VMware 2014 Annual Report Download - page 37

Table of Contents
member of the consolidated, combined or unitary group. Accordingly, for any period in which we are included in the EMC consolidated group
for U.S. federal income tax purposes or any other consolidated, combined or unitary group of EMC Corporation and/or its subsidiaries, we could
be liable in the event that any income tax liability was incurred, but not discharged, by any other member of any such group.
Any inability to resolve favorably any disputes that arise between us and EMC with respect to our past and ongoing relationships may result
in a significant reduction of our revenues and earnings.
Disputes may arise between EMC and us in a number of areas relating to our ongoing relationships, including:
We may not be able to resolve any potential conflicts, and even if we do, the resolution may be less favorable than if we were dealing with
an unaffiliated party.
The agreements we enter into with EMC may be amended upon agreement between the parties. While we are controlled by EMC, we may
not have the leverage to negotiate amendments to these agreements if required on terms as favorable to us as those we would negotiate with an
unaffiliated third party.
Our CEO and some of our directors own EMC common stock or equity awards to acquire EMC common stock, and some of our directors
hold management positions with EMC, which could cause conflicts of interests that result in our not acting on opportunities we otherwise
may have.
Our CEO and some of our directors own EMC common stock or equity awards to purchase EMC common stock. In addition, some of our
directors are executive officers or directors of EMC, and EMC, as the sole holder of our Class B common stock, is entitled to elect 8 of our 9
directors. Ownership of EMC common stock, restricted shares of EMC common stock and equity awards to purchase EMC common stock by
our directors and the presence of executive officers or directors of EMC on our board of directors could create, or appear to create, conflicts of
interest with respect to matters involving both us and EMC that could have different implications for EMC than they do for us. Provisions of our
certificate of incorporation and the master transaction agreement between EMC and us address corporate opportunities that are presented to our
directors or officers that are also directors or officers of EMC. There can be no assurance that the provisions in our certificate of incorporation or
the master transaction agreement will adequately address potential conflicts of interest or that potential conflicts of interest will be resolved in
our favor, or that we will be able to take advantage of corporate opportunities presented to individuals who are officers or directors of both us
and EMC. As a result, we may be precluded from pursuing certain growth initiatives.
EMC
’s ability to control our board of directors may make it difficult for us to recruit independent directors.
So long as EMC 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 can effectively control and direct our board of directors. Further, the interests of EMC and our other
stockholders may diverge. Under these circumstances, persons who might otherwise accept our invitation to join our board of directors may
decline.
35
•
labor, tax, employee benefit, indemnification and other matters arising from our separation from EMC;
•
our reseller arrangements with EMC;
•
employee retention and recruiting;
•
business combinations involving us;
•
our ability to engage in activities with certain channel, technology or other marketing partners;
•
sales or dispositions by EMC of all or any portion of its ownership interest in us;
•
the nature, quality and pricing of services EMC has agreed to provide us or we have agreed to provide to EMC;
•
arrangements with third parties that are exclusionary to EMC;
• arrangements with EMC for collaborative product or technology development, marketing and sales activities involving our technology,
employees and other resources;
•
business opportunities that may be attractive to both EMC and us; and
•
product or technology development or marketing activities or customer agreements which may require the consent of EMC.