AMD 2005 Annual Report Download - page 55

Table of Contents
Supplementary Stock-Based Incentive Compensation Disclosures
Section I. Stock-Based Incentive Program Description
Our stock stock-based incentive programs are intended to attract, retain and motivate highly qualified employees. On April 29, 2004, our stockholders
approved the 2004 Equity Incentive Plan (the 2004 Plan), which had previously been approved by our Board of Directors. Stock options available for grant under
our equity compensation plans that were in effect before April 29, 2004, (the Prior Plans), including those that were not approved by our stockholders, were
consolidated into the 2004 Plan. As of April 29, 2004, equity awards are made only from the 2004 Plan. Under our Prior Plans key employees generally were,
and under the 2004 Plan key employees generally have been, granted nonqualified stock options (NSOs) to purchase our common stock. Generally, options vest
and become exercisable over a four-year period from the date of grant and expire five to ten years after the date of grant. Any incentive stock options (ISOs)
granted under the Prior Plans or the 2004 Plan have exercise prices of not less than 100 percent of the fair market value of the common stock on the date of grant.
Exercise prices of NSOs ranged from $0.01 to the fair market value of the common stock on the date of grant.
We plan to grant employees primarily restricted stock units under the 2004 Plan in 2006.
Under the 2004 Plan, we can also grant up to a total of 9 million shares where the exercise price is less than the fair market value of our common stock on
the date of grant. These types of grants can consist of the following awards:
Restricted Stock. Restricted stock can be granted to any employee or consultant. Restricted stock that vests based on continued service does not fully vest
for three years from the date of grant. Restricted stock that vests based on performance does not vest for at least one year from the date of grant.
Restricted Stock Units. Restricted stock units are awards that obligate us to issue a specific number of shares of our common stock in the future if the
vesting terms and conditions are satisfied. Restricted stock units based on continued service may not fully vest for three years from the date of grant. Restricted
stock units that are performance based may not vest for at least one year from the date of grant.
Discount Stock Options. Discount stock options may be subject to the same requirements and conditions as are applicable to regular NSOs described
above except that the fixed exercise price may be granted at up to 85 percent of fair market value on the date of grant, if the discount is in lieu of a portion of
salary or cash bonus. Options cannot be exercised until they become vested. Options expire not later than 10 years after the date of grant.
On April 27, 2005, we accelerated the vesting of all stock options outstanding under the 2004 Plan and our prior equity compensation plans that had
exercise prices per share higher than the closing price of our stock on April 27, 2005, which was $14.51. Options to purchase approximately 12 million shares of
our common stock became exercisable immediately. Options held by non-employee directors were not included in the vesting acceleration.
The primary purpose for accelerating the vesting was to eliminate future compensation expense we would otherwise recognize in our statement of
operations with respect to these accelerated options upon the adoption of Financial Accounting Standards Board Statement of Financial Accounting Standards
No. 123 (Revised 2004), “Share-Based Payment” (SFAS 123R). SFAS 123R is effective for us beginning in the first quarter of 2006 and will require that
compensation expense associated with stock options be recognized in the statement of operations, rather than as a footnote disclosure in our consolidated
financial statements. The acceleration of the vesting of these options did not result in a charge based on U.S. generally accepted accounting principles.
On December 15, 2005, we accelerated the vesting of all outstanding AMD stock options and restricted stock units held by Spansion employees that would
otherwise have vested from December 16, 2005 to
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Source: ADVANCED MICRO DEVIC, 10-K, February 27, 2006