AMD 2001 Annual Report Download - page 171

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 grant. 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 must first 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.
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 and 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
-------------------------------------------------------------------
1 150 60 45 30 15
2 100 25 25 25 25
3 160 40 40 40
4 200 50 50
5 220 55
Total 60 70 95 130 170
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.
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Source: ADVANCED MICRO DEVIC, 10-K, March 07, 2002