VMware 2010 Annual Report Download - page 38

Table of Contents
expiration of their contractual restrictions. Additionally, EMC possesses registration rights with respect to the shares of our common stock that it
holds. If EMC chooses to exercise such rights, its sale of the shares that are registered would not be subject to the Rule 144 limitations. If a
significant amount of the shares that become eligible for resale enter the public trading markets in a short period of time, the market price of our
Class A common stock may decline.
Additionally, broad market and industry factors may decrease the market price of our Class A common stock, regardless of our actual
operating performance. The stock market in general and technology companies in particular, also have often experienced extreme price and
volume fluctuations. In addition, in the past, following periods of volatility in the overall market and the market price of a company’s securities,
securities class action litigation has often been instituted, including against us, and, if not resolved swiftly, can result in substantial costs and a
diversion of management’s attention and resources.
If securities or industry analysts cease publishing research or reports about us, our business or our market, or if they change their
recommendations regarding our stock adversely, our stock price and trading volume could decline.
The trading market for our Class A common stock will be influenced by the research and reports that industry or securities analysts may
publish about us, our business, our market or our competitors. If any of the analysts who may cover us change their recommendation regarding
our stock adversely, or provide more favorable relative recommendations about our competitors, our stock price would likely decline. If any
analyst who may cover us were to cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the
financial markets, which in turn could cause our stock price or trading volume to decline.
Delaware law and our certificate of incorporation and bylaws contain anti
-takeover provisions that could delay or discourage takeover
attempts that stockholders may consider favorable.
Provisions in our certificate of incorporation and bylaws will have the effect of delaying or preventing a change of control or changes in
our management. These provisions include the following:
35
•
the division of our board of directors into three classes, with each class serving for a staggered three
-
year term, which would prevent
stockholders from electing an entirely new board of directors at any annual meeting;
•
the right of the board of directors to elect a director to fill a vacancy created by the expansion of the board of directors;
•
following a 355 distribution of Class B common stock by EMC to its stockholders, the restriction that a beneficial owner of 10% or
more of our Class B common stock may not vote in any election of directors unless such person or group also owns at least an
equivalent percentage of Class A common stock or obtains approval of our board of directors prior to acquiring beneficial ownership
of at least 5% of Class B common stock;
•
the prohibition of cumulative voting in the election of directors or any other matters, which would otherwise allow less than a
majority of stockholders to elect director candidates;
• the requirement for advance notice for nominations for election to the board of directors or for proposing matters that can be acted
upon at a stockholders
’
meeting;
• the ability of the board of directors to issue, without stockholder approval, up to 100,000,000 shares of preferred stock with terms set
by the board of directors, which rights could be senior to those of common stock; and
•
in the event that EMC or its successor
-
in
-
interest no longer owns shares of our common stock representing at least a majority of the
votes entitled to be cast in the election of directors, stockholders may not act by written consent and may not call special meetings of
the stockholders.