-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DxwIkhdRKACcLaBRynmh/8IobElKJa7g9NyWSRFy5yWPkqj9qQBCkNR18Px+YqEi 6ywhJwJkGZ6IlOZ3XeXquQ== 0000950109-95-004667.txt : 19951130 0000950109-95-004667.hdr.sgml : 19951130 ACCESSION NUMBER: 0000950109-95-004667 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951113 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DIGITAL EQUIPMENT CORP CENTRAL INDEX KEY: 0000028887 STANDARD INDUSTRIAL CLASSIFICATION: 3570 IRS NUMBER: 042226590 STATE OF INCORPORATION: MA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-05296 FILM NUMBER: 95590885 BUSINESS ADDRESS: STREET 1: 146 MAIN ST CITY: MAYNARD STATE: MA ZIP: 01754 BUSINESS PHONE: 6178975111 MAIL ADDRESS: STREET 2: 111 POWDER MILL ROAD MS02-3/F13 CITY: MAYNARD STATE: MA ZIP: 01754 10-Q 1 FORM 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the quarterly period ended SEPTEMBER 30, 1995 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 1-5296 DIGITAL EQUIPMENT CORPORATION (Exact name of registrant as specified in its charter) Massachusetts 04-2226590 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 111 Powdermill Road, Maynard, Massachusetts 01754 (Address of principal executive offices) (Zip Code) (508) 493-5111 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO. Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Number of shares of Common Stock, par value $1, outstanding as of September 30, 1995: 150,810,547. DIGITAL EQUIPMENT CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands except per share data)
Three-Month Period Ended ---------------------------------- September 30, October 1, 1995 1994 --------------- --------------- REVENUES Product sales................................. $ 1,818,659 $ 1,652,651 Service and other revenues.................... 1,452,461 1,469,821 --------------- --------------- TOTAL OPERATING REVENUES...................... 3,271,120 3,122,472 --------------- --------------- COSTS AND EXPENSES Cost of product sales......................... 1,256,678 1,230,666 Service expense and cost of other revenues.... 960,907 948,672 Research and engineering expenses............. 256,432 287,788 Selling, general and administrative expenses.. 734,434 836,367 --------------- --------------- Operating income/(loss)....................... 62,669 (181,021) Interest income............................... 17,527 7,026 Interest expense.............................. 23,419 16,726 --------------- --------------- INCOME/(LOSS) BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE..................................... 56,777 (190,721) Provision for income taxes.................... 8,606 4,352 --------------- --------------- INCOME/(LOSS) BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE............. 48,171 (195,073) Benefit due to cumulative effect of change in accounting principle....................... - 64,503 --------------- --------------- NET INCOME/(LOSS) 48,171 (130,570) Dividend on preferred stock................... 8,875 8,875 --------------- --------------- NET INCOME/(LOSS) APPLICABLE TO COMMON STOCK......................................... $ 39,296 $ (139,445) =============== =============== PER COMMON SHARE (1) INCOME/(LOSS) APPLICABLE BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE...... $ 0.26 $ (1.44) BENEFIT DUE TO CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE....................... - 0.46 NET INCOME/(LOSS) APPLICABLE PER COMMON SHARE.............................. $ 0.26 $ (0.98) =============== ===============
2 (1) Net income applicable per common share is based on the weighted average number of common shares and common share equivalents outstanding during the period: 151,574,303 for the three months ended September 30, 1995. Net loss applicable per common share is based only on the weighted average number of common shares outstanding during the period: 141,609,402 shares for the three months ended October 1, 1994. See page 7 of this report. Cash dividends on common stock have never been paid by the Corporation. The accompanying notes are an integral part of these financial statements. DIGITAL EQUIPMENT CORPORATION CONSOLIDATED BALANCE SHEETS (Dollars in thousands)
September 30, July 1, 1995 1995 --------------- --------------- ASSETS CURRENT ASSETS Cash and cash equivalents.................... $ 1,501,311 $ 1,602,148 Accounts receivable, net of allowance of $155,369 and $150,655..................... 3,048,120 3,219,082 Inventories Raw materials.............................. 643,468 595,829 Work-in-process............................ 483,257 434,408 Finished goods............................. 1,089,900 1,023,383 --------------- --------------- Total inventories............................ 2,216,625 2,053,620 Prepaid expenses, deferred income taxes and other current assets..................... 336,068 397,047 --------------- --------------- TOTAL CURRENT ASSETS......................... 7,102,124 7,271,897 --------------- --------------- Property, plant and equipment, at cost....... 5,420,574 5,475,727 Less accumulated depreciation................ (3,183,058) (3,207,005) --------------- --------------- Net property, plant and equipment............ 2,237,516 2,268,722 Other assets................................. 404,058 406,533 --------------- --------------- TOTAL ASSETS................................. $ 9,743,698 $ 9,947,152 =============== ===============
The accompanying notes are an integral part of these financial statements. 3 DIGITAL EQUIPMENT CORPORATION CONSOLIDATED BALANCE SHEETS (continued) (Dollars in thousands)
September 30, July 1, 1995 1995 --------------- --------------- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Bank loans and current portion of long-term debt............................. $ 13,201 $ 14,371 Accounts payable.............................. 951,056 1,113,160 Income taxes payable.......................... 83,948 76,757 Salaries, wages and related items............. 543,992 562,442 Deferred revenues and customer advances....... 1,081,049 1,232,050 Accrued restructuring costs................... 392,847 492,046 Other current liabilities..................... 854,606 755,466 --------------- --------------- TOTAL CURRENT LIABILITIES..................... 3,920,699 4,246,292 --------------- --------------- Deferred income taxes......................... 4,158 16 Long-term debt................................ 1,012,742 1,012,885 Postretirement and other postemployment benefits...................................... 1,210,220 1,159,679 --------------- --------------- TOTAL LIABILITIES............................. 6,147,819 6,418,872 --------------- --------------- STOCKHOLDERS' EQUITY Preferred stock, $1.00 par value (liquidation preference of $100.00 per share); authorized 25,000,000 shares; 4,000,000 shares of Series A 8-7/8% Cumulative Preferred Stock issued and outstanding........................ 4,000 4,000 Common stock, $1.00 par value; authorized 450,000,000 shares, 150,810,547 and 149,777,573 shares issued and outstanding..... 150,811 149,778 Additional paid-in capital.................... 3,571,982 3,544,712 Retained deficit.............................. (130,914) (170,210) --------------- --------------- TOTAL STOCKHOLDERS' EQUITY.................... 3,595,879 3,528,280 --------------- --------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.... $ 9,743,698 $ 9,947,152 =============== ===============
The accompanying notes are an integral part of these financial statements. 4 DIGITAL EQUIPMENT CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands)
Three-Month Period Ended ---------------------------------- September 30, October 1, 1995 1994 --------------- --------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income/(loss)............................. $ 48,171 $ (130,570) Adjustments to reconcile net income/(loss) to net cash used by operating activities: Depreciation.................................. 98,438 132,432 Amortization.................................. 16,894 18,024 Gain on disposition of other assets........... - (16,900) Other adjustments to income................... 9,292 16,271 Decrease in accounts receivable............... 170,962 435,725 Increase in inventories....................... (163,005) (234,188) (Increase)/decrease in prepaid expenses and other current assets...................... 53,768 (31,551) Decrease in accounts payable.................. (162,104) (220,756) Increase/(decrease) in taxes.................. 19,602 (5,506) Increase in salaries, wages, benefits and related items............................. 32,091 27,577 Decrease in deferred revenues and customer advances............................. (151,001) (98,739) Decrease in accrued restructuring costs....... (99,199) (225,160) Increase in other current liabilities......... 99,788 27,885 --------------- --------------- Total adjustments............................. (74,474) (174,886) --------------- --------------- Net cash flows from operating activities...... (26,303) (305,456) --------------- --------------- CASH FLOWS FROM INVESTING ACTIVITIES: Investment in property, plant and equipment... (78,486) (117,671) Proceeds from the disposition of property, plant and equipment................. 6,965 10,800 Additions to other assets..................... (20,572) (8,556) Proceeds from the disposition of other assets. 4,693 153,379 --------------- --------------- Net cash flows from investing activities...... (87,400) 37,952 --------------- --------------- Net cash flows from operating and investing activities.......................... (113,703) (267,504) --------------- ---------------
The accompanying notes are an integral part of these financial statements. 5 DIGITAL EQUIPMENT CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) (Dollars in thousands) CASH FLOWS FROM FINANCING ACTIVITIES: Payments to retire debt....................... (1,559) (23,784) Issuance of common shares..................... 23,300 460 Dividend on preferred stock................... (8,875) (8,875) --------------- --------------- Net cash flows from financing activities...... 12,866 (32,199) --------------- --------------- Net decrease in cash and cash equivalents..... (100,837) (299,703) Cash and cash equivalents at the beginning of the year......................... 1,602,148 1,180,863 --------------- --------------- Cash and cash equivalents at end of period.... $ 1,501,311 $ 881,160 =============== ===============
The accompanying notes are an integral part of these financial statements. 6 DIGITAL EQUIPMENT CORPORATION COMPUTATION OF NET INCOME/(LOSS) PER COMMON AND COMMON EQUIVALENT SHARE (Dollars in thousands except per share data)
Three-Month Period Ended ---------------------------------- September 30, October 1, 1995 1994 --------------- --------------- Net income/(loss) applicable to common and common equivalent shares...................... $ 39,296 $ (139,445) =============== =============== Weighted-average number of common shares outstanding during the period................. 149,592,266 141,609,402 Common stock equivalents from application of "treasury stock" method to unexercised and outstanding stock options................. 1,982,037 - --------------- --------------- Total weighted-average number of common and common equivalent shares outstanding during the period............................. 151,574,303 141,609,402 =============== =============== Net income/(loss) applicable per common and common equivalent share................... $ 0.26 $ (0.98) =============== ===============
The accompanying notes are an integral part of these financial statements. 7 DIGITAL EQUIPMENT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note A - Significant Accounting Policies The accompanying unaudited financial statements as of and for the period ended September 30, 1995 and October 1, 1994 have been prepared on substantially the same basis as the annual consolidated financial statements, reflecting all adustments of a normal recurring nature. In the opinion of the Corporation, the financial statements reflect all adjustments necessary for a fair presentation of the results for those periods and the financial condition at those dates. Note B - Restructuring Actions During the first three months of fiscal 1996, restructuring actions resulted in approximately 300 employee separations. The Corporation incurred costs of approximately $55 million, net of postretirement benefits curtailment gains for the first three months. Cash expenditures for employee separations were approximately $59 million in the first quarter of fiscal 1996. During the first quarter of fiscal 1996, the Corporation incurred costs of approximately $44 million for facility closures and related actions. Related cash expenditures were approximately $14 million for the first quarter of fiscal 1996. The Corporation believes that the remaining restructuring reserve balance of $393 million is adequate to cover currently planned restructuring actions, the majority of which are facilities related. Note C - Litigation Several purported class action lawsuits were filed against the Corporation during the fourth quarter of fiscal 1994 alleging violations of the Federal securities laws arising from alleged misrepresentations and omissions in connection with the Corporation's issuance and sale of Series A 8-7/8% Cumulative Preferred Stock and the Corporation's financial results for the quarter ended April 2, 1994. During fiscal 1995, the lawsuits were consolidated into three cases, which were pending before the United States District Court for the District of Massachusetts. On August 8, 1995, the Massachusetts federal court granted the defendants' motion to dismiss all three cases in their entirety. On September 6, 1995, notices of appeal were filed in two of the cases. Note D - Subsequent Events On October 2, 1995, the Corporation marked-to-market certain interest rate swap agreements resulting in a final payment of $17 million which will be amortized over the seven year remaining life of the agreements. During the initial years, the Corporation received net proceeds on these swap agreements. On October 26, 1995, the Corporation's French subsidiary entered into a one-year agreement with a major financial institution allowing it to sell an undivided ownership interest in a designated pool of trade accounts receivable (the "Receivables") to a group of investors for proceeds of up to approximately $95 million (450 million French francs). Commitment fees under the agreement are immaterial. As of November 10, 1995, no interests in the Receivables had been sold. 8 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION As an aid to understanding the Corporation's operating results, the following tables indicate the percentage relationships of income and expense items included in the statements of operations for the most recent quarter ended September 30, 1995 and the corresponding quarter ended October 1, 1994 of the preceding fiscal year, and the percentage changes in those items for such periods. Components of total costs of operating revenues are shown as percentages of their related revenues.
Income and Expense Items Percentage as a Percentage of Total Increases/ Operating Revenues (a) (Decreases) ------------------------------ ------------------------------ Three-Month Period Ended Three-Month Period Ended ------------------------------ ------------------------------ Income and Sept. 30, Oct. 1, September 30, 1995 vs Expense Items 1995 1994 October 1, 1994 ------------- ------------------------------------------------ Product sales 55.6% 52.9% 10.0% Service and other revenues 44.4% 47.1% (1.2%) ------------- ------------- Total operating revenues 100.0% 100.0% 4.8% Cost of product sales 69.1% 74.5% 2.1% Service expense and cost of other revenues 66.2% 64.5% 1.3% Total cost of operating revenues 67.8% 69.8% 1.8% Research and engineering expenses 7.8% 9.2% (10.9%) Selling, general and administrative expenses 22.5% 26.8% (12.2%) ------------- ------------- Operating income/(loss) 1.9% (5.8%) 100+% Interest income 0.5% 0.2% 100+% Interest expense 0.7% 0.5% 40.0% ------------- ------------- Income/(loss) before income taxes and cumulative effect of change in accounting principle 1.7% (6.1%) 100+% Provision for income taxes 0.3% 0.1% 97.7% ------------- ------------- Income/(loss) before cumulative effect of change in accounting principle 1.5% (6.2%) 100+% Benefit due to cumulative effect of change in accounting principle - (2.1%) (100%) ------------- ------------- Net income/(loss) 1.5% (4.2%) 100+% Dividend on preferred stock 0.3% 0.3% 0.0% ------------- ------------- Net income/(loss) applicable to common stock 1.2% (4.5%) 100+% ============= =============
Note (a) Percentage of operating revenues may not be additive due to rounding. 9 REVENUES Total operating revenues for the first three months of fiscal 1996 were $3.3 billion, up 5% from the comparable quarter last year. Total operating revenues included product sales of $1.8 billion and service and other revenues of $1.5 billion. Operating revenues from customers outside the United States were $2.1 billion, or 63% of total operating revenues, compared with $1.9 billion, or 62% of total operating revenues for the first three months of fiscal 1995. Product sales for the first three months of fiscal 1996 were up 10% from the comparable period last year, due principally to increased demand for Alpha-based systems and Intel-based personal computers. Adjusted for divestments, product sales for the quarter increased 22% compared with the same period last year. Continued increased demand for the Corporation's UNIX-based offerings and server products and increased acceptance of the Corporation's Windows NT products, contributed to the growth in Alpha-based systems revenues in the first quarter of fiscal 1996. New products and expanded distribution channels contributed to growth in demand for the Corporation's personal computer products. The Corporation also experienced growing demand for certain networks and storage subsystem products. For the quarter, Alpha-based systems revenues represented 24% of product sales, up from 19% for the same quarter last year. Revenues from Intel-based personal computers represented 27% of product sales, up from 22% for the comparable quarter last year. VAX systems revenues represented 5% of product sales, as the Corporation nears the end of a major product transition. Revenues from the Corporation's other product businesses, including storage subsystems, networks and software represented 44% of product sales for the quarter, compared with 47% for the same quarter last year. Service and other revenues for the first quarter were $1.5 billion, down slightly compared with the same quarter last year. The components of the Corporation's service revenues reflect the continuing change in the Corporation's business, including increased revenues from multivendor maintenance services, lower levels of revenues from VAX systems maintenance business and more competitive pricing. Revenues from consulting services, including systems integration and network integration services, were essentially flat compared with the same quarter last year. EXPENSES AND PROFIT MARGINS Product gross margin was 30.9% for the first three months of fiscal 1996, compared with 25.5% for the same period last year. The increase in product gross margin was due principally to a favorable hardware and software product mix, in part reflecting the effects of divestments, increased volume and improved pricing discipline. Service gross margin was 33.8% for the first quarter of fiscal 1996, compared with 35.5% for the same quarter last year. The decline in service gross margin was due principally to a continuing shift in the mix of service revenues toward lower-margin multivendor and newer service offerings. Research and engineering (R&E) expenses totaled $256 million, a decrease of 11% from $288 million in the first quarter last year. The decrease in R&E spending was principally due to the effects of divestments in the last three quarters of fiscal 1995. Selling, general and administrative (SG&A) expenses decreased 12% to $734 million for the first three months of fiscal 1996 from $836 million for the same period last year. The decrease in SG&A expenses was due principally to restructuring actions and the effects of divestments. 10 At the end of fiscal 1994, the Corporation approved a restructuring plan intended to achieve a more competitive cost structure. While certain restructuring actions remain to be implemented during the current fiscal year and beyond, the Corporation expects to meet the objectives of the plan. The total estimated cost of planned restructuring actions remains unchanged (see Note B). Employee population decreased by 200 from the end of fiscal 1995 to approximately 61,500, and by 12,300 from the end of the first quarter last year. The net effect of currency exchange rate movements on revenues was slightly positive in the first quarter of fiscal 1996 compared with the first quarter of fiscal 1995. This effect was offset substantially by the effects of currency exchange rate movements on non-dollar denominated costs and by competitive responses to market conditions resulting from currency fluctuations. Interest income for the first quarter of fiscal 1996 was $18 million, compared with $7 million in the same quarter last year, reflecting significantly higher cash balances and higher interest rates. Interest expense was $23 million for the first three months of fiscal 1996, compared with $17 million for the first three months of last year. For the first quarter of fiscal 1996, interest expense relating to interest rate swap agreements was approximately $1 million, compared with a reduction of interest expense of approximately $3 million in the same quarter last year (see Note D). Income tax expense was $9 million for the first three months of fiscal 1996, compared with $4 million for the same period last year. Income tax expense reflects several factors, including income taxes provided for profitable operations, benefits taken from net operating loss carryforwards in certain non- U.S. operations and an inability to recognize currently certain non-U.S. tax benefits from operating losses. AVAILABILITY OF FUNDS TO SUPPORT CURRENT AND FUTURE OPERATIONS AND SPENDING FOR OPERATIONS Cash and cash equivalents totaled $1.5 billion at the end of the first quarter of fiscal 1996, down from $1.6 billion at the end of fiscal 1995. Net cash used for operating activities was $26 million for the first three months of fiscal 1996, due principally to increased inventory to support demand for Alpha products, higher than planned inventory due to manufacturing delays resulting from component shortages, and decreased accounts payable. Cash expenditures for restructuring in the quarter were approximately $73 million. The Corporation currently estimates that cash expenditures for restructuring actions for the remainder of fiscal 1996 will be approximately $200 million (see Note B). Net cash used for investing activities was $87 million for the first three months of fiscal 1996 due principally to capital spending. Net cash flows generated from financing activities in the first three months were $13 million, due principally to the issuance of stock under employee stock plans, offset by the payment of a dividend on the preferred stock. The Corporation's need for, cost of and access to funds are dependent on future operating results, as well as conditions external to the Corporation. The Corporation historically has maintained a conservative capital structure, and believes that its current cash position and its sources of and access to capital are adequate to support current and future operations. 11 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS As previously reported, several purported class action lawsuits were filed against the Corporation during the fourth quarter of fiscal 1994 alleging violations of the Federal securities laws arising from alleged misrepresentations and omissions in connection with the Corporation's issuance and sale of Series A 8-7/8% Cumulative Preferred Stock and the Corporation's financial results for the quarter ended April 2, 1994. During fiscal 1995, the lawsuits were consolidated into three cases, which were pending before the United States District Court for the District of Massachusetts. On August 8, 1995, the Massachusetts federal court granted the defendants' motion to dismiss all three cases in their entirety. On September 6, 1995, notices of appeal were filed in two of the cases. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. On November 9, 1995, the Corporation held its Annual Meeting of Stockholders. At the meeting the stockholders elected three Class III Directors for three-year terms. 115,311,012 votes were cast for the nominees for Class III Directors, 1,294,515 votes were withheld and there were no broker non-votes. 114,973,597 votes were cast for Colby H. Chandler, a nominee for Class III Director and 1,631,930 votes were withheld. 115,143,222 votes were cast for Arnaud de Vitry, a nominee for Class III Director and 1,462,305 votes were withheld. 115,143,536 votes were cast for Thomas P. Gerrity, a nominee for Class III Director and 1,461,991 votes were withheld. At the meeting the stockholders also approved the Corporation's 1995 Equity Plan ("1995 Equity Plan") and the Corporation's 1995 Stock Option Plan for Nonemployee Directors ("1995 Nonemployee Directors Plan"). 70,975,945 votes were cast for the proposal to approve the 1995 Equity Plan and 23,420,130 votes were cast against, with 692,733 abstentions and 21,516,719 broker non-votes; 86,017,361 votes were cast for the proposal to approve the 1995 Nonemployee Directors Plan and 8,313,566 votes were cast against, with 757,881 abstentions and 21,516,719 broker non- votes. The stockholders also ratified the selection of Coopers & Lybrand L.L.P. as the Corporation's auditors. 115,850,050 votes were cast for the ratification and 377,286 were cast against, with 378,191 abstentions and no broker non-votes. At the meeting, a stockholder proposal relating to declassification of the Board of Directors also was approved. 57,618,885 votes were cast for approval of the proposal, 35,469,874 were cast against, with 2,031,642 abstentions and 21,485,126 broker non-votes. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits 10(a) - Digital Equipment Corporation 1981 International Employee Stock Purchase Plan, as amended. 10(b) - Digital Equipment Corporation SAVE Restoration Plan (as Established Effective as of July 1, 1995). (b) Reports on Form 8-K. No reports on Form 8-K were filed by the Corporation during the period covered by this report. 12 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DIGITAL EQUIPMENT CORPORATION (Registrant) By /s/ Vincent J. Mullarkey Vincent J. Mullarkey Vice President, Finance and Chief Financial Officer (Duly Authorized Officer and Principal Financial Officer) November 13, 1995 13 EX-10.A 2 EMP STOCK PURCHASE PLAN DIGITAL EQUIPMENT CORPORATION 1981 INTERNATIONAL EMPLOYEE STOCK PURCHASE PLAN (Amended effective as of December 1, 1995) Article 1--Purpose This 1981 International Employee Stock Purchase Plan (the 'Plan') is intended as an incentive and to encourage stock ownership by all eligible employees of the Participating Subsidiaries of Digital Equipment Corporation (the 'Company') so that they may share in the fortunes of the Company by acquiring or increasing their proprietary interest in the Company. The Plan is designed to encourage eligible employees to remain in the employ of the Company or its subsidiaries. Article 2--Eligible Employees In general, all employees of any of the Participating Subsidiaries of the Company who have completed six months employment with the Company or any of its subsidiaries shall be eligible to receive options under this Plan to purchase the Company's Common Stock. In certain instances, a Participating Subsidiary which has branches in more than one country may desire to implement the Plan in fewer than all countries in which its branches are located. In such an instance, upon approval by the Company's Board of Directors or the Committee (as defined in Article 18), only participating eligible employees of the branches located within the country or countries where implementation is desired will be granted options under this Plan. Participating eligible employees who have been so employed for six months or more on the first day of the Payment Period shall receive their options as of such day. Persons who attain the status of employment for six months or more after the date on which the initial options are granted under this Plan shall be granted options, if they elect to participate in the Plan, on the next date on which options are granted to all participating eligible employees. In no event may an employee be granted an option if such employee is a director of the Company. Article 3--Stock Subject To The Plan The stock subject to the options shall be shares of the Company's authorized but unissued Common Stock or shares of Common Stock reacquired by the Company including shares purchased in the open market. The aggregate number of shares which may be issued pursuant to the Plan is 13,600,000 subject to increase or decrease by reason of stock split-ups, reclassifications, stock dividends, changes in par value and the like. 1 Article 4--Payment Periods And Stock Options The six-month periods, June 1 to November 30 and December 1 to May 31, are Payment Periods during which payroll deductions will be accumulated under the Plan. Each Payment Period includes only regular pay days falling within it. Twice each year, on the first business day of each Payment Period, each Participating Subsidiary will grant to each eligible employee who is then a participant in the Plan an option to purchase on the last day of such Payment Period, at the Option Price hereinafter provided for, such number of shares of the Common Stock of the Company reserved for the purpose of the Plan as does not exceed the greater of the number of shares equal in value to 10% of the employee's total earned cash compensation divided by the price determined in accordance with (i) below on condition that such employee remains eligible to participate in the Plan throughout such Payment Period. The foregoing limitation on the number of shares which may be granted in any Payment Period is subject to increase or decrease by reason of stock split-ups, reclassifications, stock dividends, changes in par value and the like. The participant shall be entitled to exercise such options so granted only to the extent of his accumulated payroll deductions on the last day of such Payment Period. The Option Price for each Payment Period shall be the lesser of (i) 85% of the average market price of the Company's Common Stock on the first business day of the Payment Period, rounded up to avoid fractions other than 1/4, 1/2 and 3/4, or (ii) 85% of the average market price of the Company's Common Stock on the last business day of the Payment Period, rounded up to avoid fractions other than 1/4, 1/2 and 3/4. In the event of an increase or decrease in the number of outstanding shares of Common Stock of the Company through stock split-ups, reclassifications, stock dividends, changes in par value and the like, an appropriate adjustment shall be made in the number of shares and Option Price per share provided for under the Plan, either by a proportionate increase in the number of shares and a proportionate decrease in the Option Price per share, or by a proportionate decrease in the number of shares and a proportionate increase in the Option Price per share, as may be required to enable an eligible employee who is then a participant in the Plan as to whom an option is exercised on the last day of any then current Payment Period to acquire such number of full shares as his accumulated payroll deductions on such date will pay for at the adjusted Option Price. For purposes of this Plan the term 'average market price' means the average of the high and low prices of the Common Stock of the Company on the New York Stock Exchange or such other national securities exchange as shall be designated by the Board of Directors. For purposes of this Plan the term 'business day' as used herein means a day on which there is trading on the New York Stock Exchange or such other national securities exchange as shall be designated by the Board of Directors pursuant to the preceding paragraph. 2 Article 5--Exercise Of Option Each eligible employee who continues to be a participant in the Plan on the last business day of a Payment Period shall be deemed to have exercised his option on such date and shall be deemed to have acquired the number of full shares of Common Stock reserved for the purpose of the Plan as his accumulated payroll deductions on such date will pay for at such Option Price. If a participant is not an employee on the last business day of a Payment Period, he shall not be entitled to exercise his option. Article 6--Supplementary Contributions and Unused Payroll Deductions (a) Only full shares of Common Stock may be purchased under the Plan. Subject to the limitations set forth below, unused payroll deductions remaining in an employee's account at the end of a Payment Period will be carried forward to the succeeding Payment Period. However, in no event will the amount of unused payroll deductions carried forward from a Payment Period exceed the Option Price per share for that Payment Period. If for any Payment Period the amount of unused payroll deductions should exceed the Option Price per share of stock, the amount of the excess for any participant shall be refunded to such participant. (b) An employee who has completed a Payment Period shall have the right to make a supplementary contribution in an amount equal to the Option Price for the most recently completed Payment Period less the unused payroll deductions being carried forward. The election to make a supplementary contribution shall be made by written notice received by the Participating Subsidiary's personnel office (the 'Personnel Office') no later than 10 days after the beginning of the Payment Period in which the supplementary contribution is to be made and shall remain in effect through all succeeding Payment Periods until revoked by written notice received by the Personnel Office no later than 10 days after the beginning of the Payment Period to which such notice applies. (c) An employee initially entering the Plan will be permitted to make a supplementary contribution in an amount equal to the Option Price for the most recently completed Payment Period. An election to make such supplementary contribution shall be made by written notice received by the Personnel Office no later than 10 days after the beginning of the Payment Period in which the employee's supplementary contribution is to be made. An election under this paragraph by an employee initially entering the Plan shall constitute an election to make supplementary contributions for succeeding Payment Periods, subject to the terms and conditions of paragraph (b) above. Article 7--Authorization For Entering Plan In addition to any procedures adopted by the Participating Subsidiary, each eligible employee entering the Plan must fill out, sign and deliver to the Personnel Office an Authorization: 3 (a) stating the percentage to be deducted regularly from his pay; (b) authorizing the purchase of stock for him in each Payment Period in accordance with the terms of the Plan; and (c) specifying the exact name in which stock purchased for him is to be issued as provided under Article 11 hereof. Such Authorization must be received by the Personnel Office at least 10 days before the beginning date of such next succeeding Payment Period. Unless an employee files a new Authorization or withdraws from the Plan, his deductions and purchases under the Authorization he has on file under the Plan will continue as long as the Plan remains in effect. The Participating Subsidiary will accumulate and hold for the employee's account the amounts deducted from his pay. No interest will be paid on it. Article 8--Maximum Amount Of Payroll Deductions An employee may authorize payroll deductions in an amount not less than 2% but not more than 10% of his regular base pay. In addition, an employee shall be entitled to make supplementary contributions pursuant to Article 6 hereof. Article 9--Change In Payroll Deductions Deductions may be increased or decreased only once in a Payment Period. A new Authorization will be required and must be received by the Personnel Office. Article 10--Withdrawal From The Plan An employee may withdraw from the Plan, in whole but not in part, at any time prior to the last business day of each Payment Period by delivering a Withdrawal Notice to the Personnel Office, in which event the Participating Subsidiary will promptly refund the entire balance of his deductions not theretofore used to purchase stock under the Plan. An employee who withdraws from the Plan is like an employee who has never entered the Plan. To re-enter, he must file a new Authorization at least 10 days before the beginning date of the next Payment Period which cannot, however, become effective before the beginning of the next Payment Period following his withdrawal. Article 11--Issuance Of Stock A participant will receive Statements of Ownership for stock purchased under the Plan, or may elect to receive stock certificates instead of Statements of Ownership. 4 Stock purchased under the Plan will be issued only in the name of the employee, or if his Authorization so specifies, in the name of the employee and another person of legal age as joint tenants with rights of survivorship. Article 12--No Transfer Or Assignment Of Employee's Rights An employee's rights under the Plan are his alone and may not be transferred or assigned to, or availed of by, any other person. Any option granted to an employee may be exercised only by him. Article 13--Termination Of Employee's Rights An employee's rights under the Plan will terminate when he ceases to be an employee because of retirement, resignation, lay-off, discharge, death, change of status, or for any other reason. A Withdrawal Notice will be considered as having been received from the employee on the day his employment ceases, and all payroll deductions not used to purchase stock will be refunded. If an employee's payroll deductions are interrupted by any legal process, a Withdrawal Notice will be considered as having been received from him on the day the interruption occurs. Article 14--Termination And Amendments To Plan The Plan may be terminated at any time by the Company's Board of Directors. It will terminate in any case when all or substantially all of the unissued shares of stock reserved for the purposes of the Plan have been purchased. If at any time shares of stock reserved for the purpose of the Plan remain available for purchase but not in sufficient number to satisfy all then unfilled purchase requirements, the available shares shall be apportioned among participants in proportion to their options and the Plan shall terminate. Upon such termination or any other termination of the Plan, all payroll deductions not used to purchase stock will be refunded. The Board of Directors also reserves the right to amend the Plan from time to time in any respect provided, however, that no amendment shall be effective without prior approval of the stockholders, which would (a) except as provided in Articles 3 and 4, increase the number of shares of Common Stock to be offered above or (b) change the class of employees eligible to receive options under the Plan. Article 15--Limitations On Sale Of Stock Purchased Under The Plan The Plan is intended to provide common stock for investment and not for resale. The Company does not, however, intend to restrict or influence any employee in the conduct of his own affairs. An employee may, therefore, sell stock purchased under the Plan at any time he chooses. The employee assumes the risk of any market fluctuations in the price of such stock. 5 Article 16--Payment Of Expenses Related To Plan The Company and the Participating Subsidiaries will bear all costs of administering and carrying out the Plan. Article 17--Participating Subsidiaries The term 'Participating Subsidiaries' shall mean subsidiaries of the Company which are designated by the Board of Directors to participate in the Plan. The Board of Directors shall have the power to make such designation before or after the Plan is approved by the stockholders. Article 18--Administration Of The Plan The Plan shall be administered by a committee appointed by the Board of Directors of the Company (the 'Committee'). The Committee shall consist of not less than three members of the Company's Board of Directors. The Board of Directors may from time to time remove members from, or add members to, the Committee. Vacancies on the Committee, howsoever caused, shall be filled by the Board of Directors. The Committee shall select one of its members as Chairman, and shall hold meetings at such times and places as it may determine. Acts by a majority of the Committee, or acts reduced to or approved in writing by a majority of the members of the Committee, shall be the valid acts of the Committee. The interpretation and construction by the Committee of any provisions of the Plan or of any option granted under it shall be final unless otherwise determined by the Board of Directors. The Committee may from time to time adopt such rules and regulations for carrying out the Plan as it may deem best. No member of the Board of Directors or the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any option granted under it. Article 19--Optionees Not Stockholders Neither the granting of an option to an employee nor the deductions from his pay shall constitute such employee a stockholder of the shares covered by an option until such shares have been purchased by and issued to him. Article 20--Application Of Funds The proceeds received by the Company from the sale of Common Stock pursuant to options granted under the Plan will be used for general corporate purposes. Article 21--Governmental Regulation The Company's obligation to sell and deliver shares of the Company's Common Stock under this Plan is subject to the approval of any governmental 6 authority required in connection with the authorization, issuance or sale of such stock. Article 22--Approval Of Stockholders The Plan was adopted by the Company's Board of Directors on August 10, 1981, subject to approval by the stockholders of the Company. The Plan was approved by the stockholders on November 5, 1981. 7 EX-10.B 3 DEC SAVE RESTORATION PLAN DIGITAL EQUIPMENT CORPORATION SAVE RESTORATION PLAN (AS ESTABLISHED EFFECTIVE AS OF JULY 1, 1995) TABLE OF CONTENTS ARTICLE 1 .................................................................................... 1 Introduction............................................................................. 1 Section 1.1 Definitions.......................................................... 1 Section 1.2 Background and Purpose............................................... 1 Section 1.3 Legal Status......................................................... 1 Section 1.4 Appendix A........................................................... 1 ARTICLE 2 .................................................................................... 2 Eligibility and Participation............................................................ 2 Section 2.1 Eligible Employees................................................... 2 Section 2.2 Participation........................................................ 2 Section 2.3 Establishment of Accounts............................................ 2 ARTICLE 3 .................................................................................... 3 Credits and Other Adjustments to Accounts................................................ 3 Section 3.1 Credits to Accounts for the 1995 Plan Year........................... 3 Section 3.2 Credits to Accounts for Plan Years after 1995........................ 3 Section 3.3 Other Adjustments to Accounts........................................ 4 ARTICLE 4 .................................................................................... 5 Payments................................................................................. 5 Section 4.1 Source of Payments................................................... 5 Section 4.2 Payments to Participants After Termination........................... 5 Section 4.3 Payments after a Participant's Death................................. 6 Section 4.4 No Adjustments after Payment is Determined........................... 7 Section 4.5 No Assignment or Alienation.......................................... 7 Section 4.6 Miscellaneous Payment Rules.......................................... 7 Section 4.7 Forfeiture........................................................... 8 ARTICLE 5 .................................................................................... 9 Administration........................................................................... 9 Section 5.1 Plan Administration and Interpretation............................... 9 Section 5.2 Claims and Claims Review Procedure................................... 9 Section 5.3 Indemnification...................................................... 9 ARTICLE 6 ................................................................................... 10 Special Rules for Participating Subsidiaries............................................ 10 Section 6.1 Different Source of Payments........................................ 10 Section 6.2 Change in Subsidiary Status......................................... 10
ARTICLE 7 ................................................................................... 11 Amendment and Termination............................................................... 11 Section 7.1 Amendment or Termination............................................ 11 Section 7.2 Effect of Amendment or Termination.................................. 11 ARTICLE 8 ................................................................................... 12 Miscellaneous........................................................................... 12 Section 8.1 No Enlargement of Employee Rights................................... 12 Section 8.2 Liability of the Company............................................ 12 Section 8.3 Corporate Successors................................................ 12 Section 8.4 Applicable Law and Construction..................................... 12 ARTICLE 9 ................................................................................... 13 Glossary................................................................................ 13 APPENDIX A ................................................................................... 1
ARTICLE 1 INTRODUCTION ------------ SECTION 1.1 Definitions. Certain capitalized words used in this document ----------- are defined in the glossary in Article 9. SECTION 1.2 Background and Purpose. The Company maintains SAVE, which is ---------------------- a profit sharing plan qualified under Section 401(a) of the Code. Certain qualification requirements of the Code limit the amount of Elective Contributions that can be made to SAVE on behalf of certain highly compensated Employees, and limit the amount of Matching Contributions that may be made on behalf of those Employees. In particular, Section 401(a)(30) of the Code limits the Elective Contributions to SAVE, for any Employee for a calendar year, to the dollar amount described in Section 402(g) of the Code (e.g., $9,240 for 1995) ---- and Section 401(a)(17) of the Code limits the amount of an Employee's compensation (to, e.g., $75,000 for the six-month plan year beginning July 1, ---- 1995) which may be taken into account under SAVE in determining the contributions that may be made to SAVE by or on behalf of an Employee. The purpose of this Plan is to provide deferred compensation, subject to the conditions set forth in the Plan, to the Employees for whom contributions under SAVE are limited by the Code provisions described above. In general, the amount of the deferred compensation credited under this Plan to a Participant for any Plan Year is equal to the amount of Matching Contributions that would have been made to SAVE, based on Compensation in excess of the limit in Section 401(a)(17) of the Code, assuming that the Participant had deferred six percent (6%) of his or her Compensation under SAVE, without applying the limits required by Sections 401(a)(17) and 401(a)(30) to the Participant's Elective Contributions. Section 1.3 Legal Status. The Plan is not qualified under Section 401(a) ------------ of the Code. The generally applicable provisions of the Plan are intended to provide for the deferral of income to the termination of employment (or beyond) and, to that extent, establish a "pension plan" under ERISA, which constitutes "a plan which is unfunded and is maintained . . . for the purpose of providing deferred compensation to a select group of management or highly compensated employees" as described in Sections 201(2), 301(a)(3), and 401(a)(1) of ERISA and 29 C.F.R. Section 2520.104-23. SECTION 1.4 Appendix A. Appendix A to this Plan provides certain special ---------- rules to establish and govern a separate short-term deferred compensation arrangement applicable only with respect to the Plan Year beginning July 1, 1995 to certain SAVE Members not covered by the generally applicable provisions of this Plan. 1 ARTICLE 2 ELIGIBILITY AND PARTICIPATION ----------------------------- SECTION 2.1 Eligible Employees. An Employee is an Eligible Employee if ------------------ he or she is a SAVE Member and his or her SAVE Compensation for any Plan Year equals the limit described in Section 401(a)(17) of the Code (as applicable to such Plan Year). SECTION 2.2 Participation. An Eligible Employee will become a ------------- Participant in this Plan when an amount is first credited to his or her Account in accordance with Article 3. An Eligible Employee who becomes a Participant will continue to be a Participant until the earlier of his or her death or the date that his or her Account is reduced to zero (0) in accordance with the terms of the Plan. SECTION 2.3 Establishment of Accounts. The Company will establish a book ------------------------- Account in the name of each Participant at the time that an amount is first credited to him or her under Article 3. A Participant's Account will thereafter be adjusted as provided in this Plan. The sole purpose of a Participant's Account will be to calculate the amount payable to or in behalf of that Participant under this Plan. 2 ARTICLE 3 CREDITS AND OTHER ADJUSTMENTS TO ACCOUNTS ----------------------------------------- SECTION 3.1 Credits to Accounts for the 1995 Plan Year. ------------------------------------------ As of December 31, 1995, the Company will credit the Account of a Participant with an amount equal to two percent (2%) of that Participant's Compensation for the 1995 Plan Year minus the sum of the Matching Contributions ----- that have been and are to be made for that Participant under SAVE for the plan year of SAVE ending December 31, 1995, if that Participant has satisfied both of the following conditions for that Plan Year: (a) Either (i) for the 1995 calendar year, the amount of Elective ------ Contributions made on behalf of that Participant under SAVE equals $9,240 (i.e., ---- the limit described in Section 402(g) of the Code, as applicable for the 1995 calendar year), or (ii) Elective Contributions are made on behalf of that -- Participant throughout the plan year of SAVE ending December 31, 1995 at the maximum percentage rate of SAVE Compensation permitted under SAVE with respect to that Participant for that plan year. (b) For the 1995 Plan Year, that Participant's SAVE Compensation equals $75,000 (i.e., the limit described in Section 401(a)(17) of the Code, as ---- applicable for the 1995 Plan Year). SECTION 3.2 Credits to Accounts for Plan Years after 1995. --------------------------------------------- (a) The Company will credit amounts to the Account of a Participant under this Section for Plan Years after the 1995 Plan Year, if the Participant has satisfied both of the following conditions for that Plan Year: (i) Either (A) for the calendar year that ends with the end of that ------ Plan Year, the amount of Elective Contributions made on behalf of the Participant under SAVE equals the limit described in Section 402(g) of the Code, as applicable for that calendar year, or (B) Elective Contributions -- are made on behalf of that Participant throughout the plan year of SAVE ending with the end of such Plan Year at the maximum percentage rate of SAVE Compensation permitted under SAVE with respect to that Participant for that plan year. (ii) For that Plan Year, that Participant's SAVE Compensation equals the limit described in Section 401(a)(17) of the Code, as applicable for that Plan Year. (b) As of each date during a Plan Year (after the 1995 Plan Year) that a Participant who has satisfied the requirements of paragraph (a) of this Section (for that Plan Year) is paid 3 Excess Compensation by the Company, the Company shall credit to the Account of that Participant an amount equal to two percent (2%) of that Participant's Excess Compensation. (c) In addition to the amounts credited under paragraph (b) of this Section, as of a date no later than December 31 of each Plan Year after the 1995 Plan Year, the Company will credit to the Account of each Participant who has satisfied the requirements of paragraph (a) of this Section (for that Plan Year) an amount equal to (i) two percent (2%) of that Participant's Compensation for that Plan Year, minus ----- (ii) the sum of (A) the amounts credited to that Participant's Account under paragraph (b) of this Section for that Plan Year, plus (B) ---- the Matching Contributions that have been made or are to be made for that Participant under SAVE for the plan year of SAVE ending with that December 31. SECTION 3.3 Other Adjustments to Accounts. ----------------------------- (a) Amounts credited under Section 3.1 or Section 3.2 will be adjusted (positively or negatively) as if they were funds invested in the SAVE Investment Alternatives, as provided in this Section; however, this Plan is an unfunded plan, as is described more fully in Section 4.1. (b) Amounts contributed by or for the benefit of a SAVE Member under SAVE are allocated, in accordance with the instructions of that SAVE Member, among the SAVE Investment Alternatives. As amounts are credited to a Participant's Account under this Plan (in accordance with Section 3.1 or 3.2), those amounts will be treated for purposes of this Section as if they were funds allocated among the SAVE Investment Alternatives, in the same proportion as amounts contributed at the same time under SAVE would be allocated. (c) Amounts standing to the credit of a SAVE Member's account under SAVE may be reallocated among the SAVE Investment Alternatives, in accordance with that SAVE Member's instructions. Whenever a Participant reallocates amounts standing to the credit of his or her account under SAVE among the SAVE Investment Alternatives, the amounts standing to the credit of that Participant's Account under this Plan will be treated for purposes of this Section as if they were funds that are reallocated among the SAVE Investment Alternatives in the same proportion as amounts under that Participant's SAVE account are reallocated. (d) If a Participant under this Plan has no account under SAVE, the amounts standing to the credit of his or her Account under this Plan will be treated as if they were funds allocated among the SAVE Investment Alternatives in accordance with instructions provided by the Participant under procedures established by the Company. 4 ARTICLE 4 PAYMENTS -------- SECTION 4.1 Source of Payments. Nothing in this Plan will be construed ------------------ to create a trust or to obligate the Company or any other person to segregate a fund, to purchase an insurance contract, or in any other way to fund currently the future payment of any benefits hereunder, nor will anything in this Plan be construed to give any Participant or any other person rights to any specific assets of the Company or of any other person. In particular, although Section 3.3 provides for the adjustment of Accounts as though they were funds invested in the SAVE Investment Alternatives, amounts standing to the credit of Participants' Accounts do not in fact constitute funds invested in those alternatives and no Participant or Beneficiary shall be considered to have any interest in any such alternatives based upon Section 3.3. Any amounts which become payable hereunder will be paid solely from the general assets of the Company (or, in the circumstances described in Article 6, solely from the general assets of the relevant Subsidiary), and no Participant or Beneficiary (or any other person) shall have any right, other than the right of an unsecured general creditor, against the Company (or the relevant Subsidiary) with respect to amounts payable hereunder. Nothing in this Plan constitutes a guaranty by the Company or any other entity or person that the assets of the Company (or the relevant Subsidiary) will be sufficient to make any payment hereunder. SECTION 4.2 Payments to Participants After Termination. ------------------------------------------ (a) General Rules. A Participant may elect to have the amounts standing ------------- to the credit of his or her Account paid to him or her following his or her Termination in a lump sum or in installments, subject to the conditions set forth in this Section. Such an election will be valid only if it is filed with and received by the Company (in a form and manner that is consistent with procedures prescribed by the Company) at least twelve (12) months prior to the Participant's Termination. Once it has become valid, such an election shall be revoked only upon the date (if any) that a subsequently filed election of the same Participant becomes valid. On the first anniversary of the date it is received by the Company, that subsequent election will become valid, and will revoke and supersede any election of that Participant that had previously become valid, if that Participant has not had a Termination prior to that first anniversary. (b) Lump Sum. If at the time of a Participant's Termination, he or she -------- has in effect a valid election for a lump sum payment, the amount standing to the credit of his or her Account will be determined as of the Payment Valuation Date next following the close of the Plan Year in which his or her Termination occurs, and will be paid to him or her within a reasonable time thereafter. (c) Installments. A Participant's election for installments will be valid ------------ only if the 5 generally applicable conditions described in paragraph (a) above are satisfied and (i) as of the Payment Valuation Date next following the close of the Plan - - --- Year during which the Participant's Termination occurs, the amount standing to the credit of that Participant's Account exceeds $100,000; and (ii) the election --- specifies that payments are to be made in installments that meet the requirements of this paragraph (c). Installment payments under such an election will be made annually, for up to five (5) years. The amount of each such installment payment will be determined as of a Payment Valuation Date, beginning with the Payment Valuation Date next following the close of the Plan Year in which the Participant's Termination occurs, and will be paid to the Participant within a reasonable time thereafter. The amount of each such installment payment will equal the amount standing to the credit of the Participant's Account on the Payment Valuation Date as of which the amount of the payment is determined, divided by the number of annual payments remaining to be made (including the payment then being determined). (d) No Valid Election. If at the time of a Participant's Termination ----------------- there is no valid election in effect under this Section, the amount standing to the credit of his or her Account will be determined as of the Payment Valuation Date next following the close of the Plan Year in which his or her Termination occurs and will be paid to him or her within a reasonable time thereafter. SECTION 4.3 Payments after a Participant's Death. ------------------------------------ (a) As of a date determined by the Company, within a reasonable time following the date of a Participant's death, the amount standing to the credit of his or her Account will be determined and paid in a lump sum to that Participant's Beneficiary or Beneficiaries. The preceding sentence will apply regardless of whether the Participant had a Termination prior to his or her death or whether payments had begun to the Participant under Section 4.2. (b) For purposes of this Section, a Participant's Beneficiary or Beneficiaries are the person or persons entitled to receive a death benefit in respect of that Participant under SAVE or, in the case of a Participant who does not have an account under SAVE at the time of his or her death, the person or persons who would have been entitled to receive a death benefit in respect of that Participant, if the Participant had had an account under SAVE at the time of his or her death and had no valid beneficiary designation in effect at that time. (c) If upon his or her death a Participant has an account under SAVE, the amount described in paragraph (a) of this Section will be paid to that Participant's Beneficiary or Beneficiaries in the same proportion as that Participant's death benefit under SAVE is payable to those Beneficiaries. If upon his or her death a Participant has no account under SAVE, the amount described in paragraph (a) of this Section will be paid to that Participant's Beneficiary or Beneficiaries in the same proportions a death benefit would have been paid under SAVE if that Participant had had an account under SAVE at the time of his death. 6 SECTION 4.4 No Adjustments after Payment is Determined. Whenever the ------------------------------------------ amount of a payment is to be determined under this Article (or any other provision of the Plan) as of a date (whether a Payment Valuation Date or otherwise) and paid after that date, that amount will be determined as of the close of business as of that date and no adjustment will be made to the amount to be paid (under Section 3.3 or otherwise) for the period following the date as of which the amount is determined. SECTION 4.5 No Assignment or Alienation. Except to the extent otherwise --------------------------- required by applicable law, amounts payable under this Plan will not be subject to alienation, assignment, garnishment, execution, or levy of any kind, and any attempt to cause any such amount to be so subjected shall be null, void, and of no effect and will not be recognized. SECTION 4.6 Miscellaneous Payment Rules. --------------------------- (a) A Participant's Account will be charged with the amount of a payment as of the Payment Valuation Date for which the payment is determined (or, in the case of the payment to a Beneficiary, as of the date after the Participant's death on which the determination is made). (b) If any person entitled to a payment under the Plan is deemed by the Company to be incapable of personally receiving and giving a valid receipt for such payment, then, unless and until claim therefor shall have been made by a duly appointed guardian or other legal representative of such person, the Company may provide for such payment or any part thereof to be made to any other person or institution then contributing toward or providing for the care and maintenance of such person. Any such payment shall be a payment for the account of such person and a complete discharge of any liability of the Company and the Plan therefor. (c) All amounts to be paid hereunder may be paid in cash or cash equivalents (including, without limitation, a check drawn on a bank account of the Company). (d) Notwithstanding any provision hereof, there may be deducted and withheld from any payment to be made hereunder such taxes or other amounts which the Company reasonably determines should be deducted and withheld to comply with applicable laws, regulations, orders, or rulings of any court, agency, or other governmental organization. (e) It is the responsibility of the Participants and the Beneficiaries to keep the Company informed of their current addresses. The Company will not be obligated to search for the whereabouts of any person and no payment will be required to be made under this Plan where the Company has not been informed of the current address of the Participant or Beneficiary to whom payment would otherwise be made. If the current address of a Participant or Beneficiary is not known by the Company at the time payment is to be made, the Company may in its sole discretion decide to make payment hereunder as if that person had died (in which case, the obligation to make such payment to such person shall be 7 considered discharged) or decide to refrain from making any payment at that time. SECTION 4.7 Forfeiture. Notwithstanding any other provision of this ---------- Plan, no payment will be made under this Plan to, or in respect of, a Participant (and that Participant will be considered to have forfeited all rights under this Plan) if the Company determines, reasonably and in good faith, that that Participant (a) committed fraud in respect of any matter involving the Company, (b) breached any material contract with, or other material obligation to, the Company, (c) misappropriated any asset of the Company, whether tangible or intangible, (d) committed gross misconduct in connection with his or her employment with the Company, or (e) engaged in conduct that would constitute a felony or other serious crime adversely affecting the operation or the reputation of the Company. In that event, that Participant's Account will be reduced to zero (0). 8 ARTICLE 5 ADMINISTRATION -------------- SECTION 5.1 Plan Administration and Interpretation. The Company will -------------------------------------- have complete control over the administration of the Plan, including authority to interpret the Plan and to determine, in its sole discretion, the rights and benefits and all claims, demands, and actions arising out of the provisions of the Plan of any Participant, Beneficiary, or other person having or claiming to have any interest under the Plan. The Company's interpretations of, and determinations under, the Plan shall be conclusive and binding on all parties. The Company shall have the authority to establish such reasonable rules and procedures regarding the administration of the Plan as it deems necessary or appropriate. The Company's authority and responsibility with respect to the administration of the Plan may be exercised and discharged by the appropriate Employees of the Company or may be delegated by the Company to persons other than Employees. SECTION 5.2 Claims and Claims Review Procedure. Claims for payment (and ---------------------------------- the denial, appeal, and review of claims) under this Plan will be subject to such reasonable procedures as are established by the Company. SECTION 5.3 Indemnification. The Company shall indemnify and hold --------------- harmless each Employee who has responsibility in connection with the administration of the Plan from any and all claims, losses, damages, expenses (including reasonable counsel fees approved by the Company), and liability (including any reasonable amounts paid in settlement with the Company's approval) arising from any act or omission (or alleged act or omission) by such Employee in connection with the administration of the Plan, except when the same is judicially determined to be due to the willful misconduct of such Employee. 9 ARTICLE 6 SPECIAL RULES FOR PARTICIPATING SUBSIDIARIES -------------------------------------------- SECTION 6.1 Different Source of Payments. Except as otherwise ---------------------------- specifically agreed to by the Company in writing, payments under this Plan from that portion of a Participant's Account which is attributable to his or her employment with a Participating Subsidiary will be paid solely from the general assets of that Participating Subsidiary (and not from the assets of the Company). The portion of a Participant's Account which is attributable to his or her employment with a Participating Subsidiary will be determined under a reasonable method established by the Company. SECTION 6.2 Change in Subsidiary Status. If an entity (a "Former --------------------------- Subsidiary") that was at any time a Participating Subsidiary ceases to be a Subsidiary, the Participants who are employees of that Former Subsidiary at that time shall not be considered to have a Termination until their employment with the Former Subsidiary (and its affiliated companies, if any) terminates, unless the Company in its sole discretion determines that the Former Subsidiary's ceasing to be a Subsidiary should be treated as a Termination under this Plan with respect to those Participants. Such a determination by the Company may, in the Company's sole discretion, apply to all or any portion of the amounts standing to the credit of such Participants' Accounts at that time. Any determination by the Company under this Section with respect to any Former Subsidiary will have no effect on the Company's determination with respect to any other Former Subsidiary. 10 ARTICLE 7 AMENDMENT AND TERMINATION ------------------------- SECTION 7.1 Amendment or Termination. The Company may amend or terminate ------------------------ the Plan under the procedures provided for in the vote of the Board of Directors of the Company dated August 25, 1994. SECTION 7.2 Effect of Amendment or Termination. Any amendment or ---------------------------------- termination shall be effective as of the date of the Company's action to adopt the amendment or termination, unless the Company specifies another effective date occurring after the date of such action. No amendment or termination may reduce the amount then standing to the credit of any Participant's Account or change the timing or form of distribution of any Participant's Account balance, determined as of the date the amendment or termination is adopted, without the written consent of that Participant. However, any amendment or termination may (without limitation) change the method for determining amounts to be credited to Accounts under Section 3.1 or Section 3.2 (or eliminate such credits) for Plan Years ending after the effective date of the amendment or termination, or change the method of adjusting Accounts under Section 3.3 for periods after the effective date of the amendment. 11 ARTICLE 8 MISCELLANEOUS ------------- SECTION 8.1 No Enlargement of Employee Rights. No Participant or --------------------------------- Beneficiary will have any right to a benefit under this Plan except in accordance with the terms of the Plan. Establishment of the Plan will not be construed to give any Participant the right to be retained in the service of the Company. SECTION 8.2 Liability of the Company. Subject to obligations of the ------------------------ Company (or the Participating Subsidiaries) to pay the amounts credited to the Participants' Accounts, as and to the extent specifically provided in this Plan, and the indemnification provided by the Company under Section 5.3, neither the Company, the Participating Subsidiaries, nor any person acting in behalf of the Company (or the Participating Subsidiaries) shall be liable to any Participant or any other person for any act performed or the failure to perform any act with respect to the Plan. SECTION 8.3 Corporate Successors. The Plan shall not be automatically -------------------- terminated by a transfer or sale of assets of the Company or by the merger or acquisition or consolidation of the Company into or with any other corporation or other entity, but the Plan shall be continued after such sale, merger, or consolidation only if and to the extent that the transferee, purchaser, or successor entity agrees to continue the Plan. In the event that the Plan is not continued by the transferee, purchaser, or successor entity, the Plan will then terminate subject to the provisions of Section 7.2 hereof. SECTION 8.4 Applicable Law and Construction. ------------------------------- (a) Except to the extent preempted by federal law, the provisions of the Plan shall be interpreted in accordance with the laws of the Commonwealth of Massachusetts. (b) The titles of Articles and Sections are for reference only. In the event of a conflict between a title and the content of an Article or Section, the content shall control. Whenever used, the masculine pronoun shall include the feminine pronoun and the singular number shall include the plural number unless the context of the Plan requires otherwise. 12 ARTICLE 9 GLOSSARY -------- Whenever used in this Plan, the following terms shall have the following meanings, unless the context clearly requires a different meaning: "Account" means the bookkeeping account maintained for each Participant to which ------- are recorded amounts credited on behalf of the Participant and other adjustments. "Beneficiary" or Beneficiaries" means the person or persons described in Section ----------- ------------- 4.3. "Code" means the Internal Revenue Code of 1986, as amended, and any successor ---- code. "Company" means Digital Equipment Corporation. ------- "Compensation" of a Participant for a Plan Year means (a) the SAVE Compensation ------------ of that Participant for that Plan Year, but without application of the limit described in Section 401(a)(17) of the Code, plus (b) any amounts properly ---- reportable as part of that Participant's wages on Internal Revenue Service Form W-2 (for the calendar year that ends with that Plan Year) as a result of restricted stock awards received by that Participant under the Company's 1990 Equity Plan (and any successor thereto) and approved by the Compensation and Stock Option Committee of the Board of Directors of the Company on August 14, 1995. "Effective Date" means July 1, 1995. -------------- "Elective Contributions" means the elective contributions made on behalf of SAVE ---------------------- Members under SAVE's cash or deferred arrangement. "Eligible Employee" means an Employee described in Section 2.1. ----------------- "Employee" means any person who is an employee of the Company or an employee of -------- a Participating Subsidiary. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. ----- "Excess Compensation" of a Participant for a Plan Year means the portion of ------------------- Compensation received by that Participant for that Plan Year after the Participant has received SAVE Compensation for that Plan Year equal to the limit described in Section 401(a)(17) of the Code (as applicable for that Plan Year). "Matching Contributions" means the matching contributions made on behalf of SAVE ---------------------- Members under SAVE. 13 "Participant" means a person described in Section 2.2. ----------- "Participating Subsidiary" means any Subsidiary which has adopted SAVE and which ------------------------ adopts this Plan with the permission of the Company. "Payment Valuation Date" means the last business day in January. ---------------------- "Plan" means this Digital Equipment Corporation SAVE Restoration Plan, as set ---- forth in this document, and as amended from time to time hereafter. "Plan Year" means the six-month period beginning on the Effective Date and --------- ending December 31, 1995, and each calendar year beginning after December 31, 1995. The "1995 Plan Year" means six-month period beginning on the Effective Date and ending December 31, 1995. "SAVE" means the Digital Equipment Corporation Savings and Investment Plan, as ---- in effect as of the Effective Date of this Plan and as amended from time to time thereafter. "SAVE Compensation" means that compensation of a Participant, for a plan year of ----------------- SAVE beginning on or after the Effective Date of this Plan, which is used under SAVE for determining the amount of Elective Contributions and Matching Contributions to be made under SAVE on behalf of that Participant for that plan year (and which is subject to the limitation described in Section 401(a)(17) of the Code). "SAVE Member" means an Employee who is a Member of SAVE, under the rules set ----------- forth in SAVE. "SAVE Investment Alternatives" means the investment alternatives that are made ---------------------------- available to SAVE Members under SAVE. "Subsidiary" means any entity in which the Company owns (directly or indirectly) ---------- a greater than fifty percent (50%) voting interest or economic interest. "Termination" means a Participant's termination of employment (for reasons other ----------- than death) with the Company and all Subsidiaries. 14 APPENDIX A DIGITAL EQUIPMENT CORPORATION SHORT-TERM DEFERRED COMPENSATION ARRANGEMENT FOR 1995 ----------------------------------------------------- 1. INTRODUCTION. ------------ (a) The definitions set forth in Article 9 of the Digital Equipment Corporation SAVE Restoration Plan (the "SAVE Restoration Plan") will apply to this Appendix A in the same manner as under the generally applicable terms of the SAVE Restoration Plan. (b) The Company has established the short-term deferred compensation arrangement set forth in this Appendix A (the "Arrangement") to address certain specific issues in connection with the establishment of Matching Contributions under SAVE for the plan year of SAVE beginning July 1, 1995 and ending December 31, 1995 (the "1995 Plan Year"). The Matching Contributions of a SAVE Member for the 1995 Plan Year may be limited because his or her Elective Contributions for the 1995 calendar year are subject to a limit of $9,240 under Section 402(g) of the Code. This Arrangement provides deferred compensation for those SAVE Members who are subject to that limit and who are not Participants in the SAVE Restoration Plan for the 1995 Plan Year. (c) This Arrangement is not qualified under Section 401(a) of the Code and is not a pension plan subject to ERISA. 2. CREDITS AND ADJUSTMENTS TO ACCOUNTS. ----------------------------------- (a) Each SAVE Member who satisfies each of the following criteria will be a "Covered Employee" under this Arrangement: (i) the SAVE Member's Elective Contributions under SAVE for the 1995 calendar year equal $9,240; (ii) the SAVE Member's SAVE Compensation for the 1995 Plan Year is less than $75,000; and --- (iii) the SAVE Member either (A) is an Employee on December 31, 1995, or (B) during the 1995 Plan Year, dies, or terminates employment on or -- after his or her sixty-fifth (65th) birthday or his "Early Retirement Date" as defined in SAVE. (b) As of December 31, 1995, the Company shall establish an Account for each Covered Employee, and credit to that Account an amount equal to: (i) two percent (2%) of the Covered Employee's Compensation for the 1995 Plan Year, minus ----- 1 (ii) the Matching Contributions which have been made or are to be made under SAVE for the 1995 Plan Year on behalf of that Covered Employee. (c) The Account established under this Section 2 of this Arrangement will thereafter be adjusted in the same manner as is provided in Section 3.3 of the SAVE Restoration Plan. (d) No credits will be made under this Arrangement except as specifically provided in this Section 2. 3. PAYMENT. ------- (a) Except as provided paragraph (b), the amount standing to the credit of a Covered Employee's Account under this Arrangement will be determined as of the close of business on January 30, 1998 (or, if earlier, the Payment Valuation Date next following the close of the Plan Year in which the Covered Employee's Termination occurs) and paid in a lump sum to the Covered Employee within a reasonable time thereafter. If a Covered Employee dies before January 30, 1998 and before he or she has a Termination, the amount standing to the credit of his or her Account will be determined as of the date established by the Company within a reasonable period following his or her death and paid within a reasonable time thereafter, in a lump sum, to his or her Beneficiary or Beneficiaries (in the same proportion as payments of his or her accounts under SAVE are to be paid to the Beneficiary or Beneficiaries). (b) If a Covered Employee becomes a Participant under Article 3 of the SAVE Restoration Plan at any time after December 31, 1995 and before payment is made under paragraph (a), the amount standing to the credit of his or her Account under this Arrangement will be added to the Account established under Article 3 of the SAVE Restoration Plan (at the time that Account is established), and he or she will no longer be considered a "Covered Employee" under this Arrangement, and payment to him or her will be governed by the generally applicable rules of the SAVE Restoration Plan (and not this Appendix A). (c) This Arrangement will terminate after all amounts standing to the credit of Covered Employees' Accounts are either paid to Participants or Beneficiaries or added to the Accounts of Participants under the SAVE Restoration Plan, as provided in paragraphs (a) and (b) of this Section 3. 4. APPLICATION OF OTHER PROVISIONS OF SAVE RESTORATION PLAN. In addition -------------------------------------------------------- to other generally applicable provisions of the SAVE Restoration Plan which apply to this Arrangement by reason of other Sections of this Appendix A, the following generally applicable provisions of the SAVE Restoration Plan apply to this Arrangement to the same extent as they apply to the SAVE Restoration Plan (and as if Covered Employees were Participants): Section 4.1, Section 4.4, Section 4.5, Section 4.6, Section 4.6(b), Section 4.6(c), Section 4.6(d), Section 4.6(e), Section 4.7, Article 5, Article 7, and Article 8. 2 EX-27 4 ARTICLE 5 FDS
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF THE CORPORATION FOR THE 3 MONTHS ENDED SEPTEMBER 30, 1995 1,000 3-MOS JUN-29-1996 JUL-02-1995 SEP-30-1995 1,501,311 0 3,203,489 155,369 2,216,625 7,102,124 5,420,574 3,183,058 9,743,698 3,920,699 1,012,742 150,811 0 4,000 3,441,068 9,743,698 1,818,659 3,271,120 1,256,678 2,217,585 990,866 0 23,419 56,777 8,606 48,171 0 0 0 48,171 0.26 0.26
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