VMware 2014 Annual Report Download - page 39

Table of Contents
outstanding Class A common stock or our four-week average weekly trading volume during any three-
month period and following the expiration
of their contractual restrictions. Additionally, EMC possesses registration rights with respect to the shares of our common stock that it holds. If
EMC chooses to exercise such rights, its sale of the shares that are registered would not be subject to the Rule 144 limitations. Additionally, the
provisions of our charter documents and the agreements that we entered into with EMC prior to our IPO enable EMC to elect to distribute all of
its holdings of our Class A and Class B common stock to EMC stockholders and require us to register the shares so they could be resold in the
public trading markets. If a significant amount of the shares that become eligible for resale enter the public trading markets in a short period of
time, the market price of our Class A common stock may decline. Additionally, if our Class B common stock is distributed to EMC stockholders
and remains outstanding, it would trade separately from and potentially at a premium to our Class A common stock, and could thereby contribute
additional volatility to the price of our Class A common stock.
Additionally, broad market and industry factors may decrease the market price of our Class A common stock, regardless of our actual
operating performance. The stock market in general and technology companies in particular have often experienced extreme price and volume
fluctuations. In addition, in the past, following periods of volatility in the overall market and the market price of a company’s securities,
securities class action litigation has often been instituted, including against us, and, if not resolved swiftly, can result in substantial costs and a
diversion of management’s attention and resources.
If securities or industry analysts change their recommendations regarding our stock adversely, our stock price and trading volume could
decline.
The trading market for our Class A common stock is influenced by the research and reports that industry or securities analysts publish about
us, our business, our market or our competitors. If any of the analysts who cover us change their recommendation regarding our stock adversely,
or provide more favorable relative recommendations about our competitors, our stock price would likely decline.
Delaware law and our certificate of incorporation and bylaws contain anti
-takeover provisions that could delay or discourage takeover
attempts that stockholders may consider favorable.
Provisions in our certificate of incorporation and bylaws will have the effect of delaying or preventing a change of control or changes in our
management. These provisions include the following:
Until such time as EMC or its successor-in-interest ceases to beneficially own 20% or more of the outstanding shares of our common stock,
the affirmative vote or written consent of the holders of a majority of the outstanding shares of the Class B common stock will be required to:
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• the division of our board of directors into three classes, with each class serving for a staggered three-year term, which prevents
stockholders from electing an entirely new board of directors at any annual meeting;
•
the right of the board of directors to elect a director to fill a vacancy created by the expansion of the board of directors;
• following a 355 distribution of Class B common stock by EMC to its stockholders, the restriction that a beneficial owner of 10% or
more of our Class B common stock may not vote in any election of directors unless such person or group also owns at least an
equivalent percentage of Class A common stock or obtains approval of our board of directors prior to acquiring beneficial ownership of
at least 5% of Class B common stock;
• the prohibition of cumulative voting in the election of directors or any other matters, which would otherwise allow less than a majority
of stockholders to elect director candidates;
•
the requirement for advance notice for nominations for election to the board of directors or for proposing matters that can be acted upon
at a stockholders’ meeting;
•
the ability of the board of directors to issue, without stockholder approval, up to 100,000,000 shares of preferred stock with terms set by
the board of directors, which rights could be senior to those of common stock; and
• in the event that EMC or its successor-in-interest no longer owns shares of our common stock representing at least a majority of the
votes entitled to be cast in the election of directors, stockholders may not act by written consent and may not call special meetings of the
stockholders.
•
amend certain provisions of our bylaws or certificate of incorporation;
•
make certain acquisitions or dispositions;
•
declare dividends, or undertake a recapitalization or liquidation;
• adopt any stockholder rights plan, “poison pill”
or other similar arrangement;