EMC 2006 Annual Report Download - page 101

Table of Contents
EMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The fair value of each option granted during 2006, 2005 and 2004 is estimated on the date of grant using the Black-Scholes option-pricing model with
the following weighted average assumptions:
For the Year Ended
December 31,
Stock Options
2006 2005 2004
Dividend yield None None None
Expected volatility 35.2% 40.3% 46.4%
Risk-free interest rate 4.80% 4.02% 3.18%
Expected life (in years) 4.0 4.0 4.2
Weighted-average fair value at grant date $ 3.80 $ 5.29 $ 5.15
For the Year Ended
December 31,
Employee Stock Purchase Plan
2006 2005 2004
Dividend yield None None None
Expected volatility 27.6% 42.4% 49.9%
Risk-free interest rate 4.82% 2.91% 1.33%
Expected life (in years) 0.5 0.5 0.5
Weighted-average fair value at grant date $ 2.89 $ 3.97 $ 3.51
Expected volatilities are based on our historical and implied volatilities from traded options in our stock. We use EMC historical data to estimate the
expected term of options granted within the valuation model. The risk-free rate for periods within the contractual life of the option is based on the U.S.
Treasury yield curve in effect at the time of grant.
O. Related Party Transactions
In 2006, 2005 and 2004, we leased certain real estate from a company owned by a member of our Board of Directors and such Director's siblings, for
which payments aggregated approximately $3.8 million, $3.8 million and $2.9 million, respectively. Such leases were initially assumed by us as a result of
our acquisition of Data General in 1999, and one lease was renewed for a ten-year term in 2003.
We purchased upgrades and licenses to software products from two companies, for which payments aggregated approximately $3.5 million and $0.3
million in 2005 and 2004, respectively. We sublet facilities to one of these companies, for which we were paid $30,000 in 2004. A member of our Board of
Directors is Chairman of the Board of Directors of one of these companies and is managing partner and general partner in a limited partnership which is
currently a stockholder of both such companies.
In 2006, we purchased approximately $152,000 of hardware, software and services from a company. A member of our Board of Directors is a
managing partner and general partner in a limited partnership which is currently a stockholder of such company.
In February 2006, we acquired all of the outstanding shares of Authentica, Inc. A member of our Board of Directors is a general partner in a limited
partnership that was a stockholder of Authentica. Of the total cash paid to Authentica's stockholders of approximately $16 million, proceeds to the limited
partnership as a result of this acquisition were approximately $2.7 million. Such director did not participate in any Board or committee approval of this
acquisition, and EMC believes that the terms of the transaction were negotiated at arms' length.
In September 2006, we acquired all of the outstanding shares of Network Intelligence. A member of our Board of Directors is a managing partner and
general partner in a limited partnership that was a stockholder in Network Intelligence. Of the total cash paid to Network Intelligence's stockholders of
approximately $170 million, proceeds to the limited partnership as a result of the acquisition were approximately $24.4 million. Such director did not
participate in any Board or committee approval of this acquisition, and EMC believes that the terms of the transaction were negotiated at arms' length.
In accordance with its written policy and procedures relating to related person transactions, EMC's Audit Committee has approved each of the above
transactions pertaining to 2006.
EMC is a large global organization which engages in thousands of purchase, sales and other transactions annually. We enter into purchase and sales
transactions with other publicly- and privately-held companies, universities, hospitals and not-for-profit organizations in which members of our Board of
Directors or executive officers are executive officers or members of boards of these entities. We enter into these arrangements in the ordinary course of our
business.