Dell 2001 Annual Report Download - page 48

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Table of Contents
Preferred Share Purchase Rights
In December 1995, the Company distributed a dividend of one Preferred Share Repurchase Right (a "Right") for each outstanding share of common stock, and
since that distribution, shares of common stock have been issued with accompanying Rights. Each Right entitles the holder to purchase shares of Junior
Preferred Stock at specified prices and rates. The Rights become exercisable when a person or group acquires 15% or more of the Company's outstanding
common stock. When it becomes exercisable, a Right will entitle the holder (other than the acquiring person or group) to purchase, at the Right's then current
exercise price, the number of shares of common stock having a market value of twice the exercise price of the Right. The Rights also contain provisions
relating to mergers or other business combinations.
In certain circumstances, the Board of Directors may, at its option, exchange Rights (other than Rights held by the acquiring person or group) for shares of
common stock or shares of Junior Preferred Stock at specified exchange rates. In addition, the Company will be entitled to redeem the Rights at $.001 per
Right at any time before a person or group has acquired 15% or more of the Company's outstanding common stock. The Rights expire on November 29, 2005.
The Board of Directors may amend the terms of the Rights to lower the 15% acquisition threshold to not less than the greater of (a) any percentage greater
than the largest percentage of common stock known by the Company to be owned by any person (other than Michael S. Dell) or (b) 10%.
Neither the ownership nor the further acquisition of common stock by Michael S. Dell will cause the Rights to become exercisable or nonredeemable or will
trigger the other features of the Rights.
NOTE 6 — Benefit Plans
Stock Option Plans — The Compensation Committee of the Board of Directors administers the Company's two stock option plans, the Dell Computer
Corporation Incentive Plan (the "Incentive Plan") and the Dell Computer Corporation 1998 Broad-Based Stock Option Plan (the "Broad-Based Plan" and,
together with the Incentive Plan, the "Option Plans"). The Incentive Plan provides for the granting of stock-based incentive awards to the Company's directors
(including the nonemployee directors), executive officers and key employees and to certain of its consultants and advisors, while the Broad-Based Plan
provides for the award of stock options to non-executive employees.
Options granted under the Incentive Plan may be either incentive stock options within the meaning of Section 422 of the Internal Revenue Code or
nonqualified; only nonqualified stock options can be granted under the Broad-Based Plan. Under either of the Option Plans, the right to purchase shares
pursuant to existing stock option agreements typically vest pro-rata at each option anniversary date over a five-year period. The options are generally issued at
fair market value and must be exercised within ten years from the date of grant.
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