AMD 2000 Annual Report Download - page 111

Congratulations on being selected to receive a stock option award. AMD's success
is a direct result of the creativity, innovation, and hard work of employees
like you. In recognition of this, we maintain a stock option program, under
which you can benefit from AMD's long-term success as the company's common stock
price grows.
AMD limits the granting of stock options to those employees whose individual
contributions most influence AMD's performance and add to shareholder value. The
number of options you are granted reflects competitive compensation practices,
your position at AMD, and, most importantly, your individual performance.
WHAT ARE STOCK OPTIONS?
Stock options give you the right to buy shares of AMD common stock at the
"exercise price" within a specified number of years. You "exercise" your option
by purchasing the underlying shares any time after you "vest" in the option (see
How Your Stock Options Vest), but before the option expires.
The attractiveness of stock options lies in the potential for increases in the
market price of the company's common stock over time. For example, if you are
granted options to buy 100 shares of AMD stock at an exercise price of $35 per
share, and the market price of the stock rises to $45, then your "unrealized"
financial gain is $10 per share (the difference between the exercise price and
the current market price). To realize that gain, you first have to be vested in
those 100 options. If you are, you can exercise your options by buying the
stock. You can then hold the shares for potential future gain, or sell them in
the market at any time for the current market price. In this example, if you
exercise your options and sell the purchased shares when the market price moved
up to $50, you would realize a gain of $15 per share ($50 - $35).
Enclosed with this brochure is your stock option document. It gives the grant
date, exercise price, and the vesting and expiration dates for your options.
HOW YOUR STOCK OPTIONS VEST
You earn the right to exercise your stock options according to the vesting
schedule for your grant. Each stock option grant has its own vesting period. The
stock option document for your grant shows the vesting dates for your options.
The following table shows the typical vesting schedules. An initial grant is the
first grant to an eligible employee and an annual grant is a grant that can be
awarded each year subsequent to an initial grant.
Percent of Granted Options
That Are Fully Vested
--------------------------------------
Anniversary of Initial Annual
Grant Date Grant Grant
--------------------------------------------------------------------------------
First* 40% 25%
Second +20% = 60% +25% = 50%
Third +20% = 80% +25% = 75%
Fourth +20% = 100% +25% = 100%
*After the first year, awards vest in monthly increments over the remaining
time.
If you receive stock option grants in several years, their vesting periods will
overlap. For example, the following chart illustrates the vesting for a
hypothetical employee who receives an initial grant when he/she joins AMD and
then annual grants thereafter based on varying performance ratings:
Calendar # of Options Options Vesting in Calendar Year
--------------------------------------
Year Granted 2 3 4 5 6
--------------------------------------------------------------------------------
1 150 60 30 30 30
2 100 25 25 25 25
3 160 40 40 40
4 200 50 50
5 220 55
Total 60 55 95 145 170
The above vesting chart is based on continuous active service with AMD.
Source: ADVANCED MICRO DEVIC, 10-K405, March 20, 2001