Dell 2006 Annual Report Download - page 21

Table of Contents
that suspension, we discovered that we had inadvertently failed to file with the SEC certain registration statements relating to
securities under the plans.
• Employee Stock Purchase Plan — We maintain an Employee Stock Purchase Plan that is available to substantially all our
employees worldwide. In 1994, stockholders approved additional shares for issuance under our Employee Stock Purchase
Plan. We recently discovered that the issuance of these additional shares was never registered. Consequently, we have
inadvertently issued approximately 54 million unregistered shares under this plan since 1996.
• Retirement Plans — We maintain a 401(k) retirement savings plan that is available to substantially all of our
U.S. employees and a separate retirement plan that is available to our employees in Canada. Both of those plans contain a
"Dell Stock Fund," and both plans allow participants to allocate some or all of their account balances to interests in the Dell
Stock Fund. The Dell common stock held in the Dell Stock Funds is not purchased from Dell; rather, the plan trustees
accumulate the plan contributions that are directed to the Dell Stock Funds and purchase for the Dell Stock Funds shares of
Dell common stock in open market transactions. Nevertheless, because we sponsor the plans, we are required to register
certain transactions in the plans related to shares of Dell common stock. We recently discovered that we may be deemed to
have been required to file a Form S-8 in July 2003 to register additional share transactions in the 401(k) Plan, and we
should have filed a Form S-8 to register share transactions in the Canada retirement plan in 1999. Consequently, we may
be deemed to have inadvertently failed to register transactions in the two plans relating to up to approximately 37 million
shares.
We intend to file registration statements on Form S-8 to register future transactions in these plans as soon as practicable.
Nonetheless, we may be subject to civil and other penalties by regulatory authorities as a result of the failure to register. We
have implemented monitoring and reporting procedures to ensure that in the future we timely meet our registration
obligations with respect to these and other employee benefit plans.
The failure to file registration statements noted above was inadvertent, and we have always treated the shares issued under
the Employee Stock Purchase Plan or held in the Dell Stock Funds under the retirement plans as outstanding for financial
reporting purposes. Consequently, these unregistered transactions do not represent any additional dilution. We believe that
we have always provided the employee-participants in these plans with the same information they would have received had
the registration statements been filed. The outstanding shares subject to potential rescission rights are reflected as
redeemable common stock on our Consolidated Statement of Financial Position.
Purchases of Common Stock
Cash Payments for Certain Employee Stock Options
As a result of our inability to timely file our Annual Report on Form 10-K for Fiscal 2007, we suspended the exercise of
employee stock options. As a result, stock options held by current and former employees expired while the holders had no
ability to exercise them or otherwise prevent their expiration. Therefore, we agreed to pay cash to certain current and former
employees who held in-the-money stock options that expired during the period of unexercisability.
If an in-the-money stock option expired during the period in which it was not exercisable because of our filing delinquency,
we will pay to the holder in cash an amount of up to the difference between the "calculated value" of the option and its
exercise price. For this purpose, the "calculated value" is equal to the average closing price of Dell common stock during the
week immediately preceding the week in which the expiration date occurred. Payment will be made within 45 days after the
date this report is filed, so long as the holder has executed an agreement providing for a release of any claims the holder
may have against us and obligating the holder to return the cash to us if the holder, while employed by us or within one year
following receipt of the payment, engages in certain conduct that is detrimental to us (such as serious misconduct or breach
of confidentiality, non-competition or non-solicitation obligations). Cash payments related to stock options that expired in the
second and third quarters of Fiscal 2008 will be paid to
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