VMware 2010 Annual Report Download - page 35

Table of Contents
successor-in-interest continues to own greater than 50% of the voting control of our outstanding common stock, we will not knowingly take or
fail to take any action that could reasonably be expected to preclude EMC’s or its successor-in-interest’s ability to undertake a tax-free spin-off.
Additionally, under our certificate of incorporation and the master transaction agreement we entered into with EMC, we must obtain the consent
of EMC or its successor-in-
interest, as the holder of our Class B common stock, to issue stock or other VMware securities, excluding pursuant to
employee benefit plans (provided that we obtain Class B common stockholder approval of the aggregate annual number of shares to be granted
under such plans), which could cause us to forgo capital raising or acquisition opportunities that would otherwise be available to us. As a result,
we may be precluded from pursuing certain growth initiatives.
Third parties may seek to hold us responsible for liabilities of EMC, which could result in a decrease in our income.
Third parties may seek to hold us responsible for EMC’s liabilities. Under our master transaction agreement with EMC, EMC will
indemnify us for claims and losses’ relating to liabilities related to EMC’s business and not related to our business. However, if those liabilities
are significant and we are ultimately held liable for them, we cannot be certain that we will be able to recover the full amount of our losses from
EMC.
Although we have entered into a tax sharing agreement with EMC under which our tax liabilities effectively will be determined as if we were
not part of any consolidated, combined or unitary tax group of EMC Corporation and/or its subsidiaries, we nonetheless could be held liable
for the tax liabilities of other members of these groups.
We have historically been included in EMC’s consolidated group for U.S. federal income tax purposes, as well as in certain consolidated,
combined or unitary groups that include EMC Corporation and/or certain of its subsidiaries for state and local income tax purposes. Pursuant to
our tax sharing agreement with EMC, we and EMC generally will make payments to each other such that, with respect to tax returns for any
taxable period in which we or any of our subsidiaries are included in EMC’s consolidated group for U.S. federal income tax purposes or any
other consolidated, combined or unitary group of EMC Corporation and/or its subsidiaries, the amount of taxes to be paid by us will be
determined, subject to certain adjustments, as if we and each of our subsidiaries included in such consolidated, combined or unitary group filed
our own consolidated, combined or unitary tax return.
We have been included in the EMC consolidated group for U.S. federal income tax purposes since our acquisition by EMC, and expect to
continue to be included in such consolidated group for periods in which EMC owns at least 80% of the total voting power and value of our
outstanding stock. Each member of a consolidated group during any part of a consolidated return year is jointly and severally liable for tax on the
consolidated return of such year and for any subsequently determined deficiency thereon. Similarly, in some jurisdictions, each member of a
consolidated, combined or unitary group for state, local or foreign income tax purposes is jointly and severally liable for the state, local or
foreign income tax liability of each other member of the consolidated, combined or unitary group. Accordingly, for any period in which we are
included in the EMC consolidated group for U.S. federal income tax purposes or any other consolidated, combined or unitary group of EMC
Corporation and/or its subsidiaries, we could be liable in the event that any income tax liability was incurred, but not discharged, by any other
member of any such group.
Any inability to resolve favorably any disputes that arise between us and EMC with respect to our past and ongoing relationships may result
in a significant reduction of our revenues and earnings.
Disputes may arise between EMC and us in a number of areas relating to our ongoing relationships, including:
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labor, tax, employee benefit, indemnification and other matters arising from our separation from EMC;
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employee retention and recruiting;