Dell 2002 Annual Report Download - page 47

Table of Contents
cumulatively repurchased 991 million shares for an aggregate cost of $12 billion. During fiscal year 2003, the Company repurchased 50 million shares of
common stock for an aggregate cost of $2 billion. The Company historically utilized equity instrument contracts to facilitate its repurchase of common stock,
but has not entered into any new contracts subsequent to October 2000. During fiscal 2003, these contracts were exercised in full, and consequently, no put
obligations remain outstanding. At February 1, 2002, the Company held equity options that allowed for the purchase of 25 million shares of common stock at
an average price of $58 per share. At February 1, 2002, the Company also had outstanding put obligations covering 51 million shares with an average exercise
price of $45 per share for a total of $2.3 billion. The outstanding put obligations at February 1, 2002 permitted net share settlement at the Company's option
and, therefore, did not result in a liability on the accompanying Consolidated Statement of Financial Position.
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 5 — Benefit Plans
Stock Option Plans — The Compensation Committee of the Board of Directors administers the Company's three stock option plans: the Dell Computer
Corporation Incentive Plan (the "1994 Incentive Plan"), the Dell Computer Corporation 1998 Broad-Based Stock Option Plan (the "Broad-Based Plan"), and
the Dell Computer Corporation 2002 Long-Term Incentive Plan (the "2002 Incentive Plan", collectively the "Options Plans"). The 1994 Incentive Plan and
2002 Incentive Plan provide 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.
The Company is permitted to grant either incentive stock options within the meaning of Section 422 of the Internal Revenue Code or nonqualified options
under the 1994 Incentive Plan and the 2002 Incentive Plan. The Company granted only nonqualified stock options under the Broad-Based Plan. Under each of
the Option Plans, the right to purchase shares pursuant to existing stock option agreements typically vests pro-rata at each option anniversary date over a five-
year period. The options are generally granted at fair market value and must be exercised within ten years from the date of grant.
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