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Table of Contents
VMware, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
K. Stockholders’ Equity
VMware Class B Common Stock Conversion Rights
Each share of Class B common stock is convertible while held by EMC or its successor-in-interest at the option of EMC or its successor-
in-interest into one share of Class A common stock. If VMware’s Class B common stock is distributed to security holders of EMC in a
transaction (including any distribution in exchange for shares of EMC’s or its successor-in-interest’s common stock or other securities) intended
to qualify as a distribution under Section 355 of the Internal Revenue Code, or any corresponding provision of any successor statute, shares of
VMware’
s Class B common stock will no longer be convertible into shares of Class A common stock. Prior to any such distribution, all shares of
Class B common stock will automatically be converted into shares of Class A common stock upon the transfer of such shares of Class B
common stock by EMC other than to any of EMC’s successors or any of its subsidiaries (excluding VMware). If such a distribution has not
occurred, each share of Class B common stock will also automatically convert at such time as the number of shares of common stock owned by
EMC or its successor-in-interest falls below 20% of the outstanding shares of VMware’s common stock. Following any such distribution,
VMware may submit to its stockholders a proposal to convert all outstanding shares of Class B common stock into shares of Class A common
stock, provided that VMware has received a favorable private letter ruling from the Internal Revenue Service satisfactory to EMC to the effect
that the conversion will not affect the intended tax treatment of the distribution. In a meeting of VMware stockholders called for this purpose, the
holders of VMware Class A common stock and VMware Class B common stock will be entitled to one vote per share and, subject to applicable
law, will vote together as a single class, and neither class of common stock will be entitled to a separate class vote. All conversions will be
effected on a share-for-share basis.
VMware Equity Plan
In June 2007, VMware adopted its 2007 Equity and Incentive Plan (the “2007 Plan”). In May 2009, VMware amended its 2007 Plan to
increase the number of shares available for issuance by 20.0 million shares for total shares available for issuance of 100.0 million. Awards under
the 2007 Plan may be in the form of stock options or other stock-based awards, including awards of restricted stock units. The exercise price for
a stock option awarded under the 2007 Plan shall not be less than 100% of the fair market value of VMware Class A common stock on the date
of grant. Most options granted under the 2007 Plan vest 25% after the first year and then monthly thereafter over the following three years. All
options granted pursuant to the 2007 Plan expire between six and seven years from the date of grant. Most restricted stock unit awards granted
under the 2007 Plan have a three-year to four-year period over which they vest. VMware’
s Compensation and Corporate Governance Committee
determines the vesting schedule for all equity awards. VMware utilizes both authorized and unissued shares to satisfy all shares issued under the
2007 Plan.
VMware Stock Repurchase Program
In March 2010, VMware’
s Board of Directors approved a stock repurchase program, authorizing the purchase of up to $400.0 million of its
Class A common stock through the end of 2011. From time to time, subject to market conditions, stock is purchased pursuant to this program in
the open market or through private transactions as permitted by securities laws and other legal requirements. In the year ended December 31,
2010, VMware repurchased and retired 4,908,969 shares of its Class A common stock at a weighted-average price of $68.96 per share for an
aggregate purchase price of $338.5 million, including commissions. The amount of repurchased shares was classified as a reduction to additional
paid-in capital. VMware is not obligated to purchase any shares under its stock repurchase program. Subject to applicable corporate and
securities laws, repurchases under the stock repurchase program may be made at such times and in such amounts as VMware deems appropriate.
Purchases under the stock repurchase program can be discontinued at any time that VMware feels additional purchases are not warranted.
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