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Table of Contents
VMWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Based upon VMware’s historical experience and information known as of December 31, 2007, VMware believes the liability on the above
guarantees and indemnities at December 31, 2007 is insignificant.
J. Stockholders’ Equity (Deficit)
Initial Public Offering
In August 2007, VMware completed its IPO in which the Company sold 37,950,000 shares (including 4,950,000 shares pursuant to the
underwriters’ full exercise of their over-allotment option) of its Class A common stock at a price to the public of $29.00 per share. The net
proceeds of the IPO to the Company were $1,035.2 million after deducting the offering expenses and underwriters’ discounts. In August 2007,
VMware used a portion of the proceeds to repay $350.0 million of principal on the intercompany note payable owed to EMC; VMware also
purchased its new headquarters facilities from EMC for $132.6 million which is equal to the cost expended by EMC in the construction of those
facilities.
Intel Agreement
In July 2007, VMware entered into a stock purchase agreement with Intel Corporation (“Intel”), pursuant to which Intel, through its
affiliate, Intel Capital Corporation (“Intel Capital”), agreed to purchase 9.5 million shares of VMware’s Class A common stock at $23.00 per
share for an aggregate offering price of $218.5 million. VMware has also entered into an investor rights agreement with Intel pursuant to which
Intel will have certain registration and other rights as a holder of VMware Class A common stock. Intel Capital’s purchase of the 9.5 million
shares of Class A common stock closed in August 2007.
Cisco Agreement
In July 2007, VMware was a party to a stock purchase agreement with Cisco Systems, Inc. (“Cisco”) and EMC, pursuant to which Cisco
agreed to purchase 6.0 million shares of VMware Class A common stock from EMC at $25.00 per share for an aggregate offering price of
$150.0 million. VMware received no proceeds from this transaction. VMware has also entered into an investor rights agreement with Cisco
pursuant to which Cisco will have certain registration rights as a holder of VMware Class A common stock. Cisco’s purchase of the 6.0 million
shares of Class A common stock closed in August 2007.
Class B Common Stock Conversion Rights
Each share of Class B common stock is convertible while held by EMC or its successor-in-interest at the option of EMC or its successor-
in-interest into one share of Class A common stock. If VMware’s Class B common stock is distributed to security holders of EMC in a
transaction (including any distribution in exchange for shares of EMC’s or its successor-in-interest’s common stock or other securities) intended
to qualify as a distribution under Section 355 of the Code, or any corresponding provision of any successor statute, shares of VMware’s Class B
common stock will no longer be convertible into shares of Class A common stock. Prior to any such distribution, all shares of Class B common
stock will automatically be converted into shares of Class A common stock upon the transfer of such shares of Class B common stock by EMC
other than to any of EMC’
s successors or any of its subsidiaries (excluding VMware). If such a distribution has not occurred, each share of Class
B common stock will also automatically convert at such time as the number of shares of common stock owned by EMC or its successor-in-
interest falls below 20% of the outstanding shares of VMware’s common stock. Following any such distribution, VMware may submit to its
stockholders a proposal to convert all outstanding shares of Class B common stock into shares of Class A common stock, provided that VMware
has received a favorable private letter ruling from the Internal Revenue Service satisfactory to EMC to the effect that
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