Dell 2011 Annual Report Download - page 99

Table of Contents DELL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 14 — STOCK-BASED COMPENSATION AND BENEFIT PLANS
Stock-based Compensation
Description of the Plans
Employee Stock Plans — Dell is currently issuing stock grants under the Dell Amended and Restated 2002 Long-Term Incentive Plan (the “2002 Incentive
Plan”), which was approved by shareholders on December 4, 2007. There are previous plans that have been terminated, except for options previously granted
under those plans which remain outstanding. In Fiscal 2012, in connection with a business acquisition, Dell assumed the stock incentive plan of one of its
acquired companies. No future grants will be made under the assumed plan. The 2002 Incentive Plan, all previous plans, and the assumed plan are all
collectively referred to as the “Stock Plans.”
The 2002 Incentive Plan provides for the grant of stock-based incentive awards to Dell's employees and non-employee directors. Awards may be incentive
stock options within the meaning of Section 422 of the Internal Revenue Code, non-qualified stock options, restricted stock, restricted stock units, or
performance-based restricted stock units. There were approximately 342 million, 344 million, and 320 million shares of Dell's common stock available for
future grants under the 2002 Incentive Plan at February 3, 2012, January 28, 2011, and January 29, 2010, respectively. To satisfy stock option exercises and
vested restricted stock awards, Dell has a policy of issuing new shares rather than repurchasing shares on the open market.
Stock Option Agreements — Stock options granted under the 2002 Incentive Plan typically vest pro-rata at each option anniversary date over a three- to five-
year period. These options, which are granted with option exercise prices equal to the fair market value of Dell's common stock on the date of grant, generally
expire within ten to twelve years from the date of grant. In connection with business acquisitions, during Fiscal 2012, Dell converted or assumed a small
number of stock options granted under the stock incentive plans of acquired companies, which are collectively referred to as the "assumed options." These
assumed options vest over a period of up to four years and generally expire within ten years from the date of assumption. Compensation expense for all stock
options is recognized on a straight-line basis over the requisite service period.
Restricted Stock Awards — Awards of restricted stock may be either grants of restricted stock, restricted stock units, or performance-based stock units that are
issued at no cost to the recipient. For restricted stock grants, at the date of grant, the recipient has all rights of a stockholder, subject to certain restrictions on
transferability and a risk of forfeiture. Restricted stock grants typically vest over a three- to seven-year period beginning on the date of the grant. For restricted
stock units, legal ownership of the shares is not transferred to the employee until the units vest, which is generally over a three- to five-year period. The cost
of these awards is determined using the fair market value of Dell's common stock on the date of the grant. Dell also grants performance-based restricted stock
units as a long-term incentive in which an award recipient receives shares contingent upon Dell achieving performance objectives and the employee's
continuing employment through the vesting period, which is generally over a three- to five-year period. Compensation costs recorded in connection with these
performance-based restricted stock units are based on Dell's best estimate of the number of shares that will eventually be issued upon achievement of the
specified performance objectives and when it becomes probable that such performance objectives will be achieved.
Compensation costs for restricted stock awards with a service condition is recognized on a straight-line basis over the requisite service period. Compensation
costs for performance-based restricted stock awards is recognized on an accelerated multiple-award approach based on the most probable outcome of the
performance condition.
96