EMC 2005 Annual Report Download - page 35

Table of Contents
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 and executive 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
executive 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. In connection with certain dispositions, we have
agreed to indemnify the buyer for certain matters, such as breaches of representations and warranties. These indemnities vary in length of time.
Based upon our historical experience and information known as of December 31, 2005, we believe our liability on the above guarantees and
indemnities at December 31, 2005 are not material.
Notes and Accounts Receivable
We derive revenues from both selling and leasing information storage systems. We customarily sell the notes receivable resulting from our leasing
activity to provide for current liquidity. Generally, we do not retain any recourse on the sale of these notes.
Litigation
We are a party to litigation which we consider routine and incidental to our business. Management does not expect the results of any of these actions to
have a material adverse effect on our business, results of operations or financial condition.
Pension and Post-Retirement Medical and Life Insurance Plans
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 were frozen in 1999, resulting in employees no longer accruing pension benefits for future services. The
assets for these defined benefit plans are invested in common stocks, bonds and cash. 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, 2005 was 8.25%. This rate represents the average of the long-term
rates of return for all defined benefit plans (international and U.S.) weighted by the plans' assets as of December 31, 2005. The actual long-term rate of return
for the ten years ended December 31, 2005 was 7.3%. Based upon current market conditions, the expected long-term rate of return for 2006 will remain at
8.25%. A 25 basis point change in the expected long-term rate of return on the plans' assets would have approximately a $0.9 impact on the 2006 pension
expense. As of December 31, 2005, the pension plans had a $141.9 unrecognized actuarial loss that will be expensed over the average future working lifetime
of active participants. For the year ended December 31, 2005, the discount rate to determine the benefit obligation was 5.7%. 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. This rate represents the average of the discount rates for all defined benefit
plans (international and U.S.) weighted by plan liabilities as of December 31, 2005. The discount rate reflects the rate at which the pension benefits could be
effectively settled. A 25 basis point change in the discount rate would have approximately a $0.7 impact on the 2006 pension expense for all plans
(international and U.S.).
We also assumed a post-retirement benefit plan as part of the Data General acquisition that provides certain medical and life insurance benefits for
retired former Data General employees. The plan's assets are invested in common stocks, bonds and cash. The market related value of the plan's assets is equal
to the assets' fair value. The expected long-term rate of return on the plan's assets for the year ended December 31, 2005 was 8.25%. The actual long-term rate
of return for the ten years ended December 31, 2005 was 7.3%. Based on current capital market conditions, the expected long-term rate of return for 2005 will
remain at 8.25%. A 25 basis point change in the expected long-term rate of return on the plan's assets has minimal impact on our benefit expense. As of
December 31, 2005, the plan had a $1.8 unrecognized actuarial loss that will be recognized over the anticipated remaining years of service for participants.
For the year ended December 31, 2005, the discount rate to determine the benefit obligation was 5.7%.
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