EMC 2002 Annual Report Download - page 80

Table of Contents
EMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
January 1 and July 1, and are exercisable on the succeeding June 30 or December 31. Grants for the last three years are as follows (shares in thousands):
2002 2001 2000
Shares 11,012 5,909 1,223
Weighted average exercise price $ 5.81 $ 15.72 $ 51.72
Weighted average fair value $ 2.09 $ 6.04 $ 20.63
Issuance of Subsidiary Stock
On August 9, 2000, EMC completed the initial public offering of 14.4 million shares of Class B common stock of its indirect majority owned
subsidiary, McDATA Corporation. The offering represented approximately 13% of the McDATA common stock outstanding on August 9, 2000. McDATA
offered the shares at a price of $28 per share and realized net proceeds from the offering of $376.6 million. EMC recognized a gain of $270.5 million from the
share issuance which was recognized directly in stockholders' equity. McDATA retained the net proceeds for general corporate purposes. As of December 31,
2000, EMC owned approximately 74% of the outstanding McDATA common stock. On December 28, 2000, EMC's Board of Directors declared a stock
dividend of approximately .0368069 of a share of McDATA Class A common stock for each share of Common Stock. The dividend was distributed on
February 7, 2001 to holders of record on January 24, 2001. As a result of the distribution, EMC no longer has any equity ownership interest in McDATA.
N. Related Party Transactions
EMC has retained a company owned by the brother and uncle of members of the EMC Board of Directors as a broker to provide various forms of
corporate insurance. EMC paid such company approximately $0.6 million, $1.6 million and $2.8 million in 2002, 2001 and 2000, respectively. Such amounts
include broker's fees of $75,000, $35,000 and $70,000 in 2002, 2001 and 2000, respectively. As of December 31, 2001, approximately $26,000 was owed to
this company.
In 2002, 2001 and 2000, EMC leased certain real estate from a company owned by a member of the EMC Board of Directors and such director's
siblings, for which payments aggregated $2.2 million, $2.4 million and $2.4 million, respectively. EMC acquired such leased property in connection with its
acquisition of Data General in 1999.
In 2002, EMC acquired 3.8 million shares of Series A Preferred Stock of Diligent in exchange for $5.0 million and an equity interest in one of its
wholly owned subsidiaries, which had a net book value of $4.6 million. See Note B. Diligent is majority owned by two former EMC employees.
In 2002, EMC purchased from a company, upgrades to and additional licenses for, space planning and facilities operational software previously
installed in 1998, for which payments aggregated $75,775. A member of the EMC Board of Directors became a director of such company in 2002 and is a
principal in a limited partnership which became a stockholder of such company in 2001.
In 2001 and 2000, a distributor and provider of components supplied to EMC received payments of approximately $321,000 and $280,000,
respectively, on component sales to EMC and approximately $1.1 million and $3.0 million, respectively, on component sales to unaffiliated third parties who
in turn sold products incorporating such components to EMC. A former member of the EMC Board of Directors, who resigned in 2001, is an officer and
member of the Board of Directors of the distributor and provider.
In 2000, EMC acquired all of the issued and outstanding capital stock of Terascape Software, Inc. A member of the EMC Board of Directors is a
principal in a limited partnership, which was a stockholder of Terascape. The limited partnership received proceeds of approximately $5.9 million. The
director, together with his children, had beneficial interests of approximately $0.6 million in such proceeds.
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