VMware 2009 Annual Report Download - page 31

Table of Contents
except for the election of our Group II directors, in which case they are entitled to one vote per share, and the holders of our Class A common
stock are entitled to one vote per share of Class A common stock. The holders of Class B common stock, voting separately as a class, are entitled
to elect 80% of the total number of directors on our board of directors that we would have if there were no vacancies on our board of directors at
the time. These are our Group I directors. Subject to any rights of any series of preferred stock to elect directors, the holders of Class A common
stock and the holders of Class B common stock, voting together as a single class, are entitled to elect our remaining directors, which at no time
will be less than one director—
our Group II director(s). Accordingly, the holders of our Class B common stock currently are entitled to elect 7 of
our 8 directors.
If EMC transfers shares of our Class B common stock to any party other than a successor-in-interest or a subsidiary of EMC prior to a
distribution to its stockholders under Section 355 of the Internal Revenue Code of 1986, as amended, (a “355 distribution”), those shares will
automatically convert into Class A common stock. Additionally, if, prior to a 355 Distribution, EMC’s ownership falls below 20% of the
outstanding shares of common stock, all outstanding shares of Class B common stock will automatically convert to Class A common stock.
Following a 355 distribution, shares of Class B common stock may convert to Class A common stock if such conversion is approved by
VMware stockholders after the 355 distribution. For so long as EMC or its successor-in-interest 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 will be able to elect all of the
members of our board of directors.
In addition, until such time as EMC or its successor-in-interest beneficially owns shares of our common stock representing less than a
majority of the votes entitled to be cast by the holders of outstanding voting stock, EMC will have the ability to take stockholder action without
the vote of any other stockholder and without having to call a stockholder meeting, and holders of our Class A common stock will not be able to
affect the outcome of any stockholder vote during this period. As a result, EMC will have the ability to control all matters affecting us, including:
Our certificate of incorporation and the master transaction agreement between us and EMC also contain provisions that require that as long
as EMC beneficially owns at least 20% or more of the outstanding shares of our common stock, the prior affirmative vote or written consent of
EMC (or its successor-in-interest) as the holder of the Class B common stock is required (subject in each case to certain exceptions) in order to
authorize us to:
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the composition of our board of directors and, through our board of directors, any determination with respect to our business plans
and policies;
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any determinations with respect to mergers, acquisitions and other business combinations;
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our acquisition or disposition of assets;
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our financing activities;
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certain changes to our certificate of incorporation;
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changes to the agreements providing for our transition to becoming a public company;
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corporate opportunities that may be suitable for us and EMC;
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determinations with respect to enforcement of rights we may have against third parties, including with respect to intellectual property
rights;
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the payment of dividends on our common stock; and
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the number of shares available for issuance under our stock plans for our prospective and existing employees.
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consolidate or merge with any other entity;
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acquire the stock or assets of another entity in excess of $100 million;
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issue any stock or securities except to our subsidiaries or pursuant to our employee benefit plans;