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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the fiscal year ended December 26, 1999
OR
[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from to
Commission File Number 1-7882
ADVANCED MICRO DEVICES, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-1692300
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
One AMD Place,
Sunnyvale, California 94086
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (408) 732-2400
Securities registered pursuant to Section 12(b) of the Act:
(Name of each exchange
(Title of each class) on which registered)
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$.01 Par Value Common Stock New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [X]
Aggregate market value of the voting stock held by non-affiliates as of
February 28, 2000.
$5,725,334,007
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
152,006,873 shares as of February 28, 2000.
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DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the Annual Report to Stockholders for the fiscal year ended
December 26, 1999, are incorporated into Parts II and IV hereof.
(2) Portions of the Proxy Statement for the Annual Meeting of Stockholders to
be held on April 27, 2000, are incorporated into Part III hereof.
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AMD, Advanced Micro Devices, K86, AMD-K6, AMD Athlon and 3DNow! are either
our trademarks or our registered trademarks. Vantis is a trademark of Lattice
Semiconductor Corporation. Microsoft, Windows, Windows NT and MS-DOS are
either registered trademarks or trademarks of Microsoft Corporation. Alpha is
a trademark of Compaq Computer Corporation. Pentium is a registered trademark
of Intel Corporation. Other terms used to identify companies and products may
be trademarks of their respective owners.
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PART I
ITEM 1. BUSINESS
Cautionary Statement Regarding Forward-Looking Statements
The statements in this report that are forward-looking are based on current
expectations and beliefs and involve numerous risks and uncertainties that
could cause actual results to differ materially. The forward-looking
statements relate to, among other things, operating results; anticipated cash
flows; capital expenditures; adequacy of resources to fund operations and
capital investments; our ability to transition to new process technologies;
our ability to produce AMD Athlon(TM) microprocessors in the volume required
by customers on a timely basis; our ability, and the ability of third parties,
to provide timely infrastructure solutions (motherboards and chipsets) to
support AMD Athlon microprocessors; our ability to increase customer and
market acceptance of AMD Athlon microprocessors; our ability to maintain
average selling prices for AMD Athlon microprocessors; our ability to increase
manufacturing capacity to meet the demand for Flash memory products; the
effect of foreign currency hedging transactions; our new submicron integrated
circuit manufacturing and design facility located in Dresden, Germany (Dresden
Fab 30); and the Fujitsu AMD Semiconductor Limited (FASL) manufacturing
facilities. For a discussion of the factors that could cause actual results to
differ materially from the forward-looking statements, see "Financial
Condition" and "Risk Factors" and such other risks and uncertainties as set
forth below in this report or detailed in our other Securities and Exchange
Commission reports and filings.
General
Advanced Micro Devices, Inc. was incorporated under the laws of Delaware on
May 1, 1969. Our mailing address and executive offices are located at One AMD
Place, Sunnyvale, California 94086, and our telephone number is (408) 732-
2400. Unless otherwise indicated, references to "AMD," "we" and "us" in this
report include our subsidiaries.
We are a semiconductor manufacturer with manufacturing facilities in the
U.S., Europe and Asia and sales offices throughout the world. Our products
include a wide variety of industry-standard integrated circuits (ICs) which
are used in many diverse product applications such as telecommunications
equipment, data and network communications equipment, consumer electronics,
personal computers (PCs) and workstations.
For segment information with respect to sales, operating results and
identifiable assets, refer to the information set forth in Note 9 of the
Consolidated Financial Statements contained in our 1999 Annual Report to
Stockholders.
For a discussion of the risk factors related to our business operations,
please see the "Cautionary Statement Regarding Forward-Looking Statements" and
"Risk Factors" and "Financial Condition" sections set forth in Management's
Discussion and Analysis of Financial Condition and Results of Operations
contained in our 1999 Annual Report to Stockholders.
The IC Industry
The IC market has grown dramatically over the past ten years, driven
primarily by the demand for electronic business and consumer products. Today,
virtually all electronic products use ICs, including PCs and related
peripherals, voice and data communications and networking products, facsimile
and photocopy machines, home entertainment equipment, industrial control
equipment and automobiles.
The market for ICs can be divided into separate markets for digital and
analog devices. We participate primarily in the market for digital ICs. The
three types of digital ICs used in most electronic systems are:
. microprocessors, which are used for control and computing tasks;
. memory circuits, which are used to store data and programming
instructions; and
. logic circuits, which are employed to manage the interchange and
manipulation of digital signals within a system.
A discussion of the principal parts of the digital IC market in which we
participate follows.
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The Microprocessor Market
The microprocessor, an IC generally consisting of millions of transistors,
serves as the central processing unit, or brain, of a computer system. The
microprocessor is typically the most critical component to the performance and
efficiency of a PC. The microprocessor controls data flowing through the
electronic system and manipulates such data as specified by the hardware or
software which controls the system. In 1981, IBM introduced its first PC
containing a microprocessor based upon the x86 instruction set developed by
Intel Corporation and utilizing the Microsoft(R) Corporation MS-DOS(R)
operating system. As circuit design and very large scale integration process
technology have evolved, performance and functionality of each new generation
of x86 microprocessors have increased.
The x86 microprocessor market is characterized by short product life cycles,
intense price competition and rapid advances in product design and process
technology. Today, the greatest demand for microprocessors is from PC
manufacturers. In particular, PC manufacturers require microprocessors which
are Microsoft Windows(R) compatible and are based on the x86 instruction set.
Improvements in the performance characteristics of microprocessors and
decreases in production costs resulting from advances in process technology
have broadened the market for PCs and increased the demand for
microprocessors. The microprocessor market has been dominated by Intel for
many years.
The PC original equipment manufacturer (OEM) market is highly competitive.
Most PC suppliers have evolved from fully integrated manufacturers with
proprietary system designs to vendors focused on building brand recognition
and distribution capabilities. Almost all of these suppliers now rely on Intel
or on third-party manufacturers for the major subsystems of their PCs, such as
the motherboard. These suppliers are also increasingly outsourcing the design
and manufacture of complete systems. The third-party manufacturers of these
subsystems, 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 third-party manufacturers are also supplying
fully configured PC systems through alternative distribution channels.
Embedded processors are also an important part of the microprocessor market.
Embedded processors are general purpose devices used to carry out a single
application with limited user interface and programmability. A system designed
around an embedded processor usually cannot be programmed by an end user
because the system is preprogrammed to execute a specific task. Key markets
for embedded processors include telecommunications, networking, office
automation, storage, automotive applications and industrial control.
The Memory Market
Memory ICs store data and programs, and are characterized as either volatile
or non-volatile. Volatile devices lose their stored information after
electrical power is shut off, while non-volatile devices retain their stored
information. The three most significant categories of semiconductor memory are
(1) Dynamic Random Access Memory (DRAM) and (2) Static Random Access Memory
(SRAM), both of which are volatile memories, and (3) non-volatile memory,
which includes Read-Only Memory (ROM), Erasable Programmable Read-Only Memory
(EPROM), Electrically Erasable Electrically Programmable Read-Only Memory
(EEPROM) and Flash memory devices. DRAM provides large capacity main memory,
and SRAM provides specialized high-speed memory. We do not produce any DRAM
products, which are the largest part of the memory market, or SRAM products.
Flash and other non-volatile memory devices are used in applications in which
data must be retained after power is turned off. However, ROM cannot be
rewritten, EPROM requires ultraviolet light as part of an erasure step before
it can be rewritten, and EEPROM utilizes a larger, more expensive, memory
cell.
Several factors have contributed to an increasing demand for memory devices
in recent years, including the:
. expanding unit sales of PCs in the business and consumer markets;
. increasing use of cellular phones;
. increasing use of PCs to perform memory-intensive graphics and
multimedia functions;
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. volume of memory required to support faster microprocessors;
. proliferation of increasingly complex PC software; and
. increasing performance requirements of workstations, servers and
networking and telecommunications equipment.
Flash memory devices are being utilized for an expanding range of uses.
Flash memory devices have a size and cost advantage over EEPROM devices, and
the ability of Flash memory devices to be electrically rewritten to update
parameters or system software provides greater flexibility and ease of use
than other non-volatile memory devices, such as ROM or EPROM devices. Flash
memory devices can be used to provide storage of control programs and system-
critical data in communication devices such as cellular telephones and routers
(devices used to transfer data between local area networks). Another common
application for Flash memory product is in PC cards, which are inserted into
notebook and subnotebook computers or personal digital assistants to provide
added data storage.
The Logic Market
Logic devices consist of structurally interconnected groupings of simple
logical "AND" and logical "OR" functions, commonly described as "gates."
Typically, complex combinations of individual gates are required to implement
the specialized logic functions required for system applications. The greater
the number of gates on a logic device, the higher that logic device's density
and, in general, device cost (for a particular process and architecture).
Logic devices are generally grouped into five families of products (from
lowest density to highest density):
. standard logic devices;
. programmable logic devices (PLDs);
. conventional gate-arrays;
. standard cells; and
. full custom ICs.
Conventional gate-arrays, standard cells and full-custom ICs are often
referred to as application-specific ICs (ASICs).
Many manufacturers of electronic systems are striving to develop new and
increasingly complex products to rapidly address evolving market
opportunities. Achievement of this goal often precludes the use of standard
logic ICs and ASICs. Standard logic ICs generally perform simple functions and
are not customizable, limiting a manufacturer's ability to adequately tailor
an end-product system. Although ASICs can be manufactured to perform
customized functions, they generally involve relatively high initial design,
engineering and manufacturing costs, significant design risks, and may
increase an end-product's time to market. As a result, ASICs are generally
limited to high-volume products and products for which time to market may be
less critical.
Unlike ASICs and standard logic ICs, PLDs are standard products, purchased
by system manufacturers in an unprogrammed or blank state. Each system
manufacturer may then program the PLDs to perform a variety of specific logic
functions. Certain PLDs are reprogrammable. This means that the logic
configuration can be modified after the device is initially programmed, and,
sometimes, while the PLD remains in the end-product system. The programmable
and reprogrammable characteristics of PLDs reduce the risk of inventory
obsolescence for system designers and distributors. The risk is reduced
because systems designers and distributors can stock a large number of
standard PLDs that may be programmed for a variety of applications. In
addition, system designers may make last minute design changes, reduce time to
market and accelerate design cycle time. Compared to standard logic ICs and
ASICs, PLDs allow system designers to more quickly design and implement custom
logic. On June 15, 1999, we sold Vantis Corporation, our programmable logic
subsidiary, and we now function as a foundry and provide administrative
services to Vantis.
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Product Groups
In 1999, we participated in all three technology areas within the digital IC
market--microprocessors, memory circuits and logic circuits--through our
product groups--Computation Products Group (CPG), Memory Group, Communications
Group and our programmable logic subsidiary, Vantis Corporation. On June 15,
1999, we sold Vantis to Lattice Semiconductor Corporation.
Computation Products Group
CPG products ($1.7 billion, or 58 percent, of our 1999 net sales) include
microprocessors and core logic products, with the majority of CPG's net sales
being derived from Microsoft Windows compatible microprocessors, which are
used primarily in PCs.
In 1999, our most significant microprocessor product was the AMD-K6-2(R)
processor with 3DNow!(TM) technology, a sixth-generation microprocessor
product and a member of the K86(TM) microprocessor family. The K86
microprocessors are based on superscalar RISC architecture and are designed to
be compatible with operating system software such as Windows NT(R), Windows 98
and their predecessor operating systems, Linux, Netware and UNIX. The AMD-K6
microprocessor was designed to be competitive in performance to Intel's sixth-
generation microprocessor, the Pentium(R) II, which was designed by Intel
specifically for desktop PCs.
We commenced initial shipments of AMD Athlon(TM) microprocessors in June
1999 and began volume shipments in the second half of 1999. The AMD Athlon
processor is an x86-compatible, seventh-generation design featuring:
. a superpipelined, nine-issue superscalar microarchitecture optimized for
high clock frequency;
. a fully pipelined, superscalar floating point unit;
. high-performance backside L2 cache interface;
. enhanced 3DNow!(TM) technology with 24 additional instructions designed
to improve integer math calculations, data movements for Internet
streaming, and digital signal processor (DSP) communications; and
. a system bus which is a 200 MHz system interface based on the Alpha(TM)
EV6 bus protocol with support for scalable multiprocessing.
Sales of AMD Athlon processors are highly dependent in 2000 upon the
successful design, manufacture and delivery of processor modules by
subcontractors. Overall CPG sales growth in 2000 is dependent upon a
successful production ramp to .18 micron process technology and copper
interconnect technology, availability of chipsets and motherboards from third
party suppliers and expanding market acceptance of AMD Athlon microprocessors.
Our microprocessor products have in the past significantly impacted, and
will continue in 2000 to significantly impact, our overall revenues, profit
margins and operating results. We plan to continue to make significant capital
expenditures to support our microprocessor products both in the near and long
term. Our ability to increase microprocessor product revenues, and benefit
fully from the substantial financial investments and commitments that we have
made and continue to make related to microprocessors, depends upon the success
of AMD Athlon, AMD-K6 and future generations of K86 microprocessors. The
microprocessor market is characterized by short product life cycles and
migration to ever higher performance microprocessors. To compete successfully
against Intel in this market, we must transition to new process technologies
at a faster pace than before and offer higher performance microprocessors in
significantly greater volumes.
Intel has dominated the market for microprocessors used in PCs for many
years. Because of its dominant market position, Intel has historically set and
controlled x86 microprocessor standards and, thus, dictated the type of
product the market requires of Intel's competitors. In addition, Intel may
vary prices on its microprocessors and other products at will and thereby
affect the margins and profitability of its competitors due to its financial
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strength and dominant position. Given Intel's industry dominance and brand
strength, Intel's processor marketing and pricing can impact and have impacted
the average selling prices of AMD-K6 and AMD Athlon microprocessors, and
consequently, can impact and has impacted our overall margins. As an extension
of its dominant microprocessor market share, Intel also dominates the PC
platform. As a result, it is difficult for PC manufacturers to innovate and
differentiate their product offerings. We do not have the financial resources
to compete with Intel on such a large scale.
As Intel expanded its dominance over the entirety of the PC system platform,
many PC original equipment manufacturers (OEMs) reduced their system
development expenditures and now purchase microprocessors in conjunction with
core logic chipsets or in assembled motherboards from Intel. PC OEMs are
increasingly dependent on Intel, less innovative on their own and, to a large
extent, distributors of Intel technology. In marketing our microprocessors to
these OEMs and dealers, we depend upon companies other than Intel for the
design and manufacture of chipsets, motherboards, basic input/output system
(BIOS) software and other components. In recent years, many of these third-
party designers and manufacturers have lost significant market share to Intel.
In addition, these companies produce chipsets, motherboards, BIOS software and
other components to support each new generation of Intel's microprocessors
only if Intel makes information about its products available to them in time
to address market opportunities. Delay in the availability of such information
makes, and will continue to make, it increasingly difficult for these third
parties to retain or regain market share. To compete with Intel in this market
in the future, we intend to continue to form closer relationships with third-
party designers and manufacturers of chipsets, motherboards, BIOS software and
other components. Similarly, we intend to expand our chipset and system design
capabilities, and to offer OEMs licensed system designs incorporating our
processors and companion products. We cannot be certain, however, that our
efforts will be successful.
Embedded Processors. Embedded processors are general purpose devices, which
consist of an instruction control unit and an arithmetic and logic unit, and
are used to carry out a single application with limited user interface and
programmability. We also offer a line of C186, C188 and AMD-K6E processors for
use as embedded processors in hard disk drives. We offer an expanding range of
embedded processors based upon x86 microprocessor technology for both
communications as well as handheld computing applications. These embedded
processors are derivative of the microprocessors we sell in PCs.
Memory Group
Memory Group products ($773 million, or 27 percent, of our 1999 net sales)
include Flash memory devices and EPROMs.
Flash Memory Devices. Our Flash memory devices are used in cellular
telephones, networking equipment and other applications that require memory to
be non-volatile and rewritten. These Flash memory devices may be electrically
rewritten. This feature provides greater flexibility and ease of use than
EPROMs and other similar integrated circuits that cannot be electrically
rewritten. Flash memory devices have a size and cost advantage over EEPROM
devices. Communications companies use Flash memory devices in cellular
telephones and related equipment to enable users to add and modify frequently
called numbers and to allow manufacturers to preprogram firmware and other
information. In networking applications, Flash memory devices are used in
hubs, switches and routers to enable systems to store firmware and
reprogrammed Internet addresses and other routing information. Use of Flash
memory devices is proliferating into a variety of other applications, such as
set-top boxes and automotive control systems.
Competition in the market for Flash memory devices is increasing as existing
manufacturers introduce competitive products and industry-wide production
capacity increases, and as Intel continues to aggressively price its Flash
memory products. In 1999, almost all of our Flash memory devices were produced
in Aizu-Wakamatsu, Japan through Fujitsu AMD Semiconductor Limited (FASL), our
joint venture with Fujitsu Limited.
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EPROMs. EPROMs represent an older generation of erasable, programmable read-
only memory technology which is used primarily in the electronic equipment
industry. These devices are used in cellular telephones, wireless base
stations, telecommunication switching equipment, automotive applications, PC
hard disk drives, printer controllers, industrial machine controls and
numerous other types of electronic equipment to store firmware which controls
the equipment's operation. EPROMs are generally preferred over more expensive
Flash memory devices in applications where end users do not need to reprogram
the information stored on the IC. We believe the market for EPROMS, which is
significantly smaller than the market for Flash memory devices, will continue
to decline as EPROMs are replaced in various applications by Flash memory
devices.
Communications Group
Communications Group products ($298 million, or 10 percent, of our 1999 net
sales) include telecommunication and networking products. In October 1999, we
announced our intention to sell certain assets of the Communications Group.
Telecommunication Products. Our telecommunication products are used
primarily in public communications infrastructure systems, customer premise
equipment and cordless telephony applications. Specifically, the products are
used in infrastructure equipment such as central office switches, digital loop
carriers and digital subscriber loop access multiplexers (DSLAMS), and in
customer premise equipment such as wireless local loop systems, cable
telephony systems, private branch exchange (PBX) equipment and voice over
digital subscriber line (DSL) systems. Among our more significant products for
the communications market are our line card products. In modern telephone
communications systems, voice communications are generally transmitted between
the speaker and the central office switch in analog format, but are switched
and transmitted over longer distances in digital format. Our subscriber line
interface circuits (SLIC) for line cards connect the user's telephone wire to
the telephone company's digital switching equipment. Our SLAC(TM) line cards
are coder/decoders which convert analog voice signals to a digital format and
back. Our DSL products include a coder/decoder device and a modem device for
use in DSLAM applications. Our cordless telephony products include a baseband
controller for the 900 MHz narrow band digital cordless market.
Networking Products. Our networking products are used in the data
communication and networking industry to establish and manage connectivity.
The product portfolio encompasses the following local area network (LAN)
products:
. home networking controllers and physical layer products;
. Ethernet controllers supporting the enterprise and small business
networking areas;
. Ethernet physical layer and repeater products which are used in
enterprise and small business systems solutions; and
. Ethernet physical layer and switch products which are used in
enterprise, small business and telecommunication systems.
Vantis Corporation
On June 15, 1999, we completed the sale of our programmable logic
subsidiary, Vantis Corporation, to Lattice Semiconductor Corporation for
approximately $500 million in cash. We now function as a foundry and provide
administrative services to Vantis.
Through June 15, 1999, Vantis products ($87 million, or 3 percent, of our
1999 net sales) included both complex and simple high performance
complementary metal oxide semiconductor (CMOS) PLDs. We received service fees
of $43 million from Lattice in 1999.
Research and Development; Manufacturing Technology
Our expenses for research and development were $636 million in 1999, $567
million in 1998 and $468 million in 1997. These expenses represented 22
percent of net sales in 1999, 22 percent of net sales in 1998 and
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20 percent of net sales in 1997. Our research and development expenses are
charged to operations as they are incurred. Most of our research and
development personnel are integrated into the engineering staff.
Manufacturing technology is the key determinant in the improvement in most
semiconductor products. Each new generation of process technology has resulted
in products with higher speeds and greater performance produced at lower cost.
We continue to make significant infrastructure investments to enable us to
continue to achieve high volume, high reliability and low cost production
using leading edge process technology.
Our efforts concerning process technologies are focused in two major areas:
logic technology used by our microprocessors and embedded processors, and non-
volatile memory technology used by Flash memory products. Our goals are to
improve product performance, increase manufacturing volumes and reduce unit
costs.
In order to remain competitive, we must continue to make substantial
investments in improving our process technologies. In particular, we have made
and continue to make significant research and development investments in the
technologies and equipment used in the fabrication of our microprocessor
products and in the fabrication of Flash memory devices. If we are not
successful in our microprocessor and Flash memory businesses, we will be
unable to recover such investments, which would have a material adverse effect
on our business. In addition, if we are unable to remain competitive with
respect to process technology we will be materially and adversely affected.
Competition
The IC industry is intensely competitive and, historically, has experienced
rapid technological advances in product and system technologies. After a
product is introduced, prices normally decrease over time as production
efficiency and competition increase, and as successive generations of products
are developed and introduced for sale. Technological advances in the industry
result in frequent product introductions, regular price reductions, short
product life cycles and increased product capabilities that may result in
significant performance improvements. Competition in the sale of ICs is based
on:
. performance;
. product quality and reliability;
. price;
. adherence to industry standards;
. software and hardware compatibility;
. marketing and distribution capability;
. brand recognition;
. financial strength; and
. ability to deliver in large volumes on a timely basis.
In each market in which we participate, we face competition from different
groups of companies. With respect to microprocessors, Intel holds a dominant
market position. With respect to the Memory Group, our principal competitors
are Intel, Sharp, Atmel and ST Microelectronics. We also compete to a lesser
degree with Fujitsu, our joint venture partner in FASL. With respect to the
Communications Group product lines, our principal competitors are Broadcom
Corp., ST Microelectronics, Texas Instruments Incorporated, Infineon
Corporation, NEC Corporation, LM Ericsson, Alcatel, National Semiconductor
Corporation, 3Com Corporation, Intel Corporation, Lucent Technologies Inc.,
Conexant Systems, Inc. and Motorola, Inc.
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Manufacturing Facilities
Our current IC manufacturing facilities are described in the chart set forth
below:
<TABLE>
<CAPTION>
Production
Technology Approximate
Wafer Size (in Clean Room
Facility Location (Diameter in Inches) Microns) (Square Footage)
----------------- -------------------- ----------- ----------------
<S> <C> <C> <C>
Austin, Texas
Fab 25................... 8 0.18 120,000
Fab 14/15(1)............. 6 0.5 42,000
Aizu-Wakamatsu, Japan
FASL(2).................. 8 0.35 70,000
FASL II(2)............... 8 0.25 & 0.35 91,000
Sunnyvale, California
SDC...................... 8 0.18 & 0.25 42,500
</TABLE>
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(1) We consolidated our Fab 14 and Fab 15 operations in 1999.
(2) We own 49.992 percent of FASL. Fujitsu owns 50.008 percent of FASL.
AMD Saxony Manufacturing GmbH, an indirect wholly owned German subsidiary of
AMD, has constructed and is installing equipment in Dresden Fab 30, a 900,000-
square-foot submicron integrated circuit manufacturing and design facility
located in Dresden, in the State of Saxony, Germany. The building construction
of FASL II, a second Flash manufacturing facility, was completed, equipment
was installed and production was initiated in 1999. We also have foundry
arrangements for the production of our products by third parties.
Our current assembly and test facilities are described in the chart set
forth below:
<TABLE>
<CAPTION>
Approximate
Assembly & Test
Facility Location Square Footage Activity
----------------- --------------- ---------------
<S> <C> <C>
Penang, Malaysia............................. 377,000 Assembly & Test
Bangkok, Thailand............................ 78,000 Assembly & Test
Singapore.................................... 162,000 Test
Suzhou, China................................ 30,250 Assembly & Test
</TABLE>
We began operations in our new assembly and test facility in Suzhou during
the first quarter of 1999. Foreign manufacturing and construction of foreign
facilities entails political and economic risks, including political
instability, expropriation, currency controls and fluctuations, changes in
freight and interest rates, and loss or modification of exemptions for taxes
and tariffs. For example, if we were unable to assemble and test our products
abroad, or if air transportation between the United States and our overseas
facilities were disrupted, there could be a material adverse effect on our
business.
Certain Material Agreements. Set forth below are descriptions of certain
material contractual relationships we have relating to FASL, Dresden Fab 30
and Motorola.
FASL. In 1993, we formed FASL, a joint venture with Fujitsu, for the
development and manufacture of Flash memory devices. FASL operates two
advanced IC manufacturing facilities in Aizu-Wakamatsu, Japan, for the
production of Flash memory devices. FASL began volume production in the first
quarter of 1995, and utilizes eight-inch wafer processing technologies capable
of producing products with geometrics of .35 micron or smaller. FASL II began
volume production in 1999, and utilizes eight-inch wafer processing
technologies.
We expect FASL II, including equipment, to cost approximately $1 billion
(denominated in yen) when fully equipped. Capital expenditures for FASL II
construction to date have been funded by cash generated from FASL operations
and local borrowings by FASL. To the extent that FASL is unable to secure the
necessary funds for FASL II, we may be required to contribute cash or
guarantee third-party loans in proportion to our 49.992 percent interest in
FASL. As of December 26, 1999, we had loan guarantees of $2 million
(denominated in yen)
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outstanding with respect to these loans. The planned FASL II costs are
denominated in yen and are, therefore, subject to change due to foreign
exchange rate fluctuations. As of December 26, 1999, the exchange rate was
approximately 103.51 yen to one U.S. dollar (which we used to calculate the
amounts denominated in yen).
In connection with FASL, AMD and Fujitsu have entered into various joint
development, cross-license and investment arrangements. Accordingly, the
companies are providing their product designs and process and manufacturing
technologies to FASL. In addition, both companies are collaborating in
developing manufacturing processes and designing Flash memory devices for
FASL. The right of each company to use the licensed intellectual property of
the other with respect to certain products is limited both in scope and
geographic areas. For instance, AMD and Fujitsu have cross-licensed their
respective intellectual property to produce stand-alone Flash memory devices
with geometrics of 0.5 micron or smaller within the joint venture.
Furthermore, our ability to sell Flash memory products incorporating Fujitsu
intellectual property, whether or not produced by FASL, is also limited in
certain territories, including Japan and Asia (excluding Taiwan). Fujitsu is
likewise limited in its ability to sell Flash memory devices incorporating our
intellectual property, whether or not produced by FASL, in certain territories
including the United States and Taiwan.
Dresden Fab 30. AMD Saxony has constructed and is installing equipment in
Dresden Fab 30, a 900,000-square-foot submicron integrated circuit
manufacturing and design facility located in Dresden, in the State of Saxony,
Germany. AMD, the Federal Republic of Germany, the State of Saxony and a
consortium of banks are supporting the project. We currently estimate
construction and facilitization costs of Dresden Fab 30 to be approximately
$1.9 billion (denominated in deutsche marks) when the facility is fully
equipped. In March 1997, AMD Saxony entered into a loan agreement and other
related agreements (the Dresden Loan Agreements) with a consortium of banks
led by Dresdner Bank AG. The Dresden Loan Agreements provide for the funding
of the construction and facilitization of Dresden Fab 30. The funding consists
of:
. equity, subordinated loans and loan guarantees from AMD;
. loans from a consortium of banks; and
. grants, subsidies and loan guarantees from the Federal Republic of
Germany and the State of Saxony.
The Dresden Loan Agreements, which were amended in February 1998 to reflect
planned upgrades in wafer production technology as well as the decline in the
deutsche mark relative to the U.S. dollar, require that we partially fund
Dresden Fab 30 project costs in the form of subordinated loans to, or equity
investments in, AMD Saxony. In accordance with the terms of the Dresden Loan
Agreements, we have invested $421 million as of December 26, 1999 in the form
of subordinated loans and equity in AMD Saxony (denominated in both deutsche
marks and U.S. dollars).
The Dresden Loan Agreements were amended again in June 1999 to remove a
requirement that we sell at least $200 million of our stock by June 30, 1999
in order to fund a $70 million loan to AMD Saxony. In lieu of the stock
offering, we funded the $70 million loan to AMD Saxony with proceeds from the
sale of Vantis.
In addition to support from AMD, the consortium of banks led by Dresdner
Bank AG has made available $850 million in loans (denominated in deutsche
marks) to AMD Saxony to help fund Dresden Fab 30 project costs. AMD Saxony had
$270 million of such loans outstanding as of December 26, 1999.
Finally, the Federal Republic of Germany and the State of Saxony are
supporting the Dresden Fab 30 project, in accordance with the Dresden Loan
Agreements, in the form of:
. guarantees of 65 percent of AMD Saxony bank debt up to a maximum amount
of $850 million;
. capital investment grants and allowances totaling $287 million; and
. interest subsidies totaling $156 million.
Of these amounts (which are all denominated in deutsche marks), AMD Saxony
has received approximately $275 million in capital investment grants and $23
million in interest subsidies as of December 26, 1999. The
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grants and subsidies are subject to conditions, including meeting specified
levels of employment in December 2001 and maintaining those levels until June
2007. Noncompliance with the conditions of the grants and subsidies could
result in the forfeiture of all or a portion of the future amounts to be
received as well as the repayment of all or a portion of amounts received to
date. As of December 26, 1999, we were in compliance with all of the
conditions of the grants and subsidies.
The Dresden Loan Agreements also require that we:
. provide interim funding to AMD Saxony if either the remaining capital
investment allowances or the remaining interest subsidies are delayed,
in which event the funding would be repaid to AMD as AMD Saxony receives
the grants or subsidies from the state of Saxony;
. fund shortfalls in government subsidies resulting from any default under
the subsidy agreements caused by AMD Saxony or its affiliates;
. guarantee a portion of AMD Saxony's obligations under the Dresden Loan
Agreements up to a maximum of $112 million (denominated in deutsche
marks) until Dresden Fab 30 has been completed;
. fund certain contingent obligations, including obligations to fund
project cost overruns, if any; and
. make funds available to AMD Saxony, after completion of Dresden Fab 30,
up to approximately $75 million (denominated in deutsche marks) if AMD
Saxony does not meet its fixed charge coverage ratio covenant.
Because the amounts under the Dresden Loan Agreements are denominated in
deutsche marks, the dollar amounts set forth herein are subject to change
based on applicable conversion rates. At the end of 1999 the exchange rate was
approximately 1.94 deutsche marks to one U.S. dollar (which we used to
calculate the amounts denominated in deutsche marks). We entered into foreign
currency hedging transactions for Dresden Fab 30 in 1997, 1998 and 1999 and
anticipate entering into additional such foreign currency hedging transactions
in 2000 and in future years.
Motorola. In 1998, we entered into an alliance with Motorola for the
development of Flash memory and logic technology. The alliance includes a
seven-year technology development and license agreement, which was amended on
January 21, 2000 to include certain additional technology, and a patent cross-
license agreement. The agreements provide that we will co-develop with
Motorola future generation logic process and embedded Flash technologies. In
addition, we will receive certain licenses to Motorola's semiconductor logic
process technology, including copper interconnect technology, which may be
subject to variable royalty rates. In exchange, we will develop and license to
Motorola a Flash module design to be used in Motorola's future embedded Flash
products. Motorola will have additional rights, subject to certain conditions,
to make stand-alone Flash devices, and to make and sell certain data
networking devices. The rights to data networking devices may be subject to
variable royalty payment provisions.
Marketing and Sales
Our products are marketed and sold under the AMD trademark. We employ a
direct sales force through our principal facilities in Sunnyvale, California,
and field sales offices throughout the United States and abroad (primarily
Europe and Asia Pacific). We also sell our products through third-party
distributors and independent representatives in both domestic and
international markets pursuant to nonexclusive agreements. The distributors
also sell products manufactured by our competitors, including those products
for which we are an alternate source. One of our OEMs, Compaq Computer
Corporation, accounted for approximately 13 percent of our 1999 net sales. No
other single distributor or OEM customer accounted for 10 percent or more of
our net sales in 1999.
Distributors typically maintain an inventory of our products. In most
instances, our agreements with distributors protect their inventory of our
products against price reductions, as well as products that are slow moving or
have been discontinued. These agreements, which may be canceled by either
party on a specified
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notice, generally allow for the return of our products if the agreement with
the distributor is terminated. The market for our products is generally
characterized by, among other things, severe price competition. The price
protection and return rights we offer to our distributors could materially and
adversely affect us if there is an unexpected significant decline in the price
of our products.
Our international sales operations entail political and economic risks,
including expropriation, currency controls, exchange rate fluctuations,
changes in freight rates and changes in rates and exemptions for taxes and
tariffs.
Raw Materials
Certain raw materials we use in the manufacture of our products are
available from a limited number of suppliers. For example, a few foreign
companies principally supply several types of the IC packages purchased by us,
as well as by the majority of other companies in the semiconductor industry.
Interruption of supply, increased demand in the industry or currency
fluctuations could cause shortages in various essential materials. We would
have to reduce our manufacturing operations if we were unable to procure
certain of these materials. This reduction in our manufacturing operations
could have a material adverse effect on our business. To date, we have not
experienced significant difficulty in obtaining the raw materials required for
our manufacturing operations.
Environmental Regulations
We could possibly be subject to fines, suspension of production, alteration
of our manufacturing processes or cessation of our operations if we fail to
comply with present or future governmental regulations related to the use,
storage, handling, discharge or disposal of toxic, volatile or otherwise
hazardous chemicals used in our manufacturing processes. Such regulations
could require us to acquire expensive remediation equipment or to incur other
expenses to comply with environmental regulations. Our failure to control the
use, disposal or storage of, or adequately restrict the discharge of,
hazardous substances could subject us to future liabilities and could have a
material adverse effect on our business.
Intellectual Property and Licensing
We have been granted over 2,500 United States patents, and have several
thousand patent applications pending in the United States. In certain cases,
we have filed corresponding applications in foreign jurisdictions. We expect
to file future patent applications in both the United States and abroad on
significant inventions as we deem appropriate.
In January 1995, we reached an agreement with Intel to settle all previously
outstanding legal disputes between the two companies. As part of the
settlement, in December 1995, we signed a five-year, comprehensive cross-
license agreement with Intel which expires on December 31, 2000. The agreement
provides that after December 20, 1999, the parties will negotiate in good
faith a patent cross-license agreement to be effective on January 1, 2001. The
existing cross-license agreement gives AMD and Intel the right to use each
others' patents and certain copyrights, including copyrights to the x86
instruction sets but excluding other microprocessor microcode copyrights. The
cross-license is royalty-bearing for our products that use certain Intel
technologies. We are required to pay Intel minimum non-refundable royalties
during the years 1997 through 2000.
In addition, we have entered into numerous cross-licensing and technology
exchange agreements with other companies under which we both transfer and
receive technology and intellectual property rights. Although we attempt to
protect our intellectual property rights through patents, copyrights, trade
secrets and other measures, we cannot give any assurance that we will be able
to protect our technology or other intellectual property adequately or that
competitors will not be able to develop similar technology independently. We
cannot give any assurance that any patent applications that we may file will
be issued or that foreign intellectual property laws will protect our
intellectual property rights. We cannot give any assurance that any patent
licensed by or issued
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to us will not be challenged, invalidated or circumvented, or that the rights
granted thereunder will provide competitive advantages to us. Furthermore, we
cannot give any assurance that others will not independently develop similar
products, duplicate our products or design around our patents and other
rights.
From time to time, we have been notified that we may be infringing
intellectual property rights of others. If any claims are asserted against us,
we may seek to obtain a license under the third party's intellectual property
rights. We could decide, in the alternative, to resort to litigation to
challenge these claims. These challenges could be extremely expensive and
time-consuming and could materially and adversely affect our business. We
cannot give any assurance that all necessary licenses can be obtained on
satisfactory terms, or that litigation may always be avoided or favorably
concluded.
Backlog
We manufacture and market standard lines of products. Consequently, a
significant portion of our sales are made from inventory on a current basis.
Sales are made primarily pursuant to purchase orders for current delivery, or
agreements covering purchases over a period of time, which are frequently
subject to revision and cancellation without penalty. Generally, in light of
current industry practice and experience, we do not believe that such
agreements provide meaningful backlog figures or are necessarily indicative of
actual sales for any succeeding period.
Employees
On January 30, 2000, we employed approximately 13,387 employees, none of
whom are represented by collective bargaining arrangements. We believe that
our relationship with our employees is generally good.
Executive Officers of the Registrant
W. J. Sanders III--Mr. Sanders, 63, is Chairman of the Board and Chief
Executive Officer of Advanced Micro Devices, Inc. Mr. Sanders co-founded AMD
in 1969.
Benjamin M. Anixter--Mr. Anixter, 62, is Vice President, External Affairs of
Advanced Micro Devices, Inc., and has been since 1987. Mr. Anixter became a
corporate officer in April of 1999. He has been with AMD since 1971.
Francis P. Barton--Mr. Barton, 53, is Senior Vice President and Chief
Financial Officer of Advanced Micro Devices, Inc. Mr. Barton joined AMD in
September 1998. Before joining AMD, he was Chief Financial Officer for Amdahl
Corporation, where he worked for two years. Before that, Mr. Barton spent 22
years in various financial management positions at Digital Equipment
Corporation, including Vice President, Finance of the Personal Computer
division.
Eugene D. Conner--Mr. Conner, 56, is Executive Vice President, Strategic
Relations of Advanced Micro Devices, Inc. From 1997 to 1999, Mr. Conner served
as Executive Vice President, Operations and as a Member of the Office of the
CEO. Mr. Conner was elected an executive officer in 1981. Mr. Conner joined
AMD in 1969.
Robert R. Herb--Mr. Herb, 38, is Senior Vice President, Chief Sales and
Marketing Officer of Advanced Micro Devices, Inc. In 1998, Mr. Herb became an
officer of AMD and was promoted to Senior Vice President and Co-Chief
Marketing Officer. Before his promotion, Mr. Herb served as the Vice President
of Group Strategic Marketing for the Computation Products Group. Before that,
he was a director of Marketing for the Personal Computer Products Division.
Thomas M. McCoy--Mr. McCoy, 49, is Senior Vice President, General Counsel,
Secretary and Year 2000 Compliance Officer of Advanced Micro Devices, Inc. He
held the office of Vice President, General Counsel and Secretary from 1995 to
1998. Before his appointment as Vice President, General Counsel and Secretary,
Mr. McCoy was with the law firm of O'Melveny and Myers where he practiced law,
first as an associate and then as a partner, from 1977 to 1995.
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Richard Previte--Mr. Previte, 65, is Vice Chairman of Advanced Micro
Devices, Inc. Mr. Previte was President, Co-Chief Operating Officer from
October 1998 to April 1999; President from 1990 to October 1998; Executive
Vice President and Chief Operating Officer from 1989 to 1999; Chief Financial
Officer and Treasurer from 1969 to 1989; and Chief Administrative Officer and
Secretary from 1986 to 1989.
Hector de J. Ruiz--Dr. Ruiz, 54, is President and Chief Operating Officer of
Advanced Micro Devices, Inc. Dr. Ruiz joined AMD in January 2000. Before
joining AMD, Dr. Ruiz was President of Motorola Inc.'s Semiconductor Products
Sector. Dr. Ruiz held various executive positions with Motorola since 1977.
William T. Siegle--Dr. Siegle, 61, is Senior Vice President, Technology and
Manufacturing Operations, Chief Scientist of Advanced Micro Devices, Inc. Dr.
Siegle was Group Vice President, Technology Development Group and Chief
Scientist from 1997 until 1998. Before his appointment as Group Vice
President, Dr. Siegle served as Vice President, Integrated Technology
Department and Chief Scientist since 1990.
Stanley Winvick--Mr. Winvick, 60, is Senior Vice President, Human Resources
of Advanced Micro Devices, Inc. Before his appointment as Senior Vice
President in 1991, Mr. Winvick served as Vice President, Human Resources since
1980.
Stephen J. Zelencik--Mr. Zelencik, 65, is Senior Vice President, Market
Development of Advanced Micro Devices, Inc. Before his appointment as Senior
Vice President, Market Development in 1999, Mr. Zelencik served as Senior Vice
President and Co-Chief Marketing Officer. From 1979 until 1998, Mr. Zelencik
was Senior Vice President and Chief Marketing Executive.
ITEM 2. PROPERTIES
Our principal engineering, manufacturing, warehouse and administrative
facilities comprise approximately 4.0 million square feet and are located in
Sunnyvale, California; Austin, Texas; and Dresden, Germany. Over 3.1 million
square feet of this space is in buildings we own.
We lease property containing two buildings with an aggregate of
approximately 360,000 square feet, located on 45.6 acres of land in Sunnyvale,
California (One AMD Place). The lease term ends in December 2018. In 1993, we
entered into a lease agreement for approximately 175,000 square feet located
adjacent to One AMD Place (known as AMD Square) to be used by the product
groups as engineering offices and laboratory facilities.
We also own or lease facilities containing approximately 1.2 million square
feet for our operations in Malaysia, Thailand, Singapore and China. We lease
approximately 15 acres of land in Suzhou, China for our assembly and test
facility. In 1996, we acquired approximately 103 acres of land in Dresden,
Germany for Dresden Fab 30. Dresden Fab 30 is encumbered by a lien securing
borrowings of AMD Saxony. Fab 25, our fabrication facility in Austin, Texas,
is encumbered by a lien securing our $400 million of 11% Senior Secured Notes
due 2003.
We lease 22 sales offices in North America, 11 sales offices in Asia
Pacific, ten sales offices in Europe and one sales office in South America for
our direct sales force. These offices are located in cities in major
electronics markets where concentrations of our customers are located.
Leases covering our facilities expire over terms of generally one to 20
years. We currently do not anticipate significant difficulty in either
retaining occupancy of any of our facilities through lease renewals prior to
expiration or through month-to-month occupancy, or replacing them with
equivalent facilities.
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ITEM 3. LEGAL PROCEEDINGS
1. Environmental Matters. Since 1981, we have discovered, investigated and
begun remediation of three sites where releases from underground chemical
tanks at our 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 we no longer use) has been
identified as a probable carcinogen.
In 1991, we received four Final Site Clean-up Requirements Orders from the
California Regional Water Quality Control Board, San Francisco Bay Region
relating to the three sites. One of the orders named us as well as TRW
Microwave, Inc. and Philips Semiconductors Corporation. In January 1999, we
entered into a settlement agreement with Philips whereby Philips will assume
costs allocated to us under this order, although we would be responsible for
these costs in the event that Philips does not fulfill its obligations under
the settlement agreement. Another of the orders named us as well as National
Semiconductor Corporation.
The three sites in Santa Clara County are on the National Priorities List
(Superfund). If we fail to satisfy federal compliance requirements or
inadequately perform the compliance measures, the government (1) can bring an
action to enforce compliance or (2) 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. The
statute of limitations has been tolled on the claims of landowners adjacent to
the Santa Clara County Superfund sites for causes of action such as
negligence, nuisance and trespass.
We have computed and recorded the estimated environmental liability in
accordance with applicable accounting rules and have not recorded any
potential insurance recoveries in determining the estimated costs of the
cleanup. The amount of environmental charges to earnings has not been material
during any of the last three fiscal years. We believe that the potential
liability, if any, in excess of amounts already accrued with respect to the
foregoing environmental matters will not have a material adverse effect on our
business.
We received a notice dated October 14, 1998 from the Environmental
Protection Agency (EPA) indicating that the EPA has determined AMD to be a
potentially responsible party that arranged for disposal of hazardous
substances at a site located in Santa Barbara County, California. We are
currently in settlement discussions with the EPA and believe that any
settlement will not have a material adverse effect on our financial condition
or results of operations.
2. Securities Class Action Litigation. Between March 10, 1999 and April 22,
1999, AMD and certain individual officers of AMD were named as defendants in a
number of lawsuits that have been consolidated under Ellis Investment Co.,
Ltd., et al v. Advanced Micro Devices, Inc. et al. (Case No. C-99-01102-BZ,
N.D. Cal.). The class action complaints allege various violations of Section
10(b) of the Securities Exchange Act and Rule 10b-5 promulgated thereunder.
Most of the complaints purportedly were filed on behalf of all persons, other
than the defendants, who purchased or otherwise acquired common stock of AMD
during the period from October 6, 1998 to March 8, 1999. Two of the complaints
allege a class period from July 13, 1998 to March 9, 1999. All of the
complaints allege that materially misleading statements and/or material
omissions were made by AMD and certain individual officers of AMD concerning
design and production problems relating to high-speed versions of AMD-K6-2 and
AMD-K6-III microprocessors. Based upon information presently known to
management, we do not believe that the ultimate resolution of these lawsuits
will have a material adverse effect on our business.
3. Other Matters. We are a defendant or plaintiff in various other actions
which arose in the normal course of business. In the opinion of management,
the ultimate disposition of these matters will not have a material adverse
effect on our business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our common stock (symbol AMD) is listed on the New York Stock Exchange. The
information regarding market price range, dividend information and number of
holders of our common stock appearing under the captions "Supplementary
Financial Data" and "Financial Summary" on pages 45 and 46 of our 1999 Annual
Report to Stockholders is incorporated herein by reference.
During 1999, we did not make any sales of our equity securities which were
not registered under the Securities Act of 1933, as amended.
ITEM 6. SELECTED FINANCIAL DATA
The information regarding selected financial data for the fiscal years 1995
through 1999, under the caption "Financial Summary" on page 46 of our 1999
Annual Report to Stockholders is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information appearing under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" on pages 6 through
22 of our 1999 Annual Report to Stockholders is incorporated herein by
reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The information appearing under the caption "Quantitative and Qualitative
Disclosure about Market Risk" on pages 12 through 14 of our 1999 Annual Report
to Stockholders is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our consolidated financial statements at December 26, 1999 and December 27,
1998 and for each of the three years in the period ended December 26, 1999,
and the report of independent auditors thereon, and our unaudited quarterly
financial data for the two-year period ended December 26, 1999, appearing on
pages 23 through 46 of our 1999 Annual Report to Stockholders are incorporated
herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information under the captions "Item 1--Election of Directors" and
"Section 16(a) Beneficial Ownership Reporting Compliance" in our Proxy
Statement for our Annual Meeting of Stockholders to be held on April 27, 2000
(2000 Proxy Statement) is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information under the captions "Directors' Compensation and Benefits,"
"Committees and Meetings of the Board of Directors," "Executive Compensation,"
"Employment Agreements" and "Change in Control Arrangements" in our 2000 Proxy
Statement is incorporated herein by reference.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information under the captions "Principal Stockholders" and "Security
Ownership of Directors and Executive Officers" in our 2000 Proxy Statement is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information under the caption "Certain Relationships and Related
Transactions" in our 2000 Proxy Statement is incorporated herein by reference.
With the exception of the information specifically incorporated by reference
in Part III of this Annual Report on Form 10-K from our 2000 Proxy Statement,
our 2000 Proxy Statement shall not be deemed to be filed as part of this
report. Without limiting the foregoing, the information under the captions
"Board Compensation Committee Report on Executive Compensation" and
"Performance Graphs" in our 2000 Proxy Statement is not incorporated by
reference in this Annual Report on Form 10-K.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)
1. Financial Statements
The financial statements listed in the accompanying Index to Consolidated
Financial Statements and Financial Statement Schedule covered by the Report of
Independent Auditors are filed or incorporated by reference as part of this
Annual Report on Form 10-K. The following is a list of such financial
statements:
<TABLE>
<CAPTION>
Page References
-----------------
1999 Annual
Form Report to
10-K Stockholders
---- ------------
<S> <C> <C>
Report of Ernst & Young LLP, Independent Auditors......... -- 44
Consolidated Statements of Operations for the three years
in the period ended December 26, 1999.................... -- 23
Consolidated Balance Sheets at December 26, 1999 and
December 27, 1998........................................ -- 24
Consolidated Statements of Stockholders' Equity for the
three years in the period ended December 26, 1999........ -- 25
Consolidated Statements of Cash Flows for the three years
in the period ended December 26, 1999.................... -- 26
Notes to Consolidated Financial Statements................ -- 27-43
</TABLE>
2. Financial Statement Schedule
The financial statement schedule listed below is filed as part of this
Annual Report on Form 10-K.
<TABLE>
<CAPTION>
Page References
-----------------
1999 Annual
Form Report to
10-K Stockholders
---- ------------
<S> <C> <C>
Schedule for the three years in the period ended
December 26, 1999:
Schedule II Valuation and Qualifying Accounts......... F-3 --
</TABLE>
All other schedules have been omitted because 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. With the exception of the
information specifically incorporated by reference into Parts II and IV of
this Annual Report on Form 10-K, the 1999 Annual Report to Stockholders is not
to be deemed filed as part of this report.
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3. Exhibits
The exhibits listed in the accompanying Index to Exhibits are filed as part
of, or incorporated by reference into, this Annual Report on Form 10-K. The
following is a list of such Exhibits:
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibits
------- -----------------------
<C> <S>
2.1 Agreement and Plan of Merger dated October 20, 1995, between AMD
and NexGen, Inc., filed as Exhibit 2 to AMD's Quarterly Report for
the period ended October 1, 1995, and as amended as Exhibit 2.1 to
AMD's Current Report on Form 8-K dated January 17, 1996, is hereby
incorporated by reference.
2.2 Amendment No. 2 to the Agreement and Plan of Merger, dated January
11, 1996, between AMD and NexGen, Inc., filed as Exhibit 2.2 to
AMD's Current Report on Form 8-K dated January 17, 1996, is hereby
incorporated by reference.
2.3 Stock Purchase Agreement dated as of April 21, 1999, by and
between Lattice Semiconductor and AMD, filed as Exhibit 2.3 to
AMD's Current Report on Form 8-K dated April 26, 1999, is hereby
incorporated by reference.
2.3(a) First Amendment to Stock Purchase Agreement, dated as of June 7,
1999, between AMD and Lattice Semiconductor Corporation, filed as
Exhibit 2.3 (a) to AMD's Quarterly Report on Form 10-Q for the
period ended June 27, 1999, is hereby incorporated by reference.
2.3(b) Second Amendment to Stock Purchase Agreement, dated as of June 15,
1999, between AMD and Lattice Semiconductor Corporation, filed as
Exhibit 2.3 (b) to AMD's Quarterly Report on From 10-Q for the
period ended June 27, 1999, is hereby incorporated by reference.
3.1 Certificate of Incorporation, as amended, filed as Exhibit 3.1 to
AMD's Quarterly Report on Form 10-Q for the period ended July 2,
1995, is hereby incorporated by reference.
3.2 By-Laws, as amended.
4.1 Form of AMD 11% Senior Secured Notes due August 1, 2003, filed as
Exhibit 4.1 to AMD's Current Report on Form 8-K dated August 13,
1996, is hereby incorporated by reference.
4.2(a) Indenture, dated as of August 1, 1996, between AMD and United
States Trust Company of New York, as trustee, filed as Exhibit 4.2
to AMD's Current Report on Form 8-K dated August 13, 1996, is
hereby incorporated by reference.
4.2(b) First Supplemental Indenture, dated as of January 13, 1999,
between AMD and United States Trust Company of New York, as
trustee, filed as Exhibit 4.2(b) to AMD's Annual Report on
Form 10-K for the fiscal year ended December 27, 1998, is hereby
incorporated by reference.
4.2(c) Second Supplemental Indenture, dated as of April 8, 1999, between
AMD and United States Trust Company of New York, as trustee.
4.3 Intercreditor and Collateral Agent Agreement, dated as of August
1, 1996, among United States Trust Company of New York, as
trustee, Bank of America NT&SA, as agent for the banks under the
Credit Agreement of July 19, 1996, and IBJ Schroder Bank & Trust
Company, filed as Exhibit 4.3 to AMD's Current Report on Form 8-K
dated August 13, 1996, is hereby incorporated by reference.
4.4 Payment, Reimbursement and Indemnity Agreement, dated as of August
1, 1996, between AMD and IBJ Schroder Bank & Trust Company, filed
as Exhibit 4.4 to AMD's Current Report on Form 8-K dated August
13, 1996, is hereby incorporated by reference.
</TABLE>
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<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibits
------- -----------------------
<C> <S>
4.5 Deed of Trust, Assignment, Security Agreement and Financing
Statement, dated as of August 1, 1996, among AMD, as grantor, IBJ
Schroder Bank & Trust Company, as grantee, and Shelley W. Austin,
as trustee, filed as Exhibit 4.5 to AMD's Current Report on Form
8-K dated August 13, 1996, is hereby incorporated by reference.
4.6 Security Agreement, dated as of August 1, 1996, among AMD and IBJ
Schroder Bank & Trust Company, as agent for United States Trust
Company of New York, as trustee, and Bank of America NT&SA, as
agent for banks, filed as Exhibit 4.6 to AMD's Current Report on
Form 8-K dated August 13, 1996, is hereby incorporated by
reference.
4.7 Lease, Option to Purchase and Put Option Agreement, dated as of
August 1, 1996, between AMD, as lessor, and AMD Texas Properties,
LLC, as lessee, filed as Exhibit 4.7 to AMD's Current Report on
Form 8-K dated August 13, 1996, is hereby incorporated by
reference.
4.8 Reciprocal Easement Agreement, dated as of August 1, 1996, between
AMD and AMD Texas Properties, LLC, filed as Exhibit 4.8 to AMD's
Current Report on Form 8-K dated August 13, 1996, is hereby
incorporated by reference.
4.9 Sublease Agreement, dated as of August 1, 1996, between AMD, as
sublessee, and AMD Texas Properties, LLC, as sublessor, filed as
Exhibit 4.9 to AMD's Current Report on Form 8-K dated August 13,
1996, is hereby incorporated by reference.
4.10 Indenture, dated as of May 8, 1998, by and between AMD and The
Bank of New York, as trustee, filed as Exhibit 4.1 to AMD's
Current Report on Form 8-K dated May 8, 1998, is hereby
incorporated by reference.
4.11 Officers' Certificate, dated as of May 8, 1998, filed as Exhibit
4.2 to AMD's Current Report on Form 8-K dated May 8, 1998, is
hereby incorporated by reference.
4.12 Form of 6% Convertible Subordinated Note due 2005, filed as
Exhibit 4.3 to AMD's Current Report on Form 8-K dated May 8, 1998,
is hereby incorporated by reference.
4.13 AMD hereby agrees to file on request of the Commission a copy of
all instruments not otherwise filed with respect to AMD's long-
term debt or any of its subsidiaries for which the total amount of
securities authorized under such instruments does not exceed 10
percent of the total assets of AMD and its subsidiaries on a
consolidated basis.
*10.1 AMD 1982 Stock Option Plan, as amended, filed as Exhibit 10.1 to
AMD's Annual Report on Form 10-K for the fiscal year ended
December 26, 1993, is hereby incorporated by reference.
*10.2 AMD 1986 Stock Option Plan, as amended, filed as Exhibit 10.2 to
AMD's Annual Report on Form 10-K for the fiscal year ended
December 26, 1993, is hereby incorporated by reference.
*10.3 AMD 1992 Stock Incentive Plan, as amended, filed as Exhibit 10.3
to AMD's Annual Report on Form 10-K for the fiscal year ended
December 26, 1993, is hereby incorporated by reference.
*10.4 AMD 1980 Stock Appreciation Rights Plan, as amended, filed as
Exhibit 10.4 to AMD's Annual Report on Form 10-K for the fiscal
year ended December 26, 1993, is hereby incorporated by reference.
*10.5 AMD 1986 Stock Appreciation Rights Plan, as amended, filed as
Exhibit 10.5 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 26, 1993, is hereby incorporated by
reference.
*10.6 Forms of Stock Option Agreements, filed as Exhibit 10.8 to AMD's
Annual Report on Form 10-K for the fiscal year ended December 29,
1991, are hereby incorporated by reference.
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibits
------- -----------------------
<C> <S>
*10.7 Form of Limited Stock Appreciation Rights Agreement, filed as
Exhibit 4.11 to AMD's Registration Statement on Form S-8 (No. 33-
26266), is hereby incorporated by reference.
*10.8 AMD 1987 Restricted Stock Award Plan, as amended, filed as Exhibit
10.10 to AMD's Annual Report on Form 10-K for the fiscal year
ended December 26, 1993, is hereby incorporated by reference.
*10.9 Forms of Restricted Stock Agreements, filed as Exhibit 10.11 to
AMD's Annual Report on Form 10-K for the fiscal year ended
December 29, 1991, are hereby incorporated by reference.
*10.10 Resolution of Board of Directors on September 9, 1981, regarding
acceleration of vesting of all outstanding stock options and
associated limited stock appreciation rights held by officers
under certain circumstances, filed as Exhibit 10.10 to AMD's
Annual Report on Form 10-K for the fiscal year ended March 31,
1985, is hereby incorporated by reference.
*10.11 AMD 1996 Stock Incentive Plan, as amended, filed as Exhibit 10.11
to AMD's Annual Report on Form 10-K for the fiscal year ended
December 29, 1996, is hereby incorporated by reference.
*10.12 Employment Agreement dated September 29, 1996, between AMD and W.
J. Sanders III, filed as Exhibit 10.11(a) to AMD's Quarterly
Report on Form 10-Q for the period ended September 29, 1996, is
hereby incorporated by reference.
*10.13 Management Continuity Agreement between AMD and W. J. Sanders III,
filed as Exhibit 10.14 to AMD's Annual Report on Form 10-K for the
fiscal year ended December 29, 1991, is hereby incorporated by
reference.
*10.14 Bonus Agreement between AMD and Richard Previte, filed as Exhibit
10.14 to AMD's Quarterly Report on Form 10-Q for the period ended
June 28, 1998, is hereby incorporated by reference.
*10.15 Executive Bonus Plan, as amended, filed as Exhibit 10.16 to AMD's
Annual Report on Form 10-K for the fiscal year ended December 25,
1994, is hereby incorporated by reference.
*10.16 AMD Executive Incentive Plan, filed as Exhibit 10.14(b) to AMD's
Quarterly Report on Form 10-Q for the period ended June 30, 1996,
is hereby incorporated by reference.
*10.17 Form of Bonus Deferral Agreement, filed as Exhibit 10.12 to AMD's
Annual Report on Form 10-K for the fiscal year ended March 30,
1986, is hereby incorporated by reference.
*10.18 Form of Executive Deferral Agreement, filed as Exhibit 10.17 to
AMD's Annual Report on Form 10-K for the fiscal year ended
December 31, 1989, is hereby incorporated by reference.
*10.19 Director Deferral Agreement of R. Gene Brown, filed as Exhibit
10.18 to AMD's Annual Report on Form 10-K for the fiscal year
ended December 31, 1989, is hereby incorporated by reference.
10.20 Intellectual Property Agreements with Intel Corporation, filed as
Exhibit 10.21 to AMD's Annual Report on Form 10-K for the fiscal
year ended December 29, 1991, are hereby incorporated by
reference.
*10.21 Form of Indemnification Agreements with former officers of
Monolithic Memories, Inc., filed as Exhibit 10.22 to AMD's Annual
Report on Form 10-K for the fiscal year ended December 27, 1987,
is hereby incorporated by reference.
*10.22 Form of Management Continuity Agreement, filed as Exhibit 10.25 to
AMD's Annual Report on Form 10-K for the fiscal year ended
December 29, 1991, is hereby incorporated by reference.
**10.23(a) Joint Venture Agreement between AMD and Fujitsu Limited, filed as
Exhibit 10.27(a) to AMD's Amendment No. 1 to its Annual Report on
Form 10-K for the fiscal year ended December 26, 1993, is hereby
incorporated by reference.
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibits
------- -----------------------
<C> <S>
**10.23(b) Technology Cross-License Agreement between AMD and Fujitsu
Limited, filed as Exhibit 10.27(b) to AMD's Amendment No. 1 to its
Annual Report on Form 10-K for the fiscal year ended December 26,
1993, is hereby incorporated by reference.
**10.23(c) AMD Investment Agreement between AMD and Fujitsu Limited, filed as
Exhibit 10.27(c) to AMD's Amendment No. 1 to its Annual Report on
Form 10-K for the fiscal year ended December 26, 1993, is hereby
incorporated by reference.
**10.23(d) Fujitsu Investment Agreement between AMD and Fujitsu Limited,
filed as Exhibit 10.27(d) to AMD's Amendment No. 1 to its Annual
Report on Form 10-K for the fiscal year ended December 26, 1993,
is hereby incorporated by reference.
**10.23(e) First Amendment to Fujitsu Investment Agreement dated April 28,
1995, filed as Exhibit 10.23(e) to AMD's Annual Report on Form 10-
K for the fiscal year ended December 29, 1996, is hereby
incorporated by reference.
10.23(f) Second Amendment to Fujitsu Investment Agreement, dated February
27, 1996, filed as Exhibit 10.23 (f) to AMD's Annual Report on
Form 10-K for the fiscal year ended December 29, 1996, is hereby
incorporated by reference.
**10.23(g) Joint Venture License Agreement between AMD and Fujitsu Limited,
filed as Exhibit 10.27(e) to AMD's Amendment No. 1 to its Annual
Report on Form 10-K for the fiscal year ended December 26, 1993,
is hereby incorporated by reference.
**10.23(h) Joint Development Agreement between AMD and Fujitsu Limited, filed
as Exhibit 10.27(f) to AMD's Amendment No. 1 to its Annual Report
on Form 10-K for the fiscal year ended December 26, 1993, is
hereby incorporated by reference.
**10.23(i) Fujitsu Joint Development Agreement Amendment, filed as Exhibit
10.23(g) to AMD's Quarterly Report on Form 10-Q for the period
ended March 31, 1996, is hereby incorporated by reference.
10.24(a) Credit Agreement, dated as of July 19, 1996, among AMD, Bank of
America NT&SA, as administrative agent and lender, ABN AMRO Bank
N.V., as syndication agent and lender, and Canadian Imperial Bank
of Commerce, as documentation agent and lender, filed as Exhibit
99.1 to AMD's Current Report on Form 8-K dated August 13, 1996, is
hereby incorporated by reference.
10.24(b) First Amendment to Credit Agreement, dated as of August 7, 1996,
among AMD, Bank of America NT&SA, as administrative agent and
lender, ABN AMRO Bank N.V., as syndication agent and lender, and
Canadian Imperial Bank of Commerce, as documentation agent and
lender, filed as Exhibit 99.2 to AMD's Current Report on Form 8-K
dated August 13, 1996, is hereby incorporated by reference.
10.24(c) Second Amendment to Credit Agreement, dated as of September 9,
1996, among AMD, Bank of America NT&SA, as administrative agent
and lender, ABN AMRO Bank N.V., as syndication agent and lender,
and Canadian Imperial Bank of Commerce, as documentation agent and
lender, filed as Exhibit 10.24(b) to AMD's Quarterly Report on
Form 10-Q for the period ended September 29, 1996, is hereby
incorporated by reference.
10.24(d) Third Amendment to Credit Agreement, dated as of October 1, 1997,
among AMD, Bank of America NT & SA, as administrative agent and
lender, ABN AMRO Bank N.V., as syndicated agent and lender, and
Canadian Imperial Bank of Commerce, as documentation agent and
lender, filed as Exhibit 10.24(d) to AMD's Quarterly Report on
Form 10-Q for the period ended September 28, 1997, is hereby
incorporated by reference.
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibits
------- -----------------------
<C> <S>
10.24(e) Fourth Amendment to Credit Agreement, dated as of January 26,
1998, among AMD, Bank of America NT & SA, as administrative agent
and lender, ABN AMRO Bank N.V., as syndicated agent and lender,
and Canadian Imperial Bank of Commerce, as documentation agent and
lender, filed as Exhibit 10.24(e) to AMD's Annual Report on Form
10-K for the fiscal year ended December 28, 1997, is hereby
incorporated by reference.
10.24(f) Fifth Amendment to Credit Agreement, dated as of February 26,
1998, among AMD, Bank of America NT & SA, as administrative agent
and lender, ABN AMRO Bank, N.V., as syndicated agent and lender,
and Canadian Imperial Bank of Commerce, as documentation agent and
lender, filed as Exhibit 10.24(f) to AMD's Annual Report on Form
10-K for the fiscal year ended December 28, 1997, is hereby
incorporated by reference.
10.24(g) Sixth Amendment to Credit Agreement, dated as of June 30, 1998,
among AMD, Bank of America NT & SA, as administrative agent and
lender, ABN AMRO Bank N.V., as syndicated agent and lender, and
Canadian Imperial Bank of Commerce, as documentation agent and
lender, filed as Exhibit 10.24(g) to AMD's Current Report on Form
8-K dated July 8, 1998, is hereby incorporated by reference.
10.24(h) Seventh Amendment to the Credit Agreement and waiver, dated as of
April 8, 1999, among AMD, Bank of America NT & SA, as
administrative agent and lender, ABN AMRO Bank of N.V., as
syndicated agent and lender, and Canadian Imperial Bank of
Commerce, as documentation agent and lender.
10.24(i) Eighth Amendment to Credit Agreement, dated as of June 25, 1999,
among AMD, Bank of America NT&SA, as administrative agent and
lender, ABN AMRO Bank N.V., as syndicated agent and lender, and
Canadian Imperial Bank of Commerce, as documentation agent and
lender, filed as Exhibit 10.24 (i) to AMD's Quarterly Report on
Form 10-Q for the period ended June 27, 1999, is hereby
incorporated by reference.
10.24(j) Ninth Amendment to Credit Agreement, dated as of July 30, 1999,
among AMD, Bank of America NT&SA, as administrative agent and
lender, ABN AMRO Bank N.V., as syndicated agent and lender, and
Canadian Imperial Bank of Commerce, as documentation agent and
lender, filed as Exhibit 10.24 (j) to AMD's Quarterly Report on
Form 10-Q for the period ended June 27, 1999, is hereby
incorporated by reference.
**10.25 Technology Development and License Agreement, dated as of October
1, 1998, among AMD and its subsidiaries and Motorola, Inc. and its
subsidiaries, filed as Exhibit 10.25 to AMD's Annual Report on
Form 10-K for the fiscal year ended December 27, 1998, is hereby
incorporated by reference.
***10.25(a) Amendment to the Technology Development and License Agreement,
entered into as of October 1, 1998, by AMD and its subsidiaries
and Motorola, Inc. and its subsidiaries.
**10.26 Patent License Agreement, dated as of December 3, 1998, between
AMD and Motorola, Inc., filed as Exhibit 10.26 to AMD's Annual
Report on Form 10-K for the fiscal year ended December 27, 1998,
is hereby incorporated by reference.
10.27 Lease Agreement, dated as of December 22, 1998, between AMD and
Delaware Chip LLC, filed as Exhibit 10.27 to AMD's Annual Report
on Form 10-K for the fiscal year ended December 27, 1998 is hereby
incorporated by reference.
*10.28(a) AMD Executive Savings Plan (Amendment and Restatement, effective
as of August 1, 1993), filed as Exhibit 10.30 to AMD's Annual
Report on Form 10-K for the fiscal year ended December 25, 1994,
is hereby incorporated by reference.
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibits
------- -----------------------
<C> <S>
*10.28(b) First Amendment to the AMD Executive Savings Plan (as amended and
restated, effective as of August 1, 1993), filed as Exhibit
10.28(b) to AMD's Annual Report on Form 10-K for the fiscal year
ended December 28, 1997, is hereby incorporated by reference.
*10.28(c) Second Amendment to the AMD Executive Savings Plan (as amended and
restated, effective as of August 1, 1993), filed as Exhibit
10.28(b) to AMD's Annual Report on Form 10-K for the fiscal year
ended December 28, 1997, is hereby incorporated by reference.
*10.29 Form of Split Dollar Agreement, as amended, filed as Exhibit 10.31
to AMD's Annual Report on Form 10-K for the fiscal year ended
December 25, 1994, is hereby incorporated by reference.
*10.30 Form of Collateral Security Assignment Agreement, filed as Exhibit
10.32 to AMD's Annual Report on Form 10-K for the fiscal year
ended December 26, 1993, is hereby incorporated by reference.
*10.31 Forms of Stock Option Agreements to the 1992 Stock Incentive Plan,
filed as Exhibit 4.3 to AMD's Registration Statement on Form S-8
(No. 33-46577), are hereby incorporated by reference.
*10.32 1992 United Kingdom Share Option Scheme, filed as Exhibit 4.2 to
AMD's Registration Statement on Form S-8 (No. 33-46577), is hereby
incorporated by reference.
**10.33 AMD 1998 Stock Incentive Plan, filed as Exhibit 10.33 to AMD's
Annual Report on Form 10-K for the fiscal year ended December 27,
1998, is hereby incorporated by reference.
*10.34 Form of indemnification agreements with officers and directors of
AMD, filed as Exhibit 10.38 to AMD's Annual Report on Form 10-K
for the fiscal year ended December 25, 1994, is hereby
incorporated by reference.
*10.35 Agreement to Preserve Goodwill dated January 15, 1996, between AMD
and S. Atiq Raza, filed as Exhibit 10.36 to AMD's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995, is hereby
incorporated by reference.
*10.36 1995 Stock Plan of NexGen, Inc., as amended, filed as Exhibit
10.36 to AMD's Annual Report on Form 10-K for the fiscal year
ended December 29, 1996, is hereby incorporated by reference.
**10.37 Patent Cross-License Agreement dated December 20, 1995, between
AMD and Intel Corporation, filed as Exhibit 10.38 to AMD's Annual
Report on Form 10-K for the fiscal year ended December 31, 1995,
is hereby incorporated by reference.
10.38 Contract for Transfer of the Right to the Use of Land between AMD
(Suzhou) Limited and China-Singapore Suzhou Industrial Park
Development Co., Ltd., filed as Exhibit 10.39 to AMD's Annual
Report on Form 10-K for the fiscal year ended December 31, 1995,
is hereby incorporated by reference.
*10.39 NexGen, Inc. 1987 Employee Stock Plan, filed as Exhibit 99.3 to
Post-Effective Amendment No. 1 on Form S-8 to AMD's Registration
Statement on Form S-4 (No. 33-64911), is hereby incorporated by
reference.
*10.40 1995 Stock Plan of NexGen, Inc. (assumed by AMD), as amended,
filed as Exhibit 10.37 to AMD's Quarterly Report on Form 10-Q for
the period ended June 30, 1996, is hereby incorporated by
reference.
*10.41 Form of indemnity agreement between NexGen, Inc. and its directors
and officers, filed as Exhibit 10.5 to the Registration Statement
of NexGen, Inc. on Form S-1 (No. 33-90750), is hereby incorporated
by reference.
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibits
------- -----------------------
<C> <S>
10.42 Series E Preferred Stock Purchase Warrant of NexGen, Inc. issued
to PaineWebber Incorporated, filed as Exhibit 10.14 to the
Registration Statement of NexGen, Inc. on Form S-1 (No. 33-
90750), is hereby incorporated by reference.
10.43 Series F Preferred Stock Purchase Warrant of NexGen, Inc., filed
as Exhibit 10.15 to the Registration Statement of NexGen, Inc.
on Form S-1 (No. 33-90750), is hereby incorporated by reference.
10.44 Series G Preferred Stock Purchase Warrant of NexGen, Inc., filed
as Exhibit 10.16 to the Registration Statement of NexGen, Inc.
on Form S-1 (No. 33-90750), is hereby incorporated by reference.
**10.45 Agreement for Purchase of IBM Products between IBM and NexGen,
Inc. dated June 2, 1994, filed as Exhibit 10.17 to the
Registration Statement of NexGen, Inc. on Form S-1
(No. 33-90750), is hereby incorporated by reference.
*10.46 Letter Agreement dated as of September, 1988, between NexGen,
Inc. and S. Atiq Raza, First Promissory Note dated October 17,
1988, and Second Promissory Note dated October 17, 1988, as
amended, filed as Exhibit 10.20 to the Registration Statement of
NexGen, Inc. on Form S-1 (No. 33-90750), are hereby incorporated
by reference.
10.47 Series B Preferred Stock Purchase Warrant of NexGen, Inc. issued
to Kleiner, Perkins, Caufield and Byers IV, as amended, filed as
Exhibit 10.23 to the Registration Statement of NexGen, Inc. on
Form S-1 (No. 33-90750), is hereby incorporated by reference.
**10.48(a) C-4 Technology Transfer and Licensing Agreement dated June 11,
1996, between AMD and IBM Corporation, filed as Exhibit 10.48 to
AMD's Amendment No. 1 to its Quarterly Report on Form 10-Q/A for
the period ended September 29, 1996, is hereby incorporated by
reference.
**10.48(b) Amendment No. 1 to the C-4 Technology Transfer and Licensing
Agreement, dated as of February 23, 1997, between AMD and
International Business Machine Corporation, filed as Exhibit
10.48(a) to AMD's Quarterly Report on Form 10-Q for the period
ended March 30, 1997, is hereby incorporated by reference.
**10.49(a) Design and Build Agreement dated November 15, 1996, between AMD
Saxony Manufacturing GmbH and Meissner and Wurst GmbH, filed as
Exhibit 10.49(a) to AMD's Annual Report on Form 10-K for the
fiscal year ended December 29, 1996, is hereby incorporated by
reference.
10.49(b) Amendment to Design and Build Agreement dated January 16, 1997,
between AMD Saxony Manufacturing GmbH and Meissner and Wurst
GmbH filed as Exhibit 10.49(b) to AMD's Annual Report on Form
10-K for the fiscal year ended December 29, 1996, is hereby
incorporated by reference.
**10.50(a-1) Syndicated Loan Agreement with Schedules 1, 2 and 17, dated as
of March 11, 1997, among AMD Saxony Manufacturing GmbH, Dresdner
Bank AG and Dresdner Bank Luxembourg S.A., filed as Exhibit
10.50(a) to AMD's Quarterly Report on Form 10-Q for the period
ended March 30, 1997, is hereby incorporated by reference.
**10.50(a-2) Supplemental Agreement to the Syndicated Loan Agreement dated
February 6, 1998, among AMD Saxony Manufacturing GmbH, Dresdner
Bank AG and Dresdner Bank Luxembourg S.A., filed as Exhibit
10.50(a-2) to AMD's Annual Report on Form 10-K/A (No.1) for the
fiscal year ended December 28, 1997, is hereby incorporated by
reference.
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibits
------- -----------------------
<C> <S>
10.50(a-3) Supplemental Agreement No. 2 to the Syndicated Loan Agreement as
of March 11, 1997, dated as of June 29, 1999, among AMD Saxony
Manufacturing GmbH, Dresdner Bank AG and Dresdner Bank
Luxembourg S.A., filed as Exhibit 10.50 (a-3) to AMD's Quarterly
Report on Form 10-Q for the period ended June 27, 1999, is
hereby incorporated by reference.
**10.50(b) Determination Regarding the Request for a Guarantee by AMD
Saxony Manufacturing GmbH, filed as Exhibit 10.50(b) to AMD's
Quarterly Report on Form 10-Q for the period ended March 30,
1997, is hereby incorporated by reference.
**10.50(c) AMD Subsidy Agreement, between AMD Saxony Manufacturing GmbH and
Dresdner Bank AG, filed as Exhibit 10.50(c) to AMD's Quarterly
Report on Form 10-Q for the period ended March 30, 1997, is
hereby incorporated by reference.
**10.50(d) Subsidy Agreement, dated February 12, 1997, between Sachsische
Aufbaubank and Dresdner Bank AG, with Appendices 1, 2a, 2b, 3
and 4, filed as Exhibit 10.50(d) to AMD's Quarterly Report on
Form 10-Q for the period ended March 30, 1997, is hereby
incorporated by reference.
10.50(e) AMD, Inc. Guaranty, dated as of March 11, 1997, among AMD,
Saxony Manufacturing GmbH and Dresdner Bank AG, filed as Exhibit
10.50(e) to AMD's Quarterly Report on Form 10-Q for the period
ended March 30, 1997, is hereby incorporated by reference.
10.50(f-1) Sponsors' Support Agreement, dated as of March 11, 1997, among
AMD, AMD Saxony Holding GmbH and Dresdner Bank AG, filed as
Exhibit 10.50(f) to AMD's Quarterly Report on Form 10-Q for the
period ended March 30, 1997, is hereby incorporated by
reference.
10.50(f-2) First Amendment to Sponsors' Support Agreement, dated as of
February 6, 1998, among AMD, AMD Saxony Holding GmbH and
Dresdner Bank AG, filed as Exhibit 10.50(f-2) to AMD's Annual
Report on Form 10-K for the fiscal year ended December 28, 1997,
is hereby incorporated by reference.
10.50(f-3) Second Amendment to Sponsors' Support Agreement, dated as of
June 29, 1999, among AMD, AMD Saxony Holding GmbH, Dresdner Bank
AG and Dresdner Bank Luxembourg S.A., filed as Exhibit 10.50 (f-
3) to AMD's Quarterly Report on Form 10-Q for the period ended
June 27, 1999, is hereby incorporated by reference.
10.50(g-1) Sponsors' Loan Agreement, dated as of March 11, 1997, among AMD,
AMD Saxony Holding GmbH and Saxony Manufacturing GmbH, filed as
Exhibit 10.50(g) to AMD's Quarterly Report on Form 10-Q for the
period ended March 30, 1997, is hereby incorporated by
reference.
10.50(g-2) First Amendment to Sponsors' Loan Agreement, dated as of
February 6, 1998, among AMD, AMD Saxony Holding GmbH and AMD
Saxony Manufacturing GmbH, filed as Exhibit 10.50(g-2) to AMD's
Annual Report on Form 10-K for the fiscal year ended
December 28, 1997, is hereby incorporated by reference.
10.50(g-3) Second Amendment to Sponsors' Loan Agreement, dated as of June
25, 1999, among AMD and AMD Saxony Holding GmbH and AMD Saxony
Manufacturing GmbH, filed as Exhibit 10.50(g-3) to the Company's
Quarterly Report on Form 10-Q for the period ended June 27,
1999, is hereby incorporated by reference.
10.50(h) Sponsors' Subordination Agreement, dated as of March 11, 1997,
among AMD, AMD Saxony Holding GmbH, AMD Saxony Manufacturing
GmbH and Dresdner Bank AG, filed as Exhibit 10.50(h) to AMD's
Quarterly Report on Form 10-Q for the period ended March 30,
1997, is hereby incorporated by reference.
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibits
------- -----------------------
<C> <S>
10.50(i) Sponsors' Guaranty, dated as of March 11, 1997, among AMD, AMD
Saxony Holding GmbH and Dresdner Bank AG, filed as Exhibit
10.50(i) to AMD's Quarterly Report on Form 10-Q for the period
ended March 30, 1997, is hereby incorporated by reference.
**10.50(j) AMD Holding Wafer Purchase Agreement, dated as of March 11,
1997, among AMD and AMD Saxony Holding GmbH, filed as Exhibit
10.50(j) to AMD's Quarterly Report on Form 10-Q for the period
ended March 30, 1997, is hereby incorporated by reference.
**10.50(k) AMD Holding Research, Design and Development Agreement, dated as
of March 11, 1997, between AMD Saxony Holding GmbH and AMD,
filed as Exhibit 10.50(k) to AMD's Quarterly Report on Form 10-Q
for the period ended March 30, 1997, is hereby incorporated by
reference.
**10.50(l-1) AMD Saxonia Wafer Purchase Agreement, dated as of March 11,
1997, between AMD Saxony Holding GmbH and AMD Saxony
Manufacturing GmbH, filed as Exhibit 10.50(l) to AMD's Quarterly
Report on Form 10-Q for the period ended March 30, 1997, is
hereby incorporated by reference.
10.50(l-2) First Amendment to AMD Saxonia Wafer Purchase Agreement, dated
as of February 6, 1998, between AMD Saxony Holding GmbH and AMD
Saxony Manufacturing GmbH, filed as Exhibit 10.50 (l-2) to AMD's
Annual Report on Form 10-K for the fiscal year ended December
28, 1997, is hereby incorporated by reference.
**10.50(m) AMD Saxonia Research, Design and Development Agreement, dated as
of March 11, 1997, between AMD Saxony Manufacturing GmbH and AMD
Saxony Holding GmbH, filed as Exhibit 10.50(m) to AMD's
Quarterly Report on Form 10-Q for the period ended March 30,
1997, is hereby incorporated by reference.
10.50(n) License Agreement, dated March 11, 1997, among AMD, AMD Saxony
Holding GmbH and AMD Saxony Manufacturing GmbH, filed as Exhibit
10.50(n) to AMD's Quarterly Report on Form 10-Q for the period
ended March 30, 1997, is hereby incorporated by reference.
10.50(o) AMD, Inc. Subordination Agreement, dated March 11, 1997, among
AMD, AMD Saxony Holding GmbH and Dresdner Bank AG, filed as
Exhibit 10.50(o) to AMD's Quarterly Report on Form 10-Q for the
period ended March 30, 1997, is hereby incorporated by
reference.
**10.50(p-1) ISDA Agreement, dated March 11, 1997, between AMD and AMD Saxony
Manufacturing GmbH, filed as Exhibit 10.50(p) to AMD's Quarterly
Report on Form 10-Q for the period ended March 30, 1997, is
hereby incorporated by reference.
**10.50(p-2) Confirmation to ISDA Agreement, dated February 6, 1998, between
AMD and AMD Saxony Manufacturing GmbH, filed as Exhibit 10.50(p-
2) to AMD's Annual Report on Form 10-K for the fiscal year ended
December 28, 1997, is hereby incorporated by reference.
10.51 Loan and Security Agreement, dated as of July 13,1999, among
AMD, AMD International Sales and Service, Ltd. and Bank of
America NT&SA as agent, filed as Exhibit 10.51 to AMD's
Quarterly Report on Form 10-Q for the period ended June 27,
1999, is hereby incorporated by reference.
10.51(a) First Amendment to Loan and Security Agreement, dated as of July
30, 1999, among AMD, AMD International Sales and Service, Ltd.
and Bank of America NT&SA, as agent, filed as Exhibit 10.51(a)
to AMD's Quarterly Report on Form 10-Q for the period ended June
27, 1999, is hereby incorporated by reference.
*10.52 Agreement, dated as of June 16, 1999, between AMD and Richard
Previte, filed as Exhibit 10.52 to AMD's Quarterly Report on
Form 10-Q for the period ended June 27, 1999, is hereby
incorporated by reference.
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibits
------- -----------------------
<C> <S>
*10.53 Agreement, dated as of June 23, 1999, between AMD and Gene Conner,
filed as Exhibit 10.53 to AMD's Quarterly Report on Form 10-Q for
the period ended June 27, 1999, is hereby incorporated by
reference.
*10.54 Management Continuity Agreement, between AMD and Robert R. Herb.
*10.55 Employment Agreement, dated as of January 13, 2000, between AMD
and Hector de J. Ruiz.
*10.56 Form of indemnification agreements with officers and directors of
AMD.
13 Pages 6 through 46 of AMD's 1999 Annual Report to Stockholders,
which have been incorporated by reference into Parts II and IV of
this annual report.
21 List of AMD subsidiaries.
23 Consent of Ernst & Young LLP, Independent Auditors, refer to page
F-2 herein.
24 Power of Attorney.
27 Financial Data Schedule.
</TABLE>
- --------
* Management contracts and compensatory plans or arrangements required to
be filed as an Exhibit to comply with Item 14(a)(3).
** Confidential treatment has been granted as to certain portions of these
Exhibits.
*** Confidential treatment has been requested with respect to certain
portions of this Exhibit.
AMD will furnish a copy of any exhibit on request and payment of AMD's
reasonable expenses of furnishing such exhibit.
(b) Reports on Form 8-K.
A Current Report on Form 8-K dated October 6, 1999 reporting under Item 5--
Other Events was filed announcing AMD's third quarter earnings.
A Current Report on Form 8-K dated October 6, 1999 reporting under Item 5--
Other Events was filed announcing the intention of AMD to sell the
Communications Group.
A Current Report on Form 8-K dated November 11, 1999 reporting under Item
5--Other Events was filed announcing expected revenues in the fourth quarter.
27
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Advanced Micro Devices, Inc.
March 16, 2000
/s/ Francis P. Barton
By: _________________________________
Francis P. Barton
Senior Vice President,
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons, on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<C> <S> <C>
* Chairman of the Board March 16, 2000
______________________________________ and Chief Executive
W. J. Sanders III Officer (Principal
Executive Officer)
/s/ Francis P. Barton* Senior Vice President, March 16, 2000
______________________________________ Chief Financial Officer
Francis P. Barton (Principal Financial
Officer)
* Director March 16, 2000
______________________________________
Friedrich Baur
* Director March 16, 2000
______________________________________
Charles M. Blalack
* Director March 16, 2000
______________________________________
R. Gene Brown
* Director March 16, 2000
______________________________________
Robert B. Palmer
* Director, Vice Chairman March 16, 2000
______________________________________
Richard Previte
* Director March 16, 2000
______________________________________
Joe L. Roby
* Director, President and March 16, 2000
______________________________________ Chief Operating Officer
Hector de J. Ruiz
* Director March 16, 2000
______________________________________
Leonard Silverman
</TABLE>
/s/ Francis P. Barton
*By: ____________________________
(Francis P. Barton, Attorney-in-
Fact)
28
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE
COVERED BY THE REPORT OF INDEPENDENT AUDITORS
ITEM 14(a) (1) and (2)
The information under the following captions, which is included in AMD's
1999 Annual Report to Stockholders, a copy of which is attached hereto as
Exhibit 13, is incorporated herein by reference:
<TABLE>
<CAPTION>
Page References
-----------------
1999 Annual
Form Report to
10-K Stockholders
---- ------------
<S> <C> <C>
Report of Ernst & Young LLP, Independent Auditors............ -- 44
Consolidated Statements of Operations for the three years in
the period ended December 26, 1999.......................... -- 23
Consolidated Balance Sheets at December 26, 1999 and December
27, 1998.................................................... -- 24
Consolidated Statements of Stockholders' Equity for the three
years in the period ended December 26, 1999................. -- 25
Consolidated Statements of Cash Flows for the three years in
the period ended December 26, 1999.......................... -- 26
Notes to Consolidated Financial Statements................... -- 27-43
Schedule for the three years in the period ended December 26,
1999:
Schedule II Valuation and Qualifying Accounts.............. F-3 --
</TABLE>
All other schedules have been omitted because 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. With the exception of the
information specifically incorporated by reference into Parts II and IV of
this Annual Report on Form 10-K, our 1999 Annual Report to Stockholders is not
to be deemed filed as part of this report.
F-1
<PAGE>
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form 10-
K) of Advanced Micro Devices, Inc. of our report dated January 14, 2000
included in the 1999 Annual Report to Stockholders of Advanced Micro Devices,
Inc.
Our audits also included the financial statement schedule of Advanced Micro
Devices, Inc. listed in Item 14(a). This schedule is the responsibility of the
management of Advanced Micro Devices, Inc. Our responsibility is to express an
opinion based on our audits. In our opinion, the financial statement schedule
referred to above, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
We also consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 33-16095) pertaining to the Advanced Micro Devices,
Inc. 1987 Restricted Stock Award Plan; in the Registration Statement on Form
S-8 (Nos. 33-39747, 333-33855 and 333-77495) pertaining to the Advanced Micro
Devices, Inc. 1991 Employee Stock Purchase Plan; in the Registration
Statements on Form S-8 (Nos. 33-10319, 33-26266, 33-36596 and 33-46578)
pertaining to the Advanced Micro Devices, Inc. 1982 and 1986 Stock Option
Plans and the 1980 and 1986 Stock Appreciation Rights Plans; in the
Registration Statements on Form S-8 (Nos. 33-46577 and 33-55107) pertaining to
the Advanced Micro Devices, Inc. 1992 Stock Incentive Plan; in the
Registration Statements on Form S-8 (No. 333-00969) pertaining to the Advanced
Micro Devices, Inc. 1991 Employee Stock Purchase Plan and to the 1995 Stock
Plan of NexGen, Inc.; in the Registration Statements on Form S-8 (Nos. 333-
04797 and 333-57525) pertaining to the Advanced Micro Devices, Inc. 1996 Stock
Incentive Plan; in the Registration Statement on Form S-8 (No. 333-68005)
pertaining to the Advanced Micro Devices, Inc. 1998 Stock Incentive Plan; in
the Registration Statement on Form S-3 (No. 333-47243), as amended, pertaining
to debt securities, preferred stock, common stock, equity warrants and debt
warrants issued or issuable by Advanced Micro Devices, Inc.; in Post-Effective
Amendment No. 1 to the Registration Statement on Form S-8 (No. 33-95888-99)
pertaining to the 1995 Stock Plan of NexGen, Inc. and the NexGen, Inc. 1987
Employee Stock Plan; in Post-Effective Amendment No. 1 to the Registration
Statement on Form S-8 (No. 33-92688-99) pertaining to the 1995 Employee Stock
Purchase Plan of NexGen, Inc.; in Post-Effective Amendment No. 1 on Form S-8
to the Registration Statement on Form S-4 (No. 33-64911) pertaining to the
1995 Employee Stock Purchase Plan of NexGen, Inc., the 1995 Stock Plan of
NexGen, Inc. and the NexGen, Inc. 1987 Employee Stock Plan; and in Post-
Effective Amendment No. 2 on Form S-3 to the Registration Statement on Form S-
4 (No. 33-64911) pertaining to common stock issuable to certain warrantholders
of our report dated January 14, 2000 with respect to the consolidated
financial statements incorporated herein by reference, and our report included
in the preceding paragraph with respect to the financial statement schedule
included in this Annual Report (Form 10-K) of Advanced Micro Devices, Inc.
/s/ Ernst & Young LLP
San Jose, California
March 17, 2000
F-2
<PAGE>
SCHEDULE II
ADVANCED MICRO DEVICES, INC.
VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 28, 1997,
December 27, 1998 and December 26, 1999
<TABLE>
<CAPTION>
Additions
Charged
(Reductions
Balance Credited) Balance
Beginning To End of
of Period Operations Deductions(1) Period
--------- ----------- ------------- -------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
Years ended:
December 28, 1997.............. $ 9,809 $1,500 $ (88) $11,221
December 27, 1998.............. 11,221 1,498 (56) 12,663
December 26, 1999.............. 12,663 3,543 (828) 15,378
</TABLE>
- --------
(1) Accounts (written off) recovered, net.
F-3
<PAGE>
AMD-22934-A
<PAGE>
Exhibit 3.2
ADVANCED MICRO DEVICES, INC.
BYLAWS
------------
(AS AMENDED)
ARTICLE I
OFFICES
Section 1. The registered office shall be in the City of Wilmington,
County of New Castle, State of Delaware.
Section 2. The Corporation may also have offices at such other places both
within and without the State of Delaware as the Board of Directors may from time
to time determine or the business of the Corporation may require.
ARTICLE II
MEETING OF STOCKHOLDERS
Section 1. Only persons who are nominated in accordance with the following
procedures shall be eligible for election as directors of the Corporation except
as may be otherwise provided in the Certificate with respect to the right of
holders of preferred shares of the Corporation to nominate and elect a specified
number of directors in certain circumstances.
(a) Annual Meetings of Stockholders. (1) Nominations of persons
-------------------------------
for election to the Board of Directors of the Corporation may be made at an
annual meeting of stockholders only (i) pursuant to the Corporation's notice of
meeting delivered pursuant to Article II, Section 3 of these Bylaws (or any
supplement thereto), (ii) by or at the direction of the Board (or any duly
authorized committee thereof) or the Chairman of the Board or (iii) by any
stockholder of the Corporation who was a stockholder of record of the
Corporation at the time the notice provided for in this Section is delivered to
the Secretary of the Corporation, who is entitled to vote at the meeting and who
complies with the notice procedures set forth in subparagraphs (2) and (3) of
this paragraph (a) of this Section.
(2) For nominations to be properly brought before an annual
meeting by a stockholder pursuant to clause (iii) of paragraph (a)(1) of this
Section, the stockholder must have given timely notice thereof in writing to the
Secretary of the Corporation. To be timely, a stockholder's notice shall be
delivered to the Secretary at the principal executive offices of the Corporation
not less than sixty (60) nor more than ninety (90) days prior to the anniversary
date of the immediately preceding annual meeting of stockholders; provided,
--------
however, that in the event that the annual meeting is called for a date that is
- -------
not within thirty (30) days before or after such anniversary date, notice by the
stockholder in order to be timely must be so received not later than the close
of business on the
1
<PAGE>
tenth day following the day on which the first public announcement of the
date of the annual meeting was made or the notice of the meeting was mailed,
whichever first occurs. In no event shall the public announcement of an
adjournment or postponement of an annual meeting of stockholders commence a new
time period (or extend any time period) for the giving of a stockholder's notice
as described above. The stockholder's notice shall contain, at a minimum, the
information set forth in paragraph (c) of this Section. For purposes of this
Section, "public announcement" shall mean disclosure in a press release reported
by the Dow Jones News Service, Associated Press or comparable national news
service or in a document publicly filed by the Corporation with the Securities
and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.
(3) Notwithstanding anything in the second sentence of
paragraph (a)(2) of this Section to the contrary, in the event that the number
of directors to be elected to the Board of the Corporation at an annual meeting
is increased and there is no public announcement by the Corporation naming all
of the nominees for director or specifying the size of the increased Board at
least one hundred days prior to the first anniversary of the preceding year's
annual meeting, a stockholder's notice required by this Section shall also be
considered timely, but only with respect to nominees for any new positions
created by such increase, if it shall be delivered to the Secretary at the
principal executive offices of the Corporation not later than the close of
business on the tenth day following the day on which such public announcement is
first made by the Corporation.
(b) Special Meetings of Stockholders. Only such business shall be
---------------------------------
conducted at a special meeting of stockholders as shall have been described in
the Corporation's notice of meeting given pursuant to Article II, Section 3 of
these Bylaws. To the extent such business includes the election of directors,
nominations of persons for election to the Board may be made at a special
meeting of stockholders only (i) by or at the direction of the Board (or any
duly authorized committee thereof) or the Chairman of the Board, or (ii) by any
stockholder of the Corporation who is a stockholder of record at the time the
notice provided for in this paragraph (b) of this Section is delivered to the
Secretary of the Corporation, who is entitled to vote at the special meeting and
who gives timely notice in writing by the Secretary of the Corporation. The
stockholder's notice shall contain, at a minimum, the information set forth in
paragraph (c) of this Section. To be timely, a stockholder's notice shall be
delivered to the Secretary at the principal executive offices of the Corporation
not later than the close of business on the tenth day following the day on which
public announcement is first made of the date of the special meeting and of the
nominees proposed by the Board to be elected at such meeting. In no event shall
the public announcement of an adjournment or postponement of a special meeting
commence a new time period (or extend any time period) for the giving of a
stockholder's notice as described above.
2
<PAGE>
(c) Contents of Stockholder's Notice. Any stockholder's notice
--------------------------------
required by this Section shall set forth as to each person whom the stockholder
proposes to nominate for election or reelection as a director (i) the name, age,
nationality, business address and residence address of the person, (ii) the
principal occupation and employment of the person, (iii) the class or series and
number of shares of capital stock of the Corporation which are owned
beneficially or of record by the person and (iv) any other information relating
to the person that would be required to be disclosed in a proxy statement or
other filings required to be made in connection with solicitations of proxies
for election of directors pursuant to Section 14 of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and the rules and regulations
promulgated thereunder. Such stockholder's notice further shall set forth as to
the stockholder giving the notice and the beneficial owner, if any, on whose
behalf the nomination or proposal is made (i) the name and address of such
stockholder and of such beneficial owner, as they appear on the Corporation's
books, (ii) the class and number of shares of capital stock of the Corporation
which are owned beneficially and of record by such stockholder and such
beneficial owner, as to the stockholder giving the notice, (iii) a description
of all arrangements or understandings between such stockholder and each proposed
nominee and any other person or persons (including their names) pursuant to
which the nomination(s) are to be made by such stockholder, (iv) a
representation that such stockholder intends to appear in person or by proxy at
the annual meeting to nominate the person named in its notice, (v) a
representation whether the stockholder or the beneficial owner, if any, intends
or is part of a group which intends to (1) deliver a proxy statement and/or form
of proxy to holders of at least the percentage of the Corporation's outstanding
capital stock required to elect the nominee and/or (2) otherwise solicit proxies
from stockholders in support of such nomination, and (vi) any other information
relating to such stockholder that would be required to be disclosed in a proxy
statement or other filings required to be made in connection with solicitations
of proxies for election of directors pursuant to Section 14 of the Exchange Act,
and the rules and regulations promulgated thereunder. Such notice must be
accompanied by a written consent of each proposed nominee to being named as a
nominee and to serve as a director if elected. The Corporation may require any
proposed nominee to furnish such other information as it may reasonably require
to determine the eligibility of such proposed nominee to serve as a director of
the Corporation.
(d) Only such persons who are nominated in accordance with the
procedures set forth in this Section shall be eligible to be elected at an
annual or special meeting of stockholders of the Corporation to serve as
directors. Except as otherwise provided by law, the chair of the meeting shall
have the power and duty to determine (i) whether a nomination to be brought
before an annual or special meeting was made in accordance with the procedures
set forth in this Section and (ii) if any proposed nomination is not in
compliance with this Section (including whether the stockholder or beneficial
owner, if any, on whose behalf the nomination is made solicits (or is part of a
group which solicits), or fails
3
<PAGE>
to so solicit (as the case may be), proxies in support of such stockholder's
nominee in compliance with such stockholder's representation as required by
paragraph (c) of this Section, to declare that such nomination shall be
disregarded.
Section 2. The annual meeting of stockholders shall be held each year on a
date and at a time designated by the Board of Directors. At the meeting,
directors shall be elected and any other business properly brought before the
meeting pursuant to these Bylaws may be transacted.
Section 3. Whenever stockholders are required or permitted to take any
action at a meeting, a written notice of the meeting shall be given that shall
state the place, date and hour of the meeting and, in the case of a special
meeting, the purpose or purposes for which the meeting is called. Unless
otherwise provided by law, the Certificate of Incorporation or these Bylaws, the
written notice of any meeting shall be given not less than ten (10) nor more
than sixty (60) days before the date of the meeting to each stockholder entitled
to vote at such meeting. If mailed, such notice shall be deemed to be given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at the stockholder's address as it appears on the records of the
Corporation.
Section 4. The officer who has charge of the stock ledger of the
Corporation shall prepare and make, at least ten (10) days before every meeting
of stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the Certificate of
Incorporation, may be called by the chairman and shall be called by the chairman
or secretary at the request in writing of a majority of the Board of Directors.
Section 6. No business shall be transacted at a meeting of stockholders
except in accordance with the following procedures.
(a) Annual Meetings of Stockholders. (1) The proposal of business
-------------------------------
to be considered by the stockholders may be made at an annual meeting of
stockholders only (i) pursuant to the Corporation's notice of meeting
4
<PAGE>
delivered pursuant to Article II, Section 3 of these Bylaws (or any supplement
thereto), (ii) by or at the direction of the Board (or any duly authorized
committee thereof) or (iii) by any stockholder of the Corporation who was a
stockholder of record of the Corporation at the time the notice provided for in
subparagraph (2) of this paragraph (a) of this Section is delivered to the
Secretary of the Corporation, who is entitled to vote at the meeting and who
complies with the notice procedures set forth in subparagraphs (2) and (3) of
this paragraph (a) of this Section.
(2) For business to be properly brought before an annual
meeting by a stockholder pursuant to clause (iii) of paragraph (a)(1) of this
Section, the stockholder must have given timely notice thereof in writing to the
Secretary of the Corporation and such business must otherwise be a proper matter
for stockholder action as determined by the Board. To be timely, a stockholder's
notice shall be delivered to the Secretary at the principal executive offices of
the Corporation not less than sixty (60) nor more than ninety (90) days prior to
the anniversary date of the immediately preceding annual meeting of
stockholders; provided, however, that in the event that the annual meeting is
------------------
called for a date that is not within thirty (30) days before or after such
anniversary date, notice by the stockholder in order to be timely must be so
received not later than the close of business on the tenth day following the day
on which the first public announcement of the date of the annual meeting was
made or the notice of the meeting was mailed, whichever first occurs. In no
event shall the public announcement of an adjournment or postponement of an
annual meeting of stockholders commence a new time period (or extend any time
period) for the giving of a stockholder's notice as described above. The
stockholder's notice shall contain, at a minimum, the information set forth in
paragraph (c) of this Section. For purposes of this Section, "public
announcement" shall mean disclosure in a press release reported by the Dow Jones
News Service, Associated Press or comparable national news service or in a
document publicly filed by the Corporation with the Securities and Exchange
Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.
(b) Special Meeting of Stockholders. Only such business shall be
-------------------------------
conducted at a special meeting of stockholders as shall have been described in
the Corporation's notice of meeting given pursuant to Article II, Section 3 of
these Bylaws.
(c) Contents of Stockholder's Notice. Any stockholder's notice
--------------------------------
required by this Section shall set forth for each item of business that the
stockholder proposes for consideration (i) a description of the business desired
to be brought before the stockholder meeting, (ii) the text of the proposal or
business (including the text on any resolutions proposed for consideration and
in the event that such business includes a proposal to amend the Bylaws of the
Corporation, the language of the proposed amendment), (iii) the reasons for
conducting such business at the stockholder meeting, ((iv) and any material
5
<PAGE>
interest in such business of such stockholder and the beneficial owner, if any,
on whose behalf the proposal is made and (v) any other information relating to
the stockholder, the beneficial owner, or proposed business that would be
required to be disclosed in a proxy statement or other filings in connection
with solicitations of proxies relating to the proposed item of business pursuant
to Section 14 of the Exchange Act and the rules and regulations promulgated
thereunder. Such stockholder's notice further shall set forth as to the
stockholder giving the notice and the beneficial owner, if any, on whose behalf
the proposal is made (i) the name and address of such stockholder, as they
appear on the Corporation's books, and of such beneficial owner, (ii) the class
and number of shares of capital stock of the Corporation which are owned
beneficially and of record of such stockholder and such beneficial owner, (iii)
a description of all arrangements or understandings between such stockholder and
any other person or persons (including their names) pursuant to which the
proposals are to be made by such stockholder, (iv) a representation that such
stockholder intends to appear in person or by proxy at the annual meeting to
propose the items of business set forth in the notice, (v) a representation
whether the stockholder or the beneficial owner, if any, intends or is part of a
group which intends to (1) deliver a proxy statement and/or form of proxy to
holders of at least the percentage of the Corporation's outstanding capital
stock required to approve or adopt the proposal and/or (2) otherwise solicit
proxies from stockholders in support of such proposal, and (vi) any other
information relating to such stockholder, beneficial owner, or proposed business
that would be required to be disclosed in a proxy statement or other filings
required to be made in connection with solicitations of proxies in support of
such proposal pursuant to Section 14 of the Exchange Act, and the rules and
regulations promulgated thereunder. The Corporation may require the stockholder
to furnish such other information as it may reasonably require to determine
whether each proposed item of business is a proper matter for stockholder
action.
(d) Except as otherwise provided by law, the chair of the meeting
shall have the power and duty to (i) determine whether any business proposed to
be brought before an annual or special meeting was proposed in accordance with
the procedures set forth in this Section and (ii) if any proposed business is
not in compliance with this Section (including whether the stockholder or
beneficial owner, if any, on whose behalf the proposal is made solicits (or is
part of a group which solicits), or fails to so solicit (as the case may be),
proxies in support of such stockholder's proposal in compliance with such
stockholder's representation as required by paragraph (c) of this Section, to
declare that such proposed business shall not be transacted.
(e) Notwithstanding the foregoing provisions of this Section 2.4, a
stockholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth in this Section 2.4. Nothing in this Section 2.4 shall be deemed to affect
any
6
<PAGE>
rights of stockholders to request inclusion of proposals in the
Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act.
Section 7. Any meeting of stockholders, annual or special, may be
adjourned solely by the chair of the meeting from time to time to reconvene at
the same or some other time, date and place. The stockholders present at a
meeting shall not have authority to adjourn the meeting. Notice need not be
given of any such adjourned meeting if the time, date and place thereof are
announced at the meeting at which the adjournment is taken. If the time, date
and place of the adjourned meeting are not announced at the meeting at which the
adjournment is taken, then the Secretary of the Corporation shall give written
notice of the time, date and place of the adjourned meeting not less than ten
(10) days prior to the date of the adjourned meeting. The provisions of Article
II, Section 3 of these Bylaws shall govern the delivery of such notice.
At an adjourned meeting at which a quorum is present, the stockholders may
transact any business which might have been transacted at the original meeting.
Once a share is represented for any purpose at a meeting, it shall be present
for quorum purposes for the remainder of the meeting and for any adjournment of
that meeting unless a new record date is or must be set for the adjourned
meeting. A new record date must be set only if the meeting is adjourned in a
single adjournment to a date more than 120 days after the original date fixed
for the meeting. If after the adjournment a new record date is fixed for the
adjourned meeting, notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the adjourned meeting consistent with
the new record date.
Section 8. The holders of a majority of the stock issued and outstanding
and entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the Certificate. When a
quorum is present at any meeting, the vote of the holders of a majority of the
stock having voting power present in person or represented by proxy shall decide
any question brought before such meeting, unless the question is one upon which
by express provision of applicable law, rule or regulation or of the
Certificate, different vote is requirement in which case such express provision
shall govern and control the decision of such question.
Section 9. Each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder, but no proxy shall be voted on
after three years from its date, unless the proxy provides for a longer period.
Section 10. (a) Every written consent purporting to take or authorize the
taking of corporate action and/or related revocations (each such written consent
and related revocation is referred to in this Section as a "Consent") shall
7
<PAGE>
bear the date of signature of each stockholder who signs the Consent, and no
Consent shall be effective to take the corporate action referred to therein
unless, within 60 days of the earliest dated Consent delivered in the manner
required by this Section, Consents signed by a sufficient number of stockholders
to take such action are so delivered to the Corporation.
(b) A Consent shall be delivered to the Corporation by
delivery to its registered office in the State of Delaware or to the Secretary
of the Corporation at the Corporation's principal place of business. Delivery to
the Corporation's registered office shall be made by hand or by certified or
registered mail, return receipt requested. In the event of the delivery to the
Corporation of a Consent, the Secretary of the Corporation shall provide for the
safe-keeping of such Consent and shall promptly conduct such ministerial review
of the sufficiency of the Consents and of the validity of the action to be taken
by stockholder consent as the Secretary deems necessary or appropriate,
including, without limitation, whether the holders of a number of shares having
the requisite voting power to authorize or take the action specified in the
Consent have given consent; provided, however, that if the corporate action to
------------------
which the Consent relates is the removal or replacement of one or more members
of the Board of Directors, the Secretary of the Corporation shall promptly
designate two persons, who shall not be members of the Board of Directors, to
serve as Inspectors with respect to such Consent and such Inspectors shall
discharge the functions of the Secretary of the Corporation under this Section.
If after such investigation the Secretary or the Inspectors (as the case may be)
shall determine that the Consent is valid and that the action therein specified
has been validly authorized, that fact shall forthwith be certified on the
records of the Corporation kept for the purpose of recording the proceedings of
meetings of stockholders, and the Consent shall be filed in such records, at
which time the Consent shall become effective as stockholder action. In
conducting the investigation required by this Section, the Secretary or the
Inspectors (as the case may be) may, at the expense of the Corporation, retain
special legal counsel and any other necessary or appropriate professional
advisors, and such other personnel as they may deem necessary or appropriate to
assist them, and shall be fully protected in relying in good faith upon the
opinion of such counsel or advisors.
(c) No action by written consent without a meeting shall be effective
until such date as the Secretary or the Inspectors (as the case may be) certify
to the Corporation that the Consents delivered to the Corporation in accordance
with this Section represent at least the minimum number of votes that would be
necessary to take action.
(d) Nothing contained in this Section shall in any way be construed to
suggest or imply that the Board of Directors or any stockholder shall not be
entitled to contest the validity of any Consent or revocation thereof, whether
before or after such certification by the Secretary or the Inspectors, or to
take any other action (including, without limitation, the commencement,
8
<PAGE>
prosecution, or defense of any litigation with respect thereto, and the seeking
of injunctive relief in such litigation).
Section 11. Meetings of stockholders shall be presided over by the
Chairman of the Board or by another chair designated by the Board of Directors.
The date and time of the opening and the closing of the polls for each matter
upon which the stockholders will vote at a meeting shall be determined by the
chair of the meeting and announced at the meeting. The Board of Directors may
adopt by resolution such rules and regulations for the conduct of the meeting of
stockholders as it shall deem appropriate. Except to the extent inconsistent
with such rules and regulations as adopted by the Board of Directors, the chair
of any meeting of stockholders shall have the exclusive right and authority to
prescribe such rules, regulations and procedures and to do all such acts as, in
the judgement of such chair, are appropriate for the proper conduct of the
meeting. Such rules, regulations or procedures, whether adopted by the Board or
prescribed by the chair of the meeting, may include, without limitation, the
following: (i) the establishment of an agenda or order of business for the
meeting; (ii) rules and procedures for maintaining order at the meeting and the
safety of those present; (iii) limitations on attendance at or participation in
the meeting to stockholders of record of the Corporation, their duly authorized
and constituted proxies or such other persons as the chair of the meeting shall
determine; (iv) restrictions on entry to the meeting after the time fixed for
the commencement thereof, and (v) limitations on the time allotted to questions
or comments by participants. Unless and to the extent determined by the Board of
Directors or the chair of the meeting, meetings of stockholders shall not be
required to be held in accordance with the rules of parliamentary procedure.
Section 12. Any previously scheduled annual or special meeting of the
stockholders may be postponed, and any previously scheduled annual or special
meeting of the stockholders called by the Board may be canceled, by resolution
of the Board upon public notice given prior to the time previously scheduled for
such meeting of stockholders. The Board of Directors in its discretion may set a
new record date for the postponed meeting. The Board of Directors shall be
required to set a new record date for the postponed meeting only if the meeting
is postponed in a single postponement to a date more than 120 days after the
original date fixed for the meeting. If after the postponement a new record date
is fixed for the postponed meeting, notice of the postponed meeting shall be
given to each stockholder of record entitled to vote at the postponed meeting
consistent with the new record date.
Section 13. The Board of Directors may, and shall if required by law, in
advance of any meeting of stockholders, appoint one or more inspectors of
election, who may be employees of the Corporation, to act at the meeting or any
adjournment thereof and to make a written report thereof. The Board of Directors
may designate one or more persons as alternate inspectors to replace any
inspector who fails to act. In the event that no inspector so appointed or
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designated is able to act at a meeting of stockholders, the person presiding at
the meeting shall appoint one or more inspectors to act at the meeting. No
person who is a candidate for an office at an election may serve as an inspector
at such election.
Each inspector, before entering upon the discharge of his or her duties,
shall take and sign an oath to execute faithfully the duties of inspector with
strict impartiality and according to the best of his or her ability. The
inspector or inspectors so appointed or designated shall (i) ascertain the
number of shares of capital stock of the Corporation outstanding and the voting
power of each such share, (ii) determine the shares of capital stock of the
Corporation represented at the meeting and the validity of proxies and ballots,
(iii) count all votes and ballots, (iv) determine and retain for a reasonable
period a record of the disposition of any challenges made to any determination
by the inspectors, and (v) certify their determination of the number of shares
of capital stock of the Corporation represented at the meeting and such
inspector's count of all votes and ballots. Such certification and report shall
specify such other information as may be required by law. In determining the
validity and counting of proxies and ballots cast at any meeting of stockholders
of the Corporation, the inspectors may consider such information as is permitted
by applicable law. The results of any election at which inspectors are appointed
shall not be deemed final and effective until the receipt and approval by the
Board of Directors of the inspectors' certification and report.
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole board
shall be not less than three (3) nor more than eleven (11). The first board
shall consist of three (3) directors. Thereafter, within the limits above
specified, the number of directors shall be determined by resolution of the
Board of Directors or by the stockholders at the annual meeting. The directors
shall be elected at the annual meeting of the stockholders, except as provided
in Section 2 of this Article, and each director elected shall hold office until
his successor is elected and qualified. Directors need not be stockholders.
Section 2. Vacancies and newly created directorships resulting from any
increase in the authorized number of directors may be filled by a majority of
the directors then in office, though less than a quorum, or by a sole remaining
director, and the directors so chosen shall hold office until the next annual
election and until their successors are duly elected and shall qualify, unless
sooner displaced. If there are no directors in office, then an election of
directors may be held in the manner provided by statute. If, at the time of
filling any vacancy or any newly created directorship, the directors then in
office shall constitute less than a majority of the whole board (as constituted
immediately
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prior to any such increase), the Court of Chancery may, upon application of any
stockholder or stockholders holding at least ten percent (10%) of the total
number of the shares at the time outstanding having the right to vote for such
directors, summarily order an election to be held to fill any such vacancies or
newly created directorships, or to replace the directors chosen by the directors
then in office.
Section 3. The business of the Corporation shall be managed by or under
the direction of its Board of Directors which may exercise all such powers of
the Corporation and do all such lawful acts and things as are not by statute or
by the Certificate of Incorporation or by these Bylaws directed or required to
be exercised or done by the stockholders.
Section 4. The provisions of Sections 1 and 2 of this Article are subject
to the rights, if any, of the holders of shares of any series of the Preferred
Stock of the Corporation with respect to the election of directors in the event
the Corporation defaults in the payment of dividends, the term of office of any
director so elected and the filling of a vacancy in the office of any director
so elected.
MEETINGS OF THE BOARD OF DIRECTORS
Section 5. The Board of Directors of the Corporation may hold meetings,
both regular and special, either within or without the State of Delaware.
Section 6. The first meeting of each newly elected Board of Directors
shall be held at such time and place as the Board of Directors shall determine.
Section 7. Regular meetings of the Board of Directors may be held without
notice at such time and at such place as shall from time to time be determined
by the Board.
Section 8. Special meetings of the Board of Directors may be called by the
Chairman, the President, or the Secretary. A special meeting of the Board of
Directors shall be called by the President or the Secretary upon the written
request of at least two directors. Notice of a special meeting of the Board of
Directors shall be given in writing, by telephone, telegraph, facsimile or e-
mail, or in person, as the person or persons calling such meeting may deem
necessary or appropriate in the circumstances. Notice shall be deemed valid if
deposited in the United States mail, postage prepaid, directed to the director
at the director's address as it appears in the records of the Corporation, not
less than 48 hours before the date of the meeting, or if sent by telephone,
telegram, facsimile or e-mail not less than 24 hours before the date of the
meeting to the director in accordance with the information for such
communications as it appears in the records of the Corporation.
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Section 9. At all meetings of the Board a majority of the Directors shall
constitute a quorum for the transaction of business and the act of a majority of
the Directors present at any meeting at which there is a quorum shall be the act
of the Board of Directors, except as may be otherwise specifically provided by
statute or by the Certificate of Incorporation. If a quorum shall not be present
at any meeting of the Board of Directors, the Directors present thereat may
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present.
Section 10. Pursuant to Section 141 (i) of the Delaware Corporation Law,
meetings of the Board of Directors may be held by use of conference telephone
communications equipment by means of which all persons participating in the
meeting can hear each other.
Section 11. Unless otherwise restricted by the Certificate of
Incorporation or these bylaws, any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting, if all members of the board or committee, as the case may be,
consent thereto in writing or writings are filed with the minutes of proceedings
of the board or committee.
COMMITTEES OF DIRECTORS
Section 12. The Board of Directors may, in the manner provided by law,
designate one or more committees of the board. Any such committee, to the extent
provided in the enabling resolution and permitted by applicable law, shall have
and may exercise the powers of the Board of Directors in the management of the
business and affairs of the Corporation, and may authorize the seal of the
Corporation to be affixed to all papers which may require it; provided that in
the absence or disqualification of any member of such committee or committees,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member. Such committee or committees shall have
such name or names as they may be determined from time to time by resolution
adopted by the Board of Directors.
Section 13. Meetings of a committee may be called by any member of the
committee upon notice thereof given to each member either by mail not less than
48 hours before the date of the meeting, by telephone or telegram on 24 hours'
notice, or on such shorter notice as the person or persons calling such meeting
may deem necessary or appropriate in the circumstances. Except as may be
otherwise specifically provided by the Board, at all committee meetings a
majority of the members of the committee shall constitute a quorum for the
transaction of business and the act of a majority of the members voting at any
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meeting at which there is a quorum shall be the act of the committee; if a
quorum shall not be present at any committee meeting the members present thereat
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present. Each committee
shall keep regular minutes of its meetings and report the same to the Board of
Directors when required.
COMPENSATION OF DIRECTORS
Section 14. The directors may be paid their expenses, if any, of
attendance at each meeting of the Board of Directors and any may be paid a fixed
sum for attendance at each meeting of the Board of Directors or a stated salary
as director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation thereof. Members of
special or standing committees may be allowed like compensation for attending
committee meetings.
ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the
Certificate of Incorporation or of these bylaws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
Corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by telegram.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes of the Certificate of Incorporation or of these
bylaws, a waiver thereof in writing, signed by the person or persons entitled to
said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The officers of the Corporation shall be chosen by the Board of
Directors and shall be a chairman of the board, a president, a vice president, a
secretary and a treasurer. The Board of Directors may also choose additional
vice presidents, and one or more assistant secretaries and assistant treasurers.
Any number of offices may be held by the same person, unless the Certificate of
Incorporation or these bylaws otherwise provide.
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Section 2. The Board of Directors at its first meeting after each annual
meeting of stockholders shall choose a chairman of the board, a president, one
or more vice presidents, a secretary and a treasurer.
Section 3. The Board of Directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the board.
Section 4. The salaries of all officers and agents of the Corporation
shall be fixed by the Board of Directors, or by the officers under authority
granted by the Board of Directors.
Section 5. The officers of the Corporation shall hold office until their
successors are chosen and qualify. Any officer elected or appointed by the Board
of Directors may be removed at any time by the affirmative vote of a majority of
the Board of Directors. Any vacancy occurring in any office of the Corporation
shall be filled by the Board of Directors.
THE CHAIRMAN OF THE BOARD
Section 6. The chairman of the board shall be the chief executive officer
of the Corporation; he shall preside at all meetings of the stockholders and
directors, shall have general and active management of the business of the
Corporation, shall see that all orders and resolutions of the board are carried
into effect and shall perform such other duties as the Board of Directors shall
prescribe. The chairman of the board shall be a full time employee and subject
to such compensation as the Board of Directors shall determine.
THE PRESIDENT
Section 7. The president of the Corporation shall be the principal
operating and administrative officer of the Corporation. If there is no chairman
of the board or during the absence or disability of the chairman of the board,
he shall exercise all of the powers and discharge all of the duties of the
chairman of the board. He shall possess power to sign all certificates,
contracts and other instruments of the Corporation. He shall, in the absence of
the chairman of the board, preside at all meetings of the stockholders and of
the Board of Directors. He shall perform all such other duties as are incident
to his office or are properly required of him by the Board of Directors.
THE VICE PRESIDENTS
Section 8. Unless otherwise provided by the Board of Directors, each
senior vice president may, in the absence of the president and the chairman of
the Board of Directors, perform the duties and exercise the powers of the
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president. Each vice president shall at all times possess power to sign all
certificates, contracts and other instruments of the Corporation, except as
otherwise limited in writing by the chairman of the board or the president of
the Corporation, and shall have such other authority and perform such other
duties as these bylaws or the Board of Directors, executive committee, chairman
of the board or president shall prescribe.
THE SECRETARY AND ASSISTANT SECRETARIES
Section 9. The secretary shall attend all meetings of the Board of
Directors and all meetings of the stockholders and record all the proceedings of
the meetings of the Corporation and of the Board of Directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board of Directors or
president, under whose supervision he shall be. He shall have custody of the
corporate seal of the Corporation and he, or an assistant secretary, shall have
authority to affix the same to any instrument requiring it and when so affixed,
it may be attested by his signature or by the signature of such assistant
secretary. The Board of Directors may give general authority to any other
officer to affix the seal of the Corporation and to attest the affixing by his
signature.
Section 10. The assistant secretary, or if there be more than one, the
assistant secretaries in the order determined by the Board of Directors (or if
there be no such determination, then in the order of their election), shall, in
the absence of the secretary or in the event of his inability or refusal to act,
perform the duties and exercise the powers of the secretary and shall perform
such other duties and have such other powers as the Board of Directors may from
time to time prescribe.
THE TREASURER AND ASSISTANT TREASURER
Section 11. The treasurer shall have the custody of the corporate funds
and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the Corporation to
such depositories as may be designated by the Board of Directors.
Section 12. He shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the president and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all his transactions as treasurer and of the financial condition of the
Corporation.
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Section 13. If required by the Board of Directors, he shall give the
Corporation a bond (which shall be renewed every six years) in such sum and with
such surety or sureties as shall be satisfactory to the Board of Directors for
the faithful performance of the duties of his office and for the restoration to
the Corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the Corporation.
Section 14. The assistant treasurer, or if there shall be more than one,
the assistant treasurers in the order determined by the Board of Directors (or
if there be no such determination, then in the order of their election), shall,
in the absence of the treasurer or in the event of his inability or refusal to
act, perform the duties and exercise the powers of the treasurer and shall
perform such other duties and have such powers as the Board of Directors may
from time to time prescribe.
ARTICLE VI
CERTIFICATES OF STOCK
Section 1. Every holder of stock in the Corporation shall be entitled to
have a certificate, signed by, or in the name of the Corporation by, the
chairman or vice chairman of the Board of Directors or the president or a vice
president and the treasurer or an assistant treasurer, or the secretary or an
assistant secretary of the Corporation, certifying the number of shares owned by
him in the Corporation.
Section 2. Any or all of the signatures on the certificate may be a
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the Corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issue.
LOST CERTIFICATES
Section 3. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the Corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen, or destroyed. When authorizing such
issue of a new certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it shall require
and/or to give the Corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the Corporation with respect to the
Certificate alleged to have been lost, stolen or destroyed.
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TRANSFERS OF STOCK
Section 4. Upon surrender to the Corporation or the transfer agent of the
Corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, it shall be the
duty of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
Section 5. (a) In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action other than stockholder action by written consent, the Board
of Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which record date: (i) in the case of determination of
stockholders entitled to vote at any meeting of stockholders or adjournment
thereof, shall, unless otherwise required by law, not be more than sixty (60)
nor less than ten (10) days before the date of such meeting, and (ii) in the
case of any other lawful action other than stockholder action by written
consent, shall not be more than sixty days prior to such other action. If no
record date is fixed by the Board of Directors: (i) the record date for
determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the
day on which notice is given, or, if notice is waived, at the close of
business on the next day preceding the day on which the meeting is held, and
(ii) the record date for determining stockholders for any other purpose (other
than stockholder action by written consent) shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
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date for the adjourned meeting.
(b) The record date for determining stockholders entitled to express
consent to corporate action in writing without a meeting shall be as fixed by
the Board of Directors or as otherwise established under this Section. Any
person seeking to have the stockholders authorize or take corporate action by
written consent without a meeting shall, by written notice addressed to the
Secretary and delivered to the Corporation and signed by a stockholder of
record, request that a record date be fixed for such purpose. The written notice
shall contain at a minimum the information set forth in paragraph (c) of this
Section. The Board of Directors shall have ten (10) days following the date of
receipt of the notice to determine the validity of the request. Following the
determination of the validity of the request, and (subject to the requirements
of this paragraph) no later than ten (10) days after the date on which such
request
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is received by the Corporation, the Board of Directors may fix a record
date for such purpose which shall be no more than ten (10) days after the date
upon which the resolution fixing the record date is adopted by the Board of
Directors and shall not precede the date such resolution is adopted. If the
Board of Directors fails within ten (10) days after the date the Corporation
receives such notice to fix a record date for such purpose, the record date
shall be the day on which the first written consent is delivered to the
Corporation in the manner described in Article II, Section 11 unless prior
action by the Board of Directors is required under the General Corporation Law
of Delaware, in which event the record date shall be at the close of business on
the day on which the Board of Directors adopts the resolution taking such prior
action.
(c) Any stockholder's notice required by this Section shall describe each
action that the stockholder proposes to take by consent. For each such proposal,
the notice shall set forth (i) the text of the proposal (including the text of
any resolutions to be adopted by consent and the language of any proposed
amendment to the bylaws of the Corporation), (ii) the reasons for soliciting
consents for the proposal, (iii) any material interest in the proposal held by
the stockholder and the beneficial owner, if any, on whose behalf the action is
to be taken, and (iv) any other information relating to the stockholder, the
beneficial owner, or the proposal that would be required to be disclosed in
filings in connection with the solicitation of proxies or consents pursuant to
Section 14 of the Exchange Act and the rules and regulations promulgated
thereunder. To the extent the proposed action by consent involves the election
of directors, the notice shall set forth as to each person whom the stockholder
proposes to elect as a director (i) the name, age, business address, residence
address and nationality of the person, (ii) the principal occupation and
employment of the person, (iii) the class or series and number of shares of
capital stock of the Corporation which are owned beneficially or of record by
the person and (iv) any other information relating to the person that would be
required to be disclosed in filings required to be made in connection with
solicitations of proxies or consents for the election of directors pursuant to
Section 14 of the Exchange Act and the rules and regulations promulgated
thereunder. In addition to the foregoing, the notice shall set forth as to the
stockholder giving the notice and the beneficial owner, if any, on whose behalf
the notice is given (i) the name and address of such stockholder as they appear
on the Corporation's books, and the name and address of such beneficial owner,
(ii) the class and number of shares of capital stock of the Corporation which
are owned beneficially and of record by such stockholder and such beneficial
owner, (iii) a description of all arrangements or understandings between such
stockholder and any other person or persons relating to the proposed action by
consent, (iv) a representation whether the stockholder or the beneficial owner,
if any, intends or is part of a group which intends to (1) deliver a proxy
statement and/or consent solicitation statement to holders of at least the
percentage of the Corporation's outstanding capital stock required to effect the
action by consent either to solicit consents or to solicit proxies to execute
consents, and/or (2) otherwise solicit proxies or consents from
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stockholders in support of the action to be taken by consent, and (v) any other
information relating to such stockholder and beneficial owner that would be
required to be disclosed in filings required to be made in connection with
solicitation of proxies or consents relating to the proposed action by consent
pursuant to Section 14 of the Exchange Act and the rules and regulations
promulgated thereunder. During the ten (10) day period following the date of the
receipt of the notice required under paragraph (b) of this Section, the
Corporation may require the stockholder of record and/or beneficial owner
requesting a record date for proposed stockholder action by consent to furnish
such other information as it may reasonably require to determine the validity of
the request for a record date.
REGISTERED STOCKHOLDERS
Section 6. The Corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the Corporation, subject to
the provisions of the Certificate of Incorporation, if any, may be declared by
the Board of Directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the Certificate of Incorporation.
Section 2. Before payment of any dividend, there may be set aside out of
any funds of the Corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for such other
purpose as the directors shall think conducive to the interest of the
Corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
ANNUAL STATEMENT
Section 3. The Board of Directors shall present at each annual meeting,
and at any special meeting of the stockholders when called for by vote of the
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stockholders, a full and clear statement of the business and condition of the
Corporation.
CHECKS
Section 4. All checks or demands for money and notes of the Corporation
shall be signed by such officer or officers or such other person or persons as
the Board of Directors may from time to time designate.
FISCAL YEAR
Section 5. The fiscal year of the Corporation shall be fixed by resolution
of the Board of Directors.
SEAL
Section 6. The corporate seal shall have inscribed thereon the name of the
Corporation, the year of its organization and the words "Corporate Seal,
Delaware". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE VIII
INDEMNIFICATION
Section 1. Subject to Section 3 of this Article VIII, the Corporation
shall indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the Corporation) (a "third party proceeding") by reason of
the fact that he is or was a director or officer of the Corporation, or is or
was serving at the request of the Corporation as a director or officer of
another corporation, partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans (an "indemnitee"),
against all expenses, liability and loss (including attorneys' fees, judgements,
fines, ERISA excise taxes or penalties and amounts paid in settlement) actually
and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation, and, with respect
to any criminal action or proceeding had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding by
judgement, order, settlement, conviction, or upon a plea of nolo contendere or
---- ----------
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be in or
not opposed to the best interests of the Corporation, and with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
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Section 2. Subject to Section 3 of this Article VIII, the Corporation
shall indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the right
of the Corporation to procure a judgement in its favor (together with third
party proceedings, "proceedings") by reason of the fact that he is or was a
director or officer of the Corporation, or is or was serving at the request of
the Corporation as a director or officer of another Corporation, partnership,
joint venture, trust or other enterprise, including service with respect to
employee benefit plans (an "indemnitee"), against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation; except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
AUTHORIZATION OF INDEMNIFICATION
Section 3. Any indemnification under this Article VIII (unless ordered by
a court) shall be made by the Corporation only as authorized in the specific
case upon a determination that indemnification of the director, or officer is
proper in the circumstances because he has not met the applicable standard of
conduct set forth in Section 1 or Section 2 of this Article VIII, as the case
may be. Such determination shall be made (i) by a majority vote of the directors
who were not parties to such actions, suit or proceeding, even though less than
a quorum, or (ii) if there are no such directors or if such directors so direct,
by independent legal counsel in a written opinion, or (iii) by the stockholders.
To the extent, however, that a director or officer of the Corporation has been
successful on the merits or otherwise in defense of any action, suit or
proceeding, described above, or in defense of any claim, issue or matter
therein, he shall be indemnified against expenses (including attorney's fees)
actually and reasonably incurred by him in connection therewith, without the
necessity of authorization in the specific case.
Section 4. Presumptions And Procedural Protections.
----------------------------------------
(a) The termination of any action, suit or proceeding by judgement, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the Corporation, and with respect to any criminal action
or proceeding, had reasonable cause to believe that his conduct was unlawful.
21
<PAGE>
(b) Except as otherwise provided in this Section, the determination of
whether an Indemnitee is eligible for indemnification and has met the applicable
standard of conduct shall be made by the Board of Directors by a majority vote
of the directors who are not parties to the action, suit or proceeding in
question, even though less than a quorum. In the event there are no such
directors, the Board of Directors shall direct that the determination be made by
independent counsel pursuant to paragraph (c) of this Section.
(c) At the request of the Indemnitee or the Corporation, the determination
of whether an Indemnitee is eligible for indemnification and has met the
applicable standard of conduct shall be made by independent counsel, selected by
the Indemnitee and reasonably acceptable to the Corporation. The Corporation
shall bear the expense of the independent counsel, and the independent counsel's
determination regarding the eligibility of the Indemnitee to indemnification
shall be binding on the Corporation.
(d) For purposes of this Article VIII, a person shall be deemed to have
acted or refrained from acting in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Corporation, or,
with respect to any criminal action or proceeding had no reasonable cause to
believe his conduct was unlawful, if his action, or forbearance as the case may
be, is based on the records or books of account of the Corporation or other
enterprise, or on information supplied by the officers of the Corporation or
other enterprise in the course of their duties, or on the advice of legal
counsel for the Corporation or other enterprise or on information or records
given or reports made to the Corporation or other enterprise by an independent
certified public accountant or by an appraiser or other expert selected with
reasonable care by the Corporation or other enterprise. The term "other
enterprise" as used in this Section shall mean any other Corporation or any
partnership, joint venture, trust, employee benefit plan, or other enterprise
which such person is or was serving at the request of the Corporation as a
director, officer or employee. The provisions of this Section shall not be
deemed exclusive or to limit in any way the circumstances in which a person may
be deemed to have met the applicable standard of conduct for indemnification or
to show good faith, as the case may be.
Section 5. If a claim for indemnification or advancement of expenses under
this Article VIII is not paid in full within ten (10) days after a written claim
therefor by the Indemnitee has been received by the Corporation, the Indemnitee
may file suit to recover the unpaid amount of such claim and shall be entitled
to have all the expenses of prosecuting such claim, including attorneys fees and
costs, paid by the Corporation as incurred. In any such action the Corporation
shall have the burden of proving that the Indemnitee is not entitled to the
requested indemnification or advancement of expenses under applicable law. The
Indemnitee only shall have to repay the expenses of prosecuting such claim
22
<PAGE>
if the Indemnitee is wholly unsuccessful. The Court of Chancery of the State of
Delaware shall be the exclusive forum for any litigation by the Indemnitee and
the Corporation over any aspect of the Indemnitee's rights to indemnification or
advancements.
EXPENSES PAYABLE IN ADVANCE
Section 6. Except as limited by Section 5 of this Article, expenses
incurred in defending a threatened or pending action, suit or proceeding shall
be paid by the Corporation in advance of the final disposition of such action,
suit or proceeding upon receipt of an undertaking by or on behalf of the
director or officer to repay such amount if it shall ultimately be determined
that he is not entitled to be indemnified by the Corporation as authorized in
the Article VIII.
NON-EXCLUSIVITY AND SURVIVAL OF INDEMNIFICATION
Section 7. The indemnification and advancement of expenses provided by or
granted pursuant to the other Sections of this Article VIII shall not be deemed
exclusive of any rights to which any person seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, contract,
vote of stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding such
office, it being the policy of the Corporation that indemnification of the
persons specified in Sections 1 and 2 of this Article VIII shall be made to the
fullest extent permitted by Delaware law. The provisions of this Article VIII
shall not be deemed to preclude the indemnification of any person who is not
specified in Sections 1 or 2 of this Article VIII but whom the Corporation has
the power or obligation to indemnify under the provisions of Delaware law or
otherwise. The indemnification and advancement of expenses provided by or
granted pursuant to this Article VIII shall, unless otherwise provided or
ratified, continue as to a person who has ceased to be a director, officer or
employee and shall inure to the benefit of the heirs, executors and
administrators of such person.
INSURANCE
Section 8. The Corporation may purchase and maintain insurance on behalf
of any person who is or was a director or employee of the Corporation, or is or
was serving at the request of the Corporation as a director, officer or employee
of another Corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise against any liability asserted against him and incurred by
him in any such capacity, or arising out of his status as such, whether or not
the Corporation would have the power or the obligation to indemnify him against
such liability under the provisions of this Article VIII, or otherwise under
Delaware law.
23
<PAGE>
MEANING OF "CORPORATION" FOR PURPOSES OF ARTICLE VIII
Section 9. For purposes of this Article VIII, references to "the
Corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers or employees,
so that any person who is or was a director, officer or employee, of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer or employee of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise,
shall stand in the same position under the provisions of this Article VIII with
respect to the resulting or surviving corporation as he would have with respect
to such constituent corporation if its separate existence had continued.
Section 10. Subject to Section 5 hereof, the Corporation shall be
required to indemnify an indemnitee in connection with a proceeding (or part
thereof) initiated by such indemnitee only if the initiation of such
proceeding (or part thereof) by the indemnitee was authorized in writing by
the Board of Directors.
ARTICLE IX
AMENDMENTS
Section 1. These bylaws may be altered, amended or repealed or new bylaws
may be adopted by the stockholders or by the Board of Directors, when such power
is conferred upon the Board of Directors, by the Certificate of Incorporation,
at any regular meeting of the stockholders or of the Board of Directors or at
any special meeting of the stockholders or of the Board of Directors if notice
of such alteration, amendment, repeal or adoption of new bylaws be contained in
the notice of such meeting.
24
<PAGE>
EXHIBIT 4.2(c)
================================================================================
ADVANCED MICRO DEVICES, INC.
ISSUER
11% Senior Secured Notes due 2003
---------------------------------
SECOND SUPPLEMENTAL INDENTURE
Dated as of April 8, 1999
---------------------------------
United States Trust Company of New York
TRUSTEE
================================================================================
<PAGE>
SECOND SUPPLEMENTAL INDENTURE
-----------------------------
This SECOND SUPPLEMENTAL INDENTURE (this "Second Supplemental
Indenture"), dated as of April 8, 1999, by and between Advanced Micro Devices,
Inc., a Delaware corporation (the "Company"), and United States Trust Company of
New York, as trustee (the "Trustee").
RECITALS
--------
A. Pursuant to that certain Indenture (the "Original Indenture"),
dated as of August 1, 1996 by and between the Company and the Trustee, the
Company issued and sold $400,000,000 in aggregate principal amount of its 11%
Senior Secured Notes due 2003 (the "Notes").
B. Pursuant to the provisions of the Indenture and with the consent of
the holders of at least a majority in principal amount of the outstanding Notes,
the Company and the Trustee have amended, modified and supplemented the Original
Indenture by that certain First Supplemental Indenture dated as of January 13,
1999 (the Original Indenture, as amended by the First Supplemental Indenture,
being the "Indenture"). Capitalized terms used herein without definition shall
have the same meanings herein as set forth in the Indenture.
C. Under the Indenture, unless certain financial tests can be met, the
Company is only permitted to make Restricted Investments up to specified amounts
and/or for certain purposes, and may not reallocate or adjusts the amounts of
such permitted exceptions. One such permitted exception (which has not been
utilized to date) permits the Company to make Investments of up to $50 million,
but restricts those Investments to the FASL Unrestricted Subsidiary.
D. The Company expects it may need to make certain Restricted
Investments outside of the existing permitted exceptions and, in particular, to
use the $50 million currently allocated to the FASL Unrestricted Subsidiary for
other Restricted Investments (including, without limitation, Investments in the
Dresden, Germany Unrestricted Subsidiary).
E. The Company and the Trustee now desire to amend, modify and
supplement the Indenture, in the respects hereinafter set forth, to specifically
permit, absent an Event of Default, additional Investments of up to $70 million,
without additional restrictions and to reallocate $50 million (which is
currently restricted to investment in the FASL Unrestricted Subsidiary) to
general investment purposes, making a total of $120 million available for such
general investments.
F. The Indenture further provides that the Company may, at its option,
apply the Net Proceeds from any Asset Sale to certain uses, including, without
limitation, the permanent reduction of amounts outstanding under the New Credit
Agreement (and to correspondingly reduce commitments with respect thereto).
1
<PAGE>
G. The Company and the Trustee now desire to amend, modify and
supplement the Indenture, the respects hereinafter set forth, to provide that,
from and after the date of this Second Supplemental Indenture, the Company
shall, following receipt of the Net Proceeds from Asset Sales (including,
without limitation, Asset Sales of the capital stock or assets of the PLD
Subsidiary), apply the cash portion of such aggregate Net Proceeds to the
reduction of outstanding term loans made pursuant to the New Credit Agreement,
until such term loans shall have been reduced by at least $70 million in the
aggregate.
H. In accordance with Section 9.02 of the Indenture, the holders of at
least a majority in principal amount of the outstanding Notes have consented to
the amendments to the Indenture set forth in this Second Supplemental Indenture.
NOW, THEREFORE, in consideration of the foregoing and in consideration
of the mutual covenants herein contained, the parties hereto make this Second
Supplemental Indenture intending to be legally bound hereby.
Section 1. Incorporation of the Indenture. Except as specifically
------------------------------
amended hereby, the terms and conditions of the Indenture remain in full force
and effect as if fully rewritten herein.
Section 2. Amendment to Section 1.01 of the Indenture. Section 1.01
------------------------------------------
of the Indenture is hereby amended by adding the following definition of "Second
Supplemental Indenture":
"'Second Supplemental Indenture' means that certain Second
Supplemental Indenture, dated as of April 8, 1999, by and between the
Company and the Trustee."
Section 3. Amendment to Section 4.07 of the Indenture. Section 4.07
------------------------------------------
of the Indenture is hereby amended by deleting the paragraph immediately
following subparagraph (c) in its entirety and inserting in lieu thereof the
following text:
"Provided that no Event of Default shall have occurred and be
continuing, the foregoing provisions will not prohibit (i) the payment of
any dividend within 60 days after the date of declaration thereof, if at
said date of declaration such payment would have complied with the
provisions of this Indenture; (ii) the redemption, repurchase, retirement
or other acquisition of any Equity Interests of the Company in exchange
for, or out of the proceeds of, the substantially concurrent sale (other
than to a Subsidiary of the Company) of other Equity Interests of the
Company (other than any Disqualified Stock) or the substantially concurrent
conversion of such Equity Interests for other Equity Interests of the
Company (other than Disqualified Stock); provided that the amount of any
such net cash proceeds that are utilized for any such redemption,
repurchase, retirement or other acquisition shall be excluded from clause
(c)(ii) of the preceding paragraph; (iii) the making of any principal
payment on, or the purchase, redemption, defeasance or other acquisition or
retirement for value of any
2
<PAGE>
subordinated Indebtedness with the net cash proceeds from an incurrence of
Permitted Refinancing Indebtedness or the substantially concurrent sale
(other than to a Subsidiary of the Company) of Equity Interests of the
Company (other than Disqualified Stock) or the substantially concurrent
conversion of such Indebtedness into Equity Interests of the Company (other
than Disqualified Stock); provided that the amount of any such net cash
proceeds that are utilized for any such redemption, repurchase, retirement
or other acquisition shall be excluded from clause (c)(ii) of the preceding
paragraph; (iv) the making of a Guarantee (but not the payment of such
Guarantee) by the Company of up to $175.0 million of the FASL Unrestricted
Subsidiary's Indebtedness; (v) any payments by the Company required
pursuant to the CIBC Guarantee; (vi) Restricted Payments in an aggregate
amount not to exceed $10.0 million; and (vii) Investments by the Company of
up to $120.0 million."
Section 4. Amendment to Section 4.10(a) of the Indenture. Section
---------------------------------------------
4.10(a) of the Indenture is hereby amended by deleting the second paragraph of
subparagraph (a) in its entirety and inserting in lieu thereof the following
text:
"Within 24 months after the receipt of any Net Proceeds from an Asset
Sale, the Company may apply, or may cause the applicable Restricted
Subsidiary to apply, such Net Proceeds to (i) the acquisition by the
Company of all of the Capital Stock of any Person in the same or a
substantially similar line of business as that conducted by the Company or
any of its Subsidiaries as of the Issue Date, (ii) the making of a capital
expenditure, (iii) the acquisition of other long-term Tangible Assets, (iv)
the permanent reduction of amounts outstanding under the New Credit
Agreement (and to correspondingly reduce commitments with respect thereto)
and (v) the making of a Restricted Strategic Investment which is a
Permitted Investment. Notwithstanding anything to the contrary in this
Indenture, from and after the date of the Second Supplemental Indenture,
within 30 Business Days after the receipt by the Company of Net Proceeds
from Asset Sales (including without limitation, Asset Sales of all or any
portion of the assets or Equity Interests in the PLD Subsidiary), the
Company shall apply the cash portion of such aggregate Net Proceeds to the
reduction of the amounts outstanding under the term loans made pursuant to
the New Credit Agreement, until the amounts outstanding under such term
loans shall have been reduced by an aggregate amount of at least $70
million. Pending the final application of any such Net Proceeds, the
Company shall hold such Net Proceeds in the form of cash or Cash
Equivalents. Any Net Proceeds from Asset Sales that are not applied or
invested as provided in the first or second sentences of this paragraph
will be deemed to constitute "Excess Proceeds.""
Section 5. Counterparts. This Second Supplemental Indenture may be
------------
executed in several counterparts, each of which shall be deemed an original but
shall constitute one and the same instrument.
3
<PAGE>
Section 6. Effectiveness. This Second Supplemental Indenture shall
-------------
become effective as of the date first written above.
Section 7. Headings. The Section references herein are for
--------
convenience of reference only and shall not affect the construction hereof.
[Remainder of page intentionally left blank]
4
<PAGE>
SIGNATURES
----------
IN WITNESS WHEREOF, the parties hereto have caused this Second
Supplemental Indenture to be duly executed by their duly authorized officers and
attested, all as of the day and year first above written.
ADVANCED MICRO DEVICES, INC.
/s/Francis P. Barton
--------------------------------------------------------
By: Francis P. Barton
Title: Senior Vice President and Chief Financial Officer
UNITED STATES TRUST COMPANY OF NEW YORK, as Trustee
/s/Louis P. Young
--------------------------------------------------------
By: Louis P. Young
Title: Vice President
<PAGE>
EXHIBIT 10.24h
SEVENTH AMENDMENT TO CREDIT AGREEMENT AND WAIVER
THIS SEVENTH AMENDMENT TO CREDIT AGREEMENT AND WAIVER (this
"Amendment"), is entered into as of April 8, 1999, among Advanced Micro Devices,
---------
Inc., a Delaware corporation (the "Company"), the "Banks" party to the Credit
-------
Agreement referenced below (collectively, the "Banks"), ABN AMRO Bank N.V., as
-----
Syndication Agent for the Banks (the "Syndication Agent"), Canadian Imperial
-----------------
Bank of Commerce, as Documentation Agent for the Banks (the "Documentation
-------------
Agent"), and Bank of America National Trust and Savings Association, as
Administrative Agent for the Banks (the "Agent").
-----
WHEREAS, the Company, the Banks, the Syndication Agent, the
Documentation Agent and the Agent are parties to a Credit Agreement dated as of
July 19, 1996, as amended by a First Amendment to Credit Agreement dated as of
August 7, 1996, a Second Amendment to Credit Agreement dated as of September 9,
1996, a Third Amendment to Credit Agreement dated as of October 1, 1997, a
Fourth Amendment to Credit Agreement dated as of January 26, 1998, a Fifth
Amendment to Credit Agreement dated as of February 26, 1998, and a Sixth
Amendment to Credit Agreement dated as of June 30, 1998 (as so amended, the
"Credit Agreement");
- -----------------
WHEREAS, the Company has requested that the Majority Banks agree to
certain amendments to the Credit Agreement;
WHEREAS, the Majority Banks have agreed to such request, subject to
the terms and conditions hereof;
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained herein, the parties hereto agree as follows:
1. Definitions; Interpretation.
(a) Terms Defined in Credit Agreement. All capitalized terms used in
---------------------------------
this Amendment (including in the recitals hereof) and not otherwise defined
herein shall have the meanings assigned to them in the Credit Agreement.
(b) Interpretation. The roles of interpretation set forth in Section
--------------
1.02 of the Credit Agreement shall be applicable to this Amendment and are
incorporated herein by this reference.
2. Amendments to the Credit Agreement.
(a) Amendments. The Credit Agreement is hereby amended as
----------
follows:
(i) The definition of Applicable Fee Amount set forth in
Section 1.01 of the Credit Agreement is hereby amended and restated in its
entirety as follows:
<PAGE>
"Applicable Fee Amount" means, for purposes of calculating the commitment
---------------------
fee hereunder for any date, 0.50% per annum.
(ii) The definition of Applicable Margin set forth in
Section 1.01 of the Credit Agreement is hereby amended and restated in its
entirety as follows:
"Applicable Margin" means, for any day, (i) 1.50% per annum with respect to
-----------------
any Base Rate Loan and (ii) 2.75% per annum with respect to any Offshore
Rate Loan.
(iii) A new Section 5.21 is hereby added to the Credit
Agreement as follows
"5.21 Year 2000. On the basis of a comprehensive review and assessment
---------
undertaken by the Company of the Company's and its Subsidiaries' computer
applications and an assessment by the Company of the Company's and its
Subsidiaries' material suppliers, vendors and customers, the Company reasonably
believes that the "Year 2000 problem" (that is, the risk that the computer
applications used by any Person may be unable to recognize and perform properly
date-sensitive functions involving certain dates prior to and any date after
December 31, 1999) will not result in a Material Adverse Effect."
(iv) Section 7.04(g) is hereby amended and restated in its
entirety as follows:
"(g) Investments (i) by the Company in the capital stock of the Vantis
Subsidiary, made in exchange for asset transfers permitted under Section
7.02(d), (ii) by the Vantis Subsidiary in the capital stock of one or more of
its Wholly-Owned Subsidiaries, made in exchange for asset transfers permitted
under Section 7.02(d) and (iii) in connection with the Disposition of the
capital stock or assets of the Vantis Subsidiary (the "Vantis Disposition"), as
permitted by waiver in the Seventh Amendment to Credit Agreement and Waiver
dated as of April 8, 1999 (the "Seventh Amendment"), by the Company in the
capital stock of Vantis Corporation or in the entity acquiring the Vantis
Subsidiary as a portion of the consideration for the sale or transfer of the
assets or capital stock of the Vantis Subsidiary, to the extent such Investments
are permitted by waiver as set forth in the Seventh Amendment."
(v) Section 7.15 is hereby amended and restated in its
entirety as follows:
"7.15 Modified Quick Ratio. The Company shall not as of the end of
--------------------
any fiscal quarter suffer or permit its ratio (determined on a Consolidated
basis) of (a) cash plus the value (valued in accordance with GAAP) of all
Cash Equivalents, other than Cash Equivalents subject to a Lien securing
Indebtedness, plus net Receivables, plus Fujitsu Receivables, to (b)
Consolidated Current Liabilities, to be less than (i) 0.75 to 1.00 at the
end of each of the first, second and third fiscal quarters of 1999, (ii)
0.80 to 1.00 at fiscal year-end 1999, (iii) 0.90 to 1.00 at the end of the
first fiscal quarter of 2000, and (iv) 1.00 to 1.00 at the end of the
second fiscal quarter of 2000 and thereafter."
(vi) Section 7.16 of the Credit Agreement is hereby amended
and restated in its entirety as follows:
2
<PAGE>
"7.16 Minimum Tangible Net Worth. The Company shall not suffer or
--------------------------
permit its Consolidated Tangible Net Worth as of the end of any fiscal
quarter to be less than 90% of the Company's Consolidated Tangible Net
Worth at the end of the first fiscal quarter of 1999 plus (i) (without
----
duplication for amounts included under clause (iv) below) 85% of net income
for the Company and its Restricted Subsidiaries computed from the first day
of the Company's second fiscal quarter of 1999 through the end of such
fiscal quarter for which the determination is being made, determined
quarterly on a Consolidated basis and not reduced by any quarterly loss,
plus (ii) 100% of the Net Issuance Proceeds of any sale of capital stock of
----
the Company by or for the account of the Company occurring on or after the
first day of the Company's second fiscal quarter of 1999, plus (iii) any
----
increase in stockholders' equity of the Company resulting from the
conversion of debt securities of the Company to equity securities of the
Company on or after the first day of the Company's second fiscal quarter of
1999, plus (iv) 100% of the Net Issuance Proceeds (net of Taxes payable in
----
respect thereof) of any sale of capital stock of the Vantis Subsidiary by
or for the account of the Company occurring on or after the first day of
the Company's second fiscal quarter of 1999."
(vii) Section 7.17 of the Credit Agreement is hereby
amended and restated in its entirety as follows:
"7.17 Leverage Ratio. The Company shall not as of the end of any
--------------
fiscal quarter suffer or permit its Leverage Ratio to be greater than (i)
1.05 to 1.00 at the end of any fiscal quarter ending in 1999, (ii) 1.00 to
1.00 at the end of the first fiscal quarter of 2000, and (iii) 0.90 to 1.00
at the end of the second fiscal quarter of 2000 and thereafter."
(viii) Section 7.19 is hereby amended and restated in its
entirety as follows:
"7.19 Profitability. The Company shall not suffer or permit (a) a net
-------------
loss of greater than $150,000,000 for the first fiscal quarter of 1999, (b)
a net loss of greater than $45,000,000 for the second fiscal quarter of
1999, and (c) net income to be less than $1.00 for the third fiscal quarter
of 1999 and for each fiscal quarter thereafter, in each case determined for
the Company on a Consolidated basis."
(ix) A new Section 7.20 is hereby added to the Credit
Agreement as follows:
"7.20 Minimum Cash and Cash Equivalents. The Company shall not at any
---------------------------------
time suffer or permit the value of its (a) cash plus the value (valued in
----
accordance with GAAP) of all Cash Equivalents, other than cash and Cash
Equivalents subject to a Lien securing Indebtedness, minus (b) the
-----
aggregate principal amount of all Revolving Loans outstanding at such time,
to be less than $200,000,000, determined for the Company on a Consolidated
basis."
(b) References Within Credit Agreement. Each reference in the
----------------------------------
Credit Agreement to "this Agreement" and the words "hereof," "herein,"
"hereunder," or words of like import, shall mean and be a reference to the
Credit Agreement as amended by this Amendment.
3
<PAGE>
3. Waivers. The Majority Banks hereby irrevocably waive the
-------
restrictions (i) set forth in subsection 7.02(e)(iii) which would otherwise
prohibit a sale by the Company of the Vantis Subsidiary (or the assets thereof)
insofar as the sale of the Vantis Subsidiary, together with the aggregate value
of all other assets sold by the Company and its Restricted Subsidiaries after
the Effective Date, would exceed 20% of the Company's Consolidated Tangible Net
Worth measured as of the Effective Date, (ii) set forth in Section 7.02(e)(ii)
which would otherwise prohibit a percentage of the sales price to be paid in
capital stock of the Vantis Subsidiary, any entity into which the Vantis
Subsidiary is merged or the entity who acquires the Vantis Subsidiary; provided
--------
that the percentage of the sales price so paid in capital stock may not exceed
25% of the total sales price, and (iii) set forth in the last paragraph of
Section 7.02 insofar as the sale of the Vantis Subsidiary (or the assets
thereof) may include the disposition of Receivables of the Vantis Subsidiary.
The Majority Banks further hereby waive the restrictions set forth in Section
7.03 which would otherwise prohibit the merger, consolidation, or conveyance,
transfer or other disposal of all or substantially all of the assets of the
Vantis Subsidiary to the extent such merger, consolidation, conveyance, transfer
or other disposal would be permitted under the waiver of Section 7.02 set forth
in the immediately preceding sentence. The Majority Banks further hereby waive
the restrictions set forth in Sections 7.02(e) and 7.10 which would otherwise
prohibit the issuance by the Company of up to 15% of the existing capital stock
of the Vantis Subsidiary outstanding on the date hereof to directors, employees,
officers, consultants and advisors of the Vantis Subsidiary pursuant to stock
option plans (the "Employee Stock") and the repurchase or acquisition of such
Employee Stock by the Company in connection with a Disposition of 50% or more of
the capital stock of the Vantis Subsidiary.
4. Irrevocable Notice of Prepayment. The Company hereby gives notice
--------------------------------
to the Agent (which notice shall be irrevocable) that, within thirty (30)
Business Days of the Company's or any Subsidiary's receipt of any cash Net
Issuance Proceeds or any cash Net Proceeds of any Disposition (including any
Disposition of the Vantis Subsidiary or any assets thereof), except for any
Disposition permitted under subsections 7.02(a), (b) or (c), the Company shall
make a prepayment, in accordance with Section 2.06, in an amount equal to at
least 25% of such cash Net Issuance Proceeds or cash Net Proceeds, as the case
may be, up to a maximum amount, together with all such prepayments to the Agent
made pursuant to this notice, of $50,000,000 in the aggregate, for application
to the principal balance of the Term Loans then outstanding. The Company's
failure to make any such payment within any such 30-Business Day period
referenced above shall constitute an Event of Default under the Credit
Agreement. For purposes of this Section 4 and the prepayments contemplated
hereby, cash Net Issuance Proceeds and cash Net Proceeds shall be deemed to
include (and shall not be reduced by) any amounts paid or payable to the holders
of the Employee Stock in connection with the repurchase or acquisition of such
Employee Stock by the Company as contemplated in the preceding Section 3.
5. Representations and Warranties. The Company hereby represents and
------------------------------
warrants to the Agent, the Syndication Agent, the Documentation Agent and the
Banks as follows:
a. No Default or Event of Default has occurred and is
continuing.
4
<PAGE>
b. The execution, delivery and performance by the Company 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.
c. This Amendment and the Loan Documents, as amended by this
Amendment, constitute the legal, valid and binding obligations of the Company,
enforceable against it in accordance with their respective terms, without
defense, counterclaim or offset.
6. Amendment Effective Date. This Amendment will become effective as
------------------------
of March 18, 1999, provided that the Agent has received (a) from each of the
--------
Company and the Majority Banks an executed counterpart of this Amendment, (b)
from the Company a nonrefundable amendment fee equal to 0.25% of the aggregate
Commitments to be distributed to each Bank in accordance with its Pro Rata
Share.
7. Miscellaneous.
-------------
(a) Credit Agreement Otherwise Not Affected. Except as expressly
---------------------------------------
amended pursuant hereto, the Credit Agreement shall remain unchanged and in full
force and effect and is hereby ratified and confirmed in all respects. The
Banks', the Agent's, the Syndication Agent's and the Documentation Agent's
execution and delivery of, or acceptance of, this Amendment shall not be deemed
to create a course of dealing or otherwise create any express or implied duty by
any of them to provide any other or further amendments, consents or waivers in
the future.
(b) No Reliance. The Company hereby acknowledges and confirms to
-----------
the Agent, the Syndication Agent, the Documentation Agent and the Banks that the
Company is executing this Amendment on the basis of its own investigations and
for its own reasons without reliance upon any agreement, representation,
understanding or communication by or on behalf of the Agent, the Syndication
Agent, the Documentation Agent, any Bank or any other Person.
(c) Amendments and Waivers. The provisions of this Amendment may
----------------------
only be amended or waived, and any consent with respect to any departure by the
Company therefrom may only be granted, in accordance with the terms of Section
10.01 of the Credit Agreement.
(d) Costs and Expenses. The Company shall, whether or not the
------------------
amendments contemplated hereby shall become effective, pay or reimburse the
Agent, within five Business Days after demand, for all costs and expenses
incurred by the Agent in connection with the development, preparation, delivery,
administration and execution of, and any amendment, supplement, waiver or
modification to, this Amendment and the consummation of the transactions
contemplated hereby and thereby, including the Attorney Costs incurred by the
Agent with respect thereto.
(e) Successors and Assigns. The provisions of this Amendment shall
----------------------
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns.
5
<PAGE>
(f) Counterparts. This Amendment may be executed by one or more of the
------------
parties to this Amendment in any number of separate counterparts, each of which,
when so executed, shall be deemed an original, and all of said counterparts
taken together shall be deemed to constitute but one and the same instrument.
The parties hereto agree that the Agent and the Company may accept and rely on
facsimile transmissions of executed signature pages of this Amendment.
(g) Severability. The illegality or unenforceability of any provision
------------
of this Amendment or any instrument or agreement required hereunder shall not in
any way affect or impair the legality or enforceability of the remaining
provisions of this Amendment or any instrument or agreement required hereunder.
(h) No Third Parties Benefited. This Amendment is made and entered
--------------------------
into for the sole protection and legal benefit of the Company, the Syndication
Agent, the Documentation Agent, the Banks and the Agent, and their successors
and assigns, and no other Person shall be a direct or indirect legal beneficiary
of, or have any direct or indirect cause of action or claim in connection with,
this Amendment. Each of the Agent, the Syndication Agent, the Documentation
Agent and the Banks shall not have any obligation to any Person not a party to
this Amendment.
(i) Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED
-------------
IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK; PROVIDED THAT THE AGENT
AND THE BANKS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
(j) Entire Agreement. This Amendment embodies the entire agreement and
----------------
understanding among the Company, the Banks, the Syndication Agent, the
Documentation Agent and the Agent, and supersedes all prior or contemporaneous
agreements and understandings of such Persons, verbal or written, relating to
the subject matter hereof and thereof.
(k) Interpretation. This Amendment is the result of negotiations
--------------
between and has been reviewed by counsel to the Agent, the Company and other
parties, and is the product of all parties hereto. Accordingly, this Amendment
shall not be construed against the Banks, the Syndication Agent, the
Documentation Agent or the Agent merely because of the Agent's or such other
Person's involvement in the preparation of such documents and agreements.
[Signature pages follow.]
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered in San Francisco, California, by their proper and
duly authorized officers as of the day and year first above written.
THE COMPANY
-----------
ADVANCED MICRO DEVICES, INC.
By: /s/ Francis P. Barton
------------------------------------------------
Title: Sr. Vice President and Chief Financial Officer
-----------------------------------------------
THE AGENT
---------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as
Administrative Agent
By: /s/Roger Fleischmann
----------------------------------------------
Title:
-----------------------------------------------
THE SYNDICATION AGENT
---------------------
ABN AMRO BANK N.V., as Syndication Agent
By: /s/Nanci H. Meyer
---------------------------------------------
Title: Vice President
--------------------------------------------
By: /s/Thomas R. Wagner
---------------------------------------------
Title: Group Vice President
--------------------------------------------
7
<PAGE>
THE DOCUMENTATION AGENT
-----------------------
CANADIAN IMPERIAL BANK OF
COMMERCE, as Documentation Agent
By:
-------------------------------------------------
Title:
----------------------------------------------
THE BANKS
---------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as a Bank
By: /s/Roger Fleischmann
-------------------------------------------------
Title:
----------------------------------------------
ABN AMRO BANK N.V., as a Bank
By: /s/Nanci H. Meyer
-------------------------------------------------
Title: Vice President
----------------------------------------------
By: /s/Thomas R. Wagner
-------------------------------------------------
Title: Group Vice President
----------------------------------------------
8
<PAGE>
CANADIAN IMPERIAL BANK OF
COMMERCE, as a Bank
By:
-------------------------------------------------
Title:
----------------------------------------------
BANKBOSTON, N.A.
By: /s/John B. Desmond
-------------------------------------------------
Title:
----------------------------------------------
THE BANK OF NOVA SCOTIA
By: /s/Chris Osborne
-------------------------------------------------
Title:
----------------------------------------------
BANQUE PARIBAS
By: Lee S. Buckner
-------------------------------------------------
Title: Managing Director
----------------------------------------------
By: /s/Jonathan Leon
-------------------------------------------------
Title: Vice President
----------------------------------------------
THE DAI-ICHI KANGYO BANK, LTD.
By:
-------------------------------------------------
Title:
----------------------------------------------
9
<PAGE>
FLEET NATIONAL BANK
By: /s/Matt Glauninger
-------------------------------------------------
Title:
----------------------------------------------
THE INDUSTRIAL BANK OF JAPAN,
LIMITED
By: K. Iwata
-------------------------------------------------
Title: Deputy General Manager
----------------------------------------------
KEYBANK NATIONAL ASSOCIATION
By: Mary K. Young
-------------------------------------------------
Title: Assistant Vice President
----------------------------------------------
THE LONG-TERM CREDIT BANK OF
JAPAN, LIMITED
By: /s/Noboiu Akahane
-------------------------------------------------
Title:
----------------------------------------------
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION
By: Douglas A. Lindstrom
-------------------------------------------------
Title: Assistant Vice President
----------------------------------------------
10
<PAGE>
ROYAL BANK OF CANADA
By:
-------------------------------------------------
Title:
----------------------------------------------
UNION BANK OF CALIFORNIA, N.A.
By:
-------------------------------------------------
Title:
----------------------------------------------
11
<PAGE>
EXHIBIT 10.25(a)
AMENDMENT
This is an Amendment to the Technology Development and License Agreement
("Agreement") entered into as of October 1, 1998 by and between Advanced Micro
Devices, Inc. and its Subsidiaries ("AMD"), a Delaware Corporation, with
principal offices located at One AMD Place, P.O. Box 3453, Sunnyvale, California
94088-3453, and Motorola, Inc. and its Subsidiaries ("Motorola"), a Delaware
corporation, with principal offices located at 1303 East Algonquin Road,
Schaumburg, Illinois 60196.
Add Section 1.40 as follows:
1.40 ***** a semiconductor manufacturing process wherein *****. ***** may be
used in conjunction with semiconductor manufacturing technologies such
as Logic Process Technologies and Embedded Flash Technology.
Amend Section 5.1 as follows:
Change the first sentence to read "The parties will undertake Projects to
complete and develop Logic Process Technologies and ***** in conjunction with
Logic Process Technologies."
Add new Section 5.8 as follows:
5.8 ***** Licenses.
--------------
(a) The parties intend to create a Statement of Work on ***** and to
collaborate on the remaining development of that technology. It
is anticipated that each party will make contributions to the
development of that technology. Any contributions or Improvements
to ***** developed solely by AMD will be deemed AMD Technology,
subject to Motorola's rights in *****. Any contributions or
Improvements to ***** developed solely by Motorola will be deemed
Motorola Technology, subject to AMD's rights in *****.
(b) Motorola hereby grants to AMD under Motorola Intellectual
Property a non-exclusive, non-transferable, worldwide, royalty-
free (except as provided in Sections 6.5 and 6.6) license to:
(i) practice the methods and processes of ***** and Motorola
Improvements to *****,
CONFIDENTIAL Page 1
Confidential treatment has been requested for portions of this exhibit. The
copy filed herewith omits the information subject to the confidentiality
request. Omissions are designated as *****. A complete version of this exhibit
has been filed separately with the Securities and Exchange Commission.
<PAGE>
(ii) make, have made, use, import and sell devices manufactured
using ***** and Motorola Improvements to *****,
(iii) make Improvements to ***** and Derivative Processes using
***** technology,
(iv) only with Motorola approval, such approval not to be
unreasonably withheld, undertake ***** within ***** after
the first commercial shipment of a product manufactured
using ***** and without approval, undertake *****
thereafter with respect to ***** and sublicense the rights
granted in Section 5.8 (b)(i), (ii) and (iii) only as part
of such *****,
(v) only with Motorola approval, such approval not to be
unreasonably withheld, undertake ***** with respect to
***** and sublicense the rights granted in Section 5.8
(b)(i),(ii) and (iii) only as part of such *****,
(vi) only with Motorola approval, such approval not to be
unreasonably withheld, undertake ***** with respect to
***** and sublicense the rights granted in Section 5.8
(b)(i), (ii) and (iii) only as a part of such *****, and
(vii) only with Motorola approval, such approval not to be
unreasonably withheld, undertake ***** within *****
after the first commercial shipment of a product
manufactured using ***** and without approval, undertake
unlimited ***** thereafter with respect to ***** and
sublicense the rights granted in Section 5.8 (b)(i),
(ii) and (iii) only as a part of such *****, and
upon the later of (i) first commercial shipment of a product
manufactured using HIP7L or (ii) ***** after the first
commercial shipment of a product manufactured using HIP6L:
(viii) undertake ***** with respect to ***** and sublicense the
rights granted in Section 5.8 (b)(i), (ii) and (iii)
only as part of such *****,
(ix) undertake ***** with respect to ***** and sublicense the
rights granted in Section 5.8 (b)(i), (ii) and (iii)
only as part of such *****,
CONFIDENTIAL Page 2
*****Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
(x) undertake ***** with respect to ***** and sublicense the
rights granted in Section 5.8 (b)(i), (ii) and (iii)
only as a part of such *****, and
(xi) undertake ***** with respect to ***** and sublicense the
rights granted in Section 5.8 (b)(i), (ii) and (iii)
only as a part of such *****.
(c) AMD hereby grants to Motorola under AMD Intellectual Property, a
non-exclusive, non-transferable, worldwide, royalty-free license
to:
(i) practice the methods and processes of ***** and AMD
Improvements to *****,
(ii) make, have made, use, import and sell devices manufactured
using ***** and AMD Improvements to *****,
(iii) make Improvements to ***** and Derivative Processes using
***** technology,
(iv) undertake ***** with respect to ***** and sublicense the
rights granted in Section 5.8 (c)(i), (ii) and (iii)
only as part of such *****,
(v) undertake ***** with respect to ***** and sublicense the
rights granted in Section 5.8 (c)(i), (ii) and (iii)
only as part of such *****,
(vi) undertake ***** with respect to ***** and sublicense the
rights granted in Section 5.8 (c)(i), (ii) and (iii)
only as a part of such *****, and
(vii) undertake ***** with respect to ***** and sublicense the
rights granted in Section 5.8 (c)(i), (ii) and (iii)
only as a part of such *****.
(d) In the event that AMD exercises its rights granted by Motorola
in Section 5.8(b) (iv)-(xi) Motorola will negotiate in good
faith with such ***** for a license under Motorola patents
essential to utilize ***** and Improvements thereto on
reasonable terms, or, at Motorola's option, will represent and
warrant to AMD that it will not assert it's patents essential
to utilize ***** against the *****. In the event that Motorola
enters into a patent license with, or covenants not to assert
CONFIDENTIAL Page 3
***** Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
its patents against, a ***** who received a ***** under *****
as described in this Section, AMD will ***** from such *****
upon the later of (i) first commercial shipment of a product
manufactured using the combination of HIP7L and ***** or (ii)
***** after the first commercial shipment of a product
manufactured using HIP6L.
(e) In the event that Motorola exercises its rights granted by AMD
in Section 5.8(c) (iv)-(vii) AMD will negotiate in good faith
with such ***** for a license under AMD patents essential to
utilize ***** and Improvements thereto on reasonable terms, or,
at AMD's option, will represent and warrant to Motorola that it
will not assert it's patents essential to utilize ***** against
the *****. In the event that Motorola enters into a patent
license with, or covenants not to assert its patents against, a
***** who received a ***** under ***** as described in this
Section, ***** from such ***** upon the later of (i) first
commercial shipment of a product manufactured using the
combination of HIP7L and ***** or (ii) ***** after the first
commercial shipment of a product manufactured using HIP6L.
(f) AMD will assign engineers to work in agreed-upon wafer
fabrication facilities of Motorola in order to gain an
understanding of *****. AMD will install an ***** production
process in AMD's *****. Motorola will train and support the AMD
engineers with respect to ***** including but not limited to,
disclosing all necessary information and know-how and providing
all necessary documentation and technical support.
(g) The parties understand that Motorola may gain access to *****
process or design information or know-how. In such event and
provided it is legally permitted to do so, Motorola will
disclose such information to AMD further provided that prior to
any such disclosure i) Motorola describes in writing to AMD any
restrictions placed upon Motorola or AMD by the ***** of such
information or know-how as well as the identity of the *****,
and (ii) AMD agrees in writing to the described restrictions.
In the particular situation of Motorola entering into an
agreement with ***** pertaining to ***** design information,
AMD agrees that Section 5.8(g)(ii) above shall not apply and
that AMD shall accept such restrictions.
(h) It is the further intent of the parties to jointly develop or
to disclose to one another design information specific to the
design of well-known, general purpose circuit block in *****
technology. It is the intent of the parties that each shall be
able to use such information to design and have designed
CONFIDENTIAL Page 4
***** Certain information on this page hgas been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
semiconductor products. Notwithstanding the above, no licenses
are granted by this Section to proprietary circuit blocks or
designs of Motorola or AMD.
Replace Section 6.7 with the below new Section 6.7.
6.7 HIP6F.
-----
(a) The parties will undertake one or more Projects and create a Statement of
Work therefore of HIP6F and SGEFT and collaborate on the development of
those technologies. It is anticipated that each party will make substantial
contributions to the development of those technologies. Any contributions
or Improvements to HIP6F and SGEFT developed solely by AMD will be deemed
AMD Technology, subject to Motorola's rights in HIP6F and SGEFT. Any
contributions or Improvements to HIP6F and SGEFT developed solely by
Motorola will be deemed Motorola Technology, subject to AMD's rights in
HIP6F and SGEFT. *****. In the event that the parties cannot agree on a
Statement of Work for a Project hereunder within ***** of the execution of
this Amendment, Sections 1.40, 5.8, this Section 6.7, and the change to
Section 5.1 shall become null and void or revert back to the original
Sections prior to this Amendment, as the case may be.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
January 21, 2000.
ADVANCED MICRO DEVICES, INC. MOTOROLA, INC.
Signature: Signature:
-------------------- --------------------
Name: Name:
------------------------- -------------------------
CONFIDENTIAL Page 5
***** Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
EXHIBIT 10.54
ADVANCED MICRO DEVICES, INC.
Management Continuity Agreement
-------------------------------
Robert R. Herb
1241 Pineto Place
Pleasanton, CA 94566
Dear Mr. Herb,
Advanced Micro Devices, Inc. (the "Company") considers the establishment
and maintenance of a sound and vital management to be essential to protecting
and enhancing the best interests of the Company and its stockholders. The
Company recognizes that, as is the case with many publicly held corporations,
the possibility of a change of control may exist and that the uncertainty and
questions which such possibility may raise among management may result in the
departure or distraction of management personnel to the detriment of the Company
and its stockholders. Accordingly, the non-management members of the Company's
Board of Directors have determined that it is imperative to be able to rely upon
management's continuance and that appropriate steps should be taken to reinforce
and encourage the continued attention and dedication of members of the Company's
management, including you, to their assigned duties without distraction in the
face of the potentially disturbing circumstances arising from the possibility of
a change of control of the Company.
In order to induce you to remain in the employ of the Company under such
circumstances, this letter agreement sets forth the benefits which the Company
agrees will be provided to you in the event there is a "Change of Control" of
the Company under the circumstances described below. ("Change of Control" is
defined in Section 1.) In addition, the Company is also willing to agree to
provide you the benefits described herein in consideration of your agreement to
the arbitration provisions set forth in Section 14 hereof. This agreement
amends and replaces the management continuity agreement between the Company and
you dated May 18, 1998.
1. Change of Control. For purposes of this Agreement, a "Change of
Control" shall mean a change of control of a nature which would be required to
be reported in response to Item 6(e) of Schedule 14A of Regulation 14A
promulgated under the Securities Exchange Act of 1934, as amended ("Exchange
Act") or in response to any other form or report to the Securities and Exchange
Commission or any stock exchange on which the Company's shares are listed which
requires the reporting of a change of control. In addition, a Change of Control
shall be deemed to have occurred if (i) any "person" (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act) is or becomes the beneficial
owner, directly or indirectly, of securities of the Company representing more
than 35% of the combined voting power of the Company's then outstanding
securities; or (ii) in any two year period, individuals who were members of the
Board of Directors (the "Board") at the beginning of such period plus each new
director whose election or nomination for election was approved by at least two-
thirds of the directors in office immediately prior to such election or
nomination, cease for any reason to constitute at least a majority of the Board,
or (iii) a majority of the members of the Board in office prior to the
<PAGE>
happening of any event and who are still in office after such event,
determines in its sole discretion within one year after such event, that as a
result of such event there has been a Change of Control.
Notwithstanding the foregoing definition, "Change of Control" for purposes
of this Agreement, shall exclude the acquisition of securities representing more
than 35% of the combined voting power of the Company by the Company, any of its
wholly owned subsidiaries, or any trustee or other fiduciary holding securities
of the Company under an employee benefit plan now or hereafter established by
the Company. As used herein, the term "beneficial owner" shall have the same
meaning as under Section 13(d) of the Exchange Act, and related case law.
2. Term. This Agreement shall become effective immediately on the
delivery of fully executed copies to both parties, and shall continue until
canceled pursuant to the notice of either party. Either party hereto may
provide written notice to the other of cancellation of this Agreement, to take
effect on the date specified in such notice, but in no event shall such
cancellation take effect less than two years from the date on which notice is
given. Such notice shall be furnished in accordance with Section 11 of this
Agreement.
3. Tax Indemnity.
(a) If all or any portion of the amounts payable to you on your behalf
under this Agreement or otherwise are subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended (or similar
state tax and/or assessment), the Company shall pay to you an amount
necessary to place you in the same after-tax position as you would have
been in had no such excise tax been imposed. The amount payable pursuant to
the preceding sentence shall be increased to the extent necessary to pay
income and excise taxes due on such amount. The determination of the
amount of any such tax indemnity shall initially be made by the independent
accounting firm employed by the Company immediately prior to the Change of
Control.
(b) If at a later date it is determined (pursuant to final regulations or
published rulings of the IRS, final judgment of a court of competent
jurisdiction or otherwise) that the amount of excise taxes payable by you
is greater than the amount initially so determined, then the Company (or
its successor) shall pay you an amount equal to the sum of (1) such
additional excise taxes (2) an interest, fines and penalties resulting
from such underpayment, plus (3) an amount necessary to reimburse you for
any income, excise or other taxes payable by you with respect to the
amounts specified in (1) and (2) above, and the reimbursement provided by
this clause (3). If at a later date it is determined (pursuant to final
regulations or published rulings of the IRS, final judgment of a court of
competent jurisdiction or otherwise) that the amount of excise taxes
payable by you is lesser than the amount initially so determined, then you
shall pay to the Company (or its successor) an amount equal to such
overpayment to the extent such is refunded to you.
2
<PAGE>
(c) By signing this agreement, you and the Company both agree to cooperate
with the person(s) calculating the amount of the tax indemnity, and will
provide copies of whatever tax returns and other documents may be necessary
to perform the calculation.
4. Termination of Employment Following Change of Control. If any of the
events described in Section 1 hereof constituting a Change of Control shall have
occurred, you shall be entitled to the benefits provided in Section 5 hereof
upon the termination of your employment by you or the Company after such Change
of Control.
(a) Notice of Termination. Any termination of your employment by the
----------------------
Company or by you for any reason whatsoever during the term of this
Agreement shall be communicated by written notice of termination to the
other party hereto ("Notice of Termination").
(b) Date of Termination. "Date of Termination" shall mean a date which
--------------------
follows a Change of Control and is either (1) the date specified in the
Notice of Termination, if your employment is terminated by you during the
term hereof: or (2) the date on which a Notice of Termination is given, if
your employment is terminated for any other reason.
5. Benefits Upon Termination Following a Change Of Control.
(a) Amount of Benefits. The Company shall provide to you as soon as
-------------------
practicable, but not more than ten business days following the Date of
Termination subsequent to a Change of Control of the Company, each of the
following benefits:
(1) Severance Benefit. The Company shall pay you a lump sum severance
benefit which shall equal three times the sum of (A) your Base
Compensation, plus (B) the average of the two highest annual bonuses paid
to you during the last five full calendar years immediately prior to the
Change of Control. For purposes of this Section 5(a)(1), "Base
Compensation" means your rate of annual salary, as in effect for the
twelve-month period ending on the date six months prior to the Change of
Control or on the Date of Termination, whichever is higher. Base
Compensation does not include elements such as bonuses, reimbursement of
interest paid on guaranteed loans, auto allowances, nor any income from
equity based compensation, such as may result from the exercise of stock
options or stock appreciation rights, or the receipt of restricted stock
awards or the lapse of restrictions on such awards. If you were employed
by the Company and/or any of its subsidiaries for less than one full
calendar year immediately preceding the Change of Control, your "highest
annual bonus" will be determined by annualizing the bonus earned during
your period of employment.
(2) Equity Compensation. All unvested stock options, stock
appreciation rights and restricted stock awards held by you at the time of
your Date of Termination shall be deemed fully vested and exercisable at
such Date of Termination, provided, that if any such option, right or award
would, as a result of such early exercisability no longer qualify for
exemption under Section 16 of the Exchange Act, then such option, right or
award shall be fully vested but shall not become exercisable until the
earliest date on
3
<PAGE>
which it could become exercisable and also qualify for exemption from
Section 16 of the Exchange Act. All vested options held by you, including
those deemed fully vested as of the Date of Termination shall become
automatically exercisable for a period of one (1) year from the Date of
Termination; provided, however, in no event shall any option remain
exercisable beyond the maximum period allowed therefor in the stock
option plan under which it was granted. This agreement shall serve as an
amendment to all of your outstanding stock options, restricted stock
awards and stock appreciation rights as of the Date of Termination.
(3) Accrued Bonus. The Company shall pay you an amount equal to the
pro rata amount of the annual bonus accrued under the Company's Executive
Bonus Plan for the portion of the year to the Date of Termination.
(4) Company Car. The Company shall allow you the continued use of the
Company automobile, on the same terms which existed prior to the Change of
Control, for twelve (12) months following the Date of Termination.
(5) Financial and Tax Planning. The Company shall provide you with
continued personal financial planning and tax planning services up to
$4,000 for twelve (12) months following the Date of Termination.
(6) Other Benefits. The Company shall provide for a period of
twelve(12) months following the Date of Termination, health and welfare
benefits at least comparable to those benefits in effect on your Date of
Termination, including but not limited to medical, dental, disability,
dependent care, and life insurance coverage. At the Company's election,
health benefits may be provided by reimbursing you for the cost of
converting a group policy to individual coverage, or for the cost of
extended COBRA coverage. The Company shall also pay you an amount
calculated to pay any income taxes due as a result of the payment by the
Company on your behalf for such health benefits. Such tax payment shall be
calculated to place you in the same after-tax position as if no such income
had been imposed.
(b) Other Benefits Payable. The benefits described in subsection (a) above
-----------------------
shall be payable in addition to, and not in lieu of, all other accrued or vested
or earned but deferred compensation, rights, options or other benefits which may
be owed to you following termination of your employment, irrespective of whether
your termination was preceded by a Change of Control, including but not limited
to accrued vacation or sick pay, amounts or benefits payable under any
employment agreement or any bonus or other compensation plans, stock option
plan, stock ownership plan, stock purchase plan, life insurance plan, health
plan, disability plan or similar plan.
6. Payment Obligations Absolute. The Company's obligation to pay the
benefits described herein shall be absolute and unconditional and shall not be
affected by any circumstances, including, without limitation, any set-off,
counterclaim, recoupment, defense or other right which the Company or any of its
subsidiaries may have against you or anyone else. In
4
<PAGE>
the event of any dispute concerning your right to payment, the Company shall
nevertheless continue to pay to you your Base Compensation (as such term is
defined in Section 5) until the dispute is resolved. Any such amounts paid
following your termination of employment shall be credited against the amounts
otherwise due to you under this Agreement or in the event the Company
prevails, shall be repaid to the Company.
7. Legal Fees. The Company shall also pay forthwith upon written demand
from you all legal fees and expenses reasonably incurred by you in seeking to
obtain or enforce any right or benefit provided by this Agreement. In the event
you do not prevail in any ensuing arbitration or litigation, the Company shall
absorb its own costs, expenses, and attorneys' fees, and you shall reimburse the
Company for one-half of your costs, expenses, and attorneys' fees.
8. Mitigation. You shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or otherwise,
nor shall the amount of any payment provided for in this Agreement be reduced or
offset in any way whatsoever by any amount received by you for any reason
whatsoever from another employer or otherwise after the Date of Termination.
9. Indemnification. For at least six years following a Change of Control,
you shall continue to be indemnified under the Company's Certificate of
Incorporation and Bylaws at least to the same extent as prior to the Change of
Control, and you shall be covered by the directors and officers liability
insurance, the fiduciary liability insurance and the professional liability
insurance policies that are the same as, or provide coverage at least equivalent
to, those the Company carried prior to the Change of Control.
10. Successors; Binding Agreement.
(a) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company, to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place. Failure of the
Company to obtain such agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle you to
compensation from the Company in the same amount and on the same terms as you
would be entitled hereunder if the Company had terminated your employment after
a Change of Control, except that for purposes of implementing the foregoing, the
date on which any such succession becomes effective shall be deemed the Date of
Termination. As used in this Agreement, "Company" shall mean the Company as
hereinabove defined and any successor to its business and/or assets as aforesaid
which executes and delivers the agreement provided for in this Section or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law.
(b) This Agreement shall terminate upon your death except that if you
should die while you are entitled to receive any amounts under this Agreement
but which are unpaid at your date of death, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
your devisee, legatee, or other designee or, if there be no such
5
<PAGE>
designee, to your estate. This Agreement shall inure to the benefit of and be
enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees, and legatees.
11. Notice. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by the United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the first page of this Agreement, provided
that all notices to the Company shall be directed to the Chairman of the Board
of Directors of the Company with a copy to the Secretary of the Company, or such
other address as either party may have furnished to the other in writing in
accordance herewith, except that notices of change of address shall be effective
only upon receipt.
12. Amendments. No provisions of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing
signed by you and the Company's Chief Executive Officer. No waiver by either
part hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time.
13. Validity. The invalidity or unenforceability of any provisions of this
Agreement shall not affect the validity or enforceablity of any other provision
of this Agreement, which shall remain in full force and effect.
14. Arbitration.
(a) Arbitration shall be the exclusive and final forum for settling any
disagreement, dispute, controversy or claim arising out of or in any way related
to (i) this Agreement or the subject matter thereof or the interpretation hereof
or any arrangements relating hereto or contemplated herein or the breach,
termination or invalidity hereof; or (ii) the provision of or failure to provide
any other benefits upon a Change of Control pursuant to any other employment
agreement, bonus or compensation plans, stock option plan, stock ownership plan,
stock purchase plan, life insurance plan or similar plan or agreement with the
Company and/or any of its subsidiaries as Change of Control may be defined in
such other agreement or plan, which benefits constitute "parachute payments"
within the meaning of Section 280G of the Code. If this Section 14 conflicts
with any provision in any such compensation or bonus plan, stock option plan, or
any other similar plan or agreement, this provision requiring arbitration shall
control.
(b) The arbitration shall be conducted in accordance with the Commercial
Arbitration Rules (the "Arbitration Rules") of the American Arbitration
Association (the "AAA").
(c) The arbitral tribunal shall consist of one arbitrator. Except as
otherwise provided in Section 8, the Company shall pay all the fees, if any, and
expenses of such arbitration.
6
<PAGE>
(d) The arbitration shall be conducted in San Jose or in any other city in
the United States of America as the parties to the dispute may designate by
mutual written consent.
(e) Any decision or award of the arbitral tribunal shall be final and
binding upon the parties to the arbitration proceeding. The parties hereto
hereby waive to the extent permitted by law any rights to appeal or to review of
such award by any court or tribunal. The parties hereto agree that the arbitral
award may be enforced against the parties to the arbitration proceeding or
their assets wherever the award may be entered in any court having jurisdiction
thereof.
(f) The parties stipulate that discovery may be had in any such arbitration
proceeding as provided in Section 1283.05 of the California Code of Civil
Procedure, as may be amended or revised from time to time.
15. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
16. Withholding of Taxes. The Company may withhold from any amounts
payable under this Agreement all federal, state, city, or other taxes as shall
be required pursuant to any law or government regulation or ruling.
17. Nonassignability. This Agreement is personal in nature and neither of
the parties hereto shall, without the consent of the other, assign or transfer
this Agreement or any rights or obligations hereunder, except as provided in
Section 10 above. Without limiting the foregoing, your right to receive
payments hereunder, shall not be assignable or transferable, whether by pledge,
creation of a security interest or otherwise, other than by a transfer by will
or by laws of descent and distribution and in the event of any attempted
assignment or transfer contrary to this Section the Company shall have no
liability to pay any amounts so attempted to be assigned or transferred.
18. No Right to Employment. Nothing in this Agreement shall confer on you
any right to continue in the employ of the Company, or shall interfere with or
restrict in any way the rights of the Company, which are hereby expressly
reserved, to discharge you at any time for any reason whatsoever, with or
without cause.
19. Miscellaneous. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this Agreement. This
Agreement shall not affect your rights under any pension, welfare or fringe
benefit arrangements of the Company under which you are entitled to receive any
benefits. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Delaware. The
provisions of this Agreement, and any payment provided for hereunder, shall not
reduce any amounts otherwise payable, or in any way diminish your existing
rights, or rights which would accrue solely as a result of the passage of time,
under any employment agreement or other contract, plan or agreement with the
Company.
7
<PAGE>
If this letter correctly sets forth our agreement on the subject matter
hereof, kindly sign and return to the Company the enclosed copy of this letter
which will then constitute our agreement on this subject.
Sincerely,
ADVANCED MICRO DEVICES, INC.
By:
___________________________________
Chairman of the Compensation Committee
of the Board of Directors
Agreed to this_____ day
of _____________19___
______________________
(Signature)
8
<PAGE>
Exhibit 10.55
ADVANCED MICRO DEVICES, INC.
January 13, 2000
Mr. Hector Ruiz
8218 Chalk Knoll Drive
Austin, TX 78735
Employment Agreement
--------------------
Dear Hector:
On behalf of the Board of Directors of Advanced Micro Devices, Inc.
("AMD"), I am pleased to offer you the position of President and Chief Operating
Officer of AMD on the terms set forth below.
1. Position. You will be employed by AMD as its President and Chief
--------
Operating Officer effective commencing upon the date of your resignation from
your current employer (the "Commencement Date"), reporting directly to me.
During your term, you will also be a member of the Office of the CEO. You will
be elected to the AMD Board of Directors at the next scheduled Board Meeting
following your commencement date. During the term of your employment, you will
be expected to devote your full working time and attention to the business of
AMD, and you will not render services to any other business without the prior
approval of the Board of Directors or, directly or indirectly, engage or
participate in any business that is competitive in any manner with the business
of AMD. Notwithstanding the foregoing, you may remain a director of businesses
with respect to which you are a director on the Commencement Date. You will also
be expected to comply with and be bound by AMD's operating policies, procedures
and practices that are from time to time in effect during the term of your
employment.
2. Base Salary. Your initial base annual salary will be $750,000, payable
-----------
in accordance with AMD's normal payroll practices with such payroll deductions
and withholdings as are required by law. Your base salary will be reviewed on an
annual basis by the Compensation Committee of the Board of Directors and
increased in April 2001 and from time to time thereafter, in the discretion of
the Board of Directors.
3. Bonus. Your bonus each year will be equal to 0.3% of AMD's Adjusted
-----
Operating Profit ("AOP") for that fiscal year in excess of 20% of AMD's AOP for
the immediately preceding fiscal year, subject to a maximum award of $5M in any
year. Since AMD will report a loss for 1999, your bonus for FY2000 will be equal
to 0.3% of AOP for FY2000. AMD will guarantee that your FY2000 bonus will be no
less than $500,000.
<PAGE>
4. Stock Options.
-------------
(a) On the Commencement Date, the Compensation Committee of the Board
of Directors shall grant you a nonqualified stock option to purchase 1,000,000
shares of AMD common stock at an exercise price equal to the closing price of
the common stock on the Commencement Date (the "Initial Option"), the schedule
of which is attached as Exhibit A. This Initial Option will vest and become
---------
exercisable over a four year period, with 250,000 shares vesting and becoming
exercisable on each anniversary of the Commencement Date.
(b) Commencing in April 2001, you will be granted annually
nonqualified stock options to purchase 250,000 shares of AMD common stock at an
exercise price equal to the closing price of the common stock on the grant date
(the "Additional Options"). These Additional Options will each vest in two equal
annual installments such that you will vest in 250,000 shares of AMD common
stock each year commencing in 2005.
5. Retirement Benefit Replacement. AMD will provide you with a lump sum
------------------------------
cash benefit of $3,727,020, which is estimated to be the current projected
benefit available to you under the Motorola Executive Incentive Plan (the
"Retirement Benefit Amount"), on the date you attain age 57. Upon your
attainment of age 55 in December 2000, AMD will establish a secular trust in
your name, to which we will contribute an amount necessary to fully fund such
Retirement Benefit Amount by age 57. AMD will pay quarterly cash payments to
you between December 2000 and December 2002 in the amounts necessary for you
to pay federal and state income or employment taxes on this Retirement Benefit
Amount.
6. Other Benefits. You will be entitled to the following additional
--------------
benefits:
(a) You will be eligible for the normal vacation, health insurance,
401(k), Employee Stock Purchase Plan and other benefits offered to all AMD
senior executives of similar rank and stares.
(b) You will be eligible for other employee benefits as set forth in
Exhibit B of the letter.
- ----------
7. At-Will Employment and Termination. Your employment with AMD will be
----------------------------------
at-will and may be terminated by you or by AMD at any time for any reason as
follows:
(a) You may terminate your employment upon written notice to the Board
of Directors within ten (10) days following a determination no later than
December 31, 2001 by such Board of Directors that you will not become Chief
Executive Officer of AMD following the Company's 2002 Annual Meeting (a
"Specific Constructive Termination");
(b) You may terminate your employment upon written notice to the Board
of Directors at any time in your discretion. ("Voluntary Termination");
(c) AMD may terminate your employment upon written notice to you at
any time following a determination by the Board of Directors that there is
"Cause," as defined below, for such termination ("Termination for Cause"); or
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<PAGE>
(d) AMD may terminate your employment upon written notice to you at
any time in the sole discretion of the Board of Directors without a
determination that there is Cause for such termination ("Termination without
Cause").
8. Definitions. As used in this agreement, the following terms have the
-----------
following meanings:
(a) "Cause" means the termination of your employment by AMD for
repeated failure to perform assigned duties after being notified in writing of
such failure with an opportunity to correct, or if you are determined by a court
of law or pursuant to Section 13 below to have committed a willful act of
embezzlement, fraud or dishonesty which resulted in material loss, material
damage or material injury to AMD.
(b) "Change in Control" means a change in control of a nature which
would be required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended
("Exchange Act") or in response to any other form or report to the Securities
and Exchange Commission or any stock exchange on which AMD's shares are listed
which requires the reporting of a change of control. In addition, a Change of
Control shall be deemed to have occurred if (i) any "person" (as such term is
used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the
beneficial owner, directly or indirectly, of securities of AMD representing 35%
or more of the combined voting power of AMD's then outstanding securities; or
(ii) in any two year period, individuals who were members of AMD's Board of
Directors at the beginning of such period plus each new director whose election
or nomination for election was approved by at least two-thirds of the directors
in office immediately prior to such election or nomination, cease for any reason
to constitute at least a majority of the Board, or (iii) a majority of the
members of the Board in office prior to the happening of any event and who are
still in office after such event, determines in its sole discretion within one
year after such event, that as a result of such event there has been a Change of
Control.
9. Separation Benefits. Upon termination of your employment with AMD for
-------------------
any reason, you will receive payment for all salary and vacation accrued but
unpaid to the date of your termination of employment and your benefits will be
continued under AMD's then existing benefit plans and policies for so long as
provided under the terms of such plans and policies and as required by
applicable law. Under certain circumstances, you will also be entitled to
receive severance benefits as set forth below, but you will not be entitled to
any other compensation, award or damages with respect to your employment or
termination.
(a) In the event of your Voluntary Termination or Termination for
Cause, you will not be entitled to any cash severance benefits or additional
vesting of options. You also will not be entitled to any Retirement Benefit
Amount, provided that upon your Voluntary Termination following your attainment
of age 55 you will be entitled to a lump sum payment of the Retirement Benefit
Amount otherwise payable to you at age 57, together with any additional payments
for federal or state income or employment taxes on such Retirement Benefit
Amount in full satisfaction of all obligations of AMD pursuant to Section 5 of
this agreement.
3
<PAGE>
(b) (i) In the event of your Termination without Cause within three
years of the Commencement Date, you will be entitled to (A) a single lump sum
severance payment equal to one year of your current annual base salary (less
applicable deductions and withholdings), (B) acceleration of the vesting and
exercisability of that portion of your Initial Option that would have become
vested within twelve months following your termination and (C) a lump sum
payment of the Retirement Benefit Amount (regardless of your age on date of
termination), otherwise payable to you at age 57, together with any additional
payments for federal and state income or employment taxes on such Retirement
Benefit Amount in full satisfaction of all obligations of AMD pursuant to
Section 5 of this agreement.
(ii) In the event of your Specific Constructive Termination, you
will be entitled to (A) a single lump sum severance payment equal to two years
of your current annual base salary (less applicable deductions and
withholdings), (B) acceleration of the vesting and exercisability of that
portion of your Initial Option that would have become vested within twenty-four
months following notification that you will not become Chief Executive Officer
of AMD, and (C) a lump sum payment of the Retirement Benefit Amount (regardless
of your age on date of termination), otherwise payable to you at age 57,
together with any additional payments for federal and state income or employment
taxes on such Retirement Benefit Amount in full satisfaction of all obligations
of AMD pursuant to Section 5 of this agreement.
(iii) In the event of your Constructive Termination or Termination
without Cause in each case following a Change in Control, you will be entitled
to a (A) single lump sum severance payment equal to the sum of (x) three years
current annual base salary and (y) the average of your two highest bonuses in
the five years preceding your termination of employment (less applicable
deductions and withholdings), (B) full acceleration of the vesting and
exercisability of your Initial Option and any Additional Options, and (C) a lump
sum payment of the Retirement Benefit Amount (regardless of your age on date of
termination), otherwise payable to you at age 57, together with any additional
payments for federal and state income or employment taxes on such Retirement
Benefit Amount in full satisfaction of all obligations of AMD pursuant to
Section 5 of this agreement. For purposes of this Section 9(b)(iii),
"Constructive Termination" shall mean a resignation by you due to any diminution
or adverse change in the circumstances of your employment as determined in good
faith by you, including, without limitation, your reporting relationships, job
description, duties, responsibilities, compensation, prerequisites, office or
location of employment.
(c) If all or any portion of the amounts payable to you on your behalf
under this agreement or otherwise are subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended (or similar state
tax and/or assessment), AMD shall pay to you an amount necessary to place you in
the same after-tax position as you would have been in had no such excise tax
been imposed. The amount payable pursuant to the preceding sentence shall be
increased to the extent necessary to pay income and excise taxes due on such
amount. The determination of the amount of any such tax indemnity shall be made
by the independent accounting firm employed by AMD immediately prior to the
Change of Control.
(d) No payments due to you under this Section 9 shall be subject to
mitigation or offset.
4
<PAGE>
10. Restoration Payments. AMD will work with you and Motorola senior
--------------------
management to avoid any forfeiture of your 1999 Annual Bonus from Motorola and
to avoid any forfeiture of any gains attributable to your 46,667 vested Motorola
stock options.
(a) In the event that you forfeit any portion of your Motorola 1999
Annual Bonus, AMD will pay an equivalent amount to you (not to exceed $500,000)
on the date that you provide evidence of such forfeiture.
(b) In the event that you forfeit any gains attributable to your
46,667 vested Motorola stock options, AMD will pay an amount to you equal to the
lesser of (i) the aggregate amount of the forfeiture by you of such gains or
(ii) the aggregate spread on shares subject to the option based on the
difference between $52 per share and the closing price of Motorola common stock
on the New York Stock Exchange on the Commencement Date, in either case on the
date your provide evidence of such forfeiture.
(c) You shall be required to make reasonable efforts (including, but
not limited to, at the request of AMD after consultation with you, commencement
of litigation for which AMD will pay reasonable costs) to avoid the above
forfeitures or to reinstate any forfeited benefits and you shall be required to
reimburse AMD if such amounts are subsequently reinstated by Motorola.
(d) In the event of your Voluntary Termination or Termination for
Cause within two years of the Commencement Date, you shall be required to repay
the full amount of any payments by AMD pursuant to this Section 10.
11. Confidential Information and Invention Assignment Agreement. Upon your
-----------------------------------------------------------
commencement of employment with AMD, you will be required to sign its standard
form of Nondisclosure Agreement to protect AMD's confidential information and
intellectual property.
12. Nonsolicitation. During the term of your employment with AMD and for
---------------
one year thereafter, you will not, on behalf of yourself or any third party,
solicit or attempt to induce any employee of AMD to terminate his or her
employment with AMD.
13. Arbitration. The parties agree that any dispute regarding the
-----------
interpretation or enforcement of this agreement shall be decided by
confidential, final and binding arbitration conducted in Austin, Texas by
Judicial Arbitration and Mediation Services under the then existing roles rather
than by litigation in court, trial by jury, administrative proceeding or in any
other forum.
14. Miscellaneous.
-------------
(a) Absence of Conflicts. You represent that upon the Commencement
--------------------
Date your performance of your duties under this agreement will not breach any
other agreement as to which you are a party.
(b) Successors. This agreement is binding on and may be enforced by
----------
AMD and its successors and assigns and is binding on and may be enforced by you
and your heirs and legal representatives. Any successor to AMD or substantially
all of its business (whether by
5
<PAGE>
purchase, merger, consolidation or otherwise) will in advance assume in writing
and be bound by all of AMD's obligations under this agreement.
(c) Notices. Notices under this agreement must be in writing and will
-------
be deemed to have been given when personally delivered or two days after mailed
by U.S. registered or certified mail, return receipt requested and postage
prepaid. Mailed notices to you will be addressed to you at the home address
which you have most recently communicated to AMD in writing. Notices to AMD will
be addressed to its General Counsel at AMD's corporate headquarters.
(d) Waiver. No provision of this agreement will be modified or waived
------
except in writing signed by you and an officer of AMD duly authorized by its
Board of Directors. No waiver by either party of any breach of this agreement by
the other party will be considered a waiver of any other breach of this
agreement.
(e) Entire Agreement. This agreement, including the attached exhibits,
----------------
represents the entire agreement between us concerning the subject matter of your
employment by AMD and supersedes any prior agreements.
(f) Governing Law. This agreement will be governed by the laws of the
-------------
State of California without reference to conflict of laws provisions.
Hector, we are very pleased to extend this offer of employment to you and
look forward to your joining AMD as its President and Chief Operating Officer.
Please indicate your acceptance of the terms of this agreement by signing in the
place indicated below.
Very truly yours, Accepted January 24, 2000:
/s/ W.J. Sanders, III /s/ Hector Ruiz
- ------------------------- ----------------------------------
W.J. Sanders, III Hector Ruiz
Chairman of the Board of Directors
Advanced Micro Devices, Inc.
6
<PAGE>
Exhibit 10.56
INDEMNITY AGREEMENT
-------------------
This Indemnification Agreement ("Agreement") is made as of October 21, 1999
by and between ADVANCED MICRO DEVICES, INC., a Delaware corporation (the
"Company"), and ______________ ("Indemnitee").
RECITALS
WHEREAS, highly competent persons have become more reluctant to serve
publicly-held corporations as directors or in other capacities unless they are
provided with adequate protection through insurance or adequate indemnification
against inordinate risks of claims and actions against them arising out of their
service to and activities on behalf of the corporation.
WHEREAS, the Board of Directors of the Company (the "Board") has determined
that, in order to attract and retain qualified individuals, the Company will
attempt to maintain on an ongoing basis, at its sole expense, liability
insurance to protect persons serving the Company and its subsidiaries from
certain liabilities. Although the furnishing of such insurance has been a
customary and widespread practice among United States-based corporations and
other business enterprises, the Company believes that, given current market
conditions and trends, such insurance may be available to it in the future only
at higher premiums and with more exclusions. At the same time, directors,
officers, and other persons in service to corporations or business enterprises
are being increasingly subjected to expensive and time-consuming litigation
relating to, among other things, matters that traditionally would have been
brought only against the Company or business enterprise itself. The By-laws of
the Company require indemnification of the officers and directors of the
Company. Indemnitee may also be entitled to indemnification pursuant to the
Delaware General Corporation Law ("DGCL"). The By-laws and the DGCL expressly
provide that the indemnification provisions set forth therein are not exclusive,
and thereby contemplate that contracts may be entered into between the Company
and members of the board of directors, officers and other persons with respect
to indemnification.
WHEREAS, the uncertainties relating to such insurance and to
indemnification have increased the difficulty of attracting and retaining such
persons.
WHEREAS, the Board has determined that the increased difficulty in
attracting and retaining such persons is detrimental to the best interests of
the Company's stockholders and that the Company should act to assure such
persons that there will be increased certainty of such protection in the future.
WHEREAS, it is reasonable, prudent and necessary for the Company
contractually to obligate itself to indemnify, and to advance expenses on behalf
of, such persons to the fullest extent permitted by applicable law so that they
will serve or continue to serve the Company free from undue concern that they
will not be so indemnified.
-1-
<PAGE>
WHEREAS, this Agreement is a supplement to and in furtherance of the Bylaws
of the Company and any resolutions adopted pursuant thereto, and shall not be
deemed a substitute therefor, nor to diminish or abrogate any rights of
Indemnitee thereunder.
WHEREAS, Indemnitee does not regard the protection available under the
Company's Bylaws and insurance as adequate in the present circumstances, and may
not be willing to serve as an officer or director without adequate protection,
and the Company desires Indemnitee to serve in such capacity. Indemnitee is
willing to serve, continue to serve and to take on additional service for or on
behalf of the Company on the condition that he be so indemnified;
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein, the Company and Indemnitee do hereby covenant and agree as
follows:
1. Services to the Company. Indemnitee will serve or continue to serve, at
the will of the Company, as an officer, director or key employee of the Company
for so long as Indemnitee is duly elected or appointed or until Indemnitee
tenders his or her resignation.
2. Definitions. As used in this Agreement:
(a) A "Change in Control" shall be deemed to occur upon the earliest to
occur after the date of this Agreement of any of the following events:
(i) Acquisition of Stock by Third Party. Any Person (as defined
below) is or becomes the Beneficial Owner (as defined below), directly or
indirectly, of securities of the Company representing fifteen percent (15%) or
more of the combined voting power of the Company's then outstanding securities;
(ii) Change in Board of Directors. During any period of two (2)
consecutive years (not including any period prior to the execution of this
Agreement), individuals who at the beginning of such period constitute the
Board, and any new director (other than a director designated by a person who
has entered into an agreement with the Company to effect a transaction described
in Sections 2(a)(i), 2(a)(iii) or 2(a)(iv)) whose election by the Board or
nomination for election by the Company's shareholders was approved by a vote of
at least two-thirds of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to constitute a least
a majority of the members of the Board;
(iii) Corporate Transactions. The effective date of a merger or
consolidation of the Company with any other entity, other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior to such merger of consolidation continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than 51% of the combined voting power
of the voting securities of the surviving entity outstanding immediately after
such merger or consolidation and with the power to elect at least a majority of
the board of directors or other governing body of such surviving entity;
-2-
<PAGE>
(iv) Liquidation. The approval by the shareholders of the Company
of a complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the Company's assets;
and
(v) Other Events. There occurs any other event of a nature that
would be required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A (or a response to any similar item on any similar schedule or
form) promulgated under the Exchange Act (as defined below), whether or not the
Company is then subject to such reporting requirement.
(vi) Certain Definitions. For purposes of this Section 2(a),
the following terms shall have the following meanings:
(A) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(B) "Person" shall have the meaning as set forth in Sections
13(d) and 14(d) of the Exchange Act; provided, however, that
Person shall exclude (i) the Company, (ii) any trustee or other
fiduciary holding securities under an employee benefit plan of
the Company, and (iii) any corporation owned, directly or
indirectly, by the shareholders of the Company in substantially
the same proportions as their ownership of stock of the Company.
(C) "Beneficial Owner" shall have the meaning given to such
term in Rule 13d-3 under the Exchange Act; provided, however,
that Beneficial Owner shall exclude any Person otherwise becoming
a Beneficial Owner by reason of the shareholders of the Company
approving a merger of the Company with another entity.
(b) "Corporate Status" describes the status of a person who is or
was a director, officer, employee or agent of the Company or of any other
corporation, partnership or joint venture, trust, employee benefit plan or
other enterprise which such person is or was serving at the request of the
Company.
(c) "Disinterested Director" means a director of the Company who is
not and was not a party to the Proceeding in respect of which
indemnification is sought by Indemnitee.
(d) "Enterprise" shall mean the Company and any other corporation,
partnership, joint venture, trust, employee benefit plan or other
enterprise of which Indemnitee is or was serving at the request of the
Company as a director, officer, employee, agent or fiduciary.
-3-
<PAGE>
(e) "Expenses" shall include all reasonable attorneys' fees,
retainers, court costs, transcript costs, fees of experts, witness fees,
travel expenses, duplicating costs, printing and binding costs, telephone
charges, postage, delivery service fees, and all other disbursements or
expenses of the types customarily incurred in connection with prosecuting,
defending, preparing to prosecute or defend, investigating, being or
preparing to be a witness in, or otherwise participating in, a Proceeding.
Expenses also shall include Expenses incurred in connection with any appeal
resulting from any Proceeding, including without limitation the premium,
security for, and other costs relating to any cost bond, supersedeas bond,
or other appeal bond or its equivalent. Expenses, however, shall not
include amounts paid in settlement by Indemnitee or the amount of judgments
or fines against Indemnitee.
(f) Reference to "other enterprise" shall include employee benefit
plans; references to "fines" shall include any excise tax assessed with
respect to any employee benefit plan; references to "serving at the request
of the Company" shall include any service as a director, officer, employee
or agent of the Company which imposes duties on, or involves services by,
such director, officer, employee or agent with respect to an employee
benefit plan, its participants or beneficiaries; and a person who acted in
good faith and in a manner he reasonably believed to be in the best
interests of the participants and beneficiaries of an employee benefit plan
shall be deemed to have acted in manner "not opposed to the best interests
of the Company" as referred to in this Agreement.
(g) The term "Proceeding" shall include any threatened, pending or
completed action, suit, arbitration, alternate dispute resolution
mechanism, investigation, inquiry, administrative hearing or any other
actual, threatened or completed proceeding, whether brought in the right of
the Company or otherwise and whether of a civil, criminal, administrative
or investigative nature, in which Indemnitee was, is or will be involved as
a party or otherwise by reason of the fact that Indemnitee is or was a
director or officer of the Company, by reason of any action taken by him or
of any action on his part while acting as director or officer of the
Company, or by reason of the fact that he is or was serving at the request
of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, in each
case whether or not serving in such capacity at the time any liability or
expense is incurred for which indemnification, reimbursement, or
advancement of expenses can be provided under this Agreement.
(h) "Independent Counsel" means a law firm, or a member of a law
firm, that is experienced in matters of corporation law and neither
presently is, nor in the past five years has been, retained to represent:
(i) the Company or Indemnitee in any matter material to either such party
(other than with respect to matters concerning the Indemnitee under this
Agreement, or of other indemnitees under similar indemnification
agreements), or (ii) any other party to the Proceeding giving rise to a
claim for indemnification hereunder. Notwithstanding the foregoing, the
term "Independent Counsel" shall not include any person who, under the
applicable standards of professional conduct then prevailing, would have a
conflict of interest in representing either the Company or Indemnitee in an
action to determine Indemnitee's rights under this Agreement. The Company
agrees to pay the reasonable fees and expenses of the Independent Counsel
referred to above and to fully
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<PAGE>
indemnify such counsel against any and all Expenses, claims, liabilities
and damages arising out of or relating to this Agreement or its engagement
pursuant hereto.
3. Indemnity in Third-Party Proceedings. The Company shall indemnify
Indemnitee in accordance with the provisions of this Section 3 if Indemnitee is,
or is threatened to be made, a party to or a participant in any Proceeding,
other than a Proceeding by or in the right of the Company to procure a judgment
in its favor. Pursuant to this Section 3, Indemnitee shall be indemnified
against all Expenses, judgments, fines and amounts paid in settlement actually
and reasonably incurred by Indemnitee or on his behalf in connection with such
Proceeding or any claim, issue or matter therein, if Indemnitee acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Company and, in the case of a criminal proceeding had no
reasonable cause to believe that his conduct was unlawful.
4. Indemnity in Proceedings by or in the Right of the Company. The Company
shall indemnify Indemnitee in accordance with the provisions of this Section 4
if Indemnitee is, or is threatened to be made, a party to or a participant in
any Proceeding by or in the right of the Company to procure a judgment in its
favor. Pursuant to this Section 4, Indemnitee shall be indemnified against all
Expenses actually and reasonably incurred by him or on his behalf in connection
with such Proceeding or any claim, issue or matter therein, if Indemnitee acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Company. No indemnification for Expenses shall be made
under this Section 4 in respect of any claim, issue or matter as to which
Indemnitee shall have been finally adjudged by a court to be liable to the
Company, unless and only to the extent that any court in which the Proceeding
was brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, Indemnitee is fairly
and reasonably entitled to indemnification.
5. Indemnification for Expenses of a Party Who is Wholly or Partly
Successful. Notwithstanding any other provisions of this Agreement, to the
extent that Indemnitee is a party to (or a participant in) and is successful, on
the merits or otherwise, in any Proceeding or in defense of any claim, issue or
matter therein, in whole or in part, the Company shall indemnify Indemnitee
against all Expenses actually and reasonably incurred by him in connection
therewith. If Indemnitee is not wholly successful in such Proceeding but is
successful, on the merits or otherwise, as to one or more but less than all
claims, issues or matters in such Proceeding, the Company shall indemnify
Indemnitee against all Expenses actually and reasonably incurred by him or on
his behalf in connection with each successfully resolved claim, issue or matter.
If the Indemnitee is not wholly successful in such Proceeding, the Company also
shall indemnify Indemnitee against all Expenses reasonably incurred in
connection with a claim, issue or matter related to any claim, issue, or matter
on which the Indemnitee was successful. For purposes of this Section and without
limitation, the termination of any claim, issue or matter in such a Proceeding
by dismissal, with or without prejudice, shall be deemed to be a successful
result as to such claim, issue or matter.
6. Indemnification For Expenses of a Witness. Notwithstanding any other
provision of this Agreement, to the extent that Indemnitee is, by reason of his
Corporate Status, a witness
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<PAGE>
in any Proceeding to which Indemnitee is not a party, he shall be indemnified
against all Expenses actually and reasonably incurred by him or on his behalf in
connection therewith.
7. Additional Indemnification.
(a) Notwithstanding any limitation in Sections 3, 4, or 5, the
Company shall indemnify Indemnitee to the fullest extent permitted by law
if Indemnitee is a party to or threatened to be made a party to any
Proceeding (including a Proceeding by or in the right of the Company to
procure a judgment in its favor) against all Expenses, judgments, fines and
amounts paid in settlement actually and reasonably incurred by Indemnitee
in connection with the Proceeding. No indemnity shall be made under this
Section 7(a) on account of Indemnitee's conduct which constitutes a breach
of Indemnitee's duty of loyalty to the Company or its shareholders or is an
act or omission not in good faith or which involves intentional misconduct
or a knowing violation of the law.
(b) Notwithstanding any limitation in Sections 3, 4, 5 or 7(a), the
Company shall indemnify Indemnitee to the fullest extent permitted by law
if Indemnitee is a party to or threatened to be made a party to any
Proceeding (including a Proceeding by or in the right of the Company to
procure a judgement in its favor) against all Expenses, judgments, fines
and amounts paid in settlement actually and reasonably incurred by
Indemnitee in connection with the Proceeding.
(c) For purposes of Sections 7(a) and 7(b), the meaning of the
phrase "to the fullest extent permitted by law" shall include, but not be
limited to:
(i) to the fullest extent permitted by the provision of the
Act that authorizes or contemplates additional indemnification by
agreement, or the corresponding provision of any amendment to or
replacement of the Act, and
(ii) to the fullest extent authorized or permitted by any
amendments to or replacements of the Act adopted after the date of this
Agreement that increase the extent to which a corporation may indemnify its
officers and directors.
8. Exclusions. Notwithstanding any provision in this Agreement, the
Company shall not be obligated under this Agreement to make any indemnity in
connection with any claim made against Indemnitee:
(a) for which payment has actually been made to or on behalf of
Indemnitee under any insurance policy or other indemnity provision, except
with respect to any excess beyond the amount paid under any insurance
policy or other indemnity provision; or
(b) for an accounting of profits made from the purchase and sale
(or sale and purchase) by Indemnitee of securities of the Company within
the meaning of Section 16(b) of the Securities Exchange Act of 1934, as
amended, or similar provisions of state statutory law or common law; or
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<PAGE>
(c) in connection with any Proceeding (or any part of any
Proceeding) initiated by Indemnitee, including any Proceeding (or any part
of any Proceeding) initiated by Indemnitee against the Company or its
directors, officers, employees or other indemnitees, unless (i) the Board
of Directors of the Company authorized the Proceeding (or any part of any
Proceeding) prior to its initiation or (ii) the Company provides the
indemnification, in its sole discretion, pursuant to the powers vested in
the Company under applicable law.
9. Advances of Expenses. Notwithstanding any provision of this Agreement
to the contrary, the Company shall advance the expenses incurred by Indemnitee
in connection with any Proceeding within 10 days after the receipt by the
Company of a statement or statements requesting such advances from time to time,
whether prior to or after final disposition of any Proceeding. Advances shall be
unsecured and interest free. Advances shall be made without regard to
Indemnitee's ability to repay the expenses and without regard to Indemnitee's
ultimate entitlement to indemnification under the other provisions of this
Agreement. Advances shall include any and all reasonable Expenses incurred
pursuing an action to enforce this right of advancement, including Expenses
incurred preparing and forwarding statements to the Company to support the
advances claimed. The Indemnitee shall qualify for advances solely upon the
execution and delivery to the Company of an undertaking providing that the
Indemnitee undertakes to repay the advance to the extent that it is ultimately
determined that Indemnitee is not entitled to be indemnified by the Company.
This Section 9 shall not apply to any claim made by Indemnitee for which
indenity is excluded pursuant to Section 8.
10. Procedure for Notification and Defense of Claim.
(a) To obtain indemnification under this Agreement, Indemnitee
shall submit to the Company a written request, including therein or
therewith such documentation and information as is reasonably available to
Indemnitee and is reasonably necessary to determine whether and to what
extent Indemnitee is entitled to indemnification, not later than thirty
(30) days after receipt by Indemnitee of notice of the commencement of any
Proceeding. The omission to notify the Company will not relieve the Company
from any liability which it may have to Indemnitee otherwise than under
this Agreement. The Secretary of the Company shall, promptly upon receipt
of such a request for indemnification, advise the Board in writing that
Indemnitee has requested indemnification.
(b) The Company will be entitled to participate in the Proceeding
at its own expense.
11. Procedure Upon Application for Indemnification.
(a) Upon written request by Indemnitee for indemnification pursuant
to the first sentence of Section 10(a), a determination, if required by
applicable law, with respect to Indemnitee's entitlement thereto shall be
made in the specific case: (i) if a Change in Control shall have occurred,
by Independent Counsel in a written opinion to the Board of Directors, a
copy of which shall be delivered to Indemnitee; or (ii) if a Change in
Control shall not have occurred, (A) by a majority vote of the
Disinterested Directors, even though
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<PAGE>
less than a quorum of the Board, or (B) if there are no such Disinterested
Directors or, if such Disinterested Directors so direct, by Independent
Counsel in a written opinion to the Board, a copy of which shall be
delivered to Indemnitee or (C) if so directed by the Board, by the
stockholders of the Company; and, if it is so determined that Indemnitee is
entitled to indemnification, payment to Indemnitee shall be made within ten
(10) days after such determination. Indemnitee shall cooperate with the
person, persons or entity making such determination with respect to
Indemnitee's entitlement to indemnification, including providing to such
person, persons or entity upon reasonable advance request any documentation
or information which is not privileged or otherwise protected from
disclosure and which is reasonably available to Indemnitee and reasonably
necessary to such determination. Any costs or expenses (including
attorneys' fees and disbursements) incurred by Indemnitee in so cooperating
with the person, persons or entity making such determination shall be borne
by the Company (irrespective of the determination as to Indemnitee's
entitlement to indemnification) and the Company hereby indemnifies and
agrees to hold Indemnitee harmless therefrom.
(b) In the event the determination of entitlement to
indemnification is to be made by Independent Counsel pursuant to Section
11(a) hereof, the Independent Counsel shall be selected as provided in this
Section 11(b). If a Change in Control shall not have occurred, the
Independent Counsel shall be selected by the Board of Directors, and the
Company shall give written notice to Indemnitee advising him of the
identity of the Independent Counsel so selected. If a Change in Control
shall have occurred, the Independent Counsel shall be selected by
Indemnitee (unless Indemnitee shall request that such selection be made by
the Board of Directors, in which event the preceding sentence shall apply),
and Indemnitee shall give written notice to the Company advising it of the
identity of the Independent Counsel so selected. In either event,
Indemnitee or the Company, as the case may be, may, within 10 days after
such written notice of selection shall have been given, deliver to the
Company or to Indemnitee, as the case may be, a written objection to such
selection; provided, however, that such objection may be asserted only on
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the ground that the Independent Counsel so selected does not meet the
requirements of "Independent Counsel" as defined in Section 2 of this
Agreement, and the objection shall set forth with particularity the factual
basis of such assertion. Absent a proper and timely objection, the person
so selected shall act as Independent Counsel. If such written objection is
so made and substantiated, the Independent Counsel so selected may not
serve as Independent Counsel unless and until such objection is withdrawn
or a court has determined that such objection is without merit. If, within
20 days after submission by Indemnitee of a written request for
indemnification pursuant to Section 10(a) hereof, no Independent Counsel
shall have been selected and not objected to, either the Company or
Indemnitee may petition a court of competent jurisdiction for resolution of
any objection which shall have been made by the Company or Indemnitee to
the other's selection of Independent Counsel and/or for the appointment as
Independent Counsel of a person selected by the Court or by such other
person as the Court shall designate, and the person with respect to whom
all objections are so resolved or the person so appointed shall act as
Independent Counsel under Section 11(a) hereof. Upon the due commencement
of any judicial proceeding or arbitration pursuant to Section 13(a) of this
Agreement, Independent Counsel shall be discharged and relieved of
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<PAGE>
any further responsibility in such capacity (subject to the applicable
standards of professional conduct then prevailing).
12. Presumptions and Effect of Certain Proceedings.
(a) In making a determination with respect to entitlement to
indemnification hereunder, the person or persons or entity making such
determination shall presume that Indemnitee is entitled to indemnification
under this Agreement if Indemnitee has submitted a request for
indemnification in accordance with Section 10(a) of this Agreement, and the
Company shall have the burden of proof to overcome that presumption in
connection with the making by any person, persons or entity of any
determination contrary to that presumption. Neither the failure of the
Company (including by its directors or independent legal counsel) to have
made a determination prior to the commencement of any action pursuant to
this Agreement that indemnification is proper in the circumstances because
Indemnitee has met the applicable standard of conduct, nor an actual
determination by the Company (including by its directors or independent
legal counsel) that Indemnitee has not met such applicable standard of
conduct, shall be a defense to the action or create a presumption that
Indemnitee has not met the applicable standard of conduct.
(b) If the person, persons or entity empowered or selected under
Section 11 of this Agreement to determine whether Indemnitee is entitled to
indemnification shall not have made a determination within sixty (60) days
after receipt by the Company of the request therefor, the requisite
determination of entitlement to indemnification shall be deemed to have
been made and Indemnitee shall be entitled to such indemnification, absent
(i) a misstatement by Indemnitee of a material fact, or an omission of a
material fact necessary to make Indemnitee's statement not materially
misleading, in connection with the request for indemnification, or (ii) a
prohibition of such indemnification under applicable law; provided,
however, that such 60-day period may be extended for a reasonable time, not
to exceed an additional thirty (30) days, if the person, persons or entity
making the determination with respect to entitlement to indemnification in
good faith requires such additional time for the obtaining or evaluating of
documentation and/or information relating thereto; and provided, further,
that the foregoing provisions of this Section 12(b) shall not apply (i) if
the determination of entitlement to indemnification is to be made by the
stockholders pursuant to Section 11(a) of this Agreement and if (A) within
fifteen (15) days after receipt by the Company of the request for such
determination the Board of Directors has resolved to submit such
determination to the stockholders for their consideration at an annual
meeting thereof to be held within seventy five (75) days after such receipt
and such determination is made thereat, or (B) a special meeting of
stockholders is called within fifteen (15) days after such receipt for the
purpose of making such determination, such meeting is held for such purpose
within sixty (60) days after having been so called and such determination
is made thereat, or (ii) if the determination of entitlement to
indemnification is to be made by Independent Counsel pursuant to Section
11(a) of this Agreement.
(c) The termination of any Proceeding or of any claim, issue or
matter therein, by judgment, order, settlement or conviction, or upon a
plea of nolo contendere or its equivalent, shall not (except as otherwise
---------------
expressly provided in this Agreement) of itself
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<PAGE>
adversely affect the right of Indemnitee to indemnification or create a
presumption that Indemnitee did not act in good faith and in a manner which
he reasonably believed to be in or not opposed to the best interests of the
Company or, with respect to any criminal Proceeding, that Indemnitee had
reasonable cause to believe that his conduct was unlawful.
(d) Reliance as Safe Harbor. For purposes of any determination of
-----------------------
good faith, Indemnitee shall be deemed to have acted in good faith if
Indemnitee's action is based on the records or books of account of the
Enterprise, including financial statements, or on information supplied to
Indemnitee by the officers of the Enterprise in the course of their duties,
or on the advice of legal counsel for the Enterprise or on information or
records given or reports made to the Enterprise by an independent certified
public accountant or by an appraiser or other expert selected with the
reasonable care by the Enterprise. The provisions of this Section 12(d)
shall not be deemed to be exclusive or to limit in any way the other
circumstances in which the Indemnitee may be deemed to have met the
applicable standard of conduct set forth in this Agreement.
(e) Actions of Others. The knowledge and/or actions, or failure to
-----------------
act, of any director, officer, agent or employee of the Enterprise shall
not be imputed to Indemnitee for purposes of determining the right to
indemnification under this Agreement.
13. Remedies of Indemnitee.
(a) In the event that (i) a determination is made pursuant to
Section 11 of this Agreement that Indemnitee is not entitled to
indemnification under this Agreement, (ii) advancement of Expenses is not
timely made pursuant to Section 9 of this Agreement, (iii) no determination
of entitlement to indemnification shall have been made pursuant to Section
11(a) of this Agreement within 45 days after receipt by the Company of the
request for indemnification, (iv) payment of indemnification is not made
pursuant to Section 5, 6, 7 or the last sentence of Section 11(a) of this
Agreement within ten (10) days after receipt by the Company of a written
request therefor, or (v) payment of indemnification pursuant to Section 3
or 4 of this Agreement is not made within ten (10) days after a
determination has been made that Indemnitee is entitled to indemnification,
Indemnitee shall be entitled to an adjudication by a court of his
entitlement to such indemnification or advancement of Expenses.
Alternatively, Indemnitee, at his option, may seek an award in arbitration
to be conducted by a single arbitrator pursuant to the Commercial
Arbitration Rules of the American Arbitration Association. The Company
shall not oppose Indemnitee's right to seek any such adjudication or award
in arbitration.
(b) In the event that a determination shall have been made pursuant
to Section 11(a) of this Agreement that Indemnitee is not entitled to
indemnification, any judicial proceeding or arbitration commenced pursuant
to this Section 13 shall be conducted in all respects as a de novo trial,
-- ----
or arbitration, on the merits and Indemnitee shall not be prejudiced by
reason of that adverse determination. In any judicial proceeding or
arbitration commenced pursuant to this Section 13 the Company shall have
the burden of proving Indemnitee is not entitled to indemnification or
advancement of Expenses, as the case may
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<PAGE>
be.
(c) If a determination shall have been made pursuant to Section
11(a) of this Agreement that Indemnitee is entitled to indemnification, the
Company shall be bound by such determination in any judicial proceeding or
arbitration commenced pursuant to this Section 13, absent (i) a
misstatement by Indemnitee of a material fact, or an omission of a material
fact necessary to make Indemnitee's statement not materially misleading, in
connection with the request for indemnification, or (ii) a prohibition of
such indemnification under applicable law.
(d) In the event that Indemnitee, pursuant to this Section 13,
seeks a judicial adjudication of or an award in arbitration to enforce his
rights under, or to recover damages for breach of, this Agreement,
Indemnitee shall be entitled to recover from the Company, and shall be
indemnified by the Company against, any and all Expenses actually and
reasonably incurred by him in such judicial adjudication or arbitration. If
it shall be determined in said judicial adjudication or arbitration that
Indemnitee is entitled to receive part but not all of the indemnification
or advancement of Expenses sought, the Indemnitee shall be entitled to
recover from the Company, and shall be indemnified by the Company against,
any and all Expenses reasonably incurred by Indemnitee in connection with
such judicial adjudication or arbitration.
(e) The Company shall be precluded from asserting in any judicial
proceeding or arbitration commenced pursuant to this Section 13 that the
procedures and presumptions of this Agreement are not valid, binding and
enforceable and shall stipulate in any such court or before any such
arbitrator that the Company is bound by all the provisions of this
Agreement. The Company shall indemnify Indemnitee against any and all
Expenses and, if requested by Indemnitee, shall (within ten (10) days after
receipt by the Company of a written request therefor) advance such
expenses to Indemnitee, which are incurred by Indemnitee in connection with
any action brought by Indemnitee for indemnification or advance of Expenses
from the Company under this Agreement or under any directors' and officers'
liability insurance policies maintained by the Company, regardless of
whether Indemnitee ultimately is determined to be entitled to such
indemnification, advancement of Expenses or insurance recovery, as the case
may be.
14. Non-exclusivity; Survival of Rights; Insurance; Subrogation.
(a) The rights of indemnification and to receive advancement of
Expenses as provided by this Agreement shall not be deemed exclusive of any
other rights to which Indemnitee may at any time be entitled under
applicable law, the Company's Articles of Incorporation, the Company's
Bylaws, any agreement, a vote of stockholders or a resolution of directors,
or otherwise. No amendment, alteration or repeal of this Agreement or of
any provision hereof shall limit or restrict any right of Indemnitee under
this Agreement in respect of any action taken or omitted by such Indemnitee
in his Corporate Status prior to such amendment, alteration or repeal. To
the extent that a change in Delaware law, whether by statute or judicial
decision, permits greater indemnification or advancement of Expenses than
would be afforded currently under the Company's Bylaws and this Agreement,
it is the intent of the parties hereto that Indemnitee shall enjoy by this
Agreement the greater benefits
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<PAGE>
so afforded by such change. No right or remedy herein conferred is intended
to be exclusive of any other right or remedy, and every other right and
remedy shall be cumulative and in addition to every other right and remedy
given hereunder or now or hereafter existing at law or in equity or
otherwise. The assertion or employment of any right or remedy hereunder, or
otherwise, shall not prevent the concurrent assertion or employment of any
other right or remedy.
(b) To the extent that the Company maintains an insurance policy or
policies providing liability insurance for directors, officers, employees,
or agents of the Company or of any other corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise which such person
serves at the request of the Company, Indemnitee shall be covered by such
policy or policies in accordance with its or their terms to the maximum
extent of the coverage available for any such director, officer, employee
or agent under such policy or policies. If, at the time of the receipt of a
notice of a claim pursuant to Section 2(b) of Section 2 hereof, the Company
has director and officer liability insurance in effect, the Company shall
give prompt notice of the commencement of such proceeding to the insurers
in accordance with the procedures set forth in the respective policies. The
Company shall thereafter take all necessary or desirable action to cause
such insurers to pay, on behalf of the Indemnitee, all amounts payable as a
result of such proceeding in accordance with the terms of such policies.
(c) In the event of any payment under this Agreement, the Company
shall be subrogated to the extent of such payment to all of the rights of
recovery of Indemnitee, who shall execute all papers required and take all
action necessary to secure such rights, including execution of such
documents as are necessary to enable the Company to bring suit to enforce
such rights.
(d) The Company shall not be liable under this Agreement to make
any payment of amounts otherwise indemnifiable (or for which advancement is
provided hereunder) hereunder if and to the extent that Indemnitee has
otherwise actually received such payment under any insurance policy,
contract, agreement or otherwise.
(e) The Company's obligation to indemnify or advance Expenses
hereunder to Indemnitee who is or was serving at the request of the Company
as a director, officer, employee or agent of any other corporation,
partnership, joint venture, trust, employee benefit plan or other
enterprise shall be reduced by any amount Indemnitee has actually received
as indemnification or advancement of expenses from such other corporation,
partnership, joint venture, trust, employee benefit plan or other
enterprise.
15. Duration of Agreement. This Agreement shall continue until and
terminate upon the later of: (a) 10 years after the date that Indemnitee shall
have ceased to serve as a director or officer of the Company or as a director,
officer, employee or agent of any other corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise which Indemnitee served at the
request of the Company; or (b) 1 year after the final termination of any
Proceeding then pending in respect of which Indemnitee is granted rights of
indemnification or advancement of Expenses hereunder and of any proceeding
commenced by Indemnitee pursuant to Section 13
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of this Agreement relating thereto. This Agreement shall be binding upon the
Company and its successors and assigns and shall inure to the benefit of
Indemnitee and his heirs, executors and administrators.
16. Severability. If any provision or provisions of this Agreement shall
be held to be invalid, illegal or unenforceable for any reason whatsoever: (a)
the validity, legality and enforceability of the remaining provisions of this
Agreement (including without limitation, each portion of any Section of this
Agreement containing any such provision held to be invalid, illegal or
unenforceable, that is not itself invalid, illegal or unenforceable) shall not
in any way be affected or impaired thereby and shall remain enforceable to the
fullest extent permitted by law; (b) such provision or provisions shall be
deemed reformed to the extent necessary to conform to applicable law and to give
the maximum effect to the intent of the parties hereto; and (c) to the fullest
extent possible, the provisions of this Agreement (including, without
limitation, each portion of any Section of this Agreement containing any such
provision held to be invalid, illegal or unenforceable, that is not itself
invalid, illegal or unenforceable) shall be construed so as to give effect to
the intent manifested thereby.
17. Enforcement.
(a) The Company expressly confirms and agrees that it has entered
into this Agreement and assumed the obligations imposed on it hereby in
order to induce Indemnitee to serve as a director or officer of the
Company, and the Company acknowledges that Indemnitee is relying upon this
Agreement in serving as a director or officer of the Company.
(b) This Agreement constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof and supersedes all
prior agreements and understandings, oral, written and implied, between the
parties hereto with respect to the subject matter hereof.
18. Modification and Waiver. No supplement, modification or amendment of
this Agreement shall be binding unless executed in writing by the parties
thereto. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provisions of this Agreement nor shall
any waiver constitute a continuing waiver.
19. Notice by Indemnitee. Indemnitee agrees promptly to notify the Company
in writing upon being served with any summons, citation, subpoena, complaint,
indictment, information or other document relating to any Proceeding or matter
which may be subject to indemnification or advancement of Expenses covered
hereunder. The failure of Indemnitee to so notify the Company shall not relieve
the Company of any obligation which it may have to the Indemnitee under this
Agreement or otherwise.
20. Notices. All notices, requests, demands and other communications under
this Agreement shall be in writing and shall be deemed to have been duly given
(a) if delivered by hand and receipted for by the party to whom said notice or
other communication shall have been
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directed, or (b) mailed by certified or registered mail with postage prepaid, on
the third business day after the date on which it is so mailed:
(a) If to Indemnitee, at the address indicated on the signature
page of this Agreement, or such other address as Indemnitee shall provide
to the Company.
(b) If to the Company, to One AMD Place, Sunnyvale, California
94086, Attn: General Counsel, or to any other address as may have been
furnished to Indemnitee by the Company.
21. Contribution. To the fullest extent permissible under applicable law,
if the indemnification provided for in this Agreement is unavailable to
Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying
Indemnitee, shall contribute to the amount incurred by Indemnitee, whether for
judgments, fines, penalties, excise taxes, amounts paid or to be paid in
settlement and/or for Expenses, in connection with any claim relating to an
indemnifiable event under this Agreement, in such proportion as is deemed fair
and reasonable in light of all of the circumstances of such Proceeding in order
to reflect (i) the relative benefits received by the Company and Indemnitee as a
result of the event(s) and/or transaction(s) giving cause to such Proceeding;
and/or (ii) the relative fault of the Company (and its directors, officers,
employees and agents) and Indemnitee in connection with such event(s) and/or
transaction(s).
22. Applicable Law and Consent to Jurisdiction. This Agreement and the
legal relations among the parties shall be governed by, and construed and
enforced in accordance with, the laws of the State of Delaware, without regard
to its conflict of laws rules. Except with respect to any arbitration commenced
by Indemnitee pursuant to Section 10(a) of this Agreement, the Company and
Indemnitee hereby irrevocably and unconditionally (i) agree that any action or
proceeding arising out of or in connection with this Agreement shall be brought
only in the Chancery Court of the State of Delaware (the "Delaware Court"), and
not in any other state or federal court in the United States of America or any
court in any other country, (ii) consent to submit to the exclusive jurisdiction
of the Delaware Court for purposes of any action or proceeding arising out of or
in connection with this Agreement, (iii) appoint, to the extent such party is
not a resident of the State of Delaware, irrevocably RL&F Service Corp., One
Rodney Square, 10th Floor, 10th and King Streets, Wilmington, Delaware 19801 as
its agent in the State of Delaware as such party's agent for acceptance of legal
process in connection with any such action or proceeding against such party with
the same legal force and validity as if served upon such party personally within
the State of Delaware, (iv) waive any objection to the laying of venue of any
such action or proceeding in the Delaware Court, and (v) waive, and agree not to
plead or to make, any claim that any such action or proceeding brought in the
Delaware Court has been brought in an improper or inconvenient forum.
23. Identical Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
but all of which together shall constitute one and the same Agreement. Only one
such counterpart signed by the party against whom enforceability is sought needs
to be produced to evidence the existence of this Agreement.
-14-
<PAGE>
24. Miscellaneous. Use of the masculine pronoun shall be deemed to include
usage of the feminine pronoun where appropriate. The headings of the paragraphs
of this Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction thereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as
of the day and year first above written.
ADVANCED MICRO DEVICES, INC. INDEMNITEE
- ------------------------------ -----------------------------
By: Name:
Chief Executive Officer Address:
-15-
<PAGE>
EXHIBIT 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
The statements in this Management's Discussion and Analysis of Financial
Condition and Results of Operations that are forward-looking are based on
current expectations and beliefs and involve numerous risks and uncertainties
that could cause actual results to differ materially. The forward-looking
statements relate to, among other things, operating results; anticipated cash
flows; capital expenditures; adequacy of resources to fund operations and
capital investments; our ability to transition to new process technologies; our
ability to produce AMD Athlon microprocessors in the volume required by
customers on a timely basis; our ability, and the ability of third parties, to
provide timely infrastructure solutions (motherboards and chipsets) to support
AMD Athlon microprocessors; our ability to increase customer and market
acceptance of AMD Athlon microprocessors; our ability to maintain average
selling prices for AMD Athlon microprocessors; our ability to increase
manufacturing capacity to meet the demand for Flash memory products; the effect
of foreign currency hedging transactions; our new submicron integrated circuit
manufacturing and design facility in Dresden, Germany (Dresden Fab 30); and the
Fujitsu AMD Semiconductor Limited (FASL) manufacturing facilities. See
"Financial Condition" and "Risk Factors" below, as well as such other risks and
uncertainties as are detailed in our Securities and Exchange Commission reports
and filings for a discussion of the factors that could cause actual results to
differ materially from the forward-looking statements.
The following discussion should be read in conjunction with the
consolidated financial statements and related notes as of December 26, 1999 and
December 27, 1998 and for each of the three years in the period ended December
26, 1999.
RESULTS OF OPERATIONS
In 1997, 1998 and 1999, we participated in all three technology areas within the
digital integrated circuit (IC) market--microprocessors, memory circuits and
logic circuits--through (1) our AMD segment, which consists of our three product
groups--our Computation Products Group (CPG), our Memory Group and our
Communications Group and (2) our Vantis segment, up until June 15, 1999, which
consisted of our programmable logic subsidiary, Vantis Corporation (Vantis). CPG
products include microprocessors, core logic products and embedded processors.
Memory Group products include Flash memory devices and Erasable Programmable
Read-Only Memory (EPROM) devices. Communications Group products include
telecommunication products and networking products. Vantis products consisted of
complex and simple, high-performance complementary metal oxide semiconductor
(CMOS) programmable logic devices (PLDs).
On June 15, 1999, we completed the sale of Vantis to Lattice Semiconductor
Corporation. After the Vantis sale, we provided foundry and administrative
services to Vantis during 1999.
The following is a summary of the net sales of the AMD and Vantis segments
for 1999, 1998 and 1997:
(Millions) 1999 1998 1997
- --------------------------------------------------------------------------------
AMD segment:
CPG $1,657 $1,484 $ 938
Memory Group 773 561 724
Communications Group 298 292 451
Lattice service fees 43 -- --
- --------------------------------------------------------------------------------
2,771 2,337 2,113
Vantis segment 87 205 243
- --------------------------------------------------------------------------------
Total $2,858 $2,542 $2,356
================================================================================
Net Sales Comparison of Years Ended December 26, 1999 and December 27, 1998
Total net sales increased by $315 million, or 12 percent, to $2,858 million in
1999 from $2,542 million in 1998. Excluding sales from the Vantis segment and
Lattice service fees, net sales for 1999 increased by 17 percent compared to
1998.
CPG net sales of $1,657 million increased by 12 percent in 1999 compared to
1998. This increase was primarily due to the introduction of AMD Athlon
microprocessors, which are our seventh-generation Microsoft(R) Windows(R)
compatible microprocessors, at the end of the second quarter of 1999, and was
partially offset by a decrease in net sales of AMD-K6 microprocessors. Although
unit sales volumes of AMD-K6 microprocessors increased, net sales decreased due
to declines in average selling prices which were caused by aggressive Intel
pricing, including marketing rebates and product bundling of microprocessors,
motherboards, chipsets and combinations thereof. Overall CPG sales growth in
2000 is dependent upon a successful production ramp to 0.18-micron process
technology and copper interconnect technology, availability of chipsets and
motherboards from third-party suppliers and increasing market acceptance of AMD
Athlon microprocessors, as to which we cannot give any assurance.
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Memory Group net sales of $773 million increased by 38 percent in 1999
compared to 1998 primarily as a result of strong growth in demand for Flash
memory devices, which was slightly offset by a decline in net sales of EPROMs.
Demand for Flash memory devices remained strong. However, our ability to achieve
further growth will depend upon our ability to increase our Flash memory
manufacturing capacity, as to which we cannot give any assurance.
Communications Group net sales of $298 million were relatively flat between
1999 and 1998. Increases in net sales from our new Ethernet controllers and
physical layer circuits, as well as increases in net sales of linecard circuits,
were offset by a weakness in the mature network products. In October 1999, we
announced our intention to sell certain assets of the Communications Group.
Through June 15, 1999, Vantis products contributed $87 million to our 1999
net sales. On June 15, 1999, we sold Vantis to Lattice Semiconductor Corporation
for approximately $500 million in cash. As a result, there were no sales from
Vantis in the third and fourth quarters of 1999. As part of the sale of Vantis,
we negotiated various service contracts with Lattice to continue to provide,
among other things, wafer fabrication and assembly, test, mark and pack services
to Vantis. Pursuant to these contracts, we received service fees of $43 million
from Lattice during 1999. We expect the wafer fabrication and assembly, test,
mark and pack service contracts to continue until September 2003.
Net Sales Comparison of Years Ended December 27, 1998 and December 28, 1997
Total net sales increased by $186 million, or eight percent, to $2,542 million
in 1998 from $2,356 million in 1997.
CPG net sales of $1,484 million increased by 58 percent in 1998 compared to
1997. This increase was primarily due to increased sales of microprocessors at a
higher speed grade mix and higher average selling prices.
Memory Group net sales of $561 million decreased by 23 percent in 1998
compared to 1997 primarily due to a significant decline in the average selling
price of Flash memory devices. This decrease was partially offset by an increase
in unit sales of Flash memory devices. Oversupply in the Flash market, combined
with an increase in competition, caused downward pressure on the average selling
price of Flash memory devices in 1998. In addition, average selling prices and
unit sales of EPROMs declined.
Communications Group net sales of $292 million decreased by 35 percent in
1998 compared to 1997 primarily due to a significant decrease in unit sales of
nearly all products. Our offerings of network products, which represented
approximately one-half of the decline in Communications Group net sales, did not
keep pace with the market shift towards higher performance products. Our sales
of telecommunication products were particularly impacted by the general economic
downturn in Asia.
Vantis net sales decreased 16 percent to $205 million from the prior year
due to a decrease in unit shipments and lower average selling prices of low-
density or simple PLD (SPLD) products. The total available market for SPLD
products decreased as older SPLD products were replaced by complex PLD (CPLD)
and field programmable gate array (FPGA) products in new designs.
Comparison of Expenses, Gross Margin Percentage and Interest Income and Other,
Net
The following is a summary of expenses, gross margin percentage and interest
income and other, net for 1999, 1998 and 1997:
(Millions except for gross margin percentage) 1999 1998 1997
- --------------------------------------------------------------------------------
Cost of sales $1,964 $1,719 $1,578
Gross margin percentage 31% 32% 33%
Research and development $ 636 $ 567 $ 468
Marketing, general and administrative 540 420 401
Restructuring and other special charges 38 -- --
Gain on sale of Vantis 432 -- --
Litigation settlement -- 12 --
Interest income and other, net 32 34 35
Interest expense 69 66 45
- --------------------------------------------------------------------------------
7
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We operate in an industry characterized by high fixed costs due to capital-
intensive manufacturing processes, particularly the state-of-the-art production
facilities required for microprocessors. As a result, our gross margin
percentage is significantly affected by fluctuations in product sales. Gross
margin percentage growth depends on continually increasing sales from
microprocessors and other products because fixed costs continue to rise due to
the ongoing capital investments required to expand production capacity and
capability.
Gross margin percentage decreased to 31 percent in 1999 compared to 32
percent in 1998. The decrease in gross margin percentage was primarily caused by
lower average selling prices of AMD K-6 microprocessors combined with higher
fixed costs. Fixed costs will continue to increase as we introduce equipment for
0.18-micron process technology capacity and facilitize Fab 25, our IC
manufacturing facility in Austin, Texas. As described below, Dresden Fab 30 will
also contribute to a significant increase in cost of sales when it begins
producing units for sale, which we anticipate to be no earlier than the second
quarter of 2000. Accordingly, absent significant increases in sales,
particularly with respect to microprocessors, we will continue to experience
pressure on our gross margin percentage.
Gross margin percentage decreased to 32 percent in 1998 compared to 33
percent in 1997. The lower gross margin percentage was primarily caused by a
decline in net sales of non-microprocessor products. In addition, our fixed
costs associated with our microprocessor products increased. During 1998, we
continued to invest in the transition from 0.35-micron to 0.25-micron process
technology and in the facilitization of Fab 25.
Research and development expenses of $636 million in 1999 increased 12
percent compared to 1998 due to a full year of expenses associated with the
Motorola alliance, which is described below, increases in spending for
facilitization and pre-production process development in Dresden Fab 30 and
research and development activities for the AMD Athlon microprocessor. These
additional costs were partially offset in 1999 by savings in our Submicron
Development Center (SDC) as a result of restructuring activities, savings
related to the absence of Vantis expenses in the second half of 1999 and the
recognition of deferred credits on foreign capital grants and interest subsidies
that were received for Dresden Fab 30. These credits of approximately $12
million per quarter (denominated in deutsche marks) will continue to be offset
against Dresden Fab 30 expenses in future quarters until June 2007. Beginning no
earlier than the second quarter of 2000, we expect Dresden Fab 30 to begin
producing units for sale. At that time, a significant portion of Dresden Fab 30
expenses, including the deferred credits referred to above, will shift from
research and development expense to cost of sales.
Research and development expenses of $567 million in 1998 increased 21
percent compared to 1997 due to an increase in spending in Dresden Fab 30 for
facilitization and pre-production process development, and in Fab 25 for new
product and process development.
In 1998, we entered into an alliance with Motorola for the development of
Flash memory and logic technology. Costs related to the alliance are included in
research and development expenses. The alliance includes a seven-year technology
development and license agreement, which was amended on January 21, 2000 to
include certain additional technology, and a patent cross-license agreement. The
agreements provide that we will co-develop with Motorola future generation logic
process and embedded Flash technologies. In addition, we will receive certain
licenses to Motorola's semiconductor logic process technologies, including
copper interconnect technology, which may be subject to variable royalty rates.
In exchange, we will develop and license to Motorola a Flash module design to be
used in Motorola's future embedded Flash products. Motorola will have additional
rights, subject to certain conditions, to make stand-alone Flash devices, and to
make and sell certain data networking devices. The rights to data networking
devices may be subject to variable royalty payment provisions.
Marketing, general and administrative expenses of $540 million in 1999
increased 29 percent compared to 1998 primarily as a result of marketing and
promotional activities for our launch of the AMD Athlon microprocessor,
increased costs and related depreciation expense associated with new information
systems and software put into production in 1999 and higher labor costs. These
increases were partially offset by savings related to the absence of Vantis
expenses in the third and fourth quarters of 1999.
Marketing, general and administrative expenses of $420 million in 1998
increased five percent compared to 1997 primarily due to depreciation expense
and labor costs associated with the installation of new order management and
accounts receivable systems and related software upgrades.
In the first quarter of 1999, we initiated a review of our cost structure.
Based upon this review, we recorded restructuring and other special charges of
$38 million in 1999 as a result of certain of our actions to better align our
cost structure with expected revenue growth rates.
8
<PAGE>
The $38 million in restructuring and other special charges consisted of the
following:
. $25 million for the closure of a submicron development laboratory facility
in the SDC, the write-off of certain equipment in the SDC and the write-off of
equipment taken out of service in Fab 25 related to the 0.35-micron wafer
fabrication process;
. $6 million for the write-off of capitalized costs related to discontinued
system projects;
. $3 million for the disposal of equipment taken out of service in the SDC;
. $3 million for severance and employee benefits for 178 terminated employees
in the Information Technology department, the SDC and certain sales offices; and
. $1 million for costs of leases for vacated and unused sales offices.
As of December 26, 1999, the total cash outlay for restructuring and other
special charges was approximately $5 million. We anticipate that accruals of $1
million for sales office facilities will be utilized over the period through
lease terminations in the second quarter of 2002. Accruals of $2 million for the
disconnection and removal costs for equipment that has been taken out of service
will be fully discharged by the end of the first quarter of 2000. The payments
of the accruals are expected to be funded by cash from operations.
The remaining $30 million of restructuring and other special charges
consisted of non-cash charges primarily for asset write-offs. As a result of the
restructuring and other special charges, we expect to save a total of $30
million in depreciation expense over the next three to five years.
On June 15, 1999, we completed the sale of Vantis to Lattice Semiconductor
Corporation for approximately $500 million in cash. The actual cash received was
net of Vantis' cash and cash equivalent balance of approximately $46 million as
of the closing of the sale. Our pretax gain on the sale of Vantis was $432
million. The gain was computed based on Vantis' net assets as of June 15, 1999
and other direct expenses related to the sale. The applicable tax rate on the
gain was 40 percent, resulting in an after-tax gain of $259 million.
A litigation settlement of approximately $12 million was recorded in the
first quarter of 1998 for the settlement of a class action securities lawsuit
against us and certain of our current and former officers and directors. We paid
the settlement during the third quarter of 1998.
Interest income and other, net of $32 million in 1999 decreased seven
percent compared to 1998 primarily as a result of lower interest income from
lower invested cash balances during 1999. Interest expense of $69 million in
1999 increased four percent compared to 1998 due to a full year of interest
expense in 1999 on the $517.5 million of Convertible Subordinated Notes sold in
May 1998 (the Convertible Subordinated Notes). This increase was partially
offset by lower interest expense on the $250 million secured term loan received
under the 1996 syndicated bank loan agreement (the Credit Agreement), which was
paid in full in July 1999, as well as higher capitalized interest related to the
facilitization of Fab 25 and Dresden Fab 30.
Interest expense of $66 million in 1998 increased 47 percent compared to
1997 due to the increase in debt balances, including the Convertible
Subordinated Notes. There was no significant change in interest income and
other, net in 1998 compared to 1997.
Income Tax
We recorded an income tax provision of $167 million in 1999, and tax benefits of
$92 million in 1998 and $55 million in 1997. Excluding the gain on the sale of
Vantis and restructuring charges, the effective tax rate for the year ended
December 26, 1999 was zero. The effective tax benefit rate was approximately 44
percent for 1998 and 55 percent for 1997. No tax benefits were recorded for the
operating losses incurred during 1999 because the deferred tax assets arising
from such losses were offset by a valuation allowance. The tax benefit rates in
1998 and 1997 were greater than the federal statutory rate due to fixed tax
benefits that increase the benefit rate in a loss year.
We had net deferred tax liabilities of $5 million as of December 26, 1999
representing certain foreign deferred taxes.
Other Items
International sales as a percent of net sales were 60 percent in 1999, 55
percent in 1998 and 57 percent in 1997. During 1999, approximately eight percent
of our net sales were denominated in foreign currencies. We do not have sales
denominated in local currencies in those countries which have highly
inflationary economies (as defined by generally accepted accounting principles).
The impact on our operating results from changes in foreign currency rates
individually and in the aggregate has not been material.
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Comparison of Segment Income (Loss)
In the first half of 1999 and in 1998 and 1997, we operated in two segments: (1)
the AMD segment and (2) the Vantis segment. For a comparison of segment net
sales, refer to the previous discussions on net sales by product group.
The following is a summary of operating income (loss) by segment for 1999,
1998 and 1997:
(Millions) 1999 1998 1997
- --------------------------------------------------------------------------------
AMD segment $(327) $(185) $(127)
Vantis segment 6 22 37
- --------------------------------------------------------------------------------
Total $(321) $(163) $ (90)
- --------------------------------------------------------------------------------
The AMD segment's operating loss increased by $142 million in 1999 compared to
1998 primarily due to an increase in fixed costs associated with the continued
facilitization of Fab 25 and research and development costs related to Dresden
Fab 30, the Motorola alliance and the AMD Athlon microprocessor. We also
incurred $38 million in restructuring and other special charges in 1999. The
increases in costs were partially offset by higher net sales in CPG and the
Memory Group.
The Vantis segment's operating income decreased in 1999 compared to 1998
due primarily to the sale of Vantis on June 15, 1999, resulting in sales
activity for 24 weeks in 1999. In addition to the shorter period for sales
activity in 1999, Vantis net sales for the first half of 1999 were also lower
compared to the first half of 1998 due to lower sales of SPLD products which
were partially offset by higher sales of CPLD products.
FINANCIAL CONDITION
Cash flow from operating activities was $260 million in 1999 compared to $142
million in 1998 and $399 million in 1997. Net operating cash flows in 1999
increased $118 million over 1998 primarily due to a decrease in net loss of $15
million and an increase in the net change in operating assets and liabilities of
$245 million, which was mainly due to higher payables and accrued liabilities.
The increase in net operating cash flows was partially offset by a decrease in
net non-cash adjustments to net loss of $142 million. This offset was primarily
due to the gain on the sale of Vantis which was partially offset by a larger
decrease in deferred income tax assets in 1999 compared to 1998.
Investing activities consumed $142 million in cash during 1999 compared to
$977 million in 1998 and $633 million in 1997. Cash used in investing activities
decreased in 1999 compared to 1998 primarily due to an offset from proceeds from
the sale of Vantis, as well as lower capital expenditures.
Our financing activities used cash of $174 million in 1999 compared to
providing cash of $950 million in 1998 and $309 million in 1997. In 1999, we
used cash primarily for payments on debt and capital lease obligations,
including repayment of the secured term loan under the Credit Agreement. Our
1998 sources of cash included proceeds from the Convertible Subordinated Notes,
borrowings from Dresdner Bank AG and capital investment grants and interest
subsidies from the Federal Republic of Germany and the State of Saxony.
Financing activities for all years presented include proceeds from the issuance
of common stock under employee stock plans.
The Credit Agreement provided for a $150 million three-year secured
revolving line of credit and a $250 million four-year secured term loan. On June
25, 1999, we terminated the secured revolving line of credit. On July 13, 1999,
we replaced the Credit Agreement with a new Loan and Security Agreement (the
Loan Agreement) with a consortium of banks led by Bank of America. On July 30,
1999, we repaid the outstanding principal balance of $86 million on the secured
term loan and terminated the Credit Agreement. Under the Loan Agreement, which
provides for a four-year secured revolving line of credit of up to $200 million,
we can borrow, subject to amounts which may be set aside by the lenders, up to
85 percent of our eligible accounts receivable from Original Equipment
Manufacturers (OEMs) and 50 percent of our eligible accounts receivable from
distributors. We must comply with certain financial covenants if the level of
domestic cash we hold declines to certain levels, or the amount of borrowings
under the Loan Agreement rises to certain levels. Our obligations under the Loan
Agreement are secured by a pledge of most of our accounts receivable, inventory,
general intangibles and the related proceeds. As of December 26, 1999, we had
not borrowed any funds under the Loan Agreement. In addition, we had available
unsecured, uncommitted bank lines of credit in the amount of $71 million.
We currently plan to make additional capital investments of approximately
$800 million in 2000, although actual expenditures may vary. These investments
include those relating to the continued facilitization of Dresden Fab 30 and Fab
25.
AMD Saxony, an indirect wholly owned German subsidiary of AMD, has
constructed and is installing equipment in Dresden Fab 30, a 900,000-square-foot
submicron integrated circuit manufacturing and design facility located in
Dresden, in the State of Saxony, Germany. AMD, the Federal Republic of Germany,
the State of Saxony and a consortium of banks are supporting the project. We
currently estimate that construction and facilitization costs of Dresden Fab 30
will be $1.9 billion (denominated in deutsche marks) when the facility is fully
equipped. In March 1997, AMD Saxony entered into a loan agreement and other
related agreements (the Dresden Loan Agreements) with a consortium of banks led
by Dresdner Bank AG. The Dresden Loan Agreements provide for the funding of the
construction and facilitization of Dresden Fab 30. The funding consists of:
. equity, subordinated loans and loan guarantees from AMD;
. loans from a consortium of banks; and
. grants, subsidies and loan guarantees from the Federal Republic of Germany
and the State of Saxony.
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The Dresden Loan Agreements, which were amended in February 1998 to reflect
upgrades in wafer production technology as well as the decline in the deutsche
mark relative to the U.S. dollar, require that we partially fund Dresden Fab 30
project costs in the form of subordinated loans to, or equity investments in,
AMD Saxony. In accordance with the terms of the Dresden Loan Agreements, we have
invested $421 million as of December 26, 1999 in the form of subordinated loans
and equity in AMD Saxony (denominated in both deutsche marks and U.S. dollars).
The Dresden Loan Agreements were amended again in June 1999 to remove a
requirement that we sell at least $200 million of our stock by June 30, 1999 in
order to fund a $70 million loan to AMD Saxony. In lieu of the stock offering,
we funded the $70 million loan to AMD Saxony with proceeds from the sale of
Vantis.
In addition to support from AMD, the consortium of banks referred to above
has made available $850 million in loans (denominated in deutsche marks) to AMD
Saxony to help fund Dresden Fab 30 project costs. AMD Saxony had $270 million of
such loans outstanding as of December 26, 1999.
Finally, the Federal Republic of Germany and the State of Saxony are
supporting the Dresden Fab 30 project, in accordance with the Dresden Loan
Agreements, in the form of:
. guarantees of 65 percent of AMD Saxony bank debt up to a maximum amount of
$850 million;
. capital investment grants and allowances totaling $287 million; and
. interest subsidies totaling $156 million.
Of these amounts (which are all denominated in deutsche marks), AMD Saxony
has received $275 million in capital investment grants and $23 million in
interest subsidies as of December 26, 1999. The grants and subsidies are subject
to conditions, including meeting specified levels of employment in December 2001
and maintaining those levels until June 2007. Non-compliance with the conditions
of the grants and subsidies could result in the forfeiture of all or a portion
of the future amounts to be received, as well as the repayment of all or a
portion of amounts, received to date. As of December 26, 1999, we were in
compliance with all of the conditions of the grants and subsidies.
The Dresden Loan Agreements also require that we:
. provide interim funding to AMD Saxony if either the remaining capital
investment allowances or the remaining interest subsidies are delayed, which
will be repaid to AMD as AMD Saxony receives the grants or subsidies from the
State of Saxony;
. fund shortfalls in government subsidies resulting from any default under
the subsidy agreements caused by AMD Saxony or its affiliates;
. guarantee a portion of AMD Saxony's obligations under the Dresden Loan
Agreements up to a maximum of $112 million (denominated in deutsche marks) until
Dresden Fab 30 has been completed;
. fund certain contingent obligations, including obligations to fund project
cost overruns, if any; and
. make funds available to AMD Saxony, after completion of Dresden Fab 30, up
to approximately $75 million (denominated in deutsche marks) if AMD Saxony does
not meet its fixed charge coverage ratio covenant.
Because the amounts under the Dresden Loan Agreements are denominated in
deutsche marks, the dollar amounts set forth herein are subject to change based
on applicable conversion rates. At the end of 1999, the exchange rate was
approximately 1.94 deutsche marks to 1 U.S. dollar (which we used to calculate
the amounts denominated in deutsche marks).
The definition of defaults under the Dresden Loan Agreements includes the
failure of AMD, AMD Saxony or AMD Holding, the parent company of AMD Saxony and
the wholly owned subsidiary of AMD, to comply with obligations in connection
with the Dresden Loan Agreements, including:
. material variances from the approved schedule and budget;
. our failure to fund equity contributions or shareholder loans or otherwise
comply with our obligations relating to the Dresden Loan Agreements;
. the sale of shares in AMD Saxony or AMD Holding;
. the failure to pay material obligations;
. the occurrence of a material adverse change or filings of proceedings in
bankruptcy or insolvency with respect to us, AMD Saxony or AMD Holding; and
. the occurrence of default under the indenture pursuant to which the 11
percent Senior Secured Notes due 2003 were issued (the Indenture) or the Loan
Agreement.
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Generally, any such default which either (1) results from our noncompliance
with the Dresden Loan Agreements and is not cured by AMD or (2) results in
recourse to AMD of more than $10 million and is not cured by AMD, would result
in a cross-default under the Dresden Loan Agreements and the Indenture. Under
certain circumstances, cross-defaults result under the Convertible Subordinated
Notes, the Indenture and the Dresden Loan Agreements.
In the event we are unable to meet our obligation to make loans to, or
equity investments in, AMD Saxony as required under the Dresden Loan Agreements,
AMD Saxony will be unable to complete Dresden Fab 30 and we will be in default
under the Dresden Loan Agreements and the Indenture, which would permit
acceleration of certain indebtedness, which would have a material adverse effect
on our business. There can be no assurance that we will be able to obtain the
funds necessary to fulfill these obligations and any such failure would have a
material adverse effect on our business.
FASL, a joint venture formed by AMD and Fujitsu Limited in 1993, is
continuing the facilitization of its second Flash memory device wafer
fabrication facility, FASL II, in Aizu-Wakamatsu, Japan. We expect the facility,
including equipment, to cost approximately $1 billion (denominated in yen) when
fully equipped. As of December 26, 1999, approximately $434 million (denominated
in yen) of such costs have been funded. Capital expenditures for FASL II
construction to date have been funded by cash generated from FASL operations and
local borrowings by FASL. During 2000, we anticipate that FASL capital
expenditures will continue to be funded by cash generated from FASL operations
and local borrowings by FASL. However, to the extent that FASL is unable to
secure the necessary funds for FASL II, we may be required to contribute cash or
guarantee third-party loans in proportion to our 49.992 percent interest in
FASL. As of December 26, 1999, we had guarantees of $2 million (denominated in
yen) outstanding with respect to these loans. The planned FASL II costs are
denominated in yen and, therefore, are subject to change due to foreign exchange
rate fluctuations. At the end of fiscal 1999, the exchange rate was
approximately 103.51 yen to 1 U.S. dollar (which we used to calculate the
amounts denominated in yen).
We believe that cash flows from operations and current cash balances,
together with available external financing facilities, will be sufficient to
fund operations and capital investments through fiscal 2000.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In 1999, the Financial Accounting Standards Board extended the implementation of
Statement of Financial Accounting Standards No. 133 (SFAS 133), "Accounting for
Derivative Instruments and Hedging Activities." SFAS 133 is required to be
adopted in years beginning after June 15, 2000. We expect to adopt SFAS 133 in
fiscal 2001. We have not completed our review of SFAS 133, and accordingly have
not evaluated the effect the adoption of the Statement may have on our
consolidated results of operations and financial position. SFAS 133 will require
AMD to recognize all derivatives on the balance sheet at fair value. Derivatives
that are not hedges must be adjusted to fair value through income. If the
derivative is a hedge, depending on the nature of the hedge, changes in the fair
value of derivatives will either be offset against the change in fair value of
the hedged assets, liabilities or firm commitments through earnings or recog-
nized in other comprehensive income until the hedged item is recognized in
earnings. The portion of a derivative's change in fair value which is
ineffective as a hedge will be immediately recognized in earnings.
In December 1999, the Securities and Exchange Commission (SEC) issued SEC
Staff Accounting Bulletin No. 101 (SAB 101), "Revenue Recognition in Financial
Statements." SAB 101 summarizes certain of the SEC's views in applying generally
accepted accounting principles to revenue recognition in financial statements.
We have reviewed SAB 101 and have determined that we are in compliance with its
requirements. Therefore, application of SAB 101 will have no impact on our
consolidated results of operations.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Interest Rate Risk Our exposure to market risk for changes in interest rates
relates primarily to our investment portfolio and long-term debt obligations. We
do not use derivative financial instruments in our investment portfolio. We
place our investments with high credit quality issuers and, by policy, limit the
amount of credit exposure to any one issuer. As stated in our investment policy,
we are averse to principal loss and ensure the safety and preservation of our
invested funds by limiting default risk and market risk.
We mitigate default risk by investing in only the highest credit quality
securities and by constantly positioning our portfolio to respond appropriately
to a significant reduction in a credit rating of any investment issuer or
guarantor. The portfolio includes only marketable securities with active
secondary or resale markets to ensure portfolio liquidity.
We use proceeds from debt obligations primarily to support general
corporate purposes, including capital expenditures and working capital needs. We
have no variable interest rate exposure on the Convertible Subordinated Notes
and the Senior Secured Notes. There were no interest rate swaps outstanding at
the end of fiscal 1999.
The table below presents principal (or notional) amounts and related
weighted-average interest rates by year of maturity for our investment portfolio
and debt obligations as of December 26, 1999 and December 27, 1998.
12
<PAGE>
<TABLE>
<CAPTION>
1999 1998
- ------------------------------------------------------------------------------------------------------------------------------
(Thousands) 2000 2001 2002 2003 2004 Thereafter Total Fair value Total
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cash equivalents
Fixed rate amounts $ 19,505 -- -- -- -- -- $ 19,505 $ 19,484 $ 22,434
Average rate 5.40% -- -- -- --
Variable rate amounts $143,000 -- -- -- -- -- $ 143,000 $ 143,000 $ 136,408
Average rate 5.36% -- -- -- --
Short-term investments
Fixed rate amounts $175,004 -- -- -- -- -- $ 175,004 $ 175,686 $ 219,085
Average rate 5.57% -- -- -- --
Variable rate amounts $126,700 -- -- -- -- -- $ 126,700 $ 126,700 $ 115,500
Average rate 6.58% -- -- -- --
Long-term investments
Equity investments -- $ 6,161 -- -- -- -- $ 6,161 $ 28,175 $ 7,027
Fixed rate amounts -- $ 1,907 -- -- -- -- $ 1,907 $ 1,875 $ 2,000
Average rate 4.93% -- -- -- --
Total investments
Securities $464,209 $ 8,068 -- -- -- -- $ 472,277 $ 494,920 $ 502,454
Average rate 5.77% 4.93% -- -- -- --
Notes payable
Fixed rate amounts -- -- -- -- -- -- -- -- $ 6,017
Long-term debt
Fixed rate amounts $ 5,127 $46,517 $154,684 $456,853 $13,097 $517,959 $1,194,237 $1,128,919 $1,218,836
Average rate 9.88% 5.41% 5.40% 10.30% 5.47% 6.00%
Variable rate amounts -- -- -- -- -- -- 218,750
==============================================================================================================================
</TABLE>
Foreign Exchange Risk We use foreign currency forward and option contracts to
reduce our exposure to currency fluctuations on our foreign currency exposures
in our foreign sales subsidiaries, liabilities for products purchased from FASL
and for fixed asset purchase commitments. The objective of these contracts is to
minimize the impact of foreign currency exchange rate movements on our operating
results and on the cost of capital asset acquisition. Our accounting policy for
these instruments is based on our designation of such instruments as hedging
transactions. We do not use derivative financial instruments for speculative or
trading purposes.
We had $59 million (notional amount) of short-term foreign currency forward
contracts denominated in Japanese yen, British pound, Swiss franc, European
Union euro, Singapore dollar and Thai baht outstanding as of December 26, 1999.
In 1998, we entered into an intercompany no-cost collar agreement to hedge
Dresden Fab 30 project costs denominated in U.S. dollars. The no-cost collars
included purchased put option contracts and no-cost collar written call option
contracts, the contract rates of which were structured to avoid payment of any
option premium at the time of purchase. During 1999, we entered into various
option positions with various third-party banks to neutralize the exposures of
the outstanding put and call option contracts. As a result, all the options were
offset and canceled and we had no outstanding option contracts as of December
26, 1999.
In 1999, the $75 million foreign currency call option contracts remaining
from the $150 million call option contracts purchased in 1997 to hedge our
obligations to provide loans to, or invest equity in, AMD Saxony also expired.
Gains and losses related to the foreign currency forward and option
contracts for the year ended December 26, 1999 were not material. We do not
anticipate any material adverse effect on our consolidated financial position,
results of operations or cash flows resulting from the use of these instruments
in the future. We cannot give any assurance that these strategies will be
effective or that transaction losses can be minimized or forecasted accurately.
13
<PAGE>
The table below provides information about our foreign currency forward and
option contracts as of December 26, 1999 and December 27, 1998. All of our
foreign currency forward contracts mature within the next 12 months.
<TABLE>
<CAPTION>
1999 1998
----------------------------------------- ---------------------------------------
Notional Average Estimated Notional Average Estimated
(Thousands except contract rates) amount contract rate fair value amount contract rate fair value
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Foreign currency forward contracts:
Japanese yen $ 2,425 103.11 $ 4 $ 6,865 117.07 $ (22)
German mark -- -- -- 5,407 1.66 (7)
British pound 1,219 1.63 10 840 1.68 4
Swiss franc 318 1.57 (1) -- -- --
European Union euro 45,101 1.03 (611) -- -- --
Singapore dollar 8,382 1.67 17 -- -- --
Thai baht 1,245 40.18 48 -- -- --
--------------------------------------------------------------------------------------------------------------------
$58,690 $(533) $ 13,112 $ (25)
- --------------------------------------------------------------------------------------------------------------------
Purchased call options contracts:
German mark $ -- -- $ -- $ 75,000 1.45 $ 45
Purchased put options contracts:
German mark $ -- -- $ -- $220,000 1.85 $ 1,547
Written call options contracts:
German mark $ -- -- $ -- $220,000 1.69 $(13,469)
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
RISK FACTORS
Our business, results of operations and financial condition are subject to a
number of risk factors, including the following:
Microprocessor Products
Future Dependence on the AMD Athlon Microprocessor. We will need to successfully
market the AMD Athlon microprocessor, our seventh-generation Microsoft Windows
compatible microprocessor, in order to increase our microprocessor product
revenues in 2000 and beyond, and to benefit fully from the substantial financial
investments and commitments we have made and continue to make related to
microprocessors. We commenced initial shipments of AMD Athlon microprocessors in
June 1999 and began volume shipments in the second half of 1999. Our production
and sales plans for AMD Athlon microprocessors are subject to numerous risks and
uncertainties, including:
. our ability to produce AMD Athlon microprocessors in the volume and with
the feature set required by customers on a timely basis;
. our ability to design, manufacture and deliver processor modules through
subcontractors;
. the availability and acceptance of motherboards and chipsets designed for
AMD Athlon microprocessors;
. market acceptance of AMD Athlon microprocessors;
. our ability to maintain average selling prices of AMD Athlon
microprocessors despite aggressive Intel pricing, including market rebates and
product bundling of microprocessors, motherboards, chipsets and combination
thereof, or customer relationships which affect market demand;
. the successful development and installation of 0.18-micron process
technology and copper interconnect technology;
. the pace at which we are able to transition production in Fab 25 from 0.25-
to 0.18-micron process technology and to ramp production in Dresden Fab 30 on
0.18-micron copper interconnect process technology;
. the use and market acceptance of a non-Intel processor bus (adapted by us
from Digital Equipment Corporation's EV6 bus) in the design of the AMD Athlon
microprocessor, and the availability of chipsets from vendors who will develop,
manufacture and sell chipsets with the EV6 interface in volumes required by us;
. our ability to expand our chipset and system design capabilities; and
. the availability to our customers of cost and performance competitive
Static Random Access Memories (SRAMs) (including Tag chips) if Intel controls
the market for SRAM production capacity through its relationships with SRAM
manufacturers.
If we fail to achieve market acceptance of AMD Athlon microprocessors, if our
subcontractors are unable to provide the processor modules we require or if
chipsets and motherboards which are compatible with AMD Athlon microprocessors
are not made available, our business will be materially and adversely affected.
14
<PAGE>
Investment in and Dependence on K86(TM) AMD Microprocessor Products. Our
microprocessor product revenues have significantly impacted, and will continue
in 2000 and 2001 to significantly impact, our overall revenues,
profit margins and operating results. We plan to continue to make significant
capital expenditures to support our microprocessor products both in the near and
long term. These capital expenditures will be a substantial drain on our cash
flow and cash balances.
Our ability to increase microprocessor product revenues, and benefit fully
from the substantial financial investments and commitments we have made and
continue to make related to microprocessors, depends upon success of the AMD
Athlon microprocessor, which is our seventh-generation Microsoft Windows
compatible microprocessor, the AMD-K6 microprocessors with 3DNow! technology and
future generations of K86 microprocessors. The microprocessor market is
characterized by short product life cycles and migration to ever-higher
performance microprocessors. To compete successfully against Intel in this
market, we must transition to new process technologies at a faster pace than
before and offer higher performance microprocessors in significantly greater
volumes. We must achieve acceptable yields while producing microprocessors at
higher speeds. In the past, we have experienced significant difficulty in
achieving microprocessor yield and volume plans. Such difficulties have in the
past, and may in the future, adversely affect our results of operations and
liquidity. If we fail to offer higher performance microprocessors in
significant volume on a timely basis in the future, our business could be
materially and adversely affected. We may not achieve the production ramp
necessary to meet our customers' volume requirements for higher performance AMD
Athlon and AMD-K6 microprocessors. It is also possible that we may not increase
our microprocessor revenues enough to achieve sustained profitability.
To sell the volume of AMD Athlon and AMD-K6 microprocessors we currently plan
to make in 2000 and 2001, we must increase sales to existing customers and
develop new customers in both consumer and commercial markets. If we lose any
current top tier OEM customer, or if we fail to attract additional customers
through direct sales and through our distributors, we may not be able to sell
the volume of units planned. This result could have a material adverse effect on
our business.
Our production and sales plans for AMD Athlon and AMD-K6 microprocessors are
subject to other risks and uncertainties, including:
. market acceptance of AMD Athlon microprocessors, including the timely
availability of processor modules as well as motherboards and chipsets designed
for these processors;
. whether we can successfully fabricate higher performance AMD Athlon and
AMD-K6 microprocessors in planned volume and speed mixes;
. the effects of Intel's new product introductions, marketing strategies and
pricing;
. the continued market acceptance for AMD-K6 microprocessors and systems
based on them;
. whether we will have the financial and other resources necessary to
continue to invest in the microprocessor products, including leading-edge wafer
fabrication equipment and advanced process technologies;
. the possibility that our newly introduced products may be defective;
. adverse market conditions in the personal computer (PC) market and
consequent diminished demand for our microprocessors; and
. unexpected interruptions in our manufacturing operations.
Because Intel has dominated the microprocessor market for many years and has
brand strength, we have in the past priced AMD-K6 microprocessors below the
published price of Intel processors offering comparable performance. Thus,
Intel's processor marketing and pricing can impact and have impacted the average
selling prices of the AMD-K6 and AMD Athlon microprocessors, and consequently
can impact and have impacted our overall margins. Our business could be
materially and adversely affected if we are unable to:
. achieve the product performance improvements necessary to meet customer
needs;
. continue to achieve market acceptance of our AMD-K6 and AMD Athlon
microprocessors and increase market share;
. maintain revenues of AMD-K6 microprocessors; and
. successfully ramp production and sales of AMD Athlon microprocessors.
See also the discussions below regarding Intel Dominance and Process
Technology.
Intel Dominance. Intel has dominated the market for microprocessors used in PCs
for many years. Because of its dominant market position, Intel has historically
set and controlled x86 microprocessor and PC system standards and, thus,
dictated the type of product the market requires of Intel's competitors. In
addition, Intel may vary prices on its microprocessors and other products at
will and thereby affect the margins and profitability of its competitors due to
its financial strength and dominant position. Intel exerts substantial influence
over PC manufacturers and their channels of distribution through the Intel
Inside advertising rebate program and other marketing programs. Intel invests
billions of dollars in, and as a result exerts influence over, many other
technology companies.
15
<PAGE>
We expect Intel to continue to invest heavily in research and development, new
manufacturing facilities and other technology companies, and to remain dominant:
. through the Intel Inside and other marketing programs;
. through other contractual constraints on customers, retailers, industry
suppliers and other third parties;
. by controlling industry standards; and
. by controlling supply and demand of motherboards, chipsets and other system
components.
As an extension of its dominant microprocessor market share, Intel also
dominates the PC platform. As a result, it is difficult for PC manufacturers to
innovate and differentiate their product offerings. We do not have the financial
resources to compete with Intel on such a large scale. As long as Intel remains
in this dominant position, we may be materially and adversely affected by its:
. product mix and introduction schedules;
. product bundling and pricing strategies;
. control over industry standards, PC manufacturers and other PC industry
participants, including motherboard, chipset and BIOS suppliers; and
. customer brand loyalty.
As Intel expanded its dominance over the PC system platform, many PC
manufacturers reduced their system development expenditures and now purchase
microprocessors together with chipsets or in assembled motherboards. PC OEMs are
increasingly dependent on Intel, less innovative on their own and, to a large
extent, distributors of Intel technology. In marketing our microprocessors to
these OEMs and dealers, we depend on companies other than Intel for the design
and manufacture of core-logic chipsets, motherboards, basic input/output system
(BIOS) software and other components. In recent years, many of these third-party
designers and manufacturers have lost significant market share to Intel. In
addition, these companies produce chipsets, motherboards, BIOS software and
other components to support each new generation of Intel's microprocessors only
if Intel makes information about its products available to them in time to
address market opportunities. Delay in the availability of such information
makes, and will continue to make, it increasingly difficult for these third
parties to retain or regain market share.
To compete with Intel in the microprocessor market in the future, we intend to
continue to form closer relationships with third-party designers and
manufacturers of chipsets, motherboards, BIOS software and other components.
Similarly, we intend to expand our chipset and system design capabilities, and
to offer OEMs licensed system designs incorporating our microprocessors and
companion products. We cannot be certain, however, that our efforts will be
successful. We expect that, as Intel introduces future generations of
microprocessors, chipsets and motherboards, the design of chipsets, memory and
other semiconductor devices, and higher level board products which support Intel
microprocessors, will become increasingly dependent on the Intel microprocessor
design and may become incompatible with non-Intel processor-based PC systems.
Intel's Pentium(R) III and Celeron(TM) microprocessors are sold only in form
factors that are not physically or interface protocol compatible with "Socket 7"
motherboards currently used with AMD-K6 microprocessors. Thus, Intel no longer
supports the Socket 7 infrastructure as it did when it was selling its fifth-
generation Pentium processors. Because AMD-K6 microprocessors are designed to be
Socket 7 compatible, and will not work with motherboards designed for Pentium
II, III and Celeron processors, we intend to continue to work with third-party
designers and manufacturers of motherboards, chipsets and other products to
ensure the continued availability of Socket 7 infrastructure support for AMD-K6
microprocessors, including support for enhancements and features we add to our
microprocessors. Socket 7 infrastructure support for AMD-K6 microprocessors may
not endure over time as Intel moves the market to its infrastructure choices.
We do not currently plan to develop microprocessors that are bus interface
protocol compatible with the Pentium III and Celeron processors because our
patent cross-license agreement with Intel does not extend to microprocessors
that are bus interface protocol compatible with Intel's sixth and subsequent
generation processors. Thus, the AMD Athlon microprocessor is not designed to
function with motherboards and chipsets designed to work with Intel
microprocessors. Our ability to compete with Intel in the market for AMD Athlon
seventh-generation and future generation microprocessors will depend on our:
. success in designing and developing the microprocessors; and
. ability to ensure that the microprocessors can be used in PC platforms
designed to support Intel's microprocessors and our microprocessors, or that
alternative platforms are available which are competitive with those used with
Intel processors.
A failure for any reason of the designers and producers of motherboards,
chipsets, processor modules and other system components to support our K86
microprocessor offerings would have a material adverse effect on our business.
16
<PAGE>
Dependence on Microsoft and Logo License. Our ability to innovate beyond the x86
instruction set controlled by Intel depends on support from Microsoft in its
operating systems. If Microsoft does not provide support in its operating
systems for the x86 instructions that we innovate and design into our
processors, independent software providers may forego designing their software
applications to take advantage of our innovations. This would adversely affect
our ability to market our processors. In addition, we have entered into logo
license agreements with Microsoft that allow us to label our products as
"Designed for Microsoft Windows." We have also obtained appropriate
certifications from recognized testing organizations for our K86
microprocessors. If we fail to maintain the logo license agreements with
Microsoft, we may lose our ability to label our K86 microprocessors with the
Microsoft Windows logo. This could impair our ability to market the products and
could have a material adverse effect on our business.
Fluctuations in PC Market. Since most of our microprocessor products are used in
PCs and related peripherals, our future growth is closely tied to the growth of
the PC industry. Industry-wide fluctuations in the PC marketplace have in the
past and may in the future materially and adversely affect our business.
Financing Requirements
We currently plan to make capital investments of approximately $800 million in
2000 although the actual expenditures may vary. These investments include those
relating to the continued facilitization of Dresden Fab 30 and Fab 25.
In 1999, the building construction of FASL II was completed, equipment was
installed and production was initiated. We expect the facility, including
equipment, to cost approximately $1 billion when fully equipped. Capital
expenditures for FASL II construction to date have been funded by cash generated
from FASL operations and borrowings by FASL. If FASL is unable to secure the
necessary funds for FASL II, we may be required to contribute cash or guarantee
third-party loans in proportion to our 49.992 percent interest in FASL.
In 1996, we entered into the Credit Agreement, which provided for a $150
million three-year secured revolving line of credit and a $250 million four-year
secured term loan. On June 25, 1999, we terminated the secured revolving line of
credit. On July 13, 1999, we replaced the Credit Agreement with a new Loan and
Security Agreement (the Loan Agreement) with a consortium of banks led by Bank
of America. On July 30, 1999, we repaid the outstanding balance on the secured
term loan and terminated the Credit Agreement. Under the Loan Agreement, which
provides for a four-year secured revolving line of credit of up to $200 million,
we can borrow, subject to amounts which may be set aside by the lenders, up to
85 percent of our eligible accounts receivable from OEMs and 50 percent of our
eligible accounts receivable from distributors. We must comply with certain
financial covenants if the level of domestic cash we hold declines to certain
levels, or the amount of borrowings under the Loan Agreement rises to certain
levels. Our obligations under the Loan Agreement are secured by a pledge of most
of our accounts receivable, inventory, general intangibles and the related
proceeds.
In March 1997, our indirect wholly owned subsidiary, AMD Saxony, entered into
the Dresden Loan Agreements with a consortium of banks led by Dresdner Bank AG.
The terms of the Dresden Loan Agreements required us to make subordinated loans
to AMD Saxony totaling $100 million in 1998, and to make additional subordinated
loans to, or equity investments in, AMD Saxony totaling $100 million in 1999.
The Dresden Loan Agreements, which were amended in February 1998 to reflect
planned upgrades in wafer production technology as well as the decline in the
deutsche mark relative to the U.S. dollar, require that we partially fund
Dresden Fab 30 project costs in the form of subordinated loans to, or equity
investments in, AMD Saxony. In accordance with the terms of the Dresden Loan
Agreements, we have invested $421 million as of December 26,1999 in the form of
subordinated loans and equity in AMD Saxony. The Dresden Loan Agreements were
amended again in June 1999 to remove a requirement that we sell at least $200
million of our stock by June 30, 1999 in order to fund a $70 million loan to AMD
Saxony. In lieu of the stock offering, we funded the $70 million loan to AMD
Saxony with proceeds from the sale of Vantis.
Because the amounts under the Dresden Loan Agreements are denominated in
deutsche marks, the dollar amounts set forth herein are subject to change based
on applicable conversion rates. As of the end of 1999, the exchange rate was
approximately 1.94 deutsche marks to 1 U.S. dollar (which we used to calculate
our obligations denominated in deutsche marks).
If we are unable to meet our obligation to make loans to, or equity
investments in, AMD Saxony as required under the Dresden Loan Agreements, AMD
Saxony will be unable to complete Dresden Fab 30 and we will be in default under
the Dresden Loan Agreement, the Loan Agreement and the Indenture, which would
have a material adverse effect on our business. If we are unable to obtain the
funds necessary to fulfill these obligations, our business will be materially
and adversely affected.
17
<PAGE>
Manufacturing
Capacity. We underutilize our manufacturing facilities from time to time as a
result of reduced demand for certain of our products. Our operations related to
microprocessors have been particularly affected by this situation. If we
underutilize our manufacturing facilities in the future, our gross margins may
suffer. We are substantially increasing our manufacturing capacity by making
significant capital investments in Fab 25 and Dresden Fab 30. In addition, in
1999, the building construction of FASL II, a second Flash memory device
manufacturing facility, was completed, equipment was installed and production
was initiated. We have also built a new test and assembly facility in Suzhou,
China. We are basing our strategy of increasing our manufacturing capacity on
industry projections for future growth. If these industry projections are
inaccurate, or if demand for our products does not increase consistent with our
plans and expectations, we will likely underutilize our manufacturing facilities
and our business could be materially and adversely affected.
In contrast to the above, there also have been situations in the past in which
our manufacturing facilities were inadequate to meet the demand for certain of
our products. Our inability to obtain sufficient manufacturing capacities to
meet demand, either in our own facilities or through foundry or similar
arrangements with others, could have a material adverse effect on our business.
At this time, the risk is that we will have insufficient capacity to meet demand
for Flash memory products and significant underutilized capacity relative to
demand for our microprocessor offerings.
Process Technology. In order to remain competitive, we must make continuing
substantial investments in improving our process technologies. In particular, we
have made and continue to make significant research and development investments
in the technologies and equipment used to fabricate our microprocessor products
and our Flash memory devices. Portions of these investments might not be fully
recovered if we fail to continue to gain market acceptance or if the market for
our Flash memory products should significantly deteriorate. Likewise, we are
making a substantial investment in Dresden Fab 30. The business plan for Dresden
Fab 30 calls for the successful development and installation of 0.18-micron
process technology and copper interconnect technology in order to manufacture
AMD Athlon microprocessors in Dresden Fab 30. We have entered into a strategic
alliance with Motorola to co-develop logic process and embedded Flash
technologies. The logic process technology which is the subject of the alliance
includes the copper interconnect technology that is required for AMD Athlon
microprocessors and subsequent generations of microprocessors. We cannot be
certain that the strategic alliance will be successful or that we will be able
to develop or obtain the leading-edge process technologies that will be required
in Fab 25 or Dresden Fab 30 to fabricate AMD Athlon microprocessors
successfully.
Manufacturing Interruptions and Yields. Any substantial interruption of our
manufacturing operations, either as a result of a labor dispute, equipment
failure or other cause, could materially and adversely affect our business
operations. We also have been and may in the future be materially and adversely
affected by fluctuations in manufacturing yields. For example, our results in
the past have been negatively affected by disappointing AMD-K6 microprocessor
yields. The design and manufacture of ICs is a complex process. Normal
manufacturing risks include errors and interruptions in the fabrication process
and defects in raw materials, as well as other risks, all of which can affect
yields. Additional manufacturing risks incurred in ramping up new fabrication
areas and/or new manufacturing processes include equipment performance and
process controls, as well as other risks, all of which can affect yields.
Product Incompatibility. Our products may possibly be incompatible with some or
all industry-standard software and hardware. If our customers are unable to
achieve compatibility with software or hardware after our products are shipped
in volume, we could be materially adversely affected. It is also possible that
we may be unsuccessful in correcting any such compatibility problems that are
discovered or that corrections will be unacceptable to customers or made in an
untimely manner. In addition, the mere announcement of an incompatibility
problem relating to our products could have a material adverse effect on our
business.
Product Defects. One or more of our products may possibly be found to be
defective after we have already shipped such products in volume, requiring a
product replacement, recall or a software fix which would cure such defect but
impede performance. We may also be subject to product returns which could impose
substantial costs on us and have a material and adverse effect on our business.
18
<PAGE>
Essential Manufacturing Materials. Certain raw materials we use in the
manufacture of our products are available from a limited number of suppliers.
For example, a few foreign companies principally supply several types of the IC
packages purchased by us, as well as by the majority of other companies in the
semiconductor industry. Interruption of supply or increased demand in the
industry could cause shortages in various essential materials. We would have to
reduce our manufacturing operations if we were unable to procure certain of
these materials. This reduction in our manufacturing operations could have a
material adverse effect on our business.
International Manufacturing and Foundries. Nearly all product assembly and final
testing of our products are performed at our manufacturing facilities in Penang,
Malaysia; Bangkok, Thailand; Suzhou, China; and Singapore; or by subcontractors
in the United States and Asia. We also depend on foreign foundry suppliers and
joint ventures for the manufacture of a portion of our finished silicon wafers.
Foreign manufacturing and construction of foreign facilities entail political
and economic risks, including political instability, expropriation, currency
controls and fluctuations, changes in freight and interest rates, and loss or
modification of exemptions for taxes and tariffs. For example, if we were unable
to assemble and test our products abroad, or if air transportation between the
United States and our overseas facilities were disrupted, there could be a
material adverse effect on our business.
Flash Memory Products
The demand for Flash memory devices has recently increased due to the increasing
use of equipment and other devices requiring non-volatile memory such as:
. cellular telephones;
. routers which transfer data between local area networks; and
. PC cards which are inserted into notebook and subnotebook computers or
personal digital assistants.
As a result, the demand for Flash memory devices currently exceeds the
available supply. In order to meet this demand, we must increase our production
of Flash memory devices through FASL and FASL II or through foundry or similar
arrangements with others. We cannot be certain that the demand for Flash memory
products will remain at current or greater levels, or that we will have
sufficient capacity to meet the demand for Flash memory devices. Our inability
to meet the demand for Flash memory devices could have a material adverse effect
on our business.
Competition in the market for Flash memory devices will increase as existing
manufacturers introduce new products and industry-wide production capacity
increases, and as Intel continues to aggressively price its Flash memory
products. We expect competition in the marketplace for Flash memory devices to
continue to increase in 2000 and beyond. It is possible that we will be unable
to maintain or increase our market share in Flash memory devices as the market
develops and as existing and potential new competitors introduce competitive
products. A decline in our Flash memory device business or decline in the gross
margin percentage in this product line could have a material adverse effect on
our business.
Key Personnel
Our future success depends upon the continued service of numerous key
engineering, manufacturing, marketing, sales and executive personnel. We may or
may not be able to continue to attract, retain and motivate qualified personnel
necessary for our business. Loss of the service of, or failure to recruit, key
engineering design personnel could be significantly detrimental to our product
development programs or otherwise have a material adverse effect on our
business.
Demand for Our Products Affected by Asian and Other Domestic and International
Economic Conditions
While general industry demand is currently strengthening, the demand for our
products during the last few years has been weak due to the general downturn in
the worldwide semiconductor market and an economic crisis in Asia. A renewed
decline of the worldwide semiconductor market or economic condition in Asia
could decrease the demand for microprocessors and other ICs. A significant
decline in economic conditions in any significant geographic area, either
domestically or internationally, could decrease the overall demand for our
products which could have a material adverse effect on our business.
19
<PAGE>
Fluctuations in Operating Results
Our operating results are subject to substantial quarterly and annual
fluctuations due to a variety of factors, including:
. the effects of competition with Intel in microprocessor and Flash memory
device markets;
. competitive pricing pressures;
. decreases in unit average selling prices of our products;
. production capacity levels and fluctuations in manufacturing yields;
. availability and cost of products from our suppliers;
. the gain or loss of significant customers;
. new product introductions by us or our competitors;
. changes in the mix of products produced and sold and in the mix of sales by
distribution channels;
. market acceptance of new or enhanced versions of our products;
. seasonal customer demand; and
. the timing of significant orders and the timing and extent of product
development costs.
Our operating results also tend to vary seasonally due to vacation and holiday
schedules. Our revenues are generally lower in the first, second and third
quarters of each year than in the fourth quarter. This seasonal pattern is
largely a result of decreased demand in Europe during the summer months and
higher demand in the retail sector of the personal computer market during the
winter holiday season.
In addition, operating results have recently been, and may in the future be,
adversely affected by general economic and other conditions causing a downturn
in the market for semiconductor devices, or otherwise affecting the timing of
customer orders or causing order cancellations or rescheduling. Our customers
may change delivery schedules or cancel orders without significant penalty. Many
of the factors listed above are outside of our control. These factors are
difficult to forecast, and these or other factors could materially and adversely
affect our quarterly or annual operating results.
Other Risk Factors
Debt Restrictions. The Loan Agreement and the Indenture contain significant
covenants that limit our ability and our subsidiaries' ability to engage in
various transactions and require satisfaction of specified financial performance
criteria. In addition, the occurrence of certain events, including, among other
things, failure to comply with the foregoing covenants, material inaccuracies of
representations and warranties, certain defaults under or acceleration of other
indebtedness and events of bankruptcy or insolvency, would in certain cases
after notice and grace periods, constitute events of default permitting
acceleration of indebtedness. The limitations imposed by the Loan Agreement and
the Indenture are substantial, and failure to comply with such limitations could
have a material adverse effect on our business.
In addition, the Dresden Loan Agreements substantially prohibit AMD Saxony
from transferring assets to us, which will prevent us from using current or
future assets of AMD Saxony other than to satisfy obligations of AMD Saxony.
Technological Change and Industry Standards. The market for our products is
generally characterized by rapid technological developments, evolving industry
standards, changes in customer requirements, frequent new product introductions
and enhancements, short product life cycles and severe price competition.
Currently accepted industry standards may change. Our success depends
substantially on our ability, on a cost-effective and timely basis, to continue
to enhance our existing products and to develop and introduce new products that
take advantage of technological advances and adhere to evolving industry
standards. An unexpected change in one or more of the technologies related to
our products, in market demand for products based on a particular technology or
of accepted industry standards could materially and adversely affect our
business. We may or may not be able to develop new products in a timely and
satisfactory manner to address new industry standards and technological changes,
or to respond to new product announcements by others. In addition, new products
may or may not achieve market acceptance.
Competition. The IC industry is intensely competitive and, historically, has
experienced rapid technological advances in product and system technologies.
After a product is introduced, prices normally decrease over time as production
efficiency and competition increase, and as successive generations of products
are developed and introduced for sale. Technological advances in the industry
result in frequent product introductions, regular price reductions, short
product life cycles and increased product capabilities that may result in
significant performance improvements.
20
<PAGE>
Competition in the sale of ICs is based on:
. performance;
. product quality and reliability;
. price;
. adherence to industry standards;
. software and hardware compatibility;
. marketing and distribution capability;
. brand recognition;
. financial strength; and
. ability to deliver in large volumes on a timely basis.
Order Revision and Cancellation Policies. We manufacture and market standard
lines of products. Sales are made primarily pursuant to purchase orders for
current delivery or agreements covering purchases over a period of time, which
may be revised or canceled without penalty. As a result, we must commit
resources to the production of products without any advance purchase commitments
from customers. Our inability to sell products after we devoted significant
resources to them could have a material adverse effect on our business.
Distributors typically maintain an inventory of our products. In most
instances, our agreements with distributors protect their inventory of our
products against price reductions, as well as products that are slow moving or
have been discontinued. These agreements, which may be canceled by either party
on a specified notice, generally allow for the return of our products if the
agreement with the distributor is terminated. The market for our products is
generally characterized by, among other things, severe price competition. The
price protection and return rights we offer to our distributors could materially
and adversely affect us if there is an unexpected significant decline in the
price of our products.
Intellectual Property Rights; Potential Litigation. It is possible that:
. we will be unable to protect our technology or other intellectual property
adequately through patents, copyrights, trade secrets, trademarks and other
measures;
. patent applications that we may file will not be issued;
. foreign intellectual property laws will not protect our intellectual
property rights;
. any patent licensed by or issued to us will be challenged, invalidated or
circumvented or that the rights granted thereunder will not provide competitive
advantages to us; and
. others will independently develop similar products, duplicate our products
or design around our patents and other rights.
From time to time, we have been notified that we may be infringing
intellectual property rights of others. If any such claims are asserted against
us, we may seek to obtain a license under the third party's intellectual
property rights. We could decide, in the alternative, to resort to litigation to
challenge such claims. Such challenges could be extremely expensive and time-
consuming and could have a material adverse effect on our business. We cannot
give any assurance that all necessary licenses can be obtained on satisfactory
terms, or whether litigation may always be avoided or successfully concluded.
Environmental Regulations. We could possibly be subject to fines, suspension of
production, alteration of our manufacturing processes or cessation of our
operations if we fail to comply with present or future governmental regulations
related to the use, storage, handling, discharge or disposal of toxic, volatile
or otherwise hazardous chemicals used in the manufacturing process. Such
regulations could require us to acquire expensive remediation equipment or to
incur other expenses to comply with environmental regulations. Our failure to
control the use of, disposal or storage of, or adequately restrict the discharge
of, hazardous substances could subject us to future liabilities and could have a
material adverse effect on our business.
Year 2000. We have previously discussed the nature and progress of our plans to
become Year 2000 ready. Pursuant to our plans, we completed our remediation and
testing of systems. We have not experienced any material system failures,
disruptions of operations or interruptions of our ability to process
transactions, send invoices or engage in other normal business activities as a
result of Year 2000 issues. In addition, we are not aware of any material
problems resulting from Year 2000 issues with our products and services.
Although we have not experienced any material problems related to the Year 2000,
we cannot give any assurance that issues will not arise in the future or that we
will be able to adequately address any issues that may arise. We will continue
to monitor our critical computer applications in the year 2000 to ensure that
any Year 2000 issues that may arise are addressed as promptly as possible. Our
inability to adequately address all Year 2000-related issues that may arise
could have a material adverse impact on our operations.
21
<PAGE>
The actual costs incurred as of December 26, 1999 in connection with our Year
2000 readiness plan were approximately $18 million, the majority of which was
expensed. The expenses of the Year 2000 readiness plan were funded through
operating cash flows.
International Sales. Our international sales operations entail political and
economic risks, including expropriation, currency controls, exchange rate
fluctuations, changes in freight rates and changes in rates and exemptions for
taxes and tariffs.
Volatility of Stock Price; Ability to Access Capital. Based on the trading
history of our stock, we believe that the following factors have caused and are
likely to continue to cause the market price of our common stock to fluctuate
substantially:
. quarterly fluctuations in our operating and financial results;
. announcements of new products and/or pricing by us or our competitors;
. the pace of new process technology and product manufacturing ramps;
. production yields of key products; and
. general conditions in the semiconductor industry.
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 our common stock in any given period. Technology company
stocks in general have experienced extreme price and volume fluctuations that
are often unrelated to the operating performance of the companies. This market
volatility may adversely affect the market price of our common stock and
consequently limit our ability to raise capital or to make acquisitions. Our
current business plan envisions substantial cash outlays which may require
external capital financing. It is possible that capital and/or long-term
financing will be unavailable on terms favorable to us or in sufficient amounts
to enable us to implement our current plan.
Earthquake Danger. Our corporate headquarters, a portion of our manufacturing
facilities, assembly and research and development activities and certain other
critical business operations are located near major earthquake fault lines. We
could be materially and adversely affected in the event of a major earthquake.
Euro Conversion. On January 1, 1999, eleven of the fifteen member countries of
the European Union established fixed conversion rates between their existing
currencies and the euro. The participating countries adopted the euro as their
common legal currency on that date. The transition period will last through
January 1, 2002. We are assessing the potential impact to us that may result
from the euro conversion. We do not expect the introduction and use of the euro
to materially affect our foreign exchange activities, to affect our use of
derivatives and other financial instruments or to result in any material
increase in costs to us. We will continue to assess the impact of the
introduction of the euro currency over the transition period, as well as the
period subsequent to the transition, as applicable.
22
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Years Ended December 26, 1999
(Thousands except per share amounts) 1999 1998 1997
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $2,857,604 $2,542,141 $2,356,375
Expenses:
Cost of sales 1,964,434 1,718,703 1,578,438
Research and development 635,786 567,402 467,877
Marketing, general and administrative 540,070 419,678 400,713
Restructuring and other special charges 38,230 -- --
- -----------------------------------------------------------------------------------------------------
3,178,520 2,705,783 2,447,028
- -----------------------------------------------------------------------------------------------------
Operating loss (320,916) (163,642) (90,653)
Gain on sale of Vantis 432,059 -- --
Litigation settlement -- (11,500) --
Interest income and other, net 31,735 34,207 35,097
Interest expense (69,253) (66,494) (45,276)
- -----------------------------------------------------------------------------------------------------
Income (loss) before income taxes and equity in joint venture 73,625 (207,429) (100,832)
Provision (benefit) for income taxes 167,350 (91,878) (55,155)
- -----------------------------------------------------------------------------------------------------
Loss before equity in joint venture (93,725) (115,551) (45,677)
Equity in net income of joint venture 4,789 11,591 24,587
- -----------------------------------------------------------------------------------------------------
Net loss $ (88,936) $ (103,960) $ (21,090)
- -----------------------------------------------------------------------------------------------------
Net loss per common share:
Basic $ (0.60) $ (0.72) $ (0.15)
- -----------------------------------------------------------------------------------------------------
Diluted $ (0.60) $ (0.72) $ (0.15)
- -----------------------------------------------------------------------------------------------------
Shares used in per share calculation:
Basic 147,068 143,668 140,453
Diluted 147,068 143,668 140,453
=====================================================================================================
</TABLE>
See accompanying notes
23
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 26, 1999 and December 27, 1998
(Thousands except per share amounts) 1999 1998
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 294,125 $ 361,908
Short-term investments 302,386 335,117
- -------------------------------------------------------------------------------------------------------
Total cash, cash equivalents and short-term investments 596,511 697,025
Accounts receivable, net of allowance for doubtful accounts
of $15,378 in 1999 and $12,663 in 1998 429,809 415,557
Inventories:
Raw materials 10,236 21,185
Work-in-process 97,143 129,036
Finished goods 90,834 24,854
- -------------------------------------------------------------------------------------------------------
Total inventories 198,213 175,075
Deferred income taxes 55,956 205,959
Prepaid expenses and other current assets 129,389 68,411
- -------------------------------------------------------------------------------------------------------
Total current assets 1,409,878 1,562,027
Property, plant and equipment:
Land 35,872 36,273
Buildings and leasehold improvements 1,187,712 823,287
Equipment 2,851,315 2,776,336
Construction in progress 863,403 744,466
- -------------------------------------------------------------------------------------------------------
Total property, plant and equipment 4,938,302 4,380,362
Accumulated depreciation and amortization (2,415,066) (2,111,894)
- -------------------------------------------------------------------------------------------------------
Property, plant and equipment, net 2,523,236 2,268,468
Investment in joint venture 273,608 236,820
Other assets 170,976 185,653
- -------------------------------------------------------------------------------------------------------
$ 4,377,698 $ 4,252,968
- -------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to banks $ -- $ 6,017
Accounts payable 387,193 333,975
Accrued compensation and benefits 91,900 80,334
Accrued liabilities 273,689 168,280
Income tax payable 17,327 22,026
Deferred income on shipments to distributors 92,917 84,523
Current portion of long-term debt, capital lease obligations and other 47,626 145,564
- -------------------------------------------------------------------------------------------------------
Total current liabilities 910,652 840,719
Deferred income taxes 60,491 34,784
Long-term debt, capital lease obligations and other, less current portion 1,427,282 1,372,416
Commitments and contingencies
Stockholders' equity:
Capital stock:
Common stock, par value $0.01; 250,000,000 shares
authorized; 148,656,278 shares issued and
outstanding in 1999 and 145,477,376 in 1998 1,496 1,465
Capital in excess of par value 1,121,956 1,071,591
Retained earnings 873,235 962,171
Accumulated other comprehensive loss (17,414) (30,178)
- -------------------------------------------------------------------------------------------------------
Total stockholders' equity 1,979,273 2,005,049
- -------------------------------------------------------------------------------------------------------
$ 4,377,698 $ 4,252,968
=======================================================================================================
</TABLE>
See accompanying notes
24
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Accumulated
Common Stock Capital in other Total
------------
Number excess of Retained comprehensive stockholders'
Three Years Ended December 26, 1999 (Thousands) of shares Amount par value earnings loss equity
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
December 29, 1996 137,580 $1,380 $ 957,226 $1,087,221 $(23,949) $2,021,878
Comprehensive loss:
Net loss -- -- -- (21,090) -- (21,090)
Other comprehensive loss:
Net change in unrealized gain on investments,
net of tax benefit of $1,230 -- -- -- -- 2,094 2,094
Less: Reclassification adjustment for gains
included in earnings (4,907) (4,907)
Net change in cumulative translation
adjustments -- -- -- -- (30,138) (30,138)
- ------------------------------------------------------------------------------------------------------------------------------
Total other comprehensive loss (32,951)
- ------------------------------------------------------------------------------------------------------------------------------
Total comprehensive loss (54,041)
- ------------------------------------------------------------------------------------------------------------------------------
Issuance of shares for employee stock plans 4,113 44 38,013 -- -- 38,057
Compensation recognized under employee stock plans -- -- 21,232 -- -- 21,232
Warrants exercised 430 4 2,413 -- -- 2,417
- ------------------------------------------------------------------------------------------------------------------------------
December 28, 1997 142,123 1,428 1,018,884 1,066,131 (56,900) 2,029,543
==============================================================================================================================
Comprehensive loss:
Net loss -- -- -- (103,960) -- (103,960)
Other comprehensive income:
Net change in unrealized gain on investments,
net of tax benefit of $355 -- -- -- -- 4,753 4,753
Net change in cumulative translation
adjustments -- -- -- -- 21,969 21,969
- ------------------------------------------------------------------------------------------------------------------------------
Total other comprehensive income 26,722
- ------------------------------------------------------------------------------------------------------------------------------
Total comprehensive loss (77,238)
- ------------------------------------------------------------------------------------------------------------------------------
Issuance of shares:
Employee stock plans 2,354 27 25,656 -- -- 25,683
Fujitsu Limited 1,000 10 18,395 -- -- 18,405
Compensation recognized under employee stock plans -- -- 8,645 -- -- 8,645
Warrants exercised -- -- 11 -- -- 11
- ------------------------------------------------------------------------------------------------------------------------------
December 27, 1998 145,477 1,465 1,071,591 962,171 (30,178) 2,005,049
==============================================================================================================================
Comprehensive loss:
Net loss -- -- -- (88,936) -- (88,936)
Other comprehensive income:
Net change in unrealized gain on investments,
net of tax benefit of $2,635 -- -- -- -- 12,121 12,121
Less: Reclassification adjustment for
gains included in earnings (4,603) (4,603)
Net change in cumulative translation
adjustments -- -- -- -- 5,246 5,246
- ------------------------------------------------------------------------------------------------------------------------------
Total other comprehensive income 12,764
- ------------------------------------------------------------------------------------------------------------------------------
Total comprehensive loss (76,172)
- ------------------------------------------------------------------------------------------------------------------------------
Issuance of shares:
Employee stock plans 2,679 26 31,153 -- -- 31,179
Fujitsu Limited 500 5 12,593 -- -- 12,598
Compensation recognized under employee stock plans -- -- 6,619 -- -- 6,619
- ------------------------------------------------------------------------------------------------------------------------------
December 26, 1999 148,656 $1,496 $1,121,956 $ 873,235 $(17,414) $1,979,273
==============================================================================================================================
</TABLE>
See accompanying notes
25
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Years Ended December 26, 1999 (Thousands) 1999 1998 1997
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (88,936) $ (103,960) $ (21,090)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Gain on sale of Vantis (432,059) -- --
Depreciation and amortization 515,520 467,521 394,465
(Increase) decrease in deferred income tax assets 160,668 (106,861) (18,566)
Restructuring and other special charges 29,858 -- --
Foreign grant subsidy income (50,178) -- --
Net loss on disposal of property, plant and equipment 10,665 11,515 19,763
Net gain realized on sale of available-for-sale securities (4,250) -- (4,978)
Compensation recognized under employee stock plans 2,655 8,645 21,232
Undistributed income of joint venture (4,789) (11,591) (24,587)
Recognition of deferred gain on sale of building (1,680) -- --
Changes in operating assets and liabilities:
Net increase in receivables, inventories,
prepaid expenses and other assets (113,965) (151,998) (184,966)
Increase (decrease) in tax refund receivable
and tax payable (4,992) 9,350 61,209
Net increase in payables and accrued liabilities 241,403 19,195 156,333
- -----------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 259,920 141,816 398,815
- -----------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchase of property, plant and equipment (619,772) (975,105) (685,100)
Proceeds from sale of Vantis 454,269 -- --
Proceeds from sale of property, plant and equipment 3,996 106,968 43,596
Purchase of available-for-sale securities (1,579,813) (1,591,802) (537,275)
Proceeds from sale and maturity of available-for-sale securities 1,598,946 1,482,890 545,478
- -----------------------------------------------------------------------------------------------------------
Net cash used in investing activities (142,374) (977,049) (633,301)
- -----------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from borrowings 12,101 816,448 283,482
Debt issuance costs -- (14,350) (13,080)
Payments on debt and capital lease obligations (243,762) (92,601) (79,791)
Proceeds from foreign grants and subsidies 14,341 196,651 77,865
Proceeds from issuance of stock 43,777 44,099 40,474
- -----------------------------------------------------------------------------------------------------------
Net cash (used) provided by financing activities (173,543) 950,247 308,950
- -----------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash and cash equivalents (11,786) 6,236 --
Net increase (decrease) in cash and cash equivalents (67,783) 121,250 74,464
- -----------------------------------------------------------------------------------------------------------
Cash and cash equivalents at beginning of year 361,908 240,658 166,194
- -----------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 294,125 $ 361,908 $ 240,658
- -----------------------------------------------------------------------------------------------------------
Supplemental disclosures of cash flow information:
Cash paid (refunded) during the year for:
Interest, net of amounts capitalized $ 51,682 $ 58,517 $ 34,600
- -----------------------------------------------------------------------------------------------------------
Income taxes $ 15,466 $ 2,732 $(100,016)
- -----------------------------------------------------------------------------------------------------------
Non-cash financing activities:
Equipment capital leases $ 2,307 $ 13,908 $ 44,770
- -----------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes
26
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 26, 1999, December 27, 1998 and December 28, 1997
Note 1: Nature of Operations
AMD (the Company) is a semiconductor manfacturer with manufacturing facilities
in the U.S., Europe and Asia and sales offices throughout the world. The
Company's products include a wide variety of industry-standard integrated
circuits (ICs) which are used in many diverse product applications such as
telecommunications equipment, data and network communications equipment,
consumer electronics, personal computers (PCs) and workstations.
Note 2: Summary of Significant Accounting Policies
Fiscal Year. The Company uses a 52- to 53-week fiscal year ending on the last
Sunday in December. Fiscal 1999, 1998 and 1997 were 52-week years which ended on
December 26, December 27 and December 28, respectively. Fiscal 2000 will be a
53-week year ending on December 31, 2000.
Principles of Consolidation. The consolidated financial statements include the
Company's accounts and those of its wholly owned subsidiaries. Upon
consolidation, all significant intercompany accounts and transactions are
eliminated. Also included in the consolidated financial statements, under the
equity method of accounting, is the Company's 49.992 percent investment in
Fujitsu AMD Semiconductor Limited (FASL).
Foreign Currency Translation. Translation adjustments resulting from the process
of translating into the U.S. dollars the foreign currency financial statements
of the Company's wholly owned foreign subsidiaries for which the U.S. dollar is
the functional currency are included in operations. The translation adjustments
relating to the translation of the financial statements of the Company's
indirect wholly owned German subsidiary in Dresden, in the State of Saxony (AMD
Saxony), and the Company's unconsolidated joint venture, FASL, for which the
local currencies are the functional currencies, are included in stockholders'
equity.
Cash Equivalents. Cash equivalents consist of financial instruments which are
readily convertible into cash and have original maturities of three months or
less at the time of acquisition.
Investments. The Company classifies its marketable debt and equity securities at
the date of acquisition, into held-to-maturity and available-for-sale
categories. Currently, the Company classifies its securities as available-for-
sale. These securities are reported at fair market value with the related
unrealized gains and losses included in stockholders' equity. Realized gains and
losses and declines in value of securities judged to be other than temporary are
included in interest income and other, net. Interest and dividends on all
securities are also included in interest income and other, net. The cost of
securities sold is based on the specific identification method.
The Company considers investments with maturities between three and 12 months
as short-term investments. Short-term investments consist of money market
auction rate preferred stocks and debt securities such as commercial paper,
corporate notes, certificates of deposit and marketable direct obligations of
the United States governmental agencies.
Derivative Financial Instruments. The Company utilizes derivative financial
instruments to reduce financial market risks. The Company uses these instruments
to hedge foreign currency and interest rate market exposures of underlying
assets, liabilities and other obligations. The Company does not use derivative
financial instruments for speculative or trading purposes. The Company's
accounting policies for these instruments are based on whether such instruments
are designated as hedging transactions. The criteria the Company uses for
designating an instrument as a hedge includes the instrument's effectiveness in
risk reduction and one-to-one matching of derivative instruments to underlying
transactions. Gains and losses on foreign currency forward and option contracts
that are designated and effective as hedges of anticipated transactions, for
which a firm commitment has been attained, are deferred and either recognized in
income or included in the basis of the transaction in the same period that the
underlying transactions are settled. Gains and losses on foreign currency
forward and option contracts and interest rate swap contracts that are
designated and effective as hedges of existing transactions are recognized in
income in the same period as losses and gains on the underlying transactions are
recognized and generally offset. Gains and losses on any instruments not meeting
the above criteria are recognized in income in the current period. If an
underlying hedged transaction is terminated earlier than initially anticipated,
the offsetting gain or loss on the related derivative instrument is recognized
in income in the same period. Subsequent gains or losses on the related
derivative instrument are recognized in income in each period until the
instrument matures, is terminated or is sold. Premiums paid for foreign currency
forward and option contracts are generally amortized over the life of the
contracts and are not material to our results of operations. Unamortized
premiums are included in prepaid expenses and other current assets.
27
<PAGE>
Inventories. Inventories are stated at standard cost adjusted to approximate the
lower of cost (first-in, first-out method) or market (net realizable value).
Property, Plant and Equipment. Property, plant and equipment are stated at cost.
Depreciation and amortization are provided on a straight-line basis over the
estimated useful lives of the assets for financial reporting purposes and on
accelerated methods for tax purposes. Estimated useful lives for financial
reporting purposes are as follows:
. machinery and equipment, three to five years;
. buildings, up to 26 years; and
. leasehold improvements, the shorter of the remaining terms of the leases or
the estimated economic useful lives of the improvements.
Revenue Recognition. The Company recognizes revenue from product sold direct to
customers when the contract is in place, the price is fixed or determinable,
shipment is made and collectibility is reasonably assured. The Company sells to
distributors under terms allowing the distributors certain rights of return and
price protection on unsold merchandise held by them. The distributor agreements,
which may be canceled by either party upon specified notice, generally contain a
provision for the return of the Company's products in the event the agreement
with the distributor is terminated. Accordingly, the Company defers recognition
of revenue and related profits from sales to distributors with agreements that
have the aforementioned terms until the merchandise is resold by the
distributors.
Foreign Grants and Subsidies. The Federal Republic of Germany and the State of
Saxony have agreed to support the Dresden Fab 30 project in the amount of $443
million (denominated in deutsche marks) consisting of capital investment grants
and interest subsidies. Dresden Fab 30 is the Company's new integrated circuit
manufacturing and design facility in Dresden, Germany. The grants and subsidies
are subject to conditions, including meeting specified levels of employment in
December 2001 and maintaining those levels until June 2007. The grants and
subsidies will be recognized as a reduction of operating expense ratably over
the life of the project. In 1999, grants and subsidies recognized as a reduction
to operating expenses amounted to $50 million. As of December 26, 1999, AMD
Saxony had received grants and subsidies totaling approximately $298 million
(denominated in deutsche marks). Noncompliance with the conditions of the grants
and subsidies could result in the forfeiture of all or a portion of the future
amounts to be received, as well as the repayment, of all or a portion of the
amounts received to date.
Advertising Expenses. The Company accounts for advertising costs as expense in
the period in which they are incurred. Advertising expense for 1999, 1998 and
1997 was approximately $101 million, $74 million and $74 million, respectively.
Net Loss Per Common Share. Basic and diluted net loss per share are computed
using weighted-average common shares outstanding.
The following table sets forth the computation of basic and diluted net loss
per common share:
<TABLE>
<CAPTION>
(Thousands except per share data) 1999 1998 1997
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Numerator for basic and diluted net
loss per common share $(88,936) $(103,960) $(21,090)
- ---------------------------------------------------------------------------
Denominator for basic and
diluted net loss per common
share -- weighted-average shares 147,068 143,668 140,453
- ---------------------------------------------------------------------------
Basic and diluted net loss
per common share $ (0.60) $ (0.72) $ (0.15)
- ---------------------------------------------------------------------------
</TABLE>
28
<PAGE>
Options and restricted stock were outstanding during 1999, 1998 and 1997.
Convertible debt was outstanding during 1999 and 1998. Warrants were outstanding
in 1998 and 1997. All of these instruments were not included in the computation
of diluted net loss per common share because the effect in years with a net loss
would be antidilutive.
Accumulated Other Comprehensive Loss. As required under Statement of Financial
Accounting Standards No. 130 (SFAS 130), unrealized gains or losses on the
Company's available-for-sale securities and the foreign currency translation
adjustments, are included in other comprehensive loss.
The following are the components of accumulated other comprehensive loss:
<TABLE>
<CAPTION>
(Thousands) 1999 1998
- -------------------------------------------------------------------
<S> <C> <C>
Unrealized gain on investments, net of tax $ 14,278 $ 6,760
Cumulative translation adjustments (31,692) (36,938)
- -------------------------------------------------------------------
$(17,414) $(30,178)
- -------------------------------------------------------------------
</TABLE>
Cumulative translation adjustments are not tax affected.
Employee Stock Plans. As allowed under Statement of Financial Accounting
Standards No. 123 (SFAS 123), "Accounting for Stock-Based Compensation," the
Company continues to account for its stock option plans and its employee stock
purchase plan in accordance with provisions of the Accounting Principles Board's
Opinion No. 25 (APB 25), "Accounting For Stock Issued to Employees." See Note
10.
Use of Estimates. The preparation of the consolidated financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting periods. Actual results inevitably will differ from those
estimates, and such differences may be material to the financial statements.
Financial Presentation. The Company has reclassified certain prior year amounts
on the consolidated financial statements to conform to the 1999 presentation.
New Accounting Pronouncements. In 1999, the Financial Accounting Standards Board
extended the adoption of the Statement of Financial Accounting Standards No. 133
(SFAS 133), "Accounting for Derivative Instruments and Hedging Activities." SFAS
133 is required to be adopted in years beginning after June 15, 2000. The
Company expects to adopt SFAS 133 in fiscal 2001. The Company has not completed
its review of SFAS 133, and accordingly has not evaluated the effect the
adoption of the statement may have on its consolidated results of operations and
financial position. SFAS 133 will require the Company to recognize all
derivatives on the balance sheet at fair value. Derivatives that are not hedges
must be adjusted to fair value through income. If the derivative is a hedge,
depending on the nature of the hedge, changes in the fair value of derivatives
will either be offset against the change in fair value of the hedged assets,
liabilities, or firm commitments through earnings or recognized in other
comprehensive income until the hedged item is recognized in earnings. The
portion of a derivative's change in fair value which is ineffective as a hedge
will be immediately recognized in earnings.
In December 1999, the Securities and Exchange Commission (SEC) issued SEC
Staff Accounting Bulletin No. 101 (SAB 101), "Revenue Recognition in Financial
Statements." SAB 101 summarizes certain of the SEC's views in applying generally
accepted accounting principles to revenue recognition in financial statements.
The Company has reviewed SAB 101 and has determined that it is in compliance
with its requirements. Therefore, the application of SAB 101 will have no impact
on the Company's consolidated results of operations.
Note 3: Sale of Vantis Corporation
On June 15, 1999, the Company sold Vantis to Lattice Semiconductor Corporation
for approximately $500 million in cash. The actual cash received was net of
Vantis' cash and cash equivalents balance of approximately $46 million as of the
closing of the sale. The Company's pretax gain on the sale of Vantis was $432
million. The gain was computed based upon Vantis' net assets as of June 15, 1999
and other direct expenses related to the sale. The applicable tax rate on the
gain was 40 percent, resulting in an after-tax gain of $259 million.
As part of the sale of Vantis, the Company negotiated various service
contracts with Lattice to continue to provide services to Vantis after the sale.
Pursuant to the service contracts, the Company will continue to provide, among
other things, wafer fabrication and assembly, test, mark and pack services to
Vantis. The Company expects the wafer fabrication and assembly, test, mark and
pack service contracts to continue until September 2003. Approximately $43
million of revenue was generated from the above service contracts in 1999.
29
<PAGE>
Note 4: Financial Instruments
Available-for-sale Securities
Available-for-sale securities as of December 26, 1999 and December 27, 1998 were
as follows:
<TABLE>
<CAPTION>
Gross Gross Fair
unrealized unrealized market
(Thousands) Cost gains losses value
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1999
Cash equivalents:
Commercial paper $ 19,505 -- $ (21) $ 19,484
Money market funds 143,000 -- -- 143,000
- ----------------------------------------------------------------------------------------------
Total cash equivalents $162,505 -- $ (21) $162,484
- ----------------------------------------------------------------------------------------------
Short-term investments:
Money market auction rate preferred stocks $126,700 -- -- $126,700
Certificates of deposit 27,454 -- $ (26) 27,428
Corporate notes 30,759 -- (13) 30,746
Federal agency notes 61,541 -- (170) 61,371
Commercial paper 55,250 $ 891 -- 56,141
- ----------------------------------------------------------------------------------------------
Total short-term investments $301,704 $ 891 $(209) $302,386
- ----------------------------------------------------------------------------------------------
Long-term investments:
Equity investments $ 6,161 $22,014 -- $ 28,175
Federal agency notes 1,907 -- $ (32) 1,875
- ----------------------------------------------------------------------------------------------
Total long-term investments $ 8,068 $22,014 $ (32) $ 30,050
- ----------------------------------------------------------------------------------------------
1998
Cash equivalents:
Commercial paper $ 22,434 -- $ (40) $ 22,394
Money market funds 136,408 -- -- 136,408
- ----------------------------------------------------------------------------------------------
Total cash equivalents $158,842 -- $ (40) $158,802
- ----------------------------------------------------------------------------------------------
Short-term investments:
Money market auction rate preferred stocks $115,500 -- -- $115,500
Certificates of deposit 100,230 $ 58 $ (50) 100,238
Treasury notes 7,696 -- (18) 7,678
Corporate notes 32,657 30 -- 32,687
Federal agency notes 34,616 50 (153) 34,513
Commercial paper 43,886 704 (89) 44,501
- ----------------------------------------------------------------------------------------------
Total short-term investments $334,585 $ 842 $(310) $335,117
- ----------------------------------------------------------------------------------------------
Long-term investments:
Equity investments $ 7,027 $ 6,265 -- $ 13,292
Treasury notes 2,000 3 -- 2,003
- ----------------------------------------------------------------------------------------------
Total long-term investments $ 9,027 $ 6,268 -- $ 15,295
- ----------------------------------------------------------------------------------------------
</TABLE>
30
<PAGE>
The Company realized a net gain on the sales of available-for-sale securities of
$4.3 million for 1999. The Company did not sell any available-for-sale
securities in 1998.
Financial Instruments With Off-balance-sheet Risk
As part of the Company's asset and liability management strategy, AMD uses
financial instruments with off-balance-sheet risk to manage financial market
risk, including interest rate and foreign exchange risk. The notional amounts,
carrying amounts and fair values of these instruments as of December 26, 1999
and December 27, 1998 are included in the table below:
<TABLE>
<CAPTION>
Notional Carrying Fair
(Thousands) amount amount value
- ----------------------------------------------------------------------
<S> <C> <C> <C>
1999
Foreign exchange instruments:
Foreign currency forward contracts $ 58,690 $ (102) $ (533)
- ----------------------------------------------------------------------
1998
Foreign exchange instruments:
Purchased foreign currency
call option contracts 75,000 289 45
Purchased foreign currency
put option contracts 220,000 -- 1,547
Written foreign currency
call option contracts 220,000 (3,416) (13,469)
Foreign currency forward contracts 13,112 (32) (25)
- ----------------------------------------------------------------------
</TABLE>
The Company used prevailing financial market information and price quotes from
certain of its counterparty financial institutions as of the respective dates to
obtain the estimates of fair value.
Foreign Exchange Forward Contracts
The Company uses foreign exchange forward contracts to hedge the exposure to
currency fluctuations on its foreign currency exposures in its foreign sales
subsidiaries, liabilities for products purchased from FASL and fixed asset
purchase commitments. The hedging transactions in 1999 were denominated in
Italian lira, Japanese yen, French franc, German mark, British pound, Dutch
guilder, Thailand baht, Singapore dollar, Swiss franc and European Union euro.
The maturities of these contracts were generally less than twelve months.
Foreign Currency Option Contracts
In 1998, the Company entered into an intercompany no-cost collar arrangement to
hedge Dresden Fab 30 project costs denominated in U.S. dollars. The no-cost
collars included purchased put option contracts and written call option
contracts, the contract rates of which were structured so as to avoid payment of
any option premium at the time of purchase. In March 1999, the Company entered
into various option positions with several third party banks to neutralize the
exposure of the outstanding put and call option contracts. As a result, all the
options were offset and canceled. As of December 26, 1999, there were no
outstanding foreign currency option contracts.
In 1999, the $75 million foreign currency call option contracts remaining from
the $150 million call option contracts purchased in 1997 to hedge our
obligations to provide loans to or invest equity in, AMD Saxony also expired.
Fair Value of Other Financial Instruments
The fair value of debt was estimated using discounted cash flow analysis based
on estimated interest rates for similar types of borrowing arrangements.
The carrying amounts and estimated fair values of the Company's other
financial instruments are as follows:
<TABLE>
<CAPTION>
1999 1998
Carrying Fair Carrying Fair
(Thousands) amount value amount value
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Short-term debt:
Notes payable -- -- $ 6,017 $ 6,017
Current portion of long-term debt (excluding capital leases) $ 5,127 $ 4,974 125,283 148,178
Long-term debt (excluding capital leases) 1,189,110 1,123,945 1,312,303 1,336,768
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
31
<PAGE>
Note 5: Concentrations of Credit Risk
Financial instruments that potentially subject the Company to concentrations of
credit risk consist primarily of cash equivalents, short-term investments, trade
receivables and financial instruments used in hedging activities.
The Company places its cash equivalents and short-term investments with high
credit quality financial institutions and, by policy, limits the amount of
credit exposure with any one financial institution. The Company acquires
investments in time deposits and certificates of deposit from banks having
combined capital, surplus and undistributed profits of not less than $200
million. Investments in commercial paper and money market auction rate preferred
stocks of industrial firms and financial institutions are rated A1, P1 or
better, investments in tax-exempt securities including municipal notes and bonds
are rated AA, Aa or better, and investments in repurchase agreements must have
securities of the type and quality listed above as collateral.
Concentrations of credit risk with respect to trade receivables are limited
because a large number of geographically diverse customers make up the Company's
customer base, thus spreading the trade credit risk. The Company controls credit
risk through credit approvals, credit limits and monitoring procedures. The
Company performs in-depth credit evaluations of all new customers and requires
letters of credit, bank guarantees and advance payments, if deemed necessary.
The Company's bad debt expenses have not been material.
The counterparties to the agreements relating to the Company derivative
instruments consist of a number of major, high credit quality, international
financial institutions. The Company does not believe that there is significant
risk of nonperformance by these counterparties because the Company monitors
their credit ratings, and limits the financial exposure and the amount of
agreements entered into with any one financial institution. While the notional
amounts of financial instruments are often used to express the volume of these
transactions, the potential accounting loss on these transactions if all
counterparties failed to perform is limited to the amounts, if any, by which the
counterparties' obligations under the contracts exceed the Company's obligations
to the counterparties.
Note 6: Income Taxes
Provision (benefit) for income taxes consists of:
<TABLE>
<CAPTION>
(Thousands) 1999 1998 1997
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
U.S. Federal $ (7,072) $ 1,706 $(43,053)
U.S. State and Local 363 1,772 (1,959)
Foreign National and Local 14,095 11,505 8,423
Deferred:
U.S. Federal 134,050 (89,997) (12,902)
U.S. State and Local 26,178 (16,869) (7,872)
Foreign National and Local (264) 5 2,208
- -------------------------------------------------------------------------
Provision (benefit) for income taxes $167,350 $(91,878) $(55,155)
- -------------------------------------------------------------------------
</TABLE>
Tax benefits generated from stock option deductions in 1999, 1998 and 1997 did
not reduce taxes currently payable.
Deferred income taxes reflect the net tax effects of tax carryovers and
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax assets and liabilities as
of December 26, 1999 and December 27, 1998 are as follows:
(Thousands) 1999 1998
- ----------------------------------------------------------------------
Deferred tax assets:
Net operating loss carryovers $ 231,542 $ 237,767
Deferred distributor income 32,759 28,940
Accrued expenses not currently deductible 28,149 29,462
Federal and state tax credit carryovers 115,396 92,879
Other 95,660 112,550
- ----------------------------------------------------------------------
Total deferred tax assets 503,506 501,598
Less: valuation allowance (249,116) (73,243)
- ----------------------------------------------------------------------
254,390 428,355
- ----------------------------------------------------------------------
Deferred tax liabilities:
Depreciation (188,879) (196,293)
Other (70,046) (60,887)
- ----------------------------------------------------------------------
Total deferred tax liabilities (258,925) (257,180)
- ----------------------------------------------------------------------
Net deferred tax assets (liabilities) $ (4,535) $ 171,175
- ----------------------------------------------------------------------
32
<PAGE>
The valuation allowance for deferred tax assets increased $176 million in 1999
from 1998 primarily to offset tax benefits from operating losses incurred during
1999. The valuation allowance for deferred tax assets includes $38 million
attributable to stock option deductions, the benefit of which will be credited
to equity when realized.
Pretax income from foreign operations was approximately $62 million in 1999.
Pretax loss from foreign operations was approximately $36 million in 1998.
Pretax income from foreign operations was approximately $10 million in 1997.
The federal and state tax credit and net operating loss carryovers expire
beginning in the year 2002 through 2019.
The table below displays a reconciliation between statutory federal income
taxes and the total benefit for income taxes.
<TABLE>
<CAPTION>
(Thousands except percent) Tax Rate
- ----------------------------------------------------------------------
<S> <C> <C>
1999
Statutory federal income tax expense $ 25,766 35.0%
State taxes, net of federal benefit 17,252 23.4
Foreign income at other than U.S. rates (4,952) (6.7)
Net operating losses not currently benefitted 126,684 172.1
Other 2,600 3.5
- ----------------------------------------------------------------------
$167,350 227.3%
- ----------------------------------------------------------------------
1998
Statutory federal income tax benefit $(72,598) (35.0)%
State taxes, net of federal benefit (8,000) (3.9)
Tax-exempt Foreign Sales Corporation income (940) (0.5)
Foreign income at other than U.S. rates (3,949) (1.9)
Tax credits (6,200) (3.0)
Other (191) --
- ----------------------------------------------------------------------
$(91,878) (44.3)%
- ----------------------------------------------------------------------
1997
Statutory federal income tax benefit $(35,291) (35.0)%
State taxes, net of federal benefit (7,500) (7.4)
Tax-exempt Foreign Sales Corporation income (1,369) (1.4)
Foreign income at other than U.S. rates (10,228) (10.1)
Tax credits (4,077) (4.0)
Other 3,310 3.2
- ----------------------------------------------------------------------
$(55,155) (54.7)%
- ----------------------------------------------------------------------
</TABLE>
The Company has made no provision for income taxes on approximately $394
million of cumulative undistributed earnings of certain foreign subsidiaries
because it is the Company's intention to permanently invest such earnings. If
such earnings were distributed, the Company would accrue additional taxes of
approximately $125 million.
Note 7: Debt
Significant elements of revolving lines of credit are:
<TABLE>
<CAPTION>
(Thousands except percent) 1999 1998
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Committed:
Three-year secured revolving line of credit $ 200,000 $ 150,000
</TABLE>
33
<PAGE>
<TABLE>
<S> <C> <C>
Uncommitted:
Portion of unsecured lines of
credit available to foreign subsidiaries 71,032 68,980
Amounts outstanding at year-end under lines of credit:
Short-term 4,831 6,017
Short-term borrowings:
Average daily borrowings 5,441 5,386
Maximum amount outstanding at any month-end 6,166 6,017
Weighted-average interest rate 0.76% 1.18%
Average interest rate on amounts
outstanding at year-end 0.78% 1.06%
- ---------------------------------------------------------------------------------------------------
</TABLE>
Interest on foreign and short-term domestic borrowings is negotiated at the
time of the borrowing.
Information with respect to the Company's long-term debt, capital lease
obligations and other at year-end is:
<TABLE>
<CAPTION>
(Thousands) 1999 1998
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
6% Convertible Subordinated Notes with
interest payable semiannually and
principal due in April 2005 $ 517,500 $ 517,500
11% Senior Secured Notes with interest payable
semiannually and principal due on
August 1, 2003, secured by the Fab 25
facility and equipment 400,000 400,000
Term loans under the Dresden Loan Agreement
with weighted-average interest of 5.39% and
principal due between February 2001 and
December 2004, secured by the Dresden Fab 30
facility and equipment 270,374 299,679
Secured term loan with interest at LIBOR plus
2.5% (8.06% as of December 27, 1998)
payable quarterly and principal payable quarterly
from October 1998 through May 2000,
secured by the Fab 25 facility and equipment -- 218,750
Obligations under capital leases 27,805 42,812
Mortgage with principal and 9.88% interest payable
in monthly installments through April 2007 1,532 1,657
- -------------------------------------------------------------------------------------------------------
1,217,211 1,480,398
Other 257,697 37,582
- -------------------------------------------------------------------------------------------------------
1,474,908 1,517,980
Less: current portion (47,626) (145,564)
- -------------------------------------------------------------------------------------------------------
Long-term debt, capital lease obligations
and other, less current portion $1,427,282 $1,372,416
- -------------------------------------------------------------------------------------------------------
</TABLE>
The 1996 syndicated bank loan agreement (the Credit Agreement) provided for a
$150 million three-year secured revolving line of credit and a $250 million
four-year secured term loan. On June 25, 1999, the Company terminated the
secured revolving line of credit. On July 13, 1999, the Company replaced the
Credit Agreement with a new Loan and Security Agreement (the Loan Agreement)
with a consortium of banks led by Bank of America. On July 30, 1999, the Company
repaid the outstanding principal balance of $86 million on the secured term loan
and terminated the Credit Agreement. Under the Loan Agreement, which provides
for a four-year secured revolving line of credit of up to $200 million, the
Company can borrow, subject to amounts which may be set aside by the lenders, up
to 85 percent of its eligible accounts receivable from Original Equipment
Manufacturers (OEMs) and 50 percent of its eligible accounts receivable from
distributors. The Company must comply with certain financial covenants if the
levels of domestic cash it holds declines to certain levels, or the amount of
borrowing under the Loan Agreement rises to certain levels. The Company's
obligations under the Loan Agreement are secured by a pledge of most of its
accounts receivable, inventory,
34
<PAGE>
general intangibles and the related proceeds. As of December 26, 1999, the
Company had not borrowed any funds under the Loan Agreement.
In May 1998, the Company sold $517.5 million of Convertible Subordinated Notes
due May 15, 2005 under its $1 billion shelf registration declared effective by
the Securities and Exchange Commission on April 20, 1998. Interest on the
Convertible Subordinated Notes accrues at the rate of six percent per annum and
is payable semiannually in arrears on May 15 and November 15 of each year,
commencing November 15, 1998. The Convertible Subordinated Notes are redeemable
at the Company's option on and after May 15, 2001. The Notes are convertible at
the option of the holder at any time prior to the close of business on the
maturity date, unless previously redeemed or repurchased, into shares of common
stock at a conversion price of $37.00 per share, subject to adjustment in
certain circumstances.
Included in other is $221 million of deferred grants and subsidies related to
the Dresden Fab 30 project. See Note 2. Also included in other is a deferred
gain of $32 million as of December 26, 1999, as a result of the sale and
leaseback of the Company's corporate marketing, general and administrative
facility in 1998. The Company is amortizing the deferred gain ratably over the
lease term, which is 20 years. See Note 12.
For each of the next five years and beyond, the Company's long-term debt and
capital lease obligations are:
<TABLE>
<CAPTION>
Long-term debt Capital
(Thousands) (Principal only) leases
- ------------------------------------------------------------------
<S> <C> <C>
2000 $ 5,127 $13,756
2001 46,517 9,352
2002 154,684 4,197
2003 456,853 3,374
2004 13,097 916
Beyond 2004 517,959 --
- ------------------------------------------------------------------
Total 1,194,237 31,595
Less: amount representing interest -- (3,790)
- ------------------------------------------------------------------
Total at present value $1,194,237 $27,805
- ------------------------------------------------------------------
</TABLE>
Obligations under the lease agreements are collateralized by the assets leased.
The Company leased assets totaling approximately $64 million and $97 million as
of December 26, 1999 and December 27, 1998, respectively. Accumulated
amortization of these leased assets was approximately $39 million and $60
million as of December 26, 1999 and December 27, 1998, respectively.
The above debt agreements limit the Company and its subsidiaries' ability to
engage in various transactions and require satisfaction of specified financial
performance criteria. As of December 26, 1999, the Company was in compliance
with all restrictive covenants of such debt agreements and all retained earnings
were restricted as to payments of cash dividends on common stock.
Under certain circumstances, cross-defaults result under the Convertible
Subordinated Notes, the Indenture for the Senior Secured Notes and the Dresden
Loan Agreements, which consist of a loan agreement and other related agreements
between AMD Saxony and a consortium of banks led by Dresdner Bank AG.
Note 8: Interest Expense & Interest Income and Other, Net
Interest Expense
<TABLE>
<CAPTION>
(Thousands) 1999 1998 1997
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total interest charges $116,255 $ 96,206 $ 74,716
Less: interest capitalized (47,002) (29,712) (29,440)
- ----------------------------------------------------------------------------------------------
Interest expense $ 69,253 $ 66,494 $ 45,276
- ----------------------------------------------------------------------------------------------
</TABLE>
In 1999 and 1998, interest expense primarily consisted of interest incurred on
the Company's Senior Secured Notes sold in August 1996, interest on the
Company's Convertible Subordinated Notes sold in May 1998 and interest on the
Company's $250 million four-year secured term loan, net of interest capitalized
primarily related to the facilitization of Fab 25 and Fab 30. In 1997, interest
expense primarily consisted of interest expense incurred on the Company's Senior
Secured Notes sold in August 1996 and interest on the Company's $250 million
four-year secured term loan, net of interest capitalized primarily related to
the second phase of construction of Fab 25 and Dresden Fab 30.
35
<PAGE>
Interest Income and Other, Net
<TABLE>
<CAPTION>
(Thousands) 1999 1998 1997
- --------------------------------------------------------------
<S> <C> <C> <C>
Interest income $26,461 $31,478 $28,975
Other income, net 5,274 2,729 6,122
- --------------------------------------------------------------
$31,735 $34,207 $35,097
- --------------------------------------------------------------
</TABLE>
Other income consists of gains from the sales of investments, other assets and
fixed assets.
Note 9: Segment Reporting
For purposes of the disclosure required by the Statement of Financial Accounting
Standards SFAS 131, the Company operated in two reportable segments in the first
half of 1999, and in 1998 and 1997: (1) the AMD segment and (2) through June 15,
1999, the Vantis segment. The Company's reportable segments were organized as
discrete and separate functional units with separate management teams and
separate performance assessment and resource allocation processes. The AMD
segment produces microprocessors, core logic products, Flash memory devices,
EPROMs, telecommunication products, networking products and embedded processors.
The Vantis segment produced complex and simple, high performance complementary
metal oxide semiconductor (CMOS) programmable logic devices (PLDs).
The accounting policies of the segments are the same as those described in the
summary of significant accounting policies. The Company evaluates performance
and allocates resources based on segment operating income (loss).
The AMD segment did not have intersegment sales prior to the fourth quarter of
1997. The Vantis segment did not have intersegment sales for any of the years
presented below.
<TABLE>
<CAPTION>
(Thousands) 1999 1998 1997
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales:
AMD segment
External customers $2,770,912 $2,337,144 $2,113,276
Intersegment 32,626 88,455 25,896
- -----------------------------------------------------------------------------------------
2,803,538 2,425,599 2,139,172
Vantis segment external customers 86,692 204,997 243,099
Elimination of intersegment sales (32,626) (88,455) (25,896)
- -----------------------------------------------------------------------------------------
Net sales $2,857,604 $2,542,141 $2,356,375
- -----------------------------------------------------------------------------------------
Segment income (loss):
AMD segment $ (326,555) $ (185,242) $ (127,406)
Vantis segment 5,639 21,600 36,753
- -----------------------------------------------------------------------------------------
Total operating loss (320,916) (163,642) (90,653)
Gain on sale of Vantis 432,059 -- --
Litigation settlement -- (11,500) --
Interest income and other, net 31,735 34,207 35,097
Interest expense (69,253) (66,494) (45,276)
Benefit (provision) for income taxes (167,350) 91,878 55,155
Equity in net income of FASL (AMD segment) 4,789 11,591 24,587
- -----------------------------------------------------------------------------------------
Net loss $ (88,936) $ (103,960) $ (21,090)
- -----------------------------------------------------------------------------------------
Total assets:
AMD segment
Assets excluding investment in FASL $4,104,090 $3,881,268 $3,187,506
Investment in FASL 273,608 236,820 204,031
- -----------------------------------------------------------------------------------------
4,377,698 4,118,088 3,391,537
Vantis segment assets -- 134,880 123,734
- -----------------------------------------------------------------------------------------
Total assets $4,377,698 $4,252,968 $3,515,271
- -----------------------------------------------------------------------------------------
Expenditures for long-lived assets:
AMD segment $ 613,631 $ 993,679 $ 683,346
Vantis segment 6,141 2,491 1,754
- -----------------------------------------------------------------------------------------
Total expenditures for long-lived assets $ 619,772 $ 996,170 $ 685,100
- -----------------------------------------------------------------------------------------
Depreciation and amortization expense:
AMD segment $ 513,247 $ 463,719 $ 390,577
</TABLE>
36
<PAGE>
<TABLE>
<S> <C> <C> <C>
Vantis segment 2,273 3,802 3,888
- -----------------------------------------------------------------------------------------
Total depreciation and amortization expense $ 515,520 $ 467,521 $ 394,465
- -----------------------------------------------------------------------------------------
</TABLE>
The Company's operations outside the United States include both manufacturing
and sales. The Company's manufacturing subsidiaries are located in Germany,
Malaysia, Thailand, Singapore and China. Its sales subsidiaries are in Europe,
Asia Pacific and Brazil.
The following is a summary of operations by entities within geographic areas
for the three years ended December 26, 1999:
<TABLE>
<CAPTION>
(Thousands) 1999 1998 1997
- -------------------------------------------------------------------
<S> <C> <C> <C>
Sales to external customers:
United States $1,131,983 $1,148,610 $1,024,718
Europe 835,673 730,189 683,360
Asia Pacific 889,948 663,342 648,297
- -------------------------------------------------------------------
$2,857,604 $2,542,141 $2,356,375
- -------------------------------------------------------------------
Long-lived assets:
United States $1,469,412 $1,718,435 $1,705,084
Germany 812,773 333,851 102,810
Other Europe 3,847 3,927 3,735
Asia Pacific 237,204 212,255 179,060
- -------------------------------------------------------------------
$2,523,236 $2,268,468 $1,990,689
- -------------------------------------------------------------------
</TABLE>
Sales to external customers are based on the customer's billing location. Long-
lived assets are those assets used in each geographic area.
The Company markets and sells its products primarily to a broad base of
customers comprised of distributors and Original Equipment Manufacturers (OEMs)
of computation and communication equipment. One of the Company's OEMs accounted
for approximately 13 and 12 percent of 1999 and 1998 net sales, respectively.
One of the Company's distributors accounted for approximately 12 percent of 1997
net sales.
Note 10: Stock-Based Benefit Plans
Stock Option Plans. The Company has several stock option plans under which key
employees have been granted incentive (ISOs) and nonqualified (NSOs) stock
options to purchase the Company's common stock. Generally, options vest and
become exercisable over the four years from the date of grant and expire five to
ten years after the date of grant. ISOs granted under the plans have exercise
prices of not less than 100 percent of the fair market value of the common stock
on the date of grant. Exercise prices of NSOs range from $0.01 to the fair
market value of the common stock on the date of grant. As of December 26, 1999,
2,884 employees were eligible and participating in the plans.
In 1998, the Compensation Committee of the Company's Board of Directors
approved a stock option repricing program pursuant to which the Company's
employees (excluding officers and vice presidents) could elect to cancel certain
unexercised stock options in exchange for new stock options with an exercise
price of $19.43, which was equal to 20 percent above the closing price of the
Company's common stock on the New York Stock Exchange on September 10, 1998.
Approximately two million options were eligible for repricing, of which the
Company repriced approximately 1.7 million. The Company extended the vesting
schedules and expiration dates of repriced stock options by one year.
The following is a summary of stock option activity and related information
(the repriced options are shown as canceled and granted options in 1998 when
they were repriced):
<TABLE>
<CAPTION>
1999 1998 1997
Number Weighted-average Number Weighted-average Number Weighted-average
(Shares in thousands) of shares exercise price of shares exercise price of shares exercise price
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Options:
Outstanding at beginning
of year 20,275 $ 16.71 17,780 $17.07 18,651 $12.17
Granted 4,903 16.70 6,555 19.84 3,392 34.33
Canceled (2,355) 20.90 (2,666) 31.17 (782) 16.05
Exercised (1,829) 10.91 (1,394) 8.38 (3,481) 8.03
- --------------------------------------- ------- -------
Outstanding at end of year 20,994 16.74 20,275 16.71 17,780 17.07
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
37
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Exercisable at end of year 10,704 15.93 9,697 14.60 8,299 13.28
Available for grant at
beginning of year 5,653 966 3,845
Available for grant at end
of year 3,057 5,653 966
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The following table summarizes information about options outstanding as of
December 26, 1999.
<TABLE>
<CAPTION>
(Shares in thousands) Options outstanding Options exerciseable
- --------------------------------------------------------------------------------------------------------------------------------
Weighted-average
Range of Number remaining contractual Weighted-average Number Weighted-average
exercise prices of shares life (years) exercise price of shares exercise price
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 0.01 - $13.00 5,530 4.44 $ 9.89 4,768 $10.31
13.38 - 16.44 7,267 7.62 15.25 2,843 14.42
16.50 - 22.38 5,561 8.64 18.77 1,404 18.77
22.56 - 43.25 2,636 6.74 30.92 1,689 31.98
------ ------
$ 0.01 - $43.25 20,994 6.94 16.74 10,704 15.93
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Stock Purchase Plan. The Company has an employee stock purchase plan (ESPP) that
allows participating U.S. employees to purchase, through payroll deductions,
shares of our common stock at 85 percent of the fair market value at specified
dates. As of December 26, 1999, 1,566,766 common shares remained available for
issuance under the plan. A summary of stock purchased under the plan is shown
below:
<TABLE>
<CAPTION>
(Thousands except employee participants) 1999 1998 1997
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Aggregate purchase price $13,294 $14,949 $14,470
Shares purchased 861 952 673
Employee participants 2,273 3,037 3,046
- -----------------------------------------------------------------------
</TABLE>
Stock Appreciation Rights. The Company may grant stock appreciation rights
(SARs) to key employees under the 1992 stock incentive plan. The number of SARs
exercised plus common stock issued under the stock option plans may not exceed
the number of shares authorized under the stock option plans. The Company may
grant SARs in tandem with outstanding stock options, in tandem with future stock
option grants or independently of any stock options. Generally, the terms of
SARs granted under the plan are similar to those of options granted under the
stock option plans, including exercise prices, exercise dates and expiration
dates. To date, the Company has granted only limited SARs, which become
exercisable in the event of certain changes in control of AMD.
Restricted Stock Awards. The Company established the 1987 restricted stock award
plan under which the Company was authorized to issue up to two million shares of
common stock to employees, subject to terms and conditions determined at the
discretion of the Board of Directors. The Company entered into agreements to
issue 15,000 shares in 1997. The 1987 plan expired in 1997. To date, the Company
has canceled agreements covering 316,239 shares without issuance and the Company
has issued 1,874,922 shares pursuant to prior agreements. As of December 26,
1999, agreements covering 46,051 shares were outstanding. Outstanding awards
vest under varying terms within five years.
In 1998, the Company adopted the 1998 stock incentive plan under which the
Company was authorized to issue one million shares of common stock to employees
who are not covered by Section 16 of the Securities Exchange Act of 1934, as
amended (the Exchange Act), subject to terms and conditions determined at the
discretion of the Board of Directors. During the fiscal year, the Company issued
90,900 shares. As of December 26, 1999, all the shares issued were outstanding.
Shares Reserved for Issuance. The Company had a total of approximately
40,245,000 shares of common stock reserved as of December 26, 1999 for issuance
related to our Convertible Subordinated Notes, the employee stock option plans,
the ESPP and the restricted stock awards.
Stock-Based Compensation. As permitted under SFAS 123, the Company has elected
to follow APB 25 and related Interpretations in accounting for stock-based
awards to employees. Pro forma information regarding net income (loss) and net
income (loss) per share is required by SFAS 123 for awards granted after
December 31, 1994, as if the Company had
38
<PAGE>
accounted for its stock-based awards to employees under the fair value method of
SFAS 123. The Company estimated the fair value of its stock-based awards to
employees using a Black-Scholes option pricing model. The Black-Scholes model
was developed for use in estimating the fair value of traded options which have
no vesting restrictions and are fully transferable. In addition, the Black-
Scholes model requires the input of highly subjective assumptions including the
expected stock price volatility. Because our stock-based awards to employees
have characteristics significantly different from those of traded options, and
because changes in the subjective input assumptions can materially affect the
fair value estimate, in management's opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of our stock-
based awards to employees. The fair value of our stock-based awards to employees
was estimated assuming no expected dividends and the following weighted-average
assumptions:
<TABLE>
<CAPTION>
Options ESPP
1999 1998 1997 1999 1998 1997
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Expected life (years) 3.45 3.33 3.35 0.25 0.25 0.25
Expected stock price volatility 68.72% 64.34% 54.69% 67.10% 76.09% 68.41%
Risk-free interest rate 5.48% 5.42% 6.21% 4.77% 5.18% 5.37%
- -------------------------------------------------------------------------------------
</TABLE>
For pro forma purposes, the estimated fair value of our stock-based awards to
employees is amortized over the options' vesting period (for options) and the
three-month purchase period (for stock purchases under the ESPP). Pro forma
information follows:
<TABLE>
<CAPTION>
(Thousands except per share amounts) 1999 1998 1997
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Net loss--as reported $ (88,936) $(103,960) $(21,090)
Net loss--pro forma (122,497) (129,721) (44,304)
Basic and diluted net loss
per share--as reported (0.60) (0.72) (0.15)
Basic and diluted net loss
per share--pro forma (0.83) (0.90) (0.32)
- --------------------------------------------------------------------------
</TABLE>
Because SFAS 123 is applicable only to awards granted subsequent to December 31,
1994, its pro forma effect was not fully reflected until 1999. The Company
granted a total of 4,701,114 stock-based awards during 1999 with exercise prices
equal to the market price of the stock on the grant date. The weighted-average
exercise price and weighted-average fair value of these awards were $17.15 and
$8.80, respectively. The Company granted a total of 7,625 stock-based awards
during 1999 with exercise prices greater than the market price of the stock on
the grant date. The weighted-average exercise price and weighted-average fair
value of these awards were $23.83 and $0.07, respectively. The Company granted a
total of 193,966 stock-based awards during 1999 with exercise prices less than
the market price of the stock on the grant date. The weighted-average exercise
price and weighted-average fair value of these awards were $5.51 and $15.31,
respectively. The Company granted a total of 4,342,824 stock-based awards during
1998 with exercise prices equal to the market price of the stock on the grant
date. The weighted-average exercise price and weighted-average fair value of
these awards were $20.16 and $9.80, respectively. The Company granted a total of
2,060,591 stock-based awards during 1998 with exercise prices greater than the
market price of the stock on the grant date. The weighted-average exercise price
and weighted-average fair value of these awards were $20.44 and $3.51,
respectively. The Company granted a total of 150,990 stock-based awards during
1998 with exercise prices less than market price of the stock on the grant date.
The weighted-average exercise price and weighted-average fair value of these
awards were $3.36 and $17.88, respectively.
The weighted-average fair value of stock purchase rights during 1999, 1998 and
1997 was $4.77 per share, $6.21 per share and $8.42 per share, respectively.
Note 11: Other Employee Benefit Plans
Profit Sharing Program. The Company had a profit sharing program to which the
Board of Directors authorized semiannual contributions. Effective January 2000,
profit sharing is based on the Company's quarterly results, instead of semi-
annual results, and payable quarterly to eligible employees. There were no
profit sharing contributions in 1999. Profit sharing contributions were
approximately $5 million in 1998 and $4 million in 1997.
39
<PAGE>
Retirement Savings Plan. The Company has a retirement savings plan, commonly
known as a 401(k) plan, that allows participating United States employees to
contribute from one percent to 15 percent of their pretax salary subject to
I.R.S. limits. Before December 26, 1999, the Company made a matching
contribution calculated at 50 cents on each dollar of the first three percent of
participant contributions, to a maximum of 1.5 percent of eligible compensation.
After December 26, 1999, the Company revised the contribution rate and
contributes 50 cents on each dollar of the first six percent of participants'
contributions, to a maximum of three percent of eligible compensation. The
contributions to the 401(k) plan were approximately $5 million in 1999 and $5
million in both 1998 and 1997.
Note 12: Commitments
The Company leases certain of its facilities under agreements which expire at
various dates through 2018. The Company also leases certain of its manufacturing
and office equipment for terms ranging from one to five years. Rent expense was
approximately $52 million, $54 million and $48 million in 1999, 1998 and 1997,
respectively.
For each of the next five years and beyond, noncancelable long-term operating
lease obligations and commitments to purchase manufacturing supplies and
services are as follows:
<TABLE>
<CAPTION>
Operating Purchase
(Thousands) leases commitments
- ------------------------------------------------------------------------------
<S> <C> <C>
2000 $ 43,462 $ 50,579
2001 34,267 38,938
2002 32,395 11,226
2003 26,821 5,245
2004 25,075 5,091
Beyond 2004 198,467 14,843
- ------------------------------------------------------------------------------
$360,487 $125,922
- ------------------------------------------------------------------------------
</TABLE>
The operating lease of the Company's corporate marketing, general and
administrative facility expired in December 1998. At the end of the lease term,
the Company was obligated to either purchase the facility or to arrange for its
sale to a third party with a guarantee of residual value to the seller equal to
the option purchase price. In December 1998, the Company arranged for the sale
of the facility to a third party and leased it back under a new operating lease.
The Company has deferred the gain and is amortizing it over a period of 20
years, the life of the lease. The lease expires in December 2018. At the
beginning of the fourth lease year and every three years thereafter, the rent
will be adjusted by 200% of the cumulative increase in the consumer price index
over the prior three-year period.
In addition to the purchase commitments above, the Company had commitments of
approximately $2.6 million for the construction or acquisition of additional
property, plant and equipment as of December 26, 1999.
AMD Saxony has constructed and is installing equipment in Dresden Fab 30. AMD,
the Federal Republic of Germany, the State of Saxony and a consortium of banks
are supporting the project. In March 1997, AMD Saxony entered into the Dresden
Loan Agreements which provide for the funding of the construction and
facilitization of Dresden Fab 30. The funding consists of:
. equity, subordinated loans and loan guarantees from AMD;
. loans from a consortium of banks; and
. grants, subsidies and loan guarantees from the Federal Republic of Germany
and the State of Saxony.
The Dresden Loan Agreements, which were amended in February 1998 to reflect
upgrades in wafer production technology as well as the decline in the deutsche
mark relative to the U.S. dollar, require that the Company partially fund
Dresden Fab 30 project costs in the form of subordinated loans to, or equity
investments in, AMD Saxony. In accordance with the terms of the Dresden Loan
Agreements, the Company has invested $421 million as of December 26, 1999 in the
form of subordinated loans and equity in AMD Saxony (denominated in both
deutsche marks and U.S. dollars).
In addition to AMD's support, the consortium of banks referred to above has
made available $850 million in loans (denominated in deutsche marks) to AMD
Saxony to help fund Dresden Fab 30 project costs. AMD Saxony had $270 million of
such loans outstanding as of December 26, 1999.
Finally, the Federal Republic of Germany and the State of Saxony are
supporting the Dresden Fab 30 project, in accordance with the Dresden Loan
Agreements, in the form of:
. guarantees of 65 percent of AMD Saxony bank debt up to a maximum amount of
$850 million;
. capital investment grants and allowances totaling $287 million; and
. interest subsidies totaling $156 million.
40
<PAGE>
Of these amounts (which are all denominated in deutsche marks), AMD Saxony has
received $275 million in capital investment grants and $23 million in interest
subsidies as of December 26, 1999.
The Dresden Loan Agreements also require that the Company:
. provide interim funding to AMD Saxony if either the remaining capital
investment allowances or the remaining interest subsidies are delayed, which
will be repaid to AMD as AMD Saxony receives the grants or subsidies from the
State of Saxony;
. fund shortfalls in government subsidies resulting from any default under the
subsidy agreements caused by AMD Saxony or its affiliates;
. guarantee a portion of AMD Saxony's obligations under the Dresden Loan
Agreement up to a maximum of $112 million (denominated in deutsche marks) until
Dresden Fab 30 has been completed;
. fund certain contingent obligations including various obligations to fund
project cost overruns, if any; and
. make funds available to AMD Saxony, after completion of Dresden Fab 30, up
to approximately $75 million (denominated in deutsche marks) if AMD Saxony does
not meet its fixed charge coverage ratio covenant.
Because the amounts under the Dresden Loan Agreements are denominated in
deutsche marks, the dollar amounts set forth herein are subject to change based
on applicable conversion rates. At the end of 1999, the exchange rate was
approximately 1.94 deutsche marks to 1 U.S. dollar (which the Company used to
calculate the amounts denominated in deutsche marks).
In December 1995, the Company signed a five-year, comprehensive cross-license
agreement with Intel. The cross-license is royalty-bearing for the Company's
products that use certain Intel technologies. The Company is required to pay
Intel minimum nonrefundable royalties through 2000.
Note 13: Investment in Joint Venture
In 1993, the Company formed a joint venture (FASL) with Fujitsu Limited for the
development and manufacture of non-volatile memory devices. FASL operates
advanced IC manufacturing facilities in Aizu-Wakamatsu, Japan, to produce Flash
memory devices. The Company's share of FASL is 49.992 percent and the investment
is being accounted for under the equity method. The Company's share of FASL net
income during 1999 was $5 million, net of income taxes of approximately $3
million. As of December 26, 1999, the cumulative adjustment related to the
translation of the FASL financial statements into U.S. dollars resulted in an
increase of approximately $7 million to the investment in FASL. The following
tables present the significant FASL related party transactions and balances:
<TABLE>
<CAPTION>
Three years ended December 26, 1999 (Thousands) 1999 1998 1997
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Royalty income $ 23,214 $ 21,136 $ 19,322
Purchases 264,344 211,640 242,161
- --------------------------------------------------------------------------------------
December 26, 1999 and December 27, 1998 (Thousands) 1999 1998
- --------------------------------------------------------------------------------------
Royalty receivable $ 6,601 $ 6,027
Accounts payable 35,701 39,424
- --------------------------------------------------------------------------------------
</TABLE>
Pursuant to a cross-equity provision between the Company and Fujitsu, the
Company purchased and owned 0.5 million shares of Fujitsu Limited common stock
as of December 26, 1999. Under the same provision, Fujitsu Limited purchased 4.5
million shares of the Company's common stock, of which 0.5 million shares were
purchased in 1999.
In the third quarter of 1997, FASL completed construction of the building for
a second Flash memory device wafer fabrication facility, FASL II, at a site
contiguous to the existing FASL facility in Aizu-Wakamatsu, Japan. Equipment
installation is in progress and the facility is expected to cost approximately
$1 billion (denominated in yen) when fully equipped. Capital expenditures for
FASL II construction to date have been funded by cash generated from FASL
operations and local borrowings by FASL. To the extent that FASL is unable to
secure the necessary funds for FASL II, the Company may be required to
contribute cash or guarantee third-party loans in proportion to our 49.992
percent interest in FASL. As of December 26, 1999, the Company had loan
guarantees of $2 million (denominated in yen) outstanding with respect to such
loans. At the end of 1999, the exchange rate was approximately 103.51 yen to 1
U.S. dollar (which was used to calculated the amounts denominated in yen).
The following is condensed financial data of FASL:
41
<PAGE>
<TABLE>
<CAPTION>
Three years ended December 26, 1999 (Thousands) 1999 1998 1997
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $501,797 $427,140 $423,251
Gross profit 20,415 25,432 105,691
Operating income 17,724 20,758 94,863
Net income 9,977 13,104 46,000
- ------------------------------------------------------------------------------------
December 26, 1999 and December 27, 1998 (Thousands) 1999 1998
- ------------------------------------------------------------------------------------
Current assets $166,391 $118,140
Non-current assets 594,031 640,040
Current liabilities 206,532 278,309
Non-current liabilities 1,488 1,774
- ------------------------------------------------------------------------------------
</TABLE>
The Company's share of the above FASL net income differs from the equity in net
income of joint venture reported on the consolidated statements of operations.
The difference is due to adjustments resulting from the related party
relationship between FASL and the Company which are reflected on the Company's
consolidated statements of operations.
Note 14: Restructuring and Other Special Charges
In 1999, restructuring and other special charges were $38 million. These charges
were the result of the Company's efforts to better align its cost structure with
the expected revenue growth rates. The restructuring efforts resulted in non-
cash charges for the following:
. closure of a submicron development laboratory facility in the SDC;
. write-off of equipment in the Submicron Development Center (SDC);
. write-off of equipment taken out of service in Fab 25, our integrated
circuit (IC) manufacturing facility located in Austin, Texas, related to the
0.35-micron wafer fabrication process; and write-off of capitalized costs
related to discontinued system projects.
Cash charges consisted of:
. severance and employee benefits for 178 terminated employees in the
Information Technology department, the SDC and certain sales offices;
. costs for leases of vacated and unused sales offices; and
. costs for the disposal of equipment taken out of service in the SDC.
The restructuring and other special charges for the year ended December 26,
1999 are reflected in the table below.
The Company anticipates that the accruals for sales office facilities will be
utilized over the period through lease termination in the second quarter of
2002. The remaining accruals for the disposal costs for equipment that have been
taken out of service will be fully discharged by the end of the first quarter of
2000.
<TABLE>
<CAPTION>
Severance and Equipment Discontinued
(Thousands) employee benefits Facilities Equipment disposal costs system projects Total
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Q1 99 charges $ 779 $ -- $ 8,148 $ -- $ 6,089 $ 15,016
Non-cash charges -- -- (8,148) -- (6,089) (14,237)
- ----------------------------------------------------------------------------------------------------------------------------
Accruals at March 28, 1999 779 -- -- -- -- 779
Q2 99 charges 2,245 968 10,801 3,500 -- 17,514
Cash charges (1,360) -- -- -- -- (1,360)
Non-cash charges -- -- (10,801) -- -- (10,801)
- ----------------------------------------------------------------------------------------------------------------------------
Accruals at June 27, 1999 1,664 968 -- 3,500 -- 6,132
Cash charges (1,664) (35) -- (1,067) -- (2,766)
- ----------------------------------------------------------------------------------------------------------------------------
Accruals at September 26, 1999 -- 933 -- 2,433 -- 3,366
Q4 99 charges -- -- 4,820 880 -- 5,700
Cash charges -- (21) -- (870) -- (891)
Non-cash charges -- -- (4,820) -- -- (4,820)
- ----------------------------------------------------------------------------------------------------------------------------
Accruals at December 26, 1999 $ -- $912 $ -- $ 2,443 $ -- $ 3,355
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
42
<PAGE>
Note 15: Contingencies
I. Litigation
Ellis Investment Co., Ltd., et al v. AMD, et al. Between March 10, 1999 and
April 22, 1999, AMD and certain individual officers of AMD were named as
defendants in a number of lawsuits that have been consolidated under Ellis
Investment Co., Ltd., et al v. Advanced Micro Devices, Inc., et al. The class
action complaints allege various violations of Section 10(b) of the Exchange Act
and Rule 10b-5 promulgated thereunder. Most of the complaints purportedly were
filed on behalf of all persons, other than the defendants, who purchased or
otherwise acquired common stock of AMD during the period from October 6, 1998 to
March 8, 1999. Two of the complaints allege a class period from July 13, 1998 to
March 9, 1999. All of the complaints allege that materially misleading
statements and/or material omissions were made by AMD and certain individual
officers of AMD concerning design and production problems relating to high-speed
versions of the AMD-K6-2 and AMD-K6-III microprocessors. Based upon information
presently known to management, the Company does not believe that the ultimate
resolution of these lawsuits will have a material adverse effect on the
Company's financial condition.
II. Environmental Matters
Clean-up Orders. Since 1981, the Company has discovered, investigated and begun
remediation of three sites where releases from underground chemical tanks at our
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 the Company no longer uses) has been
identified as a probable carcinogen.
In 1991, the Company received four Final Site Clean-up Requirements Orders
from the California Regional Water Quality Control Board, San Francisco Bay
Region, relating to the three sites. One of the orders named us as well as TRW
Microwave, Inc. and Philips Semiconductors Corporation. In January 1999, the
Company entered into a settlement agreement with Philips whereby Philips will
assume costs allocated to us under this order, although the Company would be
responsible for these costs in the event that Philips does not fulfill its
obligations under the settlement agreement. Another of the orders named AMD as
well as National Semiconductor Corporation.
The three sites in Santa Clara County are on the National Priorities List
(Superfund). If the Company fails to satisfy federal compliance requirements or
inadequately performs the compliance measures, the government (1) can bring an
action to enforce compliance or (2) 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. The statute
of limitations has been tolled on the claims of landowners adjacent to the Santa
Clara County Superfund sites for causes of action such as negligence, nuisance
and trespass.
The Company 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 cleanup. The
amount of environmental charges to earnings has not been material during any of
the last three fiscal years. The Company believes that the potential liability,
if any, in excess of amounts already accrued with respect to the foregoing
environmental matters will not have a material adverse effect on the Company's
financial condition or results of operations.
The Company received a notice dated October 14, 1998 from the Environmental
Protection Agency (EPA) indicating that the EPA has determined AMD to be a
potentially responsible party that arranged for disposal of hazardous substances
at a site located in Santa Barbara County, California. The Company is currently
in settlement discussions with the EPA and believes that any settlement will not
have a material adverse effect on the Company's financial condition or results
of operations.
III. Other Matters
The Company is a defendant or plaintiff in various other actions which arose in
the normal course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's financial condition or results of operations.
43
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Advanced Micro Devices, Inc.
We have audited the accompanying consolidated balance sheets of Advanced Micro
Devices, Inc. as of December 26, 1999 and December 27, 1998, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the three years in the period ended December 26, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatements. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Advanced Micro
Devices, Inc. at December 26, 1999 and December 27, 1998, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 26, 1999, in conformity with accounting principles
generally accepted in the United States.
/s/ Ernst & Young LLP
San Jose, California
January 14, 2000
44
<PAGE>
SUPPLEMENTARY FINANCIAL DATA
<TABLE>
<CAPTION>
1999 and 1998 by Quarter (Unaudited)
(Thousands except per share and market price amounts) 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------------
Dec. 26 Sept. 26 June 27 Mar. 28 Dec. 27 Sept. 27 June 28 Mar. 29
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
Net sales $968,710 $ 662,192 $ 595,109 $ 631,593 $788,820 $685,927 $ 526,538 $ 540,856
Expenses:
Cost of sales 581,545 474,119 458,339 450,431 481,987 422,985 390,140 423,591
Research and development 150,936 157,626 167,278 159,946 156,459 143,665 139,158 128,120
Marketing, general and
administrative 158,803 129,437 124,520 127,310 120,498 109,768 101,198 88,214
Restructuring and other
special charges 5,700 -- 17,514 15,016 -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
896,984 761,182 767,651 752,703 758,944 676,418 630,496 639,925
- ---------------------------------------------------------------------------------------------------------------------------------
Operating income (loss) 71,726 (98,990) (172,542) (121,110) 29,876 9,509 (103,958) (99,069)
Gain on sale of Vantis -- -- 432,059 -- -- -- -- --
Litigation settlement -- -- -- -- -- -- -- (11,500)
Interest income and other, net 6,958 6,757 7,252 10,768 10,037 10,071 8,518 5,581
Interest expense (12,370) (18,033) (18,087) (20,763) (15,177) (21,182) (17,663) (12,472)
- ---------------------------------------------------------------------------------------------------------------------------------
Income (loss) before
income taxes and
equity in joint venture 66,314 (110,266) 248,682 (131,105) 24,736 (1,602) (113,103) (117,460)
Provision (benefit) for
income taxes -- -- 172,823 (5,473) (136) (635) (44,110) (46,997)
- ---------------------------------------------------------------------------------------------------------------------------------
Income (loss) before equity
in joint venture 66,314 (110,266) 75,859 (125,632) 24,872 (967) (68,993) (70,463)
Equity in net income (loss)
of joint venture (1,234) 4,721 4,037 (2,735) (2,551) 1,973 4,433 7,736
- ---------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 65,080 $(105,545) $ 79,896 $(128,367) $ 22,321 $ 1,006 $ (64,560) $ (62,727)
=================================================================================================================================
Net income (loss) per share:
Basic $ 0.44 $ (0.72) $ 0.54 $ (0.88) $ 0.15 $ 0.01 $ (0.45) $ (0.44)
- ---------------------------------------------------------------------------------------------------------------------------------
Diluted $ 0.43 $ (0.72) $ 0.53 $ (0.88) $ 0.15 $ 0.01 $ (0.45) $ (0.44)
- ---------------------------------------------------------------------------------------------------------------------------------
Shares used in per share
calculation:
Basic 148,029 147,388 146,947 145,909 144,926 143,915 143,462 142,503
- ---------------------------------------------------------------------------------------------------------------------------------
Diluted 152,750 147,388 149,540 145,909 149,949 146,642 143,462 142,503
- ---------------------------------------------------------------------------------------------------------------------------------
Common stock market price
range:
High $ 31.75 $ 23.25 $ 21.63 $ 31.88 $ 32.00 $ 20.94 $ 30.50 $ 25.13
Low $ 16.44 $ 16.13 $ 14.75 $ 15.69 $ 14.00 $ 13.00 $ 16.88 $ 17.13
=================================================================================================================================
</TABLE>
45
<PAGE>
Financial summary
<TABLE>
<CAPTION>
Five Years Ended December 26, 1999
(Thousands except per share amounts) 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $2,857,604 $2,542,141 $2,356,375 $1,953,019 $2,468,379
Expenses:
Cost of sales 1,964,434 1,718,703 1,578,438 1,440,828 1,417,007
Research and development 635,786 567,402 467,877 400,703 416,521
Marketing, general and administrative 540,070 419,678 400,713 364,798 412,651
Restructuring and other special charges 38,230 -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------
3,178,520 2,705,783 2,447,028 2,206,329 2,246,179
- ---------------------------------------------------------------------------------------------------------------------
Operating income (loss) (320,916) (163,642) (90,653) (253,310) 222,200
Gain on sale of Vantis 432,059 -- -- -- --
Litigation settlement -- (11,500) -- -- --
Interest income and other, net 31,735 34,207 35,097 59,391 32,465
Interest expense (69,253) (66,494) (45,276) (14,837) (3,059)
- ---------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes
and equity in joint venture 73,625 (207,429) (100,832) (208,756) 251,606
Provision (benefit) for income taxes 167,350 (91,878) (55,155) (85,008) 70,206
- ---------------------------------------------------------------------------------------------------------------------
Income (loss) before equity in joint venture (93,725) (115,551) (45,677) (123,748) 181,400
Equity in net income of joint venture 4,789 11,591 24,587 54,798 34,926
- ---------------------------------------------------------------------------------------------------------------------
Net income (loss) (88,936) (103,960) (21,090) (68,950) 216,326
Preferred stock dividends -- -- -- -- 10
Net income (loss) applicable to common stockholders $ (88,936) $ (103,960) $ (21,090) $ (68,950) $ 216,316
=====================================================================================================================
Net income (loss) per common share:
Basic $ (0.60) $ (0.72) $ (0.15) $ (0.51) $ 1.69
=====================================================================================================================
Diluted $ (0.60) $ (0.72) $ (0.15) $ (0.51) $ 1.57
=====================================================================================================================
Shares used in per share calculation:
Basic 147,068 143,668 140,453 135,126 127,680
=====================================================================================================================
Diluted 147,068 143,668 140,453 135,126 137,698
=====================================================================================================================
Long-term debt, capital lease obligations
and other, less current portion $1,427,282 $1,372,416 $ 662,689 $ 444,830 $ 214,965
Total assets $4,377,698 $4,252,968 $3,515,271 $3,145,283 $3,078,467
=====================================================================================================================
</TABLE>
The Company's common stock (symbol AMD) is listed on the New York Stock
Exchange. The Company has never paid cash dividends on common stock and is
restricted from doing so. Refer to the notes to consolidated financial
statements. The number of stockholders of record at January 31, 2000 was 8,739.
AMD, the AMD logo, and combinations thereof, Advanced Micro Devices, K86, AMD-
K6, AMD Athlon and 3DNow! are either trademarks or registered trademarks of
Advanced Micro Devices, Inc. Vantis is a trademark of Vantis Corporation.
Microsoft and Windows are registered trademarks of Microsoft Corporation.
Pentium is a registered trademark and Celeron is a trademark of Intel
Corporation. Other terms used to identify companies and products may be
trademarks of their respective owners.
46
<PAGE>
EXHIBIT 21
ADVANCED MICRO DEVICES, INC.
LIST OF SUBSIDIARIES
Name of Subsidiary State or Jurisdiction in Which
- ------------------ Incorporated or Organized
-------------------------
Domestic Subsidiaries
- ---------------------
Advanced Micro Ltd. California
AMD Corporation California
AMD Far East Ltd. Delaware
AMD International Sales and Service, Ltd. Delaware
AMD Texas Properties, LLC Delaware
Foreign Subsidiaries
- --------------------
Advanced Micro Devices S.A.N.V. Belgium
AMD South America Limitada (1) Brazil
Advanced Micro Devices (Canada) Limited Canada
Advanced Micro Devices (Suzhou) Limited (2) China
Advanced Micro Devices S.A. France
Advanced Micro Devices GmbH Germany
AMD Saxony Holding GmbH Germany
AMD Saxony Manufacturing GmbH (3) Germany
AMD Foreign Sales Corporation Guam
Advanced Micro Devices S.p.A. Italy
AMD Japan Ltd. Japan
Advanced Micro Devices Sdn. Bhd. Malaysia
Advanced Micro Devices Export Sdn. Bhd. (4) Malaysia
Advanced Micro Devices Services Sdn. Bhd. Malaysia
AMD (Netherlands) B.V. (5) Netherlands
Advanced Micro Devices (Singapore) Pte. Ltd. Singapore
AMD Holdings (Singapore) Pte. Ltd. (6) Singapore
Advanced Micro Devices AB Sweden
Advanced Micro Devices S.A. (7) Switzerland
AMD (Thailand) Limited (6) Thailand
Advanced Micro Devices (U.K.) Limited United Kingdom
- ------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
(1) Subsidiary of AMD International Sales and Service, Ltd. and AMD Far East Ltd.
(2) Subsidiary of AMD Holdings (Singapore) Pte. Ltd.
(3) Subsidiary of AMD Saxony Holding GmbH
(4) Subsidiary of Advanced Micro Devices Sdn. Bhd.
(5) Subsidiary of Advanced Micro Devices Export Sdn. Bhd.
(6) Subsidiary of Advanced Micro Devices (Singapore) Pte. Ltd.
(7) Subsidiary of AMD International Sales and Service, Ltd.
</TABLE>
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints W. J. Sanders III and Francis P. Barton, and each
of them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign Advanced Micro Devices, Inc.'s Annual Report on
Form 10-K for the fiscal year ended December 26, 1999, and any and all
amendments thereto, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
<TABLE>
<CAPTION>
<S> <C> <C>
Signature Title Date
- ----------------------------------- -------------------------------------------------- --------------------
/s/ W. J. Sanders III Chairman of the Board and Chief
- ----------------------------------- Executive Officer 2/25/00
W. J. Sanders III
/s/ Francis P. Barton Senior Vice President, Chief Financial
- ----------------------------------- Officer (Principal Financial Officer)
Francis P. Barton
/s/ Friedrich Baur Director 2/28/00
- -----------------------------------
Friedrich Baur
/s/ Charles M. Blalack Director 2/25/00
- -----------------------------------
Charles M. Blalack
/s/ R. Gene Brown Director 2/23/00
- -----------------------------------
R. Gene Brown
/s/ Robert Palmer Director 2/29/00
- -----------------------------------
Robert Palmer
/s/ Richard Previte Director, Vice Chairman 3/1/00
- -----------------------------------
Richard Previte
/s/ Joe L. Roby Director 3/1/00
- -----------------------------------
Joe L. Roby
/s/ Hector de J. Ruiz Director, 2/24/00
- ----------------------------------- President and Chief Operating Officer
Hector de J. Ruiz
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS FINANCIAL INFORMATION EXTRACTED FROM 1999 ANNUAL REPORT
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-26-1999
<PERIOD-START> DEC-28-1998
<PERIOD-END> DEC-26-1999
<CASH> 294,125
<SECURITIES> 302,386
<RECEIVABLES> 445,187
<ALLOWANCES> 15,378
<INVENTORY> 198,213
<CURRENT-ASSETS> 1,409,878
<PP&E> 4,938,302
<DEPRECIATION> (2,415,066)
<TOTAL-ASSETS> 4,377,698
<CURRENT-LIABILITIES> 910,652
<BONDS> 0
0
0
<COMMON> 1,496
<OTHER-SE> 1,977,777
<TOTAL-LIABILITY-AND-EQUITY> 4,377,698
<SALES> 2,814,604
<TOTAL-REVENUES> 2,857,604
<CGS> 1,964,434
<TOTAL-COSTS> 1,964,434
<OTHER-EXPENSES> 674,016
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 69,253
<INCOME-PRETAX> 73,625
<INCOME-TAX> 167,350
<INCOME-CONTINUING> (88,936)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (88,936)
<EPS-BASIC> (0.60)
<EPS-DILUTED> (0.60)
</TABLE>
