EMC 2010 Annual Report Download - page 80

Table of Contents
EMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
In connection with certain acquisitions, we have agreed to indemnify the current and former directors, officers and employees of the acquired company
in accordance with the acquired company's by-laws and charter in effect immediately prior to the acquisition or in accordance with indemnification or similar
agreements entered into by the acquired company and such persons. In a substantial majority of instances, we have maintained the acquired company's
directors' and officers' insurance, which should enable us to recover a portion of any future amounts paid. These indemnities vary in length of time.
Based upon our historical experience and information known as of December 31, 2010, we believe our liability on the above guarantees and
indemnities at December 31, 2010 is not material.
Litigation
We are involved in a variety of claims, demands, suits, investigations, and proceedings, including those identified below, that arise from time to time
relating to matters incidental to the ordinary course of our business, including actions with respect to contracts, intellectual property, product liability,
employment, benefits and securities matters. As required by authoritative guidance, we have estimated the amount of probable losses that may result from any
such pending matters, and such amounts are reflected in our consolidated financial statements. These recorded amounts are not material to our consolidated
financial position or results of operations. While it is not possible to predict the outcome of these matters with certainty, we do not expect the results of any of
these actions to have a material adverse effect on our business, results of operations or financial condition. Because litigation is inherently unpredictable,
however, the actual amounts of loss may prove to be larger or smaller than the amounts reflected in our consolidated financial statements, and we could incur
judgments or enter into settlements of claims that could adversely affect our operating results or cash flows in a particular period.
We have received three derivative demand letters sent on behalf of purported EMC shareholders. The letters refer to a now-settled civil action in which
EMC was named as a defendant and in which the United States (acting through the Civil Division of the Department of Justice (DoJ)) intervened. The civil
action involved allegations concerning EMC's compliance with the terms and conditions of certain agreements pursuant to which we sold products and
services to the federal government and EMC's fee arrangements with partners and systems integrators in federal government transactions. EMC reached a
settlement of all claims asserted in this action effective as of May 4, 2010, without any admission of liability or wrongdoing. The derivative demand letters
contend that the existence of the civil action serves as evidence that certain EMC officers and directors failed to exercise due care and/or failed to oversee
compliance with certain federal laws.
The matters relating to the demand letters were referred to a Special Committee of independent directors of the Board of Directors, which investigated
and made a determination regarding such allegations. At the conclusion of their investigation, the Special Committee determined in good faith that
commencing or maintaining derivative proceedings based on the allegations would not be in the best interests of EMC. In October 2009, one of the purported
shareholders filed a complaint in the Superior Court for Middlesex County in Massachusetts alleging claims for breach of fiduciary duty against EMC
directors and certain officers based on the same allegations set forth in the demand letter. In May 2010, another purported shareholder filed a complaint in the
same court making virtually identical allegations. We are defending these matters vigorously.
N. Stockholders' Equity
Net Income Per Share
The reconciliation from basic to diluted earnings per share for both the numerators and denominators is as follows (table in thousands):
2010 2009 2008
Numerator:
Net income attributable to EMC Corporation $ 1,899,995 $ 1,088,077 $ 1,275,104
Incremental dilution from VMware (9,267) (2,252) (7,516)
Net income – diluted attributable to EMC Corporation $ 1,890,728 $ 1,085,825 $ 1,267,588
Denominator:
Weighted average shares, basic 2,055,959 2,022,371 2,048,506
Weighted common stock equivalents 49,616 29,393 31,287
Assumed conversion of the Notes and associated warrants 42,356 3,382 60
Weighted average shares, diluted 2,147,931 2,055,146 2,079,853
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