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Table of Contents
VMware, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
VMware Employee Stock Purchase Plan
In June 2007, VMware adopted its 2007 Employee Stock Purchase Plan (the “ESPP”), which is intended to be qualified under Section 423
of the Internal Revenue Code. A total of 6.4 million shares of VMware Class A common stock were reserved for future issuance. Under the
ESPP, eligible VMware employees are granted options to purchase shares at the lower of 85% of the fair market value of the stock at the time of
grant or 85% of the fair market value at the time of exercise. Options to purchase shares were generally granted twice yearly on January 1 and
July 1 and exercisable on the succeeding June 30 and December 31 of each year until the timing of the purchase plan was amended in 2009; as a
result since then, options to purchase shares are generally granted on February 1 and August 1 and exercisable on the succeeding July 31 and
January 31, respectively, of each year.
In 2010, 1.5 million shares of Class A common stock were purchased under the ESPP at a weighted-average purchase price per share of
$29.90. The total cash proceeds from the purchase of these shares under the ESPP were $45.2 million. As of December 31, 2010, $24.8 million
of ESPP withholdings were recorded as a liability on the consolidated balance sheet for the next purchase in January 2011.
In 2009, 0.9 million shares of Class A common stock were purchased under the ESPP at a purchase price per share of $20.14. The total
cash proceeds from the purchase of these shares under the ESPP were $18.3 million. As of December 31, 2009, $21.6 million of ESPP
withholdings were recorded as a liability on the consolidated balance sheet for the subsequent purchase in January 2010. In 2008, 1.7 million
shares of Class A common stock were purchased under the ESPP at a weighted-average purchase price per share of $28.05. The total cash
proceeds from the purchase of these shares under the ESPP were $46.9 million. As part of the 1.7 million shares purchased in 2008, employees
purchased 0.6 million shares under the ESPP at a purchase price per share of $24.65 related to the December 31, 2007 purchase, which was
completed in January 2008.
VMware 2008 Exchange Offer
In September 2008, VMware completed an offer to exchange certain employee stock options issued under VMware’s 2007 Equity and
Incentive Plan (“2008 Exchange Offer”). Certain previously granted options were exchanged for new, lower-priced stock options granted on a
one-for-one basis. Executive officers and members of the Company’
s Board of Directors were excluded from participating in the 2008 Exchange
Offer. Options for an aggregate of 4.1 million shares of VMware’s Class A common stock were exchanged with a weighted-average exercise
price per share of $71.60. Options granted pursuant to the 2008 Exchange Offer have an exercise price of $33.95 per share, vest pro rata over
four years beginning September 10, 2008 with no credit for past vesting and have a new six-year option term. The 2008 Exchange Offer resulted
in incremental stock-based compensation expense of $18.0 million to be recognized over the four-year vesting term.
VMware and EMC Stock Options
Prior to the adoption of VMware’s 2007 Plan in June 2007, eligible VMware employees participated in EMC’s equity plans. In August
2007, VMware and EMC completed an exchange offer (the “EMC Exchange Offer”) enabling eligible VMware employees to exchange their
options to acquire EMC common stock for options to acquire VMware Class A common stock and to exchange restricted stock awards of
EMC’s common stock for restricted stock awards of VMware’s Class A common stock. VMware employees who did not elect to exchange their
EMC options and EMC restricted stock for options to purchase VMware Class A common stock and restricted stock awards of VMware Class A
common stock, respectively, continue to have their existing grants governed under EMC’s stock plans.
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