AMD 1997 Annual Report Download - page 47

CHAIRMAN'S EMPLOYMENT AGREEMENT
In 1996, the Company entered into an amended and restated employment
agreement with Mr. Sanders, the term of which is September 1, 1996 through
December 31, 2003 (the Agreement). The Agreement provides for annual base
compensation to Mr. Sanders of no less than $1,000,000 through 2001, $500,000
in 2002 and $350,000 in 2003. Base compensation for periods prior to 2003 will
be adjusted for cost of living increases. Cost of living adjustments for
periods prior to 2002 will be deferred (with interest) until a deduction for
federal income tax purposes will be allowed for their payment or March 31,
2004, if earlier.
Incentive compensation takes the form of an annual incentive bonus and stock
options. The annual incentive bonus equals 0.6 percent of the adjusted
operating profits of the Company for each respective fiscal year through 2001
in excess of twenty percent (20 percent) of adjusted operating profits for the
immediately preceding fiscal year. Under the Agreement, the annual bonus
payment may not exceed $5,000,000. Any excess amount of an annual incentive
bonus over $5,000,000 (the Unpaid Contingent Bonus) will be added to the bonus
determined for each specified future period (subject to the $5,000,000 limit
in each of those years). "Adjusted operating profits" for these purposes
constitute the Company's operating income as reported on the Company's
financial statements, adjusted for any pretax gain or loss from certain joint
ventures and increased by any expenses accrued for profit sharing plan
contributions and Executive Bonus Plan bonuses. Mr. Sanders is also eligible
to receive a discretionary bonus, in an amount determined by the Compensation
Committee of the Board, based on the Committee's assessment of his
performance.
In 1996, Mr. Sanders received an option grant for 2,500,000 shares under the
Agreement. The Compensation Committee expects that no further stock option
awards will be granted to Mr. Sanders over the term of the Agreement, except
in unusual circumstances. Options for 1,250,000 shares are performance- and
time-based. The performance element of the options provides for a scheduled
accelerated vesting should the Company's average stock price attain or exceed
certain milestones for a rolling three month period. The milestone stock
prices are $26.00, $31.00, $37.50, $45.00 and $54.00 per share for 1997
through 2001, respectively. If the highest milestone applicable to a year is
met, options for 250,000 shares applicable to that year will vest. (Achieving
lower stock price milestones results in the acceleration of lesser percentages
of the stock.) Performance-accelerated vesting will occur early if the
performance milestones for a later year are attained in an earlier year.
If the performance-based options do not vest on an accelerated basis, they
will vest on a time-based schedule provided that Mr. Sanders is employed on
the applicable vesting date. They vest at the rate of 0 percent in 1997 and
1998, 10 percent (125,000 shares) on November 15, 1999, 15 percent (187,500)
on November 15, 2000, 20 percent (250,000 shares) on November 15, 2001, 20
percent (250,000 shares) on November 15, 2002 and 35 percent (437,500 shares)
on November 15, 2003, if Mr. Sanders is employed on those dates. Options to
purchase the remaining 1,250,000 shares vest on a time-based schedule at the
rate of 325,000 shares per year on November 15, 1997 and 1998, and 200,000
shares per year on November 15, 1999, 2000 and 2001, if Mr. Sanders is
employed on the applicable vesting date. Vested 1996 options may be exercised
after termination of employment no later than: five years after retirement as
Chief Executive Officer; three years after death or disability; one year after
a voluntary resignation of employment other than for defined reasons; thirty
days after a termination by the Company "for cause"; and, with respect to any
other termination of employment, two years after such termination in the case
of options that vested prior to termination of employment and one year after
the later of termination of service or the vesting date in the case of options
that vest only upon or following termination of employment. All of the 1996
options will expire on September 29, 2006, if not earlier exercised or
terminated.
If the Company terminates Mr. Sanders' employment other than "for cause" or
constructively terminates Mr. Sanders' employment (including re-assigning him
to lesser duties, reducing or limiting his compensation or benefits, removing
him from his responsibilities other than for good cause, requiring him to
relocate or transfer his principal place of residence, or not electing or
retaining him as Chairman and Chief Executive Officer of the Company), the
Company is obligated to pay Mr. Sanders his annual base salary through the
later to occur of December 31, 2002 or one year from the date of termination
of employment. In such circumstances, the Company is obligated to pay Mr.
Sanders' incentive compensation for the fiscal year during which such
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Source: ADVANCED MICRO DEVIC, 10-K405, March 03, 1998