
of instructions. First generation RISC processors reduced the number of clock
cycles necessary to execute a single instruction, but required the use of a
larger number of instructions (as compared to CISC microprocessors) to
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perform certain tasks. Overall, this approach enhanced system performance for
certain technical applications. Second generation RISC designs are capable of
executing multiple instructions per clock cycle, which computer architects
refer to as "superscalar execution." RISC has been widely used to provide very
high performance processors for workstations. In creating new instruction sets,
however, RISC developers have encountered difficulty in maintaining
compatibility with the large installed base of software designed for the x86
instruction set.
The Nx586 processor is designed to take advantage of certain RISC features,
including superscalar execution, while maintaining compatibility for the large
installed base of software designed for the x86 instruction set.
NexGen's Approach. NexGen's approach combines selected features of RISC
architecture with the industry standard x86 instruction set to run the more
than 50,000 software applications now available for PCs. This was accomplished
through the use of NexGen's proprietary RISC86 microarchitecture. NexGen's
architecture implements the x86 instruction set by translating x86 instructions
into RISC86 instructions, which are simpler and easier to execute. The RISC86
microarchitecture then executes these RISC86 instructions in some cases with
specific hardware accelerators, to minimize historical x86 performance
bottlenecks. This approach is fundamentally different from other RISC
processors that emulate x86 instructions. NexGen believes that the benefits of
its approach are as follows: (1) the performance advantages of RISC are applied
to the x86 instruction set; (2) each execution unit can be smaller and more
compact; (3) the execution units in the processor can be more specialized to
give specific performance enhancements; and (4) it will be simpler to add
additional and different execution units in future designs.
The caching structure of the Nx586 was designed to support high performance
operation at the full range of expected fifth generation clock rates, but with
a low system cost structure. NexGen has designed the Nx586 primarily for
business applications, consumer applications and many mathematically intensive
applications that require a high level of integer performance. A version of the
Nx586 which includes the floating point unit in a multi-chip module with the
same pinout as the current Nx586 is currently expected to be available for use
with certain scientific and engineering applications by the end of 1995. See
"Risk Factors--Risk Factors Relating to NexGen--Dependence on Product
Development; Risk of Product Development Delays." The Nx586 provides improved
integer performance by use of the RISC86 microarchitecture, as well as by
providing a large amount of on-chip level one cache and an on-chip level two
cache controller. This design is intended to increase performance and eliminate
the performance detriments created when the processor is running at a
significantly greater speed than the other components of the systems, commonly
referred to as clock doubling or clock tripling.
The Nx586 processor includes the following advanced features:
Superscalar Execution. NexGen's processor architecture is designed to execute
multiple instructions in parallel using independent execution units. NexGen's
Nx586 processor is designed to process a number of instructions in various
stages of execution at any one time and up to three instructions may be
completed in any given clock cycle. NexGen believes that its Nx586 processor is
among the first processors designed for PCs that achieves superscalar
execution.
Branch Prediction. Branch prediction is a method by which a processor may
continue to fetch instructions from the most likely execution path without
having to wait for the completion of other pending instructions. NexGen has
designed a branch prediction scheme for its processor that is expected to
increase throughput significantly.
Speculative Execution. Speculative execution is an advanced capability by
which instructions fetched using branch prediction are executed by the
processor before it is known whether the execution path of a program will use
those instructions, thereby increasing performance. A necessary companion
capability is called backout, which enables the processor to undo instruction
executions if the branch prediction was incorrect.
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Register Renaming. Register renaming is an advanced technique whereby the
processor physically implements more general purpose registers than are
specified in the x86 instruction set. These additional registers are then used
to relieve register usage bottlenecks in program code, thereby increasing
performance. This is a particularly important technique for x86 microprocessors
because the x86 instruction set contains only eight general purpose registers.
Out-of-Order Execution. Out-of-order execution is an advanced technique
whereby program instructions are able to be executed in an order different from
that in the program in order to increase performance. The basic technique is to
allow instructions to execute as soon as the operands for the instruction are
available. In this way, an instruction that comes later in a program
instruction stream, but whose operands are ready, can execute without waiting
for an instruction that came earlier in the instruction stream but whose
operands are not yet available.
Data Forwarding. Data forwarding is a technique whereby the results of one
instruction are made available as the inputs of other instructions without
waiting for registers or memory locations to be updated and read back, which is
the case when this technique is not used.
Microprocessor chips are connected to the PC motherboard through metal pins.
A microprocessor is designed to have a certain "pinout," or specification of
number of pins, orientation of pins, and definition of specific pin functions.
PC motherboards are then designed to be able to accept the pinout of a
microprocessor. Microprocessors that have identical pinouts are said to be
"pin-compatible" because they can fit into the same slot on a motherboard.
Because of NexGen's proprietary microarchitecture, the Nx586 processor has a
pinout that is not pin-compatible with any other x86 microprocessor. NexGen has
developed a system logic chipset to be used on PC motherboards and has formed a
customer applications engineering group to assist PC and motherboard
manufacturers in developing motherboards that accept the design of the Nx586
processor. NexGen provides a reference manufacturing kit with NexGen's system
logic chipsets and a complete motherboard design, in addition to providing
support and consulting services. See "Risk Factors--Risk Factors Relating to
NexGen--Dependence on Product Development; Risk of Product Development Delays,"
"--Risk Factors Relating to NexGen--Product Defects; Incompatibility" and "--
Risk Factors Relating to NexGen--Competition."
While NexGen believes that the modularity of its processor architecture gives
it several important advantages in product development and may reduce the cost
of development and result in faster time to market for its future products,
there can be no assurance that such advantages, if realized, will result in
financial benefits to NexGen. See "--Competition."
Products
NexGen's processor products are targeted at the high performance segment of
the x86 microprocessor marketplace for mainstream PC users.
Nx586 Processor. NexGen began shipping limited volumes of its Nx586 processor
to customers in September 1994. The Nx586 processor family is binary compatible
with the industry standard x86 instruction set. NexGen currently offers the
Nx586 in four versions, the P133 and P120, both introduced in November 1995,
and the P100 and P90, which provide different levels of performance. NexGen
plans to introduce increased operating frequencies in the future. See "Risk
Factors--Risk Factors Relating to NexGen--Dependence on Product Development;
Risk of Product Development Delays." NexGen believes that PCs that incorporate
its P133, P120, P100 and P90 versions of its Nx586 processor provide comparable
performance to similarly configured systems that incorporate 133 MHz, 120 MHz,
100 MHz and 90 MHz versions of the Pentium, respectively. In response to
customer demand and as a result of better yields on the P100 and P90, NexGen
has chosen to focus on higher performance versions of its Nx586 processor and
in August 1995 discontinued its P80 and P75 versions.
The Nx586 utilizes an advanced cache design incorporating a 32K on-chip
level-one cache subsystem and an on-chip full speed cache controller for the
level two cache, which is the SRAM-based cache memory that
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supplements the on-chip level one cache and is placed between the level one
cache and the slower main memory. To ensure immediate access to level two cache
data, the Nx586 cache controller interfaces directly with the level two cache
memory using a dedicated 64-bit bus, rather than by sharing the system
input/output ("I/O") bus.
The Nx586 is currently being manufactured exclusively by IBM.
Floating Point Unit. High floating point performance is required in some
technical, scientific and engineering PC applications. NexGen has developed a
floating point unit ("FPU") for the Nx586 family to meet the needs of users of
these applications. NexGen intends to offer a version of the Nx586 which
includes the FPU in a multi-chip module with the same pinout as the current
Nx586 by the end of calendar year 1995. This multi-chip module will be
manufactured exclusively by IBM. Although NexGen believes that most mainstream
PC users do not require the use of a FPU, NexGen's plans to offer the Nx586
with an FPU in a multi-chip module are intended to enable NexGen to offer a
more complete product portfolio in competition with Intel's Pentium product
line. See "Risk Factors--Risk Factors Relating to NexGen--Dependence on Product
Development; Risk of Product Development Delays."
System Logic Chipsets. NexGen's Nx586 processors require the use of
proprietary high performance system logic chipsets to manage the flow of data
between the processor, memory devices, bus controllers and peripheral devices
such as the disk drive and keyboard. These system logic chipsets have been
designed by NexGen and are sold together with a custom motherboard also
designed by NexGen.
In response to the emergence of the PCI bus as an industry standard for fifth
generation processors, NexGen has phased out VL-based system logic chipsets and
motherboards and has transitioned to products based on the PCI bus. In July
1995, NexGen began shipments of the NxPCI, its second generation system logic
chipset for PCI and ISA buses which are exclusively manufactured by VLSI. The
NxPCI is a customized gate array which provides a high performance link between
the Nx586 processor and the PCI bus.
Future Processor Products. In future implementations of the Nx586 processor,
NexGen plans to increase operating frequencies and reduce the die size. NexGen
in August 1995 began shipping its latest version of its Nx586 die size, which
NexGen believes is smaller than any fifth generation x86 die size currently
available.
In addition, NexGen is in the advanced stages of development of its next
generation processor product, the Nx686. NexGen is designing this processor
with a higher degree of internal parallelism than the Nx586 processor, for
higher performance.
In October 1995 NexGen announced details of the technology for its sixth
generation x86 processor family, the Nx686. This single-chip processor is
designed for the highest levels of performance, yet is targeted for the
mainstream, high-volume PC portable and desktop market. The Nx686 processor is
a single-chip x86-compatible superscalar processor with approximately six
million transistors. Targeted to be initially available at 180 MHz, it will be
manufactured using IBM's 0.35 micron 5 layer metal CMOS process. NexGen
believes that the performance of the Nx686 will be up to twice the performance
on 16-bit applications than those announced for Intel's Pentium Pro, and up to
33 percent higher on 32-bit code. The Nx686 processor is being designed to be
pin-compatible with the Pentium processor.
The Nx686 will use an enhanced version of the RISC86 microarchitecture used
in the Nx586, a 48K level one cache with a data cache twice the size of the
Nx586's level one data cache, a multimedia execution unit for acceleration of
multimedia algorithms, and a floating point unit. As with the Nx586, the Nx686
will have an on-chip level two cache controller that will support SRAM-based
level two cache memory. The Nx686 will feature a greater degree of internal
parallel processing than the Nx586 by incorporating seven execution units and
allowing the execution of up to six operations in parallel, as compared to the
Nx586's ability to execute up to three operations in parallel. The
implementation of the superscalar execution capability of the Nx686 processor
uses Enhanced RISC86 microarchitecture.
The development of future processor products entails a number of risks. See
"Risk Factors--Risk Factors Relating to NexGen--Dependence on Product
Development; Risk of Product Development Delays."
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Research and Development
NexGen believes that product and technical leadership is essential to its
success. NexGen's current research and development focus is on the development
of future enhancements to the Nx586 processor and further design and
development of its next generation processor as well as other system logic
chipsets. During the fiscal years ended June 30, 1993, 1994 and 1995 and the
three months ended September 30, 1995, NexGen spent approximately $9.8 million,
$16.6 million, $15.3 million and $6.2 million, respectively, on research and
development activities.
NexGen's research and development effort has also focused on methods of
designing its products more efficiently. NexGen uses advanced software tools to
develop its products. NexGen has invested a considerable portion of its
resources in the formation of a highly automated and integrated design
environment to facilitate the development of derivatives and next generation
products. NexGen's "NexNet," the backbone of this design environment, organizes
in a common design database a variety of commercially available software for
hardware description, design synthesis, simulation, timing verification,
silicon compilation and automated placement and routing as well as NexGen's own
computer-aided engineering software. NexGen's Nx586 processor architecture is
modular in design. NexGen believes that, in future versions of its products,
the modular nature of its processor architecture may result in lower cost of
design and accelerated time to market. See "Risk Factors--Risk Factors Relating
to NexGen--Dependence on Product Development; Risk of Product Development
Delays."
The Nx586 processor has received Windows and Windows 95 compatibility
certifications by Microsoft and the industry-recognized Platinum certification
from XXCAL, a leading third-party testing laboratory. In addition, NexGen's
Nx586 processor has been approved by IBM for OS/2 compatibility and has passed
the Novell-supplied tests for NetWare compatibility. NexGen has also created a
rigorous internal testing methodology for its processors. NexGen independently
tests all major operating systems, hundreds of the most popular applications,
and all the most popular hardware peripherals on PCs using NexGen's products.
NexGen runs over 2,000 internally developed compatibility tests. Before a
product is submitted to XXCAL or other third-party testing laboratory, it must
satisfy all of the conditions for compatibility in NexGen's internal testing
program. NexGen has been in the process of testing compatibility based on
Windows NT. No assurance can be given that full compatibility with all existing
or newly developed PC software and peripherals can be achieved. See "Risk
Factors--Risk Factors Relating to NexGen--Dependence on Product Development;
Risk of Product Development Delays" and "--Risk Factors Relating to NexGen--
Industry Standards."
Sales, Marketing and Distribution
NexGen's target markets for its products are PC OEMs and PC motherboard
manufacturers worldwide. These customers and potential customers range from a
small number of large companies with significant capabilities to develop their
own motherboards and other technologies to a large number of mid-size companies
and small system integrators that integrate third-party motherboards and
subassemblies into complete PCs and sell these units either through low cost
distribution channels or based on a higher level of service and support
capabilities. The PC marketplace is characterized by a very high degree of
standardization on form factor and functionality, allowing an equally high
degree of interoperability of motherboard products within different PC OEMs'
products.
NexGen's current customers are small to medium-sized OEMs which typically are
capable of making quick decisions regarding the adoption of new technologies,
are very price/performance sensitive and have faced difficulties in obtaining a
regular source of supply of the highest performance x86 microprocessors during
periods in which such products are in limited supply. To date, NexGen has had
revenue shipments to approximately 100 small to medium-sized OEMs. NexGen's
sales are currently concentrated within a limited customer base. In the year
ended June 30, 1995, three customers, Aquarius, located in Germany, and Alaris
and All American, located in the U.S., accounted for 36%, 34% and 22%,
respectively, of total sales and All American, Alaris and Wooyoung Tech.,
located in Korea, accounted for 39%, 25% and 17% of sales, respectively, for
the three months ended September 30, 1995.
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NexGen markets its processors to its customers through both a direct sales
force and through authorized distributors and representatives. NexGen's
distribution agreement in Japan is with ASCII, a holder of approximately 9.6%
of NexGen's Common Stock. NexGen is currently adding staff to its sales
organization as its revenues and customer opportunities increase. NexGen
expects to market its products worldwide.
NexGen offers a warranty on its products in line with standard industry
practice. Under the terms of this warranty, NexGen is obligated to replace or
refund the purchase price of any unit that fails to operate to NexGen's
published specifications when the unit is used within specified environmental
operating parameters. NexGen could be obligated to recall a product that does
not perform to applicable industry standards, and such a recall would likely
have a material adverse effect on NexGen's results of operations and future
prospects. See "Risk Factors--Risk Factors Relating to NexGen--Product Defects;
Incompatibility."
Export sales, primarily in Europe, accounted for 43% and 14% of net sales for
the year ended June 30, 1995 and the three months ended September 30, 1995,
respectively. Export sales, primarily in Asia, which were insignificant for the
year ended June 30, 1995, accounted for 20% of net sales for the three months
ended September 30, 1995. To date, all sales made by NexGen have been
denominated in U.S. dollars and, therefore, NexGen's exposure to foreign
exchange risk has been minimal. While NexGen expects that export sales will
continue to represent a significant portion of sales, export sales are expected
to decrease as a percent of total sales as NexGen achieves increased
penetration of the U.S. market. In addition, due to its export sales, NexGen is
subject to the risks of conducting business internationally, including
unexpected changes in, or impositions of, legislative or regulatory
requirements, fluctuations in the U.S. dollar, which could increase the sales
price in local currencies of NexGen's products in foreign markets, delays
resulting from difficulty in obtaining export licenses for certain technology,
tariffs and other barriers and restrictions, potentially longer payment cycles,
greater difficulty in accounts receivable collection, potentially adverse
taxes, and the burdens of complying with a variety of foreign laws. As sales by
NexGen increase in various countries in Asia, such as Taiwan where NexGen has a
sales office and where a large number of potential customers are located,
NexGen may become more susceptible to risks of conducting business
internationally. See "Risk Factors--Risk Factors Relating to NexGen--
International Operations."
Backlog
Sales of NexGen's products are made pursuant to standard purchase orders that
are cancellable without significant penalties. In addition, purchase orders are
subject to price renegotiations and to changes in quantities of products and
delivery schedules caused by changes in customers' requirements and
manufacturing availability. NexGen's business, and to a large and growing
extent that of the entire semiconductor industry, is characterized by short
lead times and quick delivery schedules. Also, NexGen's actual shipments depend
on the manufacturing capacity of NexGen's suppliers. As a result of the
foregoing factors, NexGen does not believe that backlog at any given time is a
meaningful indicator of future sales. See "Risk Factors--Risk Factors Relating
to NexGen-- Dependence on Sole Source Third-Party Manufacturers."
Competition
The market for NexGen's products is intensely competitive and characterized
by rapidly changing advances in processor and system technologies. These
advances result in frequent product introductions, regular price reductions,
short product life cycles and increased product capabilities that may result in
significant performance improvements. See "Risk Factors--Risk Factors Relating
to NexGen--Dependence on Product Development; Risk of Product Development
Delays," "--Risk Factors Relating to NexGen--Competition," "--Risk Factors
Relating to NexGen--Industry Conditions and Technological Changes," and "--Risk
Factors Relating to NexGen--Industry Standards."
Competition in the sale of processors is based on price, performance, product
quality and reliability, software compatibility, marketing and distribution
capability, brand recognition, financial strength and ability to deliver in
large volumes on a timely basis. Furthermore, given NexGen's reliance on third
parties for processor fabrication, NexGen's competitive position may be
affected by the reliability and performance of its
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manufacturers and the availability of adequate production capacity. There can
be no assurance that NexGen will be able to compete successfully on any of
these factors.
Many of NexGen's competitors, such as Intel, AMD, Cyrix, IBM and Texas
Instruments, are major companies with substantially greater technical,
financial, sales and marketing resources, more extensive experience, and better
brand name recognition than NexGen. Intel, in particular, has long had a
commanding position in the market for x86 microprocessors. Intel's dominant
market position has to date allowed it to set x86 microprocessor performance
standards and thus dictate the type of product the market requires of its
competitors. Intel has announced that it expects to spend $1.3 billion on
research and development and invest $2.9 billion in capital improvements in
1995. Intel is also currently attempting to consolidate its dominant market
position through an intensive advertising campaign designed to engender brand
loyalty to Intel among PC end-users. NexGen may encounter difficulties in
customer acceptance because it is a new processor supplier whose identity and
ability are not yet well known. Substantial marketing and promotional costs,
possibly in excess of what NexGen can currently afford, may be required to
achieve acceptance of NexGen's products. In addition, there can be no assurance
that NexGen will be able to overcome all such barriers. The failure to gain
customer acceptance of its Nx586 processor products will have a material
adverse effect on NexGen. Intel has increasingly made more frequent and more
significant price reductions to stimulate market demand for its Pentium
processors, encourage migration of OEMs and end users to its latest generation
of processors, and introduce new and different features and functionalities in
its new processors. As long as Intel remains in its dominant market position,
its product introduction timing and product pricing will materially, and at
times adversely, affect NexGen's future operating results. NexGen has limited
experience in product manufacturing, marketing or sales. There can be no
assurance that NexGen will have the resources and capabilities to compete
effectively.
NexGen believes that its Nx586 processor products, the P133, P120, P100 and
P90, compete primarily with the Intel Pentium, which began shipping in June
1993 and is currently available at 90, 100, 120 and 133 MHz. It is expected
that later this year Intel will introduce a 150 MHz Pentium and may in the
future introduce faster versions of the Pentium. NexGen intends to introduce
increased operating frequencies of the Nx586 in the near future. See "Risk
Factors--Risk Factors Relating to NexGen--Dependence on Product Development;
Risk of Product Development Delays." Intel also introduced its next generation
processor, the Pentium Pro, in November 1995. AMD has announced that it expects
to ship the AMD-K5 by the second half of 1996. Cyrix introduced its new
microprocessor product, the 6x86 (formerly known as the M1), in October 1995.
Although NexGen believes that Intel will be its primary competitor, it is
expected that other companies, including AMD, IBM and Cyrix, may offer
competitive products in the future. IBM, under its manufacturing agreement with
NexGen, has certain rights to market Nx586 processors. See "--Manufacturing."
Although NexGen would receive a royalty on the sale of such processors to third
parties by IBM, competition from IBM could adversely affect NexGen. IBM has
similar marketing rights under its foundry agreement with Cyrix and has
announced that it will sample the 6x86 in the first quarter of 1996. NexGen's
success will depend, among other things, on its ability to deliver, on a timely
basis and at competitive prices, processor performance that is comparable or
greater than that provided in x86 compatible products manufactured by Intel,
Cyrix, AMD, IBM and others. There can be no assurance that NexGen will be able
to deliver such performance. In addition, because NexGen's processor products
are not designed to be pin-compatible with the Intel Pentium or any other x86
microprocessor, OEMs will need to utilize motherboards and system logic
chipsets that have been specifically developed to incorporate NexGen's
processors. Consequently, this may delay and possibly limit OEM acceptance of
the Nx586 and NexGen's future processors.
NexGen's products are expected to compete to a lesser extent with high
performance RISC processors that are not currently x86 compatible, such as the
Alpha system processor developed by DEC, the PowerPC processor developed by
Motorola, Apple and IBM, and others running UNIX, Microsoft's Windows NT, and
other operating systems. Systems using such processors typically provide
significantly better floating-point performance, which is important for
scientific and technical applications. NexGen, however, believes that such
processors generally provide lesser integer performance, which is important for
most business applications. Furthermore, NexGen believes that systems based on
RISC processors are currently far more expensive than PCs with a similar level
of integer performance. However, there can be no assurance that such RISC
processors will
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not improve their level of integer performance or that the price of such RISC
based systems will not decline. In addition, Intel and HP have announced a
partnership aimed at developing a single computer chip that would run software
originally written to run on x86 microprocessors as well as HP's Personal
Architecture RISC workstation chips. This approach of melding RISC and x86
concepts is similar to the approach taken by NexGen in its Nx586 processor and
by Intel in its next generation Pentium Pro processor. There can be no
assurance that systems incorporating RISC processors will not gain rapid market
acceptance. This may increase the number of competitive processor products and
cause a decline in prices.
Manufacturing
Fabrication of NexGen's Nx586 processor requires advanced manufacturing
technology that is currently available from only a few manufacturers. NexGen's
manufacturing strategy is to use third-party manufacturers that possess state-
of-the-art process technologies in the area of wafer fabrication, PCI system
logic chipsets and motherboards. This manufacturing strategy is intended to
give NexGen access to the most advanced manufacturing processes available while
minimizing the capital expenditures that would otherwise be required to develop
its own manufacturing capabilities. Furthermore, NexGen believes that this
strategy should enable it to operate more efficiently with fewer personnel,
while capitalizing on the latest advances in semiconductor process technology
and manufacturing techniques.
NexGen's reliance on third-party manufacturers involves several material
risks, including shortages of manufacturing capacity, unavailability of or
delays in obtaining access to certain process technologies, and the absence of
controllable product delivery schedules, quality assurance, production yields
and costs. There can be no assurance that NexGen will be able to obtain a
sufficient quantity of products from its manufacturers on a timely basis, and
the failure to do so would have a material adverse effect on its business. See
"Risk Factors--Risk Factors Relating to NexGen--Dependence on Sole Source
Third-Party Manufacturers" and "--Risk Factors Relating to NexGen--Dependence
on Product Development; Risk of Product Development Delays."
The initial version of the Nx586 processor is being manufactured using IBM's
0.5 micron CMOS process technologies. NexGen is working with IBM to migrate
production of the Nx586 to processes with increasingly smaller geometries, such
as IBM's 0.35 micron CMOS process, which NexGen believes should increase clock
rates and manufacturing yields. NexGen is currently in discussions with
additional manufacturers with state-of-the-art process technologies in order to
obtain a second source for its products. However, there can be no assurance
that NexGen will be able to obtain additional sources. In addition, NexGen has
entered into an agreement with VLSI for the manufacture of its PCI system logic
chipsets, which NexGen began shipping in the third quarter of calendar 1995.
See "Risk Factors--Risk Factors Relating to NexGen--Dependence on Sole Source
Third-Party Manufacturers."
NexGen designs its products at its Milpitas, California headquarters
utilizing automated software tools. NexGen's processor products are designed in
accordance with design rules provided by and in close cooperation with
manufacturers, who assist in the development of NexGen's processor products.
NexGen develops detailed test procedures and specifications for each product
and requires its third-party manufacturers to use those procedures and
specifications before shipping finished products. Although NexGen extensively
tests its products prior to their introduction, design errors may be discovered
after initial product sampling, which may result in delays in volume production
or recall of products sold. Although NexGen has not experienced any such errors
to date, the occurrence of any such errors could have a material adverse effect
on NexGen's product introduction schedule and operating results.
In the three-month period ended September 30, 1995, NexGen began to implement
a cost reduction program designed to improve its competitiveness by decreasing
the size of its motherboard, pursuing less costly packaging suppliers and
reducing chipset costs through use of alternative vendors. There can be no
assurance that such program will result in cost benefits, or that such
benefits, if realized, will be realized in a timely manner.
Relationship with IBM. In June 1994, NexGen entered into an agreement with
IBM, pursuant to which IBM is manufacturing NexGen-designed products for sale
to NexGen at defined prices. The agreement has a
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five-year term. NexGen must commit to purchase a specified amount of products
and IBM has agreed to limited assurances of deliveries of set minimums. To meet
its objectives, NexGen anticipates that it will need to obtain volumes of
product in excess of such minimums. NexGen is currently negotiating a revised
agreement with IBM that, if entered into, would supersede the June 1994
agreement and modify the method of calculating prices from IBM. There can be no
assurance that this revised agreement will be entered into. NexGen's processor
is a complex product, and there can be no assurance that IBM will be able to
consistently produce acceptable yields of the product in the future. If IBM is
unable to produce sufficient quantities of products or otherwise make
sufficient capacity available to NexGen, NexGen's operating results will likely
be adversely affected.
In addition to supplying products to NexGen, IBM has the right to
manufacture, subject to specified volume limits, NexGen-designed products for
use internally or, subject to certain limitations, to sell such products on an
OEM basis. NexGen would receive royalties on units used by IBM internally or
sold by IBM to third parties. Although IBM has not yet exercised these rights,
should IBM choose to do so, NexGen would face competition from IBM, which could
have a material adverse effect on NexGen's business and financial condition.
System Logic Chipset Manufacturers. NexGen has arrangements with VLSI
providing for the manufacture by such entity of NexGen's PCI system logic
chipsets. Pursuant to NexGen's agreement with VLSI, VLSI will manufacture
NexGen-designed system logic chipsets for NexGen processor-based PCs using the
PCI bus interface. The agreement has a five year term. Purchases of system
logic chipsets under the VLSI agreement are subject to the acceptance by both
VLSI and NexGen of individual purchase orders. NexGen has granted VLSI a
license to manufacture such system logic chipsets for sale to NexGen and others
and to create derivatives thereof, and NexGen will have certain rights to
license certain of such chipsets to other manufacturers. Under the agreement,
VLSI is required to sell to NexGen such quantities of system logic chipsets as
NexGen requires. One system logic chipset is required for each Nx586 processor.
If NexGen is unable to purchase system logic chipsets in sufficient volume and
on acceptable delivery schedules to meet demand for its products, its ability
to meet such demand and its operating results will be adversely affected. See
"Risk Factors--Risk Factors Relating to NexGen--Dependence on Sole Source
Third-Party Manufacturers."
Motherboard Manufacturers. NexGen entered into a relationship with Alaris,
pursuant to which Alaris manufactures motherboards according to NexGen's
reference designs and NexGen incorporates the Nx586 processor into the
motherboards. In addition, Alaris also purchases Nx586 processors and system
logic chipsets from NexGen to incorporate in Alaris' PCs. NexGen has entered
into agreements with several motherboard manufacturers, mostly in Taiwan, and
continues to seek to establish additional relationships with others. NexGen's
strategy is to provide reference design kits to motherboard manufacturers who
will eventually assume the majority of the assembly and testing functions
currently being performed by NexGen. To date, the substantial majority of
NexGen's sales have been derived from the sale of Nx586 processors installed by
NexGen in motherboards. If NexGen is unable to purchase motherboards in
sufficient volume to meet demand for its products, its ability to meet such
demand and its operating results will be adversely affected.
Patents and Proprietary Technology
NexGen's policy is to protect its technology, inventions and improvements by,
among other things, filing patent applications for technology which it
considers important to the development of its business. NexGen also relies upon
trade secrets, technical know-how and continuing technological innovations to
develop and maintain a competitive position.
To date, NexGen has filed numerous patent applications (including
continuation and divisional applications) with the U.S. Patent and Trademark
Office and has filed counterparts of certain of these applications in other
countries. NexGen has fourteen U.S. patents and one foreign patent issued.
Currently there are pending approximately 26 additional applications, which are
expected by NexGen to result in the issuance of a number of additional patents
in calendar 1995 and 1996. The issued patents cover various aspects of NexGen's
technologies, such as NexGen's implementations of pipeline control and
superscalar techniques (one U.S. and one foreign patent), branch prediction and
instruction fetching (five patents), and bus arbitration and control (four
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patents). The issued patents have terms extending until 2007 to 2012. NexGen
anticipates filing additional patent applications in the future in the United
States and in other countries.
The patent positions of technology companies such as NexGen are uncertain
and involve complex legal issues and factual questions. No assurance can be
given that NexGen's patent applications will issue as patents or that any
issued patents will provide NexGen with adequate protection with respect to
the covered products, technology or processes.
A number of companies have filed patent applications or received patents in
the microprocessor field. It is possible that these companies may assert that
their patents cover NexGen's technologies or expected products. If patents are
issued to other companies that contain claims which conflict with or cover
NexGen's technologies or expected products and such claims are ultimately
determined to be valid, no assurance can be given that NexGen would be able to
obtain licenses to any such patents on acceptable terms, if at all, or develop
or obtain alternative non-infringing technology. Moreover, there can be no
assurance that litigation will not be initiated against NexGen or its
customers, regardless of merit, alleging infringement of patents held by
others or challenging NexGen's patents. See "Risk Factors--Risk Factors
Relating to NexGen--Patents and Proprietary Rights; Potential Litigation."
In an effort to maintain the confidentiality and ownership of trade secrets
and other confidential information, NexGen requires employees, consultants and
certain collaborators to execute confidentiality and invention assignment
agreements upon commencement of a relationship with NexGen. These agreements
are intended to enable NexGen to protect its confidential information by
restricting the disclosure and use of technology to which it has rights and
providing for ownership by or assignment to NexGen of confidential technology
developed at NexGen or with NexGen's resources. There can be no assurance,
however, that these agreements will provide meaningful protection for NexGen's
trade secrets or other confidential information in the event of unauthorized
use or disclosure of such information.
NexGen has granted software, technology, manufacturing and marketing
licenses and rights regarding certain of its products to particular business
partners and customers under various terms and conditions and may enter into
additional such arrangements with others in the future. See "--Manufacturing."
Personnel
As of September 30, 1995, NexGen had 163 full-time employees, 35 of whom
hold masters or doctoral degrees. Of the 163 full-time employees, 87 are
engaged directly in research and development activities, 20 are in
administrative and support functions, 27 are in operations and 29 are in
sales, marketing and customer applications support functions. None of NexGen's
employees is represented by a labor union. NexGen has experienced no work
stoppages.
Facilities
NexGen currently leases 54,000 square feet in Milpitas, California in a
single facility. This facility is used as NexGen's headquarters and includes
research and development operations, sales and administrative offices. The
initial lease term expires in September 1997, with an option to extend the
lease for an additional five years. NexGen also leases office space in Taiwan
and France in order to provide sales and technical support to customers in
Asia and Europe. NexGen believes that its facilities are adequate to support
its current needs and that suitable additional facilities will be available,
when needed, at commercially reasonable terms.
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PRICE RANGE OF NEXGEN COMMON STOCK AND DIVIDEND POLICY
NexGen Common Stock is traded in the over-the-counter market on the Nasdaq
National Market (the "NNM") under the symbol "NXGN." The following table sets
forth the high and low sale prices for the NexGen Common Stock as reported on
the NNM for the periods indicated since NexGen commenced trading on the NNM on
May 25, 1995:
<TABLE>
<CAPTION>
HIGH LOW
---- ----
<S> <C> <C>
FISCAL YEAR ENDED JUNE 30, 1995:
Fourth quarter (from May 25, 1995 to June 30, 1995)..... $ 31 $ 20
FISCAL YEAR ENDING JUNE 30, 1996:
First quarter........................................... 26 1/2 16 5/8
Second quarter (through December 11, 1995).............. 22 7/8 14 3/4
</TABLE>
See the cover page of this Joint Proxy Statement/Prospectus and "Summary--
Market Price Data" for recent sale price information of the NexGen Common
Stock. As of November 20, 1995 there were approximately 550 holders of record
of the NexGen Common Stock.
NexGen has never declared or paid dividends on its capital stock and does
not anticipate paying any dividends in the foreseeable future. NexGen
currently intends to retain its earnings, if any, for the development of its
business. NexGen's loan agreement with Phemus prohibits the declaration or
payment of any dividend on NexGen's capital stock. NexGen may in the future
enter into financing arrangements which limit or prohibit the declaration or
payment of any dividend on NexGen's capital stock. See "--NexGen Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
Notes to Consolidated Financial Statements of NexGen.
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<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA OF NEXGEN
The selected consolidated financial data as of and for each of the years in
the five-year period ended June 30, 1995 are derived from the audited
financial statements of NexGen. The financial statements as of June 30, 1994
and 1995, and for each of the three years in the period ended June 30, 1995,
have been audited by Price Waterhouse LLP, independent accountants, and are
included herewith. The financial statements as of June 30, 1991, 1992 and
1993, and for the years ended June 30, 1991 and 1992 are derived from audited
financial statements not included in this document. The consolidated statement
of operations data for the three months ended September 30, 1994 and 1995 and
the consolidated balance sheet data at September 30, 1995 are derived from
unaudited financial statements included elsewhere in this document that have
been prepared on a basis consistent with the audited consolidated financial
statements and, in the opinion of management, contain all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of NexGen's consolidated operating results and financial position
for such periods. The consolidated operating results for the three months
ended September 30, 1995 are not necessarily indicative of the results to be
expected for any other interim period or any future fiscal year. The data set
forth below should be read in conjunction with the consolidated financial
statements and related notes of NexGen and "--NexGen Management's Discussion
and Analysis of Financial Condition and Results of Operations" included
herewith. For purposes of this presentation, NexGen has indicated its fiscal
year as ending on June 30 for each of the five-year periods. Prior to the year
ended June 30, 1995, NexGen's fiscal year actually ended on the Saturday
nearest and before June 30.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED JUNE 30, ENDED SEPTEMBER 30,
------------------------------------------------ -------------------
1991 1992 1993 1994 1995 1994 1995
-------- -------- -------- -------- -------- --------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Sales.................. $ -- $ -- $ -- $ -- $ 20,794 $ 7 $ 16,568
Cost of goods sold..... -- -- -- -- 31,283 9 24,015
-------- -------- -------- -------- -------- --------- ----------
Gross margin (loss).... -- -- -- -- (10,489) (2) (7,447)
-------- -------- -------- -------- -------- --------- ----------
Operating expenses:
Research and develop-
ment.................. 10,155 9,886 9,819 16,610 15,342 $ 3,169 $ 6,223
Selling, general and
administrative........ 1,320 1,518 2,764 6,051 18,273 1,429 7,024
-------- -------- -------- -------- -------- --------- ----------
Total operating ex-
penses.............. 11,475 11,404 12,583 22,661 33,615 4,598 13,247
-------- -------- -------- -------- -------- --------- ----------
Operating loss......... (11,475) (11,404) (12,583) (22,661) (44,104) (4,600) (20,694)
Interest income (ex-
pense), net........... 63 (712) (450) (1,047) (1,691) (726) 226
-------- -------- -------- -------- -------- --------- ----------
Net loss............. $(11,412) $(12,116) $(13,033) $(23,708) $(45,795) $ (5,326) $ (20,468)
======== ======== ======== ======== ======== ========= ==========
Net loss per share..... $ (0.68) $ (0.69) $ (0.55) $ (0.84) $ (1.82) $ (0.19) $ (0.62)
======== ======== ======== ======== ======== ========= ==========
Weighted average common
shares and equivalents
used in computing per
share amounts.......... 16,787 17,619 23,626 28,076 25,180 28,782 33,170
======== ======== ======== ======== ======== ========= ==========
</TABLE>
<TABLE>
<CAPTION>
JUNE 30,
------------------------------------------------- SEPTEMBER 30
1991 1992 1993 1994 1995 1995
-------- -------- -------- -------- --------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents
and short-term invest-
ments................. $ 341 $ 10,622 $ 1,517 $ 8,422 $ 53,067 $ 26,342
Working capital (defi-
cit).................. (808) 8,394 (4,209) 1,858 40,634 19,744
Total assets........... 3,957 13,015 4,551 12,615 73,456 71,402
Long-term debt......... 672 6,199 2,537 10,562 -- --
Accumulated deficit.... (32,184) (44,300) (57,333) (81,041) (126,836) (147,304)
Total stockholders' eq-
uity (deficit)........ 943 4,371 (4,012) (5,389) 45,694 25,110
</TABLE>
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NEXGEN MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
NexGen was founded in 1986 and did not commence product shipments until
September 1994. NexGen incurred a net loss of $45.8 million for the fiscal
year ended June 30, 1995 and an additional net loss of $20.5 million for the
three months ended September 30, 1995. As of September 30, 1995, NexGen had an
accumulated deficit of approximately $147.3 million. NexGen has not been
profitable since inception and expects to incur additional operating losses
during the remainder of calendar 1995 and possibly longer. In order to achieve
profitability, NexGen must significantly increase customer orders and sales of
its products, successfully ramp up production at its third-party manufacturers
to satisfy such orders, and timely produce products that provide performance
that match the performance of competitors' high-end product offerings. A key
factor in increasing sales will be NexGen's success in expanding its customer
base. NexGen initially shipped the Nx586 processor with a system logic chipset
for the VL bus and motherboard. In response to the emergence of the PCI bus as
an industry standard for fifth generation processors, NexGen began shipments
of its NxPCI system logic chipsets using the PCI bus in July 1995. NexGen
believes that the timely availability of the NxPCI chipsets and custom
motherboards will be a critical factor in its ability to successfully increase
sales. In addition, NexGen must continue to introduce higher performance
versions of its Nx586 processor and its next generation Nx686 processor to
respond to competition. NexGen's target markets for its products are PC OEMs
and PC motherboard manufacturers. To date, NexGen has sold products to small
and medium-sized OEMs.
In March 1995, Compaq announced that it intends to use Nx586 processors in
future Compaq products. To date, NexGen has not received any purchase orders
and does not expect to recognize revenues from the sale of its products to
Compaq until at least the second half of 1996, if at all, and there can be no
assurance that Compaq will actually incorporate and ship the Nx586 in its
future products within such time frame or at all. NexGen markets its products
to other large PC OEMs worldwide. There can be no assurance that NexGen's
products will gain acceptance in the market. The failure of NexGen's processor
products to capture and retain a significant share of the market would have a
material adverse effect on NexGen's operating results and future prospects.
NexGen may never achieve significant revenues or become profitable.
NexGen expects that its future operating results will depend significantly
on the level of market acceptance of its products and its ability to
manufacture and deliver products in a timely manner. In addition, NexGen's
financial performance will be significantly affected by fluctuations in
manufacturing yields, competitive pricing pressures, including anticipated
decreases in average selling prices of NexGen's products and the effects of
price protection granted to customers, availability and cost competitiveness
of products from NexGen's suppliers, gain or loss of significant customers,
new product introductions by NexGen or its competitors, changes in the mix of
products sold and their distribution channels, market acceptance of new or
enhanced versions of NexGen's products, the timing of significant orders,
general economic and other conditions affecting the timing of customer orders
and capital spending, any downturn in the market for PCs, order cancellations
or delayed deliveries. Additionally, because NexGen is continuing to increase
its operating expenses for personnel, marketing and product development in
anticipation of increasing sales levels, NexGen's operating results would be
adversely affected if such sales levels were not achieved.
Results of Operations for the Three Months Ended September 30, 1994 and 1995
Sales. For the three months ended September 30, 1995, NexGen's sales
increased to $16.6 million as compared with $7,000 for the three months ended
September 30, 1994. NexGen began shipping limited volumes of its Nx586
processors to customers in September 1994. Since then, NexGen increased sales
of its Nx586 processors and NxVL system logic chipsets incorporated in VL-
based motherboards. Beginning in July 1995, NexGen began shipping its PCI-
based motherboards and PCI system logic chipsets with its new version of Nx586
processors.
Net sales in the three months ended September 30, 1995 reflected significant
price competition in the x86 microprocessor market. To facilitate market
acceptance of its Nx586 PCI-based systems, NexGen aggressively discounted its
prices relative to Intel's prices. NexGen subsequently further reduced its
prices as a result of severe
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<PAGE>
price pressure resulting from price reductions of Intel's Pentium products in
the marketplace, particularly for the performance levels in which NexGen
offered competing products, the P90 and P100. The anticipated continuous price
reductions by Intel will have an adverse impact on NexGen's average selling
prices. The volume of P90 shipments was significantly higher than that of
P100. Finished wafers yielded an unexpectedly higher proportion of P90
product, a higher negative gross margin product, relative to P100 product. Due
to the pricing pressures and a higher proportion of sales of lower priced
products, blended average selling prices were adversely affected.
From inception to June 30, 1995, NexGen only sold fully populated
motherboards (a Nx586 processor and a system logic chipset incorporated in a
motherboard). In the three months ended September 30, 1995, NexGen sold
processors and system logic chipsets independent of motherboards to a single
customer. Such sales constituted approximately 13% of total sales for such
period. NexGen's strategy is to continue to increase the percentage of total
sales represented by processors and chipsets that are sold independent of
motherboards. However, there can be no assurance that such product mix shift
will occur. Any decrease in sales of independent processors and chipsets, or
any failure to increase such sales, will adversely affect overall gross
margins and have a material adverse effect on NexGen's results of operations.
Cost of Sales. Cost of sales for the three months ended September 30, 1995,
totaling $24.0 million, increased significantly from $9,000 for the three
months ended September 30, 1994, primarily due to higher volume of shipments
and costs of distribution, the payment of expedite charges, and the recording
of additional lower or cost of market inventory reserves.
In anticipation of production and shipment ramp-up, NexGen formed a
manufacturing operations group to handle the production planning, assembly and
testing, shipping and receiving activities. During the three months ended
September 30, 1995, NexGen incurred $1.0 million of manufacturing expenses.
Such expenses are expected to increase as NexGen experiences increased
shipment volume and geographic market penetration, if any.
During the three months ended September 30, 1995, as part of the transition
to PCI-based systems, NexGen incurred expedite charges of approximately $0.6
million on its NxPCI system logic chipsets. While such expedite charges are
expected to be non-recurring, there can be no assurance that NexGen will not
in the future incur similar expedite charges due to the industry-wide capacity
constraint, temporary shortage of key components for motherboards, and the
necessity to maintain a balanced inventory of all key inventory items such as
Nx586 processors, chipsets and motherboards. In addition, until NexGen's
production volume reaches an optimal level, NexGen expects to incur high costs
of sales due to under-absorption of fixed manufacturing costs and due to its
inability to obtain volume discounts on the key components of its products.
There can be no assurance that NexGen will achieve production volumes
sufficient to offset fixed manufacturing costs or to obtain volume discounts.
Continued expedite charges and failure to increase production volumes would
have a material adverse effect on NexGen's results of operations.
In addition to its Nx586 processors and NxPCI system logic chipsets, NexGen
must also maintain inventory of motherboards and various other critical
components in order to mitigate interruptions to customer deliveries. Due to
competitive market pressures resulting in rapid price declines for the three
months ended September 30, 1995, NexGen recorded a $3.4 million charge to
reflect a write-down to anticipated realizable value for the inventory of
processors, logic chipsets and other components. Furthermore, the market for
x86 microprocessors is subject to rapid technological changes and has been
subject to continuous introductions by Intel of increasingly higher
performance processors. To the extent that NexGen is unable to sell all of its
inventory of older version processors, chipsets or other components that have
been surpassed in performance by higher performance versions, NexGen may be
required to record a charge, in the same manner as its charges for the three
months ended September 30, 1995 and prior periods. Any such charge could have
a material adverse effect on NexGen's results of operations.
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<PAGE>
Gross Margin (Loss). NexGen incurred a gross loss of $7.4 million for the
three months ended September 30, 1995 as compared with $2,000 for the three
months ended September 30, 1994, primarily due to lower average selling
prices, higher motherboard costs and expedite charges on chipsets. NexGen's
ability to achieve positive gross margins will depend on several factors,
including, but not limited to, increased sales level, increased sales of
higher performance products, reduced competitive pricing pressures, its
ability to maintain its average selling prices by continuing to introduce,
receive from IBM and sell in volume new higher performance products to offset
anticipated declines in average selling prices of older generation products,
the establishment of its distribution channels and its ability to produce
cost-effective versions of follow-on products. There can be no assurance that
NexGen will be able to maintain the required average selling prices or the
required mix of higher performance products or achieve any of such other
factors to ensure NexGen's gross margins will be sufficient to support
operating expenses.
Due to the continuous and rapid technological changes of, and resultant
price changes in, x86 microprocessors, NexGen's customers usually place orders
with short lead times and when NexGen reduces its OEM selling prices, such
customers require price protection for all inventory on hand. To the extent
NexGen produces excess inventories of particular products or is required to
give price protection in excess of its estimates, NexGen's gross margin could
be materially adversely impacted. During the ramp up period for NexGen's
products, such as its PCI-based products, price protection, coupled with
frequent decreases in OEM selling prices necessitated by competitive pricing
pressures and strategic marketing decisions to establish initial volume sales
and facilitate market acceptance of NexGen's products, can materially
adversely affect NexGen's gross margin. NexGen expects to generate gross
margin losses through at least the second half of fiscal 1996.
At the end of the three months ended September 30, 1995, due to intensely
competitive market conditions, NexGen pre-announced budgetary pricing to its
customers. Coupled with price protection granted to customers, such practice
significantly contributed to the negative gross margin. To the extent NexGen
provides price protection in the future, such action may adversely affect
NexGen's gross margin.
Historically, NexGen's product release dates for advanced processors have
lagged behind the release dates of Intel's comparable products. Intel has
recently implemented rapid price reductions, especially for lower performance
x86 products, after it has introduced higher performance products. In order to
compete NexGen has also reduced its prices. This has resulted in negative
gross margins. NexGen's strategy is to improve its margins in the future in
part by accelerating the introduction of more advanced products relative to
Intel's release dates, and at the same time pursuing cost reduction programs.
However, there can be no assurance that NexGen will be able to do so or that
its margins will improve.
Research and Development. Research and development expenses increased to
$6.2 million for the three months ended September 30, 1995 from $3.2 million
for the three months ended September 30, 1994. The increase was primarily due
to additional prototype fabrication and wafer starts for future new products
and additional staff associated with the general expansion of NexGen's
development activities.
Selling, General and Administrative. NexGen's selling, general and
administrative expenses were $7.0 million and $1.4 million for the three
months ended September 30, 1995 and 1994, respectively. Approximately $4.3
million of the $5.6 million increase was attributable to promotion and co-op
advertising in relation to the launching of Nx586 products. The balance of the
increase was attributable to expansion of sales staff, increased technical
support, and sales commissions. NexGen expects its selling, general and
administrative expenses will increase in absolute dollars as a result of
expanding business operations such as order administration, credit collections
and financial management.
Interest Income and Expenses. NexGen reported net interest income of $0.2
million during the quarter ended September 30, 1995, as compared to $0.7
million net interest expenses for the quarter ended September 30, 1994. The
change was primarily due to higher cash balances resulting from the initial
public offering (the "IPO") of NexGen Common Stock in May 1995, and the
repayment, upon completion of the IPO, of $7.5 million in principal and
accrued interest on the Phemus Note.
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<PAGE>
Results of Operations for the Years Ended June 30, 1993, 1994 and 1995
Sales. NexGen began shipping limited volumes of its Nx586 processors to
customers in September 1994 and is currently in the process of ramping up
production and attempting to expand market penetration. During the year ended
June 30, 1995, NexGen recorded revenues of $20.8 million resulting from the
sales of its Nx586 processors, NxVL system logic chipsets and motherboards. By
the end of the fiscal year 1995 NexGen had sold almost all of its NxVL system
logic chipsets and motherboards. There were no sales for the twelve-month
period ended June 30, 1994. In addition, NexGen has recently transitioned to
the PCI-based system logic chipsets and motherboards with its new version of
Nx586, which commenced shipments in July 1995. There can be no assurance that
NexGen will be successful in launching its PCI-based system solution, or be
able to obtain the necessary sales levels in order to ensure NexGen's sales
growth.
Cost of Sales. Cost of sales during the year ended June 30, 1995 included
the purchase price paid to manufacturing suppliers by NexGen, yield losses
resulting from testing of products and costs of distribution. Due to the
industry transition from the VL bus to the PCI bus resulting in a price
decline for the NxVL based systems, NexGen recorded a $5.6 million charge to
adjust the valuation of its NxVL system logic chipset inventory to reflect a
decline in its value. In addition, during fiscal 1995 NexGen formed a
manufacturing operations group and incurred approximately $0.8 million in
additional costs. During the initial ramp up period, NexGen expects to incur
high costs of sales due to under absorption of fixed overhead costs and due to
the inability to obtain volume discounts on the manufacture of its products.
The market for x86 microprocessors is subject to rapid technological changes
and has been subject to continuous introductions by Intel of increasingly
higher performance processors. To the extent that NexGen is unable to sell all
of its inventory of older version processors that have been surpassed in
performance by higher performance versions, NexGen may be required to record a
charge, in the same manner as its charge with respect to the NxVL inventory,
to adjust the valuation of such older version processor inventory. Any such
charge could have a material adverse effect on NexGen's results of operations.
Gross Margin (Loss). For the year ended June 30, 1995, gross margin was
negative resulting from NexGen's limited volume of shipments to customers, the
initial start-up of commercial testing of its products, the $5.6 million
charge to adjust inventory valuation, and reduced selling prices in order to
liquidate its NxVL inventory. NexGen's ability to achieve positive gross
margins will depend on several factors, including, but not limited to,
increasing its sales level, the product mix, competitive pricing pressures,
its ability to maintain its average selling prices by continuing to introduce,
receive from its supplier and sell in volume new higher performance products
to offset anticipated declines in average selling prices for older generation
products, the establishment of its distribution channels and its ability to
produce cost-effective versions of follow-on products. There can be no
assurance that NexGen will be able to maintain the required average selling
prices or the required mix of higher performance products or achieve any of
such other factors in order to ensure NexGen's margin will be sufficient to
support operating expenses.
Due to the continuous and rapid technological changes in the market for x86
microprocessors, customers usually place orders with short lead times and
require price protection for all inventory on hand when NexGen reduces its OEM
selling prices. To the extent NexGen produces excess inventories of particular
products or is required to give price protection in excess of its estimates,
NexGen's gross margin could be materially adversely impacted. During the ramp
up period for NexGen's products, such as its PCI-based products, price
protection, coupled with frequent decreases in OEM selling prices necessitated
by competitive pricing pressures and strategic marketing decisions to
establish initial volume sales of NexGen's products, can materially adversely
affect NexGen's gross margin.
Research and Development. NexGen's research, development and engineering
expenses were $9.8 million, $16.6 million and $15.3 million for fiscal 1993,
1994 and 1995, respectively. Research and development expenses increased $6.8
million from fiscal 1993 to fiscal 1994, due to $3.5 million of prototype
fabrication and pre-production evaluation costs associated with NexGen's Nx586
processor, reference system motherboards and NxVL system logic chipsets as
well as consulting and personnel costs associated with the general increase in
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NexGen's research and development activities. Research and development
expenses for fiscal 1994 included prototype fabrication and pre-production
evaluation costs associated with NexGen's Nx586 processor, reference system
motherboards and NxVL system logic chipsets which were substantially decreased
in fiscal 1995 as NexGen began commercial production of the Nx586. However,
these decreases were partially offset by increased costs related to additional
engineering personnel dedicated to additional engineering projects. NexGen
believes that future spending levels for research and development will
increase primarily due to the acceleration of the design and development of
follow-on processors and other system logic chipsets.
Selling, General and Administrative. NexGen's selling, general and
administrative expenses were $2.8 million, $6.1 million and $18.3 million for
fiscal 1993, 1994 and 1995, respectively. The increase of $3.3 million from
fiscal 1993 to fiscal 1994 primarily due to a $2.0 million increase in selling
and marketing expenses and a $1.3 million increase in general and
administrative expenses. Selling and marketing expenses increased due to
NexGen's introduction of its Nx586 at the CeBIT Computer Show, participation
in various trade shows, the establishment of sales offices in the U.S. and
Europe and costs associated with motherboard and technical support activities.
General and administrative expenses increased primarily due to increases in
legal fees. The increase of $12.2 million from fiscal 1994 to fiscal 1995 was
primarily attributed to approximately $7.4 million in promotional expenses for
the sale of initial Nx586 and VL-based systems, and also additional costs
associated in transitioning from the development stage to the revenue
generating growth stage. As a result, administrative personnel were added, and
corporate legal expenses in particular patent related expenses increased. As
commercial shipments are expected to expand further in calendar 1995 and in
1996, NexGen expects its selling, general and administrative expenses to
increase as a result of expanding business operations such as order
administration, credit collections and financial management.
Interest Income and Expenses. NexGen incurred net interest expense of $0.5
million, $1.0 million and $1.7 million in fiscal 1993, 1994 and 1995,
respectively. The increases of approximately $0.5 million from 1993 to 1994,
$0.7 million from 1994 to 1995 were attributable to higher average level of
outstanding notes payable and additional interest expense associated with the
Phemus Financing. Interest income was approximately $0.4 million and $0.9
million during the fiscal years ended June 30, 1994 and 1995, respectively.
Income Taxes. NexGen has not reflected an income tax benefit for the year
ended June 30, 1995 since realization of the net operating loss benefits is
not assured.
As of June 30, 1995, NexGen has net operating loss carryforwards of
approximately $56.0 million for federal income tax purposes. The federal
carryforwards expire on various dates through fiscal 2009. NexGen has no net
operating loss carryforwards for state tax purposes. The difference between
the federal and state net operating loss carryforwards is attributed to the
capitalization of research and development expenditures for state purposes and
state statutory limitations on the amount of net operating losses which may be
carried forward to subsequent years.
As of June 30, 1995, NexGen has general business tax credit carryforwards of
approximately $4 million and $1 million for federal and state tax reporting
purposes, respectively. The federal tax credit carryforwards expire between
the years 2004 and 2010.
Under the Tax Reform Act of 1986, the amounts of and the benefit from net
operating losses that can be carried forward may be limited. Because the sale
of Series G Preferred Stock resulted in a change of ownership greater than
50%, NexGen's net operating loss carryforwards incurred prior to December 29,
1994 that can be utilized to reduce future taxable income may be limited to
approximately $5.5 million per year.
Liquidity and Capital Resources
NexGen has financed its operations primarily through private placements of
Preferred Stock, from which it has raised approximately $106.2 million in
total consideration, net of issuance costs, and through borrowings of
approximately $7.0 million from ASCII and its United States affiliate, ASCII
of America, principal stockholders of NexGen, and $15.0 million from Phemus,
an investment management group. On May 24, 1995, NexGen also
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<PAGE>
raised $65.2 million, net of offering costs, in its IPO of NexGen Common
Stock. In addition to the cash from its IPO, private placements and loans,
NexGen has financed its operations through interest income and equipment
leases.
At September 30, 1995, NexGen owed an aggregate of $2.5 million in principal
amount under the ASCII Notes, which were issued in April 1992. The ASCII Notes
are secured by all of the tangible and intangible assets of the Company.
Interest on the ASCII Notes ceased to accrue on June 1, 1995, the closing date
of NexGen's IPO. All outstanding principal amounts and accrued interest of
$55,000 will be due and payable on March 1, 1996. ASCII and ASCII of America
may demand payment of the ASCII Notes at any time or may elect to convert the
outstanding principal, and 90% of the accrued but unpaid interest, on all or a
portion of the ASCII Notes into 180,885 shares of NexGen Common Stock (or a
conversion price of $13.95 per share) at any time up to March 1, 1996.
NexGen also obtained $15.0 million in debt financing from Phemus, which was
incurred in three installments of $5.0 million each in July 1993, January 1994
and September 1994. One-third of the aggregate debt to Phemus plus all accrued
interest thereon, totaling approximately $7.5 million in the aggregate, was
repaid upon the closing of NexGen's IPO. The remaining $10.0 million principal
amount, plus accrued interest, is due on June 1, 1996. The Phemus Notes are
secured by a priority security interest in all of the tangible and intangible
assets of NexGen. Any failure on the part of NexGen to repay the amounts
borrowed from Phemus would have a material adverse effect on NexGen's
business. See Note 2 of Notes to Consolidated Financial Statements of NexGen.
In March 1995, NexGen received a commitment letter to enter into a proposed
$10.0 million revolving accounts receivable line of credit agreement with
General Bank (the "Bank"). Under the current proposal, borrowings will bear
interest at the Bank's prime rate plus 0.5% and will be secured by NexGen's
accounts receivable and other tangible assets. As proposed, the credit
facility would require the maintenance of specified levels of tangible net
worth, profitability and certain financial ratios. There can be no assurance
that a definitive credit agreement will be entered into or that the terms will
be as set forth in the commitment letter, especially since the Credit
Agreement may cause NexGen not to be in compliance with certain required
financial ratios. If the credit agreement with the Bank is entered into,
NexGen may in the future use this credit facility to meet a portion of its
working capital requirements. Nevertheless, there can be no assurance that
such credit facility, together with the line of credit from AMD discussed
below, will be sufficient to meet such requirements.
On October 20, 1995, NexGen announced that it had executed the Merger
Agreement with AMD providing for the Merger. Concurrently with execution of
the Merger Agreement, NexGen and AMD also executed the Credit Agreement,
pursuant to which AMD provides NexGen with a revolving line of credit in the
aggregate principal amount of up to $60.0 million. Borrowings under the Credit
Agreement bear interest at the Index Rate plus 3.5% and are secured by all
tangible and intangible assets of NexGen but are subordinated to NexGen's
senior indebtedness, including the ASCII Notes and Phemus Notes. All
outstanding principal and accrued interest on borrowings under the Credit
Agreement are due on the earliest to occur of (i) the date which is 12 months
after termination of the Merger Agreement for any reason, (ii) the date on
which any person or entity other than AMD acquires more than 50% of the
outstanding NexGen Common Stock, and (iii) June 30, 1997. To date, NexGen has
drawn down borrowings in the aggregate principal amount of $30.0 million. See
"The Secured Credit Agreement."
Because NexGen has pledged its assets to ASCII, ASCII of America, Phemus and
AMD and may pledge its assets to the Bank it may be more difficult for NexGen
to obtain additional financing. Additionally, such pledge provides ASCII,
ASCII of America, Phemus and AMD and may provide the Bank with a priority
claim on all of NexGen's assets superior to any claims of all stockholders of
NexGen. The Credit Agreement also contains restrictions on NexGen's ability to
incur additional senior debt. See "The Secured Credit Agreement."
From its inception through September 30, 1995, NexGen had purchased a total
of approximately $13.7 million of capital assets, consisting primarily of
computer equipment, design software, furniture and fixtures. In addition,
NexGen entered into an operating lease for approximately $17.7 million
covering additional testing equipment.
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<PAGE>
Net cash used by operating activities was $4.4 and $25.7 million for the
three months ended September 30, 1994 and 1995, respectively. The increase in
cash used by operating activities was primarily attributable to higher net
losses, an increase of $15.1 million, associated with selling product below
cost, increased research and development activities, an increase in product
promotion costs and an increase of $3.6 million in prepaid expenses primarily
associated with advance payments to motherboard vendors for inventory
purchases. Cash used by operating activities was also affected by increases in
accounts receivable and inventory, which were substantially offset by
increases in accounts payable and accrued liabilities.
At September 30, 1995 NexGen had $5.5 million in cash and cash equivalents
and $20.8 in short-term investments, as compared to $33.4 million and $19.7
million, respectively, at June 30, 1995. In order to facilitate and secure the
ordering of inventory and critical components from overseas vendors, NexGen
had to issue letters of credit and accordingly was required to increase the
amount of cash pledged as security for these letters of credit to $6.1
million, thus reducing net available cash, cash equivalents and short-term
investments at September 30, 1995 to $20.2 million. There can be no assurances
that NexGen will be able to collect its accounts receivable in a timely
manner.
NexGen has recently experienced a number of events that have increased
significantly its working capital needs. Intel has recently implemented rapid
price reductions, especially for lower performance x86 products, after it has
introduced higher performance products. In order to compete, NexGen reduced
its prices to levels significantly lower than Intel products of comparable
performance in an attempt to establish NexGen's products in the marketplace.
During the three months ended September 30, 1995, NexGen's product cost
reductions have been insufficient to offset these price decreases and NexGen
has been affected adversely because it has unexpectedly been unable to receive
sufficient quantities of products at higher performance levels, which has
resulted in lower average selling prices for NexGen's products. To the extent
NexGen continues to experience unfavorable production mix of its products, its
aggregate average selling price will continue to be adversely affected and its
ability to achieve positive gross margins will be adversely impacted. In
response to the aggressive price reductions made by Intel during the three
months ended September 30, 1995, NexGen reduced its prices and offered price
protection to its customers. The foregoing factors, among others, have
resulted in negative gross margins, and will likely materially adversely
affect NexGen's gross margins in the future. NexGen expects to continue to
experience negative gross margins as long as it is unable to produce
sufficient quantities of higher performance processors, introduce advanced and
higher performance products more closely to Intel's release dates, or reduce
manufacturing costs. There can be no assurance that NexGen will be able to
achieve positive gross margins.
Further, in order to remain competitive NexGen must continue to expend
significant sums on research and development and on sales and marketing. Intel
has announced it will continue to spend substantial sums on research and
development and manufacturing facilities, and is currently attempting to
consolidate its dominant market position through an intensive advertising
campaign designed to further establish brand loyalty among PC end-users. In
order to establish market acceptance for NexGen products, NexGen intends to
make substantial marketing and promotional expenditures. Such expenditures may
be in excess of NexGen's current budget or its capital resources. There can be
no assurance that NexGen will be able to achieve market acceptance. The
failure to gain substantial customer acceptance of its processor products
would have a material adverse effect on NexGen. As long as Intel remains in
its dominant position, its product introduction schedule and product pricing
will materially, and at times adversely, affect NexGen's business, operating
results and financial condition. Accordingly, NexGen may be unable to reduce
significantly a substantial portion of its expenses without severely affecting
its competitive position.
NexGen has been pursuing an aggressive plan to enhance market share,
increase revenue and accelerate new products. Although cost reduction programs
have been planned to improve competitiveness, working capital requirements
will be significant until NexGen generates positive cash flows. There can be
no assurance that the Merger will be consummated or that the Credit Agreement
will be sufficient to satisfy all of NexGen's working capital needs, in which
event NexGen will require additional capital or new bank credit lines to fund
its
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<PAGE>
anticipated growth and, if the Merger is not consummated, to repay the up to
$60.0 million of borrowings, plus accrued interest thereon, incurred under the
Credit Agreement. In addition, NexGen may be required to pay AMD a termination
fee of $15.0 million or $25.0 million upon termination of the Merger Agreement
under certain circumstances. See "The Merger Agreement--Fees and Expenses." In
the event the Merger is not consummated, management currently plans to seek
equity, convertible debt or debt financing to fund future capital expenditures
and operating expenses, to repay borrowings and interest thereon incurred
under the Credit Agreement, to repay other debts and to pay transaction fees
and costs associated with the Merger (which are currently estimated to be
approximately $1.0 million in the event the Merger is not consummated), and to
pay any termination fee associated with termination of the Merger Agreement
under certain circumstances. Management must be successful in securing such
financing in order for NexGen to continue as a going concern beyond the date
the borrowings, plus accrued interest thereon, incurred under the Credit
Agreement become due. There can be no assurance that such funding can be
obtained or that the terms of such funding will be acceptable to NexGen, if at
all. To the extent that additional capital is raised through the sale of
additional equity or convertible debt securities, the issuance of such
securities could result in additional dilution to NexGen's stockholders.
Moreover, NexGen's cash requirements may vary materially from those now
planned because of the evolving market condition, probable results of
development projects, product testing, relationships with manufacturers,
changes in the focus and direction of NexGen's research and development
programs, competitive and technological advances, the level of working capital
required to sustain the planned growth, litigation, operating results,
including the extent and duration of operating losses, and other factors.
An element of NexGen's strategy is to reduce its manufacturing costs and to
produce sufficient quantities of processors matching the performance of the
highest performance Intel processors. The goal of this strategy is to enable
NexGen to achieve and maintain positive gross margins in a competitive
environment subject to significant and frequent price reductions by Intel. To
achieve these goals, NexGen has been exploring various alternatives, including
strategic business combinations, the sale or exchange of a portion of NexGen's
capital stock, strategic relationships with foundry partners, joint ventures,
and other capital transactions. In this regard, on October 20, 1995 NexGen and
AMD executed the Merger Agreement. Subject to the satisfaction of certain
conditions, including stockholder approvals, the Merger is expected to close
in the first quarter of calendar 1996. See "The Merger Agreement--Conditions
to the Merger." There can be no assurance, however, that NexGen will
consummate such transaction, and the failure to do so could materially
adversely affect NexGen's business.
COMPENSATION OF DIRECTORS
Directors do not receive any fees for service on the NexGen Board of
Directors. Non-employee directors are reimbursed for their expenses for each
meeting attended. Directors are eligible to participate in the 1995 Stock Plan
of NexGen. Each non-employee director who was in office on March 27, 1995
received a one time grant of 25,000 nonstatutory stock options ("NSOs") on May
24, 1995, the effective date of NexGen's IPO. New non-employee directors who
join the Board of Directors after March 27, 1995 are eligible to receive a one
time grant of 25,000 NSOs upon being elected to the Board of Directors. In
addition, all non-employee directors will automatically receive 5,000 NSOs
each year. See "Proposal to Approve an Amendment to the 1995 Stock Plan of
NexGen, Inc."
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<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth compensation for services rendered in all
capacities to NexGen for the fiscal years ended June 30, 1994 and 1995 of (i)
NexGen's Chief Executive Officer and (ii) NexGen's five most highly compensated
executive officers whose total annual salary and bonus for fiscal year 1995
exceeded $100,000 (the "Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------------------------------- ------------
SECURITIES
NAME AND PRINCIPAL FISCAL OTHER ANNUAL UNDERLYING
POSITION YEAR SALARY BONUS COMPENSATION($) OPTIONS(#)
------------------ ------ -------- -------- --------------- ------------
<S> <C> <C> <C> <C> <C>
S. Atiq Raza 1995 $244,269 $ 13,500 $ -- 200,000
President and Chief 1994 170,000 39,250(1) -- 100,000
Executive Officer
Anthony S. S. Chan 1995 140,192 -- -- 22,000
Vice President, Finance 1994 29,077(2) 5,000(1) -- 149,000
and Administration and
Chief Financial Officer
Vinod Dham 1995 39,423(3) 100,000 -- 400,000
Executive Vice Presi-
dent and Chief Operat-
ing Officer
David I. Epstein(4) 1995 155,423 -- -- 90,000
Vice President, Engi- 1994 145,514 -- -- 54,000
neering
Dana B. Krelle 1995 168,577 -- -- 50,000
Vice President, Sales
and Marketing 1994 150,000 -- -- 44,000
David M. Rickey 1995 27,038(5) -- 9,237(6) 160,000
Vice President,
Operations
</TABLE>
- --------
(1) Represents cash bonuses earned during the last fiscal year and paid in
fiscal 1995.
(2) Mr. Chan joined NexGen in April 1994.
(3) Mr. Dham joined NexGen in May 1995. Mr. Dham's salary reflects a partial
year of employment and his current salary is $250,000 per annum.
(4) Mr. Epstein resigned from NexGen effective September 15, 1995.
(5) Mr. Rickey joined NexGen in May 1995. Mr. Rickey's salary reflects a
partial year of employment and his current salary is $190,000 per annum.
(6) These amounts represent relocation expenses paid to Mr. Rickey.
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<PAGE>
STOCK OPTIONS
The following tables summarize options grants to, and exercises by, NexGen's
Chief Executive Officer and the Named Officers during fiscal 1995, and the
value of options held by each such person at the end of fiscal 1995.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------- POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS ANNUAL RATES OF STOCK
SECURITIES GRANTED TO PRICE APPRECIATION
UNDERLYING EMPLOYEES EXERCISE FOR OPTION TERM(3)
OPTIONS IN FISCAL PRICE EXPIRATION ---------------------
NAME GRANTED(#) YEAR ($/SH)(1) DATE(2) 5%($) 10%($)
---- ---------- ---------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
S. Atiq Raza............ 200,000(4) 10.9% $7.50 3/12/05 $ 943,342 $2,390,614
Anthony S. S. Chan...... 22,000(4) 1.2 7.50 3/12/05 103,768 262,968
Vinod Dham.............. 400,000(5) 21.8 9.00 4/28/05 2,264,021 5,737,473
David I. Epstein........ 20,000(6)(7) 1.1 3.50 2/06/05 44,023 111,562
70,000(4)(7) 3.8 7.50 3/12/05 330,170 836,715
Dana B. Krelle.......... 50,000(4) 2.7 7.50 3/12/05 235,835 597,653
David M. Rickey......... 160,000(5) 8.7 7.50 4/18/05 754,674 1,912,491
</TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
- --------
(1) The exercise price is equal to 100% of the fair market value on the date
of grant.
(2) The options have a term of 10 years, subject to earlier termination upon
certain events related to termination of employment.
(3) The 5% and 10% assumed rates of appreciation are mandated by the rules of
the Commission and do not represent NexGen's estimate or projection of the
future NexGen Common Stock price. There can be no assurance that any of
the values reflected in the table will be achieved.
(4) These options vest ratably on a monthly basis over a three-year period
after the second anniversary of the date of grant. These options vest
immediately in the event that NexGen is subject to a change in control.
(5) These options vest ratably on a monthly basis after the date of grant.
These options vest immediately in the event that NexGen is subject to a
change in control.
(6) These options are exercisable in full immediately, but are subject to
repurchase by NexGen. NexGen's right of repurchases lapses 25% commencing
on the first anniversary of the date of grant and lapses ratably on a
monthly basis over the next three years.
(7) The option to purchase 70,000 shares and the portion of the option to
purchase 20,000 shares that would still be subject to NexGen's right of
repurchase on June 15, 1996 were terminated in connection with Mr.
Epstein's resignation, which was effective September 15, 1995.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES VALUE JUNE 30, 1995 (#)(2) JUNE 30, 1995 ($)(2)(3)
ACQUIRED ON REALIZED -------------------------- -------------------------
NAME EXERCISE(#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
S. Atiq Raza............ 15,000 $46,500 735,000 200,000 17,364,375 4,725,000
Anthony S. S. Chan...... 6,500 43,550 142,500 22,000 3,366,563 519,750
Vinod Dham.............. -- -- 1,389 389,611 32,815 9,417,185
David I. Epstein........ 15,132 72,437 213,868(4) 70,000(4) 5,052,632 1,653,750
Dana B. Krelle.......... 4,500 13,950 214,500 50,000 5,067,562 1,181,250
David M. Rickey......... -- -- 278 159,722 6,568 3,773,432
</TABLE>
- --------
(1) Calculated on the basis of the fair market value of the underlying
securities at the exercise date minus the exercise price.
(2) Shares classified as exercisable include the following shares granted
under the 1987 Plan that are exercisable in full immediately, but are
subject to rights of repurchase by NexGen: Mr. Raza, 191,250 shares; Mr.
Chan, 101,242 shares; Mr. Dham, no shares; Mr. Epstein, 70,735 shares; Mr.
Krelle, 86,263 shares and Mr. Rickey, no shares. These repurchase rights
generally lapse 20-25% on the first anniversary of the date of grant and
lapse ratably on a monthly basis over the next four or three years,
respectively.
(3) Calculated on the basis of the fair market value of the underlying
securities at June 30, 1995 ($23.625 per share) minus the exercise price.
(4) Options with respect to 117,483 shares were terminated in connection with
Mr. Epstein's resignation effective September 15, 1995.
In the event that NexGen is subject to a change in control, options granted
under the 1995 Stock Plan of NexGen will become exercisable in full.
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<PAGE>
NEXGEN EMPLOYEE BENEFIT PLANS
1987 Employee Stock Plan
The 1987 Employee Stock Plan of NexGen (the "1987 Plan") was adopted by
NexGen's Board of Directors in January 1987, and subsequently approved by its
stockholders. The 1987 Plan was amended in August 1989, January 1992, June
1993 and July 1993. The 1987 Plan provides for direct sales of stock and for
the grant of both incentive stock options ("ISOs") intended to qualify for
preferential tax treatment under Section 422 of the Code, and nonstatutory
stock options ("NSOs") that do not qualify for such treatment. No additional
grants may be made under the 1987 Plan after March 31, 1995. Selected
employees, directors, officers, consultants, and promotional representatives
of NexGen were eligible for the direct sale or award of shares and the grant
of NSOs. Only employees were eligible for the grant of ISOs. Stock issued
pursuant to the exercise of options granted under the 1987 Plan (which are
immediately exercisable in full) and stock awarded or sold pursuant to the
1987 Plan are subject to repurchase by NexGen. These repurchase rights
generally lapse ratably over four or five years. The 1987 Plan is administered
by a committee comprised of directors of NexGen who are disinterested within
the meaning of Rule 16b-3 under the Exchange Act (the "Compensation
Committee"). A committee comprised of directors of NexGen who are not required
to be disinterested (the "Options Committee") assists in the administration of
the 1987 Plan with respect to employees who were not officers or directors of
NexGen.
A total of 5,210,000 shares of NexGen Common Stock has been reserved for
issuance under the 1987 Plan. As of September 30, 1995, NexGen had granted
options to purchase an aggregate of 5,166,717 shares (net of cancellations but
including options exercised) at exercise prices ranging from $0.15 to $7.50
per share, and options to purchase an aggregate of 3,411,293 shares were
outstanding. As of September 30, 1995, an aggregate of 142,501 shares (net of
repurchases) have been issued pursuant to direct sales under the 1987 Plan. If
the proposed Merger is consummated, AMD will assume all outstanding options
granted under the 1987 Plan. Such options will become exercisable for an
adjusted number of shares of AMD Common Stock at an adjusted exercise price.
The right to repurchase shares of stock issued upon exercise of options
granted under the 1987 Plan will continue and will be assumed by AMD. See "The
Merger Agreement and Related Agreements--Treatment of NexGen Options, Warrants
and Convertible Securities."
Federal Income Tax Consequences. The tax treatment of options granted under
the 1987 Plan is the same as the treatment of options granted under the 1995
Plan of NexGen. See "Proposal to Approve an Amendment to the 1995 Stock Plan
of NexGen, Inc.--Federal Income Tax Consequences."
1995 Stock Plan of NexGen.
For a description of the 1995 Stock Plan of NexGen, see "Proposal to Approve
an Amendment to the 1995 Stock Plan of NexGen, Inc."
Employee Stock Purchase Plan
In March 1995, the Board of Directors of NexGen adopted the NexGen ESPP to
provide employees of NexGen with an opportunity to purchase NexGen Common
Stock through payroll deductions. The NexGen ESPP was approved by NexGen's
stockholders in May 1995. On August 28, 1995, the Board amended the NexGen
ESPP, effective as of January 1, 1996. Under the NexGen ESPP, 500,000 shares
of NexGen Common Stock have been reserved for issuance. The NexGen ESPP became
effective on May 24, 1995. All full-time regular employees who were employed
by NexGen on the date of NexGen's initial public offering of NexGen Common
Stock are eligible to participate in the NexGen ESPP. Thereafter, effective
January 1, 1996, a full-time regular employee who is not an officer will be
eligible to participate in the NexGen ESPP upon his/her employment date.
Officers hired after the initial public offering must be continuously employed
by NexGen for 12 months in order to participate in the NexGen ESPP.
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<PAGE>
Eligible employees may participate in the NexGen ESPP by authorizing payroll
deductions of up to 12% of their total cash compensation. Amounts withheld are
applied at the end of every six-month accumulation period to purchase shares
of NexGen Common Stock, but not more than 5,000 shares. The value of the
NexGen Common Stock that may be purchased by any participant in a calendar
year is limited to $25,000. Participants may withdraw their contributions at
any time before stock is purchased. Shares purchased by officers may not be
resold for a period of three months.
The purchase price is equal to 85% of the lower of (i) the market price of
NexGen Common Stock immediately before the beginning of the applicable
offering period or (ii) the market price of NexGen Common Stock at the time of
the purchase. In general, each offering period is 24 months long, but a new
offering period begins every six months. Thus up to four overlapping offering
periods may be in effect at the same time. An offering period continues to
apply to a participant for the full 24 months, unless the market price of
NexGen Common Stock is lower when a subsequent offering period begins. In that
event, the subsequent offering period automatically becomes the applicable
period for purposes of determining the purchase price. The first accumulation
and offering periods commenced on May 24, 1995, the effective date of NexGen's
initial public offering of NexGen Common Stock, and will end on December 31,
1995, and June 30, 1997, respectively. If the proposed Merger is consummated,
AMD will assume the rights to purchase NexGen Common Stock under the NexGen
ESPP outstanding at the Effective Time which will become exercisable for an
adjusted number of shares of AMD Common Stock at an adjusted exercise price.
After the Effective Time AMD may terminate the NexGen ESPP. To the extent
permissible, AMD may also terminate the rights to purchase AMD Common Stock
which will be assumed by AMD at the Effective Time in which case amounts
withheld since January 1, 1996 through the termination date would be applied
to purchase AMD Common Stock on such date. See "The Merger Agreement and
Related Agreements--Treatment of NexGen Options, Warrants and Convertible
Securities." After the Effective Time, NexGen employees will be able to
participate in the AMD SPP in accordance with the terms of the AMD SPP. See
"Proposal to Approve an Amendment to the Advanced Micro Devices, Inc. 1991
Stock Purchase Plan."
CERTAIN RELATIONSHIPS AND TRANSACTIONS
S. Atiq Raza, who will become a member of the Board of Directors of AMD upon
consummation of the Merger, is Chairman of the Board, President, Chief
Executive Officer, and Secretary of NexGen. Mr. Raza served as Executive Vice
President responsible for NexGen's engineering, marketing and prototype
manufacturing from September 1988 until he was elected to serve as President,
Chief Executive Officer and Secretary of the Company in January 1991. He has
been a member of NexGen's Board of Directors since August 1989 and was elected
Chairman of the Board of Directors in May 1994. For the fiscal years ended
June 30, 1995 and 1994, Mr. Raza received a salary of $244,269 and $170,000,
respectively, a bonus of $13,500 and $39,250, respectively, and options to
purchase 200,000 and 100,000 shares of NexGen Common Stock, respectively.
Options granted to Mr. Raza in the fiscal year ended June 30, 1995 had an
exercise price of $7.50 per share, represented 10.9% of total options granted
to employees in that fiscal year, and expire March 12, 2005.
In connection with his employment by NexGen in September 1988, NexGen made
two loans, evidenced by two promissory notes, to Mr. Raza of $50,000 each,
bearing interest at 9% per annum, with interest payable semi-annually, and
principal due October 17, 1989 and October 17, 1998, respectively. In February
1990, in recognition of Mr. Raza's continued service to NexGen, NexGen and Mr.
Raza entered into an agreement to extend the maturity date of the note due in
1989 and to reduce the interest rate thereon to 7.98%. In addition, the
interest rate on the note due in 1998 was reduced to 8.12%. In February 1992,
in recognition of Mr. Raza's continued service to NexGen, NexGen agreed to
extend the maturity date on the $50,000 note originally due in 1989 to October
17, 1996 and to reduce the interest rate thereon to 7.07%. The largest
aggregate amount outstanding under such loans during the year ended June 30,
1995 was $125,634 and the aggregate amount outstanding at September 30, 1995
was $126,506.
Pursuant to the terms of his letter agreement with NexGen, dated September
28, 1988, Mr. Raza is entitled to receive semi-annual bonuses of $2,250 for
each year until October 17, 1998. In addition, NexGen has agreed to pay
$50,000 to Mr. Raza (or to his estate) in the event of termination of his
employment: (i) by NexGen without cause; (ii) as a result of Mr. Raza's
permanent disability, or (iii) as a result of Mr. Raza's death. In
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<PAGE>
connection with the February 1992 amendment to the $50,000 note originally due
in 1989, NexGen agreed to amend the letter agreement dated September 28, 1988
to pay a bonus, on October 17, 1996, to Mr. Raza equal to all accrued interest
on such note that accrues while Mr. Raza is employed by NexGen.
PRINCIPAL STOCKHOLDERS OF NEXGEN
The following table sets forth certain information as of September 30, 1995,
as to shares of NexGen Common Stock beneficially owned by: (i) each person who
is known by NexGen to own beneficially more than 5% of the NexGen Common
Stock, (ii) NexGen's Chief Executive Officer and five other most highly
compensated executive officers for the fiscal year ended June 30, 1995, (iii)
each of NexGen's directors, and (iv) all directors and executive officers of
NexGen as a group.
<TABLE>
<CAPTION>
SHARES PERCENTAGE
BENEFICIALLY BENEFICIALLY
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED(1) OWNED(2)
------------------------------------ ------------ ------------
<S> <C> <C>
ASCII Corporation (3)................................ 3,276,444 9.6%
Attn: Legal Affairs Group
Toshin Building
4-33-10 Yoyogi,
Shibuya-ku, Tokyo 151-24, Japan
Compaq Computer Corporation.......................... 3,057,424 9.2
20555 SH 249, Mail Stop M110701
Houston, Texas 77070
Kleiner Perkins Caulfield & Byers IV (4)............. 1,710,869 5.1
2750 Sand Hill Road
Menlo Park, California 94025
Isao Okawa (5)....................................... 1,666,667 5.0
ARK Mori Building 31F
1-12-32 Akasaka,
Minato-ku, Tokyo, Japan
Marshall G. Cox (6).................................. 317,110 *
Vinod Khosla (7)..................................... 2,060,869 6.1
Paul R. Low (6)...................................... 46,000 *
Kazuhiko Nishi (8)................................... 3,276,444 9.6
S. Atiq Raza (6)..................................... 750,485 2.2
James M. Voytko (9).................................. 15,000 *
Anthony S. S. Chan (6)............................... 149,485 *
Vinod Dham (6)....................................... 5,346 *
David I. Epstein (6)................................. 109,202 *
Dana B. Krelle (6)................................... 214,500 *
David M. Rickey (6).................................. 2,152 *
All directors and executive officers as a group (10
persons)(6)(10)..................................... 6,837,391 19.2
</TABLE>
- --------
* Amount represents less than 1% of the NexGen Common Stock
(1) To NexGen's knowledge, the persons named in the table have sole voting and
investment power with respect to all shares of NexGen Common Stock shown
as beneficially owned by them, subject to community property laws where
applicable and the information contained in the footnotes to this table.
(2) For purposes of computing the percentage of outstanding shares held by
each person or group of persons named above on a given date, shares which
such person or group has the right to acquire within 60 days after such
date are deemed to be outstanding, but are not deemed to be outstanding
for the purposes of computing the percentage ownership of any other
person.
(3) Includes 616,600 shares issuable upon the exercise of warrants. Also
includes 218,751 shares owned by ASCII of America. Includes 180,885 shares
of NexGen Common Stock that may be issued if ASCII and ASCII of America
elect to convert amounts outstanding under the ASCII Notes to ASCII and
ASCII of America.
(4) Includes 350,000 shares issuable upon the exercise of warrants.
(5) Includes 266,667 shares owned by CSK Corporation, of which Mr. Isao Okawa
is the Chairman and President.
96
<PAGE>
(6) Includes shares issuable upon exercise of options exercisable within 60
days of September 30, 1995 as follows: Mr. Cox, 170,000, Dr. Low, 46,000,
Mr. Raza, 735,000, Mr. Chan, 142,500, Mr. Dham, 4,861, Mr. Epstein (a
former executive officer), 96,385, Mr. Krelle, 214,500 and Mr. Rickey,
1,667 and directors and all executive officers as a group (10 persons),
1,314,528. Certain shares granted under the 1987 Plan are exercisable in
full immediately, but are subject to rights of repurchase by NexGen.
(7) Includes 1,360,869 shares held by Kleiner Perkins Caufield & Byers IV
("KPC&B") and 350,000 shares issuable to KPC&B upon the exercise of
warrants. Also includes 33,300 shares owned by KPCB VII Associates ("KPCB
VII"). Mr. Khosla is a General Partner and a limited partner of KPCB IV
Associates, which is the General Partner of KPC&B, and a General Partner
and limited partner of KPCB VII and may be deemed to share voting and
investment power with respect to those shares. However, Mr. Khosla
disclaims beneficial ownership of shares held by KPC&B and KPCB VII,
except for those shares in which he has a pecuniary interest and his
personal ownership included herein.
(8) Includes 2,260,208 shares owned by ASCII, 616,600 shares issuable to ASCII
upon the exercise of warrants, and 218,751 shares owned by ASCII of
America. Includes 180,885 shares of NexGen Common Stock that may be issued
if ASCII and ASCII of America elect to convert amounts outstanding under
the ASCII Notes. Mr. Nishi is President of ASCII and may be deemed to
share voting and investment power with respect to those shares. However,
Mr. Nishi disclaims beneficial ownership of such shares.
(9) Excludes 487,935, 335,100 and 59,100 shares issuable upon exercise of
warrants issued to PaineWebber in connection with private offerings of
NexGen's Series E, Series F and Series G Preferred Stock, respectively.
Mr. Voytko is a Managing Director of PaineWebber and disclaims beneficial
ownership of such warrants and the shares issuable upon the exercise
thereof.
(10) Includes shares included in footnotes (7) and (8) which are held by
entities affiliated with Mr. Khosla and Mr. Nishi, respectively.
97
<PAGE>
PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed financial statements
give effect to the combination of AMD and NexGen on a pooling of interests
basis. The pro forma combined condensed balance sheet assumes the Merger took
place on October 1, 1995 and combines AMD's unaudited condensed consolidated
balance sheet at that date with the unaudited historical condensed
consolidated balance sheet of NexGen at September 30, 1995. The pro forma
combined condensed statements of operations assume that the Merger took place
as of the beginning of each of the periods presented and combine AMD's
historical condensed consolidated statements of operations for each of the
three years in the period ended December 25, 1994 with NexGen's unaudited
condensed consolidated statements of operations for each of the three twelve-
month periods in the period ended December 31, 1994. The pro forma combined
condensed statements of operations also combine AMD's unaudited condensed
consolidated statements of operations for the nine months ended October 1,
1995 and September 25, 1994 with the unaudited condensed consolidated
statements of operations of NexGen for the nine months ended September 30,
1995 and 1994, respectively. AMD has not yet determined which periods will be
combined for inclusion in its audited consolidated statement of operations
after the Merger.
The pro forma combined condensed statements of operations are not
necessarily indicative of operating results which would have been achieved had
the Merger been consummated as of the beginning of such periods and should not
be construed as representative of future operations.
These pro forma combined condensed financial statements should be read in
conjunction with the historical consolidated financial statements and the
notes thereof of AMD and NexGen which are incorporated in or included
elsewhere in this Joint Proxy Statement/Prospectus.
98
<PAGE>
AMD AND NEXGEN
PRO FORMA COMBINED CONDENSED BALANCE SHEET
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
AMD NEXGEN
OCTOBER 1, SEPTEMBER 30, PRO FORMA
1995 1995 ADJUSTMENTS COMBINED
----------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash & cash equiva-
lents................. $ 178,428 $ 5,542 $ 183,970
Short-term investments. 314,495 20,800 335,295
----------- --------- -----------
Total cash, cash
equivalents, and
short-term
investments......... 492,923 26,342 519,265
Accounts receivable,
net................... 344,047 20,127 364,174
Inventories:
Raw materials......... 31,958 2,517 34,475
Work-in-process....... 68,148 616 68,764
Finished goods........ 53,024 9,306 62,330
----------- --------- -----------
Total inventories.... 153,130 12,439 165,569
Deferred income taxes.. 98,675 -- 98,675
Prepaid expenses and
other current assets.. 42,887 7,128 50,015
----------- --------- -----------
Total current assets. 1,131,662 66,036 1,197,698
Property, plant, and
equipment, at cost..... 2,844,558 14,652 2,859,210
Accumulated depreciation
and amortization....... (1,258,973) (9,722) (1,268,695)
----------- --------- -----------
Property, plant and
equipment, net...... 1,585,585 4,930 1,590,515
Investment in joint ven-
ture................... 162,949 -- 162,949
Other assets............ 87,211 436 87,647
----------- --------- -----------
$ 2,967,407 $ 71,402 $ 3,038,809
=========== ========= ===========
LIABILITIES AND STOCK-
HOLDERS' EQUITY
Current liabilities:
Notes payable to banks. $ 24,980 $ -- $ 24,980
Accounts payable....... 210,065 24,559 234,624
Accrued compensation
and benefits.......... 91,487 1,568 93,055
Accrued liabilities.... 101,378 7,649 $ 10,000 (3) 119,027
Litigation settlement.. 20,000 -- 20,000
Income tax payable..... 106,034 -- 106,034
Deferred income on
shipments to distribu-
tors.................. 102,191 -- 102,191
Current portion of
long-term debt and
capital lease
obligations........... 31,921 12,516 44,437
----------- --------- -------- -----------
Total current liabil-
ities............... 688,056 46,292 10,000 744,348
Deferred income taxes... 42,518 -- (22,700)(5) 19,818
Long-term debt and capi-
tal lease obligations,
less current portion... 216,378 -- 216,378
Stockholders' equity:
Capital stock:
Common stock, par val-
ue................... 1,044 536 263 (1) 1,843
Capital in excess of
par value............. 727,308 171,878 (263)(1) 898,923
Retained earnings...... 1,292,103 (147,304) 12,700 (3)(5) 1,157,499
----------- --------- -------- -----------
Total stockholders'
equity.............. 2,020,455 25,110 12,700 2,058,265
----------- --------- -------- -----------
$ 2,967,407 $ 71,402 $ 3,038,809
=========== ========= ===========
</TABLE>
See Accompanying Notes to Pro Forma Combined Condensed Financial Statements
99
<PAGE>
AMD AND NEXGEN
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
-------------------------------------- ------------------------
DECEMBER 27, DECEMBER 26, DECEMBER 25, SEPTEMBER 25, OCTOBER 1,
1992 1993 1994 1994 1995
------------ ------------ ------------ ------------- ----------
<S> <C> <C> <C> <C> <C>
Net sales............... $1,514,489 $1,648,280 $2,135,515 $1,589,498 $1,873,201
Expenses:
Cost of sales.......... 746,486 789,564 983,730 718,478 989,949
Research and develop-
ment.................. 237,495 273,951 296,542 217,291 308,806
Marketing, general and
administrative........ 271,742 294,905 366,318 277,264 311,885
---------- ---------- ---------- ---------- ----------
Operating income........ 258,766 289,860 488,925 376,465 262,561
Litigation settlement... -- -- (58,000) -- --
Interest income and oth-
er, net................ 18,913 16,490 16,259 10,942 23,237
Interest expense........ (17,824) (3,709) (3,649) (3,098) (190)
---------- ---------- ---------- ---------- ----------
Income before income
taxes and equity in
joint venture.......... 259,855 302,641 443,535 384,309 285,608
Provision for income
taxes.................. 26,620 85,418 151,703 130,655 92,052
---------- ---------- ---------- ---------- ----------
Income before equity in
joint venture.......... 233,235 217,223 291,832 253,654 193,556
Equity in net income
(loss) of joint
venture................ -- (634) (10,585) (7,596) 13,426
---------- ---------- ---------- ---------- ----------
Net income.............. 233,235 216,589 281,247 246,058 206,982
Preferred stock divi-
dends.................. 10,350 10,350 10,350 7,762 10
---------- ---------- ---------- ---------- ----------
Net income applicable to
common stockholders.... $ 222,885 $ 206,239 $ 270,897 $ 238,296 $ 206,972
========== ========== ========== ========== ==========
Net income per share
Primary................ $ 2.08 $ 1.79 $ 2.18 $ 1.94 $ 1.53
Fully diluted.......... $ 2.04 $ 1.77 $ 2.14 $ 1.89 $ 1.51
Shares used in per share
calculation:
Primary................ 107,367 115,355 124,123 122,927 135,451
Fully diluted.......... 114,608 122,459 131,816 130,594 137,617
</TABLE>
See Accompanying Notes to Pro Forma Combined Condensed Financial Statements
100
<PAGE>
AMD AND NEXGEN
NOTES TO PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. The pro forma combined condensed financial statements reflect the
issuance of up to approximately 26.6 million shares of AMD Common Stock for an
aggregate of up to approximately 33.2 million shares of NexGen Common Stock
(based on shares of NexGen Common Stock outstanding as of September 30, 1995)
in connection with the Merger based upon an Exchange Ratio of 0.8 of a share
of AMD Common Stock for each share of NexGen Common Stock. The actual number
of shares of AMD Common Stock to be issued will be determined at the Effective
Time of the Merger based on the Exchange Ratio and the number of shares of
NexGen Common Stock then outstanding.
2. On a combined basis, there were no material transactions between AMD and
NexGen during any period presented.
3. The combined company expects to incur charges to operations currently
estimated to be between $9.0 million and $11.0 million, primarily in the
quarter in which the Merger is consummated, to reflect transaction fees and
costs incident to the Merger. An estimated charge, at the midpoint of the
above range, of $10.0 million is reflected in the pro forma combined condensed
balance sheet as a reduction to retained earnings and an increase to accrued
liabilities. The estimated charge is not reflected in the pro forma combined
statement of operations data. The amount of this charge is a preliminary
estimate and therefore subject to change.
4. Income (loss) per share is computed after taking into consideration the
dilutive effect of convertible preferred stock, stock options and warrants.
5. Pro forma adjustments have been made to reduce valuation allowances
previously provided by NexGen against deferred tax assets attributable to its
net operating loss carryforwards. AMD has concluded that it is more likely
than not that a significant portion of NexGen's net operating loss carryovers
($22.7 million of tax benefit at October 1, 1995) will be realized against
future projected combined taxable income of the two companies.
6. The table below sets forth the composition of the unaudited pro forma
combined net sales, operating income (loss) and net income (loss) for each of
the periods shown, had the Merger taken place at the beginning of the periods
shown (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
-------------------------------------- ------------------------
DECEMBER 27, DECEMBER 26, DECEMBER 25, SEPTEMBER 25, OCTOBER 1,
1992 1993 1994 1994 1995
------------ ------------ ------------ ------------- ----------
<S> <C> <C> <C> <C> <C>
Net sales:
AMD................... $1,514,489 $1,648,280 $2,134,659 $1,589,491 $1,836,695
NexGen................ -- -- 856 7 36,506
---------- ---------- ---------- ---------- ----------
Combined.............. $1,514,489 $1,648,280 $2,135,515 $1,589,498 $1,873,201
========== ========== ========== ========== ==========
Operating income (loss)
AMD................... $ 269,945 $ 305,053 $ 513,139 $ 395,159 $ 317,239
NexGen................ (11,179) (15,193) (24,214) (18,694) (54,678)
---------- ---------- ---------- ---------- ----------
Combined.............. $ 258,766 $ 289,860 $ 488,925 $ 376,465 $ 262,561
========== ========== ========== ========== ==========
Net income (loss)
AMD................... $ 245,011 $ 228,781 $ 305,266 $ 264,507 $ 244,949
NexGen................ (11,776) (15,992) (26,019) (19,949) (54,867)
Pro forma tax adjust-
ment................. -- 3,800 2,000 1,500 16,900
---------- ---------- ---------- ---------- ----------
Combined.............. $ 233,235 $ 216,589 $ 281,247 $ 246,058 $ 206,982
========== ========== ========== ========== ==========
</TABLE>
101
<PAGE>
DESCRIPTION OF AMD CAPITAL STOCK
The following summary of terms of AMD's capital stock does not purport to be
complete and is subject to, and qualified in its entirety by, the provisions
of AMD's Certificate of Incorporation.
GENERAL
The authorized capital stock of AMD consists of 250,000,000 shares of AMD
Common Stock, par value $.01 per share, and 1,000,000 shares of AMD Serial
Preferred Stock, par value $.10 per share.
AMD COMMON STOCK
Of the 250,000,000 authorized shares of AMD Common Stock, 105,465,896 shares
were issued and outstanding on December 4, 1995. No shares of AMD Serial
Preferred Stock were outstanding on that date. Holders of AMD Common Stock are
entitled to receive dividends when and as declared by the AMD Board of
Directors out of funds legally available therefor, and after payment of
dividends on any AMD Serial Preferred Stock then outstanding. Each outstanding
share of AMD Common Stock has one vote, subject to such special voting rights
by class as may be granted to the holders of AMD Serial Preferred Stock, with
respect to the election of a limited number of directors upon default by AMD
in the payment of dividends upon such serial preferred stock.
The AMD Common Stock is not entitled to any preemptive or other subscription
rights, and does not have any conversion rights or redemption or sinking fund
provisions. Voting on the election of directors is not cumulative. Upon
liquidation, the holders of AMD Common Stock are entitled to share ratably in
the entire net assets of AMD remaining available for distribution to
stockholders after payment of all preferential amounts payable on liquidation
in respect of the holders of classes or series of stock entitled thereto.
All outstanding shares of AMD Common Stock are, and the shares of AMD Common
Stock issued hereunder will be, validly issued, fully paid and nonassessable.
The transfer agent and registrar for the AMD Common Stock is The First
National Bank of Boston.
The outstanding shares of AMD Common Stock are listed on the NYSE, and AMD
has applied for listing of the shares of AMD Common Stock to be issued to
NexGen stockholders pursuant to the Merger.
AMD SERIAL PREFERRED STOCK
The AMD Serial Preferred Stock may be issued from time to time in one or
more series by resolution of the AMD Board of Directors, which may without any
further stockholder action determine or fix the dividend rights, dividend
rate, voting rights, redemption provisions, liquidation rights, sinking fund
provisions and other rights, preferences, privileges and restrictions of any
wholly unissued series, the number of shares constituting any such series and
the designation thereof. Of the 1,000,000 authorized shares of AMD Serial
Preferred Stock, none are outstanding.
COMPARISON OF STOCKHOLDERS' RIGHTS
If the Merger is consummated, former holders of shares of NexGen Common
Stock will, at the Effective Time, own shares of AMD Common Stock. Since
NexGen and AMD both are incorporated under the laws of the State of Delaware,
the rights and privileges of stockholders of the two companies are identical,
except to the extent that their Certificates of Incorporation or Bylaws may
differ. The following discussion sets forth all material differences between
the rights of stockholders of NexGen and stockholders of AMD. This summary is
qualified in its entirety by reference to the full text of the respective
Certificates of Incorporation and Bylaws of AMD and NexGen.
102
<PAGE>
AUTHORIZED CAPITAL
AMD's authorized capital stock consists of 250,000,000 shares of AMD Common
Stock, par value $.01 per share, and 1,000,000 shares of AMD Serial Preferred
Stock, par value $.10 per share. For a description of the AMD capital stock,
see "Description of AMD Capital Stock."
NexGen's authorized capital stock consists of 125,000,000 shares of NexGen
Common Stock, and 5,000,000 shares of preferred stock, $0.0001 par value per
share (the "NexGen Preferred Stock").
ACTION TAKEN BY WRITTEN CONSENT OF STOCKHOLDERS
Section 228 of the DGCL provides that, unless otherwise provided in its
certificate of incorporation, any action required to (or which may) be taken
at any annual or special meeting of stockholders of a Delaware stock
corporation may be taken without notice and without a meeting if a consent or
consents in writing, signed by the holders of outstanding stock having not
less than the minimum votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted, is delivered to the corporation. Such power of its stockholders to
consent in writing to any action without notice or meeting is expressly denied
to the stockholders of NexGen by its Certificate of Incorporation. In
addition, the NexGen Certificate of Incorporation provides that this provision
of the Certificate of Incorporation may be amended or repealed only by vote of
two-thirds of the voting power of all of the then outstanding shares of NexGen
entitled to vote generally in the election of directors. The power to take
action without notice or meeting is not denied to stockholders of AMD by its
Certificate of Incorporation.
ADOPTION, AMENDMENT AND REPEAL OF BYLAWS
Section 109 of the DGCL provides that, after a corporation has received any
payment for its shares of stock, the power to adopt, amend or repeal bylaws
shall be in the stockholders entitled to vote, provided that the corporation
may, in its certificate of incorporation, confer such power also upon the
directors of the corporation. The NexGen Certificate of Incorporation
expressly empowers its Board of Directors to adopt, amend or repeal bylaws of
Nexgen, subject to the condition that any such adoption, amendment or repeal
shall require the approval of at least two-thirds of the total number of
authorized directors (whether or not there exist any vacancies). In addition,
the NexGen Certificate of Incorporation provides that the power of
stockholders of NexGen to adopt, amend or repeal bylaws shall be subject to
the condition that, in addition to any vote of the holders of any class or
series of stock required by law or by NexGen's Certificate of Incorporation,
any adoption, amendment or repeal of bylaws must be approved by vote of two-
thirds of the voting power of all of the then outstanding shares of NexGen
entitled to vote generally in the election of directors. Further, the NexGen
Certificate of Incorporation provides that this provision of the Certificate
of Incorporation may be amended or repealed only by vote of two-thirds of the
voting power of all of the then outstanding shares of NexGen entitled to vote
generally in the election of directors.
The Certificate of Incorporation of AMD also confers the power to adopt,
amend or repeal bylaws on AMD's directors, but does not impose any
supermajority requirement upon the power of AMD stockholders to adopt, amend
or repeal bylaws.
ACTIONS CHANGING THE POWERS, PREFERENCES AND RIGHTS OF STOCKHOLDERS
Section 242(b)(2) of the DGCL provides that the holders of the outstanding
shares of a class of stock shall be entitled to vote as a class upon any
amendment of the corporation's certificate of incorporation if the amendment
would increase or decrease the number of authorized shares of the class,
increase or decrease its par value, or adversely alter or affect the powers,
preferences or rights of the class. Section 242(b)(2) further provides,
however, that a corporation, in its original certificate of incorporation, or
in any amendment which creates any class of stock or which is adopted prior to
the issuance of any shares of such class, or in any amendment approved by the
affected class, may provide that the number of authorized shares of any such
class
103
<PAGE>
may be increased or decreased (but not below the number of shares of the class
then outstanding) by vote of a majority of the stock of the corporation
entitled to vote.
Pursuant to the authority granted by Section 242(b)(2), the NexGen
Certificate of Incorporation provides that the number of authorized shares of
common or preferred stock may be increased or decreased (but not below the
number of shares thereof then outstanding) by the affirmative vote of the
holders of a majority of the then outstanding shares of common stock, without
a vote of the holders of any affected class of preferred stock unless such
right is granted to such class in the resolutions of the Board of Directors
approving the issuance of such class, and that, if such right be granted,
except as otherwise provided in NexGen's Certificate of Incorporation, the
only stockholder approval required in such case shall be the affirmative vote
of a majority of the combined voting power of the common stock and the
preferred class so entitled.
The Certificate of Incorporation of AMD contains no provision which affects
the rights of stockholders as permitted by Section 242(b)(2).
WRITTEN BALLOTS IN THE ELECTION OF DIRECTORS
Section 211(e) of the DGCL provides that elections of directors must be by
written ballot unless otherwise provided by the certificate of incorporation.
NexGen's Certificate of Incorporation provides that election of directors need
not be by written ballot unless otherwise provided in the Bylaws of NexGen.
The Certificate of Incorporation of AMD does not permit the election of
directors otherwise than by written ballot.
NOMINATIONS TO THE BOARD OF DIRECTORS
Under the AMD Bylaws, notice of intention to make any nominations for
directors must be mailed or delivered by a nominating stockholder to the
Secretary of AMD not less than 90 days in advance of an annual meeting, or not
later than 10 days after the mailing of notice of a special meeting, called
for the purpose of electing directors. Such notice must be accompanied by the
written consent of the nominee.
The Bylaws of NexGen provide that such a notice must be delivered or mailed
to the Secretary or Assistant Secretary of NexGen not less than 120 days prior
to the date of the meeting (or, if less than 100 days' notice of the meeting
is given by NexGen, not later than the close of business on the seventh day
following the day on which the notice of meeting was mailed). The notice
requirements do not include obtaining the consent of the nominee.
CONDUCT OF BUSINESS AT ANNUAL MEETINGS
The Bylaws of both AMD and NexGen provide that only such business may be
conducted at an annual meeting as shall have been properly brought before the
meeting. With respect to business brought before an annual meeting by a
stockholder, the NexGen Bylaws specify that any such business is not properly
brought unless notice of intention to bring such matter before the meeting is
delivered or mailed to NexGen's executive offices not less than 50 nor more
than 75 days before the meeting, or, if less than 65 days' notice or prior
public disclosure of the date of the meeting is not given to stockholders, not
later than the close of business on the fifteenth day following the date of
such notice or disclosure. The NexGen Bylaws further declare that the chairman
of the meeting shall declare when any business is not properly brought by a
stockholder and that such business shall not be conducted. The AMD Bylaws
contain similar provisions as to what shall constitute proper business at an
annual meeting, except that the required notice must be given to the Secretary
of AMD not less than 90 days in advance of the date which is the first
anniversary of the previous year's annual meeting. In the event that the date
of the annual meeting is advanced by more than 30 days or delayed more than 60
days from such first anniversary, such notice must be delivered not later than
the 60th day prior to the annual meeting or the tenth day following the day on
which notice of the meeting is first given to stockholders.
104
<PAGE>
CALL OF SPECIAL MEETINGS OF STOCKHOLDERS
The Bylaws of NexGen provide that special meetings of stockholders may be
called by the Chairman, the President, or the Board of Directors. The Bylaws
of AMD provide that such meetings may be called by the Chairman, and shall be
called by the Chairman or the Secretary at the written request of a majority
of the Board of Directors.
TERM OF PROXIES
Under the AMD Bylaws, a valid proxy may not be voted at an AMD stockholders'
meeting after three years from its date unless the proxy specifies otherwise.
The NexGen Bylaws specify that the period for which a proxy may be voted,
unless the proxy specifies otherwise, is eleven months from the date of the
proxy.
APPOINTMENT OF INSPECTORS OF ELECTION
The NexGen Bylaws specify that one or three inspectors of election shall be
appointed by the presiding officer at a meeting of stockholders, that nominees
for election may not serve as inspectors of election at any meeting of
stockholders, and that, where a request for appointment of inspectors of
election is made by one or more stockholders, the decision whether one or
three inspectors shall be appointed shall be determined by a majority of
shares present in person or by proxy at the meeting. The AMD Bylaws authorize
no departures from the procedures otherwise specified by the DGCL, which
states that the corporation or person presiding at the meeting may appoint one
or more inspectors of election.
NUMBER OF DIRECTORS
Pursuant to its Bylaws, AMD's Board of Directors may consist of not less
than three nor more than eleven members, the exact number to be specified by
resolution of the Board or by the stockholders at the annual meeting. The
Bylaws of NexGen specify that the number of members of its Board of Directors
shall be one or more, and that such number shall be determined from time to
time by resolution of the Board.
EXPERTS
The consolidated financial statements of AMD at December 25, 1994 and
December 26, 1993 and for each of the three years in the period ended December
25, 1994, incorporated by reference in this Joint Proxy Statement/Prospectus,
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report incorporated herein by reference, and are included in reliance
upon such report given upon the authority of such firm as experts in
accounting and auditing.
The consolidated financial statements of NexGen at June 30, 1994 and 1995
and for each of the three years in the period ended June 30, 1995 included in
this Joint Proxy Statement/Prospectus have been so included in reliance on the
report of Price Waterhouse LLP ("Price Waterhouse"), independent accountants,
given on the authority of said firm as experts in auditing and accounting.
Effective May 25, 1994, Price Waterhouse was engaged as principal
independent accountants for NexGen. Ernst & Young LLP, dismissed effective May
25, 1994, had been the independent auditors of NexGen. The decision to change
independent auditors was approved by NexGen's Board of Directors. In
connection with the audit of the three-year period ended June 30, 1994, there
were no disagreements with Ernst & Young LLP on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedures, which disagreements if not resolved to Ernst & Young LLP's
satisfaction would have caused them to make reference to the matter in their
report. The audit reports of Ernst & Young LLP on the financial statements of
NexGen as of and for the year ended June 30, 1993 did not contain any adverse
opinion or disclaimer of opinion, nor were they qualified or modified as to
uncertainty, audit scope or accounting principles. During the fiscal year
ended June 30, 1994 and the nine months ended March 31, 1995, there have been
no reportable events. During the two most recent fiscal years prior to and
through June 30, 1994, NexGen had not consulted with Price Waterhouse on items
which involved either NexGen accounting principles or the form of audit
opinion or concerned the subject matter of a disagreement or reportable event
with the former auditor.
105
<PAGE>
ACCOUNTANTS' REPRESENTATIVES
Representatives of Ernst & Young LLP, AMD's independent auditors, and Price
Waterhouse, NexGen's independent accountants, are expected to be present at
the AMD Meeting and NexGen Meeting, respectively, and will have the
opportunity to make a statement if they desire to do so. Such representatives
are also expected to be available to respond to appropriate questions.
LEGAL MATTERS
The validity of the AMD Common Stock to be issued in connection with the
Merger will be passed upon for AMD by Bronson, Bronson & McKinnon, San
Francisco, California. Bronson, Bronson & McKinnon will also opine to AMD
under certain circumstances upon certain of the federal income tax
consequences in the Merger. See "The Merger--Certain Federal Income Tax
Consequences."
Pillsbury Madison & Sutro LLP, Menlo Park and San Francisco, California, is
acting as counsel for NexGen in connection with certain legal matters relating
to the Merger and the transactions contemplated thereby. Pillsbury Madison &
Sutro LLP will render an opinion to NexGen with respect to certain federal
income tax consequences of the Merger. See "The Merger--Certain Federal Income
Tax Consequences." A member of Pillsbury Madison & Sutro LLP participating in
the consideration of legal matters relating to the Merger and the transactions
contemplated thereby holds options to purchase 40,000 shares of NexGen Common
Stock. In addition, an investment partnership composed of certain current and
former members of Pillsbury Madison & Sutro LLP owns an aggregate of 7,500
shares of NexGen Common Stock.
PROPOSAL TO APPROVE AN AMENDMENT
TO
THE ADVANCED MICRO DEVICES, INC.
1991 STOCK PURCHASE PLAN
(TO BE VOTED UPON BY AMD STOCKHOLDERS)
In February 1991, the AMD Board of Directors adopted the 1991 Stock Purchase
Plan (the "AMD SPP") that authorized two million five-hundred thousand
(2,500,000) shares to be issued to employees. The AMD SPP was approved by AMD
stockholders at the 1991 annual meeting. As of December 4, 1995, there are
only 482,182 shares of AMD Common Stock remaining available for issuance under
the AMD SPP. At the AMD Meeting, the AMD stockholders are being asked to
approve an amendment to the AMD SPP to increase the number of shares
authorized to be issued thereunder to three million six hundred thousand
(3,600,000).
The essential features of the AMD SPP, as proposed to be amended, are
outlined below. The following description is qualified by reference to the AMD
SPP, as proposed to be amended, and attached hereto as Annex D.
SUMMARY DESCRIPTION OF THE AMD SPP AS AMENDED
Purpose. The purpose of the AMD SPP, which is intended to qualify under
Section 423 of the Internal Revenue Code, is to provide employees (including
officers) of AMD and participating subsidiaries with an opportunity to
purchase AMD Common Stock through payroll deductions. The AMD Board of
Directors believes that equity participation in the AMD SPP provides employees
at all levels with a greater incentive to contribute to the success of AMD.
Administration. The AMD SPP is administered by the Board of Directors of AMD
or a committee appointed by the AMD Board. Offerings under the AMD SPP have a
duration of three months and commence on the first business day on or after
February 1, May 1, August 1 and November 1 of each year, unless otherwise
specified by the AMD Board of Directors.
106
<PAGE>
Eligibility and Participation. Any employee who is customarily employed for
at least 20 hours per week and more than five months per calendar year by AMD
or its participating subsidiaries is eligible to participate in the AMD SPP.
Employees become participants in the AMD SPP by delivering to AMD a
subscription agreement within the specified period of time prior to the
commencement of each offering period.
No employee who owns 5% or more of the total combined voting power or value
of all classes of shares of stock of AMD or its subsidiaries (including shares
which may be purchased under the AMD SPP or pursuant to any other options) is
permitted to purchase shares under the AMD SPP. In addition, no employee is
entitled to purchase more than $25,000 worth of shares under the AMD SPP (in any
calendar year) based on the fair market value of the shares at the time the
option is granted.
AMD estimates as many as 6,676 of AMD's current employees are eligible to
participate in the AMD SPP. AMD is not presently able to determine the amount
of benefits which may be received by AMD employees under the AMD SPP.
Payroll Deductions. The purchase price of the shares is accumulated by
payroll deductions over each offering period. The deductions may not be
greater than ten percent (10%) of a participant's compensation, nor less than
a minimum established by the AMD Board or its delegate. Compensation, for
purposes of the AMD SPP, includes salary, shift differential, lead pay and
overtime, but excludes commissions, bonuses, special awards, income
attributable to option exercises, reimbursements and allowances. A participant
may increase or decrease his rate of payroll deductions once during each
offering period.
All payroll deductions of a participant are credited to his account under
the AMD SPP and are deposited with the general funds of AMD. Such funds may be
used for any corporate purpose. No charges for administrative or other costs
may be made by AMD against the payroll deductions.
Purchase Price. The price at which shares are sold under the AMD SPP is the
lower of 85% of the fair market value of the AMD Common Stock at the beginning
of the offering period, or 85% of the fair market value of the AMD Common
Stock as of the end of such period.
Number of Shares. As amended, the AMD SPP authorizes 3,600,000 shares of AMD
Common Stock for issuance thereunder, subject to stockholder approval. For
information concerning the market value of AMD Common Stock, see "Summary--
Market Price Data."
At the beginning of an offering period, each participant is granted an
option to purchase up to that number of shares equal to thirty percent (30%)
of the participant's eligible compensation for the preceding offering period
divided by 85% of the fair market value of a share of AMD Common Stock at the
beginning of the offering period. Unless the employee's participation is
discontinued, his option for the purchase of shares will be exercised
automatically at the end of the offering period at the applicable price. To
the extent an employee's payroll deductions exceed that amount required to
purchase the shares subject to option, such excess amount is refunded to the
employee at the end of the offering period. To the extent that an employee's
payroll deductions are insufficient to exercise the full number of shares
subject to option, the remaining portion of the option expires unexercised.
Withdrawal from the AMD SPP. A participant may terminate his or her interest
in a given offering by withdrawing all, but not less than all, of the
accumulated payroll deductions credited to such participant's account at any
time prior to the end of the offering period. The withdrawal of accumulated
payroll deductions automatically terminates the employee's interest in that
offering. As soon as practicable after such withdrawal, the payroll deductions
credited to a participant's account are returned to the participant without
interest.
A participant's withdrawal from an offering does not have any effect upon
such participant's eligibility to participate in subsequent offerings under
the AMD SPP. However, to the extent required by Commission Rule
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<PAGE>
16b-3, or its successor, a participant who is subject to Section 16 of the
Exchange Act, may not resume contributions under the AMD SPP for a period of
six months after discontinuing his or her contributions.
Termination of Employment. Termination of a participant's employment for any
reason, including retirement or death or the failure to remain in the
continuous employ of AMD for at least 20 hours per week (except for certain
leaves of absence), cancels his or her participation in the AMD SPP
immediately. In such event, the payroll deductions credited to the
participant's account will be returned to the participant, or in the case of
death, to the person or persons entitled thereto, without interest.
Changes in Capitalization. In the event of any stock dividend, stock split,
spin-off, recapitalization, merger, consolidation, exchange of shares or other
change in capitalization, the number of shares then subject to option and the
number of authorized shares remaining available to be sold shall be increased
or decreased appropriately, with such other adjustment as may be deemed
necessary or equitable by the AMD Board, including adjustments to the price
per share.
Transferability. No rights or accumulated payroll deductions of an employee
under the AMD SPP may be pledged, assigned or transferred for any reason and
any such attempt may be treated by AMD as an election to withdraw from the AMD
SPP.
Amendment and Termination of the Plan. The Board of Directors of AMD may at
any time amend or terminate the AMD SPP, except that such termination cannot
affect options previously granted nor may any amendment make any change in an
existing option which adversely affects the rights of any participant without
the participant's consent. No amendment may be made to the AMD SPP without
prior or subsequent stockholder approval, if stockholder approval would be
required to meet the requirements of Section 423 of the Code, to satisfy the
requirements of a stock exchange on which AMD shares are listed, or to meet
the requirements of Rule 16b-3 (or its successor) promulgated under the
Exchange Act.
FEDERAL INCOME TAX CONSEQUENCES
The AMD SPP, and the right of participants to make purchases thereunder, is
intended to qualify as an "employee stock purchase plan" under the provisions
of Section 423 of the Code. Under these provisions, no income will be taxable
to a participant at the time of grant of the option or purchase of shares. AMD
will be entitled to a deduction for amounts taxed as ordinary income to a
participant only to the extent that ordinary income must be reported upon
disposition of shares by the participant before the expiration of the holding
period described below. A participant may become liable for tax upon
disposition of the shares acquired, as summarized below.
1. If the shares are sold or disposed of (including by way of gift) at least
two years after the date of the beginning of the offering period the
participant will recognize ordinary income in an amount equal to the lesser of
(a) the excess of the value of the shares at the time of such disposition over
the purchase price of the shares or (b) 15% of the value of the shares at the
beginning of the offering period. Any further gain upon such disposition will
be treated as long-term capital gain. If the sales price is less than the
purchase price, there is no ordinary income and the participant has a capital
loss for the difference.
2. If the shares are sold or disposed of (including by way of gift or by
exchange in connection with the exercise of an incentive stock option) before
the expiration of the two-year holding period described above, the excess of
the value of the shares on the date of purchase over the purchase price will
be treated as ordinary income to the participant. This amount will constitute
ordinary income in the year of sale or other disposition even if no gain is
realized on the sale or other disposition. A capital loss will be recognized
if the sales price is lower than the value of the shares on the date of
purchase but any such loss will not affect the ordinary income recognized upon
the disposition.
The Board of Directors of AMD unanimously recommends a vote FOR approval of
the amendment to the AMD SPP.
108
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS OF AMD
The following table shows for the three fiscal years ended December 25,
1994, the compensation paid by AMD and its subsidiaries to AMD's Chief
Executive Officer, to the four other most highly paid executive officers whose
aggregate salary and bonus compensation exceeded $100,000, and to a former
executive officer, Mr. Holbrook, who would have been included in the group of
the four most highly paid executive officers if he had remained an executive
through year-end.
SUMMARY COMPENSATION TABLE (1992-1994)
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
----------------------------------------------------- ------------------------------
(A) (B) (C) (D) (E) (F) (G) (I)
SECURITIES
NAME AND OTHER ANNUAL RESTRICTED UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS(/1/) COMPENSATION STOCK AWARDS(/2/) OPTIONS/SARS COMPENSATION(/3/)
- ------------------ ---- -------- ---------- ------------ ----------------- ------------ -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
W. J. Sanders III. 1994 $952,225 $3,573,261(/4/) $315,578(/5/) $1,597,200 200,000 $51,648
Chairman and 1993 $929,000 $2,141,618(/6/) $141,000(/7/) $ 0 0 $40,926
Chief 1992 $874,999 $1,934,988(/8/) $150,929(/9/) $ 0 0 $24,872
Executive Officer
Richard Previte... 1994 $606,250 $1,801,952(/1//0/) $ 0 $3,194,000 152,500 $46,592
President and 1993 $543,125 $1,073,888 $ 0 $ 0 25,000 $33,796
Chief 1992 $510,625 $ 981,842 $ 0 $ 0 0 $24,872
Operating Officer
Anthony B.
Holbrook(/1//1/). 1994 $370,633(/1//2/) $ 908,190 $ 0 $ 0 65,000 $41,196
Vice Chairman 1993 $440,937 $ 547,834 $ 0 $ 0 12,500 $32,432
1992 $425,000 $ 504,310 $ 0 $ 0 0 $23,576
Stephen J.
Zelencik......... 1994 $364,022 $ 599,069 $ 0 $ 0 72,125 $41,467
Sr. Vice 1993 $334,593 $ 326,252 $ 0 $ 0 12,500 $31,882
President and 1992 $316,875 $ 315,440 $ 0 $ 0 0 $24,872
Chief Marketing
Executive
Marvin D. Burkett. 1994 $348,750 $ 513,379 $ 0 $ 0 75,000 $40,443
Senior Vice 1993 $310,499 $ 271,935 $ 0 $ 0 12,500 $30,657
President 1992 $292,749 $ 261,362 $ 0 $ 0 0 $23,576
Chief Financial
and
Administrative
Officer and
Treasurer
Eugene D. Conner.. 1994 $342,000 $ 499,425 $ 0 $ 0 75,000 $38,542
Sr. Vice 1993 $313,501 $ 287,401 $ 0 $ 0 12,500 $28,824
President, 1992 $285,052 $ 263,213 $ 0 $ 0 94,300 $22,664
Operations
</TABLE>
- --------
(1) For the named persons, includes cash profit sharing in the following
amounts for Messrs. Sanders, Previte, Holbrook, Zelencik, Burkett and
Conner, respectively: for 1994, $90,711, $60,677, $37,552, $36,445,
$34,903 and $34,240; for 1993, $60,200, $34,879, $28,319, $21,489, $19,935
and $20,128; for 1992, $60,012, $37,328, $32,053, $25,190, $23,762 and
$23,213.
(2) The dollar value of the restricted stock appearing in the table is based
on the closing sales price of AMD Common Stock on August 5, 1994 ($26.63),
the date of the award. The total number of restricted shares held, and
their aggregate value, at December 25, 1994, were as follows: for Mr.
Sanders, 180,000 shares valued at $4,118,400; for Mr. Previte, 120,000
shares valued at $2,745,600; and for the four other persons listed on the
table, none. The value is based on the closing sales price of AMD Common
Stock on December 23, 1994 ($22.88), and does not reflect the diminution
in value resulting from the restrictions placed on such shares. Mr.
Sanders and Mr. Previte have voting and dividend rights with respect to
the restricted shares. Of the 180,000 restricted shares held by Mr.
Sanders at year-end, 60,000 shares vested in January 1995, 60,000 shares
are scheduled to vest in January 1996, and the remaining 60,000 restricted
shares will vest, if at all, upon achievement of targeted average
quarterly stock prices beginning in the last quarter of 1996. If the
applicable target for the last quarter of 1998 is not met, Mr. Sanders
will forfeit the 60,000 shares of performance based restricted stock
awarded in 1994. The restricted shares awarded to Mr. Previte will also
vest, if at all, upon achievement of targeted average quarterly stock
prices at a rate of 30,000 shares per year beginning with the first
quarter of 1995 and ending with the last quarter of 1998. As the targeted
average quarterly stock price for the first quarter of 1995 has been
achieved, 30,000 restricted shares have vested. If the target for the last
quarter of 1998 is not met, Mr. Previte will forfeit any restricted shares
then remaining. The quarterly stock price targets which must be met before
the restrictions on the restricted stock awarded to Messrs. Sanders and
Previte will be lifted were determined with the assistance of an
independent compensation consultant and were approved by the Committee.
The quarterly stock price targets were calculated to reflect a 15%
increase compounded annually in the price of
109
<PAGE>
AMD's Common Stock which equals or exceeds the historical performance of
the S&P 500 Index. Vesting of 60,000 restricted shares held by Mr. Sanders
which are scheduled to vest in January 1996 (and which are not performance
based), is subject to acceleration upon his termination of employment under
the terms of his employment agreement. Vesting of all of Mr. Sanders'
restricted shares is subject to acceleration under the terms of his
management continuity agreement upon a change in control of AMD. Vesting of
Mr. Previte's restricted shares is also subject to acceleration under the
terms of his management continuity agreement upon termination of his
employment with AMD following a change in control of AMD. In addition,
vesting of all restricted stock held by Messrs. Sanders and Previte is
subject to acceleration if more than 50% of the outstanding equity or
assets of AMD are acquired by another corporation pursuant to merger, sale
of substantially all the assets, tender offer or other business
combination, other than a transaction in which the stockholders of AMD
prior to the transaction retain a majority interest in the surviving
corporation.
(3) Includes, for the most recent fiscal year and for each of the named
persons, AMD's contributions to AMD's tax-qualified profit sharing plan
in the amount of $17,223, AMD's matching contributions to AMD's 401(k)
Plan in the amount of $3,538, and on behalf of Messrs. Sanders, Previte,
Holbrook, Zelencik, Burkett and Conner, AMD's contributions to the Excess
415 Plan (nonqualified deferred compensation) in the amounts of $16,571,
$16,571, $16,571, $16,571, $16,537 and $16,571, respectively, AMD's
matching contributions to the Executive Savings Plan in the amounts of
$10,068, $4,940, $2,022, $1,560, $1,694, and 0, respectively, and the
amount of premiums paid by AMD for term life insurance in the amounts of
$4,248, $4,320, $1,842, $2,575, $1,452 and $1,210, respectively.
AMD has purchased individual insurance policies for Messrs. Sanders,
Previte, Holbrook, Zelencik, Burkett and Conner. AMD has agreed to continue
to pay premiums on each policy for each year in an amount sufficient to
maintain a death benefit of at least three times the executive officer's
base salary, subject to a limit of $2,000,000, plus, for each year in which
the executive officer defers compensation under the Executive Savings Plan
(the "Plan"), an amount equal to such deferrals. The executive officer will
become entitled to fully exercise his ownership rights in the policy free
of the security interest in the policy granted to AMD only if he continues
employment with AMD until the date set forth in the agreement, becomes
totally disabled, is terminated without cause or terminates employment
following a change in control under certain conditions, or if AMD fails to
pay the required premiums on the policy. If an executive officer's rights
in his policy become unencumbered, his benefits under the Plan will be
reduced by an amount equal to the cash surrender value of the policy. If
the executive officer terminates employment before his rights in the policy
become unencumbered, AMD will be entitled to receive an amount equal to the
cash surrender value of the policy. If the executive officer dies while
employed by AMD and before his rights in the policy become unencumbered,
the executive officer's beneficiary will be entitled to receive a portion
of the policy's death benefit equal to three times the executive officer's
base salary, subject to a limit of $2,000,000. The value of the premium
attributable to this term insurance provided under each policy has been
included in the amounts described above.
The cash surrender value of the life insurance policies of Messrs. Sanders,
Previte, Holbrook, Zelencik and Burkett exceeded the balance of the
deferred compensation and interest credited to their accounts under the
Plan by a maximum of approximately $20,553, $12,823, $12,231, $7,892 and
$6,974, respectively, during 1994. Thus, if the rights of Messrs. Sanders,
Previte, Holbrook, Zelencik and Burkett in their life insurance policies
had become unencumbered in 1994, they would have received benefits which
would have exceeded their benefits payable under the Plan by the foregoing
amounts. Mr. Conner did not participate in the Plan for 1994. For more
information concerning the Plan and life insurance arrangements for the
named executive officers, please see the respective discussions under the
section entitled "--Compensation Agreements."
(4) A maximum amount of $1,904,450 was paid out with respect to fiscal year
1994, with a balance of $1,578,100 carried over for payment with respect
to fiscal year 1995, 1996 or 1997 (if Mr. Sanders extends his employment
agreement to December 31, 1997).
(5) Includes $93,206 of in-kind compensation in the form of the use of
company-provided vehicles and drivers, $181,556, the cost to AMD of
providing physical security services, and cash payments for tax gross-ups
in the amount of $39,416.
(6) A maximum amount of $1,854,837 was paid out with respect to fiscal year
1993, with a balance of $226,580 carried over for payment with respect to
fiscal year 1994, 1995 or 1996.
(7) Includes $94,937 of in-kind compensation in the form of the use of
company-provided vehicles and drivers, and cash payments for tax gross-
ups in the amount $38,663.
(8) A maximum amount of $1,800,000 was paid out for fiscal year 1992, and the
balance of $74,976 was carried over for payment with respect to fiscal
year 1993, 1994 or 1995.
(9) Includes $94,932 of in-kind compensation, in the form of the use of
company-provided vehicles and drivers, and cash payments for tax gross-
ups in the amount $48,497.
(10) A maximum amount of $1,250,000 was paid out with respect to fiscal year
1994, with a balance of $491,275 carried over for payment with respect to
fiscal year 1995, 1996 or 1997.
(11) Mr. Holbrook resigned his position as Chief Technical Officer of AMD
effective August 27, 1994, although he will remain a part-time employee
through November 30, 1995. He continues to serve as Vice Chairman of the
Board.
(12) Includes $47,532 paid under the terms of an agreement with AMD pursuant
to which Mr. Holbrook has continued to render services to AMD. See the
discussion under the section entitled "--Compensation Agreements--Other
Agreements."
110
<PAGE>
OPTION/SAR GRANTS IN THE LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE APPRECIATION
FOR OPTION TERM
-------------------------
(A) (B) (C) (D) (E) (F) (G)
% OF TOTAL
NUMBER OF SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO
OPTIONS/SARS EMPLOYEES IN EXERCISE PRICE EXPIRATION
NAME GRANTED(/1/) FISCAL YEAR PER SHARE DATE 0% 5% 10%
---- -------------------- ------------ -------------- ---------- --- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
W. J. Sanders III....... 200,000 7.17% $26.88 4/27/04 $0 $3,380,938 $8,567,959
Richard Previte......... 152,500 5.47% $26.88 4/27/04 $0 $2,577,965 $6,533,069
Anthony B. Holbrook..... 65,000 2.33% $26.88 4/27/04 $0 $1,098,805 $2,784,587
Stephen J. Zelencik..... 72,125 2.59% $26.88 4/27/04 $0 $1,219,251 $3,089,820
Marvin D. Burkett....... 75,000 2.69% $26.88 4/27/04 $0 $1,267,852 $3,212,985
Eugene D. Conner........ 75,000 2.69% $26.88 4/27/04 $0 $1,267,852 $3,212,985
</TABLE>
- --------
(1) Each option has a ten year term. Each option is subject to earlier
termination upon the optionee's termination of employment, death or
disability as provided in the 1992 Stock Incentive Plan and the optionee's
option agreement, except that Mr. Sanders' options will remain exercisable
for the remainder of the ten year term, as provided in his employment
agreement. The exercise price may be paid in cash or in shares.
Withholding taxes due on exercise may be paid in cash, with previously
owned shares, or by having shares withheld. Except for the options granted
to Mr. Sanders, all options become cumulatively exercisable in three
approximately equal installments on July 25, 1995, July 15, 1996, and July
15, 1997. Mr. Sanders' options become exercisable in a single increment on
January 15, 1997. Upon an optionees' termination of employment, death or
disability, options may be exercised only to the extent exercisable on the
date of such termination of employment, death or disability, except that
upon termination of Mr. Sanders' employment in the circumstances described
in his employment agreement his options become fully exercisable. However,
if termination of Mr. Sanders' employment is due to his death or
disability, only his options which would have become exercisable in the
two year period following such termination will become exercisable as of
the date of such termination, as provided in his employment agreement.
Options may also become fully exercisable upon a change in control of AMD
or in accordance with an optionee's management continuity agreement. See
the discussion under "--Compensation Agreements" and "--Change in Control
Arrangements." No stock appreciation rights ("SARs") were granted to the
executive officers listed in the table during 1994.
AGGREGATED OPTION/SAR EXERCISES IN THE LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
(A) (B) (C) (D) (E)
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
NUMBER OF OPTIONS/SARS AT 12/25/94 OPTIONS/SARS AT 12/25/94(/1/)
SHARES ----------------------------- -----------------------------
ACQUIRED ON VALUE
NAME EXERCISE REALIZED(/1/) (EXERCISABLE) (UNEXERCISABLE) (EXERCISABLE) (UNEXERCISABLE)
---- ----------- ------------- ------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
W. J. Sanders III....... 200,496 $4,176,054 600,000 600,000 $10,075,000 $3,950,000
Richard Previte......... 0 $ 0 234,300 200,000 $ 2,148,326 $ 222,188
Anthony B. Holbrook..... 100,000 $2,232,189 322,862 100,000 $ 5,392,293 $ 222,188
Stephen J. Zelencik..... 61,500 $1,187,719 73,125 100,000 $ 584,634 $ 151,828
Marvin D. Burkett....... 0 $ 0 223,784 100,000 $ 3,056,193 $ 123,438
Eugene D. Conner........ 0 $ 0 259,264 100,000 $ 3,717,008 $ 123,438
</TABLE>
- --------
(1) Value for these purposes is based solely on the difference between market
value of underlying shares on the applicable date (i.e. date of exercise
or fiscal year-end) and the exercise price of ("In-the-Money")
options/SARs.
COMPENSATION AGREEMENTS
Chairman's Employment Agreement. AMD has an employment agreement with Mr.
Sanders, the term of which commenced July 1, 1991, and continues until
December 31, 1996, unless terminated prior to that time by a majority vote of
the full Board of Directors. Mr. Sanders may extend the term of the employment
agreement for an additional one-year period upon written notice to AMD given
no later than October 15, 1996. Mr. Sanders'
111
<PAGE>
annual base compensation is currently $978,887. This amount may be increased
(but not reduced) by the Board of Directors or its delegate. In accordance
with Mr. Sanders' contract, his 1994 base salary of $952,225 was increased to
$978,887. This 2.8% increase was equal to the cost of living increase as
permitted by proposed regulations under Section 162(m) of the Code. Additional
incentive compensation is payable in the form of an annual incentive bonus
equal to 0.6% of the adjusted operating profits of AMD. However, such annual
bonus may not be greater than 200% of his annual base salary. The amount of
the annual incentive bonus which exceeds the maximum bonus payable in a
particular year (the "Excess Bonus"), if any, shall be added to the bonus
determined for any of the next three fiscal years (or such shorter number of
fiscal years then remaining in the term), provided that the addition of the
Excess Bonus does not cause the bonus otherwise payable to exceed the maximum
incentive bonus payable in that year. If the Excess Bonus is not paid within
such period it will not be paid in any subsequent year. "Adjusted operating
profits" are deemed for these purposes to constitute AMD's operating income as
reported on AMD's financial statements, increased by any expenses accrued for
profit sharing plan contributions, bonuses under AMD's Executive Bonus Plan,
the bonuses to AMD's Chief Operating Officer and Chief Technical Officer, and
the bonus payable to Mr. Sanders. Mr. Sanders may also receive a discretionary
bonus, not subject to the 200% of base salary limitation, in an amount (if
any) fixed by the Board, based on the Board's assessment of his performance
during the period for which the bonus is payable.
Under the employment agreement, AMD is obligated to guarantee the repayment
of any loan obtained by Mr. Sanders for the purpose of exercising options or
warrants to purchase stock of AMD, and to pay the interest on any such loan.
AMD's obligation to guarantee such loans and pay interest thereon continues
for a period of 13 months following the date of the event that causes Mr.
Sanders to incur tax liability by virtue of having exercised options or
warrants to purchase stock of AMD. The amount of any such guarantee and the
amount on which interest will be paid is limited to the exercise price of the
options and warrants plus taxes paid by Mr. Sanders from exercise through such
13-month period by reason of the exercise. AMD may also limit such guarantee
obligations in order to comply with state and federal law or to comply with
financial covenants imposed by AMD's lenders. Mr. Sanders is also entitled to
receive certain benefits upon his disability (as that term is defined in the
employment agreement) and upon his death while employed by AMD. Mr. Sanders is
also entitled to receive such other benefits of employment with AMD as are
generally available to members of AMD's management.
If AMD terminates Mr. Sanders' employment (for reasons other than theft,
misappropriation or conversion of corporate funds) or constructively
terminates Mr. Sanders which includes re-assigning him to lesser duties,
reducing or limiting his compensation or benefits, removing him from his
responsibilities other than for good cause, requiring him to relocate or
transfer his principal place of residence, or not electing or retaining him as
Chairman and Chief Executive Officer and a Director of AMD, AMD is
nevertheless obligated to pay Mr. Sanders his annual base salary (at the
annual rate in effect as of the date of the event triggering the payment) for
the unexpired balance of the term of the agreement, but no less than one full
year's base salary at such rate. In such circumstances, AMD would also be
obligated to pay Mr. Sanders the incentive compensation to which he would have
been entitled for the fiscal year during which such termination or other event
takes place and for the following fiscal year, plus the amount of any Excess
Bonus then remaining unpaid. In addition, under such circumstances, any
options which Mr. Sanders holds on stock of AMD will become fully exercisable
for the remainder of the ten year term, and the restrictions on any shares of
restricted stock of AMD which Mr. Sanders may then hold will lapse. This
accelerated vesting provision does not apply to the performance based
restricted stock awarded in 1994. Mr. Sanders will also be entitled to receive
all benefits due him under AMD's tax-qualified employee benefit plans and any
supplementary plans as well as the unvested company contributions. He will
also have the right to be paid his legal fees for contesting any portion of
the employment agreement including termination or in connection with any tax
audit seeking to assess an excise tax on the payments under the agreement. Mr.
Sanders will also be entitled to receive, for five years following termination
or such other event, health and welfare benefits comparable to those he was
receiving, reimbursements for all income taxes due on the receipt of such
benefits, the use of an AMD-owned automobile, up to $25,000 each year for
expenses incurred for estate, tax and financial planning, and an office and
secretarial services equivalent to those provided Mr. Sanders while he was
Chairman and Chief Executive Officer. For at least six years following
termination or
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such other event, Mr. Sanders will be indemnified by AMD to the same extent as
prior thereto and be provided with director's and officer's fiduciary and
professional liability insurance equivalent to the insurance carried by AMD
while he was Chairman and Chief Executive Officer. Mr. Sanders is also
entitled to receive an amount from AMD necessary to reimburse Mr. Sanders for
any federal excise tax imposed on Mr. Sanders by reason of his receipt of
payments under his employment agreement or otherwise, so that he will be
placed in the same after-tax position as he would have been in had no such tax
been imposed.
If Mr. Sanders' employment is terminated by AMD for good cause, as defined
in the employment agreement, or cause as defined in the California Labor Code
(other than as a result of certain actions by AMD), or Mr. Sanders voluntarily
terminates his employment, AMD has the right to retain Mr. Sanders as a
consultant for 12 months thereafter, but in no event beyond the unexpired
balance of the term of his employment agreement, at a rate of compensation
equal to that then in effect pursuant to the employment agreement. While so
retained, Mr. Sanders is prohibited from being associated with any competitive
business. If AMD does not exercise this right, Mr. Sanders' right to
compensation ceases upon his resignation or termination as described above.
If Mr. Sanders' employment is terminated by reason of his disability or
death, he or his estate is entitled to his full base salary under the
agreement for the unexpired balance of its term, plus the incentive
compensation for the fiscal year in which such termination occurred and for
the following fiscal year, plus the amount of any Excess Bonus then remaining
unpaid. In addition, the restrictions on any restricted stock of AMD which
Mr. Sanders holds will lapse. This accelerated vesting provision does not
apply to the performance based restricted stock awarded in 1994. In addition,
any options Mr. Sanders holds to purchase AMD's stock which would have become
vested within two years from the date of termination will become fully vested
for the remainder of the ten year term. In the event of Mr. Sanders' death,
AMD must pay to his designated representative, his personal representative or
his estate as a death benefit, compensation for a period of 12 months after
his death at the same monthly rate of compensation which prevailed during the
month of his death. In addition, his beneficiaries will be entitled to receive
that portion of the death benefit payable under a $1,000,000 face amount
policy which exceeds the aggregate premiums paid by AMD on that policy.
Further, if his death occurs before his rights in the policy described in
footnote 3 to the Summary Compensation Table become unencumbered, his
beneficiaries will be entitled to the death benefit described in that
footnote.
Bonus Agreements. In 1992, AMD entered into separate bonus agreements with
Mr. Previte and Mr. Holbrook. Under the terms of the agreements, Mr. Previte
receives 0.3% of adjusted operating profits of AMD and Mr. Holbrook receives
0.15% of adjusted operating profits up to an annual maximum and carryover
amount similar to that under Mr. Sanders' employment agreement. "Adjusted
operating profits" are treated in the same manner as under Mr. Sanders'
employment agreement.
Deferred Compensation Elections. Messrs. Sanders, Previte, Holbrook,
Zelencik, Burkett and Conner have filed elections to defer compensation under
the Advanced Micro Devices, Inc. Executive Savings Plan (the "Plan"). The Plan
is an unfunded, nonqualified plan of deferred compensation. Under the Plan, a
participant may elect to defer up to 50% of salary and 100% of any bonus. AMD
has established bookkeeping accounts to record the amounts of deferrals under
the Plan, plus any gains or losses, as described below. In addition, AMD
"matches" the salary deferrals by crediting each participant's account with an
amount equal to 50% of the salary deferred by that participant, such "matching
contribution' not to exceed 1.5% of the executive's salary in excess of the
maximum recognizable compensation allowed under Section 401(a)(17) of the
Code. While a participant is employed by AMD, he may select one or more types
of mutual funds in which his deferred compensation will be deemed to be
invested. AMD selects the actual commercially available mutual funds to be
used in determining the amount of earnings or losses to be credited to a
participant's account. The amounts credited to a participant's accounts are
paid following termination of his employment in either a lump sum or
substantially equal annual installments over three to ten years. The amount of
benefits payable under the Plan will be offset by the cash surrender value of
the life insurance policies referred to below if the participant's ownership
rights in the policy become unencumbered as a result of the occurrence of one
of the events outlined in footnote 3 to the Summary Compensation Table.
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Life Insurance Agreements. As described more fully in footnote 3 to the
Summary Compensation Table, AMD has purchased individual life insurance
policies for Messrs. Sanders, Previte, Holbrook, Zelencik, Burkett and Conner,
and has agreed to make certain premium payments on such policies. Each
executive will be entitled to exercise his ownership rights in the policy free
of the security interest granted to AMD upon the occurrence of one of the
events described in the footnote. If an executive's rights in his policy
become unencumbered, his benefits under the Advanced Micro Devices, Inc.
Executive Savings Plan will be reduced by an amount equal to the cash
surrender value of the policy. If the executive terminates employment before
his rights in the policy become unencumbered, AMD will be entitled to receive
an amount equal to the cash surrender value of the policy. If the executive
dies while employed by AMD and before his rights in the policy become
unencumbered, his beneficiary will be entitled to receive the portion of the
policy's death benefit equal to three times the executive's salary, subject to
a limitation of $2,000,000.
Other Agreements. Effective on August 27, 1994, Mr. Holbrook resigned from
his position as Chief Technical Officer of AMD, a position he held since 1990.
He continues to serve as Vice Chairman of the Board of Directors. AMD and Mr.
Holbrook entered into an agreement pursuant to which Mr. Holbrook agreed to
become a part-time employee of AMD, devoting up to thirty-five hours per month
to advise AMD with respect to various matters, through July 31, 1995. This
agreement was extended to expire on April 25, 1996. Mr. Holbrook is
compensated at the bi-weekly rate of $5,592. Mr. Holbrook's stock options
continue to vest as a part-time employee and he remains eligible to receive
his annual bonus as described above. He continues to be eligible to
participate in certain of AMD's employee benefit plans including the profit
sharing and 401(k) plans.
CHANGE IN CONTROL ARRANGEMENTS
Management Continuity Agreements. AMD has entered into management continuity
agreements with each of its executive officers named in the Summary
Compensation Table, designed to ensure their continued services in the event
of a Change in Control. Except for Mr. Sanders' management continuity
agreement, all the agreements provide that benefits are payable only if the
executive officer's employment is terminated by AMD (including a constructive
discharge) within two years following a Change in Control. For purposes of the
agreements, a Change in Control includes any change of a nature which would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A promulgated under the Exchange Act. A Change in Control is conclusively
presumed to have occurred on (1) acquisition by any person (other than AMD or
any employee benefit plan of AMD) of beneficial ownership of more than 20% of
the combined voting power of AMD's then outstanding securities; (2) a change
of the majority of AMD's Board of Directors during any two consecutive years,
unless certain conditions of Board approval are met; or (3) certain members of
the Board determine within one year after an event that such event constitutes
a Change in Control.
All of the management continuity agreements provide that, in the event of a
Change in Control, AMD will reimburse each executive officer who has signed a
management continuity agreement for any federal excise tax payable as a result
of benefits received from AMD. Other than Mr. Sanders' agreement, the
agreements provide that, if within two years after the Change in Control the
executive officer's employment is terminated by AMD or the executive officer
is constructively discharged, the executive officer will receive: (1) a
severance benefit equal to three times the sum of his rate of base
compensation plus the average of his two highest bonuses in the last five
years; (2) payment of his accrued bonus; (3) twelve months' continuation of
other incidental benefits; and (4) full and immediate vesting of all unvested
stock options, stock appreciation rights and restricted stock awards.
Mr. Sanders' management continuity agreement provides that not more than ten
business days after a Change in Control, he is entitled to receive an amount
equal to three times his annual base compensation plus the average of his two
highest bonuses in the last five years, whether or not his employment by AMD
is terminated. In addition, all stock options and stock appreciation rights
that Mr. Sanders holds will become fully vested on the occurrence of a Change
in Control and the restrictions on any shares of restricted stock of AMD which
he may hold will lapse as of such date. The deductibility limitation of $1
million for certain executive
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compensation under (S)162(m) must be reduced by payments which are considered
"excess parachute payments" under (S)280G of the Code. Some of the payments
made under the management continuity agreements may be considered "excess
parachute payments" and, if so characterized, could increase the portion of
the compensation paid to the affected executive which AMD could not deduct.
Vesting of Stock Options, Limited Stock Appreciation Rights and Restricted
Stock. All options and associated limited stock appreciation rights ("LSARs")
granted to officers of AMD shall become exercisable upon the occurrence of any
change in the beneficial ownership of any quantity of shares of Common Stock
of AMD (where the purpose for the acquisition of such beneficial ownership is
other than passive investment), that would effect a "change in control" of AMD
of a nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A promulgated under the Exchange Act, other than
a change that has been approved in advance by AMD's Board of Directors. A
change in control shall be conclusively deemed to have occurred if any person
(other than AMD, any employee benefit plan, trustee or custodian therefor) is
or becomes the beneficial owner, directly or indirectly, of securities of AMD
representing more than 50% of the combined voting power of AMD's then
outstanding securities. Under AMD's 1980 and 1986 stock appreciation rights
plans, outstanding LSARs may be exercised for cash during a thirty day period
following the expiration date of any tender or exchange offer for AMD's Common
Stock (other than one made by AMD); provided the offeror acquires shares
pursuant to its offer and owns thereafter more than 25% of the outstanding AMD
Common Stock. In addition, all options granted under the 1982 and 1986 stock
option plans and the 1992 Stock Incentive Plan become fully vested on
termination of employment within one year following a change in control as
defined in that plan.
Restricted stock awarded under the 1987 Restricted Stock Award Plan, if
provided for in the individual restricted stock award agreement, will be
subject to accelerated vesting in connection with a change in control of AMD
as defined in the particular agreement. Messrs. Sanders' and Previte's
restricted stock award agreements provide that their restricted stock will
vest if more than 50% of the outstanding equity or assets of AMD are acquired
by another corporation pursuant to merger, sale of substantially all the
assets, tender offer or other business combination, other than a transaction
in which the stockholders of AMD prior to the transaction retain a majority
interest in the surviving corporation. Further, as described above, stock
options, stock appreciation rights and restricted stock held by executive
officers who have entered into management continuity agreements with AMD will
vest in accordance with the terms of such agreements in connection with a
change of control of AMD as defined in such agreements.
Life Insurance Agreements. The life insurance agreements described in
footnote 3 to the Summary Compensation Table provide that Messrs. Sanders,
Previte, Holbrook, Zelencik, Burkett and Conner will become entitled to fully
exercise their rights in their life insurance policies free of the security
interest granted to AMD if they are terminated without cause at any time or if
they are constructively discharged within six months prior to or thirty-six
months following a "change in control" of AMD. For this purpose, "change in
control" has the same meaning as defined under the management continuity
agreements described above. However, if an executive's rights in his policy
become unencumbered under these circumstances, his benefits under the Advanced
Micro Devices, Inc. Executive Savings Plan will be reduced by an amount equal
to the cash surrendered value of the policy.
DIRECTORS' FEES AND EXPENSES
Directors who are not employees of AMD individually receive an annual fee of
$20,000, a fee of $1,000 for attendance at each regular or special
nontelephonic meeting of the Board, and a fee of $500 for attendance at each
nontelephonic meeting of each committee (other than the Nominating Committee)
on which they serve. In addition, the Chairman of the Audit Committee receives
an annual fee of $20,000 for services in that capacity, and the Chairman of
the Compensation Committee receives an annual fee of $4,000 for services in
that capacity. No additional amounts are paid for special assignments. AMD
also reimburses reasonable out-of-pocket expenses incurred by directors
performing services for AMD, including travel expenses of their spouses.
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Pursuant to a nondiscretionary formula set forth in the 1992 Stock Incentive
Plan, non-employee directors also receive stock options covering 12,000 shares
on their initial election to AMD's Board (the "First Option"), and
automatically receive supplemental options covering 3,000 shares on each
subsequent reelection (the "Annual Option"). The First Option vests in
increments of 4,800, 3,600, 2,400 and 1,200 on July 15 of the first, second,
third and fourth calendar years following election. Each Annual Option vests
in increments of 1,000 shares each on July 15 of the second, third and fourth
calendar years following reelection. Each such option is granted with an
exercise price at fair market value on the date of grant. These options expire
on the earlier of ten years from the grant date or twelve months following
termination of the director's service on the Board.
Any non-employee director may elect to defer receipt of all or a portion of
his annual fees and meeting fees, but not less than $5,000. Deferred amounts
plus interest are credited to an account for recordkeeping purposes and are
payable in a lump sum cash payment or in installments over a period of years,
as elected by the director. Except in the case of the director's death or
disability, payments commence upon the latest of the director's tenth
anniversary of his first deferral, age 55, or upon retirement from AMD's
Board, but in no event later than age 70. The aggregate amount of retirement
payments equals the director's deferred fees plus the accumulation of
interest. In the event of the director's death, his beneficiary will receive
the value of his account plus, in certain cases, a supplemental death benefit
of up to ten times the average annual amount of his deferred fees. During
1994, Dr. Brown deferred fees in the amount of $20,000 pursuant to this
program. In addition, Dr. Brown received the use of an automobile provided by
AMD, a value taxable to him at $19,069 in lieu of his annual fee for acting as
Chairman of the Audit Committee.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Compensation Committee of AMD's Board of
Directors are Mr. Charles M. Blalack, Dr. R. Gene Brown, and Mr. Joe L. Roby.
Mr. Sanders is the sole member of the Employee Stock Committee, which grants
stock options and awards restricted stock to employees who are not also
officers. Mr. Sanders has the authority to act alone in making determinations
concerning the compensation of executives other than himself, but often makes
such determinations in consultation with the Compensation Committee.
Mr. Roby has recently been appointed as the Chief Operating Officer of
Donaldson, Lufkin & Jenrette, Inc., the parent company of DLJ. Mr. Roby is
also a director of the parent company. Over the past twenty years, DLJ has
provided investment banking services to AMD. In exchange for the payment of a
fee, DLJ acted as a standby purchaser in connection with AMD's call for
redemption on March 13, 1995, of AMD's Depositary Convertible Exchangeable
Preferred Shares. DLJ also has acted as AMD's financial advisor in connection
with the Merger for which DLJ will receive fees as described in the section
entitled "The Merger--Opinions of Financial Advisors."
Mr. Sanders, the Chief Executive Officer of AMD, is also a director of
Donaldson, Lufkin & Jenrette, Inc.
PROPOSAL TO APPROVE AN AMENDMENT TO
THE 1995 STOCK PLAN OF NEXGEN, INC.
(TO BE VOTED UPON BY NEXGEN STOCKHOLDERS)
The 1995 Stock Plan of NexGen (the "1995 Plan") replaces the 1987 Plan.
While all future awards will be made under the 1995 Plan, awards made under
the 1987 Plan will continue to be administered in accordance with the 1987
Plan. The 1995 Plan was initially adopted by NexGen's Board of Directors in
March 1995 and was approved by its stockholders in May 1995. The 1995 Plan
currently limits participation to employees, consultants and advisors of
NexGen or subsidiaries of NexGen. The NexGen Board of Directors has approved
adopting an amendment to the 1995 Plan to change the definition of Company
from "NexGen, Inc., a Delaware corporation" to "NexGen, Inc., a Delaware
corporation, its parent corporation, or its successor." Such amendment to the
1995 Plan will be proposed for approval by the NexGen stockholders at the
NexGen Meeting and the NexGen Board of Directors recommends such approval. The
amendment of the 1995 Plan as proposed
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will be effective upon approval of the NexGen stockholders. Approval of the
amendment is not contingent upon
approval or effectiveness of the Merger. However, if the amendment to the 1995
Plan is approved and the Merger is consummated AMD will assume the 1995 Plan,
as amended, and the employees, consultants and advisors of AMD and its
subsidiaries including NexGen will be eligible to participate in the 1995
Plan, as amended.
DESCRIPTION OF THE 1995 PLAN, AS AMENDED
Any stockholder of NexGen or AMD who wishes to review the 1995 Plan can
obtain the full text of the 1995 Plan by writing to NexGen, Attention:
Investor Relations. The following is a summary description of the principal
features of the 1995 Plan, as amended. All references in this Proposal to
"NexGen" shall mean NexGen, its parent corporation or its successor. In the
event the Merger is consummated all references to NexGen in this Proposal will
mean AMD.
PURPOSE
The purpose of the 1995 Plan is to assist NexGen in the recruitment,
retention and motivation of outside directors, employees and independent
contractors who are in a position to make material contributions to NexGen's
progress. The 1995 Plan offers a significant incentive to the outside
directors, employees (including officers and certain directors who are also
employees) and independent contractors of NexGen by enabling them to acquire
NexGen's Common Stock, thereby increasing their proprietary interest in the
growth and success of NexGen.
ADMINISTRATION
The 1995 Plan is administered by the Compensation Committee and, with
respect to participants who are not officers or directors, by the Options
Committee. Both Committees are composed of members of the NexGen Board of
Directors. Subject to the limitations set forth in the 1995 Plan, the
Committees have the authority to select the individuals to whom options will
be granted or shares will be sold or awarded and to determine all terms and
conditions of each grant, sale or award.
ELIGIBILITY AND SHARES SUBJECT TO THE 1995 PLAN
The 1995 Plan provides for direct sales or awards of stock and for the grant
of both ISOs and NSOs. Employees, consultants and advisors of NexGen are
eligible for the direct sale or award of shares and the grant of NSOs. Only
employees are eligible for the grant of ISOs. The non-employee directors of
NexGen receive the automatic NSO grants described below but are ineligible for
other awards.
A total of 1,500,000 shares of NexGen Common Stock has been reserved for
issuance under the 1995 Plan. At the beginning of each calendar year after
1995 and until 2000, the number of available shares automatically increases by
3.5% of the number of shares of NexGen Common Stock outstanding at that time,
but not more than 1,500,000 shares are available for the grant of ISOs. If
options granted under the 1987 Plan or the 1995 Plan expire without having
been exercised or if shares issued under either plan are forfeited, then the
unused shares revert to the pool available for future sales, awards or grants
under the 1995 Plan. Reserved but unused shares under the 1987 Plan after
March 31, 1995 were also added to the pool. No participant will be granted
options covering more than 500,000 shares under the 1995 Plan in any calendar
year.
Assuming that the NexGen stockholders approve the amendment to the 1995
Plan, AMD may grant options and awards with respect to shares of AMD Common
Stock under the 1995 Plan after the Effective Time to employees, consultants
and advisors of AMD and its subsidiaries including NexGen. After the Effective
Time, however, AMD will discontinue the provision of the 1995 Plan providing
for an automatic increase in the number of shares available under the 1995
Plan as described in the previous paragraph.
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As of September 30, 1995, NexGen had granted options to purchase an
aggregate of 1,468,250 shares at exercise prices ranging from $7.50 to $26.25
per share pursuant to the 1995 Plan. As of September 30, 1995, approximately
163 employees (including one director who is an employee) and five non-
employee directors were eligible to participate in the 1995 Plan. See the
cover page of this Joint Proxy Statement/Prospectus and "Summary--Market Price
Data" for recent sale price information of the NexGen Common Stock. All stock
options granted prior to NexGen's IPO on May 24, 1995 were granted with
exercise prices equal to the fair market value of NexGen's Common Stock on the
date of grant, as determined in good faith by the NexGen Board of Directors.
Stock options granted subsequent to NexGen's IPO have been granted with
exercise prices equal to the closing price for NexGen Common Stock on the
Nasdaq National Market on the date of grant. As of September 30, 1995, no
stock options granted under the 1995 Plan had been exercised and no shares of
NexGen Common Stock had been issued for direct sale. As of September 30, 1995,
a total of 75,033 shares of NexGen Common Stock are available for future
options, grants or direct sales under the 1995 Plan (including 43,283 reserved
but unused shares under the 1987 Plan). The Compensation Committee and the
Options Committee have not made any determination with respect to future
awards under the 1995 Plan, and any allocation of such awards will be made
only in accordance with the provisions of the 1995 Plan.
TERMS OF OPTIONS
The maximum term of each ISO which may be granted under the 1995 Plan is 10
years (five years in the case of an ISO granted to a 10% stockholder). Except
for grants to non-employee directors, options granted pursuant to the 1995
Plan will vest at the time or times determined by the Compensation Committee
or Options Committee. An option will become fully exercisable in the event of
the optionee's death, disability or a change in control of NexGen.
The exercise price for ISO's will be no less than 100% of fair market value
of the common stock subject to the ISO on the date of grant. The exercise
price for NSOs will be no less than the par value of the underlying shares.
Under the 1995 Plan, the exercise price is payable in cash, NexGen Common
Stock or a full-recourse promissory note secured by the shares, except that
the par value of the shares must be paid in cash. The 1995 Plan also allows an
optionee to pay the exercise price by giving "exercise/sale" or
"exercise/pledge" directions. If exercise/sale directions are given, a number
of option shares sufficient to pay the exercise price and any withholding
taxes is issued to a securities broker selected by NexGen, who, in turn, sells
the shares in the open market. The broker remits the exercise price and any
withholding taxes to NexGen from the proceeds of the sale, and the optionee
receives any remaining shares or cash. If exercise/pledge directions are
given, the option shares are issued directly to a securities broker or other
lender selected by NexGen. The broker or other lender will hold the shares as
security and will extend credit for up to 50% of their market value. The loan
proceeds will be paid to NexGen to the extent necessary to pay the exercise
price and any withholding taxes. Any excess loan proceeds may be paid to the
optionee. If the loan proceeds are insufficient to cover the exercise price
and withholding taxes, the optionee will be required to pay the deficiency to
NexGen at the time of exercise. The Compensation Committee or Options
Committee may also permit optionees to satisfy their withholding tax
obligation upon exercise of a nonstatutory stock option (or upon receipt of
restricted shares) by having a portion of their shares withheld by NexGen.
TERMS OF SHARES OFFERED FOR SALE
The terms of sale of shares of NexGen Common Stock under the 1995 Plan will
be set forth in a common stock purchase agreement to be entered into between
NexGen and each purchaser. The terms of stock purchase agreements entered into
under the 1995 Plan need not be identical, and the Compensation Committee or
Options Committee determines all terms and conditions of each agreement, which
will be consistent with the 1995 Plan. The purchase price for shares sold
under the 1995 Plan cannot be less than the par value of such shares. The
purchase price may be paid, at the Compensation Committee or Options
Committee's discretion, with a full-recourse promissory note secured by the
shares, except that the par value of the shares must be paid in cash.
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Shares may also be awarded under the 1995 Plan in consideration of services
rendered prior to the award, without a cash payment by the recipient.
NexGen Common Stock sold pursuant to the 1995 Plan will generally vest
ratably over a five-year period and upon satisfaction of the conditions
specified in the stock purchase agreement. Vesting conditions are determined
by the Compensation Committee or Options Committee and may be based on the
recipient's service, individual performance, NexGen's performance or such
other criteria as the Compensation Committee or Options Committee may adopt.
Shares may be subject to repurchase by NexGen at their original purchase price
in the event that any applicable vesting conditions are not satisfied. Shares
issued under the 1995 Plan may not be resold or otherwise transferred until
they have vested, except that certain transfers to a trust may be permitted. A
holder of shares transferred under the 1995 Plan has the same voting, dividend
and other rights as NexGen's other stockholders.
NON-EMPLOYEE DIRECTORS
Each non-employee director of NexGen who was in office on March 27, 1995
(Dr. Low and Messrs. Cox, Khosla, Nishi, Giuliano Raviola, who retired
effective August 28, 1995, and Voytko) received 25,000 NSOs on May 24, 1995
with a per share exercise price of $15.00, the initial public offering price
of the NexGen Common Stock, and a vesting period of 5 years. Vesting will
begin upon the later of (i) May 24, 1995 or (ii) when the unvested portion of
previously granted options becomes less than 10,000 shares. New non-employee
directors who join the NexGen Board of Directors after March 27, 1995 will
also receive 25,000 NSOs at the time of their election. In addition, all non-
employee directors will automatically receive 5,000 NSOs each year. In
general, NSOs granted to non-employee directors of NexGen become exercisable
over a period of five years. In addition, such NSOs become exercisable in full
in the event that NexGen is subject to a change in control or in the event
that the optionee's service as a director terminates because of death,
disability or retirement after age 65. The exercise price of NSOs granted to
non-employee directors of NexGen is equal to 100% of the market value of
NexGen Common Stock at the time of grant. The term of such NSOs is 10 years,
subject to earlier expiration if the optionee's service terminates. Mr.
Raviola's 25,000 NSOs expired prior to vesting upon his retirement. Although
AMD will continue the 1995 Plan after the Effective Time, if the NexGen
stockholders approve the amendment to the 1995 Plan, AMD will discontinue the
provisions of the 1995 Plan automatically granting options to non-employee
directors.
DURATION, AMENDMENT AND TERMINATION
Unless terminated earlier by the NexGen Board of Directors, the 1995 Plan
will terminate on March 11, 2005. The NexGen Board of Directors may amend,
suspend or terminate the 1995 Plan at any time. Plan amendments are subject to
stockholder approval only to the extent required by law.
FEDERAL INCOME TAX CONSEQUENCES
Neither the optionee nor NexGen will incur any federal tax consequences as a
result of the grant of an option. The optionee will have no taxable income
upon exercising an ISO (except that the alternative minimum tax may apply),
and NexGen will receive no deduction when an ISO is exercised. Upon exercising
a NSO, the optionee generally must recognize ordinary income equal to the
"spread" between the exercise price and the fair market value of NexGen Common
Stock on the date of exercise; NexGen generally will be entitled to a
deduction for the same amount. In the case of an employee, the option spread
at the time an NSO is exercised is subject to income tax withholding, but the
optionee generally may elect to satisfy the withholding tax obligation by
having shares of NexGen Common Stock withheld from those purchased under the
NSO. The tax treatment of a disposition of option shares acquired under the
1995 Plan depends on how long the shares have been held and on whether such
shares were acquired by exercising an ISO or by exercising a NSO. NexGen will
not be entitled to a deduction in connection with a disposition of option
shares, except in the case of a disposition of shares acquired under an ISO
before the applicable ISO holding periods have been satisfied.
119
<PAGE>
EFFECT OF CERTAIN CORPORATE EVENTS
Outstanding awards under the 1995 Plan provide for the automatic vesting of
employee stock options upon a change in control. Future employee stock option
agreements and common stock purchase agreements, if any, entered into pursuant
to the 1995 Plan will contain similar provisions.
For purposes of the 1995 Plan, the term "change in control" means (1) that a
change in the composition of the NexGen Board of Directors occurs as a result
of which fewer than one-half of the incumbent directors are directors who
either had been directors of NexGen 24 months prior to such change or were
elected or nominated for election to the NexGen Board of Directors with the
approval of at least a majority of the directors who had been directors of
NexGen 24 months prior to such change and who were still in office at the time
of the election or nomination, or (2) that any person is or becomes the
beneficial owner, directly or indirectly, of at least 50% of the combined
voting power of NexGen's outstanding securities, except by reason of a
repurchase by NexGen of its own securities. In the event of a subdivision of
the outstanding NexGen Common Stock or a combination or consolidation of the
outstanding NexGen (by reclassification or otherwise) into a lesser number of
shares, a spinoff or a similar occurrence, or declaration of a dividend
payable in NexGen Common Stock or, if in an amount that has a material effect
on the price of the shares, in cash, the Board will make adjustments in the
number and/or exercise price of options and/or the number of shares available
under the 1995 Plan, as appropriate.
In the event of a merger or other reorganization, outstanding options will
be subject to the agreement of merger or reorganization. Such agreement may
provide that outstanding options will be assumed by the surviving corporation
or its parent, continued by NexGen (if NexGen is the surviving corporation),
vested on an accelerated basis or settled for cash. Options may also be
cancelled, but only after vesting was accelerated and the optionee was advised
of the acceleration.
If the proposed Merger is consummated, AMD will assume all outstanding
options granted under the 1995 Plan. Such options will become exercisable for
an adjusted number of shares of AMD Common Stock at an adjusted exercise
price. See "The Merger Agreement and Related Agreements--Treatment of NexGen
Options, Warrants and Convertible Securities." All options granted under the
1995 Plan will become exercisable in full as a result of the Merger.
The NexGen Board of Directors recommends a vote FOR approval of the
amendment of the 1995 Stock Plan of NexGen, Inc.
NEXGEN STOCKHOLDER PROPOSALS
If the Merger is not consummated, proposals of stockholders of NexGen
intended to be presented at the 1996 Annual Meeting of Stockholders of NexGen
must be received no later than February 20, 1996, by the Secretary of NexGen
at the principal executive offices of NexGen, 1623 Buckeye Drive, Milpitas,
California 95035, in order to be eligible for inclusion in NexGen's proxy
statement for such meeting.
120
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF NEXGEN
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants......................................... F-2
Consolidated Balance Sheets as of June 30, 1994 and 1995 and September 30,
1995 (unaudited) ........................................................ F-3
Consolidated Statements of Operations for the years ended June 30, 1993,
1994 and 1995 and the
unaudited three months ended September 30, 1994 and 1995................. F-4
Consolidated Statements of Stockholders' Equity (Deficit) for the years
ended June 30, 1993, 1994 and 1995 and the unaudited three months ended
September 30, 1995....................................................... F-5
Consolidated Statements of Cash Flows for the years ended June 30, 1993,
1994 and 1995 and the unaudited three months ended September 30, 1994 and
1995..................................................................... F-6
Notes to Consolidated Financial Statements................................ F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of NexGen, Inc.
In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of NexGen, Inc. ("NexGen") and its subsidiaries at June 30, 1994 and
1995, and the results of their operations and their cash flows for each of the
three years in the period ended June 30, 1995, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of NexGen's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
As described in Note 7 to the financial statements, concurrent with the
Merger Agreement, Advanced Micro Devices provided NexGen with a $60,000,000
revolving line of credit which NexGen intends to use to pursue an aggressive
plan to enhance market share, increase revenue and accelerate new products. In
the event the merger is not consummated, NexGen will be required to repay all
borrowings under this line of credit one year from termination of the Merger
Agreement. If this should occur, NexGen will require additional financing to
repay this line of credit. There can be no assurance that such financing can
be obtained.
PRICE WATERHOUSE LLP
San Jose, California
July 24, 1995, except for Note 7 which is
as of November 1, 1995
F-2
<PAGE>
NEXGEN, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
JUNE 30,
-------------------
SEPTEMBER 30,
1994 1995 1995
-------- --------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................. $ 3,488 $ 33,354 $ 5,542
Short-term investments.................... 4,934 19,713 20,800
Accounts receivable....................... -- 8,439 20,127
Inventory................................. -- 4,813 12,439
Prepaid expenses and other current assets. 878 2,077 7,128
-------- --------- ---------
Total current assets.................... 9,300 68,396 66,036
Property and equipment, net................. 2,782 4,630 4,930
Other assets................................ 533 430 436
-------- --------- ---------
Total assets............................ $ 12,615 $ 73,456 $ 71,402
======== ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFI-
CIT)
Current liabilities:
Accounts payable.......................... $ 2,922 $ 10,817 $ 24,559
Accrued compensation...................... 660 1,078 1,568
Other accrued expense..................... 507 3,342 7,649
Current portion of long-term debt......... 3,353 12,525 12,516
-------- --------- ---------
Total current liabilities............... 7,442 27,762 46,292
-------- --------- ---------
Long-term debt, net......................... 10,562 -- --
-------- --------- ---------
Commitments and contingencies (Notes 2 and 6)
Stockholders' equity (deficit):
Convertible Preferred Stock; 30,000 shares
authorized, no par value, 20,097 shares
issued and outstanding at June 30, 1994;
5,000 authorized, $0.0001 par value, none
issued and outstanding at June 30, 1995;
and September 30, 1995 ................... 74,809 -- --
Common Stock; 50,000 shares authorized, no
par value, 2,321 shares issued and out-
standing at June 30, 1994; 125,000 shares
authorized, $0.0001 par value, 33,127 and
33,212 shares issued and outstanding at
June 30, 1995; and September 30, 1995..... 310 3 3
Warrant valuation.......................... 533 533 533
Additional paid-in capital................. -- 171,994 171,878
Accumulated deficit........................ (81,041) (126,836) (147,304)
-------- --------- ---------
Total stockholders' equity (deficit).... (5,389) 45,694 25,110
-------- --------- ---------
Total liabilities and stockholders' eq-
uity (deficit)......................... $ 12,615 $ 73,456 $ 71,402
======== ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
NEXGEN, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED JUNE 30, ENDED SEPTEMBER 30,
---------------------------- ---------------------
1993 1994 1995 1994 1995
-------- -------- -------- --------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Sales..................... $ -- $ -- $ 20,794 $ 7 $ 16,568
Cost of sales............. -- -- 31,283 9 24,015
-------- -------- -------- --------- ----------
Gross margin (loss)....... -- -- (10,489) (2) (7,447)
-------- -------- -------- --------- ----------
Operating expenses:
Research and develop-
ment................... 9,819 16,610 15,342 3,169 6,223
Selling, general and ad-
ministrative........... 2,764 6,051 18,273 1,429 7,024
-------- -------- -------- --------- ----------
Total operating ex-
penses............... 12,583 22,661 33,615 4,598 13,247
-------- -------- -------- --------- ----------
Operating loss............ (12,583) (22,661) (44,104) (4,600) (20,694)
Interest income (expense),
net...................... (450) (1,047) (1,691) (726) 226
-------- -------- -------- --------- ----------
Net loss.................. $(13,033) $(23,708) $(45,795) $ (5,326) $ (20,468)
======== ======== ======== ========= ==========
Net loss per share........ $ (0.55) $ (0.84) $ (1.82) $ (0.19) $ (0.62)
======== ======== ======== ========= ==========
Weighted average common
shares and equivalents... 23,626 28,076 25,180 28,782 33,170
======== ======== ======== ========= ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
NEXGEN, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)
<TABLE>
<CAPTION>
CONVERTIBLE
PREFERRED STOCK COMMON STOCK
------------------ -------------
ADDDITIONAL
WARRANT PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT VALUATION CAPITAL DEFICIT TOTAL
------- --------- ------ ------ --------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JUNE 30,
1992................... 13,888 $ 48,479 2,043 $ 192 $-- $ -- $ (44,300) $ 4,371
Issuance of Series B
Preferred Stock upon
conversion of bridge
loans and accrued
interest............... 219 328 328
Issuance of Series E
Preferred Stock, net... 1,187 4,252 4,252
Payments on notes re-
ceivable............... 25 25
Issuance of Common
Stock.................. 145 45 45
Net loss................ (13,033) (13,033)
------- --------- ------ ----- ---- -------- --------- --------
BALANCE AT JUNE 30,
1993................... 15,294 53,084 2,188 237 -- -- (57,333) (4,012)
Issuance of Series F
Preferred Stock, net... 4,803 21,663 21,663
Payments on notes re-
ceivable............... 62 62
Issuance of Common
Stock.................. 133 33 33
Amortization of deferred
compensation........... 40 40
Valuation of warrants... 533 533
Net loss................ (23,708) (23,708)
------- --------- ------ ----- ---- -------- --------- --------
BALANCE AT JUNE 30,
1994................... 20,097 74,809 2,321 310 533 -- (81,041) (5,389)
Issuance of Series G
Preferred Stock, net... 4,323 31,392 31,392
Issuance of Common
Stock.................. 861 316 316
Conversion of preferred
stock.................. (24,420) (106,201) 24,963 2 106,199 --
Issuance of Common Stock
in initial public of-
fering, net of issuance
costs of $1,280........ 4,716 65,170 65,170
Exercise of Cashless
warrants............... 266
Reincorporation into a
Delaware
Corporation............ (625) 625 --
Net loss................ (45,795) (45,795)
------- --------- ------ ----- ---- -------- --------- --------
BALANCE AT JUNE 30,
1995................... -- -- 33,127 3 533 171,994 (126,836) 45,694
Exercise of stock op-
tions (unaudited)...... 73 32 32
Exercise of Cashless
warrants (unaudited)... 12
Issuance costs (unau-
dited)................. (148) (148)
Net loss (unaudited).... (20,468) (20,468)
------- --------- ------ ----- ---- -------- --------- --------
BALANCE AT SEPTEMBER 30,
1995 (UNAUDITED)....... -- $ -- 33,212 $ 3 $533 $171,878 $(147,304) $ 25,110
======= ========= ====== ===== ==== ======== ========= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
NEXGEN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED SEPTEMBER
YEARS ENDED JUNE 30, 30,
---------------------------- -----------------
1993 1994 1995 1994 1995
-------- -------- -------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating ac-
tivities:
Net loss..................... $(13,033) $(23,708) $(45,795) $(5,326) $(20,468)
Adjustments to reconcile net
loss to net cash used in op-
erating activities:
Depreciation and amortiza-
tion....................... 1,370 1,552 1,681 383 627
Writedown of inventory...... -- -- 5,559 -- 3,400
Changes in assets and liabil-
ities:
Accounts receivable......... -- -- (8,439) (2) (11,688)
Inventory................... -- -- (10,372) -- (11,026)
Other assets................ (335) (359) (1,096) (23) (5,057)
Accounts payable and accrued
liabilities................ 811 2,381 11,148 533 18,539
-------- -------- -------- ------- --------
Net cash used in operating
activities.................. (11,187) (20,134) (47,314) (4,435) (25,673)
-------- -------- -------- ------- --------
Cash flows from investing ac-
tivities:
Purchases of property and
equipment................... (1,570) (2,312) (3,529) (255) (927)
Purchases of short-term in-
vestments................... -- (4,934) (19,628) (2,047) (2,414)
Sale of short-term invest-
ments....................... -- -- 4,849 -- 1,327
-------- -------- -------- ------- --------
Net cash used in investing
activities................. (1,570) (7,246) (18,308) (2,302) (2,014)
-------- -------- -------- ------- --------
Cash flows from financing ac-
tivities:
Proceeds from issuance of
Preferred Stock, net........ 4,276 21,725 31,392 (120) --
Proceeds (payments) on issu-
ance of debt, net........... (670) 7,593 (1,390) 4,716 (9)
Proceeds from issuance of
Common Stock................ 46 33 65,486 4 (116)
-------- -------- -------- ------- --------
Net cash provided by (used
in) financing activities... 3,652 29,351 95,488 4,600 (125)
-------- -------- -------- ------- --------
Net increase (decrease) in
cash and cash equivalents.... (9,105) 1,971 29,866 (2,137) (27,812)
Cash and cash equivalents at
beginning of period.......... 10,622 1,517 3,488 3,488 33,354
-------- -------- -------- ------- --------
Cash and cash equivalents at
end of period................ $ 1,517 $ 3,488 $ 33,354 $ 1,351 $ 5,542
======== ======== ======== ======= ========
Supplemental disclosures:
Interest paid................ $ 873 $ 339 $ 3,148 $ 67 --
======== ======== ======== ======= ========
Income taxes paid............ $ -- $ -- $ -- $ -- $ 290
======== ======== ======== ======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
NEXGEN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
NexGen, Inc. ("NexGen") has adopted accounting policies which are generally
accepted in the industry in which it operates. The following is a summary of
NexGen's significant accounting policies:
Basis of presentation
The consolidated financial statements include the financial statements of
NexGen and its wholly-owned subsidiaries. All significant intercompany
transactions and accounts have been eliminated.
Cash equivalents and short-term investments
NexGen considers all highly liquid investments purchased with an original
maturity of ninety days or less as cash and cash equivalents.
Management determines the appropriate classifications of debt securities at
the time of purchase and reevaluates such designations as of each balance
sheet date. Marketable equity securities and debt securities are classified as
available-for-sale. Available-for-sale securities are required to be carried
at fair value, with the unrealized gains and losses, net of tax, reported as a
separate component of stockholders' equity. As of June 30 and September 30,
1995, gross realized and unrealized gains and losses on investments available
for sale were not material. Interest and dividends on securities classified as
available-for-sale are included in interest income.
All short-term investments, by contractual maturity, mature in less than one
year and are summarized as follows (in thousands):
<TABLE>
<CAPTION>
JUNE
30, SEPTEMBER 30,
1995 1995
------- -------------
(UNAUDITED)
<S> <C> <C>
Cash and money market................................ $ 1,002 $ 5,542
Time deposits........................................ 3,716 6,131
U.S. Treasury securities and obligations of U.S. gov-
ernment agencies.................................... 30,351 14,669
U.S. corporate securities............................ 17,998 --
------- -------
53,067 26,342
Less: cash and cash equivalents...................... (33,354) (5,542)
------- -------
Short-term investments............................... $19,713 $20,800
======= =======
</TABLE>
Time deposits at June 30, 1995 and September 30, 1995 included $3,631,000
and $6,131,000, respectively, which are pledged to secure letters of credit
provided to vendors.
Concentration of credit risk of financial instruments
Financial instruments which potentially subject NexGen to concentrations of
credit risk consist of cash equivalents, short-term investments and accounts
receivable. Cash equivalents and short-term investments are maintained with
high quality institutions, the composition and maturities of which are
regularly monitored by
F-7
<PAGE>
NEXGEN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
management. Generally, these investments may be redeemed upon demand and,
therefore, bear minimal risk. To date, NexGen has not experienced any material
losses on its investments. NexGen sells its products to original equipment
manufacturers and distributors in the personal computer industry. NexGen
generally requires no collateral on trade receivables, although certain export
sales are guaranteed by letters of credit. NexGen performs ongoing credit
evaluations of its customers' financial condition but does not require
collateral to support customer receivables.
NexGen operates in one industry segment. During the year ended June 30,
1995, NexGen had sales to three customers representing 36%, 34% and 22% of net
sales, respectively. At June 30, 1995, these three customers represented 34%,
31% and 29% of the accounts receivable balance. During the three months ended
September 30, 1995 NexGen had sales to three customers representing 39%, 25%
and 17% of net sales, respectively. At September 30, 1995 these three
customers represented 31%, 24% and 14% of the accounts receivable balance.
Export sales to Europe, represented 43% and 14% of sales for the year ended
June 30, 1995 and the three months ended September 30, 1995, respectively. No
geographic region other than Europe accounted for more than 10% of total sales
in the year ended June 30, 1995. Export sales to the Far East accounted for
20% of total sales in the three months ended September 30, 1995.
Inventory
Inventory is stated at the lower of cost (determined on a first-in, first-
out basis) or market. In addition, due to the transition from NxVL system
logic chipsets to PCI chipsets, during the fiscal year ended June 30, 1995,
NexGen recorded a write-down in inventory of approximately $5.6 million to
value the inventory at market.
Property and equipment
Property and equipment are stated at cost. Depreciation is computed using
the straight-line method over the assets' useful lives of three to five years.
Capital leases and leasehold improvements are amortized using the straight-
line method over the shorter of the useful lives of the assets or the terms of
the lease.
Revenue recognition
Revenue is recognized upon product shipment. A provision for estimated
future returns and potential warranty liability is recorded at the time
revenue is recognized.
Income taxes
Income taxes have been provided using the liability method in accordance
with SFAS No. 109, Accounting for Income Taxes.
Net loss per share
Net loss per share is computed using the weighted average number of shares
of Common Stock outstanding during the year. Common equivalent shares include
Common Stock which was issued upon conversion of NexGen's Convertible
Preferred Stock ("Preferred Stock") and the exercise of stock options and
warrants using the treasury stock method. Common equivalent shares are
excluded from the computation if their effect is anti-dilutive except that,
pursuant to the requirements of the Securities and Exchange Commission, common
equivalent shares relating to stock, options and warrants (using the treasury
stock method and the initial public offering price) issued during the 12 month
period prior to the initial public offering have been included in the
computations as if they were outstanding for all applicable periods.
F-8
<PAGE>
NEXGEN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Reclassifications
Certain reclassifications have been made to the prior fiscal years'
financial statements to conform with the current year presentation.
Interim Financial Statements
The accompanying balance sheet at September 30, 1995 and the related
statements of operations and of cash flows for the three months ended
September 30, 1994 and 1995, and the statement of stockholders' equity
(deficit) for the three months ended September 30, 1995 are unaudited. In the
opinion of management, these statements have been prepared on the same basis
as the audited financial statements and include all adjustments, consisting of
only normal recurring adjustments, necessary for the fair statement of results
of the interim periods. The data disclosed in these notes to consolidated
financial statements for those periods are also unaudited.
2. RELATED PARTY TRANSACTIONS
Corporate borrowings
<TABLE>
<CAPTION>
JUNE 30,
----------------- SEPTEMBER 30,
1994 1995 1995
------- -------- -------------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C>
10-11% notes payable to ASCII Corporation
and ASCII of America, Inc. .............. $ 3,316 $ 2,500 $ 2,500
12% note payable to Phemus................ 10,536 10,000 10,000
Other..................................... 63 25 16
------- -------- --------
13,915 12,525 12,516
Current portion of long-term debt......... (3,353) (12,525) (12,516)
------- -------- --------
Long-term debt............................ $10,562 $ -- $ --
======= ======== ========
</TABLE>
ASCII Corporation Borrowings
At June 30, 1995, NexGen owed an aggregate of $2.5 million in principal
amount under promissory notes (the "ASCII Notes") to ASCII Corporation
("ASCII") and ASCII of America, Inc. ("ASCII of America"). ASCII is a
principal stockholder of NexGen and the President of ASCII is a director of
NexGen. The ASCII Notes bear interest at rates ranging from 10% to 11% per
annum. Pursuant to an amendment entered into by NexGen, ASCII and ASCII of
America, that extended the maturity of the ASCII Notes, interest on the ASCII
Notes ceased to accrue on June 1, 1995, the closing date of NexGen's initial
public offering. The outstanding principal and accrued interest of $107,000 on
the ASCII Notes is due and payable on March 1, 1996. ASCII and ASCII of
America may demand payment of the ASCII Notes at any time or may elect to
convert the outstanding principal and 90% of the accrued but unpaid interest
on all or a portion of the ASCII Notes into shares of Common Stock at $13.95
per share at any time up to March 1, 1996. The ASCII Notes and accrued
interest will be convertible into approximately 181,000 shares of Common
Stock. The ASCII Notes are secured by a first priority security interest in
all of NexGen's tangible and intangible assets. In conjunction with the
issuance of the ASCII Notes, in April 1992, NexGen issued to ASCII warrants to
purchase 250,000 shares of Common Stock at an exercise price of $0.50 per
share and warrants to purchase 250,000 shares of Common Stock at $4.00 per
share. In September 1994, in connection with NexGen's Preferred G offering,
NexGen issued ASCII a warrant to purchase 116,600 shares of Series G Preferred
Stock at an exercise price of $7.50 per share.
F-9
<PAGE>
NEXGEN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Phemus Corporation Borrowings
On July 22, 1993, NexGen entered into a Note and Warrant Agreement with
Phemus Corporation ("Phemus"), an affiliate of Harvard Private Capital Group,
Inc. One of NexGen's directors is a representative of Phemus. The loan
provides for a total of $15.0 million in three installments of $5.0 million
each. The installments were loaned to NexGen in July 1993, January 1994 and
September 1994. The loan is secured by all of NexGen's tangible and intangible
assets, is subordinate to the ASCII Notes, bears interest at 12% compounded
annually, and prohibits the declaration or payment of any dividends on
NexGen's Stock.
In consideration for providing the loan, Phemus was issued warrants to
purchase a total of 1.6 million shares of NexGen's Common Stock at an initial
exercise price of $4.00 per share. The exercise price and number of shares
will automatically be adjusted upon the occurrence of certain events. NexGen
valued these warrants at $533,000, which was recorded as a discount on long-
term debt and has been fully amortized. All warrants expire on May 24, 2002.
Upon completion of NexGen's initial public offering, and in accordance with
the Note and Warrant Agreement, NexGen repaid Phemus $5.0 million in principal
and approximately $2.5 million in accrued interest. The remaining $10.0
million principal, plus any additional accrued interest, is due on June 1,
1996. Accrued interest totaled approximately $118,000 at June 30, 1995.
Kleiner Perkins Caufield & Byers IV
On May 4, 1988, a warrant to purchase 350,000 shares of Series B Preferred
Stock was sold to Kleiner Perkins Caufield & Byers IV ("KPC&B") in
consideration for a $175,000 promissory note bearing interest at 7%. KPC&B is
a principal stockholder of NexGen and a General Partner of KPC&B is a director
of NexGen. The promissory note, including interest thereon, was repaid through
consulting services which were rendered and expensed over a two-year period.
The exercise price of the warrant is $4.00 per share.
In January 1993, NexGen entered into a Warrant Purchase and Amendment
Agreement with KPC&B (the "Warrant Purchase and Amendment Agreement") in
connection with an arrangement under which KPC&B agreed to provide consulting
services to NexGen. Under the Warrant Purchase and Amendment Agreement, KPC&B
received, in consideration for a 7% promissory note in the principal amount of
$125,000, a warrant to purchase 250,000 shares of the Series E Preferred Stock
of NexGen at an exercise price of $4.00 per share. During the year ended June
30, 1995, these warrants were exercised on a cashless basis for 183,333 shares
of Common Stock. The promissory note including interest thereon, was repaid
through consulting services which were rendered and expensed over a two-year
period. Pursuant to the Warrant Purchase and Amendment Agreement, NexGen also
agreed to extend the terms of the outstanding warrant to purchase 350,000
shares of Series B Preferred Stock of NexGen previously issued to KPC&B.
Compaq Computer Corporation
On March 23, 1995, NexGen entered into a long-term purchase agreement with
Compaq pursuant to which Compaq may purchase NexGen's products. In addition,
on March 29, 1995 Compaq also purchased 1,333,334 shares of NexGen's Series G
Preferred Stock for $7.50 per share. On May 24, 1995, in connection with
NexGen's initial public offering, the Series G preferred stock and Compaq's
previous investments in preferred stock were all converted into Common Stock.
Transactions with Directors and Officers
In July 1992, in connection with NexGen's Series E Preferred Stock offering,
warrants to purchase 509,375 shares of Series E Preferred Stock were issued to
the sales agent whose director is also a director of NexGen.
F-10
<PAGE>
NEXGEN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The warrants expire on or before the earlier of July 15, 1997 or other
occurrences as specified in the agreements. In July 1993, warrants to purchase
348,750 shares of Series F Preferred Stock were issued to the sales agent in
connection with NexGen's Series F Preferred Stock offering. In December 1994
and January 1995, warrants to purchase 46,800 shares and 12,300 shares,
respectively, of Series G Preferred Stock were issued to the sales agent in
connection with NexGen's Series G Preferred Stock offering.
In October 1992, NexGen loaned an executive officer approximately $207,000
for the officer's principal residence. The promissory note is due in October
1997 and accrues interest at 6% per annum. In October 1988, NexGen loaned an
executive officer who is also a director of NexGen $100,000. The promissory
note is due in October 1996 and accrues interest at 7% per annum. In June
1995, NexGen also loaned an executive officer $50,000 under a promissory note
which accrues interest at 8%. Both the note and all accrued interest are due
and payable in June 1998.
Warrants
On May 24, 1995, the effective date of NexGen's initial public offering, all
previously issued preferred series warrants were converted into warrants to
purchase common stock. All outstanding warrants are held by related parties.
The following table summarizes the warrants outstanding as of June 30, 1995:
<TABLE>
<CAPTION>
WARRANT HOLDER WARRANTS WARRANT PRICE
-------------- --------- -------------
<S> <C> <C>
Warrants issued in connection with Note and Warrant
Agreement.......................................... 1,600,000 $4.00
Warrants issued in connection with ASCII Notes and
Preferred G Offering............................... 616,600 $0.50-$7.50
Warrants issued in connection with consulting serv-
ices............................................... 350,000 $4.00
Warrants issued to sales agent...................... 917,225 $4.00-$7.50
---------
3,483,825 $0.50-$7.50
=========
</TABLE>
During the year ended June 30, 1990, NexGen entered into two equipment lease
lines with a financing institution. In conjunction with the lease lines,
NexGen issued warrants to purchase 55,000 shares of Series C Preferred Stock.
During the year ended June 30, 1995 these warrants were exercised on a
cashless basis for 40,332 shares of Common Stock.
In addition, in April 1992, a warrant to purchase 50,000 shares of Series E
Preferred Stock was issued to a bank as additional consideration for a note
payable, which was repaid in June 1992. During the year ended June 30, 1995,
this warrant was exercised on a cashless basis for 42,452 shares of Common
Stock.
3. BALANCE SHEET DETAIL
<TABLE>
<CAPTION>
JUNE 30,
----------------
1994 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Property and equipment:
Equipment................................................ $ 9,899 $13,268
Furniture and fixtures................................... 297 457
------- -------
10,196 13,725
Less accumulated depreciation and amortization............. (7,414) (9,095)
------- -------
$ 2,782 $ 4,630
======= =======
</TABLE>
F-11
<PAGE>
NEXGEN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Equipment includes $355,000 of equipment under capitalized leases at June
30, 1994 and 1995. Accumulated depreciation for such equipment was $291,000
and $328,000 at June 30, 1994 and 1995, respectively.
<TABLE>
<CAPTION>
JUNE
30, SEPTEMBER 30,
1995 1995
------- -------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Inventory:
Raw materials........................................ $ 1,493 $ 2,517
Work in process...................................... 2,260 616
Finished goods....................................... 1,060 9,306
------- -------
$ 4,813 $12,439
======= =======
</TABLE>
4. STOCKHOLDERS' EQUITY (DEFICIT)
Initial Public Offering
Pursuant to its initial public offering on May 24, 1995, NexGen issued
4,715,836 shares of its common stock at $15 per share. In conjunction with
this offering, NexGen's 24,420,410 shares of Convertible Preferred Stock
issued and outstanding as of May 24, 1995 were converted into 24,962,910
shares of Common Stock.
As of June 30, 1994 Convertible Preferred Stock consisted of the following:
<TABLE>
<CAPTION>
JUNE 30, 1994
--------------
(IN THOUSANDS)
<S> <C>
Series A, 1,115,000 shares designated, issued and outstand-
ing......................................................... $ 558
Series B, 4,566,671 shares designated, 3,985,421 shares is-
sued and outstanding........................................ 7,070
Series C, 2,616,250 shares designated, 2,561,250 shares is-
sued and outstanding........................................ 10,245
Series D, 2,002,585 shares designated, issued and outstand-
ing......................................................... 15,423
Series E, 6,439,528 shares designated 5,630,153 shares issued
and outstanding............................................. 19,850
Series F, 8,900,000 shares designated, 4,802,500 shares is-
sued and outstanding........................................ 21,663
-------
$74,809
=======
</TABLE>
During the year ended June 30, 1995, NexGen issued 4,323,501 shares of
Series G Convertible Preferred stock for approximately $31,392,000. In
conjunction with NexGen's initial public offering these shares were converted
into common stock.
Stock Option Plans
NexGen has two stock option plans, the 1987 and 1995 Employee Stock Plans.
In addition, NexGen also has an employee stock purchase plan. On August 22,
1995, NexGen filed with the Securities and Exchange Commission a registration
statement on Form S-8 for the shares to be issued under the Stock Plans and
the Employee Stock Purchase Plan. A brief description of each plan is as
follows:
1987 Stock Plan
In January 1987, NexGen established an Employee Stock Plan (the "1987
Plan"), which provides the direct sale of shares and grants of incentive stock
options ("ISOs") to employees and nonqualified stock options ("NSOs") to
purchase Common Stock to directors, officers and consultants. All NSOs allow
for the
F-12
<PAGE>
NEXGEN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
purchase of Common Stock at prices not less than 85% of the fair market value
as determined by the Board of Directors at the date of grant. ISOs and the
direct sale of shares allow for the purchase of Common Stock at prices not
less than 100% of the fair market value as determined by the Board of
Directors at the date of grant. All options are exercisable immediately and
must be exercised within ten years from the date of grant. Options vest as
determined by the Board of Directors, generally at the rates of 20% or 25% per
year. In the event options are exercised prior to vesting, upon termination of
service, NexGen has the right to repurchase the issued Common Stock at the
original issuance price. Shares are released from this repurchase restriction
over periods consistent with the original options vesting period.
1995 Stock Plan
In March 1995, NexGen adopted the 1995 Stock Plan and reserved 1.5 million
shares of Common Stock for issuance to employees and directors of NexGen. Each
calendar year after 1995 until 2000, such reserved shares shall be increased
by 3.5% of the number of Common Stock outstanding at the prior calendar year
end.
The 1995 Stock Plan replaces the 1987 Stock Plan. While all future awards
will be made under the 1995 Plan, awards made under the 1987 Plan will
continue to be administered in accordance with the 1987 Plan. If any option
granted under the 1987 Plan or 1995 Plan expires or terminates for any reason
without having been exercised in full, then the unpurchased shares subject to
that option will once again be available for additional option grants under
the 1995 Plan.
1995 Employee Stock Purchase Plan
In March 1995, NexGen adopted the 1995 Employee Stock Purchase Plan (the
"ESPP"), and reserved 500,000 shares of Common Stock for issuance to eligible
employees. The ESPP, permits eligible employees to purchase Common Stock at a
discount through payroll deductions during concurrent 24-month offering
periods. Each offering period will be divided into four consecutive six-month
accumulation periods. The price at which the Common Stock is purchased under
the ESPP is equal to 85% of the fair market value of the Common Stock on the
first day of the offering period or the last day of the purchase period,
whichever is lower. The initial offering period commenced on May 24, 1995, the
effective date of NexGen's initial public offering and the future offering
periods will commence January 1 and July 1.
F-13
<PAGE>
NEXGEN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following table presents activity under the 1987 and 1995 Plans:
<TABLE>
<CAPTION>
SHARES OPTIONS
AVAILABLE OUTSTANDING OPTION PRICE
---------- ----------- -------------
<S> <C> <C> <C>
Balance at June 30, 1992.............. 1,391,780 2,701,250 0.15-0.40
Additional shares authorized........ 500,000 -- --
Options granted..................... (628,375) 628,375 0.40
Options canceled.................... 245,063 (245,063) 0.40
Options exercised................... -- (145,236) 0.15-0.40
---------- ---------
Balance at June 30, 1993.............. 1,508,468 2,939,326 0.15-0.40
Options granted..................... (1,114,500) 1,114,500 0.50-2.50
Options canceled.................... 175,859 (175,859) 0.40-0.80
Options exercised................... -- (132,750) 0.15-0.40
---------- ---------
Balance at June 30, 1994.............. 569,827 3,745,217 0.15-2.50
Options authorized.................. 1,500,000 -- --
Options granted..................... (1,999,929) 1,999,929 3.50-26.25
Options canceled.................... 167,808 (167,808) 0.40-7.50
Options exercised................... -- (786,074) 0.15-3.50
---------- ---------
Balance at June 30, 1995.............. 237,706 4,791,264 $0.15-$ 26.25
Options granted (unaudited)......... (175,250) 175,250 $15.00-$24.00
Options canceled (unaudited)........ 12,577 (12,577) $0.40-$ 24.00
Options exercised (unaudited)....... -- (74,394) $ 0.40-$ 0.80
---------- ---------
Balance at September 30, 1995 (unau-
dited)............................... 75,033 4,879,543 $0.40-$ 26.25
========== =========
</TABLE>
At June 30, 1995 and September 30, 1995, 1,778,281 and 1,856,446 (unaudited)
options were vested.
5. INCOME TAXES
Deferred income tax assets comprise the following:
<TABLE>
<CAPTION>
JUNE 30, 1995
------------------
1994 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Federal and state net operating loss carryforwards....... $ 26,000 $ 19,000
Tax credit carryforwards................................. 4,000 6,000
Capitalized research and development expenses............ 4,000 5,000
-------- --------
Deferred tax assets...................................... 34,000 30,000
Less valuation allowance................................. (34,000) (30,000)
-------- --------
$ -- $ --
======== ========
</TABLE>
As of June 30, 1995, NexGen has net operating loss carryforwards of
approximately $56.0 million for federal income tax purposes. The federal
carryforwards expire on various dates through fiscal 2009. NexGen does not
have net operating loss carryforwards for state tax purposes. The difference
between the federal and state net operating loss carryforwards is attributed
to the capitalization of research and development expenditures for state
purposes and state statutory limitations on the amount of net operating losses
which may be carried forward to subsequent years.
F-14
<PAGE>
NEXGEN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
As of June 30, 1995, NexGen has general business tax credit carryforwards of
approximately $4 million and $1 million for federal and state tax reporting
purposes, respectively. The federal tax credit carryforwards expire between
the years 2004 and 2010.
Under the Tax Reform Act of 1986, the amounts of and the benefit from net
operating losses that can be carried forward may be limited in certain
circumstances. Because the sale of Series G Preferred Stock resulted in a
change of ownership greater than 50%, NexGen's net operating loss
carryforwards incurred prior to December 29, 1994 that can be utilized to
reduce future taxable income are limited to approximately $5.5 million per
year.
6. COMMITMENTS AND CONTINGENCIES
NexGen leases its facilities and certain equipment under noncancelable
operating lease agreements which expire at various dates through 1999. Rent
expense for the years ended June 30, 1993, 1994 and 1995 totaled approximately
$347,000, $421,000 and $497,000 respectively, and $245,000 for the unaudited
three months ended September 30, 1995.
Future minimum payments under the facilities and equipment leases with non-
cancelable terms in excess of one year are as follows as of June 30, 1995 (in
thousands):
<TABLE>
<S> <C>
1996............................................................... $ 948
1997............................................................... 970
1998............................................................... 734
1999............................................................... 582
Thereafter......................................................... --
------
Total.............................................................. $3,234
======
</TABLE>
In June 1994, NexGen entered into an agreement with a third party to
manufacture NexGen's processors. In connection with this agreement, NexGen is
committed to purchasing certain annual minimum amounts under a purchase order
based on annual forecasts and quarterly revisions. NexGen believes it will be
able to use current quantities committed. The third party has the right to
manufacture, subject to specified volume limits, NexGen designed products upon
payment of a royalty.
License Agreement
During March 1995, NexGen entered into a multi-year agreement with VLSI
Technology, Inc. ("VLSI") which will manufacture system logic chipsets using
the PCI bus for NexGen. NexGen will license to VLSI a nonexclusive
transferable right to certain designs in exchange for a royalty. In addition,
VLSI will provide NexGen with an exclusive royalty-free right to use certain
designs. Certain product quantities per quarter (to be adjusted annually) are
to be provided to NexGen based on a six-month forecast and a committed
noncancelable purchase order to be provided to the vendor.
Line of Credit
In March 1995, NexGen received a commitment letter to enter into a proposed
$10 million revolving accounts receivable line of credit agreement with a
commercial bank. Under the current proposal, borrowings will bear interest at
the bank's prime rate plus 0.5% and will be secured by NexGen's accounts
receivable and other tangible assets. As proposed, the credit facility would
require the maintenance of specified levels of tangible net worth,
profitability and certain financial ratios. As of September 30, 1995 the
credit agreement had not been entered into and there were no borrowings
outstanding related to such agreement.
F-15
<PAGE>
NEXGEN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. SUBSEQUENT EVENTS
Merger Agreement
On October 20, 1995, NexGen and Advanced Micro Devices, Inc. ("AMD")
executed an Agreement and Plan of Merger (the "Merger Agreement"). Under the
terms of the Merger Agreement, a wholly-owned subsidiary of AMD will be merged
into NexGen (the "Merger"), and NexGen will become a wholly-owned subsidiary
of AMD. Upon consummation of the Merger, each issued and outstanding share of
Common Stock of NexGen will be converted into the right to receive eight-
tenths (0.8) of a share of Common Stock of AMD. The transaction is intended to
be a tax-free exchange for NexGen's stockholders. The consummation of the
Agreement and the Merger is subject to approval of both NexGen and AMD
stockholders, receipt of a letter from the independent accountants of AMD that
the transaction will qualify as a "pooling of interests" and regulatory
approval, as well as certain other conditions precedent. If approved, the
transaction is expected to close in the first quarter of calendar 1996.
Concurrently with execution of the Merger Agreement, NexGen and AMD also
executed a Secured Credit Agreement (the "Credit Agreement") pursuant to which
AMD has agreed to provide NexGen with a revolving line of credit in the
aggregate principal amount of up to $60,000,000. Borrowings under the Credit
Agreement will bear interest at prime plus 3.5% and will be secured by all
tangible and intangible assets of NexGen but will be subordinated to NexGen's
senior indebtedness. All outstanding principal and secured interest on
borrowings under the Credit Agreement are due 12 months after termination of
the Merger Agreement for any reason, or earlier, if any person other than AMD
acquires more than 50% of NexGen's outstanding Common Stock.
Capital Resources
NexGen has recently experienced a number of events that have increased
significantly its working capital needs. The industry's major manufacturer,
Intel has recently implemented rapid price reductions, especially for lower
performance x86 products, after it has introduced higher performance products.
In order to compete, NexGen reduced its prices to levels significantly lower
than Intel products of comparable performance in an attempt to establish
NexGen's products in the marketplace. During the three months ended September
30, 1995, NexGen's product cost reductions have been insufficient to offset
these price decreases and NexGen has been affected adversely because it has
unexpectedly been unable to receive sufficient quantities of products at
higher performance levels, which has resulted in lower average selling prices
for NexGen's products. In response to the aggressive price reductions made by
Intel during the three months ended September 30, 1995, NexGen reduced its
prices and offered price protection to its customers. The foregoing factors
have resulted in negative gross margins for the three months ended September
30, 1995. NexGen expects to continue to experience negative gross margins as
long as it is unable to produce sufficient quantities of higher performance
processors, introduce advanced and higher performance products more closely to
Intel's release dates, or reduce manufacturing costs.
NexGen has been pursuing an aggressive plan to enhance market share,
increase revenue and accelerate new products. Although cost reduction programs
have been planned to improve competitiveness, working capital requirements
will be significant until NexGen generates positive cash flows. In the event
the Merger is not consummated, NexGen will require additional capital or new
bank credit lines to repay the up to $60,000,000 of borrowings from AMD, plus
accrued interest thereon, incurred under the Credit Agreement. The borrowings
from AMD become due no later than one year from the date that the Merger
Agreement is terminated. Management must be successful in securing financing
to repay such borrowings in order for NexGen to continue as a going concern
beyond the date the borrowings from AMD become due. There can be no assurance
that such funding can be obtained or that the terms of such funding will be
acceptable to NexGen, if at all.
Litigation
On November 1, 1995, two alleged stockholders filed suit in the Superior
Court of the State of California, County of Santa Clara, against NexGen, the
members of NexGen's Board of Directors and a former director of NexGen.
F-16
<PAGE>
NEXGEN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The plaintiffs, who purport to represent a class of all NexGen stockholders,
allege that the consideration which NexGen stockholders would receive pursuant
to the Merger, 0.8 of a share of AMD Common Stock, is inadequate, and that the
defendants have therefore breached the directors' fiduciary duties to the
NexGen stockholders. The complaint alleges that the Merger consideration is
below the fair or inherent value of NexGen and that the defendants have not
considered other potential purchasers of NexGen or its stock. The complaint
seeks an injunction against the Merger, rescission of the Merger, if
consummated, unspecified damages, attorneys' fees and other relief. NexGen
believes it has meritorious defenses and intends to vigorously defend the
lawsuit. While the outcome of litigation cannot be accurately predicted, based
upon information presently known to management, NexGen does not believe that
the ultimate resolution of this lawsuit will have a material adverse effect
upon its financial statements presented herein.
F-17
<PAGE>
ANNEX A
AGREEMENT AND PLAN OF MERGER
DATED OCTOBER 20, 1995
AMONG
ADVANCED MICRO DEVICES, INC.,
AMD MERGER CORPORATION
AND
NEXGEN, INC.
AS AMENDED
DECEMBER 11, 1995
A-1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
SECTION 1
THE MERGER.............................................................. A-6
1.1 Merger........................................................... A-6
1.2 Closing.......................................................... A-6
1.3 Consummation of Transactions..................................... A-6
1.4 Effect of Transactions........................................... A-7
1.5 Conversion of NexGen Common Stock................................ A-7
1.6 Surrender and Payment............................................ A-7
1.7 Fractional Shares................................................ A-8
1.8 Assumption of Stock Options and Warrants......................... A-8
1.9 Stockholders' Approvals.......................................... A-8
Certificate of Incorporation, By-laws, Directors and Officers of
1.10 Surviving Corporation........................................... A-8
1.11 Accounting Treatment............................................. A-9
1.12 Tax Consequences................................................. A-9
1.13 Stock Subject to Conditions of Forfeiture........................ A-9
SECTION 2
REPRESENTATIONS AND WARRANTIES OF NEXGEN................................ A-9
2.1 Organization; Qualification...................................... A-9
2.2 Capitalization................................................... A-9
2.3 Subsidiaries..................................................... A-10
2.4 Authority Relative to Agreements................................. A-10
2.5 Consents and Approvals; No Violation............................. A-10
2.6 SEC Reports and Financial Statements............................. A-11
2.7 Undisclosed Liabilities.......................................... A-11
2.8 Absence of Certain Changes or Events............................. A-11
2.9 Proxy Statement.................................................. A-12
2.10 Certain Contracts and Arrangements............................... A-12
2.11 Legal Proceedings................................................ A-13
2.12 No Violation..................................................... A-13
2.13 Taxes and Tax Returns............................................ A-13
(a)General Tax Representations................................... A-13
(b)Withholding................................................... A-13
(c)Tax Sharing Agreements........................................ A-14
(d)Taxes Since June 30, 1995..................................... A-14
(e)Tax Methods................................................... A-14
(f)Definitions................................................... A-14
2.14 Employee Benefit Plans........................................... A-14
2.15 Intellectual Property............................................ A-15
2.16 Title to Properties.............................................. A-16
2.17 Insurance........................................................ A-16
2.18 Transactions with Management..................................... A-17
2.19 Disclosure....................................................... A-17
2.20 Brokerage and Finders' Fees...................................... A-17
2.21 Actions Affecting Pooling........................................ A-17
2.22 Takeover Statutes................................................ A-17
2.23 Agreements of Affiliates and Others.............................. A-17
2.24 Employee Relations............................................... A-18
2.25 Environmental Matters............................................ A-18
2.26 Commercial Relationships......................................... A-18
</TABLE>
A-2
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
SECTION 3
REPRESENTATIONS AND WARRANTIES OF AMD AND AMD MERGER..................... A-18
3.1 Organization; Qualification....................................... A-18
3.2 Capitalization.................................................... A-18
3.3 Subsidiaries...................................................... A-19
3.4 Authority Relative to this Agreement.............................. A-19
3.5 Consents and Approvals; No Violation.............................. A-19
3.6 SEC Reports and Financial Statement............................... A-20
3.7 Undisclosed Liabilities........................................... A-20
3.8 Absence of Certain Changes or Events.............................. A-20
3.9 Proxy Statement................................................... A-21
3.10 Material Contracts................................................ A-21
3.11 Legal Proceedings................................................. A-21
3.12 No Violation...................................................... A-22
3.13 Taxes and Tax Returns............................................. A-22
(a)General Tax Representations.................................... A-22
(b)Withholding.................................................... A-22
(c)Tax Sharing Agreements......................................... A-22
(d)Taxes Since July 2, 1995....................................... A-22
(e)Tax Methods.................................................... A-23
(f)Definitions.................................................... A-23
3.14 Employee Benefit Plans............................................ A-23
3.15 Intellectual Property............................................. A-24
3.16 Title to Properties............................................... A-25
3.17 Insurance......................................................... A-25
3.18 Transactions with Management...................................... A-25
3.19 Disclosure........................................................ A-25
3.20 Brokerage and Finders' Fees....................................... A-25
3.21 Actions Affecting Pooling......................................... A-25
3.22 Takeover Statutes................................................. A-26
3.23 Environmental Matters............................................. A-26
3.24 NexGen Commercial Relationships................................... A-26
SECTION 4
COVENANTS OF NEXGEN...................................................... A-26
4.1 Negative Covenants................................................ A-26
4.2 Affirmative Covenants............................................. A-27
4.3 No Solicitation................................................... A-29
SECTION 5
COVENANTS OF AMD AND AMD MERGER.......................................... A-30
5.1 Negative Covenants................................................ A-30
5.2 Affirmative Covenants............................................. A-31
5.3 Stock Options, Warrants and Convertible Instruments............... A-33
5.4 Employee Benefits................................................. A-33
SECTION 6
INDEMNIFICATION.......................................................... A-34
6.1 Indemnification by NexGen......................................... A-34
6.2 Indemnification by AMD............................................ A-34
6.3 Defense of Action................................................. A-34
6.4 Additional Indemnification by AMD................................. A-35
</TABLE>
A-3
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
SECTION 7
MUTUAL CONDITIONS....................................................... A-35
7.1 Absence of Restraint............................................. A-35
7.2 Absence of Termination........................................... A-35
7.3 Required Approvals............................................... A-35
7.4 Securities Law Requirements...................................... A-35
7.5 Hart-Scott-Rodino Antitrust Improvements Act..................... A-35
7.6 NexGen Stockholders' Approval.................................... A-35
7.7 AMD Stockholders' Approval....................................... A-35
7.8 New York Stock Exchange Listing.................................. A-35
SECTION 8
CONDITIONS PRECEDENT TO OBLIGATIONS OF AMD AND AMD MERGER............... A-36
Compliance with Covenants; Representations and Warranties
8.1 Correct......................................................... A-36
8.2 No Material Adverse Change....................................... A-36
8.3 Section 2.23 Documents........................................... A-36
8.4 Key Employees.................................................... A-36
8.5 Fairness Opinion................................................. A-36
8.6 Comfort Letter................................................... A-36
8.7 Legal Opinion.................................................... A-37
8.8 Resignations..................................................... A-37
8.9 Tax Opinion...................................................... A-37
8.10 Pooling-of-Interests Accounting Treatment........................ A-37
SECTION 9
CONDITIONS PRECEDENT TO NEXGEN'S OBLIGATIONS............................ A-37
Compliance with Covenants; Representations and Warranties
9.1 Correct......................................................... A-37
9.2 No Material Adverse Change....................................... A-37
9.3 Tax Opinion...................................................... A-38
9.4 Fairness Opinion................................................. A-38
9.5 Legal Opinion.................................................... A-38
SECTION 10
TERMINATION OF AGREEMENT................................................ A-38
10.1 Termination...................................................... A-38
10.2 Effect of Termination............................................ A-39
10.3 Fees and Expenses................................................ A-39
10.4 Return of Information; Confidentiality........................... A-40
10.5 Extension of Time; Waivers....................................... A-40
(a) By AMD and AMD Merger........................................ A-40
(b) By NexGen.................................................... A-40
SECTION 11
MISCELLANEOUS........................................................... A-41
11.1 Amendment........................................................ A-41
11.2 No Survival of Representations and Warranties.................... A-41
11.3 Entire Agreement; Counterparts; Applicable Law................... A-41
11.4 Attorneys' Fees.................................................. A-41
11.5 Assignability.................................................... A-41
11.6 Notices.......................................................... A-41
11.7 Titles........................................................... A-42
11.8 Third Party Beneficiary.......................................... A-42
11.9 Cooperation...................................................... A-42
</TABLE>
A-4
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
ANNEXES
Annex 1 Credit Agreement............................................ A-43
EXHIBIT
Exhibit A Form of Voting Agreement.................................... A-68
Exhibit B Form of Affiliate Agreement................................. A-72
Exhibit C Form of No Sale Agreement................................... A-75
</TABLE>
A-5
<PAGE>
AGREEMENT AND PLAN OF MERGER AS AMENDED
AGREEMENT AND PLAN OF MERGER (the "Agreement") dated as of October 20, 1995,
by and among ADVANCED MICRO DEVICES, INC., a Delaware corporation (hereinafter
referred to as "AMD"), AMD MERGER CORPORATION, a Delaware corporation
(hereinafter referred to as "AMD Merger"), and NEXGEN, INC., a Delaware
corporation (hereinafter referred to as "NexGen").
A. AMD has formed AMD Merger as a wholly-owned subsidiary in order to effect
the merger of AMD Merger with and into NexGen (the "Merger") in accordance
with the laws of the State of Delaware and in accordance with this Agreement
so that upon consummation of the Merger, NexGen will be a wholly-owned
subsidiary of AMD and AMD Merger will cease to exist; and
B. This Agreement has been approved by the Boards of Directors of AMD, AMD
Merger and NexGen, by AMD in its capacity as the sole stockholder of AMD
Merger, and will be submitted for approval by the stockholders of AMD and
NexGen; and
C. The Merger is intended to qualify as a tax-free reorganization within the
meaning of the provisions of Section 368 of the Internal Revenue Code of 1986,
as it may be amended from time to time (the "Code"); and
D. AMD and NexGen have entered into a Credit Agreement, dated as of the date
hereof, in the form attached hereto as Annex 1 and forming an integral part of
this Agreement (the "Credit Agreement").
NOW, THEREFORE, in consideration of their mutual covenants, promises and
obligations contained in this Agreement and the Credit Agreement, the parties
hereto agree as follows:
SECTION 1
THE MERGER
1.1 Merger. At the Effective Time (as hereinafter defined) AMD Merger shall
be merged with and into NexGen, whereupon the separate existence of AMD Merger
shall cease, and NexGen shall be the surviving corporation. The above
notwithstanding, at the election of AMD, the Merger shall be restructured such
that either (i) NexGen shall be merged with and into AMD, whereupon the
separate existence of NexGen shall cease, AMD shall be the surviving
corporation, and AMD Merger shall not be a constituent corporation of the
Merger, or (ii) NexGen shall be merged with and into AMD Merger, whereupon the
separate existence of NexGen shall cease, and AMD Merger shall be the
surviving corporation; provided, however, that in each case, AMD's right to
elect an alternative structure shall be subject to the condition that the
Merger will qualify as a tax-free reorganization within the meaning of the
provisions of Section 368 of the Code.
1.2 Closing. The transactions contemplated by this Agreement shall be
consummated at a closing (the "Closing") which will take place at the offices
of Bronson, Bronson & McKinnon, 505 Montgomery Street, San Francisco,
California as soon as practicable after the respective stockholders of AMD and
NexGen shall have approved the Merger, as provided in Section 1.9 of this
Agreement; provided, however, that if any condition of Closing specified in
Sections 7 through 9 has not been satisfied, NexGen or AMD, as the case may
be, may postpone the Closing until a date which is promptly after the
satisfaction of such condition, but in no event shall such postponement extend
beyond April 30, 1996. Notwithstanding the foregoing, the Closing may take
place at such other place, time or date as may be agreed upon by NexGen and
AMD. The date of the Closing is referred to in this Agreement as the "Closing
Date."
1.3 Consummation of Transactions. If, at the Closing, no condition exists
which would permit any of the parties to terminate this Agreement or a
condition then exists and the party entitled to terminate because of that
condition elects not to do so, then the Merger shall be consummated, and then
and thereupon AMD Merger and NexGen will each carry out the procedures
specified under the applicable provisions of the Delaware General
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Corporation Law, as amended (the "DGCL"), including filing a Certificate of
Merger with the Secretary of State of the State of Delaware, whereupon the
Merger shall become effective. The time that the Merger shall become effective
is referred to in this Agreement as the "Effective Time."
1.4 Effect of Transactions. The Merger shall have the effects set forth in
Section 259 of the DGCL.
1.5 Conversion of NexGen Common Stock. (a) At the Effective Time, (i) each
issued and outstanding share of NexGen common stock, par value $.0001 per
share ("NexGen Common Stock") shall cease to be an existing and issued share
and shall become and be converted into, by virtue of the Merger and without
any action on the part of the holder thereof, the right to receive, upon
surrender of the certificate representing such share and in exchange therefor,
8/10th's of a share (the "Exchange Ratio") of AMD common stock, $.01 par value
("AMD Common Stock"); such shares shall be fully paid and nonassessable; and
(ii) each issued and outstanding share of AMD Merger Common Stock, par value
$.01 per share, shall be converted into one (1) issued and outstanding share
of NexGen Common Stock.
(b) In the case of any consolidation or merger of AMD with or into another
corporation other than a merger with another corporation in which AMD is a
continuing corporation and which does not result in any reclassification or
change of AMD Common Stock, at the Effective Time, (i) each issued and
outstanding share of NexGen Common Stock shall cease to be an existing and
issued share and shall become and be converted into, by virtue of the Merger
and without any action on the part of the holder thereof, the right to
receive, upon surrender of the certificate representing such share and in
exchange therefor, 8/10th's of the kind and amount of shares of stock or other
securities receivable upon such consolidation or merger by a holder of one (1)
share of AMD Common Stock; such securities shall be fully paid and
nonassessable; and (ii) each issued and outstanding share of AMD Merger Common
Stock, par value $0.01 per share, shall be converted into one (1) issued and
outstanding share of NexGen Common Stock. Upon any such consolidation or
merger, to the extent reasonably deemed necessary by NexGen, AMD or the
successor corporation shall execute appropriate documentation to insure the
result provided for in this Section 1.5(b).
1.6 Surrender and Payment. (a) Prior to the Effective Time, AMD shall
appoint an agent reasonably satisfactory to NexGen (the "Exchange Agent") for
the purpose of exchanging certificates representing shares of NexGen Common
Stock as provided in Section 1.5. At the Effective Time, AMD will deposit with
the Exchange Agent certificates representing the aggregate number of shares of
AMD Common Stock to be issued in respect of shares of NexGen Common Stock.
Promptly after the Effective Time, AMD will send, or will cause the Exchange
Agent to send, to each holder of shares of NexGen Common Stock at the
Effective Time a letter of transmittal for use in such exchange (which shall
specify that the delivery shall be effected, and risk of loss and title shall
pass, only upon proper delivery of the certificates representing shares of
NexGen Common Stock to the Exchange Agent.
(b) Each holder of shares of NexGen Common Stock that have been converted
into a right to receive shares of AMD Common Stock upon surrender to the
Exchange Agent of a certificate or certificates representing such shares of
NexGen Common Stock, together with a properly completed letter of transmittal
covering such shares, will be entitled to receive the shares of AMD Common
Stock issuable in respect of such shares. Until so surrendered, each such
certificate shall, after the Effective Time, represent for all purposes only
the right to receive such shares of AMD Common Stock.
(c) If any shares of AMD Common Stock are to be paid to a person other than
the registered holder of the shares of NexGen Common Stock represented by the
certificate or certificates surrendered in exchange therefor, it shall be a
condition to such payment that the certificate or certificates so surrendered
shall be properly endorsed or otherwise be in proper form for transfer and
that the person requesting such payment shall pay to the Exchange Agent any
transfer or other taxes required as a result of such payment to a person other
than the registered holder of such shares of NexGen Common Stock or establish
to the satisfaction of the Exchange Agent that such tax has been paid or is
not payable.
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(d) After the Effective Time, there shall be no further registration of
transfers of shares of NexGen Common Stock. If, after the Effective Time,
certificates representing shares of NexGen Common Stock are presented to
NexGen or AMD, they shall be canceled and exchanged for shares of AMD Common
Stock in accordance with the procedures set forth herein.
(e) Any shares of AMD Common Stock deposited with the Exchange Agent
pursuant to Section 1.6(a) that remain unclaimed by the holders of shares of
NexGen Common Stock twelve months after the Effective Time shall be returned
to AMD upon demand, and any such holder who has not exchanged his shares of
NexGen Common Stock for AMD in accordance with this Section 1.6 prior to that
time shall thereafter look only to AMD for his claim for AMD Common Stock, any
cash in lieu of fractional shares of AMD Common Stock and any dividends or
distributions with respect to AMD Common Stock. Notwithstanding the foregoing,
AMD shall not be liable to any holder of shares of AMD Common Stock for any
amount paid to a public official pursuant to applicable abandoned property
laws.
(f) No dividends or other distributions with respect to the AMD Common Stock
to be issued in the Merger shall be paid to the holder of any unsurrendered
certificates representing shares of NexGen Common Stock until such
certificates are surrendered as provided in this Section 1.6. Upon such
surrender, there shall be paid, without interest, to the holder of the AMD
Common Stock into which such shares of NexGen Common Stock were converted, (1)
all dividends and other distributions in respect of AMD Common Stock that are
payable on a date subsequent to, and the record date for which occurs after,
the Effective Time, and (2) all dividends or other distributions in respect of
shares of NexGen Common Stock that are payable on a date subsequent to, and
the record date for which occurs before, the Effective Time.
1.7 Fractional Shares. No fractional shares of AMD Common Stock will be
issued in connection with the Merger and no certificate therefor will be
issued. In lieu of such fractional shares, any holder of NexGen Common Stock
who would otherwise be entitled to a fraction of a share of AMD Common Stock
shall, upon surrender of his certificate or certificates representing NexGen
Common Stock, be paid an amount in cash (without interest) determined by
multiplying such fraction by the average of the last reported sales price,
regular way, of AMD Common Stock on the New York Stock Exchange (the "NYSE")
for the twenty trading days immediately preceding the Closing. The Exchange
Agent will, subject to any applicable abandoned property or similar law, until
one year after the Effective Time, pay to such holders, upon surrender of
their certificates, representing NexGen Common Stock outstanding immediately
prior to the Effective Time, the cash value of such fractions so determined,
without interest. This obligation shall be assumed by AMD one year after the
Effective Time subject to any applicable statute of limitations or any
abandoned property or similar law.
1.8 Assumption of Stock Options and Warrants. At the Effective Time, all
options or rights to purchase NexGen Common Stock then outstanding under the
NexGen 1995 Employee Stock Purchase Plan, the NexGen 1987 Stock Plan, and the
NexGen 1995 Stock Plan (the "NexGen Options"), all outstanding warrants to
purchase NexGen Common Stock (the "NexGen Warrants") and the option of ASCII
to acquire NexGen Common Stock under the ASCII Notes described in Section
2.2(b) shall be assumed by AMD in accordance with the provisions of Section
5.3 hereof.
1.9 Stockholders' Approvals. AMD and NexGen shall each call a meeting of
their respective stockholders to consider and vote upon the approval of this
Agreement and the Merger contemplated hereby (the "AMD Stockholders' Meeting"
and the "NexGen Stockholders' Meeting"), all in accordance with the provisions
of the DGCL and the Securities Exchange Act of 1934, as amended ("the Exchange
Act"), as soon as practicable after AMD's registration statement on Form S-4
relating to the shares of AMD Common Stock to be issued in connection with the
Merger (the "S-4") shall have been declared effective by the Securities and
Exchange Commission (the "SEC") and the Proxy Statement, as defined in Section
4.2(c), has been cleared by the SEC.
1.10 Certificate of Incorporation, By-laws, Directors and Officers of
Surviving Corporation. At the Effective Time of the Merger, (i) the
Certificate of Incorporation and By-laws of NexGen, as in effect immediately
prior thereto, shall be and remain the Certificate of Incorporation and By-
laws of the surviving
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corporation until thereafter amended in accordance with applicable law and
(ii) the officers and directors of NexGen shall be as set forth below:
<TABLE>
<C> <S>
Directors: W.J. Sanders III
Richard Previte
S. Atiq Raza
Officers: S. Atiq Raza, President and
Secretary
Anthony S.S. Chan, Treasurer
</TABLE>
1.11 Accounting Treatment. The parties intend that the Merger will be
treated as a pooling-of-interests for accounting purposes by AMD.
1.12 Tax Consequences. For federal income tax purposes, the Merger is
intended to constitute a tax-free reorganization within the meaning of Section
368(a) of the Code.
1.13 Stock Subject to Conditions of Forfeiture. All shares of AMD Common
Stock which are received in the Merger in exchange for shares of NexGen Common
Stock which, under agreements with NexGen or its subsidiaries, are unvested or
subject to a repurchase option or other condition of forfeiture which, by its
terms, does not terminate due to the Merger will also be unvested or subject
to the same repurchase option or other condition, as the case may be, and the
certificates evidencing such shares will be marked with appropriate legends.
SECTION 2
REPRESENTATIONS AND WARRANTIES OF NEXGEN
Except as set forth in the schedule of disclosures and exceptions delivered
to AMD contemporaneously with the execution of this Agreement and initialled
by an officer of NexGen (the "NexGen Disclosure Schedule"), the sections of
which are numbered to correspond to the section numbers of this Agreement,
NexGen represents and warrants to AMD and AMD Merger as follows:
2.1 Organization; Qualification. NexGen is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
NexGen has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted and
is duly qualified and in good standing to do business as a foreign corporation
in each jurisdiction in which the property owned, leased or operated by it or
the nature of the business conducted by it makes such qualification necessary,
except where the failure to have such power and authority or to be so duly
qualified and in good standing would not, in the aggregate, have a material
adverse effect on the business, operations or financial condition of NexGen.
NexGen has previously delivered to AMD complete and correct copies of NexGen's
Certificate of Incorporation and Bylaws.
2.2 Capitalization.
(a) NexGen's authorized capital stock consists of 125,000,000 shares of
NexGen Common Stock, $0.0001 par value per share, and 5,000,000 shares of
Preferred Stock, $0.0001 par value per share. As of September 30, 1995,
33,212,010 shares of NexGen Common Stock were issued and outstanding and were
designated for quotation on the Nasdaq National Market, no shares of Preferred
Stock were issued and outstanding, and no shares of NexGen Common Stock or
Preferred Stock were issued and held in the treasury. As of September 30,
1995, NexGen had reserved 8,590,588 shares of NexGen Common Stock for issuance
pursuant to the NexGen employee benefit programs described in Section 2.2 of
the NexGen Disclosure Schedule and pursuant to outstanding warrants and
convertible securities.
(b) All outstanding shares of NexGen Common Stock are validly issued, fully
paid, nonassessable and free of preemptive rights. Section 2.2 of the NexGen
Disclosure Schedule contains a true and complete list of all
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employee benefit programs and warrants which obligate or permit NexGen to
issue its capital stock to its directors, officers, employees, outside
independent sales representatives or other parties. Except for the options and
warrants issued pursuant to any of the employee benefit programs and warrants
described in Section 2.2 of the NexGen Disclosure Schedule, and the option
held by ASCII Corporation and ASCII of America, Inc. (collectively "ASCII")
pursuant to promissory notes between NexGen and ASCII (the "ASCII Notes")
which permit ASCII to convert all or a portion of the ASCII Notes into shares
of NexGen Common Stock, there are no outstanding subscriptions, options,
warrants, calls, rights, agreements or commitments obligating NexGen to issue,
sell, deliver or transfer (including any right of conversion or exchange under
any outstanding security or other instrument) any shares of NexGen's capital
stock.
(c) Except for this Agreement, the Section 2.23 Documents as defined below,
the employee benefit programs described in the NexGen Disclosure Schedule and
outstanding warrants, there are no agreements, restrictions or understandings
to which NexGen is a party, with respect to the sale, transfer or voting of
any shares of NexGen Common Stock.
2.3 Subsidiaries. Section 2.3 of the NexGen Disclosure Schedule contains a
true and complete list of all of NexGen's subsidiaries (each such subsidiary
shall hereinafter separately be called a "NexGen Subsidiary" and all such
subsidiaries shall collectively be called the "NexGen Subsidiaries") and their
jurisdictions of incorporation. All of the shares of capital stock of each of
the NexGen Subsidiaries are owned directly or indirectly by NexGen, are
validly issued, fully paid and nonassessable and are owned free and clear of
any liens, claims, charges or encumbrances. There are no existing options,
warrants, calls or commitments of any character relating to the issued or
unissued capital stock of any of the NexGen Subsidiaries. NexGen has, and the
NexGen Subsidiaries have, no material investment in any subsidiary or any
material investment in any partnership, joint venture or similar entity,
except as disclosed in Section 2.3 of the NexGen Disclosure Schedule, all of
which investments are owned free and clear of any liens, claims, charges or
encumbrances. Each of the NexGen Subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of
its incorporation. Each of the NexGen Subsidiaries has all requisite corporate
power and authority to own, lease and operate its properties and to carry on
its business as now being conducted and is duly qualified and in good standing
to do business as a foreign corporation in each jurisdiction in which the
nature of its business or the owning or leasing of its properties makes such
qualification necessary, except where the failure to have such power and
authority or to be so qualified would not, in the aggregate, have a material
adverse effect on the assets, properties, business or financial condition of
NexGen and the NexGen Subsidiaries taken as a whole.
2.4 Authority Relative to Agreements. NexGen has full corporate power and
authority to execute and deliver this Agreement and the Credit Agreement and
to consummate the transactions contemplated hereby and thereby. The execution
and delivery of this Agreement and the Credit Agreement and the consummation
of the transactions contemplated hereby and thereby have been duly and validly
authorized by the Board of Directors of NexGen, and no other corporate
proceedings on the part of NexGen are necessary for NexGen to authorize this
Agreement and the Credit Agreement or, other than approval of this Agreement
by NexGen's stockholders, to consummate the transactions contemplated hereby
and thereby. This Agreement and the Credit Agreement have been duly and
validly executed and delivered by NexGen and constitute valid and binding
agreements of NexGen, enforceable against NexGen in accordance with their
terms.
2.5 Consents and Approvals; No Violation. Except as may be required by the
Exchange Act, the Securities Act of 1933, as amended (the "Securities Act"),
Title II of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), state securities laws and the DGCL, there is no
requirement applicable to NexGen or any of the NexGen Subsidiaries to make any
filing with, or to obtain any permit, authorization, consent or approval of,
any governmental or regulatory authority as a condition to the lawful
consummation by NexGen of the transactions contemplated by this Agreement.
NexGen does not know of any reason why any required permit, authorization,
consent or approval will not be obtained. Neither the execution and delivery
of this Agreement or the Credit Agreement by NexGen nor the consummation by
NexGen of the transactions contemplated by this Agreement or the Credit
Agreement will (a) conflict with or result in
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any breach of any provision of the Certificate of Incorporation or Bylaws of
NexGen, (b) result in a breach of or constitute a default (or an event that
with notice or lapse of time or both would become a default), or impair
NexGen's or any of the NexGen Subsidiaries' rights or alter the rights or
obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any material
contract, note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which NexGen
or any of the NexGen Subsidiaries is a party or by which NexGen or any of the
NexGen Subsidiaries or its or any of their respective properties is bound or
affected, (c) violate in any material respects any statute, rule, regulation,
order, writ, injunction or decree applicable to NexGen, any NexGen Subsidiary
or any of their respective assets where the consequences of such violation
would, in the aggregate, have a material and adverse effect on NexGen and the
NexGen Subsidiaries taken as a whole, or (d) result in the creation of any
material, individually or in the aggregate, liens, charges or encumbrances on
any of the assets of NexGen or the NexGen Subsidiaries.
2.6 SEC Reports and Financial Statements.
(a) NexGen has previously furnished to AMD complete and correct copies,
including exhibits, of: (i) its prospectus dated May 24, 1995, filed with the
SEC on May 26, 1995, pursuant to Rule 424(b)(4) under the Act (the "NexGen
Prospectus"); (ii) its Annual Report (the "NexGen Annual Report") on Form 10-K
for the fiscal year ended June 30, 1995; (iii) all reports or filings, other
than the NexGen Annual Report, filed by NexGen with the SEC (the "NexGen Other
Reports"); and (iv) a draft of its Quarterly Report (the "NexGen Draft
Quarterly Report") on Form 10-Q for the quarter ended September 30, 1995.
(b) As of their respective dates, the NexGen Prospectus, the NexGen Annual
Report, the NexGen Other Reports, and the NexGen Draft Quarterly Report did
not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(c) NexGen has filed with the SEC all reports and registration statements
and other filings required to be filed with the SEC under the rules and
regulations of the SEC.
(d) The audited consolidated financial statements and unaudited interim
financial statements included in the reports or other filings referred to in
Section 2.6(a) were prepared in conformity with generally accepted accounting
principles applied on a consistent basis (except as may be indicated therein
or in the notes thereto, and except that the unaudited interim financial
statements do not include complete footnote disclosure), fairly present the
consolidated financial position of NexGen and the NexGen Subsidiaries as of
the dates thereof and the consolidated results of operations and changes in
financial position of NexGen and the NexGen Subsidiaries for the periods shown
therein, subject, in the case of unaudited interim financial statements, to
normal year-end audit adjustments.
2.7 Undisclosed Liabilities. Neither NexGen nor any NexGen Subsidiary has
any material liability or obligation, secured or unsecured (whether absolute,
accrued, contingent or otherwise, and whether due or to become due), except
for any such material liability and obligation which (a) is accrued or
reserved against in the balance sheet as of June 30, 1995, contained in the
NexGen Annual Report for the period ended June 30, 1995, (the "NexGen Audited
Balance Sheet"), or disclosed in the notes included in the audited financial
statements of NexGen for the fiscal year ended June 30, 1995, contained in the
NexGen Annual Report (the "NexGen Audited Financial Statements"), (b) is of a
normally recurring nature and was incurred after June 30, 1995, in the
ordinary course of business consistent with past practice, or (c) was incurred
in the ordinary course of business and is not required to be disclosed in
financial statements or the notes thereto under generally accepted accounting
principles.
2.8 Absence of Certain Changes or Events. Since June 30, 1995, there has not
been:
(a) any material adverse change in the business, assets, liabilities,
financial condition or results of operations of NexGen and the NexGen
Subsidiaries taken as a whole or any event which could, so far as can
reasonably be foreseen, have such an effect;
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(b) any damage, destruction or casualty loss, whether or not covered by
insurance, materially and adversely affecting, or which could materially
and adversely affect, the assets, properties, business, results of
operations or financial condition of NexGen and the NexGen Subsidiaries
taken as a whole;
(c) any material increase in the compensation payable or to become
payable by NexGen or any NexGen Subsidiary to its directors, officers or
employees or any material increase in any bonus, insurance, pension or
other employee benefit plan or program, payment or arrangement made to, for
or with any such directors, officers or employees, other than in the
ordinary course of business;
(d) any labor dispute, other than routine matters none of which is, or so
far as can reasonably be foreseen could be, materially adverse to the
assets, properties, business, results of operations or financial condition
of NexGen and the NexGen Subsidiaries taken as a whole;
(e) any entry by NexGen or the NexGen Subsidiaries into any material
commitment or transaction (including, without limitation, any borrowing or
capital expenditure), other than in the ordinary course of business;
(f) any change by NexGen or the NexGen Subsidiaries in accounting
methods, principles or practices, except as required by generally accepted
accounting principles or concurred with by NexGen's independent certified
public accountants;
(g) any declaration, payment or setting aside for payment of any dividend
(whether in cash, stock or property) with respect to the capital stock of
NexGen; or
(h) any material agreement, whether in writing or otherwise, to take any
action described in this Section 2.8.
2.9 Proxy Statement. None of the information relating to NexGen which is
furnished to AMD by NexGen for the purpose of inclusion in or the preparation
of (i) the Proxy Statement (as defined in Section 4.2(c)) at the time the
Proxy Statement is mailed, at the time of the meeting of NexGen's stockholders
to vote on the Merger or at the Effective Time of the Merger, as then amended
or supplemented, or (ii) the S-4 to be filed by AMD with the SEC pursuant to
Section 5.2(d) at the time the S-4 becomes effective or at the Effective Time
of the Merger, as then amended or supplemented, will contain any statement
which, at the time and in light of the circumstances under which it is made,
is false or misleading with respect to any material fact or omits to state any
material fact required to be stated therein or necessary in order to make the
statements therein not misleading or necessary to correct any statement which
has become false or misleading in any earlier communication with respect to
the solicitation of proxies for the NexGen Stockholders' Meeting. The Proxy
Statement as it relates to NexGen will comply as to form in all material
respects with the requirements of the Exchange Act and the rules and
regulations thereunder in effect at the time the Proxy Statement is mailed.
2.10 Certain Contracts and Arrangements. Except for agreements listed as
exhibits to the NexGen Annual Report, none of NexGen or any Of the NexGen
Subsidiaries is a party to any material: (a) employment agreement; (b)
collective bargaining agreement; (c) license agreement or arrangement; (d)
indenture, mortgage, note, installment obligation, agreement or other
instrument relating to the borrowing of money in excess of $50,000 by NexGen
or any NexGen Subsidiary or the guaranty of any obligation for the borrowing
of money by NexGen or any NexGen Subsidiary in excess of such amount; or (e)
agreement (other than contracts for insurance) which (i) is not terminable by
NexGen, or a NexGen Subsidiary, as applicable, on ninety (90) or fewer days
notice at any time without penalty and involves the receipt or payment by
NexGen or a NexGen Subsidiary of more than $50,000 in any 12 month period,
(ii) any joint venture, partnership or similar arrangement extending beyond
six (6) months or involving equity or investments of more than $50,000, or
(iii) is otherwise material to NexGen or the NexGen Subsidiaries taken as a
whole. There is not, under any of the aforesaid agreements or obligations, any
material default or event of default by NexGen or other event which (with or
without notice, lapse of time or both) would constitute a material default or
event of default by NexGen or any NexGen Subsidiary. Except as disclosed in
the NexGen Prospectus, no director or officer of NexGen or any NexGen
Subsidiary, and to the knowledge of the executive officers of NexGen, no
person who is an affiliate of any such director or officer has any material
contractual relationship with NexGen or any NexGen Subsidiary.
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2.11 Legal Proceedings. Except as disclosed in the footnotes to the NexGen
Audited Financial Statements or the NexGen Annual Report there are no pending
or, to the knowledge of NexGen, threatened legal, administrative, arbitration
or other proceedings or governmental investigations or reviews against NexGen
or any NexGen Subsidiary which could, individually or in the aggregate, have a
material adverse effect on the business, results of operations or financial
condition of NexGen and the NexGen Subsidiaries taken as a whole or on the
ability of NexGen to carry out the transactions contemplated in this
Agreement. Neither NexGen nor any NexGen Subsidiary is in default with respect
to any order, writ, award, judgment, injunction or decree of any court or
governmental or administrative body or agency applicable to it which could
have a materially adverse effect on the consolidated assets, properties,
business or financial condition of NexGen and the NexGen Subsidiaries taken as
a whole.
2.12 No Violation. Except as disclosed in the NexGen Annual Report, NexGen
and the NexGen Subsidiaries have substantially complied with all applicable
laws, ordinances, regulations, judgments, decrees, injunctions or orders of
any court or other governmental entity, except for violations which,
individually or in the aggregate, do not and are not expected to have a
material adverse effect on the operations, business or financial condition of
NexGen and the NexGen Subsidiaries taken as a whole.
2.13 Taxes and Tax Returns.
(a) General Tax Representations. NexGen represents and warrants, on behalf
of itself and each of the NexGen Subsidiaries, that (i) each of NexGen and the
NexGen Subsidiaries has timely filed (or will timely file prior to the
Closing) all federal, state, local and foreign tax returns required to be
filed by it prior to the Closing, (ii) each of NexGen and the NexGen
Subsidiaries has timely paid (or will do so prior to the Closing) or made
adequate provision for the payment of all taxes (which are separately or in
the aggregate material), as defined below, due and payable by it (without
regard to whether or not such taxes have been assessed); (iii) all material
information contained in or provided in connection with the tax returns filed
by (or to be filed by) NexGen or any of the NexGen Subsidiaries is (or will
be) true, complete and accurate; (iv) NexGen and each of the NexGen
Subsidiaries has no liability for unpaid taxes (which are separately or in the
aggregate material), whether or not disputed, accrued or applicable for the
period ended June 30, 1995, and for all years and periods ended prior thereto,
except for amounts reserved on the NexGen Audited Balance Sheet; (v) the
California Bank and Corporation Franchise and Corporation Income tax returns
of NexGen and of each of the NexGen Subsidiaries have been audited by the
Franchise Tax Board ("FTB") or the statutes of limitations with respect to
California Bank and Corporation Franchise and Corporation Income taxes have
all expired, for all fiscal years to and including the fiscal year ended June
30, 1988; (vi) the federal income tax returns of NexGen and each of the NexGen
Subsidiaries have been audited by the Internal Revenue Service ("IRS"), or the
statutes of limitations with respect to federal income taxes have all expired,
for all fiscal years to and including the fiscal year ended June 30, 1988;
(vii) all deficiencies asserted as a result of all foreign, if any, U.S.
federal, state and local tax examinations have been paid, fully settled or
adequately provided for as a tax liability in the NexGen Audited Balance
Sheet; (viii) there are no audits, investigations, examinations or tax
litigation matters threatened or pending, nor have any claims been made or
asserted, for or with respect to taxes (which are separately or in the
aggregate material) of NexGen or any of the NexGen Subsidiaries; (ix) there
are no outstanding agreements or waivers extending the statutory period of
limitation on assessment or collection applicable to any tax return or tax
period of NexGen or any of the NexGen Subsidiaries; (x) neither NexGen nor any
of the NexGen Subsidiaries has filed a consent to the application of Section
341(f) of the Code; and (xi) to the best of NexGen's knowledge, NexGen's
stockholders do not have, and as of the Closing will not have, any present
intention, plan or arrangement to sell, transfer or otherwise dispose of, in
the aggregate, that number of the shares of AMD Common Stock to be received by
them pursuant to the terms of this Agreement which would result, after all
such transfers are made, in such stockholders retaining and holding, after the
Closing, shares of AMD common stock having an aggregate value of less than
fifty percent (50%) of the aggregate value of the NexGen Common Stock held by
all of NexGen's shareholders immediately prior to the Closing.
(b) Withholding. NexGen and each of the NexGen Subsidiaries has withheld
from its employees, customers and any other applicable payees (and timely paid
to the appropriate governmental entity) proper and
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accurate amounts for all periods through the date hereof in compliance with
all tax withholding laws (including, without limitation, income, social
security and employment tax withholding for all types of compensation, back-up
withholding and withholding on payments to non-United States persons).
(c) Tax Sharing Agreements. There is no contract, agreement or intercompany
account system in existence pursuant to which NexGen or any of the NexGen
Subsidiaries has, or may at any time in the future have, an obligation to
contribute to the payment of any portion of a tax (or pay any amount
calculated with reference to any portion of a tax) determined on a
consolidated, combined or unitary basis with respect to an affiliated group or
other group of corporations of which NexGen or any NexGen Subsidiary is or was
a member.
(d) Taxes Since June 30, 1995. Since June 30, 1995, NexGen and the NexGen
Subsidiaries have not incurred any material tax liability other than taxes
incurred (i) in the ordinary course of their business, (ii) pursuant to a
change set forth in Section 2.8(f) of the NexGen Disclosure Schedule, or (iii)
pursuant to a transaction permitted under Section 4.1 of this Agreement.
(e) Tax Methods. Since June 30, 1995, NexGen and the NexGen Subsidiaries
have used tax accounting methods, practices and elections consistent with past
practices.
(f) Definitions. (i) The term "tax" or "taxes" shall mean all taxes,
charges, fees, levies or other assessments, including, without limitation,
income, gross receipts, ad valorem, value added, alternative or add-on
minimum, capital stock, registration, net worth, severance, stamp, windfall
profits, environmental (including taxes under Section 59A of the Code),
excise, property, sales, use, license, payroll, employment, disability, social
security, workers' compensation, franchise, duties, business or other
occupation, withholding, transfer or recording taxes, fees, charges and
obligations, imposed by the United States, or any state, local or other
political subdivision or agency thereof, as well as any foreign government or
other political subdivision or agency thereof, whether computed on a
consolidated, unitary, combined or any other basis; and such term shall
include any and all interest, penalties and additions to tax, as well as any
primary or secondary liability for taxes. (ii) The term "tax return" shall
mean any report, election, claim, information statement, filing, return or
other document or information required by law to be supplied to a taxing
authority in connection with taxes, including any schedules, supplements or
attachments thereto.
2.14 Employee Benefit Plans.
(a) Section 2.14(a) of the NexGen Disclosure Schedule lists each employee
benefit plan, as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974 ("ERISA") and hereinafter referred to as "Employee
Benefit Plan(s)," which NexGen or any of the NexGen Subsidiaries maintains or
administers, or to which NexGen or any of the NexGen Subsidiaries contributes
or is required to contribute, or with respect to which NexGen has or may incur
any present or future obligation. True and correct copies of all Employee
Benefit Plans, and all related trust agreements, annuity contracts and any
other funding instruments have been furnished to AMD, together with (i) the
most recent annual report (Form 5500 series, including, if applicable,
Schedule B thereto), (ii) the most recent actuarial valuations, if any, and
(iii) all "summary plan descriptions" and "summaries of material
modifications" (as defined in Section 102 of ERISA and the regulations
thereunder) prepared in connection with each Employee Benefit Plan. Neither
NexGen nor any of the NexGen Subsidiaries is a participant in any "multi-
employer plan" within the meaning of Section 4001(a)(3) of ERISA.
(b) Section 2.14(b) of the NexGen Disclosure Schedule lists all plans,
agreements or arrangements, exclusive of any Employee Benefit Plan, relating
to any form of current or deferred compensation (exclusive of base salary and
base wages), bonus, stock option, stock purchase, incentive, vacation, health,
dental, disability and death benefits which NexGen or any of the NexGen
Subsidiaries maintains or administers, or to which NexGen or any of the NexGen
Subsidiaries contributes or is required to contribute, or with respect to
which NexGen has or may incur any present or future obligation. True and
correct copies of all such plans, agreements or arrangements (hereinafter
referred to collectively as "NexGen Benefit Arrangements") have been furnished
to AMD.
(c) Each Employee Benefit Plan (and any related trust agreements, annuity
contracts and other funding instruments) has been and is being administered
and operated in accordance with its terms and has complied, and complies
currently, in all material respects, with the provisions of ERISA and of the
Code and all other
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applicable laws, rules and regulations. Each NexGen Benefit Arrangement has
been and is being administered and operated in accordance with its terms and
has complied, and currently complies, with the provisions of all applicable
laws, rules and regulations. All reports required by any governmental agencies
have been timely filed with respect to all Employee Benefit Plans and all
NexGen Benefit Arrangements.
Each Employee Benefit Plan which is intended to be tax qualified under
Section 401(a) or Section 403 of the Code is so qualified and has received a
favorable determination letter, covering all amendments thereto, from the IRS
indicating that it is so qualified. Each trust which is intended to be tax-
exempt--under Section 501(a) of the Code is exempt from taxation.
(d) No "prohibited transaction," as defined in Section 406 of ERISA and
Section 4975 of the Code, has occurred with respect to any Employee Benefit
Plan which could subject any person or entity (other than a person or entity
for whom NexGen or any of the NexGen Subsidiaries is not directly or
indirectly responsible) to liability under Title I of ERISA or to the
imposition of any tax under Section 4975 of the Code.
(e) Other than for claims in the ordinary course for benefits under any and
all Employee Benefit Plans or NexGen Benefit Arrangements, there are no
actions, suits, claims or proceedings pending or, to the best knowledge of
NexGen, threatened, nor does there exist any basis therefor, which could
result in any material liability on the part of NexGen or any NexGen
Subsidiary with respect to any Employee Benefit Plan or NexGen Benefit
Arrangement.
(f) Neither NexGen nor any NexGen Subsidiary maintains any Employee Benefit
Plan subject to Title IV of ERISA.
(g) There has been no amendment to, or changes in the actuarial assumptions
or funding of, any Employee Benefit Plan or NexGen Benefit Arrangement which
would materially increase the annual expense associated with such plan or
arrangement above the level of the expense set forth in the NexGen
Consolidated Statement of Operations for the fiscal year ended June 30, 1995.
2.15 Intellectual Property.
(a) NexGen owns, or is licensed or otherwise possesses legally sufficient
rights to use, all patents, trademarks, trade names, service marks,
copyrights, maskworks and any applications therefor, technology, know-how,
computer software programs or applications (in both source code and object
code form) and tangible or intangible proprietary information or material that
are used or proposed to be used in the business of NexGen as currently
conducted in any material respect. Section 2.15(a) of the NexGen Disclosure
Schedule lists all current and past (lapsed, expired, abandoned or cancelled)
patents, registered and material unregistered copyrights, maskworks, trade
names and any applications therefor owned by NexGen (the "NexGen Intellectual
Property Rights"), and specifies the jurisdictions in which each such
Intellectual Property Right has been issued or registered or in which an
application for such issuance and registration has been filed, including the
respective registration or application numbers and the names of all registered
owners, together with a list of all of NexGen's currently marketed software
products and an indication as to which, if any, of such software products have
been registered for copyright protection with the United States Copyright
Office and any foreign offices and by whom such items have been registered.
Section 2.15(a) of the NexGen Disclosure Schedule includes and specifically
identifies all third-party patents, trademarks, copyrights (including
software) and maskworks (the "Third Party Intellectual Property Rights"), to
the knowledge of NexGen, which are incorporated in, are, or form a part of,
any NexGen product. Section 2.15(a) of the NexGen Disclosure Schedule lists
(i) any requests NexGen has received to make any registration of the type
referred to in the penultimate sentence prior hereto, including the identity
of the requestor and the item requested to be so registered, and the
jurisdiction for which such request has been made; (ii) all material licenses,
sublicenses and other agreements as to which the Company is a party and
pursuant to which any person is authorized to use NexGen Intellectual Property
Right, or any trade secret material to NexGen; and (iii) all material
licenses, sublicenses and other agreements as to which NexGen is a party and
pursuant to which NexGen is authorized to use any Third Party Intellectual
Property Rights, or other trade secret of a third party in or as any product,
and includes the identity of all parties thereto, a description of the nature
and subject matter thereof, the applicable royalty and the term thereof.
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(b) NexGen is not, nor will it be as a result of the execution and delivery
of this Agreement or the performance of its obligations hereunder, in
violation of any license, sublicense or agreement described in Section 2.15(a)
of the NexGen Disclosure Schedule. No claims with respect to the NexGen
Intellectual Property Rights, any trade secret material to NexGen, or Third
Party Intellectual Property Rights to the extent arising out of any use,
reproduction or distribution of such Third Party Intellectual Property Rights
by or through NexGen, are currently pending or, to the knowledge of NexGen,
are threatened by any person, nor does NexGen know of any valid grounds for
any bona fide claims (i) to the effect that the manufacture, sale, licensing
or use of any product as now used, sold or licensed or proposed for use, sale
or license by NexGen infringes on any copyright, maskwork, patent, trademark,
service mark or trade secret; (ii) against the use by NexGen of any
trademarks, trade names, trade secrets, copyrights, maskworks, patents,
technology, know-how or computer software programs and applications used in
NexGen's business as currently conducted or as proposed to be conducted by
NexGen; (iii) challenging the ownership, validity or effectiveness of any of
NexGen's Intellectual Property Rights or other trade secret material to
NexGen, or (iv) challenging NexGen's license or legally enforceable right to
use of the Third Party Intellectual Rights. To NexGen's knowledge, after
reasonable investigation, all patents, registered trademarks, maskworks and
copyrights held by NexGen are valid and subsisting. To NexGen's knowledge,
there is no material unauthorized use, infringement or misappropriation of any
of the NexGen Intellectual Property by any third party, including any employee
or former employee of NexGen or any of the NexGen Subsidiaries. Neither NexGen
nor any of the NexGen Subsidiaries (i) has been sued or charged in writing as
a defendant in any claim, suit, action or proceeding which involves a claim or
infringement of trade secrets, any patents, trademarks, service marks,
maskworks or copyrights and which has not been finally terminated prior to the
date hereof or been informed or notified by any third party that NexGen may be
engaged in such infringement or (ii) has knowledge of any infringement
liability with respect to, or infringement by, NexGen or any of the NexGen
Subsidiaries of any trade secret, patent, trademark, service mark, maskwork or
copyright of another.
(c) Neither the execution and delivery of this Agreement or the Credit
Agreement by NexGen nor the consummation by NexGen of the transactions
contemplated by this Agreement or the Credit Agreement will result in any
breach of or constitute a default (or an event that with notice or lapse of
time or both would become a default), or impair NexGen's or any of the NexGen
Subsidiaries' rights or alter the rights or obligations of any third party
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any license agreement, contract or other arrangement of any
nature relating to NexGen Intellectual Property Rights or Third Party
Intellectual Property Rights.
(d) Each employee of NexGen has executed a confidentiality, invention and
copyright agreement with NexGen in the forms previously delivered to AMD.
2.16 Title to Properties. NexGen or a NexGen Subsidiary has good and
marketable title to all properties and assets reflected on the NexGen Audited
Balance Sheet as owned by it and to properties or assets acquired by it or a
NexGen Subsidiary after the date thereof (except for equipment which is
subject to capital leases and properties sold or otherwise disposed of in the
ordinary course of business since the date of the NexGen Audited Balance
sheet), free and clear of all title defects and all liens, mortgages, pledges,
claims, charges, security interests or other encumbrances of any nature
whatsoever except as stated in the NexGen Annual Report or which alone or in
the aggregate do not materially detract from the value, or materially
interfere with the present use, of any material asset or property or of the
assets or properties of NexGen and the NexGen Subsidiaries as a whole or
otherwise materially impair the business of NexGen and the NexGen Subsidiaries
as a whole.
2.17 Insurance. NexGen and each of the NexGen Subsidiaries has insurance on
its officers, directors, employees, business operations and property, in such
amounts as are reasonable and deemed adequate by its Board of Directors or
management, against all risks usually insured against by persons operating
similar properties or businesses in the localities where such properties are
located, under, to the best of NexGen's knowledge, valid and enforceable
policies issued by insurers of recognized responsibility, and such policies
shall not, pursuant to their terms, in any way be affected by, or terminate or
lapse by reason of, the Merger. Section 2.17 of the NexGen Disclosure Schedule
contains a list of the policies of fire, casualty, liability, title, workers'
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compensation and other forms of insurance held by NexGen, a list of all
liability policies and self-insured retentions (including the names of
insurers and the limits of liability for each policy) for the past nine years,
as well as a description of general liability loss details for the past five
years and any exposure ordinarily covered by commercial insurance which is
self-insured. NexGen has not done anything, either by way of action or
inaction, that might invalidate such policies in whole or in part.
2.18 Transactions with Management. Except as disclosed in the documents
described in Section 2.6(a), no executive officer, director or, stockholder of
NexGen or any of the NexGen Subsidiaries has, since June 30, 1995, engaged in
any business dealings with NexGen or any of the NexGen Subsidiaries other than
such business dealings as would not be required to be disclosed in such
documents or reports pursuant to the Securities Act and the rules and
regulations promulgated thereunder. No executive officer or director of NexGen
or any of the NexGen Subsidiaries (except in his capacity as such) has any
direct or indirect material interest in (i) any property or assets of NexGen
or that of any of the NexGen Subsidiaries (except as a stockholder), (ii) any
competitor, customer, supplier or agent of NexGen or any of the NexGen
Subsidiaries, or (iii) any person which is a party to any contract or
agreement which is material to NexGen or any of the NexGen Subsidiaries.
2.19 Disclosure. No representations or warranties by NexGen in this
Agreement or the NexGen Disclosure Schedule and no statement by NexGen or, to
the best knowledge of NexGen, any other person, contained in any document,
certificate or other writing furnished by NexGen to AMD in connection with the
preparation of the Proxy Statement or the S-4, contains any untrue statement
of a material fact or omits any material fact necessary to make the statements
made herein or therein, in light of the circumstances under which they were
made, not misleading.
2.20 Brokerage and Finders' Fees. NexGen has not incurred and will not incur
any liability for brokerage or finders' fees or agents commissions in
connection with this Agreement or the Merger other than fees agreed to be paid
to PaineWebber Incorporated in consideration for investment banking advice and
the rendering of a fairness opinion with respect to the Merger. NexGen has
provided AMD with a true copy of the agreement between NexGen and PaineWebber
Incorporated regarding the services to be rendered by such firm in connection
with the Merger. The fees to be paid to PaineWebber Incorporated and will be
equal to 0.45% of the fair market value as of the Effective Time of the AMD
Common Stock to issued in the Merger plus expenses. NexGen has received a
fairness opinion rendered by PaineWebber Incorporated and a copy of such
opinion is attached to the NexGen Disclosure Schedule.
2.21 Actions Affecting Pooling. Aside from any actions contemplated by this
Agreement, NexGen has not taken or permitted any action relating to NexGen
which would prevent the Merger from qualifying for pooling-of-interests
accounting treatment in accordance with generally accepted accounting
principles and all rules, regulations and policies of the SEC.
2.22 Takeover Statutes. No "fair price," "moratorium," "control share
acquisition" or other similar anti-takeover statute or regulation enacted
under state or federal laws in the United States (each a "Takeover Statute"),
including, without limitation, Section 203 of the DGCL, applicable to NexGen
or any of the NexGen Subsidiaries, is applicable to the Merger or the other
transactions contemplated hereby.
2.23 Agreements of Affiliates and Others. As evidenced by the executed
Voting Agreements in the form of Exhibit A, which have been delivered to AMD,
the persons listed in Section 2.23 of the NexGen Disclosure Schedule have
agreed to vote all shares of NexGen Common Stock held by such persons in favor
of the Agreement and the Merger as more fully set forth in such agreement. All
persons who are believed by NexGen or its counsel to be affiliates, as defined
in the Securities Act and in the rules promulgated thereunder, of NexGen,
which determination shall be reasonably satisfactory to counsel for AMD, have
executed Affiliate Agreements in the form attached hereto as Exhibit B, which
have been delivered to AMD. The documents executed by the stockholders of
NexGen referred to in this Section 2.23 are referred to hereinafter and after
as the "Section 2.23 Documents."
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2.24 Employee Relations. NexGen has excellent relations with its key
employees and has no reason to believe that any of its key employees will not
continue in the employment of NexGen following the execution hereof.
2.25 Environmental Matters. Except with respect to matters which in the
aggregate have not had and could not reasonably be expected to have a material
adverse effect on NexGen, NexGen and each of the NexGen Subsidiaries to the
best of NexGen's knowledge (i) have obtained all applicable permits, licenses
and other authorizations which are required under federal, state, provincial
or local laws relating to pollution or protection of the environment,
including laws relating to emissions, discharges, releases or threatened
releases of pollutants, contaminants or hazardous or toxic materials or wastes
into ambient air, surface water, ground water or land or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants or hazardous or toxic
materials or wastes by NexGen or the NexGen Subsidiaries (or their respective
agents); (ii) are in compliance with all the terms and conditions of such
required permits, licenses and authorization, and also are in compliance with
all other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in such laws or
contained in any regulation, code, plan, order, decree, judgment, notice or
demand letter issued, entered, promulgated or approved thereunder; (iii) as of
the date hereof, are not aware of nor have received notice of any event,
condition, circumstance, activity, practice, incident, action or plan which is
reasonable likely to interfere with or prevent continued compliance with or
which would give rise to any common law or statutory liability, or otherwise
form the basis of any claim, action, suit or proceeding, based on or resulting
from NexGen's or any NexGen Subsidiary's (or any of their respective agents)
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling, or the emission, discharge or release into the
environment, of any pollutant, contaminant or hazardous or toxic material or
waste; and (iv) have taken all actions necessary under applicable requirements
of federal, state or local laws, rules or regulations to register any products
or materials required to be registered by NexGen or the NexGen Subsidiaries
(or any of their respective agents) thereunder.
2.26 Commercial Relationships. NexGen has no reason to believe that either
IBM or VLSI will elect not to continue their relationships with NexGen
following the Effective Time.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF AMD AND AMD MERGER
Except as set forth in the schedule of disclosures and exceptions delivered
to NexGen contemporaneously with the execution of this Agreement and
initialled by an officer of AMD (the "AMD Disclosure Schedule"), the sections
of which are numbered to correspond to the section numbers of this Agreement,
AMD and AMD Merger represent and warrant to NexGen as follows:
3.1 Organization; Qualification. Each of AMD and AMD Merger is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. AMD has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted and is duly qualified and in good standing to do business as a
foreign corporation in each jurisdiction in which the property owned, leased
or operated by it or the nature of the business conducted by it makes such
qualification necessary, except where the failure to have such power and
authority or to be so duly qualified and in good standing would not, in the
aggregate, have a material adverse effect on the business, operations or
financial condition of AMD. AMD has previously delivered to NexGen complete
and correct copies of the Certificate of Incorporation and Bylaws of each of
AMD and AMD Merger.
3.2 Capitalization.
(a) The authorized common stock of AMD consists of 250,000,000 shares, $.01
par value. As of October 18, 1995, 104,510,668 of such shares were issued and
outstanding and listed on the New York Stock Exchange (the "NYSE"), and
245,021 of such shares were issued and held as treasury shares. The authorized
preferred
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stock of AMD consists of 1,000,000 shares of serial preferred stock, $0.10 par
value, of which no shares are issued and outstanding. AMD has reserved
14,973,925 shares of common stock for issuance pursuant to employee benefit
plans described in Section 3.2 of the AMD Disclosure Schedule.
(b) All outstanding shares of AMD Common Stock are, and the shares of AMD
Common Stock issuable in the Merger, when issued in accordance with the terms
of this Agreement, will be, validly issued, fully paid, nonassessable and free
of preemptive rights. Section 3.2 of the AMD Disclosure Schedule contains a
true and complete list of all employee benefit plans which obligate or permit
AMD to issue its capital stock to its directors, officer, employees or other
parties. Except for the options issued pursuant to any of the employee benefit
plans described in Section 3.2 of the AMD Disclosure Schedule, there are no
outstanding subscriptions, options, warrants, calls, rights, agreements or
commitments obligating AMD or any of its subsidiaries to issue, sell, deliver
or transfer (including any right of conversion or exchange under any
outstanding security or other instrument) any shares of AMD capital stock.
(c) Except for this Agreement or as set forth in the AMD Annual Reports or
the AMD 1995 Proxy Statement (as defined in Section 3.6(a)), there are no
agreements, restrictions or understandings to which AMD is a party, with
respect to the sale, transfer or voting of any shares of AMD Common Stock.
3.3 Subsidiaries. Section 3.3 of the AMD Disclosure Schedule contains a true
and complete list of all of AMD's subsidiaries (each such subsidiary shall
hereinafter separately be called an "AMD Subsidiary" and all of such
subsidiaries shall collectively be called the "AMD Subsidiaries") and their
jurisdictions of incorporation. All of the shares of capital stock of each of
the AMD Subsidiaries are owned directly or indirectly by AMD, are validly
issued, fully paid and nonassessable and are owned free and clear of any
liens, claims, charges or encumbrances. There are no existing options,
warrants, calls or commitments of any character relating to the issued or
unissued capital stock of any of the AMD Subsidiaries. AMD has, and the AMD
Subsidiaries have, no material investment in any subsidiary or any material
investment in any partnership, joint venture or similar entity, except as
disclosed in Section 3.3 of the AMD Disclosure Schedule, all of which
investments are owned free and clear of any liens, claims, charges or
encumbrances. Each of the AMD Subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of
its incorporation. Each of the AMD Subsidiaries has all requisite corporate
power and authority to own, lease and operate its properties and to carry on
its business as now being conducted and is duly qualified and in good standing
to do business as a foreign corporation in each jurisdiction in which the
nature of its business or the owning or leasing of its properties makes such
qualification necessary, except where the failure to have such power and
authority or to be so qualified would not, in the aggregate, have a material
adverse effect on the assets, properties, business or financial condition of
AMD and the AMD Subsidiaries taken as a whole.
3.4 Authority Relative to this Agreement. Each of AMD and AMD Merger has
full corporate power and authority to execute and deliver this Agreement and
to consummate the transactions contemplated hereby. The execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
have been duly and validly authorized by the Board of Directors of AMD and AMD
Merger and by AMD as the sole stockholder of AMD Merger, and no other
corporate proceedings on the part of AMD or AMD Merger are necessary to
authorize this Agreement, other than approval of this Agreement by AMD's
stockholders, or to consummate the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by AMD and AMD
Merger and constitutes the valid and binding agreement of each of AMD and AMD
Merger, enforceable against AMD and AMD Merger in accordance with its terms.
3.5 Consents and Approvals; No Violation. Except for applicable requirements
of the HSR Act, the Exchange Act, the Securities Act, state securities laws,
the NYSE and the DGCL, there is no requirement applicable to AMD or AMD Merger
to make any filing with, or to obtain any permit, authorization, consent or
approval of any governmental or regulatory authority as a condition to the
lawful consummation by AMD and AMD Merger of the transactions contemplated by
this Agreement. AMD does not know of any reason why any required permit,
authorization, consent or approval will not be obtained. Except as set forth
in Section 3.5 of the AMD Disclosure Statement, neither the execution and
delivery of this Agreement by AMD and AMD Merger
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nor the consummation by AMD and AMD Merger of the transactions contemplated by
this Agreement will (a) conflict with or result in any breach of any provision
of the Certificate of Incorporation or Bylaws of AMD or AMD Merger, (b) result
in a breach of or constitute a default (or any event that with notice or lapse
of time or both would become a default), or impair AMD's or any of the AMD
Subsidiaries' rights or alter the rights or obligations of any third party
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any material contract, note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which AMD or any of the AMD Subsidiaries is a party or by which
AMD or any of the AMD Subsidiaries or its or any of their respective
properties is bound or affected, (c) violate, in any material respects any
statute, rule, regulation, order, writ, injunction or decree applicable to
AMD, any Subsidiary or any of their respective assets, where the consequences
of such violation would, in the aggregate, have a material and adverse effect
on AMD and the AMD Subsidiaries taken as a whole, or (d) result in the
creation of any material, individually or in the aggregate, liens, charges or
encumbrances on any of the assets of AMD or the AMD Subsidiaries.
3.6 SEC Reports and Financial Statement.
(a) AMD has previously furnished to NexGen complete and correct copies,
including exhibits, of: (i) its Annual Reports on Form 10-K for the years
ended December 27, 1992, December 26, 1993, and December 25, 1994 (the "AMD
Annual Reports"); (ii) its Quarterly Reports on Form 10-Q for the quarters
ended April 2, 1995, and July 2, 1995 (the "AMD Quarterly Reports"); (iii) its
proxy statement relating to its most recent annual meeting of stockholders
held on May 9, 1995 (the "AMD 1995 Proxy Statement"); and (iv) all reports or
filings other than the AMD Annual Reports, the AMD Quarterly Reports and the
AMD 1995 Proxy Statement filed by AMD with the SEC since December 28, 1992
(the "AMD Other Reports").
(b) As of their respective dates, the AMD Annual Reports, the AMD Quarterly
Reports, the AMD 1995 Proxy Statement and the AMD Other Reports did not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(c) Since December 25, 1994, AMD has filed with the SEC all reports and
registration statements and all other filings required to be filed with the
SEC under the rules and regulations of the SEC.
(d) The audited consolidated financial statements unaudited interim
financial statements included in reports or other filings referred to in
Section 3.6(a) were prepared in conformity with generally accepted accounting
principles applied on a consistent basis (except as may be indicated therein
or in the notes thereto, and except that the unaudited interim financial
statements do not include complete footnote disclosures) and fairly present
the consolidated financial position of AMD and the AMD Subsidiaries as of the
dates thereof and the consolidated results of operations and changes in
financial position of AMD and the AMD Subsidiaries for the periods shown
therein, subject, in the case of unaudited interim financial statements, to
normal year-end audit adjustments.
3.7 Undisclosed Liabilities. Neither AMD nor any AMD Subsidiary has any
material liability or obligation, secured or unsecured (whether absolute,
accrued, contingent or otherwise, and whether due or to become due), except
for any such material liability and obligation which (a) is accrued or
reserved against in the consolidated balance sheet as of July 2, 1995,
contained in the AMD Quarterly Report for the period ended July 2, 1995 (the
"AMD Unaudited Balance Sheet"), or disclosed in the notes included in the
audited financial statement of AMD for the fiscal year ended December 25,
1994, contained in the AMD Annual Report for the period ended December 25,
1994 (the "AMD Audited Financial Statements"), (b) is of a normally recurring
nature and was incurred after December 25, 1994, in the ordinary course of
business and consistent with past practice, or (c) was incurred in the
ordinary course of business and is not required to be disclosed in financial
statements or the notes thereto under generally accepted accounting
principles.
3.8 Absence of Certain Changes or Events. Except as set forth in Section 3.8
of the AMD Disclosure Schedule, since July 2, 1995, there has not been:
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(a) any material adverse change in the business, assets, liabilities,
financial condition or results of operations of AMD and the AMD
Subsidiaries taken as a whole or any event which could, so far as can
reasonably be foreseen, have such an effect;
(b) any damage, destruction or casualty loss, whether or not covered by
insurance, materially and adversely affecting, or which could materially
and adversely affect, the assets, properties, business, results of
operations or financial condition of AMD and the AMD Subsidiaries taken as
a whole;
(c) any material increase in the compensation payable or to become
payable by AMD or any AMD Subsidiary to its directors, officers or
employees or any material increase in any bonus, insurance, pension or
other employee benefit plan, payment or arrangement made to, for or with
any such directors, officers or employees, other than in the ordinary
course of business;
(d) any labor dispute, other than routine matters none of which is, or so
far as can reasonably be foreseen could be, materially adverse to the
assets, properties, business, results of operations or financial condition
of AMD and the AMD Subsidiaries taken as a whole;
(e) any entry by AMD or the AMD Subsidiaries into any material commitment
or transaction (including, without limitation, any borrowing or capital
expenditure), other than in the ordinary course of business;
(f) any change by AMD or the AMD Subsidiaries in accounting methods,
principles or practices, except as required by generally accepted
accounting principles or concurred with by AMD's independent certified
public accountants;
(g) any declaration, payment or setting aside for payment of any dividend
(whether in cash, stock or property) with respect to the capital stock of
AMD; or
(h) any material agreement, whether in writing or otherwise, to take any
action described in this Section 3.8.
3.9 Proxy Statement. None of the information relating to AMD included in (i)
the Proxy Statement (as defined in Section 4.2(c)) at the time the Proxy
Statement is mailed, at the time of the meeting of AMD's stockholders to vote
on the Merger or at the Effective Time of the Merger, as then amended or
supplemented, or (ii) the S-4 to be filed by AMD with the SEC pursuant to
Section 5.2(d) at the time the S-4 becomes effective or at the Effective Time
of the Merger, as then amended or supplemented, will contain any statement
which, at the time and in light of the circumstances under which it is made,
is false or misleading with respect to any material fact or omits to state any
material fact required to be stated therein or necessary in order to make the
statements therein not misleading or necessary to correct any statement which
has become false or misleading in any earlier communication with respect to
the solicitation of proxies for the AMD Stockholders' Meeting. The Proxy
Statement as it relates to AMD will comply as to form in all material respects
with the requirements of the Exchange Act and the rules and regulations
thereunder in effect at the time the Proxy Statement is mailed.
3.10 Material Contracts. There is no material default or event of default by
AMD or any AMD Subsidiary, or other event which (with or without notice, lapse
of time or both) would constitute a material default or event of default, by
AMD or any AMD Subsidiary, under any agreement which is material to AMD and to
which either AMD or any AMD Subsidiary is a party. Except as disclosed in the
AMD Annual Report, no director or officer of AMD or any AMD Subsidiary, and to
the knowledge of the executive officers of AMD, no person who is an affiliate
of any such director or officer has any material contractual relationship with
AMD or any AMD Subsidiary.
3.11 Legal Proceedings. Except as disclosed in the footnotes to the AMD
Audited Financial Statements or in the AMD Annual Reports or the AMD Quarterly
Reports there are no pending or, to the knowledge of AMD, threatened legal,
administrative, arbitration or other proceedings or governmental
investigations or reviews against AMD or any AMD Subsidiary which could,
individually or in the aggregate, have a material adverse effect on the
business, results of operations or financial condition of AMD and the AMD
Subsidiaries taken as a whole or on the ability of AMD to carry out the
transactions contemplated in this Agreement. Neither
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AMD nor any AMD Subsidiary is in default with respect to any order, writ,
award, judgment, injunction or decree of any court or governmental or
administrative body or agency applicable to it which could have a materially
adverse effect on the consolidated assets, properties, business or financial
condition of AMD and the AMD Subsidiaries taken as a whole.
3.12 No Violation. Except as disclosed in the AMD Annual Reports or the AMD
Quarterly Reports, AMD and the AMD Subsidiaries have substantially complied
with all applicable laws, ordinances, regulations, judgments, decrees,
injunctions or orders of any court or other governmental entity, except for
violations which, individually or in the aggregate, do not and are not
expected to have a material adverse effect on the operations, business or
financial condition of AMD and the AMD Subsidiaries taken as a whole.
3.13 Taxes and Tax Returns.
(a) General Tax Representations. AMD represents and warrants, on behalf of
itself and each of the AMD Subsidiaries, that (i) each of AMD and the AMD
Subsidiaries has timely filed (or will timely file prior to the Closing) all
federal, state, local and foreign tax returns required to be filed by it prior
to the Closing, (ii) each of AMD and the AMD Subsidiaries has timely paid (or
will do so prior to the Closing) or made adequate provision for the payment of
all taxes (which are separately or in the aggregate material), as defined
below, due and payable by it (without regard to whether or not such taxes have
been assessed); (iii) all material information contained in or provided in
connection with the tax returns filed by (or to be filed by) AMD or any of the
AMD Subsidiaries is (or will be) true, complete and accurate; (iv) the
liability for taxes reflected in the AMD Audited Balance Sheet is sufficient
for the payment for all unpaid taxes, whether or not disputed, accrued or
applicable for the period ended December 25, 1994 and for all years and
periods ended prior thereto; (v) the California Bank and Corporation Franchise
and Corporation Income tax returns of AMD and of each of the AMD Subsidiaries
have been audited by the Franchise Tax Board ("FTB") or the statutes of
limitations with respect to California Bank and Corporation Franchise and
Corporation Income taxes have all expired, for all fiscal years to and
including the fiscal year ended December, 1988; (vi) the federal income tax
returns of AMD and each of the AMD Subsidiaries have been audited by the
Internal Revenue Service ("IRS"), or the statutes of limitations with respect
to federal income taxes have all expired, for all fiscal years to and
including the fiscal year ended December, 1990; (vii) all deficiencies
asserted as a result of all foreign, if any, U.S. federal, state and local tax
examinations have been paid, fully settled or adequately provided for as a tax
liability in the AMD Audited Balance Sheet; (viii) there are no audits,
investigations, examinations or tax litigation matters threatened or pending,
nor have any claims been made or asserted, for or with respect to taxes (which
are separately or in the aggregate material) of AMD or any of the AMD
Subsidiaries; (ix) there are no outstanding agreements or waivers extending
the statutory period of limitation on assessment or collection applicable to
any tax return or tax period of AMD or any of the AMD Subsidiaries; and (x)
neither AMD nor any of the AMD Subsidiaries has filed a consent to the
application of Section 341(f) of the Code.
(b) Withholding. AMD and each of the AMD Subsidiaries has withheld from its
employees, customers and any other applicable payees (and timely paid to the
appropriate governmental entity) proper and accurate amounts for all periods
through the date hereof in compliance with all tax withholding laws
(including, without limitation, income, social security and employment tax
withholding for all types of compensation, back-up withholding and withholding
on payments to non-United States persons).
(c) Tax Sharing Agreements. There is no contract, agreement or intercompany
account system in existence pursuant to which AMD or any of the AMD
Subsidiaries has, or may at any time in the future have, an obligation to
contribute to the payment of any portion of a tax (or pay any amount
calculated with reference to any portion of a tax) determined on a
consolidated, combined or unitary basis with respect to an affiliated group or
other group of corporations of which AMD or any AMD Subsidiary is or was a
member.
(d) Taxes Since July 2, 1995. Since July 2, 1995, AMD and the AMD
Subsidiaries have not incurred any material tax liability other than taxes
incurred (i) in the ordinary course of their business, (ii) pursuant a change
set forth in Section 3.8(f) of the AMD Disclosure Schedule, or (iii) pursuant
to a transaction not prohibited by Section 5.1 of this Agreement.
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(e) Tax Methods. Since July 2, 1995, AMD and the AMD Subsidiaries have used
tax accounting methods, practices and elections consistent with past
practices.
(f) Definitions. (i) The term "tax" or "taxes" shall mean all taxes,
charges, fees, levies or other assessments, including, without limitation,
income, gross receipts, ad valorem, value added, alternative or add-on
minimum, capital stock, registration, net worth, severance, stamp, windfall
profits, environmental (including taxes under Section 59A of the Code),
excise, property, sales, use, license, payroll, employment, disability, social
security, workers' compensation, franchise, duties, business or other
occupation, withholding, transfer or recording taxes, fees, charges and
obligations, imposed by the United States, or any state, local or other
political subdivision or agency thereof, as well as any foreign government or
other political subdivision or agency thereof, whether computed on a
consolidated, unitary, combined or any other basis; and such term shall
include any and all interest, penalties and additions to tax, as well as any
primary or secondary liability for taxes. (ii) The term "tax return" shall
mean any report, election, claim, information statement, filing, return or
other document or information required by law to be supplied to a taxing
authority in connection with taxes, including any schedules, supplements or
attachments thereto.
3.14 Employee Benefit Plans.
(a) As used in this Section 3.14, the term "Employee Benefit Plan(s)" means
an employee benefit plan, as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974 ("ERISA") which AMD or any of the AMD
Subsidiaries maintains or administers, or to which AMD or any of the AMD
Subsidiaries contributes or is required to contribute, or with respect to
which AMD has or may incur any present or future obligation. Neither AMD nor
any of the AMD Subsidiaries is a participant in any "multi-employer plan"
within the meaning of Section 4001(a)(3) of ERISA.
(b) All plans, agreements or arrangements, exclusive of any Employee Benefit
Plan, relating to any form of current or deferred compensation (exclusive of
base salary and base wages), bonus, stock option, stock purchase, incentive,
vacation, health, dental, disability and death benefits which AMD or any of
the AMD Subsidiaries maintains or administers, or to which AMD or any of the
AMD Subsidiaries contributes or is required to contribute, or with respect to
which AMD has or may incur any present or future obligation, referred to
collectively in this Section 3.14 as "AMD Benefit Arrangements".
(c) Each Employee Benefit Plan (and any related trust agreements, annuity
contracts and other funding instruments) has been and is being administered
and operated in accordance with its terms and has complied, and complies
currently, in all material respects, with the provisions of ERISA and of the
Code and all other applicable laws, rules and regulations. Each AMD Benefit
Arrangement has been and is being administered and operated in accordance with
its terms and has complied, and currently complies, with the provisions of all
applicable laws, rules and regulations. All reports required by any
governmental agencies have been timely filed with respect to all Employee
Benefit Plans and all AMD Benefit Arrangements.
Each Employee Benefit Plan which is intended to be tax qualified under
Section 401(a) or Section 403 of the Code is so qualified and has received a
favorable determination letter, covering all amendments thereto, from the IRS
indicating that it is so qualified. Each trust which is intended to be tax-
exempt--under Section 501(a) of the Code is exempt from taxation.
(d) No "prohibited transaction," as defined in Section 406 of ERISA and
Section 4975 of the Code, has occurred with respect to any Employee Benefit
Plan which could subject any person or entity (other than a person or entity
for whom AMD or any of the AMD Subsidiaries is not directly or indirectly
responsible) to liability under Title I of ERISA or to the imposition of any
tax under Section 4975 of the Code.
(e) Other than for claims in the ordinary course for benefits under any and
all Employee Benefit Plans or AMD Benefit Arrangements, there are no actions,
suits, claims or proceedings pending or, to the best knowledge of AMD,
threatened, nor does there exist any basis therefor, which could result in any
material liability on the part of AMD or any AMD Subsidiary with respect to
any Employee Benefit Plan or AMD Benefit Arrangement.
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(f) Neither AMD nor any AMD Subsidiary maintains any Employee Benefit Plan
subject to Title IV of ERISA.
(g) There has been no amendment to, or changes in the actuarial assumptions
or funding of, any Employee Benefit Plan or AMD Benefit Arrangement which
would materially increase the annual expense associated with such plan or
arrangement above the level of the expense set forth in the AMD Consolidated
Statement of Operations for the fiscal year ended December 25, 1994.
3.15 Intellectual Property.
(a) AMD owns, or is licensed or otherwise possesses legally sufficient
rights to use, all patents, trademarks, trade names, service marks,
copyrights, maskworks and any applications therefor, technology, know-how,
computer software programs or applications (in both source code and object
code form) and tangible or intangible proprietary information or material that
are used or proposed to be used in the business of AMD as currently conducted
in any material respect. The term "AMD Intellectual Property Rights" as used
in this Section 3.15 means all current and past (lapsed, expired, abandoned or
cancelled) patents, registered and material unregistered copyrights,
maskworks, trade names and any applications therefor owned by AMD. The term
"Third Party Intellectual Property Rights" as used in this Section 3.15 means
all third-party patents, trademarks, copyrights (including software) or
maskworks, to the knowledge of AMD, which are incorporated in, are, or form a
part of, any AMD product.
(b) AMD is not, nor will it be as a result of the execution and delivery of
this Agreement or the performance of its obligations hereunder, in violation
of any license, sublicense or agreement, which relates to the AMD Intellectual
Property Rights. No claims with respect to the AMD Intellectual Property
Rights, any trade secret material to AMD, or Third Party Intellectual Property
Rights to the extent arising out of any use, reproduction or distribution of
such Third Party Intellectual Property Rights by or through AMD, are currently
pending or, to the knowledge of AMD, are threatened by any person, nor does
AMD know of any valid grounds for any bona fide claims (i) to the effect that
the manufacture, sale, licensing or use of any product as now used, sold or
licensed or proposed for use, sale or license by AMD infringes on any
copyright, maskwork, patent, trademark, service mark or trade secret; (ii)
against the use by AMD of any trademarks, trade names, trade secrets,
copyrights, maskworks, patents, technology, know-how or computer software
programs and applications used in AMD's business as currently conducted or as
proposed to be conducted by AMD; (iii) challenging the ownership, validity or
effectiveness of any of AMD's Intellectual Property Rights or other trade
secret material to AMD, or (iv) challenging AMD's license or legally
enforceable right to use of the Third Party Intellectual Rights. To AMD's
knowledge, after reasonable investigation, all patents, registered trademarks,
maskworks and copyrights held by AMD are valid and subsisting. To AMD's
knowledge, there is no material unauthorized use, infringement or
misappropriation of any of the AMD Intellectual Property by any third party,
including any employee or former employee of AMD or any of the AMD
Subsidiaries. Neither AMD nor any of the AMD Subsidiaries (i) has been sued or
charged in writing as a defendant in any claim, suit, action or proceeding
which involves a claim or infringement of trade secrets, any patents,
trademarks, service marks, maskworks or copyrights and which has not been
finally terminated prior to the date hereof or been informed or notified by
any third party that AMD may be engaged in such infringement or (ii) has
knowledge of any infringement liability with respect to, or infringement by,
AMD or any of the AMD Subsidiaries of any trade secret, patent, trademark,
service mark, maskwork or copyright of another.
(c) Neither the execution and delivery of this Agreement, the Warrant
Purchase Agreement or the Credit Agreement by AMD nor the consummation by AMD
of the transactions contemplated by this Agreement, the Warrant Purchase
Agreement or the Credit Agreement will result in any breach of or constitute a
default (or an event that with notice or lapse of time or both would become a
default), or impair AMD's or any of the AMD Subsidiaries' rights or alter the
rights or obligations of any third party under, or give to others any rights
of termination, amendment, acceleration or cancellation of, any license
agreement, contract or other arrangement of any nature relating to AMD
Intellectual Property Rights or Third Party Intellectual Property Rights.
(d) Each employee of AMD has executed a confidentiality and invention
agreement.
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3.16 Title to Properties. Either AMD or an AMD Subsidiary has good and
marketable title to all properties and assets reflected on the AMD Unaudited
Balance Sheet as owned by AMD and to properties or assets acquired by AMD or
any AMD Subsidiary after the date thereof (except for equipment which is
subject to capital leases and properties sold or otherwise disposed of in the
ordinary course of business since the date of the AMD Unaudited Balance
sheet), free and clear of all title defects and all liens, mortgages, pledges,
claims, charges, security interests or other encumbrances of any nature
whatsoever except as stated in the AMD Annual Reports or the AMD Quarterly
Reports, or which alone or in the aggregate do not materially detract from the
value, or materially interfere with the present use, of any material asset or
property or of the assets or properties of AMD and the AMD Subsidiaries as a
whole or otherwise materially impair the business of AMD and the AMD
Subsidiaries as a whole.
3.17 Insurance. AMD and each of the AMD Subsidiaries has insurance on its
officers, directors, employees, business operations and property, in such
amounts as are reasonable and deemed adequate by its Board of Directors or
management, against all risks usually insured against by persons operating
similar properties or businesses in the localities where such properties are
located, under, to the best of AMD's knowledge, valid and enforceable policies
issued by insurers of recognized responsibility, and such policies shall not,
pursuant to their terms, in any way be affected by, or terminate or lapse by
reason of, the Merger. AMD has not done anything, either by way of action or
inaction, that might invalidate, in whole or in part, any of the material
policies of fire, casualty, liability, title, workers' compensation and other
forms of insurance held by AMD.
3.18 Transactions with Management. Except as disclosed in the documents
described in Section 3.6(a), no executive officer, director or, stockholder of
AMD or any of the AMD Subsidiaries has, since July 2, 1995, engaged in any
business dealings with AMD or any of the AMD Subsidiaries other than such
business dealings as would not be required to be disclosed in such documents
or reports pursuant to the Securities Act and the rules and regulations
promulgated thereunder. No executive officer or director of AMD or any of the
AMD Subsidiaries (except in his capacity as such) has any direct or indirect
material interest in (i) any property or assets of AMD or that of any of the
AMD Subsidiaries (except as a stockholder), (ii) any competitor, customer,
supplier or agent of AMD or any of the AMD Subsidiaries, or (iii) any person
which is a party to any contract or agreement which is material to AMD or any
of the AMD Subsidiaries.
3.19 Disclosure. No representations or warranties by AMD in this Agreement
or the AMD Disclosure Schedule and no statement by AMD or, to the best
knowledge of AMD, any other person, contained in any document, certificate or
other writing furnished by AMD to NexGen in connection with the preparation of
the Proxy Statement or the S-4, contains any untrue statement of a material
fact or omits any material fact necessary to make the statements made herein
or therein, in light of the circumstances under which they were made, not
misleading.
3.20 Brokerage and Finders' Fees. AMD has not incurred and will not incur
any liability for brokerage or finders' fees or agents commissions in
connection with this Agreement or the Merger other than fees agreed to be paid
to Donaldson, Lufkin & Jenrette Securities Corporation in consideration for
investment banking advice and the rendering of a fairness opinion with respect
to the Merger. AMD has provided NexGen with a true copy of the agreement
between AMD and Donaldson, Lufkin & Jenrette Securities Corporation regarding
the services to be rendered by Donaldson, Lufkin & Jenrette Securities
Corporation in connection with the Merger, and the fee to be paid to
Donaldson, Lufkin & Jenrette Securities Corporation will not exceed $4,500,000
plus expenses. AMD has received the fairness opinion rendered by Donaldson,
Lufkin & Jenrette Securities Corporation, and a copy of such opinion is
attached to the AMD Disclosure Schedule.
3.21 Actions Affecting Pooling. Aside from any actions contemplated this
Agreement, AMD has not taken or permitted any action relating to AMD which
would prevent the Merger from qualifying for pooling-of-interests accounting
treatment in accordance with generally accepted accounting principles and all
rules, regulations and policies of the SEC.
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3.22 Takeover Statutes. No "fair price," "moratorium," "control share
acquisition" or other similar anti-takeover statute or regulation enacted
under state or federal laws in the United States (each a "Takeover Statute"),
including, without limitation, Section 203 of the DGCL, applicable to AMD or
any of the AMD Subsidiaries, is applicable to the Merger or the other
transactions contemplated hereby.
3.23 Environmental Matters. Except with respect to matters which in the
aggregate have not had and could not reasonably be expected to have a material
adverse effect on AMD, AMD and each of the AMD Subsidiaries to the best of
AMD's knowledge (i) have obtained all applicable permits, licenses and other
authorizations which are required under federal, state, provincial or local
laws relating to pollution or protection of the environment, including laws
relating to emissions, discharges, releases or threatened releases of
pollutants, contaminants or hazardous or toxic materials or wastes into
ambient air, surface water, ground water or land or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants or hazardous or toxic
materials or wastes by AMD or the AMD Subsidiaries (or their respective
agents); (ii) are in compliance with all the terms and conditions of such
required permits, licenses and authorization, and also are in compliance with
all other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in such laws or
contained in any regulation, code, plan, order, decree, judgment, notice or
demand letter issued, entered, promulgated or approved thereunder; (iii) as of
the date hereof, are not aware of nor have received notice of any event,
condition, circumstance, activity, practice, incident, action or plan which is
reasonable likely to interfere with or prevent continued compliance with or
which would give rise to any common law or statutory liability, or otherwise
form the basis of any claim, action, suit or proceeding, based on or resulting
from AMD's or any AMD Subsidiary's (or any of their respective agents)
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling, or the emission, discharge or release into the
environment, of any pollutant, contaminant or hazardous or toxic material or
waste; and (iv) have taken all actions necessary under applicable requirements
of federal, state or local laws, rules or regulations to register any products
or materials required to be registered by AMD or the AMD Subsidiaries (or any
of their respective agents) thereunder.
3.24 NexGen Commercial Relationships. AMD and AMD Merger have no reason to
believe that either IBM or VLSI will elect not to continue their relationship
with NexGen following the Effective Time.
SECTION 4
COVENANTS OF NEXGEN
NexGen hereby covenants and agrees as follows:
4.1 Negative Covenants. Between the date of this Agreement and the
Effective Time, unless AMD shall otherwise consent in writing, which consent
AMD may not unreasonably withhold, neither NexGen nor any NexGen Subsidiary
will do any of the following or commit to do so:
(a) Make any purchase, sale or disposition of any material asset or
property or mortgage, pledge, subject to a lien or otherwise encumber any
of its material properties or assets, other than in the ordinary course of
business consistent with past practices;
(b) Except for obligations under existing contracts and agreements, incur
any material contingent liability as a guarantor or otherwise with respect
to the obligations of any person or entity other than NexGen Subsidiaries;
(c) Take or permit any action which would prevent the Merger from
qualifying as a tax-free reorganization under Section 368 of the Code or
from being eligible for pooling-of-interests accounting treatment in
accordance with generally accepted accounting principles and all rules,
regulations and policies of the SEC, and NexGen will use its best efforts
to prevent any of its officers or directors from taking or permitting any
such action;
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(d) Amend or incur any obligation to amend its Certificate of
Incorporation or Bylaws, offer to issue or issue any shares of its capital
stock (other than pursuant to presently outstanding options or warrants),
effect any stock split, reverse stock split or stock dividend, or grant any
options, warrants or rights to acquire any capital stock of NexGen (other
than grants of options pursuant to existing employee benefit programs in a
manner which is consistent with past practice), or accelerate the
exercisability or vesting of options or warrants presently outstanding,
except (i) acceleration which occurs automatically pursuant to the terms of
an existing agreement between NexGen and a holder of NexGen Options or
NexGen Warrants and (ii) to provide that any presently outstanding options
or warrants shall not terminate merely by reason of the Merger;
(e) Declare, set aside or pay any dividend or make any other distribution
in respect of its capital stock, or make any direct or indirect redemption,
purchase or other acquisition of its capital stock (other than in
connection with the repurchase of stock from terminated employees or the
surrender of stock to NexGen for the purpose of a stock- for-stock exercise
of an employee stock option);
(f) Make any change in the compensation payable or to become payable to
any of its directors, officers or employees (other than increases in
compensation called for by the terms of any outstanding employment
agreement or increases which are consistent with past practice) or enter
into or amend any indemnity, employment or consulting agreements;
(g) Make any loans to any of its stockholders, officers, directors or
employees or make any change in its borrowing arrangements;
(h) Enter into (i) any licensing or manufacturing contracts or agreements
or (ii) any sales agent, distributor or OEM sales contracts or agreements
not entered into in the ordinary course of business;
(i) Undertake any change in the capital structure of NexGen or of any
NexGen Subsidiary or in the operational or management structure of NexGen
and the NexGen Subsidiaries as a whole;
(j) Undertake a course of action inconsistent with this Agreement or
which would prevent any conditions precedent to its obligations under this
Agreement from being satisfied at or prior to the Effective Time;
(k) Provide or publish to its stockholders any material which might
constitute an unauthorized "prospectus" within the meaning of the
Securities Act;
(l) Violate the terms of the Credit Agreement;
(m) Issue any press release or any public disclosure, either written or
oral, of the transactions contemplated by this Agreement or negotiations
related thereto without the prior knowledge and written consent of AMD,
which consent shall not be unreasonably withheld; provided, however, that
no such consent shall be required if NexGen has determined in good faith
upon written advice of counsel that it is required under applicable
securities laws to make the disclosure; or
(n) Aside from any actions contemplated by this Agreement, take or permit
any action relating to NexGen which would prevent the Merger from
qualifying for pooling-of-interests accounting treatment in accordance with
Generally Accepted Accounting Principles and all rules, regulations and
policies of the SEC.
4.2 Affirmative Covenants. Prior to or on the Effective Time NexGen will do
each of the following:
(a) Use its best efforts to perform and fulfill all conditions and
obligations on its part to be performed and fulfilled under this Agreement
to the end that the transactions contemplated by this Agreement shall be
fully carried out;
(b) Use its best efforts to obtain all authorizations, consents and
permits of others required to permit the consummation by NexGen of the
transactions contemplated by this Agreement and the Credit Agreement and
the continuation of NexGen's business after consummation of the Merger,
including, without limitation, using its best efforts through preparation,
SEC clearance and distribution as promptly as possible of the Proxy
Statement (as defined below) and otherwise to obtain the approval of
NexGen's stockholders sufficient for corporate and tax law purposes and
pooling-of-interests accounting;
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(c) Cooperate with AMD to the best of NexGen's ability in the preparation
of (i) the joint proxy statement to be used in connection with the
solicitation of proxies from the respective stockholders of AMD and NexGen
with respect to approval of the Merger (the "Proxy Statement"); (ii) the S-
4; and (iii) the S-8 (as defined below). (Collectively, the S-4 and S-8 are
referred to herein as the "Registration Statements.") In this regard,
NexGen from time to time will furnish to AMD, and be responsible for, all
information regarding NexGen required for the proper preparation of such
Proxy Statement and Registration Statements and shall promptly furnish AMD
with information with respect to any event as a result of which the
Registration Statements, if such information were not disclosed therein,
would include an untrue statement of a material fact relating to NexGen or
the NexGen Subsidiaries or omit a material fact necessary to make the
statements therein relating to NexGen or the NexGen Subsidiaries not
misleading;
(d) Promptly advise AMD in writing of (i) any materially adverse change
in the financial condition, business, operations or key personnel of NexGen
or the NexGen Subsidiaries; and (ii) the occurrence of any event which
causes the representations and warranties made by NexGen in this Agreement
or the information included in NexGen Disclosure Schedule to be incomplete
or inaccurate in any material respect;
(e) Conduct its business only in the ordinary course and refrain from
changing or introducing any method of management or operations except in
the ordinary course of business and consistent with prior practices;
(f) Use its best efforts to keep intact its business organization to keep
available its present officers, agents and employees as NexGen deems
necessary or appropriate to continue its business as presently conducted
and to preserve the goodwill of all suppliers, customers and others having
business relations with it;
(g) Permit AMD and its authorized representatives to have full access to
all of its properties, assets, records, tax returns, contracts and
documents and furnish to AMD and its authorized representatives such
financial and other information with respect to its business and properties
as AMD may from time to time reasonably request for purposes of making a
review of the business of NexGen, which review may include an environmental
assessment;
(h) Except as expressly permitted by Section 4.3(d), use its best efforts
to obtain approval of this Agreement by the holders of outstanding shares
of NexGen Common Stock entitled to vote (and to that end, will recommend
approval of the Merger to NexGen's stockholders) and present evidence of
such recommendation and approval to AMD in form and content satisfactory to
AMD and its counsel;
(i) As promptly as reasonably practicable after the date of this
Agreement, file with the Federal Trade Commission and the Antitrust
Division of the United States Department of Justice and any other
governmental agencies or departments all notices, reports and other
documents required by law with respect to this Agreement and the Merger and
promptly submit any additional information or documentary material properly
requested by any such governmental agency or department;
(j) In the event that between the date hereof and the Effective Time, any
person, entity or federal, state, local or foreign governmental authority
shall commence any examination, review, investigation, action, suit or
proceeding against NexGen with respect to the Merger, NexGen shall give
prompt notice thereof to AMD, shall keep AMD informed as to the status
thereof, and shall (except as may be prohibited by such governmental
authority or by any court order or decree in an action or suit instituted
by a person other than NexGen or an affiliate of NexGen) permit AMD to
observe and be present at each meeting, conference or other proceeding and
have access to and be consulted in connection with any document filed or
provided to such person, entity or governmental authority in connection
with such examination, review, investigation, action, suit or proceeding;
(k) Deliver to AMD at the Closing the resignations of all directors of
NexGen;
(l) Promptly provide AMD with (i) copies of all written materials and
communications furnished by NexGen to its stockholders after the date of
this Agreement, and (ii) copies of all notices, reports or other documents
filed with the Federal Trade Commission or the Antitrust Division of the
United States Department of Justice pursuant to Section 4.2(i) hereof, and
(iii) copies of all reports filed with the SEC;
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(m) Promptly provide AMD copies of its consolidated balance sheet and
related consolidated statements of income, changes in financial position
and changes in stockholders' equity for all interim monthly and quarterly
periods prior to the Closing. Such monthly and quarterly financial
statements shall be prepared in conformity with generally accepted
accounting principles applied on a consistent basis (subject to the absence
of footnotes) and shall present (subject to normal year-end audit
adjustments) the consolidated financial condition, results of operations
and changes in consolidated financial position of NexGen and the NexGen
Subsidiaries as of the dates and for the periods covered by such
statements;
(n) As of the Effective Time, employees of NexGen and its Subsidiaries
shall cease to accrue any additional benefits under all NexGen Benefit
Arrangements and Employee Benefit Plans and any other plans or agreements
for the benefit of the employees of NexGen or its Subsidiaries, except
under plans, arrangements or agreements which AMD has elected to continue,
which election will be in the sole discretion of AMD. At the request of
AMD, NexGen and the NexGen Subsidiaries will take such action as may be
requested by AMD to enter into, amend, or terminate any or all of the
NexGen Benefit Arrangements, Employee Benefit Plans and any other benefit
plans or agreements in connection therewith, with such amendments or
terminations to be effective as of the Effective Time;
(o) Use its best efforts to deliver to AMD, and to cause its counsel to
deliver to AMD, the closing documents referred to in this Agreement;
(p) Use its best efforts to provide to AMD No Sale Agreements, in the
form of Exhibit C attached hereto, executed by NexGen's stockholders after
the date on which a public announcement is made concerning the execution of
this Agreement; and
(q) Promptly following the date of this Agreement, consider the adoption
of a stockholders rights plan and adopt such a plan if the Board of
Directors of NexGen concludes that such plan is in the best interests of
NexGen and its stockholders.
4.3 No Solicitation.
(a) NexGen shall immediately cease and cause to be terminated any existing
discussions or negotiations with regard to a business combination or similar
transaction with any parties other than AMD and AMD Merger. NexGen agrees not
to release any third party from any confidentiality or standstill agreement to
which NexGen is a party.
(b) NexGen shall not, directly or indirectly, through any officer, director,
employee, representative or agent of NexGen or any NexGen Subsidiaries,
solicit or encourage (including by way of furnishing nonpublic information)
the initiation of any inquiries or proposals regarding any merger,
consolidation, sale of substantial assets, sale of shares of capital stock
including without limitation by way of a tender offer or similar transactions
involving NexGen or any NexGen Subsidiaries (any of the foregoing inquiries or
proposals being referred to herein as an "Acquisition Proposal").
Notwithstanding the foregoing, if a corporation, partnership, person, or other
entity or group (a "Third Party") after the date of this Agreement submits to
the Board of Directors of NexGen an unsolicited bona fide, written Acquisition
Proposal (i) which is not subject to any financing contingency, (ii) which the
Board of Directors of NexGen determines may constitute a Superior Proposal (as
that term is defined in Section 4.3(d) of this Agreement), and (iii) the Board
of Directors of NexGen concludes, after receipt of advice from outside legal
counsel to NexGen, that the failure to engage in discussions with the Third
Party concerning such Acquisition Proposal would cause the Board of Directors
to violate its fiduciary duties to NexGen and its stockholders, then in such
case NexGen may (x) furnish information about its business, properties, or
assets to the Third Party under protection of a confidentiality agreement
substantially the same in its protections to NexGen as the Confidentiality and
Standstill Agreement dated October 16, 1995, between NexGen and AMD, and (y)
negotiate and participate in discussions and negotiations with such Third
Party. Thereafter, if the Board of Directors of NexGen concludes, after
receipt of advice from outside legal counsel to NexGen, that it is under a
duty to take actions reasonably calculated to maximize present stockholder
value, the Board of Directors may approve the solicitation of additional
Acquisition Proposals and furnish such information and have such negotiations
as it deems advisable under the circumstances.
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(c) NexGen shall immediately notify AMD after receipt of any Acquisition
Proposal or any request for nonpublic information relating to NexGen or any
NexGen Subsidiaries in connection with an Acquisition Proposal or for access
to the properties, books or records of NexGen or any subsidiary by any person
or entity that informs the Board of Directors of NexGen or such NexGen
Subsidiary that it is considering making, or has made, an Acquisition
Proposal. Such notice to AMD shall be made orally and in writing and shall
include a copy of any writing submitted by such person or entity and shall
indicate in reasonable detail the identity of the offeror and the terms and
conditions of such proposal, inquiry or contact.
(d) Notwithstanding the foregoing, in the event the Board of Directors of
NexGen receives an Acquisition Proposal that based on the advice of outside
counsel, the Board of Directors is required to consider in the exercise of its
fiduciary obligations and that it determines to be a Superior Proposal, the
Board of Directors may (subject to the following sentences) withdraw or
adversely modify its approval or recommendation of the Merger and recommend
any such Superior Proposal, or terminate the Agreement but such termination
may occur only after the NexGen Stockholders' Meeting, in each case at any
time after the fourth business day following delivery of written notice to AMD
(a "Notice of Superior Proposal") advising AMD that the Board of Directors has
received a Superior Proposal, specifying the material terms of the structure
of such Superior Proposal. NexGen may take any of the foregoing actions
pursuant to the preceding sentence only if an Acquisition Proposal that was a
Superior Proposal continues to be a Superior Proposal in light of any improved
transaction proposed by AMD prior to the expiration of the four business day
period specified in the preceding sentence. For purposes of this Agreement, a
"Superior Proposal" means any bona fide Acquisition Proposal to merge with
NexGen or to acquire, directly or indirectly, a material equity interest in or
a significant amount of voting securities or assets of NexGen for
consideration consisting of cash and/or securities, and otherwise on terms
which the Board of Directors of NexGen determines in the proper exercise of
its fiduciary duties (based on the advice of a financial advisor of nationally
recognized reputation including, without limitation, PaineWebber Incorporated)
to provide greater value to NexGen and its stockholders than the Merger (or
otherwise proposed by AMD as contemplated above). Nothing contained herein
shall prohibit NexGen from taking and disclosing to its stockholders a
position contemplated by Rule 14d-9(e) under the Exchange Act prior to the
fourth business day following Purchaser's receipt of a Notice of Superior
Proposal provided that NexGen does not withdraw or modify its position with
respect to the Merger or approve or recommend an Acquisition Proposal.
(e) NexGen agrees to use its best efforts to ensure that the officers,
directors and employees of NexGen and the NexGen Subsidiaries and any
investment banker or other advisor or representative retained by NexGen are
aware of the restrictions described in this Section.
SECTION 5
COVENANTS OF AMD AND AMD MERGER
AMD and AMD Merger covenant and agree as follows:
5.1 Negative Covenants. Between the date of this Agreement and the Effective
Time, unless NexGen shall otherwise consent in writing, which consent NexGen
may not unreasonably withhold, neither AMD nor any AMD Subsidiary will do any
of the following or commit to do so:
(a) Declare, set aside, or pay any dividend or make any other
distribution in respect of its capital stock, whether payable in AMD Common
Stock or otherwise, or effect a stock split of its capital stock;
(b) Undertake a sale, spinoff or other distribution of all or
substantially all of the assets of AMD or all or substantially all of the
assets of AMD associated with the production of any product or group of
products of AMD which represented 10% or more of the gross revenues of AMD
in the fiscal year ended December 25, 1994;
(c) Undertake any consolidation or merger of AMD with or into another
corporation other than a merger with another corporation in which AMD is a
continuing corporation and which does not result in any reclassification or
change of AMD Common Stock, unless at the time of any such consolidation or
merger, to the extent reasonably deemed necessary by NexGen, AMD or the
successor corporation shall execute appropriate documentation to insure the
result provided for in Section 1.5(b).
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(d) Aside from any actions contemplated by this Agreement, take or permit
any action relating to AMD which would prevent the Merger from qualifying
for pooling-of-interests accounting treatment in accordance with Generally
Accepted Accounting Principles and all rules, regulations and policies of
the SEC.
(e) Take or permit any action which would prevent the Merger from
qualifying as a tax-free reorganization under Section 368 of the Code or
from being eligible for pooling-of-interests accounting treatment in
accordance with generally accepted accounting principles and all rules,
regulations and policies of the SEC, and AMD will use its best efforts to
prevent any of its officers or directors from taking or permitting any such
action;
(f) Undertake a course of action inconsistent with this Agreement or
which would prevent any conditions precedent to its obligations under this
Agreement from being satisfied at or prior to the Effective Time;
(g) Provide or publish to its stockholders any material which might
constitute an unauthorized "prospectus" within the meaning of the
Securities Act;
(h) Issue any press release or any public disclosure, either written or
oral, of the transactions contemplated by this Agreement or negotiations
related thereto without the prior knowledge and written consent of NexGen,
which consent shall not be unreasonably withheld; provided, however, that
no such consent shall be required if AMD has determined in good faith upon
written advice of counsel that it is required under applicable securities
laws to make the disclosure; or
(i) Violate the terms of the Credit Agreement.
5.2 Affirmative Covenants. Prior to or on the Effective Time AMD and/or AMD
Merger will do the following:
(a) Use its best efforts to perform and fulfill all conditions and
obligations on their part to be performed and fulfilled under this
Agreement, to the end that the transactions contemplated by this Agreement
and the Credit Agreement shall be fully carried out;
(b) Use its best efforts to obtain all authorizations, consents and
permits of others required to permit the consummation by AMD and AMD Merger
of the transactions contemplated by this Agreement and the Credit
Agreement, including, without limitation, using its best efforts through
preparation, SEC clearance and distribution as promptly as possible of the
Proxy Statement and otherwise to obtain the approval of AMD's stockholders
sufficient for corporate law purposes and pooling-of-interests accounting;
(c) Cooperate with NexGen to the best of AMD's ability in the preparation
of the Proxy Statement;
(d) File the S-4 with the SEC as promptly as practicable, which shall
relate to the maximum number of shares of AMD Common Stock into which the
shares of NexGen Common Stock will be converted on the Effective Time, and
use its best efforts to cause the S-4 to become effective as soon after
such filing as practicable. In this regard, AMD will advise NexGen promptly
as to the time at which the S-4 becomes effective and of the issuance by
the SEC of any stop order suspending the effectiveness of the S-4 or the
institution of any proceedings for such purpose and will use its best
efforts to prevent the issuance of any stop order and to obtain as soon as
possible the lifting thereof if issued. Until the Effective Time, AMD will
advise NexGen promptly of any requirement of the SEC for any amendment or
supplement to the S-4 or for additional information, and will not at any
time file any amendment of or supplement to the prospectus contained
therein (or to the prospectus filed pursuant to Rule 424(b) of the SEC)
(the "Prospectus") which shall not have been previously submitted to NexGen
a reasonable time prior to the proposed filing thereof or to which NexGen
shall reasonably object or which is not in compliance in all material
respects with the Securities Act and the rules and regulations issued by
the SEC thereunder. When the S-4 becomes effective, it will comply in all
material respects with the provisions of the Securities Act and the rules
and regulations thereunder. From and after the date the S-4 becomes
effective and until the Effective Time, if any event occurs as a result of
which the Prospectus would include an untrue statement of a material fact
or omit to state a material fact necessary to make the statements therein
not misleading or if it is necessary at any time
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to amend the S-4 or the Prospectus to comply with the Securities Act, AMD
will promptly notify NexGen and will prepare an amended or supplemented S-4
or Prospectus which will correct such statement or omission and will use
its best efforts to cause any such amendment to become effective as
promptly as possible. AMD will deliver to NexGen two signed copies of the
S-4 and all amendments thereto, including all financial statements and
exhibits filed therewith;
(e) If any shares of AMD Common Stock are listed on the NYSE or any other
exchange as of the Closing Date, use its best efforts to list the AMD
Common Stock to be issued pursuant to the Merger on the NYSE or such other
exchange;
(f) Promptly advise NexGen in writing of (i) any materially adverse
change in the financial condition, business, operations or key personnel of
AMD or the AMD Subsidiaries; and (ii) the occurrence of any event which
causes the representations and warranties made by AMD in this Agreement or
the information included in AMD Disclosure Schedule to be incomplete or
inaccurate in any material respect;
(g) Provide to NexGen such financial reports and other information as may
be reasonably requested by NexGen for the purpose of monitoring the
business of AMD;
(h) Use its best efforts to (i) qualify the Common Stock to be issued
pursuant to the Merger under the securities or "blue sky" laws of every
jurisdiction of the United States in which any registered stockholder of
NexGen has an address on the records of NexGen's transfer agent on the
record date for determining the NexGen stockholders entitled to notice of
and to vote on the Merger, and (ii) qualify the NexGen Options and NexGen
Warrants to be assumed by AMD pursuant to Section 5.3 under the securities
or "blue sky" laws or every jurisdiction of the United States in which the
records of NexGen, as of the Closing Date, indicate that a holder of such
options or warrants resides, except in either case any such jurisdiction
with respect to which counsel for AMD has determined that such
qualification is not required under the securities or "blue sky" laws of
such jurisdiction;
(i) Use its best efforts to obtain the approval of this Agreement by
affirmative vote of the holders of the outstanding shares of AMD Common
Stock entitled to vote (and to that end, will recommend approval of the
Merger to AMD's stockholders) and shall present evidence of such
recommendation and approval to NexGen in form and content satisfactory to
NexGen and its counsel;
(j) As promptly as reasonably practicable after the date of this
Agreement, file with the Federal Trade Commission and the Antitrust
Division of the United States Department of Justice and any other
governmental agencies or departments all notices, reports and other
documents required by law with respect to this Agreement and the Merger and
promptly submit any additional information or documentary material properly
requested by any such governmental agency;
(k) In the event that between the date hereof and the Effective Time, any
person, entity or federal, state, local or foreign governmental authority
shall commence any examination, review, investigation, action, suit or
proceeding against AMD with respect to the Merger, AMD shall give prompt
notice thereof to NexGen, shall keep NexGen informed as to the status
thereof, and shall (except as may be prohibited by such governmental
authority or by any court order or decree in an action or suit instituted
by a person other than AMD or an affiliate of AMD) permit NexGen to observe
and be present at each meeting, conference or other proceeding and have
access to and be consulted in connection with any document filed or
provided to such person, entity or governmental authority in connection
with such examination, review, investigation, action, suit or proceeding;
(l) Cause AMD Merger to perform all of its agreements contained herein
and in the Merger Agreement;
(m) Promptly provide NexGen with (i) copies of all written materials and
communications furnished by AMD to its stockholders after the date of this
Agreement, and (ii) copies of notices, reports or other documents filed
with the Federal Trade Commission or the Antitrust Division of the United
States Justice Department pursuant to Section 5.2(j) hereof (iii) copies of
all reports filed with the SEC;
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(n) Promptly provide NexGen copies of its Consolidated Balance Sheet and
related consolidated statements of income, changes in financial position
and changes in stockholders' equity for all interim 4-week and quarterly
periods prior to the Closing. Such 4-week and quarterly financial
statements shall be prepared in conformity with Generally Accepted
Accounting Principals applied on a consistent basis (subject to the absence
of footnotes) and shall present (subject to normal year-end audit
adjustments) the consolidated financial condition, results of operations
and changes in financial position of AMD and the AMD Subsidiaries as of the
dates and for the periods covered by such statements;
(o) Use its best efforts to deliver to NexGen, and to cause its counsel
to deliver to NexGen, the closing documents referred to in this Agreement;
and
(p) Appoint the Chairman of NexGen to the Board of Directors of AMD
effective as of the Effective Time.
5.3 Stock Options, Warrants and Convertible Instruments.
(a) At the Effective Time, AMD shall assume the NexGen 1987 Stock Plan, the
NexGen 1995 Stock Plan and the NexGen 1995 Employee Stock Purchase Plan; and
each NexGen Option then outstanding under such plans shall remain outstanding
and shall be deemed an option to purchase, in place of the purchase of NexGen
Common Stock previously subject to such option, that number of shares of AMD
Common Stock equal to the product of the number of shares subject to the
NexGen Option, to the extent not exercised or terminated on or prior to the
Effective Time, multiplied by the Exchange Ratio and rounded downward to the
nearest whole share, at an exercise price per share equal to the exercise
price per share under the NexGen Option divided by the Exchange Ratio and
rounded upward to the nearest whole cent. The assumption of the NexGen Options
which are incentive stock options as defined in Section 422(b) of the Code and
of options outstanding under the NexGen Employee Stock Purchase Plan shall be
accomplished in a transaction to which Section 424(a) of the Code applies. All
the other terms and conditions of the NexGen Options shall remain the same.
(b) As of the Effective Time, each NexGen Warrant then outstanding shall
remain outstanding and shall be deemed to be a warrant to purchase, in place
of the purchase of the shares of NexGen Common Stock previously subject to
such Warrant, that number of shares of AMD Common Stock equal to the product
of the number of shares of NexGen Common Stock subject to such Warrant, and
not exercised prior to the Effective Time, multiplied by the Exchange Ratio
and rounded downward to the nearest whole share. The exercise price per share
shall be equal to the exercise price per share under the NexGen Warrant
divided by the Exchange Ratio and rounded upward to the nearest one-hundredth
of one (1) whole cent. As of the Effective Time, any existing right of ASCII
Corporation to convert debt payable by NexGen into NexGen Common Stock shall
remain effective and shall be deemed to be a right to convert such debt into
that number of shares of AMD Common Stock as is equal to the product of the
number of shares of NexGen Common Stock into which such debt could have been
converted prior to the Effective Time, and was not so converted, multiplied by
the Exchange Ratio and rounded downward to the nearest whole share.
(c) AMD will (i) file with the SEC a new registration statement on Form S-8
relating to such NexGen Options and the shares of AMD Common Stock to be
issued upon their exercise or an amendment to its existing registration
statement on Form S-8 to include such options and shares (such new or amended
registration statement is referred to in this Agreement as the "S-8"), (ii)
file with the SEC a registration statement on Form S-3 (or such other form as
AMD deems appropriate) (the "S-3") relating to such NexGen Warrants and the
shares of AMD Common Stock to be issued upon their exercise, (iii) use its
best efforts to cause the S-8 and the S-3 to become effective prior to the
Closing, and (iv) if the shares of AMD Common Stock issuable upon exercise of
existing AMD stock option plans are listed on the NYSE or some other exchange
as of the Closing Date, AMD will list the shares of AMD Common Stock to be
issued pursuant to NexGen Options and NexGen Warrants assumed by AMD on the
NYSE or such other exchange.
5.4 Employee Benefits. Consistent with AMD's employee benefit plans, all
NexGen employees who become employees of AMD or a subsidiary of AMD as of the
Effective Time shall receive the same or reasonably comparable benefits as
such NexGen employees currently receive and, to the extent not prohibited by
law, shall receive service credit which includes their employment by NexGen
prior to the Effective Time.
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SECTION 6
INDEMNIFICATION
6.1 Indemnification by NexGen. NexGen will indemnify and hold harmless AMD
and the AMD Subsidiaries and each of their officers, directors, employees and
agents from and against any and all losses, claims, damages or liabilities
(including expenses), joint and several, to which any of them may become
subject under the Securities Act, the Exchange Act, common law, or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of, or are based upon, any untrue statement or alleged
untrue statement of any material fact contained in the S-4, the Prospectus or
the Proxy Statement or arise out of, or based upon, the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse
each such party to be indemnified by it for any legal or other expenses
reasonably incurred by such party in connection with investigating or
defending any such loss, claim, damage, liability or action; provided,
however, that the foregoing indemnification shall be limited to any loss,
claim, damage or liability (including expenses) arising out of, or based upon,
any untrue statement or alleged untrue statement in or omission or alleged
omission from the S-4, the Prospectus or the Proxy Statement made in reliance
upon and in conformity with information furnished by or on behalf of NexGen or
any of the NexGen Subsidiaries specifically for use therein or in preparation
thereof. The indemnity agreement in this section is in addition to any
liability which NexGen may otherwise have.
6.2 Indemnification by AMD. AMD will indemnify and hold harmless NexGen and
the NexGen Subsidiaries and each of their officers, directors, employees and
agents from and against any and all losses, claims, damages or liabilities
(including expenses), joint or several, to which any of them may become
subject under the Securities Act, the Exchange Act, common law or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of, or are based upon, any untrue statement or alleged
untrue statement of any material fact contained in the S-4, the Prospectus or
the Proxy Statement or arise out of, or are based upon, the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse each such party to be indemnified by it for any legal or other
expenses reasonably incurred by such party in connection with investigating or
defending any such loss, claim, damage, liability or action; provided,
however, that there shall be excluded from the foregoing indemnification any
loss, claim, damage or liability (including expenses) arising out of, or based
upon, any untrue statement or alleged untrue statement in or omission or
alleged omission from the S-4, the Prospectus or the Proxy Statement made in
reliance upon and in conformity with information furnished by or on behalf of
NexGen or any NexGen Subsidiary specifically for use therein or in preparation
thereof. The indemnity agreement in this section is in addition to any
liability which AMD may otherwise have.
6.3 Defense of Action. Promptly after receipt by an indemnified person under
this Section 6 of notice of the commencement of any action, such indemnified
person shall, if a claim in respect thereof is to be made against the
indemnifying party under this Section 6, notify the indemnifying party in
writing of the commencement thereof, enclosing a copy of all papers served.
The failure to notify the indemnifying party shall relieve it from any
liability under this Section 6, but not from any liability the indemnifying
party might otherwise have to the indemnified party. The party proposing to be
indemnified shall cooperate fully with the indemnifying party in the defense
of the action. If the indemnifying party agrees in writing to assume and
undertake the defense of the claim or action, the indemnifying party shall
have the right to select and retain counsel reasonably satisfactory to the
indemnified person and the indemnified person, upon receipt of written notice
of the agreement of the indemnifying party, shall have no right to
indemnification of fees or expenses incurred subsequent to receipt of the
notice. If, however, the indemnified party requires separate counsel because a
conflict of interest would otherwise exist, the indemnifying party shall pay
the reasonable legal fees and reasonable expenses of such separate counsel on
a monthly basis. The identifying party shall not be liable for any settlement
or compromise effected without its consent. The indemnifying party shall have
the right to settle or otherwise compromise the action in its sole discretion
provided that it agrees to satisfy any and all settlement obligations from its
own resources.
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6.4 Additional Indemnification by AMD. AMD agrees that upon consummation of
the Merger and at all times thereafter, AMD shall indemnify and hold harmless
each person who was an officer or director of NexGen prior to the Effective
Time upon the same terms and conditions as each such person was entitled to be
indemnified by NexGen at the date hereof and as of the Effective Time pursuant
to the Bylaws of NexGen or any agreement between NexGen and each such person
or as provided by the DGCL.
SECTION 7
MUTUAL CONDITIONS
Neither AMD, AMD Merger nor NexGen will be obligated to complete or cause to
be completed the transactions contemplated by this Agreement unless the
following conditions have been satisfied prior to or at the Closing:
7.1 Absence of Restraint. No order to restrain, enjoin or otherwise prevent
the consummation of this Agreement or the transactions contemplated herein
shall have been entered and remain in effect by any court or administrative
body.
7.2 Absence of Termination. The obligations to consummate the transactions
contemplated hereby shall not have been terminated pursuant to Section 10
hereof.
7.3 Required Approvals. AMD, AMD Merger and NexGen shall have received all
such material governmental approvals, consents, authorizations or
modifications as may be required to permit the performance by AMD, AMD Merger
and NexGen, of their respective obligations under this Agreement and the
consummation of the transactions herein contemplated.
7.4 Securities Law Requirements. All permits, licenses, consents and
approvals necessary under any laws relating to the sale of securities shall
have been issued or given, and all registrations or registration statements
filed under any laws relating to the sale of securities for the issuance of
AMD Common Stock issuable pursuant to this Agreement, including the S-4, shall
have become effective, and no such permit, license, consent approval,
registration or registration statement shall have been revoked, cancelled,
terminated, suspended or made the subject of any stop order or proceeding
therefor.
7.5 Hart-Scott-Rodino Antitrust Improvements Act. AMD and NexGen shall have
made all required filings under the Hart-Scott-Rodino Antitrust Improvements
Act and the required statutory periods under such Act shall have expired.
7.6 NexGen Stockholders' Approval. The approval of this Agreement shall have
been obtained by the requisite vote of the outstanding shares of NexGen
entitled to vote, as required by and in accordance with the applicable
provisions of the DGCL and the Certificate of Incorporation and Bylaws of
NexGen; and NexGen shall have presented evidence of such approvals to AMD in
form and content satisfactory to AMD and its counsel.
7.7 AMD Stockholders' Approval. The approval of this Agreement shall have
been obtained by the requisite vote of the outstanding shares of AMD entitled
to vote as required by the Rules of the NYSE; and AMD shall have presented
evidence of such approvals to NexGen in form and content satisfactory to
NexGen and its counsel.
7.8 New York Stock Exchange Listing. If any shares of AMD Common Stock are
listed on the NYSE or another exchange on the Closing Date, the NYSE or such
other exchange shall have authorized the listing, upon official notice of
issuance, on the NYSE or such other exchange of the shares of AMD Common Stock
to be issued or delivered in connection with the Merger, and no order
suspending trading in AMD's Common Stock shall be in effect as of the Closing
Date.
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<PAGE>
SECTION 8
CONDITIONS PRECEDENT TO OBLIGATIONS OF AMD AND AMD MERGER
The obligations of AMD and AMD Merger to consummate the transactions
contemplated in this Agreement are subject to the fulfillment, prior to or
upon the Closing, of the following conditions precedent:
8.1 Compliance with Covenants; Representations and Warranties
Correct. NexGen shall have complied with and performed in all material
respects all of the covenants contained in this Agreement to be performed by
it at or prior to the Closing Date; the representations and warranties of
NexGen contained in this Agreement shall, after taking into account any
supplemental disclosures made by NexGen pursuant to Section 4.2(d)(ii) of this
Agreement, be true and correct in all material respects as of the Closing Date
with the same effect as though made on the Closing Date; and NexGen shall have
delivered to AMD a certificate of the Chief Executive Officer of NexGen
evidencing compliance with the conditions set forth in this Section 8.1.
8.2 No Material Adverse Change. From and after the date hereof, there shall
have been no material adverse change in the business or financial condition of
NexGen and the NexGen Subsidiaries taken as a whole. For the purposes hereof,
a material adverse change shall mean a material adverse change, other than a
decrease in the reported stock price, which (from the perspective of AMD)
results in a significant diminution of the value of the NexGen business
enterprise as a whole, and which material adverse change shall cause
Donaldson, Lufkin & Jenrette Securities Corporation to withdraw its written
opinion to the Board of Directors or AMD delivered pursuant to Section 8.5
hereof.
8.3 Section 2.23 Documents. AMD shall have received the Section 2.23
Documents.
8.4 Key Employees. AMD shall be reasonably satisfied prior to the Effective
Time with the employment arrangements between NexGen and (i) those employees
of NexGen whom AMD has identified to NexGen as key employees and (ii) any
additional employees of NexGen whom AMD reasonably identifies as key employees
to the business of NexGen as now being conducted or currently proposed to be
conducted prior to the Effective Time.
8.5 Fairness Opinion. The Board of Directors of AMD shall have received a
written opinion from Donaldson, Lufkin and Jenrette Securities Corporation,
dated the date of this Agreement and dated on the date on which the Proxy
Statement is first mailed to AMD stockholders, in form and substance
satisfactory to AMD, stating that the consideration to be paid by AMD in the
Merger is fair to the stockholders of AMD from a financial point of view and
such opinion shall not have been withdrawn by the closing.
8.6 Comfort Letter. AMD shall have received a letter from Price Waterhouse
LLP, as independent certified public accountants for NexGen, dated (i) the
effective date of the S-4, and (ii) the Closing Date, in each case
substantially to the effect that:
(a) it is a firm of independent public accountants with respect to NexGen
and its Subsidiaries within the meaning of the Securities Act and the rules
and regulations of the SEC thereunder;
(b) in its opinion, the audited consolidated financial statements of
NexGen and its Subsidiaries examined by it and included or incorporated by
reference in the S-4 comply as to form in all material respects with the
applicable requirements of the Securities Act and the Exchange Act and the
applicable published rules and regulations of the SEC thereunder with
respect to registration statements on Form S-4; and
(c) on the basis of specified procedures (which do not constitute an
examination in accordance with generally accepted auditing standards),
consisting of a reading of the unaudited consolidated financial statements
of NexGen and its subsidiaries included or incorporated by reference in the
S-4 and of the latest available unaudited consolidated financial statements
of NexGen and its Subsidiaries, inquiries of officers of NexGen and its
Subsidiaries responsible for financial and accounting matters, and a
reading of the minutes of meetings of stockholders and the Board of
Directors of NexGen and its Subsidiaries, nothing
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<PAGE>
has come to its attention which causes it to believe: (1) that the
unaudited consolidated financial statements of NexGen and its Subsidiaries
included or incorporated by reference in the S-4 do not comply as to form
in all material respects with the applicable accounting requirements of the
Securities Act and the published rules and regulations thereunder, (2) that
the unaudited consolidated financial statements are not fairly presented in
conformity with generally accepted accounting principles consistently
applied and on a basis substantially consistent with that of the audited
consolidated financial statements, or (3) that as of a date which is five
(5) business days prior to the date of such letter there was any change in
the capital stock, any increase in long-term debt or any decrease in
consolidated net assets of NexGen and its Subsidiaries as compared to the
amounts shown in the NexGen Audited Balance Sheet, or that during the
period from June 30, 1995, to the most recent month-end for which financial
statements are available there was any decrease, as compared with the
corresponding period in the preceding year, in consolidated net income of
NexGen and its Subsidiaries, except in all instances for changes or
decreases which are set forth in such letter or which the S-4 discloses
have occurred or may occur;
and covering such other matters (including tables, statistics and other
financial information and data included in the S-4) as AMD may reasonably
request consistent with the Statement on Auditing Standards No. 49 issued by
the American Institute of Certified Public Accountants.
8.7 Legal Opinion. AMD shall have received an opinion of Pillsbury, Madison
& Sutro, counsel to NexGen, dated the Closing Date, in substantially the form
attached hereto as Exhibit D.
8.8 Resignations. AMD shall have received written resignations, effective as
of the Closing Date, of each director of NexGen.
8.9 Tax Opinion. AMD shall have received a written opinion of Bronson,
Bronson & McKinnon, counsel for AMD, in form and substance reasonably
satisfactory to it and substantially identical in form and substance to the
opinion described in Section 9.3 of this Agreement to the effect that the
Merger will constitute a reorganization within the meaning of Section
368(a)(1) of the Code. Counsel shall, in rendering such opinion, be entitled
to rely on representations of AMD, AMD Merger and NexGen.
8.10 Pooling-of-Interests Accounting Treatment. AMD shall have received a
letter from Ernst & Young LLP, AMD's independent public accountants, dated the
Closing Date, in form and substance satisfactory to AMD, to the effect that
the Merger will qualify for pooling-of-interests accounting treatment in
accordance with generally accepted accounting principles and all applicable
rules, regulations and policies of the SEC and the NYSE.
SECTION 9
CONDITIONS PRECEDENT TO NEXGEN'S OBLIGATIONS
The obligations of NexGen to consummate the transactions contemplated herein
are subject to the fulfillment, prior to or upon the Closing, of the following
conditions precedent:
9.1 Compliance with Covenants; Representations and Warranties Correct. AMD
and AMD Merger shall have performed in all material respects all of the
covenants contained in this Agreement to be performed by them at or prior to
the Closing Date; the representations and warranties of AMD contained in this
Agreement shall, after taking into account any supplemental disclosures made
by AMD pursuant to Section 5.2(f)(ii) of this Agreement, be true and correct
in all material respects as of the Closing Date with the same effect as though
made on the Closing Date; and AMD shall have delivered to NexGen a certificate
of the Chief Executive Officer of AMD evidencing compliance with the
conditions set forth in this Section 9.1.
9.2 No Material Adverse Change. From and after the date hereof there shall
have been no material adverse change in the business or financial condition of
AMD and the AMD Subsidiaries taken as a whole. For the purposes hereof, a
material adverse change shall mean a material adverse change, other than a
decrease in
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<PAGE>
the reported stock price, which (from the perspective of NexGen) results in a
significant diminution of the value of the AMD business enterprise as a whole,
and which material adverse change shall cause PaineWebber Incorporated to
withdraw its written opinion to the Board of Directors of NexGen delivered
pursuant to Section 9.4 hereof.
9.3 Tax Opinion. NexGen shall have received a written opinion of Pillsbury,
Madison & Sutro, counsel for NexGen, in form and substance reasonably
satisfactory to it and substantially identical in form and substance to the
opinion described in Section 8.9 of this Agreement to the effect that the
Merger will constitute a reorganization within the meaning of Section
368(a)(1) of the Code. Counsel shall, in rendering such opinion, be entitled
to rely on representations of AMD, AMD Merger and NexGen.
9.4 Fairness Opinion. The Board of Directors of NexGen shall have received a
written opinion from PaineWebber Incorporated dated the date of this Agreement
and updated on the date on which the Proxy Statement is first mailed to NexGen
stockholders, in form and substance satisfactory to NexGen, stating that the
terms of the Merger are fair to the stockholders of NexGen from a financial
point of view, and such opinion shall not have been withdrawn by the Closing.
9.5 Legal Opinion. NexGen shall have received an opinion of Bronson, Bronson
& McKinnon, counsel to AMD, dated the Closing Date, in substantially the form
attached hereto as Exhibit E.
SECTION 10
TERMINATION OF AGREEMENT
10.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time, notwithstanding approval thereof by the shareholders either of
AMD or of NexGen or of both:
(a) by mutual written consent duly authorized by the Boards of Directors
of AMD and NexGen; or
(b) by either AMD or NexGen if the Merger shall not have been consummated
by April 30, 1996, provided, however, that the right to terminate this
Agreement under this Section 10.1(b) shall not be available to any party
whose failure to fulfill any obligation under this Agreement has been the
cause of or resulted in the failure of the Merger to occur on or before
such date; or
(c) by either AMD or NexGen if a court of competent jurisdiction or
governmental, regulatory or administrative agency or commission shall have
issued an order, decree or ruling or taken any other action, in each case
having the effect of permanently restraining, enjoining or otherwise
prohibiting the Merger; or
(d) by AMD or NexGen, if (i) at the NexGen Stockholders' Meeting
(including any adjournment or postponement thereof), the requisite vote of
the stockholders of NexGen shall not have been obtained and (ii) in the
case of the termination of this Agreement under this Section 10.1(d) by
NexGen, NexGen shall have paid to AMD all amounts owing by NexGen to AMD
under Section 10.3; or
(e) By AMD or NexGen, if (i) at the AMD Stockholders' Meeting (including
any adjournment or postponement thereof), the requisite vote of the
stockholders of AMD shall not have been obtained and (ii) in the case of
the termination of this Agreement under this Section 10.1(e) by AMD, AMD
shall have paid to NexGen all amounts owing by AMD to NexGen under Section
10.3; or
(f) by AMD, if a tender offer or exchange offer for 20% or more of the
outstanding shares of NexGen Common Stock is commenced (other than by AMD
or an affiliate of AMD), and within ten (10) business days of such
commencement the Board of Directors of NexGen shall not have recommended
that the shareholders of NexGen not tender their shares in such tender or
exchange offer; or
(g) by NexGen, upon a breach of any representation, warranty, covenant or
agreement on the part of AMD set forth in this Agreement, or if any
representation or warranty of AMD shall have become untrue, in either case
such that the conditions set forth in Section 9.1 would not be satisfied (a
"Terminating AMD Breach"), provided, that, if (i) such Terminating AMD
Breach is curable by AMD through the exercise of
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<PAGE>
its reasonable best efforts and for so long as AMD continues to exercise
such reasonable best efforts, or (ii) such Terminating AMD Breach relates
solely to representations and warranties and does not cause PaineWebber
Incorporated to withdraw its written opinion to the Board of Directors of
NexGen delivered pursuant to Section 9.4 hereof; then NexGen may not
terminate this Agreement under this Section 10.1(g); or
(h) by AMD, upon breach of any representation, warranty, covenant or
agreement on the part of NexGen set forth in this Agreement, or if any
representation or warranty of NexGen shall have become untrue, in either
case such that the conditions set forth in Section 8.1 would not be
satisfied ("Terminating NexGen Breach"), provided, that, (i) if such
Terminating NexGen Breach is curable by NexGen through the exercise of its
reasonable best efforts and for so long as NexGen continues to exercise
such reasonable best efforts, or (ii) such Terminating NexGen Breach
relates solely to representations and warranties and does not cause
Donaldson, Lufkin & Jenrette Securities Corporation to withdraw its written
opinion to the Board of Directors of AMD delivered pursuant to Section 8.5
hereof; then AMD may not terminate this Agreement under this Section
10.1(h).
10.2 Effect of Termination. If this Agreement shall be terminated as
provided in Section 10.1, this Agreement shall forthwith become void (except
as otherwise provided in Section 10.4 and 11.2) and there shall be no
liability on the part of any party hereto to any other party except for (i)
payment of any amounts payable pursuant to Section 10.3, (ii) payment of any
amounts payable pursuant to Section 11.4 and (iii) any damages for a material
breach of this Agreement, but the foregoing shall be without prejudice to any
other rights or remedies any party may have arising out of any prior breach of
any material representation, warranty or covenant in this Agreement.
10.3 Fees and Expenses.
(a) Except as set forth in this Section 10.3, all fees and expenses incurred
in connection with this Agreement and the transactions contemplated hereby
shall be paid by the party incurring such expenses, whether nor not the Merger
is consummated; provided, however, that AMD and NexGen shall share equally all
fees and expenses other than attorneys' fees, incurred in relation to the
printing and filing of the Proxy Statement (including any preliminary
materials related thereto) and the Registration Statement (including financial
statements and exhibits) and any amendments or supplements thereto.
(b) NexGen shall pay AMD a fee of $25,000,000 (subject to offset, for any
amount paid pursuant to Section 10.3(e)), upon the earlier to occur of the
following events:
(i) if NexGen's Board of Directors prior to the vote at the NexGen
Stockholders' Meeting has withdrawn, modified or changed in any manner
adverse to AMD its recommendation of the Merger or resolved to do so,
provided, however, that disclosing to its stockholders in conformance with
the securities laws information regarding a Superior Alternative
Transaction without so withdrawing, changing or modifying its
recommendation shall not be deemed to be a breach of this clause (i); or
(ii) the NexGen Board prior to the vote at the NexGen Stockholders'
Meeting has resolved to accept, accepted or recommended to the stockholders
of NexGen a Superior Alternative Transaction; or
(iii) the later to occur of both (A) the entering into an agreement
contemplating a Superior Alternative Transaction or the consummation of a
Superior Alternative Transaction on or before April 30, 1996 and
(B) termination of this Agreement pursuant to Sections (f) or (h) of
Section 10.1 of this Agreement; or
(iv) the later to occur of both (A) the entering into an agreement
contemplating an Alternative Transaction or the consummation of an
Alternative Transaction on or before April 30, 1996 and (B) termination of
this Agreement pursuant to Section 10.1(d); or
(v) as a result of any material breach by NexGen of Section 4.3 of this
Agreement as a result of any willful solicitation by NexGen's directors,
executive officers, five other key employees identified by AMD in
connection with Section 8.4(i), the financial advisor or counsel of NexGen;
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<PAGE>
provided, however, that no payment hereunder shall be due with respect to any
of such events which occurs after the earlier of April 30, 1996 or the
termination of the Agreement by AMD and NexGen pursuant to Sections 10.1(a),
or by NexGen pursuant to section 10.1(b), 10.1(c), 10.1(e) or 10.1(g).
(c) As used herein "Alternative Transaction" means: (i) a transaction
pursuant to which any person other than AMD or its affiliates (a "Third
Party") acquires more than 20% of the outstanding shares of NexGen Common
Stock, whether from NexGen or pursuant to a tender offer or exchange offer or
otherwise, provided, however, that after termination of this Agreement, the
issuance of new equity by NexGen where reasonably necessary to provide
continued funding for NexGen's operations shall not be deemed an Alternative
Transaction except as provided in clause (iii) of this paragraph (c); (ii) a
merger or other business combination involving NexGen pursuant to which any
Third Party acquires more than 20% of the outstanding equity securities of
NexGen or the entity surviving such merger or business combination; or (iii)
any other transaction pursuant to which any Third Party acquires control of
assets (including for this purpose the outstanding equity securities of
subsidiaries of NexGen, and the entity surviving any merger or business
combination including any of them) of NexGen or any of the NexGen Subsidiaries
having a fair market value (as determined by the Board of Directors of NexGen
in good faith) equal to more than 20% of the fair market value of all the
assets of NexGen, and the NexGen Subsidiaries, taken as a whole, immediately
prior to such transaction. As used herein, a "Superior Alternative
Transaction" means an Alternative Transaction in which consideration is
received by NexGen or its stockholders for NexGen Common Stock and the
consideration for each share of NexGen Common Stock has a greater value than
the consideration for each share of NexGen Common Stock determined as of the
date hereof to be received by Stockholders of NexGen pursuant to the Merger.
(d) If the Fee is payable pursuant to Section 10.3(b), then the Fee shall be
paid within one business day after demand therefor by AMD unless payment is
earlier due as provided in Section 10.1(d).
(e) NexGen shall pay AMD $15,000,000 upon the earliest to occur of the
following events: (i) the termination of this Agreement by AMD pursuant to
Section 10.1(d) as a result of the failure to receive the requisite vote for
approval of this Agreement and the Merger by the stockholders of NexGen at the
NexGen Stockholders' Meeting; or (ii) the termination of this Agreement by AMD
pursuant to Section 10.1(f).
(f) AMD shall pay NexGen $15,000,000 upon the termination of this Agreement
by NexGen pursuant to Section 10.1(e) as a result of the failure to receive
the requisite vote for approval of this Agreement and the Merger by the
stockholders of AMD at the AMD Stockholders' meeting.
10.4 Return of Information; Confidentiality. In the event this Agreement is
terminated or the Merger is not consummated for any reason, AMD, AMD Merger
and NexGen agree that all written information and documents supplied by either
AMD or AMD Merger to NexGen or by NexGen to either AMD or AMD Merger for their
respective evaluations of the proposed Merger shall be promptly returned to
the other party at its request, and AMD, AMD Merger and NexGen each will use
its best efforts to cause confidential information to continue to be treated
as confidential. The rights of AMD and NexGen with respect to information
disclosed to the other are set forth in the Confidentiality and Standstill
Agreement dated October 16, 1995, which agreement shall continue in full force
and effect and not be affected by or merged with the terms of this Agreement.
10.5 Extension of Time; Waivers. At any time prior to the Closing Date:
(a) By AMD and AMD Merger. AMD and AMD Merger may (i) extend the time for
the performance of any of the obligations or other acts of NexGen, and (ii)
waive compliance with any of the agreements or conditions contained herein
to be performed by NexGen. Any agreement on the part of AMD and AMD Merger
to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of AMD and AMD Merger.
(b) By NexGen. NexGen may (i) extend the time for the performance of any
of the obligations or other acts of AMD and/or AMD Merger, and (ii) waive
compliance with any of the agreements or conditions contained herein to be
performed by AMD and/or AMD Merger. Any agreement on the part of NexGen to
any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of NexGen.
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<PAGE>
SECTION 11
MISCELLANEOUS
11.1 Amendment. This Agreement may be amended with the approval of the
Boards of Directors of AMD, AMD Merger and NexGen at any time before or after
approval hereof by the stockholders of NexGen or AMD, but, after any such
stockholder approval, no amendment shall be made which would have a material
adverse effect on the stockholders of either NexGen or AMD or which changes
any of the principal terms of this Agreement, without the further approval of
such stockholders. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto.
11.2 No Survival of Representations and Warranties. None of the
representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Merger,
except for (i) the agreements of "Affiliates" of NexGen to be delivered
pursuant to Section 2.23 of this Agreement, (ii) the provisions of Section 5.3
of this Agreement, (iii) the provisions of Section 6 of this Agreement to the
extent they inure to the benefit of persons other than AMD, AMD Merger or
NexGen, and (iv) the provisions of Section 10.3 of this Agreement.
11.3 Entire Agreement; Counterparts; Applicable Law. This Agreement together
with the Confidentiality and Standstill Agreement, and the Credit Agreement
and the agreements contemplated by the exhibits hereto (a) constitute the
entire agreement and supersede all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof,
(b) may be executed in several counterparts each of which will be deemed an
original and all of which shall constitute one and the same instrument and (c)
shall be governed in all respects, including validity, interpretation and
effect, by the laws of the State of Delaware, without regard to the principles
of conflicts of laws thereof.
11.4 Attorneys' Fees. In any action at law or suit in equity in relation to
this Agreement, the prevailing party in such action or suit shall be entitled
to receive a reasonable sum for its attorneys' fees and all other reasonable
costs and expenses incurred in such action or suit.
11.5 Assignability. This Agreement shall be binding upon, and shall be
enforceable by and inure to the benefit of, the parties named herein and their
respective successors; provided, however, that this Agreement may not be
assigned by any party without the prior written consent of the other parties,
and any attempted assignment without such consent shall be void and of no
effect.
11.6 Notices. All notices, requests, demands and other communications
hereunder shall be deemed to have been duly given if delivered by hand or
mailed by certified or registered mail:
To NexGen: NexGen, Inc.
1623 Buckeye Drive
Milpitas, CA 95035
Attention: S. Atiq Raza, Chairman
With a copy to:
Pillsbury, Madison & Sutro
2700 Sandhill Road
Menlo Park, California 95113
Attention: Jorge A. del Calvo, Esq.
To AMD: Advanced Micro Devices, Inc.
Attention: General Counsel
P. O. Box 3453 M/S 150
Sunnyvale, CA 94088-3453
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<PAGE>
With a copy to:
Bronson, Bronson & McKinnon
505 Montgomery Street
San Francisco, California 94111-2514
Attention: Victor J. Bacigalupi, Esq.
Or to such other address at which any party may by registered mail notify the
other party, and shall be deemed given on the date on which hand-delivered or
on the third business day following the date on which mailed.
11.7 Titles. The titles and captions of the sections and paragraphs of this
Agreement are included for convenience of reference only and shall have no
effect on the construction or meaning of this Agreement.
11.8 Third Party Beneficiary. Section 6 of this Agreement shall be
enforceable by, and shall inure to the benefit of, the persons entitled to be
indemnified thereunder. Section 5.3 of this Agreement shall be enforceable by,
and shall inure to the benefit of, the holders of NexGen Warrants and NexGen
Options assumed by AMD. No other section of this Agreement shall be
interpreted or construed as creating any right of enforcement or cause of
action on the part of any person who is not a party to this Agreement.
11.9 Cooperation. AMD, AMD Merger and NexGen each agree to execute and
deliver such other documents, certificates, agreements and other writings and
to take such other actions as may be necessary or desirable in order to
consummate expeditiously or implement the transactions contemplated by this
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal as of the date first set forth above.
ADVANCED MICRO DEVICES, INC.
/s/ W. J. Sanders III
By __________________________________
AMD MERGER CORPORATION
/s/ W. J. Sanders III
By __________________________________
NEXGEN, INC.
/s/ S. Atiq Raza
By __________________________________
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<PAGE>
ANNEX 1
SECURED CREDIT AGREEMENT
BETWEEN
ADVANCED MICRO DEVICES, INC.
AND
NEXGEN, INC.
OCTOBER 20, 1995
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<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
ARTICLE I: DEFINITIONS................................................... A-46
1.1 Defined Terms...................................................... A-46
1.2 Accounting Terms................................................... A-49
1.3 Terms Generally.................................................... A-49
ARTICLE II: THE LOAN..................................................... A-49
2.1 The Line of Credit................................................. A-49
2.2 Availability of the Line of Credit................................. A-50
2.3 Disbursements...................................................... A-50
a. Advances........................................................ A-50
b. Notice of Advances.............................................. A-50
c. Method of Disbursement.......................................... A-50
2.4 The Note........................................................... A-50
2.5 Repayment of Principal............................................. A-50
2.6 Interest Rate and Payments of Interest............................. A-50
a. Interest Rate................................................... A-50
b. Interest on Overdue Amounts; Alternative Rate of Interest....... A-51
c. Usury Law....................................................... A-51
2.7 Prepayments........................................................ A-51
2.8 Payment to the Lender.............................................. A-51
2.9 Other Secured Indebtedness......................................... A-52
2.10 Subordination...................................................... A-52
ARTICLE III: THE CLOSING................................................. A-52
3.1 Closing Date....................................................... A-52
3.2 Failure to Meet Conditions......................................... A-52
ARTICLE IV: CONDITIONS PRECEDENT......................................... A-52
4.1 Documents Required Prior to Initial Disbursement................... A-52
4.2 Conditions Precedent to Each Disbursement.......................... A-53
ARTICLE V: COLLATERAL SECURITY........................................... A-53
5.1 Secured Obligations................................................ A-53
5.2 The Collateral..................................................... A-53
5.3 Priority of Liens.................................................. A-54
5.4 Financing Statements and Perfection................................ A-54
ARTICLE VI: REPRESENTATIONS AND WARRANTIES OF THE BORROWER............... A-54
6.1 Organization....................................................... A-54
6.2 Authorization...................................................... A-54
6.3 Enforceability..................................................... A-54
6.4 No Proceedings..................................................... A-55
6.5 Compliance with Laws and Agreements................................ A-55
6.6 Title to Assets.................................................... A-55
6.7 Financial Condition................................................ A-55
6.8 Absence of Undisclosed Liabilities................................. A-55
6.9 Taxes.............................................................. A-55
6.10 Misleading Statements.............................................. A-55
6.11 Consents........................................................... A-55
6.12 Federal Reserve Regulations........................................ A-56
6.13 Finder's or Broker's Fee........................................... A-56
6.14 Subsidiaries....................................................... A-56
6.15 Investment Company Act; Public Utility Holding Company Act......... A-56
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
ARTICLE VII: DEFAULT..................................................... A-56
7.1 Event of Default................................................... A-56
7.2 Remedies........................................................... A-56
ARTICLE VIII: GENERAL PROVISIONS......................................... A-56
8.1 Construction....................................................... A-56
8.2 Further Assurances................................................. A-56
8.3 Enforcement and Waiver by the Lender............................... A-56
8.4 Notices............................................................ A-57
8.5 Waiver and Release by the Borrower................................. A-57
8.6 Choice of Law and Forum............................................ A-57
8.7 Binding Effect, Assignment and Entire Agreement.................... A-57
8.8 Severability....................................................... A-58
8.9 Attorneys' Fees and Costs.......................................... A-58
8.10 Headings........................................................... A-58
8.11 Survival........................................................... A-58
8.12 Counterparts....................................................... A-58
EXHIBIT A: NAMES OF AUTHORIZED INDIVIDUALS............................... A-1
EXHIBIT B: FORM OF ADVANCE REQUEST....................................... B-1
EXHIBIT C: SECURED PROMISSORY NOTE....................................... A-59
EXHIBIT D: SECURITY AGREEMENT............................................ A-61
</TABLE>
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<PAGE>
SECURED CREDIT AGREEMENT
THIS SECURED CREDIT AGREEMENT (the "Agreement") is made and entered into as
of October 20, 1995, by and between NEXGEN, INC., a Delaware corporation (the
"Borrower"), and ADVANCED MICRO DEVICES, INC., a Delaware corporation (the
"Lender").
RECITALS:
a. Concurrently herewith, the Borrower is entering into a certain Agreement
and Plan of Merger (the "Merger Agreement") with the Lender and AMD Merger
Corporation, a Delaware corporation and wholly owned subsidiary of the Lender.
b. The Borrower has requested that the Lender extend revolving credit
facilities to the Borrower in the aggregate principal amount of up to Sixty
Million Dollars ($60,000,000) and the Lender is willing to do so, upon the
terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual agreements herein contained
and for other good and valuable consideration, the sufficiency and receipt of
which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 Defined Terms. For the purposes of this Agreement, the capitalized terms
in the preamble and the recitals hereto shall have the meanings therein given
them and the following terms shall have the respective meanings set forth
below:
"Accounts" shall mean all rights to payment for goods sold or leased, or
to be sold or leased, or for services rendered or to be rendered, whether
or not earned by performance, no matter how evidenced and including without
limitation accounts receivable, chattel paper, contract rights, drafts,
instruments, notes, purchase orders, acceptances and all other forms of
obligations and receivables.
"Advance" shall mean each and every advance of sums hereunder by the
Lender to or for the account of the Borrower.
"Business Day" shall mean any day which is not a Saturday, Sunday or
legal holiday in the State of California on which banks are open for
business in the City of San Francisco.
"Chattel Paper," "Contracts," "Contract Rights," "Documents,"
"Equipment," "Fixtures," "General Intangibles," "Goods," "Instruments" and
"Inventory" shall have the respective meanings as are given to those terms
in the Uniform Commercial Code as adopted by the State of California (the
"U.C.C.").
"Closing" shall mean the closing of the transactions contemplated under
this Agreement.
"Closing Date" shall mean the date referred to in Section 3.1 hereof.
"Code" shall mean the Internal Revenue Code of 1986, as the same may from
time to time be amended.
"Collateral" shall mean all of the property in which a security interest
is granted to the Lender pursuant to Section 5.2 hereof.
"Collateral Documents" shall mean all those certain documents specified
in paragraphs (c) and (d) of Section 4.1 hereof and any additional
documents executed and delivered by the Borrower pursuant to Section 5.4
hereof.
"Dollars" or "$" shall mean the lawful currency of the United States of
America.
"Event of Default" shall mean the event specified in Section 7.1 hereof.
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"Financial Statements" shall mean the consolidated balance sheet of the
Borrower and its Subsidiaries, taken as a whole, as of June 30, 1995, the
consolidated statement of operations, statement of stockholders' equity and
statement of cash flows of the Borrower and its Subsidiaries, taken as a
whole, for the fiscal year of the Borrower ended on such date, and the
notes thereto.
"Indebtedness" shall mean, with respect to any person, all items of
indebtedness, obligations and liabilities, whether matured or unmatured,
liquidated or unliquidated, fixed or contingent, joint or several,
including without limitation:
a. All indebtedness hereunder;
b. All indebtedness guaranteed in any manner, whether directly or
indirectly, or endorsed (other than for collection or deposit in the
ordinary course of business) or discounted with recourse;
c. All indebtedness in effect guaranteed, whether directly or
indirectly, through agreements, contingent or otherwise: (i) to
repurchase such indebtedness; or (ii) to purchase, sell or lease
(whether as lessee or lessor) property, products, materials or
supplies, or to purchase or sell services, primarily for the purpose of
enabling the debtor to make payment of such indebtedness or to assure
the owner of the indebtedness against loss; or (iii) to supply funds to
or in any other manner invest in the debtor; and
d. All indebtedness secured by (or for which the holder of such
indebtedness has a right, contingent or otherwise, to be secured by)
any mortgage, deed of trust, pledge, lien, security interest or other
charge or encumbrance upon property owned or acquired subject thereto,
whether or not the liabilities secured thereby have been assumed.
"Index Base Rate" shall mean, for any day, a rate per annum (rounded
upwards, if necessary, to the next higher 1/16th of 1%) equal to the Index
Rate in effect on such day plus three hundred fifty basis points (3.50).
Any change in the Index Base Rate due to a change in the Index Rate shall
be effective on the effective date of such change in the Index Rate.
"Index Rate" shall mean that rate established and published from time to
time by Bank of America National Trust and Savings Association, San
Francisco, California ("BofA"), as its prime, base or reference rate. The
Index Rate is determined by BofA at its discretion based on various factors
including its costs of funds and desired return, general economic
conditions and other factors. BofA uses the Index Rate as a benchmark for
pricing certain types of loans. Depending upon the circumstances, such as
the amount and terms of a loan, the creditworthiness of a borrower or any
guarantor, the presence and nature of collateral and other relationships
between a borrower and BofA, loans may be priced at, above or below the
Index Rate. The Borrower acknowledges that the use of the appellation
"Index Rate" does not constitute a representation on the part of the Lender
that no loans or for-bearances are made by BofA (or the Lender) at a lesser
rate of interest. In the event that BofA shall cease to establish or
publish an Index Rate, whether denominated as such or otherwise, the Index
Rate shall be deemed to be the average "prime," "base" or "reference"
interest rate for each calendar month, as of the first day of such calendar
month, of the three largest (as determined by total assets) banking
institutions in the State of California (other than BofA) then establishing
or publishing a "prime," "base" or "reference" rate of interest; provided,
however, that in the event any such banking institution publishes more than
one such rate, the rate used with respect to such banking institution shall
be the highest among those so published by it.
"Liabilities" shall mean all Indebtedness that should, in accordance with
generally accepted accounting principles consistently applied, be
classified as liabilities on a balance sheet of the Borrower.
"Lien" shall mean, with respect to any asset: (i) any mortgage, deed of
trust, lien, pledge, encumbrance, charge or security interest in or on such
asset; (ii) the interest of a vendor or a lessor under any conditional sale
agreement, capital lease or title retention agreement relating to such
asset; or (iii) in the case of securities, any purchase option, call or
similar right of a third party with respect to such securities.
"Line of Credit" shall mean that certain line of credit described in
Section 2.1 hereof.
"Loan" shall mean the aggregate of all Advances hereunder.
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"Loan Documents" shall mean: (i) this Agreement; (ii) the note,
agreements, financing statements, instruments and other documents referred
to in Article IV hereof; and (iii) any amendment, supplement, modification,
consent or waiver of, to or in respect of any of the foregoing.
"Material Adverse Effect" shall mean material impairment of the rights of
or benefits available to the Lender under any of the Loan Documents.
"Maturity Date" shall mean the first to occur of the following dates: (i)
the date which is twelve (12) months after the date of any termination of
the Merger Agreement in accordance with the provisions of Section 10.1 of
the Merger Agreement; and (ii) the date of the acquisition by any one
person or group of persons (other than the Lender, AMD Merger Corporation
or any other affiliate of the Lender) of, or of the right to acquire, more
than fifty percent (50%) of any class or series of voting securities of the
Borrower;
"Obligations" shall mean the obligations of the Borrower:
(i) To pay the principal of and interest on the Note (as defined
herein) in accordance with the terms hereof and thereof and to perform
all of its other obligations to or for the benefit of the Lender,
whether hereunder or otherwise, now existing or hereafter incurred,
matured or unmatured, fixed or contingent, joint or several, including
any extensions, modifications or renewals thereof or substitutions
therefor;
(ii) To repay to the Lender all amounts advanced by the Lender
hereunder or otherwise to or on behalf of the Borrower, including
without limitation all advances for principal or interest payments to
prior secured parties or mortgagees, or for liens, or for taxes,
levies, insurance, rent, or repairs to or maintenance or storage of any
of the property of the Borrower; and
(iii) To reimburse the Lender, on demand, for all of the Lender's
expenses and costs, including the reasonable fees and expenses of its
counsel, in connection with the enforcement of this Agreement and the
documents required hereunder, including without limitation any
proceeding brought or threatened to enforce payment of any of the
obligations referred to in clauses (i) and (ii) of this definition.
"Permitted Liens" shall mean:
(i) Liens for taxes, assessments or similar charges incurred in the
ordinary course of business that are not yet due and payable;
(ii) Pledges or deposits made in the ordinary course of business to
secure payment of workers' compensation or to participate in any fund
in connection with workers' compensation, insurance, old-age pensions
or other social security programs;
(iii) Liens of mechanics, materialmen, warehousemen or carriers, and
other like liens, securing obligations incurred in the ordinary course
of business that are not yet due and payable;
(iv) Liens arising by operation of law;
(v) Good faith pledges or deposits made in the ordinary course of
business to secure performance of bids, tenders, contracts (other than
for the repayment of borrowed money) or leases, or to secure statutory
obligations or surety, appeal, indemnity, performance or other similar
bonds required in the ordinary course of business;
(vi) Encumbrances consisting of zoning restrictions, easements or
other restrictions on the use of real property, none of which
materially impair the use of such property by the Borrower in the
operation of its business, and none of which are violated in any
material respect by existing or proposed structures or land use;
(vii) Liens in favor of the Lender;
(viii) Liens in favor of lessors of equipment under equipment lease
agreements entered into by the Borrower, as lessee, in the ordinary
course of business;
(ix) Existing Liens in favor of ASCII Corporation and ASCII of
America, Inc. under the Security Agreement with the Borrower dated
November 15, 1991, as amended;
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(x) Existing Liens in favor of Phemus Corporation under the Security
Agreement with Borrower dated July 22, 1993;
(xi) Liens with respect to the Accounts and Inventory of the
Borrower, securing the Borrower's line of credit with a commercial bank
or credit company;
(xii) Any Liens which are approved in writing by the Lender;
(xiii) Any Lien in favor of any supplier/manufacturer of inventory,
including without limitation VLSI Technology, Inc. and IBM Corporation;
(xiv) Any of the following, if the validity or amount thereof is
being contested in good faith by appropriate and lawful proceedings and
levy and execution thereon have been stayed and continue to be stayed,
and if they do not, in the aggregate, materially detract from the value
of the property of the Borrower or materially impair the use thereof in
the operation of the Borrower's business:
(A) Claims or Liens for tax assessments or charges due and payable
and subject to interest or penalty;
(B) Claims, Liens and encumbrances upon, and defects of title to,
real or personal property, including without limitation any
attachment of personal or real property or other legal process prior
to adjudication of a dispute on the merits;
(C) Claims or Liens of mechanics, materialmen, warehousemen or
carriers, or other like liens; and
(D) Adverse judgments on appeal; and
(xv) Any Lien which is expressly made subordinate to the Liens in
favor of the Lender and which come into existence after any termination
of the Merger Agreement.
"Security Agreement" shall mean that certain Security Agreement which is
to be executed and delivered by the Borrower to the Bank with respect to
those items set forth in Section 5.2 hereof.
"Subsidiary" shall mean any subsidiary of the Borrower.
"Term" shall mean the term of this Agreement, commencing on the Closing
Date and expiring on the Maturity Date; provided, however, that in the
event the Borrower fails to pay to the Lender all sums required hereunder
on or before the Maturity Date, the Borrower shall continue to be bound by
the terms of this Agreement until all such sums are paid in full but the
Lender shall be under no further obligations hereunder after such date.
1.2 Accounting Terms. Except as otherwise expressly provided herein, all
terms of an accounting or financial nature shall have the meanings given them
under generally accepted accounting principles as in effect from time to time
applied on a consistent basis over the time period in question.
1.3 Terms Generally. Except where the context requires otherwise, the
definitions in Section 1.1 hereof shall apply equally to both the singular and
plural forms of the terms defined. Whenever the context may require, any
pronoun shall include the corresponding masculine, feminine and neuter forms.
The words "include," "includes" and "including" shall be deemed to be followed
by the phrase "without limitation." Unless otherwise stated, references to
Sections, Articles, Schedules and Exhibits made herein are to Sections,
Articles, Schedules or Exhibits, as the case may be, of this Agreement.
ARTICLE II
THE LOAN
2.1 The Line of Credit. Subject to the terms of this Agreement, the Borrower
may at any time and from time to time before the Maturity Date, and so long as
no Event of Default or event which with the giving of notice or the passage of
time or both would become an Event of Default has occurred, borrow from the
Lender
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pursuant to the revolving credit facility described in this Section 2.1 (the
"Line of Credit"), and the Lender shall lend to the Borrower pursuant to the
Line of Credit, such requested Advances, each in an amount of not less than
One Million Dollars ($1,000,000), and not to exceed in the aggregate at any
one time outstanding during the Term hereof the principal sum of Sixty Million
Dollars ($60,000,000).
2.2 Availability of the Line of Credit. The Line of Credit shall be
available for Advances to the Borrower during the Term in accordance with the
following schedule:
a. On or before December 31, 1995: Advances in an aggregate principal
amount not exceeding Thirty Million Dollars ($30,000,000);
b. On or before March 31, 1996: Advances in an aggregate principal amount
not exceeding Fifty Million Dollars ($50,000,000); and
c. On or before June 30, 1996: Advances in an aggregate principal amount
not exceeding Sixty Million Dollars ($60,000,000).
Any unused portion of the Line of Credit existing on June 30, 1996 shall be
cancelled as of such date and no longer available.
2.3 Disbursements.
a. Advances. Upon satisfaction in full of the conditions precedent set forth
in Article IV hereof, the Lender shall at the Closing and thereafter make
Advances hereunder pursuant to the Line of Credit, in accordance with the
availability schedule set forth in Section 2.2 hereof, upon receipt by the
Lender of a request pursuant to paragraph (b) of this Section 2.3 from any one
of the individuals whose names are set forth in Exhibit A attached hereto,
acting alone. Notwithstanding anything to the contrary herein contained, any
Advance shall be conclusively presumed to have been made to or for the benefit
of the Borrower so long as the Lender believes in good faith that the requests
and directions received by the Lender in connection therewith have been made
by a person authorized hereunder or where such Advance is deposited to the
credit of the account of the Borrower with Bank of America National Trust and
Savings Association, regardless of the fact that persons other than those
authorized hereunder may have authority to draw against such account or to
have made such requests.
b. Notice of Advances. In order to request an Advance (including but not
limited to any Advance to be disbursed on the Closing Date), the Borrower
shall give written notice (or telephonic notice promptly confirmed in writing
or by facsimile transmission) to the Lender in the form of Exhibit B not later
than 8:00 a.m., San Francisco time, on the day of the proposed Advance. Such
notice shall be irrevocable and shall in each case refer to this Agreement and
specify the date of such Advance (which shall be a Business Day) and the
amount thereof.
c. Method of Disbursement. Unless otherwise specified by the Borrower and
agreed to by the Lender, each Advance shall be credited by the Lender to the
Borrower's deposit account number 12579-53309, FFC 10-10-435-7417910, with
Bank of America National Trust and Savings Association, Account Administration
(South) [bank routing (ABA) number 121-000-358], subject to the terms and
conditions set forth herein.
2.4 The Note. Concurrently with the execution of this Agreement, the
Borrower shall execute and deliver to the Lender a secured promissory note, in
the form of Exhibit C hereto, with respect to the Line of Credit; (the
"Note"). The Note shall be secured, as provided in Article V hereof.
2.5 Repayment of Principal. The Borrower shall repay to the Lender the
aggregate principal amount of any and all Advances under the Line of Credit on
the Maturity Date.
2.6 Interest Rate and Payments of Interest.
a. Interest Rate. All Advances shall bear interest as follows:
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(i) Each Advance shall bear interest at a rate per annum equal to the
Index Base Rate, computed on the basis of the actual number of days elapsed
over a year of 365 or 366 days (as the case may be). Interest on each
Advance shall be due and payable on the Maturity Date. The Lender shall
determine and advise the Borrower three (3) Business Days prior to the
Maturity Date of the total interest then due, which determination shall be
conclusive and binding on the Borrower, absent manifest error.
(ii) Interest on each Advance shall accrue from and including the date on
which such Advance is made and to but excluding the date on which such
Advance is repaid in full, unless the date of repayment is the same as the
date on which such Advance is made, in which case such date shall be
included.
b. Interest on Overdue Amounts; Alternative Rate of
Interest. Notwithstanding any provision of this Section 2.6 to the contrary,
if the Borrower shall default in the payment of the principal of or interest
on any Advance or any fees or other amounts becoming due hereunder, whether by
scheduled maturity, notice of prepayment, acceleration or otherwise, the
Borrower shall on demand from time to time from the Lender pay interest from
and including the date of such default, to the extent permitted by law, on
such defaulted amount up to (but not including) the date of actual payment
(after as well as before judgment) at a rate per annum (computed as provided
in paragraph (a) of this Section 2.6) equal to the Index Base Rate plus two
percent (2.00%).
c. Usury Law. It is the intent of the Lender and the Borrower in the
execution of this Agreement, the Note and the Collateral Agreements and all
other security agreements and financing statements evidencing the Borrower's
obligations hereunder, to contract in strict compliance with the usury laws of
the State of California (the "Usury Law"). In furtherance thereof, the Lender
and the Borrower stipulate and agree that none of the terms and provisions
contained herein or in the Note or in any Collateral Agreement or in any other
instrument executed in connection herewith or therewith, shall ever be
construed to create a contract to pay for the use, forbearance or detention of
money at a rate of interest in excess of the maximum interest rate permitted
to be charged by the Lender in compliance with the Usury Law. Neither the
Borrower nor any guarantors, endorsers or other parties now or hereafter
becoming liable for payment hereunder or under the Note or any Collateral
Agreement shall ever be required to pay interest thereon at a rate in excess
of the maximum interest that may be lawfully charged by the Lender in
compliance with the Usury Law, and the provisions of this paragraph 2.6(c)
shall control over all other provisions hereof or of the Note or any
Collateral Agreement, and of any other instruments now or hereafter executed
in connection herewith or therewith, which may be in apparent conflict
herewith. If the maturity of any Obligations shall be accelerated for any
reason or if the principal of the Note is paid prior to the expiration of the
term thereof, and as a result thereof the interest received for the actual
period of existence of the Loan exceeds the applicable maximum lawful rate
permitted to be charged by the Lender in compliance with the Usury Law, the
Lender shall refund to the Borrower the amount of such excess or shall, at its
option, credit the amount of such excess against the principal balance of the
Loan then outstanding. In the event that the Lender shall collect monies which
are deemed to constitute interest in excess of the lawful rate which the
Lender may charge, for any reason whatsoever, such monies shall, upon such
determination and at the option of the Lender, be immediately either returned
to the Borrower or credited against the principal balance of the Loan then
outstanding.
2.7 Prepayments. The Borrower shall have the right to make payments in
reduction of the outstanding balance of the Line of Credit, in whole or in
part, at any time; provided, however, that each such prepayment must be
accompanied by payment of all interest accrued thereon, and provided further
that such prepayment must be in the amount of One Million Dollars ($1,000,000)
or integral multiples thereof, or the outstanding balance if less. Any amount
of principal so repaid may be reborrowed by Borrower and shall be available
for future Advances under the Line of Credit.
2.8 Payment to the Lender. All sums payable to the Lender hereunder shall be
paid directly to the Lender (or to a bank account specified by the Lender) in
immediately available funds. The Lender shall send the Borrower statements of
all amounts due hereunder, which statements shall be considered correct and
conclusively binding upon the Borrower (absent manifest error) unless the
Borrower notifies the Lender to the contrary within thirty (30) days of its
receipt of any statement which the Borrower believes to be incorrect.
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2.9 Other Secured Indebtedness. The Borrower covenants and agrees with the
Lender that, so long as any of the Obligations shall remain outstanding, the
Borrower shall not, and shall not cause or permit any of the Subsidiaries to,
either directly or indirectly, create, incur, assume or permit to exist any
indebtedness secured by a Lien on any of its properties or assets, except for
Permitted Liens. The Borrower also covenants and agrees to furnish to the
Lender promptly (and within any applicable cure period) notice of the
occurrence of an event of default or any event which with notice or the
passage of time (or both) would constitute an event of default under the
Security Agreement dated November 15, 1991, as amended, with ASCII Corporation
and ASCII of America, Inc. or the Security Agreement dated July 22, 1993 with
Phemus Corporation.
2.10 Subordination. Lender agrees that the Obligations of Borrower
hereunder, and the Liens granted to Lender pursuant to Article V hereof, are
subordinate to the prior payment in full of the indebtedness owing to ASCII
Corporation, ASCII of America, Inc. and Phemus Corporation (together the
"Senior Lenders") and junior in priority to the existing Liens in favor of the
Senior Lenders, as described in the security agreements referenced in Section
2.9 hereof, in each case whether such right of payment is in the ordinary
course of business or in the event of any distribution of the assets of
Borrower upon any dissolution, winding-up, liquidation or bankruptcy,
insolvency or other similar proceedings. The Borrower will not make and the
Lender will not demand, accept or receive any payment on the Line of Credit or
any Advances hereunder until all amounts owing to the Senior Lenders shall
have been paid in full. The Lender and the Borrower covenant to execute and
deliver to the Senior Lenders such further instruments and to take such
further action as the Senior Lenders may at any time or times reasonably
request in order to carry out the provisions and intent of this Section 2.10.
ARTICLE III
THE CLOSING
3.1 Closing Date. The Closing shall be held on October 20, 1995, at 5:00
p.m., local time, in the offices of Bronson, Bronson & McKinnon at 10 Almaden
Boulevard, Suite 600, San Jose, California, or at such other time and location
as the parties hereto shall mutually agree. At or prior to the Closing, the
Borrower shall deliver and execute all documents, reports, opinions and
instruments required to be delivered and/or executed hereunder.
3.2 Failure to Meet Conditions. If, at the Closing, the conditions specified
in Article IV of this Agreement have not been satisfied or waived in writing
by the Lender, the Lender may thereupon elect to be relieved of all further
obligations under this Agreement.
ARTICLE IV
CONDITIONS PRECEDENT
The obligation of the Lender to make any Advance hereunder is subject to the
satisfaction of the following conditions precedent:
4.1 Documents Required Prior to Initial Disbursement. The Borrower shall
have delivered to the Lender, prior to or at the Closing and prior to the
initial disbursement of any Advance hereunder, the following documents in form
and substance satisfactory to the Lender:
(a) This Agreement, duly executed by the Borrower;
(b) The Note, duly executed by the Borrower and in the form attached
hereto as Exhibit C;
(c) The Security Agreement, duly executed by the Borrower and in the form
attached hereto as Exhibit D;
(d) The UCC-1 Financing Statement and related notices of security
interests (patents, patent applications and trademarks) required by Article
V hereof;
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(e) An opinion of Pillsbury Madison & Sutro, as counsel to the Borrower,
dated as of the Closing Date, addressing the matters set forth in Exhibit E
hereto and in form and substance acceptable to the Lender and its counsel;
and
(f) A certificate of the Secretary of the Borrower, dated as of the
Closing Date, certifying: (i) that attached thereto is a true and correct
copy of the Certificate of Incorporation of the Borrower, accompanied by a
certificate to that effect from the Secretary of State of the State of
Delaware dated reasonably close to the Closing Date, which Certificate of
Incorporation has not been amended since the date of said certificate of
the Secretary of State; (ii) that attached thereto is a true, correct and
complete copy of the Bylaws of the Borrower, as in effect on the date of
such certificate; (iii) that attached thereto is a true, correct and
complete copy of the resolutions duly adopted by the Board of Directors of
the Borrower authorizing the execution, delivery and performance of this
Agreement, the Note, the Security Agreement and all other Loan Documents by
the Borrower and that said resolutions have not been amended or revoked and
are in full force and effect on the date of such certificate; and (iv) as
to the incumbency and specimen signature of each officer of the Borrower
executing this Agreement, the Note, the Security Agreement or any other
instrument or document to be executed and delivered by the Borrower in
connection herewith.
4.2 Conditions Precedent to Each Disbursement. At the time of each and every
disbursement of an Advance hereunder:
a. No Event of Default shall have occurred and be continuing, nor shall
any event have occurred and be continuing that with the giving of notice or
the passage of time, or both, would be an Event of Default;
b. No event shall have occurred which constitutes a Material Adverse
Effect;
c. All of the Collateral Documents shall be and remain in full force and
effect;
d. The Borrower shall have provided the Lender with an Advance request,
in the form of Exhibit B hereto, pursuant to Section 2.3 hereof.
ARTICLE V
COLLATERAL SECURITY
5.1 Secured Obligations. The Collateral shall constitute collateral security
for the Loan and all other Obligations and shall be general and continuing
until all Obligations have been satisfied in full. The Collateral referred to
in Section 5.2 hereof shall be the subject of the Security Agreement, which
shall be executed by the Borrower and delivered to the Lender concurrently
with the execution and delivery of this Agreement.
5.2 The Collateral. As security for the prompt satisfaction of all
Obligations, the Borrower shall assign to the Lender, pursuant to the terms
and conditions of the Security Agreement, all of its right, title and interest
in and to, and grants to the Lender a Lien upon and security interest in, all
of the following:
(a) all patents, patent applications, and like protection, including,
without limitation, those patents and pending applications, U.S. and
foreign, listed in Schedules (1) and (2) attached hereto, improvements,
divisions, continuations, renewals, reissues and extensions thereof
heretofore or hereafter filed, issued or acquired (collectively,
"Patents");
(b) all inventions, whether or not any of said inventions are patentable,
including, without limitation, those inventions disclosed or claimed in
patents and patent applications (collectively, "Inventions");
(c) all trademarks and service marks (collectively, "Trademarks")
registered or unregistered, including without limitation those marks listed
in Schedule (3) attached hereto;
(d) all works of authorship, copyrights, copyright applications,
copyright registrations, mask work applications, mask work registrations,
and like protection, including, without limitation, renewals, rights of
termination, continuations, divisions and extensions thereof, whether or
not the underlying works of authorship have been published and whether said
copyrights are statutory or arise under the common law (collectively,
"Copyrights");
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(e) all foreign rights corresponding to Patent, Invention, Trademark and
Copyright rights, including, without limitation, those available by treaty
and reciprocity;
(f) all computer programs and software, whether in source code or object
code and in whatever medium created or acquired;
(g) all trade secrets, processes, confidential information, and all
assets (including, without limitation, any General Intangibles) associated
with the Patents, Inventions, Trademarks or Copyrights;
(h) any and all tangible or intangible assets, including without
limitation all Chattel Paper, Instruments, Documents, Goods, Inventory,
Contracts, Contract Rights, General Intangibles, Accounts, Equipment or
other tangible property owned by the Borrower, excluding any assets subject
to equipment lease arrangements or equipment which is subject to a security
interest in favor of a lender providing financing for the purchase of such
equipment;
(i) all proceeds of the foregoing and all accessions to, substitutions
and replacements for, and royalties, profits, license fees and products of
the foregoing; and
(j) all books and records pertaining to the foregoing.
5.3 Priority of Liens. The foregoing Liens are intended by the parties to be
first and prior Liens on the Collateral, except for Permitted Liens and
subject to the provisions of Section 2.10 hereof.
5.4 Financing Statements and Perfection. The Borrower shall: (i) join with
the Lender in executing such financing statements describing all or any part
of the Collateral (including amendments thereto and continuation statements
thereof) in form and substance satisfactory to the Lender as the Lender may
specify and, at the Lender's sole discretion, at any time during the Term of
this Agreement, to make such filings with the United States Patent and
Trademark Office and the United States Copyright Office with respect to the
Patents, Trademarks and Copyrights as are necessary to perfect the Lender's
security interest therein; and (ii) take such other steps as the Lender may
reasonably direct, including the noting of the Lender's lien on the Collateral
and on any certificates of title therefor, all to perfect the Lender's
interest in the Collateral. In addition to the foregoing and not in limitation
thereof, a carbon, photographic or other reproduction of the Security
Agreement shall be sufficient as a financing statement and may be filed in any
appropriate office in lieu thereof.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE BORROWER
The Borrower represents and warrants to the Bank as follows:
6.1 Organization. The Borrower is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, has the
corporate power to own its properties and to engage in the business it
conducts, and is duly qualified and in good standing as a foreign corporation
in all jurisdictions wherein the nature of the business transacted by it or
property owned by it makes such qualification necessary, except where the
failure to so qualify could not reasonably be expected to result in a Material
Adverse Effect.
6.2 Authorization. The Borrower has the power and authority to enter into
and perform its obligations under this Agreement, the Note and the Collateral
Documents, and to incur the Obligations herein and therein provided for, and
has taken all corporate actions necessary to authorize the execution, delivery
and performance of this Agreement, the Note and the Collateral Documents.
6.3 Enforceability. This Agreement and the Collateral Documents are, and the
Note when delivered will be, legal, valid and binding Obligations of the
Borrower, enforceable upon the Borrower in accordance with their respective
terms, except to the extent that such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws of general
application from time to time affecting the rights of creditors generally.
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6.4 No Proceedings. There are no actions, suits or proceedings at law or in
equity or by or before any governmental authority now pending or, to the
knowledge of the Borrower, threatened against or affecting the Borrower or any
Subsidiary or the businesses, assets or rights of the Borrower or any
Subsidiary as to which there is a reasonable possibility of an adverse
determination and which, if adversely determined, could, individually or in
the aggregate, reasonably be expected to result in a Material Adverse Effect.
6.5 Compliance with Laws and Agreements. Neither the Borrower nor any
Subsidiary is in violation of any law, or in default with respect to any
judgment, writ, injunction, decree, rule or regulation of any governmental
authority, where such violation or default could reasonably be expected to
result in a Material Adverse Effect. Neither the Borrower nor any Subsidiary
is in default under any provision of any indenture or other agreement or
instrument evidencing Indebtedness, or any other material agreement or
instrument to which it is a party or by which it or any of its properties or
assets are or may be bound, where such default could reasonably be expected to
result in a Material Adverse Effect, and the entering into and performance by
the Borrower of this Agreement, the Note and the Collateral Documents will not
(immediately or with the expiration of an application cure period or the
giving of notice, or both): (i) violate any charter or bylaw provision of the
Borrower or any Subsidiary, or violate any law or result in a default under
any contract, agreement or instrument to which the Borrower or any Subsidiary
is a party or by which the Borrower or any Subsidiary or its respective
properties is bound; or (ii) result in the creation or imposition of any
security interest in, or Lien upon, any of the assets of the Borrower or any
Subsidiary (except a Permitted Lien).
6.6 Title to Assets. The Borrower and each of its Subsidiaries has good and
marketable title to all of its respective assets, subject to no security
interest, encumbrance, Lien (except for Permitted Liens) or claim of any third
person.
6.7 Financial Condition. The Financial Statements, including any schedules
and notes pertaining thereto, have been prepared in accordance with generally
accepted accounting principles consistently applied, and fairly present the
financial condition of the Borrower and all of its Subsidiaries, taken as a
whole, at the dates thereof and the results of operations for the periods
covered thereby, and there has occurred no event which might reasonably result
in a Material Adverse Effect from the dates thereof to the date hereof.
6.8 Absence of Undisclosed Liabilities. As of the date of the Financial
Statements, neither the Borrower nor any Subsidiary had any material
Indebtedness of any nature, including without limitation liabilities for taxes
and any interest or penalties relating thereto, except to the extent reflected
(in a footnote or otherwise) and reserved against in the Financial Statements
or as disclosed in or permitted by this Agreement. The Borrower does not know
and has no reasonable grounds to know of any basis for the assertion against
it or any Subsidiary as of the date hereof of any material Indebtedness of any
nature not fully disclosed in or permitted by this Agreement.
6.9 Taxes. Except as otherwise permitted herein, the Borrower and each
Subsidiary have filed all federal, state and local tax returns and other
reports that it is required by law to file prior to the date hereof and which
are material to the conduct of its respective businesses, have paid or caused
to be paid all taxes, assessments and other governmental charges that are due
and payable prior to the date hereof, and have made adequate provision for the
payment of such taxes, assessments or other charges accruing but not yet
payable. The Borrower has no knowledge of any deficiency or additional
assessment in a materially important amount in connection with any taxes,
assessments or charges not provided for on its books.
6.10 Misleading Statements. No representation or warranty by the Borrower
contained herein or in any certificate or other document furnished by the
Borrower pursuant hereto contains any untrue statement of material fact or
omits to state a material fact necessary to make such representation or
warranty not misleading in light of the circumstances under which it was made.
6.11 Consents. Each consent, approval or authorization of, or filing,
registration or qualification with, any entity which is required to be
obtained or effected by the Borrower or any Subsidiary in connection with the
execution and delivery of this Agreement, the Note and the Collateral
Documents, or the undertaking or performance of any Obligation hereunder or
thereunder, has been duly obtained or effected.
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6.12 Federal Reserve Regulations. Neither the Borrower nor any Subsidiary is
engaged principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying any "margin stock"
within the meaning of Regulations G, U or X of the Board of Governors of the
Federal Reserve System of the United States (the "Board"). No part of the
proceeds of the Loan has been or will be used, whether directly or indirectly,
and whether immediately, incidentally or alternately, for any purpose which
entails a violation of, or which is inconsistent with, the provisions of the
regulations promulgated by the Board, including but not limited to regulations
G, T, U or X.
6.13 Finder's or Broker's Fee. The Borrower has not made any agreement or
taken any action which might cause anyone to become entitled to a commission
or fee as a result of the making of an Advance.
6.14 Subsidiaries. As of the Closing Date, all of the issued and outstanding
shares of capital stock or partnership interest (as the case may be) of each
of the Subsidiaries have been validly issued and are fully paid and
nonassessable and are owned directly or indirectly by the Borrower free and
clear of all Liens whatsoever, and there are no options, warrants, calls,
conversion or exchange rights, commitments or agreements of any character
obligating any of the Subsidiaries to issue, deliver or sell additional shares
of capital stock of any class or any securities convertible into or
exchangeable for any such capital stock or any additional partnership interest
other than as disclosed in the Financial Statements.
6.15 Investment Company Act; Public Utility Holding Company Act. Neither the
Borrower nor any Subsidiary is an "investment company" as that term is defined
in, or is otherwise subject to regulation under, the Investment Company Act of
1940. Neither the Borrower nor any Subsidiary is a "holding company" as that
term is defined in, or is otherwise subject to regulation under, the Public
Utility Holding Company Act of 1935.
ARTICLE VII
DEFAULT
7.1 Event of Default. Any failure of the Borrower to pay the Note when the
same becomes due and payable on the Maturity Date shall constitute an Event of
Default hereunder, without regard to any fault of or cause by the Borrower.
7.2 Remedies. Upon the occurrence of an Event of Default, the Lender may
exercise any rights it may have at law or in equity or otherwise to avail
itself of any and all remedies to which it may have recourse as a secured
party under applicable law.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Construction. The provisions of this Agreement shall be in addition to
those of any agreement, instrument, note or other evidence of liability held
by the Lender, all of which shall be construed as complementary to each other.
Nothing herein contained shall prevent the Lender from enforcing any or all
other notes, instruments or agreements in accordance with their respective
terms. In the event that there is a conflict between the terms of this
Agreement and the terms of the Note or any Collateral Document, the terms of
this Agreement shall control.
8.2 Further Assurances. From time to time, the Borrower shall execute and
deliver to the Lender such additional documents and provide such additional
information as the Lender may reasonably require to carry out the terms of
this Agreement and be informed of the Borrower's status and affairs (and that
of any of its Subsidiaries).
8.3 Enforcement and Waiver by the Lender. The Lender shall have the right at
all times to enforce the provisions of this Agreement, the Note and the
Collateral Documents in strict accordance with the terms hereof
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and thereof, notwithstanding any conduct or custom on the part of the Lender
in refraining from so doing at any time or times. The failure of the Lender at
any time or times to enforce its rights under such provisions, strictly in
accordance with the same, shall not be construed as having created a custom in
any way or manner contrary to the specific provisions of this Agreement or as
having in any way or manner modified or waived the same. All rights and
remedies of the Lender are cumulative and concurrent and the exercise of one
right or remedy shall not be deemed a waiver or release of any other right or
remedy.
8.4 Notices. Any notices or consents required or permitted by this Agreement
shall be in writing and shall be deemed duly given if delivered in person or
by courier, or if sent by facsimile transmission or certified mail, postage
prepaid and return receipt requested, addressed as follows, unless such
address is changed by written notice hereunder:
a. If to the Borrower:
NexGen, Inc.
1623 Buckeye Drive
Milpitas, CA 95035
Attention: Chief Financial Officer
With a copy to:
Pillsbury Madison & Sutro
Ten Almaden Boulevard
San Jose, CA 95113
Attention: Jorge A. del Calvo, Esq.
b. If to the Lender:
Advanced Micro Devices, Inc.
One AMD Place
Sunnyvale, CA 94088
Attention: Chief Financial Officer
With a copy to:
Bronson, Bronson & McKinnon
505 Montgomery Street
San Francisco, CA 94111
Attention: Victor J. Bacigalupi, Esq.
All such notices shall be deemed to be received by the party to be noticed
upon the earlier of (i) actual receipt or (ii) delivery at the specified
address.
8.5 Waiver and Release by the Borrower. To the maximum extent permitted by
applicable law, the Borrower waives notice and opportunity to be heard before
exercise by the Lender of the remedies of self-help, setoff or of other
summary procedures permitted by any applicable law or by any agreement with
the Borrower, and except where required hereby or by any applicable law,
notice of any other action taken by the Lender.
8.6 Choice of Law and Forum. This Agreement has been entered into, and shall
be interpreted in accordance with, the laws of the State of California, and
any dispute arising hereunder or under the Note or any Collateral Document
shall be heard by a court of competent jurisdiction sitting in the City and
County of San Francisco, California.
8.7 Binding Effect, Assignment and Entire Agreement. This Agreement shall
inure to the benefit of, and shall be binding upon, the respective successors
and permitted assigns of the parties hereto. The Borrower has no right to
assign any of its rights or delegate any of its obligations hereunder without
the prior written consent of the Lender, but the Lender may freely assign its
rights hereunder without the consent of the Borrower. This Agreement, and the
documents executed and delivered pursuant hereto, constitute the entire
Agreement between the parties and may be amended only by a writing signed on
behalf of each party.
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8.8 Severability. If any provision of this Agreement shall be held invalid
under any applicable laws, such invalidity shall not affect any other
provision of this Agreement that can be given effect without the invalid
provision and, to this end, the provisions hereof are severable.
8.9 Attorneys' Fees and Costs. In the event of a dispute hereunder, the
prevailing party (as determined by the court) shall be awarded, in addition to
any judgment, all reasonable attorneys' fees and costs incurred by it in
connection with such dispute.
8.10 Headings. The headings contained in this Agreement are for convenience
of reference only and shall not affect the construction or interpretation
hereof.
8.11 Survival. All representations, warranties, agreements and covenants
made herein and in the certificates, instruments and documents delivered
pursuant hereto shall survive the making by the Lender of Advances and the
execution and delivery to the Lender of the Note and shall continue in full
force and effect until all Obligations are satisfied in full.
8.12 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute but one and the same instrument.
IN WITNESS WHEREOF, each of the parties hereto has caused its duly
authorized representative to execute this Agreement on its behalf as of the
day and year first above written.
THE BORROWER:
NEXGEN, INC.,a Delaware corporation
/s/ S. Atiq Raza
By: _________________________________
Its Chairman of the Board, President
and Chief Executive Officer
THE LENDER:
ADVANCED MICRO DEVICES, INC.,a
Delaware corporation
/s/ W. J. Sanders III
By: _________________________________
Its Chairman of the Board, President
and Chief Executive Officer
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EXHIBIT C
SECURED PROMISSORY NOTE
$60,000,000 October 20, 1995
San Jose, California
FOR VALUE RECEIVED, the undersigned, NEXGEN, INC., a Delaware corporation
(the "Borrower"), unconditionally promises to pay to the order of ADVANCED
MICRO DEVICES, INC. (the "Lender"), in lawful money of the United States of
America at its office located at One AMD Place, Sunnyvale, California 94088,
or to such other entity or at such other address as the Lender may from time
to time direct, on or before the Maturity Date, the lesser of (i) the
principal sum of Sixty Million Dollars ($60,000,000) or (ii) the aggregate
unpaid principal amount of all Advances made pursuant to that certain Secured
Credit Agreement dated October 20, 1995, by and between the Borrower and the
Lender (the "Credit Agreement"), and to pay interest (before, as well as
after, judgment) in arrears, from the date hereof in like money at said office
on the unpaid principal amount hereof from time to time outstanding, as
provided for in the Credit Agreement.
Interest which is not paid when due shall thereafter bear interest like as
to principal.
The Lender is hereby authorized by the Borrower to endorse on the schedule
forming a part hereof appropriate notations evidencing the date and amount of
each Advance made by the Lender and the date and amount of each payment of
principal and interest made by the Borrower with respect thereto.
Presentment, notice of dishonor and protest are hereby waived by all makers,
sureties, guarantors and endorsers hereof. The Borrower hereby expressly
waives, to the full extent permitted by law, its rights to plead any and all
statutes of limitations as a defense to any demand hereunder.
This Note is the Note referred to in the Credit Agreement and is secured by
a Security Agreement between the Lender and the Borrower of even date
herewith. Reference is hereby made to said Credit Agreement for provisions
regarding the payment and prepayment hereof. Terms defined in said Credit
Agreement and not otherwise defined herein are used herein as therein defined.
This Note was made and shall be governed and construed in accordance with
the laws of the State of California.
THE BORROWER:
NEXGEN, INC., a Delaware corporation
By: _________________________________
Its: ________________________________
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BORROWINGS AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
PRINCIPAL
OR FACE DATE OF AMOUNT OF
DATE OF AMOUNT OF INTEREST REPAYMENT/ REPAYMENT/ NOTATION
ADVANCE ADVANCE RATE PREPAYMENT PREPAYMENT MADE BY
- ------- --------- -------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
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</TABLE>
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EXHIBIT D
SECURITY AGREEMENT
THIS SECURITY AGREEMENT is made as of October 20, 1995, by and between
ADVANCED MICRO DEVICES, INC., a Delaware corporation ("Secured Party"), and
NEXGEN, INC., a Delaware corporation ("Debtor").
RECITALS
This Security Agreement is entered into in order to grant to Secured Party a
security interest in the property described herein as Collateral for the
indebtedness of Debtor to Secured Party pursuant to that certain Secured
Credit Agreement of even date herewith (the "Credit Agreement"), as evidenced
by a Secured Promissory Note of even date herewith in the principal amount of
Sixty Million Dollars ($60,000,000) (the "Note"), and for other obligations as
set forth herein. All terms not otherwise defined herein shall have the
meanings ascribed thereto in the Credit Agreement.
AGREEMENT
NOW, THEREFORE, in reliance upon the foregoing and in consideration of the
premises and covenants set forth herein, the parties hereto agree as follows:
1. Grant of Security Interest. Debtor hereby grants to Secured Party a
security interest in the property described in Section 2 hereof
(collectively and severally, the "Collateral") to secure the payment and
performance of the obligations of Debtor to Secured Party described in
Section 3 hereof (collectively and severally, the "Obligations").
2. Collateral. The Collateral shall consist of the following, whether now
existing or hereafter acquired by Debtor:
(a) all patents, patent applications, and like protection, including,
without limitation, those patents and pending applications, U.S. and
foreign, listed in Schedules (1) and (2) attached hereto, improvements,
divisions, continuations, renewals, reissues and extensions thereof
heretofore or hereafter filed, issued or acquired (collectively,
"Patents");
(b) all inventions, whether or not any of said inventions are
patentable, including, without limitation, those inventions disclosed
or claimed in patents and patent applications (collectively,
"Inventions");
(c) all trademarks and service marks (collectively, "Trademarks")
registered or unregistered, including without limitation those marks
listed in Schedule (3) attached hereto;
(d) all works of authorship, copyrights, copyright applications,
copyright registrations, mask work applications, mask work
registrations, and like protection, including, without limitation,
renewals, rights of termination, continuations, divisions and
extensions thereof, whether or not the underlying works of authorship
have been published and whether said copyrights are statutory or arise
under the common law (collectively, "Copyrights");
(e) all foreign rights corresponding to Patent, Invention, Trademark
and Copyright rights, including, without limitation, those available by
treaty and reciprocity;
(f) all computer programs and software, whether in source code or
object code and in whatever medium created or acquired;
(g) all trade secrets, processes, confidential information, and all
assets (including, without limitation, any general intangibles)
associated with the Patents, Inventions, Trademarks or Copyrights;
(h) any and all tangible or intangible assets, including without
limitation all Chattel Paper, Instruments, Documents, Goods, Inventory,
Contracts, Contract Rights, General Intangibles, Accounts,
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Equipment or other tangible property owned by Debtor, excluding any
assets subject to equipment lease arrangements or equipment which is
subject to a security interest in favor of a lender providing financing
for the purchase of such equipment;
(i) all proceeds of the foregoing and all accessions to,
substitutions and replacements for, and royalties, profits, license
fees and products of the foregoing; and
(j) all books and records pertaining to the foregoing.
3. Obligations. The Obligations of Debtor secured by the Collateral shall
consist of any and all debts, obligations and liabilities of Debtor to
Secured Party, including without limitation those arising under the Credit
Agreement, the Note, this Security Agreement, all other Collateral
Documents and any other documents or agreements executed in connection
therewith, and all amendments, extensions and renewals thereof, whether now
existing or hereafter arising, voluntary or involuntary, whether or not
jointly owed with others, direct or indirect, absolute or contingent,
liquidated or unliquidated, and whether or not from time to time decreased
or extinguished and later increased, created or incurred.
4. Representations and Warranties. Debtor hereby represents and warrants
that:
(i) Debtor is the owner of the Collateral (or, in the case of after-
acquired Collateral, at the time Debtor acquires rights in the
Collateral will be the owner thereof) and that no other person, entity,
agency or government has (or, in the case of after-acquired Collateral,
at the time Debtor acquires rights therein will have) any right, title,
claim or interest (by way of security interest or other Lien or charge
or otherwise) in, against or to the Collateral, except as previously
disclosed to Secured Party including Permitted Liens.
(ii) All information heretofore, herein or hereafter supplied to
Secured Party by or on behalf of Debtor with respect to the Collateral
is true and correct in all material respects.
(iii) Debtor has the authority to enter into this Security Agreement
and to be obligated under the terms of the Credit Agreement, the Note
and the Collateral Documents, and any person signing this Security
Agreement and/or the Note or Collateral Document has been duly
authorized to sign same.
5. Covenants of Debtor. In addition to all covenants and agreements of
Debtor set forth in the Credit Agreement, the Note and the Collateral
Documents, which are incorporated herein by this reference, Debtor hereby
agrees:
(i) To do all acts that may be necessary to reasonably maintain,
preserve and protect the Collateral;
(ii) Not to use or permit any Collateral to be used unlawfully or in
violation of any provision of this Security Agreement or any applicable
statute, regulation or ordinance, or any policy of insurance, covering
the Collateral;
(iii) To pay promptly when due all taxes, assessments, charges,
encumbrances and liens now or hereafter imposed upon or affecting any
Collateral;
(iv) To notify Secured Party promptly of any change in Debtor's name
or place of business or, if Debtor has more than one place of business,
its head office or office in which Debtor's records relating to the
Collateral are kept and any material change in the permanent location
of the Collateral;
(v) To procure, execute and deliver from time to time any and all
endorsements, assignments, financing statements and other writings
deemed necessary or appropriate by Secured Party to perfect, maintain
and protect its security interest hereunder and the priority thereof,
and to deliver promptly to Secured Party all originals of Collateral,
and proceeds, consisting of chattel paper or instruments not delivered
to a senior lien holder.
(vi) To communicate to Secured Party, or its representatives, any
material facts respecting said Patents, Inventions, Trademarks or
Copyrights, and to testify in any legal proceedings, sign all lawful
papers, execute all divisions, continuations, substitutions, and
renewal, reexamination and reissue applications, and upon an Event of
Default, execute all necessary assignment papers to cause title to
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any and all Patents, Inventions, Trademarks or Copyrights to be
transferred to Secured Party, make all rightful oaths and generally do
everything reasonably necessary or desirable to preserve Secured
Party's interests in said Collateral.
(vii) To appear in and defend any action or proceeding which may
affect its title to or Secured Party's interest in the Collateral, to
give Secured Party notice of same, and to assist Secured Party should
Secured Party take part in any such action or proceeding;
(viii) If Secured Party gives value to enable Debtor to acquire
rights in, or the use of, any Collateral, to use such value for such
purpose;
(ix) To keep separate, accurate and complete records of the
Collateral, and to provide Secured Party upon an Event of Default with
such records and such other reports and information relating to the
Collateral as Secured Party may request from time to time;
(x) Not to surrender or lose possession of (other than to Secured
Party), sell, encumber, lease, rent or otherwise dispose of or transfer
any Collateral, or any right or interest therein, except in the
ordinary course of Debtor's business, and to keep the Collateral free
of all levies and security interests or other liens, charges or
encumbrances except Permitted Liens;
(xi) To keep the Collateral in good condition and repair, reasonable
wear and tear excepted;
(xii) Not to cause or permit any waste or unusual or unreasonable
depreciation of the Collateral;
(xiii) At any reasonable time, upon demand by Secured Party upon an
Event of Default, to exhibit to and allow inspection by Secured Party
(or persons designated by Secured Party) of the Collateral;
(xiv) To comply with all laws, regulations and ordinances relating to
the possession, operation, maintenance and control of the Collateral;
and
5.1 Authorized Action by Secured Party. Debtor hereby irrevocably
appoints Secured Party as its attorney-in-fact, to do (but Secured Party
shall not be obligated to and shall incur no liability to Debtor or any
third party for failure so to do) any act which Debtor is obligated by this
Security Agreement to do upon the occurrence of an Event of Default as
defined herein, and to exercise such rights and powers as Debtor might
exercise with respect to the Collateral, including without limitation the
right to:
(i) Collect by legal proceedings or otherwise and endorse, receive
and issue receipts for all dividends, interest payments, proceeds and
other sums and property now or hereafter payable on or on account of
the Collateral;
(ii) Enter into any extension, reorganization, deposit, merger,
consolidation or other agreement pertaining to, or deposit, surrender,
accept, hold or apply other property in exchange for, the Collateral;
(iii) Insure, process and preserve the Collateral;
(iv) Transfer the Collateral to its own or its nominee's name; and
(v) Make any compromise or settlement, and take any action it deems
advisable, with respect to the Collateral.
Debtor agrees to reimburse Secured Party upon demand for any costs and
expenses, including but not limited to reasonable attorneys' fees, which
Secured Party may incur while acting as Debtor's attorney-in-fact
hereunder, all of which costs and expenses are included in the Obligations
secured hereby. It is further agreed and understood between the parties
hereto that such care as Secured Party gives to the safekeeping of its own
property of like kind shall constitute reasonable care of the Collateral
when in Secured Party's possession; provided, however, that Secured Party
shall not be required to make any presentment, demand or protest, or give
any notice, and need not take any action to preserve any rights against any
prior party or any other Person in connection with the Obligations or with
respect to the Collateral.
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6. Events of Default. The occurrence of any Event of Default under the
Credit Agreement shall constitute a default hereunder by Debtor.
7. Remedies of Secured Party. Subject to the prior payment in full of the
indebtedness owed by Debtor to the Senior Lenders, and upon the occurrence
of any Event of Default, Secured Party may, at its option and without
notice to or demand on Debtor and in addition to all rights and remedies
otherwise available at law or in equity or otherwise to Secured Party, do
any one or more of the following:
(i) Foreclose or otherwise enforce Secured Party's security interest
in any manner permitted by law or provided for in this Security
Agreement;
(ii) Sell, lease or otherwise dispose of any Collateral at one or
more public or private sales, whether or not such Collateral is present
at the place of sale, for cash or credit or future delivery, on such
terms and in such manner as Secured Party may determine;
(iii) Recover from Debtor all costs and expenses, including but not
limited to reasonable attorneys' fees, incurred or paid by Secured
Party in exercising any right, power or remedy provided by this
Security Agreement or by law;
(iv) Require Debtor to assemble the Collateral and make it available
to Secured Party at a place to be designated by Secured Party;
(v) Enter onto property where any Collateral is located and take
possession thereof with or without judicial process; and
(vi) Prior to the disposition of the Collateral, store, process,
repair or recondition it or otherwise prepare it for disposition in any
manner.
provided however that upon the occurrence of an Event of Default, Secured
Party shall have the right to purchase from the Senior Lenders their entire
right, title and interest with respect to the indebtedness owed by Debtor
to the Senior Lenders, for a cash purchase price equal to the aggregate
unpaid principal balance of such indebtedness plus accrued and unpaid
interest (including default interest), fees and any other amounts then
owing to the Senior Lenders.
8. Waiver of Hearing. Debtor hereby expressly waives, to the extent
permitted by law, any constitutional or other right to a judicial hearing
prior to the time Secured Party takes possession or disposes of the
Collateral upon default.
9. Cumulative Rights. The rights, powers and remedies of Secured Party
under this Security Agreement shall be in addition to all rights, powers
and remedies given to Secured Party by virtue of any statute or rule of
law, or any other agreement, all of which rights, powers and remedies shall
be cumulative and may be exercised successively or concurrently without
impairing Secured Party's security interest in the Collateral.
10. Waiver. Any forbearance, failure or delay by Secured Party in
exercising any right, power or remedy shall not preclude the further
exercise thereof, and every right, power or remedy of Secured Party shall
continue in full force and effect until such right, power or remedy is
specifically waived in a writing executed by Secured Party. Debtor waives
all rights to require Secured Party to proceed against any Person or to
exhaust any Collateral or to pursue any remedy in Secured Party's power.
11. Setoff. Debtor agrees that Secured Party may exercise its rights of
setoff with respect to the Obligations in the same manner as if the
Obligations were unsecured.
12. Binding Upon Successors; Agency. All rights of Secured Party under
this Security Agreement shall inure to the benefit of its successors and
assigns, and all obligations of Debtor shall bind its heirs, executors,
administrators, successors and assigns. Secured Party may exercise any and
all of its rights hereunder through one or more agents.
13. Entire Agreement; Severability. This Security Agreement contains the
entire security agreement between Secured Party and Debtor. If any of the
provisions of this Security Agreement shall be held invalid
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or unenforceable, this Security Agreement shall be construed as if not
containing those provisions and the rights and obligations of the parties
hereto shall be construed and enforced accordingly.
14. References. The singular includes the plural. If more than one Debtor
executes this Security Agreement, the term "Debtor" shall be deemed to
refer to each of the undersigned as well as to all of them, and their
obligations and agreements hereunder shall be joint and several.
15. No Obligations Assumed. Secured Party does not assume any of Debtor's
obligations arising under any of the Collateral in which a security
interest is hereby granted or any agreement with respect thereto, and
Debtor hereby covenants and agrees to keep and perform all such
obligations.
16. Choice of Law. This Security Agreement shall be construed in
accordance with and governed by the laws of the State of California, and,
where applicable and except as otherwise defined herein or in the Credit
Agreement, terms used herein shall have the meanings given them in the
Uniform Commercial Code as adopted in the State of California.
17. Notice. Any written notice, consent or other communication provided
for in this Security Agreement shall be delivered or sent pursuant to the
notice provisions of the Credit Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Security Agreement
on the day and year first written above.
SECURED PARTY:
ADVANCED MICRO DEVICES, INC., a
Delaware Corporation
By: _________________________________
Its _________________________________
DEBTOR:
NEXGEN, INC., a Delaware Corporation
By: _________________________________
Its _________________________________
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FIRST AMENDMENT
TO
SECURED CREDIT AGREEMENT
THIS FIRST AMENDMENT TO SECURED CREDIT AGREEMENT (this "Amendment"), dated
as of October 30, 1995, is entered into by and between NEXGEN, INC., a
Delaware corporation (the "Borrower"), and ADVANCED MICRO DEVICES, INC., a
Delaware corporation (the "Lender").
RECITALS:
A. The Borrower and the Lender are parties to a Secured Credit Agreement
dated as of October 20, 1995 (the "Credit Agreement"), pursuant to which the
Lender has extended certain credit facilities to the Borrower.
B. The Borrower and the Lender desire to amend the Credit Agreement in
certain respects, subject to the terms and conditions of this Amendment.
NOW, THEREFORE, in consideration of the mutual agreements herein contained
and for other good and valuable consideration, the sufficiency and receipt of
which are hereby acknowledged, the parties hereto agree as follows:
1. Defined Terms. Capitalized terms not otherwise defined herein shall
have the meanings given to them in the Credit Agreement.
2. Amendment of the Credit Agreement. The Lender and the Borrower hereby
acknowledge their mutual understanding that all sums of principal and
accrued interest with respect to the Loan, the Credit Agreement and the
Note shall be due and payable not later than June 30, 1997. In order to
confirm this understanding, Section 1.1 of the Credit Agreement is hereby
amended by changing the definition of "Maturity Date" to read as follows:
"Maturity Date" shall mean the first to occur of the following dates:
(i) June 30, 1997; (ii) the date which is twelve (12) months after the
date of any termination of the Merger Agreement in accordance with the
provisions of Section 10.1 of the Merger Agreement; and (iii) the date
of the acquisition by any one person or group of persons (other than
the Lender, AMD Merger Corporation or any other affiliate of the
Lender) of, or of the right to acquire, more than fifty percent (50%)
of any class or series of voting securities of the Borrower;
3. Representations and Warranties. The Borrower hereby represents and
warrants to the Lender as follows:
(a) The execution, delivery and performance by the Borrower of this
Amendment have been duly authorized by all necessary corporate and
other action and do not and will not require any registration with,
consent or approval of, notice to or action by, any person (including
any governmental authority) in order to be effective and enforceable.
The Credit Agreement as amended by this Amendment constitutes the
legal, valid and binding obligations of the Borrower, enforceable
against the Borrower in accordance with its respective terms, without
defense, counterclaim or offset.
(b) All representations and warranties of the Borrower contained in
the Credit Agreement are true and correct.
4. Conditions to Effectiveness of Amendment. This Amendment will become
effective on the date on which all of the following conditions precedent
shall have been satisfied:
4.1 The Borrower and the Lender shall have executed and delivered
this Amendment; and
4.2 As necessary, the Borrower shall have delivered to the Lender a
certificate of the Secretary of the Borrower, dated as of the date
hereof, certifying that attached thereto is a true, correct and
complete copy of the resolutions duly adopted by the Board of Directors
of the Borrower authorizing the execution, delivery and performance of
this Amendment.
5. Reservation of Rights. The Borrower acknowledges and agrees that the
execution and delivery by the Lender of this Amendment shall not be deemed
to create a course of dealing or otherwise obligate the Lender to forbear
or execute similar amendments under the same or similar circumstances in
the future.
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6. Miscellaneous.
(a) Except as herein expressly amended, all terms, covenants and
provisions of the Credit Agreement are and shall remain in full force
and effect and all references therein to such Credit Agreement shall
henceforth refer to the Credit Agreement as amended by this Amendment.
This Amendment shall be deemed incorporated into, and a part of, the
Credit Agreement.
(b) This Amendment shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns. No
third party beneficiaries are intended in connection with this
Amendment.
(c) This Amendment shall be governed by and construed in accordance
with the laws of the State of California.
(d) This Amendment may be executed in any number of counterparts,
each of which shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument. Each of the
parties hereto understands and agrees that this document (and any other
document required herein) may be delivered by any party hereto either
in the form of an executed original or an executed original sent by
facsimile transmission to be followed promptly by mailing of a hard
copy original. Any failure by the Lender to receive the hard copy
executed original of any such document shall not diminish the binding
effect of receipt of the facsimile transmitted executed original of
such document of the Borrower whose hard copy page was not received by
the Lender.
(e) This Amendment, together with the Credit Agreement, contains the
entire and exclusive agreement of the parties hereto with reference to
the matters discussed herein and therein. This Amendment supersedes all
prior drafts and communications with respect to the subject matter
hereof. This Amendment may not be amended except in accordance with the
provisions of Section 8.7 of the Credit Agreement.
(f) If any term or provision of this Amendment shall be deemed
prohibited by or invalid under any applicable law, such provision shall
be invalidated without affecting the remaining provisions of this
Amendment or the Credit Agreement, respectively.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Amendment as of the date first above written.
THE BORROWER:
NEXGEN, INC.,
a Delaware corporation
/s/ Anthony S.S. Chan
By __________________________________
ANTHONY S.S. CHAN
CHIEF FINANCIAL OFFICER
THE LENDER:
ADVANCED MICRO DEVICES, INC.,
a Delaware corporation
/s/ Marvin D. Burkett
By __________________________________
MARVIN D. BURKETT
SENIOR VICE PRESIDENT AND CHIEF
FINANCIAL OFFICER
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EXHIBIT A
VOTING AGREEMENT
AGREEMENT (hereinafter referred to as the "Agreement") entered into as of
October , 1995, between ADVANCED MICRO DEVICES, INC., a Delaware corporation
(hereinafter referred to as "AMD"), and the undersigned officer, director, or
stockholder (such officer, director or stockholder being referred to below as
the "Stockholder") of NEXGEN, INC., a Delaware corporation (hereinafter
referred to as "NexGen").
WITNESSETH:
WHEREAS, NexGen, AMD and AMD Merger Corporation, a Delaware corporation
(hereinafter referred to as the "Subsidiary"), propose to enter into an
Agreement and Plan of Merger expected to be signed and dated on October 20,
1995 (hereafter referred to as the "Merger Agreement") pursuant to which the
Subsidiary, which is wholly-owned by AMD, will be merged into NexGen (the
"Merger"), and NexGen will become a wholly-owned subsidiary of AMD; and
WHEREAS, the Stockholder owns of record or beneficially the number of
outstanding shares of Common Stock, par value $.0001 per share, of NexGen
("NexGen Common Stock"), which is listed opposite the Stockholder's name on
the signature page to this Agreement; and
WHEREAS, as a condition to their willingness to enter into the Merger
Agreement, AMD and the Subsidiary have requested the Stockholder to enter into
this Agreement; and
WHEREAS, to induce AMD and the Subsidiary to enter into the Merger
Agreement, the Stockholder has agreed to enter into this Agreement;
NOW, THEREFORE, in consideration of the entry into the Merger Agreement of
AMD and the Subsidiary and the mutual agreements, covenants, representations
and warranties contained herein and intending to be legally bound hereby, the
parties hereto agree as follows:
1. Voting and Proxy. The Stockholder hereby agrees to vote all shares of
NexGen Common Stock now or at any time hereafter owned by the Stockholder
of record or beneficially (the "Shares") in favor of the Merger Agreement
and the Merger at any meeting of the stockholders of NexGen called for the
purpose of considering the Merger. Concurrently with the Stockholder's
execution of this Agreement, the Stockholder has executed and delivered to
AMD an irrevocable proxy (the "AMD Proxy") in the form of Exhibit 1
attached hereto, appointing the officers of AMD named therein, or either of
them, as proxy for the Stockholder to vote the Shares in accordance with
the preceding sentence.
2. Transfer Restriction. The Stockholder shall not, prior to the meeting
of the stockholders of NexGen to be called for the purpose of considering
the Merger or the termination of the Merger Agreement, whichever is
earlier, sell, assign, otherwise transfer or encumber any of the Shares or
execute any proxy with respect to any of the Shares other than the AMD
Proxy, or enter into any agreement or other arrangement relating to the
voting of any of the Shares which proxy, agreement or arrangement is in any
way inconsistent with the AMD Proxy.
3. Representations and Warranties of the Stockholder. The Stockholder
represents and warrants to AMD that:
(a) This Agreement is a valid and binding agreement of the
Stockholder, enforceable against the Stockholder in accordance with its
terms;
(b) Neither the execution of this Agreement by the Stockholder nor
the consummation by the Stockholder of the transactions contemplated
hereby will constitute a violation of or default under, or conflict
with, any contract, commitment, agreement, understanding, arrangement
or restriction of any kind by which the Stockholder is bound;
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(c) No consent, approval, order or authorization of any court,
administrative agency or other governmental entity or any other person
as required by or with respect to the Stockholder in connection with
the execution and delivery of this Agreement by the Stockholder;
(d) On the date hereof the Stockholder has, and at the Effective Time
(as defined in the Merger Agreement) the Stockholder shall have, sole
voting power or power to direct the vote with respect to the Shares,
and the Stockholder has not granted any proxy with respect to the
Shares that is in effect on the date hereof, and
(e) The Stockholder has not, with the exception of this Agreement and
the AMD Proxy, subjected the Shares to any voting trust or any other
agreement, understanding or arrangement.
4. Commitment of AMD. If, as a result of the Stockholder's execution of
this Agreement and the AMD Proxy, any shares of AMD Common Stock received
by the Stockholder pursuant to the Merger are not deemed to have been
registered under the Securities Act of 1933, as amended, notwithstanding
the fact that they have been issued and sold pursuant to a registration
statement on Form S-4, filed in connection with the Merger, AMD will
register such shares on a registration statement on Form S-3 (the "S-3").
AMD will use its best efforts to have the S-3 declared effective at the
Effective Time, as defined in the Merger Agreement. AMD shall use its best
efforts to keep the S-3 effective for a period of two (2) years.
5. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware.
6. Termination. This Agreement shall terminate upon the earlier of (a)
the Effective Time; or (b) the date as of which the Merger Agreement is
terminated in accordance with its terms or (c) nine months from the date
hereof.
7. Specific Performance. The Stockholder acknowledges that irreparable
damages would occur in the event any of the provisions hereof were not
performed in accordance with their specific terms or were otherwise
breached. Accordingly, the Stockholder agrees that AMD shall be entitled to
an injunction or injunctions to prevent breaches of the provisions hereof
and to enforce specifically the terms and provisions hereof in any court of
competent jurisdiction in the United States or any state thereof, in
addition to any other remedy with which AMD may be entitled at law or
equity.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as
of the date first above written.
Number of Shares of NexGen Common
Stock held:
STOCKHOLDER:
_____________________________________ _____________________________________
(NAME)
_____________________________________
_____________________________________
(ADDRESS)
Accepted and agreed to as of _ , 1995
ADVANCED MICRO DEVICES, INC.
By: _________________________________
Title: ______________________________
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<PAGE>
IRREVOCABLE PROXY
The undersigned, as owner of shares of Common Stock of NexGen, Inc. (the
"Corporation"), a Delaware corporation, the number and description of which
shares are set forth below, hereby revokes all previous proxies and appoints
W.J. Sanders III and Marvin D. Burkett, and each of such persons acting alone,
as proxy holder to attend and to vote all shares of the Common Stock of the
Corporation held by the undersigned in favor of the Agreement and Plan of
Merger expected to be signed and dated on October 20, 1995, among Advanced
Micro Devices, Inc., AMD Merger Corporation and the Corporation (the
"Agreement") and the Merger, as such term is defined in the Agreement, at any
and all meetings of the stockholders of the Corporation called to consider the
Agreement or the Merger or both, and any adjournments thereof, held on or
after the date of the giving of this proxy and prior to the termination of the
Agreement, and to execute any and all written consents of stockholders of the
Corporation executed on or after the date of the giving of this proxy and
prior to the termination of the Agreement in favor of the Agreement or the
Merger or both, with the same effect as if the undersigned had personally
attended the meeting or had personally voted the shares or had personally
signed a written consent.
The undersigned authorizes and directs the proxy holder to file this proxy
appointment with the Secretary of the Corporation and authorizes the proxy
holder to substitute another person as proxy holder and to file the
substitution instrument with the Secretary of the Corporation.
This proxy is given pursuant to a Voting Agreement of even date with the
Agreement between the undersigned and Advanced Micro Devices, Inc. as a
condition to the execution by Advanced Micro Devices, Inc. of the Agreement
and the extension by Advanced Micro Devices, Inc., of credit to the
Corporation pursuant to the Credit Agreement of even date with the Agreement
and is, therefore, coupled with an interest and may not be revoked without the
written consent of Advanced Micro Devices, Inc. for a period of nine months
from the date hereof unless the Agreement is terminated.
Dated: October , 1995
Number and Description of Shares:
shares of common stock of NexGen, Inc.
_____________________________________
(Signature)
_____________________________________
(Printed Name)
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<PAGE>
AMENDMENT NO. 1
TO
VOTING AGREEMENT
This Amendment No. 1 to Voting Agreement is entered into as of November 30,
1995, by and between ADVANCED MICRO DEVICES, INC., a Delaware corporation
(hereinafter referred to as "AMD"), and the undersigned officer, director, or
stockholder (such officer, director or stockholder being referred to below as
the "Stockholder") of NexGen, Inc., a Delaware corporation (hereinafter
referred to as "NexGen").
WITNESSETH
WHEREAS, AMD and the Stockholder have entered into the Voting Agreement (the
"Voting Agreement") as of October , 1995; and
WHEREAS, AMD and the Stockholder have agreed to amend the Voting Agreement
as set forth below;
NOW, THEREFORE, the parties hereto agree as follows:
1. Amendment. Paragraph 2 of the Voting Agreement is hereby amended to
read as follows:
The Stockholder shall not, prior to the Effective Time of the Merger
(as defined in the Merger Agreement) or the termination of the Merger
Agreement, whichever is earlier, sell, assign, otherwise transfer or
encumber any of the Shares or execute any proxy with respect to any of
the Shares other than the AMD Proxy, or enter into any agreement or
other arrangement relating to the voting of any of the Shares which
proxy, agreement or arrangement is in any way inconsistent with the AMD
Proxy.
2. Continued Effectiveness. Except as amended by this Amendment No. 1,
the Voting Agreement remains in full force and effect.
IN WITNESS WHEREOF, the parties have caused this agreement to be executed as
of the date first above written.
STOCKHOLDER:
_____________________________________
(Signature)
_____________________________________
(Printed name)
ADVANCED MICRO DEVICES, INC.
By: _________________________________
Its _________________________________
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<PAGE>
EXHIBIT B
AFFILIATE AGREEMENT
AGREEMENT (hereinafter referred to as the "Agreement") entered into as of
October , 1995, between Advanced Micro Devices, Inc., a Delaware corporation
(hereinafter referred to as "AMD"), and the stockholder (the "Stockholder") of
NexGen, Inc., a Delaware corporation (hereinafter referred to as "NexGen").
WITNESSETH:
WHEREAS, NexGen, AMD and AMD Merger Corporation, a Delaware corporation
(hereinafter referred to as the "Subsidiary"), propose to enter, or have
entered into an Agreement and Plan of Merger expected to be dated, or dated
October 20, 1995 (hereinafter referred to as the "Merger Agreement"), pursuant
to which the Subsidiary, which is wholly-owned by AMD, will be merged into
NexGen (the "Merger"), and NexGen will become a wholly-owned subsidiary of
AMD;
WHEREAS, upon the consummation of the Merger and in connection therewith,
the Stockholder will become the owner of shares of Common Stock of AMD
(hereinafter referred to as the "AMD Shares"); and
WHEREAS, it is intended that the transactions contemplated by the Merger
Agreement will be treated as a "pooling of interests" in accordance with
generally accepted accounting principles and the applicable General Rules and
Regulations published by the Securities and Exchange Commission (the
"Commission").
NOW, THEREFORE, in consideration of the promises and the mutual agreements,
provisions and covenants set forth in the Merger Agreement, and hereinafter in
this Agreement, it is hereby agreed as follows:
1. The Stockholder hereby agrees that:
(a) He may be deemed to be (but does not hereby admit to be) an
"affiliate" of NexGen within the meaning of Rule 145 under the
Securities Act of 1933, as amended (the "Securities Act"), and
Accounting Series Release No. 130, as amended, of the Commission.
(b) He will not sell or otherwise reduce his risk relative to the AMD
Shares or any part thereof until such time after the Effective Time, as
defined in the Merger Agreement, of the Merger as financial results
covering at least thirty (30) days of the post-Effective Time combined
operations of AMD and NexGen have been, within the meaning of said
Accounting Series Release No. 130, as amended, filed by AMD with the
Commission or published by AMD in an Annual Report on Form 10-K, a
Quarterly Report on Form 10-Q, a Current Report on Form 8-K, a
quarterly earnings report, a press release or other public issuance
which includes combined sales and income of NexGen and AMD. AMD agrees
to make such filing or publication as soon as practicable.
(c) Subject in any event to paragraph (b) of this Section 1, he
agrees not to offer, sell, pledge, transfer or otherwise dispose of any
of the AMD Shares unless at that time either:
(i) such transaction shall be permitted pursuant to the provisions
of Rule 145(d) under the Securities Act;
(ii) counsel representing the Stockholder, satisfactory to AMD,
shall have advised AMD in a written opinion letter satisfactory to
AMD and AMD's counsel and upon which AMD and its counsel may rely,
that no registration under the Securities Act would be required in
connection with the proposed sale, transfer or other disposition;
(iii) a registration statement under the Securities Act covering
the AMD Shares proposed to be sold, transferred or otherwise
disposed of, describing the manner and terms of the proposed sale,
transfer or other disposition, and containing a current prospectus
under the Securities Act, shall be effective under the Securities
Act; or
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(iv) an authorized representative of the Commission shall have
rendered written advice to the Stockholder (sought by the
Stockholder or counsel to the Stockholder, with a copy thereof and
of all other related communications delivered to AMD) to the effect
that the Commission would take no action, or that the staff of the
Commission would not recommend that the Commission take action, with
respect to the proposed sale, transfer or other disposition if
consummated.
(d) (1) Until the financial results described in paragraph (b) of
this Section 1 have been filed or published as described therein, and
until a public sale of the AMD Shares represented by such certificate
has been made in compliance with one of the alternative conditions set
forth in the subparagraphs of paragraph (c) of this Section 1, all
certificates representing the AMD Shares deliverable to the Stockholder
pursuant to the Merger Agreement and in connection with the Merger and
any certificates subsequently issued with respect thereto or in
substitution therefor shall bear a legend substantially as follows:
"The shares represented by this certificate may not be offered,
sold, pledged, transferred or otherwise disposed of except in
accordance with the requirements of the Securities Act of 1933, as
amended, and the other conditions specified in the Affiliate
Agreement dated as of October , 1995, between Advanced Micro
Devices, Inc. and the registered holder, a copy of which Affiliate
Agreement may be inspected by the holder of this certificate at the
offices of Advanced Micro Devices, Inc., or Advanced Micro Devices,
Inc. will furnish a copy thereof to the holder of this certificate
upon written request and without charge."
AMD, at its discretion, may cause stop transfer orders to be placed
with its transfer agent(s) with respect to the certificates for the AMD
Shares but not as to the certificates for any part of the AMD Shares as
to which said legend is no longer appropriate as hereinabove provided.
(2) Notwithstanding paragraph (d)(1) of this Section 1, at any time
after the financial results described in paragraph (b) of this Section
1 have been filed or published as described therein, any or all
certificates representing the AMD Shares shall, at the written request
of the Stockholder and upon surrender of such certificates to the
transfer agent for AMD Common Stock, be replaced by stock certificates
representing the AMD Shares bearing only the following legend:
"The shares represented by this certificate may not be offered,
sold, pledged, transferred or otherwise disposed of except in
compliance with paragraph (d) of Rule 145 promulgated by the
Securities and Exchange Commission."
The reference in the foregoing legend to Rule 145 shall not preclude,
however, the alternative of a transaction in compliance with
subparagraphs (ii), (iii) or (iv) of paragraph (c) of this Section 1.
(e) The Stockholder will observe and comply with the Securities Act
and the General Rules and Regulations thereunder, as now in effect and
as from time to time amended and including those hereafter enacted or
promulgated, in connection with any offer, sale, pledge or transfer or
other disposition of the AMD Shares or any part thereof.
2. From and after the Effective Time of the Merger and for so long as
necessary in order to permit the Stockholder to sell the AMD Shares
pursuant to Rule 145 and, to the extent applicable, Rule 144 under the
Securities Act, AMD will use its best efforts to file on a timely basis all
reports required to be filed by it pursuant to Section 13 of the Securities
Exchange Act of 1934, referred to in paragraph (c)(l) of Rule 144 under the
Securities Act (or, if applicable, AMD will use its best efforts to make
publicly available the information regarding itself referred to in
paragraph (c)(2) of Rule 144) in order to permit the Stockholder to sell,
pursuant to the terms and conditions of Rule 145 and the applicable
provisions of Rule 144, the AMD Shares.
3. No waiver by any party hereto of any condition or of any breach of any
provision of this Agreement shall be effective unless in writing.
4. All notices, requests, demands or other communications which are
required or may be given pursuant to the terms of this Agreement shall be
in writing and shall be deemed to have been duly given if
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delivered by hand or (except where receipt thereof is specifically required
for purposes of this Agreement) mailed by registered or certified mail,
postage prepaid, as follows:
If to the Stockholder, at the address set forth below the Stockholder's
signature at the end hereof.
If to AMD or the other Indemnified Persons:
To: Copies to:
Advanced Micro Devices, Inc. Bronson, Bronson & McKinnon
Attention: General Counsel 505 Montgomery Street
P.O. Box 3453 M\S 150 San Francisco, CA 94111-2514
Sunnyvale, CA 94088-3453 Attention: Victor J. Bacigalupi
or to such other address as any party hereto or any Indemnified Person may
designate for itself by notice given as herein provided.
5. For the convenience of the parties hereto this Agreement may be
executed in one or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
document.
6. This Agreement shall be enforceable by, and shall inure to the benefit
of and be binding upon, the parties hereto and their respective successors
and assigns. Moreover, this Agreement shall be enforceable by, and shall
inure to the benefit of, the Indemnified Persons and their respective
successors and assigns. As used herein, the term "successors and assigns"
shall mean, where the context so permits, heirs, executors, administrators,
trustees and successor trustees, and personal and other representatives.
7. This Agreement shall be governed by and construed, interpreted and
enforced in accordance with the laws of the State of Delaware.
8. This Agreement shall become effective on the Effective Time of the
Merger. If a court of competent jurisdiction determines that any provision
of this Agreement is unenforceable or enforceable only if limited in time
and/or scope, this Agreement shall continue in full force and effect with
such provision stricken or so limited.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as
of the date first above written.
Stockholder:
_____________________________________
_____________________________________
_____________________________________
Accepted and agreed to as of October
, 1995.
AMD:
Advanced Micro Devices, Inc.
By: _________________________________
Title: ______________________________
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EXHIBIT C
NO SALE AGREEMENT
AGREEMENT (hereinafter referred to as the "Agreement") entered into as of
October , 1995, between ADVANCED MICRO DEVICES, INC., a Delaware corporation
(hereinafter referred to as "AMD"), and the undersigned officer, director, or
stockholder (such officer, director or stockholder being referred to below as
the "Stockholder") of NEXGEN, INC., a Delaware corporation (hereinafter
referred to as "NexGen").
WITNESSETH:
WHEREAS, NexGen, AMD and AMD Merger Corporation, a Delaware corporation
(hereinafter referred to as the "Subsidiary"), propose to enter into an
Agreement and Plan of Merger expected to be signed and dated on October 20,
1995 (hereafter referred to as the "Merger Agreement") pursuant to which the
Subsidiary, which is wholly-owned by AMD, will be merged into NexGen (the
"Merger"), and NexGen will become a wholly-owned subsidiary of AMD; and
WHEREAS, the Stockholder owns of record or beneficially the number of
outstanding shares of Common Stock, par value $.0001 per share, of NexGen
("NexGen Common Stock"), which is listed opposite the Stockholder's name on
the signature page to this Agreement; and
WHEREAS, as a condition to their willingness to enter into the Merger
Agreement, AMD and the Subsidiary have requested the Stockholder to enter into
this Agreement; and
WHEREAS, to induce AMD and the Subsidiary to enter into the Merger
Agreement, the Stockholder has agreed to enter into this Agreement;
NOW, THEREFORE, in consideration of the entry into the Merger Agreement of
AMD and the Subsidiary and the mutual agreements, covenants, representations
and warranties contained herein and intending to be legally bound hereby, the
parties hereto agree as follows:
1. Transfer Restriction. The Stockholder shall not, prior to the meeting
of the stockholders of NexGen to be called for the purpose of considering
the Merger or the termination of the Merger Agreement, whichever is
earlier, sell, assign, otherwise transfer or encumber any of the shares of
NexGen Common Stock now or at any time hereafter owned by the Stockholder
of record or beneficially (the "Shares")
2. Representations and Warranties of the Stockholder. The Stockholder
represents and warrants to AMD that:
(a) This Agreement is a valid and binding agreement of the
Stockholder, enforceable against the Stockholder in accordance with its
terms;
(b) Neither the execution of this Agreement by the Stockholder nor
compliance by the Stockholder with the provisions hereof will
constitute a violation of or default under, or conflict with, any
contract, commitment, agreement, understanding, arrangement or
restriction of any kind by which the Stockholder is bound;
(c) No consent, approval, order or authorization of any court,
administrative agency or other governmental entity or any other person
as required by or with respect to the Stockholder in connection with
the execution and delivery of this Agreement by the Stockholder;
(d) On the date hereof the Stockholder has, and at the Effective Time
(as defined in the Merger Agreement) the Stockholder shall have, sole
voting power or power to direct the vote with respect to the Shares,
and the Stockholder has not granted any proxy with respect to the
Shares to any person other than NexGen or representatives of NexGen
that is in effect on the date hereof, and
(e) The Stockholder has not subjected the Shares to any voting trust
or any similar agreement, understanding or arrangement.
A-75
<PAGE>
3. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware.
4. Termination. This Agreement shall terminate upon the earlier of (a)
the Effective Time; or (b) the date as of which the Merger Agreement is
terminated in accordance with its terms or (c) nine months from the date
hereof.
5. Specific Performance. The Stockholder acknowledges that irreparable
damages would occur in the event any of the provisions hereof were not
performed in accordance with their specific terms or were otherwise
breached. Accordingly, the Stockholder agrees that AMD shall be entitled to
an injunction or injunctions to prevent breaches of the provisions hereof
and to enforce specifically the terms and provisions hereof in any court of
competent jurisdiction in the United States or any state thereof, in
addition to any other remedy with which AMD may be entitled at law or
equity.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as
of the date first above written.
Number of Shares of NexGen Common STOCKHOLDER:
Stock held:
_____________________________________ _____________________________________
(NAME)
_____________________________________
(ADDRESS)
Accepted and agreed to as of _ , 1995
ADVANCED MICRO DEVICES, INC.
By: _________________________________
Title: ______________________________
A-76
<PAGE>
AMENDMENT NO. 1
TO
NO SALE AGREEMENT
This Amendment No. 1 to No Sale Agreement is entered into as of November 30,
1995, by and between ADVANCED MICRO DEVICES, INC., a Delaware corporation
(hereinafter referred to as "AMD"), and the undersigned officer, director, or
stockholder (such officer, director or stockholder being referred to below as
the "Stockholder") of NexGen, Inc., a Delaware corporation (hereinafter
referred to as "NexGen").
WITNESSETH
WHEREAS, AMD and the Stockholder have entered into the No Sale Agreement
(the "No Sale Agreement") as of October , 1995; and
WHEREAS, AMD and the Stockholder have agreed to amend the No Sale Agreement
as set forth below;
NOW, THEREFORE, the parties hereto agree as follows:
1. Amendment. Paragraph 1 of the No Sale Agreement is hereby amended to
read as follows:
The Stockholder shall not, prior to the Effective Time of the Merger
(as defined in the Merger Agreement) or the termination of the Merger
Agreement, whichever is earlier, sell, assign, otherwise transfer or
encumber any of the shares of NexGen Common Stock now or at any time
hereafter owned by the Stockholder of record or beneficially (the
"Shares").
2. Continued Effectiveness. Except as amended by this Amendment No. 1,
the No Sale Agreement remains in full force and effect.
IN WITNESS WHEREOF, the parties have caused this agreement to be executed as
of the date first above written.
STOCKHOLDER:
_____________________________________
(Signature)
_____________________________________
(Printed name)
ADVANCED MICRO DEVICES, INC.
By: _________________________________
Its _________________________________
A-77
<PAGE>
ANNEX B
DONALDSON, LUFKIN & JENRETTE
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION . 140 BROADWAY, NEW YORK,
NY 10005-1285-(212) 504-3000
December 14, 1995
Board of Directors
Advanced Micro Devices, Inc.
One AMD Place
Sunnyvale, CA 94088-3453
Dear Sirs:
You have requested our opinion as to the fairness from a financial point of
view to Advanced Micro Devices, Inc. ("AMD" or the "Company") of the Exchange
Ratio (as defined herein) to be applied in connection with the proposed merger
(the "Merger") of AMD with NexGen, Inc. ("NexGen") pursuant to the Definitive
Merger Agreement dated October 20, 1995 (the "Agreement") between AMD and
NexGen.
Pursuant to the Agreement, each share of common stock of NexGen will be
converted into the right to receive 0.80 shares (the "Exchange Ratio") of the
common stock, par value $0.01 per share (the "Common Stock"), of the Company.
In addition, pursuant to the Agreement, each outstanding warrant or option to
purchase shares of common stock of NexGen will be exchanged for a warrant or
option to purchase shares of Common Stock based on the Exchange Ratio.
In arriving at our opinion, we have reviewed the Agreement as well as
financial and other information that was publicly available or furnished to us
by the Company and NexGen including information provided during discussions
with their respective managements. Included in the information provided during
discussions with the respective managements were certain financial projections
of the Company prepared by the management of the Company, certain financial
projections of NexGen prepared by the Company in conjunction with the
management of NexGen and certain financial projections of the Company and
NexGen on a combined basis, including estimates of synergies, prepared by the
Company. In addition, we have compared certain financial and securities data
of the Company and NexGen from calendar 1992 through the twelve months ended
September 30, 1995 with various other companies whose securities are traded in
public markets, reviewed the historical stock prices and trading volumes of
the common stock of the Company and NexGen, reviewed prices and premiums paid
in other business combinations and conducted such other financial studies,
analyses and investigations as we deemed appropriate for purposes of this
opinion.
In rendering our opinion, we have relied upon and assumed, without
independent verification, the accuracy, completeness and fairness of all of
the financial and other information that was available to us from public
sources, that was provided to us by the Company and NexGen and their
respective representatives, or that was otherwise reviewed by us. In
particular, we have relied, without independent investigation, upon the
estimates of the managements of the Company and NexGen of the operating
synergies achievable as a result of the Transaction. With respect to the
financial projections supplied to us, we have assumed that they have been
reasonably prepared on the basis reflecting the best currently available
estimates and judgments of the management of the Company and NexGen as to the
future operating and financial performance of the Company and NexGen. We are
not qualified to and did not evaluate the technical capabilities of NexGen's
products or the capabilities of the Company's manufacturing facilities or
process technology to produce NexGen's products in a timely and cost effective
manner. We have relied on the Company's evaluation of such matters as
reflected in the foregoing projections. We have not assumed any responsibility
for making any independent evaluation of the assets or liabilities of the
Company or NexGen or for making any independent verification of any of the
information supplied to or reviewed by us.
Our opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to us as
of, the date of this letter. It should be understood that, although subsequent
developments may affect this opinion, we do not have any obligation to update,
revise or reaffirm
B-1
<PAGE>
this opinion. Our opinion does not constitute a recommendation to any
shareholder as to how such shareholder should vote on the proposed Merger. Our
opinion does not address the underlying business decision of the Company to
enter into the Merger.
We are expressing no opinion as to what the value of the Common Stock will
actually be when issued pursuant to the Merger or the prices at which the
Common Stock will actually trade at any time.
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), as part of its
investment banking services, is regularly engaged in the valuation of
businesses and securities in connection with mergers, acquisitions,
underwritings, sales and distributions of listed and unlisted securities,
private placements and valuations for estate, corporate and other purposes.
DLJ has performed investment banking and other services for the Company in the
past and has received customary compensation for such services. Joe L. Roby,
the Chief Operating Officer and a director of DLJ's parent, is a director of
the Company.
Based upon the foregoing and such factors as we deem relevant, we are of the
opinion that the Exchange Ratio to be applied in the Merger is fair to the
Company from a financial point of view.
Very truly yours,
Donaldson, Lufkin & Jenrette
Securities Corporation
B-2
<PAGE>
ANNEX C
Investment Banking Division
PaineWebber Incorporated
1285 Avenue of the Americas
New York, NY 10019
212 713-2000
PAINEWEBBER
December 14, 1995
Board of Directors
NexGen, Inc.
1623 Buckeye Drive
Milpitas, California 95035-7423
Gentlemen:
NexGen, Inc. (the "Company"), Advanced Micro Devices, Inc. ("AMD"), and AMD
Merger Corporation, a wholly-owned subsidiary of AMD ("Merger Sub"), have
entered into an Agreement and Plan of Merger (the "Agreement"), pursuant to
which Merger Sub will be merged with and into the Company (the "Merger"), in
which each share of the Company's common stock (the "Shares") will be
converted into the right to receive 0.8 (the "Exchange Ratio") shares of
common stock of AMD. In connection with the Merger, the parties also have
entered into an agreement (the "Credit Agreement") pursuant to which AMD will
extend a credit facility to the Company. The terms and conditions of the
Merger are more fully set forth in the Agreement.
You have asked us whether or not, in our opinion, the Exchange Ratio is fair
to the shareholders of the Company from a financial point of view.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed, among other public information, the Company's Form 10-K for
the fiscal year ended June 30, 1995, prospectus dated May 24, 1995, and
related financial information for the four fiscal years ended June 30, 1995
and the Company's Form 10-Q and related unaudited financial information for
the three months ended September 30, 1995;
(2) Reviewed, among other public information, AMD's Annual Reports, Forms
10-K and related financial information for the five fiscal years ended
December 25, 1994 and AMD's Forms 10-Q and the related unaudited financial
information for the six months ended July 2, 1995 and for the nine months
ended October 1, 1995;
(3) Reviewed certain information, including financial forecasts relating
to the buiness, earnings, cash flow, assets and prospects of the Company
and AMD, furnished to us by the Company and AMD, respectively;
(4) Conducted discussions with members of senior management of the
Company and AMD concerning their respective businesses and prospects;
(5) Reviewed the historical market prices and trading activity for the
Shares and AMD shares and compared such prices and trading histories with
those of certain other publicly traded companies which we deemed to be
relevant;
(6) Compared the financial positions and results of operations of the
Company and AMD with those of certain other publicly traded companies which
we deemed to be relevant;
C-1
<PAGE>
(7) Compared the financial terms of the Merger with the financial terms
of certain other business combinations which we deemed to be relevant;
(8) Reviewed the Agreement dated October 20, 1995, as amended;
(9) Reviewed the Credit Agreement dated October 20, 1995, as amended; and
(10) Reviewed such other financial studies and analyses and performed
such other investigations and took into account such other matters as we
deemed necessary including our assessment of general market and monetary
conditions.
In preparing our opinion, we have relied on the accuracy and completeness of
all information that was publicly available, supplied or otherwise
communicated to us by the Company and AMD and we have not independently
verified the same. We have assumed that the financial forecasts examined by us
were reasonably prepared on bases reflecting the best currently available
estimates and good faith judgments of the management of the Company and AMD as
to the future performance of the Company and AMD, respectively. We have also
assumed, with your consent, that: (i) the Merger will be accounted for under
the pooling-of-interests method of accounting; (ii) the Merger will be a tax-
free reorganization; and (iii) any material liabilities (contingent or
otherwise, known or unknown) of the Company and AMD are as set forth in the
consolidated financial statements of the Company and AMD, respectively. We
have not made an independent evaluation or appraisal of the assets or
liabilities (contingent or otherwise) of the Company or AMD, nor have we been
furnished with any such evaluations or appraisals. Our opinion is based upon
economic, monetary and market conditions existing on the date hereof.
Furthermore, we express no opinion as to the price or trading range at which
the shares of AMD will trade from the date hereof.
Our opinion is directed to the Board of Directors of the Company and does
not constitute a recommendation to any shareholder of the Company as to how
any such shareholder should vote on the Merger. This opinion does not address
the relative merits of the Merger and any other transactions or business
strategies discussed by the Board of Directors of the Company as alternatives
to the Merger or the decision of the Board of Directors of the Company to
proceed with the Merger. PaineWebber Incorporated was not requested or
authorized to solicit, and did not solicit potential purchasers of the
Company.
This opinion has been prepared solely for the use of the Board of Directors
of the Company and shall not be reproduced, summarized, described or referred
to or given to any other person or otherwise made public without the prior
written consent of PaineWebber Incorporated; provided however, that this
letter may be reproduced in full in a proxy statement/prospectus relating to
the Merger.
PaineWebber Incorporated is currently acting as financial advisor to the
Company in connection with the Merger and will receive a fee upon delivery of
this opinion and upon consummation of the Merger. In the past, PaineWebber
Incorporated and its affiliates have provided financial advisory services and
financing services for the Company and have received fees for the rendering of
these services. In addition, a representative of PaineWebber is a member of
the Board of Directors of the Company.
In the ordinary course of our business, we may actively trade the securities
of the Company and AMD for our own account and for the accounts of our
customers and, accordingly, may at any time hold long or short positions in
such securities. Among other securities of the Company which we may hold for
our own account from time to time, we hold warrants relating to approximately
917,225 Shares which have an average exercise price of approximately $4.61.
On the basis of, and subject to the foregoing, we are of the opinion that,
as of the date hereof, the Exchange Ratio is fair to the shareholders of the
Company from a financial point of view.
Very truly yours,
PaineWebber Incorporated
C-2
<PAGE>
ANNEX D
ADVANCED MICRO DEVICES, INC.
1991 EMPLOYEE STOCK PURCHASE PLAN
(AS PROPOSED TO BE AMENDED)
The following constitutes the provisions of Advanced Micro Devices, Inc.
1991 Employee Stock Purchase Plan (herein called the "Plan"). As used herein
the terms "Corporation" and "AMD" refer to Advanced Micro Devices, Inc., and,
where appropriate, any Participating Subsidiary of Advanced Micro Devices,
Inc.
1. Purpose. The purpose of the Plan is to foster continued cordial employee
relations by providing employees of the Corporation and Participating
Subsidiaries with an opportunity to purchase Common Stock of the Corporation
through payroll deductions. It is the intention of the Corporation that the
Plan qualify as an "employee stock purchase plan" under Section 423 of the
Internal Revenue Code of 1986, as amended (the "Code"). The provisions of the
Plan shall be construed so as to extend and limit participation in a manner
consistent with the requirements of that section of the Code and the
regulations promulgated thereunder.
2. Definitions.
(a) "Board" means the Board of Directors of the Corporation.
(b) "Business Day" means a day on which AMD Common Stock is publicly
traded.
(c) "Committee" means the committee designated by the board to administer
this Plan.
(d) "Compensation" means salaries, overtime, shift differential and lead
pay. Bonuses, special awards, sales commissions, cash profit sharing,
income attributable to the exercise of a compensatory stock option or
warrant, reimbursements and allowances are excluded.
(e) "Employee" means any person, including an officer, customarily
employed for at least twenty (20) hours per week and more than five (5)
months in a calendar year by the Corporation or its Participating
Subsidiaries.
(f) "Participating Subsidiary" means any subsidiary (determined by
reference to Section 424 of the Code) designated by the Board to be a
participating subsidiary.
(g) "Offering Period" shall have meaning assigned by paragraph 4.
(h) "Option Grant Date" means the first Business Day of each Offering
Period of the Plan.
(i) "Purchase Date" means the last Business Day of each Offering Period
of the Plan.
3. Eligibility. Any Employee who shall be employed by the Corporation or its
Participating Subsidiaries on the first day of an Offering Period, shall be
eligible to participate in such Offering Period under the Plan, subject to the
requirements of paragraph 5 and the limitations imposed by Section 423(b) of
the Code.
4. Offering period. Absent action by the Board, each Offering Period shall
extend for three calendar months commencing on the first Business Day on or
after February 1, May 1, August 1 and November 1 of each year and ending on
the last Business Day of the third month. The initial Offering Period under
this plan shall be a four-month period commencing on April 1, 1991 and ending
on July 31, 1991.
5. Participation.
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement authorizing payroll deduction on the
form provided by the Corporation and filing it with the designated
Corporation office not later than the 15th day of the month prior to a new
Offering Period; provided that participants who go on a leave of absence
are subject to the special rules set forth in paragraph 10(c) hereof; and
provided further that an Employee who commences employment in the month
prior to a new Offering Period may complete a subscription agreement on the
date he commences employment. An Employee who becomes eligible to
participate in the Plan after an Option Grant Date may not participate
until the next Offering Period.
D-1
<PAGE>
(b) Payroll deductions for a participant shall commence with the first
payroll following the Option Grant Date and shall end with the Purchase
Date of the offering, unless sooner terminated by the participant as
provided in paragraph 10, or by the Corporation.
6. Payroll Deductions
(a) At the time a participant files his subscription agreement, he shall
elect to have payroll deductions made on each payday during the Offering
Period at a rate not exceeding ten percent (10%) of the Compensation which
he would otherwise receive on such payday, provided that the aggregate of
such payroll deductions during the Offering Period shall not exceed ten
percent (10%) of the aggregate Compensation which he would otherwise have
received during said Offering Period. The Committee shall determine whether
the amount to be deducted from each paycheck is to be designated as a
specific dollar amount, or as a percentage of the eligible Compensation
being paid on such payday, or as either, and may also establish a minimum
percentage or amount for such payroll deductions.
(b) All payroll deductions authorized by a participant shall be credited
to his account under the Plan. A participant may not make any additional
payments into such account.
(c) A participant may discontinue his preparation in the Plan as provided
in paragraph 10, and may decrease or increase the rate of his payroll
deductions a maximum of once during the Offering Period by completing and
filing with the Corporation a new authorization for payroll deduction. The
change in rate shall become effective no later than fifteen (15) days after
the Corporation's receipt of the new authorization.
7. Grant of Option
(a) On each Option Grant Date, each participant in the Plan shall be
granted an option to purchase (at the per share option price) the number of
shares of the Corporation's Common Stock determined by dividing: (i) thirty
percent (30%) of the participant's Pay by (ii) eighty-five percent (85%) of
the fair market value of a share of the Corporation's Common Stock on such
Option Grant Date; but in no event shall such number be greater than the
amount permitted under Section 7(b) of this Plan. Fair market value of a
share of the Corporation's Common Stock shall be determined a provided in
Section 7(c) herein. In calculating under this section the number of shares
subject to option for the next Offering Period, and for purposes of
calculating the foregoing limit, Pay for a current Offering Period shall
mean: (1) Five Hundred Seventy (570) times the sum of (a) the participant's
hourly wage rate in effect on the first day of the current Offering Period
plus (b) the participant's average hourly overtime for the preceding
Offering Period; plus (2) the amount of Compensation deferred from a prior
Offering Period and which will be paid to the participant during the
current Offering Period.
(b) Exceptions. Any provisions of the Plan to the contrary
notwithstanding, any option granted to an Employee shall be limited so
that:
(i) immediately after the grant, such employee would not own stock
possessing five percent (5%) or more of the total combined voting power
or value of all classes of stock of the Corporation or of any
subsidiary of the Corporation (including stock which the employee may
purchase under outstanding options, and stock the ownership of which is
attributed to the employee under Section 424(d) of the Code), and
(ii) the Employee's rights to purchase shares under all employee
stock purchase plans of the Corporation and its subsidiaries shall not
accrue (i.e., become exercisable) at a rate which exceeds twenty-five
thousand dollars ($25,000) of the fair market value of such shares
(determined at the time such option is granted) for each calendar year
in which such option is outstanding at any time.
(c) The option price per share of such shares shall be the lower of: (i)
85% of the fair market value of a share of the Corporation's Common Stock
at the Option Grant Date; or (ii) 85% of the fair market value of the
Corporation's Common Stock at the Purchase Date. The fair market value of
the Corporation's Common Stock on said dates shall be the closing price on
the New York Stock Exchange for such date, or if no sale is made on such
date, the corresponding closing price on the first preceding date on which
the Corporation's Common Stock was sold.
D-2
<PAGE>
(d) Any excess contributions remaining in the Employee's account after
the purchase of the shares on the Purchase Date will be returned to the
employee, or may be credited against future payroll deductions.
8. Exercise of Option. Unless a participant withdraws from the Plan as
provided in paragraph 10, his option for the purchase of shares will be
exercised automatically for the number of whole shares which the accumulated
payroll deductions in his account could purchase at the applicable option
price on the Purchase Date. During his lifetime, a participant's option to
purchase shares hereunder is exercisable only by him. Options granted with
respect to the initial Offering Period of April 1, 1991 through July 31, 1991
shall not be exercisable unless stockholders approve this Plan prior to
February 12, 1992.
9. Delivery. As promptly as practicable after the Purchase Date of each
offering, the Corporation shall arrange the delivery to each participant, as
appropriate, of a certificate representing the number of whole shares
purchased on exercise of his option.
10. Withdrawal; Termination of Employment.
(a) A participant may withdraw all, but not less than all, the payroll
deductions credited to his account under the Plan at any time prior to the
Purchase Date by giving written notice to the Corporation on a form
provided for such purpose. All of the participant's payroll deductions
credited to his account will be paid to him promptly after receipt of his
notice of withdrawal, his option for the current period will be
automatically cancelled, and no further payroll deductions for the purchase
of shares will be made during the Offering Period.
(b) Upon termination of the participant's employment for any reason,
including retirement, permanent disability or death, the payroll deductions
credited to his account will be returned to him or, in the case of his
death, to the person or persons entitled thereto under paragraph 14, and
his option will be automatically canceled.
(c) In the event an Employee fails to remain in the continuous employ of
the Corporation or its subsidiaries for customarily at least twenty (20)
hours per week during an Offering Period, he will be deemed to have elected
to withdraw from the Plan and the payroll deductions credited to his
account will be returned to him and his option cancelled; provided that a
participant who goes on an unpaid leave of absence shall be permitted to
remain in the Plan with respect to an Offering Period which commenced prior
to the beginning of such leave of absence. If such participant is not
guaranteed reemployment by contract or statute and the leave of absence
extends beyond 90 days, such participant shall be deemed to have terminated
employment on the 91st day of such leave of absence. Payroll deductions for
a participant who has been on an unpaid leave of absence will resume at the
same rate as in effect prior to such leave upon return to work unless
changed by such participant or unless the participant has been on an unpaid
leave of absence either throughout an entire Offering Period or for more
than ninety (90) days, in which cases the participant shall not be
permitted to re-enter the Plan until a subscription agreement is filed with
respect to a subsequent Offering Period which commences after such
participant has returned to work from the unpaid leave of absence.
(d) A participant's withdrawal from an offering will not have any effect
upon his eligibility to participate in a succeeding offering or in any
similar plan which may hereafter be adopted by the Corporation.
(e) Any other provision of the Plan notwithstanding, an Employee who is
subject to Section 16 of the Securities Exchange Act of 1934 shall not
resume contributions under the Plan for a period of at least six months
after discontinuing his or her contributions. This subsection (e) shall be
applicable only to the extent required by Rule 16b-3 (or its successor)
under the Securities Exchange Act of 1934.
11. No Interest. No interest shall accrue on the payroll deductions of a
participant in the Plan.
D-3
<PAGE>
12. Stock.
(a) The maximum number of shares of the Corporation's Common Stock which
may be sold pursuant to options exercised under the Plan shall be three
million six hundred thousand (3,600,000) shares, subject to adjustment upon
changes in capitalization of the Corporation as provided in paragraph 18.
The shares to be sold to participants in the Plan may be, at the election
of the Corporation, either treasury shares or shares authorized by
unissued. In addition, the officers of the Corporation are authorized to
acquire shares of the Corporation's Common Stock in the open market for
resale under this Plan. If the total number of shares which would otherwise
be subject to options granted pursuant to paragraph 7(a) hereof at the
Option Grant Date exceeds the number of shares then available under the
Plan (after deduction of all shares for which options have been exercised
or are then outstanding), the Corporation shall make a pro rata allocation
of the shares remaining available for option grant in as uniform and
equitable a manner as is practicable. In such event, the Corporation may
reduce the rate of payroll deductions as appropriate.
(b) The participant will have no interest or voting right in shares
covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan will be
registered in the name of the participant.
13. Administration.
(a) The Plan shall be administered by the Board or a committee appointed
by the Board (the "Committee"). The Board may from time to time remove
members from or add members to the Committee. Vacancies on the Committee,
however caused, shall be filled by the Board. Acts taken or approved by a
majority of the Committee at which a quorum is present, or acts approved in
writing by all members of the Committee, shall be the valid acts of the
Committee. The Plan shall be administered in a manner that assures all
participants the same rights and privileges.
(b) The administration, interpretation or application of the Plan by the
Board or its Committee shall be final, conclusive and binding upon all
participants. Members of the Board or the Committee who are eligible
Employees are permitted to participate in the Plan.
(c) No member of the Board or the Committee shall be liable for any
action or determination made in good faith with respect to the Plan or any
option granted under it. In addition to such other rights of
indemnification as they may have as directors or as members of the
Committee, the members of the Committee shall be indemnified by the
Corporation against the reasonable expenses, including attorney's fees
actually and necessarily incurred in connection with the defense of any
action, suit or proceeding, or in connection with any appeal therein, to
which they or any of them may be a party by reason of any action taken or
failure to act under or in connection with the Plan or any option granted
thereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel selected
by the Corporation) or paid by them in satisfaction of a judgment in any
such action, suit or proceeding, except in relation to matters as to which
it shall be adjudged in such action, suit or proceeding that such Committee
member is liable for negligence or misconduct in the performance of his
duties; provided that within sixty (60) days after institution of any such
action, suit or proceeding the Committee member seeking indemnification
shall in writing offer the Corporation the opportunity, at its own expense,
to handle and defend the same.
(d) All costs and expenses incurred in administering the Plan shall be
paid by the Corporation. The Board or the Committee, if any is appointed,
may request advice or assistance or employ such other persons as are
necessary for proper administration of the Plan.
14. Designation of Beneficiary.
(a) A participant may file a written designation of a beneficiary who is
to receive any shares and cash, if any, from the participant's account
under the Plan in the event of such participant's death subsequent to the
Purchase Date but prior to delivery to him of such shares and cash. In
addition, a participant may file a
D-4
<PAGE>
written designation of beneficiary who is to receive any cash from the
participant's account under the Plan in the event of such participant's
death prior to the Purchase Date.
(b) Such designation of beneficiary may be changed by the participant at
any time by written notice. In the event of the death of a participant in
the absence of a valid designation of a beneficiary who is living at the
time of such participant's death, the Corporation shall deliver such shares
and/or cash in accordance with the participant's designation of
beneficiaries under the Advanced Micro Devices, Inc. Deferred Profit
Sharing Plan; or, in the absence of such designation, to the executor or
administrator of the estate of the participant; or if no such executor or
administrator has been appointed (to the knowledge of the Corporation), the
Corporation, in its discretion, may deliver such shares and/or cash to the
spouse or to any one or more dependents or relatives of the participant; or
if no spouse, dependent or relative is known to the Corporation, then to
such other person as the Corporation may designate.
15. Transferability. Neither payroll deduction credited to a participant's
account nor any rights with regard to the exercise of an option or to receive
shares under the Plan may be assigned, transferred, pledged or otherwise
disposed of in any way (other than by will, the laws of descent and
distribution, or as provided in paragraph 14 hereof) by the participant. Any
such attempt at assignment, transfer, pledge or other disposition, shall be
void and without effect, except that the Corporation may treat such act as an
election to withdraw funds in accordance with paragraph 10.
16. Use of Funds. All payroll deductions received or held by the Corporation
under the Plan may be used by the Corporation for any corporate purpose, and
the Corporation shall not be obligated to segregate such payroll deductions.
17. Statements. Statements of account will be given to participating
employees promptly following each Purchase Date, which statements will set
forth the amounts of payroll deductions, the per share purchase price, the
number of shares purchased and any excess contributions.
18. Changes in Capitalization. In the event of any stock dividend, stock
split, spin-off, recapitalization, merger, consolidation, exchange of shares
or the like, the number of shares then subject to option and the number of
authorized shares remaining available to be sold shall be increased or
decreased appropriately, with such other adjustment as may be deemed necessary
or equitable by the Board.
19. Amendment. The Board of Directors may at any time amend the Plan. No
such amendment may make any change in any option previously granted which
adversely affects the rights of any participant without such participant's
consent. No amendment for which 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 Committee
and consistent with Securities and Exchange Commission Rule 16b-3 (or its
successor), the Code or the stock exchange(s) on which the Corporation's
shares are listed, as such rules are in effect at the time the plan amendment
becomes effective.
20. Termination. The Board of Directors of Advanced Micro Devices, Inc. may
at any time terminate the Plan. No such termination will affect options
previously granted. Unless sooner terminated by the Board, this Plan shall
terminate February 1, 2001.
21. Notices. All notices or other communications by a participant to the
Corporation in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Corporation at the location,
or by the person, designated by the Corporation for the receipt thereof.
22. Government and Other Regulations. The Plan, and the grant and exercise
of the rights to purchase shares hereunder, and the Corporation's obligation
to sell and deliver shares upon the exercise of rights to purchase shares,
shall be subject to all applicable federal, state and foreign laws, rules and
regulations, and to such approvals by any regulatory or government agency as
may, in the opinion of counsel for the Corporation, be required. Any
amendments requiring stockholder approval shall take effect only subject to
such approval.
23. Applicable Law. The interpretation, performance and enforcement of this
Plan shall be governed by the laws of the State of California.
D-5
<PAGE>
LOGO
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Delaware Corporation Law provides for the indemnification of directors
and officers under certain conditions. The Bylaws of AMD permit
indemnification to the maximum extent permitted by Delaware law. In addition,
AMD is bound by agreements with certain of its directors and officers which
obligate it to indemnify such persons in various circumstances. Insofar as
indemnification for liabilities arising under the Securities Act of 1933, as
amended (the "Act"), may be permitted to directors, officers and controlling
persons of AMD pursuant to the foregoing provisions, or otherwise, AMD has
been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by AMD of expenses incurred
or paid by a director, officer or controlling person of AMD in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, AMD will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication
of such issue.
AMD has in effect a directors and officers liability insurance policy
indemnifying the directors and officers of AMD and the directors and officers
of AMD's subsidiaries within a specific limit for certain liabilities incurred
by them, including liabilities under the Act. AMD pays the entire premium of
this policy.
AMD's Certificate of Incorporation contains a provision which eliminates the
personal liability of directors of AMD for monetary damages for certain
breaches of fiduciary duty, as permitted by Section 102(b)(7) of the DGCL.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following exhibits are filed herewith or incorporated herein by
reference:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
2.1* Agreement and Plan of Merger, dated October 20, 1995, among Advanced
Micro Devices, Inc., AMD Merger Corporation and NexGen, Inc., as
amended December 11, 1995 (incorporated by reference to Annex A to
the Joint Proxy Statement/Prospectus included as part of this
Registration Statement)
5.1* Opinion of Bronson, Bronson & McKinnon as to the legality of the
Registrant's Common Stock being registered hereby
8.1* Tax Opinion of Bronson, Bronson & McKinnon
23.1* Consent of Bronson, Bronson & McKinnon with respect to the use of its
opinion as to the legality of securities being registered (contained
in Exhibit 5.1)
23.2* Consent of Bronson, Bronson & McKinnon with respect to the use of its
opinion as to certain tax matters (contained in Exhibit 8.1)
23.3* Consent of Ernst & Young LLP, independent auditors
23.4* Consent of Price Waterhouse LLP, independent accountants
23.5 Consent of Donaldson, Lufkin & Jenrette Securities Corporation
23.6 Consent of PaineWebber Incorporated
24* Power of attorney (included on page II-4)
99.1* Form of 1995 Stock Plan of NexGen, Inc. As Proposed to be Amended
99.2 Form of Proxy to be used in soliciting stockholders of Advanced Micro
Devices, Inc.
99.3 Form of Proxy to be used in soliciting stockholders of NexGen, Inc.
</TABLE>
* Previously Filed
(b) Financial Statement Schedules
II-1
<PAGE>
AMD
The following schedule is incorporated by reference to item 14 of AMD's
Annual Report on Form 10-K for the fiscal year ended December 25, 1994:
VIIIValuation and qualifying accounts.
All other Financial Statement Schedules have been omitted since the required
information is not present or is not present in amounts sufficient to require
submission of the schedules, or because the information required is included
in the consolidated financial statements or notes thereto.
NEXGEN
Schedules have been omitted because they are not applicable or not required
or because the information is included elsewhere in the consolidated financial
statements or the notes thereto.
(c) Reports, Opinions and Appraisals
Opinions of Donaldson, Lufkin & Jenrette Securities Corporation and
PaineWebber Incorporated are attached as Annexes B and C to the Joint Proxy
Statement/Prospectus.
ITEM 22. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(c) The undersigned Registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of the Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c),
the issuer undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
II-2
<PAGE>
(d) The Registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (c) immediately preceding or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Securities Act of 1933 and is used
in connection with an offering of securities subject to Rule 415, will be
filed as a part of an amendment to the Registration Statement and will not be
used until such amendment is effective, and that, for purposes of determining
any liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(e) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that such a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
(f) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through
the date of responding to the request.
(g) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this pre-effective amendment to registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Sunnyvale and the State of California, on December
12, 1995.
ADVANCED MICRO DEVICES, INC.
By: /s/ Marvin D. Burkett
---------------------------------
Marvin D. Burkett
Senior Vice President
Chief Financial and Administrative
Officer
and Treasurer
Pursuant to the requirements of the Securities Act of 1933, as amended, this
amendment to registration statement has been signed by the following persons in
the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ W.J. Sanders III* Chairman of the Board and Chief December 12, 1995
- ------------------------------- Executive Officer (Principal
(W.J. Sanders III) Executive Officer)
/s/ Anthony B. Holbrook* Vice Chairman of the Board December 12, 1995
- -------------------------------
(Anthony B. Holbrook)
/s/ Richard Previte* Director, President and Chief December 12, 1995
- ------------------------------- Operating Officer
(Richard Previte)
/s/ Friedrich Baur* Director December 12, 1995
- -------------------------------
(Friedrich Baur)
/s/ Charles M. Blalack* Director December 12, 1995
- -------------------------------
(Charles M. Blalack)
/s/ R. Gene Brown* Director December 12, 1995
- -------------------------------
(R. Gene Brown)
/s/ Joe L. Roby* Director December 12, 1995
- -------------------------------
(Joe L. Roby)
/s/ Leonard Silverman* Director December 12, 1995
- -------------------------------
(Leonard Silverman)
/s/ Marvin D. Burkett Senior Vice President, December 12, 1995
- ------------------------------- Chief Financial and
(Marvin D. Burkett) Administrative Officer
and Treasurer
(Principal Financial
Officer and Principal
Accounting Officer)
</TABLE>
* by: /s/ Marvin D. Burkett
-------------------------------
(Marvin D. Burkett)
Attorney-in-fact
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT PAGE
------- ------- ----
<C> <S> <C>
2.1* Agreement and Plan of Merger, dated October 20, 1995, among
Advanced Micro Devices, Inc., AMD Merger Corporation and
NexGen, Inc., as amended December 11, 1995 (incorporated by
reference to Annex A to the Joint Proxy Statement/Prospectus
included as part of this Registration Statement)
5.1* Opinion of Bronson, Bronson & McKinnon as to the legality of
the Registrant's Common Stock being registered hereby
8.1* Tax Opinion of Bronson, Bronson & McKinnon
23.1* Consent of Bronson, Bronson & McKinnon with respect to the use
of its opinion as to the legality of securities being
registered (contained in Exhibit 5.1)
23.2* Consent of Bronson, Bronson & McKinnon with respect to the use
of its opinion as to certain tax matters (contained in Exhibit
8.1)
23.3* Consent of Ernst & Young LLP, independent auditors
23.4* Consent of Price Waterhouse LLP, independent accountants
23.5 Consent of Donaldson, Lufkin & Jenrette Securities Corporation
23.6 Consent of PaineWebber Incorporated
24* Power of attorney (included on page II-4)
99.1* Form of 1995 Stock Plan of NexGen, Inc. As Proposed to be
Amended
99.2 Form of Proxy to be used in soliciting stockholders of Advanced
Micro Devices, Inc.
99.3 Form of Proxy to be used in soliciting stockholders of NexGen,
Inc.
</TABLE>
- --------
* Previously Filed
<PAGE>
EXHIBIT 23.5
CONSENT OF DONALDSON, LUFKIN & JENRETTE
We hereby consent to the inclusion of our opinion, dated December 14, 1995,
as Annex B to the Joint Proxy Statement/Prospectus Constituting a part of the
Registration Statement on Form S-4 (Registration No. 33-64911) filed by
Advanced Micro Devices, Inc. and to the references to us and our opinion under
the captions "Summary--Opinions of Financial Advisors". "The Merger--
Background of the Merger", The Merger--Reasons for the Merger--Recommendations
of the Boards of Directors", "The Merger--Opinions of Financial Advisors--
Opinion of Financial Advisor to AMD" in such Joint Proxy Statement/Prospectus.
In giving such consent, we do not hereby admit that we come within the
category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder.
Donaldson, Lufkin & Jenrette
Securities Corporation
Steven G. Puccinelli
By: _________________________________
Steven G. Puccinelli
Managing Director
New York, NY
12/12/95
<PAGE>
EXHIBIT 23.6
CONSENT OF PAINEWEBBER INCORPORATED
December 12, 1995
Board of Directors
NexGen, Inc.
1623 Buckeye Drive
Milpitas, California 95035-7243
Reference is made to the letter dated October 5, 1995 from PaineWebber
Incorporated to NexGen, Inc. ("NexGen") and our opinion dated December 14,
1995 to the Board of Directors of NexGen. We hereby consent to the reference
to us and our opinion in the Joint Proxy Statement/Prospectus forming a part
of a Registration Statement on Form S-4.
PaineWebber Incorporated
David M. Reed, Jr.
By: _________________________________
David M. Reed, Jr.
Managing Director
<PAGE>
EXHIBIT 99.2
LOGO
PROXY
ADVANCED MICRO DEVICES, INC.
SPECIAL MEETING OF STOCKHOLDERS--JANUARY 16, 1996
The undersigned appoints W.J. SANDERS III and MARVIN D. BURKETT and each of
them as proxies for the undersigned, with full power of substitution to
represent and vote all of the stock of the undersigned at the Special Meeting
of Stockholders of Advanced Micro Devices, Inc. to be held on January 16, 1996,
and at any adjournment thereof, on the following matters as described in the
Joint Proxy Statement/Prospectus accompanying the Notice of Meeting, receipt of
which is hereby acknowledged, and according to their or his discretion on all
other matters that may be properly presented for action at the meeting and at
any postponement or adjournment thereof. The undersigned may revoke this proxy
at any time prior to its exercise.
Unless otherwise specified, this proxy will be voted FOR the proposals set
forth below.
1. Proposal to approve and adopt an Agreement and Plan of Merger dated October
20, 1995, as amended, pursuant to which NexGen, Inc. will be merged with a
wholly-owned subsidiary of Advanced Micro Devices, Inc. or with Advanced
Micro Devices, Inc. as described in the Joint Proxy Statement/Prospectus.
FOR [_] AGAINST [_] ABSTAIN [_]
2. Proposal to approve an amendment to the Advanced Micro Devices, Inc. 1991
Stock Purchase Plan.
FOR [_] AGAINST [_] ABSTAIN [_]
<PAGE>
LOGO
Dated: _______________________, 199
____________________________________
____________________________________
____________________________________
Signature(s) of Stockholders
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, ad- ministrators and
trustees should so indicate when
signing.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Please mark, date and return this proxy card promptly in the enclosed postpaid
return envelope.
<PAGE>
- --------------------------------------------------------------------------------
NEXGEN, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR SPECIAL MEETING - JANUARY 16, 1996
The undersigned stockholder of NexGen, Inc., ("NexGen") acknowledges receipt of
the Notice of Special Meeting of Stockholders and Joint Proxy
Statement/Prospectus dated December 14, 1995 and the undersigned revokes all
prior proxies and appoints S. Atiq Raza and Anthony S. S. Chan, or each of
them, proxies for the undersigned to vote all shares of Common Stock of NexGen
which the undersigned would be entitled to vote with respect to the proposals
set forth below and in their or his discretion on all other matters that may
properly be presented for action at the Special Meeting of Stockholders to be
held at the Crown Sterling Suites, 901 East Calaveras Boulevard, Milpitas,
California, at 3:00 p.m. on January 16, 1996 and any postponement or
adjournment thereof, and instructs said proxies to vote as follows:
1. To approve and adopt the Agreement and Plan of Merger, dated as of October
20, 1995, as amended among Advanced Micro Devices, Inc. ("AMD"), AMD Merger
Corporation, a wholly owned subsidiary of AMD, and NexGen, and the
transactions contemplated thereby.
[_]FOR [_]AGAINST [_]ABSTAIN
2. To approve an amendment to the 1995 Stock Plan of NexGen Inc. as described
in the Joint Proxy Statement/Prospectus.
[_]FOR [_]AGAINST [_]ABSTAIN
(continued on reverse side)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(continued from reverse side)
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE SPECIFICATIONS MADE. IF NO
SPECIFICATIONS ARE MADE, THIS PROXY WILL BE VOTED FOR THE APPROVAL AND ADOPTION
OF THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY AND FOR ITEM
2.
NEXGEN INC. BOARD OF DIRECTORS PROXY
Special Meeting of Stockholders January 16, 1996
Dated this day of ______, 199
---------------------------------
Signature of Stockholder
---------------------------------
Signature of Stockholder
Please sign exactly as your name
or names appear hereon. When
signing as attorney, executor,
administrator, trustee or
guardian, please give full title
as such. If shares are held
jointly, each holder should
sign.
PLEASE MARK, SIGN, DATE AND MAIL THIS PROXY CARD
PROMPTLY, USING THE ENCLOSED ENVELOPE.
- --------------------------------------------------------------------------------
