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EXHIBIT 10.31
SPLIT-DOLLAR LIFE INSURANCE AGREEMENT
This Agreement is entered into as of __________, 19__ by
and between Advanced Micro Devices, Inc. (the "Company") and
_______________________ ("Employee") in reference to the following facts:
1. Employee is a valued employee of __________
_______________________.
2. The Company has simultaneously with the
execution of this Agreement caused Manufacturer's Life Insurance Company (the
"Insurance Company") to issue policy number ___________________ (the "Policy")
on the life of Employee. Employee is the owner of the Policy. The first
three-month premium has been paid by the Company as of the date of this
Agreement.
3. For purposes of this Agreement, the Company
and its subsidiaries shall constitute the "Employer." For this purpose, a
subsidiary is a corporation of which the Company owns, directly or indirectly,
more than 50% of such corporation's outstanding securities. If Employee is
employed by a corporation which, as a result of a sale or other corporate
reorganization, ceases to be a subsidiary, such sale or other corporate
reorganization shall be treated as a termination of Employee by Employer
without Cause (as defined in Section 8) unless immediately following the event
and without any break in employment the Employee remains employed by the
Company or another corporation which is a subsidiary.
NOW THEREFORE, in consideration of the facts set forth
above and the various promises and covenants set forth below, the parties to
this Agreement agree as follows:
1. Ownership of Policy.
The Company acknowledges that Employee is the owner of the Policy and
that Employee is entitled to exercise all of his or her ownership rights
granted by the terms of the Policy, except to the extent that the power of the
Employee to exercise those rights is specifically limited by this Agreement.
Except as so limited, it is the expressed intention of the parties to reserve
to Employee all rights in and to the Policy granted to its owner by the terms
thereof, including, but not limited to, the right to change the beneficiary of
that portion of the proceeds to which the Employee is entitled under Section 4
of the Agreement and the right to exercise settlement options.
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2. The Company's Security Interest.
The Company's security interest in the Policy is conditioned upon its
satisfactorily performing all of the covenants under this Agreement. Each
period covered by any individual premium payment described in Section 3 shall
be considered a discrete extension of the Company's security interest in the
Policy. The Company shall not have nor exercise any right in and to the Policy
which could, in any way, endanger, defeat, or impair any of the rights of
Employee in the Policy, including by way of illustration any right to collect
the proceeds of the Policy in excess of the amount due the Company as provided
in this Agreement and in the Policy. The only rights in and to the Policy
granted to the Company in this Agreement shall be limited to the Company's
security interest in and to the cash value of the Policy, as defined herein,
and a portion of the death benefit of the Policy as hereinafter provided (the
"Security Interest"). The Company shall not assign any of its Security
Interest in the Policy to anyone other than Employee.
3. Premium payments.
So long as Employee is employed by the Employer and the Company's
Security Interest has not been released, the Company agrees to pay premiums
under the Policy in an amount such that cumulative premiums (not counting the
initial three months' premiums) received by the first of each month are at
least equal to the cumulative "cost of term insurance" (as defined under the
Policy) from the first anniversary through the end of the third month of
coverage provided by the initial three months' premium. The premium payment
shall be transmitted directly by the Company to the Insurance Company.
Consistent with the preceding sentences, prior to the release of the Company's
Security Interest in the Policy, Employee and the Company agree that the
Company shall from time to time designate one or more individuals (the
"Designee"), who may be officers of the Company, who shall be entitled to
adjust the death benefit under the Policy and to administer the investments
under the Policy; provided, however, that the Designee may only increase, but
not decrease, the death benefit in effect on the date that the Policy is
issued; provided further, that the Designee may only direct the investments
under the Policies in funds offered by the Insurance Company under the Policy.
During the period of time that this Agreement is in effect, Employee
irrevocably agrees that all dividends paid on the Policy shall be applied to
purchase from the Insurance Company additional paid up life insurance on the
life of Employee.
4. Death of Employee while employed by Employer.
(a) If Employee dies prior to termination of employment with
Employer and prior to his or her Security Release Date (as defined in Section
10 below), Employee's designated beneficiary
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shall be entitled to receive as a death benefit an amount equal to three times
the Employee's annual base salary at the time of death, subject to a maximum
benefit of the lesser of (i) two million dollars ($2,000,000), or (ii) the
amount of insurance approved by Insurance Company. The amount described in the
preceding sentence shall be paid from the proceeds of the Policy; to the extent
such amount exceeds such proceeds, the difference shall be paid from any other
source that the Company may designate, which may be either another life
insurance policy on the life of Employee or the general assets of the Company.
To the extent that the death benefit under the Policy exceeds such amount, the
balance of the death benefit shall be payable to the Company. The designation
of the beneficiaries under the Policy shall be in accordance with this Section.
(b) Employee agrees that, during the period of this
Agreement, Employee will obtain and provide to the Company and/or the Insurance
Company the written consent of the spouse of the Employee, in the form attached
hereto as Exhibit C, to any designation by Employee of anyone other than the
Employee's spouse as the beneficiary to receive the benefits under this Section
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5. Employee's attaining his or her Security Release Date or termination
of Employee's employment on account of a Qualifying Termination.
(a) By making timely payment of the premiums described in
Section 3, the Company may renew its Security Interest in the Policy for the
period commencing with the due date of such payment until the later of (1) the
due date of the next payment described in Section 3, or (2) the date that
Employee attains his or her Security Release Date or terminates employment with
the Employer on account of a Qualifying Termination (either of which events
described in this clause 2 is referred to herein as a "Qualifying Event"). The
Company may not extend its Security Interest in the Policy under the Collateral
Security Assignment Agreement attached as Exhibit A after the occurrence of a
Qualifying Event. After such Qualifying Event, Employee shall be entitled to
exercise all of his or her ownership rights in the Policy without any
limitation and this Agreement and its accompanying Collateral Security
Assignment Agreement shall no longer constitute a restriction on Employee's
rights.
(b) Notwithstanding paragraph (a), the Company shall continue to
have its Security Interest in the Policy, to the extent required to satisfy its
withholding obligations as described in Section 12 and to recover any amounts
owed by Employee as described in paragraph (c) below.
(c) Employee agrees that if, at the time of the occurrence of
a Qualifying Event, Employee has any outstanding balances on any loans made by
the Company to Employee, then, unless Employee
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otherwise pays such outstanding balances, Employee shall cause, either by
withdrawing from or borrowing on a non-recourse basis against the Policy, to be
transferred to the Company, that portion of the cash value of the Policy which
is equal to the sum of the outstanding balances on all such loans.
6. Termination of an Employee for a reason other than a Qualifying
Termination.
If the employment of Employee with Employer is terminated prior to
his or her Security Release Date for a reason other than a Qualifying
Termination (as described below), Employee shall cause, either by withdrawing
from or borrowing against the Policy, on a nonrecourse basis, to be transferred
to the Company an amount equal to the maximum amount that may then be obtained
under the Policy; provided that, the amount to be transferred to the Company
shall be reduced to the extent the Employee has previously transferred to the
Company an amount equal to any difference that then exists between the cash
value of the Policy and the amount that may be borrowed against the Policy. In
no event shall Employee's voluntary resignation prior to attaining his or her
Security Release Date (as such concept is further defined below) ever
constitute a Qualifying Termination, except in certain situations following a
Change in Control (see Section 9).
7. Definition of a Qualifying Termination.
A Qualifying Termination is either of the following events: the
termination of Employee by Employer for any reason other than "Cause," as
described in Section 8; or the termination of Employee after a Change in
Control under the circumstances described in Section 9(a). Both of these
concepts are further defined below.
8. Qualifying Termination because Employee is terminated for a reason
other than "Cause".
For purposes of this Section, "Cause" shall mean (1) an act or acts
of dishonesty or moral turpitude (including but not limited to conviction of a
felony) taken by Employee which materially injures or damages the Employer;
(2) Employee's willful failure to substantially perform Employee's duties where
such willful failure results in demonstrable material injury and damage to the
Employer; (3) Employee's misrepresentation or concealment of a material fact
for the purpose of securing employment with the Employer; or (4) performance by
Employee which is substantially below the standard of performance which can
reasonably be expected from an individual occupying Employee's position or
Employee's substantially failing to meet performance objectives (such as
performance objectives relating to profit) which have been previously agreed to
between Employee and Employer.
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9. Qualifying Termination on account of a Change in Control.
(a) A Qualifying Termination shall be treated as occurring on
account of a "Change in Control" (as defined below) if within six (6) months
prior to or 36 months following such Change in Control, either (1) Employee's
employment with the Employer is terminated without "Cause" (as defined in
Section 8) or (2) Employee terminates his or her employment with the Employer
for "Good Reason" (as defined in subsection (c) below).
(b) For purposes of this Section, a "Change in Control" shall mean a
change of control of a nature that would be required to be reported in response
to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities
and Exchange Act of 1934, as amended (the "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 20% 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 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. Not-withstanding the foregoing definition, "Change of
Control" shall exclude the acquisition of securities representing more than 20%
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.
(c) For purposes of this Section, "Good Reason" shall mean the
occurrence of one of the following events without Employee's consent:
(1) An adverse and significant change in the
Employee's position, duties,
responsibilities, or status with the
Employer, or a change in
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Employee's office location to a point which
is more than 30 miles from his or her office
location prior to the Change in Control.
(2) A reduction by the Employer in Employee's
base salary or incentive compensation
opportunity not agreed to by Employee; and
(3) The taking of any action by the Employer to
eliminate benefit plans without providing
substitutes therefor, to reduce benefits
thereunder or to substantially diminish the
aggregate value of incentive awards or other
fringe benefits.
(d) A termination of employment by Employee shall be for Good Reason
if one of the occurrences specified in paragraph (c) shall have occurred,
notwithstanding that Employee may have other reasons for terminating
employment, including employment by another employer which Employee desires to
accept.
10. Employee's attaining his or her Security Release Date.
(a) Employee's "Security Release Date" shall mean the later
of: (i) the date which is two years following the date on which the Company
receives from Employee a completed notice in the form attached hereto as
Exhibit B or (ii) the date specified in such notice as the Security Release
Date; provided that Employee continues to be employed by Employer until such
date. Employee's Security Release Date may be changed to a later date by a
subsequent election, but no more than twice, and may not be accelerated.
(b) Employee shall attain his or her Security Release Date upon
becoming disabled while employed by the Employer. Employee shall be considered
"disabled" at the time that the Administrator (as defined in Section 13(a)
below) determines, based upon competent medical advice, that an Employee is
incapable of rendering substantial services to the Employer by reason of mental
or physical disability.
(c) The Company's Security Interest in the Policy is
contingent upon the timely payment of premiums under Section 3 of this
Agreement. Each period covered by any individual premium payment shall be
considered an independent extension of the Company's Security Interest in the
Policy. In the event that the Company waives its rights by reason of failure
to make payments under Section 3 of this Agreement, Employee shall immediately
attain his or her Security Release Date. The Company's failure to extend its
rights in no way affects the Company's duties and obligations under this
Agreement.
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11. Limitation on Employee's rights prior to a Qualifying Event.
In order to protect the Company's Security Interest and
notwithstanding any other provisions in this Agreement, prior to a Qualifying
Event, Employee agrees that he or she will not modify the death benefit under
the Policy, borrow against the Policy, assign the Policy, direct the investment
of the cash surrender value of the Policy, or obtain any portion of the cash
value of the Policy. Notwithstanding the preceding sentence, if Section 6
applies to a termination, Employee may borrow or withdraw from the Policy, so
long as the borrowing or withdrawal request is submitted to the Insurance
Company along with a directive that the borrowed or withdrawn amount be
transferred directly to the Company.
12. Tax Withholding.
It is recognized by the parties that the rights of Employee in the
Policy (as modified by the Agreement) may cause Employee to be treated under
certain circumstances as in receipt of gross income. These circumstances may
also impose upon the Company an obligation to deduct and withhold federal,
state or local taxes. Unless Employee otherwise provides the Company the
amounts it is required to withhold, Employee shall cause, either by withdrawing
from or borrowing on a nonrecourse basis against the Policy, to be transferred
to the Company that portion of the cash value of the Policy which is equal to
the amount of any federal, state or local taxes required to be withheld.
13. Disputes.
(a) The Compensation Committee of the Board of Directors
shall be the "Administrator" if Employee is a member of the Board of Directors.
In all other cases, the plan administrator of the Corporation's 401(k) Plans
shall be the "Administrator." The Administrator (either directly or through
its designees) will have power and authority to interpret, construe, and
administer this Agreement (for the purpose of this section, the Agreement shall
include the Collateral Security Assignment Agreement); provided that, the
Administrator's authority to interpret this Agreement shall not cause the
Administrator's decisions in this regard to be entitled to a deferential
standard of review in the event that Employee or his or her beneficiary seeks
review of the Administrator's decision as described below.
(b) Neither the Administrator, its designee nor its advisors,
shall be liable to any person for any action taken or omitted in connection
with the interpretation and administration of this Agreement.
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(c) Because it is agreed that time will be of the essence in
detepmining whether any payments are due to Employee or his or her beneficiary
under this Agreement, Employee or his or her beneficiary may, if he or she
desires, submit any claim for payment under this Agreement or dispute regarding
the interpretation of this Agreement to arbitration. This right to select
arbitration shall be solely that of Employee or his or her beneficiary and
Employee or his or her beneficiary may decide whether or not to arbitrate in
his or her discretion. The "right to select arbitration" is not mandatory on
Employee or his or her beneficiary and Employee or his or her beneficiary may
choose in lieu thereof to bring an action in an appropriate civil court. Once
an arbitration is commenced, however, it may not be discontinued without the
mutual consent of both parties to the arbitration. During the lifetime of the
Employee only he or she can use the arbitration procedure set forth in this
section.
(d) Any claim for arbitration may be submitted as follows:
if Employee or his or her beneficiary disagrees with the Administrator
regarding the interpretation of this Agreement and the claim is finally denied
by the Administrator in whole or in part, such claim may be filed in writing
with an arbitrator of Employee's or beneficiary's choice who is selected by the
method described in the next four sentences. The first step of the selection
shall consist of Employee or his or her beneficiary submitting a list of five
potential arbitrators to the Administrator. Each of the five arbitrators must
be either (1) a member of the National Academy of Arbitrators located in the
State of California or (2) a retired California Superior Court or Appellate
Court judge. Within one week after receipt of the list, the Administrator
shall select one of the five arbitrators as the arbitrator for the dispute in
question. If the Administrator fails to select an arbitrator in a timely
manner, Employee or his or her beneficiary shall then designate one of the five
arbitrators as the arbitrator for the dispute in question.
(e) The arbitration hearing shall be held within seven days
(or as soon thereafter as possible) after the picking of the arbitrator. No
continuance of said hearing shall be allowed without the mutual consent of
Employee or his or her beneficiary and the Administrator. Absence from or
nonparticipation at the hearing by either party shall not prevent the issuance
of an award. Hearing procedures which will expedite the hearing may be ordered
at the arbitrator's discretion, and the arbitrator may close the hearing in his
or her sole discretion when he or she decides he or she has heard sufficient
evidence to satisfy issuance of an award.
(f) The arbitrator's award shall be rendered as expeditiously
as possible and in no event later than one week after the close of the hearing.
In the event the arbitrator finds that the Company has breached this Agreement,
he or she shall order the
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Company to immediately take the necessary steps to remedy the breach. The
award of the arbitrator shall be final and binding upon the parties. The award
may be enforced in any appropriate court as soon as possible after its
rendition. If an action is brought to confirm the award, both the Company and
Employee agree that no appeal shall be taken by either party from any decision
rendered in such action.
(g) Solely for purposes of determining the allocation of the
costs described in this subsection, the Administrator will be considered the
prevailing party in a dispute if the arbitrator determines (1) that the Company
has not breached this Agreement and (2) the claim by Employee or his or her
beneficiary was not made in good faith. Otherwise, Employee or his or her
beneficiary will be considered the prevailing party. In the event that the
Company is the prevailing party, the fee of the arbitrator and all necessary
expenses of the hearing (excluding any attorneys' fees incurred by the Company)
including stenographic reporter, if employed, shall be paid by the other party.
In the event that Employee or his or her beneficiary is the prevailing party,
the fee of the arbitrator and all necessary expenses of the hearing (including
all attorneys' fees incurred by Employee or his or her beneficiary in pursuing
his or her claim), including the fees of a stenographic reporter if employed,
shall be paid by the Company.
14. Collateral Security Assignment of Policy to the Company.
In consideration of the promises contained herein, the Employee has
contemporaneously herewith granted the Security Interest in the Policy to the
Company as collateral, under the form of Collateral Security Assignment
attached hereto as Exhibit A, which Collateral Security Assignment gives the
Company the limited power to enforce its rights to recover the cash value of
the Policy under the circumstances defined herein, or a portion of the death
benefit thereof. The Company's Security Interest in the Policy shall be
specifically limited to the rights set forth above in this Agreement,
notwithstanding the provisions of any other documents including the Policy.
Employee agrees to execute any notice prepared by the Company requesting a
withdrawal or non-recourse loan in an amount equal to the amount to which the
Company is entitled under Sections 5, 6 or 12 of this Agreement.
15. Employee's beneficiary rights and security interest.
(a) The Company and Employee intend that in no event shall
the Company have any power or interest related to the Policy or its proceeds,
except as provided herein and in the Collateral Security Assignment. In the
event that the Company ever receives or may be deemed to have received any
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right or interest in the Policy or its proceeds beyond the limited rights
described herein and in the Collateral Security Assignment, such right or
interest shall be held in trust for the benefit of Employee and be held
separate from the property of the Company.
(b) In order to further protect the rights of the Employee, the
Company agrees that its rights to the Policy and proceeds thereof shall serve
as security for the Company's obligations as provided in this Agreement to
Employee. The Company grants to Employee a security interest in and
collaterally assigns to Employee any and all rights the Company has in the
Policy, and products and proceeds thereof whether now existing or hereafter
arising pursuant to the provisions of the Policy, this Agreement, the
Collateral Security Assignment or otherwise, to secure any and all obligations
owed by the Company to Employee under this Agreement. In no event shall this
provision be interpreted to reduce Employee's rights to the Policy or expand in
any way the rights or benefits of the Company under this Agreement, the Policy
or the Collateral Security Assignment. This security interest granted to
Employee from the Company shall automatically expire and be deemed waived if
Employee terminates employment with Employer prior to a Qualifying Event.
Nothing in this provision shall prevent the Company from receiving its share of
the death benefits under the Policy as provided in Section 4 of this Agreement.
16. Amendment of Agreement.
Except as provided in a written instrument signed by the Company and
Employee, this Agreement may not be cancelled, amended, altered, or modified.
17. Notice under Agreement.
Any notice, consent, or demand required or permitted to be given
under the provisions of this Agreement by one party to another shall be in
writing, signed by the party giving or making it, and may be given either by
delivering it to such other party personally or by mailing it, by United States
Certified mail, postage prepaid, to such party, addressed to its last known
address as shown on the records of the Company. The date of such mailing shall
be deemed the date of such mailed notice, consent, or demand.
18. Binding Agreement.
This Agreement shall bind the parties hereto and their respective
successors, heirs, executor, administrators, and transferees, and any Policy
beneficiary.
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19. Controlling law and characterization of Agreement.
(a) To the extent not governed by federal law, this Agreement
and the right to the parties hereunder shall be controlled by the laws of the
State of California.
(b) If this Agreement is considered a "plan" under the
Employee Retirement Income Security Act of 1974 (ERISA), both the Company and
Employee acknowledge and agree that for all purposes the Agreement shall be
treated as a "welfare plan" within the meaning of section 3(1) of ERISA.
Consistent with the preceding sentence, Employee further acknowledges that his
or her rights to the Policy and the release of the Company's Security Interest
are strictly limited to those rights set forth in this Agreement. In
furtherance of this acknowledgement and in consideration of the Company's
payment of the initial premiums for this Policy, Employee voluntarily and
irrevocably relinquishes and waives any additional rights in the Policy or any
different restrictions on the release of the Company's Security Interest that
he or she might otherwise argue to exist under either state, federal, or other
law. Employee further agrees that he or she will not argue in any judicial or
arbitration proceeding that any such additional rights or different
restrictions exist. Similarly, the Company acknowledges that its Security
Interest is strictly limited as set forth in this Agreement and voluntarily and
irrevocably relinquishes and waives any additional interest or different
interest or advantages that the Company would have or enjoy if the Agreement
were not treated as a "welfare plan" within the meaning of Section 3(1) of
ERISA.
20. The Company and Employee agree to execute any and all
documents necessary to effectuate the terms of this
Agreement.
EMPLOYEE ADVANCED MICRO DEVICES, INC.
____________________ By: __________________________
Its __________________________
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EXHIBIT B
SPLIT-DOLLAR LIFE INSURANCE SECURITY RELEASE NOTICE
Pursuant to the Split-Dollar Life Insurance Agreement
entered into between Advanced Micro Devices, Inc. ("the Company") and me on
______________, 199__ (the "Agreement"), I hereby notify the Company that I
request to be released on __________, ____ ("Security Release Date") from the
Company's collateral security interest in Policy Number ________ issued by
Manufacturer's Life Insurance Company. I understand that my Security Release
Date must be at least two years from the date the Company receives this Notice.
I also understand that my Security Release Date may be changed no more than
twice, and then only to a later date, not an earlier date. I further understand
that in order for the Company's collateral security interest to be released on
my Security Release Date, I must continue to be employed by the Employer (as
defined in the Agreement) until such date.
______________________
Participant
Date:_________________
Received by the Company on ____________________________
by ___________________
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EXHIBIT C
SPOUSAL CONSENT TO DESIGNATION OF NONSPOUSAL BENEFICIARY
My spouse is _____________________. I hereby consent to
the designation made by my spouse of _______________________ as the beneficiary
(subject to any rights collaterally assigned to Advanced Micro Devices, Inc.)
under Life Insurance Policy No. _________________ which Advanced Micro
Devices, Inc. has caused Manufacturer's Life Insurance Company to issue to
him/her. I also understand that this consent is valid only with respect to the
naming of the beneficiary indicated above and that the designation of any other
beneficiary will not be valid unless I consent in writing to such designation.
This consent is being voluntarily given, and no undue
influence or coercion has been exercised in connection with my consent to the
designation made by my spouse of the beneficiary named above rather than myself
as the beneficiary under the Split-Dollar Life Insurance Policy.
___________________________
Spouse's Signature
___________________________
Print Spouse's Name
Date: ______________________________
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