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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________
FORM 10-Q
(Mark one)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the quarterly period ended December 26, 1998
-----------------
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the transition period from _______________________ to
__________________________
Commission File Number 1-7352
______________________________
Data General Corporation
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(Exact name of registrant as specified in its charter)
Delaware 04-2436397
- ------------------------------- ---------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
4400 Computer Drive, Westboro, Massachusetts 01580
- -------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (508) 898-5000
Former name, former address and former fiscal year if changed since last report:
Not Applicable
______________________________
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Number of shares outstanding of each of the registrant's classes of common
stock, as of January 22, 1999:
Common Stock, par value $.01 50,152,458
---------------------------- ------------------
(Title of each class) (Number of shares)
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<PAGE>
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
DATA GENERAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Quarter Ended
--------------------
Dec. 26, Dec. 27,
in thousands, except per share amounts 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
Revenues:
Product............................................. $268,836 $267,177
Service............................................. 96,753 98,098
-------- --------
Total revenues................................. 365,589 365,275
-------- --------
Costs and expenses:
Cost of product revenues............................ 184,217 189,171
Cost of service revenues............................ 60,831 60,176
Research and development............................ 28,873 27,448
Selling, general, and administrative................ 86,475 84,371
-------- --------
Total costs and expenses....................... 360,396 361,166
-------- --------
Income from operations.................................. 5,193 4,109
Interest income......................................... 3,019 3,509
Interest expense........................................ 3,776 3,620
Other income ........................................... 5,372 --
-------- --------
Income before income taxes.............................. 9,808 3,998
Provision (benefit) for income taxes.................... (6,700) 500
-------- --------
Net income.............................................. $ 16,508 $ 3,498
======== ========
Basic net income per share
Net income per share................................ $0.33 $0.07
======== ========
Weighted average shares outstanding................. 49,801 48,640
======== ========
Diluted net income per share
Net income per share................................ $0.32 $0.07
======== ========
Weighted average shares outstanding, including
common stock equivalents, where applicable.......... 51,236 50,676
======== ========
<FN>
No cash dividends have been declared or paid since inception.
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
DATA GENERAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
(Unaudited)
Dec. 26, Sept. 26,
dollars in thousands, except par value 1998 1998
- --------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets
Cash and temporary cash investments................. $ 130,289 $ 158,220
Marketable securities............................... 157,184 160,354
Receivables, net.................................... 308,378 307,428
Inventories......................................... 134,181 141,639
Other current assets................................ 31,170 28,320
---------- ----------
Total current assets........................... 761,202 795,961
Property, plant, and equipment, net..................... 185,626 180,454
Other assets............................................ 93,034 88,649
---------- ----------
Total assets................................... $1,039,862 $1,065,064
========== ==========
Liabilities and stockholders' equity
Current liabilities
Accounts payable.................................... $ 126,127 $ 160,940
Other current liabilities........................... 267,807 269,774
---------- ----------
Total current liabilities...................... 393,934 430,714
---------- ----------
Long-term debt.......................................... 212,750 212,750
---------- ----------
Other liabilities....................................... 28,324 36,645
---------- ----------
Stockholders' equity
Common stock, $0.01 par value
Outstanding - 49,984,000 shares at Dec. 26, 1998
and 49,689,000 shares at Sept. 26, 1998 (net of
deferred compensation of $19,494 at Dec. 26, 1998
and $15,444 at Sept. 26, 1998)................... 629,377 626,137
Accumulated deficit..................................... (215,468) (231,976)
Unrealized gains on marketable securities............... 9,276 8,513
Equity adjustment for minimum pension liability......... (6,252) (6,252)
Cumulative translation adjustment....................... (12,079) (11,467)
---------- ----------
Total stockholders' equity..................... 404,854 384,955
---------- ----------
Total liabilities and stockholders' equity..... $1,039,862 $1,065,064
========== ==========
<FN>
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
DATA GENERAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Quarter Ended
----------------------
Dec. 26, Dec. 27,
in thousands 1998 1997
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities
Net income................................................... $ 16,508 $ 3,498
Adjustments to reconcile net income to
net cash used by operating activities
Depreciation............................................ 19,805 19,756
Amortization of capitalized software development costs.. 4,540 6,403
Gain on sale of marketable securities .................. (5,372) --
Other non-cash items, net............................... (1,720) 184
Change in operating assets and liabilities.............. (34,630) (58,744)
-------- --------
Net cash used by operating activities................... (869) (28,903)
-------- --------
Cash flows from investing activities
Expenditures for property, plant, and equipment.............. (29,165) (31,361)
Net proceeds from the sales (purchases) of marketable
securities................................................. 8,834 (4,494)
Capitalized software development costs ...................... (8,043) (10,702)
-------- --------
Net cash used by investing activities................... (28,374) (46,557)
-------- --------
Cash flows from financing activities
Cash provided from stock plans............................... 1,541 606
-------- --------
Net cash provided from financing activities............. 1,541 606
-------- --------
Effect of foreign currency rate fluctuations
on cash and temporary cash investments.......................... (229) (613)
-------- --------
Decrease in cash and temporary cash investments.................. (27,931) (75,467)
Cash and temporary cash investments - beginning of period........ 158,220 216,814
-------- --------
Cash and temporary cash investments - end of period.............. $130,289 $141,347
======== ========
Supplemental disclosure of cash flow information
Interest paid................................................ $ 6,714 $ 6,437
Income taxes paid............................................ $ 1,825 $ 263
<FN>
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
DATA GENERAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
<TABLE>
Note 1. Consolidated Balance Sheet Details
<CAPTION>
Dec. 26, Sept. 26,
in thousands 1998 1998
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Inventories
Raw materials................................................ $ 4,130 $ 1,420
Work in process.............................................. 63,880 64,200
Finished systems............................................. 42,381 50,632
Field engineering parts and components....................... 23,790 25,387
-------- --------
$134,181 $141,639
======== ========
Property, plant, and equipment
Property, plant, and equipment............................... $657,653 $641,612
Accumulated depreciation..................................... (472,027) (461,158)
-------- --------
$185,626 $180,454
======== ========
</TABLE>
Note 2. Accounting Policies
In the first quarter of fiscal 1998, the Company adopted Statement of
Financial Accounting Standards ("SFAS") Number 128, "Earnings per Share." The
following data show the amounts used in computing earnings per share and the
effect on income and the weighted average number of shares of potentially
dilutive common stock.
<TABLE>
Quarter Ended
----------------------------------------------------------------------------------
December 26, 1998 December 27, 1997
------------------------------------- ----------------------------------------
Income Shares Per-Share Income Shares Per-Share
in thousands, except per share amounts (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- --------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Basic Earnings Per Share
Net income available to
common stockholders $16,508 49,801 $0.33 $ 3,498 48,640 $0.07
Effect of Dilutive Securities
Stock Options -- 1,435 -- 2,036
------- ------ ------- ------
Diluted Earnings Per Share
Net income available to
common stockholders and
assumed conversions $16,508 51,236 $0.32 $ 3,498 50,676 $0.07
======= ====== ===== ======= ====== =====
<FN>
For the quarters ended December 26, 1998 and December 27, 1997, the assumed
conversion of the convertible debentures, giving effect to the incremental
shares and the adjustment to reduce interest expense, is anti-dilutive and has
therefore been excluded from the computation.
</FN>
</TABLE>
<PAGE>
Note 3. Basis of Presentation and Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements reflect all adjustments, consisting of normal
recurring accruals, considered necessary for a fair presentation. The Company's
accounting policies are described in the Notes to Consolidated Financial
Statements in the Company's 1998 Annual Report. The results of operations for
the quarter ended December 26, 1998 are not necessarily indicative of the
results of the entire fiscal year.
Note 4. Restructuring Charge
During fiscal year 1998, the Company approved and implemented a
restructuring program designed to strengthen the Company's focus on storage and
enterprise computing solutions and reduce costs in non-strategic areas. The
restructuring was adopted in response to the increasing price competition within
the computer hardware industry.
Accordingly, during fiscal year 1998, the Company recorded a charge of
approximately $135 million related to the restructuring program and certain
asset write-downs resulting from the plan. A summary of the related accrued
liability balance at December 26, 1998 is as follows:
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------
Less:
Sept. 26, 1998 Cash payments and Dec. 26, 1998
in millions Balance Asset write-downs Balance
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Employee termination benefits $ 27.0 $ 5.6 $ 21.4
Asset write-downs 6.7 1.0 5.7
Lease abandonments 10.6 0.4 10.2
Other exit costs 3.7 0.6 3.1
------ ----- ------
Total $ 48.0 $ 7.6 $ 40.4
====== ===== ======
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
The provision included severance benefits for approximately 480 employees,
of which approximately 65% were based in the United States and the remainder in
Europe and Asia/Pacific. Of the 480 employees identified, approximately 398 were
terminated as of December 26, 1998. The remaining terminations are expected to
be completed during the first half of calendar 1999. Asset write-downs are
composed primarily of fixed assets, including leasehold improvements and
demonstration equipment which are being disposed of in connection with the
restructuring program. The provision for lease abandonments relates to vacated
lease properties, mainly in Europe and Asia, and includes a change in estimate
of $1.3 million for lease abandonment costs accrued in prior years. There were
no material changes in estimates to prior provisions or additional charges
recorded during the three-month period ended December 26, 1998.
<PAGE>
Note 5. Comprehensive Income
In the first quarter of fiscal 1999, the Company adopted SFAS Number 130,
"Reporting Comprehensive Income." This statement establishes standards for
reporting and displaying comprehensive income and its components in a full set
of general purpose financial statements. This statement requires the
classification of items of comprehensive income by their nature in a financial
statement and the accumulated balance of other comprehensive income separately
from retained earnings and additional paid-in capital in the equity section of
the balance sheet. The Company's total comprehensive income is as follows:
<TABLE>
Quarter Ended
-----------------------------
Dec. 26, Dec. 27,
in thousands 1998 1997
- -------------------------------------------------------------------------------------
<S> <C> <C>
Net income $ 16,508 $ 3,498
Other comprehensive income (expense):
Unrealized gains on marketable securities........... 763 675
Cumulative translation adjustment................... (612) (377)
-------- --------
Total other comprehensive income........................ 151 298
-------- --------
Total comprehensive income.............................. $ 16,659 $ 3,796
======== ========
</TABLE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations
The Company reported net income of $16.5 million for the current quarter
ended December 26, 1998, compared with net income of $3.5 million for the same
period of the prior year. The current quarter net income of $16.5 million
includes a benefit for taxes of $7.5 million resulting from a settlement with
the Internal Revenue Service related to taxes paid during the Company's 1983
through 1991 fiscal years, and a gain of $5.4 million resulting from the sale of
an investment in marketable securities.
<TABLE>
Revenues (in millions)
- -------------------------------------------------------------------------------------
Quarter ended
------------------------------------------
12/26/98 Change 12/27/97
-------- ------ --------
<S> <C> <C> <C>
Product $268.8 1% $267.2
% of Total Revenues 74% 73%
Service 96.8 (1%) 98.1
% of Total Revenues 26% 27%
Total $365.6 -- $365.3
- -------------------------------------------------------------------------------------
</TABLE>
In the fiscal quarter ended December 26, 1998, product revenues were $137.7
million from the Company's AViiON family of open systems server products
compared with product revenues of $133.3 million in the comparable period of the
prior year. In the current quarter, revenues from the Company's Intel
processor-based AViiON systems increased 17% to $126.7 million as compared to
the comparable quarter in fiscal 1998. Revenues from AViiON systems running the
Microsoft Windows NT operating system increased by approximately 36% while
revenues from the Motorola-based AViiON systems declined by 55% compared with
the same period of the prior year. The Company anticipates that the percentage
of server product revenues generated by the Intel processor-based AViiON
products will continue to increase in fiscal 1999, while the Motorola-based
AViiON system revenues are expected to continue to decline. Product revenues
from the Company's CLARiiON storage systems increased 9% to $113.7 million from
the comparable prior-year period and accounted for 42% of total product revenues
in the current quarter. Within the CLARiiON family of storage systems, full
fibre channel revenues were nearly six times the full fibre channel revenues of
the quarter ended December 27, 1997 and represented approximately one half of
total CLARiiON revenues in the current quarter. The Company anticipates that the
percentage of revenues from full fibre channel products will continue to
increase. CLARiiON is sold primarily through the Company's original equipment
manufacturer (OEM) and distributor channels; thus sales in any given period are
subject to sales cycles and inventory levels of the Company's customers.
CLARiiON product revenues have been concentrated in a limited number of
customers, with a significant portion of the Company's CLARiiON product sales to
a single OEM customer. Product revenues from personal computers and other
equipment decreased 33% from the same period in the prior year and represented
6% of total product revenues compared to 9% for the comparable prior-year
period. Product revenues from VALiiANT, the Company's contract manufacturing
operation, represented less than 1% of total product revenues for the quarter
ended December 26, 1998.
<PAGE>
<TABLE>
Revenues by Geographic Marketplace
- -------------------------------------------------------------------------------------
Percentage of Percentage Change of
Consolidated Revenues $ of Revenues
-------------------------------- --------------------------
Quarter ended 12/26/98 - 12/27/97
-------------------------------- --------------------------
12/26/98 12/27/97 Quarter ended
-------------------------------- --------------------------
<S> <C> <C> <C>
Domestic
- --------
Product 60% 60% 1%
Service 58% 61% (6%)
Total 60% 60% (1%)
Europe
- ------
Product 25% 24% 4%
Service 33% 30% 11%
Total 27% 26% 6%
Other International
- -------------------
Product 15% 16% (4%)
Service 9% 9% (10%)
Total 13% 14% (5%)
- -------------------------------------------------------------------------------------
</TABLE>
The increase in domestic product revenues for the current quarter ended
December 26, 1998 was primarily a result of increased shipments of CLARiiON and
Intel processor-based AViiON systems, which was partly offset by decreased
shipments of Motorola-based AViiON systems and VALiiANT products. The increase
in European product revenues, including U.S. direct export sales, for the
current quarter was mainly attributable to increases in CLARiiON and AViiON
product revenues, which was partly offset by decreases in VALiiANT and PC and
other equipment product revenues. Other international product revenues,
including U.S. direct export sales, for the current quarter decreased 4% as
compared with the same fiscal quarter in 1998.
In the service business, the Company experienced a 3% decrease in contract
maintenance revenues in the current quarter ended December 26, 1998 as compared
with the same period in fiscal 1998 due to a decline in the contract maintenance
service base. This decrease was partially offset by a 3% increase in
professional service revenues in the current quarter ended December 26, 1998 as
compared with the quarter ended December 27, 1997. Professional service revenues
represent approximately 25% of total service revenues in the current quarter.
In Europe, the effect of foreign exchange accounted for approximately 3% of
the 6% increase in total revenues for the current quarter as compared to the
quarter ended December 27, 1997.
<PAGE>
<TABLE>
Cost of Revenues (in millions)
- -------------------------------------------------------------------------------------
Quarter ended
------------------------------------------
12/26/98 Change 12/27/97
-------- ------ ---------
<S> <C> <C> <C>
Product $184.2 (3%) $189.2
% of Product Revenues 69% 71%
Service 60.8 1% 60.2
% of Service Revenues 63% 61%
Total Cost of Revenues $245.0 (2%) $249.4
% of Total Revenues 67% 68%
- -------------------------------------------------------------------------------------
</TABLE>
The decrease in the product cost as a percentage of product revenues from
the comparable prior-year period was primarily the result of the shift in
product mix to high-end NUMA technology based AViiON servers. The increase in
the service cost as a percentage of service revenues for the current quarter
ended December 26, 1998 was primarily caused by the decline in contract
maintenance revenues.
Operating Expenses (in millions)
<TABLE>
- -------------------------------------------------------------------------------------
Quarter ended
------------------------------------------
12/26/98 Change 12/27/97
-------- ------ ---------
<S> <C> <C> <C>
Research & Development $28.9 5% $27.4
% of Total Revenues 8% 8%
Selling, general & administrative $86.5 2% $84.4
% of Total Revenues 24% 23%
- -------------------------------------------------------------------------------------
</TABLE>
The Company continues to focus its research and development efforts on its
core business technology: multi-user computer systems and mass storage devices.
In the current three-month period, gross expenditures on research and
development and software development before capitalization were $36.9 million, a
decrease of 3% from $38.1 million for the comparable prior-year period.
Continued increases in research and development expenditures in CLARiiON fibre
channel products and NUMA technology, were offset, in part, by savings
associated from the Company's restructuring program implemented in fiscal year
1998.
For the current quarter ended December 26, 1998, selling, general, and
administrative expenses increased by 2% over the comparable prior-year quarter.
The increase is a result of increased sales marketing efforts in the storage
business, partially offset by savings in the server business resulting from the
Company's fiscal 1998 restructuring program.
During fiscal year 1998, the Company approved and implemented a
restructuring program designed to strengthen the Company's focus on storage and
enterprise computing solutions and reduce costs in non-strategic areas. The
restructuring was adopted in response to the increasing price competition within
the computer hardware industry.
<PAGE>
Accordingly, during fiscal year 1998, the Company recorded a charge of
approximately $135 million related to the restructuring program and certain
asset write-downs resulting from the plan. A summary of the related accrued
liability balance at December 26, 1998 is as follows:
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------
Less:
Sept. 26, 1998 Cash payments and Dec. 26, 1998
in millions Balance Asset write-downs Balance
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Employee termination benefits $ 27.0 $ 5.6 $ 21.4
Asset write-downs 6.7 1.0 5.7
Lease abandonments 10.6 0.4 10.2
Other exit costs 3.7 0.6 3.1
------ ----- ------
Total $ 48.0 $ 7.6 $ 40.4
====== ===== ======
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
The provision included severance benefits for approximately 480 employees,
of which approximately 65% were based in the United States and the remainder in
Europe and Asia/Pacific. Of the 480 employees identified, approximately 398 were
terminated as of December 26, 1998. The remaining terminations are expected to
be completed during the first half of calendar 1999. Asset write-downs are
composed primarily of fixed assets, including leasehold improvements and
demonstration equipment which are being disposed of in connection with the
restructuring program. The provision for lease abandonments relates to vacated
lease properties, mainly in Europe and Asia, and includes a change in estimate
of $1.3 million for lease abandonment costs accrued in prior years. There were
no material changes in estimates to prior provisions or additional charges
recorded during the three-month period ended December 26, 1998.
During fiscal year 1995, the Company recorded a restructuring charge of $43
million. As of December 26, 1998 the remaining reserves of $3.1 million from the
1995 restructuring charge are for excess vacant rental properties, primarily
located in Europe.
At December 26, 1998, the number of employees totaled approximately 4,700,
which is unchanged from the number of employees at September 26, 1998 and a
decrease of approximately 400 employees from December 27, 1997.
Interest income for the current quarter was $3.0 million, a 14% decrease
from $3.5 million for the comparable period of fiscal 1998, due to lower levels
of invested cash. Interest expense for the current quarter, primarily related to
interest expense and amortization of issuance costs associated with the
Company's 6% Convertible Subordinated Notes due 2004, was approximately $3.8
million, a 4% increase from $3.6 million for the comparable period of fiscal
1998. Other income for the current quarter includes a gain of $5.4 million from
the sale of equity investments in non-affiliated companies which had been
previously carried at cost.
The current quarter income tax benefit of $6.7 million includes a gain of
$7.5 million resulting from a settlement with the Internal Revenue Service for
taxes paid during the Company's 1983 through 1991 fiscal years. The remainder of
the current quarter tax provision relates primarily to foreign, state, and
federal alternative minimum taxes. The Company has a valuation allowance which
offsets substantially all deferred tax assets as of December 26, 1998 and
December 27, 1997. The amount of the deferred tax assets considered realizable
is subject to change based on estimates of future income during the carryforward
period. The Company will assess the need for the valuation allowance at each
balance sheet date based on all available evidence and may adjust the level of
the valuation allowance, if appropriate.
<PAGE>
Financial Condition
Cash and temporary cash investments as of December 26, 1998 were $130.3
million, a decrease of $27.9 million from the end of fiscal 1998. At the same
date, the Company held $157.2 million in marketable securities, a net decrease
of $3.2 million from the end of fiscal 1998. In total, cash and temporary cash
investments along with marketable securities decreased $31.1 million for the
current three-month period. The decrease was mainly attributable to the
purchases of equipment required for the Company's server and storage businesses,
payments reducing employee and vendor related accruals, and payments related to
the restructuring program implemented in June 1998. The marketable securities
held, which supplement cash and temporary cash investments, include United
States treasury bills and notes, notes issued by U.S. government agencies,
commercial paper and certificates of deposit, as well as equity securities
recorded at their fair market value of $10.5 million and classified as
available-for-sale. The unrealized gain on marketable securities of $9.3 million
is recorded as a separate component of stockholders' equity. During the current
three-month period, the Company recorded a gain of $5.4 million on the sale of
an investment in marketable securities. Net cash used by operations for the
three months ended December 26, 1998 totaled $0.9 million; expenditures for
property, plant, and equipment totaled $29.2 million; capitalized software
development costs totaled $8.0 million. Cash provided from stock plans totaled
$1.5 million during the current three-month period ended December 26, 1998. The
effect of foreign currency exchange rate fluctuations on cash and temporary cash
investments was a decrease of $0.2 million.
Net receivables as of December 26, 1998 were $308.4 million, an increase of
$1.0 million from $307.4 million as of September 26, 1998. Total inventories as
of December 26, 1998 were $134.2 million, a decrease of $7.5 million from
September 26, 1998, primarily as a result of the reduction in inventory levels
related to improved supply management. Net property, plant, and equipment
increased $5.2 million from September 26, 1998 to $185.6 million primarily due
to the purchases of equipment and capital expenditures for developing both
operating and financial systems and to support the new product initiatives in
the server and storage businesses. Fixed asset dispositions related to the sale
of demonstration equipment totaled $1.0 million for the current three-month
period. Management expects that sales of demonstration equipment will continue.
The increase of $4.4 million in other assets from September 26, 1998 was
attributed mainly to the capitalization of software development costs net of
related amortization.
The decrease of $34.8 million in accounts payable from September 26, 1998
levels was attributed mainly to the timing of payments related to purchases of
material and a decrease in the value of unmatured foreign exchange contracts.
Other current and other liabilities decreased by approximately $10.3 million
from September 26, 1998 to $296.1 million. The decrease from September 26, 1998
was primarily related to funding of the Company's domestic pension plan and
payments related to the Company's restructuring program. Long-term debt of
$212.8 million remained unchanged from September 26, 1998.
<PAGE>
Year 2000 Information and Readiness Disclosure
The "Year 2000 issue" arises because many computer hardware and software
systems use only two digits to represent the year. As a result, these systems
and programs may not correctly handle dates beyond 1999, resulting in errors in
information or program or systems failures. Assessments of the potential effects
of the Year 2000 issues vary markedly among different companies, governments,
consultants, economists, and commentators. It is not possible to accurately
predict what the actual impact may be. In this context, the Company offers the
following statements concerning the Year 2000 issues. All statements made and
referred to here are Year 2000 readiness disclosures under the U.S. Year 2000
Information and Readiness Disclosure Act.
1. Product Readiness and Customer Communications
The Company is communicating and continues to communicate with its
customers concerning the Year 2000 issue. In addition, the Company has created
Data General and CLARiiON Year 2000 Internet web sites at
http://www.dg.com/year2000 and http://www.clariion.com/corporat/yr2000readiness
.html where Year 2000 readiness disclosures concerning various products and the
Company's Year 2000 program are made available to customers and the general
public.
The Company has established teams to codify and confirm the Year 2000
readiness of Data General's AViiON, CLARiiON, and 32-bit ECLIPSE MV computer
products, as well as Data General Pentium processor-based and later generation
personal computers. Based on these efforts as of December 26, 1998, and subject
to ongoing investigation, the Company has identified many products which are
either Year 2000 Ready or may be made so by means of Year 2000 updates which the
Company intends to make available. The Company is making no assurance of Year
2000 readiness for products not so identified. As well, the Company does not
intend to generally address the Year 2000 readiness of third-party products
(i.e., products not marketed under the Data General or CLARiiON brand name).
2. Data General's Internal Systems, Manufacturing Processes, and Facilities
With regard to the Company's own business systems, Data General has been
preparing for Year 2000 since mid-1996, and has established teams to coordinate
solutions to the Year 2000 issue for its own internal information systems and
applications across the Company's operations worldwide. As of December 26, 1998,
the Company's assessment was that a significant proportion of the Company's
information system and applications have been rendered Year 2000 Ready through a
combination of re-engineering, software updates, or replacement with new
technologies. The Company is continuing its assessment and remediation of Year
2000 issues. Based on existing plans and schedules, and subject in any event to
the possibilities of delays, the Company plans to complete the process of making
all its significant internal information systems Year 2000 Ready in time to meet
the Company's specific business requirements. Although Data General's evaluation
of its information management systems is still in process, the Company believes
that the impact of the Year 2000 issues on its business systems and applications
should not have a material adverse impact on future results.
The Company has also undertaken an assessment of the Year 2000 issue as
related to its manufacturing facilities and processes. Although work remains to
be done, a significant portion of this evaluation has been completed and the
Company is not aware at December 26, 1998, of any material Year 2000 concerns
with respect to its manufacturing facilities and processes. The Company is also
continuing its assessment of the possible impact of Year 2000 issues on the
operations of its facilities (including such matters as security systems,
building equipment, and potential interruptions to utilities). This evaluation
is ongoing at this time. It is the Company's intention that all material Year
2000 issues regarding the operation of the Company's facilities will be
addressed as the requisite information is received by the Company.
<PAGE>
3. Data General's Suppliers
The Company's procurement organizations are seeking to monitor the Year
2000 readiness of the Company's key suppliers. In 1997, the Company contacted
over 200 of its significant suppliers to determine their Year 2000 readiness. In
December, 1998, the Company sent Year 2000 readiness questionnaires to a more
extensive list of suppliers, and will be assessing the responses. Since the
Company's suppliers' Year 2000 preparations and assessments are ongoing, Data
General's efforts to monitor the Year 2000 readiness of key suppliers will be
continuing. If Year 2000 readiness issues are identified concerning the Year
2000 readiness of suppliers, the Company intends to evaluate contingency plans
as needed to address the Company's business requirements.
Since determining the Year 2000 readiness of suppliers depends upon their
cooperation and upon their disclosure of often imprecise or estimated
information, it is likely that the Company's inquiries will not be entirely
successful, and it remains possible that actual results may deviate from
assurances which were given to the Company. It is possible that notwithstanding
the Company's efforts, interruptions of key components or services could have an
adverse impact on the Company's operations and future results. If significant
exposures are identified, the Company expects during 1999 to assess the efficacy
and reasonability of contingency plans to mitigate or avoid potential
interruptions to delivery of critical supplies or services, but alternatives--
particularly for single-sourced components or suppliers--may not always be
readily available or economically reasonable. It is likely that not every
potential Year 2000 exposure will be protected by a contingency plan; a measure
of reasonable business risk will be undertaken relative to the Year 2000
problem, both by Data General and by other companies.
4. Risks of Claims
There may be a potential for claims against the Company arising from
products and services that were not Year 2000 Ready. Because the Company is in
the business of selling computer system products, the Company's risk of being
subjected to lawsuits relating to Year 2000 issues with its products is likely
to be greater than that of companies in other industries. The outcomes of any
Year 2000 claims and the impact of such claims on the Company cannot be
determined at this time; such outcomes will depend on the facts and
circumstances of each situation and an evolving state of law as these types of
claims are addressed by legal systems worldwide.
5. Accounting Treatment of Year 2000 Expenses
The cost of addressing Year 2000 issues is presently being funded through
operating cash flows. The Company is expensing costs associated with
identification and resulting changes to its systems, but does not expect the
amounts to have a material effect on its financial position or results of
operations. During the fiscal year ended September 26, 1998, the Company had
expensed approximately $840,000 in Year 2000 costs for internal labor and
outside consultants in connection with internal projects supporting the
Company's critical systems and has expensed an additional $322,000 for the three
months ended December 26, 1998. As of December 26, 1998, the Company believes
the cost of administering its Year 2000 readiness program will not have a
material adverse impact on future earnings.
<PAGE>
6. Certain Additional Risk Factors
It is unknown how the Company's sales may be impacted by Year 2000 issues.
As the Company's customers focus on preparing their businesses for Year 2000,
capital budgets in the near term may be redirected toward remediation efforts,
potentially delaying the purchase and implementation of new systems, thereby
creating less demand for the Company's products and services. Alternatively,
sales of Year 2000 Ready Data General products could be increased, to replace
older products. Service revenues could be reduced if customers discontinue
support of products which are not Year 2000 Ready, or perhaps increased as
customers purchase new, Year 2000 Ready systems. As well, the Company's sales
during 1999 could be affected by the customers' perceptions of Data General's
own state of Year 2000 readiness. All these factors could affect the Company's
future revenues.
Overriding any preparations taken by the Company, the Year 2000 issue
presents risks and uncertainties that could affect the Company; these include
unexpected Year 2000 issues, or unexpected problems arising from plans
implemented to anticipate Year 2000 problems; extended interruptions to power,
water or telecommunications utility services; potential unavailability of
skilled or critical personnel; delays or interruptions in national or
international transportation systems; and potential governments' responses to
Year 2000 emergencies, among others. Further, there can be no assurance that
there will not be delays in, or increased costs associated with, the Company's
Year 2000 readiness efforts, or that the Company's suppliers and other parties
will adequately prepare for the Year 2000. The nature of these uncertainties is
such that it remains possible that Year 2000 issues could have a material
adverse impact on the Company's operations and financial results. While the
Company does not currently expect that this will be the case, and continues to
aggressively pursue its preparations for the Year 2000, the Company can offer no
express assurance whether or to what extent the Company may be affected by
matters which it has not anticipated or by matters outside of the Company's
control. The Company recognizes the need to continue its analysis, assessment,
monitoring, and planning for the various Year 2000 issues, across its businesses
worldwide, and to address Year 2000 issues as they are identified. Within that
uncertain context, however, and subject to the various factors discussed above,
the Company believes that the impact of Year 2000 issues on its business should
not have a material adverse effect on the Company's financial position or
results of operations.
Market Risk
The Company is exposed to market risk primarily in its cash and foreign
currency transactions. Because a substantial portion of the Company's operations
and revenue occur outside the United States, the Company's results can be
significantly impacted by changes in foreign currency exchange rates. The
Company manages its foreign currency risk through the use of forward foreign
currency contracts. The Company does not hold or enter into derivative financial
instruments for trading purposes. At inception, the forward foreign currency
contracts are designated as hedges of intercompany accounts receivable and
foreign sales which are firmly committed or forecasted. These contracts
generally mature within three months. Market value gains and losses on these
contracts are included in the cost of product revenues and generally offset
exchange gains or losses on the related transactions.
As of December 26, 1998, the Company had entered into forward foreign
currency contracts to purchase $40.9 million and sell $125.4 million in various
foreign currencies with maturity dates between January 25, and March 30, 1999.
The potential gain or loss for a hypothetical 10% beneficial or adverse change
in foreign currency exchange rates on the forward foreign currency contracts
maturing after December 26, 1998 would result in a gain or loss of approximately
$8.4 million. The Company expects that this gain or loss would be offset by
exchange gains or losses on the related hedged transactions.
<PAGE>
Euro Conversion
On January 1, 1999, 11 of the 15 members of the European Union established
fixed conversion rates between their existing currencies and the "euro". The
euro will trade on currency exchanges and the legacy currencies will remain
legal tender for a transition period between January 1, 1999 and January 1,
2002. During the transition period, public and private companies may pay for
goods and services using the euro or the participating country's legacy
currency. The participating countries will issue sovereign debt exclusively in
euros, and will redenominate outstanding sovereign debt. Participating countries
no longer control their own monetary policies by directing independent interest
rates for their legacy currencies. Instead, the authority to direct monetary
policy, including money supply and official interest rates will be exercised by
the new European Central Bank.
The Company has established plans and has begun developing the necessary
modifications for the technical adaptation of its internal information
technology and other systems to accommodate euro-denominated transactions. The
Company is also assessing the business implications of the conversion to the
euro, including long-term competitive implications and the effect of market risk
with respect to financial instruments. The Company is currently unable to
determine the ultimate financial impact of these matters, if any, on its results
of operations, financial condition or cash flows. However, the Company will
continue to assess the impact of euro conversion issues as the applicable
accounting, tax, legal, and regulatory guidance evolves.
Statements concerning the Company's business outlook or future economic
performance; Year 2000 readiness; currency market risk; Euro conversion issues;
anticipated profitability, revenues, expenses or other financial items; product
or service line growth, plans or objectives; and statements concerning
assumptions made or expectations as to any future events, conditions,
performance or other matters, are "forward-looking statements", as that term is
defined under the Federal Securities Laws. Forward-looking statements are
subject to risks, uncertainties and other factors which could cause actual
results to differ materially from those stated in such statements. Such risks,
uncertainties and factors include, but are not limited to, fluctuations in
customer demand, order patterns and inventory levels, changes and delays in
product development plans and schedules, customer acceptance of new products,
changes in pricing or other actions by competitors, general economic conditions,
as well as other risks detailed in the Company's filings with the Securities and
Exchange Commission, including Data General's Report on Form 10-K for the 1998
fiscal year ended September 26, 1998 and this Quarterly Report on Form 10-Q for
the first fiscal quarter of 1999, which ended December 26, 1998.
<PAGE>
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings.
The Company has been engaged in patent infringement litigation against IBM
Corporation since November 1994. Two lawsuits, both in the discovery stages, are
pending in the United States District Court for the District of Massachusetts in
Worcester. The Company alleges that several IBM products including the AS/400
midrange systems and the AS/400 RISC-based computer product line infringe
various Company patents. Both suits seek compensatory damages and, where
appropriate, injunctive relief. IBM has answered both complaints, has denied the
Company's infringement claims and has interposed counterclaims alleging that the
Company's AViiON and CLARiiON computer systems infringe IBM patents.
Although the Company believes its claims are valid, it cannot predict the
outcome of the litigation. In the opinion of management, based on preliminary
evaluation of the IBM patents covered in the counterclaims and subject to the
risks of litigation, the counterclaims are without merit, the Company will
prevail thereon and the counterclaims will not have a material adverse impact on
the results of operations or the financial position of the Company.
The Company and certain of its subsidiaries are involved in various other
patent infringement, contractual, and proprietary rights suits. In the opinion
of management, the conclusion of these suits will not have a material adverse
effect on the financial position or results of operations and cash flows of the
Company and its subsidiaries.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
3. (c) By-Laws of the Company, as amended through November 4, 1998.
3. (e) Amendment to Certificate of Incorporation of the Company,
filed January 28, 1999.
10. (jj) 1998 Employee Stock Option Plan, previously filed as Exhibit
4.1 to the Company's Registration Statement on Form S-8,
Registration Number 333-69559, which is incorporated herein by
reference.
10. (kk) Form of (Key Executive) 1998 Employee Stock Option Agreement.
10. (ll) Form of Amendment to Employment Agreements between the Company
and its key executives.
10. (mm) 1998 Non-Employee Director Stock Option Plan, previously filed
as Exhibit 4.2 to the Company's Registration Statement on Form
S-8, Registration Number 333-69559, which is incorporated
herein by reference.
10. (nn) Form of 1998 Non-Employee Director Stock Option Agreement.
10. (oo) Summary of 1999 Fiscal Year Bonus Opportunity for Chief
Executive Officer.
10. (pp) Amendment to Supplemental Pension and Retiree Medical
Agreement dated December 2, 1998, between the Company and its
President and Chief Executive Officer.
11. Computation of basic and diluted earnings per share.
(b) No reports on Form 8-K were filed during the current quarter ended
December 26, 1998.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DATA GENERAL CORPORATION
(Registrant)
/s/ John J Gavin Jr.
------------------------------------
John J. Gavin Jr.
Vice President; Controller; and
Acting Chief Financial Officer
/s/ Robert C. McBride
------------------------------------
Robert C. McBride
Vice President; Treasurer; and
Acting Chief Accounting Officer
Dated: February 4, 1999
<PAGE>
EXHIBITS
Index to Exhibits.
3. (c) By-Laws of the Company, as amended through November 4, 1998.
3. (e) Amendment to Certificate of Incorporation of the Company,
filed January 28, 1999.
10. (jj) 1998 Employee Stock Option Plan, previously filed as Exhibit
4.1 to the Company's Registration Statement on Form S-8,
Registration Number 333-69559, which is incorporated herein
by reference.
10. (kk) Form of (Key Executive) 1998 Employee Stock Option Agreement.
10. (ll) Form of Amendment to Employment Agreements between the Company
and its key executives.
10. (mm) 1998 Non-Employee Director Stock Option Plan, previously filed
as Exhibit 4.2 to the Company's Registration Statement on
Form S-8, Registration Number 333-69559, which is incorporated
herein by reference.
10. (nn) Form of 1998 Non-Employee Director Stock Option Agreement.
10. (oo) Summary of 1999 Fiscal Year Bonus Opportunity for Chief
Executive Officer.
10. (pp) Amendment to Supplemental Pension and Retiree Medical
Agreement dated December 2, 1998, between the Company and its
current President and Chief Executive Officer.
11. Computation of basic and diluted earnings per share.
Exhibit 3(c)
DATA GENERAL CORPORATION
BY-LAWS*
ARTICLE I
OFFICES.
SECTION 1. The registered office shall be in the City of Wilmington, County
of New Castle, State of Delaware.
SECTION 2. The Corporation may also have offices at such other places both
within and without the State of Delaware as the board of directors may from time
to time determine or the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. All meetings of the stockholders for the election of directors
shall be held in the City of New York, State of New York, at such place as may
be fixed from time to time by the board of directors, or at such other place
either within or without the State of Delaware as shall be designated from time
to time by the board of directors and stated in the notice of the meeting.
Meetings of stockholders for any other purpose may be held at such time and
place, within or without the State of Delaware, as shall be stated in the notice
of the meeting or in a duly executed waiver of notice thereof.
SECTION 2. Annual meetings of stockholders, commencing with the year 1985,
shall be held on the last Wednesday in January if not a legal holiday, and if a
legal holiday, then on the next secular day following, at 11:00 A.M., or at such
other date and time as shall be designated from time to time by the board of
directors and stated in the notice of the meeting, at which they shall elect by
a plurality vote by written ballot a board of directors, and transact such other
business as may properly be brought before the meeting.
SECTION 3. Written notice of the annual meeting stating the place, date and
hour of the meeting shall be given to each stockholder entitled to vote at such
meeting not less than ten nor more than sixty days before the date of the
meeting.
SECTION 4. The officer who has charge of the stock ledger of the
Corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, showing the address of each stockholder
and the number of shares registered in the name of each stockholder. Such list
shall be open to the examination of any stockholder, for any purpose germane to
the meeting, during the ordinary business hours, for a period of at least ten
days prior to the meeting, either at a place within the city where the meeting
is to be held, which place shall be specified in the notice of the meeting, or,
if not so specified, at the place where the meeting is to be held. The list
shall also be produced and kept at the time and place of the meeting during the
whole time thereof, and may be inspected by any stockholder who may be present.
SECTION 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be so called by the president and shall be called by the
president or secretary at the request in writing of a majority of the board of
directors, or the request in writing of stockholders owning at least two-thirds
in amount of the entire capital stock of the Corporation issued and outstanding
and entitled to vote generally in the election of directors. Such request shall
state the purpose or purposes of the proposed meeting.
SECTION 6. Written notice of a special meeting, stating the place, date and
hour of the meeting and the purpose or purposes for which the meeting is called,
shall be given not less than ten nor more than fifty days before the date of the
meeting to each stockholder entitled to vote at such meeting.
SECTION 7. Business transacted at any special meeting of stockholders shall
be limited to the purposes stated in the notice.
SECTION 8. The holders of a majority of the stock issued and outstanding
and entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the certificate of
incorporation. If, however, such quorum shall not be present or represented at
any meeting of the stockholders, the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting a notice of the
adjourned meeting shall be given to each stockholder of record entitled to vote
at the meeting.
SECTION 9. When a quorum is present at any meeting, the vote of the holders
of a majority of the stock having voting power present in person or represented
by proxy shall decide any question brought before such meeting, unless the
question is one upon which, by express provision of the statutes or of the
certificate of incorporation, a different vote is required in which case such
express provision shall govern and control the decision of such question.
SECTION 10. Each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder, but no proxy shall be voted on
after three years from its date, unless the proxy provides for a longer period.
SECTION 11. Whenever the vote of stockholders at a meeting thereof is
required or permitted to be taken for or in connection with any corporate
action, by any provision of the statutes, the meeting and vote of stockholders
may be dispensed with if all of the stockholders who would have been entitled to
vote upon the action if such meeting were held shall consent in writing to such
corporate action being taken; or if the certificate of incorporation authorizes
the action to be taken with the written consent of the holders of less than all
of the stock who would have been entitled to vote upon the action if a meeting
were held, then on the written consent of the stockholders having not less than
such percentage of the total number of votes as may be authorized in the
certificate of incorporation; provided that in no case shall the written consent
be by the holders of stock having less than the minimum percentage of the total
vote required by statute for the proposed corporate action, and provided that
prompt notice must be given to all stockholders of the taking of corporate
action without a meeting and by less than unanimous written consent.
SECTION 12. (a) Nominations of persons for election to the board of
directors of the Corporation and the proposal of business to be considered by
the stockholders may be made at an annual meeting of stockholders (i) pursuant
to the Corporation's notice of meeting delivered pursuant to Section 3 of this
Article 12, (ii) by or at the direction of the chairman of the board of
directors or (iii) by any stockholder of the Corporation who is entitled to vote
at the meeting, who complied with the notice procedures set forth in paragraphs
(b) and (c) of this Section 12 and who was a stockholder of record at the time
such notice is delivered to the secretary of the Corporation.
(b) For nominations or other business to be properly brought
before an annual meeting by a stockholder pursuant to clause (iii) of paragraph
(a) of this by-law, the stockholder must have given timely notice thereof in
writing to the secretary of the Corporation. To be timely, a stockholder's
notice shall be delivered to the secretary at the principal executive offices of
the Corporation not less than ninety days nor more than one hundred eighty days
prior to the first anniversary of the preceding year's annual meeting; provided,
however, that in the event that the date of the annual meeting is advanced by
more than thirty days, or delayed by more than sixty days, from such anniversary
date, notice by the stockholder to be timely must be so delivered not earlier
than the one hundred eightieth day prior to such annual meeting and not later
than the close of business on the later of the ninetieth day prior to such
annual meeting or the tenth day following the day on which public announcement
of the date of such meeting is first made. In lieu of delivery to the secretary
of the Corporation, notice may be mailed to the secretary of the Corporation by
certified mail, return receipt requested, but shall be deemed to have been given
only upon actual receipt by the secretary of the Corporation. Such stockholder's
notice shall set forth (i) as to each person whom the stockholder proposes to
nominate for election or reelection as a director all information relating to
such person that is required to be disclosed in solicitations of proxies for
election of directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), including such person's written consent to being named in the
proxy statement as a nominee and to serving as a director if elected; (ii) as to
any other business that the stockholder proposes to bring before the meeting, a
brief description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting and any material interest in
such business of such stockholder and the beneficial owner, if any, on whose
behalf the proposal is made; and (iii) as to the stockholder giving the notice
and the beneficial owner, if any, on whose behalf the nomination or proposal is
made (A) the name and address of such stockholder, as they appear on the
Corporation's books, and of such beneficial owner and (B) the class and number
of shares of the Corporation which are owned beneficially and of record by such
stockholder and such beneficial owner.
(c) Notwithstanding anything in the second sentence of
paragraph (b) of this by-law to the contrary, in the event that the number of
directors to be elected to the board of directors of the Corporation is
increased and there is no public announcement naming all of the nominees for
director or specifying the size of the increased board of directors made by the
Corporation at least seventy days prior to the first anniversary of the
preceding year's annual meeting, a stockholder's notice required by the by-law
shall also be considered timely, but only with respect to nominees for any new
positions created by such increase, if it shall be delivered to the secretary at
the principal executive offices of the Corporation not later than the close of
business on the tenth day following the day on which such public announcement is
first made by the Corporation.
SECTION 13. Only such business shall be conducted at a special meeting of
stockholders as shall have been brought before the meeting pursuant to the
Corporation's notice of meeting pursuant to Section 5 of this Article 12.
Nominations of persons for election to the board of directors may be made at a
special meeting of stockholders at which directors are to be elected pursuant to
the Corporation's notice of meeting (a) by or at the direction of the board of
directors or (b) by any stockholder of the Corporation who is entitled to vote
at the meeting, who complies with the notice procedures set forth in this by-law
and who is a stockholder of record at the time such notice is delivered to the
secretary of the Corporation. Nominations by stockholders of persons for
election to the board of directors may be made at such a special meeting of
stockholders if the stockholder's notice as required by Section 12(b) of these
by-laws shall be delivered to the secretary at the principal executive offices
of the Corporation not earlier than the ninetieth day prior to such special
meeting and not later than the close of business on the later of the sixtieth
day prior to such special meeting or the tenth day following the day on which
public announcement is first made of the date of the special meeting and of the
nominees proposed by the board of directors to be elected at such meeting.
SECTION 14. (a) Only persons who are nominated in accordance with the
procedures set forth in these by-laws shall be eligible to serve as director and
only such business shall be conducted at a meeting of stockholders as shall have
been brought before the meeting in accordance with the procedures set forth in
these by-laws. Except as otherwise provided by law, the Certificate of
Incorporation or these by-laws, the chairman of the meeting shall have the power
and duty to determine whether a nomination or any business proposed to be
brought before the meeting was made in accordance with the procedures set forth
in these by-laws and, if any proposed nomination or business is not in
compliance with these by-laws, to declare that such defective proposal or
nomination shall be disregarded.
(b) For purposes of these by-laws, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document publicly
filed by the Corporation with the Securities and Exchange Commission pursuant to
Section 13, 14 or 15(d) of the Exchange Act.
(c) Notwithstanding the foregoing provisions of this by-law, a
stockholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth in these by-laws. Nothing in these by-laws shall be deemed to affect any
rights of stockholders to request inclusion of proposals in the Corporation's
proxy statement pursuant to Rule 14a-8 under the Exchange Act.
SECTION 15. (a) The board of directors by resolution shall appoint one or
more inspectors, which inspector or inspectors may include individuals who serve
the Corporation in other capacities, including, without limitation, as officers,
employees, agents or representatives of the Corporation, to act at the meeting
and make a written report thereof. One or more persons may be designated as
alternate inspectors to replace any inspector who fails to act. If no inspector
or alternate has been appointed to act, or if all inspectors or alternates who
have been appointed are unable to act, at a meeting of stockholders, the
chairman of the meeting shall appoint one or more inspectors to act at the
meeting. Each inspector, before discharging his or her duties, shall take and
sign an oath faithfully to execute the duties of inspector with strict
impartiality and according to the best of his or her ability. The inspectors
shall have the duties prescribed by the General Corporation Law of the State of
Delaware.
(b) The chairman of the meeting shall fix and announce at the
meeting the date and time of the opening and the closing of the polls for each
matter upon which the stockholders will vote at a meeting.
ARTICLE III
DIRECTORS
SECTION 1. The number of directors which shall constitute the whole board
shall be not less than three nor more than fifteen. Within the limits above
specified, the number of directors shall be determined by resolution of the
board of directors or by the stockholders at the annual meeting. The directors
shall be elected at the annual meeting of the stockholders, except as provided
in Section 2 of this Article, and each director elected shall hold office until
his successor is elected and qualified. Directors need not be stockholders.
SECTION 2. Vacancies and newly created directorships resulting from any
increase in the authorized number of directors may be filled by a majority of
the directors then in office, though less than a quorum, or by a sole remaining
director, and the directors so chosen shall hold office until the next annual
election and until their successors are duly elected and shall qualify, unless
sooner displaced. If there are no directors in office, then an election of
directors may be held in the same manner provided by statute. If, at the time of
filling any vacancy or newly created directorship, the directors then in office
shall constitute less than a majority of the whole board (as constituted
immediately prior to any such increase), the Court of Chancery may, upon
application of any stockholder or stockholders holding at least ten percent of
the total number of the shares at the time outstanding having the right to vote
for such directors, summarily order an election to be held to fill any such
vacancies or newly created directorships, or to replace the directors chosen by
the directors then in office.
SECTION 3. The business of the Corporation shall be managed by its board of
directors which may exercise all such powers of the Corporation and do all such
lawful acts and things as are not by statute or by the certificate of
incorporation or by these by-laws directed or required to be exercised or done
by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
SECTION 4. The board of directors of the Corporation may hold meetings,
both regular and special, either within or without the State of Delaware.
SECTION 5. The first meeting of each newly elected board of directors shall
be held at such time and place as shall be fixed by the vote of the stockholders
at the annual meeting and no notice of such meeting shall be necessary to the
newly elected directors in order legally to constitute the meeting, provided a
quorum shall be present. In the event of the failure of the stockholders to fix
the time or place of such first meeting of the newly elected board of directors,
or in the event such meeting is not held at the time and place so fixed by the
stockholders, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
board of directors, or as shall be specified in a written waiver signed by all
of the directors.
SECTION 6. Regular meetings of the board of directors may be held without
notice at such time and at such place as shall from time to time be determined
by the board.
SECTION 7. Special meetings of the board may be called by the president on
three days' notice to each director, either personally or by mail or by
telegram; special meetings shall be called by the president or secretary in like
manner and on like notice on the written request of two directors.
SECTION 8. At all meetings of the board a majority of the directors shall
constitute a quorum for the transaction of business and the act of a majority of
the directors present at any meeting at which there is a quorum shall be the act
of the board of directors, except as may be otherwise specifically provided by
statute or by the certificate of incorporation. If a quorum shall not be present
at any meeting of the board of directors the directors present thereat may
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present.
SECTION 9. Unless otherwise restricted by the certificate of incorporation
or these by-laws, any action required or permitted to be taken at any meeting of
the board of directors or of any committee thereof may be taken without a
meeting, if all members of the board or committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes of
proceedings of the board or committee.
COMMITTEES OF DIRECTORS
SECTION 10. The board of directors may, by resolution passed by a majority
of the whole board, designate one or more committees, each committee to consist
of one or more of the directors of the Corporation. The board may designate one
or more directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of the committee. Any such
committee, to the extent provided in the resolution, shall have and may exercise
the powers of the board of directors in the management of the business and
affairs of the Corporation, and may authorize the seal of the Corporation to be
affixed to all papers which may require it; provided, however, that in the
absence or disqualification of any member of such committee or committees, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the board of directors to act at the meeting in the place of
any such absent or disqualified member. Such committee or committees shall have
such name or names as may be determined from time to time by resolution adopted
by the board of directors.
SECTION 11. Each committee shall keep regular minutes of its meetings and
report the same to the board of directors when required.
COMPENSATION OF DIRECTORS
SECTION 12. The directors may be paid their expenses, if any, of attendance
at each meeting of the board of directors and may be paid a fixed sum for
attendance at each meeting of the board of directors or a stated salary as
director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
ARTICLE IV
NOTICES
SECTION 1. Whenever, under the provisions of the statutes or of the
certificate of incorporation or of these by-laws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
Corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Notice to directors may also be given by telegram.
SECTION 2. Whenever any notice is required to be given under the provisions
of the statutes or of the certificate of incorporation or of these by-laws, a
waiver thereof in writing, signed by the person or persons entitled to said
notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V
OFFICERS
SECTION 1. The officers of the Corporation shall be a chairman of the board
of directors, a vice-chairman of the board, a chairman of the executive
committee of the board, a president, a vice-president, a secretary and a
treasurer. The board of directors may also choose additional vice-presidents,
and one or more assistant secretaries and assistant treasurers. Any number of
offices may be held by the same person, unless the certificate of incorporation
or these by-laws otherwise provide.
SECTION 2. The board of directors at its first meeting after each annual
meeting of stockholders shall choose a chairman of the board, a vice-chairman, a
chairman of the executive committee of the board, a president, one or more
vice-presidents, a secretary and a treasurer.
SECTION 3. The board of directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the board. The president may appoint one or more assistant
vice-presidents and one or more other officers to act under the supervision of
officers elected or appointed by the board, each of whom shall hold their
positions for such terms and shall exercise such powers and perform such duties
as shall be determined from time to time by the president.
SECTION 4. The salaries of all officers and agents of the Corporation shall
be fixed by the board of directors.
SECTION 5. The officers of the Corporation shall hold office until their
successors are chosen and qualify. Any officer elected or appointed by the board
of directors may be removed at any time by the affirmative vote of a majority of
the board of directors. Any vacancy occurring in any office of the Corporation
shall be filled by the board of directors.
THE CHAIRMAN OF THE BOARD
SECTION 6. The chairman of the board of directors shall be a member of the
board and shall preside at all meetings of the board of directors. He shall have
such other powers and perform such other duties as are provided in these
by-laws, and, in addition thereto, as the board of directors may from time to
time determine.
THE VICE-CHAIRMAN OF THE BOARD
SECTION 7. The vice-chairman of the board shall be a member of the board
and shall perform the duties of the chairman in his absence or in the event of
his inability or refusal to act, and, when so acting, he shall have all the
powers of the chairman. He shall have such other powers and perform such other
duties as are provided in these by-laws, and, in addition thereto, as the board
of directors may from time to time determine.
THE CHAIRMAN OF THE EXECUTIVE COMMITTEE OF THE BOARD
SECTION 8. The chairman of the executive committee of the board of
directors shall preside at all meetings of the executive committee of the board
of directors. He shall have such other powers and perform such other duties as
are provided in these by-laws and, in addition thereto, as the board of
directors may from time to time determine.
THE PRESIDENT
SECTION 9. The president shall be the chief executive officer of the
Corporation and shall have general and active management of the business of the
Corporation and shall see that all orders and resolutions of the board of
directors are carried into effect. The president shall preside at all meetings
of the stockholders. He shall have such other powers and perform such other
duties as are provided in these by-laws and, in addition thereto, as the board
of directors may from time to time determine.
SECTION 10. He shall execute bonds, mortgages and other contracts requiring
a seal, under the seal of the Corporation, except where required or permitted by
law to be otherwise signed and executed and except where the signing and
execution thereof shall be expressly delegated by the board of directors to some
other officer or agent of the Corporation.
THE VICE-PRESIDENTS
SECTION 11. In the absence of the president or in the event of his
inability or refusal to act, the vice-president (or in the event there be more
than one vice-president, the vice-presidents in the order designated, or in the
absence of any designation, then in the order of their election) shall have all
the powers of and be subject to all the restrictions upon the president. The
vice-presidents shall perform such other duties and have such other powers as
the board of directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARY
SECTION 12. The secretary shall attend all meetings of the board of
directors and all meetings of the stockholders and record all the proceedings of
the meetings of the Corporation and of the board of directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the board of directors, and shall
perform such other duties as may be prescribed by the board of directors or
president, under whose supervision he shall be. He shall have custody of the
corporate seal of the Corporation and he, or an assistant secretary, shall have
authority to affix the same to any instrument requiring it and, when so affixed,
it may be attested by his signature or by the signature of such assistant
secretary. The board of directors may give general authority to any other
officer to affix the seal of the Corporation and to attest the affixing by his
signature.
SECTION 13. The assistant secretary, or if there be more than one, the
assistant secretaries in the order determined by the board of directors (or if
there be no such determination, then in the order of their election), shall, in
the absence of the secretary or in the event of his inability or refusal to act,
perform the duties and exercise the powers of the secretary and shall perform
such other duties and have such other powers as the board of directors may from
time to time prescribe.
THE TREASURER AND ASSISTANT TREASURER
SECTION 14. The treasurer shall have the custody of the corporate funds and
securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the Corporation in
such depositories as may be designated by the board of directors.
SECTION 15. He shall disburse the funds of the Corporation as may be
ordered by the board of directors, taking proper vouchers for such
disbursements, and shall render to the president and the board of directors, at
its regular meetings, or when the board of directors so requires, an account of
all his transactions as treasurer and of the financial condition of the
Corporation.
SECTION 16. If required by the board of directors, he shall give the
Corporation a bond (which shall be renewed every six years) in such sum and with
such surety or sureties as shall be satisfactory to the board of directors for
the faithful performance of the duties of his office and for the restoration to
the Corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the Corporation.
SECTION 17. The assistant treasurer, or if there shall be more than one,
the assistant treasurers in the order determined by the board of directors (or
if there be no such determination, then in the order of their election), shall,
in the absence of the treasurer or in the event of his inability or refusal to
act, perform the duties and exercise the powers of the treasurer and shall
perform such other duties and have such other powers as the board of directors
may from time to time prescribe.
ARTICLE VI
INDEMNIFICATION
SECTION 1. The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
SECTION 2. The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the Corporation to procure a judgment in
its favor by reason of the fact that he is or was a director, officer, employee
or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the Corporation unless and only to the extent that
the Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
or such other court shall deem proper.
SECTION 3. To the extent that a director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Section 1 or 2 of this Article VI or
in defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection therewith.
SECTION 4. Any indemnification under Section 1 or 2 of this Article VI
(unless ordered by a court) shall be made by the Corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in Section 1 or 2 of this Article VI.
Such determination shall be made (a) by the Board of Directors of the
Corporation by a majority vote of the directors who were not parties to such
action, suit or proceedings; (b) by a committee of such disinterested directors
designated by majority vote of such disinterested directors, even though less
than a quorum; (c) if there are no disinterested directors, or if such
disinterested directors so direct, by independent legal counsel in a written
opinion; or (d) by the stockholders.
SECTION 5. Expenses incurred in defending a civil or criminal action, suit
or proceeding may be paid by the Corporation in advance of the final disposition
of such action, suit or proceeding upon receipt of an undertaking by or on
behalf of the director, officer, employee or agent to repay such amount if it
shall ultimately be determined that he is not entitled to be indemnified by the
Corporation as authorized in this Article.
SECTION 6. The indemnification and advancement of expenses provided by, or
granted pursuant to, the other sections of this Article shall not be deemed
exclusive of any other rights to which a person seeking indemnification or
advancement of expenses may be entitled under any by-law, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
SECTION 7. The Corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation, or is or was serving, at the request of the
Corporation, as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the Corporation would have the power to
indemnify him against such liability under the provisions of this Article.
SECTION 8. For purposes of Article VI, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the Corporation which
imposes duties on, or involves services by, such director, officer, employee or
agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the Corporation" as referred to in Article VI.
SECTION 9. The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
ARTICLE VII
CERTIFICATES OF STOCK
SECTION 1. Every holder of stock in the Corporation shall be entitled to
have a certificate, signed by, or in the name of the Corporation by, the
president or a vice-president and the treasurer or an assistant treasurer, or
the secretary or an assistant secretary of the Corporation, certifying the
number of shares owned by him in the Corporation. If the Corporation shall be
authorized to issue more than one class of stock or more than one series of any
class, the designations, preferences and relative, participating, optional or
other special rights of each class of stock or series thereof and the
qualifications, limitations or restrictions of such preferences and/or rights
shall be set forth in full or summarized on the face or back of the certificate
which the Corporation shall issue to represent such class or series of stock,
provided that, except as otherwise provided in section 202 of the General
Corporation Law of Delaware, in lieu of the foregoing requirements, there may be
set forth on the face or back of the certificate which the Corporation shall
issue to represent such class or series of stock, a statement that the
Corporation will furnish without charge to each stockholder who so requests the
designations, preferences and relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
SECTION 2. Where a certificate is countersigned (1) by a transfer agent
other than the Corporation or its employee, or (2) by a registrar other than the
Corporation or its employee, the signatures of the officers of the Corporation
may be facsimiles. In case any officer who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer before such certificate is issued, it may be issued by the Corporation
with the same effect as if he were such officer at the date of issue.
LOST CERTIFICATES
SECTION 3. The board of directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the Corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate or certificates the board of directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it shall require
and/or to give the Corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the Corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
TRANSFERS OF STOCK
SECTION 4. Upon surrender to the Corporation or the transfer agent of the
Corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, it shall be the
duty of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
FIXING RECORD DATE
SECTION 5. In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the board of directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the board of directors may fix a new record date for the adjourned
meeting.
REGISTERED STOCKHOLDERS
SECTION 6. The Corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE VIII
GENERAL PROVISIONS
DIVIDENDS
SECTION 1. Dividends upon the capital stock of the Corporation, subject to
the provisions of the certificate of incorporation, if any, may be declared by
the board of directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the certificate of incorporation.
SECTION 2. Before payment of any dividend, there may be set aside out of
any funds of the Corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for such other
purpose as the directors shall think conducive to the interest of the
Corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
ANNUAL STATEMENT
SECTION 3. The board of directors shall present at each annual meeting, and
at any special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
Corporation.
CHECKS
SECTION 4. All checks or demands for money and notes of the Corporation
shall be signed by such officer or officers or such other person or persons as
the board of directors may from time to time designate.
FISCAL YEAR
SECTION 5. The fiscal year of the Corporation shall be fixed by resolution
of the board of directors.
SEAL
SECTION 6. The corporate seal shall have inscribed thereon the name of the
Corporation, the year of its organization and the words "Corporate Seal,
Delaware." The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE IX
AMENDMENTS
SECTION 1. These by-laws may be altered, amended or repealed, or new
by-laws may be adopted by the stockholders or by the board of directors, when
such power is conferred upon the board of directors by the certificate of
incorporation at any regular meeting of the stockholders or of the board of
directors or at the special meeting of the stockholders or of the board of
directors if notice of such alteration, amendment, repeal or adoption of new
by-laws be contained in the notice of such special meeting.
Exhibit 3(e)
CERTIFICATE OF AMENDMENT
OF
RESTATED
CERTIFICATE OF INCORPORATION
OF
DATA GENERAL CORPORATION
DATA GENERAL CORPORATION, a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), DOES HEREBY CERTIFY:
1. That at a meeting of the Board of Directors of the Corporation held
on December 2, 1998, said Board of Directors adopted resolutions proposing and
declaring advisable a new proposed Section A to Article FOURTH of the Restated
Certificate of Incorporation of the Corporation as follows:
FOURTH.
A. Authorized Capital Stock. The total number of shares of all
classes of stock which this Corporation shall have authority to issue
is ONE HUNDRED AND FIFTY-ONE MILLION (151,000,000) shares, consisting
of ONE MILLION (1,000,000) shares of Preferred Stock, par value $.01
per share (hereinafter, the "Preferred Stock"), and ONE HUNDRED FIFTY
MILLION (150,000,000) shares of Common Stock, par value $.01 per share
(hereinafter, the "Common Stock").
2. That thereafter, pursuant to resolution of its Board of Directors,
the annual meeting of stockholders of said Corporation was duly called and held
on January 27, 1999, at which meeting the necessary number of stockholders as
required by statute voted in favor of the amendment.
3. That said amendment was duly adopted in accordance with the
applicable provisions of Sections 211 and 242 of the General Corporation Law of
Delaware, as amended.
IN WITNESS WHEREOF, DATA GENERAL CORPORATION has caused its corporate
seal to be hereunto affixed and this certificate to be signed by its President
and attested by its Assistant Secretary this 28th day of January, 1999.
DATA GENERAL CORPORATION
By: /s/ Ronald L. Skates
President and
Chief Executive Officer
ATTEST:
/s/ James K. Jacobs
Assistant Secretary
Exhibit 10(kk)
Form of
(Key Executive)
DATA GENERAL CORPORATION
DOMESTIC EMPLOYEE
1998 EMPLOYEE STOCK OPTION AGREEMENT
(Non-qualified Stock Option)
* * *
1998 EMPLOYEE STOCK OPTION AGREEMENT made this __________________, between DATA
GENERAL CORPORATION, a Delaware corporation (hereinafter called the "Company"),
and _______________________________, an employee of the Company or of a
subsidiary of the Company (hereinafter called the "Participant");
W I T N E S S E T H :
WHEREAS, the Company desires, by affording the Participant an
opportunity to purchase shares of its common stock, as hereinafter provided, to
carry out the purpose of the "1998 Employee Stock Option Plan" (hereinafter
referred to as the "Plan"), approved by its directors:
NOW, THEREFORE, in consideration of the premises and of the mutual
promises hereinafter contained, the parties hereto have agreed as follows:
1. Grant of Option. The Company hereby grants to the Participant a
non-qualified stock option (hereinafter called the "Option") to purchase all or
part of an aggregate of ___________ (___) shares of stock (hereinafter referred
to as the "Stock") (such number being subject to adjustment as provided in
Paragraph 11 hereof) on the terms and conditions hereinafter set forth.
2. Incorporation of Plan. Except as hereinafter provided, this
Agreement shall be governed by and be subject to all the terms and conditions
set forth in the Plan as in effect on the date hereof. A copy of the Plan has
been delivered to the Participant and is hereby incorporated by reference.
3. Purchase Price. The purchase price of the shares of Stock covered by
the Option shall be $__________ per share. Payment shall be made in cash, by
certified check or in shares of Common Stock in the manner prescribed in
Paragraph 9 hereof.
4. Term of Option. The term of the Option shall be for a period
commencing on the date hereof and ending on ___________________. The right of
Participant to purchase Stock through the exercise of this Option, wholly or in
part, shall be available to the Participant at any time during the term of this
Option subject to restrictions on the disposition as provided in Paragraph 6
hereof and to the obligation of resale of said Stock as provided in Paragraph 7
hereof.
5. Nontransferability. The Option shall not be transferable otherwise
than by will or the laws of descent and distribution, and the Option may be
exercised, during the lifetime of the Participant only by him, more particularly
(but without limiting generality of the foregoing), the Option may not be
assigned, transferred (except as provided above), pledged, hypothecated in any
way, shall not be assignable by operation of law, and shall not be subject to
execution, attachment or similar process. Any attempted assignment, transfer,
pledge, hypothecation or other disposition of the Option contrary to the
provision hereof, and the levy of any execution, attachment, or similar process
upon the Option, shall be null and void and without effect; provided however,
that if Participant shall die while in the employ of the Company or a subsidiary
of the Company, his executor, personal representative, or administrator shall
have the right to exercise the Option (to the extent that the Participant would
have been entitled to do so at the date of his death) at any time within twelve
(12) months from the date of death in respect of the total number of shares as
to which he would be entitled to exercise his Option at the date of his death.
6. Restrictions on Disposition. Stock acquired by Participant pursuant
to the exercise of an Option is subject to certain restrictions on dispositions
and obligations of resale to the Company as provided in Section 7 of the Plan
and such Stock shall not be sold, transferred, or otherwise disposed of and
shall not be pledged to anyone other than the Company or otherwise hypothecated
until such restrictions lapse. Participant understands and agrees that, if the
Stock is subject to restrictions which have not yet lapsed, certificates
representing such Stock will contain a legend to the effect that the Stock is
subject to certain restrictions on disposition and obligations of resale as
contained in Section 7 of the Plan. Such restrictions against the disposition of
the Stock shall lapse in accordance with the provisions of Exhibit A attached
hereto; provided, however, that the 1998 Employee Stock Option Plan Committee
(the "Committee") shall, in its sole discretion, decide at the time Participant
is granted an Authorized Leave of Absence (as defined in this Paragraph 6),
whether the period of time during which Participant takes an Authorized Leave of
Absence shall be included in determining whether the restrictions against
disposition shall have lapsed in accordance with the provisions of Exhibit A
attached hereto.
In any event, upon the occurrence of the earlier of the death of
Participant, the retirement of Participant with the consent of the Company or
the attainment by Participant of the age of 65 whether or not Participant
retires, the restrictions against disposition which have not otherwise lapsed
under the Plan shall immediately lapse.
For purposes of this Paragraph 6, "Authorized Leave of Absence" shall
mean (a) any period of leave granted to Participant by the Company for reasons
of sickness or disability or for the pursuit of graduate or other academic
studies or for government service or personal or family hardship, or such other
reasons as the Company may in its discretion determine provided that in no event
shall the period of such leave exceed the period granted by the Company and
provided further that unless Participant retires during such leave, Participant
returns to the employment of the Company at the termination of such period; and
(b) absence for military service in the armed forces of the United States under
leave granted by the Company or as required by law, provided Participant returns
to employment within six (6) months of his release from such military service,
or within any longer period during which his right to reemployment is protected
by law.
7. Obligation of Resale. If Participant's employment terminates other
than by retirement with the consent of the Company or by Participant's death,
then the Stock for which Participant has paid the purchase price but on which
restrictions against disposition have not lapsed shall be offered for resale to
the Company at the price paid by Participant. This offer of resale must be in
writing and must be delivered to the Company within thirty (30) days following
termination and certificates for such Stock shall be delivered to the Company
within such thirty-day period. If such Stock is not delivered to the Company
within thirty (30) days following the termination of Participant's employment,
such Stock shall remain subject to the restrictions against disposition and such
restrictions shall not lapse as otherwise provided herein and in the Plan.
Within sixty (60) days following a timely delivery of the Stock, the Company
will compensate Participant (at the original purchase price) for such number of
the shares of the Stock as the Company elects to repurchase and will return to
the Participant any such shares not so purchased. In the event that the Company
declines in writing to repurchase such Stock, such Stock shall remain the
property of Participant and the restrictions against disposition shall lapse at
the rate stated in this Agreement.
8. Employment. Subject to the provisions of Paragraph 5 hereof, this
Option shall be exercisable only by Participant while he is employed by the
Company or a subsidiary of the Company or upon his retirement with the consent
of the Company. If Participant shall retire with the consent of the Company
before his Option shall have terminated, he must exercise the Option within (3)
months after the date on which he ceases to be employed by the Company or a
subsidiary of the Company.
Participant acknowledges and agrees that the Company is not obligated
by this Agreement or the Plan to continue the Participant in its employment, and
this Agreement does not in any manner constitute an employment agreement or
create any rights, benefits, or obligations not specifically set forth herein.
9. Method of Exercising Option. Subject to the terms and conditions of
this Option Agreement, the Option may be exercised by written notice to the
Company at its office at 4400 Computer Drive, Westboro, MA 01580, Attn:
Treasurer. Such notice shall state the election to exercise the Option, and the
number of shares of Stock in respect of which it is being exercised. It shall be
signed by the person or persons so exercising the Option and shall be
accompanied by payment of the full purchase price of such Stock in cash, by
certified check or in shares of Common Stock. If shares of Common Stock are
tendered as payment of the Option exercise price, the value of such shares shall
be their fair market value as of the date of exercise.
If such tender would result in the issuance of fractional shares of
Common Stock, the Participant shall purchase, at the price which reflects the
fair market value of the Stock as of the date of exercise, in cash, by certified
check, or cashier's check such additional fractional shares of Common Stock as
are necessary to result in the issuance to the Participant of an additional
whole share of Stock. The Company shall issue, in the name of the person or
persons exercising the Option, and deliver a certificate or certificates
representing such shares as soon as practicable after the notice and payment
shall be received.
In the event the Option shall be exercised, pursuant to Paragraph 5
hereof, by any person or persons other than the Participant, such notice shall
be accompanied by appropriate proof of the right of such person or persons to
exercise the Option.
Until Participant (or his representative as provided in Paragraph 5
hereof) has been issued a certificate or certificates for the shares as
acquired, Participant shall possess no stockholder rights with respect to any
such Stock.
10. Additional Withholding for Tax Purposes. Upon exercise of an
Option, if the restrictions on any of the shares being purchased thereunder
shall have already lapsed, then the Company will require, at the time of
exercise, an additional payment equal to all applicable withholding taxes which
may be imposed on the difference between the purchase price of such shares and
the fair market value of such shares as of the exercise date (which sum shall be
paid in due course by the Company to the applicable agencies as income taxes
withheld on income resulting from the exercise of the Option).
The Company will also require, in each year during which restrictions
on any shares purchased upon exercise of the Option shall lapse, a payment equal
to all applicable withholding taxes which may be imposed on the difference
between the purchase price of such shares and the fair market value of such
shares as of the date on which the restrictions lapse.
If a Participant elects, in accordance with Section 83(b) of the
Internal Revenue Code of 1986 as amended, and Section 9 of the Plan, to
recognize ordinary income in the year of exercise with respect to the shares
being purchased upon exercise of the Option, then the Company will require at
the time of such election an additional payment equal to all applicable
withholding taxes which may be imposed on the difference between the purchase
price of such shares and the fair market value of such shares as of the exercise
date.
11. Changes in Capital Structure. If all or any portion of the Option
shall be exercised subsequent to any stock dividend splitup, recapitalization,
merger, consolidation, combination or exchange of shares, or otherwise,
occurring after the date hereof, the aggregate number of shares of the Stock
subject to this Agreement and the Option price may be proportionately adjusted,
and any other appropriate changes may be made by the Board of Directors or the
Committee, whose determination shall be conclusive. No fractional share shall be
issued upon any such exercise and the aggregate price shall be reduced on
account of any fractional share not issued. In no event, however, shall
adjustment be made in the rate at which restrictions against disposition lapse
and Participant's obligation of resale, as fixed by Paragraph 6 and 7 hereof.
12. Termination of Option. In the event of the institution of any legal
proceedings directed to the validity of the Plan pursuant to which the Option is
granted, or to any option granted under it, the Company may, in its discretion,
and without incurring any liability therefor to any Participant, terminate the
Option.
13. Change of Control. Notwithstanding any other provision of the Plan
or this Agreement to the contrary, upon a Change of Control (as defined below),
(i) the Option shall become fully and immediately exercisable into free Stock
without restrictions as to disposition or obligations as to resale to the
Company and shall remain exercisable until the earlier to occur of (x) three
months after the termination of employment of the Participant and (y) ten years
after the date of grant of such Option and (ii) all restrictions against
disposition and all obligations of resale to the Company of shares of Stock
acquired by the Participant pursuant to the exercise of the Option as to which
such restrictions and obligations have not otherwise lapsed shall immediately
lapse. For purposes of this Agreement, the term "Change of Control", shall mean:
(i) The acquisition, other than from the Company, by any individual,
entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 25% or more of either the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or the combined voting power of
the then outstanding voting securities of the Company entitled to vote generally
in the election of directors (the "Outstanding Company Voting Securities"),
provided, however, that any acquisition by the Company or any of its
subsidiaries, or by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any of its subsidiaries, or by any corporation with
respect to which, following such acquisition, more than 60% of, respectively,
the then outstanding shares of common stock of such corporation and the combined
voting power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all the individuals and
entities who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities immediately prior
to such acquisition in substantially the same proportion as their ownership,
immediately prior to such acquisition, of the Outstanding Company Common Stock
and Outstanding Company Voting Securities, as the case may be, shall not
constitute a Change of Control; or
(ii) Individuals who, as of January 1, 1991, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a majority
of the Board, provided that any individual becoming a director subsequent to
January 1, 1991 whose election, or nomination for election, by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office is in connection
with an actual or threatened election contest relating to the election of the
Directors of the Company (as such terms are used in Rule 14a-11 of Regulation
14A promulgated under the Exchange Act); or
(iii) Approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company or of the sale or other disposition of
all or substantially all of the assets of the Company, or 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.
14. Enforceability. This agreement shall be binding upon the
Participant, his estate, his personal representatives and beneficiaries.
IN WITNESS WHEREOF, the Company has caused this Option Agreement to be
executed by its duly authorized officer, and the Participant has hereunto set
his hand and seal, all on the day and year first above written.
DATA GENERAL CORPORATION
By: _______________________________
Robert C. McBride
Vice President & Treasurer
I have read and understood this Agreement and agree
to be bound by its terms.
_________________________________
Print Name: _______________________
11/98
EXHIBIT A TO
1998 STOCK OPTION AGREEMENT
Dated: ______________________
The Option is immediately exercisable except as otherwise provided in
the Agreement. During the term of this Option, the restrictions against
disposition and obligation of resale to the Company shall lapse so the shares
become freely tradeable ("free shares") in accordance with the following
schedule:
<TABLE>
<S> <C> <C>
# of Years From Cumulative % of
Date of Option % of Grant Becoming Grant Becoming
Agreement Free Shares Free Shares
__________________ __________________ ___________________
1 year or on ________ 25% =_______ shares 25% =_______ shares
2 years or on ________ 25% =_______ shares 50% =_______ shares
3 years or on ________ 25% =_______ shares 75% =_______ shares
4 years or on ________ 25% =_______ shares 100%=_______ shares
</TABLE>
Exhibit 10(ll)
FORM OF
AMENDMENT TO EMPLOYMENT AGREEMENT
(Dated as of November 4, 1998)
This Amendment to Employment Agreement is dated as of November 4, 1998
and entered into between Data General Corporation (the "Company") and
________________________ (the "Executive").
Reference is made to that Employment Agreement dated
_________________________ between the Executive and the Company (as and if
previously amended, the "Employment Agreement").
Whereas the parties, for good and sufficient consideration, the receipt
and sufficiency of which is hereby confirmed, wish to amend the Employment
Agreement to clarify the meaning of certain terms used therein;
Now, therefore, the parties agree as follows:
1. In order to expand the definition of Option Plans to
include the Data General Corporation 1998 Stock Option Plan, the first
sentence of Subsection 6(d)(i)(D) of the Employment Agreement is hereby
amended by so that it reads as follows:
"D. in the event that the Executive's employment with the
Company is terminated pursuant to this Section 6(d) prior to the date
on which a Change of Control occurs and, as a result of such
termination of employment, (a) the Executive forfeits (an "Option
Forfeiture") any option (an "Option") to purchase shares of stock of
the Company granted pursuant to the Data General Corporation Restricted
Stock Option Plan (or any successor plan thereto) or the Data General
Corporation Employee Stock Option Plan (or any successor plan thereto)
or the Data General Corporation 1998 Employee Stock Option Plan (or any
successor plan thereto) (collectively, the "Option Plans") and/or
(b) any shares of stock of the Company acquired by the Executive upon
exercise of an Option which, as of the date of such termination of
employment of the Executive, are subject to restrictions on disposition
and obligations of resale to the Company pursuant to the terms of any
Option Plan have been resold to the Company in accordance with such
obligations of resale (a "Restricted Stock Resale"), then the Executive
shall be entitled to receive an additional lump-sum severance benefit
equal to the sum of the Option Spread (as defined below) with respect
to any Option Forfeiture and the Restricted Stock Resale Shortfall (as
defined below) with respect to any Restricted Stock Resale."
Except as hereby amended, the Employment Agreement is hereby ratified
and confirmed.
IN WITNESS WHEREOF, the parties have executed this Amendment effective
as of November 4, 1998.
DATA GENERAL CORPORATION
By: _____________________ _____________________________
Ronald L. Skates Print name: _________________
President and C.E.O.
Exhibit 10(nn)
Form of
DATA GENERAL CORPORATION
1998 NON-EMPLOYEE DIRECTOR
STOCK OPTION AGREEMENT
* * *
OPTION AGREEMENT made this ____th day of January, ____ between DATA GENERAL
CORPORATION, a Delaware corporation (hereinafter called the "Company"), and
______________________________, a Director of the Company (hereinafter called
the "Participant");
WITNESSETH
WHEREAS, the Company desires, by affording the Participant an
opportunity to purchase shares of its common stock, as hereinafter provided, to
carry out the purpose of the "1998 Non-Employee Director Stock Option Plan"
(hereinafter referred to as the "Plan"), approved by its stockholders and
directors:
NOW, THEREFORE, in consideration of the premises and of the mutual
promises hereinafter contained, the parties hereto have agreed as follows:
1. Grant of Option. The Company hereby grants to the Participant an
option (hereinafter called the "Option") to purchase all or part of an aggregate
of ________________ (______) shares of stock (hereinafter referred to as the
"Stock") (such number being subject to adjustment as provided in Paragraph 11
hereof) on the terms and conditions hereinafter set forth.
2. Incorporation of Plan. Except as hereinafter provided, this
Agreement shall be governed by and be subject to all the terms and conditions
set forth in the Plan as in effect on the date hereof. A copy of the Plan has
been delivered to the Participant and is hereby incorporated by reference. In
the event of any discrepancy or inconsistency between the terms and conditions
of this Agreement and the Plan, the terms and conditions of the Plan shall
control.
3. Purchase Price. The purchase price of the shares of Stock covered by
the Option shall be $________ per share. Payment shall be made in cash, by
certified check, cashier's check or in shares of Common Stock in the manner
prescribed in Paragraph 9 hereof.
4. Term of Option. The term of the Option shall be for a period
commencing on the date hereof and ending ten years thereafter. The right of
Participant to purchase Stock through the exercise of this Option, wholly or in
part, shall be available to the Participant at any time during the term of this
Option subject to restrictions on disposition as provided in Paragraph 6 hereof
and to the obligation of resale of said Stock as provided in Paragraph 7 hereof.
5. Nontransferability. The Option shall not be transferable otherwise
than by will or the laws of descent and distribution, and the Option may be
exercised, during the lifetime of the Participant only by him, more particularly
(but without limiting the generality of the foregoing), the Option may not be
assigned, transferred (except as provided above), pledged, hypothecated in any
way, shall not be assignable by operation of law, and shall not be subject to
execution, attachment or similar process. Any attempted assignment, transfer,
pledge, hypothecation or other disposition of the Option contrary to the
provision hereof, and the levy of any execution, attachment, or similar process
upon the Option, shall be null and void and without effect; provided however,
that if Participant shall die while serving as a Director of the Company, his
executor, personal representative, or beneficiary shall have the right to
exercise the Option (to the extent that the Participant would have been entitled
to do so at the date of his death) at any time within twelve (12) months from
the date of death in respect of the total number of shares as to which he would
be entitled to exercise his Option at the date of his death.
6. Restrictions on Disposition. Stock acquired by Participant pursuant
to the exercise of an Option is subject to certain restrictions on dispositions
and obligations of resale to the Company as provided in Section 7 of the Plan
and such Stock shall not be sold, transferred, or otherwise disposed of and
shall not be pledged or otherwise hypothecated until such restrictions lapse.
Participant understands and agrees that, if the Stock is subject to restrictions
which have not yet lapsed, certificates representing such Stock will contain a
legend to the effect that the Stock is subject to certain restrictions on
disposition and obligations of resale as contained in Section 7 of the Plan.
Such restrictions against the disposition of the Stock shall lapse in accordance
with the provisions of Exhibit A attached hereto.
Upon the occurrence of the earlier of the death of Participant or the
Participant's cessation of service as a Director with the consent of the
Company, the restrictions against disposition which have not otherwise lapsed
under the Plan shall immediately lapse.
7. Obligation of Resale. In the event of Participant's cessation of
service as a Director for any reason except death or with the consent of the
Company, then the Stock for which Participant has paid the purchase price but on
which restrictions against disposition have not lapsed shall be offered for
resale to the Company at the price paid by Participant. This offer of resale
must be in writing and must be delivered to the Company within thirty (30) days
following the cessation of service and certificates for such Stock shall be
delivered to the Company within such thirty-day period. If such Stock is not
delivered to the Company within thirty (30) days following cessation of
Participant's service, such Stock shall remain subject to the restrictions
against disposition and such restrictions shall not lapse as otherwise provided
herein and in the Plan. Within sixty (60) days following a timely delivery of
the Stock, the Company will compensate Participant (at the original purchase
price) for such number of shares of the Stock as the Company elects to
repurchase and will return to the Participant any such shares not so purchased.
In the event that the Company declines in writing to repurchase such Stock, such
Stock shall remain the property of Participant and the restrictions against
disposition shall lapse at the rate stated in this Agreement.
8. Service as a Director. Subject to the provisions of Paragraph 5
hereof, this Option shall be exercisable only by Participant while he is serving
as a Director of the Company or upon his cessation of service as a Director with
the consent of the Company. If Participant shall cease to serve as a Director
with the consent of the Company before his Option shall have terminated, he must
exercise the Option within ninety (90) days after the date on which he ceases to
serve as a Director the Company.
Participant acknowledges and agrees that the Company is not obligated
by this Agreement or the Plan to continue the Participant as a Director of the
Company, and this Agreement does not in any manner create any rights, benefits,
or obligations not specifically set forth herein.
9. Method of Exercising Option. Subject to the terms and conditions of
this Option Agreement, the Option may be exercised by written notice to the
Company at its office at 4400 Computer Drive, Westboro, MA 0l580, Attn:
Treasurer. Such notice shall state the election to exercise the Option, and the
number of shares of Stock in respect of which it is being exercised. It shall be
signed by the person or persons so exercising the Option and shall be
accompanied by payment of the full purchase price of such Stock in cash, by
certified check, cashier's check or in shares of Common Stock. If shares of
Common Stock are tendered as payment of the Option exercise price, the value of
such shares shall be their fair market value as of the date of exercise. If such
tender would result in the issuance of fractional shares of Common Stock, the
Participant shall purchase at the price which reflects the fair market value of
the Stock as of the date of exercise, in cash, by certified check or cashier's
check such additional fractional shares of Common Stock as are necessary to
result in the issuance to the Participant of an additional whole share of Common
Stock. The Company shall issue, in the name of the person or persons exercising
the Option, and deliver a certificate or certificates representing such shares
as soon as practicable after the notice and payment shall be received. In the
event the Option shall be exercised, pursuant to Paragraph 5 hereof, by any
person or persons other than the Participant, such notice shall be accompanied
by appropriate proof of the right of such person or persons to exercise the
Option.
Until Participant (or his representative as provided in Paragraph 5 hereof) has
been issued a certificate or certificates for the shares as acquired,
Participant shall possess no stockholder rights with respect to any such Stock.
10. Tax Information. Information with respect to the ordinary income
recognized by Participant in any year on account of the exercise of the Option,
whether such income arises from the receipt of Stock not subject to restrictions
or from the lapse of restrictions, shall be reported by the Company to the
Internal Revenue Service to the extent required by law.
A copy of any election statement filed by Participant with the Internal Revenue
Service in order to elect, in accordance with Section 83(b) of the Internal
Revenue Code of 1986, as amended, to recognize ordinary income in the year of
exercise with respect to the Stock being purchased upon exercise of the Option,
shall be provided by the Participant to the Company.
11. Changes in Capital Structure. If all or any portion of the Option
shall be exercised subsequent to any stock dividend, split-up, recapitalization,
merger, consolidation, combination or exchange of shares, or otherwise,
occurring after the date hereof, the aggregate number of shares of the Stock
subject to this Agreement and the Option price may be proportionately adjusted,
and any other appropriate changes may be made by the Board of Directors, whose
determination shall be conclusive. No fractional share shall be issued upon any
such exercise, and the aggregate price shall be appropriately reduced on account
of any fractional share not issued. In no event, however, shall adjustment be
made in the rate at which restrictions against disposition lapse and
Participant's obligation of resale, as fixed by Paragraph 6 and 7 hereof.
12. Termination of Option. In the event of the institution of any legal
proceedings directed to the validity of the Plan pursuant to which the Option is
granted, or to any option granted under it, the Company may, in its discretion,
and without incurring any liability therefor to any Participant, terminate the
Option.
13. Enforceability. This Agreement shall be binding upon the
Participant, his estate, his personal representatives and beneficiaries.
14. Notices. Each notice relating to this Agreement shall be in writing
and delivered in person or by first class mail, postage prepaid, to the address
as hereinafter provided. Each notice shall be deemed to have been given on the
date it is received. Each notice to the Company shall be addressed to it at its
offices at 4400 Computer Drive, Westboro, MA 01580 (Attention: Treasurer). Each
notice to the Participant or other person or persons then entitled to exercise
the Option shall be addressed to the Participant or such other person or persons
at the Participant's last known address.
15. Successors, Etc. For purposes of this Agreement, the "Company"
shall also mean any successor to Data General Corporation, whether by merger,
acquisition or otherwise.
IN WITNESS WHEREOF, the Company has caused this Option Agreement to be
executed by its duly authorized officer, and the Participant has hereunto set
his hand and seal, all on the day and year first above written.
DATA GENERAL CORPORATION
By:_________________________
Robert C. McBride,
Vice President and Treasurer
I have read and understood this Agreement
and agree to be bound by its terms.
___________________________________
Print Name: _________________________
1/98
EXHIBIT A TO
DATA GENERAL CORPORATION
1998 NON-EMPLOYEE DIRECTOR
STOCK OPTION AGREEMENT
Dated: January __, _____
During the term of this option, the restrictions against disposition of the
Stock and the obligation of resale to the Company shall lapse so the shares
become freely tradeable ("Free Shares") in accordance with the following
schedule:
<TABLE>
# of Years Free of Restrictions
From Date of
Option Agreement Per Time Period Cumulative
<S> <C> <C>
1 year or on __/__/__ 25% = ____ shs. 25% = ____ shs.
2 years or on __/__/__ 25% = ____ shs. 50% = ____ shs.
3 years or on __/__/__ 25% = ____ shs. 75% = ____ shs.
4 years or on __/__/__ 25% = ____ shs 100% = ____ shs.
</TABLE>
Exhibit 10(oo)
Summary of 1999 Fiscal Year Bonus Opportunity
for Chief Executive Officer
The Company provided Ronald L. Skates, President and Chief Executive Officer of
the Company, a bonus opportunity by which Mr. Skates would be entitled to earn a
cash bonus for the 1999 fiscal year based on the Company's performance as
measured against goals relating to earnings-per-share (with a maximum of 300% of
base salary), or, if greater, a cash bonus equal to 1.5% of the increase in the
Company's market capitalization based on the following formula: the difference
between (i) the product of the average price of the Corporation's Common Stock
for the last 30 trading days prior to the close of the 1999 fiscal year times
the number of shares actually outstanding as of the close of the 1999 fiscal
year and (ii) the product of the average price of the Corporation's Common Stock
for the first 30 trading days of the 1999 fiscal year times the number of shares
actually outstanding as of the close of the 1998 fiscal year (with a maximum
amount of $3,500,000, except in the event of a change of control). The Board
reserved the right to adjust this bonus in the event of extraordinary
transactions and to award other bonuses.
Exhibit 10(pp)
AMENDMENT TO
SUPPLEMENTAL PENSION AND RETIREE MEDICAL AGREEMENT
(Dated as of December 2, 1998)
This Amendment to Supplemental Pension and Retiree Medical Agreement is
dated as of December 2, 1998 and is entered into between Data General
Corporation (the "Company") and Ronald L. Skates (the "Executive").
Reference is made to that Supplemental Pension and Retiree Medical
Agreement dated as of December 7, 1994 between the Executive and the Company
(the "Agreement").
Whereas the parties, for good and sufficient consideration, the receipt
and sufficiency of which is hereby confirmed, wish to amend the Agreement to
clarify the meaning of certain terms used therein;
Now, therefore, Paragraph 1(e) of the Agreement shall be and is hereby
amended to read as follows:
e) Form and Timing of Benefit. Payment of the Supplemental Benefit (as
that term is defined in this Agreement) shall commence on the first day
of the month coincident with or following the termination of the
Executive's employment with the Company. The Supplemental Benefit shall
be payable in equal monthly installments to the Executive until his
death; and in the event he predeceases his Spouse, shall continue to be
payable to his Spouse until the death of such Spouse."
Except as hereby amended, the Agreement is hereby ratified and confirmed.
IN WITNESS WHEREOF, the parties have executed this Amendment effective
as of December 2, 1998.
DATA GENERAL CORPORATION
By: /s/ Robert C. McBride /s/ Ronald L. Skates
---------------------------- ----------------------
Robert C. McBride RONALD L. SKATES
Vice President and Treasurer
EXHIBIT 11
<TABLE>
DATA GENERAL CORPORATION
COMPUTATION OF BASIC AND DILUTED EARNINGS PER SHARE
(Unaudited)
(In thousands except per share amounts)
Quarter Ended
------------------------
Dec. 26, Dec. 27,
1998 1997
-------- --------
<S> <C> <C>
Basic earnings per share:
Net income.......................................... $16,508 $ 3,498
======= =======
Weighted average shares outstanding................. 49,801 48,640
======= =======
Net income per share................................ $0.33 $0.07
===== =====
Diluted earnings per share: (a)
Net income.......................................... $16,508 $ 3,498
======= =======
Weighted average shares outstanding................. 49,801 48,640
Incremental shares from use of treasury
stock method for stock options.................... 1,435 2,036
------- -------
Common and common equivalent shares,
assuming full dilution, where applicable.......... 51,236 50,676
======= =======
Net income per share............................... $0.32 $0.07
======= =======
<FN>
(a) For the quarters ended December 26, 1998 and December 27, 1997, the
assumed conversion of convertible debentures, giving effect to the incremental
shares and the adjustment to reduce interest expense, results in anti-dilution
and has therefore been excluded from the computation.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE Q1 FY99 CONDENSED CONSOLIDATED BALANCE SHEET AND
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-25-1999
<PERIOD-END> DEC-26-1998
<CASH> 130,289
<SECURITIES> 157,184
<RECEIVABLES> 308,378
<ALLOWANCES> 0
<INVENTORY> 134,181
<CURRENT-ASSETS> 761,202
<PP&E> 657,653
<DEPRECIATION> 472,027
<TOTAL-ASSETS> 1,039,862
<CURRENT-LIABILITIES> 393,934
<BONDS> 212,750
0
0
<COMMON> 629,377
<OTHER-SE> (224,523)
<TOTAL-LIABILITY-AND-EQUITY> 1,039,862
<SALES> 268,836
<TOTAL-REVENUES> 365,589
<CGS> 184,217
<TOTAL-COSTS> 245,048
<OTHER-EXPENSES> 115,348
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,776
<INCOME-PRETAX> 9,808
<INCOME-TAX> (6,700)
<INCOME-CONTINUING> 16,508
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,508
<EPS-PRIMARY> 0.33
<EPS-DILUTED> 0.32
</TABLE>