-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, mzmX/GllfOY9Rfv5s7EcVWJH1ZQ3gsCenCuRSoGMvxsGeNZjari0cVrIH5Bh7lvv J1MYA2o8BovqTGjvVlu3Qg== 0000950131-94-000419.txt : 19940330 0000950131-94-000419.hdr.sgml : 19940330 ACCESSION NUMBER: 0000950131-94-000419 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940329 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMDAHL CORP CENTRAL INDEX KEY: 0000004427 STANDARD INDUSTRIAL CLASSIFICATION: 3571 IRS NUMBER: 941728548 STATE OF INCORPORATION: DE FISCAL YEAR END: 1228 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-07713 FILM NUMBER: 94518443 BUSINESS ADDRESS: STREET 1: 1250 E ARQUES AVE CITY: SUNNYVALE STATE: CA ZIP: 94088 BUSINESS PHONE: 4087466000 10-K 1 FORM 10-K - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993 COMMISSION FILE NUMBER 1-7713 AMDAHL CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 94-1728548 (STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.) 1250 EAST ARQUES AVENUE SUNNYVALE, CALIFORNIA 94088-3470 (ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE) OFFICES) Registrant's telephone number: (408) 746-6000 Securities registered pursuant to Section 12(b) of the Act:
Title of class Name of each exchange on which registered -------------- ----------------------------------------- common stock, par value of $.05 per share American Stock Exchange, Inc. London Stock Exchange
---------------- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [_] 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 [_] Aggregate market value of the registrant's common stock held by non- affiliates, based on the closing sales price on March 7, 1994: $351,513,118. Number of shares of common stock, par value of $.05 per share, outstanding as of March 7, 1994: 115,120,751. DOCUMENTS INCORPORATED BY REFERENCE THE FOLLOWING DOCUMENTS ARE INCORPORATED BY REFERENCE IN THOSE PARTS OF THIS ANNUAL REPORT ON FORM 10-K AS SET FORTH BELOW, BUT ONLY TO THE EXTENT SPECIFICALLY STATED IN SUCH PARTS: (1) REGISTRANT'S PROXY STATEMENT FOR THE ANNUAL MEETING OF STOCKHOLDERS SCHEDULED TO BE HELD ON MAY 5, 1994 (THE "PROXY STATEMENT"). THE INFORMATION REQUIRED BY PART III OF THIS FORM 10-K IS INCORPORATED BY REFERENCE FROM THE PROXY STATEMENT AS PROVIDED ABOVE; AND, (2) REGISTRANT'S ANNUAL REPORT TO STOCKHOLDERS FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993 (THE "ANNUAL REPORT"). PORTIONS OF THE INFORMATION REQUIRED BY PARTS I AND II OF THIS FORM 10-K ARE INCORPORATED BY REFERENCE FROM THE ANNUAL REPORT AS PROVIDED ABOVE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PART I ITEM 1. BUSINESS General Amdahl Corporation ("Amdahl" or the "Company"), organized in 1970, provides large-scale, high-performance general-purpose computer systems as well as software, storage and communications products. The Company also provides consulting and professional services. Its principal computer systems are architecturally compatible at specific software and hardware interface levels with the basic functions of competing IBM computer systems. The Company also develops and markets certain products for the open systems marketplace. Amdahl's customer base is diversified and includes large corporations, financial institutions, public utilities, government agencies and universities with high- volume data processing requirements. Since its first product shipment in June 1975, the Company has continued to introduce new and more powerful computer systems. In December 1991 Amdahl began initial shipments of its newest system, the 5995M series. In 1993 Amdahl began delivery of higher performance models in this series. Since 1982 Amdahl has also offered high-performance direct access storage devices (DASD) and front-end communications processors (FEP) for use with large-scale computer systems. In the third quarter of 1992 the Company began shipments of its newest line of DASD. In addition to its primary product line of large-scale computers and storage systems, Amdahl offers software products, educational and professional services, and hardware maintenance services. As part of its software products, the Company has developed and offers Huron, a comprehensive applications development and production system, and UTS, a UNIX based operating system for the mainframe environment. During the latter half of 1993 the Company organized itself along lines of business consisting of its compatible processor, storage, maintenance and professional services, Huron and open systems operations in order to enable Amdahl to more effectively diversify its product offerings beyond those associated primarily with its large-scale computer systems. The Company intends to enhance its professional and consulting services business and also expects to enter into partnerships and alliances with other companies as a way of enhancing its existing product offerings or developing new products and services. For example, in June 1993 Amdahl and Electronic Data Systems Corporation ("EDS") formed a joint venture, Antares Alliance Group, in which Amdahl holds an 80 percent (80%) interest, for the purpose of continuing the development and marketing of Huron as well as certain software products contributed by EDS. The Company has also entered into a series of marketing and development agreements with Sun Microsystems Inc. ("Sun") pursuant to which the Company will offer certain Sun products through its open systems organization. Until its Huron, professional services and open systems offerings are more fully developed, however, the large-scale compatible processor business, including its related storage product and maintenance service components, will continue to be the primary source of the Company's revenues. Fujitsu Limited ("Fujitsu"), a major Japanese manufacturer of computer systems, telecommunications equipment and electronic components, owns approximately 45.01% of the Company's outstanding common stock and is of substantial importance to the Company in the areas of manufacturing and technical assistance and supply of subsystems and components. Fujitsu also manufactures the Company's DASD and FEP products. In November 1993 Amdahl and Fujitsu entered into a preliminary agreement pursuant to which Amdahl and Fujitsu would participate in the joint development of the Company's next generation of compatible mainframes. Under the agreement, Fujitsu will undertake primary responsibility for the design and manufacture of these systems. Also in January 1994 the Company and Fujitsu entered into an agreement under which Fujitsu would provide loans to the Company in an aggregate amount not to exceed $100,000,000. Because of Amdahl's increased dependence on Fujitsu as its supplier of future large-scale compatible processors and Fujitsu's participation with the Company in certain other ongoing research and development activities, the ability to negotiate favorable pricing terms with respect to future product requirements and to maintain a satisfactory working relationship are important. Marketing The Company markets its products directly through its sales force to customers in the United States, Canada, Western Europe and the Pacific Basin, through Fujitsu in Brazil, Japan, Malaysia and South Korea and through other distributors in Saudi Arabia, Latin America and South Africa. In 1993 approximately 38% of Amdahl's revenues were from international operations. The Company offers its products for sale and lease. For further information on leasing see "Note 4 - Equipment Leasing and Third Party Transactions" on pages 21 and 22 of the Annual Report. Service for Amdahl products is provided under service and parts warranty or separate maintenance agreements. For further information on warranties, see "Note 1 - Summary of Accounting Policies" on pages 18 and 19 of the Annual Report. While it may receive "letters of intent" and "orders" from potential customers, typically the Company does not have a firm contract with a customer until shortly before shipment. In addition, the Company in many cases will permit cancellation of an order without charge at any time until actual delivery, which is common practice in the industry. For these reasons, the Company does not believe indications of customer interest and "orders" constitute a firm "backlog" and believes that a disclosure of a value of unfilled orders is not a meaningful indicator of revenues nor material to an understanding of its business. Major Customer Information and Geographic Area Data The information under "Note 8 - Major Customer, Geographic Area and Product Line Data" on pages 24 and 25 of the Annual Report is incorporated by reference. Competition The principal segment of the data processing industry in which the Company competes remains the highly competitive large-scale computer system and related storage products and services segment. Amdahl markets its products in competition with several major multinational companies with substantial resources. IBM is Amdahl's principal competitor and is dominant in this segment of the computer industry. Competition is based primarily on price and performance, product enhancements and new product development, and customer service and support. However, price/performance relationships can change as new models or enhancements to existing models are introduced and as prices change. The financial strength and long-term viability of the supplier are also important. IBM competitive actions in the large-scale computer market and related submarkets have historically taken the form of price reductions and shortened product life cycles. As a result, selling prices and residual values of large- scale computer systems have declined substantially over time. Also, the continuing introduction by IBM of certain product modifications requires that Amdahl also make comparable changes to remain fully compatible. Moreover, IBM has indicated its intention to utilize lower cost technologies in future versions of its large-scale computer systems. While Amdahl has announced similar intentions, a successful introduction by IBM would require a timely response by the Company in order to remain competitive on a price/performance basis. The growth in the market for large-scale computers itself has also been affected by rapid technological changes in recent years which have enabled smaller, less costly computer systems to compete for the development of application programs historically run in mainframe environments. The areas into which the Company is seeking to diversify its product, software and service offerings are also intensely competitive. Competitors include both highly specialized companies as well as fully integrated vendors such as IBM, Digital Equipment Corporation and Hewlett-Packard Company. New computer products, particularly in the open systems marketplace, are subject to rapid technological changes, short product life cycles, frequent product enhancements and price reductions. For software products, ease of use, product reliability, quality of technical support and product capabilities are important. Strength of distribution channels and brand name recognition are also of great importance. While the Company believes that it can compete successfully in its established and newer areas of business, there remain the inherent risks attendant with the introduction of new technologies and the Company's lack of extensive experience in developing product offerings not related to its traditional compatible processor business. For further discussion of competitive conditions, see "Management's Discussion & Analysis - Results of Operations and Factors That May Affect Future Operating Results" on pages 31 through 33 of the Annual Report. Manufacturing Amdahl manufactures its computers in Sunnyvale, California, and near Dublin, Ireland. Major subsystems and components used in its computers are manufactured by Amdahl as well as by Fujitsu. As part of its recently announced restructuring programs, Amdahl has significantly reduced its manufacturing capacity, partly to address the lower levels of business experienced in large- scale mainframes and in anticipation of greater dependence on Fujitsu for the supply of future mainframe products. Amdahl purchases under contracts with Fujitsu certain subassemblies and substantially all of its large-scale integrated semiconductor components and high-density printed circuit boards. The FEP and DASD products are manufactured by Fujitsu to Amdahl specifications. While the Company seeks to identify qualified second sources of supply and to maintain adequate inventories, it may have only one source of supply for certain critical components, and material interruptions in product shipments could occur if those components were unavailable for a period of time. In addition, if for a substantial period Fujitsu failed to deliver subassemblies, DASDs or certain other equipment as required under manufacturing agreements with Amdahl, or should Fujitsu fail to meet development or manufacturing schedules for future mainframe products, serious interruptions to the Company's delivery schedules would occur, which would have a material adverse effect on the Company. The current supply agreements between Amdahl and Fujitsu generally provide for fixed U.S. dollar prices so long as the U.S.-Japanese currency exchange rate remains within a specified range. If the exchange rate fluctuates outside of this range, prices are to be adjusted pursuant to a formula under which Amdahl and Fujitsu will share equally any benefits or disadvantages. For further information regarding purchases from Fujitsu see "Note 3 - Relationship with Fujitsu Limited" on pages 20 and 21 of the Annual Report. Product Development The Company's future prospects depend upon its successful development and introduction of new products. During the last three years, the Company's product development costs, including amounts expended on development of both existing and new products, amounted to $334,514,000 in 1993, $372,365,000 in 1992 and $312,541,000 in 1991. However, as part of recent restructuring efforts, the Company has substantially reduced certain of its product development activities and expects that future product development expenditures will be considerably below those of recent years. The Company intends to rely, to a much greater degree than in the past, on strategic alliances, partnering arrangements and OEM relationships for major new products or product components. Patents, Licenses and Related Matters Amdahl has an active program to file applications for and obtain patents in the United States and in selected foreign countries where a potential market for its products exists. The Company's general policy has been to seek patent protection for those inventions and improvements likely to be incorporated in its products or otherwise expected to be of value. While Amdahl believes that its patents and applications have value, it also believes that its competitive position depends on the ability to successfully enter into partnering or OEM agreements with outside suppliers and the technical competence of its development personnel. Amdahl and IBM concluded an agreement pursuant to which each party grants to the other nonexclusive worldwide licenses as to certain of each other's patents to be issued on patent applications having an effective filing date prior to January 1, 1998. Under the agreement, which supersedes prior agreements between the companies, Amdahl is licensed under substantially all IBM patents relating to computer systems, communications networks and related semiconductor technology, generally covering the planned products of the Company while IBM is licensed under substantially all Amdahl patents. The Company has also entered into licensing agreements with others and contemplates entering into additional license agreements under patents or know- how in the routine conduct of its business. Employees As of February 25, 1994, the Company had approximately 5,552 full-time employees. Executive Officers of Amdahl The following sets forth certain information regarding the executive officers of Amdahl as of February 1, 1994. Mr. John C. Lewis, 58, has been Chairman of the Board since 1987. He was President of Amdahl from 1977, when he joined the Company, until 1987. He was the Company's Chief Executive Officer from 1983 until 1992. Mr. Eugene R. White, 62, has been Vice Chairman of the Board since 1987. He served as Chairman of the Board from 1979 to 1987 and as Chief Executive Officer from 1979 to 1983. From 1977 until 1979, Mr. White was Deputy Chairman of the Board, and he was Amdahl's President from 1974 to 1977. Mr. E. Joseph Zemke, 53, was elected President and a Director in 1987 and has been the Company's Chief Executive Officer since May 1992. He was the Chief Operating Officer from 1985, when he joined the Company, until 1992. Mr. David L. Anderson, 46, has been Vice President and General Manager of Compatible Systems since 1993. Mr. Anderson joined the Company in 1971 and was elected Vice President, Processor Product Management in 1987. In 1989 Mr. Anderson became Vice President of Advanced Systems and in 1992 became Vice President of Compatible Products Development. Mr. John C. Cavalier, 54, joined the Company in 1993 as Vice President and General Manager, Huron Sales and Development. In mid-1993 Mr. Cavalier became President and Chief Executive Officer of Antares Alliance Group. From 1990 through 1992 Mr. Cavalier was President and Chief Executive Officer of Bimillennium Corporation and from 1987 through 1990 he was President and Chief Executive Officer of ShareBase Corporation. Mr. William F. Ferone, 49, has been Vice President and General Manager of Customer Services since 1992. He joined the Company in 1978 and was elected Vice President of Customer Services in 1987. In 1988 he became Vice President of Unix Systems. Mr. Ferone was elected to the position of Vice President, Marketing, Open Systems Operations in 1990. Mr. William Flanagan, 54, joined the Company in 1973 and was elected Vice President of Manufacturing in 1985. Mr. Flanagan has been Vice President of Operations, Compatible Systems since 1993. Mr. Charles E. Fonner, 50, joined the Company in 1979 and was elected Vice President of Systems Marketing in 1991. In 1992 Mr. Fonner became the Vice President of Product Management and Marketing. Mr. Orval J. Nutt, 53, joined the Company in 1976 and was elected Vice President of Corporate Marketing in 1986 and Vice President and General Manager of U.S. Operations in 1991. In 1993 Mr. Nutt became Vice President and General Manager of Worldwide Field Operations. Mr. William F. O'Connell, Jr., 66, was appointed Senior Vice President, Software Business Development in 1993. Mr. O'Connell joined the Company in 1977 as Senior Vice President, Corporate Marketing, and in 1979 became Senior Vice President, International Operations. Mr. O'Connell became Senior Vice President, Corporate Strategy in 1983. Mr. Anthony M. Pozos, 53, has been Senior Vice President, Human Resources and Corporate Services since 1986. Mr. Pozos joined the Company in 1976 as Corporate Vice President, Industrial Relations, and in 1983 assumed responsibility for Corporate Services. Mr. Edward F. Thompson, 55, has been Chief Financial Officer and Secretary since 1983. Mr. Thompson joined the Company in 1976, was elected Treasurer in 1977 and became a Corporate Vice President in 1980. Mr. Ernest B. Thompson, 57, joined the Company in 1978 as Controller. He was elected Corporate Vice President in 1980. Ms. Erika Williams, 46, joined the Company in 1978 and was elected Vice President of Processor Business Management in 1990 and Vice President of Compatible Products Management in 1992. In 1993 Ms. Williams was appointed Vice President, Compatible Products Marketing, and then Vice President and General Manager, Enterprise Storage Systems. Mr. David B. Wright, 44, joined the Company in 1987 as a regional Vice President of Sales. After being named Vice President of Commercial U.S. Sales in 1989 and Vice President and General Manager of European Operations in 1992, Mr. Wright was appointed Vice President and General Manager of Worldwide Field Operations in 1993. ITEM 2. PROPERTIES Amdahl's corporate headquarters is in Sunnyvale, California, as are its principal United States manufacturing, marketing, engineering and educational facilities, of which it owns 511,543 square feet and leases 944,041 square feet. Amdahl owns 117,430 square feet of expansion space which is currently leased to outside companies, and several parcels totalling 15.6 acres in the San Jose/Sunnyvale area, of which 7.25 acres are being held as potential future building sites. Amdahl owns a 50,000 square foot administrative facility in Dogmersfield Park, England, a 260,000 square foot manufacturing facility in Dublin, Ireland and a 6,000 square foot engineering facility in Rexburg, Idaho. Amdahl also leases approximately 109 sales and service offices throughout the United States, Canada, Europe and the Pacific Basin. See also "Note 12 - Lease Commitments" on page 29 of the Annual Report. Restructuring actions, which began in 1993, caused certain Company facilities and properties to be under utilized. Included within this group of facilities and properties are 485,000 square feet of leased properties worldwide, the Dublin manufacturing facility, the Dogmersfield Park facility, the Rexburg facility and 8.35 acres of San Jose property. The 485,000 square feet of leased properties are being, or will be, offered for sublease. The Dogmersfield Park facility, Rexburg facility and 8.35 acres of San Jose property are being offered for sale. ITEM 3. LEGAL PROCEEDINGS Multiple securities class action lawsuits were filed against the Company and certain of its directors, officers and other employees in September and October of 1992 in the United States District Court for the Northern District of California. These cases were subsequently consolidated into a single action. On September 10, 1993 the Court gave final approval to a settlement of this litigation under which all claims in the litigation were dismissed and finally settled, and plaintiffs and their attorneys received a cash payment from the Company and its insurer. The settlement payment did not have a material impact on the Company's financial position or results of operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY OWNERS Not Applicable. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCK HOLDER MATTERS The information under "Common Stock Dividends and Price Range" on page 35 of the Annual Report is incorporated by reference. ITEM 6. SELECTED FINANCIAL DATA The information under "Selected Financial Data" on page 35 of the Annual Report is incorporated by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information under "Management's Discussion & Analysis" on pages 31 through 34 of the Annual Report is incorporated by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information on pages 13 through 35 of the Annual Report is incorporated by reference. ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not Applicable. PART III ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information under "Certain Information with Respect to Directors and Officers - Nominees to Board of Directors" in the Proxy Statement is incorporated by reference. Also refer to the item entitled "Executive Officers of Amdahl" in Part I of this Form 10-K. ITEM 11. EXECUTIVE COMPENSATION The information under "Certain Information with Respect to Directors and Officers - Director Compensation" and "Executive Compensation" (but excluding the information under "Compensation Committee Report on Executive Compensation" and "Company Stock Price Performance") in the Proxy Statement is incorporated by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information under "Principal Stockholders" and "Certain Information with Respect to Directors and Officers - Security Ownership" in the Proxy Statement is incorporated by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information under "Loans to Executive Officers" and "Compensation Committee Interlocks and Insider Participation" in the Proxy Statement is incorporated by reference. PART IV ITEM 14. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a)(1) Financial Statements Consolidated Financial Statements The following consolidated financial statements and related notes, together with the report thereon of Arthur Andersen & Co., independent public accountants, are incorporated by reference from the Annual Report: Consolidated Balance Sheets--December 31, 1993 and December 25, 1992. Consolidated Statements of Operations for each of the three years in the period ended December 31, 1993. Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 1993. Consolidated Statements of Stockholders' Equity for each of the three years in the period ended December 31, 1993. (a)(2) Schedules Supporting Consolidated Financial Statements Report of Independent Public Accountants on Schedules II Accounts Receivable from Employees V Property and Equipment VI Accumulated Depreciation and Amortization of Property and Equipment VIII Valuation and Qualifying Accounts and Reserves IX Short-term Borrowings X Supplementary Income Statement Information Schedules Omitted In accordance with the rules of Regulation S-X, the other required schedules are not submitted because (a) they are not applicable to or required by the Company or (b) the information required to be set forth therein is included in the consolidated financial statements or other schedules. (a)(3) Exhibits Exhibit Description ------- ----------- 3(a) Restated Certificate of Incorporation, as amended (incorporated by reference to Exhibit 3(a) to Form 10-K for fiscal year ended December 25, 1992) 3(b) Restated By-Laws (incorporated by reference to Exhibit 3(b) to Form 10-K for fiscal year ended December 25, 1992) Executive Compensation Plans and Agreements ------------------------------------------- 10(a) Officer Loan Program, as amended (incorporated by reference to Exhibit 10(a) to Form 10-K for fiscal year ended December 27, 1991) 10(b) Amdahl Corporation Restricted Stock Plan, as amended (incorporated by reference to Exhibit 10(c) to Form 10-Q for the quarter ended June 26, 1992) 10(c) Amdahl Corporation Stock Option Plan (1971), as amended (incorporated by reference to Exhibit 10(c) to Form 10-K for fiscal year ended December 27, 1991) 10(d) Amdahl Corporation Stock Option Plan (1974), as amended (incorporated by reference to Exhibit 10(a) to Form 10-Q for the quarter ended June 26, 1992) 10(e) Amdahl Corporation Non-Qualified Stock Option Plan (1982), as amended (incorporated by reference to Exhibit 10(b) to Form 10-Q for the quarter ended June 26, 1992) *10(f) Amdahl Corporation Executive Incentive Performance Plan, as amended 10(g) Amdahl Corporation Director Fee Deferral Election Plan, as amended (incorporated by reference to Exhibit 10(g) to Form 10-K for fiscal year ended December 25, 1992) 10(h) Amdahl Corporation Deferral Election Plan, as amended (incorporated by reference to Exhibit 10(h) to Form 10-K for fiscal year ended December 25, 1992) 10(i) Form of Option Agreement under the Stock Option Plan (1974) relating to a stock option granted to a non-employee director of Amdahl (incorporated by reference to Exhibit 4(b) of Registrant's Registration Statement 33-55460, filed December 7, 1992) 10(j) Form of Notice of Grant of Stock Option and Grant Agreement for incentive stock option grants under the Stock Option Plan (1974) (incorporated by reference to Exhibit 4(f) of Registrant's Registration Statement 33-35547, filed June 22, 1990) 10(k) Form of Automatic/Non-Employee Director Grant Non- Qualified Stock Option Agreement dated November 15, 1988 under the Stock Option Plan (1974) (incorporated by reference to Exhibit 4(i) of Registrant's Registration Statement 33-35547, filed June 22, 1990) 10(l) Form of Automatic/Non-Employee Director Grant Non- Qualified Stock Option Agreement under the Stock Option Plan (1974) (incorporated by reference to Exhibit 4(j) of Registrant's Registration Statement 33-35547, filed June 22, 1990) 10(m) Form of Non-Qualified Stock Option Agreement for repriced options under the Stock Option Plan (1971) and Stock Option Plan (1974) (incorporated by reference to Exhibit 4(m) of Registrant's Registration Statement 33-35547, filed June 22, 1990) 10(n) Form of Notice of Grant of Stock Option and Grant Agreement for non-qualified stock option grants under the Stock Option Plan (1971), Stock Option Plan (1974) and Non-Qualified Stock Option Plan (1982) (incorporated by reference to Exhibit 4(o) of Registrant's Registration Statement 33-35547, filed June 22, 1990) 10(o) Form of Addendum to Stock Option Agreement (incorporated by reference to Exhibit 4(m) of Registrant's Registration Statement 33-55460, filed December 7, 1992) 10(p) Form of Non-Qualified Stock Option Agreement dated December 1, 1992 (incorporated by reference to Exhibit 10(p) to Form 10-K for fiscal year ended December 25, 1992) 10(q) Form of Restricted Stock Purchase Agreement under the Restricted Stock Plan (incorporated by reference to Exhibit 4(z) of Registrant's Registration Statement 33-35547, filed June 22, 1990) 10(r) Form of Addendum to Restricted Stock Purchase Agreement (incorporated by reference to Exhibit 10(r) to Form 10-K for fiscal year ended December 25, 1992) *10(s) Termination Agreement With Named Executive Officer dated July 1, 1993 Other Material Agreements ------------------------- *10(t) Letter Agreement between Amdahl and Fujitsu dated April 3, 1984 10(u) Agreement between Amdahl and Fujitsu dated March 4, 1982, regarding Conversion and Modification of License Rights (incorporated by reference to Exhibit 10(t) to Form 10-K for fiscal year ended December 25, 1992) 10(v) Credit Agreement dated November 21, 1990 among Amdahl, certain Amdahl subsidiaries and certain banks (Portions of this exhibit are deleted pursuant to a request for confidential treatment) (incorporated by reference to Exhibit 10(m) to Form 10-K for the fiscal year ended December 28, 1990) 10(w) Development Agreement between Amdahl and Fujitsu dated June 7, 1991 (Portions of this exhibit are deleted pursuant to a request for confidential treatment) (incorporated by reference to Exhibit 10(b) to Form 10-Q for the quarter ended June 28, 1991) 10(x) Amendment dated as of September 24, 1993 to Credit Agreement dated November 21, 1990 (incorporated by reference to Exhibit 10(a) to Form 10-Q/A for the quarter ended September 24, 1993) *10(y) Partnership Agreement dated June 21, 1993 between wholly owned subsidiaries of Amdahl and Electronic Data Systems Corporation (Portions of this exhibit are deleted pursuant to a request for confidential treatment) *10(z) Letter of commitment by Fujitsu dated December 3, 1993 *10(aa) Joint Development Agreement between Amdahl and Fujitsu dated December 8, 1993 (Portions of this exhibit are deleted pursuant to a request for confidential treatment) Additional Exhibits ------------------- *13 Annual Report to Stockholders for fiscal year 1993 (Only portions incorporated by reference) *21 List of Subsidiaries *23 Consent of Arthur Andersen & Co. *24 Powers of Attorney *Filed herewith (b) Reports on Form 8-K No reports on Form 8-K were filed during the quarter ended December 31, 1993. REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES To Amdahl Corporation: We have audited in accordance with generally accepted auditing standards, the consolidated financial statements included in Amdahl Corporation's Annual Report to Stockholders incorporated by reference in this Form 10-K, and have issued our report thereon dated January 31, 1994. Our audits were made for the purpose of forming an opinion on those statements taken as a whole. The schedules listed under Item 14 are the responsibility of the Company's management and are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. Arthur Andersen & Co. San Jose, California January 31, 1994 SCHEDULE II AMDAHL CORPORATION AND SUBSIDIARIES ACCOUNTS RECEIVABLE FROM EMPLOYEES(1) (in thousands)
BALANCE AT BALANCE BEGINNING AT END NAME OF DEBTOR OF PERIOD ADDITIONS COLLECTIONS OF PERIOD(2) Year ended December 27, 1991: Bruce O. Beebe $278 $ 21 $--- $299 David M. Brewer 183 13 --- 196 Orval J. Nutt 104 7 --- 111 Erika Williams 102 7 --- 109 Year ended December 25, 1992: Bruce O. Beebe $299 $ 2 $301 $--- David M. Brewer 196 1 197 --- Eric L. Miles --- 250 --- 250 Orval J. Nutt 111 6 --- 117 Edward F. Thompson --- 569 --- 569 Eugene R. White 62 42 --- 104 Erika Williams 109 5 69 45 Year ended December 31, 1993: John C. Cavalier $--- $408 $--- $408 Eric L. Miles 250 16 --- 266 Orval J. Nutt 117 5 --- 122 Edward F. Thompson 569 22 --- 591 Eugene R. White 104 17 --- 121
(1) Includes only amounts receivable from employees with balances due of $100,000 or more at any time during the periods, exclusive of amounts receivable for ordinary travel and expense advances and other items arising in the ordinary course of business. (2) Depending upon the nature of the amount outstanding, balance is included in current receivables or as an offset to additional paid-in capital. Except as noted below, these receivables represent loans made under the Officer Loan Program. This program provides qualified individuals with loans at the applicable short term federal interest rate for the purpose of purchasing common stock and/or paying taxes incidental to the purchase of stock. The notes under the Officer Loan Program are due and payable after six months and may be renewed for a maximum of nine additional six-month periods. All loans are collateralized by common stock valued at not less than 150% of the principal loan amount based on market prices of the Company's common stock at the time the note is made or renewed. The receivable from Mr. Miles represents an unsecured loan, with interest payable at 6.06% per year, compounded semi-annually, and all principal and accrued interest payable in one lump sum on December 15, 1998. Payment is subject to acceleration in the following amounts: (i) 50% of each cash bonus awarded to Mr. Miles, but no more than $50,000 in the aggregate during any calendar year; (ii) Mr. Miles' share of any net proceeds from the sale of his home; and (iii) the entire unpaid balance, at the discretion of the Company, should Mr. Miles cease to be employed by the Company. The receivable from Mr. Cavalier represents a loan for $400,000, for the purpose of assisting Mr. Cavalier with his relocation to Dallas, Texas, the headquarters of Antares Alliance Group, where Mr. Cavalier is President and Chief Executive Officer. The note bears interest at 5.25% compounded semi-annually. This note will become due and payable within ten years except to the extent previously forgiven or paid. SCHEDULE V AMDAHL CORPORATION AND SUBSIDIARIES PROPERTY AND EQUIPMENT (in thousands)
BALANCE SALES, AT RETIREMENTS BALANCE BEGINNING ADDITIONS AND OTHER OTHER AT END OF PERIOD AT COST DISPOSITIONS CHANGES(1) OF PERIOD YEAR ENDED DECEMBER 27, 1991: LEASED SYSTEMS $ 63,104 $ 33,874 $ 34,780 $ (6,524) $ 55,674 SYSTEM SPARES 401,362 70,766 98,109 --- 374,019 PRODUCTION AND DATA PROCESSING EQUIPMENT 594,127 208,324 34,908 (41,548) 725,995 OFFICE FURNITURE, EQUIPMENT AND IMPROVEMENTS 129,519 5,859 3,740 12,419 144,057 LAND AND BUILDINGS 127,280 6,959 1,241 35,653 168,651 ---------- -------- -------- -------- ---------- $1,315,392 $325,782 $172,778 $ --- $1,468,396 ========== ======== ======== ======== ========== YEAR ENDED DECEMBER 25, 1992: LEASED SYSTEMS $ 55,674 $ 51,770 $ 29,702 $ (917) $ 76,825 SYSTEM SPARES 374,019 100,546 25,090 (19,870) 429,605 PRODUCTION AND DATA PROCESSING EQUIPMENT 725,995 243,611 78,111 (30,592) 860,903 OFFICE FURNITURE, EQUIPMENT AND IMPROVEMENTS 144,057 5,886 3,270 17,630 164,303 LAND AND BUILDINGS 168,651 1,665 2,989 13,223 180,550 ---------- -------- -------- -------- ---------- $1,468,396 $403,478 $139,162 $(20,526) $1,712,186 ========== ======== ======== ======== ==========
YEAR ENDED DECEMBER 31, 1993: LEASED SYSTEMS $ 76,825 $ 45,866 $ 61,470 $ (992) $ 60,229 SYSTEM SPARES 429,605 40,273 37,821 (14,000) 418,057 PRODUCTION AND DATA PROCESSING EQUIPMENT 860,903 36,759 81,278 (149,247) 667,137 OFFICE FURNITURE, EQUIPMENT AND IMPROVEMENTS 164,303 2,112 7,397 (956) 158,062 LAND AND BUILDINGS 180,550 267 3,358 332 177,791 ---------- -------- -------- --------- ---------- $1,712,186 $125,277 $191,324 $(164,863) $1,481,276 ========== ======== ======== ========= ==========
(1) Generally represents transfers and reclassifications. In 1993, however, property, plant, and equipment cost decreased approximately $165 million and accumulated depreciation increased approximately $36 million as a result of the Company's restructuring of operations. See Note 2 to the Consolidated Financial Statements, on page 20 of the Annual Report. SCHEDULE VI AMDAHL CORPORATION AND SUBSIDIARIES ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY AND EQUIPMENT (in thousands)
ADDITIONS BALANCE CHARGED SALES, AT TO COSTS RETIREMENTS BALANCE BEGINNING AND AND OTHER OTHER AT END OF PERIOD EXPENSES DISPOSITIONS CHANGES(1) OF PERIOD YEAR ENDED DECEMBER 27, 1991: LEASED SYSTEMS $ 35,463 $ 8,828 $ 12,320 $(2,368) $ 29,603 SYSTEM SPARES 271,045 40,844 63,438 --- 248,451 PRODUCTION AND DATA PROCESSING EQUIPMENT 300,279 81,192 23,436 2,319 360,354 OFFICE FURNITURE, EQUIPMENT AND IMPROVEMENTS 56,733 12,841 2,227 (513) 66,834 BUILDINGS 30,832 6,151 6 562 37,539 -------- -------- -------- ------- -------- $694,352 $149,856 $101,427 $ --- $742,781 ======== ======== ======== ======= ======== YEAR ENDED DECEMBER 25, 1992: LEASED SYSTEMS $ 29,603 $ 12,130 $ 8,286 $ (917) $ 32,530 SYSTEM SPARES 248,451 48,226 16,968 (1,086) 278,623 PRODUCTION AND DATA PROCESSING EQUIPMENT 360,354 123,880 57,455 1,040 427,819 OFFICE FURNITURE, EQUIPMENT AND IMPROVEMENTS 66,834 15,651 2,087 (777) 79,621 BUILDINGS 37,539 7,716 399 (2) 44,854 -------- -------- -------- ------- -------- $742,781 $207,603 $ 85,195 $(1,742) $863,447 ======== ======== ======== ======= ========
YEAR ENDED DECEMBER 31, 1993: LEASED SYSTEMS $ 32,530 $ 13,604 $ 37,899 $ 5,085 $ 13,320 SYSTEM SPARES 278,623 53,045 29,123 --- 302,545 PRODUCTION AND DATA PROCESSING EQUIPMENT 427,819 111,516 49,476 93 489,952 OFFICE FURNITURE, EQUIPMENT AND IMPROVEMENTS 79,621 8,207 4,339 13,124 96,613 BUILDINGS 44,854 15,746 1,090 17,916 77,426 -------- -------- -------- ------- -------- $863,447 $202,118 $121,927 $36,218 $979,856 ======== ======== ======== ======= ========
Depreciation and amortization methods and asset lives: See Notes 1 and 4 to the Consolidated Financial Statements, on pages 18 and 21 of the Annual Report. (1) Generally represents transfers and reclassifications. In 1993, however, property, plant, and equipment cost decreased approximately $165 million and accumulated depreciation increased approximately $36 million as a result of the Company's restructuring of operations. See Note 2 to the Consolidated Financial Statements, on page 20 of the Annual Report. SCHEDULE VIII AMDAHL CORPORATION AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS AND RESERVES (in thousands)
ADDITIONS ADDITIONS BALANCE CHARGED CHARGED AT TO COSTS TO PROPERTY BALANCE BEGINNING AND AND DEDUC- AT END OF PERIOD EXPENSES EQUIPMENT TIONS(3) OF PERIOD YEAR ENDED DECEMBER 27, 1991: DOUBTFUL RECEIVABLES $ 5,042 $ 1,298(1) $ --- $ 1,544 $ 4,796 FUTURE ENGINEERING ======= ======== ====== ======= ======= CHANGES $84,144 $ 1,512(2) $3,361(2) $51,906 $37,111 ======= ======== ======= ======= ======= YEAR ENDED DECEMBER 25, 1992: DOUBTFUL RECEIVABLES $ 4,796 $ 296(1) $ --- $ 1,865 $ 3,227 FUTURE ENGINEERING ======= ======== ====== ======= ======= CHANGES $37,111 $60,278(2) $9,032(2) $20,417 $86,004 ======= ======== ======= ======= ======= YEAR ENDED DECEMBER 31, 1993: DOUBTFUL RECEIVABLES $ 3,227 $ 1,009(1) $ --- $ 970 $ 3,266 FUTURE ENGINEERING ======= ======== ======= ======= ======= CHANGES $86,004 $16,672(2) $ 967(2) $46,510 $57,133 ======= ======== ======= ======= =======
(1) Estimated uncollectible accounts receivable. (2) Estimated costs of future engineering changes for shipped and capitalized systems. (3) The deductions represent charges against the reserves for the purposes for which the reserves are intended. Doubtful receivables deductions also include changes in estimates. SCHEDULE IX AMDAHL CORPORATION AND SUBSIDIARIES SHORT-TERM BORROWINGS (dollars in thousands)
WEIGHTED MAXIMUM AVERAGE AVERAGE WEIGHTED AMOUNT AMOUNT INTEREST BALANCE AVERAGE OUTSTAND. OUTSTAND. RATE AT END INTEREST DURING DURING DURING OF PERIOD RATE PERIOD PERIOD(1) PERIOD(2) DECEMBER 27, 1991: BORROWINGS UNDER THE COMPANY'S LINES OF CREDIT $ 82,827 7.01% $ 82,827 $ 44,634 10.34% ========= ==== ========= ========= ===== DECEMBER 25, 1992: BORROWINGS UNDER THE COMPANY'S LINES OF CREDIT $211,153 4.88% $215,806 $150,326 6.66% ========= ==== ========= ========= ===== DECEMBER 31, 1993: BORROWINGS UNDER THE COMPANY'S LINES OF CREDIT $135,806 4.06% $271,667 $124,431 4.85% ========= ==== ========= ========= =====
(1) The average borrowings were determined based on the month-end amounts outstanding. (2) Represents the weighted average of contracted interest rates on all short- term borrowings outstanding during the period. SCHEDULE X AMDAHL CORPORATION AND SUBSIDIARIES SUPPLEMENTARY INCOME STATEMENT INFORMATION (in thousands) For the period ended December 31, 1993 Taxes, other than payroll and income taxes: Property Taxes $18,180 INDEMNIFICATION OF DIRECTORS AND OFFICERS For the purposes of complying with the amendments to the rules governing Form S-8 under the Securities Act of 1933, the Company hereby undertakes as follows: Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers or controlling persons of the Company, the Company has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the 1933 Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Company of expenses incurred or paid by a director, officer or controlling person of the Company in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities registered on the Form S-8 Registration Statements identified below, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the 1933 Act and will be governed by the final adjudication of such issue. The preceding undertaking is hereby incorporated by reference to outstanding Registration Statements Nos. 2-94748, 33-7275, 33-27425, 33-35547 and 33-55460 of the Company on Form S-8. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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, on this 25th day of March, 1994. AMDAHL CORPORATION By E. JOSEPH ZEMKE --------------------------------- (E. Joseph Zemke, President and Chief Executive Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signatures Title Date - ------------------- ----- ---- JOHN C. LEWIS* Chairman of the Board - ------------------ (John C. Lewis) EUGENE R. WHITE* Vice Chairman of - ------------------ the Board (Eugene R. White) E. JOSEPH ZEMKE President, Chief March 25, 1994 - ------------------ Executive Officer (E. Joseph Zemke) and Director (Principal Executive Officer) EDWARD F. THOMPSON Vice President, Chief March 25, 1994 - ------------------ Financial Officer (Edward F. Thompson) and Secretary (Principal Financial Officer) ERNEST B. THOMPSON Vice President and March 25, 1994 - ------------------ Controller (Ernest B. Thompson) (Principal Accounting Officer) Signatures Title Date - ---------- ----- ---- KEIZO FUKAGAWA* Director - ------------------- (Keizo Fukagawa) E. F. HEIZER, JR.* Director - ------------------ (E. F. Heizer, Jr.) KAZUTO KOJIMA* Director - ------------------- (Kazuto Kojima) R. STANLEY LAING* Director - ------------------- (R. Stanley Laing) BURTON G. MALKIEL* Director - ------------------ (Burton G. Malkiel) GEORGE R. PACKARD* Director - ------------------- (George R. Packard) WALTER B. REINHOLD* Director - ------------------- (Walter B. Reinhold) TAKAMITSU TSUCHIMOTO* Director - --------------------- (Takamitsu Tsuchimoto) J. SIDNEY WEBB* Director - ------------------ (J. Sidney Webb) *By: EDWARD F. THOMPSON Attorney-in-Fact March 25, 1994 ------------------ (Edward F. Thompson) EXHIBIT INDEX Exhibit Number Exhibit - ------- ------- 10(f) Amdahl Corporation Executive Incentive Performance Plan, as amended 10(s) Termination Agreement With Named Executive Officer dated July 1, 1993 10(t) Letter Agreement between Amdahl and Fujitsu dated April 3, 1984 10(y) Partnership Agreement dated June 21, 1993 between wholly owned subsidiaries of Amdahl and Electronic Data Systems Corporation (Portions of this exhibit are deleted pursuant to a request for confidential treatment) 10(z) Letter of commitment by Fujitsu dated December 3, 1993 10(aa) Joint Development Agreement between Amdahl and Fujitsu dated December 8, 1993 (Portions of this exhibit are deleted pursuant to a request for confidential treatment) 13 Annual Report to Stockholders for fiscal year 1993 (Only portions incorporated by reference) 21 List of Subsidiaries 23 Consent of Arthur Andersen & Co. 24 Powers of Attorney EX-10.F 2 INCENTIVE PERFORMANCE PLAN Exhibit 10(f) AMDAHL CORPORATION EXECUTIVE INCENTIVE PERFORMANCE PLAN REVISED AND RESTATED THROUGH DECEMBER 31, 1993 1. PURPOSES OF THE PLAN 1.1 This Executive Incentive Performance Plan (the "Plan") is intended to promote the interests of AMDAHL CORPORATION (the "Corporation") and its Subsidiaries by providing a select group of employees of the Corporation and its Subsidiaries who are primarily responsible for the management, growth and success of the business with the opportunity to participate in a special program of deferred cash bonuses and retirement income accumulation designed to reward them for the services they have rendered and to provide them with an incentive to continue in the employ of the Corporation and its Subsidiaries through normal retirement age. 2. ADMINISTRATION OF THE PLAN 2.1 The Plan shall be administered by a committee (the "Committee") of three (3) or more members appointed from time to time by the Corporation's Board of Directors (the "Board"). The Committee shall have full authority to administer the Plan and shall from time to time select the eligible employees who are to participate in the Plan. 2.2 The interpretation and construction of any provision of the Plan and the adoption of rules and regulations for administering the Plan shall be made by the Committee. Decisions of the Committee shall be final and binding on all parties who have an interest in the Plan. 2.3 For purposes of the Plan, the following definitions shall be in effect: Active Participant: An Active Participant shall, for each fiscal year the ------------------- Plan remains in effect after December 1, 1993, be any individual selected for participation in the Plan, whether in the current fiscal year or in any earlier fiscal year, who has not otherwise been excluded by the Committee from receiving an allocation of the short-term and long-term awards made under the Plan for the current fiscal year. Eligible Earnings: The Eligible Earnings of a participant for any relevant ------------------ fiscal year under the Plan shall be equal to (i) his/her base salary for such fiscal year plus (ii) any cash bonus (other than awards under this Plan) earned for services rendered in such fiscal year and payable in the immediately succeeding fiscal year. Employee: A participant shall be deemed to continue in Employee status for --------- so long as the participant remains in the active employ of the Corporation or one or more of its Subsidiaries. Long-Term Account: The Long-Term Account of each participant shall be the ------------------ account maintained in his/her name on the books of the Corporation to which there shall be credited the participant's share of the long-term awards made for the 1988 and all subsequent fiscal years. Normal Retirement Date: The participant's Normal Retirement Date shall be ----------------------- the latest to occur of (i) the first date on which the sum of the participant's ------ age and Years of Service total at least 70 years, (ii) the date on which the participant attains age 55, or (iii) the date on which the participant completes 10 Years of Service. Permanent Disability: A participant shall be deemed to have terminated --------------------- Employee status by reason of Permanent Disability if he/she is unable, by reason of any physical or mental impairment or illness expected to result in death or to continue for a period of twenty-four (24) consecutive months or more, to perform his/her usual duties for the Corporation or Subsidiary employing such individual. Separate Account: The Separate Account of each participant shall be the ----------------- account maintained in his/her name on the books of the Corporation to which there is credited the participant's share of the long-term awards made for the 1986 and 1987 fiscal years. Short-Term Account: The Short-Term Account of each participant shall be ------------------- the account maintained in his/her name on the books of the Corporation to which there shall be credited the participant's share of the short-term awards made for each of his/her fiscal years of participation in the Plan. The Short-Term Account of each participant will be divided into a series of subaccounts in accordance with the provisions of Section 5.2(b). Subsidiary: Each corporation (other than the Corporation) in any unbroken ----------- chain of corporations ending with the Corporation shall be considered to be a Subsidiary of the Corporation, provided such corporation (other than the last corporation in the unbroken chain) owns, at the time of determination, stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. Year of Service: The participant shall be credited with one Year of ---------------- Service under the Plan for each twelve (12)-month period, measured from his/her date of hire, during which he/she remains an Employee (whether or not the months of Employee status included within such period were rendered consecutively). Any period intervening between the participant's termination of Employee status and his/her subsequent rehire shall not be taken into account for Year of Service purposes. 3. DETERMINATION OF PARTICIPANTS 3.1 The persons who shall be eligible to participate in the Plan shall be those Corporate Officers and other key employees primarily responsible for the management, growth and success of the business who are recommended for participation in the Plan by the Chairman of the Board and approved by the Committee. 3.2 Each individual selected for participation in the Plan shall remain an Active Participant for each fiscal year during which that individual continues in Employee status, except to the extent the Committee should elect to exclude such individual from Active Participant status for one or more of those fiscal years. Effective with the 1994 fiscal year, the Committee shall have complete discretion to exclude one or more existing participants from Active Participant status for any fiscal year or years the Committee deems appropriate, including the entire period the participant continues in Employee status following such exclusion. If any individual is excluded from Active Participant status for one or more fiscal years, then such individual shall not receive any allocation of the incentive awards (either short-term or long-term) made to the Plan for those fiscal years. However, each participant in Employee status shall, in accordance with the applicable vesting schedule, continue to vest with respect to any incentive awards already allocated to his/her accounts under the Plan, whether or not that participant remains an Active Participant for the current or any subsequent fiscal year. 4. INCENTIVE PERFORMANCE AWARDS 4.1 For each fiscal year of the Corporation for which the Plan is in effect, the Corporation shall make an aggregate incentive award on behalf of the Active Participants in an amount not to exceed two percent (2%) of the Corporation's consolidated pre-tax earnings for such fiscal year. The amount of the award each fiscal year shall be determined at the discretion of the Board on the basis of the progress made in such year toward achievement of the Corporation's long-term performance objectives, as such objectives may be identified from time to time by the Board. 4.2 The aggregate incentive award for each fiscal year, beginning with the incentive award for the 1986 fiscal year, shall be divided into two components: (i) the short-term award and (ii) the long-term award. For the 1986 and 1987 fiscal year incentive awards, the Board shall have discretionary authority to determine the percentage of the aggregate award allocated to each component, provided not more than 50% of the aggregate award shall be designated as the - -------- long-term component. Beginning with the 1988 fiscal year, each aggregate incentive award shall automatically be divided into equal short-term and long- term components. 4.3 The short-term and long-term components of the aggregate incentive award for the fiscal year shall be allocated among the individuals who are Active Participants for that fiscal year. Beginning with the 1988 fiscal year, the allocation shall be made in accordance with the following provisions: Short-Term Award (a) The Committee shall, as soon as reasonably practicable after the aggregate short-term award for the fiscal year has been determined, allocate a portion of such award to the Short-Term Account of each Active Participant who has continued in Employee status through the last day of such year. The allocation to each such Active Participant shall be in the same proportion as his/her Eligible Earnings for the fiscal year of the award bear to the Eligible Earnings of all Active Participants for such fiscal year. (b) The short-term award so allocated to each individual Active Participant (the "Short-Term Award") shall not exceed 25% of his/her Eligible Earnings for the fiscal year for which the award is made. To the extent the Short-Term Award for any fiscal year would otherwise exceed the applicable 25% limitation for one or more Active Participants, the excess shall be added to the long-term award to be allocated for such year. Long-Term Award (a) Effective with the 1988 fiscal year, the Committee shall establish a fixed-dollar retirement income pool for each individual participant (the "Retirement Fund Objective") in order to provide such individual with replacement income upon his/her retirement from the Corporation following his/her Normal Retirement Date. The Retirement Fund Objective established for each participant shall be reviewed periodically by the Committee and shall be adjusted from time to time as circumstances warrant. (b) The Committee shall, as soon as reasonably practicable after the aggregate long-term award for the fiscal year has been determined, allocate to each Active Participant who has continued in Employee status through the last day of such year that portion of the actual long-term award which is in the same ratio as the Retirement Fund Objective then in effect for such Active Participant bears to the aggregate dollar amount of the Retirement Fund Objectives then in effect for all Active Participants in the Plan. (c) The long-term award allocated to each individual Active Participant (the "Long-Term Award") shall in no event exceed in dollar amount the sum necessary to bring the existing balance of the Long-Term Account maintained for such Active Participant under the Plan (as adjusted in accordance with Sections 4.4 and 4.5 below) up to the dollar amount of the Retirement Fund Objective then in effect for that individual. 4.4 Once an individual becomes a participant in this Plan, he/she may not during the balance of his/her period of continued Employee status participate in any other pension or retirement plans sponsored by the Corporation or its Subsidiaries (other than the Employee Savings Plan and the Individual Deferred Compensation Program), whether or not that individual remains an Active Participant after selection into this Plan. If such individual has participated in the Accumulation Program of the Corporation's Capital Accumulation/Individual Deferred Compensation Plan prior to his/her entry into the Plan, the balance from time to time outstanding in his/her capital accumulation account under the Accumulation Program shall be added to the balance of his/her Long-Term Account under this Plan for purposes of determining whether the combined sum exceeds the participant's Retirement Fund Objective. To the extent the combined sum equals or exceeds the participant's Retirement Fund Objective, no further long-term awards under the Plan shall, by reason of the limitations of Section 4.3(c), be allocated to his/her Long-Term Account. 4.5 As a transitional procedure for the new vesting schedule made applicable to the participant's Long-Term Account by reason of Section 6.2 of the November 15, 1988 restatement of the Plan, the participant's long-term account as of the close of the 1987 fiscal year shall be maintained as his/her Separate Account under the Plan, and the participant shall continue to vest in this Separate Account in accordance with the vesting schedule in effect immediately prior to the November 15, 1988 restatement of the Plan (100% vesting when age and Years of Service total at least 70 years with at least 10 Years of Service, but in no event earlier than April 1, 1989). However, no payment from the vested portion of such account shall be made prior to the participant's attainment of age 55. The following additional provisions shall be applicable to the Separate Account: (a) Until paid, the balance in the Separate Account shall continue to accrue interest in accordance with the applicable provisions of Section 7.2. (b) The balance from time to time outstanding in the Separate Account shall be added to the balance of the participant's post-1987 Long- Term Account under the Plan for purposes of determining whether the combined sum exceeds the participant's Retirement Fund Objective. To the extent the combined sum equals or exceeds the participant's Retirement Fund Objective, no further long-term awards under the Plan shall, by reason of the limitations of Section 4.3(c), be allocated to his/her Long-Term Account. (c) To the extent any portion of the Separate Account is paid to the participant prior to his/her actual retirement from the Corporation, the amount distributed, together with interest imputed thereon at the rate specified in Section 7.2 from the date of distribution, shall continue to be treated as part of the outstanding balance of the participant's Separate Account for purposes of applying the provisions of Sections 4.3(c) and 4.5(b). 4.6 Should any portion of an aggregate or individual incentive award for a particular fiscal year remain unallocated by reason of one or more of the foregoing limitations, then such portion shall not be allocated to any other participant (whether for the current or any subsequent fiscal year) nor used for any other purpose under the Plan. 5. VESTING AND PAYMENT OF SHORT-TERM AWARD 5.1 The interest of the participant in his/her Short-Term Award for a particular fiscal year shall vest in accordance with the following provisions, whether or not such individual remains an Active Participant: (a) Upon the expiration of the one-year period measured from the day on which the Short-Term Award is first allocated to the participant pursuant to Section 4.3, the participant shall vest in 25% of the principal amount of such award, provided such individual continues in Employee status through vesting date. (b) On each of the next three (3) anniversaries of the initial vesting date under subparagraph (a), the participant shall vest in an additional 25% of the principal amount of the Short-Term Award, provided the participant continues in Employee status through each such vesting date. (c) The participant's interest, however, shall immediately vest with respect to all unvested Short-Term Awards credited to his/her Short-Term Account under this Plan or to his/her deferred compensation account under the Corporation's Deferral Election Plan (the "Deferral Plan"), if his/her Employee status is terminated by reason of death or Permanent Disability. Such full and immediate vesting shall likewise occur if the participant terminates Employee status on or after attainment of his/her Normal Retirement Date. 5.2 The following provisions shall govern the maintenance of the Short-Term Account to be established for each Active Participant who is allocated one or more Short-Term Awards under the Plan: (a) Each participant to whom a Short-Term Award is made hereunder shall have the election to (i) receive payment of one or more vested installments of such award in accordance with the provisions of this Plan or (ii) defer payment of one or more vested installments of such award to a later period pursuant to a timely-filed election under the Deferral Plan. Except to the extent the participant makes such a deferral election with respect to one or more vested installments of the Short Term Award earned for a particular fiscal year, all vested installments of that award will be paid in accordance with the provisions of this Plan. (b) The Short-Term Account of each participant who is to receive payment under this Plan of one or more Short Term Awards shall be maintained as a special deferred compensation account on the books of the Corporation. This account shall in turn be divided into a series of separate subaccounts ("Short-Term Subaccounts"), and a separate subaccount shall accordingly be maintained for the installments of each annual Short Term Award allocated to the participant under Section 4.3 and not otherwise subject to a deferred payout under the Deferral Plan. Each of the participant's Short-Term Subaccounts shall be paid in accordance with the provisions of Section 5.4. (c) Any installments of a Short-Term Award which are the subject of a timely-filed deferral election under the Deferral Plan shall be paid in accordance with the deferred payout provisions of that plan, and payment shall not be governed by the terms and conditions of this Plan. (d) Should the participant elect, with respect to the Short-Term Award for a particular fiscal year, to receive payment of one or more installments of that award under this Plan and to receive the balance of such installments under the Deferral Plan, then the installments which are to be paid under this Plan shall be the last installments in which the participant vests hereunder pursuant to the annual vesting schedule of Section 5.1 and shall accordingly be paid hereunder as such installments vest. The installments which are to be paid under the Deferral Plan shall be the first annual installments which vest pursuant to the Section 5.1 schedule and, once vested, shall be subject to payment in accordance with the deferral election in effect for such installments under the Deferral Plan. 5.3 Each Short-Term Subaccount shall accrue interest in accordance with the provisions of Section 7.1 5.4 The balance credited to the participant's Short-Term Subaccount shall be paid to him/her as the installment or installments of the Short Term Award credited to such subaccount vest from time to time in accordance with the vesting provisions of Section 5.1. Each payment shall be equal in amount to the installment of the Short-Term Award in which the participant has vested, together with the accrued interest thereon. Should a participant terminate Employee status by reason of death or Permanent Disability while there is still an amount outstanding in one or more of his/her Short-Term Subaccounts, then the total amount outstanding in all such subaccounts shall be distributed in one lump-sum payment to him/her (or the designated beneficiary in the case of the participant's death) within ninety (90) days after such termination of Employee status. Upon the participant's accelerated vesting in one or more otherwise unvested Short-Term Award installments following termination of Employee status after attainment of his/her Normal Retirement Date, the amount so accelerated shall be paid to the participant either in one lump sum under this Plan within ninety (90) days after such termination of Employee status or in accordance with any deferral election in effect for such installments under the Deferral Plan. 5.5 The Committee shall have full power and authority, exercisable in its sole discretion at any time, to accelerate the vesting and payout of one or more otherwise unvested installments credited to the Short-Term Subaccounts maintained for the participants under Section 5.2(b) of the Plan, together with all interest accrued to date on those installments. Each accelerated installment shall be paid in a lump sum within thirty (30) days after Committee authorization of the payout, and such payment shall be subject to the Company's collection of all applicable Federal and State income and employment taxes. In no event, however, shall there be any accelerated payout of any installments credited to the participant's Short-Terms Subaccounts as to which there exists any outstanding deferral election filed by the Participant under the Deferral Plan. 6. VESTING AND PAYMENT OF LONG-TERM AWARD. 6.1 The Corporation shall establish on its books a Long-Term Account for each participant as a special deferred compensation account to which there shall be credited one or more annual Long-Term Awards allocated to the participant under Section 4.3. 6.2 The participant's interest in his/her Long-Term Account (to the extent attributable to Long-Term Awards for the 1988 and all subsequent fiscal years) shall initially vest upon his/her Normal Retirement Date, provided the participant continues in Employee status through such date. At such vesting date, the participant shall be vested in that percentage of his/her Long-Term Account obtained by multiplying his/her Years of Service by 5%. The participant shall vest in an additional 5% of the Long-Term Account for each Year of Service subsequently completed until he/she becomes 100% vested in the Long-Term Account upon completion of 20 Years of Service. Should the participant terminate Employee status by reason of death or Permanent Disability prior to his/her Normal Retirement Date, such individual shall thereupon vest in that percentage of his/her Long-Term Account obtained by multiplying his/her Years of Service (whether or not in excess of 10 years) by 5%. Such vesting in the Long-Term Account shall occur on the basis of the Years of Service completed by the participant, whether or not the participant remains in Active Participant status for one or more of those Years of Service. 6.3 Upon the participant's termination of Employee status on or after his/her Normal Retirement Date, benefit payments from his/her Long-Term Account shall be made in accordance with the following provisions: (a) If the participant is at the time of his/her termination of Employee status vested in 100% of his/her Long-Term Account, then the entire balance of the Long-Term Account shall be paid to him/her in a lump sum within ninety (90) days. (b) If the participant is at the time of his/her termination of Employee status vested in less than 100% of his/her Long-Term Account, then the participant shall be entitled to a lump sum payment, due within ninety (90) days after such termination of Employee status, equal to the lesser of (i) the product of the Retirement Fund Objective at the ------ time in effect for him/her and the percentage to which he/she is at such time vested in his/her Long-Term Account, less any amount paid or payable to such individual from his/her Separate Account in accordance with Section 6.5, or (ii) the entire balance credited to his/her Long-Term Account at the time of such termination. (c) The participant may, by filing an irrevocable election with the Committee at least 24 months prior to attainment of his/her Normal Retirement Date, elect to receive his/her subparagraph (a) or (b) benefits in substantially equal annual installments over a 5 or 10- year period. To the extent such an installment payout is elected, the unpaid vested balance of the Long-Term Account shall accrue interest at the rate specified in Section 7.2 for the period commencing with the participant's actual retirement date and ending with the date of the payment. 6.4 The participant's interest in the Separate Account attributable to the Long-Term Awards made for the 1986 and 1987 fiscal years shall vest upon the latest to occur of (i) his/her completion of 10 Years of Service, (ii) the first - ------ date on which the sum of the participant's age and Years of Service totals 70 years, or (iii) April 1, 1989. However, the participant's interest in the Separate Account shall immediately vest if his/her Employee status is terminated by reason of death or Permanent Disability. The balance from time to time outstanding in the Separate Account shall accrue interest in accordance with the provisions of Section 7.2. 6.5 The balance credited to the participant's Separate Account, to the extent vested pursuant to the provisions of Section 6.4, shall be paid to such participant either in one lump sum or in a series of annual installments over a designated period of years (not to exceed ten (10) years). The method of distribution and commencement date shall be irrevocably designated by the participant in an election filed with the Committee no later than the earlier of ------- (i) eighteen (18) months prior to the earliest date on which he/she will vest in the Separate Account pursuant to the provisions of Section 6.4 or (ii) the first day of the first calendar year immediately preceding the calendar year in which the participant's vesting date under Section 6.4 will occur. In the absence of such a timely-filed election, the vested balance of the Separate Account shall be paid in one lump sum upon the participant's termination of Employee status. However, no payment shall be made from the participant's Separate Account prior to his/her attainment of age fifty-five (55), except to the limited extent otherwise provided in Section 6.6. 6.6 Notwithstanding either the provisions of Section 6.5 or any election made by the participant to receive payment of his/her vested interest in the Long- Term Account or the Separate Account in two or more installments, in the event of such participant's death or Permanent Disability (whether or not he/she is still in Employee status), the entire vested balance of his/her Long-Term Account and Separate Account shall be paid to him/her (or to the designated beneficiary in the event of the participant's death) in one lump sum payment within ninety (90) days after the date of the participant's death or Permanent Disability. 6.7 If either the Long-Term Account or the Separate Account is to be paid in two or more annual installments, then the amount payable at the time of each installment shall be equal to the aggregate balance outstanding in such account at the time of the installment payment, divided by the number of unpaid installments (including the current installment). 7. PAYMENT OF INTEREST 7.1 Short-Term Awards. ------------------ (a) Pre-1987 Awards. The balance from time to time outstanding in each ---------------- Short-Term Subaccount maintained hereunder, to the extent attributable to incentive awards made to the participant for fiscal years ending prior to January 1, 1987 ("Pre-1987 Awards"), shall accrue interest each calendar year at the average blended rate at which interest is earned for the same period on the assets of the Corporation's Employee Savings Plan invested in one or more guaranteed investment contracts thereunder ("Blended Rate"). Pre-1987 Awards will earn interest at the Blended Rate until paid to the participant. (b) Post-1986 Awards. The balance from time to time outstanding in each ----------------- Short-Term Subaccount attributable to incentive awards made for fiscal years ending after December 31, 1986 shall accrue interest each calendar year at the Applicable Rate specified in Section 7.2 until paid to the participant. 7.2 Long-Term Awards. ----------------- (a) Pre-1988 Awards. The balance from time to time outstanding in each ---------------- Separate Account maintained hereunder for Long-Term Awards made for the 1986 and 1987 fiscal years shall accrue interest each calendar year at the weighted average rate at which interest is earned for such year on the assets of the Employee Savings Plan invested in one or more guaranteed insurance contracts thereunder during such year ("Applicable Rate"). The Applicable Rate shall be calculated at the end of each calendar year, and interest earned on outstanding account balances for such year shall be credited to the participant's Separate Account at that time. (b) Post-1987 Awards. The individual Long-Term Account to which each ----------------- participant's share of the Long-Term Awards made for the 1988 and all subsequent fiscal years is to be allocated shall not bear any interest during the period the participant remains in Employee status. Following the participant's termination of Employee status at or after his/her Normal Retirement Date, the unpaid vested balance of the Long-Term Account shall bear interest at the Applicable Rate during any installment period in excess of ninety (90) days which may be in effect for the payment of such account balance. 7.3 Pro-Rated Interest. To the extent an amount is paid out of a particular ------------------ account prior to the last day of a calendar year, the interest accruable on such amount for the portion of such calendar year preceding the payment date shall, in accordance with Section 7.1 or Section 7.2 (whichever is applicable), be calculated and credited at the end of such year, and payment of such accrued interest shall be made within ninety (90) days after the close of the year. 8. GENERAL PROVISIONS ------------------ 8.1 Upon the participant's cessation of Employee status prior to attainment of his/her Normal Retirement Date, the portion of his/her Long-Term and Separate Accounts and each of his/her Short-Term Subaccounts in which the participant is not at such time vested shall be immediately forfeited, and the participant shall have no further rights or interest with respect to the portion of each account or subaccount so forfeited. 8.2 In the event of a severe financial hardship, the participant may apply to the Committee for an immediate distribution (in whole or in part) of the vested balance of his/her Long-Term and Separate Accounts maintained hereunder. The Committee shall have complete discretion to accept or reject the request. 8.3 Except to the extent the Committee may in its sole discretion elect to implement a so-called "Rabbi Trust" for the payment of benefits hereunder, the obligation to pay the balance credited to the participant's Long-Term Account, Separate Account and Short-Term Subaccounts shall at all times be an unfunded and unsecured obligation of the Corporation or Subsidiary employing such individual; and the participant shall look solely and exclusively to the general assets of the Corporation or Subsidiary employing the participant for the payment of his/her accounts under the Plan. 8.4 This restated version of the Plan shall become effective with respect to the eligible employees of the Corporation when adopted by the Board (October 27, 1993) and shall become effective with respect to the eligible employees of one or more Subsidiaries when adopted by the board of directors of such Subsidiary or Subsidiaries. The board of directors of any participating corporation may at any time amend, suspend or terminate the Plan with respect to its participants; provided, however, that such action shall not adversely affect rights and - -------- interests existing under the Plan at the time of such action. 8.5 No participant shall have the right to alienate, pledge or encumber his/her interest in any Long-Term Account, Separate Account or any Short-Term Subaccounts maintained hereunder, and no such account or subaccount shall be subject to the claims of the participant's creditors or to attachment, execution or other process of law. 8.6 A participant may designate a beneficiary to receive any unpaid vested balance outstanding in his/her Long-Term Account or Separate Account or any of his/her Short-Term Subaccounts at the time of the participant's death. In the absence of such designation, such vested balance shall be paid in accordance with the participant's will or pursuant to the laws of descent and distribution. The participant may from time to time revoke his/her beneficiary designation and file a new beneficiary designation. All beneficiary designations, however, must be on the form prescribed by the Committee. 8.7 Neither the action of the Corporation in establishing the Plan, nor any action taken under the Plan by the board of directors of any participating company or by the Committee, nor any provision of the Plan itself, shall be construed so as to grant any person the right to remain in the employ of the Corporation or any of its Subsidiaries for any period of specific duration, and the Employee status of such individual may be terminated at any time, with or without cause. 8.8 All costs and expenses incurred in the operation and administration of the Plan shall be borne by the Corporation. Payment of applicable withholding taxes on benefits paid under the Plan shall be the responsibility of the recipients. 8.9 The provisions of the Plan shall be governed by the Employee Retirement Income Security Act of 1974 (as amended) and, to the extent not thereby pre- empted, by the laws of the State of California without resort to the conflict-of-laws rules of such State. 8.10 The obligations of the Corporation and its Subsidiaries to make the payments required hereunder shall be binding upon any successor or assign of the Corporation or any such Subsidiary, whether by merger, consolidation, acquisition or other reorganization. No amendment or termination of the Plan by the Corporation or any of its Subsidiaries (or any successor or assign) shall adversely affect or otherwise impair the rights of participants to receive benefit payments hereunder, to the extent attributable to Short-Term or Long- Term Awards made prior to the date of such amendment or termination, in accordance with the applicable vesting and payment provisions of Articles 4, 5 and 6 hereof. AMDAHL CORPORATION EXECUTIVE INCENTIVE PERFORMANCE PLAN DESIGNATION OF BENEFICIARY -------------------------- I hereby designate the following individual or individuals as the beneficiary or beneficiaries of all my right, title and interest in and to all monies in which I am vested under the Executive Incentive Performance Plan at the time of my death, hereby revoking any prior designation of beneficiaries made by me: Name Relationship Percent of Total (1) --------------------------- --------------------- ---------------- (2) --------------------------- --------------------- ---------------- (3) --------------------------- --------------------- ---------------- (4) --------------------------- --------------------- ---------------- The beneficiary must survive me; otherwise, his or her designated share is to be divided equally among the beneficiaries who do survive me. Signature: ------------------------------------- Name: ------------------------------------- Date: ------------------------------------- EX-10.S 3 TERMINATION AGREEMENT Exhibit 10(s) July 1, 1993 Mr. Joseph J. Francesconi 1319 San Mateo Drive Menlo Park, CA 94025 Dear Joe: The following reflects Amdahl's agreement with you that is associated with your leaving the company: 1. You will resign as an officer of the company effective today. 2. Your salary will continue to be paid through December 31, 1994. 3. Vacation accrued through July 1, 1993 will be paid. 4. Life, long-term disability, and health insurances now in effect will be continued through December 31, 1994. All other benefits will cease as of July 1, 1993. 5. On January 31, 1994, the $47,092.12 installment due you from the short-term account of the Executive Incentive Performance Plan will be paid you. On December 31, 1994 the remaining balance of $27,066.98 will be paid. Each of these amounts will be increased by interest earnings to the date of payment. 6. On September 30, 1993 and on every three (3) months thereafter, one sixth of an amount equivalent to the balance of $866,639 in the long-term account of the Executive Incentive Performance Plan will be paid to you. These quarterly disbursements will be increased by the interest earnings that are attributable to the $290,634 in the 1986 - 1987 subaccount. 7. Consistent with the terms of the Officer Financial Planning Assistance Program, up to $5,000 will be reimbursed for the personal financial plan that is now being developed for you. 8. On January 1, 1995, you will be placed on personal leave of absence, without pay or benefits, through January 31, 1996. 9. Restrictions will continue to lapse on your restricted stock grants through January 31, 1996. 10. Your existing stock options will continue to vest through January 31, 1996, and you will have 90 days from that date to exercise any stock that has vested to you through that date. 11. You will continue to be entitled to indemnification, as provided in Amdahl's bylaws, with respect to the current securities litigation in which you are named as an individual defendant. 12. We have agreed that you will not join or form a company through January 31, 1996 that sells the same compatible products as does Amdahl. Lastly, we have further agreed that you will not directly or indirectly solicit for hire any Amdahl/Antares employee or refer any Amdahl/Antares employee for hire by another employer through January 31, 1996. Please confirm your agreement with these terms by signing in the space provided below. I regret that you will be leaving Amdahl and join with many others in thanking you for your many contributions that have materially and positively enabled our business growth and success. Stay in touch and please let me know if I can be helpful to you in some way as you develop and implement your plans. Cordially, Anthony M. Pozos Senior Vice President Human Resources and Corporate Services AMP/sh By Joseph J. Francesconi --------------------- Joseph J. Francesconi EX-10.T 4 AGREEMENT BETWEEN AMDAHL AND FUJITSU Exhibit 10(t) April 3, 1984 Amdahl Corporation 1250 East Arques Sunnyvale, CA 94086 U.S.A. Attention: Mr. John C. Lewis President Gentlemen: This letter will confirm the agreements and representations of Fujitsu Limited ("Fujitsu") and Amdahl Corporation ("Amdahl") with respect to the acquisition by Fujitsu of 6,007,832 shares (the "Shares") of Amdahl Common Stock, $.05 par value ("Common Stock") and warrants to purchase 2,490,000 shares of Common Stock expiring December 31, 1984 ("Warrants") from Heizer Corporation ("Heizer"). For purposes of this Agreement, the term "Amdahl Equity Securities" at a particular time shall mean all shares of Amdahl Common Stock, $.05 par value, Amdahl Preferred Stock and any other class or series of equity securities then authorized in the Amdahl Certificate of Incorporation, and all such securities issuable upon conversion or exercise of any then outstanding options, warrants or convertible securities of Amdahl. 1. Neither Fujitsu nor any majority-owned subsidiary of Fujitsu (collectively called "Fujitsu Group") will, without the prior approval of Amdahl, directly or indirectly, acquire any Amdahl Equity Securities, whether in the open market, directly from Amdahl, directly from other Amdahl security holders, or otherwise, if such acquisition would result in the Fujitsu Group's Percentage Ownership of Common Stock Outstanding On A Fully Diluted Basis exceeding 49.5% of all Common Stock Outstanding On A Fully Diluted Basis. "Common Stock Outstanding On A Fully Diluted Basis" shall mean all shares of Common Stock having voting power in the election of directors outstanding at any time plus all shares of Common Stock issuable upon conversion or exercise of securities convertible into, and rights to acquire, Common Stock having voting power in the election of directors outstanding at any time. 2. Section 1 (a) (i) of the Amdahl/Fujitsu 1982 Agreement, dated as of March 4, 1982, is hereby amended so as to delete the number "31.3%" wherever it appears and to substitute therefor the number "49.5%". 3. The provisions of this Agreement will become effective on the date of the closing of the purchase of the Shares and Warrants by Fujitsu from Heizer and shall remain in full force and effect until the tenth anniversary of such date, or earlier termination as provided below, after which such provisions, except for provisions of Section 2 above, which shall survive, shall become null and void and will cease to have any further force or effect, provided, however, that this Agreement (except for Section 2) may be terminated by Fujitsu or by Amdahl by delivering a written notice of termination to the other party at any time during the period from April 1, 1990 to June 30, 1990. 4. Each party hereto acknowledges that the breach of any of its agreements contained herein would result in irreparable damage to the other which could not be adequately compensated in monetary damages. 5. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware. If the foregoing correctly sets forth the understanding between us, please execute this letter in the space provided below, whereupon it will become a binding agreement between us pursuant to its terms. Very truly yours, FUJITSU LIMITED By TAKUMA YAMAMOTO ----------------- (Takuma Yamamoto) President Acknowledge and agreed to: AMDAHL CORPORATION By JOHN C. LEWIS --------------- (John C. Lewis) EX-10.Y 5 PARTNERSHIP AGREEMENT Portions of this exhibit have been deleted pursuant to a request for confidential treatment. Exhibit 10(y) PARTNERSHIP AGREEMENT between AMSUB INC., a California Corporation and EDS ANTARES, INC. a Nevada Corporation to form ANTARES ALLIANCE GROUP, a Delaware General Partnership June 21, 1993 PARTNERSHIP AGREEMENT AGREEMENT dated as of June 21, 1993 between Amsub Inc., a wholly owned corporate subsidiary of Amdahl Corporation ("Amdahl"), organized and existing under the laws of California, having its principal place of business at 1250 E. Arques Avenue, Sunnyvale, California 94086 (hereinafter referred to as "Amdahl Sub") and EDS Antares, Inc. a wholly owned corporate subsidiary of Electronic Data Systems Corporation ("EDS") organized and existing under the laws of Nevada, having its principal place of business at 5400 Legacy Drive, Plano, Texas, 75024 (hereinafter referred to as "EDS Sub"), pursuant to which Antares Alliance Group, a Delaware general partnership having its principal place of business at , Dallas, Texas (hereinafter referred to as the "Partnership") is hereby formed. INTRODUCTION ------------ In consideration of the mutual covenants and promises contained in this Agreement and other good and valuable consideration, receipt of which is hereby acknowledged, the parties agree as follows: ARTICLE I DEFINITIONS ----------- As used in this Agreement, the following terms, whether used in the singular or the plural, will have the following meanings: 1.1 "Affiliate" means any corporation, company, partnership, joint venture, firm --------- and/or entity which controls, is controlled by, or is under common control with a Partner, except for the Partnership. For purposes of this Section 1.1, "control" will mean (a) in the case of corporate entities, direct or indirect ownership of greater than fifty percent (50%) of the stock or shares entitled to vote for the election of the board of directors or other governing body of the entity; and (b) in the case of noncorporate entities, direct or indirect ownership of greater than fifty percent (50%) of the equity interest with the power to direct the management and policies of such noncorporate entities. 1.2 "Annual Budget" is defined in Section 3.3 of this Agreement. ------------- 1.3 "Agreements" has the same meaning as in the Master Agreement ---------- between Amdahl, EDS and the Partnership dated the same date as this Agreement. 1.4 "Board" means the Supervisory Board of the Partnership. ----- 1.5 "Business Deadlock" means the inability of the Board to obtain a unanimous ----------------- decision for any Unanimous Decision requiring action by the Board, which inability continues for a period of at least 75 days from the time the Unanimous Decision at issue was initially presented to the Board for action. 1.6 "Capital Account" means a separate account maintained for each Partner and --------------- adjusted in accordance with the Treasury Regulations under Section 704 of the Internal Revenue Code of 1986, as amended (the "Code"). Consistent with such Treasury Regulations, the following adjustments to such accounts will be made: (a) There will be credited to each Partner's Capital Account the amount of any cash contributed by such Partner to the capital of the Partnership, the fair market value of any property (other than cash) contributed by such Partner to the capital of the Partnership (net of any liabilities secured by such property that the Partnership is considered to assume or take subject to under Code Section 752) and such Partner's share of the Net Profit of the Partnership and of any items in the nature of income or gain separately allocated to such Partner; and there will be charged against each Partner's Capital Account the amount of all cash distributions to such Partner, the fair market value of any property (other than cash) distributed to such Partner by the Partnership (net of any liability secured by such property that the Partner is considered to assume or take subject to under Code Section 752) and such Partner's share of the Net Loss of the Partnership and of any items in the nature of loss or deduction separately allocated to such Partner; (b) If the Partnership at any time distributes any of its assets in-kind to any Partner, the Capital Account of each Partner will be adjusted to account for that Partner's allocable share (as determined under Section 4.2 of this Agreement) of the Net Profit or Net Loss that would have been realized by the Partnership had it sold the assets that were distributed at their respective fair market values immediately prior to their distribution; and (c) In the event any interest in the Partnership is transferred in accordance with the terms of this Agreement, the transferee will succeed to the Capital Account of the transferor to the extent it relates to the transferred interest. (d) Sections 1.6(a), (b), and (c) are intended to comply with the capital account maintenance rules under Code Section 704(b) and the regulations promulgated thereunder. The Board will implement such adjustments to the Capital Accounts of the Partners as are necessary or appropriate, consistent with this Agreement, to insure compliance with such capital account maintenance rules, provided that if such adjustments adversely affect any Partner, such Partner must consent to such adjustment. 1.7 "Capital Budget" is defined in Section 3.3 of this Agreement. -------------- 1.8 "Carrying Value" means, with respect to any Partnership asset, the asset's -------------- adjusted basis for federal income tax purposes, except as follows: (a) the initial Carrying Value of any asset contributed to the Partnership will be such asset's gross fair market value, as determined by the contributing Partner and agreed to by the Partnership, at the time of such contribution; (b) the Carrying Values of all Partnership assets will be adjusted to equal their respective gross fair market values upon an election by the Partnership pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(f) to adjust Partners' Capital Accounts; and (c) if the Carrying Value of an asset has been determined pursuant to clause (a) or (b) above, such Carrying Value will thereafter be adjusted in the same manner as would the asset's adjusted basis for federal income tax purposes except that depreciation deductions will be computed in accordance with Section 1.12(a) hereof. 1.9 "Cash Available for Distribution" means, with respect to any fiscal period, ------------------------------- the excess of all cash receipts of the Partnership from operations and from any and all other sources, including any proceeds from sales, financings or refinancings and any amounts released from reserves (provided that in no event will any Cash Available for Distribution be deemed to exist during any fiscal quarter in which any Partner makes any cash capital contribution), over the sum of the following amounts (to the extent the following amounts are expected to be paid before other cash receipts sufficient to cover them are anticipated to be received): (a) cash disbursements for all items which are customarily considered to be operating expenses under generally accepted accounting principles, including, without limitation, all payments made to any party pursuant to agreements between the Partnership and either Amdahl Sub or EDS Sub or their respective Affiliates; (b) payments of interest and principal under any indebtedness of the Partnership; (c) payments made for capital expenditures; and (d) reasonable amounts set aside as reserves by the Board for working capital, contingent liabilities, replacements or for any of the expenditures described in clauses (a), (b) and (c) above, or as otherwise deemed reasonable by the Board to meet the current or anticipated needs of the Partnership. 1.10 "Confidential Information" means all information and materials of a person ------------------------ or entity, patentable or otherwise, including, without limitation, computer programs, code, equipment, data, reports, know-how, patent positioning, financial information and business plans, including any negative developments, whether disclosed on, before or after the date of this Agreement. 1.11 "Initial Period" means the period beginning on the date of this Agreement -------------- and ending on March 31, 1995. 1.12 "Net Profit" and "Net Loss" mean the taxable income or loss,as the case may ---------- -------- be, for a period as determined in accordance with Code Section 703(a) computed with the following adjustments: (a) Items of gain, loss and deduction will be computed based upon the Carrying Values of the Partnership's assets rather than upon such assets' adjusted bases for federal income tax purposes, and, in particular, the amount of any deductions for depreciation or amortization with respect to an asset for a period will equal such asset's Carrying Value multiplied by a fraction the numerator of which will be the amount of depreciation or amortization with respect to such asset allowable for federal income tax purposes for such period and the denominator of which will be such asset's adjusted tax basis at the beginning of such period; (b) Any tax-exempt income received by the Partnership will be included as an item of gross income; (c) Any items of loss or deduction allocated pursuant to Section 4.2(c) will not be taken into account; (d) The amount of any adjustments to the Carrying Values of any assets of the Partnership pursuant to Code Section 743 will not be taken into account; and (e) Any expenditure of the Partnership described in Code Section 705(a)(2)(B) (including any expenditures treated as being described in Code Section 705(a)(2)(B) pursuant to the Treasury Regulations under Code Section 704(b)) will be treated as a deductible expense. 1.13 "Operating Budget" is defined in Section 3.3 of this Agreement. ---------------- 1.14 "Operating Plan" is defined in Section 3.3 of this Agreement. -------------- 1.15 "Partners" means Amdahl Sub, EDS Sub and any new partners, whether by -------- transfer from other Partners or otherwise. 1.16 "Percentage Shares" will mean initially 80.1% for Amdahl Sub and 19.9% for ----------------- EDS Sub. The Percentage Shares will be changed to reflect transfers of Partnership interests and as otherwise specified in this Agreement and will be subject to pro rata dilution upon admission of new partners. ARTICLE II FORMATION OF THE PARTNERSHIP ---------------------------- 2.1 Formation. Amdahl Sub and EDS Sub hereby form the Partnership as a general --------- partnership under the Delaware Uniform Partnership Act. 2.2 Name of Partnership. The name of the Partnership will be Antares Alliance ------------------- Group, or such other name as the Board may from time to time determine. The Board will cause to be filed on behalf of the Partnership such partnership or assumed or fictitious name certificate or certificates as may from time to time be required by law. 2.3 Business of Partnership. The business of the Partnership will be to form and ----------------------- conduct a global business (either directly or through third parties) for the development and commercialization of software products and related products and technology. The Partnership will not sell or license products or technology directly to end-user customers except as specifically authorized by the Board, as defined below. 2.4 Place of Business of Partnership. The principal place of business of the -------------------------------- Partnership will be_______ , Dallas, Texas. The Board may, at any time and from time to time, change the location of the Partnership's principal place of business and may establish such additional place or places of business of the Partnership as they may from time to time determine. 2.5 Duration of Partnership. The term of this Agreement will commence on the ----------------------- date hereof and unless otherwise extended by the mutual agreement of the Partners will continue until dissolution and termination of the Partnership as provided in Section 7 below. 2.6 Title to Partnership Property. All property owned by the Partnership, ----------------------------- whether real or personal, tangible or intangible, will be deemed to be owned by the Partnership as an entity, and no Partner, individually, will have any ownership of such property. The Partnership may hold any of its assets in its own name or in the name of its nominee, which nominee may be one or more individuals, partnerships, trusts or other entities. 2.7 Partition. The Partners hereby agree that no Partner, nor --------- any successor-in-interest to any Partner, will have the right while this Agreement remains in effect to have the property of the Partnership partitioned, or to file a complaint or institute any proceeding at law or in equity to have the property of the Partnership partitioned, and each Partner, on behalf of itself, its successors and assigns, hereby waives any such right. It is the intention of the Partners that during the term of this Agreement, the rights of the Partners and their successors-in-interest, as among themselves, will be governed by the terms of this Agreement, and that the right of any Partner or successor-in-interest to assign, transfer, sell or otherwise dispose of its interest in the Partnership's properties will be subject to the limitations and restrictions of this Agreement. 2.8 Fiscal Year. The fiscal year of the Partnership will end on the last ----------- Friday of December of each calendar year. ARTICLE III MANAGEMENT ---------- 3.1 Supervisory Board; Officers. ---------------------------- The Partnership will be managed by a Supervisory Board (the "Board") which will consist of seven (7) members, two of which will be designated by each of Amdahl Sub and EDS Sub and the other three of which will be (a) the Chief Executive Officer of the Partnership, (b) the Senior Vice President/Chief Financial Officer of the Partnership and (c) the Senior Vice President of Operations of the Partnership. The Chairman of the Board will be one of the Amdahl Sub designees on the Board and will be determined by Amdahl Sub. The Chief Executive Officer, Chief Technical Officer and Senior Vice President of Operations of the Partnership will be designated by Amdahl Sub and the Senior Vice President/Chief Financial Officer will be designated by EDS Sub; the selection of such an officer (whether initially or as a replacement) by one such party may be rejected by the other only for good and reasonable cause. Amdahl Sub and EDS Sub will also appoint a Partnership Chief Marketing Officer by mutual agreement, which agreement will not be unreasonably withheld. If any member of the Board dies, resigns or becomes incapacitated, the Partner or Partners that designated such member or officer will designate his or her successor (whose term will commence immediately), and any Partner may withdraw the designation of and remove any member or officer designated by it and designate a replacement (whose term will commence immediately) at any time by giving notice of the withdrawal and replacement to the other Partners. In the event a Board member is unable to attend a meeting of the Board, such Board member may designate an alternate member to serve in such absent Board member's stead solely for such Board meeting. Upon admission of a new partner (other than by transfer) or, if earlier, 5 years after the date of this Agreement, Board members and officers will no longer be designated, removed or replaced as set forth above and all such matters will be determined as provided for under Delaware corporate law for corporations having cumulative voting (the Supervisory Board will be treated as analogous to a corporate board of directors and each percentage point of a Partner's Percentage Share will be treated as a share of voting stock, provided that in all events, the holder of each 14.3% Percentage Share will be entitled to appoint and elect one director and, provided further, in no event will any Unanimous Decision be adopted by the Board if less than all members of the Board are in attendance or consent in writing). 3.2 Authority of the Board and Officers. ------------------------------------ (a) The overall business of the Partnership will be managed by the Board. All acts of management of the Partnership will be taken by the Board acting by majority pursuant to this Agreement or by agents duly authorized in writing by the Board. No individual Partner will purport to act on behalf of the Partnership, either as a Partner or as an agent of the Partnership unless, and then only to the extent, authorized to do so by the Board. (b) All Unanimous Decisions by or on behalf of the Partnership will be made by the Board acting by the unanimous consent of all Board members. As used in this Agreement, the term "Unanimous Decisions" will mean: (i) admission of a new partner to the Partnership other than as the result of a transfer of a Partner's full or partial Partnership interest to a third party in accordance with this Agreement; (ii) a decision as to whether to effect a dissolution of the Partnership; (iii) approval of Annual Budgets and Quarterly Outlooks (as defined below), but only until Cash Available for Distribution is achieved for two consecutive fiscal quarters and a majority of the members of the Board do not expect more than an aggregate of $1 million in capital contributions to be required for the 24 month period thereafter (the "Development Period"); (iv) any individual capital expenditure of more than $500,000, but only during the Development Period; (v) Partnership distributions (other than distributions to the Partners to pay taxes on their allocable shares of Partnership income assuming each partner pays taxes thereon at the highest marginal tax rate applicable to corporations under the Code plus 5%), but only during the Development Period; (vi) Transfer or sale of a Partner's interest in the Partnership during the Initial Period except in accordance with Section 6.1(a). (c) The Partnership Chief Executive Officer will have the same authority with respect to the Partnership as presidents have under the Delaware corporate law with respect to their corporations. The Chief Financial, Chief Technical and Chief Marketing Officers and the Senior Vice President of Operations will similarly each have authority analogous to a vice president of a Delaware corporation. 3.3 Budgets and Outlooks. The Board will cause to be prepared an annual --------------------- operating plan ("Operating Plan") which will include an analysis of all strategic development and marketing plans of the Partnership for such fiscal year. In addition the Board will cause to be prepared an annual operating budget ("Operating Budget") and an annual capital expenditures budget ("Capital Budget") (collectively, the "Annual Budgets") for each fiscal year of the Partnership, commencing with the fiscal year ending December 31, 1993, on or before 60 days prior to the commencement of such fiscal year. The anticipated Annual Budgets for the 1993 fiscal year are attached hereto as Schedule 3.3 and the Partners recognize that such budgets are subject to further review and Board approval. The Board will also cause a quarterly forecast in such detail and for such periods as the Board may reasonably request (a "Quarterly Outlook") to be prepared at least 30 days prior to commencement of the applicable fiscal quarter. The Annual Budgets and Quarterly Outlooks will be reviewed by the Board and will not be effective until approved by a majority of the Board. The Operating Budget will set forth in reasonable detail (a) the authorized headcount and expenses on a quarterly basis of each functional area of the Partnership, (b) estimated revenue by product and distribution channel on a quarterly basis, (c) a projected profit and loss statement for the fiscal year on a quarterly basis, (d) a projected balance sheet as of the end of each quarter of each fiscal year, (e) a schedule of projected cash flow, including estimated Partner capital contributions for each quarter of each fiscal year and (f) any other information any member of the Board may reasonably request. The Capital Budget will set forth and itemize in reasonable detail amounts to be committed and/or expended on a quarterly basis for equipment, leasehold improvements and other capitalized items and any other items as any member of the Board may reasonably request. 3.4 Accounting and Internal Controls. --------------------------------- (a) The Partnership will conduct its business at all times in accordance with high standards of business ethics and maintain the Partnership's accounts in accordance with generally accepted accounting principles consistently applied and, specifically, will: (i) maintain full and accurate books, records and accounts which will, in reasonable detail, accurately and fairly reflect all transactions of the Partnership; and (ii) devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that (A) transactions are executed in accordance with general or specific authorizations, and (B) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and all tax information returns, and to maintain accountability for assets. (b) The Partnership books will be kept on the accrual method of accounting, or on such other method of accounting as the Partners may from time to time determine, and will be closed and balanced at the end of each fiscal year. The Partnership will make such tax elections as directed by the Partnership's tax matters partner from time to time, provided however, that upon a transfer of an interest in the Partnership, the Partnership will make the election provided for in Code Section 754 if requested to do so by any such transferring Partner. The Board will cause the timely preparation and filing of all required federal and state Partnership income tax returns and the provision to the Partners of all tax information returns and other information as are necessary to enable the Partners to report their respective allocations of tax items from the Partnership on their respective tax returns. (c) Amdahl Sub will be the Tax Matters Partner for the Partnership pursuant to Sections 6221-6231 of the Code. 3.5 Access to Books and Records. The Partnership will permit each Partner or any ---------------------------- authorized representative thereof to visit and inspect the properties of the Partnership, including its corporate and financial records, during normal business hours following reasonable notice and as often as may be reasonably requested. 3.6 Business Deadlock. The Partners recognize that bona fide disputes as to ------------------ business matters may arise in the conduct of the Partnership's business, which disputes may impair the ability of the Partnership to effectively carry on its business. Each Partner will act reasonably and in good faith to avoid Business Deadlock. In the event of the occurrence of a Business Deadlock regarding the subject matter listed in Section 3.2(b), either Partner may, by written notice to the other Partner, have the Business Deadlock referred to a panel consisting of one senior executive from each of Amdahl and EDS, for resolution by negotiation within 30 days after such written notice is received. In the event no resolution is achieved within such 30 day period, such Business Deadlock will be referred to the chief executive officers of Amdahl and EDS for resolution by negotiation within 45 days after such referral is made. All such negotiations will be conducted reasonably and in a good faith manner in an effort to reach a mutually satisfactory resolution. Such resolution, if any, of the Business Deadlock will be binding on the Partners, and the Partners will instruct the members of the Board designated by them to approve such resolution. ARTICLE IV CAPITAL CONTRIBUTIONS PROFITS AND LOSSES AND DISTRIBUTIONS ------------------------------------ 4.1 Capital Contributions. ---------------------- (a) On the date of this Agreement, each Partner will make a capital contribution as set forth on Schedule 4.1. On or before the first day of each fiscal quarter, or at such other times as the Board will determine, each Partner will contribute to the Partnership an amount equal to its Percentage Share of the Partnership's capital requirements for the next succeeding fiscal quarter as determined in the relevant Quarterly Outlook; provided, however, that no Partner will be required to make any such capital contribution unless it is within the capital contribution commitment amount for that Partner as specified in (i) Schedule 4.1 with respect to the Initial Period or (ii) an Annual Budget approved as a Unanimous Decision pursuant to Section 3.2. Notwithstanding the foregoing, if one Partner fails to make a required capital contribution the other Partner need not make further capital contributions until the first Partner makes the delinquent contribution. (b) Except as provided in this Section 4.1, neither Partner will be obligated to make contributions to the capital of the Partnership, lend any funds or otherwise advance or contribute any additional funds to the Partnership. (c) No interest will accrue on any contributions to the capital of the Partnership, and no Partner will have the right to withdraw or to be repaid any capital contributed by it or to receive any other payment in respect of its interest in the Partnership, including without limitation as a result of its withdrawal from the Partnership, except as specifically provided in this Agreement. (d) In the event that a Partner fails to fully make a capital contribution requested by the Partnership in which all Partners are requested to contribute in proportion to their Percentage Shares (the "Noncontributing Partner"), the other Partners who make their contributions (the "Contributing Partners") will have the right, at their option, (i) to pursue their remedies under law and under this Agreement or (ii) as their exclusive remedy, to make loans to the Partnership, subject to the provisions set forth below, up to the aggregate amount of the Noncontributing Partner's unpaid capital contribution (the "Unpaid Amount"). Such loans, if made, will bear simple interest at the then prevailing prime rate of interest as announced by the Bank of America, NT&SA from time to time plus 2% per annum, payable prior to any distributions of cash to the Partners, but in no event later than upon liquidation of the Partnership. In the first instance, each Contributing Partner may lend up to its pro rata share (based upon the relative Percentage Shares of the Contributing Partners that choose to make such loans) of the Unpaid Amount to the Partnership. In the event that any Contributing Partner fails to lend its full pro rata share of the Unpaid Amount pursuant to the preceding sentence, the Partners that did so lend may choose to lend their pro rata share of the remaining balance of the Unpaid Amount. If any Contributing Partner chooses option (ii) above, the Noncontributing Partner will have two quarters in which to make its contribution (the "Cure Period"), during which period there will be no distributions of Cash Available for Distribution. If the Noncontributing Partner does not do so, the Contributing Partners will have the option for a period of thirty days following the expiration of the Cure Period to convert all but not less than all of the principal amount of their respective loans to the Partnership to a capital contribution to the Partnership. In the event of such conversion, each such Contributing Partner's Percentage Share will be increased by one and one quarter percentage point for each $1 million of principal amount lent and converted by such Contributing Partner. Upon conversion of loan principal to capital contribution all accrued but unpaid interest will be payable in cash by the Partnership to the relevant Contributing Partner. 4.2 General Allocations of Net Profits and Net Losses. -------------------------------------------------- (a) Except as provided in Section 4.2(b), Net Profit and Net Loss of the Partnership for a period will be allocated to the Partners in accordance with their respective Percentage Shares. (b) The amount of any Net Loss in excess of any then positive balance in the Capital Account of a Partner, which would be allocable to such Partner but for this Section 4.2(b), will be allocated pro rata among the other Partners in proportion to their respective Percentage Shares to the extent that such allocation of Net Loss does not exceed the positive Capital Account balance of such other Partners. Any remaining unallocated Net Loss will be allocated among the Partners in accordance with their respective Percentage Shares. Thereafter, Net Profit otherwise allocable pursuant to Section 4.2(a) to the Partner from whom Net Loss was allocated, first will be allocated to the other Partners in proportion to the amount of Net Loss previously allocated to them pursuant to Section 4.2(b) until an amount of Net Profit equal to the amount of Net Loss previously reallocated pursuant to this Section 4.2(b) has been allocated to the other Partner. (c) Interest expense with respect to any Partnership indebtedness to a Contributing Partner established in accordance with Section 4.1(d) will be specially allocated to the Noncontributing Partner. (d) With respect to any fiscal period during which any Partner's interest in the Partnership changes, whether by reason of the admission of a Partner, the withdrawal of a Partner, a non-pro rata contribution of capital to the Partnership or any other event described in Code Section 706(d)(1) and the Treasury Regulations thereunder, allocations of Net Profit or Net Loss will take into account the varying interests of the Partners during such period in a manner consistent with Code Section 706(d) and the Treasury Regulations thereunder. (e) In accordance with Code Section 704(c) and the Treasury Regulations thereunder, income, gain, loss, and deduction with respect to any property contributed to the capital of the Partnership will, solely for tax purposes, be allocated among the Partners so as to take account of any variation between the adjusted basis of such property to the Partnership for federal income tax purposes and its initial Carrying Value. In the event the Carrying Value of any Partnership assets is adjusted pursuant to Section 1.8 hereof, subsequent allocations of income, gain, loss, and deduction with respect to such asset will take account of any variation between the adjusted basis of such asset for federal income tax purposes and its Carrying Value in the same manner as under Code Section 704(c) and the Treasury Regulations thereunder. Any elections or other decisions relating to allocations under this Section 4.2(e) will be made by the Tax Matters Partner in any manner that reasonably reflects the purpose and intention of this Agreement. Allocations pursuant to this Section 4.2(e) are solely for the purposes of federal, state, and local taxes and will not affect, or in any way be taken into account, in computing any Partner's Capital Account or share of Net Profit, Net Loss, other items, or distributions pursuant to any provision of this Agreement. 4.3 Distributions of Cash and Cash Available for Distribution. ---------------------------------------------------------- (a) Cash Available for Distribution generally will be distributed to the Partners in proportion to their respec-tive Capital Account Balances. ARTICLE V CONFIDENTIAL INFORMATION ------------------------ 5.1 Treatment of Confidential Information. Each of the Partnership and each -------------------------------------- Partner (and its Affiliates) will maintain in confidence the others' Confidential Information and will not disclose, divulge or otherwise communicate such Confidential Information to others, or use it for any purpose, except as otherwise provided under the terms of the Agreements and hereby agrees to exercise reasonable precautions (including, without limitation, use of written agreements) to prevent and restrain the unauthorized disclosure of such Confidential Information by any of its directors, officers, employees, consultants, subcontractors, sublicensees or agents. The provisions of this Article V will survive termination of this Agreement. 5.2 Release from Restrictions. -------------------------- (a) The provisions of Section 5.1 will not apply to any Confidential Information disclosed pursuant to the Agreements or otherwise which: (i) was known or used by the receiving entity or its Affiliates (unless known on account of research or development done on behalf of the disclosing entity) prior to its date of disclosure to the receiving entity, as evidenced by the prior written records of the receiving entity or its Affiliates; or (ii) either before or after the date of the disclosure to the receiving entity is lawfully disclosed without restriction to the receiving entity or its Affiliates by an independent, unaffiliated third party rightfully in possession of the Confidential Information (but only to the extent of the rights received from and limitations imposed by such third party); or (iii) either before or after the date of the disclosure to the receiving entity becomes published or available to the public through no fault or omission on the part of the receiving entity or its Affiliates; (iv) is required to be disclosed by the receiving entity or its Affiliates to comply with applicable laws, to defend or prosecute litigation or to comply with governmental regulations, provided that the receiving entity provides prior written notice of such disclosure to the other entity and takes reasonable and lawful actions to minimize the degree of such disclosure; or (v) is independently developed by the receiving entity (other than on account of research or development done on behalf of the disclosing entity) without reference to the Confidential Information, as evidenced by written records. ARTICLE VI RESTRICTIONS ON TRANSFER ------------------------ 6.1 Transfer of Partnership Interest. --------------------------------- (a) Except as set forth in Section 6.1(b), no Partner will have the right (directly, indirectly, voluntarily, involuntarily or by operation of law) to sell, assign, transfer, mortgage, encumber, grant a security interest in or otherwise dispose of all or any portion of its interest in the Partnership, provided that subject to compliance with the other terms of this Agreement (i) a Partner may transfer all, but not less than all, of its interest in the Partnership to a party that acquires all or substantially all of such Partner's business by merger, sale of assets or otherwise, and (ii) a Partner may transfer all, but not less than all, of its interest in the Partnership to an Affiliate provided that, in the event of a transfer to an Affiliate, such transferring Partner will remain fully responsible for the satisfaction of its obligations hereunder and (iii) a Partner may pledge its interest in the Partnership as security for bona fide bank credit, provided, however, that in the case of this Section 6.1(a)(iii), (A) the bank will not obtain any right to vote with respect to or participate in management of the Partnership, (B) the right of the other Partners under Section 6.1(b) will continue with respect thereto and (C) EDS' options under Section 3.5 of the Master Agreement will continue in full force and effect with respect thereto. Unless the conditions of this Section 6.1 are met, the foregoing arrangements may not take place and any attempted transfer in derogation hereof will be deemed null and void. (b) Subject to Section 3.2(b), the transfer of any Partnership interest in whole or in part by one Partner is permissible subject to the right of first refusal of any Partners with a Percentage Share of at least 7% (a "Qualified Partner") as follows: (i) No Partner may sell, assign, transfer, or in any other manner dispose of or alienate, or transfer or assign any interest in, any or all of its Partnership interest which now or hereafter may be held or owned by it to any person or entity unless such party (for purposes of this Section 6.1(b) only referred to as "Offeror") will have first made the written offer to sell as hereinafter described, and the offered Partnership interest will not have been purchased, within the time hereinafter provided. Each time an Offeror proposes to sell any or all of its Partnership interest, the Offeror will first make an offering of such Partnership interest to each Qualified Partner in accordance with the following provisions: a. The Offeror will deliver a notice by certified mail ("Notice") to the Qualified Partners stating (x) its receipt from a third party of a bona fide offer to purchase such Partnership interest, (y) the amount of the Partnership to be purchased and the identity of the proposed purchaser ("Purchaser"), and (z) the price and terms of the bona fide offer. b. If any Qualified Partner holding at least a 7% Percentage Shares determines in good faith for substantial legitimate business reasons that the Purchaser is not reasonably acceptable to such Qualified Partner, the objecting Qualified Partner will so notify the Offeror. c. Within 50 calendar days after giving of the Notice, each Qualified Partner may elect to purchase or obtain, at the price and on the terms specified in the Notice, all or none of that portion of such Partnership interest which equals the proportion that the Percentage Share then held by such Qualified Partner bears to the total Percentage Shares in the Partnership then held by all Qualified Partners excluding the Offeror; provided, however, that if the Offeror provides each Qualified Partner a general notice of its intention to sell hereunder 50 days prior to the date upon which it proposes to sell, then each Qualified Partner will have only 30 days after receipt of the Notice to elect to purchase or obtain such portion of such percentage interest. The Offeror will promptly, in writing, inform each Qualified Partner which purchases all of the offered Partnership interest available to it ("Fully-Exercising Qualified Partner") of any other Qualified Partner's failure to do likewise. During the ten-day period commencing after such information is given, each Fully-Exercising Qualified Partner will be entitled to obtain that portion of the Partnership interest for which other Qualified Partners were entitled to subscribe but which were not subscribed for by the other Qualified Partners which is equal to the proportion that the Percentage Share then held by such Fully- Exercising Qualified Partner bears to the total Percentage Shares then held, by all Fully-Exercising Qualified Partners who wish to purchase some of the unsubscribed Partnership interest. d. If all Partnership interests which Qualified Partners are entitled to obtain pursuant to the foregoing paragraph are not elected to be obtained as provided therein, the Offeror may, during the 30-day period following the expiration of the period provided in the foregoing paragraph, offer the remaining unsubscribed portion of such Partnership interest to the Purchaser at a price not less than, and upon terms no more favorable to the offeree than those specified in the Notice. If the Offeror does not enter into such an agreement for the sale of the Partnership interest within such period, or if such agreement is not consummated within 30 days of the execution thereof, the right provided hereunder will be deemed to be revived and such Partnership interest will not be offered unless first reoffered to the other Qualified Partners in accordance herewith. e. The right of first offer set forth herein may not be assigned or transferred, except that such right is assignable by each Qualified Partner to (i) any Affiliate of such Qualified Partner or (ii) a party or parties reasonably acceptable to each of the other Qualified Partners. f. In the event any Partner objects to a proposed transferee pursuant to subsections 6.1 b. or e. above, the matter will be referred for resolution under the same procedures as for resolution of a Business Deadlock, as set forth in Section 6.2 above. (c) A permitted transferee of a Partnership interest will (1) be deemed admitted as a new Partner of the Partnership and (2) be subject to all the terms of this Agreement with respect to Partners. ARTICLE VII DISSOLUTION AND TERMINATION --------------------------- 7.1 Events of Dissolution. ---------------------- (a) The Partnership will be dissolved: (i) on a date designated by mutual consent of the Partners; (ii) upon the sale or other disposition of all of the Partnership's assets; (iii) at the election by a majority of the nondefaulting Partners, in the event of a material default by a Partner of a material term of the Partnership Agreement which will not be cured or resolved within sixty (60) days of notice thereof; (iv) in any event, at 12:00 midnight on the day that is twenty (20) years from the date of this Agreement, unless extended by mutual agreement or pursuant to Section 2.5. (b) No Partner will be entitled to or attempt to terminate, dissolve, liquidate, or withdraw or retire voluntarily from the Partnership, except as expressly stated in this Agreement. (c) Dissolution of the Partnership will be effective on the day on which the event occurs giving rise to the dissolution, but the Partnership will not terminate until the assets of the Partnership will have been distributed as provided in this Agreement. Notwithstanding the dissolution of the Partnership, prior to the termination of the Partnership, as aforesaid, the business of the Partnership and the affairs of the Partners, as such, will continue to be governed by this Agreement. Subject to Section 7.2(c), upon dissolution, the Board will liquidate the assets of the Partnership and apply and distribute the proceeds thereof as provided for under this Agreement. 7.2 Distributions Upon Liquidation. ------------------------------- (a) After payment of liabilities owing to creditors, the Board will set up such reserves as it deems reasonably necessary for any contingent or unforeseen liabilities or obligations of the Partnership. Said reserves may be paid over by the Board to a bank, to be held in escrow for the purpose of paying any such contingent or unforeseen liabilities or obligations and, at the expiration of such period as the Board may deem advisable, such reserves will be distributed to the Partners or their assigns in the manner set forth in subsection (b) below. (b) After paying such liabilities and providing for such reserves, the Board will cause the remaining net assets of the Partnership to be distributed to the Partners in repayment of the amount of their Capital Account balances. In the event that any part of such net assets consists of notes or accounts receivable or other noncash assets, the Board will take whatever steps it deems appropriate to convert such assets into cash or into any other form which would facilitate the distribution thereof. If any assets of the Partnership are to be distributed in kind, such assets will be distributed on the basis of their fair market value. (c) Notwithstanding the foregoing, and without affecting any other distribution of assets, if requested by any Partner with at least a 7% Percentage Share, the intellectual property assets of the Partnership will be distributed in liquidation between such Partners on an equitable basis as they may mutually agree based on the following factors: (1) original ownership of the intellectual property used to create or derive the Partnership intellectual properties, (2) the sources and amounts of Partnership funding, (3) the elimination, to the extent possible, of affirmative harm to any Partner's business as a result of such allocation, and (4) the effect of the allocation of customer support. In the event that the intellectual property assets of the Partnership are not distributed strictly in accordance with the respective Capital Account balances of the Partners, then either the Partners or the consultants referred to in the following paragraph, as the case may be, will structure a royalty with respect to such of the intellectual property assets as is necessary to effectively achieve a distribution of assets in liquidation economically equivalent to a distribution in accordance with the Partners' Capital account balances taking into account the net present value of such royalty discounted at the then prevailing prime rate of interest as announced by The Bank of America, N.T. & S.A. Such royalty will be based on the level of use or distribution of the relevant intellectual property assets or products based thereon. If such Partners cannot reach agreement within 90 days of the request for allocation, the allocation will be determined using the same factors by a majority of three independent consultants, one picked by each of the two Partners with the largest Percentage Shares within 10 business days of a request by the other to do so and the third selected by the other two or (2) if one such Partner fails to timely select a consultant, by the other such Partner's consultant alone.) The consultant(s) will make the allocation within 30 days of being selected. Any Partner entitled to be considered for allocation of intellectual property will be entitled to submit materials for consideration by the consultant(s), provided it is simultaneously provided to all other such Partners and provided further that no materials will be submitted after 20 days following selection of the consultant(s) except in response to materials provided by other Partners, which responses will be provided as soon as reasonably possible. The consultants will not have the discretion to allocate any intellectual property to two or more Partners jointly. The participatory Partners will bear the costs and fees of the consultants equally. In reaching the allocation set forth in this Section 7.2(c); (i) no license or sublicense between any two Partners or the Partnership and a Partner may be modified in any way and (ii) no lump sum payment will be required by any Partner. (d) At such time during liquidation as all assets of the Partnership have been sold, all liabilities and expenses have been paid, all income, gains, losses and deductions have been allocated in accordance with Section 4.2, all distributions have been made, and all adjustments to the Capital Accounts have been made, if a Partner then has a negative balance in its Capital Account, such Partner will by the end of the taxable year of the liquidation (or, if later, within 90 days after the date of such liquidation) contribute to the capital of the Partnership an amount equal to the deficit amount of its Capital Account. Any amount so contributed will be distributed as provided for in this Article 7. The Partners will not be required to make any further contribution to the Partnership on dissolution except as required by this Section 7.2(d). ARTICLE VIII MISCELLANEOUS PROVISIONS ------------------------ 8.1 Other Businesses. It is understood that the Partners and their Affiliates ---------------- are and will be engaged in other activities and occupations not directly related to the Partnership, and, except to the extent otherwise agreed to, the Partners and their Affiliates will be required to devote only so much time as each in its sole discretion may deem necessary to the affairs of the Partnership. Except as otherwise specifically provided in the Agreements, and without affecting either Partner's or its Affiliates' duty to perform its obligations under the Agreements in the best interest of the Partnership, nothing contained in the Agreements will be construed as limiting the right of either Partner or its Affiliates to engage in any business outside of and independent from the Partnership, including (but not limited to) the businesses in which the respective Partners and their Affiliates are currently engaged or in which they contemplate being engaged. Any benefits and/or obligations arising from such independent business will inure solely to such Partners or its Affiliates and not the Partnership or the other Partner or its Affiliates; and neither the Partnership nor the other Partners will have any rights by virtue of this Agreement in and to such independent ventures or the income or profits derived therefrom. 8.2 Publicity. No Partner (nor any Affiliate of either Partner) will originate --------- any written publicity, news release or other public announcement, relating to the Partnership, this Agreement or any other agreement between the Partnership and either Amdahl Sub or EDS Sub or their respective Affiliates, or the existence of an arrangement between the Partners, without the prior written approval of the other Partner, which approval will not be unreasonably withheld or delayed, except as otherwise required by law. 8.3 Assignment. Neither this Agreement nor any of the rights or obligations ---------- hereunder may be assigned by any Partner without the prior written consent of the other Partner, except to a permitted transferee under Section 6.1 of this Agreement. 8.4 Governing Law. This Agreement will be governed by and interpreted in ------------- accordance with the internal laws of the State of Delaware, without regard to conflicts-of-law provisions. 8.5 Force Majeure. In the event that any Partner is prevented from performing or ------------- is unable to perform any of its obligations under this Agreement due to any act of God; fire; casualty; flood; war; strike; lockout; failure of public utilities; injunction or any act, exercise, assertion or requirement of governmental authority; epidemic; destruction of production facilities; riots; insurrection; inability to procure or use materials, labor, equipment, transportation or energy; or any other cause beyond the reasonable control of the Partner invoking this Section 8.5 if such Partner will have used its reasonable efforts to avoid such occurrence and minimize its duration, such Partner will give notice to the other Partner in writing promptly, and thereupon the affected Partner's performance will be excused and the time for performance will be extended for the period of delay or inability to perform due to such occurrence. 8.6 Waiver. The waiver by either Partner of a breach or a default of any ------ provision of this Agreement by the other Partner will not be construed as a waiver of any succeeding breach of the same or any other provision, nor will any delay or omission on the part of either Partner to exercise or avail itself of any right, power or privilege that it has or may have hereunder operate as a waiver of any right, power or privilege by such Partner. 8.7 Notices. Any notice or other communication in connection with this Agreement ------- must be in writing and will be delivered by personal delivery, by overnight courier, by registered mail (return receipt requested), or by telecopier, and will be effective when received by the addressee at the address listed below or such other address as the addressee will have specified in a notice actually received by the addressor. If to the Partnership: Antares Alliance Group Attn: Chief Executive Officer If to Amdahl Sub: Amsub Inc. 1250 East Arques Avenue Sunnyvale, CA 94086 Attn: Chief Executive Officer With a copy to: Brobeck, Phleger & Harrison 2200 Geng Road Palo Alto, CA 94303 Attn: Thomas F. Villeneuve, Esq. If to EDS Sub: EDS Antares, Inc. 5400 Legacy Drive Plano, Texas 75024 Attn: Chief Executive Officer with a copy to: Electronic Data Systems Corporation 5400 Legacy Drive Plano, Texas 75024 Attn: General Counsel 8.8 Entire Agreement. This Agreement and the Agreements contain the full ---------------- understanding of the Partners with respect to the subject matter hereof and supersedes all prior understandings and writings relating thereto. No waiver, alteration or modification of any of the provisions of this Agreement will be binding unless made in writing and signed by Partners collectively holding Percentage Shares aggregating more than 50%, provided that so long as either EDS Sub or Amdahl Sub, respectively, hold at least a 3% Percentage Share, the consent thereof will also be required. 8.9 Headings; References. The headings contained in this Agreement are for -------------------- convenience of reference only and will not be considered in construing this Agreement. The words "herein", "hereof ", "hereunder ", "hereby" and other similar references will be construed to mean and include this Agreement and all amendments and supplements to this Agreement unless the context will clearly indicate or require otherwise. 8.10 Severability. In the event that any provision of this Agreement is held by ------------ a court of competent jurisdiction to be unenforceable because it is invalid or in conflict with any law of any relevant jurisdiction, the validity of the remaining provisions will not be affected, and the rights and obligations of the Partners will be construed and enforced as if the Agreement did not contain the particular provision held to be unenforceable. 8.11 Equitable Remedies. The Partners acknowledge that the services to be ------------------ rendered hereunder are unique and substitute or comparable services will not be readily available to a Partner. Accordingly, the parties agree that monetary damages may not be an adequate remedy for a Partner in the event of a breach of this Agreement by either Partner and that the Partnership or the nondefaulting Partner will be entitled to specific performance and/or injunctive relief in the event of such a breach. Such specific performance will include a court order directing the defaulting Partner to perform any or all of its obligations set forth in the Agreements, and to assign qualified personnel of the defaulting Partner to such tasks in accordance with a schedule to be determined by the court. In the event of any legal action brought by the Partnership or by either Partner to enforce its rights under the Agreements, the prevailing party will be entitled to recover its reasonable attorneys' fees and expenses incurred in such action from the other party. 8.12 Successors and Assigns. This Agreement will be binding upon and inure to ---------------------- the benefit of the Partners hereto and their successors and permitted assigns. 8.13 Counterparts. This Agreement may be executed in any number of counterparts, ------------ each of which will be deemed an original but all of which together will constitute one and the same instrument. IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed as a sealed instrument in their names by their properly and duly authorized officers or representatives as of the date set forth above. AMSUB INC., a California Corporation By E. Joseph Zemke --------------- E. Joseph Zemke President and Chief Executive Officer EDS ANTARES, INC., a Nevada Corporation By Joseph W. Holmes ---------------- Joseph W. Holmes President SCHEDULE 4.1 1. CAPITAL CONTRIBUTION UPON EXECUTION OF PARTNERSHIP AGREEMENT ON THE DATE OF THIS AGREEMENT, EACH PARTNER WILL MAKE A CAPITAL CONTRIBUTION AS FOLLOWS: AMDAHL [ ] EDS [ ] TOTAL [ ] 2. CAPITAL CONTRIBUTIONS DURING INITIAL PERIOD THE CAPITAL CONTRIBUTIONS BY QUARTER REQUIRED TO BE MADE BY THE PARTNERS DURING THE INITIAL PERIOD INCLUDING THE AMOUNTS PAID ON EXECUTION OF THIS AGREEMENT AS STATED ABOVE ARE EQUAL TO THE PARTNER'S RESPECTIVE PERCENTAGE SHARE TIMES THE FOLLOWING AMOUNTS(1): UPON EXECUTION PER ABOVE [ ] QUARTER ENDED 9-24-93 [ ] QUARTER ENDED 12-31-93 [ ] QUARTER ENDED 3-25-94 [ ] QUARTER ENDED 6-24-94 [ ] QUARTER ENDED 9-30-94 [ ] QUARTER ENDED 12-30-94 [ ] QUARTER ENDED 3-31-95 [ ] TOTAL REQUIRED COMMITMENT [ ] - ---------------------------- (1) Any such amounts not called for by the Partnership for a particular quarter will be carried forward to succeeding quarters within the Initial Period. EX-10.Z 6 LETTER OF COMMITMENT Exhibit 10(z) December 3, 1993 Mr. Edward F. Thompson Vice President CFO and Secretary AMDAHL CORPORATION 1250 East Arques Avenue P.O. Box 3470 Sunnyvale, California, 94088-3470 Dear Mr. Thompson This commitment letter constitutes a firm commitment by Fujitsu Limited ("FJ") to make certain loans to Amdahl Corporation ("AC") on the terms and conditions specified herein. 1. FJ sets up the loan facility to AC up to the total amount USD 100 million. 2. This loan should be subordinated only to the existing bank credit facility, the Bank Credit Facility to be set up by the end of January 1994, and to bank credit extensions sharing in the collateral of the Bank Credit Facility via intercreditor agreements. 3. FJ executes loans up to USD 80 million by the end of January, 1994. 4. The loan period is longer by one year and a day than that of the Bank Credit Facility which will be executed in January, 1994. For other details of loan term, such as funding currency, interest rate, etc., will be decided after discussion with AC. Best Regards, FUJITSU LIMITED KEIZO FUKAGAWA - -------------- (Keizo Fukagawa) Managing Director EX-10.AA 7 JOINT DEVELOPMENT AGREEMENT Portions of this exhibit are deleted pursuant to a request for confidential treatment Exhibit 10(aa) Processor Joint Development Agreement Principles AC/FJ will design and FJ will manufacture complete S/390 processor systems for AC. AC and FJ will have common hardware processor systems based on a Product Specification. AC and FJ will discuss and jointly agree on a Product Specification based on FJ product needs and AC market needs. The attached diagram shows the roles and responsibilities of AC and FJ. FJ is responsible for manufacturing. [ ] Contingency clauses will be renegotiated if there are modifications to the Product Specification that change the schedule. AC and FJ Intellectual property rights to be discussed. Price [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] Price basis is [ ] or [ ] if drop shipped. AC requests to be importer of record. Final arrangements to be discussed and agreed to later. [ ] Foreign exchange conversion to be handled as currently done by AC and FJ. Ordering Products initially provided by FJ [ ] days after ordered by AC. This will be reduced to [ ] days as manufacturing processes improve. AC will provide additional [ ] day forecast for planning purposes. AC and FJ will regularly discuss long-term supply and demand planning. No volume commitments. FJ tests maximum configuration and ships standard configuration to AC. Final configuration is done by AC in the field. AC and FJ will discuss the best way of shipping, with customer drop shipping being a long term possibility. FJ warrants product and spares: design [ ] manufacturing problems [ ] technology [ ] Product Plan [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] Detailed product definition will be done jointly by AC and FJ, including RAS [ ] [ ] [ ] Competitiveness AC and FJ intend to: * Provide products that compete successfully in the S/390 market. * Keep products current with agreed to S/390 facilities. [ ] * [ ] The primary criteria for deciding whether to implement a feature [ ] * Deliver competitive RAS. Development Most development will be done and paid for by FJ. AC pays development cost of work done by AC as agreed with FJ on a task by task basis. [ ] FJ is responsible for managing product development. The following list of responsibilities is our general understanding: [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] Manufacturing FJ is responsible for all new build, repair and update. AC retains rights to technology and manufacturing if FJ cannot supply products. Spares [ ] Repair * FJ will repair spares with a [ ] factory turn-around time for FJ manufactured parts. Parts from other vendors will be determined later. * FJ will provide failure analysis feedback to AC within [ ] after receipt of failed part. Field Support AC and FJ will jointly discuss how to provide service tools. FJ 3rd level support to backup AC support center. [ ] Makes all FJ service tools available to AC. Train AC to support product. AC Direct field support and has microcode and firmware patch capability. Normal sparing. Develops any AC unique service tools. AC and FJ will work together to define interfaces to allow AC service tools to operate. FJ will make product changes to support these as mutually agreed to. Exclusivity FJ will provide S/390 compatible processors exclusively to AC. FJ can market AC products in markets to be agreed upon based on the existing distributor relationship. Approved AMDAHL David L. Anderson December 8, 1993 - ----------------- David L. Anderson Vice President and General Manager Compatible Systems FUJITSU T. Miyazawa December 9, 1993 - ----------- T. Miyazawa General Manager Mainframe Division [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] [ ] EX-13 8 ANNUAL REPORT Exhibit 13 Financial Contents Consolidated Balance Sheets Consolidated Statements of Operations Consolidated Statements of Cash Flows Consolidated Statements of Stockholders' Equity Notes to Consolidated Financial Statements Report of Independent Public Accountants Management's Discussion and Analysis Selected Financial Data Common Stock Dividends and Price Range
Consolidated Balance Sheets DECEMBER 31, 1993 AND DECEMBER 25, 1992 1993 1992 (Dollars in thousands) ASSETS Current assets: Cash and cash equivalents $ 149,484 $ 173,012 Short-term investments 103,585 121,957 Receivables, net of allowances of $3,266 in 1993 and $3,227 in 1992 307,747 575,800 Inventories 510,702 788,085 Prepaid expenses and deferred tax assets 53,629 94,022 ---------- ---------- Total current assets 1,125,147 1,752,876 ---------- ---------- Long-term receivables and other assets 45,620 99,409 ---------- ---------- Property and equipment: Leased systems 60,229 76,825 System spares 418,057 429,605 Production and data processing equipment 667,137 860,903 Office furniture, equipment and improvements 158,062 164,303 Land and buildings 177,791 180,550 ---------- ---------- 1,481,276 1,712,186 Less - accumulated depreciation and amortization 979,856 863,447 ---------- ---------- Property and equipment, net 501,420 848,739 ---------- ---------- $1,672,187 $2,701,024 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable and short-term debt $ 137,056 $ 212,621 Accounts payable 54,331 86,020 Accounts payable - stockholder (Fujitsu Limited) 18,092 136,737 Accrued liabilities 561,281 471,253
---------- ---------- Total current liabilities 770,760 906,631 ---------- ---------- Long-term debt and liabilities 52,208 262,243 Deferred income taxes 59,013 161,034 Stockholders' equity: Common stock, $.05 par value Authorized - 200,000,000 shares Outstanding - 114,578,000 shares at December 31, 1993 and 113,139,000 shares at December 25, 1992 5,729 5,657 Additional paid-in capital 507,895 500,574 Retained earnings 267,664 853,336 Cumulative translation adjustments 8,918 11,549 ---------- ---------- Total stockholders' equity 790,206 1,371,116 ---------- ---------- $1,672,187 $2,701,024 ========== ==========
The accompanying notes are an integral part of these financial statements.
Consolidated Statements of Operations FOR THE THREE YEARS ENDED DECEMBER 31, 1993 1993 1992 1991 (Dollars in thousands, except per common share amounts) REVENUES Equipment sales $ 1,132,447 $ 2,022,110 $ 1,234,616 Equipment lease, maintenance and other 548,085 502,624 467,870 ------------ ------------ ------------ 1,680,532 2,524,734 1,702,486 ------------ ------------ ------------ COST OF REVENUES Equipment sales 881,528 1,431,338 760,292 Equipment lease, maintenance and other 350,982 335,905 303,133 ------------ ------------ ------------ 1,232,510 1,767,243 1,063,425 ------------ ------------ ------------ Gross margin 448,022 757,491 639,061 ------------ ------------ ------------ OPERATING EXPENSES Engineering and development 334,514 372,365 312,541 Marketing, general and administrative 354,939 407,030 358,670 Restructuring costs 478,000 --- --- ------------ ------------ ------------ 1,167,453 779,395 671,211 ------------ ------------ ------------ Loss from operations (719,431) (21,904) (32,150) ------------ ------------ ------------ INTEREST Income 23,461 28,957 51,551 Expense (17,772) (21,028) (12,363) ------------ ------------ ------------ 5,689 7,929 39,188 Income (loss) before provision for (benefit from) income taxes (713,742) (13,975) 7,038
PROVISION FOR (BENEFIT FROM) INCOME TAXES (125,000) (7,000) 2,600 ----------- ----------- ----------- Income (loss) before extraordinary credit and change in accounting principle (588,742) (6,975) 4,438 EXTRAORDINARY CREDIT - Income tax benefit from utilization of net operating loss carryforwards -- -- 6,190 CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 8,746 -- -- ----------- ----------- ----------- NET INCOME (LOSS) $ (579,996) $ (6,975) $ 10,628 =========== =========== =========== EARNINGS (LOSS) PER COMMON SHARE Income (loss) before extraordinary credit and change in accounting principle $ (5.17) $ (.06) $ .04 ----------- ----------- ----------- Net income (loss) $(5.09) $(.06) $.10 ----------- ----------- ----------- Average outstanding shares and equivalents 113,933,000 112,203,000 111,677,000 ----------- ----------- -----------
The accompanying notes are an integral part of these financial statements. Consolidated Statements of Cash Flows
FOR THE THREE YEARS ENDED DECEMBER 31, 1993 1993 1992 1991 (Dollars in thousands) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR $ 173,012 $ 245,237 $ 239,186 ----------- ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) (579,996) (6,975) 10,628 Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities: Depreciation and amortization 209,612 211,628 151,895 Restructuring charges 478,000 -- -- Deferred income tax provision (102,611) (27,540) (14,109) Loss (gain) on property and equipment sales 1,208 (5,599) (12,484) (Increase) decrease in receivables 269,784 (182,322) 108,333 (Increase) decrease in inventories 221,454 (103,389) (252,400) (Increase) decrease in prepaid expenses and deferred tax assets 40,551 (30,534) 19,773 (Increase) decrease in long-term receivables and other assets 53,874 (29,831) 41,387 Decrease in accounts payable (150,914) (33) (17,890) Increase (decrease) in accrued liabilities (128,722) 148,957 (99,204) Increase (decrease) in long-term liabilities (10,070) 9,012 (6,596) ----------- ----------- ----------- Net cash provided by (used for) operating activities 302,170 (16,626) (70,667) ----------- ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Decrease in short-term investments 18,372 44,977 186,766 Capital expenditures: Leased systems (45,045) (52,081) (33,265) System spares (50,841) (105,184) (74,037) Other property and equipment (39,033) (252,397) (220,572) Proceeds from property and equipment sales 68,191 59,565 83,836 ----------- ----------- ----------- Net cash used for investing activities (48,356) (305,120) (57,272) ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES Increase (decrease) in notes payable and short-term borrowings (106,854) 30,233 52,767 Borrowings under revolving credit agreement -- 300,000 85,000 Repayments of borrowings under revolving credit agreement (170,000) (85,000) -- Sale of common stock and exercise of options 7,393 16,854 11,619 Dividends paid (5,676) (11,214) (11,068) ----------- ----------- ----------- Net cash provided by (used for) financing activities (275,137) 250,873 138,318 ----------- ----------- ----------- EFFECT OF EXCHANGE RATE CHANGES ON CASH (2,205) (1,352) (4,328) ----------- ----------- ----------- Net increase (decrease) in cash and cash equivalents (23,528) (72,225) 6,051 ----------- ----------- ----------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ 149,484 $ 173,012 $ 245,237 =========== =========== ===========
The accompanying notes are an integral part of these financial statements. Consolidated Statements of Stockholders' Equity
ADDITIONAL CUMULATIVE FOR THE THREE YEARS COMMON PAID-IN RETAINED TRANSLATION ENDED DECEMBER 31, 1993 STOCK CAPITAL EARNINGS ADJUSTMENTS TOTAL (Dollars in thousands, except per share amounts) BALANCE AT DECEMBER 28, 1990 $5,509 $472,249 $ 871,965 $20,904 $1,370,627 Sale of 1,053,068 shares, net of repurchases, of common stock under employee stock benefit plans 53 11,162 --- --- 11,215 Income tax benefit arising from employee stock option plans --- 404 --- --- 404 Cash dividends ($.10 per share) --- --- (11,068) --- (11,068) Net income --- --- 10,628 --- 10,628 Translation adjustments --- --- --- (4,277) (4,277) ------ -------- --------- ----------- ---------- BALANCE AT DECEMBER 27, 1991 5,562 483,815 871,525 16,627 1,377,529 Sale of 1,908,024 shares, net of repurchases, of common stock under employee stock benefit plans 95 15,602 --- --- 15,697 Income tax benefit arising from employee stock option plans --- 1,157 --- --- 1,157 Cash dividends ($.10 per share) --- --- (11,214) --- (11,214) Net loss --- --- (6,975) --- (6,975) Translation adjustments --- --- --- (5,078) (5,078) ------ -------- --------- ----------- ---------- BALANCE AT DECEMBER 25, 1992 5,657 500,574 853,336 11,549 1,371,116 Sale of 1,439,269 shares, net of repurchases, of common stock under employee stock benefit plans 72 7,234 --- --- 7,306 Income tax benefit arising from employee stock option plans --- 87 --- --- 87 Cash dividends ($.05 per share) --- --- (5,676) --- (5,676) Net loss --- --- (579,996) --- (579,996) Translation adjustments --- --- --- (2,631) (2,631) ------ -------- --------- ----------- ---------- BALANCE AT DECEMBER 31, 1993 $5,729 $507,895 $ 267,664 $ 8,918 $ 790,206 ====== ======== ========= =========== ========== The accompanying notes are an integral part of these financial statements.
NOTE 1 SUMMARY OF ACCOUNTING POLICIES Amdahl Corporation and subsidiaries (the Company or Amdahl) provide large-scale, high-performance, general-purpose computer systems, software, storage and communications products. The Company also provides consulting and professional services. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Intercompany accounts and transactions have been eliminated. FISCAL YEAR The Company's fiscal year ends on the last Friday in December. As a result, 1993 was a 53-week year, whereas 1992 and 1991 were each 52-week years. TRANSLATION OF FOREIGN CURRENCIES The financial position and results of operations of the Company's non-U.S. sales subsidiaries are measured using local currency as the functional currency. Accordingly, all assets and liabilities are translated into U.S. dollars at current exchange rates as of the respective balance sheet date. Revenue and expense items are translated at the average exchange rates prevailing during the period. Cumulative translation gains and losses are reported as a separate component of stockholders' equity. Losses resulting from foreign exchange transactions were $2,948,000, $5,826,000 and $3,340,000 in 1993, 1992 and 1991, respectively, and were included in marketing, general and administrative expenses. FOREIGN CURRENCY OPTIONS AND FORWARD CONTRACTS The Company enters into foreign currency options and forward contracts to protect against currency exchange risks associated with the settlement of its non-U.S. intercompany payables and receivables and with inventory purchase commitments with Fujitsu Limited. Realized and unrealized gains and losses on such contracts and the associated cash flows which qualify as hedges are reported as components of the related transactions. REVENUES Revenues from equipment sales and sales-type leases are generally recognized when the equipment has been shipped, installed and financing arrangements have been completed. Revenues from operating leases are recognized over the term of the respective contracts. Service for Amdahl products is provided under service and parts warranty or separate maintenance agreements. The large-scale computer systems normally carry a one-year service and parts warranty, and the storage and other products usually have shorter warranty periods. Where material, a portion of equipment sales revenue is deferred and recognized over the warranty period as service is provided. Following the warranty period, Amdahl provides maintenance service under separate contracts which typically can be terminated by the customer on 90 days notice. Revenues from maintenance contracts are recognized over the term of the respective contracts as service is provided. SOFTWARE DEVELOPMENT COSTS Certain software development costs have been capitalized and amortized over the life of the product. At December 31, 1993 and December 25, 1992 software development costs that had been capitalized were immaterial. FUTURE ENGINEERING CHANGES Amdahl's computer systems are architecturally compatible at specific software and hardware interface levels with the basic functions of competing IBM computer systems. The introduction from time to time by IBM of certain product enhancements requires that Amdahl make product changes to remain fully compatible. In addition, the Company makes changes to enhance the functionality of its products. The Company provides a reserve for estimated future engineering changes in connection with each sale. The reserve is intended to cover direct material, direct labor and manufacturing overhead associated with implementation of engineering changes. Amounts provided and charged to cost of equipment sales were $16,672,000, $60,278,000 and $1,512,000 in 1993, 1992 and 1991, respectively. CASH AND CASH EQUIVALENTS Substantially all cash equivalents consist of investments in major bank time deposits and certificates of deposit with initial maturities of three months or less. SHORT-TERM INVESTMENTS Substantially all short-term investments consist of major bank time deposits, certificates of deposit, U.S. Treasury bills and Euro-notes and bonds which the Company intends to hold between three and twelve months. Short-term investments are valued at cost, which approximates market value. In May 1993 the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities." The Company will adopt this standard in the first quarter of 1994 and does not believe that adoption of the standard will have a material impact on its financial statements or results of operations. INVENTORIES Inventories are stated at the lower of cost (first-in, first-out) or market. Systems in process and finished goods include material, labor and manufacturing overhead. Year-end inventories consisted of the following:
1993 1992 (In thousands) Purchased materials $134,615 $142,443 Systems in process 233,560 409,879 Finished goods 142,527 235,763 -------- -------- $510,702 $788,085 ======== ======== PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation and amortization are computed using the straight-line method over estimated useful lives (or, for leasehold improvements and assets recorded under capital lease obligations, over the remaining lease terms or estimated useful lives, whichever is shorter) as follows:
YEARS System spares 5 Production and data processing equipment 3-15 Office furniture, equipment and improvements 3-20 Buildings 20-40
EARNINGS (LOSS) PER COMMON SHARE Earnings (loss) per common share have been computed based on the weighted average number of common and common equivalent shares outstanding. Common equivalent shares result from the assumed exercise of stock options which would have a dilutive effect in years where there are earnings. Primary and fully diluted earnings per common share amounts are substantially the same. NOTE 2 RESTRUCTURING OF OPERATIONS In 1993 the Company began to restructure its worldwide operations in order to address the competitive conditions in the markets for large-scale computing systems, including prices which declined at much greater than normal historical rates and reduced levels of demand. The restructuring consists of a series of planned actions, including a reduction in the number of employees by approximately one-third, consolidation of offices and facilities and disposition of assets that are no longer required due to changes in product plans, reduction in manufacturing capacity by approximately 50%, and elimination of selected product development programs, as well as other expense reductions. The majority of these actions are expected to be initiated by the end of 1994. In connection with these actions, the Company recorded restructuring charges totaling $478,000,000 to operating expenses, $243,000,000 of which was recorded in the first quarter of 1993 and $235,000,000 of which was recorded in the third quarter of 1993. The restructuring costs included the following approximate amounts: $120 million related to reductions in the workforce, $200 million related to closing excess facilities and write-downs of equipment, $60 million related to write-downs of excess inventory resulting from reduced manufacturing capacity and changes in product plans, $10 million related to vendor charges due to the cancellation of development programs, and other various charges totaling $88 million. In total the restructuring charges reflected $298 million of noncash write-offs of recorded assets and $180 million of projected cash outflows. Of the estimated cash outflows, $107 million is expected to occur beyond 1993. The Company believes that the restructuring actions which it took in 1993 will bring its costs in line with anticipated levels of business in 1994 and beyond. However, levels of business are a function of a number of factors, including general economic conditions, the availability and cost of components, competition from smaller, less costly computer systems, and various other competitive pressures. Any significant deterioration in anticipated levels of business would likely require the Company to make additional adjustments to its expense structure, including additional restructuring charges. NOTE 3 RELATIONSHIP WITH FUJITSU LIMITED The Company has entered into agreements with Fujitsu Limited (Fujitsu), a principal stockholder, which provide for, among other things: A. Purchases of computer equipment, subassemblies and spare parts from Fujitsu. The cost of computer equipment, subassemblies and spare parts purchased from Fujitsu and the amount included in cost of revenues for equipment sales were as follows:
COST OF PURCHASES REVENUES (In thousands) 1993 $ 434,732 $444,595 1992 1,048,819 775,757 1991 855,379 517,680
Amdahl was committed to purchase material and other equipment from Fujitsu totaling approximately $34,000,000 at December 31, 1993. Prices for these manufacturing materials and other equipment are subject to adjustment if the U.S. dollar-Japanese yen exchange rate fluctuates outside of specified ranges. The Company has entered into hedging arrangements designed to protect against currency exchange risks associated with anticipated product purchases from Fujitsu in 1994. Also, Amdahl has agreed to purchase from Fujitsu 50% of certain subsystem components and 100% of certain devices, boards and modules contained in its current processor products. In addition, the Company has made advance payments to Fujitsu for future inventory purchases in return for lower prices on certain components related to these products. Advance payments of $4,886,000 and $7,339,000 were included in prepaid expenses as of December 31, 1993 and December 25, 1992, respectively. B. Joint development efforts under which Fujitsu supplies Amdahl with services and material related to the Company's development of current and future products, resulting in charges to engineering and development expense of $8,633,000 in 1993, $4,313,000 in 1992 and $11,923,000 in 1991. In 1991 the Company entered into a cross-license agreement related to certain technologies in the Company's processor products, in which the Company agreed to pay Fujitsu up to $15,000,000 in royalties, to be remitted to Fujitsu as shipments occurred in 1992 and 1993. Amounts charged to cost of revenues related to this agreement amounted to $3,600,000 in 1993 and $11,400,000 in 1992. In connection with an agreement for the development and supply by Fujitsu of certain LSI devices for Amdahl products, the Company paid Fujitsu approximately $16,000,000 in 1990. This advance payment was expensed in 1990 and 1991 as materials and services were provided by Fujitsu. In November 1993 Amdahl and Fujitsu entered into a preliminary agreement pursuant to which Amdahl and Fujitsu agreed to participate in the joint development of the Company's next generation of IBM compatible systems. Under the agreement, Fujitsu will undertake primary responsibility for the design and manufacture of these systems. C. A limitation on Fujitsu's maximum ownership interest in Amdahl, such that until April 19, 1994 Fujitsu will not purchase additional shares of Amdahl common stock if such purchases would cause its beneficial ownership of outstanding Amdahl common stock, computed on a fully-diluted basis, to exceed 49.5%. D. Distributorship arrangements whereby Fujitsu markets Amdahl's computer equipment in Brazil, Japan, Malaysia, South Korea and Spain. Sales in 1993, 1992 and 1991 by the Company of computer systems and complementary storage products to Fujitsu contributed $28,162,000, $60,268,000 and $29,211,000 to equipment sales and $11,687,000, $24,733,000 and $12,163,000 to gross margin, respectively. At December 31, 1993 and December 25, 1992 receivables included $35,931,000 and $42,153,000, respectively, from Fujitsu. E. A commitment by Fujitsu, pursuant to a loan agreement entered into in January 1994, under which Fujitsu would provide loans to the Company in an aggregate amount not to exceed $100,000,000 (see Note 7). NOTE 4 EQUIPMENT LEASING AND THIRD PARTY TRANSACTIONS The Company is the lessor of equipment under operating leases for periods generally less than three years. Certain operating leases contain provisions for early termination with a penalty or with conversion to another system. The cost of leased systems is depreciated to a zero value on a straight-line basis over two to four years. Accumulated depreciation on leased systems was $13,320,000 at December 31, 1993 and $32,530,000 at December 25, 1992. The Company also leases equipment to customers under sales-type leases as defined in Statement of Financial Accounting Standards No. 13. The components of the net investment in sales-type leases were as follows:
1993 1992 (In thousands) Minimum rentals receivable $63,221 $142,738 Estimated residual values of leased equipment (unguaranteed) 3,182 6,988 Less unearned interest income (7,557) (18,458) ------- -------- Net investment in sales-type leases $58,846 $131,268 ======= ========
Minimum rentals receivable under existing leases as of December 31, 1993 were as follows:
SALES-TYPE OPERATING (In thousands) 1994 $29,382 $21,739 1995 21,067 10,312 1996 9,611 4,329 1997 1,786 957 1998 1,179 411 Thereafter 196 200 ------- ------- $63,221 $37,948 ======= =======
In addition, during the periods presented, the Company sold certain equipment subject to operating leases and financed certain sales-type equipment leases and installment contracts with financing institutions ("third parties"). The Company sometimes agrees to perform certain services and obligations with respect to the equipment and related leases, such as general lease administration, invoicing and collection of rentals, payment of insurance and personal property taxes, maintenance services and non-priority remarketing of equipment that comes off lease. For these services and obligations, the Company generally receives its normal maintenance charges and a remarketing and administration fee. Many of the agreements with third parties provide the Company with residual rights in revenues, if any, derived from the equipment after the third parties have received a designated return. Equipment sales revenues arising from these transactions with third parties were approximately $91,000,000, $157,000,000 and $94,000,000 in 1993, 1992 and 1991, respectively. NOTE 5 FINANCIAL INSTRUMENTS OFF-BALANCE SHEET FINANCIAL INSTRUMENTS: RISK AND FAIR VALUE The Company hedges certain portions of its exposure to foreign currency fluctuations through a variety of strategies and financial instruments, including the use of forward foreign exchange contracts. These contracts generally have maturities that do not exceed three months. At December 31, 1993 the Company had approximately $132,000,000 of forward foreign exchange contracts outstanding. The gains and losses associated with currency rate changes on forward foreign exchange contracts are recorded currently in income as they offset corresponding gains and losses on the foreign currency-denominated assets and liabilities being hedged. Therefore, the carrying value of forward foreign exchange contracts approximates their fair value, which was immaterial at December 31, 1993 and December 25, 1992. The Company enters into foreign currency options to protect against currency exchange risks associated with its probable anticipated, but not firmly committed, non-U.S. intercompany sales and with both inventory purchase commitments and probable anticipated inventory purchases from Fujitsu. Realized and unrealized gains and losses on such contracts and the associated cash flows that qualify as hedges are reported as components of the related transactions. These option contracts generally have maturities that do not exceed one year. The net income effect deferred on foreign currency option contracts represents the amount by which the carrying value of the option contracts exceeded their fair value and was immaterial as of December 31, 1993 and December 25, 1992. The Company enters into interest rate swap agreements as hedges of investments and accrues the differential to be paid or received under the agreements as interest rates change over the life of the contracts. At December 31, 1993 the Company had approximately $50,000,000 notional principal outstanding under these agreements. The fair value of interest rate swaps is the estimated amount that the Company would receive or pay to terminate the swap agreements at the reporting date, taking into account current interest rates. The fair value of interest rate swaps at December 31, 1993 and December 25, 1992 was immaterial. BALANCE SHEET FINANCIAL INSTRUMENTS: FAIR VALUE At December 31, 1993 and December 25, 1992 the carrying value of cash, cash equivalents and short-term investments approximated fair value, primarily because of the immediate or short-term maturity of these instruments. At December 31, 1993 and December 25, 1992 the carrying value of notes payable, short-term debt and long-term debt approximated fair value because of the variable interest rate nature of these instruments. CONCENTRATIONS OF CREDIT RISK Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of temporary cash investments and trade receivables. The Company has cash investment policies that limit the amount of credit exposure to any one financial institution and restrict placement of these investments to financial institutions evaluated as highly creditworthy. Concentrations of credit risk with respect to trade receivables are limited due to the large number of customers comprising the Company's customer base, and their dispersion across many different industries and geographies. NOTE 6 ACCRUED LIABILITIES Accrued liabilities consisted of the following:
1993 1992 (In thousands) Payroll and vacation $102,363 $ 95,328 Restructuring costs 145,601 --- Income taxes 48,707 53,332 Deferred income 108,365 133,944 Future engineering changes 57,133 86,004 Other 99,112 102,645 -------- -------- $561,281 $471,253 ======== ========
NOTE 7 LONG-TERM DEBT AND LIABILITIES AND BANK CREDIT AGREEMENTS Long-term debt and liabilities consisted of the following:
1993 1992 (In thousands) Bank credit agreement $130,000 $300,000 Capitalized lease obligations (Note 12) 21,654 23,243 Long-term liabilities 31,804 40,468 -------- -------- 183,458 363,711
Less current maturities 131,250 101,468 -------- -------- Long-term debt and liabilities $ 52,208 $262,243 ======== ========
The Company's credit agreement with a group of banks providing for an unsecured multi-year revolving credit facility was amended effective September 24, 1993. As a result, the Company's borrowing capacity under the agreement was reduced from $450,000,000 to $300,000,000, its tangible net worth maintenance requirement was reduced, and the Company was required to repay all outstanding borrowings upon expiration of the facility on January 31, 1994. The interest rate applicable to borrowings under the revolving credit agreement was, at the Company's option, based upon the U.S. reference rate, Interbank Offered Rate or Certificate of Deposit rate. At December 31, 1993, and December 25, 1992, $130,000,000 and $300,000,000, respectively, was outstanding under the revolving credit agreement. The amount outstanding at December 31, 1993 was classified as short-term debt and was repaid by the Company on January 31, 1994. The amended revolving credit agreement contained certain financial restrictions and covenants. The Company was in compliance with all financial ratio requirements and covenants at December 31, 1993. In January 1994 the Company and Fujitsu entered into an agreement under which Fujitsu would provide loans to the Company in an aggregate amount not to exceed $100,000,000. Such loans bear interest at a rate based upon the London Interbank Offered Rate. Any outstanding loan balance is payable to Fujitsu on January 28, 1997. As of January 28, 1994, $80,000,000 was outstanding under this agreement. In addition, the Company has credit agreements with a number of banks providing for short-term borrowings in U.S. dollars and various foreign currencies at varying interest rates. At December 31, 1993 and December 25, 1992, $5,806,000 and $111,153,000, respectively, was outstanding under these agreements. Interest paid on all borrowings was $19,821,000, $19,366,000 and $12,015,000 in 1993, 1992 and 1991, respectively. Long-term liabilities of $31,804,000 include deferred equipment maintenance revenues and long-term amounts accrued under the Executive Incentive Performance Plan. NOTE 8 MAJOR CUSTOMER, GEOGRAPHIC AREA AND PRODUCT LINE DATA No single customer accounted for 10% or more of total revenues in 1993, 1992 or 1991. The Company's operations by geographical area for the three years ended December 31, 1993 were as follows:
ASIA UNITED PACIFIC ADJUSTMENTS 1993 STATES CANADA EUROPE & OTHER & ELIMINATIONS CONSOLIDATED (in thousands) Revenues: Customers $1,042,490 $ 50,540 $ 488,259 $ 99,243 $ --- $1,680,532 Intercompany 186,400 4,412 27,774 --- (218,586) --- ---------- -------- --------- -------- --------- ---------- Total revenues $1,228,890 $ 54,952 $ 516,033 $ 99,243 $(218,586) $1,680,532 ========== ======== ========= ======== ========= ========== Income (loss) from operations $ (502,594) $ (5,949) $(190,410) $ 3,275 $ (23,753) $ (719,431) Interest income, net 5,689 ---------- Loss before income taxes $ (713,742) ========== Identifiable assets $ 983,405 $ 33,259 $ 763,273 $ 59,057 $(393,128) $1,445,866 Corporate assets 226,321 ---------- Total assets $1,672,187 ==========
ASIA UNITED PACIFIC ADJUSTMENTS 1992 STATES CANADA EUROPE & OTHER & ELIMINATIONS CONSOLIDATED (in thousands) Revenues: Customers $1,568,390 $115,151 $ 698,655 $142,538 $ --- $2,524,734 Intercompany 383,566 1,267 101,377 --- (486,210) --- ---------- -------- --------- -------- --------- ---------- Total revenues $1,951,956 $116,418 $ 800,032 $142,538 $(486,210) $2,524,734 ========== ======== ========= ======== ========= ==========
Income (loss) from operations $ 21,494 $ (6,510) $ (35,980) $ (8,164) $ 7,256 $ (21,904) Interest income, net 7,929 ---------- Loss before income taxes $ (13,975) ========== Identifiable assets $1,800,511 $ 43,505 $ 913,376 $ 99,713 $(420,431) $2,436,674 Corporate assets 264,350 ---------- Total assets $2,701,024 ==========
ASIA UNITED PACIFIC ADJUSTMENTS 1991 STATES CANADA EUROPE & OTHER & ELIMINATIONS CONSOLIDATED (in thousands) Revenues: Customers $1,006,495 $133,992 $ 447,730 $114,269 $ --- $1,702,486 Intercompany 270,076 2,839 87,679 --- (360,594) --- ---------- -------- --------- -------- --------- ---------- Total revenues $1,276,571 $136,831 $ 535,409 $114,269 $(360,594) $1,702,486 ========== ======== ========= ======== ========= ========== Income (loss) from operations $ (46,906) $ 7,354 $ 15,094 $ 695 $ (8,387) $ (32,150) Interest income, net 39,188 ---------- Income before income taxes $ 7,038 ========== Identifiable assets $1,384,115 $ 72,826 $ 671,390 $ 45,734 $(231,195) $1,942,870 Corporate assets 392,694 ---------- Total assets $2,335,564 ==========
The Company's operations are structured to achieve consolidated objectives. As a result, significant interdependencies and overlaps exist among the Company's operating units. Accordingly, the revenue, operating income (loss) and identifiable assets shown for each geographic area may not be indicative of the amounts that would have been reported if the operating units were independent of one another. Intercompany sales and transfers of manufacturing materials between areas are at prices which, in general, provide a profit after coverage of all manufacturing costs. Intercompany sales of finished systems are at prices intended to provide a profit for purchasing entities after coverage of marketing, support and general and administrative costs. Operating income (loss) is revenue less related costs and direct and allocated operating expenses, excluding interest and, for all areas except the United States, the unallocated portion of corporate expenses. United States operating income (loss) is net of corporate research and development and administrative expenses. Corporate assets are those assets maintained for general purposes, principally cash and short-term investments. The Company operates in the large-scale computer system and related storage and communications products segment of the data processing industry. Revenues for similar classes of products or services within this one business segment for the most recent three years are presented below:
1993 1992 1991 (In millions) Processors $ 857 $1,696 $ 980 Storage products 277 316 221 Communications products 26 35 65 Maintenance services 474 431 397 Software and education services 47 47 39 ------ ------ ------ Total $1,681 $2,525 $1,702 ====== ====== ======
NOTE 9 CAPITAL STOCK There are 200,000,000 authorized shares of common stock, par value of $.05 per share, of which 114,578,000 shares were issued and outstanding as of December 31, 1993. As of December 31, 1993 the Company had reserved shares of its common stock for the following purposes:
DESCRIPTION SHARES RESERVED Stock options- Outstanding 10,736,213 Available for grant 1,931,946 Employee Stock Purchase Plan 3,475,959 Restricted Stock Plan 361,782 ---------- 16,505,900 ==========
In January 1994, the Board of Directors adopted the 1994 Stock Incentive Plan (the 1994 Plan), subject to stockholder approval at the 1994 Annual Meeting of Stockholders. Upon the 1994 Plan becoming effective, the Company's 1971 and 1974 Stock Option Plans, the 1982 Non-Qualified Stock Option Plan and the Restricted Stock Plan would be cancelled and all outstanding options and rights under these plans would be incorporated into the 1994 Plan. Up to 14,300,000 shares would be initially reserved for issuance under the 1994 Plan. There are 5,000,000 authorized shares of Preferred Stock, par value of $1 per share. This stock, if issued, will carry liquidation preferences and other rights, as determined by the Board of Directors. As of December 31, 1993, no Preferred Stock had been issued. NOTE 10 EMPLOYEE STOCK OPTION AND BENEFIT PLANS Under the Company's stock option plans, options generally become exercisable in cumulative annual installments beginning one year after the date of grant, are fully exercisable after four or five years and expire after five or ten years. Options are granted to non-employee directors, under the Automatic Option Grant Program. On December 31, 1993, options for 1,278,577 shares were exercisable at prices ranging from $4.88 to $18.88. Activity in the Company's option plans is summarized as follows:
SHARES OPTION PRICES Options outstanding at December 28, 1990 5,396,139 $ 0.07 - $20.75 Granted 1,070,965 $14.06 - $15.00 Exercised (192,894) $ 0.07 - $14.59 Expired or cancelled (119,725) $ 0.38 - $15.50 --------- --------------- Options outstanding at December 27, 1991 6,154,485 $ 0.38 - $20.75 Granted 5,636,840 $ 7.00 - $17.50 Exercised (511,393) $ 0.38 - $15.50
Expired or cancelled (4,705,662) $ 0.38 - $20.75 ---------- --------------- Options outstanding at December 25, 1992 6,574,270 $ 0.38 - $20.75 Granted 9,681,672 $ 4.72 - $8.19 Exercised (39,231) $ 0.38 - $7.03 Expired or cancelled (5,480,498) $ 0.38 - $20.75 ---------- --------------- Options outstanding at December 31, 1993 10,736,213 $ 4.72 - $18.88 ========== ===============
Under the Employee Stock Purchase Plan, the Company's employees, subject to certain restrictions, may purchase shares of common stock at a price per share that is the lesser of 85% of the fair market value as of the first day or the last day of each three month purchase period. As of December 31, 1993, the Company had 387,270 shares of common stock outstanding with certain officers and key employees under the Restricted Stock Plan. These shares carry certain restrictions on transferability, which will lapse over periods as determined by the Board of Directors at the time of grant. The difference between the fair market value at the date of grant and the purchase price of the shares (generally, $.05 per share) is recorded as compensation expense ratably over the period from the date of grant to the date the restrictions lapse. The Company has a Capital Accumulation Plan available to all its domestic and Canadian employees to which it contributes based on its profits. The Company also has a Savings Plan for domestic employees whereby it matches 25% of employee contributions up to specified limits. In addition, under the Executive Incentive Performance Plan, amounts up to 2% of income before taxes are accrued for selected key employees instead of their participation in the Capital Accumulation Plan. Approximately half of the award vests over the following four years and the remainder vests over a service period of up to twenty years. The total cost of these plans charged to income was $3,705,000 in 1993 and $5,234,000 in 1991. In 1992 the cost of these plans was immaterial. NOTE 11 INCOME TAXES In the first quarter of 1993 the Company adopted Statement of Financial Accounting Standards No. 109 (FAS 109), "Accounting for Income Taxes." The adoption of this standard changed the Company's method of accounting for income taxes from the deferred method to an asset and liability method. FAS 109 was adopted on a prospective basis and amounts presented for prior years have not been restated. The cumulative effect of this change in accounting increased earnings in 1993 by $8,746,000, or $0.08 per share. Income (loss) before taxes and the provision for (benefit from) income taxes were comprised of the following:
1993 1992 1991 (In thousands) Income (loss) before taxes: Domestic $(488,628) $ 27,476 $(35,539) Foreign (225,114) (41,451) 42,577 --------- -------- -------- $(713,742) $(13,975) $ 7,038 ========= ======== ======== Provision for (benefit from) income taxes: Federal- Current $ (47,378) $ 40,650 $ 5,012 Deferred, net 6,578 (20,529) (1,970) --------- -------- -------- (40,800) 20,121 3,042 --------- -------- -------- State- Current (4,253) 1,524 680 Deferred, net 5,466 2,839 (608) --------- -------- -------- 1,213 4,363 72 --------- -------- -------- Foreign- Current (5,090) (3,571) 15,001 Deferred, net (80,323) (27,913) (15,515) --------- -------- ------- (85,413) (31,484) (514) --------- -------- -------- Net tax provision (benefit) $(125,000) $ (7,000) $ 2,600 ========= ======== ========
The effective income tax provision (benefit) differed from the statutory Federal provision due to the following:
1993 1992 1991 (In thousands) Statutory Federal tax provision (benefit) $(249,810) $ (4,752) $ 2,393 State tax provisions, net of Federal tax benefit 780 2,880 47 Research and development credits --- (1,221) (2,396) Net operating losses in excess of available benefits 120,558 7,081 1,000 Foreign subsidiaries'
earnings taxed at rates in excess of (less than) the statutory Federal rate 94 (11,531) 1,174 Other 3,378 543 382 --------- -------- ------- Net tax provision (benefit) $(125,000) $ (7,000) $ 2,600 ========= ======== ======= Net effective tax rate 18% 50% 37% --------- -------- -------
Net income tax refunds of $16,000,000 were received by the Company in 1993, and net income taxes of $12,077,000 and $57,340,000 were paid by the Company in 1992 and 1991, respectively. The components of the net deferred tax liability under FAS 109 as of December 31, 1993 were as follows:
(In thousands) Deferred tax liabilities: Tax on foreign income $ (46,094) Depreciation (42,273) Other (16,861) --------- Total deferred tax liabilities (105,228) --------- Deferred tax assets: Reserves 165,578 Revenue timing 18,656 Net operating loss carryforwards 50,672 --------- 234,906 Valuation allowance (152,337) --------- Total deferred tax assets 82,569 --------- Net deferred tax liability $ (22,659) =========
No tax benefit was recorded for losses other than recoverable taxes or future taxable income from the reversal of deferred items. The valuation allowance of $152,337,000 at December 31, 1993 consisted of worldwide operating losses, deferred tax assets, and tax credit carryforwards which may expire before the Company can utilize them. The Company believes sufficient uncertainty exists regarding the realizability of these items, and accordingly, a valuation allowance has been established. For years prior to 1993, deferred taxes as accounted for under Accounting Principles Bulletin No. 11 resulted from differences in the timing of revenue and expense recognition for tax return and financial statement purposes. The tax effects of these timing differences for the years indicated were as follows:
1992 1991 (In thousands) Taxes on foreign income currently payable $(24,452) $(15,771) Accelerated depreciation 8,882 14,324 Reserves currently deductible (not currently deductible) for tax purpose (49,663) 37,678 Revenue timing 16,800 (49,362) Other items 2,830 (4,962) -------- -------- Net amount $(45,603) $(18,093) ======== ========
The Company provides in full for United States income taxes on the earnings of foreign subsidiaries not considered indefinitely invested outside the United States. Cumulative earnings of foreign subsidiaries considered indefinitely invested outside of the United States amounted to $130 million at December 31, 1993. If these earnings were distributed, deferred tax assets would become available to substantially reduce or eliminate any resulting United States income tax liability. The Company had operating loss carryforwards remaining at December 31, 1993 for certain foreign subsidiaries of approximately $59 million, approximately $27 million of which expire at various dates from 1997 through 2003 and approximately $32 million of which can be carried forward indefinitely. During the fourth quarter of 1993 the Internal Revenue Service (IRS) completed its field audit of the Company's 1985 and 1986 tax years. Results of the audit were similar to the IRS' proposed adjustments to the 1983 and 1984 tax years, the most significant of which related to the treatment of system spares. The Company expects to file a protest with the Appeals Division of the IRS contesting the proposed adjustments to tax years 1985 and 1986 and combine this action with the protest already underway regarding tax years 1983 and 1984. In the opinion of management, the final resolution of the protest will not have an adverse impact on the Company's operating results or financial position. NOTE 12 LEASE COMMITMENTS The Company leases a substantial portion of its principal facilities under capital lease agreements extending through the year 2008. Capitalized facilities leases totaling $25,652,000 and $31,366,000 with accumulated amortization of $15,487,000 and $18,285,000 were included in the land and buildings classification on the balance sheets at December 31, 1993 and December 25, 1992, respectively. The lease agreements provide for renewal options extending the lease terms beyond the initial terms in five-year increments. The Company also leases certain equipment and sales and service facilities under operating leases. The minimum lease commitments as of December 31, 1993 were as follows:
CAPITAL OPERATING LEASES LEASES (In thousands) 1994 $ 3,662 $ 33,231 1995 3,318 25,922 1996 3,318 21,543 1997 3,318 17,742 1998 3,273 14,686 After 1998 23,598 46,934 -------- -------- Total minimum lease commitments $ 40,487 $160,058 ======== Less imputed interest (9.25% to 13.76%) (18,833) -------- Present value of minimum lease commitments (Note 7) $ 21,654 ========
Rental expense charged to income was $44,953,000 in 1993, $48,130,000 in 1992 and $43,623,000 in 1991. NOTE 13 LITIGATION Multiple securities class action lawsuits were filed against the Company and certain of its directors, officers and other employees in September and October of 1992 in the United States District Court for the Northern District of California. These cases were subsequently consolidated into a single action. On September 10, 1993 the Court gave final approval to a settlement of this litigation under which all claims in the litigation were dismissed and finally settled, and plaintiffs and their attorneys received a cash payment from the Company and its insurer. The settlement payment did not have a material impact on the Company's financial position or results of operations. NOTE 14 SUMMARIZED QUARTERLY FINANCIAL DATA (UNAUDITED)
FIRST SECOND THIRD FOURTH YEAR (In thousands, except per common share amounts) FISCAL QUARTER 1993 Revenues $ 380,713 $463,206 $ 393,673 $442,940 $1,680,532 ========= ======== ========= ======== ========== Gross margin $ 82,709 $139,402 $ 105,264 $120,647 $ 448,022 ========= ======== ========= ======== ========== Loss before taxes $(340,353) $(29,599) $(296,930) $(46,860) $ (713,742) ========= ======== ========= ======== ========== Loss before accounting change $(248,453) $(23,699) $(275,730) $(40,860) $ (588,742) ========= ======== ========= ======== ========== Net loss $(239,707) $(23,699) $(275,730) $(40,860) $ (579,996) ========= ======== ========= ======== ========== Loss per common share: Loss before accounting change $ (2.19) $ (.21) $ (2.41) $ (.36) $ (5.17) ========= ======== ========= ======== ========== Net loss $ (2.12) $ (.21) $ (2.41) $ (.36) $ (5.09) ========= ======== ========= ======== ========== FISCAL QUARTER 1992 Revenues $ 497,916 $692,983 $ 588,840 $744,995 $2,524,734 ========= ======== ========= ======== ========== Gross margin $ 174,744 $219,943 $ 146,594 $216,210 $ 757,491 ========= ======== ========= ======== ========== Income (loss) before taxes $ 7,394 $ 28,948 $ (55,567) $ 5,250 $ (13,975) ========= ======== ========= ======== ========== Net income (loss) $ 4,394 $ 16,948 $ (30,767) $ 2,450 $ (6,975) ========= ======== ========= ======== ========== Net income (loss) per common share $ .04 $ .15 $ (.27) $ .02 $ (.06) ========= ======== ========= ======== ==========
Report of Independent Public Accountants TO AMDAHL CORPORATION: We have audited the accompanying consolidated balance sheets of Amdahl Corporation (a Delaware corporation) and subsidiaries as of December 31, 1993 and December 25, 1992, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1993. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Amdahl Corporation and subsidiaries as of December 31, 1993 and December 25, 1992, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1993 in conformity with generally accepted accounting principles. As discussed in Note 11 to the Consolidated Financial Statements, the Company adopted the provisions of Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes, in 1993. ARTHUR ANDERSEN & CO SAN JOSE, CALIFORNIA JANUARY 31, 1994 MANAGEMENT'S DISCUSSION AND ANALYSIS 1993 COMPARED TO 1992 RESULTS OF OPERATIONS In 1993 the Company began to restructure its worldwide operations in order to address the competitive conditions in the markets for large-scale computing systems, including prices which declined at much greater than normal historical rates and reduced levels of demand. The restructuring consists of a series of planned actions, including a reduction in the number of employees by approximately one-third, consolidation of offices and facilities and disposition of assets that are no longer required due to changes in product plans, reduction in manufacturing capacity by approximately 50%, and elimination of selected product development programs, as well as other expense reductions. The majority of these actions are expected to be initiated by the end of 1994. In connection with these actions, the Company recorded restructuring charges totaling $478,000,000 to operating expenses, $243,000,000 of which was recorded in the first quarter of 1993 and $235,000,000 of which was recorded in the third quarter of 1993. The restructuring costs included the following approximate amounts: $120 million related to reductions in the workforce, $200 million related to closing excess facilities and write-downs of equipment, $60 million related to write-downs of excess inventory resulting from reduced manufacturing capacity and changes in product plans, $10 million related to vendor charges due to the cancellation of development programs, and other various charges totaling $88 million. In total the restructuring charges reflected $298 million of noncash write-offs of recorded assets and $180 million of projected cash outflows. Of the estimated cash outflows, $107 million is expected to occur beyond 1993. REVENUES Total revenues decreased 33% from 1992 to 1993, and equipment sales decreased 44%. Prices for the Company's 5995M mainframe computers, as well as the Company's other products, declined at greater than normal historical rates because of significant competitive pressures. In 1993 prices for the 5995M and 5995A processors declined approximately 34% and 38%, respectively, compared to systems of like configuration and model sold in 1992. The Company also experienced reduced levels of demand during 1993 for certain of its products, particularly the 5995M mainframe systems. Processor shipment volumes of the 5995M and the older 5995A series decreased approximately 23% and 32%, respectively. As a result, processor equipment sales decreased 50%. The reduced volume of business reflected ongoing economic weakness in the Company's principal markets, particularly its international markets. Demand for large- scale mainframe processors also continued to be negatively impacted by a shift by some customers from centralized mainframe computing to smaller systems and by an excess supply of computing capacity in the marketplace. Also, as previously reported, a limited number of customers affected by component failure associated with deliveries of the 5995M mainframe system deferred additional purchases of those systems. A decrease of 13% in storage equipment sales also contributed to the Company's revenue decrease in 1993. Maintenance, lease and other revenues increased 9% from the prior year, reflecting increased maintenance revenues from a larger customer installed base and increased consulting and services revenues. Revenues were also adversely impacted by approximately $58 million by a strengthened U.S. dollar, as international revenues denominated in foreign currencies translated to fewer dollars in 1993, when compared to 1992. GROSS MARGINS Gross margin as a percentage of revenues declined from 30% in 1992 to 27% in 1993. The decreases in processor pricing discussed above more than offset improved gross margins on storage equipment sales and maintenance services revenues, lower production costs resulting from manufacturing efficiencies from maturing product lines, and a decrease in cost of equipment sales of approximately $44 million related to the provision for implementation of engineering changes to support IBM features on certain 5995M processors shipped during 1993, when compared to 1992. OPERATING EXPENSES Engineering and development expenses amounted to $334,514,000 in 1993, a decrease of 10% from 1992. Marketing, general and administrative expenses decreased 13% to $354,939,000 in 1993. These decreases reflect the benefits from the Company's reduction in force in November 1992 and the restructuring actions taken in 1993, as well as other cost control programs. Operating expenses also included a separate category for the 1993 restructuring charges discussed previously. In the first quarter of 1993 the Company implemented Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits." This statement requires that the cost of these benefits be accrued in the financial statements. The effect of this implementation did not have a material impact on the Company's financial position or results of operations. Statement of Financial Accounting Standards No. 106, which established accounting standards for employers' accounting for postretirement benefits other than pensions, was required to be adopted in 1993. The Company does not offer post-retirement benefits and therefore this statement did not have a material impact on the Company's financial position or results of operations. INTEREST INCOME/EXPENSE AND INCOME TAXES Net interest income decreased 28% in 1993 from the prior year due to lower average investment levels and decreased yields. The effective annual income tax rate decreased from 50% in 1992 to 18% in 1993. No tax benefit was recorded for losses other than recoverable taxes or future taxable income from the reversal of deferred items. The Company believes uncertainty exists as to the realizability of certain tax assets. Therefore, a valuation reserve was recorded in 1993, resulting in the decreased tax benefit. In the first quarter of 1993 the Company implemented Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." The cumulative effect of this accounting change increased earnings in 1993 by $8,746,000, or $0.08 per share. Income taxes for the prior period were not restated for this change. 1992 COMPARED TO 1991 REVENUES Revenues increased 48% from 1991 to 1992. Equipment sales increased 64% and accounted for 96% of the year over year revenue increase. Processor equipment sales increased 75%, primarily as a result of volume shipments of the Company's new 5995M processor. Combined processor shipment volumes of the 5995M and 5990/5995A series increased approximately 47%. However, because of intense competition, especially during the later half of the year, prices for the 5995M decreased approximately 26% during 1992. This rate of decline in pricing was more acute when compared to pricing patterns for previous processors during their first year of shipments. In addition, prices for the older 5990/5995A series processors decreased approximately 57% in 1992 compared to systems of like configuration and model sold in 1991. An increase of 45% in storage equipment sales revenues also contributed to the Company's revenue increase in 1992 as shipments of the Company's new storage products reached volume levels. Maintenance, lease and other revenues increased 7% from the prior year primarily due to maintenance revenue from a larger installed base of the Company's processor products. GROSS MARGINS AND OPERATING EXPENSES The gross margin percentage decreased from 38% in 1991 to 30% in 1992, reflecting the significant decreases in processor pricing. In addition, cost of equipment sales included the provision of approximately $60 million in 1992 (compared to approximately $2 million in 1991) for implementation of engineering changes to support IBM features on certain 5995M processors shipped during 1992. Gross margins and operating expenses were also unfavorably impacted by a charge of $25 million in the third and fourth quarters of 1992, of which approximately $13 million was charged to cost of sales and approximately $12 million was charged to operating expenses, in connection with a nine percent reduction in the employee workforce in November 1992. Operating expenses increased approximately 16% from 1991 to 1992 and were 31% of revenues in 1992 compared to 39% of revenues in 1991. The 19% increase in 1992 in engineering and development expenses was due primarily to the increased average number of employees in 1992, compared to 1991, and depreciation expense associated with additional capital equipment used for product design and development. The 13% increase in marketing, general and administrative expenses reflected expenses associated with a larger salesforce. INTEREST INCOME/EXPENSE AND INCOME TAXES Net interest income decreased 80% in 1992 from the prior year due to lower average investment levels, decreased yields and increased average debt levels. The effective annual income tax rate increased from 37% in 1991 to 50% in 1992. The higher rate actually reflected an increased tax benefit given the year's loss before taxes. The higher rate was primarily due to additional tax benefits from foreign subsidiaries' earnings taxed at rates lower than the statutory Federal rate. Included in this tax benefit was the permanent reinvestment of approximately $30 million of the Company's Irish subsidiary's prior years' earnings. FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS Operating results are a function of a number of factors, including general economic conditions, the availability and cost of components, the uncertainties inherent in the development, engineering and manufacturing of technically complex products, the performance and reliability of these products, the requirement to maintain compatibility with competing IBM systems, and various other competitive pressures. The Company expects the competitive pricing pressures and the shift in the mix of units shipped to equipment with smaller configurations (which are less profitable) will continue to adversely affect revenues and gross margins in 1994. A persistence of the economic weakness in the Company's international markets experienced in prior years would also have a material adverse impact on earnings. Also, the Company believes that the growth of the market for mainframe systems generally is being impacted by the competition from smaller, less costly computer systems. The Company believes that the restructuring actions which it took in 1993 will bring its costs in line with anticipated levels of business in 1994 and beyond. However, any significant deterioration in these levels of business would likely require the Company to make additional adjustments to its expense structure, including additional restructuring charges. Because of these uncertainties the Company is unable to predict when it will be able to achieve or sustain profitability. In the latter part of 1993 the Company reorganized along lines of business consisting of its compatible processors, storage products, maintenance and consulting services, open systems and Huron software businesses, in order to enable the Company to more effectively enhance and expand its product offerings. Because of the factors noted above affecting its traditional mainframe business, the Company intends to rely increasingly on its ability to utilize lower cost technologies in future compatible processor products and on the ability of its newer lines of business to contribute a higher percentage of revenues and profits to overall operations. Successful implementation of this strategy is, however, subject to the inherent risks associated with the introduction of new technologies and the Company's lack of extensive experience in developing product offerings not related to its traditional compatible processor business. In May 1993 the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities." The Company will adopt this standard in the first quarter of 1994 and does not believe that adoption of the standard will have a material impact on its financial statements or results of operations. FINANCIAL CONDITION DECEMBER 31, 1993 COMPARED TO DECEMBER 25, 1992 The Company's net cash position (cash and short-term investments net of short- term and long-term bank debt) improved by $233 million, from a net borrowing position of $116 million at December 25, 1992 to a net cash and investment position of $117 million at December 31, 1993. Cash, cash equivalents and short-term investments decreased $42 million, reflecting cash provided by operating activities which was offset by cash used for repayments of bank borrowings and capital expenditures (net of proceeds from property and equipment sales). Receivables decreased $268 million due to decreased revenues and improved collections. Inventories decreased $277 million primarily due to the Company's efforts to reduce inventory levels and as a result of additional inventory reserves taken in 1993, including $60 million related to the restructuring actions taken in the first and third quarters of 1993 (discussed under "Results of Operations"). Long-term receivables and other assets decreased $54 million primarily due to decreased sales-type lease receivables. Net property and equipment decreased by $347 million primarily due to write-downs of approximately $200 million related to the restructuring actions taken in 1993, as well as ongoing depreciation charges. The cash, cash equivalents and short-term investment balances as of December 31, 1993 included approximately $175 million currently invested outside the United States. Repatriation of these investments and cash would give rise to Federal taxable income for the year of transfer, taxes for which have been provided. (See Note 11 to the Consolidated Financial Statements regarding foreign subsidiaries' earnings on which taxes have not been provided.) Accounts payable and accounts payable to Fujitsu decreased $150 million due primarily to significantly reduced purchases of manufacturing materials. Notes payable and short-term debt decreased $76 million because the Company paid down borrowings under a number of its credit agreements. The increase in accrued liabilities of $90 million was primarily due to accruals of costs associated with restructuring the Company's operations. At December 31, 1993 and December 25, 1992, $130,000,000 and $300,000,000, respectively, was outstanding under the Company's revolving credit agreement with a group of banks. The amount outstanding at December 31, 1993 was classified as short-term debt and was repaid by the Company upon expiration of the facility on January 31, 1994. (See Note 7 to the Consolidated Financial Statements.) In January 1994 the Company and Fujitsu entered into an agreement under which Fujitsu would provide loans to the Company in an aggregate amount not to exceed $100,000,000. Such loans bear interest at a rate based upon the London Interbank Offered Rate. Any outstanding loan balance is payable to Fujitsu on January 28, 1997. As of January 28, 1994, $80,000,000 was outstanding under this agreement. LIQUIDITY The nature of the computer industry, combined with the current economic environment, make it very difficult for the Company to predict future liquidity requirements with certainty. However, the Company believes that internally generated cash and borrowings under its loan agreement with Fujitsu will be adequate to finance continuing operations, investments in plant and equipment, inventories and spare parts, and expenditures for the development of new products at least through the next twelve months, providing that financial results are not significantly less favorable than planned, and objectives for a further reduction in inventories are achieved. Capital spending for items other than leased systems in 1994 is expected to be less than the $90 million spent in 1993. While customer demands for lease financing constitute a potential use of cash, the Company feels that, as in the past, adequate sources exist to provide such funding on a non-recourse basis. The Company also expects that other sources of capital will be available to meet any additional financing requirements during and beyond 1994. The Company has no significant commitments with vendors other than Fujitsu (see Note 3 to the Consolidated Financial Statements). Selected Financial Data
FOR THE FIVE YEARS ENDED DECEMBER 31, 1993 1993 1992 1991 1990 1989 (In thousands, except per common share amounts) Revenues $1,680,532 $2,524,734 $1,702,486 $2,158,755 $2,101,121 Income (loss) before extraordinary credit and accounting change (588,742) (6,975) 4,438 183,954 152,972 Net income (loss) (579,996) (6,975) 10,628 183,954 152,972 Earnings (loss) per common share: Income (loss) before extraordinary credit and accounting change (5.17) (.06) .04 1.66 1.39 Net income (loss) (5.09) (.06) .10 1.66 1.39 Dividends per common share .05 .10 .10 .10 .10 Long-term debt and liabilities 52,208 262,243 138,347 59,893 87,085 Total assets 1,672,187 2,701,024 2,335,564 2,326,767 2,233,666
Common Stock Dividends and Price Range DIVIDENDS In the third quarter of 1993 the Company suspended the quarterly cash dividend on its common stock which the Company had paid since April 1977. Dividends declared per share for the most recent five years are shown under "Selected Financial Data." Payment of future dividends will be dependent upon the Company's earnings, capital requirements, financial condition and other factors. MARKET PRICE The common stock is listed on both the American and London Stock Exchanges. The following table sets forth, for the periods indicated, the range of high and low sale prices on the American Stock Exchange-Composite Transactions, as reported by The Wall Street Journal.
1993 HIGH LOW First Quarter $ 8 1/2 $ 6 5/8 Second Quarter 6 1/2 4 5/8 Third Quarter 6 3/8 4 1/2 Fourth Quarter 7 1/8 4 3/8 1992 HIGH LOW First Quarter $20 5/8 $15 1/4 Second Quarter 18 1/4 14 1/2 Third Quarter 18 3/8 8 7/8 Fourth Quarter 9 3/8 6 5/8
On December 31, 1993 there were approximately 22,500 holders of record of Amdahl common stock. EX-21 9 LIST OF SUBSIDIARIES Exhibit 21 Office of the Corporate Secretary December 1993 Amdahl Corporation AMDAHL CORPORATION SUBSIDIARIES
JURISDICTION SUBSIDIARY - ------------- ---------- DOMESTIC -------- California Amdahl Capital Corporation California Amdahl Finance Corporation California Amdahl International Corporation California Amdahl International Sales Corporation California Amdahl International Service Corporation California Amdahl Investment Corporation California Amdahl North Atlantic, Inc. California Amdahl Pacific Basin Operations, Inc. California Amsub Inc. Delaware Amdahl Federal Service Corporation INTERNATIONAL ------------- Australia Amdahl Australia Pty., Ltd. Australia Amdahl Import Pty., Ltd. Australia Amdahl Pacific Services Pty., Ltd. Australia Amdahl Superannuation (Australia) Pty., Ltd. Austria Amdahl Computersysteme Gesellschaft mbH Belgium Amdahl Belgium S.A. Bermuda Amdahl Ireland Limited Bermuda Amdahl Middle East Operations, Limited Canada Amdahl Canada Limited Denmark Amdahl Danmark Computer Systems A/S France Amdahl France S.A. Germany Amdahl Deutschland GmbH Guam Amdahl Foreign Sales Corporation Ireland Amdahl Ireland Limited Italy Amdahl Italia S.p.A. Netherlands Amdahl Lease B.V. Netherlands Amdahl Nederland B.V. Netherlands Antilles Amdahl Overseas Capital Corporation N.V. Norway Amdahl Norge A/S Switzerland Amdahl (Schweiz) AG United Kingdom Amdahl Communications Systems Limited United Kingdom Amdahl International Management Services Limited United Kingdom Amdahl (U.K.) Limited
EX-23 10 CONSENT Exhibit 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference of our reports included (or incorporated by reference) in this Form 10-K into the Company's previously filed Registration Statement Nos. 2-94748, 33-7275, 33-27425, 33-35547 and 33-55460 on Form S-8. Arthur Andersen & Co. San Jose, California March 25, 1994 EX-24 11 POWERS OF ATTORNEY Exhibit 24 AMDAHL CORPORATION POWERS OF ATTORNEY The undersigned directors of Amdahl Corporation, a Delaware corporation, do hereby appoint Edward F. Thompson, Secretary of the Corporation, their lawful attorney and agent for signature with power to execute the Corporation's Annual Report on Form 10-K filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended. The power granted herewith includes the power and authority to sign the names of the undersigned directors to any and all amendments filed to the Annual Report. Each of the undersigned hereby ratifies and confirms all that said attorney and agent shall do pursuant to this power. This power of attorney may be signed in several counterparts. IN WITNESS WHEREOF, each of the undersigned has executed this Power of Attorney as of January 27, 1994. By K. Fukagawa By George R. Packard ------------------- ----------------------- Keizo Fukagawa George R. Packard By E. F. Heizer, Jr. By Walter B. Reinhold ------------------- ----------------------- E. F. Heizer, Jr. Walter B. Reinhold By Kazuto Kojima By Takamitsu Tsuchimoto ------------------- ----------------------- Kazuto Kojima Takamitsu Tsuchimoto By R. Stanley Laing By J. Sidney Webb ------------------- ----------------------- R. Stanley Laing J. Sidney Webb By John C. Lewis By E. R. White ------------------- ----------------------- John C. Lewis Eugene R. White By Burton G. Malkiel By E. Joseph Zemke ------------------- ----------------------- Burton G. Malkiel E. Joseph Zemke -----END PRIVACY-ENHANCED MESSAGE-----