AMD 2000 Annual Report Download - page 90

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 portfolio of programs
that enable you to share in our success:
. Cash and deferred profit sharing plans, which entitle you to a share of AMD's
profits.
. The stock purchase plan, which enables you to buy AMD common stock at a
discounted price and participate as an owner of the company.
. The stock option program, under which you can benefit from AMD's long-term
success as the company's common stock price grows.
WHO RECEIVES STOCK OPTIONS?
Congratulations on being selected to receive a stock option award. 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 have the
right to buy those 100 shares. If you do, you can buy the stock. You can then
keep 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 purchase shares and
then sell them when the market price moved up to $50, you would have a gain of
$15 per share ($50 - $35).
Enclosed with this brochure is your stock option document. It gives the date
your option was granted, the price to purchase the shares, and the first and
last dates you can purchase the shares.
HOW YOUR STOCK OPTIONS VEST
You earn the right to purchase shares according to the schedule for your grant
("vesting"). Each stock option grant has its own vesting period. The following
table shows the typical schedule for an initial grant to a newly eligible
employee or for an annual grant
Percent of Granted Options
That Are Fully Vested
-----------------------------------
Anniversary of Initial Annual
Grant Date Grant Grant
-------------------------------------------------------------------------------
First* 40% 25%
Second 60% 50%
Third 80% 75%
Fourth 100% 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 the Year
----------------------------------
Year Granted 2 3 4 5 6
-----------------------------------------------------------------------------
1 550 220 165 110 55
2 580 145 145 145 145
3 0
4 540 135 135
5 600 150
Total 220 310 255 335 430
The above vesting chart is based on continuous active service with AMD.
The stock option document for your grant shows the vesting dates for your
options.
Source: ADVANCED MICRO DEVIC, 10-K405, March 20, 2001