VMware 2013 Annual Report Download - page 53

Table of Contents
Cash used for business acquisitions during 2013 and 2011 compared to 2012, was significantly lower as a result of our acquisition of Nicira, Inc., which
occurred in 2012.
Net cash used in investing activities during 2012 compared to 2011 was also impacted by a reduction in capitalized software development costs and
purchase of leasehold interest.
Financing Activities
Net cash used in financing activities during 2013 increased compared to 2012 primarily as a result of the decrease in excess tax benefits from stock-
based
compensation and a decrease in proceeds from issuance of common stock. During 2013 , excess tax benefits from stock-based compensation were $70
compared to $138 during 2012 .
Net cash used in financing activities during 2012 also increased compared to 2011 , which is also primarily attributable to the decrease in excess tax
benefits from stock-based compensation and a decrease in proceeds from issuance of common stock. During 2012 , excess tax benefits from stock-based
compensation were $138 compared to $224 during 2011 .
Notes Payable to EMC
As of December 31, 2013 , $450 remained outstanding on a note payable to EMC, with interest payable quarterly in arrears.
On January 21, 2014 , in connection with our agreement to acquire AirWatch Holding, the sole member and equity holder of AirWatch, we and EMC
entered into a note exchange agreement providing for the issuance of three promissory notes in the aggregate principal amount of $1,500 . Of such amount,
$450 is the exchange of our promissory note issued to EMC in April 2007, as amended and restated on June 10, 2011, and the remaining $1,050 represents
new loan proceeds from EMC.
The three notes issued have the following principal amounts and maturity dates: $680 due May 1, 2018 , $550 due May 1, 2020 and $270 due December
1, 2022 .
The notes bear interest at the annual rate of 1.75% . Interest is payable quarterly in arrears. The notes may be repaid without penalty or premium. We
drew down on all three notes in late January 2014.
Off-Balance Sheet Arrangements, Contractual Obligations, Contingent Liabilities and Commitments
Guarantees and Indemnification Obligations
We enter into agreements in the ordinary course of business with, among others, customers, distributors, resellers, system vendors and systems
integrators. Most of these agreements require us to indemnify the other party against third-party claims alleging that one of our products infringes or
misappropriates a patent, copyright, trademark, trade secret or other intellectual property right. Certain of these agreements require us to indemnify the other
party against certain claims relating to property damage, personal injury, or the acts or omissions by us and our employees, agents or representatives.
We have agreements with certain vendors, financial institutions, lessors and service providers pursuant to which we have agreed to indemnify the other
party for specified matters, such as acts and omissions by us and our employees, agents, or representatives.
We have procurement or license agreements with respect to technology that we have obtained the right to use in our products and agreements. Under
some of these agreements, we have agreed to indemnify the supplier for certain claims that may be brought against such party with respect to our acts or
omissions relating to the supplied products or technologies.
We have agreed to indemnify our directors and executive officers, to the extent legally permissible, against all liabilities reasonably incurred in
connection with any action in which such individual may be involved by reason of such individual being or having been a director or officer. Our by-
laws and
charter also provide for indemnification of our directors and officers to the extent legally permissible, against all liabilities reasonably incurred in connection
with any action in which such individual may be involved by reason of such individual being or having been a director or executive officer. We also
indemnify certain employees who provide service with respect to employee benefits plans, including the members of the Administrative Committee of the
VMware 401(k) Plan, and employees who serve as directors or officers of our subsidiaries.
In connection with certain acquisitions, we have agreed to indemnify the former directors and officers 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. We typically purchase a “tail” directors’ and officers’ insurance policy, which should enable us to recover a
portion of any future indemnification obligations related to the former officers and directors of an acquired company.
We are unable to determine the maximum potential amount under these indemnification agreements due to our limited history with prior indemnification
claims and the unique facts and circumstances involved in each particular agreement. Historically, costs related to these indemnification provisions have not
been significant.
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