SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark one)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended September 24, 1994
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission File Number 1-7352
Data General Corporation
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
04-2436397
(I.R.S. Employer Identification No.)
4400 Computer Drive, Westboro, Massachusetts 01580
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (508)898-5000
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, par value $.01 New York Stock Exchange
London Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
London Stock Exchange
7-3/4% Convertible Subordinated New York Stock Exchange
Debentures Due 2001
8-3/8% Sinking Fund Debentures Due 2002 New York Stock Exchange
(Title of each class) (Name of each exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act: None
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 the 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 [X].
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 common stock held by non-affiliates of the
registrant, as of December 9, 1994: $361,732,280
Number of shares outstanding of each of the issuer's classes of common stock,
as of December 9, 1994:
Common Stock, par value $.01 36,631,117
(Title of each class) (Number of shares)
Documents incorporated by reference:
Parts I and II - Portions of registrant's Annual Report to Stockholders for the
year ended September 24, 1994.
Part III - Portions of registrant's Proxy Statement dated December 14, 1994.
AViiON, CEO, DASHER, DESKTOP GENERATION, ECLIPSE, microNOVA, NOVA
and WALKABOUT are registered trademarks, and CEO Connection, CEO
Object Office, CLARiiON, DG/UX, DG/ViiSION, ECLIPSE MV/3200,
ECLIPSE MV/3600, ECLIPSE MV/9800, ECLIPSE MV/25000, ECLIPSE
MV/35000 and ECLIPSE MV/60000 are trademarks of Data General
Corporation.
All other brand and product names appearing in this publication
are trademarks or registered trademarks of their respective
holders.
PART I
Item 1. Business.
Data General Corporation, incorporated in Delaware on April
15, 1968, designs, manufactures, sells, and supports a broad range
of multi-user computer systems, servers, and mass storage
devices. The company's range of products and services includes
database servers, communications and networking servers,
workstations, desktop and portable systems, mass storage devices,
thousands of application solutions offered in conjunction with
various third-party firms, and a worldwide service and support
network. As used herein, the terms "Data General" and the
"company" mean Data General Corporation, and, unless otherwise
indicated, its consolidated subsidiaries.
There is a wide and expanding variety of applications for the
products manufactured by Data General. The company's products are
used for database management, integrated information processing,
distributed data processing, office automation and financial
applications, transaction processing, communications, decision
support, computer aided engineering, manufacturing planning and
control, human resource management, educational administration,
health care, testing, process control, and environmental
monitoring. Other areas of use include scientific and laboratory
research, medical instrumentation and imaging, signal analysis,
data acquisition, instrumentation, monitoring, and control. The
company's products are used in networks, at the enterprise level,
and in stand-alone applications.
Data General's AViiONR line of computer systems is based on
Reduced Instruction Set Computing (RISC) microprocessors and the
UNIXR operating system. The company's CLARiiONTM mass storage
devices are open systems disk arrays and tape arrays for computers
that run the UNIX operating system and selected other operating
systems. Data General's ECLIPSER MV family of minicomputers uses
the company's proprietary hardware architecture and operating
system. The company provides products and services needed for
networking and interoperability, which enable computing systems
from many vendors to function together in multi-platform
environments. Data General also offers a broad line of personal
computers.
During the last decade, advances in microprocessor technology
and the increasing availability of standards-based hardware and
software significantly eroded the competitive advantage of
proprietary minicomputer systems. These trends resulted in the
introduction of networked computer systems, consisting of servers
hosting PCs, terminals and other workstations, which offer
customers significant price/performance advantages over
traditional minicomputers. In response to these
developments, Data General management implemented a
strategy in fiscal 1988 that focused the company's
resources on developing the AViiON family of industry-standard
computer systems while continuing to enhance and upgrade the
performance of its ECLIPSE MV family of minicomputers. In fiscal
1994, revenues from the AViiON family were approximately $470
million, an increase of nearly 20% over fiscal 1993. Since AViiON
shipments began in fiscal 1989, more than $1.5 billion worth of
systems have been delivered. Management is encouraged by the
continued growth of its AViiON open systems computers and their
acceptance in the worldwide marketplace.
The growing demand for computers based on open architectures
led Data General to introduce the CLARiiON family of mass storage
subsystems in September 1992. In addition to CLARiiON storage
products that are sold with Data General AViiON and ECLIPSE MV
systems, "Open CLARiiON" products are available for use with
systems from IBM, Digital Equipment Corporation, and Sun
Microsystems, as well as with systems running NetWare, NT,
OS/2, and SCO UNIX. Open CLARiiON products are sold through a
worldwide network of independent distributors and Original
Equipment Manufacturers (OEM), including Storage Technology
Corporation, Amdahl, Memorex Telex, Convex Computer, Bull SA, and
other systems vendors. They are also sold through distribution
agreements with Access Graphics, Gates/FA, and Dickens Data in the
U.S., Daou in Korea, Omron in Japan, and a number of European
firms. Collectively, these agreements should provide the
foundation for continued growth of Open Clariion in 1995 and
future years.
Products and Services.
The company's computer systems can be grouped into the
following product families: AViiON systems, servers and
workstations; ECLIPSE MV family systems; CLARiiON series mass
storage subsystems; DG/ViiSIONTM and DASHERR family personal
computers and LAN servers; and WALKABOUTR notebook computer
systems. AViiON, ECLIPSE MV and CLARiiON products are the core of
the company's current business. The company also continues to sell
and support the following earlier product families: 16-bit ECLIPSE
systems; DESKTOP GENERATIONR systems; NOVAR systems; and
microNOVAR microproducts.
Introduced in fiscal 1989, AViiON servers and workstations
are based on RISC microprocessors and the VME Input/Output (I/O)
bus. The company has focused its products and services on large
commercial enterprises that need high availability systems, such
as the AViiON servers and CLARiiON storage products, to support
large numbers of users, handle large volumes of transactions, and
support large databases.
The AViiON product family ranges from high-performance,
general-purpose systems and servers to entry-level workstations.
AViiON AV 9500 servers, which currently include models with up to
16 processors, consistently rank among the leaders in database
performance, scalability, and price/performance, as measured by
independent benchmarks conducted by Aim Technology and by the
Transaction Processing Council. The AV 8500 server series is a
mid-range line which offers from two- to eight-processor systems.
These office-package systems can be used to integrate networks of
personal computers, providing users with communications, resource
sharing, office and imaging applications, and databases. The AV
5500 and AV 4500 systems are flexible and expandable enterprise
servers in deskside packaging. They are also used by many
Value-Added Resellers (VAR) for packaged information solutions.
The AV 450 and AV 550 workstations are designed for commercial
applications, such as Geographical Information Systems and
software development.
AViiON computers function as servers or as multi-user systems
for a wide range of applications. All AViiON systems run the
DG/UXTM operating system, Data General's version of the UNIX
operating system. DG/UX is designed with advanced features to
support commercial applications.
ECLIPSE MV systems are 32-bit computers using custom-designed
very large scale integration chips which utilize a more powerful
instruction set than earlier 16-bit ECLIPSE and NOVA systems,
enabling the execution of most programs that operate on the
earlier systems. The range of products includes: the low-end
ECLIPSE MV/3200TM and ECLIPSE MV/3600TM computers; the mid-range
ECLIPSE MV/9800TM, MV/25000TM and MV/35000TM systems; and the
high-end ECLIPSE MV/60000TM HA series of multi-processor
computers.
The CLARiiON family of mass storage subsystems is based on
Redundant Array of Inexpensive Disk (RAID) technology, providing
an architecture that speeds access to data while safeguarding it.
CLARiiON subsystems employ up to 20 disk drives. Currently,
CLARiiON contains SCSI 3.5 inch disk drives, each with a capacity
of 4.0 GB (billions of characters), allowing a subsystem to store
up to 80 GB of information. Higher capacity disk drives can be
accommodated as they become available in the marketplace. Up to
three subsystems can be combined in rackmount configurations. The
drives are combined with an intelligent I/O processor, which
manages the array subsystem's operations, and cache which provides
improved performance. By utilizing RAID technology, a portion of
CLARiiON's disk resources is dedicated to data redundancy. While
individual drives may fail occasionally, the array system remains
operational while the failed disk is repaired or replaced.
CLARiiON subsystems are able to be repaired while under power.
Each disk module comes in a specially designed carrier that can be
removed from its array group without disturbing data access.
CLARiiON mass storage devices come in a compact design that
occupies 2.7 square feet of floor space. To complement
these disk array systems, a CLARiiON tape array is
available. This high-performance, fault-tolerant product provides
fast, unattended back-up for large databases. This innovative
tape array employs low-cost commodity tape drives and cartridges,
and, like the disk array, can be used with UNIX servers from IBM,
Digital Equipment Corporation, and Sun Microsystems, and systems
running NetWare, NT, OS/2, and SCO UNIX, as well as Data
General's own systems.
The Data General family of personal computers includes
DG/ViiSION entry level systems, DASHER II mid-range through
multi-user systems and LAN servers, and the WALKABOUT
full-function notebook computer. These systems use the latest
available microprocessors, including Intel Pentium processors.
Connectivity to AViiON and ECLIPSE MV systems and other computers
can be achieved using various communication products offered by
Data General.
The company's computer systems differ in speed, memory,
and storage capacity; are available with certain processor
features; and are available with a number of subassembly slots
that may be used to accommodate peripheral controllers.
Data General also sells a wide variety of peripheral
equipment for use with its computers. Peripheral equipment sold
by the company includes video display terminals, printers,
plotters, communication controllers, multiplexors, disk storage,
memory, magnetic tape equipment, analog-to-digital converters and
digital-to-analog converters. The company also manufactures
peripheral controller subassemblies and related electronics for
connecting its computers to standard data communication equipment
and computer systems manufactured by others. Data General also
designs and manufactures peripheral controller subassemblies for
use with electromechanical peripheral equipment it purchases from
third parties.
The company has developed and offers an extensive library of
systems software products for use with its computer systems,
including database management and communications software for
industry-standard mainframe protocols. This library includes
operating systems with compilers, assemblers, and general utility
programs. The company's operating systems provide compatibility
throughout the company's product families. The company's
proprietary operating systems include the AOS/VS (Advanced
Operating System/Virtual Storage) and AOS/VS II multiprogramming
systems, the AOS/RT32 real-time subset of AOS/VS, and DG/RDOS
(Real-time Disk Operating System) for 32-bit systems.
More than 40 programming languages are available with the
company's systems including common versions of BASIC, Business
BASIC, COBOL 74, ICOBOL, Fortran IV, Fortran V, Fortran 77, Algol,
DG/L, PL/1, APL, Pascal, "C", and Common Lisp. Data
General's Ada compiler and Ada development environment
software allow customers to program in Ada, a standard programming
language used in military applications.
Data General also offers its customers a wide range of
applications software solutions for both open and traditional
systems. The company's relationships with systems integrators,
software suppliers, and industry-specific VARs provide a growing
presence worldwide in many specialized markets. AViiON systems
run over 6,000 software programs from leading suppliers of
databases, languages, office automation and industry application
packages. This collection of software includes many products
which can be used by customers who are migrating data processing
or data management tasks from mainframe computers. This
represents an important application area for the company's AViiON
servers. To meet the specific market requirements, the company
works with more than 1,000 VARs and distributors.
An important application area for the company's ECLIPSE MV
systems is its CEOR integrated office automation software. This
software allows users to perform routine office tasks, such as
electronic mail, word processing, filing, and maintaining
electronic calendars, while also having access to spreadsheets,
graphics, a centralized database, or specialized applications
developed by customers or purchased from Data General or third
parties. The company also offers CEO ConnectionTM communications
software, which allows CEO system functions to be used in products
using the MS-DOS operating system. In addition, CEO Object
OfficeTM brings CEO office automation software to an icon-style
graphics interface on a personal computer. Computer programs are
furnished pursuant to nonexclusive licenses.
Data General's communications architecture is based upon the
implementation of both international and defacto standards in the
data communications and networking field. Data General now
supports defacto standards such as TCP/IP (Transmission Control
Protocol/Internet Protocol), SNA (IBM's Systems Network
Architecture), Novell IPX/SPX, DECnet, AppleTalk, Async, and
Bisync protocols, among others. Formal standards support includes
OSI (Open Systems Interconnection), GOSIP (Government Open Systems
Interconnection Profile), ISDN (Integrated Services Digital
Network), CMIP/CMIS for network management, and numerous others.
Data General is able to integrate mainframes, minicomputers and
various desktops (UNIX workstations, Macintosh, async terminals,
X-terminals, Windows and DOS PCs) using a wide range of
communications products and services. Data General can help
customers integrate their filing systems (Novell, LAN Manager,
NFS), take advantage of UNIX print services, run UNIX
applications and unify their offices using network products such
as mail, electronic data interchange, and the like. Further,
customers can create cooperative program environments
(client/server) through the use of various open communication
interfaces provided by Data General such as API LU 6.2, 0, 1, 2,
3, (for IBM environments), SPX (for Novell), and TLI (for TCP/IP,
OSI, and LAN Manager environments). This set of communication
capabilities enables Data General systems to be incorporated in a
variety of networks that include systems and equipment
manufactured by the company and by many other vendors.
The total purchase price of any computer system varies
depending upon the processing power, size of main memory and
storage capacity; and upon the types and quantities of accessory,
peripheral controller subassembly, and peripheral equipment
ordered. Prices of the company's various products range from less
than $2,000 to over $1,500,000. Dollar volume discounts are
offered on most products sold by the company. New products and
revisions to existing products have resulted in improved
price/performance ratios.
The company extends a limited service and/or parts warranty
on substantially all equipment sold and offers several types of
maintenance services and contracts at additional charges.
Warranty and other maintenance services are generally performed by
service employees located in various offices throughout the
world. The company offers a mail-in parts exchange and repair
service and a cooperative maintenance program for qualified
organizations, VARs, and other customers capable of performing
maintenance services. The cooperative program includes spare
parts, back-up support, depot service, diagnostics, training,
documentation, tools and test equipment, and service planning and
support. Data General supports over 3,000 products made by other
vendors. The company also offers an On-line Information Service,
which provides customers with immediate access to support
information.
The company provides various services related to the
installation and operation of its computer systems and software.
Systems engineers provide systems and software installation
support. The Systems Integration Business Unit helps customers
get the maximum benefit from their new and existing systems by
offering a broad array of systems design, applications development
and consulting services. The Special Systems group designs custom
hardware products under contract to individual customers.
Customer training related to systems and software sold by the
company is provided at company training facilities in various
locations throughout the world or at the customer's own
facilities.
For the fiscal year ended September 24, 1994, product
revenues were 65% of consolidated total revenues and service
revenues were 35% of consolidated total revenues. For the fiscal
year ended September 25, 1993, product revenues were 62% of
consolidated total revenues and service revenues were 38% of
consolidated total revenues. For the fiscal
year ended September 26, 1992, product revenues were 61%
of consolidated total revenues and service revenues were
39% of consolidated total revenues.
Marketing and Distribution.
The company uses multiple channels of distribution to sell
its products. Sales representatives in company offices, located
throughout the world, sell products mainly to large organizations,
many of which are new accounts. A mass merchandising
organization, "Data General Plus", is primarily responsible for
meeting the needs of existing customers with a product range
including replacement systems, system upgrades and a full range of
supplies and accessories sold through catalogs. The company also
sells refurbished Data General equipment.
Data General uses several third-party distribution channels,
including OEMs, VARs, and distributors. OEMs include companies
that incorporate Data General computers into other products, such
as air traffic control systems, for resale to the final user.
VARs add applications software to the computer systems purchased
from the company before reselling them, and may provide assistance
in installing and maintaining the systems. Distributors meet
customer needs by making Data General products available,
including systems, servers, workstations, personal computers and
storage systems products for immediate off-the-shelf delivery.
The company provides financing through various leasing
and financing programs arranged with third parties. Data General
provides flexible financing programs for all Data General
products, as well as third party hardware, software and services.
These programs are available worldwide for resellers, distributors
and end users.
The company is not dependent upon any one customer, or a very
few customers, for a material part of its business. In fiscal
1994, sales made directly to various agencies of the United States
Government represented approximately 5% of the company's
consolidated total revenues. No single government agency, or any
other single customer is believed to have accounted for more than
1% of consolidated total revenues. The company's business is not
subject to any unusual seasonal fluctuations.
The company generally attempts to minimize the time from
receipt of a customer's order to shipment and virtually no orders
are booked with shipment dates in excess of one year from the date
of order. As the company's product mix shifts more towards
industry-standard systems and workstations, it is anticipated that
the average time from order date to shipment date will further
decrease. In addition, a substantial portion of the orders
received by the company are subject to cancellation without
significant penalty, at the option of the customer, at any time
prior to shipment. Therefore, the company believes that
disclosure of its backlog would not contribute to an
understanding of the company's business.
Organization and Structure.
The company's sales and service operations deliver Data
General products and provide training, hardware and software
support functions to customers through direct sales, mass
merchandising, and reseller channels. Sales divisions are
structured to cover the following major geographic areas: the
United States; General International Area (including Canada and
Latin America); Europe; and Asia/Pacific.
The company's development, marketing and service
organizations are structured in business units to enable Data
General to better respond to customer requirements.
. The AViiON Business Unit is responsible for development
and marketing of the company's AViiON family of computer
systems, and for managing associated third-party
relationships. This unit also includes sub-units aimed
at specific market opportunities, such as PICK/UNIX.
. The ECLIPSE Business Unit is responsible for the
development and marketing of the company's MV family of
systems and related software.
. The CLARiiON Business Unit is responsible for
development of the company's CLARiiON family of open
mass storage products, and for developing channels and
partnerships for sales of Open CLARiiON.
. The Personal Computer Business Unit supplies customers
with a full range of personal computers and peripherals,
ranging from notebook computers to towers.
. The Worldwide Services Organization was formed in 1994
to provide better integrated and more competitive
services to customers. The organization encompasses
Customer Services (field engineering and other
technical services) and the Systems Integration Business
Unit which focuses on business opportunities worldwide
in the growing market for integrating information
systems through professional services, network
integration services, and custom solutions.
. Early in fiscal 1995, a Strategic Alliances organization
was formed to focus on sales of applications and tools
with the world's largest suppliers of such solutions,
including Oracle Corporation, Computer Associates, SAP
AG and PeopleSoft. The group also will develop and
manage alliances with global systems integration
partners such as EDS, SHL Systemshouse, "Big Six"
consultancy and integration firms, and regional systems
integrators in North America and Europe.
Manufacturing and Corporate Quality is responsible for
producing Data General systems; for procuring associated
components, subassemblies, peripherals, and various other products
which are incorporated into Data General systems or sold under the
Data General label; and for corporate overall quality assurance.
The Finance and Administration organizations include the
Controller, the Treasurer, Information Management, Legal, Investor
Relations, Property Management, and Human Resources functions.
Raw Materials.
Data General's manufacturing operations employ a wide variety
of mechanical and electronic components, raw materials and other
supplies. In the design of its products, the company routinely
attempts to utilize multiple-sourced components. However, in some
instances, the company selectively uses sole-sourced components,
such as custom microprocessors and gate arrays, in order to
achieve desired system performance. These components are
typically based on the manufacturer's proprietary underlying
process technology. In many cases, the manufacturers will execute
crosslicense agreements with other manufacturers, and it may be
possible for Data General to access such technology through
crosslicense agreements. However, it has been the company's
experience to date that the investment necessary to execute such
crosslicense agreements and to re-engineer the component is not
warranted.
With respect to sole-sourced materials, the company has not
experienced any problems relative to the timeliness of product
availability or quality matters. To protect against such
problems, however, the company has implemented special inventory
plans for these components. These plans are designed to ensure
that, if the sole-sourced supplier was unable to meet the
company's requirements, there would be sufficient inventory
available to cover the time required to re-engineer the product or
develop an alternative source of supply. The company has not
experienced any significant problems resulting from the inability
to procure necessary raw materials.
Patents.
In November, 1994 the company commenced patent infringement
litigation against International Business Machines Corporation
charging infringement of certain of the company patents. Although
the company believes its claims are valid, it cannot predict the
outcome of the litigation. Should the company prevail in the
litigation, such patents could play a significant role in the
conduct of its business and accordingly would be material.
The company believes that most if its remaining patents do not
presently play asignificant role in the conduct of its business or in
its industry in general and that most patents, granted or which may
be granted to it, while anticipated to be of value, are note
expected to be of material significance. The company also owns certain
copyrights, trademarks and proprietary information.
From time to time, companies in the industry have claimed
that products and components similar to those manufactured by the
company are covered by valid patents held by others. It may be
necessary or desirable to obtain further patent licenses in
addition to those which the company now holds. Although there is
no assurance that such additional patent licenses could be
obtained, the company is of the opinion, based on industry
practice and information presently available, that such licenses
could be obtained and on terms which would not have a material
effect on the company's consolidated financial position or results
of operations.
Competition.
The computer industry has been characterized by rapid
technological change, product improvement, and price reductions.
During fiscal 1994, the company's margins were adversely affected
by the lower margin open systems products and by the generally
weak European economy. Data General's future may be adversely
affected by new technology developed by others or by price
reductions initiated by competitors. Some of the company's
competitors are larger companies and have substantially greater
resources than the company. The company also competes with a
number of smaller manufacturers. The company believes that it is
a significant manufacturer of multi-user computer systems,
servers, and mass storage devices for commercial applications.
According to reports from International Data Corporation (IDC),
Data General has ranked among the leading suppliers of commercial
medium-scale UNIX-based systems in both 1992 and 1993.
The company's AViiON systems have become increasingly
competitive since they were introduced in fiscal 1989 as more
applications were ported to the platform and new product
introductions added to the depth of the product family. AViiON
systems compete favorably with standards-based systems from other
industry-leading vendors based upon a wide range of features and
performance, the company's DG/UX operating system, and the
availability of an extensive range of applications software.
Based on price/performance and other measures that
demonstrate computer speed, throughput, and ability to run
applications effectively, the company's current 32-bit ECLIPSE MV
family of proprietary systems, using primarily the AOS/VS and
AOS/VS II operating systems, competes favorably against 32-bit
systems from other leading minicomputer vendors. Data General's
primary market for proprietary systems is its existing customer
base.
AViiON and ECLIPSE systems also compete favorably as a result
of their ability to connect with a variety of desktop systems
manufactured by the company and by other vendors. The company's
worldwide service and support capability, which includes service
for certain products manufactured by other vendors (such as PCs
and workstations), also enhances the competitive strength of the
company's product families.
The company believes that its CLARiiON product was the first
open, RAID-based mass storage product. This product supports
UNIX-based computers from IBM, Digital Equipment Corporation, and
Sun Microsystems, and for systems running on NetWare, NT,
OS/2, AND SCO UNIX, as well as Data General systems. NetWare is
the dominant server operating system for PC-LANs (local area
networks).
Research and Development.
The company understands that if it is to compete successfully
in the industry it will require a continuing commitment to
research and development. Research and development expenses were
$90.8 million in fiscal 1994, $100.2 million in fiscal 1993, and
$111.3 million in fiscal 1992. Research and development work
contracted out during fiscal 1994 was insignificant. During
fiscal 1994, the company focused its research and development
efforts on its core business technology, multi-user computer
systems, servers, and mass storage devices, including related
software and services.
Continued emphasis on applied research and development
programs is anticipated in order to improve existing products and
to expand product line capabilities. Research and development
work is done primarily in the following areas: general purpose
computer systems; open mass storage devices; systems and
applications software; integrated circuit technology;
microprocessor design; network services and products; terminal and
workstation development; and contracted special product design.
Environmental Conditions.
The company's various manufacturing facilities are subject to
numerous laws and regulations designed to protect the environment,
particularly from plant wastes and emissions. In the company's
opinion, it is complying with such laws and regulations. Compli-
ance has not had, and is not expected to have, a material effect
upon the company's capital expenditures, results of operations, or
competitive position.
Employees.
The company had approximately 5,800 employees at September
24, 1994, compared with 6,500 employees at September 25, 1993, and
7,100 employees at the end of fiscal 1992. The decrease in
employees resulted from various restructuring programs undertaken
to reduce the company's infrastructure and realign its organizations
to meet today's open systems business model. Additional information
on the company's restructuring programs is included in "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" and Note 2 of "Notes to Consolidated Financial
Statements" in the company's Annual Report to Stockholders for the
fiscal year ended September 24, 1994. The "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" has been incorporated by reference into Item 7 of Part
II of this Report. The "Notes to Consolidated Financial
Statements" have been incorporated by reference into Item 8 of
Part II of this Report.
The company's employees are not covered under any collective
bargaining agreements, and the company has not experienced any
significant labor problems. The company believes that its
relationship with its employees is good.
International Operations.
Foreign business is conducted through subsidiaries,
representatives and distributors, and to a lesser extent by direct
sales. International revenues, including U.S. direct export sales,
amounted to approximately 45% of consolidated total revenues in
fiscal 1994, and 46% and 49% of consolidated total revenues in
fiscal 1993 and 1992, respectively. The majority of Data
General's international revenues are derived from western Europe,
Asia and Canada. In view of the locations and diversification of
its international activities, the company does not believe that
there are any special risks beyond the normal business risks
attendant to activities abroad. The company maintains a hedging
program to minimize its exposure to foreign currency
fluctuations. Additional information relating to the
company's international operations, including financial
information by major geographic area, is included in
Note 11 "Geographic Segment Data" on page 28 of the company's
Annual Report to Stockholders for the fiscal year ended
September 24, 1994.
Item 2. Properties.
The company's executive offices are located in Westboro,
Massachusetts. Manufacturing, research and development, service,
marketing, and administrative support facilities are located in
various states and countries throughout the world. All buildings
owned are modern, air conditioned, and suitable and adequate for
the present activities of the company. The company also leases
space in 48 states and 28 countries, primarily for sales and ser-
vice offices, the corporate headquarters, and certain
manufacturing operations. Substantially all manufacturing
equipment is owned by the company and is well maintained.
In September 1994, the company sold its Westboro,
Massachusetts land and facilities, and entered into a 10-year sale
leaseback arrangement for a portion of the property. During
fiscal 1993 the company sold its facilities in Westbrook, Maine
and Portsmouth, New Hampshire, as well as a portion of its
facility in Woodstock, Connecticut. During fiscal 1992, the
company sold Data General Thailand, its Thailand manufacturing
subsidiary. The company is currently holding two facilities for
future sale: Milford, Massachusetts and the remaining portion of
Woodstock, Connecticut. Additional information regarding the
company's principal plants and properties is included under the
heading "Facilities" on page 31 of the company's Annual Report to
Stockholders for the fiscal year ended September 24, 1994.
Item 3. Legal Proceedings.
Subsequent to the end of fiscal 1994, Data General settled with
Northrop Grumman Corporation its six-year software copyright
infringement and trade secrets litigation against Grumman Systems
Support Corporation ("Grumman"). Under terms of this settlement,
Grumman paid the company $53 million and the parties have
dismissed all pending litigation.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
Executive Officers of the Registrant.
Frederick R. Adler(1), Age 69, Chairman of the Executive
Committee of the Board of Directors since July 1982; Secretary of
the company from 1968 to July 1982; retiring senior partner in the
law firm of Fulbright & Jaworski L.L.P., and senior partner of
such firm or senior partner or chief executive officer of a
professional corporation which was a senior partner in the
predecessor firm of Reavis & McGrath, New York City, for more than
five years; managing director of Adler & Company, a venture
capital investment firm, and a general partner of its related
investment funds for more than five years.
Ronald L. Skates(1), Age 53, President and Chief Executive
Officer of the company since November 1989; Executive Vice
President and Chief Operating Officer of the company from August
1988 to November 1989; Senior Vice President of the company from
November 1986 to August 1988; Chief Financial Officer of the
company from November 1986 to August 1987; Partner, Price
Waterhouse from July 1976 to November 1986.
J. Thomas West, Age 55, Senior Vice President of the company
since November 1988; Vice President of the company from September
1983 to November 1988.
William J. Cunningham, Age 56, Vice President of the company
since August 1989; prior positions at Apollo Computer Inc.
included Vice President and General Manager, Manufacturing and
Research and Development, from October 1988 to June 1989; and Vice
President and General Manager, Manufacturing and Distribution,
from September 1987 to September 1988; Vice President, U.S.
Manufacturing, for Honeywell Bull from March 1986 to September
1987.
Arthur W. DeMelle, Age 54, Vice President and Chief Financial
Officer of the company since March 1992; prior positions included
Senior Vice President of Finance and Administration at Chep USA
from November 1989 to March 1992; Executive Vice President and
Chief Financial Officer at Emery Air Freight Corporation from
April 1987 to May 1989; and Executive Vice President and Chief
Financial Officer at Purolator Courier Corporation from July 1980
to April 1987.
Stephen P. Gardner, Age 41, Vice President of the company
since January 1994; Division Vice President of the company from
March 1993 to January 1994; prior positions with Bull Worldwide
Information Systems from 1988 to 1993, including President -
Integris, Vice President of North American Marketing, and Vice
President of Small Systems Product Lines.
Robert C. Hughes, Age 54, Vice President of the company since
April 1993; Chief Operating Officer at Bachman Information Systems
from May 1992 to April 1993; prior positions at Digital Equipment
Corp. included Vice President, U.S. Sales and Industry Marketing
from 1986 to 1992, and Vice President, Office Systems Business
Unit from 1982 to 1985.
Joel Schwartz, Age 52, Vice President of the company since
February 1989; President and Chief Operating Officer of Polygen
Corp. from August 1986 to February 1989.
William L. Wilson, Age 50, Vice President of the company
since March 1994; prior positions with International Business
Machines Corporation including Assistant General Manager for
Marketing - Enterprise Systems from 1992 to 1993, General Manager
of IBM's Integrated Systems Solutions Corporation (ISSC) from 1990
to 1992, and Marketing and Sales Director for U.S Marketing
Services from 1987 to 1990.
Donald P. Zereski, Age 52, Vice President of the company
since October 1993; Principal, NorthCrest International from
December 1992 to October 1993; prior positions at Digital
Equipment Corp. included Vice President, U.S. Area, from January
1991 to December 1992; Vice President, Corporate Customer Service,
from July 1989 to January 1991; Vice President, U.S. Field
Service, from July 1985 to June 1989, and Field Service, Vice
President for Europe, from July 1983 to June 1985.
Executive officers of the company are elected annually and
hold office until the first meeting of the Board of Directors
following the Annual Meeting of Stockholders or until their
successors have been elected and have duly qualified.
(1) Member of Board of Directors and Executive Committee thereof.
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters.
The information contained under the headings "Stock Price
Range" on page 30; and "Number of Stockholders," "Dividend Pol-
icy," and "Stock Exchange Listing" on page 33 of the company's
Annual Report to Stockholders for the fiscal year ended September
24, 1994 is incorporated herein by reference.
Item 6. Selected Financial Data.
The information contained under the heading "Five Year Sum-
mary of Selected Financial Data" on page 13 of the company's An-
nual Report to Stockholders for the fiscal year ended September
24, 1994 is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condi-
tion and Results of Operations.
The information contained under the heading "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" on pages 14 through 16 of the company's Annual Report
to Stockholders for the fiscal year ended September 24, 1994 is
incorporated herein by reference. This information should be read
in conjunction with the related consolidated financial statements
incorporated by reference under Item 8.
Item 8. Financial Statements and Supplementary Data.
The information contained in the consolidated financial
statements, notes to consolidated financial statements, and report
of independent accountants, and under the headings "Quarterly
Financial Data (Unaudited)," and "Facilities," on pages 17 through
31 of the company's Annual Report to Stockholders for the fiscal
year ended September 24, 1994 is incorporated herein by reference.
Item 9. Disagreements on Accounting and Financial Disclosure.
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The information contained under the heading "Proposal No. 1
- Election of Seven Directors" on pages 3 through 5 of the com-
pany's Proxy Statement dated December 14, 1994 is incorporated
herein by reference. See also "Executive Officers of the Regis-
trant" appearing in Part I hereof.
Item 11. Executive Compensation.
The information contained under the headings "Summary
Compensation Table", "Options Grants in the 1994 Fiscal Year",
"Options Exercised and Fiscal Year-End Values", "Compensation
Pursuant to Plans", "Employee Agreements", "Compensation of
Directors" and "Directors' Retirement Program" on pages 6 through
17 of the company's Proxy Statement dated December 14, 1994 is
incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
The information contained under the heading "Beneficial Ow-
nership of Common Stock" and in the second paragraph and related
table under the heading "Proposal No. 1-Election of Seven Direc-
tors" on pages 2 through 4 of the company's Proxy Statement dated
December 14, 1994 is incorporated herein by reference.
PART IV
Item 13. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K.
(a) 1 and 2. Index to financial statements and related schedules:
Page
Five year summary of selected financial data . . . . . . . 13*
Management's discussion and analysis of financial
condition and results of operations. . . . . . . . . . . 14-16*
Consolidated balance sheets at September 24, 1994
and September 25, 1993 . . . . . . . . . . . . . . . . . 18*
For fiscal years ended September 24, 1994,
September 25, 1993, and September 26, 1992:
Consolidated statements of operations. . . . . . . . . 17*
Consolidated statements of cash flows. . . . . . . . . 19*
Consolidated statements of stockholders' equity. . . . 20*
Notes to consolidated financial statements . . . . . . . . 21-29*
Report of independent accountants. . . . . . . . . . . . . 30*
Supplemental financial information . . . . . . . . . . . . 30*
Facilities . . . . . . . . . . . . . . . . . . . . . . . . 31*
Report of independent accountants on financial
statement schedules. . . . . . . . . . . . . . . . . . . 18
Financial statement schedules:
Schedule I -- Marketable securities. . . . . . . . . . . 19
Schedule VIII -- Valuation and qualifying accounts . . . 20
Schedule IX -- Short-term borrowings . . . . . . . . . . 21
Schedule X -- Supplementary income statement information 22
The financial statement schedules should be read in conjunc-
tion with the financial statements in the 1994 Annual Report to
Stockholders. All other schedules have been omitted as they are
not applicable, not required, or the information is included in
the consolidated financial statements or notes thereto.
_____________
* Page references are to the 1994 Annual Report to
Stockholders. The 1994 Annual Report to Stockholders is not
to be deemed filed as part of this Report except for those
parts thereof specifically incorporated by reference into
this Report.
EXHIBITS
3. (a) Restated Certificate of Incorporation of the company, as
amended, including the company's Certificate of Designation
dated October 17, 1986, previously filed as Exhibit 3(a) to
the company's Annual Report on Form 10-K for the fiscal year
ended September 27, 1986, which is incorporated herein by
reference.
(b) Amendment to Certificate of Incorporation of the company,
filed January 29, 1987, previously filed as Exhibit 3 to the
company's Quarterly Report on Form 10-Q for the quarter ended
March 28, 1987, which is incorporated herein by reference.
(c) By-Laws of the company, as amended.
4. (a) Indenture dated as of September 15, 1977 between the
company and State Street Bank and Trust Company (purchased
from Fleet Bank of Massachusetts, formerly Bank of New
England and formerly New England Merchants National Bank), as
Trustee, which relates to the company's 8-3/8% Sinking Fund
Debentures Due 2002, previously filed as Exhibit 2.2 to the
company's Registration Statement on Form S-7, Registration
Number 2-59710, which is incorporated herein by reference.
(b) Amended and Restated Rights Agreement dated as of May 19,
1988 between the company and Morgan Shareholders Services
Trust Company, as Rights Agent, previously filed as Exhibit 4
to the company's Quarterly Report on Form 10-Q for the quar-
ter ended June 25, 1988, which is incorporated herein by
reference.
(c) Indenture, dated as of June 1, 1991, between the company
and Fleet National Bank, as Trustee, which relates to the
company's 7-3/4% Convertible Subordinated Debentures due
2001, previously filed as Exhibit 4(d) to Amendment No. 2 to
the company's Registration Statement on Form S-3 (No. 33-
40817), which is incorporated herein by reference.
10. (a) Restricted Stock Option Plan, Appendix A to the prospec-
tus included in the company's Registration Statement on Form
S-8, Registration Number 33-19759, which is incorporated
herein by reference.
(b) Forms of Restricted Stock Option Agreement, previously
filed as Exhibit 10(b) to the company's Annual Report on Form
10-K for the fiscal year ended September 29, 1990, which is
incorporated herein by reference.
(c) Form of Amendment to Restricted Stock Option Agreement,
previously filed as Exhibit 10(b) to the company's Quarterly
Report on Form 10-Q for the quarter ended June 25, 1988,
which is incorporated herein by reference.
(d) Form of Amendments to Key Executive Restricted Stock
Option Agreements, previously filed as Exhibit 10(b) to the
company's Quarterly Report on Form 10-Q for the quarter ended
March 25, 1989, which is incorporated herein by reference.
(e) Form of Amended and Restated Restricted Stock Option
Agreement, between the company and Ronald L. Skates,
previously filed as Exhibit 10(f) to the company's Quarterly
Report on Form 10-Q for the quarter ended March 25, 1989,
which is incorporated herein by reference.
(f) Form of Amendment to Restricted Stock Option Agreements,
between the company and Frederick R. Adler, previously filed
as Exhibit 10(g) to the company's Quarterly Report on Form
10-Q for the quarter ended March 25, 1989, which is incorpo-
rated herein by reference.
(g) Employee Stock Option Plan, Appendix A to the prospectus
included in the post-effective Amendment Number 1 to the
company's Registration Statement on Form S-8, Registration
Number 33-11527, which is incorporated herein by reference.
(h) Amendment to Restricted and Employee Incentive Stock
Option Agreements, between the company and Ronald L. Skates,
dated November 14, 1988, previously filed as Exhibit 10(e) to
the company's Annual Report on Form 10-K for the fiscal year
ended September 24, 1988, which is incorporated herein by
reference.
(i) Forms of Incentive Stock Option Agreement, previously
filed as Exhibit 10(d) to the company's Annual Report on Form
10-K for the fiscal year ended September 26, 1987, which is
incorporated herein by reference.
(j) Form to Amendment to Employee Stock Option Agreement,
previously filed as Exhibit 10(a) to the company's Quarterly
Report on Form 10-Q for the quarter ended June 25, 1988,
which is incorporated herein by reference.
(k) Form of Amended and Restated Employee Stock Option Agree-
ment, between the company and Ronald L. Skates, previously
filed as Exhibit 10(e) to the company's Quarterly Report on
Form 10-Q for the quarter ended March 25, 1989, which is
incorporated herein by reference.
(l) Form of Amendments to Key Executive Stock Option Agree-
ments, previously filed as Exhibit 10(c) to the company's
Quarterly Report on Form 10-Q for the quarter ended March 25,
1989, which is incorporated herein by reference.
(m) Non-Employee Director Restricted Stock Option Plan, Ap-
pendix A to the prospectus included in the company's Regis-
tration Statement on Form S-8, Registration Number 2-91481,
which is incorporated herein by reference.
(n) Form of Non-Employee Director Restricted Stock Option
Agreement, previously filed as Exhibit 10(n) to the company's
Annual Report on Form 10-K for the fiscal year ended Septem-
ber 29, 1990, which is incorporated herein by reference.
(o) Employee Qualified Stock Purchase Plan, Appendix A to the
prospectus included in the company's Registration Statement
on Form S-8, Registration Number 33-33300, which is incorpo-
rated herein by reference.
(p) Form of Employment Agreement between the company and its
full-time officers, previously filed as Exhibit 10(a) to the
company's Quarterly Report on Form 10-Q for the quarter ended
March 25, 1989, which is incorporated herein by reference.
(q) Form of Indemnity Agreement between the company and its
officers and directors, previously filed as Exhibit 10 to the
company's Quarterly Report on Form 10-Q for the quarter ended
March 28, 1987, which is incorporated herein by reference.
(r) Form of Revolving Credit Agreement dated as of November
22, 1991, previously filed as Exhibit 10(aa) to the company's
Annual Report on Form 10-K for the fiscal year ended
September 28, 1991, which is incorporated herein by
reference.
(s) Form of Amendment to Revolving Credit Agreement,
previously filed as Exhibit 10(a) to the company's Quarterly
Report on Form 10-Q for the quarter ended March 28, 1992,
which is incorporated herein by reference.
(t) Form of Amendments dated April 12, 1993 and September 23,
1993 to Revolving Credit Agreement dated November 22, 1991,
previously filed as Exhibit 10(t) to the company's Annual
Report on Form 10-K for the fiscal year ended September 25,
1993, which is incorporated herein by reference.
(u) Form of Amendment dated September 1, 1993, to various
Employment Agreements between the company and its full-time
officers, previously filed as Exhibit 10(u) to the company's
Annual Report on Form 10-K for the fiscal year ended
September 25, 1993, which is incorporated herein by
reference.
(v) Form of Amendment dated December 30, 1993, amending and
restating Revolving Credit Agreement and Letter of Credit
Agreement, previously filed as Exhibit 10 to the company's
Quarterly Report on Form 10-Q for the quarter ended December
25, 1993, which is incorporated herein by reference.
(w) Amendment dated September 16, 1994 to Revolving Credit
Agreement and Letter of Credit Agreement dated December 30, 1993,
changing the Net Worth ratio of Consolidated Total Liabilities
to Consolidated Tangible Net Worth.
(x) Data General Corporation Supplemental Retirement Benefit
Plan dated as of October 1, 1989, between the company and its
highly compensated employees, providing the employees with
additional pensions benefits and Trust Agreement with Boston
Safe Deposit and Trust Company for the Plan.
(y) Supplemental Pension and Retiree Medical Agreement dated
as of December 7, 1994, between the company and it's current
president and Chief Executive Officer, providing the
Executive with appropriate pension and post-employment
welfare benefits and Trust Agreement with Boston Safe Deposit
and Trust Company for the Supplemental Pension and Retiree Medical
Agreement.
(z) Amendments dated April 18, 1994 to Revolving Credit
Agreement and Letter of Credit Agreement dated
December 30, 1993, changing the Consolidated Tangible
Net Worth limitation and ratio.
(aa) 1994 Non-Employee Director Stock Option Plan, Appendix A
to the prospectus included in the company's Registration
Statement on Form S-8, Registration Number 33-53039, which is
incorporated herein by reference.
(bb) Form of 1994 Non-Employee Director Stock Option Agreement.
11. Computation of primary and fully diluted earnings per share.
13. Annual report to stockholders for the fiscal year ended Sep-
tember 24, 1994, certain portions of which have been incorpo-
rated herein by reference.
22. Subsidiaries of the registrant.
24. Consent of independent accountants.
Exhibits, other than those incorporated by reference, have
been included in copies of this Report filed with the Securities
and Exchange Commission. Stockholders of the company will be
provided with copies of these exhibits upon written request to the
company.
(b) There were no reports on Form 8-K filed during the last
thirteen weeks of the period covered by this Report
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, the registrant has
duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DATA GENERAL CORPORATION
(Registrant)
By: Ronald L. Skates
Ronald L. Skates
President and Chief Executive Officer
December 16, 1994
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.
Signature Title Date
President and Chief
Executive Officer;
Ronald L. Skates Director December 16, 1994
Ronald L. Skates
Chairman of Executive
Committee of Board of
Frederick R. Adler Directors; Director December 16, 1994
Frederick R. Adler
Vice President
Chief Financial Officer
Arthur W. DeMelle Chief Accounting December 16, 1994
Arthur W. DeMelle Officer
Ferdinand Colloredo-Mansfeld Director December 16, 1994
Ferdinand Colloredo-Mansfeld
John G. McElwee Director December 16, 1994
John G. McElwee
Donald H. Trautlein Director December 16, 1994
Donald H. Trautlein
Richard L. Tucker Director December 16, 1994
Richard L. Tucker
DATA GENERAL CORPORATION
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENTS SCHEDULES
To the Board of Directors of data General Corporation
Our audits of the consolidated financial statements referred
to in our report dated October 26, 1994 appearing on page 30 of
the 1994 Annual Report to Stockholders of Data General Corporation
(which report and consolidated financial statements are
incorporated by reference in this Annual Report on Form 10-K) also
included an audit of the Financial Statement schedules listed in
Item 14(a) of this Form 10-K. In our opinion, these Financial
Statement Schedules present fairly, in all material respects, the
information set forth therein when read in conjunction with the
related consolidated financial statements.
PRICE WATERHOUSE LLP
/s/ Price Waterhouse LLP
Boston, Massachusetts
October 26, 1994
SCHEDULE I
DATA GENERAL CORPORATION
MARKETABLE SECURITIES
(In thousands)
AMOUNT AT
WHICH CARRIED
PRINCIPLE MARKET IN BALANCE
DESCRIPTION AMOUNT COST VALUE SHEET
SEPTEMBER 24, 1994:
U.S. government $41,104 $40,280 $40,495 $40,498
securities
Certificate of 7,230 7,230 7,229 7,367
Deposit
------- ------- ------- -------
Total $48,334 $47,510 $47,724 $47,865
SCHEDULE VIII
DATA GENERAL CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
Balance at
Previous Balance at
Description End of Year Additions Deductions End of Year
SEPTEMBER 24, 1994:
Allowance for
doubtful accounts . .$ 12,992 $ 9,919(a) $( 9,159)(b) $ 13,752
Valuation allowance on
deferred tax asset (c) 0 209,936 0 209,936
SEPTEMBER 25, 1993:
Allowance for
doubtful accounts . . 19,934 11,379(a) (18,321)(b) 12,992
SEPTEMBER 26, 1992:
Allowance for
doubtful accounts . . 22,437 8,756(a) (11,259)(b) 19,934
____________________
(a) Charged to costs and expenses.
(b) Accounts deemed uncollectable.
(c) SFAS 109 "Accounting for Income Taxes" adopted September 26, 1993.
SCHEDULE IX
DATA GENERAL CORPORATION
SHORT-TERM BORROWINGS
(Dollars in thousands)
Weighted
Maximum Average Average
Category of Balance Weighted Amount Amount Interest
Aggregate at Average Outstanding Outstanding Rate
Short-term End of Interest During the During the During the
Borrowings Period Rate Period Period Period
SEPTEMBER 24, 1994:
Amounts payable to
banks for
borrowings. . . . $ 2,461 6.2% $ 2,461 $ 2,300 6.8%
SEPTEMBER 25, 1993:
Amounts payable to
banks for
borrowings. . . . 2,267 8.1% 3,940 2,996 10.7%
SEPTEMBER 26, 1992:
Amounts payable to
banks for
borrowings. . . . 3,940 10.7% 5,719 3,845 10.9%
____________________
The weighted average interest rate and average amount outstanding during the
period are based on borrowings outstanding at the end of each of the company's
twelve fiscal periods.
SCHEDULE X
DATA GENERAL CORPORATION
SUPPLEMENTARY INCOME STATEMENT INFORMATION
(In thousands)
Fiscal Year Ended
Sept. 24, Sept. 25, Sept. 26,
Charged to Costs 1994 1993 1992
and Expenses
Advertising. . . . . . . . . . $18,086 $17,086 $23,334
____________________
Royalties, Repairs and maintenance, and Taxes, other than payroll and income
taxes, amounted to less than 1% of consolidated total revenues. Depreciation
expense and amortization of capitalized software development costs are included
in the Consolidated Statement of Cash Flows in the company's Annual Report to
Stockholders.
EXHIBITS
Index to Exhibits.
3. (a) Restated Certificate of Incorporation of the company, as
amended, including the company's Certificate of Designation
dated October 17, 1986, previously filed as Exhibit 3(a) to
the company's Annual Report on Form 10-K for the fiscal year
ended September 27, 1986, which is incorporated herein by
reference.
(b) Amendment to Certificate of Incorporation of the company,
filed January 29, 1987, previously filed as Exhibit 3 to the
company's Quarterly Report on Form 10-Q for the quarter ended
March 28, 1987, which is incorporated herein by reference.
(c) By-Laws of the company, as amended.
4. (a) Indenture dated as of September 15, 1977 between the
company and State Street Bank and Trust Company (purchased
from Fleet Bank of Massachusetts, formerly Bank of New
England and formerly New England Merchants National Bank), as
Trustee, which relates to the company's 8-3/8% Sinking Fund
Debentures Due 2002, previously filed as Exhibit 2.2 to the
company's Registration Statement on Form S-7, Registration
Number 2-59710, which is incorporated herein by reference.
(b) Amended and Restated Rights Agreement dated as of May 19,
1988 between the company and Morgan Shareholders Services
Trust Company, as Rights Agent, previously filed as Exhibit 4
to the company's Quarterly Report on Form 10-Q for the quar-
ter ended June 25, 1988, which is incorporated herein by
reference.
(c) Indenture, dated as of June 1, 1991, between the company
and Fleet National Bank, as Trustee, which relates to the
company's 7-3/4% Convertible Subordinated Debentures due
2001, previously filed as Exhibit 4(d) to Amendment No. 2 to
the company's Registration Statement on Form S-3 (No. 33-
40817), which is incorporated herein by reference.
10. (a) Restricted Stock Option Plan, Appendix A to the prospec-
tus included in the company's Registration Statement on Form
S-8, Registration Number 33-19759, which is incorporated
herein by reference.
(b) Forms of Restricted Stock Option Agreement, previously
filed as Exhibit 10(b) to the company's Annual Report on Form
10-K for the fiscal year ended September 29, 1990, which is
incorporated herein by reference.
(c) Form of Amendment to Restricted Stock Option Agreement,
previously filed as Exhibit 10(b) to the company's Quarterly
Report on Form 10-Q for the quarter ended June 25, 1988,
which is incorporated herein by reference.
(d) Form of Amendments to Key Executive Restricted Stock
Option Agreements, previously filed as Exhibit 10(b) to the
company's Quarterly Report on Form 10-Q for the quarter ended
March 25, 1989, which is incorporated herein by reference.
(e) Form of Amended and Restated Restricted Stock Option
Agreement, between the company and Ronald L. Skates,
previously filed as Exhibit 10(f) to the company's Quarterly
Report on Form 10-Q for the quarter ended March 25, 1989,
which is incorporated herein by reference.
(f) Form of Amendment to Restricted Stock Option Agreements,
between the company and Frederick R. Adler, previously filed
as Exhibit 10(g) to the company's Quarterly Report on Form
10-Q for the quarter ended March 25, 1989, which is incorpo-
rated herein by reference.
(g) Employee Stock Option Plan, Appendix A to the prospectus
included in the post-effective Amendment Number 1 to the
company's Registration Statement on Form S-8, Registration
Number 33-11527, which is incorporated herein by reference.
(h) Amendment to Restricted and Employee Incentive Stock
Option Agreements, between the company and Ronald L. Skates,
dated November 14, 1988, previously filed as Exhibit 10(e) to
the company's Annual Report on Form 10-K for the fiscal year
ended September 24, 1988, which is incorporated herein by
reference.
(i) Forms of Incentive Stock Option Agreement, previously
filed as Exhibit 10(d) to the company's Annual Report on Form
10-K for the fiscal year ended September 26, 1987, which is
incorporated herein by reference.
(j) Form of Amendment to Employee Stock Option Agreement,
previously filed as Exhibit 10(a) to the company's Quarterly
Report on Form 10-Q for the quarter ended June 25, 1988,
which is incorporated herein by reference.
(k) Form of Amended and Restated Employee Stock Option Agree-
ment, between the company and Ronald L. Skates, previously
filed as Exhibit 10(e) to the company's Quarterly Report on
Form 10-Q for the quarter ended March 25, 1989, which is
incorporated herein by reference.
(l) Form of Amendments to Key Executive Stock Option Agree-
ments, previously filed as Exhibit 10(c) to the company's
Quarterly Report on Form 10-Q for the quarter ended March 25,
1989, which is incorporated herein by reference.
(m) Non-Employee Director Restricted Stock Option Plan, Ap-
pendix A to the prospectus included in the company's Regis-
tration Statement on Form S-8, Registration Number 2-91481,
which is incorporated herein by reference.
(n) Form of Non-Employee Director Restricted Stock Option
Agreement, previously filed as Exhibit 10(n) to the company's
Annual Report on Form 10-K for the fiscal year ended Septem-
ber 29, 1990, which is incorporated herein by reference.
(o) Employee Qualified Stock Purchase Plan, Appendix A to the
prospectus included in the company's Registration Statement
on Form S-8, Registration Number 33-33300, which is incorpo-
rated herein by reference.
(p) Form of Employment Agreement between the company and its
full-time officers, previously filed as Exhibit 10(a) to the
company's Quarterly Report on Form 10-Q for the quarter ended
March 25, 1989, which is incorporated herein by reference.
(q) Form of Indemnity Agreement between the company and its
officers and directors, previously filed as Exhibit 10 to the
company's Quarterly Report on Form 10-Q for the quarter ended
March 28, 1987, which is incorporated herein by reference.
(r) Form of Revolving Credit Agreement dated as of November
22, 1991, previously filed as Exhibit 10(aa) to the company's
Annual Report on Form 10-K for the fiscal year ended
September 28, 1991, which is incorporated herein by
reference.
(s) Form of Amendment to Revolving Credit Agreement,
previously filed as Exhibit 10(a) to the company's Quarterly
Report on Form 10-Q for the quarter ended March 28, 1992,
which is incorporated herein by reference.
(t) Form of Amendments dated April 12, 1993 and September 23,
1993 to Revolving Credit Agreement dated November 22, 1991,
previously filed as Exhibit 10(t) to the company's Annual
Report on Form 10-K for the fiscal year ended September 25,
1993, which is incorporated herein by reference.
(u) Form of Amendment dated September 1, 1993, to various
Employment Agreements between the company and its full-time
officers, previously filed as Exhibit 10(u) to the company's
Annual Report on Form 10-K for the fiscal year ended
September 25, 1993, which is incorporated herein by
reference.
(v) Form of Amendment dated December 30, 1993, amending and
restating Revolving Credit Agreement and Letter of Credit
Agreement, previously filed as Exhibit 10 to the company's
Quarterly Report on Form 10-Q for the quarter ended December
25, 1993, which is incorporated herein by reference.
(w) Amendment dated September 16, 1994 to Revolving Credit
Agreement and Letter of Credit Agreement dated December 30, 1993,
changing the Net Worth ratio of Consolidated Total Liabilities
to Consolidated Tangible Net Worth.
(x) Data General Corporation Supplemental Retirement Benefit
Plan dated as of October 1, 1989, between the company and its
highly compensated employees, providing the employees with
additional pensions benefits and Trust Agreement with Boston Safe
Deposit and Trust Company for the Plan.
(y) Supplemental Pension and Retiree Medical Agreement dated
as of December 7, 1994, between the company and it's current
president and Chief Executive Officer, providing the
Executive with appropriate pension and post-employment
welfare benefits and Trust Agreement with Boston Safe Deposit and
Trust Company for the Supplemental Pension and Retiree Medical
Agreement.
(z) Amendments dated April 18, 1994 to Revolving Credit
Agreement and Letter of Credit Agreement dated December
30, 1993, changing the Consolidated Tangible Net Worth
limitation and ratio.
(aa) 1994 Non-Employee Director Stock Option Plan, Appendix A to
the prospectus included in the company's Registration
Statement on Form S-8, Registration Number 33-53039, which is
incorporated herein by reference.
(bb) Form of 1994 Non-Employee Director Stock Option Agreement.
11. Computation of primary and fully diluted earnings per share.
13. Annual report to stockholders for the fiscal year ended Sep-
tember 24, 1994, certain portions of which have been incorpo-
rated herein by reference.
22. Subsidiaries of the registrant.
24. Consent of independent accountants.
Exhibits, other than those incorporated by reference, have
been included in copies of this Report filed with the Securities
and Exchange Commission. Stockholders of the company will be
provided with copies of these exhibits upon written request to the
company.
Exhibit 10(w)
SECOND AMENDMENT TO (I) AMENDED AND
RESTATED REVOLVING CREDIT AGREEMENT AND
(II) LETTER OF CREDIT AGREEMENT
This SECOND AMENDMENT, dated as of September 16, 1994 (this
"Amendment"), among the parties hereto amends each of the (i) December
30, 1993 (as heretofore amended, the "Credit Agreement"), and (ii)
LETTER OF CREDIT AGREEMENT, dated as of December 30, 1993 (as heretofor
amended, the "L/C Agreement"; the Credit Agreement and the L/C
Agreement, the "Agreements"), each of which Agreements is among DATA
GENERAL CORPORATION, a Delaware corporation (the "Borrower"), NATIONAL
WESTMINSTER BANK PLC ("NWB"), THE BANK OF NOVA SCOTIA ("BNS"), FLEET
BANK OF MASSACHUSETTS, NATIONAL ASSOCIATION ("Fleet"), NATIONSBANK OF
NORTH CAROLINA, N.A. ("NationsBank"), and CANADIAN IMPERIAL BANK OF
COMMERCE (NEW YORK) ("CIBC" and, together with NWB, BNS, FLEET and
NATIONSBANK, the "Lenders") and NWB, as Agent (the "Agent"), for the
Lenders of the agreements.
WHEREAS, the Borrower, the Lenders and the Agent desire to
amend the Credit Agreement as set forth herein.
NOW, THEREFORE, it is agreed:
1. As used herein all terms which are defined in the Credit
Agreement shall have the same meanings herein.
2. Section 5.02(j) of each of the Credit Agreement is hereby
amended in its entirety to read as follows:
(j) Net Worth, Permit the ratio of Consolidated Total
Liabilities to Consolidated Tangible Net Worth to be greater
than 1.25 to 1 at the end of any fiscal quarter, provided that
such ratio shall be no greater than (x) 1.30 to 1 at the end of
the fiscal quarters ending on March 26, 1994 and June 25, 1994
and (y) 1.35 to 1 at the end of the fiscal quarter ending on
September 24, 1994.
3. All representations and warranties contained in Article
IV of each of the Agreements are ture and correct as of the date hereof.
4. This Amendment shall not become effective until the date
on which this Amendment shall have been executed by the Borrower,
Lenders constituting the Majority Lenders under each of the Agreements
and the Agent, and the Agent shall have received evidence satisfactory
to such execution.
5. The Borrower agrees to pay on demand all out-of-pocket
costs and expenses of the Agent in connection with the negotiation,
preparation, execution and delivery of this Amendment, including
(without limitation) the reasonable fees and out-of-pocket expenses of
counsel for the Agent in connection therewith.
6. This Amendment shall be limited precisely as written and
shall not be deemed (a) to be a consent granted pursuant to, or a waiver
or modification of, any other term or condition of either of the
Agreements or any of the instruments or agreements referred to thereof
or (b) to prejudice any right or rights which the Agent or the Lenders
may now have or have in the future under or in connection with either
Agreements or any of the instruments, agreements or other documents or
papers contemplated in connection with either therof, and any reference
therein to the Credit Agreement or the L/C Agreement, as the case may
be, shall be deemed to mean the Credit Agreement or L/C Agreement as
modified by this Amendment.
7. This Amendment may be executed in any number of
counterparts and by the different parties hereto in separate
counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall
constitute but one and the same instrument.
8. This Amendment shall be governed by, and construed in
accordance with, the laws of the State of New York.
IN WITNESS HEREOF, the parties hereto have caused this
Amendment to be duly executed as of the day and the year first above
written.
DATA GENERAL CORPORATION
By: _____________________________
Treasurer
NATIONAL WESTMINSTER BANK PLC,
as Lender and as Agent
By: _____________________________
Vice President
THE BANK OF NOVA SCOTIA
By:______________________________
Vice President
FLEET BANK OF MASSACHUSETTS,
NATIONAL ASSOCIATION
By:_____________________________
Vice President
NATIONSBANK, formerly known as
NCNB NATIONAL BANK OF
NORTH CAROLINA
By:______________________________
Vice President
CANADIAN IMPERIAL BANK
OF COMMERCE (New York)
By:______________________________
Vice President
Exhibit 10(x)
DATA GENERAL CORPORATION
SUPPLEMENTAL RETIREMENT BENEFIT PLAN
Effective: October 1, 1989
TABLE OF CONTENTS
Article and Section Page
I. Introduction . . . . . . . . . . . . . . . . 1
1.1 Name . . . . . . . . . . . . . . . . . 1
1.2 Purpose . . . . . . . . . . . . . . . . 1
1.3 Effective Date . . . . . . . . . . . . 1
II. Definitions . . . . . . . . . . . . . . . . 2
III. Eligibility to Participate . . . . . . . . 9
3.1 Eligibility Requirement . . . . . . . . 9
3.2 Participation . . . . . . . . . . . . . 9
IV. Supplemental Retirement Benefits. . . . . . 10
4.1 Supplemental Retirement Benefit . . . . 10
4.2 Form of Payment . . . . . . . . . . . . 10
4.3 Commencement of Supplemental Retirement
Benefits at Retirement . . . . . . . . 11
4.4 Accrued Supplemental Retirement Benefit 11
4.5 Vested Supplemental Retirement Benefit. 11
4.6 Supplemental Pre-Retirement Death
Benefit . . . . . . . . . . . . . . . . 11
4.7 Allocation of Surplus Assets of the
Trust Upon Change In Control of the
Company . . . . . . . . . . . . . . . . 11
4.8 Forfeiture of Benefits. . . . . . . . . 12
4.9 Accrual of Benefits Upon Termination of
Plan. . . . . . . . . . . . . . . . . 13
4.10 Medical Benefits. . . . . . . . . . . . 13
V. Trust . . . . . . . . . . . . . . . . . . . 14
5.1 Administration and Management of
the Trust Fund. . . . . . . . . . . . . 14
5.2 Valuation of the Trust Fund . . . . . . 14
VI. Administration . . . . . . . . . . . . . . 15
6.1 The Committee . . . . . . . . . . . . . 15
6.2 Administrative Rules . . . . . . . . . 15
6.3 Decisions and Actions of
Committee . . . . . . . . . . . . . . 15
6.4 Authorization of Payments . . . . . . . 15
6.5 Administrative and Professional
Assistance . . . . . . . . . . . . . 16
6.6 Appointment of Investment
Managers . . . . . . . . . . . . . . 16
6.7 Reliance on Actuary . . . . . . . . . . 16
6.8 Agent for Service of Legal
Process . . . . . . . . . . . . . . . 16
6.9 Plan Expenses . . . . . . . . . . . . . 16
6.10 Records and Reports . . . . . . . . . . 17
6.11 Multiple Fiduciary Capacities . . . . . 17
6.12 Indemnification . . . . . . . . . . . . 17
VII. Adoption of Plan By Affiliated Company . . . 18
VIII. Miscellaneous . . . . . . . . . . . . . . . 19
8.1 Non-Guarantee of Employment . . . . . 19
8.2 Rights Under the Retirement Plan . . . 19
8.3 Payment of Benefits to Incompetent . 19
8.4 Missing Person . . . . . . . . . . . 19
8.5 Forms . . . . . . . . . . . . . . . . 20
8.6 Notices . . . . . . . . . . . . . . . 20
8.7 Amendment . . . . . . . . . . . . . . . 21
8.8 Right to Terminate Plan . . . . . . . . 21
8.9 Merger/Consolidation of Plan and Trust. 21
8.10 Controlling Law . . . . . . . . . . . . 21
8.11 Rights to Trust Fund Assets . . . . . . 21
8.12 Nonassignability . . . . . . . . . . . 21
8.13 Separability . . . . . . . . . . . . . 22
8.14 Captions . . . . . . . . . . . . . . . 22
8.15 Terminology . . . . . . . . . . . . . . 22
ARTICLE I
INTRODUCTION
1.1. Name. The Plan set forth herein shall be known as
the Data General Corporation Supplemental Retirement Benefit Plan.
1.2 Purpose. The Data General Corporation Supplemental
Retirement Benefit Plan is established by the Data General
Corporation to provide its employees with certain benefits that
cannot be provided under the Data General Corporation Retirement
Plan.
1.3 Effective Date. The Plan shall be effective
October 1, 1989.
ARTICLE II
DEFINITIONS
Whenever used in this Plan, unless the context clearly indicates
otherwise, the following terms shall have the following meanings:
2.1 "Actuarial Present Value" means the value of the benefit
to the Participant payable at age sixty-five (65) calculated in
accordance with the most recently published rates set by the
Pension Benefit Guaranty Corporation.
2.2 "Affiliated Company" means any corporation which is a
member of the controlled group of corporations of which the
Company is a member. For purposes hereof, a "controlled group of
corporations" shall mean a controlled group of corporations as
defined in Section 1563(a) of the Code, determined without regard
to Section 1563(a)(4) and (e)(3)(C) of the Code, or any trade or
business (whether or not incorporated) which is under common
control with the Company within the meaning of Section 414(c) of
the Code.
2.3 "Beneficiary" or "Beneficiaries" means any qualified
individual or individuals designated by a Participant to receive
amounts payable hereunder if such individual or individuals
survive(s) the Participant. In the absence of any such
designation the "Beneficiary" shall be the Participant's Eligible
Spouse or if there is no Eligible Spouse, the Participant's
estate.
2.4 "Board" means the board of directors of the Company.
2.5 "Change in Control of the Company" shall mean:
(i) The acquisition, other than from the Company,
by any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 25%
or more of either the then outstanding shares of common stock of
the Company (the "Outstanding Company Common Stock") or the
combined voting power of the then outstanding voting securities of
the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities"), provided,
however, that any acquisition by the Company or any of its
subsidiaries, or by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any of its subsidiaries,
or by any corporation with respect to which, following such
acquisition, more than 60% of, respectively, the then outstanding
shares of common stock of such corporation and the combined voting
power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of
directors is then beneficially owned,
directly or indirectly, by all or substantially all the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such
acquisition in substantially the same proportion as their
ownership, immediately prior to such acquisition, of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be, shall not constitute a Change of
Control; or
(ii) Individuals who, as of January 1, 1989,
constitute the Board (the "Incumbent Board") cease for any reason
to constitute at least a majority of the Board, provided that any
individual becoming a director subsequent to January 1, 1989 whose
election, or nomination for election, by the Company's
shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered
as though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose initial
assumption of office is in connection with an actual or threatened
election contest relating to the election of the Directors of the
Company (as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act); or
(iii) Approval by the stockholders of the Company
of a complete liquidation or dissolution of the Company or of the
sale or other disposition of all or substantially all of the
assets of the Company, or of a reorganization, merger or
consolidation, in each case, with respect to which all or
substantially all of the individuals and entities who were the
respective beneficial owners of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior
to such reorganization, merger or consolidation do not, following
such reorganization, merger or consolidation, beneficially own,
directly or indirectly, more than 60% of, respectively, the then
outstanding shares of common stock and the combined voting power
of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the
corporation resulting from such reorganization, merger or
consolidation.
2.6 "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
2.7 "Committee" means the person, persons or entity
appointed by the Board to administer the Plan.
2.8 "Company" means Data General Corporation, a Delaware
corporation, and any successor thereto which agrees to continue
the Plan.
2.9 "Compensation" means the annual regular base rate of
pay paid by a Participating Company to a Participant, determined
as of the first day of the Plan Year (or, if the Participant was
not an Employee on the first day of the Plan Year, the annual
regular base rate of pay of such Participant on the first day
during such Plan Year on which he performs an Hour of Service),
excluding overtime, shift differential, group leader differential,
bonuses, and all other special payments and commissions.
Compensation, for Participants who are eligible to earn sales
incentives and commissions, means the annual regular base rate of
pay paid by a Participating Company to a Participant, determined
as of the first day of the immediately prior Plan Year (or, if the
Participant was not an Employee on the first day of the Plan Year,
the annual regular base rate of pay of such Participant on the
first day during the Plan Year on which such Participant performs
an Hour of Service) plus the aggregate incentives and commissions
paid to the Participant for the twelve (12) month period ending
with the September 30th immediately preceding the first day of the
Plan Year, or guaranteed commissions and draws, if applicable, but
not to exceed one hundred and twenty five percent (125%) of the
target salary of Employees in the same job classification as the
Participant (as determined by the Participating Company) for the
Plan Year. Notwithstanding the foregoing, in no event shall a
Participant's Compensation be less than the annual regular base
rate of pay determined as of the first day of the Plan Year.
Compensation shall not include any Contributions made by a
Participating Company to fund a Participant's benefits under the
Plan, and shall not include amounts contributed by a Participating
Company on behalf of a Participant under any other employee
benefit plan other than contributions resulting from compensation
deferred by Participants under the Data General Corporation
Savings and Investment Plan and the Data General Corporation
Flexible Benefits Plan.
2.10 "Credited Service" shall have the same meaning as that
expression is used in the Data General Corporation Retirement
Plan.
2.11 "Early Retirement Date" means the first day of the
calendar month coincident with or next following the date on which
a Participant has attained age fifty-five (55) and completed five
(5) Years of Service.
2.12 "Effective Date" means October 1, 1989.
2.13 "Eligible Spouse" means the spouse to whom a
Participant is married on the date payment of such Participant's
benefits is made under the Plan for purposes of a joint and
survivor annuity or the spouse to whom a Participant is married on
the date such Participant dies if the Participant dies before
payment of benefits commence under the Plan.
2.14 "Employee" means any person who is employed by one or
more Participating Companies or is a United States citizen
employed by an Affiliated Company which is a domestic subsidiary
engaged in business outside of the United States within the
meaning of Section 407 of the Code or a foreign subsidiary within
the meaning of Section 406 of the Code. The term "Employee" shall
include any person on an authorized leave of absence, but shall
not include: (i) any person included in a unit of employees
covered by a collective bargaining agreement (as so determined by
the Secretary of Labor) between employee representatives and one
or more Participating Companies if retirement benefits were the
subject of good faith bargaining between such employee
representatives and any such Participating Company unless such
collective bargaining agreement expressly provides for the
inclusion of such persons as Participants in the Plan, or (ii)
any person who is a nonresident alien and who received no earned
income (within the meaning of Section 911(b) of the Code) from a
Participating Company which constitutes income from sources within
the United States (within the meaning of Section 861(a)(3) of the
Code).
2.15 "Existing Board of Directors" means the persons
constituting the Company's Board of Directors on October 1, 1989,
together with each new director whose election, or nomination for
election by the Company's stockholders, was previously approved,
or is approved within thirty (30) days after his election or
nomination, by a vote of at least two-thirds (2/3) of the
directors in office prior to his election as a director.
2.16 "FICA Wage Base" means the maximum taxable earnings for
the calendar year under the Federal Insurance Contributions Act of
1935, as amended from time to time.
2.17 "Hours of Service" shall be based on the records
maintained by a Participating Company or an Affiliated Company and
shall include the following:
(a) Performance of Duties. Each hour for which an
Employee is paid, or entitled to payment, by a
participating Company or an Affiliated Company for the
performance of duties.
(b) Back Pay. Each hour for which back pay
(irrespective of mitigation of damages) has been either
awarded or agreed to by a Participating Company or an
Affiliated Company.
(c) Non-Working Time Pay. Each hour for which an
Employee is paid, or entitled to payment, by a
Participating Company or an Affiliated Company for
reasons other than for the performance of duties during
a period of service with a Participating Company or
Affiliated Company (irrespective of whether the
employment relationship has terminated), such as
vacation, holiday, sickness, disability, jury duty,
military duty or compensated leave of absence and
similar paid periods; provided, however, that if such
compensated leave of absence is for a Maternity or a
Paternity Leave then such Hours of Service will be
credited in accordance with Section 2.17(g) hereof.
However, no more than 1170 Hours of Service will be
credited under this Section 2.17(c) for any single
continuous period during which the Employee performs no
duties.
(d) Uncompensated Leaves of Absence. Solely for
purposes of determining whether an Employee has incurred
a One-Year Break in Service and subject to the
provisions of Sections 4.3 and 4.4 of the Retirement
Plan regarding foreign service assignment and Authorized
Leaves of Absence, Hours of Service shall include each
hour during which an Employee is on an uncompensated
leave of absence; provided, however, that if such
uncompensated leave of absence is for a Maternity or
Paternity Leave, then such Hours of Service shall be
credited in accordance with Section 2.17(g) hereof.
(e) Non-Working Time and Computation Periods. The
rules for determining Hours of Service for periods
during which an Employee performs no duties and for
determining the manner in which an Employee's Hours of
Service will be credited to computation periods shall be
the rules contained in Sections 2530.200-2(b) and 2(c)
of the regulations promulgated by the Secretary of Labor
regarding Hours of Service which are hereby incorporated
by reference.
(f) Determination of Service To Be Credited to
Employees. The number of Hours of Service to be credited
to Employees in a computation period shall be based on
weeks of employment. An Employee shall be credited with
forty-five (45) Hours of Service for each week which the
Employee would be required to be credited with at least
one (1) Hour of Service in accordance with the rules
set forth in Section 1.28(a), (b), (c) or (d) of the
Retirement Plan.
(g) Maternity and Paternity Leaves. Solely for
purposes of determining whether an Employee has incurred
a One-Year Break in Service with respect to
participation and vesting, during a Maternity or
Paternity Leave, an Employee will be credited with each
hour for which he or she normally would have been paid,
or entitled to payment, by a Participating Company or an
Affiliated Company, or if such number of hours cannot be
determined, then eight (8) hours for each day of such
Maternity of Paternity Leave, up to a maximum of five
hundred one (501) hours for any single continuous period
(whether or not such period occurs in a single Plan
Year); provided, however, that the Employee must supply
the Committee with such timely information as is
reasonably required to establish (i) that such absence
from work is a bona fide Maternity or Paternity Leave
and (ii) the number of days during such Maternity or
Paternity Leave. Each such Hour of Service shall be
credited to the Plan Year in which such Maternity or
Paternity Leave begins if needed to prevent a One-Year
Break in Service which might otherwise occur during such
Plan Year, or if not, then to the following Plan Year.
2.18 "Normal Retirement Date" means the date on which a
Participant has attained age sixty-five (65) and completed five
Years of Service.
2.19 "Participant" shall mean an eligible Employee who
becomes a Participant in the Plan as provided in Article III
hereof.
2.20 "Participating Company" shall mean the Company and any
Affiliated Company which adopts the Plan pursuant to Article VII
hereof.
2.21 "Plan" means the Data General Corporation Supplemental
Retirement Benefit Plan as set forth herein, including any
amendments hereafter adopted.
2.22 "Plan Year" means the period of twelve (12) months
beginning on October 1 of each calendar year and ending on the
following September 30 beginning on or after the Effective Date.
2.23 "Predecessor Company" means any person, firm or
corporation not previously controlled by, or under common control
with, the Company or any Affiliated Company prior to the time such
entity merges with or into, or consolidates with or is acquired
by, the Company or any Affiliated Company.
2.24 "Retirement Plan" means the Data General Corporation
Retirement Plan, as amended from time to time.
2.25 "Supplemental Retirement Benefit" means the amount
determined in accordance with the provisions of Section 4.1 of
Article IV of this Plan.
2.26 "Termination of Employment" or "Terminates Employment"
means termination of employment with any Participating Company or
Affiliated Company, whether voluntarily or involuntarily, other
than by reason of a Participant's retirement on or after his Early
Retirement Date or Normal Retirement Date, death, Total and
Permanent Disability or transfer to a Participating Company or
Affiliated Company.
2.27 "Total and Permanent Disability" means the total and
permanent incapacity of a Participant to perform the usual duties
of his employment because of a mental, physical or emotional
condition. Such incapacity shall be deemed to exist only when (i)
a Participant's condition satisfies the definition of disability
used to determine eligibility for disability benefits under the
Federal Social Security Act and (ii) such Participant is receiving
disability benefits under such Act.
2.28 "Trust" means the legal entity organized pursuant to
the Trust Agreement between the Company and the Trustee to hold
and administer the Trust Fund in which Contributions made
hereunder are to be held, invested and disbursed to or for the
benefit of Participants, their Eligible Spouses, dependents or
Beneficiaries.
2.29 "Trust Agreement" means the trust agreement between the
Company and the Trustee together with any amendments thereto.
2.30 "Trust Fund" means the total of Contributions made by
the Participating Companies to the Trust pursuant to the Plan,
increased by profits, gains, income and recoveries received, and
decreased by losses, depreciation, benefits paid and expenses
incurred in the administration of the Plan and Trust, all in
accordance with the provisions of the Trust Agreement.
2.31 "Trustee" means the person, persons or entity selected
by the Board to serve as Trustee pursuant to the Trust Agreement
and any successor or successors thereof.
2.32 "Valuation Date" shall mean the last day of any Plan
Year, and as the Committee in its sole discretion may from time to
time determine, the last business day of any quarter of any Plan
Year.
2.33 "Years of Service" shall have the same meaning as that
expression is used in the Retirement Plan.
ARTICLE III
ELIGIBILITY TO PARTICIPATE
3.1 Eligibility Requirement. Each Employee of the
Company shall be eligible to participate in the Plan if he/she is
a highly compensated employee as that term is defined by Section
414(q) of the Code and he/she earns Compensation equal to or
greater than two times the FICA Wage Base.
3.2 Participation. Each eligible Employee shall become
a Participant in the Plan as of the date he satisfies the
following:
a. meets the requirements of Section 3.1 hereunder
and is a participant in the Retirement Plan and
either Sections 3.2(b) or 3.2(c) below;
b. the eligible Employee's pension benefit under
the Retirement Plan is in excess of the limitations
contained in Sections 415(b), 415(c) and/or 415(e)
of the Code or is otherwise reduced due to the
limitations under 401(a)(17) of the Code;
c. the eligible Employee's pension benefit under
the Retirement Plan would be greater if calculated
by an amount equal to one percent (1%) of his
Compensation not in excess of the FICA Wage Base
for each year of Credited Service, plus two percent
(2%) of such Compensation (as defined in the
Retirement Plan) in excess of the FICA Wage Base
for each year of Credited Service than the one and
one half percent (1 1/2%) of his Compensation for
each year of Credited Service as provided for in
the Retirement Plan;
ARTICLE IV
SUPPLEMENTAL RETIREMENT BENEFIT
4.1 Supplemental Retirement Benefit. At his
commencement date specified in Section 4.3, a Participant's annual
Supplemental Pension Benefit shall equal (a) less (b) below:
a. the Participant's accrued benefit through
September 30, 1989 plus the Participant's annual
retirement benefit calculated in an amount equal to
one percent (1%) of his Compensation up to the FICA
Wage Base for each year of Credited Service plus
two percent (2%) of such Compensation in excess of
the FICA Wage Base for each year of Credited
Service beginning October 1, 1989, for each active
Participant as of October 1, 1991, the active
Participant's accrued benefit through September 30,
1989 and annual retirement benefit shall be
calculated based on the Participant's Compensation
on October 1, 1991 multiplied by the Participant's
years of Credited Service as of September 30, 1991,
applied to the formula set forth above in this
Section 4.1(a) less
b. the actual amount of annual benefit that is
payable from the Retirement Plan under the normal
form of payment applicable to such Participant
after application of any restrictions imposed by
Article IX of the Retirement Plan (or such other
provision as contains the Code Sections 415(b) and
415(e) limitations) or any dollar limitation
imposed by Code Section 401(a)(17).
To the extent that the Participant's accrued benefit payable
under the Retirement Plan is increased at any time due to
increases in the limitations on benefits under the Code, whether
by statute, regulations, actions of the Secretary of Treasury or
his delegate, or otherwise, the Participant's benefits hereunder
shall be reduced correspondingly.
4.2 Form of Payment. A Participant or Beneficiary will
receive his Supplemental Retirement Benefit under this Plan in the
same manner and form as he receives his pension benefits pursuant
to Article V of the Retirement Plan, except that in the event the
Participant's monthly benefit under this plan is one hundred
dollars ($100.00) or less, the Participant shall receive a
lump-sum distribution of the Participant's benefit under this
Plan. Such Supplemental Retirement Benefit paid under this Plan shall be
subject to the withholding and other similar requirements of any
applicable governmental law or regulation with respect to taxes or
similar provisions.
4.3 Commencement of Supplemental Retirement Benefit at
Retirement. A Participant's Supplemental Retirement Benefit shall
commence as of the date the Participant commences benefits under
the Retirement Plan.
4.4 Accrued Supplemental Retirement Benefit. A
Participant's accrued Supplemental Retirement Benefit at any point
in time prior to retirement shall be equal to the amount
determined under Section 4.1 of this Plan based on the
Participant's Compensation and Credited Service as of the date of
determination.
4.5 Vested Supplemental Retirement Benefit. Subject to
the forfeiture of benefits provisions of Section 4.8 hereunder, a
Participant's right to a benefit under this Plan shall be accrued,
subject to the provisions of the Trust, if he is credited with
five (5) Years of Service.
4.6 Supplemental Pre-Retirement Death Benefit. Upon
the death of a Participant prior to commencement of benefits, the
Plan shall provide such Participant's surviving Eligible Spouse
with the Participant's accrued Supplemental Pre-Retirement Death
Benefit under the same terms and in the same manner as provided by
the applicable death benefit provision of the Retirement Plan.
4.7 Allocation of Surplus Assets of the Trust Upon
Change in Control of the Company. In the event of a Change in
Control of the Company a Participant's right to a benefit under
this Plan shall become immediately fully vested and
nonforfeitable. Subsequent to a Change in Control of the Company
and upon the occurance of any of the following: (i) Amendment to
reduce the benefits under the Plan, (ii) Plan termination, (iii)
merger or consolidation of the Plan or Trust, or (iv)
discontinuance of contributions subsequent to a Change in Control
of the Company, all assets and credits in the Trust Fund shall
accrue to the benefit of the Participant and be allocated in the
manner described in Section 4.1 hereof as if the Plan were
terminated as of the date of any event described in clauses (i)
through (iv) above (the "Allocation Date"), and if any surplus in
the Trust Fund remains in the Trust Fund, such surplus shall
accrue to the benefit of, and be allocated to, all such
Participants in the manner hereinafter described.
The portion of such surplus that is allocable to each such
Participant shall be determined by multiplying the entire surplus
by a fraction, the numerator of which is the actuarial present
value of the Participant's benefit under the Plan (determined
without regard to the allocation of any surplus) as of the
Allocation Date and the denominator of which is the actuarial
present value of all Participants' benefits under the Plan
(determined without regard to the allocation of any surplus) as of
the Allocation Date. The Committee shall direct the Trustee, as
soon as reasonably practicable following the Allocation Date, to
pay in the form of a lump-sum payment to all persons who were
Participants on the Allocation Date, all amounts sufficient to
satisfy the pension obligations of the Plan as of such date in
respect to all such Participants, taking into account the
allocation of any surplus in the Fund as hereinabove described.
Each person who is a Participant on the Allocation Date shall have
a fully vested and nonforfeitable interest in his entire pension
benefits then accrued under the Plan, including any pension
benefit accrued by reason of this Paragraph. Notwithstanding
anything contained in this Plan to the contrary, the foregoing
provisions of this Paragraph may not be amended following a Change
in Control of the Company without the written consent of a
majority in both number and interest of the Participants and their
Beneficiaries under this Plan.
4.8 Forfeiture of Benefits. Subject to the provisions
of Sections 4.7 and 4.9 hereof, all benefits for which a
Participant would otherwise be eligible hereunder may be
forfeited, at the discretion of the Board, under the following
circumstances:
(a) The Participant is discharged by a Participating
Company or Affiliate for cause; or
(b) The Participant is discharged by a Participating
Company or Affiliate subsequent to conviction for the
commission of a felony.
(c) Determination by the Board that the Participant
engaged in misconduct in connection with his employment
with the Company, a Participating Company or Affiliate;
or
(d) The Participant has at any time disclosed directly
or indirectly any secret or other confidential
information of the Company to any competitor of the
Company or to any person not authorized to receive such
information.
4.9 Accrual of Benefits Upon Termination of Plan. In
the event a Participating Company or Affiliate terminates the
Plan, the rights of all Participants of the terminated Plan of
such Participating Company or Affiliate to their accrued benefits
shall thereupon become nonforfeitable, to the extent permitted
under the Trust Agreement, notwithstanding any other provisions of
the Plan.
4.10 Medical Benefits. For each Key Employee (as
defined in the Retirement Plan) and his Dependents (as defined in
the Data General Corporation Retiree Medical Plan) who is eligible
for Medical Benefits as provided in Article II under the Data
General Retiree Medical Plan and whose separate account under the
Medical Plan has been depleted, the Trust Fund shall pay to the
Data General Medical Plan the amounts set forth on Schedule A of
the Retirement Plan.
ARTICLE V
TRUST
5.1 Administration and Management of the Trust Fund.
All contributions shall be paid to the Trustee, who shall be
appointed by the Board, and who shall deposit such contributions
in the Trust Fund. Pursuant to and in accordance with the terms
of the Trust Agreement the Trustee shall have exclusive authority
and discretion, as permitted by the Trust Agreement and the
provisions of this Plan, to administer the Trust and manage the
assets held in the Trust Fund, except those assets which are
managed by any Investment Manager appointed by the Committee, and
shall have all the duties and responsibilities set forth in the
Trust Agreement.
5.2 Valuation of the Trust Fund. The Trustee shall
value the Trust Fund at its fair market value as of each Valuation
Date. In making such valuation, the Trustee shall deduct all
charges, expenses and other liabilities then chargeable against
such Trust Fund in order to give effect to income, expenses, or
losses, including appreciation or depreciation in the value of
theTrust Fund since the last previous Valuation Date. As soon as
practicable after each Valuation Date, the Trustee shall deliver
in writing to the Committee a valuation of the Trust Fund together
with a statement of the amount of net income or loss (including
appreciation or depreciation in the value of Trust investments)
since the last previous Valuation Date.
ARTICLE VI
ADMINISTRATION
6.1 The Committee. The Board shall appoint a Committee
consisting of not less than two (2) nor more than five (5) members
and shall designate one member as the Chairman thereof and one
member as the Secretary thereof. The initial Committee shall
consist of three (3) members, and thereafter the number of members
which shall constitute the whole Committee may be increased or
decreased by resolution of the Executive Committee of the Board,
but shall in no case be less than two (2) members nor more than
five (5) members. All members of the Committee shall serve until
their resignation or dismissal by the Board, and vacancies shall
be filled in the same manner as the original appointments. The
Committee shall be the Plan administrator and any member or
members of the Committee designated by the Chairman shall be
authorized to sign any reports in representation of all members.
The Board may dismiss any member of the Committee at any time
without cause.
6.2 Administrative Rules. The Committee shall, from
time to time, establish rules for the administration of the Plan
and shall have the sole responsibility and authority for the
control and management of the operation and administration of the
Plan. The Committee shall determine all questions arising in the
administration, interpretation and application of the Plan, and
such determination shall be conclusive and binding on all
persons. All rules and decisions of the Committee shall be
uniformly and consistently applied to all Participants, Eligible
Spouses, dependents and Beneficiaries in similar circumstances.
6.3 Decisions and Actions of Committee. The Committee
may act at a meeting or in writing without a meeting. All
decisions and actions of the Committee shall be made by vote of
the majority, including actions in writing taken without a
meeting. Any member of the Committee who shall not concur with
any action or failure to act by the majority of the Committee
shall deliver written notice of his nonconcurrence to the
Committee promptly after such action or failure to act or
notification to him of such action or failure to act.
6.4 Authorization of Payments. The Committee shall
establish all necessary rules for payment of benefits.
Periodically, the Committee shall notify the Trustee of the amount
of money necessary to provide benefits to Participants, Eligible
Spouses, dependents and Beneficiaries who qualify for such
payments. The Committee shall keep a record of each Participant's
name, address, social security number, benefit commencement date
and amount of benefit.
6.5 Administrative and Professional Assistance. The
Committee shall appoint accountants, an Actuary and any other
persons required to be appointed for the operation and
administration of the Plan and may appoint counsel and other
persons, including Employees of the Company, as it deems necessary
or advisable for the operation and administration of the Plan.
The Committee may delegate any or all of its powers or duties to
such persons or agents unless specifically prohibited from doing
so in the Plan or Trust. In the event of an authorized
delegation, the delegate shall assume the full burden of
performing the duties or exercising the powers delegated and the
Committee shall thereafter be responsible only for having made an
appropriate and prudent delegation and for changing or revoking
the delegation if the performance of the delegate is not
appropriate under the Plan.
6.6 Appointment of Investment Managers. The Committee
may appoint one or more Investment Managers (as defined in the
Retirement Plan) to manage and invest (including the power to
acquire or dispose of) that portion of the assets of the Trust as
provided in the Trust Agreement. The functions of the Investment
Manager shall be limited to the specific services and duties for
which he is engaged, and such person shall have no other duties,
obligations or responsibilities under the Plan or Trust. Such
person shall exercise no discretionary authority or discretionary
control respecting the management of the Plan. The Committee may
remove any Investment Manager at any time and upon such removal or
upon the resignation of any Investment Manager, the Committee may
designate a successor Investment Manager. The fees and costs of
such services shall be an administrative cost of the Plan.
6.7 Reliance on Actuary. The Committee shall be
entitled to rely conclusively upon all reports, opinions, tables,
valuations, certificates and computations furnished by the
Actuary.
6.8 Agent for Service of Legal Process. The Chairman
of the Committee shall serve as agent for service of legal
process.
6.9 Plan Expenses. The Participating Companies shall
pay all expenses reasonably incurred in the administration of the
Plan and Trust; provided, however, that the Trustee may pay such
expenses from the assets of the Trust upon request of the
Committee, to the extent such expenses have not been paid by the
Participating Companies. The Participating Companies shall
reimburse the Trust Fund for any Trust Fund assets used by the
Trustee to pay expenses incurred in administration of the Plan.
The members of the Committee shall serve without compensation for
their services as such, but all expenses of the Committee shall be
expenses of the Plan. No Employee shall receive compensation from
the Plan regardless of the nature of his services to the Plan.
6.10 Records and Reports. The Committee shall exercise
such authority and responsibility as it deems appropriate relating
to records of Participants' service; accrued benefits and the
percentage of such benefits which are accrued under the Plan;
notifications to Participants.
6.11 Multiple Capacities. Any person or group of
persons may serve in more than one capacity with respect to the
Plan.
6.12 Indemnification. The Company shall indemnify each
member of the Board and the Committee, and agents thereof, under
the Plan against any and all claims, losses, damages, expenses
(including reasonable attorneys' fees) and liabilities for
anything done or omitted to be done in connection with the Plan
(including the Trust Agreement), except when the same is due to
the willful misconduct of such person.
ARTICLE VII
ADOPTION OF PLAN BY AFFILIATED COMPANY
7.1 Any Affiliated Company, whether or not presently
existing, may, with the written approval of the Board, adopt the
Plan pursuant to appropriate written resolutions of the board of
directors of such Affiliated Company. Any such Affiliated Company
shall also execute such documents with the Trustee as may be
necessary to make such Affiliated Company a party to the Trust as
a Participating Company. An Affiliated Company which adopts the
Plan shall thereafter be a Participating Company with respect to
its Employees for purposes of the Plan.
ARTICLE VIII
MISCELLANEOUS
8.1 Non-Guarantee of Employment. Neither the
establishment of the Plan nor the making of contributions by any
Participating Company nor any action of any Participating Company,
Board, Committee or the Trustee, shall be held or construed to
confer upon any person any right to be continued as an Employee of
any Participating Company. All Participants shall be subject to
discharge to the same extent as if the Plan had never been
adopted, and each Participating Company expressly reserves the
right to discharge any Employee without any liability on the part
of the Participating Company, the Trustee or any member of the
Board or the Committee.
8.2 Rights Under the Retirement Plan. Nothing in this
Plan shall be construed to limit, broaden, restrict or grant to a
Participant, Employee, Eligible Spouse, dependent or any
Beneficiary thereof under the Retirement Plan, nor grant any
additional rights or benefits to any such Participant, Employee,
Eligible Spouse, dependent or Beneficiary thereof under the
Retirement Plan, nor in any way to limit, modify, repeal or
otherwise affect the Company's or its Board's right to amend or
modify the Retirement Plan.
8.3 Payment of Benefits to Incompetent. If the
Committee receives evidence that (a) a person entitled to receive
any benefit under the Plan is legally, physically or mentally
incompetent to receive such benefit and to give a valid release
therefor and (b) another person or an institution is then
maintaining or has custody of such person and no guardian,
committee or other representative of the estate of such person has
been duly appointed by a court of competent jurisdiction, the
payment of such benefit may be made to such other person or
institution as the Committee may determine. Any such payment
shall be a payment on behalf of such person and shall, to the
extent thereof, be a complete discharge of any liability under the
Plan to such person and neither any Participating Company, the
Trustee nor any member of the Board or the Committee shall be
liable to any person or individual by reason of such payment.
8.4 Missing Person. In the event any benefit shall
become payable to any person or upon his death to his legal
representative and, if after written notice from the Committee
mailed to such person's last-known address as shown in the
Participating Company's records, such person or his legal
representatives shall not have presented himself to the Committee
within six (6) years after the mailing of such notice,
then the Committee may, in its sole discretion, distribute such
amount, including any benefit thereafter becoming due to such
person or legal representative, among the Eligible Spouse and
blood relatives of such person, or the Committee may, but it is
not required to, direct that said benefit be paid to the Trustee
to form a part of the Trust Fund. When any benefit may be payable
to the spouse or blood relative of a Participant by reason of his
failure or the failure of his legal representative to present
himself to the Committee within such six (6) year period, such
spouse or blood relative shall have an additional four (4) year
period in which to present himself to the Committee. Payments
made in good faith to any person, to a person's legal
representative or to any individual(s) who have, on the
presentation of reasonable proof, established to the satisfaction
of the Committee that he is the Eligible Spouse or blood relative
of such person, whether or not made before the expiration of the
periods provided for herein for presentation of himself, shall, to
the extent of such payments, be a complete discharge of all
obligations arising pursuant to the Plan and neither any
Participating Company, the Trustee nor any member of the Board or
the Committee shall be liable to any person or individual by
reasons of such payments.
8.5 Forms. The Committee shall provide such
appropriate forms as it may deem expedient in the administration
of the Plan and no instrument for which a form is so provided
shall be valid unless upon such form.
8.6 Notices.
(a) Any notice required to be given by a Participating
Company, Affiliated Company or the Committee to a
Participant, Eligible Spouse, dependent or Beneficiary
shall be in writing and shall be deemed satisfactorily
given if such notice is mailed by first-class mail to
the last known address of the person entitled to the
same as reflected on the records of the Participating
Company or Affiliated Company. The foregoing sentence
shall not preclude notice from effectively being given
if actually received by the person entitled to the same
in any other way.
(b) Any notice or other communication required to be
given by a Participant, spouse, dependent or Beneficiary
to the Committee shall be in writing and shall be mailed
by first-class mail to the Committee in care of the
Company. The foregoing sentence shall not preclude
notice from effectively being given if actually received
by the Committee in any other way. Notwithstanding any
other provision of the Plan, no notice or other
communication sent by a Participant, spouse, dependent
or Beneficiary to the Committee shall be effective for
any purpose unless received by the Committee.
8.7 Amendment. The provisions of the Plan may be
amended in any respect at any time by the Board, and retroactively
if deemed advisable by it; provided, however, that no such
amendment shall (i) in any way alter the provisions of Section 4.7
hereof without the written consent of a majority in both number
and interest of the Participants of the Plan and their
Beneficiaries, (ii) reduce the benefits payable under the Plan
with respect to periods of service prior to such amendment, (iii)
eliminate an optional form of benefit, if any, provided under the
Plan, (iv) reduce or eliminate any early benefits or (v) make it
possible for any part of the Trust Fund to be used for purposes
other than for the exclusive benefit of Participants, Eligible
Spouses, dependents or Beneficiaries under the Plan and defraying
reasonable expenses of administering the Plan.
8.8 Right to Terminate Plan. Each Participating
Company contemplates that the Plan shall be permanent and that it
shall be able to make Contributions to the Plan. Nevertheless, in
recognition of the fact that future conditions and circumstances
cannot now be entirely foreseen, each Participating Company,
subject to approval of the Board, reserves the right to terminate
(as to such Participating Company) either the Plan or both the
Plan and the Trust.
8.9 Merger or Consolidation of Plan and Trust. Neither
the Plan nor the Trust may be merged or consolidated with, nor may
its assets or liabilities be transferred to, any other plan or
trust, unless each Participant would (if the Plan then terminated)
receive a benefit immediately after the merger, consolidation or
transfer which is equal to or greater than the benefit he would
have been entitled to receive immediately before the merger,
consolidation or transfer (if the Plan had then terminated).
8.10 Controlling Law. The provisions of the Plan shall
be construed, interpreted, administered and enforced according to
the laws of the Commonwealth of Massachusetts and all applicable
Federal laws.
8.11 Rights to Trust Fund Assets. No Employee shall
have any right to, or interest in, any assets of the Trust Fund
upon his Termination of Employment or otherwise, except as
provided in the Plan, and then only to the extent of the benefits
payable under the Plan to such Employee out of the assets of the
Trust Fund.
8.12 Nonassignability. The benefits payable under this
Plan shall not be subject to alienation, assignment, garnishment,
execution or levy of any kind until such benefits are payable to
the Participant at which time the benefits become the property of
the Participant, Eligible Spouse, dependent or Beneficiary thereof
and any attempt to cause any benefits hereunder to be so subjected
shall not be recognized, except to the extent required by
applicable law.
8.13 Separability. If any provision of the Plan proves
to be, or is finally held by a court, tribunal, board or authority
of proper jurisdiction to be invalid such invalid or violative
provision shall be disregarded, null and void and no part of the
Plan, but such nullification of such provision shall not otherwise
impair or affect the Plan or any other provision or term hereof.
8.14 Captions. The captions at the beginning of the
several numbered sections and paragraphs of the Plan are not part
of its context, but are only guides and labels to assist in the
reading thereof, and are to be ignored in construing it.
8.15 Terminology. Whenever appropriate, words used in
the Plan in the singular may mean the plural, the plural may mean
the singular and the masculine pronoun shall be deemed to include
the feminine or neuter, unless the context clearly indicates
otherwise.
TRUST AGREEMENT
FOR THE
DATA GENERAL CORPORATION
SUPPLEMENTAL RETIREMENT BENEFIT PLAN
THIS AGREEMENT is made as of the First day of October, 1989,
by and between Data General Corporation, a Delaware corporation
having its principal office at 4400 Computer Drive, Westboro,
Massachusetts 01580 (the "Company") and Boston Safe Deposit and
Trust Company, a Massachusetts trust company having its principal
office at One Boston Place, Boston, Massachusetts 02108 (the
"Trustee").
W I T N E S S E T H
WHEREAS, the Company [and certain of its affiliates and/or
subsidiaries, (each such affiliate and/or subsidiary being
included in the definition of Company where the context so
requires)] has adopted a Supplemental Retirement Benefit Plan
(hereinafter the "Plan") for the purpose of providing its
employees with certain benefits that cannot be provided under the
Company's Retirement Plan;
WHEREAS, the Company desires to provide additional assurances
to the participants in the Plan (the "Participants") and the
beneficiaries or estates under the Plan (collectively the
"Beneficiaries") that their benefits under the Plan will in the
future be met by the application of the procedures set forth
herein;
WHEREAS, the Trustee has agreed to act as Trustee of the
trust fund created hereunder and to hold and administer such
assets as may be delivered to it as hereinafter provided;
WHEREAS, the Plan provides that it is to be administered by a
group of individuals appointed by the Company which has
established the Plan, (hereinafter referred to as the
"Committee");
WHEREAS, contributions delivered to the Trust as determined
by the Company from time to time in its sole discretion, and the
earnings thereon shall be used by the Trustee solely in
satisfaction of the liabilities of the Company with respect to the
Participants and Beneficiaries, unless otherwise provided for
herein;
WHEREAS, upon satisfaction of all liabilities of the Company
with respect to a Participant or Beneficiary under the Plan,
including liabilities to the Participants and Beneficiaries
arising from Section 4.7 of the Plan ("Allocation of Surplus
Assets of the Trust Upon Change in Control of the Company"), the
balance, if any, remaining in such Trust Fund shall revert to the
Company, except that all amounts in such Trust Fund shall at all
times be subject under this Agreement to the claims of the
Company's creditors as hereinafter provided;
NOW, THEREFORE, in consideration of the premises and mutual
and independent promises herein, the parties hereto covenant and
agree as follows:
ARTICLE I
Section 1.1 Establishment of Trust. The Company hereby
establishes with the Trustee a grantor trust consisting solely of
such sums of money and such property acceptable to the Trustee as
shall from time to time be paid or delivered to the Trustee in
such amounts and on such dates as the Company, in its sole
discretion, may determine and the earnings and profits thereon.
The trust established hereunder shall be known as the Trust
Agreement for the Data General Corporation Supplemental Retirement
Benefit Plan (the "Trust"). All such money and property, all
investments made therewith and proceeds thereof, less the payments
or other distributions which, at the time of reference, shall have
been made by the Trustee, as authorized herein, are referred to
herein as the "Trust Fund" and shall be held by the Trustee, IN
TRUST, in accordance with the provisions of this Agreement.
Section 1.2 Trustee Responsibility. The Trustee shall hold,
manage, invest and otherwise administer the Trust Fund pursuant to
the terms of this Agreement. The Trustee shall be responsible
only for the contributions actually received by it hereunder. The
amount of each contribution made by the Company to the Trust Fund
shall be determined in the sole discretion of the Company, and the
Trustee shall have no duty or responsibility with respect
thereto. Except as otherwise specifically agreed to by the
Trustee, the Trustee shall not be responsible for the
administration of the Plan (including without limitation the
determination of Plan participation rights of employees of the
Company and determination of benefits of the Participants or
Beneficiaries of the Plan); provided, however, that upon a Change
in Control of the Company and any of the following; (i) amendment
of the Plan to reduce the benefits under the Plan; (ii) Plan
termination; (iii) merger or consolidation of the Plan or Trust;
or (iv) discontinuance of contributions subsequent to a Change in
Control of the Company; the Trustee shall allocate the assets of
the Trust Fund as provided in Section 4.7 of the Plan and make
payments to Participants and Beneficiaries as provided in Section
4.7 of the Plan. The Trustee shall not have any authority or
obligation to determine the adequacy of or to enforce the
collection from the Company of any contribution to the Trust Fund,
provided, however, that upon a Change in Control of the Company
the Trustee shall, following a valuation by an actuary indicating
that a contribution is necessary to fund the benefits set forth
herein and failure of the Company to make such contribution within
60 days notice that such contribution is necessary, notify the
Company that the Trustee has determined that contributions have
been discontinued subsequent to a Change in Control and shall
allocate the assets of the Trust Fund and make payments to
Participants and Beneficiaries as provided in Section 4.7 of the
Plan. Except to the extent that the Trustee has otherwise
specifically agreed in writing, the Trustee shall not be
responsible, directly or indirectly, for the investment or
reinvestment of the assets of the Trust Fund, which investment and
reinvestment shall be the sole responsibility of the Company
unless otherwise delegated by the Company as provided in ARTICLE
IV hereof; provided, however, that upon a Change in Control of the
Company and any of the following: (i) amendment of the Plan to
reduce the benefits under the Plan; (ii) Plan termination; (iii)
merger or consolidation of the Plan or Trust; (iv) discontinuance
of contributions subsequent to a Change in Control of the Company;
or (v) investment of the assets or any part thereof in the
securities, loans, investments, indebtedness or financial vehicles
offered by, from or of affiliates, or persons or entities
affiliated with, or related to the Company, its officers,
directors or principal stockholders; the Trustee shall at that
time become solely responsible for the investment and reinvestment
of the assets of the Trust Fund until the distribution of the
assets in accordance with the provisions of Section 4.7 of the
Plan, by agreement of the parties hereto. Notwithstanding
anything in the Plan or this Agreement to the contrary, the
agreement of the parties hereto that the Trustee shall assume the
sole responsibility for the investment and reinvestment of the
assets of the Trust Fund upon a Change in Control of the Company
and any of the following: (i) amendment of the Plan to reduce the
benefits under the Plan; (ii) Plan termination; (iii) merger or
consolidation of the Plan or Trust; (iv) discontinuance of
contributions subsequent to a Change in Control of the Company; or
(v) investment of the assets or any part thereof in the
securities, loans, investments, indebtedness or financial vehicles
offered by, from or of affiliates, or persons or entities
affiliated with or related to the Company, its officers,
directors, or principal stockholders; shall not be amended or
modified without the written consent of a majority in both number
and interest of the Participants and their Beneficiaries under the
Plan.
Section 1.3 Payments from Trust Fund. Subject to the
provisions of Section 2.1 of this Agreement, the Trustee shall
make payments from the Trust Fund as directed by the Committee
which administers the Plan or the Committee's designee. The
Committee, in directing the Trustee to make payments, shall follow
the provisions of the Plan so that it shall be impossible, except
as provided in Section 2.1 of this Agreement, at any time prior to
the satisfaction of all liabilities under the Plan with respect to
the Participants and Beneficiaries covered under the Plan, for any
part of the Trust Fund to be used for or diverted to, purposes
other than for the benefit of such participants or beneficiaries
or in the event the Company enters into bankruptcy under the
Bankruptcy Act of the United States or the bankruptcy laws of any
state alleging that the Company is insolvent or bankrupt, to the
creditors of the Company. Subject to the foregoing, the Committee
may direct such payments to be made to any person, including any
member of such Committee, or to the Company, or to any paying
agent designated by the Company, and in such amounts as the
Committee shall direct. The Trustee shall have no responsibility
with respect to any payment made, pursuant to such an authorized
direction, to any Employer, any Committee or member thereof, to
any paying agent, or to any other person, and any payment so made
shall be held in trust by the recipient until disbursed in
accordance with the Plan or ruling body in a bankruptcy
proceeding. Each direction of the Committee shall be in writing
signed by at least a majority of the members of the Committee or
signed by a designee of the Committee whose appointment has been
confirmed to the Trustee in writing and signed by at least a
majority of the members of the Committee. Each direction of the
Committee or its designee shall be deemed to include a
certification that any payment directed thereby is one which the
Committee is authorized to direct, and the Trustee may
conclusively rely on such certification without further
investigation. Payments by the Trustee may be made by its check
to the order of the payee and mailed to the payee at the address
last furnished to the Trustee by the Committee or by the payee, or
if no such address has been so furnished, to the payee in care of
the Company.
Section 1.4 Change in Control of the Company. For purposes
of this Agreement, the term "Change in Control of the Company",
shall mean:
(i) The acquisition, other than from the Company,
by any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 25%
or more of either the then outstanding shares of common stock of
the Company (the "Outstanding Company Common Stock") or the
combined voting power of the then outstanding voting securities of
the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities"), provided,
however, that any acquisition by the Company or any of its
subsidiaries, or by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any of its subsidiaries,
or by any corporation with respect to which, following such
acquisition, more than 60% of, respectively, the then outstanding
shares of common stock of such corporation and the combined voting
power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by
the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such
acquisition in substantially the same proportion as their
ownership, immediately prior to such acquisition, of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be, shall not constitute a Change in
Control;
(ii) Individuals who, as of January 1, 1989,
constitute the Board (the "Incumbent Board") cease for any reason
to constitute at least a majority of the Board, provided that any
individual becoming a Director subsequent to January 1, 1989 whose
election, or nomination for election, by the Company's
shareholders, was approved by a vote of at least a majority of the
Directors then comprising the Incumbent Board shall be considered
as though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose initial
assumption of office is in connection with an actual or threatened
election contest relating to the election of the Directors of the
Company (as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act); or
(iii) Approval by the stockholders of the Company
of a reorganization, merger or consolidation, in each case, with
respect to which all or substantially all of the individuals and
entities who were the respective beneficial owners of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such reorganization, merger or
consolidation do not, following such reorganization, merger or
consolidation, beneficially own, directly or indirectly, more than
60% of, respectively, the then outstanding shares of common stock
and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of
Directors, as the case may be, of the corporation resulting from
such reorganization, merger or consolidation, or a complete
liquidation or dissolution of the Company or of the sale or other
disposition of all or substantially all of the assets of the
Company.
The Trustee may request that the Company furnish evidence to
determine, or to enable the Trustee to determine, whether a Change
in Control of the Company has occurred. In performing any of its
obligations or taking any discretionary action under the
provisions of the Plan or this Agreement which is dependent upon a
Change in Control of the Company having occurred, the Trustee may
rely on its determination, including an opinion of counsel (who
may be counsel engaged by the Trustee solely to render an opinion
as to whether or not a Change in Control of the Company has
occurred and whose fees are considered expenses of administering
the Plan), that a Change in Control has occurred, unless such a
determination arises out of the Trustee's gross negligence or
willful misconduct. The Trustee's determination as to whether a
Change in Control of the Company has occurred shall be binding and
conclusive on all persons.
ARTICLE II
Section 2.1 Company Insolvency. Notwithstanding any
provision in this Agreement to the contrary, if at any time while
the Trust is still in existence the Company becomes insolvent (as
defined herein), the Trustee shall upon written notice thereof
suspend the payment of all benefits from the Trust Fund and shall
thereafter hold the Trust Fund in suspense until it receives a
court order directing the disposition of the Trust Fund; provided,
however, the Trustee may deduct or continue to deduct its fees and
expenses and other expenses of the Trust, including taxes, pending
the receipt of such court order. The Company shall be considered
to be insolvent if bankruptcy or insolvency proceedings are
initiated by its creditors or the Company or any third party under
the Bankruptcy Act of the United States of America or the
bankruptcy laws of any State having appropriate jurisdiction over
the Company, alleging that the Company is insolvent or bankrupt.
By its approval and execution of this Agreement, the Company
represents and agrees that its Board of Directors and Chief
Executive Officer, as from time to time acting, shall have the
duty to inform the Trustee in writing of the Company's insolvency
(as defined herein) and the Trustee shall be entitled to rely
thereon to the exclusion of all directions or claims to pay
benefits thereafter made. Absent such notice, the Trustee shall
have no responsibility for determining whether or not the Company
has become insolvent unless the Trustee receives written
allegations of the event of insolvency from a third party
considered by the Trustee to be reliable and responsible. If
after an event of insolvency, the Company later becomes solvent
without the entry of a court order concerning the disposition of
the Trust Fund, the Company shall by written notice so inform the
Trustee and the Trustee shall thereupon resume all its duties and
responsibilities under this Agreement without regard for this
Section 2.1 until and unless the Company again becomes insolvent
as such term is defined herein.
Section 2.2 Funding of Trust and Plan. The Company
represents and agrees that the Trust established under this
Agreement does not fund and is not intended to fund the Plan or
any other employee benefit plan or program of the Company. This
Trust is and is intended to be a depository arrangement with the
Trustee for the setting aside of cash and other assets of the
Company as and when it so determines in its sole discretion for
the meeting of part or all of its future retirement obligations to
the Participants and their Beneficiaries under the Plan.
Contributions by the Company to the Trust shall be in amounts
determined solely by the Company. The Company shall make its
contributions to the Trust in accordance with appropriate
corporate action and the Trustee shall have no responsibility with
respect thereto, except to add such contributions to the Trust
Fund. The purpose of this Trust is to provide a fund from which
retirement benefits may be payable under the Plan and as to which
Participants and their Beneficiaries may, by exercising the
procedures set forth herein, have access to some or all of their
benefits as such become due without having the payment of such
benefits subject to the administrative control of the Company
unless the Company becomes insolvent as defined in Section 2.1.
Section 2.3 Company as Owner. Nothing provided in this
Agreement shall relieve the Company of its liabilities to pay the
retirement benefits provided under the Plan except to the extent
such liabilities are met by application of the Trust Fund's
assets. It is the intent of the Company to have the Trust Fund
established hereunder designed to satisfy in whole or in part the
Company's legal liability under the Plan. All assets of the Trust
Fund remain the assets of the Company. All expenses of
administering the Plan and the Trust Fund are expenses of the
Company. All income, deductions and credits of the Trust Fund
belong to the Company as owner for income tax purposes and will be
included on the Company's income tax return.
Section 2.4 Non-ERISA Plan. The Company further represents
that the Plan is an excess benefit plan and as such is exempt from
the application of the Employee Retirement Income Security Act of
1974 ("ERISA"). The Company further represents that the Plan is
not qualified under Section 401 of the Internal Revenue Code of
1986 (the "Code") and therefore is not subject to any of the Code
requirements applicable to tax-qualified plans.
Section 2.5 Participants as Unsecured Creditors.
Participants and their Beneficiaries shall have the rights under
this Agreement of unsecured general creditors of the Company and
shall not have any preferred claim on, or any beneficial ownership
interest in, the Trust Fund prior to the time amounts in the Trust
Fund are paid to such Participants or Beneficiaries as benefits
under Section 3.3.
ARTICLE III
Section 3.1 Information to be Provided to Trustee. The
Company shall maintain and furnish the Trustee with such reports,
documents and information as shall be required by the Trustee to
perform its duties and discharge its responsibilities under this
Agreement, including without limitation a certified copy of the
Plan and any and all amendments thereto, and written reports
setting forth the name, address, date of birth and social security
or tax identification number of each Participant and Beneficiary,
a listing of the adjusted value of each separate Participant
amount as of each valuation date prior to a distribution following
a Change in Control of the Company as required pursuant to Section
4.7 of the Plan, and a listing of each Participant's accrued
benefit (determined as of the most recent September 30 or such
other date as may be determined by the Company prior to a
distribution following a Change in Control of the Company as
required pursuant to Section 4.7 of the Plan.) The Trustee shall
be entitled to rely on the most recent reports, documents and
information furnished to it by the Company. The Company shall be
required to notify the Trustee as to the termination of employment
of any Participant by reason of death, retirement or otherwise.
Notwithstanding the foregoing, at any time after a Change in
Control of the Company, the Trustee may rely upon the information
provided to the Trustee by the Participant (or the Beneficiary of
a deceased Participant).
The Company shall arrange for each Investment Manager, if
someone other than the Trustee is appointed Investment Manager,
appointed pursuant to Section 4.5, and each insurance company
issuing contracts held by the Trustee pursuant to Section 4.6, to
furnish the Trustee with such valuations and reports as are
necessary to enable the Trustee to fulfill its obligations under
this Agreement, and the Trustee shall be fully protected in
relying upon such valuations and reports.
After the execution of this Agreement, the Company shall
promptly file with the Trustee a certified list of names and
specimen signatures of the Committee members administering the
Plan and any delegee designated by written notice signed by a
majority of the member of the Committee to act for the Committee
and the Company with respect to the Plan and Trust. Such
certified list shall describe the powers delegated by the
Committee to such persons and the limits on such powers so
delegated, if any. The Company, by written notice signed by a
majority of the members of the Committee administering the Plan,
shall promptly notify the Trustee of the addition or deletion of
any person's name to or from the list, respectively. Until
receipt by the Trustee of notice that any person is no longer
authorized so to act, the Trustee may continue to rely on the
authority of the person. All certifications, notices and
directions by any such person or persons to the Trustee, within
the authority delegated to such person or persons by the whole
Committee as provided above, shall be in writing signed by such
person or persons. The Trustee may rely on any such
certification, notice or direction, within the authority delegated
to such person or persons by the Committee as provided above,
purporting to have been signed by or on behalf of such person or
persons that the Trustee believes to have been signed thereby.
The Trustee may rely on any certification, notice or direction of
the Committee that the Trustee believes to have been signed by a
duly authorized delegee of the Committee. The Trustee shall have
no responsibility for acting in reliance upon any notification
believed by the Trustee to have been signed by a duly authorized
delegee of the Committee. If at any time there is no person
authorized to act under this Agreement in behalf of the Committee
or the Company, the Board of Directors of the Company (or if the
Board has ceased to exist, the individuals who last served as
Directors) shall have the authority to act hereunder.
Section 3.2 Payments to Participants and/or Beneficiaries.
Subject to Sections 2.1, 3.5 and 10.7, the Trustee shall commence
distributions to a Participant under the Plan upon written
notification by the Committee or the Trustee's own determination
that a distribution is required by Section 4.7 of the Plan, that
such Participant (or Beneficiary) has become entitled to receive
benefit payments under the Plan. Notification from the Committee
shall include the amount of such benefits, the manner of payment
and the name, address and social security number of the
recipient. The Trustee may take such reasonable steps as it, in
its sole discretion, determines are necessary to verify any claim
by a Participant (or Beneficiary) that such Participant (or
Beneficiary) has become entitled to receive benefit payments under
the Plan or a lump-sum distribution as provided in Section 4.7 of
the Plan and to verify any information provided by such
Participant (or Beneficiary) as to the amount of such benefits and
the manner of their payment. Upon receipt of proper notification
and appropriate Federal, state and local tax withholding
information, the Trustee shall commence distributions of cash or
property, if applicable, from the Trust Fund in accordance with
the terms of the Plan. Payment shall be mailed to the person to
whom such distributions or payment is to be made, at such address
as may have been last furnished to the Trustee. The Trustee shall
have no responsibility for and shall incur no liability with
respect to any payment made pursuant to a direction received in
accordance with this Section 3.2 or, in the event of a dispute, an
arbitrator's award issued pursuant to Section 10.7 hereof.
Section 3.3 Satisfaction of Plan Liabilities. Upon the
satisfaction of all the Company's liabilities under the Plan to
all the Participants (and such Participants' Beneficiaries) the
Trustee shall thereupon hold and distribute the balance, if any,
remaining in the Trust Fund in accordance with the written
instructions of the Committee. At no time prior to the Company's
release from bankruptcy proceedings, in the event of the Company's
insolvency (as defined in Section 2.1 hereof), or the satisfaction
of all liabilities of the Company under the Plan in respect of all
Participants and Beneficiaries shall any part of the Trust Fund
revert to the Company.
Section 3.4 Tax Withholding. The Trustee shall withhold from
any payment to a Participant (or a Beneficiary) hereunder the
amount required by law to be so withheld under Federal, state and
local wage withholding requirements or otherwise, and shall pay
over to the appropriate government authority the amount so
withheld. The Trustee may rely on instructions from the Committee
as to any required withholding and shall be fully protected under
Section 5.3 in relying on such instructions. For purposes of the
preceding sentence, a failure by the Committee to provide any
instructions as to required withholding may be deemed by the
Trustee to be an instruction by the Committee to withhold the full
amount required by law.
Section 3.5 Election Upon Taxation of Benefit. In the event
any Participant (or Beneficiary) is determined to be subject to
Federal income tax on any amount prior to the time of payment
hereunder, the Participant (or Beneficiary) may elect to be
advised of the amount of tax payable or to have distributed to
such Participant (or Beneficiary) the entire amount determined to
be so taxable. A Participant (or Beneficiary) is determined to be
subject to Federal income tax on the amount provided for under the
Plan upon the earliest of: (a) a final determination by the United
States Internal Revenue Service addressed to the Participant (or
Beneficiary) which is not appealed to the courts; (b) a final
determination by the United States Tax Court or United States
District Court affirming any such determination by the Internal
Revenue Service that amounts provided such Participant (or
Beneficiary) under the Plan are subject to Federal income tax,
unless such determination has been appealed to a higher United
States Court or; (c) a final determination of the appeal or
refusal of the higher court to hear the appeal. Any distribution
from the Trust Fund to a Participant (or Beneficiary) under this
Section 3.5 shall be applied in an equitable manner to reduce the
Company's liabilities to such Participant (and/or Beneficiary)
under the Plan.
ARTICLE IV
Section 4.1 Standard of Care. The Trustee and each Investment
Manager appointed pursuant to Section 4.5, if any, shall act with
the care, skill, prudence and diligence under the circumstances
then prevailing that a prudent man acting in a like capacity and
familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims; provided,
however, that the Trustee shall incur no liability to anyone for
any action taken or failure to take any action pursuant to a
direction, request or approval given in writing by a properly
authorized delegee of the Committee and contemplated by and
complying with the terms of this Agreement or the Plan or for
failure to take any action in the absence of such a direction,
request or approval. The duties of the Trustee shall be only
those specifically undertaken pursuant to this Agreement or by
means of a separate written agreement. The Trustee may consult
with legal counsel (who may be counsel for the Trustee) with
respect to any of its duties or obligations hereunder.
Section 4.2 Investment of Trust Assets. Unless an Investment
Manager has been appointed pursuant to Section 4.5, or the
Committee and Trustee have mutually agreed in a separate writing
that the Trustee shall have and exercise investment discretion, in
either case with respect to all or a portion of the assets of the
Trust, the Committee shall have complete discretion with respect
to the investment of such assets at all times prior to both (i) a
Change in Control of the Company and (ii) any of the following;
(a) Amendment to the Plan to reduce the benefits under the Plan,
(b) Plan termination, (c) merger or consolidation of the Plan or
Trust, or (d) discontinuance of contributions subsequent to a
Change in Control of the Company, and shall direct the Trustee
accordingly. After both a Change in Control of the Company and
one of the above enumerated events, the Trustee shall allocate and
distribute the assets of the Trust Fund as provided in Section 4.7
of the Plan. Subject to the foregoing, the Trustee shall have the
power:
(a) to deposit securities with custodians or securities
clearing corporations or depositories or similar
organizations, whether located within the Commonwealth of
Massachusetts or elsewhere in the United States or abroad,
except that the indicia of ownership of any property shall
not be maintained outside the jurisdiction of the district
courts of the United States;
(b) to retain any property at any time received by the
Trustee;
(c) to register securities in its name or in the name of
any nominee with or without indication of the capacity in
which the securities shall be held, or to hold securities in
bearer form;
(d) to employ suitable agents and legal counsel, who may
be counsel for the Company, and, as a part of its
reimbursable expenses under this Agreement, to pay their
reasonable compensation and expenses;
(e) to appoint one or more individuals or corporations
as a custodian of any property and, as a part of its
reimbursable expenses under this Agreement, to pay the
reasonable compensation and expenses of any such custodian;
(f) generally to do all acts, exclusive of acts
involving investment management discretion, which the Trustee
may deem necessary or desirable for the protection of the
Trust Fund;
(g) to commence or defend suits, legal proceedings or
arbitration proceedings; and to represent the Trust Fund in
all suits, legal proceedings or arbitration proceedings in
any court or before any other body or tribunal (provided,
however, that the Trustee shall have no obligation to take
any legal action for the benefit of the Trust Fund unless it
is specifically requested or directed to by the Committee and
unless it shall be first indemnified for all expenses in
connection therewith, including counsel fees). Upon
notification of the Trustee's intention to commence suits,
legal proceedings or arbitration proceedings or the
commencement of suits, legal proceedings or arbitration
proceedings against the Trust Fund, the Committee shall be
entitled, but not obligated to participate therein and, to
the extent that it may wish, jointly with the Trustee pursue
or defend the suit or proceeding with counsel satisfactory to
the Committee and the Trustee;
The Trustee shall exercise the following administrative
duties only upon the specific direction of the Committee or an
Investment Manager:
(h) to vote in person or by proxy, or to refrain from
voting, in respect of any securities held by the Trust Fund,
and to give general or special proxies or powers of attorney,
with or without power of substitution, and to exercise any
conversion privileges, subscription rights or other options;
to participate in reorganizations, recapitalizations,
consolidations, mergers and similar transactions with respect
to such securities; and generally to exercise any of the
powers of an owner with respect to any property held by the
Trust Fund;
(i) with respect to any investment, to consent or object
to any action or nonaction of any corporation or other
business organization, or of the directors, officers or
stockholders of any corporation or equivalent of any other
business organization;
(j) to settle, compromise or submit to arbitration any
claims, debts or damages due or owing to or from the Trust
Fund;
(k) to deposit any property with any protective,
reorganization or similar committee; to delegate power
thereto; and to pay or agree to pay part of its expenses and
compensation and any assessments levied with respect to any
property so deposited;
(l) to form a corporation or corporations under the laws
of any jurisdiction or to participate in the forming of any
such corporation or corporations or to acquire an interest in
or otherwise make use of any corporation or corporations
already formed, for the purpose of facilitating the Trust
Fund's investing in and holding title to any property;
(m) for the purpose of facilitating the Trust Fund's
investing in and holding title to real or personal property
or part interests therein, wherever situate, to appoint one
or more individuals or corporations as a subtrustee or
subtrustees, and to pay reasonable compensation and expenses
of each such subtrustee. Any such subtrustee, upon being
appointed, shall act with such one or more or all of the
powers, authorities, discretions, duties and functions of the
Trustee under this Section 4.2 as shall be designated in the
instrument establishing such subtrust including, without
limitation, the power to receive and hold property, real or
personal, or part interest therein, oil, mineral or gas
properties, royalty interests or rights, including equipment
pertaining thereto, leaseholds, mortgages and other interests
in realty, situated in any state of the United States in
which the subtrustee is authorized to act as a trustee; and
(n) to lease any property, to sell or acquire any
property (at public or private sale and for cash or on
credit), to grant or acquire options to purchase of any
property and generally make, execute, acknowledge and deliver
any and all deeds, leases, assignments and instruments
whenever such action may be required to perform its
obligations hereunder.
4.3 Securities; Property. Wherever used in this Agreement,
the term "securities" shall include bonds, mortgages, notes,
obligations, warrants and stocks of any class, certificates of
participation or shares of any mutual investment company, trust or
fund, and such other evidences of indebtedness and certificates of
interest as are usually referred to by the term "securities," and
the term "property" shall include real, personal and mixed
property, tangible or intangible, of any kind and wherever
located, including without limitation securities, depository
accounts in any bank, trust company or similar financial
institution (including depository accounts in the banking
department of the Trustee or an affiliate of the Trustee or any
custodian or an affiliate of any custodian).
Section 4.4 Proxies. In order to permit the Committee or an
Investment Manager, as the case may be, to make timely and
informed decisions regarding the management of those assets in the
Trust Fund subject to its respective control, the Trustee shall
forward to the Committee or each such Investment Manager, as the
case may be, for appropriate action any and all proxies, proxy
statements, notices, requests, advice or other communications
received by the Trustee (or its nominee) as the record owner of
such assets.
Section 4.5 Investment Managers. The Committee may from time
to time appoint one or more Investment Managers to manage any
portion of the Trust Fund and, with respect to such portion, to
direct the Trustee with respect to effecting investment
transactions on behalf of the Trust Fund and exercising such other
powers as may be granted to Investment Managers hereunder. The
Committee shall give prompt written notice to the Trustee of any
such appointment, signed by a majority of the members of the
Committee, upon which the Trustee shall rely until it receives
from the Committee written notice of the termination of such
appointment, signed by a majority of the members of the
Committee. In each case where such an appointment is made, the
Committee shall determine the assets of the Trust Fund to be
allocated to the Investment Manager from time to time and the
Committee shall issue appropriate instructions to the Trustee with
respect thereto. The Trustee shall not be liable for the acts or
omissions of such Investment Manager, shall be under no duty to
question any direction of an Investment Manager with respect to
the portion of the Trust Fund managed by such Investment Manager,
to review any securities or property held in such portion, to make
any suggestions with respect to the investment and reinvestment of
such portion, or to evaluate the performance of any Investment
Manager, and shall be fully protected in acting in accordance with
the directions of an Investment Manager or for failing to act in
the absence of such directions.
Section 4.6 Life Insurance. The Committee reserves the right
to transfer to the Trust Fund life insurance, retirement income or
annuity policies or contracts on or for the life of any
Participant or to direct the Trustee to purchase any such policies
or contracts on or for the life of any such Participant. Any such
policy or contract shall be an asset of the Trust Fund subject to
the claims of the Company's creditors in the event of insolvency,
as specified in Section 2.1 hereof. The proceeds of any life
insurance policy shall upon the death of the insured Participant
be credited to the Trust Fund under the Plan and shall be an
additional source of benefits payable to his Beneficiary. The
Trustee shall be under no duty to question any direction of the
Committee or to review the form of any such policies or contracts
or of the selection of the issuer thereof, or to make suggestions
to the Committee with respect to the form of such policies or
contracts or to the issuer thereof. The Committee may direct the
Trustee to exercise or may exercise directly the powers of the
contract holder under any such policies or contracts, and the
Trustee shall exercise such powers only upon the direction of the
Committee. Notwithstanding anything to the contrary contained in
the Plan, the Trustee shall be fully protected in acting in
accordance with written directions of the Committee, and shall be
under no liability for any loss of any kind which may result by
reason of any action taken or omitted by it in accordance with any
direction of the Committee, or by reason of inaction in the
absence of written directions from the Committee. No insurance
carrier shall for any purpose be deemed a party to this Agreement
or be responsible for the validity or sufficiency hereof.
Notwithstanding the fact that it may have knowledge of the terms
of this Trust Fund, the obligations of such insurance carrier
shall be measured and determined solely by the terms and
conditions of the policies or contracts issued by it, and there
shall be no obligations to any person, partnership, corporation,
trust or association other than as stated in such policies or
contracts.
ARTICLE V
Section 5.1 Trust Taxes. The Company shall pay any and all
Federal, state or local taxes on the Trust Fund, or any part
thereof, and on the income therefrom.
Section 5.2 Trust Expenses. The Company shall pay to the
Trustee its reasonable expenses for the management and
administration of the Trust Fund, including without limitation
advances for or prompt reimbursement of reasonable expenses of
counsel, custodians and other agents employed by the Trustee, and
reasonable compensation for its services as Trustee hereunder, the
amount of which shall be agreed upon from time to time by the
Committee and the Trustee in writing. Such expenses and
compensation shall be a charge on the Trust Fund and shall
constitute a lien on the Trust Fund in favor of the Trustee unless
and until paid by the Company.
Section 5.3 Indemnification. The Company hereby agrees to
indemnify and hold harmless the Trustee from and against any
losses, costs, damages, claims or expenses, including without
limitation reasonable attorneys' fees, which the Trustee may incur
or pay out in connection with, or otherwise arising out of, the
performance by the Trustee of its duties hereunder. Any amount
payable to the Trustee under Section 5.2 or this Section 5.3 and
not previously paid by the Company pursuant to this Agreement
shall be paid by the Company promptly upon demand therefor by the
Trustee or, if the not paid by the Company within forty-five
(45)days of demand therefor, from the Trust Fund. In the event
that payment is made hereunder to the Trustee from the Trust Fund,
the Trustee shall promptly notify the Company in writing of the
amount of such payment. The Company agrees that, upon receipt of
such notice, it will deliver to the Trustee to be held in the
Trust Fund an amount in cash (or marketable securities having a
fair market value equal to such amount, or some combination
thereof) equal to any payments made from the Trust Fund to the
Trustee pursuant to Section 5.2 or this Section 5.3. The failure
of the Company to transfer any such amount shall not in any way
impair the Trustee's right to indemnification, reimbursement and
payment pursuant to Section 5.2 hereof or this Section 5.3.
ARTICLE VI
Section 6.1 Trustee Records and Accounts. The Trustee shall
keep accurate and detailed accounts of all investments, receipts,
disbursements and other transactions hereunder, and all accounts,
books and records relating thereto shall be open to inspections
and audit at all reasonable times by any persons designated by the
Committee. Within ninety (90) days following the close of each
Plan Year, as defined in Section 2.22 of the Plan, and within
ninety (90) days after the removal or resignation of the Trustee
as provided in ARTICLE VII hereof, the Trustee shall file with the
Committee a written account setting forth all investments,
receipts, disbursements and other transactions effected by the
Trustee or reported to it by such Investment Managers, if any, as
may be appointed hereunder during each Plan Year or during the
period from the close of the last such Plan Year to the date of
such removal or resignation. Upon the expiration of ninety (90)
days from the date of filing such annual or other account, the
Trustee shall be forever released and discharged from all
liability and accountability to anyone with respect to the
propriety of all acts and transactions shown in such account,
except with respect to any such acts or transactions as to which
the Committee shall within such ninety (90) day period file with
the Trustee written objections.
The Trustee shall from time to time make such other reports
and furnish such other information concerning the Trust Fund as
the Committee may reasonably request or as may be required by the
Plan.
Section 6.2 Settlement of Accounts. Notwithstanding the
foregoing Section 6.1, the Trustee shall have the right to apply
at any time to a court of competent jurisdiction for the judicial
settlement of the Trustee's account, and in any case it shall be
necessary to join as parties thereto only the Trustee and the
Committee; and any judgment or decree which may be entered therein
shall be conclusive upon all persons having or claiming to have
any interest in the Trust Fund or under the Plan.
ARTICLE VII
Section 7.1 Resignation and Removal of Trustee. The Trustee
may resign at any time by delivering written notice thereof to the
Committee; provided, however, that no such resignation shall take
effect until the earlier of (i) thirty (30) days from the date of
delivery of such notice to the Committee, unless such notice
period is waived in whole or in part by the Committee or (ii) the
appointment of a successor trustee pursuant to Section 7.2. The
Trustee may be removed at any time by the Committee, pursuant to a
resolution of the Committee, by delivering to the Trustee a
certified copy of such resolution. Such removal shall take effect
upon the earlier of (i) thirty (30) days from the date of delivery
of such resolution, unless such notice period is waived in whole
or in part by the Trustee or (ii) the appointment of a successor
trustee pursuant to Section 7.2. Notwithstanding the foregoing,
after a Change in Control of the Company, any such removal of the
Trustee shall be effective only with the written consent of
Participants (or Beneficiaries of deceased Participants) having at
least a majority (on the basis of the present value of the
benefits accrued) of all amounts then held in the Trust Fund. If,
within thirty (30) days of the delivery of written notice of
resignation or removal, a successor trustee shall not have been
appointed, the provisions of Section 7.2 shall apply.
Section 7.2 Successor Trustee. Upon the resignation or
removal of the Trustee, a successor trustee shall be appointed by
the Committee; provided, however, that after a Change in Control
of the Company such appointment shall be effective only with the
written consent of Participants (or Beneficiaries of deceased
Participants) having at least a majority (on the basis of the
present value of benefits accrued) of all amounts then held in the
Trust Fund. If the Committee (and, after a Change in Control of
the Company, such Participants and Beneficiaries) are unable to so
agree upon a successor trustee within thirty (30) days after such
notice, the Trustee shall be entitled, at the expense of the
Company, to petition a United States District Court or any of the
courts of the Commonwealth of Massachusetts having jurisdiction to
appoint its successor. The Trustee shall continue to serve, and
to receive its compensation and reimbursement of its expenses,
until its successor accepts the trust and receives delivery of the
Trust Fund. Such successor trustee shall be a commercial bank or
trust company which is established under the laws of the United
States or a State within the United States and which is not an
affiliate of the Company. Such appointment shall take effect upon
the delivery to the Trustee of (a) a written appointment of such
successor trustee, duly executed by the Committee, and (b) a
written acceptance by such successor trustee, duly executed by an
authorized officer. Any successor trustee shall have all the
rights, powers and duties granted the Trustee hereunder. Upon the
resignation or removal of the Trustee and the appointment of a
successor trustee, and after the acceptance and approval of its
account, the Trustee shall transfer and deliver the Trust Fund to
such successor. Under no circumstances shall the Trustee transfer
or deliver the Trust Fund to any successor which is not a bank or
trust company as hereinabove defined.
ARTICLE VIII
Section 8.1 Termination of Trust. The Trust established
pursuant to this Agreement shall terminate upon the earlier of (i)
the exhaustion of the Trust Fund, or (ii) the satisfaction of all
Company liabilities under the Plan with respect to all
Participants (and Beneficiaries); provided however, that the Trust
shall terminate in any event upon the expiration of twenty-one
(21) years after the death of the last survivor of the group of
persons consisting of all employees of the Company who are living
on the date of the execution of this Agreement.
Section 8.2 Liquidation of Trust. Upon the termination of
the Trust in accordance with Section 8.1, the Trustee shall, after
the acceptance and approval of its account, distribute the
remaining Trust Fund assets, if any, to the Company. Upon
completing such distribution, the Trustee shall be relieved and
discharged of all liabilities and obligations hereunder. The
powers of the Trustee shall continue as long as any part of the
Trust Fund remains in its possession.
ARTICLE IX
Section 9.1 Amendment of Trust. This Agreement may be
amended, in whole or in part, at any time and from time to time,
by the Committee, pursuant to a resolution of the Committee, by
delivery to the Trustee of a certified copy of such resolution and
a written instrument duly executed and acknowledged in the same
form as this Agreement; provided, however, that the duties and
responsibilities of the Trustee shall not be increased without the
Trustee's written consent; and provided further that, after a
Change in Control of the Company any such amendment affecting any
Participant's or Beneficiaries' rights hereunder, the Trust Fund
or the procedures for distribution thereof shall not become
effective until sixty (60) days after a copy of such amendment has
been delivered by registered mail by the Committee or the Trustee
to each Participant or Beneficiary entitled to benefits under the
Plan. In the event the Committee or the Trustee receives written
objections to such amendment from such person within such sixty
(60) day period, such amendment shall be ineffective and void in
respect of the Participant (or Beneficiary) so objecting.
ARTICLE X
Section 10.1 Governing Law. This Agreement shall be
construed and interpreted under, and the Trust hereby created
shall be governed by, the laws of the Commonwealth of
Massachusetts.
Section 10.2 Gender. Neither the gender nor the number
(singular or plural) of any word shall be construed to exclude
another gender or number when a different gender or number would
be appropriate.
Section 10.3. Non-Alienation. No right or interest of any
Participant or Beneficiary under the Plan or in the Trust Fund
shall be transferable or assignable or subject to alienation,
anticipation or encumbrance, and no right or interest of any
Participant or Beneficiary in the Plan or in the Trust Fund shall
be subject to any garnishment, attachment or execution.
Notwithstanding the foregoing, the Trust Fund shall at all times
remain subject to the claims of creditors of the Company in the
event the Company becomes insolvent as provided in Section 2.1.
Section 10.4 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of any successor to the
Company as the result of merger, consolidation, reorganization, or
otherwise. In the event of any such merger, consolidation,
reorganization, or other similar transaction, the successor to the
Company shall promptly notify the Trustee in writing of its
successorship and furnish the Trustee with the information
specified in Section 3.1 of this Agreement.
Section 10.5 Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be deemed to be an
original, but all of which shall together constitute only one
Agreement.
Section 10.6 Addresses of Parties. Communications to the
Trustee shall be sent to
Boston Safe Deposit and Trust Company
One Boston Place
Boston, MA 02108
Attn: David Crawford
or to such other address as the Trustee may specify in writing.
Communications to the Committee shall be sent to the Company's
principal office or to such other address as the Company may
specify in writing.
Section 10.7 Arbitration. Any dispute between any
Participant (or Beneficiary of a deceased Participant) and the
Trustee as to the interpretation or application of the provisions
of this Trust and amounts payable hereunder shall be determined
exclusively by binding arbitration in the Commonwealth of
Massachusetts in accordance with the rules of the American
Arbitration Association then in effect. Judqment may be entered
on the arbitrator's award in any court of competent jurisdiction.
All fees and expenses of such arbitration shall be paid by the
Trustee and considered an expense of the Trust under Section 5.2
hereof.
Section 10.8 Severability. In the event that any provision
of this Trust or the application thereof to any person or
circumstances shall be determined by a court of proper
jurisdiction to be invalid or unenforceable to any extent, the
remainder of this Trust, or the application of such provision to
persons or circumstances other than those as to which it is held
invalid or unenforceable, shall not be affected thereby, and each
provision of this Trust shall be valid and enforced to the fullest
extent permitted by law.
10.9 Trust Beneficiaries. Each Participant (and Beneficiary
of a deceased Participant) is an intended beneficiary under this
Trust, and shall be entitled to enforce all terms and provisions
hereof with the same force and effect as if such person had been a
party hereto.
IN WITNESS WHEREOF, the parties hereto have caused this
Trust Agreement to be duly executed and their respective corporate
seals to be hereto affixed this day of , 19
Attest: BOSTON SAFE DEPOSIT AND TRUST
COMPANY
By ____________________________
Attest: DATA GENERAL CORPORATION SUPPLEMENTAL
RETIREMENT BENEFIT PLAN COMMITTEE
By _________________________________
By _________________________________
By _________________________________
Exhibit 10(y)
SUPPLEMENTAL PENSION AND RETIREE MEDICAL AGREEMENT
AGREEMENT between Data General Corporation, a Delaware corporation (the
"Company") and Ronald L. Skates (the "Executive") dated as of December 7, 1994.
WHEREAS, the Executive serves as President and Chief Executive of the
Company.
WHEREAS, the Board of Directors of the Company desires the Executive to
continue in such capacities until retirement and desires to provide the
Executive with appropriate pension and post-employment welfare benefits.
NOW, THEREFORE, IT IS AGREED:
1. Supplemental Pension Benefit.
a) General. The Company agrees to provide the Executive with an
annual supplemental retirement benefit ("Supplemental Benefit") equal
to 60% of his Final Average Salary payable as provided below and
subject to the reductions described below. Except as provided below,
no benefit will be payable in the event the Executive terminates
employment prior to attaining age 55.
b) Reduction in Benefit. In the event the Executive terminates
employment with the Company prior to attaining 65 years old, the
Supplemental Benefit will be reduced by 2% of the Final Average Salary
for each year prior to the year in which the Executive would attain
age 65 the Executive's termination of employment with the Company
occurs. Thus, the Supplemental Benefit will be as follows:
Executive's
Age on Termination % of Final Average Salary
65 60
64 58
63 56
62 54
61 52
60 50
59 48
58 46
57 44
56 42
55 40
<55 0
(c) Certain Terminations. For purposes of this Agreement, in the
event that the Executive's employment is terminated by the Company
without Cause or by reason of death or Disability prior to attaining
age 55, he shall be deemed to be age 55.
(d) Offsets. The Supplemental Benefit shall be reduced by amounts
received by the Executive pursuant to the SRP and the Retirement Plan,
as determined on an actuarially equivalent basis by William M. Mercer
Incorporated or such other actuary as may be acceptable to the
Executive.
(e) Form of Benefit. The Supplemental Benefit shall be payable in
equal monthly installments to the Executive until his death; and in the
event he predeceases his Spouse, shall continue to be payable to his
Spouse until the death of such Spouse.
2. Retiree Medical Benefit.
During the period that the Executive or his Spouse are receiving the
Supplemental Benefit, the Executive and his Spouse and their respective
dependents shall be entitled to medical, dental and similar welfare
benefits offered to active officers of the Company as of the date
hereof, on the same terms (including deductibles and co-pay obligations)
as such benefits are provided to active officers as of the date hereof.
3. Coordination with Change of Control Agreement.
For purposes of the Employment Agreement, the Supplemental Benefit shall
constitute a SERP (as defined therein).
4. Definitions.
The following terms shall have the following meanings hereunder:
"Cause" shall have the same meaning as ascribed to it in the
Employment Agreement between the Company and the Executive dated
February 10, 1989 as amended September 1, 1993 (the "Change of Control
Agreement").
"Disability" shall have the same meaning as ascribed to in the Change
of Control Agreement.
"Final Average Salary" means the average of the three highest years of
annual salary, which does not include bonuses awarded the Executive,
paid to the Executive during the five years prior to the Executive's
termination of employment with the Company.
"Retirement Plan" means the Data General Corporation Retirement Plan,
as amended from time to time.
"Spouse" means the spouse to whom the Executive is married on the date
payment of the Executive's benefits are made hereunder or to whom the
Executive is married on the date of his death.
"SRP" means the Data General Corporation Supplemental Retirement
Benefit Plan, as amended from time to time.
5. FICA Gross-Up.
The Company shall make additional payments to the Executive during
the term of his employment in order to put him in the same after-tax
position that he would have been in had the benefits hereunder not
been "wages" within the meaning of the Section 3121 (v) of the
Internal Revenue Code of 1986, as amended (the "Code") prior to
commencement of payment and therefore not been subject to the tax
imposed by Section 3101 of the Code.
6. Governing Law.
This Agreement shall be construed, interpreted, administered and
enforced according to the laws of the Commonwealth of Massachusetts
and all applicable federal laws.
7. Nonassignability.
The benefits payable under this Agreement shall not be subject to
alienation, assignment, garnishment, execution or levy of any kind
until such benefits are payable to the Executive or his Spouse at
which time the benefits become the property of the Executive or his
Spouse and any attempt to cause any benefits hereunder to be so
subjected shall not be recognized, except to the extent required by
applicable law.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's
hand, and pursuant to the authorization from its Board of Directors,
the Company has caused these presents to be executed in its name of
its behalf, all as of the day and year first written.
_____________________
Ronald L. Skates
DATA GENERAL CORPORATION
By __________________________
Exhibit 10(y)
TRUST AGREEMENT
FOR THE
DATA GENERAL CORPORATION
SUPPLEMENTAL PENSION and RETIREE MEDICAL
BENEFIT FOR RONALD L. SKATES
THIS TRUST AGREEMENT is made as of the 16th day of December,
1994, by and between Data General Corporation, a Delaware
corporation having its principal office at 4400 Computer Drive,
Westboro, Massachusetts 01580 (the "Company") and Boston Safe
Deposit and Trust Company, a Massachusetts trust company having
its principal office at One Boston Place, Boston, Massachusetts
02108 (the "Trustee").
W I T N E S S E T H
WHEREAS, the Company has entered into a Supplemental Pension
and Retiree Medical Agreement (the "Agreement") with Ronald L.
Skates for the purpose of providing Mr. Skates with certain
benefits that cannot be provided under the Company's retirement
plans;
WHEREAS, the Company desires to provide additional assurances
to Mr. Skates and his beneficiaries or estate under the Agreement
(collectively the "Beneficiaries") that their benefits under the
Agreement will in the future be met by the application of the
procedures set forth herein;
WHEREAS, the Trustee has agreed to act as Trustee of the
trust fund created hereunder and to hold and administer such
assets as may be delivered to it as hereinafter provided;
WHEREAS, contributions delivered to the Trust as determined
by the Company from time to time in its sole discretion, and the
earnings thereon shall be used by the Trustee solely in
satisfaction of the liabilities of the Company with respect to the
Agreement with Mr. Skates and his Beneficiaries, unless otherwise
provided for herein;
WHEREAS, upon satisfaction of all liabilities of the Company
with respect to Mr. Skates and his Beneficiaries under the Trust
Agreement, including liabilities to Mr. Skates and his
Beneficiaries arising from Section 1(c) of the Agreement ("Certain
Terminations) and Section 3 ("Coordination with Change in Control
Agreement"), the balance, if any, remaining in such Trust Fund
shall revert to the Company, except that all amounts in such Trust
Fund shall at all times be subject under this Trust Agreement to
the claims of the Company's creditors as hereinafter provided;
NOW, THEREFORE, in consideration of the premises and mutual
and independent promises herein, the parties hereto covenant and
agree as follows:
<PAGE>
ARTICLE I
Section 1.1 Establishment of Trust. The Company hereby
establishes with the Trustee a grantor trust consisting solely of
such sums of money and such property acceptable to the Trustee as
shall from time to time be paid or delivered to the Trustee in
such amounts and on such dates as the Company, in its sole
discretion, may determine and the earnings and profits thereon.
The trust established hereunder shall be known as the Trust
Agreement for the Data General Corporation Supplemental Pension
and Retiree Medical Benefit for Ronald L. Skates (the "Trust").
All such money and property, all investments made therewith and
proceeds thereof, less the payments or other distributions which,
at the time of reference, shall have been made by the Trustee, as
authorized herein, are referred to herein as the "Trust Fund" and
shall be held by the Trustee, IN TRUST, in accordance with the
provisions of this Trust Agreement.
Section 1.2 Trustee Responsibility. The Trustee shall hold,
manage, invest and otherwise administer the Trust Fund pursuant to
the terms of this Trust Agreement. The Trustee shall be
responsible only for the contributions actually received by it
hereunder. The amount of each contribution made by the Company to
the Trust Fund shall be determined in the sole discretion of the
Company, and the Trustee shall have no duty or responsibility with
respect thereto. Except as otherwise specifically agreed to by
the Trustee, the Trustee shall not be responsible for the
administration of the Trust Agreement. The Trustee shall not have
any authority or obligation to determine the adequacy of or to
enforce the collection from the Company of any contribution to the
Trust Fund, provided, however, that upon a Change in Control of
the Company the Trustee shall, following a valuation by an actuary
indicating that a contribution is necessary to fund the benefits
set forth herein and failure of the Company to make such
contribution within 60 days notice that such contribution is
necessary, notify the Company that the Trustee has determined that
contributions have been discontinued subsequent to a Change in
Control and shall allocate the assets of the Trust Fund and make
payments to Mr. Skates and his Beneficiaries as provided in
Section 3 of the Agreement. Except to the extent that the Trustee
has otherwise specifically agreed in writing, the Trustee shall
not be responsible, directly or indirectly, for the investment or
reinvestment of the assets of the Trust Fund, which investment and
reinvestment shall be the sole responsibility of the Company
unless otherwise delegated by the Company as provided in ARTICLE
IV hereof; provided, however, that upon a Change in Control of the
Company; the Trustee shall at that time become solely responsible
for the investment and reinvestment of the assets of the Trust
Fund until the distribution of the assets in accordance with the
provisions of Section 3 of the Agreement. Notwithstanding
anything in the Agreement with Mr. Skates or this Trust Agreement
to the contrary, the agreement of the parties hereto that the
Trustee shall assume the sole responsibility for the investment
and reinvestment of the assets of the Trust Fund upon a Change in
Control of the Company shall not be amended or modified without
the written consent of Mr. Skates.
Section 1.3 Payments from Trust Fund. Subject to the
provisions of Section 2.1 of this Trust Agreement, the Trustee
shall make payments from the Trust Fund as directed by the Company
upon Mr. Skates retirement from the Company, prior to a Change in
Control of the Company (as defined below). Upon a Change in
Control of the Company (as defined below), the Trustee shall make
payments from the Trust Fund in accordance with the payment terms
of the Agreement. The Trustee may consult the Company's
retirement plan actuary, William M. Mercer, Inc., or such other
expert as it deems necessary to determine the payments due Mr.
Skates under the Agreement. The fees of such expert for such
services to the Trustee are expenses of the Company, as provided
in Section 2.3 of this Trust Agreement. The Company, in directing
the Trustee to make payment shall follow the provisions of the
Agreement so that it shall be impossible, except as provided in
Section 2.1 of this Trust Agreement, at any time prior to the
satisfaction of all liabilities under the Agreement with respect
to Mr. Skates and his Beneficiaries covered under the Agreement,
for any part of the Trust Fund to be used for or diverted to,
purposes other than for the benefit of Mr. Skates or his
beneficiaries or in the event the Company enters into bankruptcy
under the Bankruptcy Act of the United States or the bankruptcy
laws of any state alleging that the Company is insolvent or
bankrupt, to the creditors of the Company. Payments by the
Trustee may be made by its check to the order of the payee and
mailed to the payee at the address last furnished to the Trustee
by the payee, or if no such address has been so furnished, to the
payee in care of the Company.
Section 1.4 Change in Control of the Company. For purposes
of this Trust Agreement, the term "Change in Control of the
Company", shall mean:
(i) The acquisition, other than from the
Company, by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) of
beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 25% or more of either
the then outstanding shares of common stock of the Company
(the "Outstanding Company Common Stock") or the combined
voting power of the then outstanding voting securities of the
Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities"),
provided, however, that any acquisition by the Company or any
of its subsidiaries, or by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any
of its subsidiaries, or by any corporation with respect to
which, following such acquisition, more than 60% of,
respectively, the then outstanding shares of common stock of
such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to
vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or
substantially all the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities
immediately prior to such acquisition in substantially the
same proportion as their ownership, immediately prior to such
acquisition, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be,
shall not constitute a Change of Control; or
(ii) Individuals who, as of January 1,
1991, constitute the Board (the "Incumbent Board") cease for
any reason to constitute at least a majority of the Board,
provided that any individual becoming a director subsequent
to January 1, 1991 whose election, or nomination for
election, by the Company's shareholders, was approved by a
vote of at least a majority of the directors then comprising
the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose
initial assumption of office is in connection with an actual
or threatened election contest relating to the election of
the Directors of the Company (as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Exchange Act);
or
(iii) Approval by the stockholders of the
Company of a complete liquidation or dissolution of the
Company or of the sale or other disposition of all or
substantially all of the assets of the Company, or of a
reorganization, merger or consolidation, in each case, with
respect to which all or substantially all of the individuals
and entities who were the respective beneficial owners of the
Outstanding Company Common Stock and Outstanding Company
Voting Securities immediately prior to such reorganization,
merger or consolidation do not, following such
reorganization, merger or consolidation, beneficially own,
directly or indirectly, more than 60% of, respectively, the
then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from such
reorganization, merger or consolidation.
The Trustee may request that the Company furnish evidence to
determine, or to enable the Trustee to determine, whether a Change
in Control of the Company has occurred. In performing any of its
obligations or taking any discretionary action under the
provisions of the Agreement or this Trust Agreement which is
dependent upon a Change in Control of the Company having occurred,
the Trustee may rely on its determination, including an opinion of
counsel (who may be counsel engaged by the Trustee solely to
render an opinion as to whether or not a Change in Control of the
Company has occurred and whose fees are considered expenses of
administering the Trust Agreement), that a Change in Control has
occurred, unless such a determination arises out of the Trustee's
gross negligence or willful misconduct. The Trustee's
determination as to whether a Change in Control of the Company has
occurred shall be binding and conclusive on all persons.
ARTICLE II
Section 2.1 Company Insolvency. Notwithstanding any
provision in this Trust Agreement to the contrary, if at any time
while the Trust is still in existence the Company becomes
insolvent (as defined herein), the Trustee shall upon written
notice thereof suspend the payment of all benefits from the Trust
Fund and shall thereafter hold the Trust Fund in suspense until it
receives a court order directing the disposition of the Trust
Fund; provided, however, the Trustee may deduct or continue to
deduct its fees and expenses and other expenses of the Trust,
including taxes, pending the receipt of such court order. The
Company shall be considered to be insolvent if bankruptcy or
insolvency proceedings are initiated by its creditors or the
Company or any third party under the Bankruptcy Act of the United
States of America or the bankruptcy laws of any State having
appropriate jurisdiction over the Company, alleging that the
Company is insolvent or bankrupt. By its approval and execution
of this Trust Agreement, the Company represents and agrees that
its Board of Directors and Chief Executive Officer, as from time
to time acting, shall have the duty to inform the Trustee in
writing of the Company's insolvency (as defined herein) and the
Trustee shall be entitled to rely thereon to the exclusion of all
directions or claims to pay benefits thereafter made. Absent such
notice, the Trustee shall have no responsibility for determining
whether or not the Company has become insolvent unless the Trustee
receives written allegations of the event of insolvency from a
third party considered by the Trustee to be reliable and
responsible. If after an event of insolvency, the Company later
becomes solvent without the entry of a court order concerning the
disposition of the Trust Fund, the Company shall by written notice
so inform the Trustee and the Trustee shall thereupon resume all
its duties and responsibilities under this Trust Agreement without
regard for this Section 2.1 until and unless the Company again
becomes insolvent as such term is defined herein.
Section 2.2 Funding of Trust. The Company represents and
agrees that the Company shall make an annual contribution to the
Trust Fund, and in the event of a Change in Control of the Company
make a contribution to fully fund the Trust Fund, in the amount
determined by the actuary for the Agreement as necessary to
fulfill the Company's liabilities and obligations to Mr. Skates
and his Beneficiaries under the Agreement. The Trustee shall have
no responsibility with respect to the determination of amounts to
be contributed or the failure of the Company to make the mandatory
contribution, except to add such contributions to the Trust Fund.
The purpose of this Trust is to provide a fund from which
retirement benefits may be payable under the Agreement and as to
which Mr. Skates and his Beneficiaries may, by exercising the
procedures set forth herein, have access to some or all of their
benefits as such become due without having the payment of such
benefits subject to the administrative control of the Company
unless the Company becomes insolvent as defined in Section 2.1.
Section 2.3 Company as Owner. Nothing provided in this Trust
Agreement shall relieve the Company of its liabilities to pay the
retirement benefits provided under the Agreement except to the
extent such liabilities are met by application of the Trust Fund's
assets. It is the intent of the Company to have the Trust Fund
established hereunder designed to satisfy in whole or in part the
Company's legal liability under the Agreement. All assets of the
Trust Fund remain the assets of the Company. All expenses of
administering the Trust Fund are expenses of the Company. All
income, deductions and credits of the Trust Fund belong to the
Company as owner for income tax purposes and will be included on
the Company's income tax return.
Section 2.4 Non-ERISA Plan. The Company further represents
that the Agreement is an excess benefit plan and as such is exempt
from the application of the Employee Retirement Income Security
Act of 1974 ("ERISA"). The Company further represents that the
Agreement is not qualified under Section 401 of the Internal
Revenue Code of 1986, as amended (the "Code") and therefore is not
subject to any of the Code requirements applicable to
tax-qualified plans.
Section 2.5 Mr. Skates and his Beneficiaries as Unsecured
Creditors. Mr. Skates and his Beneficiaries shall have the
rights under this Trust Agreement of unsecured general creditors
of the Company and shall not have any preferred claim on, or any
beneficial ownership interest in, the Trust Fund prior to the time
amounts in the Trust Fund are paid to Mr. Skates or his
Beneficiaries as benefits under Section 3.3.
ARTICLE III
Section 3.1 Information to be Provided to Trustee. The
Company shall maintain and furnish the Trustee documents and
information as shall be required by the Trustee to perform its
duties and discharge its responsibilities under this Trust
Agreement, including without limitation a copy of the Agreement
and any and all amendments thereto. The Trustee shall be entitled
to rely on the most recent documents and information furnished to
it by the Company. The Company shall be required to notify the
Trustee as to the termination of employment of Mr. Skates by
reason of death, retirement or otherwise. Notwithstanding the
foregoing, at any time after a Change in Control of the Company,
the Trustee may rely upon the information provided to the Trustee
by Mr. Skates (or his Beneficiary if Mr. Skates is deceased).
The Company shall arrange for each Investment Manager, if
someone other than the Trustee is appointed Investment Manager,
appointed pursuant to Section 4.5, and each insurance company
issuing contracts held by the Trustee pursuant to Section 4.6, to
furnish the Trustee with such valuations and reports as are
necessary to enable the Trustee to fulfill its obligations under
this Trust Agreement, and the Trustee shall be fully protected in
relying upon such valuations and reports.
Section 3.2 Payments to Mr. Skates and/or His Beneficiaries.
Subject to Sections 2.1, 3.5 and 10.7, the Trustee shall commence
distributions to Mr. Skates or his Beneficiaries under the
Agreement upon written notification by the Company or the
Trustee's own determination that a distribution is required by
Section 1 of the Agreement, that Mr. Skates (or his Beneficiary if
Mr. Skates is deceased) has become entitled to receive benefit
payments under the Agreement. Upon receipt of proper notification
and appropriate Federal, state and local tax withholding
information, the Trustee shall commence distributions of cash or
property, if applicable, from the Trust Fund in accordance with
the terms of the Agreement. The Trustee shall have no
responsibility for and shall incur no liability with respect to
any payment made pursuant to a direction received in accordance
with this Section 3.2 or, in the event of a dispute, an
arbitrator's award issued pursuant to Section 10.7 hereof.
Section 3.3 Satisfaction of Agreement Liabilities. Upon the
satisfaction of all the Company's liabilities under the Agreement
with Mr. Skates (and Mr. Skates' Beneficiaries) the Trustee shall
thereupon hold and distribute the balance, if any, remaining in
the Trust Fund in accordance with the written instructions of the
Company. At no time prior to the Company's release from
bankruptcy proceedings, in the event of the Company's insolvency
(as defined in Section 2.1 hereof), or the satisfaction of all
liabilities of the Company under the Agreement in respect of Mr.
Skates and his Beneficiaries shall any part of the Trust Fund
revert to the Company.
Section 3.4 Tax Withholding. The Trustee shall withhold from
any payment to Mr. Skates (or his Beneficiary) hereunder the
amount required by law to be so withheld under Federal, state and
local wage withholding requirements or otherwise, and shall pay
over to the appropriate government authority the amount so
withheld. The Trustee may rely on instructions from the Company
as to any required withholding and shall be fully protected under
Section 5.3 in relying on such instructions. For purposes of the
preceding sentence, a failure by the Company to provide any
instructions as to required withholding may be deemed by the
Trustee to be an instruction by the Company to withhold the full
amount required by law.
Section 3.5 Election Upon Taxation of Benefit. In the event
Mr. Skates (or his Beneficiary) is determined to be subject to
Federal income tax on any amount prior to the time of payment
hereunder, Mr. Skates (or his Beneficiary) may elect to be advised
of the amount of tax payable or to have distributed to Mr. Skates
(or his Beneficiary) the entire amount determined to be so
taxable. Mr. Skates (or his Beneficiary) is determined to be
subject to Federal income tax on the amount provided for under the
Agreement upon the earliest of: (a) a final determination by the
United States Internal Revenue Service addressed to Mr. Skates (or
his Beneficiary) which is not appealed to the courts; (b) a final
determination by the United States Tax Court or United States
District Court affirming any such determination by the Internal
Revenue Service that amounts provided Mr. Skates (or his
Beneficiary) under the Agreement are subject to Federal income
tax, unless such determination has been appealed to a higher
United States Court or; (c) a final determination of the appeal or
refusal of the higher court to hear the appeal. Any distribution
from the Trust Fund to Mr. Skates (or his Beneficiary) under this
Section 3.5 shall be applied in an equitable manner to reduce the
Company's liabilities to Mr. Skates (and/or his Beneficiary) under
the Agreement.
ARTICLE IV
Section 4.1 Standard of Care. The Trustee and each Investment
Manager appointed pursuant to Section 4.5, if any, shall act with
the care, skill, prudence and diligence under the circumstances
then prevailing that a prudent man acting in a like capacity and
familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims; provided,
however, that the Trustee shall incur no liability to anyone for
any action taken or failure to take any action pursuant to a
direction, request or approval given in writing by a properly
authorized delegee of the Company and contemplated by and
complying with the terms of this Trust Agreement or the Agreement
with Mr. Skates or for failure to take any action in the absence
of such a direction, request or approval. The duties of the
Trustee shall be only those specifically undertaken pursuant to
this Trust Agreement or by means of a separate written agreement.
The Trustee may consult with legal counsel (who may be counsel for
the Trustee) with respect to any of its duties or obligations
hereunder.
Section 4.2 Investment of Trust Assets. Unless an Investment
Manager has been appointed pursuant to Section 4.5, or the Company
and Trustee have mutually agreed in a separate writing that the
Trustee shall have and exercise investment discretion, in either
case with respect to all or a portion of the assets of the Trust,
the Company shall have complete discretion with respect to the
investment of such assets at all times prior to a Change in
Control of the Company. After a Change in Control of the Company,
the Trustee shall allocate and distribute the assets of the Trust
Fund as provided in Agreement. Subject to the foregoing, the
Trustee shall have the power:
(a) to deposit securities with custodians or securities
clearing corporations or depositories or similar
organizations, whether located within the Commonwealth of
Massachusetts or elsewhere in the United States or abroad,
except that the indicia of ownership of any property shall
not be maintained outside the jurisdiction of the district
courts of the United States;
(b) to retain any property at any time received by the
Trustee;
(c) to register securities in its name or in the name of
any nominee with or without indication of the capacity in
which the securities shall be held, or to hold securities in
bearer form;
(d) to employ suitable agents and legal counsel, who may
be counsel for the Company, and, as a part of its
reimbursable expenses under this Trust Agreement, to pay
their reasonable compensation and expenses;
(e) to appoint one or more individuals or corporations
as a custodian of any property and, as a part of its
reimbursable expenses under this Trust Agreement, to pay the
reasonable compensation and expenses of any such custodian;
(f) generally to do all acts, exclusive of acts
involving investment management discretion, which the Trustee
may deem necessary or desirable for the protection of the
Trust Fund;
(g) to commence or defend suits, legal proceedings or
arbitration proceedings; and to represent the Trust Fund in
all suits, legal proceedings or arbitration proceedings in
any court or before any other body or tribunal (provided,
however, that the Trustee shall have no obligation to take
any legal action for the benefit of the Trust Fund unless it
is specifically requested or directed to by the Company and
unless it shall be first indemnified for all expenses in
connection therewith, including counsel fees). Upon
notification of the Trustee's intention to commence suits,
legal proceedings or arbitration proceedings or the
commencement of suits, legal proceedings or arbitration
proceedings against the Trust Fund, the Company shall be
entitled, but not obligated to participate therein and, to
the extent that it may wish, jointly with the Trustee pursue
or defend the suit or proceeding with counsel satisfactory to
the Company and the Trustee;
The Trustee shall exercise the following administrative
duties only upon the specific direction of the Company or an
Investment Manager:
(h) to vote in person or by proxy, or to refrain from
voting, in respect of any securities held by the Trust Fund,
and to give general or special proxies or powers of attorney,
with or without power of substitution, and to exercise any
conversion privileges, subscription rights or other options;
to participate in reorganizations, recapitalizations,
consolidations, mergers and similar transactions with respect
to such securities; and generally to exercise any of the
powers of an owner with respect to any property held by the
Trust Fund;
(i) with respect to any investment, to consent or object
to any action or nonaction of any corporation or other
business organization, or of the directors, officers or
stockholders of any corporation or equivalent of any other
business organization;
(j) to settle, compromise or submit to arbitration any
claims, debts or damages due or owing to or from the Trust
Fund;
(k) to deposit any property with any protective,
reorganization or similar committee; to delegate power
thereto; and to pay or agree to pay part of its expenses and
compensation and any assessments levied with respect to any
property so deposited; and
(l) to form a corporation or corporations under the laws
of any jurisdiction or to participate in the forming of any
such corporation or corporations or to acquire an interest in
or otherwise make use of any corporation or corporations
already formed, for the purpose of facilitating the Trust
Fund's investing in and holding title to any property.
4.3 Securities; Property. Wherever used in this Trust
Agreement, the term "securities" shall include bonds, notes,
obligations, warrants and stocks of any class, certificates of
participation or shares of any mutual investment company, trust or
fund, and such other evidences of indebtedness and certificates of
interest as are usually referred to by the term "securities," and
the term "property" shall include personal and mixed property,
tangible or intangible, of any kind and wherever located,
including without limitation securities, depository accounts in
any bank, trust company or similar financial institution
(including depository accounts in the banking department of the
Trustee or an affiliate of the Trustee or any custodian or an
affiliate of any custodian), however, the term "property" as used
herein, shall not include any direct or indirect interest in real
estate. For this purpose "real estate" includes, but is not
limited to, real property, mortgages, leaseholds, mineral
interests and any form of asset which is secured by any of the
above.
Section 4.4 Proxies. In order to permit the Company or an
Investment Manager, as the case may be, to make timely and
informed decisions regarding the management of those assets in the
Trust Fund subject to its respective control, the Trustee shall
forward to the Company or each such Investment Manager, as the
case may be, for appropriate action any and all proxies, proxy
statements, notices, requests, advice or other communications
received by the Trustee (or its nominee) as the record owner of
such assets.
Section 4.5 Investment Managers. Mr. Skates may from time to
time appoint one or more Investment Managers to manage any portion
of the Trust Fund and, with respect to such portion, to direct the
Trustee with respect to effecting investment transactions on
behalf of the Trust Fund and exercising such other powers as may
be granted to Investment Managers hereunder. Mr. Skates shall
give prompt written notice to the Trustee of any such
appointment, upon which the Trustee shall rely until it receives
from Mr. Skates written notice of the termination of such
appointment. In each case where such an appointment is made, Mr.
Skates shall determine the assets of the Trust Fund to be
allocated to the Investment Manager from time to time and Mr.
Skates shall issue appropriate instructions to the Trustee with
respect thereto. The Trustee shall not be liable for the acts or
omissions of such Investment Manager, shall be under no duty to
question any direction of an Investment Manager with respect to
the portion of the Trust Fund managed by such Investment Manager,
to review any securities or property held in such portion, to make
any suggestions with respect to the investment and reinvestment of
such portion, or to evaluate the performance of any Investment
Manager, and shall be fully protected in acting in accordance with
the directions of an Investment Manager or for failing to act in
the absence of such directions.
Section 4.6 Life Insurance. Mr. Skates reserves the right to
direct the Trustee to purchase any such policies or contracts on
or for the life of any Mr. Skates or his Beneficiary. Any such
policy or contract shall be an asset of the Trust Fund subject to
the claims of the Company's creditors in the event of insolvency,
as specified in Section 2.1 hereof. The proceeds of any life
insurance policy shall upon the death of the insured be credited
to the Trust Fund and shall be an additional source of benefits
payable to his Beneficiary. The Trustee shall be under no duty to
question any direction of Mr. Skates or to review the form of any
such policies or contracts or of the selection of the issuer
thereof, or to make suggestions to Mr. Skates with respect to the
form of such policies or contracts or to the issuer thereof. Mr.
Skates may direct the Trustee to exercise or may exercise directly
the powers of the contract holder under any such policies or
contracts, and the Trustee shall exercise such powers only upon
the direction of Mr. Skates. Notwithstanding anything to the
contrary contained in the Trust Agreement, the Trustee shall be
fully protected in acting in accordance with written directions of
Mr. Skates and shall be under no liability for any loss of any
kind which may result by reason of any action taken or omitted by
it in accordance with any direction of Mr. Skates or by reason of
inaction in the absence of written directions from Mr. Skates. No
insurance carrier shall for any purpose be deemed a party to this
Agreement or be responsible for the validity or sufficiency
hereof. Notwithstanding the fact that it may have knowledge of
the terms of this Trust Fund, the obligations of such insurance
carrier shall be measured and determined solely by the terms and
conditions of the policies or contracts issued by it, and there
shall be no obligations to any person, partnership, corporation,
trust or association other than as stated in such policies or
contracts.
ARTICLE V
Section 5.1 Trust Taxes. The Company shall pay any and all
Federal, state or local taxes on the Trust Fund, or any part
thereof, and on the income therefrom.
Section 5.2 Trust Expenses. The Company shall pay to the
Trustee its reasonable expenses for the management and
administration of the Trust Fund, including without limitation
advances for or prompt reimbursement of reasonable expenses of
counsel, custodians and other agents employed by the Trustee, and
reasonable compensation for its services as Trustee hereunder, the
amount of which shall be agreed upon from time to time by the
Company and the Trustee in writing. Such expenses and
compensation shall be a charge on the Trust Fund and shall
constitute a lien on the Trust Fund in favor of the Trustee unless
and until paid by the Company.
Section 5.3 Indemnification. The Company hereby agrees to
indemnify and hold harmless the Trustee from and against any
losses, costs, damages, claims or expenses, including without
limitation reasonable attorneys' fees, which the Trustee may incur
or pay out in connection with, or otherwise arising out of, the
performance by the Trustee of its duties hereunder. Any amount
payable to the Trustee under Section 5.2 or this Section 5.3 and
not previously paid by the Company pursuant to this Trust
Agreement shall be paid by the Company promptly upon demand
therefor by the Trustee or, if the not paid by the Company within
forty-five (45)days of demand therefor, from the Trust Fund. In
the event that payment is made hereunder to the Trustee from the
Trust Fund, the Trustee shall promptly notify the Company in
writing of the amount of such payment. The Company agrees that,
upon receipt of such notice, it will deliver to the Trustee to be
held in the Trust Fund an amount in cash (or marketable securities
having a fair market value equal to such amount, or some
combination thereof) equal to any payments made from the Trust
Fund to the Trustee pursuant to Section 5.2 or this Section 5.3.
The failure of the Company to transfer any such amount shall not
in any way impair the Trustee's right to indemnification,
reimbursement and payment pursuant to Section 5.2 hereof or this
Section 5.3.
ARTICLE VI
Section 6.1 Trustee Records and Accounts. The Trustee shall
keep accurate and detailed accounts of all investments, receipts,
disbursements and other transactions hereunder, and all accounts,
books and records relating thereto shall be open to inspections
and audit at all reasonable times by any persons designated by the
Company. Within ninety (90) days following the close of the
calendar year, and within ninety (90) days after the removal or
resignation of the Trustee as provided in ARTICLE VII hereof, the
Trustee shall file with the Company a written account setting
forth all investments, receipts, disbursements and other
transactions effected by the Trustee or reported to it by such
Investment Managers, if any, as may be appointed hereunder during
each calendar year or during the period from the close of the last
such calendar year to the date of such removal or resignation.
Upon the expiration of ninety (90) days from the date of filing
such annual or other account, the Trustee shall be forever
released and discharged from all liability and accountability to
anyone with respect to the propriety of all acts and transactions
shown in such account, except with respect to any such acts or
transactions as to which the Company shall within such ninety (90)
day period file with the Trustee written objections.
The Trustee shall from time to time make such other reports
and furnish such other information concerning the Trust Fund as
the Company may reasonably request or as may be required by the
Agreement.
Section 6.2 Settlement of Accounts. Notwithstanding the
foregoing Section 6.1, the Trustee shall have the right to apply
at any time to a court of competent jurisdiction for the judicial
settlement of the Trustee's account, and in any case it shall be
necessary to join as parties thereto only the Trustee and the
Company; and any judgment or decree which may be entered therein
shall be conclusive upon all persons having or claiming to have
any interest in the Trust Fund or under the Agreement.
ARTICLE VII
Section 7.1 Resignation and Removal of Trustee. The Trustee
may resign at any time by delivering written notice thereof to the
Company; provided, however, that no such resignation shall take
effect until the earlier of (i) thirty (30) days from the date of
delivery of such notice to the Company, unless such notice period
is waived in whole or in part by the Company or (ii) the
appointment of a successor trustee pursuant to Section 7.2. The
Trustee may be removed at any time by the Company, pursuant to a
resolution of the Company, by delivering to the Trustee a
certified copy of such resolution. Such removal shall take effect
upon the earlier of (i) thirty (30) days from the date of delivery
of such resolution, unless such notice period is waived in whole
or in part by the Trustee or (ii) the appointment of a successor
trustee pursuant to Section 7.2. Notwithstanding the foregoing,
after a Change in Control of the Company, any such removal of the
Trustee shall be effective only with the written consent of Mr.
Skates (or his Beneficiaries, if Mr. Skates is deceased). If,
within thirty (30) days of the delivery of written notice of
resignation or removal, a successor trustee shall not have been
appointed, the provisions of Section 7.2 shall apply.
Section 7.2 Successor Trustee. Upon the resignation or
removal of the Trustee, a successor trustee shall be appointed by
the Company; provided, however, that after a Change in Control of
the Company such appointment shall be effective only with the
written consent of Mr. Skates (or his Beneficiaries, if Mr. Skates
is deceased). If the Company (and, after a Change in Control of
the Company, Mr. Skates and his Beneficiaries, [if Mr. Skates is
deceased]) are unable to so agree upon a successor trustee within
thirty (30) days after such notice, the Trustee shall be entitled,
at the expense of the Company, to petition a United States
District Court or any of the courts of the Commonwealth of
Massachusetts having jurisdiction to appoint its successor. The
Trustee shall continue to serve, and to receive its compensation
and reimbursement of its expenses, until its successor accepts the
trust and receives delivery of the Trust Fund. Such successor
trustee shall be a commercial bank or trust company which is
established under the laws of the United States or a State within
the United States and which is not an affiliate of the Company.
Such appointment shall take effect upon the delivery to the
Trustee of (a) a written appointment of such successor trustee,
duly executed by the Company, and (b) a written acceptance by such
successor trustee, duly executed by an authorized officer. Any
successor trustee shall have all the rights, powers and duties
granted the Trustee hereunder. Upon the resignation or removal of
the Trustee and the appointment of a successor trustee, and after
the acceptance and approval of its account, the Trustee shall
transfer and deliver the Trust Fund to such successor. Under no
circumstances shall the Trustee transfer or deliver the Trust Fund
to any successor which is not a bank or trust company as
hereinabove defined.
ARTICLE VIII
Section 8.1 Termination of Trust. The Trust established
pursuant to this Trust Agreement shall terminate upon the earlier
of (i) the exhaustion of the Trust Fund, or (ii) the satisfaction
of all Company liabilities under the Agreement with respect to Mr.
Skates (and his Beneficiaries); provided however, that the Trust
shall terminate in any event upon the expiration of twenty-one
(21) years after the death of the last survivor of the group of
persons consisting of Mr. Skates and his Beneficiaries, living on
the date of the execution of this Trust Agreement.
Section 8.2 Liquidation of Trust. Upon the termination of
the Trust in accordance with Section 8.1, the Trustee shall, after
the acceptance and approval of its account, distribute the
remaining Trust Fund assets, if any, to the Company. Upon
completing such distribution, the Trustee shall be relieved and
discharged of all liabilities and obligations hereunder. The
powers of the Trustee shall continue as long as any part of the
Trust Fund remains in its possession.
ARTICLE IX
Section 9.1 Amendment of Trust. This Trust Agreement may be
amended, in whole or in part, at any time and from time to time,
by the Company, pursuant to a resolution of the Board of Directors
of the Company, by delivery to the Trustee of a certified copy of
such resolution and a written instrument duly executed and
acknowledged in the same form as this Trust Agreement; provided,
however, that the duties and responsibilities of the Trustee shall
not be increased without the Trustee's written consent; and
provided further that, after a Change in Control of the Company
any such amendment affecting Mr. Skates or his Beneficiaries'
rights hereunder, the Trust Fund or the procedures for
distribution thereof shall not become effective until sixty (60)
days after a copy of such amendment has been delivered by
registered mail by the Company or the Trustee to Mr. Skates and
his Beneficiary entitled to benefits under the Agreement. In the
event the Company or the Trustee receives written objections to
such amendment from such person within such sixty (60) day period,
such amendment shall be ineffective and void.
ARTICLE X
Section 10.1 Governing Law. This Trust Agreement shall be
construed and interpreted under, and the Trust hereby created
shall be governed by, the laws of the Commonwealth of
Massachusetts.
Section 10.2 Gender. Neither the gender nor the number
(singular or plural) of any word shall be construed to exclude
another gender or number when a different gender or number would
be appropriate.
Section 10.3. Non-Alienation. No right or interest of any
Mr. Skates or his Beneficiary under the Agreement or in the Trust
Fund shall be transferable or assignable or subject to alienation,
anticipation or encumbrance, and no right or interest of Mr.
Skates or his Beneficiary under the Agreement or in the Trust Fund
shall be subject to any garnishment, attachment or execution.
Notwithstanding the foregoing, the Trust Fund shall at all times
remain subject to the claims of creditors of the Company in the
event the Company becomes insolvent as provided in Section 2.1.
Section 10.4 Successors and Assigns. This Trust Agreement
shall be binding upon and inure to the benefit of any successor to
the Company as the result of merger, consolidation,
reorganization, or otherwise. In the event of any such merger,
consolidation, reorganization, or other similar transaction, the
successor to the Company shall promptly notify the Trustee in
writing of its successorship and furnish the Trustee with the
information specified in Section 3.1 of this Trust Agreement.
Section 10.5 Counterparts. This Trust Agreement may be
executed in any number of counterparts, each of which shall be
deemed to be an original, but all of which shall together
constitute only one agreement.
Section 10.6 Addresses of Parties. Communications to the
Trustee shall be sent to
Boston Safe Deposit and Trust Company
One Cabot Road 028-002B
Medford, MA 02155-5159
Attn: Georgia P. Sakorafos
or to such other address as the Trustee may specify in writing.
Communications to the Company shall be sent to the Company's
principal office or to such other address as the Company may
specify in writing.
Section 10.7 Arbitration. Any dispute between Mr. Skates (or
his Beneficiary if Mr. Skates is deceased) and the Trustee as to
the interpretation or application of the provisions of this Trust
and amounts payable hereunder shall be determined exclusively by
binding arbitration in the Commonwealth of Massachusetts in
accordance with the rules of the American Arbitration Association
then in effect. Judqement may be entered on the arbitrator's
award in any court of competent jurisdiction. All fees and
expenses of such arbitration shall be paid by the Trustee and
considered an expense of the Trust under Section 5.2 hereof.
Section 10.8 Severability. In the event that any provision
of this Trust or the application thereof to any person or
circumstances shall be determined by a court of proper
jurisdiction to be invalid or unenforceable to any extent, the
remainder of this Trust, or the application of such provision to
persons or circumstances other than those as to which it is held
invalid or unenforceable, shall not be affected thereby, and each
provision of this Trust shall be valid and enforced to the fullest
extent permitted by law.
10.9 Trust Beneficiaries. Mr. Skates (and his Beneficiary if
he is deceased) is an intended beneficiary under this Trust, and
shall be entitled to enforce all terms and provisions hereof with
the same force and effect as if such person had been a party
hereto.
IN WITNESS WHEREOF, the parties hereto have caused this
Trust Agreement to be duly executed and their respective corporate
seals to be hereto affixed this 16th day of December, 1994.
Attest: BOSTON SAFE DEPOSIT AND TRUST
COMPANY
By ____________________________
Title:______________________________
Attest: DATA GENERAL CORPORATION
By _________________________________
Title:______________________________
Exhibit 10(z)
AMENDMENT TO AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
This FIRST AMENDMENT, dated as of April 18, 1994 (this
"Amendment"), among the parties hereto amends the AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT, dated December 30, 1993 (the "Credit
Agreement"), and among DATA GENERAL CORPORATION, a Delaware corporation
(the "Borrower"), NATIONAL WESTMINSTER BANK PLC ("NWB"), THE BANK OF
NOVA SCOTIA ("BNS"), FLEET BANK OF MASSACHUSETTS, NATIONAL ASSOCIATION
("Fleet"), NATIONSBANK OF NORTH CAROLINA, N.A. ("NationsBank"), and
CANADIAN IMPERIAL BANK OF COMMERCE (NEW YORK) ("CIBC" and, together with
NWB, BNS, FLEET and NATIONSBANK, the "Lenders") and NWB, as Agent (the
"Agent").
WHEREAS, pursuant to the Credit Agreement, each of NWB, BNS,
Fleet, NationsBank and CIBC has agreed to make Loans to the Borrower in
an aggregate amount not to exceed the amount set forth opposite such
Lender's name on the signature pages hereof, as such amount may be
reduced pursuant to Section 2.04 of the Credit Agreement; and
WHEREAS, the Borrower, the Lenders and the Agent desire to
amend the Credit Agreement as set forth herein.
NOW, THEREFORE, it is agreed:
1. As used herein all terms which are defined in the Credit
Agreement shall have the same meanings herein.
2. Section 5.02(i) of the Credit Agreement is hereby
amended in its entirety to provide as follows:
(i) Consolidated Tangible Net Worth, Fail to maintain a
Consolidated Tangible Net Worth, determined in accordance with
U.S. GAAP of at lease (w) $351,500,000 at any time during the
quarterly period ending March 26, 1994, (x) $340,000,000 at any
time during the quarterly period ending June 25, 1994, (y)
$345,000,000 at any time during the quarterly period ending
September 24, 1994 and $400,000,000 at any time thereafter,
provided that, in the event that the Borrower incurs losses from
restructuring expenses (determined in accordance with GAAP),
during the quarterly period ending March 26, 1994 (the
"Charges") in an amount not in excess of $35,000,000, the
aforementioned amounts for each period set forth above shall be
increased by an amount equal to the amount by which $35,000,000
exceeds the amount of Charges.
3. Section 5.02(j) is hereby amended, on the third line
thereof, by the insertion of the following phrase:
, provided that, for the quarterly periods ending March 26,
1994 and June 25, 1994 only, the aforementioned ratio of "1.25
to 1" will be replaced with the ratio of "1.30 to 1."
4. Section 5.02(k) of the Credit Agreement is hereby
amended, on the seventh line thereof, by the substitution of the date
"September 24, 1993" for the date of "September 30, 1990" and
immediately after such date by the insertion of the following phrase:
, provided that, during the quarterly period beginning on
June 26, 1994 and ending on September 24, 1994 only, the
aforementioned ration of "5 to 1" will be replaced with the
ratio of "4 to 1."
5. All representations and warranties contained in Article
IV of the Credit Agreement are true and correct as of the date hereof.
6. This Amendment shall not become effective until the date
on which (i) this Amendment shall have been executed by the Borrower,
Lenders constitution the Majority Lenders and the Agent and the Agent
shall have received evidence satisfactory to it such execution, (ii) the
Borrower shall have paid to the Agent for the account of the Lenders an
amendment fee in the amount of $87,500, (iii) the Effective Date shall
have occurred and (iv) the Borrower provides evidence, satisfactory to
the Agent, that the Charges were not in excess of $35,000,000.
7. The Borrower agrees to pay on demand all out-of-pocket
costs and expenses of the Agent in connection with the negotiation,
preparation, execution and delivery of this Amendment, including
(without limitation) the reasonable fees and out-of-pocket expenses of
counsel for the Agent in connection therewith.
8. This Amendment shall be limited precisely as written and
shall not be deemed (a) to be a consent granted pursuant to, or a waiver
or modification of, any other term or condition of either of the
Agreements or any of the instruments or agreements referred to thereof
or (b) to prejudice any right or rights which the Agent or the Lenders
may now have or have in the future under or in connection with either
Agreements or any of the instruments, agreements or other documents or
papers contemplated in connection therewith, and any reference therein
to the Credit Agreement shall be deemed to mean the Credit Agreement as
modified by this Amendment.
9. This Amendment may be executed in any number of
counterparts and by the different parties hereto in separate
counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall
constitute but one and the same instrument.
10. This Amendment shall be governed by, and construed in
accordance with, the laws of the State of New York.
IN WITNESS HEREOF, the parties hereto have caused this
Amendment to be duly executed as of the day and the year first above
written.
DATA GENERAL CORPORATION
By: _____________________________
Treasurer
4400 Computer Drive
Westborough, MA 01580
Attn.: Treasurer
(Telecopy: 508-366-8016)
Commitment
$8,571,428.50 NATIONAL WESTMINSTER BANK PLC,
as Lender and as Agent
By: _____________________________
Vice President
Prime Rate Advance Lending Office
National Westminister Bank PLC
New York Branch
175 Water Street
New York, New York 10038
Attn.: Manager's Department Level 21
Telephone: (212) 602-4193
Telecopy: (212) 602-4118
With a copy to:
National Westminster Bank PLC\
New York Branch
175 Water Street
New York, New York 10038
Attn.: New York Marketing Occive
- Level 29
Telephone: (212) 602-4395
Telecopy: (212) 602-4256
NATIONAL WESTMINSTER BANK PLC,
through its LIBOR Rate Advance
Lending Office
By: _____________________________
Vice President
National Westminister Bank PLC
Nassau Branch
175 Water Street
New York, New York 10038
Attn.: Manager's Department Level 21
Telephone: (212) 602-4193
Telecopy: (212) 602-4118
$8,571,428,50 THE BANK OF NOVA SCOTIA
101 Federal Street
Boston, Massachusetts 02208
Telephone: (617) 737-6310
Telecopy: (617) 951-2177
By:______________________________
Vice President
$8,571,428.50 FLEET BANK OF MASSACHUSETTS,
NATIONAL ASSOCIATION
28 State Street
Boston, Massachusetts 02109
Telephone: (617) 573-6524
Telecopy: (617) 573-5045
By:_____________________________
Vice President
$5,714,286.00 NATIONS BANK OF NORTH CAROLINA, N.A.
767 Fifth Avenue
New York, New York 10153
Telephone: (212) 644-4449
Telecopy: (212) 593-1083
By:_____________________________
Vice President
$8,571,428.50 CANADIAN IMPERIAL BANK OF COMMERCE
(New York)
425 Lexington Avenue
New York, New York 10017
Telephone: (212) 856-3825
Telecopy: (212) 845-3600
By:_____________________________
Vice President
AMENDMENT TO LETTER OF CREDIT AGREEMENT
This FIRST AMENDMENT, dated as of April 18, 1994 (this
"Amendment"), among the parties hereto amends the LETTER OF CREDIT
AGREEMENT, dated as of December 30, 1993 (the "L/C Agreement"), and
among DATA GENERAL CORPORATION, a Delaware corporation (the "Borrower"),
NATIONAL WESTMINSTER BANK PLC ("NWB"), THE BANK OF NOVA SCOTIA ("BNS"),
FLEET BANK OF MASSACHUSETTS, NATIONAL ASSOCIATION ("Fleet"), NATIONSBANK
OF NORTH CAROLINA, N.A. ("NationsBank"), and CANADIAN IMPERIAL BANK OF
COMMERCE (NEW YORK) ("CIBC" and, together with NWB, BNS, FLEET and
NATIONSBANK, the "Lenders") and NWB, as Agent (the "Agent").
WHEREAS, the Borrower, the Lenders and the Agent desire to
amend the Letter of Credit Agreement as set forth herein.
NOW, THEREFORE, it is agreed:
1. As used herein all terms which are defined in the Letter
of Credit Agreement shall have the same meanings herein.
2. Section 5.02(i) of each of the L/C Agreement is hereby
amended in its entirety to provide as follows:
(i) Consolidated Tangible Net Worth, Fail to maintain a
Consolidated Tangible Net Worth, determind in accordance with
U.S. GAAP of at lease (w) $351,500,000 at any time during the
quarterly period ending March 26, 1994, (x) $340,000,000 at any
time during the quarterly period ending June 25, 1994, (y)
$345,000,000 at any time during the quarterly period ending
September 24, 1994 and $400,000,000 at any time thereafter,
provided that, in the event that the Borrower incurs losses from
restructuring expenses (determined in accourdance with GAAP),
during the quarterly period ending March 26, 1994 (the
"Charges") in an amount not in excess of $35,000,000, the
aforementioned amounts for each period set forth above shall be
increased by an amount equal to the amount by which $35,000,000
exceeds the amount of Charges.
3. Section 5.02(j) of the L/C Agreement is hereby amended,
on the third line thereof, by the insertion of the following phrase:
, provided that, for the quarterly periods ending March 26,
1994 and June 25, 1994 only, the aforementioned ratio of "1.25
to 1" will be replaced with the ratio of "1.30 to 1."
4. Section 5.02(k) of the L/C Agreement is hereby amended,
on the seventh line thereof, by the substitution of the date "September
24, 1993" for the date of "September 30, 1990" and immediately after
such date by the insertion of the following phrase:
, provided that, during the quarterly period beginning on June
26, 1994 and ending on September 24, 1994 only, the
aforementioned ration of "5 to 1" will be replaced with the
ratio of "4 to 1."
5. All representations and warranties contained in Article
IV of the Letter of Credit Agreement are ture and correct as of the date
hereof.
6. This Amendment shall not become effective until the date
on which (i) this Amendment shall have been executed by the Borrower,
Lenders constitution the Majority Lenders and the Agent and the Agent
shall have received evidence satisfactory to it such execution, (ii) the
Borrower shall have paid to the Agent for the account of the Lenders an
amendment fee in the amount of $87,500, (iii) the Effective Date shall
have occurred and (iv) the Borrower provides evidence, satisfactory to
the Agent, that the Charges were not in excess of $35,000,000.
7. The Borrower agrees to pay on demand all out-of-pocket
costs and expenses of the Agent in connection with the negotiation,
preparation, execution and delivery of this Amendment, including
(without limitation) the reasonable fees and out-of-pocket expenses of
counsel for the Agent in connection therewith.
8. This Amendment shall be limited precisely as written and
shall not be deemed (a) to be a consent granted pursuant to, or a waiver
or modification of, any other term or condition of the
Agreement or any of the instruments or agreements referred to thereof
or (b) to prejudice any right or rights which the Agent or the Lenders
may now have or have in the future under or in connection with either
Agreements or any of the instruments, agreements or other documents or
papers contemplated in connection therewith, and any reference therein
to the Letter of Credit Agreement shall be deemed to mean the Letter of
Credit Agreement as modified by this Amendment.
9. This Amendment may be executed in any number of
counterparts and by the different parties hereto in separate
counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall
constitute but one and the same instrument.
10. This Amendment shall be governed by, and construed in
accordance with, the laws of the State of New York.
IN WITNESS HEREOF, the parties hereto have caused this
Amendment to be duly executed as of the day and the year first above
written.
DATA GENERAL CORPORATION
By: _____________________________
Treasurer
4400 Computer Drive
Westboro, MA 01580
Attn.: Treasurer
(Telecopier: 508-366-8016)
NATIONAL WESTMINSTER BANK PLC,
as Lender and as Agent
By: _____________________________
Vice President
Prime Rate Advance Lending Office
National Westminister Bank PLC
New York Branch
175 Water Street
New York, New York 10038
Attn.: Manager's Department Level 21
Telephone: (212) 602-4193
Telecopy: (212) 602-4118
With a copy to:
NATIONAL WESTMINSTER BANK PLC,
New York Branch
175 Water Street
New York, New York 10038
Attn.: New York Marketing Occive
- Level 29
Telephone: (212) 602-4395
Telecopy: (212) 602-4256
NATIONAL WESTMINSTER BANK PLC,
through its LIBOR Rate Advance
Lending Office
By: _____________________________
Vice President
National Westminister Bank PLC
Nassau Branch
175 Water Street
New York, New York 10038
Attn.: Manager's Department Level 21
Telephone: (212) 602-4193
Telecopy: (212) 602-4118
THE BANK OF NOVA SCOTIA
101 Federal Street
Boston, Massachusetts 02208
Telephone: (617) 737-6310
Telecopy: (617) 951-2177
By:______________________________
Vice President
FLEET BANK OF MASSACHUSETTS,
NATIONAL ASSOCIATION
28 State Street
Boston, Massachusetts 02109
Telephone: (617) 573-6524
Telecopy: (617) 573-5045
By:_____________________________
Vice President
NATIONS BANK OF NORTH CAROLINA, N.A.
767 Fifth Avenue
New York, New York 10153
Telephone: (212) 644-4449
Telecopy: (212) 593-1083
By:_____________________________
Vice President
CANADIAN IMPERIAL BANK OF COMMERCE
(New York)
425 Lexington Avenue
New York, New York 10017
Telephone: (212) 856-3825
Telecopy: (212) 845-3600
By:_____________________________
Vice President
Exhibit 10(bb)
Plan 8, Grant 1
99932
DATA GENERAL CORPORATION
1994 NON-EMPLOYEE DIRECTOR
STOCK OPTION AGREEMENT
* * *
OPTION AGREEMENT made this day of
between DATA GENERAL CORPORATION, a Delaware corporation
(hereinafter called the "Company"), and , a
Director of the Company (hereinafter called the "Participant");
WITNESSETH
WHEREAS, the Company desires, by affording the
Participant an opportunity to purchase shares of its common stock,
as hereinafter provided, to carry out the purpose of the
"Non-employee Director Stock Option Plan" (hereinafter referred to
as the "Plan"), approved by its stockholders and directors:
NOW, THEREFORE, in consideration of the premises and of
the mutual promises hereinafter contained, the parties hereto have
agreed as follows:
1. Grant of Option. The Company hereby grants to the
Participant an option (hereinafter called the "Option") to
purchase all or part of an aggregate of Four Thousand * *
shares of stock (hereinafter referred to as the "Stock") (such
number being subject to adjustment as provided in Paragraph 11
hereof) on the terms and conditions hereinafter set forth.
2. Incorporation of Plan. Except as hereinafter
provided, this Agreement shall be governed by and be subject to
all the terms and conditions set forth in the Plan as in effect on
the date hereof. A copy of the Plan has been delivered to the
Participant and is hereby incorporated by reference. In the event
of any discrepancy or inconsistency between the terms and
conditions of this Agreement and the Plan, the terms and
conditions of the Plan shall control.
3. Purchase Price. The purchase price of the shares of
Stock covered by the Option shall be $ per share. Payment
shall be made in cash, by certified check, cashier's check or in
shares of Common Stock in the manner prescribed in Paragraph 9
hereof.
4. Term of Option. The term of the Option shall be for
a period commencing on the date hereof and ending ten years
thereafter. The right of Participant to purchase Stock through
the exercise of this Option, wholly or in part, shall be available
to the Participant at any time during the term of this Option
subject to restrictions on disposition as provided in Paragraph 6
hereof and to the obligation of resale of said Stock as provided
in Paragraph 7 hereof.
5. Nontransferability. The Option shall not be
transferable otherwise than by will or the laws of descent and
distribution, and the Option may be exercised, during the lifetime
of the Participant only by him, more particularly (but without
limiting the generality of the foregoing), the Option may not be
assigned, transferred (except as provided above), pledged,
hypothecated in any way, shall not be assignable by operation of
law, and shall not be subject to execution, attachment or similar
process. Any attempted assignment, transfer, pledge,
hypothecation or other disposition of the Option contrary to the
provision hereof, and the levy of any execution, attachment, or
similar process upon the Option, shall be null and void and
without effect; provided however, that if Participant shall die
while serving as a Director of the Company, his executor, personal
representative, or beneficiary shall have the right to exercise
the Option (to the extent that the Participant would have been
entitled to do so at the date of his death) at any time within
twelve (12) months from the date of death in respect of the total
number of shares as to which he would be entitled to exercise his
Option at the date of his death.
6. Restrictions on Disposition. Stock acquired by
Participant pursuant to the exercise of an Option is subject to
certain restrictions on dispositions and obligations of resale to
the Company as provided in Section 7 of the Plan and such Stock
shall not be sold, transferred, or otherwise disposed of and shall
not be pledged or otherwise hypothecated until such restrictions
lapse. Participant understands and agrees that, if the Stock is
subject to restrictions which have not yet lapsed, certificates
representing such Stock will contain a legend to the effect that
the Stock is subject to certain restrictions on disposition and
obligations of resale as contained in Section 7 of the Plan. Such
restrictions against the disposition of the Stock shall lapse in
accordance with the provisions of Exhibit A attached hereto.
Upon the occurrence of the earlier of the death of
Participant or the Participant's cessation of service as a
Director with the consent of the Company, the restrictions against
disposition which have not otherwise lapsed under the Plan shall
immediately lapse.
7. Obligation of Resale. In the event of Participant's
cessation of service as a Director for any reason except death or
with the consent of the Company, then the Stock for which
Participant has paid the purchase price but on which restrictions
against disposition have not lapsed shall be offered for resale to
the Company at the price paid by Participant. This offer of
resale must be in writing and must be delivered to the Company
within thirty (30) days following termination and certificates for
such Stock shall be delivered to the Company within such
thirty-day period. If such Stock is not delivered to the Company
within thirty (30) days following termination of Participant's
employment, such Stock shall remain subject to the restrictions
against disposition and such restrictions shall not lapse as
otherwise provided herein and in the Plan. Within sixty (60) days
following a timely delivery of the Stock, the Company will
compensate Participant (at the original purchase price) for such
number of shares of the Stock as the Company elects to repurchase
and will return to the Participant any such shares not so
purchased. In the event that the Company declines in writing to
repurchase such Stock, such Stock shall remain the property of
Participant and the restrictions against disposition shall lapse
at the rate stated in this Agreement.
8. Service as a Director. Subject to the provisions of
Paragraph 5 hereof, this Option shall be exercisable only by
Participant while he is serving as a Director of the Company or
upon his cessation of service as a Director with the consent of
the Company. If Participant shall cease to serve as a Director
with the consent of the Company before his Option shall have
terminated, he must exercise the Option within ninety (90) days
after the date on which he ceases to serve as a Director the
Company.
Participant acknowledges and agrees that the Company is
not obligated by this Agreement or the Plan to continue the
Participant as a Director of the Company, and this Agreement does
not in any manner create any rights, benefits, or obligations not
specifically set forth herein.
9. Method of Exercising Option. Subject to the terms
and conditions of this Option Agreement, the Option may be
exercised by written notice to the Company at its office at 4400
Computer Drive, Westboro, MA 0l580, Attn: Treasurer. Such notice
shall state the election to exercise the Option, and the number of
shares of Stock in respect of which it is being exercised. It
shall be signed by the person or persons so exercising the Option
and shall be accompanied by payment of the full purchase price of
such Stock in cash, by certified check, cashier's check or in
shares of Common Stock. If shares of Common Stock are tendered as
payment of the Option exercise price, the value of
such shares shall be their fair market value as the date
of exercise. If such tender would result in the
issuance of fractional shares of Common Stock, the Participant
shall purchase at the price which reflects the fair market value
of the Stock as of the date of exercise, in cash, by certified
check or cashier's check such additional fractional shares of
Common Stock as are necessary to result in the issuance to the
Participant of an additional whole share of Common Stock. The
Company shall issue, in the name of the person or persons
exercising the Option, and deliver a certificate or certificates
representing such shares as soon as practicable after the notice
and payment shall be received.
In the event the Option shall be exercised, pursuant to
Paragraph 5 hereof, by any person or persons other than the
Participant, such notice shall be accompanied by appropriate proof
of the right of such person or persons to exercise the Option.
Until Participant (or his representative as provided in
Paragraph 5 hereof) has been issued a certificate or certificates
for the shares as acquired, Participant shall possess no
stockholder rights with respect to any such Stock.
10. Tax Information. Information with respect to the
ordinary income recognized by Participant in any year on account
of the exercise of the Option, whether such income arises from the
receipt of Stock not subject to restrictions or from the lapse of
restrictions, shall be reported by the Company to the Internal
Revenue Service to the extent required by law.
A copy of any election statement filed by Participant
with the Internal Revenue Service in order to elect, in accordance
with Section 83(b) of the Internal Revenue Code of 1954, as
amended, to recognize ordinary income in the year of exercise with
respect to the Stock being purchased upon exercise of the Option,
shall be provided by the Participant to the Company.
11. Changes in Capital Structure. If all or any
portion of the Option shall be exercised subsequent to any stock
dividend, split-up, recapitalization, merger, consolidation,
combination or exchange of shares, or otherwise, occurring after
the date hereof, the aggregate number of shares of the Stock
subject to this Agreement and the Option price may be
proportionately adjusted, and any other appropriate changes may be
made by the Board of Directors, whose determination shall be
conclusive. No fractional share shall be issued upon any such
exercise, and the aggregate price shall be appropriately
reduced on account of any fractional share not issued. In no
event, however, shall adjustment be made in the rate at which
restrictions against disposition lapse and Participant's
obligation of resale, as fixed by Paragraph 6 and 7 hereof.
12. Termination of Option. In the event of the
institution of any legal proceedings directed to the validity of
the Plan pursuant to which the Option is granted, or to any option
granted under it, the Company may, in its discretion, and without
incurring any liability therefor to any Participant, terminate the
Option.
13. Enforceability. This Agreement shall be binding
upon the Participant, his estate, his personal representatives and
beneficiaries.
14. Notices. Each notice relating to this Agreement
shall be in writing and delivered in person or by first class
mail, postage prepaid, to the adress as hereinafter provided.
Each notice shall be deemed to have been given on the date it is
received. Each notice to the Company shall be addressed to it at
its offices at 4400 Computer Drive, Westboro, MA 01580 (Attention:
Treasurer). Each notice to the Participant or other person or
persons then entitled to exercise the Option shall be addressed to
the Participant or such other person or persons at the
Participant's last known address.
15. Successors, Etc. For purposes of this Agreement,
the "Company" shall also mean any successor to Data General
Corporation, whether by merger, acquisition or otherwise.
IN WITNESS WHEREOF, the Company has caused this Option
Agreement to be executed by its duly authorized officer, and the
Participant has hereunto set his hand and seal, all on the day and
year first above written.
DATA GENERAL CORPORATION
By:_________________________
Authorized Officer
I have read and understood this Agreement and agree to
be bound by its terms.
____________________________
* *
EXHIBIT A TO
DATA GENERAL CORPORATION
1994 NON-EMPLOYEE DIRECTOR
STOCK OPTION AGREEMENT
Dated:
During the term of this Option, the restrictions against
disposition of the Stock and the obligaton of resale to the Company
shall lapse so the shares become freely tradeable ("Free Shares")
in accordance with the following schedule:
# of Years
From Date of Percentage Free of Restrictions
Option Agreement Per Time Period Cumulative
1 year or on 25% = shs. 25% = shs.
2 years or on 25% = shs. 50% = shs.
3 years or on 25% = shs. 75% = shs.
4 years or on 25% = shs. 100% = shs.
EXHIBIT 11
DATA GENERAL CORPORATION
COMPUTATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE
(In thousands except per share amounts)
Fiscal Year Ended
Sept. 24, Sept. 25, Sept. 26, Sept. 28, Sept. 29,
1994 1993 1992 1991 1990
Primary earnings
per share:
Net income (loss) $ (87,693) $ (60,479) $ (62,512) $ 85,641 $(139,775)
Weighted average
shares outstanding 35,774 34,453 32,788 31,160 30,047
Incremental shares
from use of
treasury stock
method for stock
options. . . . . . -- 423 -- 1,508 --
Common and common
equivalent shares,
where applicable. . 35,774 34,876 32,788 32,688 30,047
Net income (loss)
per share . . . . . $(2.45) $(1.73) $(1.91) $2.62 $(4.65)
Earnings per
share assuming
full dilution:
Net income (loss) $ (87,693) $ (60,479) $ (62,512) $ 85,641 $(139,775)
Interest on
convertible
debentures,
net of income
taxes . . . . . . . --(a) --(a) --(a) 2,634 --
Net income (loss)
for purposes of
calculating
earnings per share
assuming full
dilution. . . . . $ (87,693) $ (60,479) $ (62,512) $ 88,275 $(139,775)
Weighted average
shares outstanding 35,774 34,453 32,788 31,247 30,047
Incremental shares
from use of treasury
stock method for
stock options. . -- 423 -- 3,022 --
Incremental shares
from assumed
conversion of
convertable debentures -- -- -- 1,807 --
Common shares, assuming
issuance of all dilutive
contingent shares,
where applicable 35,774(a) 34,876(a) 32,788(a) 36,076 30,047
Net income (loss)
per share . . . . $(2.45) $(1.73) $(1.91) $2.45 $(4.65)
(a) For the years ended September 24, 1994, September 25, 1993 and September
26, 1992, the assumed conversion of convertible debentures, giving effect to
the incremental shares and the adjustment to reduce interest expense, results
in anti-dilution and has therefore been excluded from the computation.
to our stockholders, customers, and employees:
In fiscal 1994, Data General completed the fifth year of a business transition
which has changed the course of our company. When the transition began, more
than 90 percent of our product revenues were derived from our ECLIPSE(R) MV
family of proprietary minicomputers. Today, we are an open systems company
with nearly 90 percent of fiscal 1994 fourth quarter product revenues coming
from commercial UNIX systems based on our AViiON servers, CLARiiON storage
products, DG/UX software, and associated systems and workstations. A customer
base of more than 26,000 AViiON installations, with a total value of more than
$1.5 billion, has been established since 1989.
The journey has been challenging. Our company has made as significant a
transition as any in the industry. In the proprietary minicomputer business,
Data General designed and manufactured in house virtually all products. The
open systems business of today operates with a new set of dynamics: buy rather
than make, and form alliances that complement our capabilities. These dynamics
apply to all aspects of our business from product development to the delivery
of solutions and services to customers.
To compete in open systems, where gross margins are substantially lower than
proprietary systems, Data General has restructured its operations. We have
incurred $388 million in restructuring costs over the past 10 years. We are
now positioned for a return to profitability as open systems product revenues
continue to grow.
FISCAL 1994 RESULTS
Fiscal 1994 marked our first year-over-year revenue increase since 1991.
Revenues were $1.12 billion, compared with $1.08 billion for the previous year,
an increase of four percent. Revenues increased sequentially in each of the
last three quarters of fiscal 1994, and were higher than in the comparable
periods of fiscal 1993. The major reason for this growth is our AViiON product
family, where revenues increased nearly 20 percent over last year, coupled
with the increasing acceptance of our Open CLARiiON storage systems.
For fiscal 1994, Data General reported a net loss of $87.7 million, or $2.45
per share, including a restructuring charge of $35 million recorded in the
second quarter, primarily for costs associated with a workforce reduction. In
fiscal 1993, we reported a net loss of $60.5 million, or $1.73 per share,
including a restructuring charge of $25 million.
The key to reaching our goal of returning to profitability is straightforward:
we must continue to grow revenues while keeping our costs in line.
FINANCIAL STRENGTH
Our balance sheet remains strong. Cash as a percentage of revenues continues
to be among the highest in our industry. Our inventory turn rate is among the
best in the industry.
We were able to maintain our strong cash position in the face of operating
losses during fiscal 1994. Our cash position was helped by $17 million in
proceeds from a sale and leaseback transaction for our Westboro facilities,
and improved receivable collections.
In addition, as announced in October 1994, we further strengthened our cash
position after fiscal 1994 ended as the result of a $53 million settlement of
a six-year-old copyright and trade secret infringement lawsuit with Northrop
Grumman Corporation. The settlement will result in a pre-tax gain, net of
related legal fees and other expenses, of $44.5 million which will be included
in the financial results for the first quarter of our 1995 fiscal year.
STRATEGIC FOCUS
Data General has focused its products and services on large commercial
enterprises that need high-availability systems, such as our high-end AViiON
servers and CLARiiON storage products, to support large numbers of users,
handle large volumes of transactions, and support large databases.
As a result, revenues from high-end AViiON servers grew 59 percent in fiscal
1994. We introduced new high-end models late in fiscal 1994 and added features
that are required by enterprise customers. These features include AV
Clusters(TM) that allow 24-hour, 365-day applications availability and
continuous data center operation with graphical Windows-based products for
storage, systems, and network management.
AViiON servers, which currently include models with up to 16 processors, have
consistently ranked among the leaders in database performance, scalability,
and price/performance. These attributes, together with reliability and high
availability, are key selling points of AViiON systems. They have helped Data
General rank among the leading suppliers of medium-scale UNIX based systems in
both 1992 and 1993, according to reports from International Data Corporation.
We continue to forge strategic alliances with leading software firms. We are
focusing on partners that deliver integrated business applications, databases,
development tools, and management software needed for enterprise-wide
solutions. We provide additional applications through industry-specific
software vendors and computer resellers.
In 1994, we turned working relationships into closer strategic partnerships
with such companies as Oracle, Sybase, Informix, and Computer Associates -
companies that focus on enterprise needs. We formed new alliances with other
leading vendors such as SAP AG. We also expanded our worldwide position in
several key markets by signing strategic distribution agreements with a number
of companies including Avnet Inc., the largest computer reseller in the United
States.
In addition to CLARiiON storage products that are sold with Data General
AViiON and ECLIPSE computers, Open CLARiiON products are available for use
with systems from IBM, Digital Equipment Corporation, and Sun Microsystems, as
well as with systems running on Novell NetWare, NT, OS/2, and SCO UNIX. Open
CLARiiON products are sold through OEM agreements with Storage Technology
Corporation, Amdahl, Memorex Telex, Convex Computer, Bull SA, and other
systems vendors. They are also sold through distribution agreements with
Access Graphics, Gates/FA, and Dickens Data in the U.S., Daou in Korea, Omron
in Japan, and a number of European firms. Collectively, these agreements
provide an opportunity for strong Open CLARiiON sales growth in 1995 and
future years.
In fiscal 1994, we consolidated our customer services and systems integration
operations into a single Worldwide Services organization. The consolidation
will lower our infrastructure costs while providing more efficient services to
our customers. Services represent approximately $400 million in revenues for
Data General. They also represent growth opportunities, particularly in systems
integration where we can provide customers with added value through networking,
software customization, training, and other professional services.
Our products, technology direction, strategic partnerships, solutions, and
services come together in a common sense approach to our business. "Bringing
Common Sense to Computing" is a theme you will see highlighted in this annual
report and in our worldwide advertising during fiscal 1995.
OUTLOOK
We enter fiscal 1995 as a financially strong company with a solid balance
sheet, an experienced and cost-conscious management team, and talented
employees. We have an excellent product family and we are developing new
products that respond to customer needs and provide new opportunities for Data
General. Our alliances with leading software companies continue to increase
the number of business applications available on the AViiON platform. All of
this translates into value for our customers and business for Data General.
We are confident that continued growth in revenues, combined with aggressive
management of our cost structure, will lead to a return to profitability.
Respectfully submitted,
Ronald L. Skates
President and Chief Executive Officer
December 14, 1994
BRINGING COMMON SENSE TO COMPUTING
Corporate computing has become complex and confusing. Choosing from the
plethora of computing alternatives is becoming more difficult for information
technology executives. Many new "solutions" often fail to improve business
operations or justify their cost. Today, information technology executives are
demanding straightforward, common sense solutions to computing issues.
In the new world of open systems, the rules of computing have changed
dramatically. Historically the computer industry has delivered a continuous
stream of new technologies, new cost parameters, new performance metrics, and
new solutions options, but never at today's pace or with such a pervasive
impact on business.
Data General Corporation has taken a common sense approach to resolve these
issues for customers. We have structured our business based on our experience
in high-end commercial computing.
We do not waste time and money duplicating existing commodity technology.
Rather, we create advanced computer servers and storage systems that
incorporate the best commodity technologies available. We use these
technologies in our systems, and add value in the systems software to ensure
industry-leading price/performance, systems management, and high availability.
We work with leading software partners to provide the applications, databases,
and software tools customers want.
And we offer complete services to design, implement, and support computing
solutions. The result is a reasonably priced computing solution that is
capable, flexible, scalable, and highly available.
OUR FOCUS
enterprise-wide, business-critical applications supporting:
* large numbers of users
* large transaction rates
* large databases
OUR APPROACH
* large-scale computing systems based on commodity economics
* open solutions from leading suppliers
* services to match technology to the customers' business needs
DESIGNING ADVANCED SYSTEMS USING THE BEST COMMODITY TECHNOLOGIES AVAILABLE
One important lesson we have learned since our founding in 1968 is that
commodity economics overwhelm proprietary economics. We found that the best
way to build leading-edge systems is to take inexpensive, off-the-shelf
components from commodity semiconductor vendors, and add value at the system
level with contemporary architectures, excellent software, and strong
strategic partnerships.
We believe that the issue for systems vendors today is not how to design the
fastest chip, disk, or box. Rather, the challenge is to integrate the latest
commodities into a product line ahead of competitors.
A large percentage of Data General's intellectual resources is invested in
software that enables us to get very high performance from off-the-shelf chips,
disk drives, and other commodity devices. In short, we choose software
elegance over hardware complexity, and commodity components over proprietary.
As a result, our systems are inexpensive and open, rather than exotic and
proprietary.
Data General's differentiators today are in the software and architecture that
enable us to deliver data center capabilities using multiple commodity devices.
We believe that our expertise in enterprise-capable software provides a
significant advantage.
This architectural approach has enabled us to build successive generations of
AViiON systems, increasing performance by 44 times since the first models in
1989, while preserving customer investments in the software and business
practices that are tied to their computing systems.
A similar architectural approach enabled us to build CLARiiON storage systems-
fault-tolerant disk arrays that use commodity disk drives and leverage
commodity economics and commodity technology advances. The disk drives in
CLARiiON systems have increased in capacity eight-fold in two years. Users can
take continual advantage of the increased storage capacity. And because
CLARiiON subsystems support multiple vendors' UNIX based systems, as well as
NetWare, NT, and most legacy platforms, the customer's investment in storage
is not lost when computer systems are replaced or upgraded.
Data General's operating system, DG/UX, is optimized to take advantage of the
best features of AViiON and CLARiiON systems in a commercial computing
environment. DG/UX is a sophisticated, commercial implementation of the UNIX
System V Release 4 operating system. Data General has been enhancing DG/UX for
over a decade to provide a state-of-the-art platform for running core business
applications. We have added significant value to UNIX without compromising
adherence to existing standards.
DG/UX provides a robust file system, open connectivity, comprehensive systems
and storage management, standards compliance, and applications scalability.
Near-linear performance scalability is achieved through the design of both
DG/UX and the AViiON hardware. When more processors are added in an AViiON
server, system performance increases proportionately so that moving from a
two-processor AViiON server to a four-processor server doubles the performance,
and so on up the line with six, eight, twelve, or sixteen processors.
To support mission-critical applications, DG/UX supports a range of
high-availability solutions including single-system fast recovery and
redundancy capabilities, dual-system fail-over configurations, and
multi-system AV Clusters. These high-availability systems can be combined with
"lights out" systems management enabling 24-hour a day data center operations
with minimal operator intervention.
In addition, with the recent introduction of the DSO Defense Security Option,
DG/UX became the first multi-processor UNIX operating system to support B2
level security, complying with strict security standards set by US government
agencies.
Finally, DG/UX was designed to be largely instruction-set independent and
easily portable, a cornerstone of our strategy to ensure that our customers'
software investments on Data General platforms are preserved.
BUILDING SOFTWARE ALLIANCES FOR ENTERPRISE SOLUTIONS
Today, customers decide on a particular software solution, whether it be an
integrated application or a database on which to develop a custom application.
They then choose the hardware platform on which to deploy the application. For
general-purpose system vendors, this means that a wide range of software
packages must be able to run on their systems.
The strengths and market share leadership of the AViiON platform have caught
the attention of many independent software vendors. Since Data General
announced AViiON in February, 1989, over 3,000 UNIX software applications have
been added to the company's software portfolio. Another 3,000 solutions are
available through our comprehensive support of the PICK/UNIX operating
environment.
Data General uses a common sense approach to forming software alliances that
deliver solutions to large enterprise customers. This approach is based on
maintaining an industry-leading software portfolio which divides and targets
software solutions addressing particular enterprise customer needs:
ENTERPRISE RESOURCE MANAGEMENT: Packages that allow better business management
through tools which integrate financial, human resources, manufacturing, and
distribution applications into a single view. Examples: Oracle Applications,
SAP R/3, CA-Masterpiece, PeopleSoft, FourGen, and Platinum Software.
ENTERPRISE REENGINEERING AND REHOSTING: Packages that allow enterprises to
move applications to lower-cost, higher-performance open systems; augment
existing applications with easier-to-use interfaces or enhanced functionality;
or develop new applications based on state-of-the-art architectures such as
client/server computing. Examples: AV Image and Forte.
DATABASE MANAGEMENT: Packages that allow customers to build new applications
or purchase off-the-shelf solutions, and provide data security and integrity.
Examples: Advanced Pick, Cincom, Informix, CA-Ingres, Oracle, PI/open,
Progress, Sybase, uniVerse, and Unidata.
ENTERPRISE MANAGEMENT: Packages that facilitate the management of complex
computing environments including systems, security, databases, users,
operations, and network management. Examples: HP OpenView, CA-UNICENTER,
Tivoli Management Environment, and OS/EYE*NODE.
CORPORATE INFRASTRUCTURE SOLUTIONS: Packages that integrate the office
infrastructure into the enterprise. Examples: AV onGO, GroupWise, Saros, and
Soft*Switch.
Among our enterprise solutions, Data General provides the AV Image(TM) product
set that includes document imaging software, an Imaging Toolkit for adding
images to existing applications, and related imaging peripherals. AV Image
software has been recognized as a standardsetter in the growing imaging market.
During the past year, we signed almost 50 new or enhanced agreements with
leading software firms. We recently announced significant agreements with two
of the industry's leading software manufacturers - Oracle Corporation and SAP
AG. Data General's Systems Integration unit will sell, install, and support
the full set of Oracle Applications worldwide. The Oracle product includes
more than 25 integrated software modules for accounting, manufacturing,
distribution, human resources, and project control. Our AViiON line is the
first standard UNIX based server family to support the database for SAP's
popular R/3 client/server applications running in a Windows NT environment,
and at the time of announcement, recorded the highest performance ever for the
NT R/3 application.
To provide customers with full applications support, Data General established
a dedicated enterprise application laboratory in our Research Triangle Park,
North Carolina, facility.
PROVIDING COMPLETE SERVICES TO DESIGN, IMPLEMENT, AND SUPPORT TOTAL COMPUTING
SOLUTIONS
Years ago, computers helped to manage business. Today, they are an integral
part of business. Managers rely on computers to be there, up and running,
always available. Our philosophy on high availability is a reflection of that
fact. We address availability on three different levels: components, operating
systems, and through customer service.
Through AV/Alert(SM) software, our AViiON and CLARiiON systems diagnose
themselves and automatically notify Data General if service is needed. We
eliminate failure through hot repair and redundant components, and provide
knowledgeable support people available to handle any problem the system cannot
solve itself. It is an integrated approach that focuses on the system as a
whole and not on an individual hardware or software component.
AViiON servers, CLARiiON storage systems, and the DG/UX operating system offer
a highly integrated set of system resources dedicated to minimizing downtime.
If a system should fail, a second system can automatically take over.
The Data General Customer Support Center operates 24 hours a day, 365 days a
year, supplementing our expert field service force which specializes in
on-site problem solving. Our optional OMNiiSERVICE(SM) program guarantees 99.5
percent operating system uptime for mission-critical systems.
In May 1994, Data General received the ISO 9001 certificate of compliance for
its U.S. service and support operations from Underwriters Laboratories, Inc.
Data General is the first major computer systems manufacturer to have its
entire U.S. customer service and support operation certified under the
international ISO 9001 quality standard. In addition to its customer service
and worldwide manufacturing operations, ISO certification also has been
recommended for, or received by, many of the company's research and
development operations, its Special Systems Division, and its European
Logistics organization. ISO certification has been earned by Data General
subsidiary operations in Austria, Belgium, Denmark, Finland, France, Germany,
Holland, Ireland, Norway, Portugal, Spain, Sweden, Switzerland, and the United
Kingdom.
Data General provides complete services to design, implement, and support
commercial computing environments. These include systems integration,
professional services, technical services, and maintenance. In January 1994,
Data General became the first vendor in the open systems business to offer
professional services packages with fixed prices and statements of work. The
company's Systems Integration Business Unit offers more than 50 packages,
including implementation services for AViiON, CLARiiON, CA-UNICENTER,
PICK/UNIX, AV Image, NetWare, Healthcare, and World-Wide Web (Internet)
applications. These packaged services are designed to help customers become
productive quickly.
We also offer a worldwide telecommunications service for customers with global
information needs. The network currently serves more than 20 countries, with
major hubs in North America, Australia, Hong Kong, and the United Kingdom.
Data General designs the customer network and implements a network topology
tailored to user needs. Monitoring, management, and service restoration
functions are performed through the centralized Network Control Center,
operated by Data General in Westboro, Massachusetts.
For customers of our ECLIPSE MV family of computers, we provided more than 70
ECLIPSE software releases and a dozen new professional services packages in
the past year. We also introduced the MV/9800 and the MV/25000, powerful and
cost-effective board upgrades for earlier MV systems.
In addition to our AViiON, CLARiiON, and ECLIPSE MV product families, we offer
a full line of personal computers, ranging from notebooks to towers, all based
on the latest microprocessor technologies. Other products and solutions are
offered through Data General strategic alliances with a worldwide network of
distributors, resellers, and other businesses. Data General Plus, our newly
consolidated catalog and telephone sales support operation, provides customers
with convenient access to Data General products and services, and to a full
complement of networking products, computer supplies, and accessories.
Our service portfolio also includes an extensive education curriculum, and
attractive leasing programs and options for customers, distributors, and
resellers from Data General Leasing.
As a service to customers, strategic partners, solution providers, and others
interested in Data General, we launched The Common Sense Connection,(SM) a
comprehensive, interactive information library available on the Internet. The
Common Sense Connection offers news re-leases, product and service information,
the company's solutions directory, white papers on critical issues in
computing, and a wide range of other company information.
Financial Review 1994
Five year summary of selected financial data ............................. 13
Management's discussion and analysis of financial condition and results
of operations ......................................................... 14
Consolidated statements of operations .................................... 17
Consolidated balance sheets .............................................. 18
Consolidated statements of cash flows .................................... 19
Consolidated statements of stockholders'equity ........................... 20
Notes to consolidated financial statements ............................... 21
Report of independent accountants ........................................ 30
Supplemental financial information ....................................... 30
Facilities ............................................................... 31
Officers and directors ................................................... 32
Corporate information .................................................... 33
FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA
DATA GENERAL CORPORATION
YEAR ENDED
SEPT. 24, SEPT. 25, SEPT. 26, SEPT. 28, SEPT. 29,
IN THOUSANDS EXCEPT PER 1994 1993 1992 1991 1990
SHARE AMOUNTS
Total revenues . . . ..$1,120,505 $1,077,869 $1,115,947 $1,228,854 $1,216,401
Total cost of revenues. 733,114 654,718 655,047 659,559 692,015
Research and
development . . . . . 90,826 100,172 111,336 101,986 140,743
Selling, general, and
administrative. . . . 341,343 346,740 357,528 384,317 444,583
Restructuring charge .. 35,000 25,000 48,000 -- 71,700
Total costs and
expenses. . . . . . 1,200,283 1,126,630 1,171,911 1,145,862 1,349,041
Income (loss) from
operation . . . . . . (79,778) (48,761) (55,964) 82,992 (132,640)
Interest expense, net.. 8,168 6,734 3,448 4,451 3,905
Other income, net . . . 2,353 416 -- 13,000 --
Income (loss) before
income. . . . . . . . (85,593) (55,079) (59,412) 91,541 (136,545)
Income tax provision .. 2,100 5,400 3,100 5,900 3,230
Net income (loss) . . .$ (87,693) $ (60,479)$ (62,512) $ 85,641 $ (139,775)
Primary net income
(loss) per share. . . ($2.45) ($1.73) ($1.91) $2.62 ($4.65)
Net income (loss) per
share assuming full
dilution. . . . . . . ($2.45) ($1.73) ($1.91) $2.45 ($4.65)
AS OF
SEPT. 24, SEPT. 25, SEPT. 26, SEPT. 28, SEPT. 29,
DOLLARS IN THOUSANDS 1994 1993 1992 1991 1990
Current assets. . . . ..$ 598,076 $ 611,660 $ 671,307 $ 684,480 $ 589,124
Current liabilities. . . 326,865 302,908 307,172 265,816 429,080
Working capital. . . . .$ 271,211 $ 308,752 $ 364,135 $ 418,664 $ 160,044
Total assets. . . . . ..$ 821,864 $ 866,329 $ 940,454 $ 944,046 $ 909,437
Annual expenditures for
property, plant, and
equipment . . . . . ..$ 92,955 $ 94,968 $ 93,607 $ 82,766 $ 85,066
Long-term debt. . . . ..$ 156,942 $ 158,352 $ 162,258 $ 164,911 $ 56,918
Other liabilities. . . .$ 29,445 $ 27,992 $ 20,988 $ 18,878 $ 17,947
Stockholders' equity. ..$ 308,612 $ 377,077 $ 450,036 $ 494,441 $ 405,492
Employees. . . . . . . . 5,800 6,500 7,100 8,500 10,600
The company has not declared or paid cash dividends since inception.
Results of Operations
The company reported a net loss of $88 million for fiscal 1994 compared with
a net loss of $60 million for fiscal 1993 and a net loss of $63 million for
fiscal 1992. Included in these fiscal year losses are restructuring charges
of $35 million, $25 million, and $48 million, respectively.
Total revenues were $1.12 billion in fiscal 1994, compared with $1.08 billion
in the prior fiscal year. Revenue trends improved in fiscal year 1994 with
each of the last three quarters of the fiscal year showing revenue growth
compared to the same quarter of the prior fiscal year. The growth was achieved
in both the domestic and other international marketplaces. The European
marketplace continues to be negatively impacted by the transition from
proprietary to open systems, generally weak economic conditions, and
competitive pricing pressures. In addition, the effect of a stronger U.S.
dollar in relation to European currencies during the fiscal year resulted in
lower revenues from this marketplace. Increases in sales of the company's
AViiON and CLARiiON open systems families of products more than offset the
decline in revenues from the company's proprietary ECLIPSE MV family. Revenues
from personal computers reflected considerable growth from the prior year
while service revenues showed a slight decrease from 1993 levels.
Product revenues, which accounted for 65% of total revenues in fiscal 1994,
62% in fiscal 1993 and 61% in fiscal 1992, increased more than 7% to $722
million from $673 million in fiscal 1993, following a slight decrease from
$678 million in fiscal 1992. ECLIPSE MV revenues decreased 48% during fiscal
1994 and 34% in fiscal 1993. For the year, proprietary revenues represented
less than 14% of the company's total product revenues. In fiscal 1994, the
fifth year of shipments of the company's open systems, revenues from the
AViiON family were approximately $470 million, nearly 20% more than fiscal
1993. In fiscal 1993, AViiON systems revenues grew 30% from fiscal 1992. In
its second year of shipments, the Open CLARiiON line of mass storage systems
grew considerably, accounting for more than 7% of overall product revenues in
the current fiscal year.
The domestic market represented 55% of total product revenues in fiscal 1994,
and 52% and 51% in fiscal years 1993 and 1992, respectively. Domestic product
revenues for fiscal 1994 increased 17% from fiscal 1993, following a modest
increase from fiscal 1992. Nearly 60% of this growth was attributable to
increases from sales of Open CLARiiON mass storage systems. European product
revenues, including U.S. direct export sales, decreased 12% to $192 million
for the current fiscal year from $219 million in fiscal 1993. Foreign exchange
accounted for approximately 3% of the total 12% decrease. Fiscal 1993 European
product revenues represented a 4% decrease from $228 million in fiscal 1992.
European product revenues continue to reflect the effects of the general
economic weakness in this marketplace, the continuing transition from
proprietary to open systems products, and the strengthening of the U.S. dollar
in relation to European currencies. Other international product revenues,
including U.S. direct export sales, increased 16% to $130 million for the
current fiscal year from $112 million in fiscal 1993. Fiscal 1993 reflected a
20% decrease from $139 million in fiscal 1992. The increase in other
international product revenues is largely due to stronger revenues from the
South Pacific area and an increase in U.S. direct export sales to Japan.
Total service revenues decreased 2% to $398 million from $405 million for
fiscal 1993. Fiscal 1993 had shown an 8% decrease from $438 million in fiscal
1992. Domestic service revenues remained relatively unchanged at $230 million
compared to $229 million in fiscal 1993 and $227 million in fiscal 1992.
European service revenues dropped 7% in fiscal 1994 to $122 million from $131
million in the prior year. Foreign exchange accounted for 3% of the total 7%
decrease. Other international service revenues of $46 million remained
relatively unchanged in fiscal 1994 compared to fiscal 1993. Fiscal 1993 other
international service revenues reflected an 18% decrease from $55 million in
fiscal 1992. A decline in hardware maintenance revenue in the domestic
marketplace was more than offset by an increase in professional service
revenues.
Cost of revenues accounted for 65% of total revenues in fiscal 1994 as
compared with 61% in fiscal 1993. For the year ended September 26, 1992, total
cost of revenues amounted to 59% of total revenues. Cost of product revenues
increased to 67% of product revenues in fiscal 1994, compared with 62% and 58%
in fiscal years 1993 and 1992, respectively. Competitive pricing pressures
worldwide, a continuing shift in the composition of product revenues from
international to domestic, where pricing patterns are generally lower, and the
transition to the lower-margin industry-standard AViiON family of open systems
and CLARiiON family of mass storage systems, more than offset benefits
resulting from the company's cost reduction and restructuring programs.
Cost of service revenues was 63% of service revenues in fiscal year 1994, an
increase from 59% in both fiscal years 1993 and 1992. The increase in cost of
service revenues as a percentage of total service revenues was primarily a
result of increases in revenues from systems integration activities which
yield a lower margin than traditional service contract revenues.
In fiscal 1994, research and development expenses were $91 million or 8% of
total revenues, compared to $100 million and $111 million or 9% and 10% of
total revenues for fiscal years 1993 and 1992, respectively. The company
continues to focus its research and development efforts on its core business
technology, multi-user computer systems, servers, and mass storage devices. In
addition, a change in product mix to open systems architectures has increased
the use of industry-standard components purchased from third parties, which
has reduced the requirement for research and development in hardware.
Selling, general and administrative expenses continue to decrease due to the
company's worldwide cost reduction and containment programs. Selling, general
and administrative costs decreased 2% to $341 million in fiscal 1994 when
compared to fiscal 1993. Fiscal 1993 costs represented a 3% decrease from $358
million in fiscal year 1992. The company has responded to increasingly
competitive industry conditions through ongoing cost reduction and containment
programs. From fiscal 1990 to fiscal 1994, annual selling, general, and
administrative expenses have been reduced by more than $100 million.
While the company has made significant progress towards becoming a supplier of
open systems products and services, the company believes that its cost
structure must continue to improve to that of an open systems business model.
In the second quarter of the current fiscal year, the company identified
additional cost reduction steps which include further realignment of the
company's worldwide sales and service organizations. Consequently, results of
operations for fiscal 1994 included a charge of $35 million primarily for
estimated costs associated with a worldwide workforce reduction and the
writedown of net book value of fixed assets associated with consolidating
certain activities in the European marketplace. The provision relating to the
workforce reduction was primarily for salary and benefit continuation and
outplacement service. Fiscal 1993 and 1992 included similar charges of $25
million and $48 million, respectively, for estimated costs associated with
worldwide workforce reductions, real estate and other costs associated with
the company's restructuring actions. At the close of fiscal 1994, the number
of employees totaled 5,800, a reduction of 700 employees from September 25,
1993. There were 7,100 employees as of September 26, 1992. Peak employment was
17,700 in fiscal 1984. There have been no material changes in the company's
original estimates of the costs associated with the previously announced
restructuring actions.
During fiscal 1993, the company sold three of the facilities that it had
previously closed as a result of cost reduction programs. The company sold its
Westbrook, Maine, its Portsmouth, New Hampshire, and a portion of its
Woodstock, Connecticut facilities for proceeds of $8.7 million, $5.1 million
and $1.9 million, respectively. In fiscal 1992, the company sold Data General
Thailand, its Thailand manufacturing subsidiary, for net proceeds of $4.0
million in cash and a $6.0 million note receivable. Any excess proceeds from
these sales over the net book value of properties was included in the
restructuring reserve to offset anticipated costs associated with vacant
properties.
Loss from operations of $80 million in fiscal 1994 was comprised of $45
million from the domestic marketplace, $18 million from Europe and $17 million
from other international. These losses include restructuring charges of $21
million, $12 million, and $2 million for domestic, Europe, and other
international, respectively.
Interest income for fiscal 1994 decreased 27% from fiscal 1993, following a
27% decrease from fiscal 1992 to fiscal 1993. The current year decrease was
primarily due to lower average levels of invested funds. Interest expense in
the current fiscal year remained relatively unchanged from both fiscal 1993
and 1992.
The income tax provision for fiscal 1994 was $2.1 million, compared to $5.4
million in fiscal 1993 and $3.1 million in fiscal 1992. The provisions
primarily resulted from foreign and state taxes. The company continues to have
significant operating loss carryforwards and unused tax credits available to
minimize future tax liabilities. During the first quarter of fiscal 1994, the
company adopted Statement of Financial Accounting Standards ("SFAS") 109,
"Accounting for Income Taxes". SFAS 109 is an asset and liability approach
that requires the recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been recognized in the
company's financial statements or tax returns. Previously, the company used
the SFAS 96 asset and liability approach that gave no recognition to future
events other than the recovery of assets and settlement of liabilities at
their carrying amounts. The implementation of SFAS 109 did not have a material
effect on either the company's consolidated financial position or results of
operations.
In November 1992, the Financial Accounting Standards Board ("FASB") issued
SFAS 112, "Employers' Accounting for Post-Employment Benefits". In May 1993,
the FASB issued SFAS 114 and 115, "Accounting by Creditors for Impairment of a
Loan" and "Accounting for Certain Investments in Debt and Equity Securities",
respectively. SFAS 112 and SFAS 115 are effective for fiscal years beginning
after December 15, 1993. SFAS 114 is effective for fiscal years commencing
after December 15, 1994. The company will implement these statements as
required. The future adoption of SFAS 112, SFAS 114, and SFAS 115 are not
expected to have a material effect on the company's consolidated financial
position or results of operations.
Liquidity and Capital Resources
The company's financial position remains strong. Cash and temporary cash
investments as of September 24, 1994 were $142 million, an increase of $23
million from fiscal 1993. In addition, the company holds $48 million in
marketable securities, a net decrease of $25 million from the prior fiscal
year, which supplemented cash and temporary cash investments. These securities
are primarily invested in United States Treasury bills and notes. Net cash
provided from operations in fiscal 1994 was $74 million, expenditures for
property, plant and equipment were $93 million, capitalized software
development costs totaled $18 million, and cash provided from stock plans
equaled $7 million. The company received $26 million relating to the sale of
its corporate headquarters facilities and the sale of various investments net
of a disbursement of $2 million in connection with the investment in an
unaffiliated entity. Repayment of long-term debt was $2 million. The effect of
currency fluctuations on cash and temporary cash investments was an increase
of $4 million for fiscal year 1994.
Net receivables decreased $27 million to $259 million at September 24, 1994,
primarily as a result of increased collection efforts worldwide, partially
offset by the increase in fourth quarter fiscal 1994 revenues when compared to
the same prior year period. The company's worldwide days sales outstanding
decreased 13 days when compared to the prior fiscal year as a result of the
increased collection efforts. Inventory levels increased $17 million during
fiscal 1994, primarily as a result of the timing of inventory procurements
during the fourth quarter. Net property, plant and equipment decreased $13
million principally due to the sale of the company's corporate headquarters
complex. Accounts payable increased $7 million primarily attributable to the
increase in end of quarter inventory procurements. Current and other
liabilities increased $18 million to $261 million at September 24, 1994, as a
result of the $35 million provision recorded in the company's second quarter
for estimated costs of the company's continuing restructuring program and
increased personnel and commission related accruals. These increases were
partially offset by payment of a portion of previously accrued restructuring
charges.
For the three year period ending September 24, 1994, cash and temporary cash
investments decreased $7 million. Net cash provided from operations was $232
million. The sale of the company's corporate headquarters, other facilities,
and net investments provided $47 million. The fiscal 1992 sale of the
company's Thailand manufacturing subsidiary generated proceeds of $4 million.
The company's employee stock plans provided $29 million. Long-term debt
decreased $7 million, primarily due to repayment of Industrial Revenue Bonds
applicable to the sales of the company's Portsmouth, New Hampshire and
Woodstock, Connecticut facilities. Net proceeds from maturity of marketable
securities was $44 million. Expenditures for property, plant and equipment
totaled $282 million and the company's investment in capitalized software
development costs was $61 million. The company paid $1 million of notes and
disbursed $10 million in connection with the acquisition of the Customer
Service Management Group division of HBO & Company in October of 1991. The
effect of foreign exchange on this three year period was a $2 million
decrease in cash.
Operations have generally been the primary source of the company's cash. Cash
provided from operations has been augmented by proceeds from sales of stock
under the company's stock plans, from sales of facilities, and from sales of
other non-operating assets. The company has not paid cash dividends since its
inception in order to reinvest available cash in operations. The company is
currently holding two facilities for future sale: Milford, Massachusetts and
the remaining portion of Woodstock, Connecticut. As sales of these facilities
occur, the net proceeds will supplement the net cash generated from operating
activities.
During fiscal year 1993, the company had a $70 million unsecured revolving
credit facility with a group of banks. This facility was replaced in the first
quarter of fiscal year 1994 with a $40 million revolving credit facility and
an unsecured $30 million letter of credit facility with the same group of
banks. The revolving credit facility has a duration of one year. The letter of
credit facility has a duration of 364 days and provides for automatic renewal
on a daily basis. Both of these facilities expire on December 31, 1994. The
company is currently in the process of establishing a replacement letter of
credit facility. The existing facilities contain certain covenants, including
restrictions on the sale or pledge of certain assets, the declaration of
dividends, and the incurrence of other debt. The interest rate on the
borrowings under the revolving credit facility is 1.5% per annum above the
London Interbank Offered Rate. The interest rate for borrowings under the
letter of credit facility is .5% per annum above the prime rate. During fiscal
years 1994 and 1993, there were no borrowings under any of these facilities.
At September 24, 1994 and September 25, 1993, there were letters of credit
totaling $11.6 million and $12.6 million, respectively, secured by the current
and previous facilities.
The company believes it is important to maintain a conservative capital
structure and a strong cash position. Cash is invested in liquid temporary
investments pending its utilization. The company's investment policy is to
minimize risk while maximizing return on cash, and to keep uninvested cash at
a minimum. Cash is generally centralized domestically, although some cash is
also held at various subsidiaries around the world to meet local operating
funding requirements. With minor exceptions, all cash is freely remittable to
the United States.
Although the actual level of spending will be influenced by many factors, the
company anticipates that expenditures for property, plant and equipment will
continue to be the primary use of cash during fiscal year 1995. Most of the
expenditures will be for capital assets directly related to the company's
open systems product sales, marketing, support and development. Net fixed
assets associated with the company's proprietary ECLIPSE MV family of products
represent less than 20% of the company's total net fixed assets. Such assets
are primarily spare parts employed to support the company's MV service base of
over 19,000 installed units worldwide, as well as those MVs which are serviced
by third parties. The writedown of net book value of property, plant, and
equipment during fiscal 1994 totaled $15.2 million, primarily as a result of
sales of demonstration equipment to end-users and includes a writedown of
approximately $4.0 million of net book value of fixed assets to their
realizable value as part of the consolidation of certain activities in the
European marketplace. Management expects that sales of demonstration equipment
will continue. Also during fiscal 1995, cash totaling $25 million is expected
to be utilized in relation to the company's restructuring programs.
Subsequent to the end of the fiscal year, the company settled with Northrup
Grumman Corporation its six-year software copyright infringement and trade
secrets litigation against Grumman Systems Support Corporation ("Grumman").
Under the terms of this settlement, which was approved by the U.S. District
Court, Grumman has paid to the company $53 million and the parties have
dismissed all pending litigation. These proceeds further strengthen the
company's financial condition and will be used to fund future operating
activities and other cash requirements. The settlement will result in a
pre-tax gain, net of related legal fees and other expenses, of $44.5 million
which the company will recognize in its first quarter fiscal 1995 financial
statements.
The company believes it has sufficient resources to provide for its current
operations and to continue to invest in the future.
CONSOLIDATED STATEMENTS OF OPERATIONS
DATA GENERAL CORPORATION
YEAR ENDED
SEPT. 24, SEPT. 25, SEPT. 26,
IN THOUSANDS EXCEPT PER SHARE AMOUNTS 1994 1993 1992
REVENUES
Product . . . . . . . . . . . . . . $ 722,423 $ 672,965 $ 677,804
Service. . . . . . . . . . .. . . . 398,082 404,904 438,143
Total revenues . . . . .. . . . 1,120,505 1,077,869 1,115,947
COSTS AND EXPENSES
Cost of product revenues . .. . . . 483,808 415,128 395,839
Cost of service revenues . .. . . . 249,306 239,590 259,208
Research and development. . . . . . 90,826 100,172 111,336
Selling, general, and
administrative. . . . . . . . . . 341,343 346,740 357,528
Restructuring charge . . . .. . . . 35,000 25,000 48,000
Total costs and expenses . . . 1,200,283 1,126,630 1,171,911
Loss from operations . . . .. . . . (79,778) (48,761) (55,964)
Interest income. . . . . . .. . . . 5,881 8,032 11,022
Interest expense . . . . . .. . . . 14,049 14,766 14,470
Other income, net . . . . . . . . . 2,353 416 --
Loss before income taxes. . . . . . (85,593) (55,079) (59,412)
Income tax provision . . . .. . . . 2,100 5,400 3,100
Net loss. . . . . . . . . . . . . . $ (87,693) $ (60,479) $ (62,512)
PRIMARY NET LOSS PER SHARE:
Net loss per share. . . . . . . . ($2.45) ($1.73) ($1.91)
Weighted average shares
outstanding . . . . . . . . . . 35,774 34,876 32,788
NET LOSS PER SHARE ASSUMING FULL DILUTION:
Net loss per share. . . . . . . . ($2.45) ($1.73) ($1.91)
Weighted average shares
outstanding . . . . . . . . . . 35,774 34,876 32,788
The accompanying Notes to Consolidated Financial Statements are an integral
part of these financial statements.
CONSOLIDATED BALANCE SHEETS
DATA GENERAL CORPORATION
SEPT. 24, SEPT. 25,
DOLLARS IN THOUSANDS EXCEPT PAR VALUE 1994 1993
ASSETS
Current assets:
Cash and temporary cash investments. . . $ 142,448 $ 119,560
Marketable securities. . .. . . .. . . . 47,865 72,395
Receivables, less allowances of $13,752 at
Sept. 24, 1994 and $12,992 at Sept. 25,
1993 . . . . . . . . . . . . . . . . . 258,709 285,481
Inventories. . . . . . . .. . . .. . . . 118,412 101,827
Other current assets . . .. . . .. . . . 30,642 32,397
Total current assets . .. . . .. . . . 598,076 611,660
Property, plant, and equipment, net. . . . 164,777 177,551
Other assets . . . . . . . .. . . .. . . . 59,011 77,118
$ 821,864 $ 866,329
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable. . . . . . .. . . .. . . . $ 2,461 $ 2,267
Accounts payable . . . . .. . . .. . . . 92,338 85,571
Other current liabilities.. . . .. . . . 232,066 215,070
Total current liabilities . . .. . . . 326,865 302,908
Long-term debt . . . . . . .. . . .. . . . 156,942 158,352
Other liabilities . . . . . . . . .. . . . 29,445 27,992
Commitments and Contingencies
Stockholders' equity:
Common stock, $.01 par value:
Outstanding -- 36,457,000 shares at Sept. 24, 1994
and 35,267,000 shares at Sept. 25, 1993 (net of
deferred compensation of $9,348 at Sept. 24, 1994
and $11,619 at Sept. 25, 1993. . . . 434,757 422,589
Accumulated deficit . . . . . .. . . . (116,923) (29,230)
Cumulative translation adjustment. . . (9,222) (16,282)
Total stockholders' equity. .. . . . 308,612 377,077
$ 821,864 $ 866,329
The accompanying Notes to Consolidated Financial Statements are an integral
part of these financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
DATA GENERAL CORPORATION
YEAR ENDED
SEPT. 24, SEPT. 25, SEPT. 26,
IN THOUSANDS 1994 1993 1992
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss . . . . . . . . . . . . . . . $ (87,693) $ (60,479) $ (62,512)
Adjustments to reconcile net loss
to net cash provided from
operating activities:
Depreciation. . . . . . . . . .. . . 76,957 78,756 84,172
Amortization of capitalized
software development costs . . . . 21,448 17,768 15,273
Amortization of deferred
compensation . . . . . . . . . . . 5,329 5,344 5,548
Increase in other liabilities .. . . 1,453 7,004 2,110
Writedown of net book value of
property, plant, and
equipment. . . . . . . . . . . . . 15,233 20,917 12,559
Gain on sale of investment. . .. . . (4,653) (3,216) --
Other non-cash items, net. . . . . . 11,714 6,157 (13,072)
Changes in operating assets and
liabilities, net of effects
from acquisition and sale of
non-operating assets:
(Increase) decrease in
receivables . . . . . . . . . . 31,757 (12,171) (15,498)
(Increase) decrease in
inventories . . . . . . . . . . (15,735) 15,895 16,656
(Increase) decrease in other
current assets. . . . . . . . . 3,727 (255) 4,461
Increase in accounts payable . . . 3,837 1,812 11,772
Increase (decrease) in other
current liabilities,
excluding debt. . . . . . .. . . 10,753 (2,901) 21,793
Net cash provided from operating
activities . . . . . . . . . . . . 74,127 74,631 83,262
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property, plant,
and equipment. . . . . . . . . . . . (92,955) (94,968) (93,607)
Purchase of marketable securities. . . (90,788) (110,470) (198,721)
Proceeds from maturity of
marketable securities. . . . . . . . 115,318 114,953 213,829
Capitalized software development . . .
costs. . . . . . . . . . . . . . . . (17,582) (23,078) (20,555)
Net proceeds from sale of
subsidiary . . . . . . . . . . . . . -- -- 4,002
Net proceeds from sale of
facilities and other assets. . . . . 28,314 21,284 --
Investment in equity securities .. . . (2,000) -- --
Cash disbursed for acquisition. .. . . -- -- (10,254)
Net cash used by investing
activities . . . . . . . . . . . . (59,693) (92,279) (105,306)
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash provided from stock plans, net. . 6,901 9,575 12,241
Borrowings (repayments) of notes
payable. . . . . . . . . . . . . . . -- (1,234) 546
Repayment of long-term debt . . .. . . (2,034) (3,599) (1,709)
Net cash provided from financing
activities . . . . . . . . . . . . 4,867 4,742 11,078
Effect of foreign currency rate
fluctuations on cash and
temporary cash investments . . . . . . 3,587 (6,979) 1,334
Increase (decrease) in cash and
temporary cash investments. . . .. . . 22,888 (19,885) (9,632)
Cash and temporary cash investments --
beginning of the period. . . . . . . . 119,560 139,445 149,077
Cash and temporary cash investments --
end of the period. . . . . . . . . . . $ 142,448 $ 119,560 $ 139,445
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Interest paid. . . . . . . . . . . . $ 13,422 $ 13,983 $ 13,553
Income taxes paid . . . . . . . . . $ 3,444 $ 3,098 $ 4,086
The accompanying Notes to Consolidated Financial Statements are an integral
part of these financial statements.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
DATA GENERAL CORPORATION
YEAR ENDED
SEPT. 24, SEPT. 25, SEPT. 26,
IN THOUSANDS 1994 1993 1992
COMMON STOCK:
Beginning balance. . . . . . . .. . . . $ 422,589 $ 407,798 $ 391,827
Shares issued under stock plans, net. . 6,839 9,447 10,423
Amortization of deferred compensation . 5,329 5,344 5,548
Ending balance . . . . . . . . .. . . . 434,757 422,589 407,798
ACCUMULATED EARNINGS (DEFICIT):
Beginning balance. . . . . . . .. . . . (29,230) 31,249 93,761
Net loss for year . . . . . . . . . . . (87,693) (60,479) (62,512)
Ending balance . . . . . . . . .. . . . (116,923) (29,230) 31,249
CUMULATIVE TRANSLATION ADJUSTMENT:
Beginning balance. . . . . . . .. . . . (16,282) 10,989 8,853
Net translation adjustment for year . . 7,060 (27,271) 2,136
Ending balance . . . . . . . . .. . . . (9,222) (16,282) 10,989
Total stockholders' equity . . . . . . . . $ 308,612 $ 377,077 $ 450,036
The accompanying Notes to Consolidated Financial Statements are an integral
part of these financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DATA GENERAL CORPORATION
NOTE 1. ACCOUNTING POLICIES
FISCAL YEAR. The company's fiscal year ends on the last Saturday in September.
PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include the
accounts of Data General Corporation and its domestic and foreign subsidiaries
(the "company"). All significant intercompany transactions have been
eliminated.
In October 1991, the company sold Data General Thailand ("DGT"), its Thailand
manufacturing subsidiary, for net proceeds of $4.0 million in cash and a $6.0
million note receivable. No gain or loss was recorded on the sale.
In October 1991, the company purchased certain assets of the Customer Service
Management Group ("CSMG"), a division of HBO & Company, for $10.3 million.
CSMG is a multi-vendor equipment service provider for over 350 hospitals
throughout the United States. The acquisition was accounted for by the
purchase method of accounting and accordingly, the purchase price has been
allocated to the assets acquired and the liabilities assumed based on the
estimated fair values at the date of acquisition.
The statements of operations and of cash flows include the accounts of DGT
until the date of sale, and the accounts of CSMG from the date of purchase.
TRANSLATION OF FOREIGN CURRENCIES. The functional currencies for the company's
operations in Australia, Canada, Europe, Japan, and New Zealand are the local
currencies. Assets and liabilities of these operations are translated into
U.S. dollars at exchange rates in effect at the balance sheet date. Income and
expense items are translated at average exchange rates for the period.
Accumulated net translation adjustments are included in stockholders' equity.
For the company's other foreign operations, the U.S. dollar is the functional
currency. Assets and liabilities of these operations are remeasured into U.S.
dollars at exchange rates in effect at the balance sheet date, except for
inventories and property, plant, and equipment, which are remeasured at
historical exchange rates. Income and expense items are remeasured at average
rates for the period, except for cost of sales and depreciation, which are
remeasured at historical exchange rates. Gains and losses resulting from
remeasurement, not material in amount, are included in the results of
operations.
The company enters into foreign exchange contracts as a hedge against exposure
to fluctuations in exchange rates associated with certain transactions
denominated in foreign currencies, principally accounts receivable. Market
value gains or losses on these contracts are included in the results of
operations and generally offset exchange gains or losses on the related
transactions.
Foreign exchange transaction gains and losses, not material in amount, are
included in the results of operations.
CONSOLIDATED STATEMENTS OF CASH FLOWS. Temporary cash investments consist of
highly liquid time deposits and commercial paper with original maturities of
90 days or less. Marketable securities consist primarily of U.S. Treasury
bills and notes with original maturities of greater than 90 days. These
investments are valued at cost plus accrued interest, which approximates
market value.
Cash flows from foreign exchange contracts that are accounted for as hedges of
identifiable foreign exchange transactions are classified as cash flows from
operating activities in accordance with the nature of the transactions being
hedged.
INVENTORIES. Inventories are stated at the lower of cost or market. Cost is
determined using the first-in, first-out method.
PROPERTY, PLANT, AND EQUIPMENT. Property, plant, and equipment is stated at
cost, less accumulated depreciation. Depreciation is computed using the
straight-line method, based on the following estimated useful lives: land
improvements, 10-12 years; buildings and building improvements, 3-25 years;
equipment, 3-10 years. Included in property, plant, and equipment are
computer equipment spares which are not available for resale. These spares are
used to support systems the company has sold or is using internally. Spares
are depreciated over a 3 year estimated useful life.
REVENUE RECOGNITION. Product revenues are recognized at the time of shipment.
Service revenues, including postcontract customer support, are recognized
ratably over applicable contractual periods or as services are performed. The
costs of these service revenues are charged to expense when incurred.
RESEARCH, DEVELOPMENT, AND WARRANTY COSTS. Research, engineering, and product
development costs are expensed as incurred. Software development costs
incurred after reaching technological feasibility are capitalized and
amortized to cost of product revenues over a period not to exceed 3 years,
which approximates the estimated economic lives of the software products.
Unamortized software development costs were $39.2 million at September 24,
1994 and $43.0 million at September 25, 1993. Amortization of capitalized
software development costs for fiscal 1994 included approximately $2.7 million
related to the writedown of certain capitalized software costs to net
realizable value. Estimated direct on-line support and warranty costs are
accrued at the time of shipment.
ADVERTISING. Advertising costs are charged to operations when incurred. The
company has not incurred any costs associated with direct-response advertising
during fiscal 1994 and fiscal 1993 and there were no capitalized advertising
costs at September 24, 1994 and September 25, 1993. Advertising expenses for
fiscal 1994, 1993, and 1992 were $18.1 million, $17.1 million, and $23.3
million, respectively.
RETIREMENT/POST-EMPLOYMENT BENEFITS. Net pension cost for the company's
domestic defined benefit pension plan is funded as accrued, to the extent that
current pension cost is deductible for U.S. Federal tax purposes. The plan's
transition surplus is amortized over 19 years. Net pension cost for the
company's international defined benefit pension plans is generally funded as
accrued. The net transition surplus or obligation for these plans is amortized
over periods ranging from 15 to 21 years.
Net postretirement benefit costs for the company's domestic postretirement
benefits plan are generally funded as accrued, to the extent that current cost
is deductible for U.S. Federal tax purposes. The net transition obligation for
the plan is amortized over 20 years.
In November 1992, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") 112, "Employers'
Accounting for Post-Employment Benefits". This standard is effective for
fiscal years beginning after December 15, 1993. The company will implement
this statement in its first quarter of fiscal 1995. The future adoption of
SFAS 112 is not expected to have a material effect on the company's
consolidated financial position or results of operations.
INCOME TAXES. In the first quarter of fiscal 1994, the company adopted SFAS
109, "Accounting for Income Taxes". SFAS 109 is an asset and liability
approach that requires the recognition of deferred tax assets and liabilities
for the expected future tax consequences of events that have been recognized
in the company's financial statements or tax returns. Deferred tax expense
represents the change in the net deferred tax asset or liability balance. In
estimating future tax consequences, SFAS 109 generally considers all expected
expected future events other than enactments of changes in the tax law or
rates. Previously, the company used the SFAS 96 asset and liability approach
that gave no recognition to future events other than the recovery of assets
and settlement of liabilities at their carrying amounts. The implementation of
SFAS 109 did not have a material effect on either the company's consolidated
financial position or results of operations. The company has a valuation
allowance which offsets substantially all net deferred tax assets existing as
of September 24, 1994.
EARNINGS PER SHARE. Primary net income (loss) per share is based upon the
weighted average number of common shares outstanding, including dilutive
common stock equivalents. Common stock equivalents represent the net
additional shares resulting from the assumed exercise of options outstanding
under the company's stock option plans, using the "treasury stock" method. Net
income (loss) per share assuming full dilution is based upon the weighted
average number of common shares outstanding, including dilutive common stock
equivalents and assumed conversion of the company's 7 3/4% Convertible
Subordinated Debentures, if dilutive. For fiscal 1994, 1993 and 1992, these
debentures are anti-dilutive and have been excluded from the calculation.
OTHER RECENT PRONOUNCEMENTS. In May 1993, the FASB issued SFAS 114,
"Accounting by Creditors for Impairment of a Loan" and SFAS 115, "Accounting
for Certain Investments in Debt and Equity Securities". SFAS 114 and 115 are
effective for fiscal years beginning after December 15, 1994 and December 15,
1993, respectively. The company will implement these statements as required.
The future adoption of these standards is not expected to have a material
effect on the company's consolidated financial position or results of
operations.
NOTE 2. RESTRUCTURING
During fiscal years 1994, 1993, and 1992, the company recorded restructuring
charges of $35 million, $25 million, and $48 million, respectively. The
amounts accrued and charged against the liabilities during the current fiscal
year were as follows:
Balance Fiscal Fiscal Balance
Sept 25, 1994 1994 Sept 24,
IN MILLIONS 1993 Provision Charges 1994
Provisions related to terminated employees:
Termination payments . . . . . . . . . . . . $15.4 $18.9 $(19.1) $15.2
Pension and OPEB costs (curtailment loss). . .7 1.5 (.7) 1.5
Other costs. . . . . . . . . . . . . . . . . .8 1.0 (.7) 1.1
Provisions related to employees not
terminated . . . . . . . . . . . . . . . . . -- 2.1 (.2) 1.9
Provisions for leases. . . . . . . . . . . . . 19.1 4.2 (9.3) 14.0
Writedowns of assets to be sold or discarded . 1.3 4.3 (4.9) .7
Other. . . . . . . . . . . . . . . . . . . . . 2.1 3.0 (2.8) 2.3
Total. . . . . . . . . . . . . . . . . . . $39.4 $35.0 $(37.7) $36.7
The 1994 restructuring charge included provisions for the termination of
approximately 570 employees as part of a further realignment of the company's
worldwide sales and service organizations. The 1993 and 1992 restructuring
charges included provisions for the termination of 580 and 1,100 employees,
respectively. The termination payments relate primarily to salary and benefit
continuation costs. Other provisions for terminated employees are for
outplacement costs. At September 24, 1994, approximately 200 terminations
related to the fiscal 1994 restructuring charge had occured and all
terminations relating to the fiscal 1993 and fiscal 1992 restructuring charges
had been completed. Provisions for employees not terminated relate primarily
to relocation costs where the company has consolidated or closed various
facilities and costs associated with the company's relocation and
consolidation of European operations. The writedown of fixed assets was
primarily associated with consolidating certain activities in the European
marketplace. The remaining accrual for leases is primarily for the closure of
various domestic branch sales offices and excess vacant rental properties,
located primarily in the United Kingdom. There were no material changes in
estimates included in the restructuring liability during the latest fiscal
year.
In connection with prior restructuring actions during fiscal 1993, the company
sold its facilities in Westbrook, Maine, and Portsmouth, New Hampshire, as
well as a portion of its Woodstock, Connecticut facility, for net proceeds of
$15.7 million. In fiscal 1992, the company sold Data General Thailand, its
Thailand manufacturing subsidiary, for net proceeds of $4.0 million in cash
and a $6.0 million note receivable. In each of these transactions, any excess
proceeds from these sales over the net book value of properties was included
in the restructuring reserve to offset anticipated costs associated with
vacant properties and properties held for sale.
NOTE 3. CONSOLIDATED BALANCE SHEET DETAILS
IN THOUSANDS
SEPT. 24, SEPT. 25,
1994 1993
INVENTORIES:
Raw materials. . . . . . . . . . . . . . . . . . . . $ 11,791 $ 6,665
Work in process. . . . . . . . . . . . . . . . . . . 36,282 27,778
Finished systems . . . . . . . . . . . . . . . . . . 35,521 31,566
Field engineering parts and components . . . . . . . 34,818 35,818
Total inventories. . . . . . . . . . . . . . . . . $118,412 $101,827
PROPERTY, PLANT, AND EQUIPMENT:
Land . . . . . . . . . . . . . . . . . . . . . . . . $ 3,433 $ 6,127
Buildings and improvements . . . . . . . . . . . . . 78,685 115,139
Manufacturing and design equipment . . . . . . . . . 103,537 104,973
Data processing, office, and other equipment . . . . 331,100 304,323
Computer equipment spares. . . . . . . . . . . . . . 126,169 128,877
Total property, plant, and equipment . . . . . . . 642,924 659,439
Accumulated depreciation . . . . . . . . . . . . . . (478,147) (481,888)
Total property, plant, and equipment, net. . . . . $164,777 $177,551
OTHER CURRENT LIABILITIES:
Accrued employee compensation and benefits . . . . . $ 59,857 $ 51,709
Deferred revenues. . . . . . . . . . . . . . . . . . 43,260 38,023
Accrued restructuring charges. . . . . . . . . . . . 36,696 39,377
Other accrued expenses . . . . . . . . . . . . . . . 90,833 83,927
Current portion of long-term debt. . . . . . . . . . 1,420 2,034
Total other current liabilities. . . . . . . . . . $232,066 $215,070
Property, plant, and equipment at September 24, 1994 includes assets which
are held for sale as a result of the company's corporate-wide restructuring
programs. The original cost and net book value of these assets is $12,243 and
$5,021 respectively.
In September 1994, the company sold its Westboro, Massachusetts land and
facilities for net proceeds of $16.7 million. It has entered into a 10-year
sale leaseback arrangement for a portion of the property. This arrangement has
been accounted for as an operating lease. No gain was recognized on this sale
leaseback transaction.
NOTE 4. NOTES PAYABLE
Notes payable at September 24, 1994 and September 25, 1993 consisted of
borrowings by Data General SARL (France) of $2.5 and $2.3 million,
respectively. The borrowings are from various banks, are unsecured, and
involve no commitment fees or compensating balances. The interest rate on the
borrowings is .5% per annum above the Paris Interbank Offered Rate (PIBOR),
and was 6.2% and 8.1% at September 24, 1994 and September 25, 1993,
respectively.
During fiscal 1993, the company had a $70 million unsecured revolving credit
facility from a group of banks. Effective December 30, 1993, the company
replaced the $70 million revolving credit facility with an unsecured $40
million revolving credit facility and an unsecured $30 million letter of
credit facility with the same group of banks. The facilities contain certain
covenants, including restrictions on the sale or pledge of certain assets, the
declaration of dividends and the incurrence of other debt. The interest rate
for borrowings under the revolving credit facility is 1.5% per annum above the
London Interbank Offered Rate (LIBOR). The LIBOR rates at September 24, 1994
ranged from 4.9% to 6.1%. The interest rate for borrowings under the letter of
credit facility is .5% per annum above the prime rate. Commitment fees paid on
available funds are not material and there were $11.6 million of letters of
credit secured by the letter of credit facility at September 24, 1994. At
September 25, 1993, there were $12.6 million of letters of credit secured by
the previous revolving credit facility. During fiscal years 1994 and 1993,
there were no borrowings under any of these facilities. The revolving credit
facility has a duration of one year; the letter of credit facility has a
duration of 364 days and provides for automatic renewal on a daily basis. Both
of these facilities expire on December 31, 1994. The company is currently in
the process of establishing a replacement letter of credit facility.
NOTE 5. INCOME TAXES
Domestic and foreign loss before taxes, and details of the income tax
provision (benefit) are as follows:
YEAR ENDED
SEPT. 24, SEPT. 25, SEPT. 26,
IN THOUSANDS 1994 1993 1992
LOSS BEFORE TAXES:
Domestic. . . . . . . . . . . . . . . . . . . $(54,201) $(15,119) $(19,172)
Foreign . . . . . . . . . . . . . . . . . . . (31,392) (39,960) (40,240)
$(85,593) $(55,079) $(59,412)
INCOME TAX PROVISION (BENEFIT):
Current:
Foreign . . . . . . . . . . . . . . . . . . $ 1,896 $ 2,955 $ 2,278
State . . . . . . . . . . . . . . . . . . . 700 850 600
Total current . . . . . . . . . . . . . . 2.596 3,805 2,878
Deferred:
Federal . . . . . . . . . . . . . . . . . . -- 919 --
Foreign . . . . . . . . . . . . . . . . . . (496) 676 222
Total deferred. . . . . . . . . . . . . . (496) 1,595 222
$ 2,100 $ 5,400 $ 3,100
Deferred income taxes reflect the tax impact of temporary differences between
the amount of assets and liabilities for financial reporting purposes and such
amounts as measured by tax laws and regulations. Under SFAS 109, the benefit
associated with future deductible temporary differences is recognized if it is
more likely than not that a benefit will be realized. Based on historical
evidence, the company has recorded a valuation allowance that offsets
substantially all net deferred tax assets. Principal components of the
deferred tax assets and liabilities included on the balance sheet at September
24, 1994 and as of the date of adoption were as follows:
YEAR ENDED
SEPT. 24, SEPT. 25,
IN THOUSANDS 1994 1993
Deferred tax asssets:
Inventory . . . . . . . . . . . . . . . . . . . . . . .$ 10,881 $ 9,985
Operating expenses. . . . . . . . . . . . . . . . . . . 44,750 26,338
Intercompany profit in inventory & fixed assets . . . . 9,574 11,311
Depreciation. . . . . . . . . . . . . . . . . . . . . . 8,086 5,775
Restructuring . . . . . . . . . . . . . . . . . . . . . 15,414 16,548
Stock option plans. . . . . . . . . . . . . . . . . . . 7,548 8,352
Interest on convertible debentures. . . . . . . . . . . 1,293 1,293
Net operating losses. . . . . . . . . . . . . . . . . . 119,809 101,474
Tax credits . . . . . . . . . . . . . . . . . . . . . . 11,230 12,120
Gross deferred tax assets . . . . . . . . . . . . . . . 228,585 193,196
Less: valuation allowance . . . . . . . . . . . . . . . 209,936 172,893
Total deferred tax assets . . . . . . . . . . . . . . . 18,649 20,303
Deferred tax liabilities:
Capitalized software development costs. . . . . . . . . (16,449) (15,061)
Other . . . . . . . . . . . . . . . . . . . . . . . . . (1,938) (2,464)
Total deferred tax liabilities. . . . . . . . . . . . . (18,387) (20,537)
Net deferred tax asset (liability). . . . . . . . . . . $ 262 $ (234)
Reconciliation of the U.S. Federal statutory rate to the company's effective
tax rate is as follows:
YEAR ENDED
SEPT. 24, SEPT. 25, SEPT. 26,
1994 1993 1992
U.S. Federal statutory rate . . . . . . . . (35.0)% (34.7)% (34.0)%
State income taxes. . . . . . . . . . . . . .8 1.5 1.0
Net domestic and foreign losses without . . 38.2 42.3 40.4
tax benefits. . . . . . . . . . . . . . .
Net operating loss carryforwards utilized . (2.2) (1.4) (2.4)
Foreign income taxed at different rates . . .1 .7 1.1
Other . . . . . . . . . . . . . . . . . . . .6 1.4 (.9)
Effective tax rate. . . . . . . . . . . . . 2.5% 9.8% 5.2%
The company has U.S. Federal and foreign operating loss carryforwards of
approximately $320 million and tax credit carryforwards of approximately $11
million. The operating loss carryforwards expire in the years 1995 through
2009. The tax credit carryforwards expire in the years 2000 through 2005.
Provision has not been made for U.S. or additional foreign taxes on
approximately $78 million of undistributed earnings of foreign subsidiaries,
as those earnings are considered to be permanently reinvested. Such earnings
would become taxable upon the sale or liquidation of these foreign
subsidiaries or upon the remittance of dividends. It is not practicable to
estimate the amount of the deferred tax liability on such earnings. Upon
remittance, certain foreign countries impose withholding taxes that are then
available, subject to certain limitations, for use as credits against the
company's U.S. tax liability, if any. The amount of withholding tax that would
be payable upon remittance of the entire amount of undistributed earnings
would approximate $2.5 million.
NOTE 6. LONG-TERM DEBT
SEPT. 24, SEPT. 25,
IN THOUSANDS 1994 1993
7-3/4% Convertible Subordinated Debentures due 2001. . . $125,000 $125,000
8-3/8% Sinking Fund Debentures due 2002. . . . . . . . . 32,562 32,552
Industrial revenue bonds . . . . . . . . . . . . . . . . 800 2,834
158,362 160,386
Less current portion . . . . . . . . . . . . . . . . . . (1,420) (2,034)
$156,942 $158,352
Maturities and sinking fund requirements for the next five fiscal years are as
follows: 1995 - $1,420; 1996 - $3,500; 1997 - $3,500; 1998 - $3,500; 1999 -
$3,500.
The 7 3/4% Convertible Subordinated Debentures are convertible at the option of
the holder, at any time prior to redemption or repurchase, into shares of
Common Stock of the company at a conversion price of $19.20 per share, subject
to adjustment for certain events. The debentures are subordinated to all
Senior Indebtedness (as defined in the indenture under which the bonds were
issued). At the option of the company, the bonds may be redeemed at any time
after June 1, 1994 at decreasing redemption prices, and may be redeemed at the
option of the holder if there is a Fundamental Change (as defined in the
indenture) in the company's operations. The indenture does not contain any
financial covenants or any restrictions on the payment of dividends or the
repurchase of the company's securities. Deferred debt issuance costs at
September 24, 1994 of $2.7 million are being amortized to interest expense
over the life of the debentures.
The 8 3/8% Sinking Fund Debentures are subject to mandatory sinking fund
payments which provide for annual principal retirements of $3.5 million
through 2001. The company has the option, under certain conditions, to
increase the sinking fund payments or to redeem the debentures prior to
maturity. Prior to fiscal 1992, the company reacquired a total of $27.4
million principal amount of the debentures. Of these reacquired debentures,
$24.5 million principal amount was used to satisfy sinking fund requirements
through fiscal 1994. Subsequent to September 24, 1994, the company reacquired
an additional $2.7 million principal amount of the debentures. The remainder
of all acquired debentures may be used to satisfy future sinking fund
requirements. The debentures are subject to covenants which include certain
limitations on the incurrence of additional debt, and the payment of
dividends.
The industrial revenue bonds are to be repaid in varying installments, with
the final payments due in 1995. The remaining bonds have fixed interest rates
of 81/4%. During fiscal 1993, the company repaid its Portsmouth and a portion
of its Woodstock Industrial Revenue Bonds in the amounts of $0.3 million and
$2.4 million, respectively, as a result of the sales of all or a portion of
these facilities. During fiscal 1994, the company repaid the remainder of the
Woodstock and Milford Industrial Revenue Bonds according to their scheduled
repayment dates.
NOTE 7. FINANCIAL INSTRUMENTS, COMMITMENTS AND CONTINGENCIES
FINANCIAL INSTRUMENTS. The company enters into various types of financial
instruments in the normal course of business. Fair values for certain
financial instruments are based on quoted market prices. For other financial
instruments, fair values are estimated based on assumptions concerning the
amount and timing of estimated future cash flows and assumed discount rates
reflecting varying degrees of perceived risk. Accordingly, the fair values may
not represent actual values of the financial instruments that could have been
realized as of year end or that will be realized in the future.
Fair values for cash and temporary cash investments, marketable securities,
accounts receivable, notes payable, and accounts payable approximate carrying
value at September 24, 1994 and September 25, 1993, due to the relatively
short maturity of these financial instruments. The fair value of investments
and notes receivable, included in other assets, was $4.0 million and $16.2
million at September 24, 1994 and September 25, 1993, respectively, compared
to carrying values of $4.0 million and $6.7 million, respectively. The fair
value of long-term debt, including debt due within one year, at September 24,
1994 and September 25, 1993 was $134.9 million and $157.7 million,
respectively, compared to carrying values of $158.4 million and $160.4 million,
respectively.
Included in other income, net, in the fiscal 1994 Statement of Operations is
a gain of $4.7 million on the sale of an investment held by the company in an
unaffiliated entity. This amount was offset, in part, by a $2.3 million
provision for certain other non-operating charges taken by the company.
Included in other income, net, in fiscal 1993 is a gain of $3.2 million on the
sale of an investment held by the company in the same unaffiliated entity.
This amount was offset, in part, by a $2.8 million provision for certain other
non-operating charges taken by the company.
The company enters into various forward contracts to limit its exposure to
fluctuations in foreign currency exchange rates. As of September 24, 1994, in
connection with the company's foreign exchange hedging programs, the company
had entered into forward exchange contracts to purchase $53.4 million and to
sell $105.9 million in various foreign currencies. The exposure to credit risk
is believed to be minimal since the counterparties are major financial
institutions. The market risk exposure is limited to risk related to currency
rate movements. As substantially all of these contracts were entered into
shortly before year end, the fair value of outstanding contracts at September
24, 1994 approximates the original value of the forward contracts. Between the
end of the fiscal year and September 27, 1994, forward exchange contracts to
purchase $51.8 million and to sell $58.8 million in various foreign currencies
matured and were settled. The remaining contracts mature at various dates
through January 25, 1995.
The company's temporary cash investments, marketable securities and accounts
receivable are subject to potential concentrations of credit risk. The
company's investment policies limit the amount of investments in a single
institution and restrict investments to low-risk, highly liquid securities. A
portion of the company's trade receivables are concentrated in the U.S.
government and in the health care industry. Management does not believe that
the company is subject to any unusual risk beyond the normal credit risk
attendant to operating its business.
In the normal course of business, the company enters into certain sales-type
lease arrangements with customers. These leases are generally sold to third
party financing institutions. A portion of these arrangements contain certain
recourse provisions. The company's maximum exposure under the recourse
provisions was approximately $12.8 million, net of related reserves. A portion
of these receivables are secured by security interests in the related
equipment. The fair value of the recourse obligation at September 24, 1994 was
not determinable as no market exists for these obligations.
LEASE COMMITMENTS. Lease agreements are primarily for sales and service
offices and the company's corporate headquarters. The leases expire at various
dates through 2014 and some contain options for renewal. Rental expense,
including amounts charged against previously established restructuring
reserves for vacant properties, was $32.5 million, $34.4 million, and $36.2
million for fiscal years 1994, 1993, and 1992, respectively.
Future minimum rental payments under existing non-cancelable operating leases as
of September 24, 1994 are as follows:
FISCAL YEAR IN MILLIONS
1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 38.2
1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.4
1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . 23.4
1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.0
1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.4
Subsequent to 1999 . . . . . . . . . . . . . . . . . . . . 61.6
$182.0
A majority of the leases contain escalation clauses which provide for
increases in base rentals to recover increases in future operating costs. The
future minimum rental payments shown above include base rentals, exclusive of
any future escalation. Approximately $59 million, prior to amounts expected to
be recovered through subleases, of the future minimum rental payments shown
above relate to facilities which have been closed or are expected to be closed
as the result of the company's restructuring and cost reduction program. A
portion of the future rental obligations for these facilities, net of amounts
expected to be recovered through existing and future subleases, has been
accrued as part of the restructuring charges.
LITIGATION. The company and certain of its subsidiaries are involved in
various patent infringement, contractual, and proprietary rights suits. In the
opinion of management, the conclusion of these suits will not have a material
adverse effect on the financial condition or results of operations and cash
flows of the company and its subsidiaries.
NOTE 8. STOCKHOLDERS' EQUITY
The company has 100,000,000 authorized shares of common stock. As of September
24, 1994, 36,677,000 shares of common stock have been issued, of which 220,000
shares with a cost of $6.5 million are held by the company as treasury shares.
During fiscal 1994, 1,190,000 additional shares were issued. As of September
25, 1993, 35,487,000 shares of common stock were issued, of which 220,000
shares with a cost of $6.5 million were held by the company as treasury shares.
The company has 1,000,000 authorized shares of $.01 par value preferred stock.
The company's Board of Directors (the "Board") is authorized to issue shares
of preferred stock in such series and with such terms and conditions as the
Board may determine. In connection with the adoption of the company's
Stockholder Rights Plan (see below), 400,000 shares of preferred stock have
been designated as Series A Junior Participating Preferred Stock. No shares of
preferred stock have been issued as of September 24, 1994.
Under the Stockholder Rights Plan adopted in 1986, as amended, a dividend of
Stock Purchase Rights (the "Rights") was paid. The Rights enable common
stockholders to purchase from the company shares of Series A Junior
Participating Preferred Stock under certain circumstances following the
acquisition of, or attempt to acquire, 20% or more of the company's common
stock or a determination that an "adverse person" has purchased 15% or more of
the common stock. The Rights also entitle common stockholders to purchase
shares of the company's or an acquiror's common stock at one-half of market
value under circumstances which include certain transactions by or with a
potential acquiror, including "adverse persons," and mergers and certain
asset sales. The Rights may be redeemed by the company under certain
circumstances. The Rights will expire in October 1996.
NOTE 9. STOCK PLANS
EMPLOYEE QUALIFIED STOCK PURCHASE PLAN. This plan covers substantially all
employees and authorizes the issuance of a maximum of 8,600,000 shares of
common stock upon exercise of nontransferable options granted semiannually.
The options are exercisable six months after grant, at the lower of 85% of
market value at the beginning or end of the six-month period, through
accumulation of payroll deductions of up to 10% of each participating
employee's regular base pay during such period. During fiscal 1994, 2,000,000
additional shares of common stock were authorized for issuance under the plan,
and options were exercised to purchase 729,000 shares at an average price of
$6.96 per share. Unissued shares of common stock reserved for future issuance
under this plan were 1,864,000 shares at September 24, 1994 and 593,000 shares
at September 25, 1993.
EMPLOYEE STOCK OPTION PLAN. This plan authorized the grant of either incentive
stock options or non-qualified stock options to key employees, including
officers and directors, to purchase up to 4,000,000 shares of common stock.
For incentive options, the purchase price is equal to the fair market value on
the date of grant. For non-qualified options the purchase price is determined
by the Employee Stock Option Plan Committee within limits as set forth in the
plan. Options granted under the plan generally are immediately exercisable and
include restrictions against disposition of the shares and a requirement, upon
termination of employment, to offer unvested shares for resale to the company
at their original purchase price. The periods over which restrictions lapse
are determined by the Employee Stock Option Plan Committee. Options may expire
up to ten years after date of grant.
Additional information concerning activity during fiscal 1994 is as follows:
SHARES
RESERVED FOR OPTIONS AVERAGE
FUTURE GRANTS OUTSTANDING PRICE
(000's) (000's) PER SHARE
September 25, 1993. . . . . . 1,536 1,462 $ 8.40
Options granted . . . . . . (1,111) 1,111 5.27
Options exercised . . . . . -- (82) 4.52
Options cancelled . . . . . 172 (172) 8.54
September 24, 1994. . . . . . 597 2,319 $ 7.03
RESTRICTED STOCK OPTION PLAN. This plan authorized the grant of options to key
employees, including officers, directors, and consultants, to purchase up to
11,000,000 shares of the company's common stock. Option prices are determined
by the Restricted Stock Option Plan Committee within limits as set forth in
the plan. Options granted are immediately exercisable and include restrictions
against disposition of the shares and a requirement, upon termination of
employment, to offer unvested shares for resale to the company at their
original purchase price. The periods over which restrictions lapse are
determined by the Restricted Stock Option Plan Committee. Employees may use
previously acquired shares of the company's common stock to pay the exercise
price of shares purchased. Company policy requires that shares tendered by an
employee to exercise an option be held by the employee for a minimum period of
three months prior to the exercise date.
Additional information concerning activity during fiscal 1994 is as follows:
SHARES
RESERVED FOR OPTIONS AVERAGE
FUTURE GRANTS OUTSTANDING PRICE
(000's) (000's) PER SHARE
September 25, 1993. . . . . . 490 2,941 $ 4.27
Options granted . . . . . . (268) 268 3.84
Options exercised . . . . . -- (379) 3.68
Options cancelled . . . . . 199 (199) 6.13
September 24, 1994. . . . . . 421 2,631 $ 4.17
NON-EMPLOYEE DIRECTOR RESTRICTED STOCK OPTION PLAN. This plan authorized the
grant of an option to purchase 4,000 shares of common stock to each
non-employee director upon his initial election to the Board of Directors. The
exercise price of options granted is the lesser of 50% of the book value per
share of common stock at the end of the fiscal year preceding the date of
grant or 25% of the fair market value per share on the date of grant. An
aggregate of 32,000 shares of common stock may be issued under the plan.
Options granted are immediately exercisable and include restrictions against
disposition of the shares. Should the optionee cease to serve as a director,
except under certain circumstances, any restricted shares must be offered to
the company at their original purchase price. Restrictions lapse cumulatively
to the extent of 25% of the grant on each anniversary of the date of grant.
During fiscal 1994, options to purchase 4,000 shares at an average price of
$1.81 per share were issued. At September 24, 1994, options to purchase 12,000
shares at an average purchase price of $5.56 per share were outstanding, and
8,000 shares were reserved for future grants. This plan will terminate on
December 31, 1994.
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN. This plan authorizes the grant of an
option to purchase 4,000 shares of common stock to each non-employee director
on the date of his annual election(s) to the Board of Directors. The exercise
price of options granted is 100% of the closing price per share of common
stock on the date of grant. An aggregate of 150,000 shares of common stock may
be issued under the plan. The plan was adopted in fiscal 1994 and will
terminate on December 31, 2004. Options granted are immediately exercisable
and include restrictions against disposition of the shares. Should the
optionee cease to serve as a director, except under certain circumstances, any
restricted shares must be offered to the company at their original purchase
price. Restrictions lapse cumulatively to the extent of 25% of the grant on
each anniversary of the date of grant. During fiscal 1994, 16,000 options were
granted at an average price of $8.50 per share. At September 24, 1994, options
to purchase 16,000 shares at an average price of $8.50 per share were
outstanding and 134,000 shares were reserved for future grants.
In connection with the Restricted Stock Option Plan, the Non-Employee Director
Restricted Stock Option Plan, and non-qualified options issued under the
Employee Stock Option Plan, the aggregate excess of fair market value over
option price on the dates of grant is treated as deferred compensation. Such
deferred compensation is amortized to expense over the period of the
restrictions and is credited to additional paid-in capital.
NOTE 10. BENEFIT PLANS IN THOUSANDS
The company has a noncontributory defined benefit pension plan which covers
substantially all U.S. employees. The company also has a supplemental
retirement benefit plan, which covers certain U.S. employees. Benefits under
the plans are based on an employee's regular base pay and creditable years of
service, as defined in the plans. Certain of the company's foreign
subsidiaries also have retirement plans covering substantially all of their
employees. Benefits under these plans are generally based on either career
average or final average salaries and creditable years of service, as defined
in the plans. Prior service costs are amortized over the average remaining
service period of employees expected to receive benefits under the plan. Funds
contributed to the plans are invested primarily in common stocks, mutual funds,
insurance contracts and cash equivalent securities.
The components of net pension expense are as follows:
YEAR ENDED
SEPT. 24, SEPT. 25, SEPT. 26,
1994 1993 1992
Service cost . . . . . . . . . . . . . . . . .$ 8,608 $ 7,835 $ 7,770
Interest on projected benefit obligation . . . 10,506 9,380 8,443
Actual return on plan assets . . . . . . . . . (3,286) (12,629) (6,566)
Deferral of net actuarial gains (losses)
and amortization of transition surplus
and prior service cost. . . . . . . . . . . (6,083) 5,636 (285)
Curtailment loss, net of settlement gain . . . 533 -- --
Net pension expense . . . . . . . . . . . .$10,278 $10,222 $ 9,362
The funded status of the plans is as follows:
SEPT. 24, SEPT. 25,
1994 1993
ACTUARIAL PRESENT VALUE OF BENEFIT OBLIGATIONS:
Vested benefit obligation . . . . . . . . . . . . . $116,057 $116,176
Accumulated benefit obligation. . . . . . . . . . . $121,602 $122,288
Projected benefit obligation. . . . . . . . . . . . $137,777 $140,822
Market value of plan assets. . . . . . . . . . . . . . 104,449 98,779
Excess of projected benefit obligation over plan
assets. . . . . . . . . . . . . . . . . . . . . . . 33,328 42,043
Unrecognized actuarial gain (loss) . . . . . . . . . . 1,370 (10,300)
Unrecognized prior service cost. . . . . . . . . . . . (17,072) (20,714)
Unrecognized transition surplus, net . . . . . . . . . 9,125 10,053
Adjustment required to recognize minimum liability . . -- 6,307
Net pension liability included in current and other. .
liabilities . . . . . . . . . . . . . . . . . . . . $ 26,751 $ 27,389
ASSUMPTIONS USED IN COMPUTING THE FUNDED STATUS OF THE PLANS:
Weighted average discount rate. . . . . . . . . . . 8.04% 7.68%
Expected long-term weighted average rate of return.
on assets. . . . . . . . . . . . . . . . . . . . 9.57% 8.82%
Weighted average rate of increase in compensation .
levels . . . . . . . . . . . . . . . . . . . . . 4.49% 4.45%
The assumptions used to compute the funded status of certain plans were
changed in fiscal 1994. The changes in assumptions resulted in decreases of
$8,500, $8,500, and $10,100, in the vested benefit obligation, accumulated
benefit obligation, and projected benefit obligation, respectively. The
assumptions used to compute the funded status of certain plans were changed in
fiscal 1993. The changes in assumptions resulted in increases of $8,200,
$8,400, and $8,200, in the vested benefit obligation, accumulated benefit
obligation, and projected benefit obligation, respectively.
SFAS 87 requires recognition of a minimum pension liability to reflect the
excess of accumulated benefits over the fair value of pension plan assets for
defined benefit plans. As a result, the company recorded a minimum pension
liability of $6,307 in fiscal 1993, with an offsetting intangible asset. Since
the fair value of the pension plan assets and accrued liability exceeds
accumulated benefits, no minimum pension liability was required at September
24, 1994.
As a result of the company's restructuring and cost containment programs, a
pension curtailment loss of $652 was recognized in fiscal 1994. This amount
had been previously reserved as part of the fiscal 1993 restructuring charge.
The company also has foreign defined contribution pension plans. Total pension
cost charged to expense for these plans was $1,464 in fiscal 1994, $2,288 in
fiscal 1993, and $1,722 in fiscal 1992.
The company's postretirement benefit plan provides certain medical and life
insurance benefits for retired employees. Substantially all U.S. employees of
the company may become eligible for these benefits if they remain employed
until normal retirement age and fulfill other eligibility requirements as
specified by the plan. With the exception of certain participants who retired
prior to 1986, the medical benefit plan requires monthly contributions by
retired participants in amounts equal to insured equivalent costs less a fixed
company contribution which is dependent on the participant's length of service
and Medicare eligibility. Benefits are continued to dependents of eligible
retiree participants for 39 weeks after the death of the retiree. The life
insurance benefit plan is noncontributory. Funds contributed to the plan are
invested primarily in common stocks, mutual funds and cash equivalent
securities.
The components of net periodic postretirement benefit cost are as follows:
YEAR ENDED
SEPT. 24, SEPT. 25, SEPT. 26,
1994 1993 1992
Service cost . . . . . . . . . . . . . . . . . $ 345 $ 316 $ 294
Interest on accumulated benefit obligation . . 676 680 677
Actual return on plan assets . . . . . . . . . (339) (212) (366)
Deferral of net actuarial gains and
amortization of transition obligation
and prior service costs . . . . . . . . . . . 482 407 564
Net periodic postretirement benefit cost. . $1,164 $1,191 $1,169
The funded status of the plan is as follows:
SEPT. 24, SEPT. 25,
1994 1993
ACCUMULATED POSTRETIREMENT BENEFIT OBLIGATION:
Retirees. . . . . . . . . . . . . . . . . . . . . . . . $4,217 $4,008
Fully eligible active plan participants . . . . . . . . 1,194 1,515
Other active plan participants. . . . . . . . . . . . . 3,229 4,095
Total accumulated postretirement benefit obligation. . . . 8,640 9,618
Market value of plan assets. . . . . . . . . . . . . . . . 955 622
Excess of accumulated postretirement benefit obligation. .
over plan assets. . . . . . . . . . . . . . . . . . . . . 7,685 8,996
Unrecognized transition obligation . . . . . . . . . . . . (2,821) (2,997)
Unrecognized prior service cost. . . . . . . . . . . . . . (934) (1,006)
Unrecognized actuarial gain (loss) . . . . . . . . . . . . 454 (1,065)
Net postretirement benefit liability included. . . . . . . $4,384 $3,928
in current and other liabilities. . . . . . . . . . . . .
ASSUMPTIONS USED IN COMPUTING THE FUNDED STATUS OF THE PLAN:
Discount rate . . . . . . . . . . . . . . . . . . . . . 8.0% 7.5%
Expected long-term rate of return on assets . . . . . . 10.0% 9.0%
The assumptions used to compute the funded status of the plan were changed in
fiscal 1994 and fiscal 1993. The change in assumptions did not result in a
material change in the accumulated postretirement benefit obligation in either
year. Prior service cost results from a plan amendment effective October 1,
1991, which increased amounts payable for employees who retire after December
31, 1985. Prior service costs are amortized over the average remaining service
period of the employees expected to receive benefits under the plan.
For participants who receive full retiree medical benefits, the medical
premium rates were assumed to increase at the following rates: fiscal year
1994 - 11%; thereafter - 7%. A 1% increase in the medical trend rate would not
have a significant impact on the accumulated postretirement benefit obligation
as of October 1, 1994.
During fiscal 1994, the company dissolved the Voluntary Employees' Beneficiary
Association trust which funded the cost of employee medical, life, long-term
disability, and dental insurance benefits for the company's full-time
permanent U.S. employees. Administration and funding of these benefit plans
is now handled directly by the company with no changes in the coverages
provided to employees. Amounts charged to expense are based on projected
benefit levels determined on an annual basis.
NOTE 11. GEOGRAPHIC SEGMENT DATA IN THOUSANDS
The company's operations involve a single industry segment - the design,
manufacture, sale and support of multi-user computer systems, servers, and
mass storage devices.
Financial information, summarized by geographic area, is presented below.
OTHER
UNITED INTER- ELIMINA- CONSOLI-
STATES EUROPE NATIONAL TIONS DATED
YEAR ENDED SEPTEMBER 24, 1994:
Total revenues:
Unaffiliated customers. . $691,516 $303,754 $125,235 $1,120,505
Interarea transfers . . . 149,008 -- 18,084 $(167,092) --
Total . . . . . . . . . $840,524 $303,754 $143,319 $(167,092) $1,120,505
Restructuring charge. . . . $ 20,800 $ 12,000 $ 2,200 $ 35,000
Income (loss) from
operations. . . . . . . . $(48,555) $(18,282) $(16,951) $ 4,010 $ (79,778)
Identifiable assets . . . . $559,893 $239,669 $101,110 $(179,389) $ 721,283
Corporate assets. . . . . . 100,581
Total assets. . . . . . . $ 821,864
YEAR ENDED SEPTEMBER 25, 1993:
Total revenues:
Unaffiliated customers. . $614,823 $342,945 $120,101 $1,077,869
Interarea transfers . . . 208,675 -- 20,859 $(229,534) --
Total . . . . . . . . . $823,498 $342,945 $140,960 $(229,534) $1,077,869
Restructuring charge. . . . $ 7,300 $ 15,300 $ 2,400 $ 25,000
Income (loss) from
operations. . . . . . . . $(11,213) $(22,760) $(21,148) $ 6,360 $ (48,761)
Identifiable assets . . . . $561,921 $297,923 $ 96,602 $(194,630) $ 761,816
Corporate assets. . . . . . 104,513
Total assets. . . . . . . $ 866,329
YEAR ENDED SEPTEMBER 26, 1992:
Total revenues:
Unaffiliated customers. . $613,406 $384,465 $118,076 $1,115,947
Interarea transfers . . . 199,249 -- 27,105 $(226,354) --
Total . . . . . . . . . $812,655 $384,465 $145,181 $(226,354) $1,115,947
Restructuring charge. . . . $ 21,000 $ 25,700 $ 1,300 $ 48,000
Income (loss) from
operations. . . . . . . . $(18,415) $(30,185) $(13,519) $ 6,155 $ (55,964)
Identifiable assets . . . . $563,147 $299,614 $ 95,898 $(152,092) $ 806,567
Corporate assets. . . . . . 133,887
Total assets. . . . . . . $ 940,454
United States interarea transfers primarily represent shipments of equipment
and parts to international subsidiaries. Other International interarea
transfers primarily represent shipments of work in process and finished goods
inventory from manufacturing facilities to domestic operations. These
interarea shipments are made at transfer prices which approximate prices
charged to unaffiliated customers and have been eliminated from consolidated
net revenues. United States revenues from unaffiliated customers include direct
export sales. Corporate assets consist primarily of temporary cash investments
and marketable securities.
Total liabilities of international subsidiaries, before intercompany
eliminations, were $295,651 at September 24, 1994 and $296,892 at September 25,
1993. Cumulative retained earnings of international subsidiaries were $109,541
at September 24, 1994 and $109,070 at September 25, 1993.
NOTE 12. SUBSEQUENT EVENT
Subsequent to the end of the fiscal year, the company settled with Northrup
Grumman Corporation its six-year software copyright infringement and trade
secrets litigation against Grumman Systems Support Corporation ("Grumman").
Under the terms of the settlement, Grumman paid the company $53 million and
the parties have dismissed all pending litigation. The settlement will result
in a pre-tax gain, net of related legal fees and other expenses, of $44.5
million which the company will recognize in its first quarter fiscal 1995
financial statements.
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF DATA GENERAL CORPORATION
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of cash flows, and of stockholders'
equity present fairly, in all material respects, the financial position of
Data General Corporation and its subsidiaries at September 24, 1994 and
September 25, 1993, and the results of their operations and their cash flows
for each of the three years in the period ended September 24, 1994, in
conformity with generally accepted accounting principles. 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 of these statements in accordance with
generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
October 26, 1994
SUPPLEMENTAL FINANCIAL INFORMATION
DATA GENERAL CORPORATION
QUARTERLY FINANCIAL DATA (UNAUDITED)
FIRST SECOND THIRD FOURTH FISCAL
IN MILLIONS, EXCEPT PER SHARE QUARTER QUARTER QUARTER QUARTER YEAR
AMOUNTS
FISCAL 1994:
Total revenues . . . . . . . . . . $261.2 $282.9 $283.8 $292.6 $1,120.5
Total cost of revenues . . . . . . 169.2 185.8 187.8 190.3 733.1
Net loss . . . . . . . . . . . . . (21.1) (48.0)(a) (12.4) (6.2) (87.7)
Net loss per share . . . . . . . . $ (.60) $(1.35) $ (.34) $ (.17) $ (2.45)
Net loss per share
assuming full dilution. . . . . . $ (.60) $(1.35) $ (.34) $ (.17) $ (2.45)
FISCAL 1993:
Total revenues . . . . . . . . . . $279.6 $267.5 $252.4 $278.4 $1,077.9
Total cost of revenues . . . . . . 163.3 160.4 156.7 174.3 654.7
Net income (loss). . . . . . . . . 0.8 (7.6) (16.4) (37.3)(a) (60.5)
Net income (loss) per share. . . . $ .02 $ (.22) $ (.47) $(1.06) $ (1.73)
Net income (loss) per share
assuming full dilution. . . . . . $ .02 $ (.22) $ (.47) $(1.06) $ (1.73)
(a) Includes $35.0 million and $25.0 million provision in fiscal years 1994 and
1993, respectively, for estimated expenses resulting from corporate-wide
restructuring and cost reduction programs (See Note 2 of Notes to Consolidated
Financial Statements).
STOCK PRICE RANGE
FISCAL 1994 FISCAL 1993
HIGH LOW HIGH LOW
First quarter . . . . . . . . . . 10-3/4 8-3/4 13 9-5/8
Second quarter. . . . . . . . . . 10 7-3/8 13-7/8 10-7/8
Third quarter . . . . . . . . . . 8 6-3/4 12-5/8 8-3/4
Fourth quarter. . . . . . . . . . 10 7-3/8 9-7/8 7-3/4
Data General does business in more than 70 countries through direct sales,
subsidiaries, distributors and representatives. The company has 29
subsidiaries and approximately 250 sales and service offices. Major
administrative, development, manufacturing and support facilities, and
subsidiaries' headquarter locations are listed below.
FACILITY LOCATION
(Approximate Square Feet)
Westboro, Massachusetts corporate headquarters; administration;
(850,000/Leased)* product development; special systems
Southboro, Massachusetts manufacturing service division; software
(545,000)** reproduction; distribution center; refurbished
equipment; major unit repair; custom product
manufacturing; field engineering services and
logistics
Apex, North Carolina assembly, test and systems integration facility
(300,000)
Research Triangle Park, advanced systems research and development
North Carolina
(174,000)
Norcross, Georgia customer support center
(105,000/Leased)
Mississauga, Ontario sales; field engineering; administration
Canada
(35,000/Leased)
Etobicoke, Ontario, Canada product repair center
(15,000/Leased)
Chihuahua, Mexico product repair center
(67,000/Leased)
Schwalbach, Germany sales; customer education; services;
(45,200/Leased) administration
Brentford, England sales; services; administration; customer
(120,000/Leased)*** education
Manila, Philippines power supply and transformer manufacturing;
(68,000) communications products assembly and test
Melbourne, Australia product repair center; logistics and refurbished
(31,000/Leased) equipment
* Ongoing space reductions during fiscal 1995 will result in a maximum of
490,000 square feet of occupied lease space.
** Includes 40,000 square-feet of space leased to a third party, and
200,000 square feet available for lease.
***Includes 26,000 square-feet of sub-leased space.
As part of its consolidation efforts, Data General has for sale,
facilities in Woodstock, Connecticut and Milford, Massachusetts.
SUBSIDIARY HEADQUARTERS
Canada Toronto/Mississauga
ASIA/PACIFIC
Australia Sydney
Hong Kong
Japan Tokyo
Korea Seoul
New Zealand Wellington
Singapore
EUROPE
Austria Vienna
Belgium Brussels
Denmark Copenhagen/Glostrup
Finland Helsinki/Espoo
France Paris/Meudon-la-Foret
Germany Frankfurt/Schwalbach
Italy Milan
Netherlands Amsterdam
Norway Olso/Voyenenga
Portugal Lisbon/Amadora
Spain Madrid
Sweden Stockholm/Kista
Switzerland Zurich
United Kingdom
and Ireland London/Brentford
LATIN AMERICA
Argentina Buenos Aires
Brazil Rio de Janeiro
Chile Santiago
Mexico Monterrey
Peru Lima
Puerto Rico San Juan
Venezuela Caracas
Frederick R. Adler Director, Chairman of the Executive Committee;
Retiring Senior Partner, Fulbright & Jaworski L.L.P.,
Attorneys at Law, New York, New York
Ethan Allen Jr. Vice President, Customer Services
Stephen P. Baxter Vice President, General International Area Sales
Ferdinand Colloredo- Director; Chairman of the Board, Cabot
Mansfeld Partners Limited Partnership, Boston, Massachusetts
William J. Cunningham Vice President, Manufacturing and Corporate Quality
Arthur W. DeMelle Vice President; Chief Financial Officer
Jacob Frank Vice President and General Counsel
John J. Gavin Jr. Treasurer
Stephen Gardner Vice President, Strategic Alliances
Angelo Guadagno Vice President, U.S. Sales
Robert C. Hughes Vice President, Worldwide Sales
Carl E. Kaplan Secretary; Senior Partner, Fulbright & Jaworski L.L.P.,
Attorneys at Law, New York, New York
Robert C. McBride Vice President; Controller
John G. McElwee Director; Retired Chairman, John Hancock Mutual Life
Insurance Company, Boston, Massachusetts
Anthony C. Nicoletti Vice President, Asia/Pacific Sales
Claes L. Nordwall Vice President, Europe Sales
James J. Ryan Vice President, Information Management Group
Joel Schwartz Vice President, AViiON Business Unit
Ronald L. Skates President and Chief Executive Officer; Director
W. Nicholas Thorndike* Director; Corporate Director and Trustee
Donald H. Trautlein Director; Retired Chairman, Bethlehem Steel
Corporation, Bethlehem, Pennsylvania
Richard L. Tucker* Director; Managing Director, Trinity Investment
Management Corporation, Boston, Massachusetts
J. Thomas West Senior Vice President, Advanced Development
William L. Wilson* Vice President
Donald P. Zereski Vice President, Worldwide Services
*Elected during 1994
DIVISION VICE PRESIDENTS
Anthony P. DiBona ECLIPSE Business Unit
David J. Ellenberger AViiON Marketing
Larry D. Hemmerich CLARiiON Business Unit
Lee D. Henning Sales Methodologies
Edward F. Pensel Manufacturing Operations
James Rothnie** Software Development
Michael I. Schneider Special Systems
Robert Van Steenberg AViiON Systems Development
William L. Zastrow Imaging Business Unit
**Appointed during 1994
CORPORATE HEADQUARTERS Data General Corporation
4400 Computer Drive
Westboro, Mass. 01580
(508) 898-5000
LEGAL COUNSEL Fulbright & Jaworski L.L.P
New York, New York
INDEPENDENT ACCOUNTANTS Price Waterhouse LLP
Boston, Mass.
DEBENTURE TRUSTEES Fleet National Bank
63 Wall Street
New York, New York 10005
State Street Bank and Trust
225 Franklin Street
Boston, Mass. 02110
TRANSFER AGENT AND REGISTRAR First Chicago Trust Company of New York
Inquiries related to address changes,
consolidations or legal transfers should be
directed to:
First Chicago Trust Company of New York
Post Office Box 2500
Jersey City, NJ 07303
or call (201) 324-0498
STOCK EXCHANGE LISTING New York Stock Exchange
London Stock Exchange
Unlisted trading privileges on Boston,
Midwest, Philadelphia, Pacific and
Cincinnati exchanges
TRADING SYMBOL DGN
ANNUAL MEETING The Annual Meeting of Stockholders will be held
at 1:00 p.m., Wednesday, January 25, 1995 in the
Enterprise Room, State Street Bank Building, 225
Franklin Street, Boston, Mass.
NUMBER OF STOCKHOLDERS As of September 24, 1994 there were approximately
12,500 stockholders of record. This number
excludes individual stockholders holding stock
under nominee security position listings.
DIVIDEND POLICY No cash dividends have been declared or paid by
the company since its inception. It is the policy
of the company to retain any cash flow for future
business expansion. The company anticipates no
changes in this policy in the foreseeable future.
AVAILABLE PUBLICATIONS The company's Annual Report and Interim Reports
are distributed regularly to stockholders. The
Annual Report on Form 10-K and Quarterly Reports
on Form 10-Q as filed with the Securities and
Exchange Commission, and other information is
available on written request to: Corporate
Communications Department, MS-B221, Data General
Corporation, 4400 Computer Drive, Westboro, Mass.
01580
THE COMMON SENSE CONNECTION: As a service to stockholders, customers, partners,
and others interested in Data General, the
company provides a comprehensive, interactive
information library available on the Internet.
Called "The Common Sense Connection," this
service offers the latest news releases, product
and service information, and a wide range of other
information about Data General. To access this
service, you can:
* Log on to our public server at www.dg.com or
gopher.dg.com
* Request information using e-mail to
[email protected]
* Dial our FAX-back system at 1-800-99-DGFAX
(North America only) and press 411 to receive a
faxed menu of publications
* Call Data General Corporation at 1-800-DATAGEN
Exhibit 22
Subsidiaries of Registrant.
The following are the company's subsidiaries as of the close of the
fiscal year ended September 24, 1994. All beneficial interests are
wholly-owned, directly or indirectly, by the company, with the exception of
Data General Technology (1990) Limited which is 45% owned. All
subsidiaries are included in the company's consolidated financial
statements.
State or
Jurisdiction of
Name Organization
Asia Data General Corporation Delaware
China Data General Corporation Delaware
Clariion Storage Systems, Inc. Delaware
DG Argentina S.A. Argentina
DG Foreign Sales Corp., Inc. Virgin Islands
DG Venezuela C.A. Venezuela
Data General A.G. Switzerland
Data General A/S Norway
Data General A/S Denmark
Data General Africa SARL France
Data General Australia Pty., Ltd. Australia
Data General Bahamas, Ltd. Bahamas
Data General Chile S.A. Chile
Data General (Canada) Inc. Canada
Data General Computers Sdn, Bhd. Malaysia
Data General Gesellschaft mbH Austria
Data General AB Sweden
Data General Costa Rica, S.A. Costa Rica
Data General de Mexico, S.A. de C.V. Mexico
Data General del Peru, S.A. Peru
Data General Europe, Inc. Delaware
Data General France SARL France
Data General GmbH Germany
Data General Graphics, Inc. Delaware
Data General Nederland BV The Netherlands
Data General Hong Kong, Ltd. Hong Kong
Data General Hong Kong Sales and Service, Ltd. Hong Kong
Data General Hungary Hungary
Data General International, Inc. Delaware
Data General International Manufacturing Pte., Ltd. Singapore
Data General International Sales Corporation Delaware
Data General Investment Corporation Delaware
Data General Ireland, Ltd. Ireland
Data General Israel, Ltd. Israel
Data General Japan YK Japan
Data General Korea Ltd. Korea
Data General Ltda. Brazil
Data General Latin America, Inc. Delaware
Data General Limited United Kingdom
Data General New Zealand, Limited New Zealand
Data General OY Finland
Data General Philippines, Inc. Philippines
Data General (Portugal) Sociedade de Computadores Lda. Portugal
Data General Puerto Rico, Inc. Delaware
Data General S.A. Belgium
Data General S.A. Spain
Data General S.p.A. Italy
Data General Singapore Pte., Ltd. Singapore
Data General Technology (1990) Limited Israel
Data General Telecommunications, Inc. Delaware
Data General Systems (Thailand) Limited Thailand
Datagen, Inc. Delaware
Datagen Investment Trust Delaware
Digital Computer Controls, Inc. Delaware
General Risk Insurance Company Ltd. Bermuda
Exhibit 24
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the
Prospectuses constituting part of the Registration Statements
on Form S-8 (Nos. 2-91481, 33-11527, 33-19759, 33-33300, 33-53039,
and 33-53041) of Data General Corporation of our report dated
October 26, 1994 appearing on page 30 of the 1994 Annual Report to
Stockholders which is incorporated in this Annual Report on
Form 10-K. We also consent to the incorporation by reference
of our report on the Financial Statement Schedules, which
appears on page 19 of this Form 10-K.
PRICE WATERHOUSE LLP
/s/ Price Waterhouse LLP
Boston, Massachusetts
December 16, 1994
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<ARTICLE> 5
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<FISCAL-YEAR-END> SEP-24-1994
<PERIOD-END> SEP-24-1994
<PERIOD-TYPE> YEAR
<CASH> 142,448
<SECURITIES> 47,865
<RECEIVABLES> 272,461
<ALLOWANCES> 13,752
<INVENTORY> 118,412
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<PP&E> 642,924
<DEPRECIATION> 478,147
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<CURRENT-LIABILITIES> 232,066
<BONDS> 156,942
0
0
<COMMON> 434,757
<OTHER-SE> (126,125)
<TOTAL-LIABILITY-AND-EQUITY> 821,864
<SALES> 722,423
<TOTAL-REVENUES> 1,120,505
<CGS> 483,808
<TOTAL-COSTS> 1,165,283
<OTHER-EXPENSES> 35,000
<LOSS-PROVISION> 9,919
<INTEREST-EXPENSE> 8,168
<INCOME-PRETAX> (85,593)
<INCOME-TAX> 2,100
<INCOME-CONTINUING> (87,693)
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<NET-INCOME> (87,693)
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