Management Continuity Agreement - Advanced Micro Devices Inc. and Robert R. Herb



                        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 

 
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.

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     (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
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     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
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     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
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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 

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     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
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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 

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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 

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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.

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     (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.

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     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)

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