<PAGE> 1
Schedule 14A Information
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X ]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec. 240.14a-11(c) or
Sec. 240.14a-12
DATA GENERAL CORPORATION
- ---------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- ---------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X ] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction
applies:
- ----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- ----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
- ----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- ----------------------------------------------------------------------
(5) Total fee paid:
- ----------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials. [ ] Check box if any part of
the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the
filing for which the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule and the date of
its filing.
(1) Amount Previously Paid:
- ----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- ----------------------------------------------------------------------
(3) Filing Party:
- ----------------------------------------------------------------------
(4) Date Filed:
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<PAGE> 2
[DATA GENERAL LOGO] (508) 898-5000
- --------------------------------------------------------------------------------
4400 COMPUTER DRIVE, WESTBORO, MASSACHUSETTS 01580
December 18, 1996
Dear Fellow Stockholder:
You are cordially invited to attend the Company's Annual Meeting of
Stockholders to be held at 11:00 A.M., Eastern Standard Time, on Wednesday,
January 29, 1997, at the Enterprise Room, Fifth Floor, State Street Bank and
Trust Company, 225 Franklin Street, Boston, Massachusetts.
This year in addition to electing directors, you are being asked to approve
an amendment to the Employee Qualified Stock Purchase Plan increasing the number
of shares available under that Plan. Your Board of Directors urges you to read
the accompanying proxy statement and recommends that you vote "FOR" Proposals
Nos. 1 and 2.
At the meeting, the Board of Directors will also report on the Company's
affairs and a discussion period will be provided for questions and comments.
The Board of Directors appreciates and encourages stockholder participation
in the Company's affairs. Whether or not you plan to attend the meeting, it is
important that your shares be represented. Please sign, date, and mail the
enclosed Proxy in the envelope provided at your earliest convenience.
Thank you for your cooperation.
Very truly yours,
/s/ Ronald L. Skates
-------------------------------------
Ronald L. Skates
President and Chief Executive Officer
<PAGE> 3
DATA GENERAL CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Westboro, Massachusetts
December 18, 1996
The Annual Meeting of Stockholders of Data General Corporation will be held
at the Enterprise Room, Fifth Floor, State Street Bank and Trust Company, 225
Franklin Street, Boston, Massachusetts, on Wednesday, January 29, 1997, at 11:00
A.M., Eastern Standard Time, for the following purposes:
1. To elect seven directors for the ensuing year.
2. To approve an amendment to the Company's Employee Qualified Stock
Purchase Plan to increase the number of shares that may be issued
thereunder from 8,600,000 to 11,100,000 shares.
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Stockholders of record at the close of business on December 2, 1996 will be
entitled to notice of and to vote at the meeting or any adjournment thereof.
Stockholders are requested promptly to complete, sign, date and return the
enclosed form of proxy in the envelope provided. No postage is required if
mailed in the United States.
Carl E. Kaplan
Secretary
<PAGE> 4
DATA GENERAL CORPORATION
4400 COMPUTER DRIVE
WESTBORO, MASSACHUSETTS 01580
---------------
PROXY STATEMENT
---------------
GENERAL INFORMATION
PROXY SOLICITATION
This Proxy Statement is furnished to the holders of the Common Stock, $.01
par value per share ("Common Stock"), of Data General Corporation (the
"Company") in connection with the solicitation of proxies on behalf of the Board
of Directors of the Company for use at the Annual Meeting of Stockholders to be
held on January 29, 1997, or at any adjournment thereof, pursuant to the
accompanying Notice of Annual Meeting of Stockholders. The purposes of the
meeting and the matters to be acted upon are set forth in the accompanying
Notice of Annual Meeting of Stockholders. The Board of Directors knows of no
other business that will come before the meeting.
Proxies for use at the meeting will be mailed to stockholders on or about
December 18, 1996, and will be solicited chiefly by mail, but additional
solicitations may be made by telephone or telegram. The Company has retained
Morrow & Co., Inc. to assist it with the solicitation, at an estimated fee of
$6,000, plus reimbursement of out-of-pocket expenses. The Company may enlist the
assistance of brokerage houses and banks in soliciting proxies. All solicitation
expenses, including costs of preparing, assembling and mailing proxy material,
will be borne by the Company.
REVOCABILITY AND VOTING OF PROXY
A form of proxy for use at the meeting and a return envelope for the proxy
are enclosed. Stockholders may revoke the authority granted by their execution
of proxies at any time before their effective exercise by filing with the
Secretary of the Company a written revocation or duly executed proxy bearing a
later date or by voting in person at the meeting. Shares represented by executed
and unrevoked proxies will be voted in accordance with the choice or
instructions specified thereon. Shares represented by executed proxies which
abstain from one or all matters to be acted upon at the meeting and broker
non-votes will be considered for the purpose of determining whether or not a
quorum is present at the meeting but will not be considered in determining
whether or not the matter for which authority to vote has been properly withheld
is approved by an affirmative vote of the requisite percentage of the shares
voting on such matter. ("Broker non-votes" are shares held by brokers or
nominees which are present in person or represented by proxy, but which are not
voted on a particular matter because instructions have not been received from
the beneficial owner.) The affirmative vote of the holders of a plurality of the
shares of Common Stock present or represented at the meeting is required for the
election of directors. The approval of the holders of a majority of the shares
of Common Stock present or represented by proxy and entitled to vote at the
Annual Meeting is required for approval of Proposal No. 2. If no specifications
are given, the proxies intend to vote the shares represented thereby "FOR"
Proposals Nos. 1 and 2 as set forth in the accompanying Notice of Annual Meeting
of Stockholders and in accordance with their best judgment on any other matters
that may properly come before the meeting.
Only stockholders of record at the close of business on December 2, 1996,
are entitled to notice of and to vote at the Annual Meeting or any adjournment
thereof. The Company had outstanding on December 2, 1996, 39,730,069 shares of
Common Stock, each of which is entitled to one vote upon the matters to be
presented at the meeting.
1
<PAGE> 5
BENEFICIAL OWNERSHIP OF COMMON STOCK
<TABLE>
The following table sets forth information as of November 15, 1996,
regarding the beneficial ownership of the Company's Common Stock of (i) each
person known to the Company to own beneficially more than five percent of the
Company's outstanding Common Stock, (ii) the most highly compensated executive
officers of the Company, other than the chief executive officer, and (iii) all
present executive officers and directors of the Company as a group.
<CAPTION>
AMOUNT AND NATURE PERCENTAGE OF
NAME AND ADDRESS OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP COMMON STOCK
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Norwest Corporation and its subsidiaries
Sixth and Marquette
Minneapolis, Minnesota 55479................................ 3,030,235(1) 7.6%
Brandywine Asset Management, Inc.
3 Christina Centre, 201 North Walnut Street, Suite 1200
Wilmington, Delaware 19801.................................. 2,096,795(2) 5.3%
William J. Cunningham............................................. 181,442(3) .5%
Arthur W. DeMelle................................................. 127,500(4) .3%
Joel Schwartz..................................................... 154,462(5) .4%
J. Thomas West.................................................... 117,061(6) .3%
All present executive officers and directors
as a group (twelve persons).................................. 2,398,800(7) 6.0%
<FN>
- --------------
(1) This figure is based on information set forth in the amendment to the
Schedule 13G, dated January 22, 1996 (the "Norwest Schedule"), filed by
Norwest Corporation and affiliates, as a group ("Norwest"), with the
Securities and Exchange Commission. The Norwest Schedule states that
Norwest has the sole power to dispose or direct the disposition of
3,027,735 of such shares, shared power to dispose or direct the disposition
of 200 of such shares, sole power to vote or direct the vote of 2,566,435
of such shares, and shared power to vote or direct the vote of 200 of such
shares.
(2) This figure is based on information set forth in the amendment to the
Schedule 13G, dated February 22, 1996 (the "Brandywine Schedule"), filed by
Brandywine Asset Management, Inc. ("Brandywine"), with the Securities and
Exchange Commission. The Brandywine Schedule states that Brandywine has the
sole power to dispose or direct the disposition of 1,907,745 of such shares
and that Brandywine has the sole power to vote or direct the vote of
1,907,745 of such shares.
(3) Includes 164,256 shares of Common Stock that may be acquired through
exercise of stock options.
(4) Includes 127,500 shares of Common Stock that may be acquired through
exercise of stock options.
(5) Includes 154,362 shares of Common Stock that may be acquired through
exercise of stock options.
(6) Includes 116,861 shares of Common Stock that may be acquired through
exercise of stock options.
(7) Includes 1,952,534 shares of Common Stock that may be acquired through
exercise of stock options and 5,208 shares of common stock issuable upon
conversion of $100,000 principal amount of 7-3/4% convertible debentures
due 2001.
</TABLE>
2
<PAGE> 6
PROPOSAL NO. 1 -- ELECTION OF SEVEN DIRECTORS
Seven directors (constituting the entire Board) are to be elected at the
meeting. Unless otherwise specified, the enclosed proxy will be voted in favor
of the persons named below to serve until the next annual meeting of
stockholders and until their successors shall have been duly elected and shall
qualify. Each person named below is now a director of the Company. In the event
any of these nominees shall be unable to serve as a director, discretionary
authority is reserved to vote for a substitute. The Board of Directors has no
reason to believe that any of these nominees will be unable to serve.
<TABLE>
The nominees, their ages, the year in which each first became a
director, their principal occupations or employment during the past five years,
and the number and percentage of shares of Common Stock beneficially owned by
each, are:
<CAPTION>
AMOUNT AND
YEAR NATURE (1)
FIRST OF PERCENTAGE
BECAME PRINCIPAL OCCUPATION DURING BENEFICIAL OF COMMON
NOMINEE AGE DIRECTOR THE PAST FIVE YEARS OWNERSHIP STOCK (2)
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Frederick R. Adler 70 1968 Chairman of the Executive Committee of 388,873 1.0%
the Board of Directors from July 1982 to (7)
date; Managing General Partner of Adler &
Company, a venture capital investment
firm, and a General Partner of its
related investment funds; of counsel to
Fulbright & Jaworski L.L.P., Attorneys.
Until December 31, 1995, Senior Partner
of Fulbright & Jaworski L.L.P.,
Attorneys. (3)(5)
Ferdinand Colloredo- 57 1986 Chairman of the Board and Chief Executive 22,208
Mansfeld Officer of Cabot Partners Limited (8)
Partnership, a real estate investment
firm, since 1990; Chairman, Chief
Executive Officer and Chief Investment
Officer of Cabot, Cabot & Forbes
Realty Advisors, Inc., 1986 to 1990.
(3)(4)(5)(6)
John G. McElwee 75 1989 Retired; Chairman of Board of Directors 19,000
and Chief Executive Officer of John (9)
Hancock Mutual Life Insurance Company
from 1982 until 1986. (3)(4)(6)
Ronald L. Skates 55 1989 President and Chief Executive Officer of 1,244,629 3.1%
the Company from November 1989 to date; (10)
Executive Vice President and Chief
Operating Officer from 1988 to 1989;
Senior Vice President from 1986 to
1988. (3)
</TABLE>
3
<PAGE> 7
<TABLE>
<CAPTION>
AMOUNT AND
YEAR NATURE (1)
FIRST OF PERCENTAGE
BECAME PRINCIPAL OCCUPATION DURING BENEFICIAL OF COMMON
NOMINEE AGE DIRECTOR THE PAST FIVE YEARS OWNERSHIP STOCK (2)
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
W. Nicholas Thorndike 63 1994 Chairman of the Board of Trustees of 22,000
Massachusetts General Hospital from 1987 (11)
to 1992, and President from 1992 to
1994. (4)(5)
Donald H. Trautlein 70 1989 Retired; Chairman of the Board of 14,000
Directors and Chief Executive Officer of (11)
Bethlehem Steel Corporation from 1980 to
1986. (3)(4)(5)
Richard L. Tucker 56 1994 Managing Director of Trinity Investment 12,200
Management Corporation. (4)(5) (11)
<FN>
- -------------
(1) As of November 15, 1996, unless otherwise indicated, the persons shown have
sole voting and investment power over the shares listed.
(2) Messrs. Colloredo-Mansfeld, McElwee, Thorndike, Trautlein and Tucker own
less than 1% of the Company's Common Stock.
(3) Member of Executive Committee of Board of Directors.
(4) Member of Audit Committee of Board of Directors.
(5) Member of Compensation Committee of Board of Directors.
(6) Member of Nominating Committee of Board of Directors.
(7) Includes 20,654 shares of Common Stock that may be acquired through
exercise of stock options.
(8) Includes 5,208 shares of Common Stock issuable upon conversion of $100,000
principal amount of 7-3/4% convertible debentures due 2001. Also includes
12,000 shares of Common Stock that may be acquired through exercise of
stock options.
(9) Includes 14,000 shares of Common Stock that may be acquired through
exercise of stock options.
(10) Includes 1,216,901 shares of Common Stock that may be acquired through
exercise of stock options. Includes also 4,500 shares of Common Stock owned
by family members as to which Mr. Skates disclaims beneficial ownership.
(11) Includes 12,000 shares of Common Stock that may be acquired through
exercise of stock options.
</TABLE>
Mr. Adler is a director of Global Pharmaceutical Corporation, Micro Linear
Corporation, Prime Cellular, Inc., Shells Seafood Restaurants, Inc., and USA
Detergents, Inc., and of counsel to Fulbright & Jaworski L.L.P., legal counsel
to the Company. Mr. Colloredo-Mansfeld is a director of Raytheon Company, and
until November 30, 1995 was a director of Shawmut National Corporation. Mr.
Colloredo-Mansfeld also serves as Chairman of the Board of Trustees of
Massachusetts General Hospital and Trustee of the Partners HealthCare System.
Mr. Thorndike serves as a corporate director or trustee of a number of
organizations, including Bradley Real Estate Inc., Courier Corporation,
Providence Journal Company, Eastern Utility Associates and The Putnam Funds. He
also serves as a Trustee of Massachusetts General Hospital. In
4
<PAGE> 8
February, 1994, Mr. Thorndike accepted appointment as a successor trustee of
private trusts in which he has no beneficial interest, and concurrently became,
serving until October, 1994, Chairman of the Board of two privately owned
corporations controlled by such trusts that filed voluntary petitions for
relief under Chapter 11 of the United States Bankruptcy Code in August, 1994.
Mr. Trautlein is a director of PXRE Corporation.
The Board of Directors has an Audit Committee which met four times during
the fiscal year ending September 28, 1996 (the "1996 fiscal year").
Representatives of Price Waterhouse LLP, the Company's auditors, were present at
all such meetings. The primary functions of the Audit Committee are to provide
assistance to the Board of Directors in fulfilling its responsibilities relating
to corporate accounting and reporting practices and to maintain, by way of
regularly scheduled meetings, a direct line of communication among the
directors, the Company's internal auditors and independent accountants. In
addition, the Audit Committee is responsible for reviewing and monitoring the
performance of nonaudit services by the Company's independent accountants and
for considering the range of nonaudit and audit fees.
The Board of Directors has a Nominating Committee. During the 1996 fiscal
year, the Nominating Committee did not meet. The primary functions of the
Nominating Committee are to consider qualified candidates to fill vacant seats
on the Board which may arise during the year and to recommend to the Board for
nomination for election to fill any such vacancies such candidates as it deems,
in its discretion, appropriate. The Nominating Committee does not consider
nominees recommended by stockholders for election as directors.
The Board of Directors has a Compensation Committee. During the 1996 fiscal
year, the Compensation Committee met twice. The Compensation Committee's
functions are to review the compensation of the Company's executive officers and
recommend to the Board of Directors the compensation of such executive officers.
Other committees on which directors serve include the Executive Committee,
the Restricted Stock Option Committee, the Employee Stock Option Committee and
the Employee Qualified Stock Purchase Plan Committee.
During the 1996 fiscal year, the Board of Directors held seven meetings.
Each of the incumbent directors attended at least 75% of the meetings of the
Board of Directors and of all the committee(s) of the Board of Directors on
which he served.
THE BOARD OF DIRECTORS DEEMS THE ELECTION TO THE BOARD OF
DIRECTORS OF ALL THE ABOVE-DESCRIBED NOMINEES TO BE IN THE BEST
INTEREST OF THE COMPANY AND ITS STOCKHOLDERS AND
RECOMMENDS A VOTE "FOR" APPROVAL OF PROPOSAL NO. 1.
5
<PAGE> 9
EXECUTIVE COMPENSATION
<TABLE>
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the annual and
long-term compensation for services rendered in all capacities to the Company
for the 1994, 1995 and 1996 fiscal years of those persons who were (i) during
the 1996 fiscal year, the chief executive officer and (ii) at the end of the
1996 fiscal year, the most highly compensated executive officers.
<CAPTION>
SUMMARY COMPENSATION TABLE
- ---------------------------------------------------------------------------------------------------------------
LONG-TERM
ANNUAL COMPENSATION (000'S) COMPENSATION (1)
------------------------------------- --------------------
OTHER SECURITIES
FISCAL YEAR ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION ENDING SALARY BONUS COMPENSATION(2) OPTIONS
- --------------------------- ----------- ------ ----- -------------- -------
<S> <C> <C> <C> <C> <C>
Ronald L. Skates 1996 $630.0 $1,360.0 $5.4 75,000
President & 1995 $611.5(3) $0 $3.0 225,000
Chief Executive Officer 1994 $577.5 $0 $3.0 250,000
Joel Schwartz 1996 $315.0 $185.0 $2.3 30,000
Senior Vice President 1995 $305.8(3) $50 $2.7 20,000
1994 $275.0 $100 $5.0 25,000
William J.Cunningham 1996 $315.0 $185.0 $0 30,000
Senior Vice President 1995 $305.8(3) $0 $0 20,000
1994 $280.0 $0 $0 25,000
Arthur W. DeMelle 1996 $315.0 $135.0 $8.3 30,000
Senior Vice President 1995 $305.8(3) $0 $3.0 20,000
1994 $285.0 $0 $3.0 20,000
J. Thomas West 1996 $335.0 $110.0 $1.5 25,000
Senior Vice President 1995 $326.2(3) $0 $3.0 20,000
1994 $300.0 $0 $4.0 25,000
<FN>
- ---------------
(1) The Company does not maintain any long-term incentive plans other than its
option plans. All long-term compensation earned by executive officers of
the Company during the years shown have been in the form of stock option
grants under those option plans.
(2) Amounts shown reflect benefits received under a Company program providing
certain executives with tax preparation assistance.
(3) 1995 fiscal year salary numbers reflect 53 weeks of pay.
</TABLE>
6
<PAGE> 10
OPTION GRANTS IN THE 1996 FISCAL YEAR
<TABLE>
The following table sets forth further information on grants of stock
options to the named executive officers during the 1996 fiscal year. The Company
does not have a stock appreciation rights plan.
<CAPTION>
OPTION GRANTS IN THE 1996 FISCAL YEAR
- -----------------------------------------------------------------------------------------------------------------
NUMBER % OF TOTAL
OF OPTIONS POTENTIALLY REALIZABLE VALUE
SECURITIES GRANTED MARKET AT ASSUMED ANNUAL RATES
UNDERLYING TO PRICE(3) OF STOCK PRICE APPRECIATION
OPTIONS EMPLOYEES OPTION AT OPTION FOR OPTION TERM (4)
GRANTED IN FISCAL EXERCISE DATE OF EXPIRATION ------------------------------------
NAME (1) (2) YEAR PRICE GRANT DATE 0% 5% 10%
- ---- ---------- ---------- -------- ------- ---------- ------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
R. L. Skates 75,000 12.0% $11.88 $11.88 10/31/05 $ 0 $560,345 $1,420,025
W. J. Cunningham 30,000 4.8% $ 5.94 $11.88 10/31/05 $178,200 $402,338 $ 746,210
A. W. DeMelle 30,000 4.8% $ 5.94 $11.88 10/31/05 $178,200 $402,338 $ 746,210
J. Schwartz 30,000 4.8% $ 5.94 $11.88 10/31/05 $178,200 $402,338 $ 746,210
J. T. West 25,000 4.0% $ 5.94 $11.88 10/31/05 $148,500 $335,282 $ 621,842
<FN>
- --------------
(1) The grants described above were made in the 1996 fiscal year. Thereafter,
during the first forty-five days of the 1997 fiscal year, the following
grants were made to the above-named executive officers: to Mr. Skates, an
option for 100,000 shares at $14.00 per share; to Messrs. Cunningham and
Schwartz, options for 25,000 shares each at $7.32 per share; and to Messrs.
DeMelle and West, options for 20,000 shares each at $7.32 per share. The
closing market price of the Company's Common Stock on the date of these
grants was $14.00 per share for the grant made to Mr. Skates and $14.63 per
share for the grants made to the other executive officers named above.
(2) All of the options shown in this table, although immediately exercisable,
are subject to disposition restrictions that require that any shares
acquired on the exercise of such options be offered for resale to the
Company at the original option exercise price upon termination of the
optionee's employment with the Company for any reason except death or
retirement with the consent of the Company. These restrictions lapse in 25%
installments on each of the first four anniversaries of the option grant.
(3) The market price shown is the closing price of the Company's Common Stock,
based on New York Stock Exchange Composite Tape trading for the date on
which the option was granted.
(4) The projected realizable values shown assume future market prices based,
pursuant to applicable Securities and Exchange Commission regulations, on
arbitrarily assumed annual stock price appreciation rates of 0%, 5% and 10%
for the full terms of the options. These projections are provided for
illustrative purposes only, in order to comply with such regulations, and
no representations are made as to what the actual future price of the
Company's stock will be at any point in time.
</TABLE>
7
<PAGE> 11
OPTION EXERCISES IN THE 1996 FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
<TABLE>
The following table sets forth information with respect to (i) stock
options exercised by the chief executive officer and the other named executive
officers during the 1996 fiscal year, and (ii) unexercised, in-the-money stock
options held by such individuals at September 28, 1996.
<CAPTION>
OPTION EXERCISES IN THE 1996 FISCAL YEAR AND
1996 FISCAL YEAR-END OPTION VALUES
- -----------------------------------------------------------------------------------------------------------------
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT FISCAL YEAR END FISCAL YEAR END (1)
SHARES -------------------------- --------------------------
ACQUIRED EXERCISABLE EXERCISABLE EXERCISABLE EXERCISABLE
ON VALUE VESTED UNVESTED VESTED UNVESTED
NAME EXERCISE REALIZED OPTIONS(2) OPTIONS(2) OPTIONS(2) OPTIONS(2)
- ---- -------- -------- -------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C>
R. L. Skates 135,000 $1,639,670 705,063 415,000 $4,668,788 $1,662,750
W. J. Cunningham 0 0 74,256 65,000 $670,861 $556,325
A. W. DeMelle 15,000 $192,425 50,625 56,875 $486,513 $487,038
J. Schwartz 19,000 $192,702 63,112 66,250 $531,504 $566,550
J. T. West 115,000 $1,150,488 16,611 80,250 $56,200 $716,331
<FN>
- --------------
(1) Year-end spread value of options are calculated based on the $14.00 closing
price of the Company's Common Stock on September 27, 1996, based on New
York Stock Exchange Composite Tape trading for such day.
(2) All of the options shown in this table, although immediately exercisable,
are subject to disposition restrictions that require that any shares
acquired on the exercise of such options be offered for resale to the
Company at the original option exercise price upon termination of the
optionee's employment with the Company for any reason except death or
retirement with the consent of the Company. These restrictions lapse in 25%
installments on each of the first four anniversaries of the option grant.
The option data shown in the "vested" columns relate only to the portion of
any currently outstanding options that have already vested and are free of
the disposition restrictions and related resale requirement. The option
data shown in the "unvested" columns relate to the portion of any currently
outstanding options that have not yet vested, are still subject to the
disposition restrictions and related resale requirement, and thus can be
viewed as being comparable to options that are not yet exercisable.
</TABLE>
COMPENSATION PURSUANT TO PLANS
PENSION PLANS
The Company maintains a noncontributory, defined benefit pension plan (the
"Pension Plan"). Substantially all domestic employees of the Company are
eligible to participate in the Pension Plan. All executive officers of the
Company participate in the Pension Plan. The amount of the contribution accrued
each year by the Company and participating affiliates under the Pension Plan is
actuarially determined and equals at least the minimum amount required under the
Internal Revenue Code, as amended (the "Code"). Pension benefits paid from the
Pension Plan are based on base salary, exclusive of overtime, bonuses, nonsales
incentive compensation and other similar types of payments but inclusive of
sales incentives and commissions, up to a certain maximum, and an employee's
period of service. In general, pension benefits become nonforfeitable (vested)
after the completion of 5 years of service.
8
<PAGE> 12
Under the Pension Plan, a participant's pension at normal retirement (age
65) is equal to the sum of his yearly benefits accrued during his period of
service. In general, for each year of credited service completed by an employee
after becoming a participant in the Pension Plan, the employee accrues an annual
benefit in an amount equal to 1.5 percent of his compensation. Effective in
1989, the amount of compensation taken into account to calculate the Pension
Plan benefit may not exceed $150,000 per annum under the Code. Each employee who
was a participant on October 1, 1991 had his benefit updated based on his
compensation on October 1, 1991, for each year of service as a participant in
the Pension Plan to that date. Retirees received a supplemental benefit based on
a percentage of the retirement benefit they were receiving on October 1, 1991.
As of October 28, 1996, the estimated annual benefits payable upon retirement at
age 65, based on a single life annuity, pursuant to the Pension Plan for the
following individuals would be: to Mr. Skates, $56,925; to Mr. Cunningham,
$36,137; to Mr. DeMelle, $32,700; to Mr. Schwartz, $47,537; and to Mr. West,
$95,053. In addition to pension benefits, the Pension Plan provides amounts to
fund medical benefits for certain retired employees and their dependents.
In June 1989, the Board of Directors adopted the Data General Corporation
Supplemental Retirement Benefit Plan (the "Supplemental Plan") effective October
1, 1989. The Supplemental Plan provides additional retirement benefits for
eligible employees, including executive officers of the Company, who retire
under the Company's Pension Plan. The Supplemental Plan was adopted in order to
compensate eligible employees for reductions in the benefits calculated under
the Pension Plan due to the change in the formula for the calculation of
benefits under the Pension Plan and/or legislative and regulatory limitations.
The Supplemental Plan benefit equals a participant's retirement benefit
calculated in an amount equal to 1 percent of his compensation not in excess of
the Federal Insurance Contribution Act ("FICA") wage base and 2 percent of his
compensation in excess of the FICA wage base, reduced by an amount equal to the
actual amount of the benefit that is payable under the normal form of payment
provided for under the Pension Plan. The Supplemental Plan was also updated by
basing the benefit thereunder on the participant's compensation on October 1,
1991. The Supplemental Plan is funded pursuant to a non-qualified deferred
compensation arrangement under which the Company transfers certain amounts to a
trust to be held for the benefit of the Supplemental Plan participants, except
in the event of the insolvency of the Company. As of October 28, 1996, the
estimated annual benefits payable upon retirement at age 65, based on a single
life annuity, pursuant to the Supplemental Plan for the following individuals
would be: to Mr. Skates, $178,296; to Mr. Cunningham, $39,829; to Mr. DeMelle,
$46,687; to Mr. Schwartz, $55,684; and to Mr. West, $73,848.
In December 1994, the Board of Directors adopted a Supplemental Retirement
Benefit (the "Supplemental Benefit") to provide Mr. Skates a retirement benefit
to supplement that available to him under the Company's Pension Plan and
Supplemental Plan. The Supplemental Benefit provides that if Mr. Skates retires
from service to the Company at age 65, he will receive from the Company's
Pension Plan, current Supplemental Plan and the Supplemental Benefit a combined
joint and survivor annuity equal to 60% of the average of his three highest
years of cash compensation excluding any bonuses he may be awarded. If Mr.
Skates retires prior to attaining age 65, the 60% benefit rate will be reduced
by two percentage points for each year his retirement precedes age 65. If at any
time Mr. Skates dies, is terminated due to disability, is terminated by the
Board without cause, or his employment is terminated other than for cause after
a Change in Control (as defined in the discussion under the heading "Employee
Agreements", below), payment of the above-described benefit may commence prior
to age 65, at the reduced rate described above. Based upon his compensation
during the three highest years to date, the estimated annual benefit payable
upon retirement at age 65 pursuant to the Pension Plan, the Supplemental Plan
and the Supplemental Benefit to Mr. Skates would be $372,000.
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SAVINGS AND INVESTMENT PLAN
Effective January 1, 1983, the Company adopted the Data General Corporation
Savings and Investment Plan (the "Savings and Investment Plan"), that includes a
cash or deferred arrangement ("CODA") and established a related trust.
Substantially all of the Company's employees are eligible to participate in the
Savings and Investment Plan. Under the CODA provisions of the Savings and
Investment Plan, eligible employees may elect to defer a portion of their salary
and have such amount contributed to the Savings and Investment Plan to be
invested in one or more of seven savings and investment funds. In general,
distribution of an employee's interest in the Savings and Investment Plan may
occur upon hardship, termination of employment or age 59-1/2. Amounts
attributable to the Savings and Investment Plan are distributed in cash. In
addition, employees may borrow money from the Savings and Investment Plan. For
Federal income tax purposes, the Company is entitled to a deduction for the CODA
contributions. During the 1996 fiscal year, Messrs. Skates, Cunningham and West
have each deferred amounts equal to $9,500, while Messrs. DeMelle and Schwartz
did not defer any amounts.
STOCK OPTIONS
The Company maintains a Restricted Stock Option Plan, Employee Stock Option
Plan, Employee Qualified Stock Purchase Plan and 1994 Non-Employee Director
Stock Option Plan.
RESTRICTED STOCK OPTION PLAN. The Restricted Stock Option Plan (the
"Restricted Plan"), which was originally adopted by the Board of Directors on
November 19, 1976 and approved by the stockholders on January 18, 1977,
authorizes the Company to grant "restricted stock options" to employees and
consultants of the Company and its subsidiaries. The Restricted Plan, which was
amended in 1988 to extend the termination date of the Restricted Plan to
December 31, 1998 and which has been amended from time to time to increase the
number of shares available thereunder, provides for the granting of options to
purchase up to 11,000,000 shares of Common Stock coupled with a prohibition
against disposition of the shares and an obligation to offer such shares for
resale to the Company at their original purchase price upon termination of
employment for any reason except death or retirement with the consent of the
Company. The restrictions against disposition and the obligation of resale lapse
from time to time as to portions of the grant, as determined by the Restricted
Stock Option Plan Committee (the "Restricted Plan Committee"). The Restricted
Plan Committee which administers the Restricted Plan consists of not fewer than
three non-employee directors, and currently consists of Messrs. Ferdinand
Colloredo-Mansfeld, W. Nicholas Thorndike, Donald H. Trautlein and Richard L.
Tucker. The Restricted Plan provides for the issuance of Common Stock to
employees for any lawful consideration as determined by the Board of Directors
so long as it is not less than the lower of (i) 50 percent of the book value per
share of Common Stock as of the end of the fiscal year immediately preceding the
date of such grant or (ii) 25 percent of the fair market value per share of
Common Stock on the date of such grant. Subject to the terms of the Restricted
Plan, the Restricted Plan Committee has exclusive authority to select the
employees or others to whom options are granted and to determine the number of
shares subject to such options and the time or times when options are
exercisable.
Employees of the Company and its subsidiaries, including officers and
consultants, who have not attained the age of 65 (approximately 4,900 persons)
are eligible to receive options under the Restricted Plan. Directors who are
also employees are eligible to receive options if they are not members of the
Restricted Plan Committee. Directors who are not employees may receive options
under the 1994 Non-Employee Director Stock Option Plan. (See the heading "1994
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN", below.) Options may be granted to the
same employee on more than one occasion. However, the number of shares issued to
any one employee under the Restricted Plan shall not exceed 10 percent of the
aggregate number of shares
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issuable thereunder nor exceed 3 percent during any consecutive twelve-month
period. The Company reserves the right under the Restricted Plan to terminate an
employee's option with the employee's consent and to substitute one or more
options with different terms and conditions, including a lower option price.
Options may be granted under the Restricted Plan from time to time through
December 31, 1998, the termination date of the Plan.
An option granted under the Restricted Plan is a non-statutory option and
is taxed in accordance with Section 83 of the Code and the regulations
thereunder. An employee granted an option under the Restricted Plan generally
will realize income when the shares purchased pursuant to the option become
transferable or are no longer subject to a substantial risk of forfeiture. The
income realized (the difference between the exercise price of the option and the
fair market value of the shares at the time the shares are transferable or are
no longer subject to a substantial risk of forfeiture) will be ordinary income
to the employee for which the Company can claim a business expense deduction.
EMPLOYEE STOCK OPTION PLAN. The Employee Stock Option Plan (the "Stock
Option Plan"), which was adopted by the Board of Directors on October 6, 1981,
approved by the stockholders on January 19, 1982 and amended from time to time
thereafter, among other things, to increase the number of shares available
thereunder, authorizes the Company to grant either "incentive stock options" to
employees of the Company or its subsidiaries, under Section 422A of the Code, or
non-qualified options to purchase collectively up to 7,000,000 shares of Common
Stock. Substantially all employees of the Company and of designated subsidiaries
(approximately 4,900 persons) are eligible to participate in the Stock Option
Plan. The purpose of the Stock Option Plan is to strengthen the Company's
ability to attract, motivate, and retain key employees and, in particular, to
provide the Company with the necessary flexibility to compete for highly skilled
personnel.
The Stock Option Plan is administered by an Employee Stock Option Plan
Committee appointed by the Board of Directors (the "Stock Option Committee"),
currently consisting of Messrs. Ferdinand Colloredo-Mansfeld, W. Nicholas
Thorndike, Donald H. Trautlein and Richard L. Tucker, which, subject to the
provisions of the Stock Option Plan, has exclusive authority to select the times
when and the employees to whom stock options may be granted, the number of
shares of Common Stock to be acquired by the exercise of stock options, the
exercise price and the term during which options may be exercised.
To qualify as an incentive stock option under Section 422A of the Code, an
option, among other things, must (i) not be exercisable more than ten years from
the date of grant; (ii) have an exercise price equal to or in excess of the fair
market value of the Common Stock on the date of grant and (iii) not be
transferable other than by will or laws of descent and distribution and must be
exercisable during the employee's lifetime only by him. The non-qualified
options may be granted with an exercise price as determined by the Stock Option
Committee so long as it is not less than the lower of (i) 50 percent of the book
value per share of Common Stock as of the end of the fiscal year immediately
preceding the date of such grant or (ii) 25 percent of the fair market value per
share of Common Stock on the date of such grant.
The option agreements between the Company and the optionee contain
restrictions against disposition of the shares acquired upon exercise of
non-qualified options and contain the obligation on the part of the optionee to
offer such shares for resale to the Company at their original purchase price
upon termination of the optionee's employment with the Company. The restrictions
against disposition and the obligation of resale lapse from time to time as to
portions of the grant, as determined by the Stock Option Committee.
An employee who is granted an incentive stock option will generally
recognize no income or gain on the grant or exercise of the incentive stock
option. If stock purchased pursuant to the exercise of an incentive
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<PAGE> 15
stock option is sold more than two years from the date the option is granted and
one year from the date of exercise, the gain realized on the sale of the stock
(the difference between the exercise price of the option and the amount realized
on the sale) will be treated as long-term capital gain rather than as ordinary
income. In general, in the case of incentive stock options, the excess of the
fair market value of the shares on the date of exercise (or, if later, the date
the shares become vested for purposes of Section 83 of the Code) over the
exercise price is included in alternative minimum taxable income for purposes of
the "alternative minimum tax" provisions of the Code. The non-qualified options
are taxed in accordance with Section 83 of the Code and regulations thereunder
in the same manner as restricted stock options. (See previous discussion of tax
consequences under the heading "RESTRICTED STOCK OPTION PLAN", above.)
In general, the Company can deduct as a business expense only the amount
equal to the ordinary income, if any, recognized by an employee upon his sale of
Common Stock purchased pursuant to an incentive stock option, as well as the
ordinary income realized by an optionee with respect to the exercise of a
non-qualified option. Under current accounting practice, no charge to the income
of the Company will result from the grant or exercise of an incentive stock
option because the exercise price of the incentive stock option must equal or
exceed the fair market value of the Common Stock on the date of grant. In the
case of a grant of a non-qualified stock option an amount equal to the excess of
the fair market value of the Common Stock at the date of grant over the exercise
price would be amortized as a charge over the option's vesting period. The tax
effect of the benefit of such business expense for tax return purposes in excess
of that charged to earnings will be credited to the Company's additional paid-in
capital.
EMPLOYEE QUALIFIED STOCK PURCHASE PLAN. The Employee Qualified Stock
Purchase Plan (the "Purchase Plan") was adopted by the Board of Directors on
November 10, 1970 and approved by the stockholders on January 12, 1971. The
Purchase Plan, which has been amended from time to time to increase the number
of shares available thereunder, authorizes the Company to issue up to 8,600,000
shares of Common Stock.
Substantially all employees of the Company and its designated subsidiaries
who have completed ninety days' employment with the Company or its designated
subsidiaries (approximately 4,900 persons) are eligible to participate in the
Purchase Plan. The Company believes that the Purchase Plan has advanced the
interests of the Company and its subsidiaries and furthered its growth and
development by encouraging and enabling employees to acquire the Common Stock of
the Company and an increased personal and proprietary interest in the continued
success and progress of the Company.
Under the Purchase Plan, options are granted twice yearly and are
exercisable six months from the date of grant. The option price is the lesser of
85 percent of the average market price of the Common Stock of the Company on (i)
the date the option is granted or (ii) the last day of the six month period.
Each eligible employee who continues to be a participant in the Purchase Plan on
the last day of the six month period is deemed to have exercised his option on
such date. The number of shares purchased at the option price by each
participating employee is determined by the amounts accumulated through payroll
deductions of up to 10 percent of such employee's regular base pay during such
six-month period.
Under the Purchase Plan, options granted to participants are intended to
constitute options granted pursuant to an "employee stock purchase plan" within
the meaning of Section 423 of the Code. Accordingly, no taxable income will be
realized by an employee until the shares purchased pursuant to an option are
sold. Under certain circumstances, all or a portion of the gain realized may be
treated as ordinary income to the employee, and the Company will be entitled to
claim a business expense deduction of the amount of ordinary income recognized
by the employee.
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The Purchase Plan is administered by the Employee Qualified Stock Purchase
Plan Committee (the "Purchase Plan Committee"), which is composed of at least
three members of the Board of Directors. The Purchase Plan Committee currently
consists of Messrs. Adler, McElwee, Trautlein and Tucker. Members of the
Purchase Plan Committee are presently not eligible to participate in the
Purchase Plan, nor is any employee entitled to participate in the Purchase Plan
to the extent his rights to purchase Common Stock would accrue at a rate which
exceeds $25,000 of fair market value of such stock, as determined at the time
such option is granted, for each calendar year in which such option is
outstanding at any time, or that, after the granting of the option, such
employee would own more than 5 percent of the Common Stock of the Company, as
defined and prescribed by the Code.
During the 1996 fiscal year, pursuant to the Purchase Plan, Mr. Skates
purchased 2,963 shares of Common Stock at an average per share price of $7.17;
Mr. Cunningham purchased 2,295 shares of Common Stock at an average per share
price of $7.66; and all executive officers as a group purchased 7,512 shares of
Common Stock at an average per share price of $7.48. During this period Messrs.
DeMelle, Schwartz and West did not purchase any shares pursuant to the Purchase
Plan. As of November 15, 1996, an aggregate of 8,240,841 shares of the Company's
Common Stock had been purchased under the Purchase Plan.
See "PROPOSAL NO. 2 -- EMPLOYEE QUALIFIED STOCK PURCHASE PLAN" for the
proposed amendment to increase the number of shares issuable under the Employee
Qualified Stock Purchase Plan from 8,600,000 to 11,100,000.
1994 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN. The 1994 Non-Employee
Director Stock Option Plan (the "1994 Directors' Plan") was adopted by the Board
of Directors on October 31, 1993 and approved by the stockholders on January 26,
1994. The 1994 Directors' Plan authorizes the Company to issue up to 150,000
shares of the Company's Common Stock. The 1994 Directors' Plan provides for the
issuance of an annual option to purchase 4,000 shares of the Company's Common
Stock to each non-employee director who is elected to the Board of Directors at
the Annual Meeting of Stockholders. The exercise price per share will be equal
to 100% of the closing price of the Company's Common Stock on the date of the
Company's Annual Meeting of Stockholders at which the subject director is
elected to the Board of Directors.
The 1994 Directors' Plan was established to serve the best interests of the
Company by enhancing the ability of the Company to attract and retain the
services of knowledgeable and experienced persons who, through their efforts and
expertise, can make a significant contribution to the success of the Company by
serving as members of the Company's Board of Directors.
The 1994 Directors' Plan provides that the option to purchase Common Stock
will be coupled with a prohibition against disposition of the shares and an
obligation to offer such shares for resale to the Company for any reason except
death, disability, or retirement with the consent of the Company. The
restrictions against disposition and the obligation of resale will lapse
cumulatively to the extent of 25 percent of the grant on each anniversary date
of grant of the option. Options will not be transferable other than by will or
the laws of descent and distribution, and will be exercisable during the
lifetime of an optionee only by the optionee. Options will be exercisable only
while the optionee is serving as a director of the Company or (i) within 12
months of his retirement from the Board of Directors with the consent of the
Company; (ii) within 12 months of the optionee becoming disabled to serve as a
director of the Company; (iii) by his heirs or estate within 12 months of his
death. Options terminate ten years from the date of grant. In the event of a
Change of Control of the Company (see definition of "Change of Control" in the
discussion under the heading "EMPLOYEE AGREEMENTS", below) the restrictions
against disposition and the obligation of resale of the shares acquired pursuant
to an option under the 1994 Directors' Plan will lapse and the shares will
become freely tradeable.
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An option granted under the 1994 Directors' Plan will be a non-statutory
stock option and will be taxed in accordance with Section 83 of the Internal
Revenue Code of 1986, as amended, and the regulations thereunder. A director
granted an option pursuant to the 1994 Directors' Plan generally will realize
income when the shares purchased under the option become transferable or are no
longer subject to a substantial risk of forfeiture. The income realized (the
difference between the exercise price of the option and the fair market value of
the shares at the time the shares become transferable or are no longer subject
to a substantial risk of forfeiture) will be ordinary income to the optionee for
which the Company will be able to claim a business expense deduction.
The Board may terminate, modify or suspend the 1994 Directors' Plan
provided that no such modification shall, without further stockholders'
approval, increase the maximum number of shares which may be issued under the
1994 Directors' Plan (other than adjustments for capital changes), shorten the
period over which restrictions against disposition and obligation of resale
lapse, amend the option exercise price (other than adjustments for capital
changes), or extend the period during which options may be granted or exercised
under the 1994 Directors' Plan. During the 1996 fiscal year, Messrs. Adler,
Colloredo-Mansfeld, McElwee, Thorndike, Trautlein and Tucker were each granted
an option under the 1994 Directors' Plan to purchase 4,000 shares of the
Company's Common Stock with an exercise price per share of $15.75, which was the
fair market value on the date of grant.
EMPLOYEE AGREEMENTS
Beginning in February 1989, the Company entered into employment agreements
(the "Agreements") which become effective upon a change in control of the
Company with its full-time executive officers, including Messrs. Skates,
Cunningham, DeMelle, Schwartz and West. The Board of Directors believes that
such Agreements will better ensure retention of the current officers and attract
the services of new officers. The Board also believes that under such Agreements
officers are able to devote their full attention and energies to the conduct of
the Company's business without the potentially disturbing distractions that
might arise from a change in control of the Company. Should the Company receive
any proposals with respect to any change in its control, such officers could
then, without being influenced by the uncertainties of their own situations,
assess such proposals, formulate an objective opinion as to whether such
proposals would be in the best interests of the Company and its stockholders and
take such other action regarding such proposals as the Board of Directors might
determine to be appropriate. Each Agreement has a three year term and becomes
effective upon a change in control of the Company as defined in the Agreements.
The Agreements provide that, if a change in control of the Company should
occur, and if within three years thereafter (i) the employment of the officer is
terminated for reasons other than death, disability, retirement, or "Cause" (as
defined in the Agreements); or (ii) the officer voluntarily terminates his or
her employment for "Good Reason" (as defined in the Agreements); or (iii) the
officer voluntarily terminates his or her employment for any reason or no reason
within thirty days of the first anniversary of a change in control of the
Company (the "Window Period") the officer would receive specified severance
compensation. The Agreements provide generally for the continuation of
employment of the officer with the Company for a three year period following the
date of the change in control upon substantially the same terms and conditions
with respect to duties, responsibilities, salaries, bonuses, welfare, fringe and
other benefits as those enjoyed prior to the date of the change in control of
the Company.
"Good Reason" permitting an officer to receive the specified severance
compensation upon voluntary termination of his or her employment with the
Company during the three year term of the Agreement is defined as a diminution
of responsibilities, assignment of inappropriate duties, failure of the Company
to comply
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with the compensation and benefit provisions of the Agreement, failure
of the Company to comply with the relocation provisions of the Agreement, any
purported termination in violation of the Agreements or the failure of any
successor to comply with the Agreements.
Upon termination of employment with the Company for death, disability,
retirement or by the officer without Good Reason (other than during the Window
Period) the Company has no obligations under the Agreement other than those
accrued on the date of termination and the customary Company provided death
benefits, disability benefits or retirement benefits as the case may be. Upon
termination by the Company for Cause, the only obligation of the Company to the
officer is for salary and deferred compensation accrued by the officer to the
date of termination. If the officer terminates his or her employment with the
Company for Good Reason, or without any reason during the Window Period, or his
or her employment with the Company is terminated by the Company without Cause,
during the term of the Agreement, then the officer is entitled to (a) a lump sum
cash payment equal to the sum of (1) his or her accrued salary, accrued annual
bonus and deferred compensation to the date of termination, (2) three times his
or her annual base salary and three times his or her "Highest Annual Bonus" (as
defined in the Agreements); (b) retirement benefits and health benefits for the
remainder of the term of the Agreement; (c) certain legal fees and expenses
incurred as a result of termination of employment; and (d) immediate
acceleration of the exercisability of the options granted to the officer
pursuant to the Company's Restricted Stock Option Plan and Employee Stock Option
Plan, and immediate lapse of any restrictions against disposition and obligation
of resale of the Common Stock to the Company, with the officer being able to
exercise his or her options under the Restricted Stock Option Plan and the
Employee Stock Option Plan within a period of 60 days following the termination
date. The definition of Highest Annual Bonus is the greater of the highest
annual bonus paid in the past three years or 30% of his or her annual base
salary.
The Company has established a trust fund, with the Boston Safe Deposit and
Trust Company as Trustee. The trust fund is to be funded upon a change in
control of the Company. The purpose of the trust fund is to ensure the proper
payment of the Company's obligations under the Agreements.
In the event that the amount payable to an officer under his or her
Agreement would be subject to the excise tax for federal tax purposes pursuant
to Section 4999 of the Code (the "Excise Tax"), then, unless the value of the
payment of the Excise Tax by the Company to the Executive does not exceed
$50,000 or more, the officer is entitled to receive an additional payment in an
amount such that, after payment by the officer of all taxes, including income
taxes and the Excise Tax imposed upon such additional payment, the officer is in
the same after-tax position as if no Excise Tax had been imposed upon the
officer. If the value to the executive does not exceed $50,000 or more then the
lump sum cash payment to that officer will be reduced by the amount necessary to
avoid the Excise Tax, up to the aggregate of $50,000.
A change in control of the Company means for purposes of the Agreements:
(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
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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 stockholders, 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 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.
The Code limits the business expense deduction available for so-called
golden parachute payments. A portion of the payments (if any) made (or deemed
made) by the Company under the Agreements may not be deductible as a result of
those limits.
COMPENSATION OF DIRECTORS
Directors who are full-time officers of the Company receive no additional
compensation for serving on the Board of Directors or its committees. Directors
who are not full-time officers receive an annual retainer of $25,000 in addition
to $1,000 for each meeting attended. Directors who serve on one or more than one
of the Audit Committee, the Compensation Committee, the Restricted Plan
Committee, the Stock Option Committee and the Nominating Committee receive an
additional annual retainer of $5,000, but directors who serve on more than one
such committee are limited to only one additional retainer of $5,000. Directors
serving on such committees receive $1,000 for each committee meeting they
attend.
In November, 1996, the Board of Directors adopted, effective for calendar
years beginning January 1, 1997, a "STOCK COMPENSATION PLAN FOR NON-EMPLOYEE
DIRECTORS" permitting each non-employee director to elect, prior to the start of
a calendar year, to defer all or part of the retainer and other fee compensation
payable to such director for such year in the form of stock-based units based on
the price of the Company's common stock on the date such compensation would have
otherwise been payable. Any such deferred stock-based units will be converted
into, and paid out as, actual shares of stock following the director's
termination of services as a director.
For a description of options granted to non-employee directors, see the
heading "1994 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN", above.
In November 1991 the Company adopted a retirement program for non-employee
directors. This program provides a retirement benefit to each non-employee
director who either reaches age 72 (the mandatory retirement age for members of
the Company's Board of Directors) or completes at least five years of service as
a non-employee director. The retirement benefit is equal to the highest Board
retainer paid to the
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director during his years of service to the date of the director's retirement
and is payable for a period of years (not to exceed a maximum of 15 years) equal
to the director's years of service on the Board. The five-year eligibility
service requirement is waived in the event of death in service, retirement due
to poor health or retirement within two years of a change in control, as
previously defined under the heading "EMPLOYEE AGREEMENTS", above. In the event
of death after retirement, the director's spouse (if any) is entitled to a death
benefit equal to the remaining balance (if any) of benefits otherwise payable to
the director at the time of his death. The Board of Directors waived the
mandatory retirement age for Mr. McElwee and nominated him for reelection to the
Board of Directors at the current Annual Meeting of Stockholders.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Ownership of and certain transactions in Company stock by executive
officers, directors and certain other persons are required to be reported to the
Securities and Exchange Commission pursuant to Section 16 of the Exchange Act.
Based upon a review of the information provided to the Company, all persons
subject to these reporting requirements filed the required reports on a timely
basis during the 1996 fiscal year.
JOINT REPORT OF COMPENSATION COMMITTEE
AND STOCK OPTION COMMITTEES
The Compensation Committee and Stock Option Committees of the Board of
Directors (respectively, the "Compensation Committee" and "Stock Option
Committees", and collectively the "Committees") are each composed entirely of
independent directors.
The Compensation Committee is responsible for establishing and
administering the overall compensation policies applicable to the Company's
corporate officers, and determining the annual cash compensation levels of the
Company's senior management. The two Stock Option Committees (which are both
comprised of the same directors) are responsible for establishing the general
policies applicable to the granting, vesting and other terms of stock options
granted to current and newly hired key employees under the Company's stock
option plans, and for determining the size and terms of the option grants made
to the Company's executive officers, among others.
The Committees view their charter as being to insure that the Company's
officer compensation programs are structured and implemented in a manner that
recognizes the Company's need to attract and retain the caliber of senior
executives and other key employees required for the Company to compete in a
highly competitive and rapidly evolving business sector, while also recognizing
and emphasizing the importance and value of achieving targeted annual and
long-term performance objectives at the individual, operating unit and Company
level.
SECTION 162(M)
The annual bonus opportunities and option grants provided to certain
executive officers may result in compensation that may not be fully deductible
under some circumstances, due to the limitations imposed by Section 162(m) of
the Code. In this regard, the Committees note that, due to the Company's large
net operating loss carryover position, the restrictions imposed by Section
162(m) on the deductibility of the compensation paid to certain executive
officers are expected to have only a limited impact on the Company.
17
<PAGE> 21
ANNUAL REVIEW PROCESS REGARDING PERFORMANCE AND CASH AND STOCK COMPENSATION
LEVELS
During the Summer and Fall of 1996, the Committees and the Company's Chief
Executive Officer (the "CEO") conducted, with the assistance and advice of an
independent executive compensation consultant, detailed reviews of the levels
and mix of officer cash and stock compensation, taking into account corporate,
operating unit and individual performance for the fiscal year ending on
September 28, 1996.
This annual review process included interim meetings involving the CEO,
designated Committee representatives and the compensation consultant, as well as
formal Committee meetings to consider the progress of the annual reviews and
review the recommendations of the working group. As part of the process, the CEO
reviewed with the Committees (i) the assessment of each officer's performance by
his/her immediate supervisor, (ii) the CEO's assessment of the performance of
each officer, each operating unit and group and the Company as a whole, and
(iii) the CEO's specific recommendations regarding title, salary, annual bonus
and stock option grant actions for the officer group, and the rationale for such
actions. In addition, the Committees held various private discussions regarding
such matters.
REVIEW OF BASE SALARIES
As part of the annual compensation review process, the base salary rate of
each corporate officer was reviewed, taking into account: (i) each officer's
individual performance for the preceding twelve months compared against assigned
revenue, margin, net income and other goals, and against fiscal 1995
performance, (ii) the scope and importance of the functions the officer
performed or was responsible for as of the end of the 1996 fiscal year, (iii)
the assessment of the officer's initiative, managerial ability and overall
contributions to corporate performance, (iv) the advice of the independent
executive compensation consultant regarding the competitiveness of current
officer salary levels compared to the external market based on 1996 survey data,
and (v) internal equity considerations.
The weighting given to these factors varied from officer to officer, based
in part upon the importance of the officer's position to the Company and the
caliber of the incumbent, but the Compensation Committee intended that executive
officer base salaries generally be competitive with the estimated relevant
market for each position. Based on 1996 survey data (including data for more
than twenty large computer sector companies)1 and the advice of the Company's
outside compensation consultant regarding such data, the Compensation Committee
believes that the base salaries for the Company's current executive officers are
generally in the 50th to 75th percentile compared to other large computer
companies.
As a result of the 1996 review and after taking into account the Company's
performance during the 1996 fiscal year, the Compensation Committee, effective
September 30, 1996, approved the recommended promotion of three of the executive
officers named in the "SUMMARY COMPENSATION TABLE" set forth above (Messrs.
Cunningham, DeMelle and Schwartz) to Senior Vice President, and also approved
increases in the salaries of those three executives to $340,000 each. In
addition, the Committee approved the recommended promotion of one other
executive officer (Mr. William Wilson) to Senior Vice President, as well as
increases in his salary and the salaries of certain other corporate officers.
- --------------------
1 The computer industry survey group for 1996 included the Company, eleven
of the fourteen other companies in the S&P computers (Hardware) Index that
is referred to in the "Stock Performance Graph" that appears on page 21 of
this Proxy Statement, and more than ten other large computer companies that
are not inluded in that index.
18
<PAGE> 22
ANNUAL BONUS AWARDS
The Company grants discretionary annual bonuses to executive officers and
others from time to time based on corporate performance, taking into account (i)
the Company's financial performance relative to key competitors and in absolute
terms, (ii) such other corporate performance criteria as are determined to be
appropriate by the Compensation Committee for a given year, (iii) the level and
importance of an officer's contribution to the Company's overall performance,
(iv) the officer's actual performance versus such officer's assigned business
plan goals, and (v) the estimated competitive level of bonus compensation at
other large computer companies based on available survey data.
Based on the Company's overall performance for the 1996 fiscal year, the
Compensation Committee approved discretionary annual bonus awards to Messrs.
Cunningham, DeMelle, Schwartz and West for that year in the amounts set forth in
the "SUMMARY COMPENSATION TABLE" above. Certain other corporate officers also
received discretionary corporate bonus awards for the 1996 fiscal year.
For the 1996 fiscal year, consistent with prior practice, sales-based
incentive opportunities were provided to certain sales executives, and certain
"overgoal" bonus opportunities were provided to certain officers. For the 1996
fiscal year, one executive officer (Mr. Schwartz) received a sales-based award
(included in the amounts shown in the "SUMMARY COMPENSATION TABLE" above), and
one other executive officer had an "overgoal" bonus opportunity based on
business unit performance.
For the 1997 fiscal year, the Board, at the recommendation of the
Compensation Committee and the CEO, has approved a provision for annual bonus
opportunities for the executive officers named in the "SUMMARY COMPENSATION
TABLE" as well as certain other corporate officers, based on the Company's
earnings-per-share performance, subject to certain discretionary adjustments.
STOCK OPTION GRANTS
As part of its officer compensation programs, the Company utilizes stock
options priced primarily at 50% of market on the date of grant (25% of market
for a portion of the initial grants to certain newly hired officers, and 100% of
market in the case of all recent option grants to the Company's CEO) and vesting
generally in four equal annual installments. The Stock Option Committees believe
that such grants have been effective for both new hire and retention purposes in
establishing substantial stock-based investment risks for key employees that
emphasize the importance of shareholder return and encourage a focus on
long-term results.
The Stock Option Committees also have established general guidelines
regarding the size and pricing of officer stock option grants, which establish
certain target parameters for officer option grants, based on various factors,
and are intended to provide a consistent basis for judging the internal fairness
and external competitiveness of officer stock option grants. The Stock Option
Committees believe that the officer stock option grants made in the 1996 fiscal
year and those made in the first quarter of the 1997 fiscal year reflect, and,
in the aggregate, are consistent with, such guidelines.
CEO COMPENSATION
The compensation paid to Mr. Ronald L. Skates, the Company's President and
Chief Executive Officer, is separately reviewed each year by the Committees.
19
<PAGE> 23
CEO CASH COMPENSATION
The Compensation Committee's actions in 1995 and in 1996 with respect to
Mr. Skates' cash compensation for the 1996 fiscal year (as reflected in the
"SUMMARY COMPENSATION TABLE" above) were based on reviews of both proxy and
survey data regarding the CEO cash compensation practices of more than 20 other
large computer companies, as well as the Committee's evaluations of Mr. Skates'
performance as CEO during the year and the Company's performance during the year
on an overall basis and in terms of key strategic initiatives.
For the reasons set forth in the Company's December 20, 1995 Proxy
Statement, the Board, at the recommendation of the Compensation Committee,
increased Mr. Skates' salary at the start of the 1996 fiscal year to $630,000.
As described in the December 1995 Proxy Statement, the Board, at the
Compensation Committee's recommendation, also approved a CEO bonus formula for
the 1996 fiscal year that was based on earnings-per-share performance and,
alternatively, on increases in the Company's market capitalization. Based on the
1996 fiscal year CEO bonus formula, and the Company's actual earnings-per-share
performance for the 1996 fiscal year, Mr. Skates was awarded a bonus of
$1,360,000 for the 1996 fiscal year. The Committee notes that this bonus is the
first awarded to Mr. Skates since the 1991 fiscal year.
In late September 1996, the Board decided, at the Compensation Committee's
recommendation, to continue Mr. Skates' salary rate for the 1997 fiscal year at
the same $630,000 rate paid in the 1996 fiscal year. The Board, at the
Compensation Committee's recommendation, also decided to provide Mr. Skates with
a cash bonus opportunity for the 1997 fiscal year that is similar to that
provided for the 1996 fiscal year in that it is based on the Company's
performance, as measured against goals relating to earnings-per-share, with a
maximum of 250% of base salary, or, if greater, based on the increase in the
Company's market capitalization (calculated, for the 1997 fiscal year, based on
the 30-day average share price as of the end of the 1997 fiscal year, as
compared to its market capitalization based on the 30-day average share price of
the Company's Common Stock as of September 28, 1996). The Board reserved the
right to award other bonuses and to adjust the bonus opportunity in the event of
extraordinary corporate transactions.
CEO STOCK OPTION AWARDS
As disclosed in the Company's December 20, 1995 Proxy Statement, the Stock
Option Committees made a 1996 fiscal year grant to Mr. Skates in November 1995
for 75,000 shares priced at $11.88, the fair market price of the Company's stock
at the time of grant. After taking into account the recommendations of the
Compensation Committee, the Stock Option Committees decided in late September of
1996 to award Mr. Skates a 1997 fiscal year stock option on September 30, 1996
to purchase 100,000 shares priced at $14.00, the fair market price of the
Company's stock on the effective date of grant.
The Stock Option Committees based these actions on a number of factors,
including (i) their assessment of the overall quality and value of Mr. Skates'
efforts and the Company's progress during the 1995 and 1996 fiscal years, and
the Company's cost reduction efforts, strategic initiatives and stock price
performance during such years; (ii) information regarding the median size and
value of CEO stock option grants among other large computer companies, based on
1995 and 1996 survey data for more than 20 large computer companies, and the
advice of the Company's outside compensation consultant regarding such data;
(iii) the size and pricing of Mr. Skates' prior stock option grants; (iv) the
size and value of the vested in-the-money stock options still held by Mr. Skates
as of the end of the 1996 fiscal year; and (v) the size of Mr. Skates' base
salary and annual bonus award opportunities for the 1996 and 1997 fiscal years.
20
<PAGE> 24
CONCLUSION
The Compensation Committee and Stock Option Committees are of the opinion
that the Company's current senior management compensation programs and
arrangements achieve an appropriate risk/reward balance, and are consistent with
the Committees' goals of having programs that enable the Company to compete for
high caliber executives in a highly competitive and continually evolving sector,
while also emphasizing the importance of meeting annual and longer-term
performance objectives.
COMPENSATION COMMITTEE STOCK OPTION COMMITTEES
---------------------- -----------------------
Frederick R. Adler Ferdinand Colloredo-Mansfeld
Ferdinand Colloredo-Mansfeld W. Nicholas Thorndike
W. Nicholas Thorndike Donald H. Trautlein
Donald H. Trautlein Richard L. Tucker
Richard L. Tucker
STOCK PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the cumulative
total stockholder return on the Company's Common Stock during the five fiscal
years ended September 28, 1996 with the cumulative total return on the Standard
& Poors 500 Index and the Standard & Poors Computers (Hardware) Index (formerly,
the Computer Systems Index). The comparison assumes $100 was invested on
September 30, 1991 in the Company's Common Stock and in each of such indices and
assumes reinvestment of dividends, where applicable.
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ----
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Data General Corporation $100 $ 56 $ 53 $ 51 $ 53 $ 72
- ------------------------------------------------------------------------
S&P 500 Index $100 $111 $125 $130 $169 $203
- ------------------------------------------------------------------------
S&P Computers (Hardware) Index $100 $ 83 $ 56 $ 81 $117 $142
- ------------------------------------------------------------------------
</TABLE>
21
<PAGE> 25
PROPOSAL NO. 2 -- EMPLOYEE QUALIFIED STOCK PURCHASE PLAN
The Board of Directors has unanimously adopted, subject to stockholder
approval, an amendment to the Company's Employee Qualified Stock Purchase Plan
(the "Purchase Plan"), which would increase the number of shares of Common Stock
that may be issued thereunder from 8,600,000 shares to 11,100,000 shares. The
primary features of the Purchase Plan are summarized above under the heading
"STOCK OPTIONS - EMPLOYEE QUALIFIED STOCK PURCHASE PLAN." The full text of the
Purchase Plan, as amended, is set forth in Appendix A to this Proxy Statement
and the following is qualified by reference thereto. The Board of Directors
recommends a vote FOR approval of the amendment.
The Company believes that the Purchase Plan has advanced the interests of
the Company and its subsidiaries by encouraging and enabling a large number of
employees, who otherwise might not have done so, to acquire capital stock in the
Company and thereby to increase their personal and proprietary interest in the
success and progress of the Company.
As of November 15, 1996, the number of shares available for future
purchases by employees under the Purchase Plan was 359,159 shares. Based on
reasonable assumptions regarding the operation of the Purchase Plan, it is the
opinion of the Board of Directors that these remaining available shares would
likely be exhausted during the current (1997) fiscal year.
THE BOARD OF DIRECTORS DEEMS PROPOSAL NO. 2 TO BE IN THE
BEST INTEREST OF THE COMPANY AND ITS STOCKHOLDERS AND
RECOMMENDS A VOTE "FOR" APPROVAL OF PROPOSAL NO. 2.
22
<PAGE> 26
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP has been the independent accountants for the Company
and will serve in that capacity for the 1997 fiscal year. A representative of
Price Waterhouse LLP will be present at the Annual Meeting, will have an
opportunity to make a statement if he desires to do so, and will be available to
respond to appropriate questions from stockholders.
STOCKHOLDER PROPOSALS
All stockholder proposals that are intended to be presented at the January,
1998 Annual Meeting of Stockholders of the Company must be received by the
Company no later than August 20, 1997, for inclusion in the Board of Directors'
proxy statement and form of proxy relating to that meeting.
OTHER BUSINESS
The Board of Directors knows of no other business to be acted upon at the
meeting. However, if any other business properly comes before the meeting, it is
the intention of the persons named in the enclosed proxy to vote on such matters
in accordance with their best judgment.
The prompt return of your proxy will be appreciated and helpful in
obtaining the necessary votes. Therefore, whether or not you expect to attend
the meeting, please sign the proxy and return it in the enclosed envelope.
By Order of the Board of Directors
Carl E. Kaplan
Secretary
Dated: December 18, 1996
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K WILL BE SENT
WITHOUT CHARGE TO ANY STOCKHOLDER REQUESTING IT IN WRITING FROM:
ATTENTION: MR. DAVID ROY
INVESTOR RELATIONS DEPARTMENT
DATA GENERAL CORPORATION
3400 COMPUTER DRIVE
WESTBORO, MASSACHUSETTS 01580
23
<PAGE> 27
APPENDIX A
Below is set forth the text of the Company's Employee Qualified Stock
Purchase Plan as proposed to be amended pursuant to Proposal No. 2. Proposed
amended language to the Employee Qualified Stock Purchase Plan is set forth
in italics and the language to be deleted is set forth in brackets.
DATA GENERAL CORPORATION
EMPLOYEE QUALIFIED STOCK PURCHASE PLAN
1. PURPOSE
This Employee Qualified Stock Purchase Plan (the "Plan") is intended as an
incentive and to encourage stock ownership by all eligible employees of Data
General Corporation (the "Company") and all participating subsidiaries so that
they may share in the fortunes of the Company by acquiring or increasing their
proprietary interest in the Company. The Plan is designed to encourage eligible
employees to remain in the employ of the Company. It is intended that options
issued pursuant to this Plan shall constitute options issued pursuant to an
"employee stock purchase plan" within the meaning of Section 423 of the Internal
Revenue Code of 1986 (the "Code").
2. ELIGIBLE EMPLOYEES
All employees of the Company or any of its participating subsidiaries who
have completed ninety days' employment with the Company or any of its
subsidiaries shall be eligible to receive options under this Plan to purchase
the Company's Common Stock (except employees in countries whose laws make
participation impractical). Persons who have been so employed for ninety days or
more on the February 1 next following the date this Plan is approved by the
stockholders of the Company shall receive their options as of such February 1.
Persons who attain the status of employment for ninety days or more after the
date on which the initial options are granted under this Plan shall be granted
options on the next date on which options are granted to all participating
employees. In no event may an employee be granted an option if such employee,
immediately after the option is granted, owns stock possessing 5 percent or more
of the total combined voting power or value of all classes of stock of the
Company or of its parent corporation or subsidiary corporation, as the terms
"parent corporation" and "subsidiary corporation" are defined in Section 425(e)
and (f) of the Code. For purposes of determining stock ownership under this
paragraph, the rules of Section 425 (d) of the Code shall apply and stock which
the employee may purchase under outstanding options shall be treated as stock
owned by the employee.
For purposes of this Article 2, the term employee shall not include an
employee whose customary employment is 20 hours or less per week or is for not
more than 5 months in any calendar year.
3. STOCK SUBJECT TO THE PLAN
The stock subject to the options shall be shares of the Company's
authorized but unissued shares of Common Stock of the Company or shares of
Common Stock reacquired by the Company, including shares purchased in the open
market. The aggregate number of shares which may be issued pursuant to this Plan
is [8,600,000]11,100,000, subject to increase or decrease by reason of stock
split-ups, reclassifications, stock dividends, changes in par value and the
like.
A-1
<PAGE> 28
4. PAYMENT PERIODS AND STOCK OPTIONS
The six-month periods, August 1 to January 31 and February 1 to July 31,
are Payment Periods during which payroll deductions will be accumulated under
the Plan. Each Payment Period includes only regular pay days falling within it.
Twice each year, on the first business day of each Payment Period, The
Company will grant to each eligible employee who is then a participant in the
Plan an option to purchase on the last day of such Payment Period at the Option
Price hereinafter provided for such number of shares of the Common Stock of the
Company reserved for the purpose of the Plan as his or her accumulated payroll
deductions on the last day of such Payment Period will pay for at such Option
Price; provided and on condition that such employee remains eligible to
participate in the Plan throughout such Payment Period. The Option Price for
each Payment Period shall be the lesser of (i) 85% of the average market price
of the Company's Common Stock on the first business day of the Payment Period;
or (ii) 85% of the average market price of the Company's Common Stock on the
last business day of the Payment Period. In the event of an increase or decrease
in the number of outstanding shares of Common Stock of the Company through stock
split-ups, reclassifications, stock dividends, changes in par value and the
like, an appropriate adjustment shall be made in the number of shares and Option
Price per share provided for under the Plan, either by a proportionate increase
in the number of shares and a proportionate decrease in the Option Price per
share, or by a proportionate decrease in the number of shares and a
proportionate increase in the Option Price per share, as may be required to
enable an eligible employee who is then a participant in the plan as to whom an
option is exercised on the last day of any then current Payment Period to
acquire such number of full shares as his accumulated payroll deductions on such
date will pay for at the adjusted Option Price.
For purposes of this Plan the term "average market price" means, if the
Common Stock is listed on the New York Stock Exchange, the average of the high
and low prices of the Common Stock of the Company on such exchange or such other
national securities exchange as designated by the Board of Directors or, if the
Common Stock is traded over-the-counter securities market, the mean between the
bid and asked prices of the Common Stock.
For purposes of this Plan the term "business day" as used herein means a
day on which there is trading on the New York Stock Exchange or such other
national securities exchange as shall be designated by the Board of Directors
pursuant to the preceding paragraph.
No employee shall be granted an option which permits his rights to purchase
Common Stock under the Plan and any similar plans of the Company or any parent
or subsidiary corporations to accrue at a rate which exceeds $25,000 of fair
market value of such stock (determined at the time such option is granted) for
each calendar year in which such option is outstanding at any time. The purpose
of the limitation in the preceding sentence is to comply with Section 423(b)(8)
of the Code.
A-2
<PAGE> 29
5. EXERCISE OF OPTION
Each eligible employee who continues to be a participant in the Plan on the
last business day of a Payment Period shall be deemed to have exercised his
option on such date and shall be deemed to have purchased from the Company such
number of full shares of Common Stock reserved for the purpose of the Plan as
his accumulated payroll deductions on such date will pay for at such Option
Price. If a participant is not an employee on the last business day of a Payment
Period, he shall not be entitled to exercise his option.
6. UNUSED PAYROLL DEDUCTIONS
If the participant wishes to receive a certificate representing the shares
purchased pursuant to the option, only full shares of stock will be represented
by the stock certificate. Any balance remaining in an employee account after a
purchase will be reported to the employee and will be carried forward to the
next Payment Period.
7. AUTHORIZATION FOR ENTERING PLAN
An employee may enter the Plan by filling out, signing and delivering to
the Corporate Benefits Department an Authorization:
a) stating the amount to be deducted regularly from his or her pay;
b) authorizing the purchase of stock for him in each Payment Period in
accordance with the terms of the Plan; and
c) specifying the exact name in which stock purchased for him or her is
to be issued as provided under Article 11 hereof.
Such Authorization must be received by the Corporate Benefits Department at
least 10 days before the beginning date of such next succeeding Payment Period.
Unless an employee files a new Authorization or withdraws from the Plan,
his or her deductions and purchases under the Authorization he or she has on
file under the Plan will continue as long as the Plan remains in effect.
The Company will accumulate and hold for the employee's account the amounts
deducted from his pay. No interest will be paid on it.
8. MAXIMUM AMOUNT OF PAYROLL DEDUCTIONS
An employee may authorize payroll deductions in any even dollar amount up
to but not more than 10% of his regular base pay, provided, however, that the
minimum deduction in respect of any payroll period shall be $5.00 (or such
lesser amount as the Committee shall establish).
9. CHANGE IN PAYROLL DEDUCTIONS
Deductions may be decreased only once in a Payment Period. Deductions may
be increased only prior to the first day of a Payment Period. New Authorizations
will be required and must be received by the Corporate Benefits Department.
A-3
<PAGE> 30
10. WITHDRAWAL FROM THE PLAN
An employee may withdraw from the Plan, in whole but not in part, at any
time prior to the last business day of each Payment Period by delivering a
Withdrawal Notice to the Corporate Benefits Department, in which event the
Company will promptly refund the entire balance of his deductions not
theretofore used to purchase stock under the Plan.
An employee who withdraws from the Plan is like an employee who has never
entered the Plan. To re-enter, he or she must file a new Authorization at least
10 days before the beginning date of the next Payment Period which cannot,
however, become effective before the beginning of the next Payment Period
following his or her withdrawal.
11. ISSUANCE OF STOCK
Certificates for stock issued to participants will be delivered as soon as
practicable after each Payment Period.
Stock purchased under the Plan will be issued only in the name of the
employee, or if his or her Authorization so specifies, in the name of the
employee and another person of legal age as joint tenants with rights of
survivorship.
12. NO TRANSFER OR ASSIGNMENT OF EMPLOYEE'S RIGHTS
An employee's rights under the Plan are his or hers alone and may not be
transferred or assigned to, or availed of by, any other person. Any option
granted to an employee may be exercised only by such employee.
13. TERMINATION OF EMPLOYEE'S RIGHTS
An employee's rights under the Plan will terminate when he ceases to be an
employee because of retirement, resignation, lay-off, discharge, death, change
of status, or for any other reason. A Withdrawal Notice will be considered as
having been received from the employee on the day his or her employment ceases,
and all payroll deductions not used to purchase stock will be refunded.
If an employee's payroll deductions are interrupted by any legal process, a
Withdrawal Notice will be considered as having been received from him or her on
the day the interruption occurs.
14. TERMINATION AND AMENDMENTS TO PLAN
The plan may be terminated at any time by the Company's Board of Directors.
It will terminate in any case when all or substantially all of the unissued
shares of stock reserved for the purposes of the Plan have been purchased. If
at any time shares of stock reserved for the purposes of the Plan remain
available for purchase but not in sufficient number to satisfy all then
unfilled purchase requirements, the available shares shall be apportioned among
participants in proportion to their options and the Plan shall terminate. Upon
such termination or any other termination of the Plan, all payroll deductions
not used to purchase stock will be refunded.
A-4
<PAGE> 31
The Board of Directors also reserves the right to amend the Plan from time
to time, in any respect provided, however, that no amendment shall be effective
without prior approval of the stockholders, which would (a) except as provided
in Article 3 and 4, increase the number of shares of Common Stock to be offered
above or (b) change the class of employees eligible to receive options under the
Plan.
15. LIMITATIONS ON SALE OF STOCK PURCHASED UNDER THE PLAN
The Plan is intended to provide Common Stock for investment and not for
resale. The Company does not, however, intend to restrict or influence any
employee in the conduct of his or her own affairs. An employee may, therefore,
sell stock purchased under the Plan at any time he or she chooses; provided,
however, that because of certain Federal tax requirements, each employee will
agree by entering the Plan, promptly to give the Company notice of any such
stock disposed of within two years after the date of the last day of the Payment
Period during which the stock was purchased showing the number of such shares
disposed of. The employee assumes the risk of any market fluctuations in the
price of such stock.
16. COMPANY'S PAYMENT OF EXPENSES RELATED TO PLAN
The Company will bear all costs of administering and carrying out the Plan.
17. PARTICIPATING SUBSIDIARIES
The term "participating subsidiaries" shall mean any subsidiary of the
Company which is designated by the Board of Directors to participate in the
Plan. The Board of Directors shall have the power to make such designations
before or after the Plan is approved by the stockholders.
18. ADMINISTRATION OF THE PLAN
The Plan shall be administered by a committee appointed by the Board of
Directors of the Company (the "Committee"). The Committee shall consist of not
less than three members of the Company's Board of Directors. The Board of
Directors may from time to time remove members from, or add members to, the
Committee. Vacancies on the Committee, howsoever caused, shall be filled by the
Board of Directors. The Committee shall select one of its members as Chairman,
and shall hold meetings at such times and places as it may determine. Acts by a
majority of the Committee, or acts reduced to and approved in writing by a
majority of the members of the Committee, including written approvals by
electronic means, shall be valid acts of the Committee.
The interpretation and construction by the Committee of any provisions of
the Plan or of any options granted under it shall be final unless otherwise
determined by the Board of Directors. The Committee may from time to time adopt
such rules and regulations for carrying out the Plan as it may deem best. No
member of the Board of Directors or the Committee shall be liable for any action
or determination made in good faith with respect to the Plan or any option
granted under it. No member of the Committee shall be eligible to participate
in the Plan while serving as a member of the Committee.
19. OPTIONEES NOT STOCKHOLDERS
Neither the granting of an option to an employee nor the deduction from his
or her pay shall constitute such employee a stockholder of the shares covered by
an option until such shares have been purchased by and issued to such employee.
A-5
<PAGE> 32
20. APPLICATION OF FUNDS
The proceeds received by the Company from the sale of Common Stock pursuant
to options granted under the Plan will be used for general corporate purposes.
21. GOVERNMENTAL REGULATION
The Company's obligation to sell and deliver shares of the Company's Common
Stock under this Plan is subject to the approval of any governmental authority
required in connection with the authorization, issuance or sale of such stock.
22. WITHHOLDING OF ADDITIONAL FEDERAL INCOME TAX
The Company, in accordance with Section 3402(a) of the Code and the
Regulations and Rulings promulgated thereunder, will withhold from the wages of
participating employees, in all payroll periods following and in the same
calendar year as the date on which compensation is deemed received by the
employee, additional income taxes in respect of the amount that is considered
compensation includable in the employee's gross income.
23. APPROVAL OF STOCKHOLDERS
The Plan shall not take effect until approved by the holders of a majority
of the outstanding shares of Common Stock of the Company, which approval must
occur within the period beginning twelve months before and ending twelve months
after the date the Plan is adopted by the Board of Directors.
A-6
<PAGE> 33
DATA GENERAL CORPORATION
P R O X Y
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF
STOCKHOLDERS TO BE HELD JANUARY 29, 1997
Ronald L. Skates and Frederick R. Adler, and each of them, as the true and
lawful attorneys, agents and proxies of the undersigned, with full power of
substitution, are hereby authorized to represent and to vote, as designated
below, all shares of Common Stock of Data General Corporation held of record by
the undersigned on December 2, 1996, at the Annual Meeting of Stockholders to be
held at 11:00 A.M. on January 29, 1997, at the Enterprise Room, Fifth Floor,
State Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts,
and at any adjournments thereof. Any and all proxies heretofore given are hereby
revoked.
PLEASE MARK, DATE AND SIGN THE REVERSE SIDE AND MAIL PROMPTLY IN THE
ENCLOSED ENVELOPE.
(SEE REVERSE SIDE)
DATA GENERAL CORPORATION
P.O. BOX 11235
NEW YORK, N.Y. 19203-0235
_ _ _ _ V_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _V _ _ _ _
<TABLE>
<S> <C>
Proposal No. !: Election of FOR all nominees / / WITHHOLD AUTHORITY to vote for all / / * EXCEPTIONS / /
Directors listed below nominees listed below
Nominees: Frederick R. Adler, Ferdinand Colloredo-Mansfeld, John G. McElwee, Ronald L. Skates,
W. Nicholas Thorndike, Donald H. Trautlein and Richard L. Tucker.
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark the "Exceptions"
box and write the nominee's name in the space provided below)
* Exceptions: _______________________________________________________________________________
Proposal No. 2: To approve an amendment to the Company's Employee Qualified Stock Purchase
Plan to increase the number of shares that may be issued thereunder.
FOR / / AGAINST / / ABSTAIN / / Change of Address and / /
or Comments Mark Here
Unless otherwise specified this Proxy will be voted FOR Proposals Nos. 1 and 2.
The Board of Directors recommends a vote FOR Proposals Nos. 1 and 2.
Discretionary authority is hereby granted with respect to such
other matters as may properly come before the meeting. The signer
acknowledges receipt of the Notice of Annual Meeting of
Stockholders and the Proxy Statement furnished therewith.
IMPORTANT: Please sign exactly as name appears hereon. Each joint
owner shall sign. Executors, administrators, trustees, etc. should give
full title.
Dated: ____________________________________, 199__
___________________________________________________
Signature
___________________________________________________
Signature
Please Sign, Date and Return the Proxy Card Promptly.
Votes MUST be indicated (X) in Black or Blue ink.
</TABLE>
<PAGE> 34
[DATA GENERAL LOGO]
DATA GENERAL CORPORATION
4400 Computer Drive, Westboro, MA 01580
Telephone (508) 366-8911
Dear Shareholder:
Attached below is your proxy card for the January 29, 1997 Annual Meeting of
Shareholders of Data General Corporation. Also enclosed please find the Notice
of Annual Meeting and Proxy Statement.
YOUR VOTE IS IMPORTANT. UNLESS ENOUGH SHAREHOLDERS VOTE THEIR PROXIES, THE
COMPANY WILL NOT BE ABLE TO COMPLETE THE BUSINESS AT ITS MEETING, WHICH WILL
RESULT IN THE ADDITIONAL EXPENSE OF FURTHER MAILINGS TO SHAREHOLDERS UNTIL
ENOUGH VOTES ARE RECEIVED.
Whether or not you plan to attend the Shareholder's Meeting, please immediately
complete and sign the proxy card, and return it in the envelope provided.
YOUR VOTE IS IMPORTANT NO MATTER HOW MANY SHARES YOU MAY OWN.
Thank you.
PLEASE DETACH PROXY CARD HERE
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