VMware 2009 Annual Report Download - page 99

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Table of Contents
VMWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
the total pre-tax intrinsic values based on EMC’
s closing stock price of $17.47 as of December 31, 2009, which would have been received by the
option holders had all in-the-money options been exercised as of that date.
Cash proceeds from the exercise of VMware stock options for the years ended December 31, 2009, 2008, and 2007 were $209.4 million,
$143.2 million and $2.8 million, respectively. The options exercised in 2009 and 2008 had a pre-tax intrinsic value of $132.6 million and $219.6
million, respectively, and income tax benefits realized from the exercise of stock options of $47.1 million and $71.4 million, respectively. There
was no pre-tax intrinsic value to the options exercised or related income tax benefits realized in 2007.
The pre-tax intrinsic value of EMC options held by VMware employees that were exercised during the years ended December 31, 2009,
2008 and 2007 were $2.3 million, $2.8 million and $12.3 million, respectively. Cash proceeds from the exercise of these stock options paid to
EMC were $4.7 million, $1.9 million, $8.5 million for the years ended December 31, 2009, 2008 and 2007.
In August 2009, VMware granted the Company’s President and Chief Executive Officer a stock option for the purchase of approximately
1.4 million shares of the Company’s Class A common stock in exchange for a stock option he held for the purchase of shares of common stock
of EMC Corporation. The exercise price of his new VMware grant was $31.59 per share, the closing trading price of VMware Class A common
stock on the grant date of August 12, 2009. The option expires six years from the grant date. The new VMware grant preserves the 13 months of
vesting that had been earned while serving as VMware’s President and CEO since July 2008 and accordingly was vested with respect to
0.3 million of the shares on the date of grant. The remaining 1.1 million shares will vest ratably each month through March 2013 subject to his
continued service to VMware. There is no incremental stock-based compensation expense as a result of modifying this award, and the original
grant date fair value continues to be recognized over the requisite service period of the award.
VMware and EMC Restricted Stock
VMware restricted stock includes restricted stock awards, restricted stock units, and other restricted stock. Other restricted stock includes
shares issued to certain employees of SpringSource who agreed to accept shares of VMware Class A common stock subject to vesting
restrictions in lieu of a portion of their cash merger proceeds. In addition, other restricted stock includes options exercised prior to vesting by the
Company’s non-employee directors. The exercise of those options prior to vesting resulted in the outstanding shares being subject to repurchase
and hence restricted until such time as the respective options vest.
In September 2008, VMware awarded 5.3 million restricted stock units to certain employees, including a portion for international
employees who were not eligible to participate in the 2008 Exchange Offer and a portion for retention purposes. These awards generally will
vest over a three-year or four-year period. These awards resulted in stock-based compensation expense of $164.5 million to be recognized over
the three-year or four-year vesting term.
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