EMC 2010 Annual Report Download - page 37

Table of Contents
guarantees vary in length of time. In connection with these arrangements, we have agreed to guarantee substantially all of the guarantees provided by these
financial institutions. EMC and certain of its subsidiaries have also entered into arrangements with financial institutions in order to facilitate the management
of currency risk. EMC has agreed to guarantee the obligations of its subsidiaries under these arrangements.
We enter into agreements in the ordinary course of business with, among others, customers, resellers, OEMs, systems integrators and distributors. Most
of these agreements require us to indemnify the other party against third-party claims alleging that an EMC product infringes a patent and/or copyright.
Certain agreements in which we grant limited licenses to specific EMC-trademarks require us to indemnify the other party against third-party claims alleging
that the use of the licensed trademark infringes a third-party trademark. Certain of these agreements require us to indemnify the other party against certain
claims relating to real or tangible personal property damage, personal injury or the acts or omissions of EMC, its employees, agents or representatives. In
addition, from time to time, we have made certain guarantees regarding the performance of our systems to our customers. We have also made certain
guarantees for the lease obligations of affiliated third parties.
We have agreements with certain vendors, financial institutions, lessors and service providers pursuant to which we have agreed to indemnify the other
party for specified matters, such as acts and omissions of EMC, its employees, agents or representatives.
We have procurement or license agreements with respect to technology that is used in our products and agreements in which we obtain rights to a
product from an OEM. Under some of these agreements, we have agreed to indemnify the supplier for certain claims that may be brought against such party
with respect to our acts or omissions relating to the supplied products or technologies.
We have agreed to indemnify the directors, executive officers and certain other officers of EMC and our subsidiaries, to the extent legally permissible,
against all liabilities reasonably incurred in connection with any action in which such individual may be involved by reason of such individual being or having
been a director or officer.
In connection with certain acquisitions, we have agreed to indemnify the current and former directors, officers and employees of the acquired company
in accordance with the acquired company's by-laws and charter in effect immediately prior to the acquisition or in accordance with indemnification or similar
agreements entered into by the acquired company and such persons. In a substantial majority of instances, we have maintained the acquired company's
directors' and officers' insurance, which should enable us to recover a portion of any future amounts paid. These indemnities vary in length of time.
Based upon our historical experience and information known as of December 31, 2010, we believe our liability on the above guarantees and
indemnities at December 31, 2010 is not material.
Pension
We have a noncontributory defined benefit pension plan that was assumed as part of the Data General acquisition, which covers substantially all former
Data General employees located in the United States. Certain of the former Data General foreign subsidiaries also have foreign retirement plans covering
substantially all of their employees. All of these plans have been frozen resulting in employees no longer accruing pension benefits for future services. The
assets for these defined benefit plans are invested in common stocks and bonds. The market related value of the plans' assets is based upon the assets' fair
value. The expected long-term rate of return on assets for the year ended December 31, 2010 was lowered from 8.25% to 6.75%. This rate represents the
average of the expected long-term rates of return weighted by the plan's assets as of December 31, 2010. The Company has begun to shift, and may continue
to shift in the future, its asset allocation to lower the percentage of investments in equity securities and increase the percentage of investments in fixed-income
securities. The effect of such a change results in a reduction to the long-term rate of return on plan assets and an increase in future pension expense consistent
with the sensitivity described below. As of December 31, 2010, the ten-year historical rate of return on plan assets was 4.1% and the inception to date return
on plan assets was 9.8%. In 2010 and 2009, we experienced a 12.6% and 25.1% gain on plan assets, respectively. Based upon current market conditions and
the target allocation of the plan's assets, the expected long-term rate of return for 2011 is 6.75%. A 25 basis point change in the expected long-term rate of
return on the plan's assets would have approximately a $0.9 impact on the 2011 pension expense. As of December 31, 2010, the pension plan had a $187.7
unrecognized actuarial loss that will be expensed over the average future working lifetime of active participants of 11.6 years. For the year ended
December 31, 2010, the discount rate to determine the benefit obligation was 5.4%. This rate represents the average of the discount rate weighted by the plan's
liabilities as of December 31, 2010. The discount rate selected was based on highly rated long-term bond indices and yield curves that match the duration of
the plan's benefit obligations. The bond indices and yield curve analyses include only bonds rated AA or higher from a reputable rating agency. The discount
rate reflects the rate at which the pension benefits could be effectively
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