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 27, 1996
Commission file number 1-7713
A M D A H L C O R P O R A T I O N
(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 (Zip Code)
executive offices)
Registrant's telephone number: (408) 746-6000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of class which registered
- -------------- ------------------------
common stock American Stock Exchange, Inc.
par value of $.05 London Stock Exchange
per share
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 3, 1997: $750,430,421.
Number of shares of common stock, par value of $.05 per
share, outstanding as of March 3, 1997: 122,280,788.
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) Portions of Registrant's Annual Report to
Stockholders for the fiscal year ended December 27, 1996 (the "Annual Report")
into Parts I and II; and (2) Portions of Registrant's definitive Proxy Statement
for the Annual Meeting of Stockholders scheduled to be held on May 1, 1997 (the
"Proxy Statement") into Part III.
<PAGE>
PART I
ITEM 1. BUSINESS
General
Amdahl Corporation ("Amdahl" or the "Company") was organized in 1970.
Its principal offerings consist of large-scale, high-performance,
general-purpose computer systems, storage subsystems and related hardware
services for both the IBM System/390 compatible mainframe market and the open
systems market; and a broad array of professional and consulting services for
the data processing industry. The Company also offers a variety of software
products. Amdahl's customer base is diversified and includes large corporations,
financial institutions, public utilities, government agencies and universities.
Amdahl's initial product offerings consisted of IBM compatible
mainframe systems which it first delivered in 1975. Since that time, the Company
has continued to develop more advanced systems for this market. In the latter
part of 1996, the Company introduced its newest family of compatible mainframes,
the Millennium series, utilizing for the first time CMOS based technology. Also,
in 1993 the Company began delivery of high-performance servers for the open
systems market pursuant to a reseller agreement with Sun Microsystems. In 1996
the Company introduced its EnVista series, a family of high-performance servers
based on Intel microprocessor technology and running the Microsoft Windows NT
operating system.
In November 1995 the Company acquired DMR Group Inc. based in Montreal,
Quebec, Canada, a major provider of professional and consulting services in a
number of important international markets. In April 1996 the Company acquired
Trecom Business Systems, Inc. based in Edison, New Jersey, a major provider of
professional and consulting services to a number of significant industry groups
within the United States. These entities have been combined into a single
organization known as the DMR Consulting Group ("DMR TRECOM" in the United
States) through which the Company provides its professional and consulting
services offerings. Applications development and maintenance services and "year
2000" conversion services are among the major offerings of this business unit.
Since 1982 Amdahl has offered direct access storage subsystems for use
with IBM compatible mainframe systems. In 1996 the Company introduced the
Spectris series, its newest products in this line of IBM System/390 compatible
storage devices. In 1996 the Company also introduced its LVS series of storage
devices for the server market.
<PAGE>
In addition, Amdahl offers hardware maintenance and related operational
services, and a number of software products. ObjectStar, a comprehensive
application development system; the A+ family of performance and productivity
tools intended primarily for the open systems environment; and UTS, a Unix based
operating system for use on IBM System/390 compatible mainframes, are the
Company's principal software offerings.
Amdahl is organized along lines of business consisting of the
Enterprise Computing Group, responsible for the development and marketing of the
Company's processor and storage products and the provision of maintenance and
other hardware related services; the DMR Consulting Group, responsible for the
delivery of professional and consulting services; the Antares Alliance Group, a
joint venture between Amdahl and Electronic Data Systems, responsible for the
development and marketing of ObjectStar and certain other software products; and
the A+ Software Group. The Company intends to continue to expand the scope of
its product and service offerings through its own development efforts and, when
appropriate, through partnerships and alliances with other companies.
Fujitsu Limited ("Fujitsu"), a major Japanese manufacturer of computer
systems, telecommunications equipment and electronic components, owns
approximately 43% of the Company's outstanding common stock and is of
substantial importance to Amdahl in the areas of technical assistance, product
development and manufacturing. Fujitsu has primary design and manufacturing
responsibility for the Company's Millennium, Spectris and follow-on products.
Because of Amdahl's increased dependence on Fujitsu as its supplier of future
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 and services directly through its
sales force to customers in the United States, Canada, Europe and Asia Pacific,
through Fujitsu in Brazil, Japan, Malaysia and Spain and through other
distributors in Indonesia, Saudi Arabia, Latin America and Korea. In 1996
approximately 51% 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" 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 Practices" of the Annual Report.
<PAGE>
While it may receive "letters of intent" and "orders" from potential
customers for its large-scale systems, 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", other than for its professional and consulting services business,
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. Backlog for professional and consulting services
as of December 27, 1996 was $446 million of which $325 million is expected to be
fulfilled beyond the next twelve months.
Major Customer Information and Geographic Area Data
The information under "Note 9 - Major Customer, Geographic Area and Product
Line Data" of the Annual Report is incorporated by reference.
Competition
All segments of the Company's business are intensely competitive with
the consequence that continuing attention must be paid to the Company's cost
structure in order to achieve and maintain acceptable operating margins.
Amdahl's consulting and professional services business competes with a
significant number of other service organizations, the largest of which include
companies such as IBM and Andersen Consulting. Professional service
organizations are highly dependent on the skill of their personnel and the
ability to recruit and retain such personnel and experience high levels of
utilization. Competition for such personnel is intense.
IBM and Hitachi Data Systems are Amdahl's principal competitors in the
market for large-scale System/390 compatible mainframe systems. IBM is dominant
in this segment of the industry. Competition is based primarily on price and
performance, product enhancements and new product development, and customer
service and support. The perceived financial strength and long-term viability of
the supplier are also important. IBM competitive actions have historically taken
the form of price reductions and shortened product life cycles. As a result,
selling prices and residual values of mainframe systems
<PAGE>
have declined substantially over time. Moreover, because virtually all
compatible mainframes operate under the control of IBM operating system
software, the ability of IBM to extend favorable licensing terms to purchasers
of competing IBM systems frequently requires Amdahl to offer substantial
discounts on its own systems in order to compensate for the effect of such
licensing terms. Also, the continuing introduction by IBM of certain
modifications to the System/390 architecture requires that Amdahl make
comparable changes to remain fully compatible.
The growth in the market for large mainframe systems has been affected
by rapid technological changes in recent years which have enabled smaller, less
costly systems to compete for the development of application programs
historically run in mainframe environments.
Competitors in the market for the Company's hardware servers and
software offerings include both highly specialized companies as well as fully
integrated vendors such as IBM, Digital Equipment Corporation and
Hewlett-Packard Company. New computer and storage 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. The strength and efficiency of
distribution channels and brand name recognition are of particular importance.
For further discussion of competitive conditions, see "Management's
Discussion & Analysis - Results of Operations and Factors That May Affect Future
Operating Results" of the Annual Report.
Manufacturing
Amdahl carries out limited assembly functions in Sunnyvale, California
and Dublin, Ireland. Its principal hardware products are manufactured by Fujitsu
to Amdahl specifications.
If for a substantial period Fujitsu failed to deliver products to
Amdahl or should Fujitsu fail to meet development or manufacturing schedules for
future mainframe and storage 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,
<PAGE>
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 2 - Relationship with Fujitsu
Limited" of the Annual Report.
Product Development
The Company's future prospects depend upon its successful 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,(excluding the write-off of purchased in-process engineering and
development of $20,700,000 in 1996 and $27,296,000 in 1995) amounted to
$125,825,000 in 1996, $149,610,000 in 1995 and $203,241,000 in 1994. The Company
has substantially reduced certain of its product development activities and
expects to rely on strategic alliances, partnering arrangements and original
equipment manufacturer (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 into 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 technical competence of its
development personnel and the ability to successfully enter into partnering or
OEM agreements with outside suppliers.
Amdahl and IBM are parties to an agreement pursuant to which each
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 and software, 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.
<PAGE>
Employees
As of February 21, 1997, the Company had approximately 9,900 full-time
employees.
Executive Officers of Amdahl
The executive officers of the Company as of March 17, 1997 are as
follows:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
John C. Lewis 61 Chairman of the Board, President
and Chief Executive Officer
David L. Anderson 49 Chief Technical Officer and Vice
President, Corporate Technology Group
Michael R. Carabetta 48 Vice President and General Manager,
A+ Software Group
William F. Ferone 52 Vice President, Customer Services
William Flanagan 57 Vice President and General Manager,
Compatible Business Group
Charles E. Fonner 53 Vice President and General Manager,
The SmartCard Group
Gregory R. Grodhaus 49 Vice President and General Manager,
Server Business Group
Orval J. Nutt 56 Chief Marketing Officer and Vice
President, Corporate Marketing
Michael J. Poehner 50 Chief Executive Officer and
President, DMR Consulting Group Inc.
Anthony M. Pozos 56 Senior Vice President, Human
Resources and Corporate Services
William R. Riley 54 Vice President and General Manager,
Worldwide Sales
Bruce J. Ryan 53 Executive Vice President, Chief
Financial Officer and Corporate Secretary
Ernest B. Thompson 60 Vice President and Controller
David B. Wright 47 Executive Vice President,
Enterprise Computing Group
</TABLE>
<PAGE>
Mr. John C. Lewis was appointed Chairman of the Board in 1987 and was
reelected President and Chief Executive Officer on March 15, 1996. 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. David L. 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. In 1993 he was appointed Vice President and
General Manager of Compatible Systems, and in January 1996 became Chief
Technical Officer and Vice President of Enterprise Server Development. In
January 1997 he was appointed Vice President, Corporate Technology Group, while
retaining his position as Chief Technical Officer
Mr. Michael R. Carabetta joined the Company in 1994 as Vice President and
General Manager of Open Enterprise Systems. In January 1997 he became Vice
President and General Manager of the A+ Software Group. Prior to joining Amdahl,
Mr. Carabetta worked at Digital Equipment Corporation, where he served as Vice
President Finance and Administration, Business Systems from 1993 to 1994. He had
previously been Group Manager at Digital Equipment Corporation.
Mr. William F. Ferone 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 and to the position of Vice President and
General Manager of Customer Services 1992. In January 1996 he was appointed Vice
President of Customer Services.
Mr. William Flanagan joined the Company in 1973 and was elected Vice
President of Manufacturing in 1985. In 1993 he became Vice President of
Operations, Compatible Systems and in 1994 he was appointed Vice President,
Business and Marketing, Compatible Systems. In January 1996 Mr. Flanagan became
Vice President and General Manager of Compatible Systems. In January 1997 he was
appointed Vice President and General Manager, Compatible Business Group.
Mr. Charles E. Fonner joined the Company in 1979 and was elected Vice
President of Systems Marketing in 1991. In 1992 Mr. Fonner became Vice President
of Product Management and Marketing. In January 1996 he became Vice President of
Business Development, and in November 1996 he was appointed Vice President and
General Manager, The SmartCard Group.
<PAGE>
Mr. Gregory R. Grodhaus joined the Company in 1995 as Vice President and
General Manager of Enterprise Storage Systems. In January 1997 he was appointed
Vice President and General Manager, Server Business Group. Before joining
Amdahl, he was the President and Chief Executive Officer of IPL Systems, prior
to which he served in a variety of roles at Memorex Telex Corporation.
Mr. Orval J. Nutt 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. In January 1996 he became Chief Marketing Officer
and Vice President of Corporate Marketing.
Mr. Michael J. Poehner joined the Company in 1992 as Vice President and
General Manager, East Area, Office of Field Operations. In 1994 he became Vice
President and General Manager of the Business Solutions Group. In 1995 he was
appointed President and Chief Operating Officer of DMR Group Inc. Then in June
1996 Mr. Poehner was appointed Chief Executive Officer, while retaining his
position as President.
Mr. Anthony M. Pozos 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. William R. Riley joined the Company in 1980. He held positions of
increasing responsibility within the Company until he was appointed Area General
Manager, North America, Office of Field Operations in January 1996. In November
1996 Mr. Riley was appointed Vice President & General Manager, Worldwide Sales.
Mr. Bruce J. Ryan joined the Company in 1994 as Senior Vice President,
Chief Financial Officer and Corporate Secretary. In January 1996 he became
Executive Vice President and retained his positions of Chief Financial Officer
and Corporate Secretary. From 1993 through 1994 Mr. Ryan was Vice President of
Industry Marketing at Digital Equipment Corporation, where prior to which he
served as Vice President and Corporate Controller.
Mr. Ernest B. Thompson joined the Company in 1978 as Controller. He was
elected Vice President in 1980.
Mr. David B. Wright 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. In January 1996 he became Executive Vice President of the Enterprise
Computing Group.
<PAGE>
ITEM 2. PROPERTIES
Amdahl's corporate headquarters is in Sunnyvale, California as are its
principal United States manufacturing, engineering and educational facilities.
Of these facilities, Amdahl owns 339,678 square feet and leases 722,436 square
feet. Amdahl also leases approximately 104 sales and service offices throughout
the United states, Canada, Europe and Asia Pacific. See also "Note 13 - Lease
Commitments" of the Annual Report.
An additional 46 locations were added worldwide due to the acquisitions of
C.E. Services, Inc., DMR Group Inc. and Trecom Business Systems, Inc. Lease
obligations assumed with the acquisition of C. E. Services cover approximately
300,000 square feet in seven locations, including major sites in Texas, Illinois
and England. Obligations assumed in the acquisition of DMR Group and Trecom
Business Systems cover approximately 472,000 square feet of leased space,
including major sites in Georgia, New Jersey; Melbourne, Australia; and
throughout Canada. A 15,000 square foot owned facility in Belgium was also
acquired with DMR Group.
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 494,693 square feet of leased properties
worldwide, and two buildings in San Jose (168,536 square feet). The 494,693
square feet of leased properties are subleased or offered for sublease. The San
Jose buildings are leased to third parties.
ITEM 3. LEGAL PROCEEDINGS
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY OWNERS
Not Applicable.
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The information under "Common Stock Dividends and Price Range" of the
Annual Report is incorporated by reference.
ITEM 6. SELECTED FINANCIAL DATA
The information under "Note 14 - Summarized Quarterly Financial Data"
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" of the
Annual Report is incorporated by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information contained in the following sections of the Annual Report is
incorporated by reference: "Report of Independent Public Accountants,"
"Consolidated Balance Sheets," "Consolidated Statements of Operations,"
"Consolidated Statements of Cash Flows," "Consolidated Statements of
Stockholders' Equity" and "Notes to Consolidated Financial Statements."
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not Applicable.
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information under "Certain Information with Respect to Directors
and Executive Officers - Nominees to the Board of Directors" and "Compliance
with Section 16(a) of the Securities Exchange Act of 1934" 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 Executive Officers - Director Compensation" and "Executive Compensation"
(but excluding the information under "Compensation Committee and Stock Plan
Administration 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 Executive Officers Security Ownership" in the
Proxy Statement is incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information under "Certain Information with Respect to Directors
and Executive Officers - Compensation Committee Interlocks and Insider
Participation," "Certain Transactions" and "Loans to Executive Officers" in the
Proxy Statement is incorporated by reference.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a)(1) Financial Statements
Consolidated Financial Statements
The following consolidated financial statements and related
notes, together with the report on the financial statements
and related notes from the Company's independent public
accountants, Arthur Andersen LLP, are incorporated by
reference from the Annual Report:
Consolidated Balance Sheets for December 27, 1996 and
December 29, 1995;
Consolidated Statements of Operations for each of the
three years in the period ended December 27, 1996;
Consolidated Statements of Cash Flows for each of the three
years in the period ended December 27, 1996; and
Consolidated Statements of Stockholders' Equity for each of
the three years in the period ended December 27, 1996.
(a)(2) Schedules Supporting Consolidated Financial
Statements
Report of Independent Public Accountants on Schedules
Schedule II -- Valuation and Qualifying Accounts and
Reserves
Schedules not listed above have been omitted because they are
not required or the information required in the schedules is
included in the consolidated financial statements or the notes
to the consolidated financial statements.
<PAGE>
(a)(3) Exhibits
Exhibit Description
------- -----------
3(a) Restated Certificate of Incorporation
(incorporated by reference to Exhibit 3(a) to
Form 10-K for the fiscal year ended December
30, 1994)
*3(b) Restated By-Laws
Executive Compensation Plans and Agreements
--------------------------------------------
*10(a) Amdahl Corporation 1994 Stock Incentive Plan,
as amended
10(b) Amdahl Corporation Long-Term Executive
Incentive Performance Plan, as amended
(incorporated by reference to Exhibit 10(c)
to Form 10-Q for the fiscal period ended
March 29, 1996)
10(c) Amdahl Corporation Short-Term Executive
Incentive Performance Plan (incorporated by
reference to Exhibit 10(a) to Form 10-Q for
the fiscal period ended March 31, 1995)
10(d) Amdahl Corporation Officer Loan Program, as
amended (incorporated by reference to Exhibit
10(c) to Form 10-K for the fiscal year ended
December 30, 1994)
10(e) Amdahl Corporation Director Fee Deferral
Election Plan, as amended (incorporated by
reference to Exhibit 10(g) to Form 10-K for
the fiscal year ended December 25, 1992)
10(f) Amdahl Corporation Deferral Election Plan, as
amended (incorporated by reference to Exhibit
10(a) to Form 10-Q for the fiscal period
ended June 30, 1995)
10(g) Amdahl Corporation Corporate Officer
Severance Guidelines (incorporated by
reference to Exhibit 10(f) to Form 10-K for
the fiscal year ended December 30, 1994)
<PAGE>
10(h) Form of Restricted Stock Purchase Agreement
under the Restricted Stock Plan (incorporated
by reference to Exhibit 4(k) of Registrant's
Registration Statement 33-54171, filed June
17, 1994)
10(i) Agreement with Named Executive Officer
(incorporated by reference to Exhibit 10(k)
to Form 10-K for the fiscal year ended
December 29, 1995)
10(j) Promissory Note with Named Executive Officer
and Second Deed of Trust Securing the Note
(incorporated by reference to Exhibit 10(l)
to Form 10-K for the fiscal year ended
December 29, 1995)
10(k) Summary of Terms of Resignation Agreement
with Named Executive Officer dated March 14,
1996 (incorporated by reference to Exhibit
10(a) to Form 10-Q for the fiscal period
ended March 29, 1996)
10(l) Amdahl Corporation 1996 Bonus Program for
Officers, Vice Presidents, Seniors and Keys
(incorporated by reference to Exhibit 10(b)
to Form 10-Q for the fiscal period ended
March 29, 1996)
10(m) Amdahl Corporation Restricted Stock Purchase
Agreement with Named Executive Officer
(incorporated by reference to Exhibit 10(d)
to Form 10-Q for the fiscal period ended
March 29, 1996)
10(n) Amdahl Corporation Stock Purchase Agreement
with Named Executive Officer (incorporated by
reference to Exhibit 10(e) to Form 10-Q for
the fiscal period ended March 29, 1996)
10(o) Agreement with Named Executive Officer
(incorporated by reference to Exhibit 10 to
Form 10-Q for the fiscal period ended June
28, 1996)
10(p) Termination Agreement with Named Executive
Officer (incorporated by reference to Exhibit
10 to Form 10-Q for the fiscal period ended
September 27, 1996)
*10(q) Form of Indemnification Agreement between the
Company and its Executive Officers
<PAGE>
*10(r) Form of Indemnification Agreement between the
Company and Members of the Board of Directors
Other Material Agreements
-------------------------
10(s) 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) (incorporated by reference to
Exhibit 10(y) to Form 10-K for the fiscal
year ended December 31, 1993)
10(t) Joint Development Agreement between Amdahl
and Fujitsu dated December 8, 1993 (Portions
of this exhibit are deleted pursuant to a
request for confidential treatment)
(incorporated by reference to Exhibit 10(aa)
to Form 10-K for the fiscal year ended
December 31, 1993)
10(u) Loan Agreement between Amdahl and Fujitsu
dated January 29, 1994 (incorporated by
reference to Exhibit 10(c) to Form 10-Q for
the fiscal period ended April 1, 1994)
Additional Exhibits
-------------------
*13 Annual Report to Stockholders for fiscal year
1996 (only those portions incorporated by
reference)
*21 List of Subsidiaries
*23 Consent of Arthur Andersen LLP
*24 Power of Attorney
*27 Financial Data Schedule
*Filed herewith
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended December 27,
1996.
<PAGE>
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 28, 1997. Our audits
were made for the purpose of forming an opinion on those statements taken as a
whole. The schedule listed under Item 14 is the responsibility of the Company's
management and is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied in the audit
of the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
/s/Arthur Andersen LLP
----------------------
ARTHUR ANDERSEN LLP
San Jose, California
January 28, 1997
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II
AMDAHL CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(in thousands)
Additions
Balance Charged Reserves
at to Costs of Balance
Beginning and Acquired Deduc- at end
of Period Expenses Companies tions(2) of Period
--------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
Year Ended
December 30, 1994:
Doubtful Receivables $ 3,266 $ 2,080(1) $ --- $ 150 $ 5,196
Future Engineering ======== ========== ======== ======== =======
Changes $ 57,133 $ --- $ --- $ 18,490 $38,643
======== ========== ======== ======== =======
Year Ended
December 29, 1995:
Doubtful Receivables $ 5,196 $ 656(1) $ 1,374 $ 1,262 $ 5,964
Future Engineering ======== ========== ======== ======== =======
Changes $ 38,643 $ --- $ --- $ 35,342 $ 3,301
======== ========== ======== ======== =======
Year Ended
December 27, 1996:
Doubtful Receivables $ 5,964 $ 6,524(1) $ 425 $ 2,728 $10,185
Future Engineering ======== ========== ======== ======== =======
Changes $ 3,301 $ --- $ --- $ 751 $ 2,550
======== ========== ======== ======== =======
<FN>
(1) Estimated uncollectible accounts receivable.
(2) The deductions represent charges against the reserves for the purposes for which the reserves were established. Doubtful
receivables deductions also include changes in estimates.
</FN>
</TABLE>
<PAGE>
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. 33-55460, 33-54171, 333-01943,
333-01945, 333-02009 and 333-08583 of the Company on Form S-8.
<PAGE>
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 24th day of
March, 1997.
AMDAHL CORPORATION
/s/John C. Lewis
------------------
John C. Lewis
Chairman of the Board, 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.
<TABLE>
<CAPTION>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
/s/John C. Lewis Chairman of the Board, March 24, 1997
- ---------------- President and Chief
John C. Lewis Executive Officer
(Principal Executive
Officer)
/s/Ernest B. Thompson Vice President March 24, 1997
- --------------------- and Controller
Ernest B. Thompson (Principal Accounting
Officer)
/s/Bruce J. Ryan Executive Vice March 24, 1997
- ---------------- President, Chief
Bruce J. Ryan Financial Officer
and Corporate
Secretary
(Principal Financial
Officer)
Directors:
Michael R. Hallman*
E. F. Heizer, Jr.*
Kazuto Kojima*
Burton G. Malkiel*
Takeshi Maruyama*
George R. Packard*
Walter B. Reinhold*
Takashi Takaya*
J. Sidney Webb*
*By: /s/Bruce J. Ryan Attorney-in-Fact March 24, 1997
----------------
Bruce J. Ryan
</TABLE>
<PAGE>
Exhibit Index
Item Description
- ---- -----------
3(b) Restated By-Laws
10(a) Amdahl Corporation 1994 Stock Incentive Plan, as amended
10(q) Form of Indemnification Agreement between the Company and its
Executive Officers
10(r) Form of Indemnification Agreement between the Company and Members
of the Board of Directors
13 Annual Report to Stockholders for fiscal year 1996 (only those
portions incorporated by reference)
21 List of Subsidiaries
23 Consent of Arthur Andersen LLP
24 Power of Attorney
27 Financial Data Schedule
Exhibit 3(b)
AMDAHL CORPORATION
RESTATED BY-LAWS
Article I
OFFICES
SECTION 1. The registered office shall be in the City of Wilmington,
County of New Castle, State of Delaware.
SECTION 2. The Corporation may also have offices at such other places
both within and without the State of Delaware as the Board of the Directors may
from time to time determine or the business of the Corporation may require.
Article II
MEETING OF STOCKHOLDERS
SECTION 1. All meetings of the stockholders for the election of
directors shall be held in the City of Sunnyvale, State of California, at such
place as may be fixed from time to time by the Board of Directors, or at such
other place either within or without the State of Delaware as shall be
designated from time to time by the Board of Directors and stated in the notice
of the meeting. Meetings of stockholders for any other purpose may be held at
such time and place, within or without the State of Delaware, as shall be stated
in the notice of the meeting or in a duly executed waiver of notice thereof.
SECTION 2. Annual meetings of stockholders shall be held on the third
Tuesday in April, if not a legal holiday, and if a legal holiday, then on the
next secular day following, at 10:00 a.m., or at such other date and time as
shall be designated from time to time by the Board of Directors and stated in
the notice of the meeting, at which they shall elect a Board of Directors and
transact such other business as may properly be brought before the meeting.
SECTION 3. Written notice of the Annual Meeting stating the place, date
and hour of the meeting shall be given to each stockholder entitled to vote at
such meeting not less than ten nor more than fifty days before the date of the
meeting.
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SECTION 4. The office who has charge of the stock ledger of the
Corporation shall prepare and make, at least ten days before every meeting of
the stockholders, and complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
SECTION 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the Certificate of
Incorporation, may be called by the Chairman of the Board or any two directors
and shall be called by the Chairman of the Board or Secretary at the request in
writing of one or more shareholders holding not less than one-third of the
voting power of the Corporation. Such request shall state the purpose or
purposes of the proposed meeting.
SECTION 6. Written notice of a special meeting stating the place, date
and hour of the meeting and the purpose or purposes for which the meeting is
called, shall be given not less than ten nor more than fifty days before the
date of the meeting, to each stockholder entitled to vote at such meeting.
SECTION 7. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
SECTION 8. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
Certificate of Incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such adjourned
meeting, at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
noticed. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
SECTION 9. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before
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<PAGE>
such meeting, unless the question is one upon which by express provision of the
statutes or of the Certificate of Incorporation, a different vote is required in
which case such express provision shall govern and control the decision of such
question.
SECTION 10. Except as may be otherwise provided in the Certificate of
Incorporation, each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for every share of the capital stock
having voting power held by such stockholder, but no proxy shall be voted on or
after three years from its date, unless the proxy provides for a longer period.
SECTION 11. Any action required or permitted, by statute or otherwise,
to be taken at any annual or special meeting of the shareholders of this
Corporation, may be taken without a meeting, without prior notice and without a
vote, if a consent in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted.
Prompt notice of the taking of such corporate action without a meeting by less
than unanimous written consent shall be given to those stockholders who have not
consented in writing.
Article III
DIRECTORS
SECTION 1. The number of directors which shall constitute the whole
Board shall be ten (10). The directors shall be elected at the Annual Meeting of
the stockholders, except as provided in Section 2 of this Article, and each
director elected shall hold office until his successor is elected and qualified.
Directors need not be stockholders.
SECTION 2. Vacancies and newly created directorships resulting from any
increase in the authorized number of directors may be filled by a majority of
the directors then in office, though less than a quorum, or by a sole remaining
director, and the directors so chosen shall hold office until the next annual
election and until their successors are duly elected and shall qualify, unless
soon displaced. If there are no directors in office, then an election of
directors may be held in the manner provided by statute. If, at the time of
filling any vacancy or any newly created directorship, the directors then in
office shall constitute less than a majority of the whole board (as constituted
immediately prior to any such increase), the Court of Chancery may, upon
application of any stockholder or stockholders holding at least ten percent of
the total number of the shares at the time outstanding having the right to vote
for such directors, summarily order an election to be held to fill any such
vacancies or newly created directorships, or to replace the directors chosen by
the directors then in office.
3
<PAGE>
SECTION 3. The business of the Corporation shall be managed by its
Board of Directors which may exercise all such powers of the Corporation and do
all such lawful acts and things as are not by statute or by the Certificate of
Incorporation or by these by-laws directed or required to be exercised or done
by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
SECTION 4. The Board of Directors of the Corporation may hold meetings,
both regular and special, either within or without the State of Delaware.
SECTION 5. The first meeting of each newly elected Board of Directors
shall be held immediately following and at the same place as the Annual Meeting
of the stockholders and no notice of such meeting shall be necessary to the
newly elected directors in order legally to constitute the meeting, provided a
quorum shall be present. In the event such meeting is not held at the time and
place set forth above, the meeting may be held at such time and place as shall
be specified in a notice given as hereinafter provided for special meetings of
the Board of Directors, or as shall be specified in a written waiver signed by
all of the directors.
SECTION 6. Regular meetings of the Board of Directors may be held
without notice at such time and at such place as shall from time to time be
determined by the Board.
SECTION 7. Special meetings of the Board may be called by the Chairman
of the Board on three days' notice to each director, either personally or by
telegram or on five days' notice to each director by mail; special meetings
shall be called by the Chairman of the Board or Secretary in like manner and on
like notice on the written request of two directors.
SECTION 8. At all meetings of the Board a majority of the total number
of directors shall constitute a quorum for the transaction of business and the
act of a majority of the directors present at any meeting at which there is a
quorum shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute or by the Certificate of Incorporation. If a
quorum shall not be present at any meeting of the Board of Directors, the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
SECTION 9. Unless otherwise restricted by the Certificate of
Incorporation or these by-laws, any action required or permitted to be taken at
any meeting of the Board of Directors or of any Committee thereof may be taken
without a meeting, if all members of the Board or Committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board or Committee.
4
<PAGE>
COMMITTEES OF DIRECTORS
SECTION 10. The Board of Directors may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee to
consist of two or more of the directors of the Corporation. The Board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. Any
such committee, to the extent provided in the resolution, shall have and may
exercise the powers of the Board of Directors in the management of the business
and affairs of the Corporation, and may authorize the seal of the Corporation to
be affixed to all papers which may require it; provided, however, that in the
absence or disqualification of any member of such committee or committees, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member. Such committee or committees shall have
such name or names as may be determined from time to time by resolution adopted
by the Board of Directors.
SECTION 11. Each committee shall keep regular minutes of its meeting
and report the same to the Board of Directors when required.
COMPENSATION OF DIRECTORS
SECTION 12. The directors may be paid their expenses, if any, of
attendance at each meeting of the Board of Directors and may be paid a fixed sum
for attendance at each meeting of the Board of Directors or a stated salary as
director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
Article IV
NOTICES
SECTION 1. Whenever, under the provisions of the statutes or of the
Certificate of Incorporation or of these by-laws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
Corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given personally or by telegram.
SECTION 2. Whenever any notice is required to be given under the
provisions of the statutes or of the Certificate of Incorporation or of these
by-laws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
5
<PAGE>
Article V
OFFICERS
SECTION 1. The officers of the Corporation shall be chosen by the Board
of Directors and shall be a Chairman of the Board, a President, a
Vice-President, a Secretary, and a Treasurer. The Board of Directors may also
choose additional Vice-Presidents, and one or more Assistant Secretaries and
Assistant Treasurers. Any number of offices may be held by the same person,
unless the Certificate of Incorporation or these by-laws otherwise provide.
SECTION 2. The Board of Directors at its first meeting after each
Annual Meeting of stockholders shall choose a Chairman of the Board, a
President, one or more Vice-Presidents, a Secretary, and a Treasurer.
SECTION 3. The Board of Directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the board.
SECTION 4. The salaries of all officers and agents of the Corporation
shall be fixed by the Board of Directors. The Board of Directors may appoint a
committee of its members to fix such salaries. It may also appoint an officer to
fix the salaries of subordinate officers and agents.
SECTION 5. The officers of the Corporation shall hold office until
their successors are chosen and qualify. Any officer elected or appointed by the
Board of Directors may be removed at any time by the affirmative vote of a
majority of the Board of Directors. Any vacancy occurring in any office of the
Corporation shall be filled by the Board of Directors.
THE CHAIRMAN OF THE BOARD
SECTION 6. The Chairman of the Board shall, subject to the control of
the board, and subject to the provisions below, and the by-laws of the
Corporation, have and be vested with supervision and control over the business,
affairs and property of the Corporation and over its other officers, agents and
employees. The Chairman of the Board shall:
(a) Have the right to preside at all meetings of the Board of
Directors.
(b) Have the right to preside at all meetings of stockholders.
(c) Be responsible for all resolutions, orders and directives of
the Board of Directors being carried into effect.
6
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(d) Keep the Board of Directors and any committees of the board
fully informed as to all matters within his knowledge which
the interests of the Corporation may require to be brought to
their notice and shall freely consult them concerning the
affairs of the Corporation.
(e) Be an ex-officio member of all committees of the board of
which he is not otherwise a member.
(f) Execute bonds, mortgages and other contracts requiring a seal,
under the seal of the Corporation, and upon specific approval
of the board for each instance, where required or permitted by
law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by
the board of directors to some other officer or agent of the
Corporation.
(g) Perform such other duties as these by-laws prescribe or as the
Board of Directors may prescribe from time to time.
THE PRESIDENT
SECTION 7. The President shall, subject to the control of the Board,
and subject to the provisions below and the by-laws of the Corporation, have and
be vested with supervision and control over the Corporation's manufacturing and
domestic marketing operations, as well as the design and development of the
Corporation's products. The President shall:
(a) In the absence of the Chairman of the Board, or at his
request, preside at meetings of the Board of Directors or act
as Chairman of meetings of stockholders.
(b) At the request of the Chairman of the Board, or in the case of
his absence or inability to act, perform the duties of the
Chairman of the Board and when so acting shall have all the
powers of, and be subject to all the restrictions upon, the
Chairman of the Board.
(c) From time to time report to the Chairman of the Board and the
Board of Directors upon all matters within his knowledge which
the interests of the Corporation may require to be brought to
their notice.
(d) Keep the Chairman of the Board, the Board of Directors and any
committees of the Board fully informed as to all matters
within his knowledge which the interests of the Corporation
may require to be brought to their notice including, but not
limited to, the operations of the Corporation, and shall
freely consult them concerning the affairs of the Corporation.
(e) Execute bonds, mortgages and other contracts requiring a seal,
under the seal of the Corporation, and upon specific approval
7
<PAGE>
of the Board for each instance, where required or permitted by
law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by
the Board of Directors to some other officer or agent of the
Corporation.
(f) Perform all duties incident to the office President and such
other duties as these by-laws prescribe, as the Board of
Directors may prescribe from time to time and as may be
assigned to him by the Chairman of the Board.
THE VICE-PRESIDENTS
SECTION 8. The Vice-President (or in the event there be more than one
Vice-President, the Vice-Presidents in the order designated by the Board of
Directors, or in the absence of such designation, then in the order designated
by the Chairman of the Board) may assume and perform the duties of the President
and when so acting, shall have all the powers of and be subject to all the
restrictions upon the President in the absence of the President or in the event
of his inability to act. The Vice-Presidents shall perform such other duties and
have such other powers as the Board of Directors may from time to time
prescribe.
THE SECRETARY AND ASSISTANT SECRETARIES
SECTION 9. The Secretary shall attend all meetings of the Board of
Directors and all meetings of the stockholders and record all the proceedings of
the meetings of the Corporation and of the Board of Directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board of Directors or the
Chairman of the Board, under whose supervision he shall be. He shall have
custody of the corporate seal of the Corporation and he, or an Assistant
Secretary, shall have authority to affix the same to any instrument requiring it
and when so affixed, it may be attested by his signature or by the signature of
such Assistant Secretary. The Board of Directors may give general authority to
any officer to affix the seal of the Corporation and to attest the affixing by
his signature.
SECTION 10. The Assistant Secretary, or if there be more than one, the
Assistant Secretaries in the order determined by the Board of Directors (or if
there be no such determination, then in the order of their election), shall, in
the absence of the Secretary or in the event of his inability or refusal to act,
perform the duties and exercise the powers of the Secretary and shall perform
such other duties and have such other powers as the Board of Directors may from
time to time prescribe.
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THE TREASURER AND ASSISTANT TREASURERS
SECTION 11. The Treasurer shall have the custody of the Corporation's
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the Corporation in
such depositories as may be designated by the Board of Directors.
SECTION 12. He may disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the Chairman of the Board and the Board of
Directors, at its regular meetings, or when the Board of Directors so requires,
an account of transactions and of the financial condition of the Corporation.
SECTION 13. If required by the Board of Directors, the Treasurer may
give the Corporation a bond (which shall be renewed every six years) in such sum
and with such surety or sureties as shall be satisfactory to the Board of
Directors for the faithful performance of the duties of his office and for the
restoration to the Corporation, in case of his death, resignation, retirement or
removal from office, of all books, papers, vouchers, money and other property of
whatever kind in his possession or under his control belonging to the
Corporation
SECTION 14. The Assistant Treasurer, or if there shall be more than
one, the Assistant Treasurers in the order determined by the Board of Directors
(or if there be no such determination, then in the order of their election),
shall, in the absence of the Treasurer or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the Treasurer and
shall perform such other duties and have such other powers as the Board of
Directors may from time to time prescribe.
Article VI
CERTIFICATES OF STOCK
SECTION 1. Every holder of stock in the Corporation shall be entitled
to have a certificate, signed by, or in the name of the Corporation by, the
Chairman of the Board or the President or a vice-president and the Treasurer or
an Assistant Treasurer or the Secretary or an Assistant Secretary of the
Corporation, certifying the number of shares owned by him in the Corporation.
SECTION 2. Where a certificate is countersigned (1) by a transfer agent
other than the Corporation or its employee, or, (2) by a registrar other than
the Corporation or its employee, any other signature on the certificate may be
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer,
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transfer agent or registrar before such certificate is issued, it may be issued
by the Corporation with the same effect as if he were such officer, transfer
agent or registrar at the date of issue.
LOST CERTIFICATES
SECTION 3. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the Corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate or certificates, the Board of Directors, may in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it shall require
and/or give the Corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the Corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
TRANSFERS OF STOCK
SECTION 4. Upon surrender to the Corporation or the transfer agent of
the Corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority transfer, it shall be the
duty of the Corporation, subject to restrictions on transfer of such shares, if
any, to issue a new certificate to the person entitled thereto, cancel the old
certificate and record the transaction upon its books.
FIXED RECORD DATE
SECTION 5. In order that the Corporation may determine the stockholders
entitled to notice or to vote at any meeting of stockholders or any adjournment
thereof, or to express consent to corporate action in writing without a meeting,
or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board of Directors may fix, in advance, a record date, which shall
not be more than sixty nor less than ten days before the date of such meeting,
nor more than sixty days prior to any other action. A determination of
stockholders of record entitled to notice of or to vote at meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
REGISTERED STOCKHOLDERS
SECTION 6. The Corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of
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<PAGE>
shares to receive dividends, and to vote as such owner, and to hold liable for
calls and assessments a person registered on its books as the owner of shares,
and shall not be bound to recognize any equitable or other claim to or interest
in such share or shares on the part of any other person, whether or not it shall
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
Article VII
GENERAL PROVISIONS DIVIDENDS
SECTION 1. Dividends upon the capital stock of the Corporation, subject
to the provisions of the Certificate of Incorporation, if any, may be declared
by the Board of Directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the Certificate of Incorporation. Upon the
declaration of any dividend, the Board of Directors shall set a record date upon
which the transfer agent of the Corporation shall take a record of all
stockholders entitled to the dividend; the stock transfer books of the
Corporation shall not be closed; and, all stockholders of record on the record
date shall be entitled to the dividend notwithstanding any transfer on the books
of the Corporation after the record date.
SECTION 2. Before payment of any dividend, there may be set aside out
of any funds of the Corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for such other
purpose as the directors shall think conducive to the interest of the
Corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
SECTION 3. The Board of Directors shall present at each annual meeting,
and at any special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
Corporation.
CHECKS
SECTION 4. All checks or demands for money and notes of the Corporation
shall be signed by such officer or officers or such other person or persons as
the Board of Directors may from time to time designate.
FISCAL YEAR
SECTION 5. The fiscal year of the Corporation shall begin on
the Saturday immediately following the last Friday in December of each
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calendar year, and shall end on the last Friday in December of the
following calendar year.
SEAL
SECTION 6. The Corporate Seal shall have inscribed thereon the name of
the Corporation, the date of its organization and the name of the State of
Delaware. The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
Article VIII
AMENDMENTS
SECTION 1. These by-laws may be altered, amended or repealed or new
bylaws may be adopted by the stockholders or by the Board of Directors, when
such power is conferred upon the Board of Directors by the Certificate of
Incorporation, at any regular meeting of the stockholders or of the Board of
Directors or at any special meeting of the stockholders or of the Board of
Directors if notice of such alteration, amendment, repeal or adoption of new
by-laws be contained in the notice of such special meeting.
Article IX
INDEMNIFICATION
SECTION 1. Each person who is or was a director or officer of the
Corporation and is or was made a party or is threatened to be made a party to or
is involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative (hereinafter a "proceeding"), by reason of the
fact that he or she, or a person of whom he or she is the legal representative,
is or was a director, officer, employee or agent of the Corporation or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another Corporation or a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, may be
indemnified and held harmless by the Corporation as authorized in the specific
case pursuant to the Delaware General Corporation Law, as the same exists or may
hereafter be amended, and shall be indemnified and held harmless by the
Corporation as may be provided pursuant to a written agreement between such
director or officer and the Corporation.
SECTION 2. Each person who is a director or officer of the Corporation
may be paid by the Corporation the expenses incurred in defending any proceeding
in advance of its final disposition pursuant to the Delaware General Corporation
Law, as the same exists or may hereafter be amended, as the Board of Directors
deems appropriate, and
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shall be paid such expenses as may be provided pursuant to a written agreement
between such director or officer and the Corporation. The Corporation may
provide indemnification and advancement of expenses to employees and agents of
the Corporation as the Board of Directors in its discretion deems appropriate.
SECTION 3. The right to indemnification and the payment of expenses
incurred in defending a proceeding in advance of its final disposition conferred
in this Article shall not be exclusive of any other right which any person may
have or hereafter acquire under any statute, provision of the Certificate of
Incorporation, by-law, agreement, vote of stockholders or disinterested
directors or otherwise.
SECTION 4. The Corporation may maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of the Corporation
or another Corporation, partnership, joint venture, trust or other enterprise
against any such expense, liability or loss, whether or not the Corporation
would have the power to indemnify such person against such expense, liability or
loss under the Delaware General Corporation Law.
SECTION 5. The Corporation shall have the express authority to enter
such agreements as the Board of Directors deems appropriate for the
indemnification of present or future directors or officers of the Corporation in
connection with their service to, or status with, the Corporation or any other
Corporation, entity or enterprise with whom such person is serving at the
express written request of the Corporation.
13
AMDAHL CORPORATION
1994 STOCK INCENTIVE PLAN
(As Amended through November 1, 1996)
ARTICLE ONE
GENERAL
I. PURPOSE OF THE PLAN
A. This 1994 Stock Incentive Plan (the "Plan") is intended to promote the
interests of Amdahl Corporation, a Delaware corporation (the "Corporation"), by
providing (i) key employees (including officers) of the Corporation (or its
subsidiary corporations) who are responsible for the management, growth and
financial success of the Corporation (or its subsidiary corporations); (ii) the
non-employee members of the Corporation's Board of Directors or the board of
directors of any subsidiary corporation; and (iii) those consultants and other
independent contractors who provide valuable services to the Corporation (or its
subsidiary corporations) with the opportunity to acquire a proprietary interest,
or otherwise increase their proprietary interest, in the Corporation as an
incentive for them to remain in the service of the Corporation (or its
subsidiary corporations).
B. The Plan became effective upon its approval by the Corporation's
stockholders at the 1994 Annual Meeting held on May 5, 1994. Such date is hereby
designated as the Effective Date of the Plan.
C. This Plan shall serve as the successor to the Corporation's four
previous stock programs - the Stock Option Plan (1971), the Stock Option Plan
(1974), the Non-Qualified Stock Option Plan (1982) and the Restricted Stock Plan
(collectively, the "Predecessor Plans"), and no further option grants or stock
issuances shall be made under the Predecessor Plans after the Effective Date.
All options outstanding under the Predecessor Plans and all unvested shares
issued thereunder as of such Effective Date shall immediately be incorporated
into this Plan and treated as outstanding options and share issuances under this
Plan. However, each outstanding option and share issuance so incorporated shall
continue to be governed solely by the express terms and conditions of the
instrument evidencing such option grant or share issuance, and no provision of
this Plan shall be deemed to affect or otherwise modify the rights or
obligations of the holders of such incorporated options or share issuances with
respect to their acquisition of shares of the Corporation's common stock, par
value of $.05 per share, thereunder.
II. DEFINITIONS
For purposes of the Plan, the following definitions shall be in effect:
1934 Act: the Securities and Exchange Act of 1934, as amended.
Award: the written notification provided by the Plan Administrator to a
Participant in
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the Stock Issuance Program that shares of common stock are to be issued to such
individual upon the attainment of one or more of the performance objectives
specified in Article Six.
Board: the Corporation's Board of Directors.
Change in Control: a change in ownership or control of the Corporation
effected through any of the following transactions:
- a direct acquisition by any person (or related group of
persons) of beneficial ownership (within the meaning of Rule 13d-3 of
the 1934 Act) of securities possessing more than ten percent (10%) of
the total combined voting power of the Corporation's outstanding
securities;
- the direct or indirect acquisition by any person or related
group of persons, whether by tender or exchange offer made directly to
the Corporation's stockholders, private purchases from one or more of
the Corporation's stockholders, open market purchases or any other
transaction, of additional securities of the Corporation which
increases the beneficial ownership (within the meaning of Rule 13d-3 of
the 1934 Act) of the total securities holdings of such person (or
related group of persons) to a level of securities possessing more than
fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities; or
- the direct or indirect acquisition by any person or related
group of persons, whether by tender or exchange offer made directly to
the Corporation's stockholders, private purchases from one or more of
the Corporation's stockholders, open market purchases or any other
transaction, of beneficial ownership (within the meaning of Rule 13d-3
of the 1934 Act) of securities of the Corporation possessing sufficient
voting power in the aggregate to elect an absolute majority of the
Board (rounded up to the next whole number).
Code: the Internal Revenue Code of 1986, as amended.
Committee: a committee of two (2) or more non-employee Directors appointed
by the Board.
Corporate Transaction: any of the following stockholder-approved
transactions to which the Corporation is a party:
- a merger or consolidation in which the Corporation is not
the surviving entity, except for a transaction the principal purpose of
which is to change the state in which the Corporation is incorporated;
- the sale, transfer or other disposition of all or substantially
all of the assets of the Corporation in complete liquidation or
dissolution of the Corporation; or
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- any reverse merger in which the Corporation is the surviving
entity but in which securities possessing more than fifty percent (50%)
of the total combined voting power of the Corporation's outstanding
securities are transferred to a person or persons different from those
who held such securities immediately prior to such merger.
Director: a member of the Board of Directors of Amdahl Corporation.
Employee: an individual who performs services while in the employ of the
Corporation or one or more Subsidiaries, subject to the control and direction of
the employer entity not only as to the work to be performed but also as to the
manner and method of performance.
Exercise Date: the date on which the Corporation shall have received notice
of the option exercise.
Fair Market Value: the mean between the highest and lowest selling prices
per share of common stock on the date in question on the principal exchange on
which the common stock is then listed or admitted to trading, as the prices are
officially quoted by the composite tape of transactions on such exchange. If
there are no reported sales of the common stock on the date in question, then
the Fair Market Value shall be the mean between the highest and lowest selling
prices on the last previous date for which quotations exist.
Hostile Take-Over: the direct or indirect acquisition by any person or
related group of persons of securities possessing more than fifty percent (50%)
of the total combined voting power of the Corporation's outstanding securities
pursuant to a tender or exchange offer made directly to the Corporation's
stockholders which the Board does not recommend such stockholders to accept.
Incentive Option: a stock option which satisfies the requirements of Code
Section 422.
Involuntary Termination: the termination of the Service of any Optionee or
Participant which occurs by reason of:
- such individual's involuntary dismissal or discharge by the
Corporation for reasons other than Misconduct; or
- such individual's voluntary resignation following (A) a change
in his or her position with the Corporation which materially reduces
his or her level of responsibility, (B) a reduction in his or her
level of compensation (including base salary, fringe benefits and any
non-discretionary and objective-standard incentive payment or bonus
award) by more than five percent (5%) or (C) a relocation of such
individual's place of employment by more than fifty (50) miles,
provided and only if such change, reduction or relocation is effected
by the Corporation without the individual's consent.
Misconduct: the commission of any act of fraud, embezzlement or dishonesty
by the Optionee or Participant, any unauthorized use or disclosure by such
individual of confidential
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information or trade secrets of the Corporation or its Subsidiaries, or any
other intentional misconduct by such individual adversely affecting the business
or affairs of the Corporation in a material manner. The foregoing definition
shall not be deemed to be inclusive of all the acts or omissions which the
Corporation or any Subsidiary may consider as grounds for the dismissal or
discharge of any Optionee, Participant or other individual in the Service of the
Corporation.
Newly Issued Shares: shares of common stock drawn from the Corporation's
authorized but unissued shares of common stock.
Non-Statutory Option: a stock option not intended to meet the requirements
of Code Section 422.
Optionee: any person to whom an option is granted under the Discretionary
Option Grant, Automatic Option Grant or Salary Reduction Grant Program in effect
under the Plan.
Participant: any person who receives a direct issuance of common stock
under the Stock Issuance Program in effect under the Plan.
Permanent Disability or Permanently Disabled: the inability of the Optionee
or the Participant to engage in any substantial gainful activity by reason of
any medically determinable physical or mental impairment expected to result in
death or to be of continuous duration of twelve (12) months or more. However,
solely for purposes of the Automatic Option Grant Program in effect under
Article Three and the Stock Fee Program in effect under Article Four, Permanent
Disability or Permanently Disabled shall mean the inability of the Optionee to
perform his or her normal duties as a Director by reason of any medically
determinable physical or mental impairment expected to result in death or to be
of continuous duration of twelve (12) months or more.
Plan Administrator: the committee of two (2) or more non-employee Directors
appointed by the Board to administer the Discretionary Option Grant, the Salary
Reduction and the Stock Issuance Programs.
Service: the provision of services on a periodic basis to the Corporation
or any Subsidiary in the capacity of an Employee, a non-employee director of the
Board or an independent consultant or advisor, except to the extent otherwise
specifically provided in the applicable stock option or stock issuance
agreement.
Subsidiary: each corporation (other than the Corporation) in an unbroken
chain of corporations beginning with the Corporation, provided each such
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in any other corporation in
such chain. For purposes of the grant of Non-Statutory Options and stock
appreciation rights under the Discretionary Option Grant Program, the grant of
Non-Statutory Options under the Salary Reduction Grant Program and direct stock
issuances under the Stock Issuance Program, the term Subsidiary shall also
include any partnership, joint venture or other
March 20, 1997
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business entity in which the Corporation owns, directly or indirectly through
one or more Subsidiaries, a fifty percent (50%) or greater capital or profit
interest.
Take-Over Price: the greater of: (i) the Fair Market Value per share of
common stock on the date the option is surrendered to the Corporation in
connection with a Hostile Take-Over; or (ii) the highest reported price per
share of common stock paid by the tender offeror in effecting such Hostile
Take-Over. However, if the surrendered option is an Incentive Option, the
Take-Over Price shall not exceed the clause (i) price per share.
Treasury Shares: shares of common stock reacquired by the Corporation and
held as treasury shares.
III. STRUCTURE OF THE PLAN
A. Stock Programs. The Plan shall be divided into five separate components:
- The Discretionary Option Grant Program, under which eligible
individuals may, at the discretion of the Plan Administrator, be
granted options to purchase shares of common stock in accordance with
the provisions of Article Two;
- The Automatic Option Grant Program, under which non-employee
Directors shall automatically receive special option grants at periodic
intervals to purchase shares of common stock in accordance with the
provisions of Article Three;
- The Stock Fee Program, under which the non-employee
Directors may elect to apply all or a portion of their annual retainer
fee to the acquisition of shares of common stock in accordance with the
provisions of Article Four;
- The Salary Reduction Grant Program, under which eligible
individuals may, pursuant to the provisions of Article Five, elect to
have a portion of their base salary reduced each year in return for
options to purchase shares of common stock at an aggregate discount
from the Fair Market Value of the option shares on the grant date equal
to the salary reduction amount; and
- The Stock Issuance Program, under which eligible individuals
may, pursuant to the provisions of Article Six, be issued shares of
common stock directly: (i) through the immediate purchase of such
shares at a price less than, equal to or greater than their Fair Market
Value at the time of issuance; (ii) as a bonus tied to the performance
of services or the attainment of financial or other objectives; or
(iii) pursuant to the individual's election to receive such shares in
lieu of base salary.
B. General Provisions. Unless the context clearly indicates otherwise, the
provisions of Articles One and Seven shall apply to the Discretionary Option
Grant, Automatic Option Grant, Salary Reduction Grant, Stock Issuance and Stock
Fee Programs and shall accordingly govern the
March 20, 1997
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interests of all individuals under the Plan.
IV. ADMINISTRATION OF THE PLAN
A. The Committee shall have sole and exclusive authority to administer
the Discretionary Option Grant, Salary Reduction Grant and Stock Issuance
Programs. Members of the Committee shall serve for such period as the Board may
determine and shall be subject to removal by the Board at any time.
B. The Plan Administrator shall have full power and discretion (subject
to the express provisions of the Plan) to establish such rules and regulations
as it may deem appropriate for the proper administration of the Discretionary
Option Grant, Salary Reduction Grant and Stock Issuance Programs and to make
such determinations under, and issue such interpretations of, the provisions of
each such program and any outstanding option grants or stock issuances
thereunder as it may deem necessary or advisable. Decisions of the Plan
Administrator shall be final and binding on all parties who have an interest in
the Discretionary Option Grant, Salary Reduction Grant or Stock Issuance Program
or any outstanding option or stock issuance thereunder.
C. Service on the Committee shall constitute service as a Director, and
members of the Committee shall accordingly be entitled to full indemnification
and reimbursement as Directors for their service on the Committee. No member of
the Committee shall be liable for any act or omission made in good faith with
respect to the Plan or any option granted or shares issued under the Plan.
D. Administration of the Automatic Option Grant and the Stock Fee
Programs shall be self-executing in accordance with the express terms and
conditions of Articles Three and Four, respectively, and the Plan Administrator
shall not exercise any discretionary functions with respect to the option grants
or stock issuances made pursuant to such programs.
V. ELIGIBILITY
A. The persons eligible to participate in the Discretionary Option Grant
Program under Article Two, the Salary Reduction Grant Program under Article Five
and the Stock Issuance Program under Article Six are as follows:
- officers and other key employees of the Corporation (or its
Subsidiaries) who render services which contribute to the management,
growth and financial success of the Corporation (or its Subsidiaries);
- non-employee Directors; and
- those consultants or other independent contractors who provide
valuable services to the Corporation (or its Subsidiaries).
B. Non-employee Directors shall also be eligible to participate in the
Automatic Option
March 20, 1997
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Grant Program under Article Three and the Stock Fee Program under Article Four.
C. The Plan Administrator shall have full authority to determine: (i)
with respect to grants made under the Discretionary Option Grant and Salary
Reduction Grant Programs, which eligible individuals are to receive such grants,
the number of shares to be covered by each such grant, the status of any granted
option as either an Incentive Option or a Non-Statutory Option, the time or
times at which each granted option is to become exercisable and the maximum term
for which the option may remain outstanding; and (ii) with respect to stock
issuances under the Stock Issuance Program, which eligible individuals are to be
selected for participation, the number of shares to be issued to each selected
individual, the vesting schedule (if any) to be applicable to the issued shares
and the consideration to be paid for such shares.
VI. STOCK SUBJECT TO THE PLAN
A. Shares of common stock shall be available for issuance under the
Plan and shall be drawn from either the Corporation's authorized but unissued
shares of common stock or from reacquired shares of common stock, including
shares repurchased by the Corporation on the open market. The number of shares
of common stock reserved for issuance over the term of the Plan shall initially
be fixed at 14,300,000 shares, subject to adjustment from time to time in
accordance with the provisions of this Section VI. Such authorized share reserve
shall be comprised of: (i) the number of shares which remain available for
issuance under the Predecessor Plans as of the Effective Date, including the
shares subject to the outstanding options incorporated into this Plan and any
other shares which would have been available for future option grants under the
Predecessor Plans (estimated to be 12,900,000 shares in the aggregate); plus
(ii) an additional increase of 1,400,000 shares of common stock. To the extent
one or more outstanding options under the Predecessor Plans which have been
incorporated into this Plan are subsequently exercised, the number of shares
issued with respect to each such option shall reduce, on a share-for-share
basis, the number of shares available for issuance under this Plan.
B. The number of shares of common stock available for issuance under the
Plan shall be subject to a series of automatic increases effected in accordance
with the following provisions:
- The number of shares of common stock available for
issuance under the Plan shall automatically increase on the first
trading day of each of the 1995, 1996 and 1997 calendar year, by an
amount equal to one percent (1%) of the shares of common stock
outstanding on December 31 of the immediately preceding calendar year;
provided, however that each such one percent (1%) annual increase shall
be subject to reduction to the extent necessary so that the maximum
number of shares of common stock available immediately thereafter for
future option grants and direct stock issuances under the Plan shall
not exceed 5,000,000 shares, subject to adjustment from time to time in
accordance with the provisions of this Section VI. None of the
additional shares resulting from such annual increases may be made the
subject of Incentive Options granted under the Plan;
- The number of shares available for issuance
under the Plan shall
March 20, 1997
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<PAGE>
automatically increase on the date of the 1997 Annual Stockholders
Meeting by an amount equal to two percent (2%) of the total number of
shares of common stock outstanding on the immediately preceding trading
day; and
- The number of shares available for issuance under
the Plan shall automatically increase on the first trading day of each
calendar year during the remaining term of the Plan, beginning with the
1998 calendar year, by an amount equal to three percent (3%) of the
shares of common stock outstanding on December 31 of the immediately
preceding calendar year. Each such automatic increase to the share
reserve under the Plan shall, however, be subject to reduction to the
extent necessary to assure that the maximum number of shares of common
stock available for future option grants and direct stock issuances
under the Plan immediately after each such increase shall not exceed
6,000,000 shares, subject to adjustment from time to time in accordance
with the provisions of this Section VI. None of the additional shares
resulting from such annual increases may be made the subject of
Incentive Options granted under the Plan.
C. From and after the Effective Date, the total number of shares of
common stock for which any one individual participating in the Plan may be
granted stock options or concurrently or independently exercisable stock
appreciation rights and may receive direct stock issuances shall be limited to
2,000,000 shares in the aggregate over the term of the Plan, subject to periodic
adjustment for certain changes in the Company's capital structure in accordance
with the provisions of this Section VI.
D. Should one or more outstanding options under this Plan (including
outstanding options under the Predecessor Plans incorporated into this Plan)
expire or terminate for any reason prior to exercise in full (including any
option cancelled in accordance with the cancellation-regrant provisions of
Section IV of Article Two), then the shares subject to the portion of each
option not so exercised shall be available for subsequent issuance under the
Plan. Shares issued under the Plan which are subject to the Corporation's
repurchase rights, or restricted, that are subsequently repurchased by the
Corporation, at the original exercise or issue price paid per share, pursuant to
the Corporation's repurchase rights under the Plan shall be added back to the
number of shares of common stock reserved for issuance under the Plan and shall
accordingly be available for reissuance through one or more subsequent option
grants or direct stock issuances under the Plan. Shares subject to any stock
appreciation rights exercised under the Plan shall not be available for
subsequent issuance under the Plan. In addition, should the exercise price of an
outstanding option under the Plan (including any option incorporated from the
Predecessor Plans) be paid with shares of common stock or should shares of
common stock otherwise issuable under the Plan be withheld by the Corporation in
satisfaction of the withholding taxes incurred in connection with the exercise
of an outstanding option under the Plan or the vesting of a share issuance under
the Plan, then the number of shares of common stock available for issuance under
the Plan shall be reduced by the gross number of shares for which the option is
exercised or which vest under the share issuance, and not by the net number of
shares of common stock actually issued to the holder of such option or share
issuance.
E. Should any change be made to the common stock issuable under the Plan by
reason
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of any stock split, stock dividend, recapitalization, combination of shares,
exchange of shares or other change affecting the outstanding common stock as a
class without the Corporation's receipt of consideration, then appropriate
adjustments shall be made to: (i) the maximum number and/or class of securities
issuable under the Plan; (ii) the limit on the number and/or class of securities
which are allowed to remain available for future option grants and direct stock
issuances in connection with each automatic three percent (3%) increase to the
share reserve effected annually under the Plan; (iii) the maximum number and/or
class of securities for which any one individual participating in the Plan may
be granted stock options, concurrently or independently exercisable stock
appreciation rights and direct stock issuances in the aggregate over the term of
the Plan; (iv) the number and/or class of securities for which automatic option
grants are to be subsequently made to each newly elected or continuing
non-employee Director under the Automatic Option Grant Program; and (v) the
number and/or class of securities and price per share in effect under each
option and stock appreciation right outstanding under the Plan (including each
option incorporated into this Plan from the Predecessor Plans). Such adjustments
to the outstanding options are to be effected in a manner which shall preclude
the enlargement or dilution of rights and benefits under such options. The
adjustments determined by the Plan Administrator shall be final, binding and
conclusive.
March 20, 1997
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ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
I. TERMS AND CONDITIONS OF OPTIONS
Options granted pursuant to the Discretionary Option Grant Program
shall be authorized by action of the Plan Administrator and may, at the Plan
Administrator's discretion, be either Incentive Options or Non-Statutory
Options. Individuals who are not Employees may only be granted Non- Statutory
Options. Each granted option shall be evidenced by one or more instruments in
the form approved by the Plan Administrator; provided, however, that each such
instrument shall comply with the terms and conditions specified below. Each
instrument evidencing an Incentive Option shall, in addition, be subject to the
applicable provisions of Section II of this Article Two.
A. Exercise Price.
1. The exercise price per share under this Article Two shall
be fixed by the Plan Administrator in accordance with the following provisions:
(i) The exercise price per share of common stock
subject to an Incentive Option shall in no event be less than one
hundred percent (100%) of the Fair Market Value of such common stock on
the grant date; and
(ii) The exercise price per share of common stock
subject to a Non- Statutory Option shall be the amount determined by
the Plan Administrator at the time of grant and may be less than, equal
to or greater than the Fair Market Value of such common stock on the
grant date.
2. The exercise price shall become immediately due upon
exercise of the option and, subject to the provisions of Section I of Article
Seven and the instrument evidencing the grant, shall be payable in one of the
alternative forms specified below:
(i) full payment in cash or check made payable
to the Corporation's order;
(ii) full payment in shares of common stock held for
the requisite period necessary to avoid a charge to the Corporation's
earnings for financial reporting purposes and valued at Fair Market
Value on the Exercise Date;
(iii) full payment in a combination of shares of
common stock held for the requisite period necessary to avoid a charge
to the Corporation's earnings for financial reporting purposes and
valued at Fair Market Value on the Exercise Date and cash or check made
payable to the Corporation's order; or
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(iv) to the extent the option is exercised for vested
shares, full payment through a broker-dealer sale and remittance
procedure pursuant to which the Optionee shall provide irrevocable
instructions: (a) to a Corporation-designated brokerage firm to effect
the immediate sale of the purchased shares and remit to the
Corporation, out of the sale proceeds available on the settlement date,
sufficient funds to cover the aggregate exercise price payable for the
purchased shares plus all applicable federal, state and local income
and employment taxes required to be withheld by the Corporation in
connection with such purchase; and (b) to the Corporation to deliver
the certificates for the purchased shares directly to such brokerage
firm in order to complete the sale transaction (the "Immediate Sale
Program").
B. Term and Exercise of Options. Each option granted under this Article
Two shall be exercisable at such time or times, during such period and for such
number of shares as shall be determined by the Plan Administrator and set forth
in the instrument evidencing such option. No Incentive Option shall, however,
have a maximum term in excess of ten (10) years, and no Non- Statutory Option
shall have a maximum term in excess of fifteen (15) years. An Incentive Option
shall be exercisable only by the Optionee during his or her lifetime and shall
not be assignable or transferable except for a transfer of the option effected
by will or by the laws of descent and distribution following the Optionee's
death. Non-Statutory Options may be granted under the Plan which are assignable
or transferable in whole or in part by the Optionee during his or her lifetime,
subject to such restrictions or limitations as the Plan Administrator may impose
at the time of grant.
C. Termination of Service.
1. Should an Optionee cease Service for any reason (including
death or Permanent Disability) while holding one or more outstanding options
under this Article Two, then none of those options shall (except to the extent
otherwise provided pursuant to subparagraph I.C.7 below) remain exercisable for
more than a thirty-six (36)-month period (or such shorter period determined by
the Plan Administrator and set forth in the instrument evidencing the grant)
measured from the date of such cessation of Service.
2. Any option held by the Optionee under this Article Two and
exercisable in whole or in part on the date of his or her death may be
subsequently exercised by the personal representative of the Optionee's estate
or by the person or persons to whom the option is transferred pursuant to the
Optionee's will or in accordance with the laws of descent and distribution.
However, the right to exercise such option shall lapse upon the earlier of: (i)
the third anniversary of the date of the Optionee's death (or such shorter
period determined by the Plan Administrator and set forth in the instrument
evidencing the grant); or (ii) the specified expiration date of the option term.
Accordingly, upon the occurrence of the earlier event, the option shall
terminate and cease to remain outstanding.
3. Under no circumstances shall any such option be
exercisable after the specified expiration date of the option term.
4. During the applicable post-Service exercise period,
the option may not be
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exercised in the aggregate for more than the number of shares (if any) in which
the Optionee is vested at the time of his or her cessation of Service. Upon the
expiration of the limited post-Service exercise period or (if earlier) upon the
specified expiration date of the option term, each such option shall terminate
and cease to remain outstanding with respect to any vested shares for which the
option has not otherwise been exercised. However, each outstanding option shall,
immediately upon the Optionee's cessation of Service, terminate and cease to
remain outstanding with respect to any shares for which the option is not
otherwise at that time exercisable or in which the Optionee is not otherwise at
that time vested.
5. Should the Optionee's Service be terminated for Misconduct,
all outstanding options held by the Optionee under this Article Two shall
terminate immediately and cease to remain outstanding.
6. The Plan Administrator shall have complete discretion,
exercisable either at the time the option is granted or at any time while the
option remains outstanding, to permit one or more options held by the Optionee
under this Article Two to be exercised, during the limited post- Service
exercise period applicable under this Section I.C, not only with respect to the
number of vested shares of common stock for which each such option is
exercisable at the time of the Optionee's cessation of Service but also with
respect to one or more subsequent installments for which the option would
otherwise have become exercisable or in which the Optionee would otherwise have
vested had such cessation of Service not occurred.
7. The Plan Administrator shall have full power and authority,
exercisable either at the time the option is granted or at any time while the
option remains outstanding, to extend the period of time for which the option is
to remain exercisable following the Optionee's cessation of Service or death
from the limited period in effect under subparagraphs I.C.1 and I.C.2 above to
such greater period of time as the Plan Administrator shall deem appropriate. In
no event, however, shall such option be exercisable after the specified
expiration date of the option term.
D. Stockholder Rights. An Optionee shall have none of the rights of a
stockholder with respect to any option shares until such individual shall have
exercised the option and paid the exercise price for the purchased shares.
E. Repurchase Rights. The shares of common stock acquired under this
Article Two may be subject to repurchase by the Corporation in accordance with
the following provisions:
1. The Plan Administrator shall have the discretion to grant
options which are exercisable for unvested shares of common stock under this
Article Two. Should the Optionee cease Service while holding any unvested shares
purchased under such options, then the Corporation shall have the right to
repurchase any or all of those unvested shares at the exercise price paid per
share. The terms and conditions upon which such repurchase right shall be
exercisable (including the period and procedure for exercise and the appropriate
vesting schedule for the purchased shares) shall be established by the Plan
Administrator and set forth in the instrument evidencing such repurchase right;
March 20, 1997
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2. All of the Corporation's outstanding repurchase rights
under this Article Two shall automatically terminate, and all shares subject to
such terminated rights shall immediately vest in full, upon the occurrence of a
Corporate Transaction, except to the extent: (i) any such repurchase right is
expressly assigned to the successor corporation (or parent thereof) in
connection with the Corporate Transaction; or (ii) such accelerated vesting is
precluded by other limitations imposed by the Plan Administrator at the time the
repurchase right is issued; and
3. The Plan Administrator shall have the discretionary
authority, exercisable either before or after the Optionee's cessation of
Service, to cancel the Corporation's outstanding repurchase rights with respect
to one or more shares purchased or purchasable by the Optionee under this
Article Two and thereby accelerate the vesting of such shares in whole or in
part at any time.
II. INCENTIVE OPTIONS
The terms and conditions specified below shall be applicable to all
Incentive Options granted under this Article Two. Incentive Options may only be
granted to individuals who are Employees. Options which are specifically
designated as Non-Statutory Options when issued under the Plan shall not be
subject to such terms and conditions.
A. Dollar Limitation. The aggregate Fair Market Value (determined as of
the respective date or dates of grant) of the common stock for which one or more
options granted to any Employee under this Plan (or any other option plan of the
Corporation or its Subsidiaries) may for the first time become exercisable as
incentive stock options under the federal tax laws during any one calendar year
shall not exceed the sum of One Hundred Thousand Dollars ($100,000). To the
extent the Employee holds two (2) or more such options which become exercisable
for the first time in the same calendar year, the foregoing limitation on the
exercisability of such options as incentive stock options under the federal tax
laws shall be applied on the basis of the order in which such options are
granted. Should the number of shares of common stock for which any Incentive
Option first becomes exercisable in any calendar year exceed the applicable One
Hundred Thousand Dollar ($100,000) limitation, then the option may nevertheless
be exercised in that calendar year for the excess number of shares as a
Non-Statutory Option under the federal tax laws.
B. 10% Stockholder. If any individual to whom an Incentive Option is
granted is the owner of stock (as determined under Section 424(d) of the Code)
possessing ten percent (10%) or more of the total combined voting power of all
classes of stock of the Corporation or any one of its Subsidiaries, then the
exercise price per share shall not be less than one hundred ten percent (110%)
of the Fair Market Value per share of common stock on the grant date and the
option term shall not exceed five (5) years measured from the grant date.
Except as modified by the preceding provisions of this Section
II, the provisions of Articles One, Two and Seven shall apply to all Incentive
Options granted hereunder.
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III. CORPORATE TRANSACTIONS/CHANGES IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction, each option which is at
the time outstanding under this Article Two shall automatically accelerate so
that each such option shall, immediately prior to the specified effective date
for such Corporate Transaction, become fully exercisable with respect to the
total number of shares of common stock at the time subject to such option and
may be exercised for all or any portion of such shares. However, an outstanding
option under this Article Two shall not so accelerate if and to the extent: (i)
such option is, in connection with the Corporate Transaction, either to be
assumed by the successor corporation or parent thereof or to be replaced with a
comparable option to purchase shares of the capital stock of the successor
corporation or parent thereof; (ii) such option is to be replaced with a cash
incentive program of the successor corporation which preserves the option spread
existing at the time of the Corporate Transaction and provides for subsequent
payout in accordance with the same vesting schedule applicable to such option;
or (iii) the acceleration of such option is subject to other limitations imposed
by the Plan Administrator at the time of the option grant. The determination of
option comparability under clause (i) above shall be made by the Plan
Administrator, and its determination shall be final, binding and conclusive.
B. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the option is granted or at any time while the
option remains outstanding, to provide for the automatic acceleration of one or
more outstanding options under this Article Two upon the occurrence of a
Corporate Transaction, whether or not those options are to be assumed or
replaced in the Corporate Transaction, or alternatively to provide for the
subsequent acceleration of any outstanding options under this Article Two which
do not otherwise accelerate at the time of the Corporate Transaction, should the
Optionee's Service terminate through an Involuntary Termination effected within
a designated period following the effective date of such Corporate Transaction.
The Plan Administrator shall also have the authority to provide for the
immediate termination of any of the Corporation's outstanding repurchase rights
under this Article Two which do not otherwise terminate at the time of the
Corporate Transaction, upon the subsequent termination of the Optionee's Service
through an Involuntary Termination effected within a designated period following
the effective date of such Corporate Transaction.
C. Immediately following the consummation of the Corporate Transaction,
all outstanding options under this Article Two shall terminate and cease to
remain outstanding, except to the extent assumed by the successor corporation or
its parent company.
D. Each outstanding option under this Article Two that is assumed in
connection with the Corporate Transaction or is otherwise to continue in effect
shall be appropriately adjusted, immediately after such Corporate Transaction,
to apply and pertain to the number and class of securities which would have been
issued to the option holder, in consummation of such Corporate Transaction, had
such person exercised the option immediately prior to such Corporate
Transaction. Appropriate adjustments shall also be made to the exercise price
payable per share, provided the aggregate exercise price payable for such
securities shall remain the same. In addition, the class and number of
securities available for issuance under the Plan on both an aggregate and per
individual basis following the consummation of the Corporate Transaction shall
be appropriately adjusted.
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E. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the option is granted or at any time while the
option remains outstanding, to provide for the automatic acceleration of one or
more outstanding options under this Article Two (and the termination of one or
more of the Corporation's outstanding repurchase rights under this Article Two)
upon the occurrence of a Change in Control or Hostile Take-Over. The Plan
Administrator shall also have full power and authority to condition any such
option acceleration (and the termination of any outstanding repurchase rights)
upon the subsequent termination of the Optionee's Service through an Involuntary
Termination effected within a specified period following the Change in Control
or Hostile Take-Over.
F. Any options accelerated in connection with the Change in Control or
Hostile Take- Over shall remain fully exercisable until the expiration or sooner
termination of the option term or the surrender of such option in accordance
with Section V of this Article Two.
G. The grant of options under this Article Two shall in no way affect
the right of the Corporation to adjust, reclassify, reorganize or otherwise
change its capital or business structure or to merge, consolidate, dissolve,
liquidate or sell or transfer all or any part of its business or assets.
H. The portion of any Incentive Option accelerated under this Section
III in connection with a Corporate Transaction, Change in Control or Hostile
Take-Over shall remain exercisable as an incentive stock option under the
federal tax laws only to the extent the dollar limitation of Section II of
Article Two is not exceeded. To the extent such dollar limitation is exceeded,
the accelerated portion of such option shall be exercisable as a non-statutory
option under the federal tax laws.
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the sole and exclusive authority to
effect, at any time and from time to time, with the consent of the affected
Optionees, the cancellation of any or all outstanding options under this Article
Two (including outstanding options under the Predecessor Plans incorporated into
this Plan) and to grant in substitution new options under the Plan covering the
same or different numbers of shares of common stock but with an exercise price
per share based upon the Fair Market Value of the common stock on the new grant
date.
V. STOCK APPRECIATION RIGHTS
A. The Plan Administrator shall have full power and authority,
exercisable in its sole discretion, to grant to selected Optionees or other
individuals eligible to receive option grants under the Discretionary Option
Grant Program stock appreciation rights.
B. Four types of stock appreciation rights shall be authorized for issuance
under the Plan: (i) Tandem Stock Appreciation Rights ("Tandem Rights"),
Concurrent Stock Appreciation Rights ("Concurrent Rights"), Independent Stock
Appreciation Rights ("Independent Rights") and Limited Stock Appreciation Rights
("Limited Rights").
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C. The following terms and conditions shall govern the grant and exercise
of Tandem Rights under this Article Two.
1. One or more Optionees may be granted the Tandem Right,
exercisable upon such terms and conditions as the Plan Administrator may
establish, to elect between the exercise of the underlying Article Two stock
option for shares of common stock and the surrender of that option in exchange
for a distribution from the Corporation in an amount equal to the excess of:
(i) the Fair Market Value (on the option surrender date) of the number of
shares in which the Optionee is at the time vested under the surrendered option
(or surrendered portion thereof) over; (ii) the aggregate exercise price payable
for such vested shares;
2. No such option surrender shall be effective unless it
is approved by the Plan Administrator. If the surrender is so approved, then the
distribution to which the Optionee shall accordingly become entitled under this
Section V may be made in shares of common stock valued at Fair Market Value on
the option surrender date, in cash, or partly in shares and partly in cash, as
the Plan Administrator shall in its sole discretion deem appropriate; and
3. If the surrender of an option is rejected by the Plan
Administrator, then the Optionee shall retain whatever rights the Optionee had
under the surrendered option (or surrendered portion thereof) on the option
surrender date and may exercise such rights at any time prior to the later of:
(i) five (5) business days after the receipt of the rejection notice; or (ii)
the last day on which the option is otherwise exercisable in accordance with
the terms of the instrument evidencing such option, but in no event may such
rights be exercised more than ten (10) years after the date of the option grant.
D. The following terms and conditions shall govern the grant and exercise
of Concurrent Rights under this Article Two:
1. One or more Optionees may be granted, upon such terms and
conditions as the Plan Administrator may establish, the Concurrent Right to
automatically receive an appreciation distribution from the Corporation at the
same time the underlying stock option under this Article Two is exercised for
the shares of common stock subject to such right. Accordingly, the Optionee
shall, upon exercise of the option, receive both the purchased shares of common
stock and the appreciation distribution payable on the covered shares;
2. The amount of the distribution payable upon exercise
of the Concurrent Right shall not exceed an amount equal to the excess of: (i)
the Fair Market Value (on the option exercise date) of the number of shares
for which the option is exercised over; (ii) the aggregate exercise price
payable for such shares under that option; and
3. The distribution to which the Optionee shall become
entitled under this Section V may be made in shares of common stock valued at
Fair Market Value on the option exercise date, in cash, or partly in shares
and partly in cash, as the Plan Administrator shall in its sole discretion deem
appropriate.
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E. The following terms and conditions shall govern the grant and exercise
of Independent Rights under this Article Two:
1. One or more individuals eligible to participate in the
Discretionary Option Grant Program may be granted an Independent Right not tied
to any underlying Article Two stock option. The Independent Right shall be
exercisable upon such terms and conditions as the Plan Administrator may
establish and shall entitle the holder to receive a distribution from the
Corporation in an amount equal to the excess of: (i) the aggregate Fair Market
Value (on the exercise date of such right) of the shares of common stock subject
to the exercised right over; (ii) the aggregate base price in effect for those
shares;
2. The number of shares subject to the Independent Right
and the base price in effect for those shares shall be determined by the Plan
Administrator in its sole discretion at the time the Independent Right is
granted. The base price may be less than, equal to or greater than the Fair
Market Value (on the grant date of the right) of the shares subject to that
right; and
3. The distribution to which the holder of the
Independent Right shall become entitled under this Section V may be made in
shares of common stock valued at Fair Market Value on the exercise date of
such right, in cash, or partly in shares and partly in cash, as the Plan
Administrator shall in its sole discretion deem appropriate.
F. The following terms and conditions shall govern the grant and exercise
of Limited Rights under this Article Two:
1. One or more officers of the Corporation subject to the
short-swing profit restrictions of the federal securities laws may, in the Plan
Administrator's sole discretion, be granted Limited Rights with respect to their
outstanding options under this Article Two;
2. Upon the occurrence of a Hostile Take-Over, each such
officer holding one or more options with such a Limited Right shall have the
unconditional right (exercisable for a thirty (30)-day period following such
Hostile Take-Over) to surrender each such option to the Corporation, to the
extent the option is at the time exercisable for fully vested shares of common
stock. The officer shall in return be entitled to a cash distribution from the
Corporation in an amount equal to the excess of: (i) the Take-Over Price of the
vested shares of common stock at the time subject to each surrendered option (or
surrendered portion of such option) over; (ii) the aggregate exercise price
payable for such vested shares. Such cash distribution shall be made within five
(5) days following the option surrender date; and
3. The Plan Administrator shall pre-approve, at the time
the Limited Right is granted, the subsequent exercise of that right in
accordance with the terms of the grant and the provisions of this Section V.F
of Article Two. No additional approval of the Plan Administrator or the Board
shall be required at the time of the actual option surrender and cash
distribution. Any unsurrendered portion of the option shall continue to remain
outstanding and become exercisable in accordance with the terms of the
instrument evidencing such grant.
March 20, 1997
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<PAGE>
G. The shares of common stock subject to any stock appreciation right
exercised under this Section V shall not be available for subsequent issuance
under the Plan.
March 20, 1997
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<PAGE>
ARTICLE THREE
AUTOMATIC OPTION GRANT PROGRAM
I. ELIGIBILITY
A. Eligible Optionees. The individuals eligible to receive automatic
option grants pursuant to the provisions of this Article Three shall be limited
to: (i) those individuals who are first elected as non-employee Directors at the
1994 Annual Meeting of Stockholders; (ii) those individuals who are first
elected or appointed as non-employee Directors after the date of such Annual
Meeting, whether through appointment by the Board or election by the
Corporation's stockholders; and (iii) those individuals who are re-elected to
serve as non-employee Directors at one or more Annual Stockholder Meetings
beginning with the 1994 Annual Meeting. Any non-employee Director eligible to
participate in the Automatic Option Grant Program pursuant to the foregoing
criteria shall be designated an Eligible Director for purposes of this Article
Three.
II. TERMS AND CONDITIONS OF AUTOMATIC OPTION GRANTS
A. Grant Dates. Options shall be granted under this Article Three as
follows:
1. Each individual who is first elected as an Eligible
Director at the 1994 Annual Meeting of Stockholders shall automatically be
granted on the date of such Annual Meeting a Non- Statutory Option to purchase
5,000 shares of common stock upon the terms and conditions of this Article
Three;
2. Each individual who first becomes an Eligible Director
after the date of the 1994 Annual Meeting of Stockholders, whether through
election by the Corporation's stockholders or appointment by the Board, shall
automatically be granted, at the time of such initial election or appointment, a
Non-Statutory Option to purchase 5,000 shares of common stock upon the terms and
conditions of this Article Three; and
3. On the date of each Annual Meeting of Stockholders,
beginning with the 1994 Annual Meeting, each individual who is at that time
re-elected as a non-employee Director shall automatically be granted a
Non-Statutory Option to purchase an additional 5,000 shares of common stock upon
the terms and conditions of this Article Three, provided such individual has
served as a Director for at least twelve (12) months.
B. No Limitation. There shall be no limit on the number of such 5,000-share
annual option grants any one Eligible Director may receive over his or her
period of Board service. The number of shares for which the automatic option
grants are to be made to newly elected or continuing Eligible Directors shall be
subject to periodic adjustment pursuant to the applicable provisions of Section
VI.E. of Article One.
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<PAGE>
C. Exercise Price. The exercise price per share of common stock of each
automatic option grant made under this Article Three shall be equal to one
hundred percent (100%) of the Fair Market Value per share of common stock on the
automatic grant date.
D. Payment. The exercise price shall be payable in any of the
alternative forms authorized under Section I.A.2 of Article Two. To the extent
the option is exercised for any unvested shares, the Optionee must execute and
deliver to the Corporation a stock purchase agreement for those unvested shares
which provides the Corporation with the right to repurchase, at the exercise
price paid per share, any unvested shares held by the Optionee at the time of
cessation of Board service and which precludes the sale, transfer or other
disposition of the purchased shares at any time while those shares remain
subject to the Corporation's repurchase right.
E. Option Term. Each automatic grant made under this Article Three
prior to the 1995 Annual Stockholders Meeting shall have a maximum term of ten
(10) years measured from the automatic grant date. Each automatic grant made at
the 1995 Annual Stockholders Meeting or at any time after the date of that
Annual Meeting shall have a maximum term of fifteen (15) years measured from the
automatic grant date.
F. Exercisability/Vesting. Each automatic grant shall be immediately
exercisable for any or all of the option shares. However, any shares purchased
under the option shall be subject to repurchase by the Corporation, at the
exercise price paid per share, upon the Optionee's cessation of Board service
prior to vesting in those shares. The shares subject to the initial automatic
grant made to each non-employee Director upon his or her initial appointment or
election to the Board shall vest, and the Corporation's repurchase right shall
lapse, in two (2) equal and successive annual installments over the Optionee's
period of continued service as a Director, with the first such installment to
vest upon Optionee's completion of one (1) year of Board service measured from
the automatic grant date. The shares subject to each additional automatic grant
made to the non-employee Director upon his or her re-election to the Board at
one or more Annual Stockholder Meetings shall vest, and the Corporation's
repurchase right shall lapse, in two (2) successive equal installments over the
Optionee's period of continued service as a Director, with the first such
installment to vest upon Optionee's continuation in Board service through the
day immediately preceding the date of the first Annual Stockholders Meeting
following the grant date of the option and with the second such installment to
vest upon Optionee's continuation in Board service through the day immediately
preceding the date of the second Annual Stockholders Meeting following the grant
date of the option.
Vesting of the option shares shall be subject to acceleration
as provided in Section II.H.3, Section II.H.4 and Section III of this Article
Three. In no event shall any additional option shares vest after the Optionee's
cessation of Board service, except as otherwise provided pursuant to Section
II.H.3 or Section II.H.4 of this Article Three.
G. Transferability. During the lifetime of the Optionee, the automatic
option grant, together with the limited stock appreciation right pertaining to
such option, shall be exercisable only by the Optionee and shall not be
assignable or transferable except for:
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<PAGE>
(i) a transfer of the option effected by will
or by the laws of descent and distribution following the Optionee's
death; or
(ii) a transfer of the option (granted on or after the
1997 Annual Meeting of Stockholders) effected during Optionee's
lifetime for estate planning purposes to a member of his or her
immediate family or to a trust established for one or more such family
members.
H. Termination of Board Service.
1. Except as otherwise provided in subparagraph 2, 3 or 4
below, should the Optionee cease to serve as a Director for any reason while
holding one or more automatic option grants under this Article Three, then such
individual shall have a six (6)-month period following the date of such
cessation of Board service in which to exercise each such option for any or all
of the option shares in which the Optionee is vested at the time of such
cessation of Board service. However, each such option shall, immediately upon
the Optionee's cessation of Board service, terminate and cease to remain
outstanding with respect to any option shares in which the Optionee is not
otherwise at that time vested under such option.
2. Should an Optionee with less than four (4) years of service
on the Board die within the six (6)-month period following the date of his or
her cessation of Board service, then any automatic option grant held by the
Optionee at the time of his or her death may subsequently be exercised, for any
or all of the option shares in which the Optionee is vested at the time of his
or her cessation of Board service (less any option shares subsequently purchased
by the Optionee prior to death), by the personal representative of the
Optionee's estate or by the person or persons to whom the option is transferred
pursuant to the Optionee's will or in accordance with the laws of descent and
distribution. The right to exercise each such option shall lapse upon the
expiration of the twelve (12)- month period measured from the date of the
Optionee's death.
3. If the Optionee ceases to serve as a Director for any
reason (other than removal for cause) after completion of four (4) or more years
of Board service, then the shares of common stock at the time subject to each
automatic option grant held by the Optionee shall immediately vest in full (and
the Corporation's repurchase right with respect to those shares shall
terminate), and the Optionee (or the representative of the Optionee's estate or
the person or persons to whom the option is transferred upon the Optionee's
death) shall have until the expiration date of the option term in which to
exercise such option for any or all of those vested shares of common stock.
4. Should the Optionee die or become Permanently Disabled
while serving as a Director, then the shares of common stock at the time subject
to each automatic option grant held by the Optionee shall immediately vest in
full (and the Corporation's repurchase right with respect to those shares shall
terminate), and the Optionee (or the representative of the Optionee's estate or
the person or persons to whom the option is transferred upon the Optionee's
death) shall have until the expiration date of the option term in which to
exercise such option for any or all of those vested shares of common stock.
March 20, 1997
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<PAGE>
5. In no event shall any automatic grant under this Article
Three remain exercisable after the expiration date of the option term. Upon the
expiration of the applicable post- service exercise period under subparagraphs 1
through 4 above or (if earlier) upon the expiration of the option term, the
automatic grant shall terminate and cease to be outstanding for any option
shares in which the Optionee is vested at the time of his or her cessation of
Board service but for which such option is not otherwise exercised.
I. Stockholder Rights. The holder of an automatic option grant under this
Article Three shall have none of the rights of a stockholder with respect to any
shares subject to that option until such individual shall have exercised the
option and paid the exercise price for the purchased shares.
J. Remaining Terms. The remaining terms and conditions of each automatic
option grant shall be as set forth in the form Automatic Stock Option Agreement
attached as Exhibit A to the Plan.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction, the shares of common
stock at the time subject to each outstanding option under this Article Three
but not otherwise vested shall automatically vest in full and the Corporation's
repurchase right with respect to those shares shall terminate, so that each such
option shall, immediately prior to the specified effective date for the
Corporate Transaction, become fully exercisable for all of the shares of common
stock at the time subject to that option and may be exercised for all or any
portion of such shares as fully vested shares of common stock. Immediately
following the consummation of the Corporate Transaction, all automatic option
grants under this Article Three shall terminate and cease to remain outstanding,
except to the extent one or more such grants are assumed by the successor entity
or its parent corporation.
B. In connection with any Change in Control or Hostile Take-Over of the
Corporation, the shares of common stock at the time subject to each outstanding
option under this Article Three but not otherwise vested shall automatically
vest in full and the Corporation's repurchase right with respect to those shares
shall terminate, so that each such option shall, immediately prior to the
specified effective date for the Change in Control or Hostile Take-Over, become
fully exercisable for all of the shares of common stock at the time subject to
that option and may be exercised for all or any portion of such shares as fully
vested shares of common stock. Each option shall remain so exercisable for all
the option shares following the Change in Control or Hostile Take-Over until the
expiration or sooner termination of the option term.
C. Upon the occurrence of a Hostile Take-Over, the Optionee shall also
have a thirty (30)-day period in which to surrender to the Corporation each
option held by him or her under this Article Three. The Optionee shall in return
be entitled to a cash distribution from the Corporation in an amount equal to
the excess of: (i) the Take-Over Price of the shares of common stock at the time
subject to the surrendered option over; (ii) the aggregate exercise price
payable for such shares. Such cash distribution shall be paid within five (5)
days following the surrender of the option to the
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<PAGE>
Corporation. Stockholder approval of the November 1, 1996 amendments to the Plan
shall constitute pre-approval of the subsequent grant of each such option
surrender right under this Automatic Option Grant Program and the subsequent
exercise of that right in accordance with the terms and provisions of this
Section II.C. No additional approval of the Board or any Plan Administrator
shall be required at the time of the actual option surrender and cash
distribution. The shares of common stock subject to each option surrendered in
connection with the Hostile Take-Over shall not be available for subsequent
issuance under the Plan.
D. The automatic option grants outstanding under this Article Three
shall in no way affect the right of the Corporation to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.
March 20, 1997
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<PAGE>
ARTICLE FOUR
STOCK FEE PROGRAM
I. ELIGIBILITY
Each individual serving as a non-employee Director shall be eligible to
elect to apply all or any portion of the annual retainer fee otherwise payable
to such individual in cash to the acquisition of unvested shares of common stock
upon the terms and conditions of this Article Four.
II. ELECTION PROCEDURE
A. Filing. The non-employee Director must make the stock-in-lieu-of-fee
election prior to the start of the calendar year for which the election is to be
effective. The first calendar year for which any such election may be filed
shall be the 1995 calendar year. The election, once filed, shall be irrevocable.
The election for any upcoming calendar year may be filed at any time prior to
the start of that year, but in no event later than December 31 of the
immediately preceding calendar year. The non-employee Director may file a
standing election to be in effect for two (2) or more consecutive calendar years
or to remain in effect indefinitely until revoked by written instrument filed
with the Plan Administrator prior to the start of the first calendar year for
which such standing election is no longer to remain in effect.
B. Election Form. The election must be filed with the Plan Administrator on
the appropriate form provided for this purpose. On the election form, the
non-employee Director must indicate the percentage or dollar amount of his or
her annual retainer fee to be applied to the acquisition of unvested restricted
shares under this Article Six Program.
III. SHARE ISSUANCE
A. Issue Date. On the first trading day in January of the calendar year
for which the election is effective, the portion of the retainer fee subject to
such election shall automatically be applied to the acquisition of shares of
common stock by dividing the elected dollar amount by the Fair Market Value per
share of common stock on that trading day. The number of issuable shares shall
be rounded down to the next whole share, and the issued shares shall be held in
escrow by the Secretary of the Corporation as partly-paid shares until the
non-employee Director vests in those shares. The non-employee Director shall
have full shareholder rights, including voting, dividend and liquidation rights,
with respect to all issued shares held in escrow on his or her behalf, but such
shares shall not be assignable or transferable while they remain unvested.
B. Vesting. Upon completion of each calendar month of Board service during
the year for which the election is in effect, the non-employee Director shall
vest in one-twelfth (1/12) of the issued shares, and the stock certificate for
those shares shall be released from escrow. Immediate vesting in all the issued
shares shall occur in the event: (i) the non-employee Director should die or
March 20, 1997
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<PAGE>
become Permanently Disabled during his or her period of Board service; or (ii)
there should occur a Corporate Transaction, Change in Control or Hostile
Take-Over occur while such individual remains in Board service. Should such
individual cease Board service prior to vesting in one or more monthly
installments of the issued shares, then those unvested shares shall be cancelled
by the Corporation, and the non-employee Director shall not be entitled to any
cash payment or other consideration from the Corporation with respect to the
cancelled shares and shall have no further shareholder rights with respect to
such shares.
March 20, 1997
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ARTICLE FIVE
SALARY REDUCTION GRANT PROGRAM
I. ELIGIBILITY
The Plan Administrator shall have plenary authority to select, prior to
the start of each calendar year, the particular key employees who shall be
eligible for participation in the Salary Reduction Grant Program for that
calendar year. In order to participate for a particular calendar year, each
selected individual must, prior to the start of that calendar year, file with
the Plan Administrator (or its designate) an irrevocable authorization directing
the Corporation to reduce his or her base salary for that calendar year by a
designated multiple of one percent (1%), but in no event less than five percent
(5%).
The Plan Administrator shall review the filed authorizations and
determine whether to approve, in whole or in part, one or more of those
authorizations. To the extent the Plan Administrator approves one or more
authorizations, the individuals who filed those authorizations shall be granted
options under this Salary Reduction Grant Program. To the extent one or more
authorizations are not approved by the Primary Committee, those authorizations
shall have no force or effect and no options shall be granted under this Article
Five to the individuals who filed those authorizations.
To the extent options are granted under the Salary Reduction Grant
Program, such options shall be Non-Statutory Options evidenced by instruments in
such form as the Primary Committee shall from time to time approve; provided,
however, that each such instrument shall comply with and incorporate the terms
and conditions specified below.
II. TERMS AND CONDITIONS OF OPTION
A. Exercise Price.
1. The exercise price per share shall be thirty-three and
one-third percent (33- 1/3%) of the Fair Market Value per share of common stock
on the grant date.
2. The exercise price shall become immediately due upon
exercise of the option and shall be payable in any of the alternative forms
authorized under Section I.A.2 of Article Two.
B. Number of Option Shares. The number of shares of common stock for which
each grant under this Article Five is to be made to a selected Optionee shall be
determined pursuant to the following formula (rounded down to the nearest whole
number):
X = A / (B x 66-2/3%), where
X is the number of option shares;
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A is the dollar amount of the approved reduction in the Optionee's
base salary for the calendar year; and
B is the Fair Market Value per share of common stock on the date
of the grant.
C. Term and Exercise of Options.
1. Each option shall have a maximum term of ten (10) years
measured from the grant date. Provided the Optionee continues in Service, the
option shall become exercisable for: (i) fifty percent (50%) of the option
shares on the last day of June in the calendar year for which the option is
granted; and for (ii) the balance of the option shares in a series of six (6)
successive equal monthly installments on the last day of each of the next six
(6) calendar months.
2. One or more options granted under this Salary Reduction
Grant Program may be structured so as to be assignable or transferable in whole
or in part by the Optionee during his or her lifetime, subject to such
restrictions or limitations as the Plan Administrator may impose at the time of
grant. Otherwise, the options shall be exercisable only by the Optionee during
his or her lifetime and shall not be assignable or transferable other than by
transfer of the option effected by will or by the laws of descent and
distribution following the Optionee's death.
D. Effect of Termination of Service.
1. Should an Optionee cease Service for any reason after his
or her outstanding option under this Article Five has become exercisable in
whole or in part, then that option shall remain exercisable, for any or all of
the shares for which the option is exercisable on the date of such cessation of
Service, until the expiration of the ten (10)-year option term or its sooner
termination under Section III.A. of this Article Five. Following the Optionee's
death, such option may be exercised, for any or all of the shares for which the
option is exercisable at the time of the Optionee's death, by the personal
representative of the Optionee's estate or by the person or persons to whom the
option is transferred pursuant to the Optionee's will or in accordance with the
laws of descent and distribution. Such right of exercise shall lapse, and the
option shall terminate, upon the expiration of the ten (10)-year option term or
its sooner termination under Section III.A. of this Article Five.
2. Should the Optionee die before his or her outstanding
option under this Article Five becomes exercisable for any of the option shares,
then the personal representative of the Optionee's estate or the person or
persons to whom the option is transferred pursuant to the Optionee's will or in
accordance with the laws of descent and distribution shall nevertheless have the
right to exercise such option for up to that number of option shares equal to:
(i) one-twelfth (1/12) of the total number of option shares multiplied by; (ii)
the number of full calendar months which have elapsed between the first day of
the calendar year for which the option was granted and the last day of the
calendar month during which the Optionee ceases Service. Such right of exercise
shall lapse, and the option shall terminate, upon the earliest to occur of: (i)
the specified expiration date of the option term; (ii) the termination of the
option under Section III.A. of this Article Five; or (iii) the third
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<PAGE>
anniversary of the date of the Optionee's death. However, the option shall, with
respect to any and all option shares for which it is not exercisable at the time
of the Optionee's cessation of Service, terminate immediately upon such
cessation of Service and shall cease to remain outstanding with respect to those
option shares.
3. Should the Optionee become Permanently Disabled and cease
by reason thereof to remain in Service before his or her outstanding option
under this Article Five becomes exercisable for any of the option shares, then
the Optionee shall nevertheless have the right to exercise such option for up to
that number of option shares equal to: (i) one-twelfth (1/12) of the total
number of option shares multiplied by; (ii) the number of full calendar months
which have elapsed between the first day of the calendar year for which the
option was granted and the last day of the calendar month during which the
Optionee ceases Service. Such right of exercise shall lapse, and the option
shall terminate, upon the expiration of the ten (10)-year option term or its
sooner termination under Section III.A. of this Article Five. However, the
option shall, with respect to any and all option shares for which it is not
exercisable at the time of the Optionee's cessation of Service, terminate
immediately upon such cessation of Service and shall cease to remain outstanding
with respect to those option shares.
4. Except to the limited extent specifically provided in
subparagraphs 2 and 3 above, should the Optionee cease for any reason to remain
in Service before his or her outstanding option under this Article Five first
become exercisable for one or more option shares, then that option shall
immediately terminate upon such cessation of Service and shall cease to remain
outstanding.
E. Stockholder Rights. The Optionee shall have none of the rights of a
stockholder with respect to any option shares until such individual shall have
exercised the option and paid the exercise price for those shares.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. Should any Corporate Transaction occur while the Optionee remains in
Service, then each outstanding option held by such Optionee under this Article
Five shall become exercisable, immediately prior to the specified effective date
of such Corporate Transaction, for all of the shares at the time subject to such
option and may be exercised for any or all of such shares as fully-vested shares
of common stock. Immediately following the consummation of the Corporate
Transaction, each such option shall terminate unless assumed by the successor
entity or its parent corporation.
B. Upon the occurrence of: (i) a Hostile Take-Over while the Optionee
remains in Service; or (ii) the Involuntary Termination of the Optionee's
Service following a Change in Control, each outstanding option held by such
Optionee under this Article Five shall immediately become exercisable for all of
the shares at the time subject to such option and may be exercised for any or
all of such shares as fully-vested shares of common stock. The option shall
remain so exercisable until the expiration of the ten (10)-year option term.
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<PAGE>
C. Option grants under this Article Five shall not affect the
Corporation's right to adjust, reclassify, reorganize or change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer any or all of its assets.
March 20, 1997
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ARTICLE SIX
STOCK ISSUANCE PROGRAM
I. TERMS AND CONDITIONS OF STOCK ISSUANCES
Shares of common stock may be issued under the Stock Issuance Program
through direct and immediate purchases without any intervening stock option
grants. The issued shares shall be evidenced by a Stock Issuance Agreement
("Issuance Agreement") that complies with the terms and conditions of this
Article Six.
A. Consideration
1. Newly Issued Shares shall be issued under the Stock
Issuance Program for one or more of the following items of consideration that
the Plan Administrator may deem appropriate in each individual instance:
(i) full payment in cash or check made payable
to the Corporation's order;
(ii) a promissory note payable to the Corporation's
order in one or more installments, which may be subject to cancellation
in whole or in part upon terms and conditions established by the Plan
Administrator; or
(iii) past services rendered to the Corporation or
any Subsidiary.
2. Newly Issued Shares may, in the absolute discretion of the
Plan Administrator, be issued for consideration with a value less than, equal to
or greater than the Fair Market Value of such shares at the time of issuance,
but in no event less than the par value per issued share of common stock.
3. Treasury Shares may be issued under the Stock Issuance
Program for such consideration (including one or more of the items of
consideration specified in subparagraph 1 above) as the Plan Administrator may
deem appropriate, whether such consideration is in an amount less than, equal to
or greater than the Fair Market Value of the Treasury Shares at the time of
issuance. Treasury Shares may, in lieu of any cash consideration, be issued
subject to such vesting requirements tied to the Participant's period of future
Service.
4. Treasury Shares may also, in the Plan Administrator's
absolute discretion, be issued pursuant to an irrevocable election by the
Participant to receive a portion of his or her base salary in shares of common
stock in lieu of such base salary. Any such issuance shall be effected in
accordance with the following guidelines:
- On the first trading day in January of the calendar
year for which the election
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<PAGE>
is effective, the portion of base salary subject to such election shall
automatically be applied to the acquisition of common stock by dividing
the elected dollar amount by the Fair Market Value per share of the
common stock on that trading day. The number of issuable shares shall
be rounded down to the next whole share, and the issued shares shall be
held in escrow by the Secretary of the Corporation until the
Participant vests in those shares. The Participant shall have full
stockholder rights, including voting, dividend and liquidation rights,
with respect to all issued shares held in escrow on his or her behalf,
but such shares shall not be assignable or transferable while they
remain unvested; and
- Upon completion of each calendar month of Service during the
year for which the election is in effect, the Participant shall vest in
one-twelfth (1/12) of the issued shares, and the stock certificate for
those shares shall be released from escrow. All the issued shares shall
immediately vest upon: (i) the occurrence of a Corporate Transaction or
Hostile Take-Over while such individual remains in Service; or (ii) the
Involuntary Termination of the Participant's Service following a Change
in Control. Should the Participant otherwise cease Service prior to
vesting in one or more monthly installments of the issued shares, then
those unvested shares shall immediately be surrendered to the
Corporation for cancellation, and the Participant shall not be entitled
to any cash payment or other consideration from the Corporation with
respect to the cancelled shares and shall have no further stockholder
rights with respect to such shares.
5. In lieu of the immediate issuance of shares of common stock
under the Stock Issuance Program, the Plan Administrator may condition the
actual issuance of those shares upon the attainment by the Corporation, any
designated Subsidiary or division of the Corporation or the individual
Participant of one or more performance objectives established by the Plan
Administrator at the time the Participant is provided with the notice of such
contingent Award.
B. Vesting Provisions
1. The shares of common stock issued under the Stock Issuance
Program (other than shares issued in lieu of salary) may, in the absolute
discretion of the Plan Administrator, be fully and immediately vested upon
issuance or may vest in installments over the Participant's period of Service.
The Plan Administrator shall have the authority to condition either the actual
issuance of the shares of common stock subject to an Award made under the Stock
Issuance Program or the subsequent vesting of any unvested shares of common
stock issued under the Stock Issuance Program upon the attainment by the
Corporation, any designated Subsidiary or division of the Corporation or the
individual Participant of one or more following performance objectives:
- - earnings per share - return on assets
- - revenue - market share
- - stock price - customer satisfaction
- - operating income - time to market
- - consolidated pre-tax profit - employee development
- - operating profit margin - quality
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- - return on equity - cash
- - inventory - employee satisfaction
- - gross margin - market perception
The Plan Administrator shall have complete discretion to
condition either the actual issuance of the shares of common stock subject to
the Award or the subsequent vesting of the issued shares upon the attainment of:
(i) one particular performance objective; (ii) one of a series of alternative
performance objectives; or (iii) any combination of two or more performance
objectives, as the Plan Administrator deems appropriate in each instance. The
specific target for each selected performance objective shall be established by
the Plan Administrator either: (i) at the time the Award is made, if the shares
subject to that Award are not to be issued unless the target or targets are
achieved; or (ii) at the time the shares of common stock are issued, if the
subsequent vesting of those shares is subject to the attainment of the specified
target or targets.
2. The remaining elements of the vesting schedule applicable
to any unvested shares of common stock issued under the Stock Issuance Program,
namely:
(i) any Service period to be completed by the
Participant;
(ii) the number of installments in which the shares are
to vest;
(iii) the interval or intervals (if any) which are to
lapse between installments; and
(iv) the effect which death, Permanent Disability or
oher event designated by the Plan Administrator is to have upon the vesting
schedule,
shall be determined by the Plan Administrator and incorporated into either: (i)
the Award, if the shares subject to that Award are not to be issued until the
applicable vesting requirements are satisfied; or (ii) the Issuance Agreement
executed by the Corporation and the Participant, if the shares are to be issued
initially as unvested shares.
3. The Participant shall have full stockholder rights with
respect to any shares of common stock issued to him or her under the Stock
Issuance Program, whether or not his or her interest in those shares is vested.
Accordingly, the Participant shall have the right to vote such shares and to
receive any regular cash dividends paid on such shares. Any new, additional or
different shares of stock or other property (including money paid other than as
a regular cash dividend) which the Participant may have the right to receive
with respect to his or her unvested shares by reason of any stock dividend,
stock split, recapitalization, combination of shares, exchange of shares or
other change affecting the outstanding common stock as a class without the
Corporation's receipt of consideration shall be issued, subject to: (i) the same
vesting requirements applicable to the Participant's unvested shares; and (ii)
such escrow arrangements as the Plan Administrator shall deem appropriate.
4. Should the Participant cease to remain in Service
while holding one or more
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unvested shares of common stock under the Stock Issuance Program, then those
shares shall be immediately cancelled by the Corporation, and the Participant
shall have no further stockholder rights with respect to those shares. To the
extent the cancelled shares were previously issued to the Participant for
consideration paid in cash or cash equivalent (including the Participant's
purchase- money promissory note), the Corporation shall repay to the Participant
the cash consideration paid for the surrendered shares and shall cancel the
unpaid principal balance of any outstanding purchase- money note of the
Participant attributable to such cancelled shares. The cancelled shares may, at
the Plan Administrator's discretion, be retained by the Corporation as Treasury
Shares or may be retired to authorized but unissued share status.
5. The Plan Administrator may in its discretion elect to waive
the cancellation of one or more unvested shares of common stock (or other assets
attributable thereto) which would otherwise occur upon the non-completion of any
Service requirement incorporated into the vesting schedule applicable to those
shares. Such waiver shall result in the immediate vesting of the Participant's
interest in the shares of common stock as to which the waiver applies. Such
waiver may be effected at any time, whether before or after the Participant's
cessation of Service. However, the Plan Administrator shall not waive any
performance objectives specified in Section I.B.1 above which serve as a
condition to either the issuance of shares of common stock under the Stock
Issuance Program or the subsequent vesting of any unvested shares actually
issued under such Program.
II. CORPORATE TRANSACTIONS/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. Upon the occurrence of any Corporate Transaction, all unvested
shares of common stock at the time outstanding under this Stock Issuance Program
(other than shares issued in lieu of base salary) shall immediately vest in full
and the Corporation's repurchase rights shall terminate, except to the extent:
(i) any such repurchase right is expressly assigned to the successor corporation
(or parent thereof) in connection with the Corporate Transaction; or (ii) such
termination is precluded by other limitations imposed in the Issuance Agreement.
B. The Plan Administrator shall have the discretionary authority,
exercisable at any time while unvested shares remain outstanding under this
Stock Issuance Program, to provide for the immediate and automatic vesting of
those unvested shares in whole or in part, and the termination of the
Corporation's repurchase rights with respect to those shares, upon the
occurrence of a Change in Control or Hostile Take-Over. The Plan Administrator
shall also have full power and authority to condition any such accelerated
vesting upon the subsequent termination of the Participant's Service through an
Involuntary Termination effected within a specified period following the Change
in Control or Hostile Take-Over.
III. TRANSFER RESTRICTIONS/SHARE ESCROW
A. Unvested shares may, in the Plan Administrator's discretion, be held in
escrow by the Corporation until the Participant's interest in such shares vests
or may be issued directly to the Participant with restrictive legends on the
certificates evidencing such unvested shares. To the extent
March 20, 1997
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<PAGE>
an escrow arrangement is utilized, the unvested shares and any securities or
other assets issued with respect to such shares (other than regular cash
dividends) shall be delivered in escrow to the Corporation to be held until the
Participant's interest in such shares (or other securities or assets) vests.
Alternatively, if the unvested shares are issued directly to the Participant,
the restrictive legend on the certificates for such shares shall read
substantially as follows:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE UNVESTED AND
ARE SUBJECT TO: (i) CERTAIN TRANSFER RESTRICTIONS; AND (ii)
CANCELLATION OR REPURCHASE IN THE EVENT THE REGISTERED HOLDER (OR
HIS/HER PREDECESSOR IN INTEREST) CEASES TO REMAIN IN THE CORPORATION'S
SERVICE. SUCH TRANSFER RESTRICTIONS AND THE TERMS AND CONDITIONS OF
SUCH CANCELLATION OR REPURCHASE ARE SET FORTH IN A STOCK ISSUANCE
AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER (OR HIS/HER
PREDECESSOR IN INTEREST) DATED
, A COPY OF WHICH IS ON FILE AT
AT THE PRINCIPAL OFFICE OF THE CORPORATION."
B. The Participant shall have no right to transfer any unvested shares
of common stock issued to him or her under the Stock Issuance Program. For
purposes of this restriction, the term "transfer" shall include (without
limitation) any sale, pledge, assignment, encumbrance, gift, or other
disposition of such shares, whether voluntary or involuntary. Upon any such
attempted transfer, the unvested shares shall immediately be cancelled in
accordance with substantially the same procedures in effect under Section I.B.3
of this Article Six, and neither the Participant nor the proposed transferee
shall have any rights with respect to such cancelled shares. However, the
Participant shall have the right to make a gift of unvested shares acquired
under the Stock Issuance Program to the Participant's spouse or issue, including
adopted children, or to a trust established for such spouse or issue, provided
the transferee of such shares delivers to the Corporation a written agreement to
be bound by all the provisions of the Stock Issuance Program and the Issuance
Agreement applicable to the transferred shares.
March 20, 1997
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ARTICLE SEVEN
MISCELLANEOUS
I. LOANS OR INSTALLMENT PAYMENTS
A. The Plan Administrator may, in its discretion, assist any Optionee
or Participant (including an Optionee or Participant who is an officer of the
Corporation), in the exercise of one or more options granted to such Optionee
under the Discretionary Option Grant Program or the Salary Reduction Grant
Program or the purchase of one or more shares issued to such Participant under
the Stock Issuance Program, including the satisfaction of any federal, state and
local income and employment tax obligations arising therefrom, by: (i)
authorizing the extension of a loan from the Corporation to such Optionee or
Participant; or (ii) permitting the Optionee or Participant to pay the exercise
price or purchase price for the acquired shares in installments over a period of
years. The terms of any loan or installment method of payment (including the
interest rate and terms of repayment) shall be upon such terms as the Plan
Administrator specifies in the applicable option or issuance agreement or
otherwise deems appropriate under the circumstances. Loans or installment
payments may be authorized with or without security or collateral. However, the
maximum credit available to the Optionee or Participant may not exceed the
exercise or purchase price of the acquired shares (less the par value of such
shares) plus any federal, state and local income and employment tax liability
incurred by the Optionee or Participant in connection with the acquisition of
such shares.
B. The Plan Administrator may, in its absolute discretion, determine
that one or more loans extended under this financial assistance program shall be
subject to forgiveness by the Corporation in whole or in part upon such terms
and conditions as the Plan Administrator may deem appropriate.
II. AMENDMENT OF THE PLAN AND AWARDS
A. The Board has complete and exclusive power and authority to amend or
modify the Plan (or any component thereof) in any or all respects whatsoever.
However, no such amendment or modification shall adversely affect rights and
obligations with respect to stock options, stock appreciation rights or unvested
stock issuances at the time outstanding under the Plan, unless the Optionee or
Participant consents to such amendment. In addition, certain amendments may
require stockholder approval pursuant to applicable laws or regulations.
B. Options to purchase shares of common stock may be granted under the
Discretionary Option Grant Program and the Salary Reduction Grant Program and
shares of common stock may be issued under the Stock Issuance Program, which are
in excess of the number of shares then available for issuance under the Plan,
provided any excess shares actually issued under the Discretionary Option Grant
Program, the Salary Reduction Grant Program or the Stock Issuance Program are
held in escrow until stockholder approval is obtained for a sufficient increase
in the number of shares available for issuance under the Plan. If such
stockholder approval is not obtained
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<PAGE>
within twelve (12) months after the date the first such excess option grants or
excess share issuances are made, then: (i) any unexercised excess options shall
terminate and cease to be exercisable; and (ii) the Corporation shall promptly
refund the purchase price paid for any excess shares actually issued under the
Plan and held in escrow, together with interest (at the applicable short term
federal rate) for the period the shares were held in escrow.
III. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of common stock upon
the exercise of stock options or stock appreciation rights or the direct
issuance or vesting of such shares under the Plan shall be subject to the
satisfaction of all applicable federal, state and local income tax and
employment tax withholding requirements.
B. The Plan Administrator may, in its discretion and in accordance with
the provisions of this Section III and such supplemental rules as the Plan
Administrator may from time to time adopt (including the applicable safe-harbor
provisions of Securities and Exchange Commission Rule 16b-3), provide any or all
holders of Non-Statutory Options (other than the automatic option grants made
pursuant to Article Three) or unvested shares under the Stock Issuance Program
with the right to use shares of common stock in satisfaction of all or part of
the federal, state and local income and employment tax liabilities (the "Taxes")
incurred by such holders in connection with the exercise of their options or the
vesting of their shares. Such right may be provided to any such holder in either
or both of the following formats:
- Stock Withholding: The holder of the Non-Statutory Option or
unvested shares may be provided with the election to have the
Corporation withhold, from the shares of common stock otherwise
issuable upon the exercise of such Non-Statutory Option or the vesting
of such shares, a portion of those shares with an aggregate Fair Market
Value equal to the percentage of the Taxes (up to one hundred percent
(100%)) specified by such holder.
- Stock Delivery: The holder of the Non-Statutory Option or
the unvested shares may be provided with the election to deliver to the
Corporation, at the time the Non- Statutory Option is exercised or the
shares vest, one or more shares of common stock previously acquired by
such individual (other than in connection with the option exercise or
share vesting triggering the Taxes) with an aggregate Fair Market Value
equal to the percentage of the Taxes (up to one hundred percent (100%))
specified by such holder.
IV. EFFECTIVE DATE AND TERM OF PLAN
A. This Plan became effective upon approval by the Corporation's
stockholders at the 1994 Annual Meeting held on May 5, 1994. The Plan shall
serve as the successor to the Predecessor Plans, and no further option grants or
stock issuances shall be made under the Predecessor Plans from and after the
date of 1994 Annual Meeting.
B. On January 25, 1995, the Board approved an amendment to the Plan to:
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<PAGE>
(i) extend the term for which options granted under the
Automatic Option Grant Program may be exercised from ten (10) years to
fifteen (15) years from the date of grant;
(ii) provide for the immediate vesting of all shares
purchased or purchasable by a non-employee Director under the Automatic
Option Grant Program in the event such individual's service on the
Board terminates for any reason (other than removal for cause) after
his or her completion of at least four (4) years of Board service, and
allow any outstanding options held by such non-employee Director under
the Automatic Option Grant Program to remain exercisable for
fully-vested shares until the expiration of the option term; and
(iii) identify a series of performance goals upon which
the Plan Administrator may condition either the issuance of shares of
common stock under the Stock Issuance Program or the subsequent vesting
of any unvested shares actually issued under such Program. The
amendment was approved by the stockholders at the 1995 Annual Meeting.
The item (ii) change is to be in effect for all outstanding options
under the Automatic Option Grant Program, whether made before or after
the date of the amendment. The item (i) change is to apply only to
options granted on or after the date of the 1995 Annual Meeting.
C. On November 1, 1996, the Board approved an amendment to the Plan,
subject to stockholder approval at the 1997 Annual Meeting, to effect the
following changes:
- The number of shares available for issuance under
the Plan is to increase automatically on the date of the 1997 Annual
Stockholders Meeting by an amount equal to 2% of the total number of
shares of common stock outstanding on the immediately preceding trading
day;
- The number of shares of common stock available for
issuance under the Plan is to automatically increase on the first
trading day of each calendar year, beginning with the 1998 calendar
year, by an amount equal to 3% of the total number of shares of common
stock outstanding on December 31 of the immediately preceding calendar
year;
- Each such automatic increase to the share reserve
will, however, be subject to reduction to the extent necessary to
assure that the maximum number of shares of common stock available
immediately thereafter for future option grants and direct stock
issuances under the Plan (net of all options then outstanding) will not
exceed 6,000,000 shares;
- allow one or more Non-Statutory Options, whether
currently outstanding or subsequently granted, to be assignable or
transferable by the Optionee during his or her lifetime, subject to
such restrictions and limitations as the Plan Administrator may impose;
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- allow the option grants made on or after the 1997
Annual Meeting of Stockholders to non-employee Directors under the
Automatic Option Grant Program to be transferable during Optionee's
lifetime for estate planning purposes to a member of his or her
immediate family or to a trust established for one or more such family
members;
- allow non-employee Directors to receive
discretionary grants and stock issuances under the Discretionary Option
Grant and Stock Issuance Programs;
- eliminate the restriction that the individuals who
serve as the Plan Administrator may not receive any option grants or
direct stock issuances from the Corporation during their period of
service as such or during the twelve (12)-month period preceding their
appointment as Plan Administrator;
- liberalize the requirements for the withholding of
shares of common stock in satisfaction of tax withholding obligations
incurred in connection with the exercise of Non-Statutory Options or
the vesting of unvested stock issuances so that the only condition to
the exercise of those withholding rights is the approval of the Plan
Administrator, either at the time those rights are exercised or at any
earlier time;
- require stockholder approval of future
amendments to the Plan only to the extent necessary to satisfy
applicable laws or regulations;
- eliminate both the six (6)-month holding period
requirement and the ten (10) business day "window" period requirement
for the exercise of any stock appreciation rights granted under the
Plan; and
- allow unvested shares reacquired by the Corporation
upon the Optionee's or Participant's cessation of Service prior to
vesting in those shares to be added back to the share reserve available
for future issuance under the Plan.
D. Each option issued and outstanding under the Predecessor Plans and
each unvested share issued thereunder immediately prior to the Effective Date of
this Plan shall be incorporated into this Plan and treated as an outstanding
option or share issuance under this Plan, but each such option and share
issuance shall continue to be governed solely by the terms and conditions of the
instrument evidencing such grant or issuance, and nothing in this Plan shall be
deemed to affect or otherwise modify the rights or obligations of the holders of
such options or share issuances with respect to their acquisition of shares of
common stock thereunder.
E. One or more provisions or features of this Plan may, in the Plan
Administrator's discretion, be extended to any or all stock options or share
issuances outstanding under the Predecessor Plans on the Effective Date and
incorporated into this Plan.
F. The Plan shall terminate upon the earlier of: (i) December 31, 2008; or
(ii) the date on which all shares available for issuance under the Plan shall
have been issued or cancelled pursuant
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to the exercise of options or stock appreciation rights or the issuance of
shares (whether vested or unvested) under the Plan. If the date of termination
is determined under clause (i) above, then all option grants and unvested stock
issuances outstanding on such date shall thereafter continue to have force and
effect in accordance with the provisions of the instruments evidencing such
grants or issuances.
V. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares
pursuant to option grants or stock issuances under the Plan shall be used for
general corporate purposes.
VI. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any option or stock
appreciation right under the Plan, the issuance of any shares under the Stock
Issuance Program, and the issuance of common stock upon the exercise of the
stock options and stock appreciation rights granted hereunder shall be subject
to the Corporation's procurement of all approvals and permits required by
regulatory authorities having jurisdiction over the Plan, the stock options and
stock appreciation rights granted under it and the common stock issued pursuant
to it.
B. No shares of common stock or other assets shall be issued or
delivered under this Plan unless and until there shall have been compliance with
all applicable requirements of federal and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the shares
of common stock issuable under the Plan, and all applicable listing requirements
of any securities exchange on which the common stock is then listed for trading.
VII. NO EMPLOYMENT/SERVICE RIGHTS
Neither the action of the Corporation in establishing the Plan, nor any
action taken by the Plan Administrator hereunder, nor any provision of the Plan
shall be construed so as to grant any individual the right to remain in the
Service of the Corporation (or Subsidiary) for any period of specific duration,
and the Corporation (or any Subsidiary retaining the services of such
individual) may terminate such individual's Service at any time and for any
reason, with or without cause.
March 20, 1997
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ADDENDUM I
AMDAHL CORPORATION 1994 STOCK INCENTIVE PLAN
UNITED KINGDOM STOCK OPTION SCHEME
March 20, 1997
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ADDENDUM I
AMDAHL CORPORATION 1994 STOCK INCENTIVE PLAN
UNITED KINGDOM STOCK OPTION SCHEME
Preamble
This scheme (the "Scheme") is for the benefit of those employees of Amdahl
Corporation and its subsidiary corporations who are subject to taxation in the
United Kingdom. The terms and conditions of the Scheme are established in order
to render the Scheme capable of approval as an approved share option scheme
under Schedule 9 of the United Kingdom Income and Corporation Taxes Act 1988
("Taxes Act") ("Schedule 9"). Accordingly, the terms and conditions of the
Scheme shall be interpreted in a manner consistent with Schedule 9. All options
subject to the provisions of the Scheme shall be specifically designated as
"Approved UK Stock Options."
The Scheme is an addendum to the 1994 Stock Incentive Plan (the "Plan") and
should be read in conjunction with the Plan. Accordingly, any options
specifically designated as Approved UK Stock Options will be subject to the
terms and conditions of the Plan except to the extent that such terms and
conditions differ from (or are otherwise in conflict with) the express
provisions of the Scheme in which event, the rules of the Scheme shall prevail.
Any term not otherwise defined in the Scheme shall have the meaning set forth in
Section II, Article One of the Plan.
For the avoidance of doubt only Articles One, Two Section IC and Seven shall
apply to the Scheme except to the extent that its terms and conditions differ or
are otherwise in conflict with the Scheme.
(a) Eligibility
The individuals eligible to receive Approved UK Stock Options shall be limited
to:
i) any Director except for a non-employee Director of the Corporation or
one or more of its Subsidiaries who normally devotes not less than an
aggregate of 25 hours per week (excluding meal breaks) to the duties
of such directorships; and
ii) any non-director employee of the Corporation or its Subsidiaries who
is required under his terms of employment to provide not less than an
aggregate of 20 hours per week of service (excluding meal breaks) to
the Corporation or its subsidiaries.
An individual may not be granted, nor may an individual exercise, an Approved UK
Stock Option if such individual has at the time (or had at any time during the
preceding twelve (12) months) a material interest (as defined in Section 187(3)
Taxes Act 1988) in a close company (as defined under Chapter I of Part XI of the
Taxes Act disregarding section 414(1)(a) and 415) whose shares may be acquired
on the exercise of rights obtained under the Scheme or which has control
March 20, 1997
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of such a company or is a member of a consortium (as defined in Section 187(7)
of the Taxes Act 1988) which owns such a company.
(b) Grant of Options
Approved UK Stock Options granted under the Scheme by the Plan Administrator
shall be granted by deed and the exercise price per share of stock subject to an
Approved UK Stock Option ("the Option Shares") shall in no event be less than
one hundred per cent. (100%) of the Fair Market Value of such Option Shares on
the grant date or such earlier date as is agreed with the Inland Revenue.
Each Approved UK Stock Option shall be exercisable at such time or times, during
such period and for such number of Option Shares as shall be determined by the
Plan Administrator and set forth in the instrument evidencing such option. No
Approved UK Stock Option shall, however, have a maximum term in excess of ten
(10) years. No Approved UK Stock Option may be transferred, assigned, or charged
and any purported transfer, assignment or charge shall be void ab initio.
(c) Stock issued pursuant to exercise of approved UK stock options
The Option Shares issued pursuant to the exercise of Approved UK Stock Options
shall not be subject to any restrictions (as such term is defined in Schedule 9)
other than restrictions which apply to all outstanding Option Shares. The
issuance of such Option Shares must be effected within thirty (30) days after
the date of exercise of the Approved UK Stock Options.
(d) Loans or guarantee of loans
Notwithstanding the provisions of Section I, Article Seven of the Plan:
i) no financing shall be provided directly or indirectly by the
Corporation or any of its Subsidiaries to the holder of Approved UK
Stock Options for the purposes of assisting such individuals in the
exercise of their Approved UK Stock Options; and
ii) no holder of an Approved UK Stock Option shall be permitted to pay in
instalments the purchase price of Option Shares acquired pursuant to
the exercise of such option.
(e) Termination of Service
Should an Optionee cease service for any reason (excluding death and Misconduct)
while holding one or more outstanding Approved UK Stock Options then those
Approved UK Stock Options shall terminate upon the earlier of:
(i) the expiration of ten (10) years after the grant date of this option;
March 20, 1997
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(ii) the expiration of thirty-six (36) months after the cessation of
service; or
(iii)the expiration of such period following cessation of service as
determined by the Plan Administrator at the date of grant.
If Optionee's employment is terminated by reason of Misconduct within the
specified term of the Approved UK Stock Option, then the option shall lapse
immediately.
(f) Limitation of rights
Except as may subsequently be permitted by amendment to Schedule 9, the grant of
an Approved UK Stock Option under the Plan shall be limited and take effect so
that the grant of such option would not, at the time of grant, cause the Fair
Market Value (as of the date of grant) of the Option Shares purchasable under
all Approved UK Stock Options granted to such Optionee by:
i) the Corporation;
ii) any company which controls (or at any time within the preceding twelve
(12) months controlled) the Corporation;
iii) any company which is controlled by (or within the twelve (12) months
was controlled by) the Corporation; or
iv) any company which is (or within the preceding twelve (12) months was)
under the control of the same person or persons as control the
Corporation;
to exceed in the aggregate for Approved UK Stock Options granted on or after 17
July 1995 Li.30,000 taking into account the Fair Market Value (as at the date of
grant) of the Option Shares purchasable under all Approved UK Stock Options
granted to the Optionee before 17 July 1995.
For the purposes of the Scheme "Control" shall mean:
(i) a person shall be taken to have control of a company if he exercises,
or is able to exercise, or is entitled to acquire, direct or indirect
control over the company's affairs, and in particular, but without
prejudice to the generality of the preceding words, if he possesses or
is entitled to acquire-
(a) the greater part of the share capital or issued share capital
of the company or of the voting power in the company;
(b) such part of the issued share capital of the company as
would, if the whole of the income of the company were in fact
distributed among the participators (without regard to any rights
which he or any other person has as a loan creditor), entitle him
to receive the greater part of the amount so distributed; or
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(c) such rights as would, in the event of the winding-up of the
company or in any other circumstances, entitle him to receive the
greater part of the assets of the company which would then be
available for distribution among the participators.
For the purposes of calculating the limits in this rule (f) the exchange rate
for the conversion of US dollars to pounds sterling shall be the Financial Times
pound spot rate forward as of the date of grant of the Approved UK Stock Option
to which the Option Shares are subject or on the last previous date for which
such rate exists.
(g) Changes in Capitalisation
No change or adjustment shall be effected pursuant to Section VI, Article One of
the Plan to:
i) the number of Option Shares or other securities covered by an
outstanding Approved UK Stock Option; or
ii) the exercise price payable per Option Share under an outstanding
Approved UK Stock Option;
unless any adjustment has been confirmed in writing by the Corporation's
auditors to be fair and reasonable, the aggregate exercise price payable by each
Optionee is not increased and any adjustment, whilst the Scheme is intended to
remain approved, has been approved by the Board of Inland Revenue.
(h) Amendment of the Scheme
Whilst it is intended to remain approved by the Inland Revenue, the Scheme may
not be amended without prior Inland Revenue approval. Accordingly, unless Board
of Inland Revenue approval shall have been obtained for any amendment to the
Plan, the terms and conditions of the Scheme shall be determined by reference to
the provisions of the Plan as in existence prior to such amendment.
(i) Surrender of Approved UK Stock Options
Notwithstanding Sections III and V, Article Two and Section III, Article Three
of the Plan, no Approved UK Stock Option may be surrendered for cash or stock
payment from the Corporation. However, Approved UK Stock Options may be
surrendered, cancelled or renounced by their holders at any time prior to
exercise.
(j) Exercise upon death
Notwithstanding Section IC of Article Two and Section II H of Article Three of
the Plan, upon the Optionee's death an Approved UK Stock Option may;
March 20, 1997
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i) in no event remain outstanding for more than one (1) year; and
ii) be exercised only by the deceased Optionee's personal representatives.
(k) Share limitations
Notwithstanding Section II B, Article Seven of the Plan, no Approved UK Stock
Option may be granted pursuant to the provisions of the Scheme to purchase
Option Shares in excess of the number of shares then available for issuance
under the Scheme.
(l) Stock subject to the scheme
No Approved UK Stock Option may be granted pursuant to the provisions of the
Scheme to purchase stock which does not satisfy the requirements of paragraphs
10 to 14 of Schedule 9.
(m) Manner of exercise
An Optionee may exercise an Approved UK Stock Option by sending his option
certificate together with the exercise price in cash or by cheque to the
Corporation. Notwithstanding any rights determined by reference to a record date
preceding the date of issue, stock issued on the exercise of an Approved UK
Stock Option shall rank pari passu with the other shares as the same class in
issue at the date of issue. If any shares are listed or quoted on any recognised
stock exchange, no approved UK Stock Option may be granted or exercised in
contravention of the terms of such rules of such body as may be in force from
time to time.
(n) Service Rights
Rights and obligations of any Optionee under the terms of his office or
employment with the Corporation and its subsidiaries shall not be affected by
participation in the Scheme or any right to participate therein. Any Optionee
who participates therein shall waive any and all rights to compensation or
damages and consequence of the termination of his office or employment for any
reason whatsoever in so far as those rights arise or may arise from his ceasing
to have rights under or be entitled to exercise any Approved UK Stock Option
under the Scheme as the result of such termination.
(o) Takeovers
If any person obtains Control of the Corporation as a result of making;
(i) a general offer to acquire the whole of the issued share
capital of the Corporation (other than that which is already
owned by him) which is unconditional or which is made on a
condition such that if it is satisfied the person making the
offer will have Control of the Corporation; or
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(ii) a general offer to acquire all of the shares (other than
shares which are already owned by him) in the Corporation
which are of the same class as the shares
Then the Plan Administrator shall notify all Optionees of the offer and shall
use its best efforts to have the options assumed by the acquiring entity, and
any Approved UK Stock Option so assumed may be exercised upon receipt of this
notice up to the expiry of a period ending 6 months from the time when the
person making the offer has obtained Control of the Corporation and any
conditions subject to which the offer has been made has been satisfied.
If as a result of the events specified above, a company has obtained Control of
the Corporation, the Optionee may, if that other company ("the Acquiring
Company") so agrees release any Approved UK Stock Options he holds in
consideration of the grant of a new option over shares in the Acquiring Company
or some other company falling within paragraph 10(b) or 10(c) of Schedule 9,
providing such new option meets the requirements of paragraph 15 (3)(a) to (d)
of Schedule 9 and that such release and grant occur within the "appropriate
period" as defined by paragraph 15 (2) Schedule 9.
A new option issued in consideration of the release of an Approved UK Stock
Option shall be evidenced by an option certificate which shall import the
relevant provisions of the Plan subject to the consequent amendments (including,
without prejudice to the generality of the foregoing, the amendment of the terms
"Corporation", "share" and "Approved UK Stock Option") necessary to accommodate
the new options and to comply with paragraph 15(3) Schedule 9. A new option
shall, for all other purposes of the Scheme, be treated as having been acquired
at the same time as the corresponding released options.
For the purpose of this paragraph a person shall be deemed to have obtained
Control of the Corporation if he, and other acting in concert with him have
obtained Control of it.
(p) Corporate Transactions, Hostile Takeovers and Changes in Control
In the event of a Corporate Transaction or an Involuntary Termination as a
result of the Corporate Transaction any option shall be exercisable for the
period specified by the Plan Administrator, and on expiry of such period the
option shall lapse.
March 20, 1997
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EXHIBIT A
AUTOMATIC STOCK OPTION AGREEMENT
March 20, 1997
47
<PAGE>
NOTICE OF
AUTOMATIC STOCK OPTION GRANT
Notice is hereby given of the following stock option (the
"Option") to purchase shares of the common stock of Amdahl Corporation (the
"Corporation") which has been granted pursuant to the Automatic Option Grant
Program in effect under the Corporation's 1994 Stock Incentive Plan ( the
"Plan"):
Optionee:
Grant Date:
Type of Option: Non-Statutory Stock Option
Exercise Price: $______ (100% of Fair Market Value on Grant Date)
Shares Granted: 5,000
Expiration Date:
Exercise Schedule: The Option is immediately exercisable for all the Option
Shares.
Vesting Schedule: The Option Shares shall initially be unvested and subject to
repurchase by the Corporation, at the Exercise Price paid per share, upon
Optionee's cessation of service as a member of the Corporation's Board of
Directors (the "Board") prior to vesting in the Option Shares. Optionee shall
acquire a vested interest in the Option Shares, and the Corporation's repurchase
right with respect to the Option Shares shall lapse, in two (2) equal and
successive annual installments over Optionee's continued period of Board
service, with the first such installment to vest upon Optionee's completion of
one (1) year of Board service measured from the Grant Date.
Optionee understands and agrees that the Option is granted
subject to and in accordance with the express terms and conditions of the Plan
governing automatic option grants to Board members. Optionee further agrees to
be bound by the terms and conditions of the Plan and the terms and conditions of
the Option as set forth in the Automatic Stock Option Agreement attached hereto
as Exhibit A.
Optionee hereby acknowledges receipt of a copy of the official
Plan Summary and Prospectus. A copy of the Plan is also available upon request
made to the Corporate Secretary at the Corporate Offices at 1250 East Arques
Avenue, P.O. Box 3470, Sunnyvale, California 94088-3470.
March 20, 1997
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<PAGE>
REPURCHASE RIGHT. OPTIONEE HEREBY AGREES THAT ALL UNVESTED
OPTION SHARES ACQUIRED UPON THE EXERCISE OF THE OPTION SHALL NOT BE TRANSFERABLE
AND SHALL BE SUBJECT TO REPURCHASE BY THE CORPORATION AND ITS ASSIGNS, AT THE
EXERCISE PRICE PAID PER SHARE, UPON OPTIONEE'S CESSATION OF SERVICE AS A MEMBER
OF THE CORPORATION'S BOARD OF DIRECTORS. THE TERMS AND CONDITIONS OF SUCH
REPURCHASE RIGHT SHALL BE SET FORTH IN A STOCK ISSUANCE AGREEMENT, IN FORM AND
SUBSTANCE SATISFACTORY TO THE CORPORATION, EXECUTED BY OPTIONEE AT THE TIME OF
THE OPTION EXERCISE.
No provision of this Notice of Automatic Stock Option Grant or
the attached Automatic Stock Option Agreement shall in any way be construed or
interpreted so as to affect adversely or otherwise impair the right of the
Corporation or the stockholders to remove Optionee from the Board at any time in
accordance with the provisions of applicable law.
DATED: , 199__
AMDAHL CORPORATION
By:
OPTIONEE
Attachments:
Exhibit A: Automatic Stock Option Grant Agreement
March 20, 1997
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EXHIBIT A
AMDAHL CORPORATION
AUTOMATIC STOCK OPTION GRANT AGREEMENT
RECITALS
A. The Corporation has approved an Automatic Option Grant Program under
the 1994 Stock Incentive Plan (the "Plan"), pursuant to which special option
grants are to be made to non-employee Directors of the Corporation's Board of
Directors (the "Board") at periodic intervals over their period of Board service
in order to encourage such individuals to remain in the Corporation's service.
B. Optionee is an Eligible Director in accordance with Article Three of
the Plan, and this Agreement is executed pursuant to, and is intended to carry
out the purposes of, the Plan in connection with the automatic grant of a stock
option to purchase shares of the Corporation's common stock, par value of $.05
per share ("common stock") under the Plan.
C. The granted option is intended to be a non-statutory option which
does not meet the requirements of Section 422 of the Internal Revenue Code and
is designed to provide Optionee with a meaningful incentive to continue to serve
as a member of the Board.
NOW, THEREFORE, it is hereby agreed as follows:
1. Grant of Option. Subject to and upon the terms and
conditions set forth in this Agreement, there is hereby granted to Optionee, as
of the date of grant (the "Grant Date") specified in the accompanying Notice of
Automatic Stock Option Grant (the "Grant Notice"), a stock option to purchase up
to the number of shares of common stock (the "Option Shares") as is specified in
the Grant Notice. The Option Shares shall be purchasable from time to time
during the option term at the price per share (the "Exercise Price") specified
in the Grant Notice.
2. Option Term. This option shall have a maximum term of
fifteen (15) years measured from the Grant Date and shall expire at the close of
business on the Expiration Date specified in the Grant Notice, unless terminated
earlier pursuant to Paragraph 5, 7 or 8.
3. Limited Transferability. This option, together with the
special stock appreciation right provided under Paragraph 8.b, shall be
transferable or assignable by Optionee: (i) during Optionee's lifetime for
estate planning purposes to a member of his or her immediate family or to a
trust established for one or more such family members; and (ii) by will or by
the laws of descent and distribution following Optionee's death.
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<PAGE>
4. Exercisability/Vesting. This option shall be immediately
exercisable for any or all of the Option Shares, whether or not the Option
Shares are at the time vested in accordance with the Vesting Schedule set forth
in the Grant Notice. However, any shares purchased under this option shall be
subject to repurchase by the Corporation, at the exercise price paid per share,
upon the Optionee's termination of Board service prior to vesting in those
shares. This option shall remain exercisable until the Expiration Date unless it
is fully exercised or terminated earlier pursuant to Paragraphs 5, 7 or 8. In no
event shall this option be exercisable after the Expiration Date.
The Option Shares will vest in accordance with the Vesting
Schedule set forth in the Grant Notice. Vesting of the Option Shares shall be
subject to acceleration as provided in Paragraphs 5, 7 or 8. In no event,
however, shall any additional Option Shares vest following Optionee's
termination of service as a Director, except as otherwise provided pursuant to
Paragraph 5, 7 or 8 of this Agreement.
5. Termination of Board Service.
a. Should Optionee cease to serve as a Director for
any reason (other than death or permanent disability) prior to
completing at least four (4) years of Board service while holding this
option, then Optionee shall have a six (6) month period commencing with
the date of such termination of Board service in which to exercise any
outstanding Option Shares under this option which are vested at the
time of Optionee's termination of Board service, but in no event shall
this option be exercisable at any time after the Expiration Date.
b. Should Optionee, with less than four (4) years of
service on the Board, die within the six (6)-month period following the
date of his or her termination of Board service, then the personal
representative of Optionee's estate, or the person or persons to whom
the option is transferred pursuant to Optionee's will or in accordance
with the laws of descent and distribution, shall have a twelve (12)
month period to exercise any outstanding Option Shares under this
option which are vested at the time of Optionee's termination of Board
service, but in no event shall this option be exercisable at any time
after the Expiration Date.
c. Should Optionee cease to serve as a Director for
any reason (other than removal for cause) following his or her
completion of four (4) or more years of Board service, then any
outstanding Option Shares under this option at the time of such
termination of Board service shall immediately vest in full (and the
Corporation's repurchase right with respect to such Option Shares shall
terminate), and Optionee or the personal representative of Optionee's
estate or the person or persons to whom this option is transferred
pursuant to Optionee's will or in accordance with the laws of descent
and distribution shall have the right to exercise any outstanding
Option Shares prior to the Expiration Date.
d. Should Optionee die or become permanently disabled
while serving as a Director, then any outstanding Option Shares at the
time of such termination of Board service shall immediately vest in
full (and the Corporation's repurchase rights with respect to
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<PAGE>
the Option Shares shall terminate), and Optionee or the personal
representative of Optionee's estate or the person or persons to whom
the option is transferred pursuant to Optionee's will or in accordance
with the laws of descent and distribution shall have until the
expiration date of the option term in which to exercise any outstanding
Option Shares.
e. Optionee shall be deemed to be permanently
disabled if Optionee is unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental
impairment expected to result in death or to be of continuous duration
of twelve (12) months or more.
6. Adjustment in Option Shares.
a. Should any change be made to the common stock
issuable under the Plan by reason of any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or other
change affecting such common stock as a class without the Corporation's
receipt of consideration, then the number and class of securities
purchasable under this option and the Exercise Price payable per share
shall be appropriately adjusted to prevent the dilution or enlargement
of Optionee's rights hereunder; provided, however, the aggregate
Exercise Price shall remain the same.
b. To the extent this option is assumed in connection
with any Corporate Transaction under Paragraph 7 or is otherwise to
continue in effect, this option shall be appropriately adjusted,
immediately after such Corporate Transaction, to apply and pertain to
the number and class of securities which would have been issued to
Optionee, in consummation of such Corporate Transaction, had this
option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to the Exercise Price
payable per share, provided the aggregate Exercise Price payable for
such securities shall remain the same.
7. Corporate Transaction. In the event of any of the
following stockholder-approved transactions to which the Corporation is a party
(a "Corporate Transaction"):
a. a merger or consolidation in which the Corporation
is not the surviving entity, except for a transaction the principal
purpose of which is to change the state in which the Corporation is
incorporated;
b. the sale, transfer or other disposition of
all or substantially all of the assets of the Corporation in complete
liquidation or dissolution of the Corporation; or
c. any reverse merger in which the Corporation is the
surviving entity but in which securities possessing more than fifty
percent (50%) of the total combined voting power of the Corporation's
outstanding securities are transferred to a person or persons different
from those who held such securities immediately prior to such merger;
March 20, 1997
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<PAGE>
all outstanding Option Shares under this option shall automatically vest in full
(and the Corporation's repurchase right with respect to those shares shall
immediately terminate) immediately prior to the specified effective date for the
Corporate Transaction, and this option may be exercised for any outstanding
Option Shares. Immediately following the consummation of the Corporate
Transaction, this option shall terminate and cease to be outstanding, except to
the extent assumed by the successor corporation (or parent thereof).
8. Change in Control/Hostile Takeover.
Any outstanding Option Shares under this option at the time of
a Change in Control or Hostile Take-Over (as such terms are defined below) shall
automatically vest in full (and the Corporation's repurchase right with respect
to such Option Shares shall terminate). This option shall remain exercisable
until the earliest to occur of (i) the Expiration Date, (ii) the early
termination of this option in accordance with Paragraph 5 or 7, or (iii) the
surrender of this option under Paragraph 8.b.
Optionee shall also have the unconditional right (exercisable
during the thirty (30)-day period immediately following the consummation of such
Hostile Take-Over) to surrender this option to the Corporation in exchange for a
cash distribution from the Corporation in an amount equal to the excess of (i)
the Take-Over Price of the Option Shares at the time subject to the surrendered
option over (ii) the aggregate Exercise Price payable for such shares ("limited
stock appreciation right").
To exercise this limited stock appreciation right, Optionee
must, during the applicable thirty (30)-day exercise period, provide the
Corporation with written notice of the option surrender in which there is
specified the number of Option Shares as to which the option is being
surrendered. Such notice must be accompanied by the return of Optionee's copy of
this Agreement, together with any written amendments to such Agreement. The cash
distribution shall be paid to Optionee within five (5) days following such
delivery date, and neither the approval of the Plan Administrator nor the
consent of the Board shall be required in connection with the option surrender
and cash distribution. Upon receipt of such cash distribution, this option shall
be cancelled with respect to the shares subject to the surrendered option (or
the surrendered portion), and Optionee shall cease to have any further right to
acquire those Option Shares under this Agreement. However, should this option be
surrendered for only a portion of the Option Shares at the time subject to the
option, a new stock option agreement (substantially in the form of this
Agreement) shall be issued by the Corporation for the balance of the Option
Shares for which this option is not surrendered.
This limited stock appreciation right shall in all events
terminate upon the expiration or sooner termination of the option term.
Definitions: For purposes of this Agreement, the following definitions
shall be in effect:
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Change in Control: a change in ownership or control of the Corporation
effected through either of the following transactions:
- a direct acquisition by any person (or related group of
persons) of beneficial ownership (within the meaning of Rule 13d-3 of
the Securities and Exchange Act of 1934, as amended (the "1934 Act")),
of securities possessing more than ten percent (10%) of the total
combined voting power of the Corporation's outstanding securities,
- the direct or indirect acquisition by any person or related
group of persons, whether by tender or exchange offer made directly to
the Corporation's stockholders, private purchases from one or more of
the Corporation's stockholders, open market purchases or any other
transaction, of additional securities of the Corporation which
increases the beneficial ownership (within the meaning of Rule 13d-3 of
the 1934 Act) of the total securities holdings of such person (or
related group of persons) to a level of securities possessing more than
fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities, or
- the direct or indirect acquisition by any person or related
group of persons, whether by tender or exchange offer made directly to
the Corporation's stockholders, private purchases from one or more of
the Corporation's stockholders, open market purchases or any other
transaction, of beneficial ownership (within the meaning of Rule 13d-3
of the 1934 Act) of securities of the Corporation possessing sufficient
voting power in the aggregate to elect an absolute majority of the
Board (rounded up to the next whole number).
Hostile Take-Over: a change in ownership of the Corporation effected
through the following transaction:
- the direct or indirect acquisition by any person or related
group of persons of beneficial ownership (within the meaning of Rule
13d-3 of the 1934 Act) of securities possessing more than fifty percent
(50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made
directly to the Corporation's stockholders which the Board does not
recommend such stockholders to accept, and
- more than fifty percent (50%) of the acquired securities are
accepted from holders other than the officers and directors of the
Corporation subject to the short-swing profit restrictions of Section
16 of the 1934 Act.
March 20, 1997
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Take-Over Price: the greater of: (i) the Fair Market Value (as defined in
subparagraph 9.b. below) per share of common stock on the date the option is
surrendered to the Corporation in connection with the Hostile Take-Over; or (ii)
the highest reported price per share of common stock paid by the tender offeror
in effecting such Hostile Take-Over.
9. Manner of Exercising Option.
a. In order to exercise this option for all or any part of the Option
Shares for which the option is at the time exercisable, Optionee (or in the case
of exercise after Optionee's death, Optionee's executor, administrator, heir or
legatee, as the case may be) must take the following actions:
(i) To the extent the option is exercised for vested Option Shares,
the Secretary of the Corporation shall be provided with written notice of
the option exercise (the "Exercise Notice"), in substantially the form of
Exhibit I attached hereto, in which there is specified the number of vested
Option Shares which are to be purchased under the exercised option. To the
extent the option is exercised for one or more unvested Option Shares,
Optionee (or other person exercising the option) shall deliver to the
Secretary of the Corporation a stock issuance agreement (in form and
substance satisfactory to the Corporation) which grants the Corporation the
right to repurchase, at the Exercise Price, any and all unvested Option
Shares held by Optionee at the time of his or her cessation of Board
service and which precludes the sale, transfer or other disposition of any
purchased Option Shares subject to such repurchase right (the "Issuance
Agreement");
(ii) The aggregate Exercise Price for the purchased shares shall be
paid in one of the following alternative forms:
(a) full payment in cash or check made payable to the
Corporation's order;
(b) full payment in shares of common stock held by Optionee for
the requisite period necessary to avoid a charge to the Corporation's
earnings for financial reporting purposes and valued at Fair Market
Value on the Exercise Date (as defined below);
(c) full payment in a combination of shares of common stock held
for the requisite period necessary to avoid a charge to the
Corporation's earnings for financial reporting purposes and valued at
Fair Market Value on the Exercise Date and cash or check made payable
to the Corporation's order; or
(d) to the extent the option is exercised for vested Option
Shares, full payment effected through the Immediate Sale Program: a
broker-dealer sale and remittance procedure pursuant to which Optionee
shall provide irrevocable instructions (i) to a Corporation-designated
brokerage firm to effect the immediate sale of the vested shares
purchased under the option and remit to the Corporation, out of the
sale proceeds available
March 20, 1997
55
<PAGE>
on the settlement date, sufficient funds to cover the aggregate
Exercise Price payable for those shares; and (ii) to the Corporation to
deliver the certificates for the purchased shares directly to such
brokerage firm in order to complete the sale; and
(iii) Appropriate documentation evidencing the right to exercise this
option shall be furnished to the Corporation if the person or persons
exercising the option is other than Optionee.
b. For purposes of subparagraph 9.a. above and for all other valuation
purposes under this Agreement, the Fair Market Value per share of common stock
on any relevant date shall be the mean between the highest and lowest selling
prices per share on the date in question on the principal exchange on which the
common stock is then listed or admitted to trading, as such prices are reported
on the composite tape of transactions on such exchange. If there are no reported
sales of the common stock on the date in question, then the Fair Market Value
shall be the mean between the highest and lowest selling prices on the last
preceding date for which such quotations exist.
c. The Exercise Date shall be the date on which the Exercise Notice is
delivered to the Secretary of the Corporation, together with the appropriate
Issuance Agreement for any unvested shares acquired under the option. Except to
the extent the Immediate Sale Program specified above is utilized in connection
with the exercise of the option for vested Option Shares, payment of the
Exercise Price for the purchased shares must accompany such notice.
d. As soon as practical after the Exercise Date, the Corporation shall
issue to or on behalf of Optionee (or other person or persons exercising this
option) a certificate or certificates representing the purchased Option Shares.
To the extent any such Option Shares are unvested, the certificates for those
Option Shares shall be endorsed with an appropriate legend evidencing the
Corporation's repurchase rights and may be held in escrow with the Corporation
until such shares vest.
e. In no event may this option be exercised for any fractional share.
10. Stockholder Rights. The holder of this option
shall not have any of the rights of a stockholder with respect to the Option
Shares until such individual shall have exercised this option and paid the
Exercise Price for the purchased shares.
11. No Impairment of Rights. This Agreement shall not in any
way affect the right of the Corporation to adjust, reclassify, reorganize or
otherwise make changes in its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets. Nor shall this Agreement in any way be construed or
interpreted so as to affect adversely or otherwise impair the right of the
Corporation or the stockholders to remove Optionee from the Board at any time in
accordance with the provisions of applicable law.
March 20, 1997
56
<PAGE>
12. Compliance with Laws and Regulations. The exercise of this
option and the issuance of the Option Shares upon such exercise shall be subject
to compliance by the Corporation and Optionee with all applicable requirements
of law relating thereto and with all applicable regulations of any securities
exchange on which shares of the common stock may be listed for trading at the
time of such exercise and issuance.
13. Successors and Assigns. Except to the extent otherwise
provided in Paragraph 3 or 7, the provisions of this Agreement shall inure to
the benefit of, and be binding upon, the successors, administrators, heirs,
legal representatives and assigns of Optionee and the Corporation's successors
and assigns.
14. Discharge of Liability. The inability of the Corporation
to obtain approval from any regulatory body having authority deemed by the
Corporation to be necessary to the lawful issuance and sale of any common stock
pursuant to this option shall relieve the Corporation of any liability with
respect to the non-issuance or sale of the common stock as to which such
approval shall not have been obtained. However, the Corporation shall use its
best efforts to obtain all such applicable approvals.
15. Notices. Any notice required to be given or delivered to
the Corporation under the terms of this Agreement shall be in writing and
addressed to the Corporation in care of the Corporate Secretary at the Corporate
Offices at 1250 East Arques Avenue, P.O. Box 3470, Sunnyvale, California
94088-3470. Any notice required to be given or delivered to Optionee shall be in
writing and addressed to Optionee at the address indicated below Optionee's
signature line on the Grant Notice. All notices shall be deemed to have been
given or delivered upon personal delivery or upon deposit in the U.S. mail,
postage prepaid and properly addressed to the party to be notified.
16. Construction/Governing Law. This Agreement and the option
evidenced hereby are made and granted pursuant to the Plan and are in all
respects limited by and subject to the express terms and provisions of the Plan,
including the Automatic Option Grant Program provisions of Article Three of the
Plan. The interpretation, performance and enforcement of this Agreement shall be
governed by the laws of the State of California without resort to that State's
conflict-of-laws provisions.
March 20, 1997
57
<PAGE>
EXHIBIT I
NOTICE OF EXERCISE OF
AUTOMATIC STOCK OPTION
I hereby notify Amdahl Corporation (the "Corporation") that I elect to
purchase ____________ shares of the Corporation's common stock par value of
$0.05 per share (the "Purchased Shares") at the option exercise price of $______
per share (the "Exercise Price") pursuant to that certain option (the "Option")
granted to me under the Corporation's 1994 Stock Incentive Plan on ___________,
199_ to purchase up to 5,000 shares of the Corporation's common stock.
Concurrently with the delivery of this Exercise Notice to the Secretary of
the Corporation, I shall hereby pay to the Corporation the Exercise Price for
the Purchased Shares in accordance with the provisions of my agreement with the
Corporation evidencing the Option and shall deliver whatever additional
documents may be required by such agreement as a condition for exercise.
Alternatively, I may utilize the special Immediate Sale procedure specified in
my agreement to effect payment of the Exercise Price for any Purchased Shares in
which I am vested at the time of exercise.
Date Optionee
Address:
Print name in exact manner
it is to appear on the
stock certificate:
Address to which certificate
is to be sent, if different
from address above:
Social Security Number:
March 20, 1997
58
Exhibit 10(q)
Indemnification Agreement
THIS AGREEMENT is made and entered into this ___ day of November, 1996 between
Amdahl Corporation, a Delaware corporation ("Corporation"), and
______________("Officer").
Witnesseth That:
WHEREAS, Officer, an officer of Corporation, performs a valuable service in such
capacity for Corporation; and
WHEREAS, Corporation has adopted By-Laws (the "By-Laws") providing for the
indemnification of the officers and directors of Corporation pursuant to the
Delaware General Corporation Law, as amended (the "Code"); and
WHEREAS, the Code by its non-exclusive nature and the By-Laws by express
provision, permit contracts between Corporation and its directors and officers
with respect to indemnification of such officers; and
WHEREAS, in accordance with the authorization as provided by the Code,
Corporation has purchased and presently maintains a policy or policies of
Directors and Officers Liability Insurance ("D & O Insurance"), covering certain
liabilities which may be incurred by its directors and officers in their
performance as directors and officers of Corporation; and
WHEREAS, there exists general uncertainty as to the extent of protection which
will be afforded officers of the Corporation by such D & O Insurance and by
statutory and bylaw indemnification provisions; and
WHEREAS, in order to induce Officer to continue to serve as an officer of
Corporation, Corporation has determined and agreed to enter into this contract
with Officer;
NOW, THEREFORE, in consideration of Officer's continued service as an officer
after the date hereof, the parties hereto agree as follows:
1. Indemnity of Officer. Pursuant to the By-Laws and subject only to the
exclusions set forth in Section 2 hereof, Corporation hereby agrees to hold
harmless and indemnify Officer against any and all expenses and loss
(including
<PAGE>
inter alia, attorneys' fees, judgments, fines, ERISA excise taxes or
penalties and amounts paid in settlement) actually and reasonably incurred
by Officer in connection with the investigation, defense or appeal of any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (including an action by or in the
right of Corporation) to which Officer is, was or at any time becomes a
party, or is threatened to be made a party, by reason of the fact that
Officer is or was an officer of Corporation, or is or was serving or at any
time serves at the request of Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise.
2. Limitations on Indemnity. No indemnity pursuant to Section 1 hereof shall
be paid by Corporation:
(a) except to the extent the aggregate of losses to be indemnified
pursuant to Section 1 exceeds the amount of such losses for which
Officer is indemnified either pursuant to the Code or pursuant to any
D & O Insurance purchased and maintained by Corporation;
(b) in respect to remuneration paid to Officer if such remuneration was in
violation of law;
(c) on account of any suit in which judgment is rendered against Officer
for an accounting of profits made from the purchase or sale by Officer
of securities of Corporation pursuant to the provisions of Section
16(b) of the Securities Exchange Act of 1934 and amendments thereto or
similar provisions of any federal, state or local statutory law;
(d) on account of Officer's conduct which Corporation's Board of Directors
determines was knowingly fraudulent, deliberately dishonest, knowingly
contrary to Corporation's policies, or constituted willful misconduct;
or
(e) if a final decision by a court having jurisdiction in the matter shall
determine that such indemnification is not lawful.
3. Continuation of Obligations. All agreements and obligations of Corporation
contained herein shall continue during the period Officer is an officer of
Corporation (or is or was serving at the request of Corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise) and shall continue thereafter so
long as Officer shall be subject to any possible claim or threatened,
pending or completed action, suit or proceeding whether civil, criminal,
administrative or investigative, by reason of the fact that Officer was an
officer of Corporation or serving in any other capacity referred to herein.
<PAGE>
4. Notification and Defense of Claim. Promptly after receipt by Officer of
notice of the commencement of any action, suit or proceeding, Officer will,
if a claim in respect thereof is to be made against Corporation under this
Agreement, notify Corporation of the commencement thereof; but the omission
so to notify Corporation will not relieve it from any liability which it
may have to Officer otherwise than under this Agreement. With respect to
any such action, suit or proceeding as to which Officer notifies
Corporation of the commencement thereof:
(a) Corporation will be entitled to participate therein at its own
expense;
(b) except as otherwise provided below, to the extent that it may wish,
Corporation jointly with any other indemnifying party similarly
notified will be entitled to assume the defense thereof, with counsel
satisfactory to Officer. After notice from Corporation to Officer of
its election so as to assume the defense thereof, Corporation will not
be liable to Officer under this Agreement for any legal or other
expenses subsequently incurred by Officer in connection with the
defense thereof other than reasonable costs of investigation or as
otherwise provided below. Officer shall have the right to employ its
counsel in such action, suit or proceeding but the fees and expenses
of such own counsel incurred after notice from Corporation of its
assumption of the defense thereof shall be at the expense of Officer
unless (i) the employment of counsel by Officer has been authorized by
Corporation, (ii) Corporation shall have reasonably concluded that
there may be a conflict of interest between Corporation and Officer in
the conduct of the defense of such action or (iii) Corporation shall
not in fact have employed counsel to assume the defense of such action
for which indemnification is provided by this Agreement, in each of
which cases the fees and expenses of counsel shall be at the expense
of Corporation. Corporation shall not be entitled to assume the
defense of any action, suit or proceeding brought by or on behalf of
Corporation or as to which Corporation shall have made the conclusion
provided for in (ii) above; and
<PAGE>
(c) Corporation shall not be liable to indemnify Officer under this
Agreement for any amounts paid in settlement of any action or claim
effected without its written consent. Corporation shall not settle any
action or claim in any manner which would impose any penalty or
limitation on Officer without Officer's written consent. Neither
Corporation nor Officer will unreasonably withhold its consent to any
proposed settlement.
5. Advancement and Repayment of Expenses.
(a) In the event that Officer employs his own counsel pursuant to Section
4(b) (i) through (iii) above in any action other than one by
Corporation (except a shareholders' derivative action), Corporation
shall advance to Officer, prior to any final disposition of any
threatened or pending action, suit or proceeding, whether civil,
criminal, administrative or investigative, and prior to any
determination by Corporation's Board of Directors pursuant to Section
2(d) above, any and all reasonable expenses (including legal fees and
expenses) incurred in investigating or defending any such action, suit
or proceeding within ten (10) days after receiving copies of invoices
presented to Officer for such expenses.
(b) Officer agrees that Officer will reimburse Corporation for all
reasonable expenses paid by Corporation in defending any civil or
criminal action, suit or proceeding against Officer in the event and
only to the extent it shall be ultimately determined that Officer is
not entitled, under the provisions of the Code, the By-Laws, this
Agreement or otherwise, to be indemnified by Corporation for such
expenses.
6. Enforcement. Corporation expressly confirms and agrees that it has entered
into this Agreement and assumed the obligations imposed on Corporation
hereby in order to induce Officer to continue as an officer of Corporation,
and acknowledges that Officer is relying upon this Agreement in continuing
in such capacity.
7. Separability. Each of the provisions of this Agreement is a separate and
distinct agreement and independent of the others, so that if any provision
hereof shall be held to be invalid or unenforceable for any reason, such
invalidity or unenforceability shall not affect the validity or
enforceability of the other provisions hereof.
<PAGE>
8. Governing Law. This Agreement shall be interpreted and enforced in
accordance with the laws of the State of Delaware.
9. Binding Effect. This Agreement shall be binding upon Officer and upon
Corporation, its successors and assigns, and shall inure to the benefit of
Officer, his heirs, personal representatives and assigns and to the benefit
of Corporation, its successors and assigns.
10. Amendment and Termination. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless in writing signed
by both parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and as of
the day and year first above written.
AMDAHL CORPORATION
By:
[ ]
Chairman of the Board
and
[ ]
Officer
Exhibit 10(r)
Indemnification Agreement
THIS AGREEMENT is made and entered into this ___ day of __________, 199__
between Amdahl Corporation, a Delaware corporation ("Corporation"), and
______________("Director").
Witnesseth That:
WHEREAS, Director, a member of the Board of Directors of Corporation, performs a
valuable service in such capacity for Corporation; and
WHEREAS, the stockholders of Corporation have adopted Bylaws (the "Bylaws")
providing for the indemnification of the officers and directors of Corporation
to the maximum extent authorized by the Delaware General Corporation Law, as
amended ("Code"); and
WHEREAS, the Code by its non-exclusive nature and the Bylaws by express
provision, permit contracts between Corporation and the members of its Board of
Directors with respect to indemnification of such directors; and
WHEREAS, in accordance with the authorization as provided by the Code,
Corporation has purchased and presently maintains a policy or policies of
Directors and Officers Liability Insurance ("D & O Insurance"), covering certain
liabilities which may be incurred by its directors and officers in their
performance as directors or officers of Corporation; and
WHEREAS, as a result of recent developments affecting the terms, scope and
availability of D & O Insurance there exists general uncertainty as to the
extent of protection afforded members of the Board of Directors by such D & O
Insurance and by statutory and bylaw indemnification provisions; and
WHEREAS, in order to induce Director to continue to serve as a member of the
Board of Directors of Corporation, Corporation has determined and agreed to
enter into this contract with Director;
NOW, THEREFORE, in consideration of Director's continued service as a director
after the date hereof, the parties hereto agree as follows:
1. Indemnity of Director. Corporation hereby agrees to hold harmless and
indemnify Director to the fullest extent authorized or permitted by the
provisions of the Code, as may be amended from time to time.
<PAGE>
2. Additional Indemnity. Pursuant to the Bylaws and subject only to the
exclusions set forth in Section 3 hereof, Corporation hereby further agrees
to hold harmless and indemnify Director:
(a) against any and all expenses and loss (including inter alia,
attorneys' fees, judgments, fines, ERISA excise taxes or penalties and
amounts paid in settlement) actually and reasonably incurred by
Director in connection with the investigation, defense or appeal of
any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (including an
action by or in the right of Corporation) to which Director is, was or
at any time becomes a party, or is threatened to be made a party, by
reason of the fact that Director is, was or at any time becomes a
director, officer, employee or agent of Corporation, or is or was
serving or at any time serves at the request of Corporation as a
director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise; and
(b) otherwise to the fullest extent as may be provided to Director by
Corporation under the non-exclusivity provisions of Section 4 of
Article IX of the Bylaws of Corporation and the Code.
3. Limitations on Additional Indemnity. No indemnity pursuant
to Section 2 hereof shall be paid by Corporation:
(a) except to the extent the aggregate of losses to be indemnified
thereunder exceeds the amount of such losses for which the Director is
indemnified either pursuant to Section 1 hereof or pursuant to any D &
O Insurance purchased and maintained by Corporation;
(b) in respect to remuneration paid to Director if it shall be determined
by a final judgment or other final adjudication that such remuneration
was in violation of law;
(c) on account of any suit in which judgment is rendered against Director
for an accounting of profits made from the purchase or sale by
Director of securities of Corporation pursuant to the provisions of
Section 16(b) of the Securities Exchange Act of 1934 and amendments
thereto or similar provisions of any federal, state or local statutory
law;
<PAGE>
(d) on account of Director's conduct which is finally adjudged to have
been knowingly fraudulent or deliberately dishonest, or to constitute
willful misconduct; or
(e) if a final decision by a court having jurisdiction in the matter shall
determine that such indemnification is not lawful.
4. Contribution. If the indemnification provided in Sections 1 and 2 is
unavailable and may not be paid to Director for any reason other than those
set forth in paragraphs (b), (c) and (d) of Section 3, then in respect of
any threatened, pending or completed action, suit or proceeding in which
Corporation is jointly liable with Director (or would be if joined in such
action, suit or proceeding), Corporation shall contribute to the amount of
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred and paid or payable by Director
in such proportion as is appropriate to reflect (i) the relative benefits
received by Corporation on the one hand and Director on the other hand from
the transaction from which such action, suit or proceeding arose, and (ii)
the relative fault of Corporation on the one hand and of Director on the
other in connection with the events which resulted in such expenses,
judgments, fines or settlement amounts, as well as any other relevant
equitable considerations. The relative fault of Corporation on the one hand
and of Director on the other shall be determined by reference to, among
other things, the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent the circumstances
resulting in such expenses, judgments, fines or settlement amounts.
Corporation agrees that it would not be just and equitable if contribution
pursuant to this Section 4 were determined by pro rata allocation or any
other method of allocation which does not take account of the foregoing
equitable considerations.
5. Continuation of Obligations. All agreements and obligations of Corporation
contained herein shall continue during the period Director is a director,
officer, employee or agent of Corporation (or is or was serving at the
request of Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise) and
shall continue thereafter so long as Director shall be subject to any
possible claim or threatened, pending or completed action, suit or
proceeding whether civil, criminal, administrative or investigative, by
reason of the fact that Director was a director of Corporation or serving
in any other capacity referred to herein.
<PAGE>
6. Notification and Defense of Claim. Promptly after receipt by Director of
notice of the commencement of any action, suit or proceeding, Director
will, if a claim in respect thereof is to be made against Corporation under
this Agreement, notify Corporation of the commencement thereof; but the
omission so to notify Corporation will not relieve it from any liability
which it may have to Director otherwise than under this Agreement. With
respect to any such action, suit or proceeding as to which Director
notifies Corporation of the commencement thereof:
(a) Corporation will be entitled to participate therein at its own
expense;
(b) except as otherwise provided below, to the extent that it may wish,
Corporation jointly with any other indemnifying party similarly
notified will be entitled to assume the defense thereof, with counsel
satisfactory to Director. After notice from Corporation to Director of
its election so as to assume the defense thereof, Corporation will not
be liable to Director under this Agreement for any legal or other
expenses subsequently incurred by Director in connection with the
defense thereof other than reasonable costs of investigation or as
otherwise provided below. Director shall have the right to employ its
counsel in such action, suit or proceeding but the fees and expenses
of such counsel incurred after notice from Corporation of its
assumption of the defense thereof shall be at the expense of Director
unless (i) the employment of counsel by Director has been authorized
by Corporation, (ii) Director shall have reasonably concluded that
there may be a conflict of interest between Corporation and Director
in the conduct of the defense of such action or (iii) Corporation
shall not in fact have employed counsel to assume the defense of such
action, in each of which cases the fees and expenses of counsel shall
be at the expense of Corporation. Corporation shall not be entitled to
assume the defense of any action, suit or proceeding brought by or on
behalf of Corporation or as to which Director shall have made the
conclusion provided for in (ii) above; and
<PAGE>
(c) Corporation shall not be liable to indemnify Director under this
Agreement for any amounts paid in settlement of any action or claim
effected without its written consent. Corporation shall not settle any
action or claim in any manner which would impose any penalty or
limitation on Director without Director's written consent. Neither
Corporation nor Director will unreasonably withhold its consent to any
proposed settlement.
7. Advancement and Repayment of Expenses.
(a) In the event that Director employs his own counsel pursuant to Section
6(b) (i) through (iii) above, Corporation shall advance to Director,
prior to any final disposition of any threatened or pending action,
suit or proceeding, whether civil, criminal, administrative or
investigative, any and all reasonable expenses (including legal fees
and expenses) incurred in investigating or defending any such action,
suit or proceeding within ten (10) days after receiving copies of
invoices presented to Director for such expenses.
(b) Director agrees that Director will reimburse Corporation for all
reasonable expenses paid by Corporation in defending any civil or
criminal action, suit or proceeding against Director in the event and
only to the extent it shall be ultimately determined that Director is
not entitled, under the provisions of the Code, the Bylaws, this
Agreement or otherwise, to be indemnified by Corporation for such
expenses.
8. Enforcement
(a) Corporation expressly confirms and agrees that it has entered into
this Agreement and assumed the obligations imposed on Corporation
hereby in order to induce Director to continue as a director of
Corporation, and acknowledges that Director is relying upon this
Agreement in continuing in such capacity.
(b) In the event Director is required to bring any action to enforce
rights or to collect monies due under this Agreement and is successful
in such action, Corporation shall reimburse Director for all of
Director's reasonable fees and expenses in bringing and pursuing such
action.
9. Separability. Each of the provisions of this Agreement is a separate and
distinct agreement and independent of the others, so that if any provision
hereof shall be held to be invalid or unenforceable for any reason, such
invalidity or unenforceability shall not affect the validity or
enforceability of the other provisions hereof.
<PAGE>
10. Governing Law. This Agreement shall be interpreted and enforced in
accordance with the laws of the State of Delaware.
11. Binding Effect. This Agreement shall be binding upon Director and upon
Corporation, its successors and assigns, and shall inure to the benefit of
Director, his heirs, personal representatives and assigns and to the
benefit of Corporation, its successors and assigns.
12. Amendment and Termination. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless in writing signed
by both parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and as of
the day and year first above written.
Amdahl Corporation
By:
John C. Lewis
Chairman of the Board
and
[ ]
Director
Exhibit 13
MANAGEMENT'S DISCUSSION AND ANALYSIS
Words such as "anticipates," "expects" and "believes" in the Letter to
Stockholders and the following discussion identify forward-looking statements.
These statements, and the Company's future results, are subject to certain risks
and uncertainties that could cause actual results to differ materially from
those expected. These risks and uncertainties are discussed in the section below
entitled "Factors That May Affect Future Operating Results" and in the Company's
reports filed with the Securities and Exchange Commission, including its Report
on Form 10-K for the fiscal year ended December 27, 1996 under the caption
"Business".
RESULTS OF OPERATIONS
1996 COMPARED TO 1995
Revenues
Total revenues increased 8% or $115 million from 1995 to 1996, as increases in
services revenues more than offset declines in equipment sales. Equipment sales
decreased 33% or $265 million from 1995 to 1996 and were 33% and 53% of total
revenues in 1996 and 1995, respectively. This decrease reflected the Company's
transition to new products in its principal hardware lines during 1996.
Processor equipment sales decreased 44% due to significant declines in both
pricing and volumes for the ECL-technology 5995M processor as it approached the
end of its product life cycle. This decrease was partially offset by revenues
from the Company's new CMOS-technology Millennium mainframe system, which first
went into volume production in the fourth quarter of 1996. Revenues from storage
equipment sales decreased 5% in 1996 compared to 1995 due to year-to-year
pricing declines, which more than offset increased volumes in the second half of
1996 from a new generation of Amdahl storage products for the IBM System/390-
compatible and open systems markets. Equipment sales of high-performance
servers, most of which were acquired under original equipment manufacturer (OEM)
arrangements with Sun Microsystems, increased 26% or $20 million year-to-year.
Service, software and other revenues increased 53% or $380 million from
1995 to 1996 and were 67% and 47% of total revenues in 1996 and 1995,
respectively. Professional services revenues increased $418 million principally
due to the acquisitions of DMR Group Inc. (DMR) in the fourth quarter of 1995
and Trecom Business Systems, Inc. (Trecom) in the second quarter of 1996.
Maintenance revenues decreased $40 million or 8% from a combination of price
declines and the gradual reduction of the installed base of certain older
technology mainframe systems. Software and implementation services revenues
declined $3 million reflecting nonrecurring sales of certain software to Fujitsu
in 1995 (see Note 2 to the Consolidated Financial Statements).
Approximately 51% of the Company's revenues came from outside the
United States in 1996 and was recorded in local currency (see Note 9 to the
Consolidated Financial Statements). 1996 revenues were favorably impacted by
approximately $13 million from a weaker U.S. dollar, as international revenues
denominated in foreign currencies translated into more dollars in 1996, when
compared to 1995. The Company uses a variety of financial hedging instruments to
minimize currency risk from international revenue transactions (see Note 5 to
the Consolidated Financial Statements).
Gross Margins
Total gross margin as a percentage of revenues decreased from 37% in 1995 to 16%
in 1996. Gross margin on equipment sales as a percentage of equipment sales
revenues decreased from 33% in 1995 to a negative 4% in 1996 due to severe 5995M
price declines, which resulted in a charge of $130 million to cost of equipment
sales in the second quarter of 1996 to reduce 5995M inventories and leased
systems to estimated market values. The Company took a similar charge of $26
million in the fourth quarter of 1995. Gross margins on storage product sales
improved by $3 million in 1996 over 1995 despite lower revenues year-to-year,
largely because the new generation of storage products shipped in the second
half of 1996 had significantly lower unit costs than the previous generation
products. Gross margins on service, software and other revenues as a percentage
of related revenues decreased from 41% in 1995 to 25% in 1996, reflecting the
shift to professional services which generate lower gross margins as a percent
of sales than maintenance services.
24 Amdahl Corporation
<PAGE>
Operating Expenses
In the second quarter of 1996, related to the acquisition of Trecom, Amdahl
recorded a charge to operating expenses of $21 million to write off purchased
in-process engineering and development expenses (see Note 3 to the Consolidated
Financial Statements). A similar charge of $27 million was recorded in the
fourth quarter of 1995 relating to the acquisition of DMR (see Note 3 to the
Consolidated Financial Statements). In the fourth quarter of 1996 the Company
also recorded a $40-million restructuring charge to cover the planned costs of
reducing certain sectors of its workforce and facilities. Operating expenses in
1996 and 1995, excluding these charges, were 32% and 34% of revenues,
respectively.
Excluding the charges for purchased in-process engineering and
development expenses associated with the acquisitions of Trecom and DMR,
engineering and development expenses decreased $24 million or 16% when compared
to 1995, primarily due to agreements with Fujitsu for the joint development of
the next generation of IBM-compatible processor and storage systems (see Note 2
to the Consolidated Financial Statements). 1996 marketing, general and
administrative expenses increased $32 million or 9% when compared to 1995. The
increase resulted primarily from the acquisitions of DMR and Trecom, and
included $8 million for amortization of excess costs over net assets (goodwill).
Interest Income/Expense and Income Taxes
Net interest income decreased $23 million or 55% from 1995, reflecting lower
average cash balances in 1996 compared to 1995. This decline was largely caused
by the cash payments made to acquire DMR and Trecom, plus the net cash outflow
needed to fund 1996 operations.
The effective annual income tax rate was a negative 4% in 1996,
compared to 43% in 1995. The 1996 tax rate included a provision for taxes
currently payable in foreign, state and local jurisdictions. The tax provision
did not reflect a tax benefit for the loss incurred during the year. A valuation
allowance was recorded in 1996 to reduce the deferred tax assets of the Company
to an amount realizable based on taxes paid for prior years without relying on
future income.
RESULTS OF OPERATIONS
1995 COMPARED TO 1994
Revenues
Total revenues decreased 7% from 1994 to 1995, and equipment sales decreased 23%
or $247 million from 1994 to 1995 and were 53% and 64% of total revenues in 1995
and 1994, respectively. Processor equipment sales decreased 22% due to a higher
percentage of sales of 5995M processor upgrades than in 1994 and a significant
decline in pricing experienced in the fourth quarter of 1995. Overall, 5995M
prices declined 32% in 1995. Equipment sales of the older lines of mainframe
computers also decreased. Revenues from storage product equipment sales
decreased 59% in 1995 when compared to 1994 as a result of pricing and volume
declines associated with delays in the introduction of new storage products.
Equipment sales of high-performance servers acquired under OEM arrangements with
Sun Microsystems, which were 10% and 3% of total equipment sales revenues in
1995 and 1994, respectively, increased 186% or $50 million from 1994 to 1995.
Service, software and other revenues increased 21% or $124 million from
1994 to 1995 and were 47% and 36% of total revenues in 1995 and 1994,
respectively. The increase in revenues consisted of increased professional
services revenues of $77 million, increased maintenance revenues of $26 million
from a larger customer installed base, and increased software and implementation
services revenues of $33 million, of which $15 million was of a nonrecurring
nature (see Note 2 to the Consolidated Financial Statements). This was offset by
a decrease in operating lease revenues of $12 million. DMR, which the Company
acquired in November 1995, contributed $35 million to services revenues (see
Note 3 to the Consolidated Financial Statements).
1995 revenues were favorably impacted by approximately $36 million by a
weakened U.S. dollar, as international revenues denominated in foreign
currencies translated into more dollars in 1995, when compared to 1994.
25 Amdahl Corporation
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Gross Margins
Gross margin as a percentage of revenues increased from 36% in 1994 to 37% in
1995. Gross margin on equipment sales as a percentage of equipment sales
revenues increased from 32% in 1994 to 33% in 1995, due in part to lower
manufacturing costs and a higher percentage of sales of 5995M processor
upgrades, which yield better gross margins than sales of complete new systems.
However, as a result of the severe 5995M price declines experienced in the
fourth quarter of 1995, the Company charged cost of equipment sales for $26
million to reduce 5995M inventories to market value. In addition, gross margins
on storage product sales were adversely affected by significant pricing
declines. Gross margins on service, software and other revenues as a percentage
of revenues decreased from 44% in 1994 to 41% in 1995, due primarily to lower
gross margins on services revenues and revenues from the new MultiVendor
Enterprise Services business.
Operating Expenses
In the fourth quarter of 1995 the Company recorded a charge to operating
expenses of $27 million to write off purchased in-process engineering and
development expenses associated with the acquisition of DMR that had no
alternative future use (see Note 3 to the Consolidated Financial Statements).
Operating expenses in 1995 and 1994, excluding these charges, were 34% and 32%
of revenues, respectively.
Excluding the charge for purchased engineering and development
expenses, engineering and development expenses decreased $54 million or 26% when
compared to 1994, primarily due to the agreement with Fujitsu for the joint
development of the next generation of IBM-compatible systems. 1995 marketing,
general and administrative expenses increased $43 million or 13% when compared
to 1994 due to increased marketing efforts directed toward the Company's newer
lines of business.
Interest Income/Expense and Income Taxes
Net interest income increased $24 million or 150% from 1994 to 1995 due to
increased interest income from higher average cash and investment levels.
The effective annual income tax rate increased from 7% in 1994 to 43%
in 1995, due to the write off of purchased engineering and development discussed
above and the current mix of international and domestic income, which limited
the Company's utilization of net operating loss carryforwards and deferred tax
assets in 1995 when compared to 1994.
FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS
During the latter part of 1996 Amdahl completed the introduction of its
principal new hardware products, the Millennium CMOS-based mainframe systems and
Spectris storage systems, for the IBM System/390-compatible market. Although
based on limited experience, since the Millennium systems did not begin to ship
in volume until late in the fourth quarter of 1996, many initial shipments were
of smaller configurations as customers tended to add incremental computing
capacity rather than replace entire older bipolar mainframes. These systems were
also subject to the competitive pricing pressures characteristic of the
System/390 market. A continuation of these factors, coupled with IBM's announced
intention to deliver more powerful CMOS systems in mid-1997, could adversely
affect the level of growth in this segment of the Company's business over the
near term. Moreover, the Company no longer has available for marketing any
significant number of its older 5995M mainframe systems, which contributed
significantly to fourth-quarter results in 1996. Also, in light of the
transition from older technology systems to CMOS-based mainframes, the Company
expects traditional hardware maintenance revenues to continue to decline from
historic levels.
Sales of the Spectris storage systems have been subject to extreme
pricing pressures since their introduction in volume in the third quarter of
1996. As a consequence, the Company is required to offer product enhancements on
an ongoing basis in order to remain competitive in this market. Any delays in
its current development schedules would adversely impact Amdahl's competitive
position.
While the Company's consulting and professional services business
exhibited strong growth during 1996, its continued growth will depend in
considerable part on the ability to recruit and retain sufficient skilled
26 Amdahl Corporation
<PAGE>
personnel to meet ongoing customer demand for applications development and
maintenance projects, particularly those related to the year-2000 date
conversion problem. Significant competition exists in the marketplace for such
personnel and failure by the Company to achieve its planned hiring goals would
adversely affect future rates of growth. Also, while Amdahl believes that
year-2000 projects represent a significant business opportunity for the Company,
it will be difficult to ascertain their level of success until the Company has
gained a greater level of experience in this area.
Amdahl has a continuing requirement to improve the performance and
profitability of its other product lines, and to review and consider adjustments
to its overall business model. At the present time the Company is unable to
assess the impact of such adjustments, if any, on future operating results.
In general, Amdahl's business is subject to the inherent risks and
uncertainties characteristic of high-technology industries. The introduction of
new hardware products is always subject to technological risks which can have a
significant impact on product reliability and performance, as well as on the
timing of when such products become available, notwithstanding planned or
announced introduction dates. Moreover, the ability to deliver new products with
their attendant functional capabilities can also impact product acceptance.
Development of major software systems is quite commonly subject to schedule
delays and it is not uncommon for product deficiencies and reliability problems
to be recognized after product delivery to a number of installations. Product
reliability problems, in the case of both hardware and software systems, can
place added burdens on existing support staff and can also adversely impact the
completion of follow-on projects. Consulting and professional services are often
performed under fixed-price contracts which demand a high degree of accuracy in
assessing the scope of customer projects. Organizations which grow through
acquisitions or joint venturing arrangements with other companies may be unable
to realize expected synergies which can adversely affect planned financial
performance. Finally, the market for the Company's products and services can be
subject to sudden and unexpected changes in demand due to actions of the
Company's competitors as well as changes in general economic conditions which
can often cause customers to defer or cancel major product acquisitions or
project expenditures.
FINANCIAL CONDITION
December 27, 1996 Compared to December 29, 1995
The Company's net cash position (cash and short-term investments net of
short-term and long-term debt, excluding capitalized lease obligations)
decreased by $252 million from December 29, 1995 to December 27, 1996. Cash,
cash equivalents and short-term investments decreased $235 million, reflecting
$102 million used to fund 1996 operating activities, $72 million used to
purchase capital assets (net of $32 million in proceeds from the sale of retired
assets), and $68 million used for the initial payment for the acquisition of
Trecom (see Note 3 to the Consolidated Financial Statements).
Receivables increased $179 million, primarily due to higher revenues in
the fourth quarter of 1996 plus a slower overall collection period due to higher
levels of professional services revenues, which have an inherently slower
collection cycle than the Company's traditional hardware businesses. Inventories
decreased $146 million, reflecting significant reductions in processor
inventories from end-of-life 5995M sales activity and a writedown of 5995M
assets to market value in the second quarter of 1996. The reductions in 5995M
inventories were partially offset by $34 million in Millennium inventories at
year-end 1996.
The cost of property and equipment decreased $80 million because
retirements of buildings, leasehold improvements, and capitalized equipment
exceeded the purchase of new property and equipment in 1996. New capital
spending for leased systems, capitalized spares and other property and equipment
was approximately equal to depreciation in 1996 except for the acquisition of
Trecom. The acquisition of Trecom added $8 million in property and equipment
cost and $2 million in accumulated depreciation at December 27, 1996. Overall,
the net value of property and equipment decreased $28 million in 1996 due to
asset disposals and a $25-million charge in the second quarter of 1996 to reduce
certain leased systems to market value.
At December 27, 1996 the excess of cost over net assets acquired
(goodwill), net of accumulated amortization, was $201 million, which included an
increase of $95 million from the acquisition of Trecom in the second quarter of
1996 (see Note 3 to the Consolidated Financial Statements).
27 Amdahl Corporation
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
The cash, cash equivalents and short-term investments balances as of
December 27, 1996 included approximately $171 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 (the accrued taxes for which
have been provided). See Note 12 to the Consolidated Financial Statements
regarding foreign subsidiaries' earnings on which taxes have not been provided.
The Company's valuation allowance against worldwide operating losses,
deferred tax assets and tax credit carryforwards which may expire before the
Company can utilize them increased from $89 million at December 29, 1995 to $208
million at December 27, 1996. The Company believes sufficient uncertainty exists
regarding the realizability of these items and accordingly has continued to
provide a valuation allowance for them.
Accounts payable to vendors other than Fujitsu increased $30 million,
due in part to accounts payable assumed upon the acquisition of Trecom ($19
million at December 27, 1996). Accounts payable to Fujitsu increased $39
million, primarily due to increased purchases associated with the new Millennium
processor and Spectris storage products.
Accrued liabilities increased $110 million due in part to a $64 million
liability for the acquisition of Trecom which is payable in the second quarter
of 1997 (see Note 3 to the Consolidated Financial Statements). Accrued
restructuring costs decreased from $55 million at December 29, 1995 to $43
million at December 27, 1996, as current year charges of $52 million were
partially offset by an additional $40-million reserve established in the fourth
quarter of 1996 (see Note 8 to the Consolidated Financial Statements).
Excluding capitalized lease obligations, Amdahl had no long-term debt
at December 27, 1996 compared to $80 million at December 29, 1995. The decrease
resulted from a reclassification to current debt of $80 million outstanding
under a Fujitsu loan agreement, since the debt amount was payable in January
1997. Subsequent to December 27, 1996, Amdahl renegotiated the terms of this
loan and it is now payable in January 1998 (see Note 2 to the Consolidated
Financial Statements).
Liquidity
The nature of the information-technology industry, combined with the current
economic environment, makes it very difficult for the Company to predict future
liquidity requirements with certainty. However, the Company believes that
existing cash will be adequate to finance continuing operations, investments in
property and equipment, inventories and spare parts, expenditures for the
development of new products and repayment of the remaining liability for the
acquisition of Trecom, at least through 1997. Over the longer term, Amdahl must
successfully execute its plans to generate significant positive cash flows if it
is to sustain adequate liquidity without impairing growth or requiring the
infusion of additional funds, either from external sources of cash or from the
sale of business assets. Additionally, a major expansion of the business such as
would occur with the acquisition of a major new subsidiary might also require
recourse to external funding, which could include additional debt or equity
capital.
In the first quarter of 1996 the Board of Directors authorized the
Company to buy back up to $100 million of the Company's common stock. As of
December 27, 1996, no common shares had been repurchased under this program and
Amdahl will not consider a repurchase of stock until the Company has
demonstrated sustained positive cash flows.
The Company has no significant commitments with vendors other than
Fujitsu (see Note 2 to the Consolidated Financial Statements).
28 Amdahl Corporation
<PAGE>
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 27, 1996
and December 29, 1995, and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended December 27, 1996. 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 27, 1996 and December 29, 1995, and the results of
their operations and their cash flows for each of the three years in the period
ended December 27, 1996 in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
San Jose, California
January 28, 1997
29 Amdahl Corporation
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
December 27, 1996 and December 29, 1995 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 134,646 $ 192,980
Restricted cash 57,126 --
Short-term investments 210,671 444,006
Receivables, net of allowances of $10,185 in 1996
and $5,964 in 1995 498,851 319,777
Inventories 128,755 274,813
Prepaid expenses and deferred tax assets 86,360 69,115
- ------------------------------------------------------------------------------------------------------------------------------------
Total current assets 1,116,409 1,300,691
- ------------------------------------------------------------------------------------------------------------------------------------
Long-term receivables and other assets 33,647 28,083
- ------------------------------------------------------------------------------------------------------------------------------------
Property and equipment:
Leased systems 41,582 37,937
System spares 368,209 379,797
Production and data processing equipment 318,527 327,051
Office furniture, equipment and improvements 140,050 173,691
Land and buildings 82,318 111,715
- ------------------------------------------------------------------------------------------------------------------------------------
950,686 1,030,191
Less - accumulated depreciation and amortization 705,723 757,523
- ------------------------------------------------------------------------------------------------------------------------------------
Property and equipment, net 244,963 272,668
- ------------------------------------------------------------------------------------------------------------------------------------
Excess of cost over net assets acquired,
net of accumulated amortization of $8,368 in 1996
and $692 in 1995 201,385 106,756
- ------------------------------------------------------------------------------------------------------------------------------------
$ 1,596,404 $1,708,198
====================================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and short-term debt $ 45,053 $ 22,026
Short-term debt - stockholder (Fujitsu Limited) 80,000 --
Accounts payable 141,697 111,871
Accounts payable - stockholder (Fujitsu Limited) 68,625 29,152
Accrued liabilities 541,743 431,600
- ------------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 877,118 594,649
- ------------------------------------------------------------------------------------------------------------------------------------
Long-term debt - stockholder (Fujitsu Limited) -- 80,000
Long-term debt and liabilities 43,663 51,152
- ------------------------------------------------------------------------------------------------------------------------------------
Deferred income taxes 62,375 48,573
- ------------------------------------------------------------------------------------------------------------------------------------
Stockholders' equity:
Common stock, $.05 par value
Authorized - 200,000,000 shares
Outstanding - 121,753,000 shares in 1996
and 119,259,000 shares in 1995 6,088 5,963
Additional paid-in capital 555,690 542,269
Retained earnings 44,313 370,995
Cumulative translation adjustments 9,300 10,932
Unrealized holding gains (losses) on
available-for-sale securities (2,143) 3,665
- ------------------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 613,248 933,824
- ------------------------------------------------------------------------------------------------------------------------------------
$ 1,596,404 $1,708,198
====================================================================================================================================
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
30 Amdahl Corporation
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Years Ended December 27, 1996 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands,
except per common share amounts)
<S> <C> <C> <C>
REVENUES
Equipment sales $ 538,934 $ 803,567 $ 1,050,236
Service, software and other 1,092,615 712,821 588,377
- ------------------------------------------------------------------------------------------------------------------------------------
1,631,549 1,516,388 1,638,613
- ------------------------------------------------------------------------------------------------------------------------------------
COST OF REVENUES
Equipment sales 559,229 540,541 716,144
Service, software and other 815,257 419,046 327,420
- ------------------------------------------------------------------------------------------------------------------------------------
1,374,486 959,587 1,043,564
- ------------------------------------------------------------------------------------------------------------------------------------
Gross margin 257,063 556,801 595,049
- ------------------------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES
Engineering and development 125,825 149,610 203,241
Marketing, general and administrative 402,484 370,771 327,917
Purchased in-process engineering
and development 20,700 27,296 --
Restructuring costs 40,000 -- --
- ------------------------------------------------------------------------------------------------------------------------------------
589,009 547,677 531,158
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations (331,946) 9,124 63,891
- ------------------------------------------------------------------------------------------------------------------------------------
INTEREST
Income 28,996 51,334 26,305
Expense (10,732) (10,481) (9,942)
- ------------------------------------------------------------------------------------------------------------------------------------
18,264 40,853 16,363
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) before provision
for income taxes (313,682) 49,977 80,254
PROVISION FOR INCOME TAXES 13,000 21,450 5,450
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ (326,682) $ 28,527 $ 74,804
====================================================================================================================================
EARNINGS (LOSS) PER COMMON SHARE $ (2.71) $ .24 $ .63
Average outstanding shares
and equivalents 120,510,000 120,383,000 118,909,000
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
31 Amdahl Corporation
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Years Ended December 27, 1996 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands, except note data)
<S> <C> <C> <C>
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR $ 192,980 $ 358,006 $ 149,484
- ------------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) (326,682) 28,527 74,804
Adjustments to reconcile net income
(loss) to net cash provided by
(used for) operating activities:
Depreciation and amortization 104,980 108,552 132,864
Write-down of inventories and
leased systems to market 130,000 26,000 --
Purchased in-process engineering
and development 20,700 27,296 --
Restructuring charges 40,000 -- --
Deferred income tax provision 13,816 (3,201) (7,083)
Gain on sales of assets (559) (343) (8,524)
Change in assets and liabilities net of effects of business acquisitions:
(Increase) decrease in receivables (141,335) 33,771 (2,384)
Decrease in inventories 22,211 4,391 271,872
Increase in prepaid expenses and
deferred tax assets (11,059) (12,157) (1,781)
(Increase) decrease in long-term
receivables and other assets (9,065) 10,981 9,992
Increase (decrease) in accounts payable 66,776 (13,407) 68,964
Decrease in accrued liabilities (11,834) (113,955) (49,774)
Increase (decrease) in long-term
liabilities 283 (11,853) (2,287)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used for) operating
activities (101,768) 84,602 486,663
- ------------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of available-for-sale
short-term investments (178,664) (376,503) (47,016)
Purchases of held-to-maturity
short-term investments -- (287,067) (519,684)
Proceeds from sales of available-for-sale
short-term investments 60,440 107,411 40,677
Proceeds from maturities of short-term
investments 287,917 458,116 286,075
Payments for business acquisitions,
net of cash acquired (68,204) (136,692) --
Capital expenditures:
Leased systems (38,222) (27,156) (18,200)
System spares (20,464) (16,559) (8,584)
Other property and equipment (44,627) (38,159) (40,841)
Proceeds from property and
equipment sales 31,716 30,158 62,352
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used for)
investing activities 29,892 (286,451) (245,221)
- ------------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in notes payable and
short-term borrowings 3,669 11,070 2,521
Long-term borrowings -- -- 80,000
Repayments of borrowings under
revolving credit agreement (1,665) -- (130,000)
Sale of common stock and exercise of options 13,546 22,544 12,064
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used for)
financing activities 15,550 33,614 (35,415)
- ------------------------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash (2,008) 3,209 2,495
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and
cash equivalents (58,334) (165,026) 208,522
- ------------------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 134,646 $ 192,980 $ 358,006
====================================================================================================================================
<FN>
Non-cash investing and financing activities: transfers of Amdahl-manufactured systems from net property and equipment to inventories
were $16,290,000 in 1996, $17,423,000 in 1995, and $46,225,000 in 1994.
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
32 Amdahl Corporation
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the Three Years Ended December 27, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
Unrealized
Additional Cumulative Holding
Common Paid-in Retained Translation Gains
Stock Capital Earnings Adjustments (Losses) Total
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT
DECEMBER 31, 1993 $ 5,729 $ 507,895 $ 267,664 $ 8,918 $ -- $ 790,206
Sale of 2,057,964 shares,
net of repurchases,
of common stock under
employee stock
benefit plans 103 9,513 -- -- -- 9,616
Income tax benefit
arising from employee
stock option plans -- 2,448 -- -- -- 2,448
Net income -- -- 74,804 -- -- 74,804
Translation adjustments -- -- -- (57) -- (57)
Unrealized holding
losses on available
-for-sale securities -- -- -- -- (762) (762)
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE AT
DECEMBER 30, 1994 5,832 519,856 342,468 8,861 (762) 876,255
Sale of 2,622,920 shares,
net of repurchases,
of common stock under
employee stock
benefit plans 131 17,513 -- -- -- 17,644
Income tax benefit
arising from employee
stock option plans -- 4,900 -- -- -- 4,900
Net income -- -- 28,527 -- -- 28,527
Translation adjustments -- -- -- 2,071 -- 2,071
Unrealized holding
gains on available
-for-sale securities -- -- -- -- 4,427 4,427
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE AT
DECEMBER 29, 1995 5,963 542,269 370,995 10,932 3,665 933,824
Sale of 2,494,398 shares,
net of repurchases,
of common stock under
employee stock
benefit plans 125 13,421 -- -- -- 13,546
Net loss -- -- (326,682) -- -- (326,682)
Translation adjustments -- -- -- (1,632) -- (1,632)
Unrealized holding
losses on available
-for-sale securities -- -- -- -- (5,808) (5,808)
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE AT
DECEMBER 27, 1996 $ 6,088 $ 555,690 $ 44,313 $ 9,300 $ (2,143) $ 613,248
====================================================================================================================================
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
33 Amdahl Corporation
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 SUMMARY OF ACCOUNTING PRACTICES
Amdahl Corporation and subsidiaries (the Company or Amdahl) is a multinational
company that provides large-scale, high-performance, general-purpose computer
systems, storage, software and communications products, and client-server
hardware systems for the open systems marketplace. The Company also provides
equipment maintenance, consulting and professional services. See Note 9 for
information on revenues by classes of products and services and by geographic
area. The Company's markets are worldwide and include the communications,
banking, finance and insurance, services and government industries.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported components of results of operations during the reporting period.
These estimates include, but are not limited to, inventory reserves,
amortization of intangible assets, restructuring reserves and income tax assets
and liabilities. Actual results could differ from those estimates.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly-owned and majority-owned subsidiaries. Intercompany accounts and
transactions have been eliminated.
Fiscal Year
The Company's fiscal year ends on the last Friday in December.
Translation of Foreign Currencies
The financial position and results of operations of the Company's non-U.S.
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.
Gains from foreign exchange transactions were $348,000, $247,000 and
$81,000 in 1996, 1995 and 1994, respectively, and were included in marketing,
general and administrative expenses.
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 ninety days notice. Revenues from maintenance contracts are
recognized over the term of the respective contracts as service is provided.
Revenues from consulting and professional services are generally
recognized as the service is performed or on the percentage-of-completion method
of accounting, depending on the nature of the project.
The Company accounts for software revenues in accordance with the
American Institute of Certified Public Accountants' Statement of Position 91-1,
Software Revenue Recognition. Revenues earned under software license agreements
with end users are generally recognized when the software has been shipped,
payment is due within one year, collectibility is probable, and there are no
significant obligations remaining.
34 Amdahl Corporation
<PAGE>
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:
<TABLE>
<CAPTION>
1996 1995
- --------------------------------------------------------------------------------
(In thousands)
<S> <C> <C>
Purchased materials $ 30,766 $ 18,879
Systems in process 26,407 168,322
Finished goods 71,582 87,612
- --------------------------------------------------------------------------------
$128,755 $274,813
================================================================================
</TABLE>
Inventories contained components and assemblies in excess of the
Company's current estimated requirements and were fully reserved at December 27,
1996 and December 29, 1995. Also as a result of severe price declines, the
Company charged cost of equipment sales for $105 million in 1996 and $26 million
in 1995 to reduce 5995M inventories to estimated market value. Due to
competitive pressures, it is reasonably possible that these estimates could
change in the near term.
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:
<TABLE>
<CAPTION>
Years
- --------------------------------------------------------------------------------
<S> <C>
System spares 5
Production and data processing equipment 3-15
Office furniture, equipment and improvements 3-20
Buildings 20-40
</TABLE>
Intangible Assets
Excess of cost over net assets acquired (goodwill) is amortized by the
straight-line method over twenty-five years. The realizability of goodwill is
evaluated periodically as events or circumstances indicate a possible inability
to recover its carrying amount. Such evaluation is based on various analyses,
including cash flow and profitability projections that incorporate, as
applicable, the impact on existing lines of business. The analyses involve a
significant level of management judgment in order to evaluate the ability of an
acquired business to perform within projections.
Certain software development costs have been capitalized and amortized
over the life of the product. At December 27, 1996 and December 29, 1995
software development costs that had been capitalized were immaterial.
Long-Lived Assets
Effective December 1995 the Company adopted the provisions of Statement of
Financial Accounting Standards No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of. This statement
requires that long-lived assets and certain identifiable intangibles to be held
and used or disposed of by an entity be reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. During 1996 the Company determined that no impairment loss
needed to be recognized for applicable assets of continuing operations.
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.
35 Amdahl Corporation
<PAGE>
NOTES TO CONSOLIDATED STATEMENTS (continued)
NOTE 2 RELATIONSHIP WITH FUJITSU LIMITED
At December 27, 1996 Fujitsu Limited (Fujitsu) owned approximately 43% of the
Company's outstanding stock. The Company has entered into various transactions
with Fujitsu, as follows:
A. Amdahl purchases under contracts with Fujitsu certain finished
products, certain subassemblies and substantially all of its large-scale
integrated semiconductor components and high-density printed circuit boards. The
Company's primary products are manufactured by Fujitsu to Amdahl specifications.
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:
<TABLE>
<CAPTION>
Cost of
Purchases Revenues
- --------------------------------------------------------------------------------
(In thousands)
<S> <C> <C>
1996 $160,092 $326,380
1995 $282,913 $275,707
1994 $218,925 $374,224
</TABLE>
Amdahl was committed to purchase manufacturing material and other
equipment from Fujitsu totaling approximately $34,000,000 at December 27, 1996.
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 1997.
B. Under joint development efforts, Fujitsu supplies Amdahl with
services and material related to the Company's development of current and future
products, which resulted in charges to engineering and development expense of
$7,371,000 in 1996, $2,399,000 in 1995, and $6,443,000 in 1994.
In 1996 Fujitsu entered into an agreement to reimburse Amdahl for
certain specific engineering development activities performed by Amdahl from
time to time related to products which are being jointly developed by Amdahl and
Fujitsu. In connection with these development efforts, Amdahl recorded
$24,000,000 as an offset to engineering and development expense in 1996. No such
reimbursements occurred in 1995 and 1994.
Amdahl and Fujitsu have an agreement pursuant to which Amdahl and
Fujitsu participate in the joint development of the Company's next generation of
IBM-compatible systems. Under the agreement, Fujitsu has primary responsibility
for the design and manufacture of these systems.
C. Fujitsu markets Amdahl's computer equipment in Brazil, Japan, Malaysia
and Spain under distributorship arrangements. Sales in 1996, 1995 and 1994 by
the Company of computer systems and complementary storage products to Fujitsu
contributed $23,325,000, $37,290,000 and $38,682,000 to equipment sales and
$4,793,000, $17,190,000 and $14,405,000 to gross margin, respectively.
In 1995 the Company entered into a contract-manufacturing agreement
with HaL Computer Systems, Inc. (HaL), a wholly-owned subsidiary of Fujitsu,
whereby Amdahl agreed to manufacture high-end open system workstations for HaL.
The Company also performed circuit board assembly for Ross Technology, Inc., a
majority-owned subsidiary of Fujitsu. In 1996 and 1995 these agreements
contributed $5,629,000 and $9,375,000 to equipment sales and ($2,210,000) and
$1,035,000 to gross margin, respectively. Both of these agreements were
completed by the end of 1996.
In the fourth quarter of 1995 Fujitsu agreed to pay Amdahl $14,800,000
for the right and license to use certain software diagnostic tools developed by
Amdahl and $1,000,000 for the right to market certain storage products in Japan.
These amounts were recognized in the fourth quarter of 1995 as software revenue
and equipment sales revenue, respectively. In 1996 Fujitsu paid the company
$2,000,000 for the right to market Millennium processors in Japan. This amount
was recognized in the third quarter of 1996 as equipment sales revenue.
36 Amdahl Corporation
<PAGE>
At December 27, 1996 and December 29, 1995 receivables included
$43,906,000 and $35,795,000, respectively, from Fujitsu.
D. In January 1994 the Company entered into an agreement with Fujitsu
under which Fujitsu agreed to 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 (6.78% as of December 27, 1996). As of
December 27, 1996 and December 29, 1995, $80,000,000 in principal was
outstanding under this agreement (see Note 7). Subsequent to December 27, 1996
Amdahl renegotiated the terms of this loan and it is now payable in January 1998
and cannot exceed $80,000,000. Interest expense associated with the loan was
$5,680,000 in 1996, $5,745,000 in 1995 and $4,238,000 in 1994, of which $919,000
and $958,000 was payable and was included in accrued liabilities at December 27,
1996 and December 29, 1995, respectively.
NOTE 3 ACQUISITIONS
Trecom Business Systems, Inc.
On April 22, 1996 the Company acquired all of the outstanding shares of Trecom
Business Systems, Inc. (Trecom), a provider of information technology services.
Under the merger agreement between the Company and Trecom, approximately $66
million of the purchase price was paid in April 1996 and approximately $65
million is payable without interest in April 1997. The Company has pledged cash
with a custodian as security for approximately $57 million of the April 1997
payment. This amount was classified as restricted cash on the Company's balance
sheet at December 27, 1996. Additionally, up to $2 million was payable in the
event that Trecom achieves certain financial goals during the one year period
ending March 31, 1997 (the contingent payment). The present value of the
aggregate purchase price at the acquisition date, including acquisition costs
and payment to the shareholders, and excluding the contingent payment, was
approximately $130 million. In April 1996, the Company also paid down $15
million of Trecom's debt. The Company funded the April 1996 payments and intends
to fund the April 1997 payment with existing cash.
The acquisition was accounted for using the purchase method of accounting.
Accordingly, the results of Trecom's operations have been combined with those of
the Company since the date of acquisition. In addition, a portion of the
purchase price was allocated to the net assets acquired based on their estimated
fair values. The fair value of tangible assets acquired and liabilities assumed
was $49 million and $34 million, respectively. In addition, $20,700,000 of the
purchase price was allocated to in-process engineering and development projects
that had not reached technological feasibility and had no probable alternative
future uses, which the Company expensed at the date of acquisition. The balance
of the purchase price, $94 million, was recorded as excess of cost over net
assets acquired (goodwill) and is being amortized over twenty-five years on a
straight-line basis.
During the third quarter of 1996 Trecom achieved certain financial
goals resulting in an additional payment of $1,200,000 to Trecom shareholders.
These payments have been allocated to costs in excess of net assets acquired.
Due to the uncertainty of meeting the remaining performance targets, the
remaining $800,000 was not recorded as a liability in these financial
statements.
The following table reflects unaudited pro forma combined results of
operations of the Company and Trecom on the basis that the acquisition had taken
place at the beginning of the fiscal year for each of the periods presented:
<TABLE>
<CAPTION>
1996 1995
- ----------------------------------------------------------------------------------------------------------
(Dollars in thousands, except per common share amounts)
<S> <C> <C>
Revenues $1,668,896 $1,655,723
Net income (loss) $(333,378) $26,967
Net income (loss) per common share $(2.77) $.22
Shares used in computation 120,510,000 120,383,000
</TABLE>
37 Amdahl Corporation
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
DMR Group Inc.
On November 15, 1995 the Company acquired all of the outstanding shares of DMR
Group Inc. (DMR), a multinational information technology consulting company, for
$140 million. The acquisition was funded with existing cash.
The acquisition was accounted for using the purchase method of
accounting. Accordingly, results of DMR's operations have been combined with
those of the Company since the date of acquisition. In addition, a portion of
the purchase price was allocated to the net assets acquired based on their
estimated fair values. The fair value of tangible assets acquired and
liabilities assumed was $60 million and $55 million, respectively. In addition,
$27,296,000 of the purchase price was allocated to in-process engineering and
development projects that had not reached technological feasibility and had no
probable alternative future uses, which the Company expensed at the date of
acquisition. The balance of the purchase price, $108 million, was recorded as
excess of cost over net assets acquired (goodwill) and is being amortized over
twenty-five years on a straight-line basis.
During 1996 the DMR opening balance sheet reserves were increased by
$5,395,000 and additional acquisition costs of $2,145,000 were incurred. As a
result, the goodwill was increased by $7,540,000.
The following table reflects unaudited pro forma combined results of
operations of the Company and DMR on the basis that the acquisition had taken
place and the related charge, noted above, was recorded at the beginning of the
fiscal year for each of the periods presented:
<TABLE>
<CAPTION>
1995 1994
- --------------------------------------------------------------------------------
(Dollars in thousands, except per common share amounts)
<S> <C> <C>
Revenues $ 1,693,912 $ 1,857,880
Net income $ 20,783 $ 38,777
Net income per common share $ .17 $ .33
Shares used in computation 120,383,000 118,909,000
</TABLE>
In management's opinion, the unaudited pro forma combined results of
operations are not indicative of the actual results that would have occurred had
the acquisitions been consummated at the beginning of the years presented or of
future operations of the combined companies under the ownership and management
of the Company.
NOTE 4 EQUIPMENT LEASING AND THIRD PARTY TRANSACTIONS
The Company is the lessor of equipment under operating leases for periods
generally less than four 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 $21,629,000 at
December 27, 1996 and $12,462,000 at December 29, 1995. In 1996 the Company
charged leased systems cost of sales for $24,700,000 to reduce the cost of
certain 5995M leased systems to market value. The Company also leases equipment
to customers under sales-type leases as defined in Statement of Financial
Accounting Standards No. 13, Accounting for Leases. The current portion of the
net investment in sales-type leases is included in receivables and the long-term
portion is included in long-term receivables and other assets. The components of
the net investment in sales-type leases were as follows:
<TABLE>
<CAPTION>
1996 1995
- --------------------------------------------------------------------------------
(In thousands)
<S> <C> <C>
Minimum rentals receivable $ 16,577 $ 8,020
Estimated residual values of
leased equipment (unguaranteed) 839 2,500
Less unearned interest income (3,975) (1,116)
- --------------------------------------------------------------------------------
Net investment in sales-type leases $ 13,441 $ 9,404
================================================================================
</TABLE>
38 Amdahl Corporation
<PAGE>
Minimum rentals receivable under existing leases as of December 27,
1996 were as follows:
<TABLE>
<CAPTION>
Sales-Type Operating
- --------------------------------------------------------------------------------
(In thousands)
<S> <C> <C>
1997 $ 6,585 $14,217
1998 5,488 9,519
1999 2,382 1,062
2000 1,769 --
2001 353 --
Thereafter -- --
- --------------------------------------------------------------------------------
$16,577 $24,798
================================================================================
</TABLE>
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
$42,000,000, $48,000,000 and $71,000,000 in 1996, 1995 and 1994, respectively.
NOTE 5 FINANCIAL INSTRUMENTS
The Company invests in a variety of financial instruments but does not hold or
issue financial instruments for trading purposes.
Off-Balance Sheet Financial Instruments
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 and currency swap
agreements. These contracts and swaps generally have maturities that do not
exceed three months and two years, respectively. At December 27, 1996 and
December 29, 1995 the Company had approximately $187,000,000 and $57,000,000,
respectively, in notional principal of forward foreign exchange contracts
outstanding. The Company had $20,000,000 of currency swap agreements outstanding
at December 27, 1996 and December 29, 1995. The gains and losses associated with
currency rate changes on forward foreign exchange contracts and currency swap
agreements 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 and
currency swap agreements approximates their fair value, which was immaterial at
December 27, 1996 and December 29, 1995.
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. At
December 27, 1996 and December 29, 1995 the Company had approximately
$129,000,000 and $80,000,000 in notional principal of purchased option contracts
outstanding, respectively. 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 27, 1996
and December 29, 1995.
39 Amdahl Corporation
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The Company enters into interest rate swap agreements to extend the
effective duration of a portion of the Company's investments in
available-for-sale debt securities and accrues the differential to be paid or
received under the agreements as interest rates change over the life of the
contracts. These agreements generally have maturities that do not exceed three
years. Notional principal outstanding under these agreements was zero as of
December 27, 1996 and approximately $12,000,000 as of December 29, 1995. 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 27, 1996 and December 29, 1995 was immaterial.
Balance Sheet Financial Instruments
Substantially all cash equivalents consist of investments in major bank time
deposits, certificates of deposit and commercial paper with initial maturities
of three months or less. Substantially all short-term investments consist of
major bank time deposits, certificates of deposit, commercial paper and U.S.
government securities which the Company intends to hold between three and twelve
months.
In November 1995 the Financial Accounting Standards Board issued a
Special Report, A Guide to Implementation of Statement 115 on Accounting for
Certain Investments in Debt and Equity Securities (Special Report). Concurrent
with the issue of the Special Report the Company reassessed the appropriateness
of the classifications of its securities investments and reclassified all of its
held-to-maturity securities to the available-for-sale category. Amortized cost
of the securities transferred was $161,033,000 and the related unrealized gain
was $225,000.
At December 27, 1996 the Company's available-for-sale securities had
contractual maturities of overnight to fifteen years and the average maturity
was one year. The fair value of available-for-sale securities was determined
based on quoted market prices at the reporting date for those instruments. At
December 27, 1996 and December 29, 1995 the amortized cost basis, aggregate fair
value and gross unrealized holding gains and losses by major security type were
as follows:
<TABLE>
<CAPTION>
Amortized Aggregate Unrealized
1996 Cost Fair Value Gains (Losses)
- --------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C>
Available-for-Sale Securities
Equity securities $ 2,152 $ 985 $(1,167)
Debt securities issued
by U.S. Treasury and
other U.S. government
agencies 195,134 194,402 (732)
Debt securities issued
by foreign governments 71,718 71,888 170
Corporate debt securities 50,899 50,562 (337)
Mortgage-backed securities 15,706 15,629 (77)
- --------------------------------------------------------------------------------
Total investments in debt
and equity securities $335,609 $333,466 $(2,143)
================================================================================
</TABLE>
40 Amdahl Corporation
<PAGE>
<TABLE>
<CAPTION>
Amortized Aggregate Unrealized
1995 Cost Fair Value Gains
- --------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C>
Available-for-Sale Securities
Equity securities $ 2,582 $ 2,894 $ 312
Debt securities issued
by U.S. Treasury and
other U.S. government
agencies 222,036 223,553 1,517
Debt securities issued
by foreign governments 1,821 2,020 199
Corporate debt securities 283,877 285,285 1,408
Mortgage-backed securities 17,096 17,325 229
- --------------------------------------------------------------------------------
Total investments in debt
and equity securities $527,412 $531,077 $3,665
================================================================================
</TABLE>
In 1996, 1995 and 1994 proceeds from sales of available-for-sale
securities were $60,440,000, $107,411,000 and $40,677,000, respectively. Gross
realized gains of $3,264,000 and $832,000 in 1996 and 1995, respectively, and
gross realized losses of $2,171,000 in 1994 were recognized on those sales and
were included in marketing, general and administrative expenses. The Company
used specific identification as the cost basis in computing realized gains and
losses.
At December 27, 1996 and December 29, 1995 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:
<TABLE>
<CAPTION>
1996 1995
- --------------------------------------------------------------------------------
(In thousands)
<S> <C> <C>
Payroll and vacation $138,472 $125,482
Restructuring costs (Note 8) 43,311 55,110
Income taxes 54,986 38,085
Deferred income 106,778 95,968
Acquisition price payable (Note 3) 64,174 --
Other 134,022 116,955
- --------------------------------------------------------------------------------
$541,743 $431,600
================================================================================
</TABLE>
41 Amdahl Corporation
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 7 LONG-TERM DEBT AND LIABILITIES AND BANK CREDIT
AGREEMENTS
Long-term debt and liabilities consisted of the following:
<TABLE>
<CAPTION>
1996 1995
- --------------------------------------------------------------------------------
(In thousands)
<S> <C> <C>
Long-term debt - stockholder
(Fujitsu) (Note 2) $ 80,000 $ 80,000
Bank loans at DMR 749 7,444
Capitalized lease obligations (Note 13) 17,988 19,856
Long-term liabilities 27,252 26,970
- --------------------------------------------------------------------------------
125,989 134,270
Less current maturities 82,326 3,118
- --------------------------------------------------------------------------------
Long-term debt and liabilities $ 43,663 $131,152
================================================================================
</TABLE>
Bank loans at DMR primarily consist of installment loans and have
maturity dates ranging from 1997 to 1999. Bank loans at DMR on December 29, 1995
primarily consisted of the outstanding balance on a $14,700,000 revolving term
line of credit having an original maturity of five years and bearing interest at
a rate based upon the Canadian Bankers' Acceptance Rate. In 1996 the revolving
term line of credit was refinanced to short-term borrowings and was included in
the short-term debt balance.
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 27, 1996 and December 29, 1995, $42,727,000 and
$18,908,000, respectively, were outstanding under these agreements.
Interest paid on all borrowings was $10,731,000, $10,460,000 and
$9,098,000 in 1996, 1995 and 1994, respectively.
Long-term liabilities included deferred equipment maintenance revenues
and long-term amounts accrued under the Executive Incentive Performance Plan.
NOTE 8 RESTRUCTURING OF OPERATIONS
In the fourth quarter of 1996, the Company recorded a restructuring charge based
on an evaluation of the competitive conditions in the markets for large-scale
computing systems, consulting services and software. The Company looked at
future costs in line with anticipated levels of business in 1997 and beyond, and
determined that a restructuring charge of $40 million was required to cover the
costs of reducing certain sectors of its workforce and facilities to levels more
appropriate to current business requirements.
At December 27, 1996, $43.3 million of restructuring charges remained in
accrued liabilities. The balance was comprised of $34.4 million for the
reduction of approximately 300 employees to be completed in 1997, $7.5 million
for closing excess facilities and $1.4 million for other non-cash write-downs of
recorded assets, of which $41.9 million represents estimated future cash
outflows. A summary of the restructuring activity is presented below:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(In thousands)
<S> <C>
Balance at December 31, 1993* $ 180,743
1994 activity:
Non-cash write-downs of property,
equipment and inventories (11,113)
Reduction in workforce and
other cash outflows (53,460)
- --------------------------------------------------------------------------------
Balance at December 30, 1994 116,170
1995 activity:
Restructuring reserve associated
with the acquisition of DMR 2,272
Non-cash write-downs of property,
equipment and inventories (17,004)
Reduction in workforce and
other cash outflows (22,170)
- --------------------------------------------------------------------------------
Balance at December 29, 1995 79,268
1996 provision 40,000
1996 activity:
Non-cash write-downs of property,
equipment and inventories (43,191)
Reduction in workforce and
other cash outflows (32,766)
- --------------------------------------------------------------------------------
Balance at December 27, 1996 $ 43,311
================================================================================
<FN>
* Balance of restructuring accrual recorded in 1993.
</FN>
</TABLE>
42 Amdahl Corporation
<PAGE>
NOTE 9 MAJOR CUSTOMER, GEOGRAPHIC AREA AND PRODUCT LINE DATA
No single customer accounted for 10% or more of total revenues in 1996, 1995 or
1994. The Company's operations by geographical area for the three years ended
December 27, 1996 were as follows:
<TABLE>
<CAPTION>
United Asia Pacific Adjustments
1996 States Canada Europe & Other & Eliminations Consolidated
- ------------------------------------------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Customers $ 797,766 $ 166,680 $ 488,474 $ 178,629 $ -- $ 1,631,549
Intercompany 280,686 5,971 22,978 -- (309,635) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total revenues $ 1,078,452 $ 172,651 $ 511,452 $ 178,629 $ (309,635) $ 1,631,549
====================================================================================================================================
Income (loss)
from
operations $ (319,121) $ 2,733 $ 18,853 $ (2,172) $ (32,239) $ (331,946)
Interest
income, net 18,264
-----------
Loss before
income taxes $ (313,682)
===========
Identifiable
assets $ 969,039 $ 402,670 $ 1,123,018 $ 73,989 $(1,344,809) $ 1,223,907
Corporate
assets 372,497
-----------
Total assets $ 1,596,404
===========
</TABLE>
<TABLE>
<CAPTION>
United Asia Pacific Adjustments
1995 States Canada Europe & Other & Eliminations Consolidated
- ------------------------------------------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Customers $ 872,153 $ 52,731 $ 455,216 $ 136,288 $ -- $ 1,516,388
Intercompany 236,477 1,016 10,998 -- (248,491) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total revenues $ 1,108,630 $ 53,747 $ 466,214 $ 136,288 $ (248,491) $ 1,516,388
====================================================================================================================================
Income (loss)
from
operations $ (24,390) $ (23,563) $ 40,309 $ 1,641 $ 15,127 $ 9,124
Interest
income, net 40,853
-----------
Income before
income taxes $ 49,977
===========
Identifiable
assets $ 666,019 $ 202,484 $ 945,553 $ 56,118 $ (738,903) $ 1,131,271
Corporate
assets 576,927
-----------
Total assets $ 1,708,198
===========
</TABLE>
<TABLE>
<CAPTION>
United Asia Pacific Adjustments
1994 States Canada Europe & Other & Eliminations Consolidated
- ------------------------------------------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Customers $ 955,090 $ 62,433 $ 506,526 $ 114,564 $ -- $1,638,613
Intercompany 241,468 (88) 7,428 -- (248,808) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total revenues $1,196,558 $ 62,345 $ 513,954 $ 114,564 $ (248,808) $1,638,613
====================================================================================================================================
Income from
operations $ 49,908 $ 4,444 $ 3,256 $ 3,672 $ 2,611 $ 63,891
Interest
income, net 16,363
----------
Income before
income taxes $ 80,254
=========
Identifiable
assets $ 663,205 $ 23,051 $ 681,193 $ 32,128 $ (354,320) $1,045,257
Corporate
assets 673,778
----------
Total assets $1,719,035
==========
</TABLE>
43 Amdahl Corporation
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
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 and
finished systems between areas are accounted for based on established
intercompany sales prices.
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 engineering and development and
administrative expenses. The United States' 1996 operating loss includes the
write-off of purchased in-process engineering and development recorded upon the
acquisition of Trecom (see Note 3) and the corporate restructuring charge (see
Note 8). The United States' 1996 identifiable assets included the excess of cost
over new assets acquired related to the acquisition of Trecom. Canada's 1995
loss from operations includes the write-off of purchased in-process engineering
and development. Canada's 1995 and 1996 identifiable assets include the excess
of cost over net assets acquired related to the acquisition of DMR (see Note 3).
Corporate assets include assets maintained for general purposes,
principally cash equivalents 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. The
Company also continues to make the transition to being a more service and
solutions oriented business. Revenues for similar classes of products or
services within this one business segment for the most recent three years are
presented below:
<TABLE>
<CAPTION>
1996 1995* 1994*
- --------------------------------------------------------------------------------
(In millions)
<S> <C> <C> <C>
Processor equipment sales** $ 363 $ 643 $ 820
Storage product equipment sales 79 83 203
Server equipment sales 97 77 27
- --------------------------------------------------------------------------------
Total equipment sales 539 803 1,050
- --------------------------------------------------------------------------------
Maintenance services revenues 435 475 449
Consulting and
professional services revenues 559 141 64
Lease revenues 23 18 30
Software and implementation
services revenues *** 76 79 46
- --------------------------------------------------------------------------------
Total service, software
and other revenues 1,093 713 589
- --------------------------------------------------------------------------------
$1,632 $1,516 $1,639
================================================================================
<FN>
* Reclassified to conform to 1996 presentation.
** Includes Systems/390-compatible mainframe processors and
certain related hardware products.
*** Includes all software revenue and services performed to implement the
software environment at customer sites (excludes application services). 1995
included $15 million of nonrecurring software sales to Fujitsu (see Note 2).
</FN>
</TABLE>
44 Amdahl Corporation
<PAGE>
NOTE 10 CAPITAL STOCK
There are 200,000,000 authorized shares of common stock, par value of $.05 per
share, of which 121,753,000 shares were issued and outstanding as of December
27, 1996. As of December 27, 1996 the Company had reserved shares of its common
stock for the following purposes:
<TABLE>
<CAPTION>
Description Shares Reserved
- --------------------------------------------------------------------------------
<S> <C>
Stock Option Plans -
Stock options outstanding 8,279,873
Stock options and restricted stock
available for grant 2,031,114
Employee Stock Purchase Plan 6,069,960
- --------------------------------------------------------------------------------
16,380,947
================================================================================
</TABLE>
On November 1, 1996 the Board of Directors authorized, subject to
stockholder approval at the annual meeting on May 1, 1997, an increase to the
shares available for grant under the 1994 Stock Incentive Plan by 2% of the
shares of common stock outstanding on May 1, 1997. The Board of Directors also
authorized, subject to stockholder approval, ongoing annual increases to the
shares available for grant on the first trading day of each calendar year
beginning with 1998. The annual increases will be 3% of the shares of common
stock outstanding on December 31 of the immediately preceding calendar year,
provided that each annual increase will be limited so that the shares available
for future option grants and share issuances will not exceed 6,000,000 shares at
the time of each annual increase.
On May 2, 1996 the stockholders approved an increase of 5,000,000
shares in the number of shares issuable under the Employee Stock Purchase Plan.
On February 8, 1996 the Board of Directors authorized the Company to
buy back up to $100 million of the Company's common stock. No shares were
repurchased under this authorization in 1996.
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 27, 1996
no Preferred Stock had been issued.
NOTE 11 EMPLOYEE STOCK OPTIONS 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 ten or fifteen
years. Options are granted to non-employee directors under the Automatic Option
Grant Program. The Company accounts for these plans under APB Opinion No. 25,
under which no compensation cost has been recognized. Had compensation cost for
these plans been determined consistent with Statement of Financial Accounting
Standards No. 123, Accounting for Stock-Based Compensation (SFAS No. 123), the
Company's net income (loss) and earnings (loss) per share would have been
adjusted to the following pro forma amounts:
<TABLE>
<CAPTION>
1996 1995
- --------------------------------------------------------------------------------
(In thousands, except per share amounts)
<S> <C> <C>
Net income (loss): As Reported $(326,682) $28,527
Pro Forma $(331,997) $28,165
Earnings (loss) per share: As Reported $ (2.71) $ .24
Pro Forma $ (2.75) $ .23
</TABLE>
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option pricing model with the following weighted-average
assumptions used for grants in 1996 and 1995, respectively: risk-free interest
rates of 5.6 and 6.7 percent; expected dividend yields of 0 and 0 percent;
expected lives of 4.4 and 4.5 years; and expected volatility of 37.6 and 37.6
percent.
Because the SFAS No. 123 method of accounting has not been applied to
options granted prior to fiscal 1995, the resulting pro forma compensation cost
may not be representative of that to be expected in future years.
45 Amdahl Corporation
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
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. The Company sold 755,000
shares, 619,000 shares, and 1,031,000 shares in 1996, 1995 and 1994,
respectively. The weighted average fair value of shares sold in 1996 was $10.08.
Activity in the Company's option plans excluding restricted stock is
summarized as follows:
<TABLE>
<CAPTION>
1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------------
Wtd Avg Wtd Avg Wtd Avg
Shares Ex Price* Shares Ex Price* Shares Ex Price*
- -------------------------------------------------------------------------------------------------------------------------
(Shares in thousands)
<S> <C> <C> <C> <C> <C> <C>
Options outstanding at
Beginning of year 6,875 $ 6.13 8,996 $ 5.77 10,736 $ 5.57
Granted 3,576 8.05 377 11.07 391 7.24
Exercised (1,464) 5.34 (2,032) 5.49 (935) 4.94
Expired or canceled (707) 7.43 (466) 6.01 (1,196) 5.13
- ------------------------------------------------------------------------------------------------------------------------
Options outstanding at
end of year 8,280 $ 6.98 6,875 $ 6.13 8,996 $ 5.77
- ------------------------------------------------------------------------------------------------------------------------
Exercisable at end of year 3,716 3,114 3,262
Weighted average
fair value of
options granted $ 3.51 $ 4.58
- ------------------------------------------------------------------------------------------------------------------------
<FN>
*Weighted Average Exercise Price
</FN>
</TABLE>
The following summarizes the stock options outstanding at December 27,
1996:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
-------------------------------------------------------------- --------------------------------
Actual
Range of Number Weighted-Average Number
Exercise Prices Outstanding Remaining Weighted-Average Exercisable Weighted-Average
($5 increments) 12/27/96 Contractual Life Exercise Price 12/27/96 Exercise Price
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 2.57 - 4.81 3,760,003 6.1 $ 4.65 2,481,377 $ 4.72
$ 5.31 - 9.91 3,460,186 12.4 $ 7.80 724,825 $ 7.13
$10.06 -14.72 970,684 10.1 $ 12.14 425,829 $ 12.82
$15.00 -18.88 89,000 3.6 $ 17.18 84,200 $ 17.21
- ------------------------------------------------------------------------------------------------------------------------------------
$ 2.57 -18.88 8,279,873 9.2 $ 6.98 3,716,231 $ 6.40
====================================================================================================================================
</TABLE>
As of December 27, 1996 the Company had 356,701 shares of restricted
common stock outstanding with certain officers and key employees under the 1994
Stock Incentive Plan. These shares carry certain restrictions on
transferability, which will lapse over periods as determined by the Board of
Directors at the time of award. 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 North
American 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 operations was $1,322,000 in 1996,
$10,303,000 in 1995 and $9,025,000 in 1994.
46 Amdahl Corporation
<PAGE>
NOTE 12 INCOME TAXES
Income (loss) before taxes and the provision for (benefit from) income taxes
were comprised of the following:
<TABLE>
<CAPTION>
1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C>
Income (loss) before provision for income taxes:
Domestic $(268,098) $ 18,104 $ 65,941
Foreign (45,584) 31,873 14,313
- ------------------------------------------------------------------------------------------------------------------------------------
$(313,682) $ 49,977 $ 80,254
====================================================================================================================================
Provision for (benefit from) income taxes:
Federal-
Current $ (6,244) $ 25,804 $ 20,531
Deferred, net 6,244 (12,918) (4,895)
- ------------------------------------------------------------------------------------------------------------------------------------
-- 12,886 15,636
- ------------------------------------------------------------------------------------------------------------------------------------
State-
Current 5,390 4,328 (7,284)
Deferred, net (1,890) (2,328) 8,484
- ------------------------------------------------------------------------------------------------------------------------------------
3,500 2,000 1,200
- ------------------------------------------------------------------------------------------------------------------------------------
Foreign-
Current 11,659 6,291 (744)
Deferred, net (2,159) 273 (10,642)
- ------------------------------------------------------------------------------------------------------------------------------------
9,500 6,564 (11,386)
- ------------------------------------------------------------------------------------------------------------------------------------
Net tax provision $ 13,000 $ 21,450 $ 5,450
====================================================================================================================================
</TABLE>
The effective income tax provision differed from the statutory federal provision
due to the following (prior year amounts have been reclassified to conform to
current-year presentation):
<TABLE>
<CAPTION>
1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C>
Statutory federal tax provision (benefit) $(109,789) $ 17,492 $ 28,089
State tax provisions, net of federal tax benefit 2,275 1,300 780
Foreign losses in excess of available benefits 27,163 13,132 4,199
Unutilized (utilized) deductible temporary differences 82,427 (20,055) (40,484)
Foreign subsidiaries' earnings taxed at rates in
excess of the statutory federal rate 169 235 8,750
Write-off of purchased in-process engineering
and development 7,245 9,554 --
Goodwill amortization 2,693 -- --
Other 817 (208) 4,116
- ------------------------------------------------------------------------------------------------------------------------------------
Net tax provision $ 13,000 $ 21,450 $ 5,450
====================================================================================================================================
Net effective tax rate (4%) 43% 7%
====================================================================================================================================
</TABLE>
47 Amdahl Corporation
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Net income tax refunds of $6,104,000 and $12,340,000 were received by
the Company in 1996 and 1994, respectively, and net income taxes of $26,050,000
were paid by the Company in 1995.
The components of the net deferred tax liability at December 27, 1996
and December 29, 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
- --------------------------------------------------------------------------------
(In thousands)
<S> <C> <C>
Deferred tax liabilities:
Taxes on foreign income $ (35,174) $ (18,520)
Depreciation (44,975) (26,173)
Revenue timing (3,149) (12,450)
- --------------------------------------------------------------------------------
Total deferred tax liability (83,298) (57,143)
- --------------------------------------------------------------------------------
Deferred tax assets:
Reserves 137,916 84,594
Net operating loss and credit
carryforwards 142,762 40,423
Other 7,493 20,860
- --------------------------------------------------------------------------------
288,171 145,877
Valuation allowance (207,700) (89,367)
- --------------------------------------------------------------------------------
Total deferred tax assets 80,471 56,510
- --------------------------------------------------------------------------------
Net deferred tax liability $ (2,827) $ (633)
================================================================================
</TABLE>
No tax benefit was recorded for losses other than recoverable taxes or
future taxable income from the reversal of deferred items.
The valuation allowance at December 27, 1996 and December 29, 1995
provided reserves against 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 has continued to provide a valuation allowance
for them.
Cumulative undistributed earnings of foreign subsidiaries for which no
United States income or foreign withholding taxes have been recorded, because
such earnings are expected to be reinvested indefinitely, amounted to
$105,200,000 at December 27, 1996. The Company provides in full for United
States income taxes on the earnings of foreign subsidiaries not considered
indefinitely invested outside the United States.
At December 27, 1996 the Company had U.S. federal net operating loss
carryforwards of $136,900,000 which expire in the year 2011. State net operating
loss carryforwards approximate $347,200,000 which expire in the years 1997
through 2011. Foreign net operating loss carryforwards of $71,900,000 expire at
various dates from 1997 through 2006 and $70,700,000 can be carried forward
indefinitely.
In 1994 the Internal Revenue Service (IRS) issued a notice of deficiency to
the Company for disputed items related to the 1983 through 1986 tax years, the
most significant of which related to the treatment of system spares. In the
fourth quarter of 1996 the Company was notified that the IRS was no longer
contesting the Company's treatment of system spares. The remaining disputed
items are immaterial.
The IRS field audit of the Company's 1987 through 1990 tax years is in
process. In the opinion of management, the final resolution of the matters
raised by the IRS field audit will not result in any material adverse impact to
the Company's results of operations or financial position. It is reasonably
possible that the Company's estimate of the final impact of these matters will
change in the near term upon the completion of the IRS field audit.
48 Amdahl Corporation
<PAGE>
NOTE 13 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 $18,571,000 and $32,995,000 with accumulated amortization of
$17,408,000 and $24,176,000 were included in the land and buildings
classification on the balance sheets at December 27, 1996 and December 29, 1995,
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 27, 1996 were as follows:
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
- --------------------------------------------------------------------------------
(In thousands)
<S> <C> <C>
1997 $ 3,717 $ 38,547
1998 3,390 30,742
1999 2,624 23,539
2000 2,626 16,864
2001 2,626 12,935
After 2001 15,760 19,539
- --------------------------------------------------------------------------------
Total minimum lease commitments 30,743 $142,166
========
Less imputed interest (9.25% to 13.74%) (12,755)
- ----------------------------------------------------------
Present value of minimum lease
commitments (Note 7) $17,988
=========================================================
</TABLE>
Minimum obligations have not been reduced by minimum rentals of
$6,020,000 and $ 20,691,000 receivable in the future under noncancelable
subleases of capital leases and operating leases, respectively, as of December
27, 1996.
Rental expense charged to income was as follows:
<TABLE>
<CAPTION>
1996 1995 1994
- --------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C>
Minimum rent $ 46,108 $ 37,701 $ 38,768
Less sublease rent (463) (6,276) (4,073)
- --------------------------------------------------------------------------------
Total $ 45,645 $ 31,425 $ 34,695
================================================================================
</TABLE>
49 Amdahl Corporation
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 14 SUMMARIZED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
First Second Third Fourth Year
- ------------------------------------------------------------------------------------------------------------------------------------
(In thousands, except per common share
amounts and note data)
<S> <C> <C> <C> <C> <C>
FISCAL QUARTER AND YEAR 1996
Revenues $ 317,028 $ 382,854 $ 439,819 $ 491,848 $ 1,631,549
Gross margin $ 72,582 $ (76,894) $ 123,449 $ 137,926 $ 257,063
(Loss) before taxes $ (48,153) $ (228,436) $ (4,201) $ (32,892) $ (313,682)
Net (loss) $ (38,523) $ (249,436) $ (4,833) $ (33,890) $ (326,682)
Net (loss) per common share $ (.32) $ (2.07) $ (.04) $ (.28) $ (2.71)
FISCAL QUARTER AND YEAR 1995
Revenues $ 371,526 $ 378,666 $ 350,016 $ 416,180 $ 1,516,388
Gross margin $ 145,315 $ 148,271 $ 142,469 $ 120,746 $ 556,801
Income (loss) before taxes $ 26,394 $ 33,642 $ 25,707 $ (35,766) $ 49,977
Net income (loss) $ 20,594 $ 26,242 $ 20,057 $ (38,366) $ 28,527
Net income (loss)
per common share $ .17 $ .22 $ .17 $ (.32) $ .24
<FN>
Notes: Second-quarter 1996 results of operations included charges of $20,700,000 or $.17 per share to write off in-process
engineering and development at Trecom Business Systems, Inc., and $130,000,000 or $1.08 per share to reduce 5995M assets to
estimated market value. Fourth-quarter 1996 results of operations included a restructuring charge of $40,000,000 or $.33 per share.
Fourth-quarter 1995 results of operations included charges of $27,296,000 or $.23 per share to write off in-process engineering and
development at DMR Group Inc. and $26,000,000 or $.22 per share to reduce inventories to estimated market value.
</FN>
</TABLE>
- --------------------------------------------------------------------------------
COMMON STOCK DIVIDENDS AND PRICE RANGE (UNAUDITED)
Dividends
Dividends declared per share for the most recent five years were $.05 in 1993
and $.10 in 1992. No dividends were declared or paid in 1996, 1995 or 1994.
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:
<TABLE>
<CAPTION>
1996 High Low
- --------------------------------------------------------------------------------
<S> <C> <C>
First Quarter $ 9 3/8 $6 3/4
Second Quarter $13 1/2 $8 7/16
Third Quarter $10 7/8 $8 1/8
Fourth Quarter $14 $8 11/16
1995 High Low
- --------------------------------------------------------------------------------
First Quarter $12 1/4 $ 9 7/8
Second Quarter $13 5/8 $10 1/2
Third Quarters $11 3/4 $ 8 5/8
Fourth Quarter $10 3/4 $ 8 1/8
</TABLE>
At December 27, 1996 there were approximately 15,000 holders of record of
Amdahl common stock.
- -------------------------------------------------------
Amdahl and UTS are registered trademarks and Millennium, Spectris, LVS 4000, LVS
4500, LVS 4100, EnVista, A+ Software, A+Edition, and A+FailSafe are trademarks
of Amdahl Corporation. ObjectStar and CrossView are registered trademarks and
Antares Alliance and EdgeworX are trademarks of Antares Alliance Group. Sun, Sun
Microsystems, Solaris, and Ultra Enterprise are trademarks or registered
trademarks of Sun Microsystems. UltraSPARC is a trademark of SPARC
International, licensed exclusively to Sun Microsystems, Inc. SPARC is a
registered trademark of SPARC International. Products bearing SPARC trademarks
are based upon an architecture developed by Sun Microsystems, Inc. Microsoft,
Windows NT, and Visual Basic are trademarks or registered trademarks of
Microsoft Corporation. IBM, System/390, ESCON, CICS, and Parallel Sysplex are
trademarks or registered trademarks of IBM. UNIX is a registered trademark in
the U.S. and other countries, licensed exclusively through X/Open Company
Limited. Intel and Pentium are registered trademarks of Intel Corporation. All
other trademarks and product names are the property of their respective owners.
50 Amdahl Corporation
Exhibit 21
Office of the Corporate Secretary
Amdahl Corporation December 27, 1996
AMDAHL CORPORATION SUBSIDIARIES
<TABLE>
<CAPTION>
JURISDICTION SUBSIDIARY
- ------------ ----------
<S> <C>
Australia Amdahl Australia Pty. Ltd.
Australia Amdahl Imports Pty. Ltd.
Australia Amdahl Pacific Services Pty. Ltd.
Australia Amdahl Superannuation (Australia) Pty.
Ltd.
Australia Antares Alliance Group, Australia PTY
Limited
Australia DMR Group Australia Pty. Ltd.
Australia DMR Group Development Pty. Ltd.
Australia Emsys International Pty. Ltd.
Australia Qadrant International Pty. Ltd.
Australia RailTek Australia Pty. Ltd.
Austria Amdahl Computersysteme Gesellschaft
m.b.H.
Belgium Amdahl Belgium S.A./N.V.
Belgium DMR Group (Belgium) S.A.-N.V.
Bermuda Amdahl Ireland Limited
Bermuda Amdahl Middle East Operations Limited
Canada Amdahl Canada Finance NRO Inc.
Canada DMR AMS Inc.
Canada DMR Group (Europe) Inc.
Canada DMR Group Inc.
Canada DMR Quebec Inc.
Ontario, Canada Amdahl Canada Limited
Ontario, Canada Amdahl Communications Inc.
Ontario, Canada Antares Alliance Group Canada Limited
Quebec, Canada 2638-6193 Quebec Inc. (APSI)
Quebec, Canada The IT Macroscope Inc.
Denmark Amdahl Danmark Computer Systems A/S
France Amdahl France S.A.
France Group DMR S.A.
Germany Amdahl Deutschland GmbH
Germany Amdahl Mittel-und Osteuropa GmbH
Hong Kong Amdahl (China) Limited
Ireland Amdahl Ireland Limited
Italy Amdahl Italia S.p.A.
Malaysia Amdahl Asia Services SDN BHD
Malaysia DMR Group Malaysia SDN BHD
Netherlands Amdahl Europe B.V.
Netherlands Amdahl Nederland B.V.
Netherlands Antilles Amdahl Overseas Capital Corporation N.V.
New Zealand DMR Group New Zealand Limited
Norway Amdahl Norge A/S
South Africa Amdahl South Africa (Pty) Limited
<PAGE>
Switzerland Amdahl (Schweiz) AG
United Kingdom AG Solutions Limited
United Kingdom Amdahl Communications Systems Limited
United Kingdom Amdahl International Management Services
Limited
United Kingdom Amdahl (U.K.) Limited
United Kingdom C E Services (Europe) Limited
United Kingdom DMR Group Limited
United Kingdom Landmark Communications Systems Limited
California, U.S.A Amdahl Asia, Inc.
California, U.S.A Amdahl Finance Corporation
California, U.S.A Amdahl International Corporation
California, U.S.A Amdahl International Services
Corporation
California, U.S.A Amdahl Investment Corporation
California, U.S.A Amdahl North Atlantic, Inc.
California, U.S.A Amdahl Pacific Basin Operations, Inc.
California, U.S.A Amsub Inc.
California, U.S.A Amtemp, Inc.
California, U.S.A Tran Communications, Inc.
Delaware, U.S.A Amdahl Federal Service Corporation
Delaware, U.S.A Antares Alliance Group
Delaware, U.S.A Antares Alliance Group, Europe, L.L.C.
Delaware, U.S.A Antares Alliance Group Holdings, Inc.
Delaware, U.S.A DMR TRECOM, Inc.
Texas, U.S.A C.E. Services, Inc.
</TABLE>
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. 33-55460,
33-54171, 333-01943, 333-01945, 333-02009 and 333-08583 on Form S-8.
/s/Arthur Andersent LLP
-----------------------
ARTHUR ANDERSEN LLP
San Jose, California
March 21, 1997
Exhibit 24
AMDAHL CORPORATION
POWER OF ATTORNEY
The undersigned directors of Amdahl Corporation, a Delaware corporation, do
hereby appoint John C. Lewis and Bruce J. Ryan, each of them their lawful
attorneys-in-fact and agents 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 attorneys and
agents 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 30, 1997.
/s/ Michael R. Hallman /s/ Takeshi Maruyama
- ------------------------------- ------------------------------
Michael R. Hallman Takeshi Maruyama
/s/ E.F. Heizer, Jr. /s/ George R. Packard, Ph.D.
- ------------------------------ ------------------------------
E. F. Heizer, Jr. George R. Packard, Ph.D.
/s/ Kazuto Kojima /s/ Waler B. Reinhold
- ------------------------------ ------------------------------
Kazuto Kojima Walter B. Reinhold
/s/ John C. Lewis /s/ Takashi Takaya
- ------------------------------ ------------------------------
John C. Lewis Takashi Takaya
/s/ Burton G. Malkiel, Ph.D. /s/ J. Sidney Webb
- ------------------------------ ------------------------------
Burton G. Malkiel, Ph.D. J. Sidney Webb
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 191,772
<SECURITIES> 210,671
<RECEIVABLES> 509,036
<ALLOWANCES> 10,185
<INVENTORY> 128,755
<CURRENT-ASSETS> 1,116,409
<PP&E> 950,686
<DEPRECIATION> 705,723
<TOTAL-ASSETS> 1,596,404
<CURRENT-LIABILITIES> 877,118
<BONDS> 12
0
0
<COMMON> 6,088
<OTHER-SE> 607,160
<TOTAL-LIABILITY-AND-EQUITY> 1,596,404
<SALES> 538,934
<TOTAL-REVENUES> 1,631,549
<CGS> 559,229
<TOTAL-COSTS> 1,374,486
<OTHER-EXPENSES> 589,009
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,732
<INCOME-PRETAX> (313,682)
<INCOME-TAX> 13,000
<INCOME-CONTINUING> (326,682)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (326,682)
<EPS-PRIMARY> (2.71)
<EPS-DILUTED> (2.71)
</TABLE>
