Intel 2003 Annual Report Download - page 46

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Table of Contents
Index to Financial Statements
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Employee Stock Options
Our stock option program is a broad-based, long-
term retention program that is intended to attract and retain talented employees and align
stockholder and employee interests. The program currently consists of two plans: one under which officers, key employees and non-employee
directors may be granted options to purchase shares of our stock (1984 Plan), and a broad-
based plan under which options may be granted to all
employees other than officers and directors (1997 Plan). Substantially all of our employees participate in one of the plans. Options granted by
the company expire no later than 10 years from the grant date. During 2003, options granted to existing and newly hired employees generally
vest in increments over four or five years from the date of grant, and certain grants to key employees have delayed vesting generally beginning
six years from the date of grant. Our 1984 Stock Option Plan, as amended, expires in May 2004, and our 1997 Stock Option Plan, as amended,
expires in January 2007. We presently expect to propose a new equity plan for stockholder vote at our May 2004 Annual Stockholders’
Meeting. Contingent on stockholder approval, this new equity plan would replace both the expiring 1984 Plan and the 1997 Plan, which would
be terminated early.
We have a goal to keep the potential incremental dilution related to our option program to a long-term average of less than 2% annually.
The dilution percentage is calculated using the new option grants for the year, net of options forfeited by employees leaving the company and
options expired, divided by the total outstanding shares at the beginning of the year.
Options granted to employees, including officers, and non-employee directors from 1999 through 2003 are summarized as follows:
(Shares in Millions)
2003
2002
2001
2000
1999
Total options granted
1
110
174
238
163
81
Less options forfeited
1
(40
)
(44
)
(47
)
(31
)
(25
)
Net options granted
70
130
191
132
56
Net grants as % of outstanding shares
2
1.1
%
1.9
%
2.8
%
2.0
%
0.9
%
Grants to listed officers
3
as % of total options granted
2.4
%
1.7
%
0.8
%
0.4
%
0.9
%
Grants to listed officers as % of outstanding shares
<0.1
%
<0.1
%
<0.1
%
<0.1
%
<0.1
%
Cumulative options held by listed officers as % of total options outstanding
2.1
%
2.1
%
2.0
%
2.4
%
2.9
%
1
Excluding options assumed in connection with acquisitions.
2
Outstanding shares as of the beginning of each period.
In accordance with a policy established by the Compensation Committee of the Board of Directors, total options granted to the listed
officers may not exceed 5% of total options granted in any year. During 2003, options granted to listed officers amounted to 2.4% of the grants
made to all employees. In 2003 and 2002, in addition to grants made in connection with annual performance reviews, we made further grants to
key officers, including listed officers, and other senior-level employees in recognition of their future potential in leading the company. All
stock option grants to executive officers are made after a review by, and with the approval of, the Compensation Committee. All members of
the Compensation Committee are independent directors, as defined in the applicable rules for issuers traded on The NASDAQ Stock Market*.
For additional information regarding stock option plan activity for the past three years, see the reconciliation of options outstanding in
“Note 12: Employee Stock Benefit Plans” in Notes to Consolidated Financial Statements. Information regarding our stock option plans should
be read in conjunction with the information appearing under the heading “Report of the Compensation Committee on Executive
Compensation” in our 2004 Proxy Statement, which is incorporated by reference.
43
3
“Listed officers” are defined as our Chief Executive Officer and each of the four other most highly compensated executive officers
serving at the end of each year presented.