VMware 2010 Annual Report Download - page 36

Table of Contents
We may not be able to resolve any potential conflicts, and even if we do, the resolution may be less favorable than if we were dealing with
an unaffiliated party.
The agreements we enter into with EMC may be amended upon agreement between the parties. While we are controlled by EMC, we may
not have the leverage to negotiate amendments to these agreements if required on terms as favorable to us as those we would negotiate with an
unaffiliated third party.
Some of our directors own EMC common stock, restricted shares of EMC common stock and/ or equity awards to acquire EMC common
stock and hold management positions with EMC, which could cause conflicts of interests that result in our not acting on opportunities we
otherwise may have.
Some of our directors own EMC common stock and/or equity awards to purchase EMC common stock. In addition, some of our directors
are executive officers and/or directors of EMC, and EMC, as the sole holder of our Class B common stock, is entitled to elect 7 of our 8
directors. Ownership of EMC common stock, restricted shares of EMC common stock and equity awards to purchase EMC common stock by
our directors and the presence of executive officers or directors of EMC on our board of directors could create, or appear to create, conflicts of
interest with respect to matters involving both us and EMC that could have different implications for EMC than they do for us. Provisions of our
certificate of incorporation and the master transaction agreement between EMC and us address corporate opportunities that are presented to our
directors or officers that are also directors or officers of EMC. There can be no assurance that the provisions in our certificate of incorporation or
the master transaction agreement will adequately address potential conflicts of interest or that potential conflicts of interest will be resolved in
our favor or that we will be able to take advantage of corporate opportunities presented to individuals who are officers or directors of both us and
EMC. As a result, we may be precluded from pursuing certain growth initiatives.
EMC
’s ability to control our board of directors may make it difficult for us to recruit independent directors.
So long as EMC beneficially owns shares of our common stock representing at least a majority of the votes entitled to be cast by the
holders of outstanding voting stock, EMC can effectively control and direct our board of directors. Further, the interests of EMC and our other
stockholders may diverge. Under these circumstances, persons who might otherwise accept our invitation to join our board of directors may
decline.
We are a “controlled company” within the meaning of the New York Stock Exchange rules and, as a result, are relying on exemptions from
certain corporate governance requirements that provide protection to stockholders of companies that are not “controlled companies.”
EMC owns more than 50% of the total voting power of our common shares and, as a result, we are a “controlled company” under the New
York Stock Exchange corporate governance standards. As a controlled company, we are exempt under the New York Stock Exchange standards
from the obligation to comply with certain New York Stock Exchange corporate governance requirements, including the requirements:
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business combinations involving us;
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our ability to engage in activities with certain channel, technology or other marketing partners;
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sales or dispositions by EMC of all or any portion of its ownership interest in us;
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the
nature, quality and pricing of services EMC has agreed to provide us;
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arrangements with third parties that are exclusionary to EMC;
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business opportunities that may be attractive to both EMC and us; and
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product or technology development or marketing activities or customer agreements which may require the consent of EMC.
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that a majority of our board of directors consists of independent directors;