-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, qDZnNOgvdfdWJaKVZkNPrIakZXi5Sqi7RASQvCrz/ivhuizeq4/NyXrWGk/c82so fOGTnfQCrisKxQT1AHzPeg== 0000026999-94-000014.txt : 19941222 0000026999-94-000014.hdr.sgml : 19941222 ACCESSION NUMBER: 0000026999-94-000014 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19940924 FILED AS OF DATE: 19941221 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DATA GENERAL CORP CENTRAL INDEX KEY: 0000026999 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER & OFFICE EQUIPMENT [3570] IRS NUMBER: 042436397 STATE OF INCORPORATION: DE FISCAL YEAR END: 0925 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-07352 FILM NUMBER: 94565505 BUSINESS ADDRESS: STREET 1: 4400 COMPUTER DR CITY: WESTBORO STATE: MA ZIP: 01580 BUSINESS PHONE: 5088985000 10-K 1 FY94 10K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark one) [X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended September 24, 1994 OR [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to Commission File Number 1-7352 Data General Corporation (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) 04-2436397 (I.R.S. Employer Identification No.) 4400 Computer Drive, Westboro, Massachusetts 01580 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (508)898-5000 Securities registered pursuant to Section 12(b) of the Act: Common Stock, par value $.01 New York Stock Exchange London Stock Exchange Preferred Stock Purchase Rights New York Stock Exchange London Stock Exchange 7-3/4% Convertible Subordinated New York Stock Exchange Debentures Due 2001 8-3/8% Sinking Fund Debentures Due 2002 New York Stock Exchange (Title of each class) (Name of each exchange on which registered) Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K [X]. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Aggregate market value of common stock held by non-affiliates of the registrant, as of December 9, 1994: $361,732,280 Number of shares outstanding of each of the issuer's classes of common stock, as of December 9, 1994: Common Stock, par value $.01 36,631,117 (Title of each class) (Number of shares) Documents incorporated by reference: Parts I and II - Portions of registrant's Annual Report to Stockholders for the year ended September 24, 1994. Part III - Portions of registrant's Proxy Statement dated December 14, 1994. AViiON, CEO, DASHER, DESKTOP GENERATION, ECLIPSE, microNOVA, NOVA and WALKABOUT are registered trademarks, and CEO Connection, CEO Object Office, CLARiiON, DG/UX, DG/ViiSION, ECLIPSE MV/3200, ECLIPSE MV/3600, ECLIPSE MV/9800, ECLIPSE MV/25000, ECLIPSE MV/35000 and ECLIPSE MV/60000 are trademarks of Data General Corporation. All other brand and product names appearing in this publication are trademarks or registered trademarks of their respective holders. PART I Item 1. Business. Data General Corporation, incorporated in Delaware on April 15, 1968, designs, manufactures, sells, and supports a broad range of multi-user computer systems, servers, and mass storage devices. The company's range of products and services includes database servers, communications and networking servers, workstations, desktop and portable systems, mass storage devices, thousands of application solutions offered in conjunction with various third-party firms, and a worldwide service and support network. As used herein, the terms "Data General" and the "company" mean Data General Corporation, and, unless otherwise indicated, its consolidated subsidiaries. There is a wide and expanding variety of applications for the products manufactured by Data General. The company's products are used for database management, integrated information processing, distributed data processing, office automation and financial applications, transaction processing, communications, decision support, computer aided engineering, manufacturing planning and control, human resource management, educational administration, health care, testing, process control, and environmental monitoring. Other areas of use include scientific and laboratory research, medical instrumentation and imaging, signal analysis, data acquisition, instrumentation, monitoring, and control. The company's products are used in networks, at the enterprise level, and in stand-alone applications. Data General's AViiONR line of computer systems is based on Reduced Instruction Set Computing (RISC) microprocessors and the UNIXR operating system. The company's CLARiiONTM mass storage devices are open systems disk arrays and tape arrays for computers that run the UNIX operating system and selected other operating systems. Data General's ECLIPSER MV family of minicomputers uses the company's proprietary hardware architecture and operating system. The company provides products and services needed for networking and interoperability, which enable computing systems from many vendors to function together in multi-platform environments. Data General also offers a broad line of personal computers. During the last decade, advances in microprocessor technology and the increasing availability of standards-based hardware and software significantly eroded the competitive advantage of proprietary minicomputer systems. These trends resulted in the introduction of networked computer systems, consisting of servers hosting PCs, terminals and other workstations, which offer customers significant price/performance advantages over traditional minicomputers. In response to these developments, Data General management implemented a strategy in fiscal 1988 that focused the company's resources on developing the AViiON family of industry-standard computer systems while continuing to enhance and upgrade the performance of its ECLIPSE MV family of minicomputers. In fiscal 1994, revenues from the AViiON family were approximately $470 million, an increase of nearly 20% over fiscal 1993. Since AViiON shipments began in fiscal 1989, more than $1.5 billion worth of systems have been delivered. Management is encouraged by the continued growth of its AViiON open systems computers and their acceptance in the worldwide marketplace. The growing demand for computers based on open architectures led Data General to introduce the CLARiiON family of mass storage subsystems in September 1992. In addition to CLARiiON storage products that are sold with Data General AViiON and ECLIPSE MV systems, "Open CLARiiON" products are available for use with systems from IBM, Digital Equipment Corporation, and Sun Microsystems, as well as with systems running NetWare, NT, OS/2, and SCO UNIX. Open CLARiiON products are sold through a worldwide network of independent distributors and Original Equipment Manufacturers (OEM), including Storage Technology Corporation, Amdahl, Memorex Telex, Convex Computer, Bull SA, and other systems vendors. They are also sold through distribution agreements with Access Graphics, Gates/FA, and Dickens Data in the U.S., Daou in Korea, Omron in Japan, and a number of European firms. Collectively, these agreements should provide the foundation for continued growth of Open Clariion in 1995 and future years. Products and Services. The company's computer systems can be grouped into the following product families: AViiON systems, servers and workstations; ECLIPSE MV family systems; CLARiiON series mass storage subsystems; DG/ViiSIONTM and DASHERR family personal computers and LAN servers; and WALKABOUTR notebook computer systems. AViiON, ECLIPSE MV and CLARiiON products are the core of the company's current business. The company also continues to sell and support the following earlier product families: 16-bit ECLIPSE systems; DESKTOP GENERATIONR systems; NOVAR systems; and microNOVAR microproducts. Introduced in fiscal 1989, AViiON servers and workstations are based on RISC microprocessors and the VME Input/Output (I/O) bus. The company has focused its products and services on large commercial enterprises that need high availability systems, such as the AViiON servers and CLARiiON storage products, to support large numbers of users, handle large volumes of transactions, and support large databases. The AViiON product family ranges from high-performance, general-purpose systems and servers to entry-level workstations. AViiON AV 9500 servers, which currently include models with up to 16 processors, consistently rank among the leaders in database performance, scalability, and price/performance, as measured by independent benchmarks conducted by Aim Technology and by the Transaction Processing Council. The AV 8500 server series is a mid-range line which offers from two- to eight-processor systems. These office-package systems can be used to integrate networks of personal computers, providing users with communications, resource sharing, office and imaging applications, and databases. The AV 5500 and AV 4500 systems are flexible and expandable enterprise servers in deskside packaging. They are also used by many Value-Added Resellers (VAR) for packaged information solutions. The AV 450 and AV 550 workstations are designed for commercial applications, such as Geographical Information Systems and software development. AViiON computers function as servers or as multi-user systems for a wide range of applications. All AViiON systems run the DG/UXTM operating system, Data General's version of the UNIX operating system. DG/UX is designed with advanced features to support commercial applications. ECLIPSE MV systems are 32-bit computers using custom-designed very large scale integration chips which utilize a more powerful instruction set than earlier 16-bit ECLIPSE and NOVA systems, enabling the execution of most programs that operate on the earlier systems. The range of products includes: the low-end ECLIPSE MV/3200TM and ECLIPSE MV/3600TM computers; the mid-range ECLIPSE MV/9800TM, MV/25000TM and MV/35000TM systems; and the high-end ECLIPSE MV/60000TM HA series of multi-processor computers. The CLARiiON family of mass storage subsystems is based on Redundant Array of Inexpensive Disk (RAID) technology, providing an architecture that speeds access to data while safeguarding it. CLARiiON subsystems employ up to 20 disk drives. Currently, CLARiiON contains SCSI 3.5 inch disk drives, each with a capacity of 4.0 GB (billions of characters), allowing a subsystem to store up to 80 GB of information. Higher capacity disk drives can be accommodated as they become available in the marketplace. Up to three subsystems can be combined in rackmount configurations. The drives are combined with an intelligent I/O processor, which manages the array subsystem's operations, and cache which provides improved performance. By utilizing RAID technology, a portion of CLARiiON's disk resources is dedicated to data redundancy. While individual drives may fail occasionally, the array system remains operational while the failed disk is repaired or replaced. CLARiiON subsystems are able to be repaired while under power. Each disk module comes in a specially designed carrier that can be removed from its array group without disturbing data access. CLARiiON mass storage devices come in a compact design that occupies 2.7 square feet of floor space. To complement these disk array systems, a CLARiiON tape array is available. This high-performance, fault-tolerant product provides fast, unattended back-up for large databases. This innovative tape array employs low-cost commodity tape drives and cartridges, and, like the disk array, can be used with UNIX servers from IBM, Digital Equipment Corporation, and Sun Microsystems, and systems running NetWare, NT, OS/2, and SCO UNIX, as well as Data General's own systems. The Data General family of personal computers includes DG/ViiSION entry level systems, DASHER II mid-range through multi-user systems and LAN servers, and the WALKABOUT full-function notebook computer. These systems use the latest available microprocessors, including Intel Pentium processors. Connectivity to AViiON and ECLIPSE MV systems and other computers can be achieved using various communication products offered by Data General. The company's computer systems differ in speed, memory, and storage capacity; are available with certain processor features; and are available with a number of subassembly slots that may be used to accommodate peripheral controllers. Data General also sells a wide variety of peripheral equipment for use with its computers. Peripheral equipment sold by the company includes video display terminals, printers, plotters, communication controllers, multiplexors, disk storage, memory, magnetic tape equipment, analog-to-digital converters and digital-to-analog converters. The company also manufactures peripheral controller subassemblies and related electronics for connecting its computers to standard data communication equipment and computer systems manufactured by others. Data General also designs and manufactures peripheral controller subassemblies for use with electromechanical peripheral equipment it purchases from third parties. The company has developed and offers an extensive library of systems software products for use with its computer systems, including database management and communications software for industry-standard mainframe protocols. This library includes operating systems with compilers, assemblers, and general utility programs. The company's operating systems provide compatibility throughout the company's product families. The company's proprietary operating systems include the AOS/VS (Advanced Operating System/Virtual Storage) and AOS/VS II multiprogramming systems, the AOS/RT32 real-time subset of AOS/VS, and DG/RDOS (Real-time Disk Operating System) for 32-bit systems. More than 40 programming languages are available with the company's systems including common versions of BASIC, Business BASIC, COBOL 74, ICOBOL, Fortran IV, Fortran V, Fortran 77, Algol, DG/L, PL/1, APL, Pascal, "C", and Common Lisp. Data General's Ada compiler and Ada development environment software allow customers to program in Ada, a standard programming language used in military applications. Data General also offers its customers a wide range of applications software solutions for both open and traditional systems. The company's relationships with systems integrators, software suppliers, and industry-specific VARs provide a growing presence worldwide in many specialized markets. AViiON systems run over 6,000 software programs from leading suppliers of databases, languages, office automation and industry application packages. This collection of software includes many products which can be used by customers who are migrating data processing or data management tasks from mainframe computers. This represents an important application area for the company's AViiON servers. To meet the specific market requirements, the company works with more than 1,000 VARs and distributors. An important application area for the company's ECLIPSE MV systems is its CEOR integrated office automation software. This software allows users to perform routine office tasks, such as electronic mail, word processing, filing, and maintaining electronic calendars, while also having access to spreadsheets, graphics, a centralized database, or specialized applications developed by customers or purchased from Data General or third parties. The company also offers CEO ConnectionTM communications software, which allows CEO system functions to be used in products using the MS-DOS operating system. In addition, CEO Object OfficeTM brings CEO office automation software to an icon-style graphics interface on a personal computer. Computer programs are furnished pursuant to nonexclusive licenses. Data General's communications architecture is based upon the implementation of both international and defacto standards in the data communications and networking field. Data General now supports defacto standards such as TCP/IP (Transmission Control Protocol/Internet Protocol), SNA (IBM's Systems Network Architecture), Novell IPX/SPX, DECnet, AppleTalk, Async, and Bisync protocols, among others. Formal standards support includes OSI (Open Systems Interconnection), GOSIP (Government Open Systems Interconnection Profile), ISDN (Integrated Services Digital Network), CMIP/CMIS for network management, and numerous others. Data General is able to integrate mainframes, minicomputers and various desktops (UNIX workstations, Macintosh, async terminals, X-terminals, Windows and DOS PCs) using a wide range of communications products and services. Data General can help customers integrate their filing systems (Novell, LAN Manager, NFS), take advantage of UNIX print services, run UNIX applications and unify their offices using network products such as mail, electronic data interchange, and the like. Further, customers can create cooperative program environments (client/server) through the use of various open communication interfaces provided by Data General such as API LU 6.2, 0, 1, 2, 3, (for IBM environments), SPX (for Novell), and TLI (for TCP/IP, OSI, and LAN Manager environments). This set of communication capabilities enables Data General systems to be incorporated in a variety of networks that include systems and equipment manufactured by the company and by many other vendors. The total purchase price of any computer system varies depending upon the processing power, size of main memory and storage capacity; and upon the types and quantities of accessory, peripheral controller subassembly, and peripheral equipment ordered. Prices of the company's various products range from less than $2,000 to over $1,500,000. Dollar volume discounts are offered on most products sold by the company. New products and revisions to existing products have resulted in improved price/performance ratios. The company extends a limited service and/or parts warranty on substantially all equipment sold and offers several types of maintenance services and contracts at additional charges. Warranty and other maintenance services are generally performed by service employees located in various offices throughout the world. The company offers a mail-in parts exchange and repair service and a cooperative maintenance program for qualified organizations, VARs, and other customers capable of performing maintenance services. The cooperative program includes spare parts, back-up support, depot service, diagnostics, training, documentation, tools and test equipment, and service planning and support. Data General supports over 3,000 products made by other vendors. The company also offers an On-line Information Service, which provides customers with immediate access to support information. The company provides various services related to the installation and operation of its computer systems and software. Systems engineers provide systems and software installation support. The Systems Integration Business Unit helps customers get the maximum benefit from their new and existing systems by offering a broad array of systems design, applications development and consulting services. The Special Systems group designs custom hardware products under contract to individual customers. Customer training related to systems and software sold by the company is provided at company training facilities in various locations throughout the world or at the customer's own facilities. For the fiscal year ended September 24, 1994, product revenues were 65% of consolidated total revenues and service revenues were 35% of consolidated total revenues. For the fiscal year ended September 25, 1993, product revenues were 62% of consolidated total revenues and service revenues were 38% of consolidated total revenues. For the fiscal year ended September 26, 1992, product revenues were 61% of consolidated total revenues and service revenues were 39% of consolidated total revenues. Marketing and Distribution. The company uses multiple channels of distribution to sell its products. Sales representatives in company offices, located throughout the world, sell products mainly to large organizations, many of which are new accounts. A mass merchandising organization, "Data General Plus", is primarily responsible for meeting the needs of existing customers with a product range including replacement systems, system upgrades and a full range of supplies and accessories sold through catalogs. The company also sells refurbished Data General equipment. Data General uses several third-party distribution channels, including OEMs, VARs, and distributors. OEMs include companies that incorporate Data General computers into other products, such as air traffic control systems, for resale to the final user. VARs add applications software to the computer systems purchased from the company before reselling them, and may provide assistance in installing and maintaining the systems. Distributors meet customer needs by making Data General products available, including systems, servers, workstations, personal computers and storage systems products for immediate off-the-shelf delivery. The company provides financing through various leasing and financing programs arranged with third parties. Data General provides flexible financing programs for all Data General products, as well as third party hardware, software and services. These programs are available worldwide for resellers, distributors and end users. The company is not dependent upon any one customer, or a very few customers, for a material part of its business. In fiscal 1994, sales made directly to various agencies of the United States Government represented approximately 5% of the company's consolidated total revenues. No single government agency, or any other single customer is believed to have accounted for more than 1% of consolidated total revenues. The company's business is not subject to any unusual seasonal fluctuations. The company generally attempts to minimize the time from receipt of a customer's order to shipment and virtually no orders are booked with shipment dates in excess of one year from the date of order. As the company's product mix shifts more towards industry-standard systems and workstations, it is anticipated that the average time from order date to shipment date will further decrease. In addition, a substantial portion of the orders received by the company are subject to cancellation without significant penalty, at the option of the customer, at any time prior to shipment. Therefore, the company believes that disclosure of its backlog would not contribute to an understanding of the company's business. Organization and Structure. The company's sales and service operations deliver Data General products and provide training, hardware and software support functions to customers through direct sales, mass merchandising, and reseller channels. Sales divisions are structured to cover the following major geographic areas: the United States; General International Area (including Canada and Latin America); Europe; and Asia/Pacific. The company's development, marketing and service organizations are structured in business units to enable Data General to better respond to customer requirements. . The AViiON Business Unit is responsible for development and marketing of the company's AViiON family of computer systems, and for managing associated third-party relationships. This unit also includes sub-units aimed at specific market opportunities, such as PICK/UNIX. . The ECLIPSE Business Unit is responsible for the development and marketing of the company's MV family of systems and related software. . The CLARiiON Business Unit is responsible for development of the company's CLARiiON family of open mass storage products, and for developing channels and partnerships for sales of Open CLARiiON. . The Personal Computer Business Unit supplies customers with a full range of personal computers and peripherals, ranging from notebook computers to towers. . The Worldwide Services Organization was formed in 1994 to provide better integrated and more competitive services to customers. The organization encompasses Customer Services (field engineering and other technical services) and the Systems Integration Business Unit which focuses on business opportunities worldwide in the growing market for integrating information systems through professional services, network integration services, and custom solutions. . Early in fiscal 1995, a Strategic Alliances organization was formed to focus on sales of applications and tools with the world's largest suppliers of such solutions, including Oracle Corporation, Computer Associates, SAP AG and PeopleSoft. The group also will develop and manage alliances with global systems integration partners such as EDS, SHL Systemshouse, "Big Six" consultancy and integration firms, and regional systems integrators in North America and Europe. Manufacturing and Corporate Quality is responsible for producing Data General systems; for procuring associated components, subassemblies, peripherals, and various other products which are incorporated into Data General systems or sold under the Data General label; and for corporate overall quality assurance. The Finance and Administration organizations include the Controller, the Treasurer, Information Management, Legal, Investor Relations, Property Management, and Human Resources functions. Raw Materials. Data General's manufacturing operations employ a wide variety of mechanical and electronic components, raw materials and other supplies. In the design of its products, the company routinely attempts to utilize multiple-sourced components. However, in some instances, the company selectively uses sole-sourced components, such as custom microprocessors and gate arrays, in order to achieve desired system performance. These components are typically based on the manufacturer's proprietary underlying process technology. In many cases, the manufacturers will execute crosslicense agreements with other manufacturers, and it may be possible for Data General to access such technology through crosslicense agreements. However, it has been the company's experience to date that the investment necessary to execute such crosslicense agreements and to re-engineer the component is not warranted. With respect to sole-sourced materials, the company has not experienced any problems relative to the timeliness of product availability or quality matters. To protect against such problems, however, the company has implemented special inventory plans for these components. These plans are designed to ensure that, if the sole-sourced supplier was unable to meet the company's requirements, there would be sufficient inventory available to cover the time required to re-engineer the product or develop an alternative source of supply. The company has not experienced any significant problems resulting from the inability to procure necessary raw materials. Patents. In November, 1994 the company commenced patent infringement litigation against International Business Machines Corporation charging infringement of certain of the company patents. Although the company believes its claims are valid, it cannot predict the outcome of the litigation. Should the company prevail in the litigation, such patents could play a significant role in the conduct of its business and accordingly would be material. The company believes that most if its remaining patents do not presently play asignificant role in the conduct of its business or in its industry in general and that most patents, granted or which may be granted to it, while anticipated to be of value, are note expected to be of material significance. The company also owns certain copyrights, trademarks and proprietary information. From time to time, companies in the industry have claimed that products and components similar to those manufactured by the company are covered by valid patents held by others. It may be necessary or desirable to obtain further patent licenses in addition to those which the company now holds. Although there is no assurance that such additional patent licenses could be obtained, the company is of the opinion, based on industry practice and information presently available, that such licenses could be obtained and on terms which would not have a material effect on the company's consolidated financial position or results of operations. Competition. The computer industry has been characterized by rapid technological change, product improvement, and price reductions. During fiscal 1994, the company's margins were adversely affected by the lower margin open systems products and by the generally weak European economy. Data General's future may be adversely affected by new technology developed by others or by price reductions initiated by competitors. Some of the company's competitors are larger companies and have substantially greater resources than the company. The company also competes with a number of smaller manufacturers. The company believes that it is a significant manufacturer of multi-user computer systems, servers, and mass storage devices for commercial applications. According to reports from International Data Corporation (IDC), Data General has ranked among the leading suppliers of commercial medium-scale UNIX-based systems in both 1992 and 1993. The company's AViiON systems have become increasingly competitive since they were introduced in fiscal 1989 as more applications were ported to the platform and new product introductions added to the depth of the product family. AViiON systems compete favorably with standards-based systems from other industry-leading vendors based upon a wide range of features and performance, the company's DG/UX operating system, and the availability of an extensive range of applications software. Based on price/performance and other measures that demonstrate computer speed, throughput, and ability to run applications effectively, the company's current 32-bit ECLIPSE MV family of proprietary systems, using primarily the AOS/VS and AOS/VS II operating systems, competes favorably against 32-bit systems from other leading minicomputer vendors. Data General's primary market for proprietary systems is its existing customer base. AViiON and ECLIPSE systems also compete favorably as a result of their ability to connect with a variety of desktop systems manufactured by the company and by other vendors. The company's worldwide service and support capability, which includes service for certain products manufactured by other vendors (such as PCs and workstations), also enhances the competitive strength of the company's product families. The company believes that its CLARiiON product was the first open, RAID-based mass storage product. This product supports UNIX-based computers from IBM, Digital Equipment Corporation, and Sun Microsystems, and for systems running on NetWare, NT, OS/2, AND SCO UNIX, as well as Data General systems. NetWare is the dominant server operating system for PC-LANs (local area networks). Research and Development. The company understands that if it is to compete successfully in the industry it will require a continuing commitment to research and development. Research and development expenses were $90.8 million in fiscal 1994, $100.2 million in fiscal 1993, and $111.3 million in fiscal 1992. Research and development work contracted out during fiscal 1994 was insignificant. During fiscal 1994, the company focused its research and development efforts on its core business technology, multi-user computer systems, servers, and mass storage devices, including related software and services. Continued emphasis on applied research and development programs is anticipated in order to improve existing products and to expand product line capabilities. Research and development work is done primarily in the following areas: general purpose computer systems; open mass storage devices; systems and applications software; integrated circuit technology; microprocessor design; network services and products; terminal and workstation development; and contracted special product design. Environmental Conditions. The company's various manufacturing facilities are subject to numerous laws and regulations designed to protect the environment, particularly from plant wastes and emissions. In the company's opinion, it is complying with such laws and regulations. Compli- ance has not had, and is not expected to have, a material effect upon the company's capital expenditures, results of operations, or competitive position. Employees. The company had approximately 5,800 employees at September 24, 1994, compared with 6,500 employees at September 25, 1993, and 7,100 employees at the end of fiscal 1992. The decrease in employees resulted from various restructuring programs undertaken to reduce the company's infrastructure and realign its organizations to meet today's open systems business model. Additional information on the company's restructuring programs is included in "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 2 of "Notes to Consolidated Financial Statements" in the company's Annual Report to Stockholders for the fiscal year ended September 24, 1994. The "Management's Discussion and Analysis of Financial Condition and Results of Operations" has been incorporated by reference into Item 7 of Part II of this Report. The "Notes to Consolidated Financial Statements" have been incorporated by reference into Item 8 of Part II of this Report. The company's employees are not covered under any collective bargaining agreements, and the company has not experienced any significant labor problems. The company believes that its relationship with its employees is good. International Operations. Foreign business is conducted through subsidiaries, representatives and distributors, and to a lesser extent by direct sales. International revenues, including U.S. direct export sales, amounted to approximately 45% of consolidated total revenues in fiscal 1994, and 46% and 49% of consolidated total revenues in fiscal 1993 and 1992, respectively. The majority of Data General's international revenues are derived from western Europe, Asia and Canada. In view of the locations and diversification of its international activities, the company does not believe that there are any special risks beyond the normal business risks attendant to activities abroad. The company maintains a hedging program to minimize its exposure to foreign currency fluctuations. Additional information relating to the company's international operations, including financial information by major geographic area, is included in Note 11 "Geographic Segment Data" on page 28 of the company's Annual Report to Stockholders for the fiscal year ended September 24, 1994. Item 2. Properties. The company's executive offices are located in Westboro, Massachusetts. Manufacturing, research and development, service, marketing, and administrative support facilities are located in various states and countries throughout the world. All buildings owned are modern, air conditioned, and suitable and adequate for the present activities of the company. The company also leases space in 48 states and 28 countries, primarily for sales and ser- vice offices, the corporate headquarters, and certain manufacturing operations. Substantially all manufacturing equipment is owned by the company and is well maintained. In September 1994, the company sold its Westboro, Massachusetts land and facilities, and entered into a 10-year sale leaseback arrangement for a portion of the property. During fiscal 1993 the company sold its facilities in Westbrook, Maine and Portsmouth, New Hampshire, as well as a portion of its facility in Woodstock, Connecticut. During fiscal 1992, the company sold Data General Thailand, its Thailand manufacturing subsidiary. The company is currently holding two facilities for future sale: Milford, Massachusetts and the remaining portion of Woodstock, Connecticut. Additional information regarding the company's principal plants and properties is included under the heading "Facilities" on page 31 of the company's Annual Report to Stockholders for the fiscal year ended September 24, 1994. Item 3. Legal Proceedings. Subsequent to the end of fiscal 1994, Data General settled with Northrop Grumman Corporation its six-year software copyright infringement and trade secrets litigation against Grumman Systems Support Corporation ("Grumman"). Under terms of this settlement, Grumman paid the company $53 million and the parties have dismissed all pending litigation. Item 4. Submission of Matters to a Vote of Security Holders. Not applicable. Executive Officers of the Registrant. Frederick R. Adler(1), Age 69, Chairman of the Executive Committee of the Board of Directors since July 1982; Secretary of the company from 1968 to July 1982; retiring senior partner in the law firm of Fulbright & Jaworski L.L.P., and senior partner of such firm or senior partner or chief executive officer of a professional corporation which was a senior partner in the predecessor firm of Reavis & McGrath, New York City, for more than five years; managing director of Adler & Company, a venture capital investment firm, and a general partner of its related investment funds for more than five years. Ronald L. Skates(1), Age 53, President and Chief Executive Officer of the company since November 1989; Executive Vice President and Chief Operating Officer of the company from August 1988 to November 1989; Senior Vice President of the company from November 1986 to August 1988; Chief Financial Officer of the company from November 1986 to August 1987; Partner, Price Waterhouse from July 1976 to November 1986. J. Thomas West, Age 55, Senior Vice President of the company since November 1988; Vice President of the company from September 1983 to November 1988. William J. Cunningham, Age 56, Vice President of the company since August 1989; prior positions at Apollo Computer Inc. included Vice President and General Manager, Manufacturing and Research and Development, from October 1988 to June 1989; and Vice President and General Manager, Manufacturing and Distribution, from September 1987 to September 1988; Vice President, U.S. Manufacturing, for Honeywell Bull from March 1986 to September 1987. Arthur W. DeMelle, Age 54, Vice President and Chief Financial Officer of the company since March 1992; prior positions included Senior Vice President of Finance and Administration at Chep USA from November 1989 to March 1992; Executive Vice President and Chief Financial Officer at Emery Air Freight Corporation from April 1987 to May 1989; and Executive Vice President and Chief Financial Officer at Purolator Courier Corporation from July 1980 to April 1987. Stephen P. Gardner, Age 41, Vice President of the company since January 1994; Division Vice President of the company from March 1993 to January 1994; prior positions with Bull Worldwide Information Systems from 1988 to 1993, including President - Integris, Vice President of North American Marketing, and Vice President of Small Systems Product Lines. Robert C. Hughes, Age 54, Vice President of the company since April 1993; Chief Operating Officer at Bachman Information Systems from May 1992 to April 1993; prior positions at Digital Equipment Corp. included Vice President, U.S. Sales and Industry Marketing from 1986 to 1992, and Vice President, Office Systems Business Unit from 1982 to 1985. Joel Schwartz, Age 52, Vice President of the company since February 1989; President and Chief Operating Officer of Polygen Corp. from August 1986 to February 1989. William L. Wilson, Age 50, Vice President of the company since March 1994; prior positions with International Business Machines Corporation including Assistant General Manager for Marketing - Enterprise Systems from 1992 to 1993, General Manager of IBM's Integrated Systems Solutions Corporation (ISSC) from 1990 to 1992, and Marketing and Sales Director for U.S Marketing Services from 1987 to 1990. Donald P. Zereski, Age 52, Vice President of the company since October 1993; Principal, NorthCrest International from December 1992 to October 1993; prior positions at Digital Equipment Corp. included Vice President, U.S. Area, from January 1991 to December 1992; Vice President, Corporate Customer Service, from July 1989 to January 1991; Vice President, U.S. Field Service, from July 1985 to June 1989, and Field Service, Vice President for Europe, from July 1983 to June 1985. Executive officers of the company are elected annually and hold office until the first meeting of the Board of Directors following the Annual Meeting of Stockholders or until their successors have been elected and have duly qualified. (1) Member of Board of Directors and Executive Committee thereof. PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters. The information contained under the headings "Stock Price Range" on page 30; and "Number of Stockholders," "Dividend Pol- icy," and "Stock Exchange Listing" on page 33 of the company's Annual Report to Stockholders for the fiscal year ended September 24, 1994 is incorporated herein by reference. Item 6. Selected Financial Data. The information contained under the heading "Five Year Sum- mary of Selected Financial Data" on page 13 of the company's An- nual Report to Stockholders for the fiscal year ended September 24, 1994 is incorporated herein by reference. Item 7. Management's Discussion and Analysis of Financial Condi- tion and Results of Operations. The information contained under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" on pages 14 through 16 of the company's Annual Report to Stockholders for the fiscal year ended September 24, 1994 is incorporated herein by reference. This information should be read in conjunction with the related consolidated financial statements incorporated by reference under Item 8. Item 8. Financial Statements and Supplementary Data. The information contained in the consolidated financial statements, notes to consolidated financial statements, and report of independent accountants, and under the headings "Quarterly Financial Data (Unaudited)," and "Facilities," on pages 17 through 31 of the company's Annual Report to Stockholders for the fiscal year ended September 24, 1994 is incorporated herein by reference. Item 9. Disagreements on Accounting and Financial Disclosure. Not applicable. PART III Item 10. Directors and Executive Officers of the Registrant. The information contained under the heading "Proposal No. 1 - Election of Seven Directors" on pages 3 through 5 of the com- pany's Proxy Statement dated December 14, 1994 is incorporated herein by reference. See also "Executive Officers of the Regis- trant" appearing in Part I hereof. Item 11. Executive Compensation. The information contained under the headings "Summary Compensation Table", "Options Grants in the 1994 Fiscal Year", "Options Exercised and Fiscal Year-End Values", "Compensation Pursuant to Plans", "Employee Agreements", "Compensation of Directors" and "Directors' Retirement Program" on pages 6 through 17 of the company's Proxy Statement dated December 14, 1994 is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management. The information contained under the heading "Beneficial Ow- nership of Common Stock" and in the second paragraph and related table under the heading "Proposal No. 1-Election of Seven Direc- tors" on pages 2 through 4 of the company's Proxy Statement dated December 14, 1994 is incorporated herein by reference. PART IV Item 13. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. (a) 1 and 2. Index to financial statements and related schedules: Page Five year summary of selected financial data . . . . . . . 13* Management's discussion and analysis of financial condition and results of operations. . . . . . . . . . . 14-16* Consolidated balance sheets at September 24, 1994 and September 25, 1993 . . . . . . . . . . . . . . . . . 18* For fiscal years ended September 24, 1994, September 25, 1993, and September 26, 1992: Consolidated statements of operations. . . . . . . . . 17* Consolidated statements of cash flows. . . . . . . . . 19* Consolidated statements of stockholders' equity. . . . 20* Notes to consolidated financial statements . . . . . . . . 21-29* Report of independent accountants. . . . . . . . . . . . . 30* Supplemental financial information . . . . . . . . . . . . 30* Facilities . . . . . . . . . . . . . . . . . . . . . . . . 31* Report of independent accountants on financial statement schedules. . . . . . . . . . . . . . . . . . . 18 Financial statement schedules: Schedule I -- Marketable securities. . . . . . . . . . . 19 Schedule VIII -- Valuation and qualifying accounts . . . 20 Schedule IX -- Short-term borrowings . . . . . . . . . . 21 Schedule X -- Supplementary income statement information 22 The financial statement schedules should be read in conjunc- tion with the financial statements in the 1994 Annual Report to Stockholders. All other schedules have been omitted as they are not applicable, not required, or the information is included in the consolidated financial statements or notes thereto. _____________ * Page references are to the 1994 Annual Report to Stockholders. The 1994 Annual Report to Stockholders is not to be deemed filed as part of this Report except for those parts thereof specifically incorporated by reference into this Report. EXHIBITS 3. (a) Restated Certificate of Incorporation of the company, as amended, including the company's Certificate of Designation dated October 17, 1986, previously filed as Exhibit 3(a) to the company's Annual Report on Form 10-K for the fiscal year ended September 27, 1986, which is incorporated herein by reference. (b) Amendment to Certificate of Incorporation of the company, filed January 29, 1987, previously filed as Exhibit 3 to the company's Quarterly Report on Form 10-Q for the quarter ended March 28, 1987, which is incorporated herein by reference. (c) By-Laws of the company, as amended. 4. (a) Indenture dated as of September 15, 1977 between the company and State Street Bank and Trust Company (purchased from Fleet Bank of Massachusetts, formerly Bank of New England and formerly New England Merchants National Bank), as Trustee, which relates to the company's 8-3/8% Sinking Fund Debentures Due 2002, previously filed as Exhibit 2.2 to the company's Registration Statement on Form S-7, Registration Number 2-59710, which is incorporated herein by reference. (b) Amended and Restated Rights Agreement dated as of May 19, 1988 between the company and Morgan Shareholders Services Trust Company, as Rights Agent, previously filed as Exhibit 4 to the company's Quarterly Report on Form 10-Q for the quar- ter ended June 25, 1988, which is incorporated herein by reference. (c) Indenture, dated as of June 1, 1991, between the company and Fleet National Bank, as Trustee, which relates to the company's 7-3/4% Convertible Subordinated Debentures due 2001, previously filed as Exhibit 4(d) to Amendment No. 2 to the company's Registration Statement on Form S-3 (No. 33- 40817), which is incorporated herein by reference. 10. (a) Restricted Stock Option Plan, Appendix A to the prospec- tus included in the company's Registration Statement on Form S-8, Registration Number 33-19759, which is incorporated herein by reference. (b) Forms of Restricted Stock Option Agreement, previously filed as Exhibit 10(b) to the company's Annual Report on Form 10-K for the fiscal year ended September 29, 1990, which is incorporated herein by reference. (c) Form of Amendment to Restricted Stock Option Agreement, previously filed as Exhibit 10(b) to the company's Quarterly Report on Form 10-Q for the quarter ended June 25, 1988, which is incorporated herein by reference. (d) Form of Amendments to Key Executive Restricted Stock Option Agreements, previously filed as Exhibit 10(b) to the company's Quarterly Report on Form 10-Q for the quarter ended March 25, 1989, which is incorporated herein by reference. (e) Form of Amended and Restated Restricted Stock Option Agreement, between the company and Ronald L. Skates, previously filed as Exhibit 10(f) to the company's Quarterly Report on Form 10-Q for the quarter ended March 25, 1989, which is incorporated herein by reference. (f) Form of Amendment to Restricted Stock Option Agreements, between the company and Frederick R. Adler, previously filed as Exhibit 10(g) to the company's Quarterly Report on Form 10-Q for the quarter ended March 25, 1989, which is incorpo- rated herein by reference. (g) Employee Stock Option Plan, Appendix A to the prospectus included in the post-effective Amendment Number 1 to the company's Registration Statement on Form S-8, Registration Number 33-11527, which is incorporated herein by reference. (h) Amendment to Restricted and Employee Incentive Stock Option Agreements, between the company and Ronald L. Skates, dated November 14, 1988, previously filed as Exhibit 10(e) to the company's Annual Report on Form 10-K for the fiscal year ended September 24, 1988, which is incorporated herein by reference. (i) Forms of Incentive Stock Option Agreement, previously filed as Exhibit 10(d) to the company's Annual Report on Form 10-K for the fiscal year ended September 26, 1987, which is incorporated herein by reference. (j) Form to Amendment to Employee Stock Option Agreement, previously filed as Exhibit 10(a) to the company's Quarterly Report on Form 10-Q for the quarter ended June 25, 1988, which is incorporated herein by reference. (k) Form of Amended and Restated Employee Stock Option Agree- ment, between the company and Ronald L. Skates, previously filed as Exhibit 10(e) to the company's Quarterly Report on Form 10-Q for the quarter ended March 25, 1989, which is incorporated herein by reference. (l) Form of Amendments to Key Executive Stock Option Agree- ments, previously filed as Exhibit 10(c) to the company's Quarterly Report on Form 10-Q for the quarter ended March 25, 1989, which is incorporated herein by reference. (m) Non-Employee Director Restricted Stock Option Plan, Ap- pendix A to the prospectus included in the company's Regis- tration Statement on Form S-8, Registration Number 2-91481, which is incorporated herein by reference. (n) Form of Non-Employee Director Restricted Stock Option Agreement, previously filed as Exhibit 10(n) to the company's Annual Report on Form 10-K for the fiscal year ended Septem- ber 29, 1990, which is incorporated herein by reference. (o) Employee Qualified Stock Purchase Plan, Appendix A to the prospectus included in the company's Registration Statement on Form S-8, Registration Number 33-33300, which is incorpo- rated herein by reference. (p) Form of Employment Agreement between the company and its full-time officers, previously filed as Exhibit 10(a) to the company's Quarterly Report on Form 10-Q for the quarter ended March 25, 1989, which is incorporated herein by reference. (q) Form of Indemnity Agreement between the company and its officers and directors, previously filed as Exhibit 10 to the company's Quarterly Report on Form 10-Q for the quarter ended March 28, 1987, which is incorporated herein by reference. (r) Form of Revolving Credit Agreement dated as of November 22, 1991, previously filed as Exhibit 10(aa) to the company's Annual Report on Form 10-K for the fiscal year ended September 28, 1991, which is incorporated herein by reference. (s) Form of Amendment to Revolving Credit Agreement, previously filed as Exhibit 10(a) to the company's Quarterly Report on Form 10-Q for the quarter ended March 28, 1992, which is incorporated herein by reference. (t) Form of Amendments dated April 12, 1993 and September 23, 1993 to Revolving Credit Agreement dated November 22, 1991, previously filed as Exhibit 10(t) to the company's Annual Report on Form 10-K for the fiscal year ended September 25, 1993, which is incorporated herein by reference. (u) Form of Amendment dated September 1, 1993, to various Employment Agreements between the company and its full-time officers, previously filed as Exhibit 10(u) to the company's Annual Report on Form 10-K for the fiscal year ended September 25, 1993, which is incorporated herein by reference. (v) Form of Amendment dated December 30, 1993, amending and restating Revolving Credit Agreement and Letter of Credit Agreement, previously filed as Exhibit 10 to the company's Quarterly Report on Form 10-Q for the quarter ended December 25, 1993, which is incorporated herein by reference. (w) Amendment dated September 16, 1994 to Revolving Credit Agreement and Letter of Credit Agreement dated December 30, 1993, changing the Net Worth ratio of Consolidated Total Liabilities to Consolidated Tangible Net Worth. (x) Data General Corporation Supplemental Retirement Benefit Plan dated as of October 1, 1989, between the company and its highly compensated employees, providing the employees with additional pensions benefits and Trust Agreement with Boston Safe Deposit and Trust Company for the Plan. (y) Supplemental Pension and Retiree Medical Agreement dated as of December 7, 1994, between the company and it's current president and Chief Executive Officer, providing the Executive with appropriate pension and post-employment welfare benefits and Trust Agreement with Boston Safe Deposit and Trust Company for the Supplemental Pension and Retiree Medical Agreement. (z) Amendments dated April 18, 1994 to Revolving Credit Agreement and Letter of Credit Agreement dated December 30, 1993, changing the Consolidated Tangible Net Worth limitation and ratio. (aa) 1994 Non-Employee Director Stock Option Plan, Appendix A to the prospectus included in the company's Registration Statement on Form S-8, Registration Number 33-53039, which is incorporated herein by reference. (bb) Form of 1994 Non-Employee Director Stock Option Agreement. 11. Computation of primary and fully diluted earnings per share. 13. Annual report to stockholders for the fiscal year ended Sep- tember 24, 1994, certain portions of which have been incorpo- rated herein by reference. 22. Subsidiaries of the registrant. 24. Consent of independent accountants. Exhibits, other than those incorporated by reference, have been included in copies of this Report filed with the Securities and Exchange Commission. Stockholders of the company will be provided with copies of these exhibits upon written request to the company. (b) There were no reports on Form 8-K filed during the last thirteen weeks of the period covered by this Report SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. DATA GENERAL CORPORATION (Registrant) By: Ronald L. Skates Ronald L. Skates President and Chief Executive Officer December 16, 1994 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date President and Chief Executive Officer; Ronald L. Skates Director December 16, 1994 Ronald L. Skates Chairman of Executive Committee of Board of Frederick R. Adler Directors; Director December 16, 1994 Frederick R. Adler Vice President Chief Financial Officer Arthur W. DeMelle Chief Accounting December 16, 1994 Arthur W. DeMelle Officer Ferdinand Colloredo-Mansfeld Director December 16, 1994 Ferdinand Colloredo-Mansfeld John G. McElwee Director December 16, 1994 John G. McElwee Donald H. Trautlein Director December 16, 1994 Donald H. Trautlein Richard L. Tucker Director December 16, 1994 Richard L. Tucker DATA GENERAL CORPORATION REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENTS SCHEDULES To the Board of Directors of data General Corporation Our audits of the consolidated financial statements referred to in our report dated October 26, 1994 appearing on page 30 of the 1994 Annual Report to Stockholders of Data General Corporation (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the Financial Statement schedules listed in Item 14(a) of this Form 10-K. In our opinion, these Financial Statement Schedules present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. PRICE WATERHOUSE LLP /s/ Price Waterhouse LLP Boston, Massachusetts October 26, 1994 SCHEDULE I DATA GENERAL CORPORATION MARKETABLE SECURITIES (In thousands) AMOUNT AT WHICH CARRIED PRINCIPLE MARKET IN BALANCE DESCRIPTION AMOUNT COST VALUE SHEET SEPTEMBER 24, 1994: U.S. government $41,104 $40,280 $40,495 $40,498 securities Certificate of 7,230 7,230 7,229 7,367 Deposit ------- ------- ------- ------- Total $48,334 $47,510 $47,724 $47,865 SCHEDULE VIII DATA GENERAL CORPORATION VALUATION AND QUALIFYING ACCOUNTS (In thousands) Balance at Previous Balance at Description End of Year Additions Deductions End of Year SEPTEMBER 24, 1994: Allowance for doubtful accounts . .$ 12,992 $ 9,919(a) $( 9,159)(b) $ 13,752 Valuation allowance on deferred tax asset (c) 0 209,936 0 209,936 SEPTEMBER 25, 1993: Allowance for doubtful accounts . . 19,934 11,379(a) (18,321)(b) 12,992 SEPTEMBER 26, 1992: Allowance for doubtful accounts . . 22,437 8,756(a) (11,259)(b) 19,934 ____________________ (a) Charged to costs and expenses. (b) Accounts deemed uncollectable. (c) SFAS 109 "Accounting for Income Taxes" adopted September 26, 1993. SCHEDULE IX DATA GENERAL CORPORATION SHORT-TERM BORROWINGS (Dollars in thousands) Weighted Maximum Average Average Category of Balance Weighted Amount Amount Interest Aggregate at Average Outstanding Outstanding Rate Short-term End of Interest During the During the During the Borrowings Period Rate Period Period Period SEPTEMBER 24, 1994: Amounts payable to banks for borrowings. . . . $ 2,461 6.2% $ 2,461 $ 2,300 6.8% SEPTEMBER 25, 1993: Amounts payable to banks for borrowings. . . . 2,267 8.1% 3,940 2,996 10.7% SEPTEMBER 26, 1992: Amounts payable to banks for borrowings. . . . 3,940 10.7% 5,719 3,845 10.9% ____________________ The weighted average interest rate and average amount outstanding during the period are based on borrowings outstanding at the end of each of the company's twelve fiscal periods. SCHEDULE X DATA GENERAL CORPORATION SUPPLEMENTARY INCOME STATEMENT INFORMATION (In thousands) Fiscal Year Ended Sept. 24, Sept. 25, Sept. 26, Charged to Costs 1994 1993 1992 and Expenses Advertising. . . . . . . . . . $18,086 $17,086 $23,334 ____________________ Royalties, Repairs and maintenance, and Taxes, other than payroll and income taxes, amounted to less than 1% of consolidated total revenues. Depreciation expense and amortization of capitalized software development costs are included in the Consolidated Statement of Cash Flows in the company's Annual Report to Stockholders. EXHIBITS Index to Exhibits. 3. (a) Restated Certificate of Incorporation of the company, as amended, including the company's Certificate of Designation dated October 17, 1986, previously filed as Exhibit 3(a) to the company's Annual Report on Form 10-K for the fiscal year ended September 27, 1986, which is incorporated herein by reference. (b) Amendment to Certificate of Incorporation of the company, filed January 29, 1987, previously filed as Exhibit 3 to the company's Quarterly Report on Form 10-Q for the quarter ended March 28, 1987, which is incorporated herein by reference. (c) By-Laws of the company, as amended. 4. (a) Indenture dated as of September 15, 1977 between the company and State Street Bank and Trust Company (purchased from Fleet Bank of Massachusetts, formerly Bank of New England and formerly New England Merchants National Bank), as Trustee, which relates to the company's 8-3/8% Sinking Fund Debentures Due 2002, previously filed as Exhibit 2.2 to the company's Registration Statement on Form S-7, Registration Number 2-59710, which is incorporated herein by reference. (b) Amended and Restated Rights Agreement dated as of May 19, 1988 between the company and Morgan Shareholders Services Trust Company, as Rights Agent, previously filed as Exhibit 4 to the company's Quarterly Report on Form 10-Q for the quar- ter ended June 25, 1988, which is incorporated herein by reference. (c) Indenture, dated as of June 1, 1991, between the company and Fleet National Bank, as Trustee, which relates to the company's 7-3/4% Convertible Subordinated Debentures due 2001, previously filed as Exhibit 4(d) to Amendment No. 2 to the company's Registration Statement on Form S-3 (No. 33- 40817), which is incorporated herein by reference. 10. (a) Restricted Stock Option Plan, Appendix A to the prospec- tus included in the company's Registration Statement on Form S-8, Registration Number 33-19759, which is incorporated herein by reference. (b) Forms of Restricted Stock Option Agreement, previously filed as Exhibit 10(b) to the company's Annual Report on Form 10-K for the fiscal year ended September 29, 1990, which is incorporated herein by reference. (c) Form of Amendment to Restricted Stock Option Agreement, previously filed as Exhibit 10(b) to the company's Quarterly Report on Form 10-Q for the quarter ended June 25, 1988, which is incorporated herein by reference. (d) Form of Amendments to Key Executive Restricted Stock Option Agreements, previously filed as Exhibit 10(b) to the company's Quarterly Report on Form 10-Q for the quarter ended March 25, 1989, which is incorporated herein by reference. (e) Form of Amended and Restated Restricted Stock Option Agreement, between the company and Ronald L. Skates, previously filed as Exhibit 10(f) to the company's Quarterly Report on Form 10-Q for the quarter ended March 25, 1989, which is incorporated herein by reference. (f) Form of Amendment to Restricted Stock Option Agreements, between the company and Frederick R. Adler, previously filed as Exhibit 10(g) to the company's Quarterly Report on Form 10-Q for the quarter ended March 25, 1989, which is incorpo- rated herein by reference. (g) Employee Stock Option Plan, Appendix A to the prospectus included in the post-effective Amendment Number 1 to the company's Registration Statement on Form S-8, Registration Number 33-11527, which is incorporated herein by reference. (h) Amendment to Restricted and Employee Incentive Stock Option Agreements, between the company and Ronald L. Skates, dated November 14, 1988, previously filed as Exhibit 10(e) to the company's Annual Report on Form 10-K for the fiscal year ended September 24, 1988, which is incorporated herein by reference. (i) Forms of Incentive Stock Option Agreement, previously filed as Exhibit 10(d) to the company's Annual Report on Form 10-K for the fiscal year ended September 26, 1987, which is incorporated herein by reference. (j) Form of Amendment to Employee Stock Option Agreement, previously filed as Exhibit 10(a) to the company's Quarterly Report on Form 10-Q for the quarter ended June 25, 1988, which is incorporated herein by reference. (k) Form of Amended and Restated Employee Stock Option Agree- ment, between the company and Ronald L. Skates, previously filed as Exhibit 10(e) to the company's Quarterly Report on Form 10-Q for the quarter ended March 25, 1989, which is incorporated herein by reference. (l) Form of Amendments to Key Executive Stock Option Agree- ments, previously filed as Exhibit 10(c) to the company's Quarterly Report on Form 10-Q for the quarter ended March 25, 1989, which is incorporated herein by reference. (m) Non-Employee Director Restricted Stock Option Plan, Ap- pendix A to the prospectus included in the company's Regis- tration Statement on Form S-8, Registration Number 2-91481, which is incorporated herein by reference. (n) Form of Non-Employee Director Restricted Stock Option Agreement, previously filed as Exhibit 10(n) to the company's Annual Report on Form 10-K for the fiscal year ended Septem- ber 29, 1990, which is incorporated herein by reference. (o) Employee Qualified Stock Purchase Plan, Appendix A to the prospectus included in the company's Registration Statement on Form S-8, Registration Number 33-33300, which is incorpo- rated herein by reference. (p) Form of Employment Agreement between the company and its full-time officers, previously filed as Exhibit 10(a) to the company's Quarterly Report on Form 10-Q for the quarter ended March 25, 1989, which is incorporated herein by reference. (q) Form of Indemnity Agreement between the company and its officers and directors, previously filed as Exhibit 10 to the company's Quarterly Report on Form 10-Q for the quarter ended March 28, 1987, which is incorporated herein by reference. (r) Form of Revolving Credit Agreement dated as of November 22, 1991, previously filed as Exhibit 10(aa) to the company's Annual Report on Form 10-K for the fiscal year ended September 28, 1991, which is incorporated herein by reference. (s) Form of Amendment to Revolving Credit Agreement, previously filed as Exhibit 10(a) to the company's Quarterly Report on Form 10-Q for the quarter ended March 28, 1992, which is incorporated herein by reference. (t) Form of Amendments dated April 12, 1993 and September 23, 1993 to Revolving Credit Agreement dated November 22, 1991, previously filed as Exhibit 10(t) to the company's Annual Report on Form 10-K for the fiscal year ended September 25, 1993, which is incorporated herein by reference. (u) Form of Amendment dated September 1, 1993, to various Employment Agreements between the company and its full-time officers, previously filed as Exhibit 10(u) to the company's Annual Report on Form 10-K for the fiscal year ended September 25, 1993, which is incorporated herein by reference. (v) Form of Amendment dated December 30, 1993, amending and restating Revolving Credit Agreement and Letter of Credit Agreement, previously filed as Exhibit 10 to the company's Quarterly Report on Form 10-Q for the quarter ended December 25, 1993, which is incorporated herein by reference. (w) Amendment dated September 16, 1994 to Revolving Credit Agreement and Letter of Credit Agreement dated December 30, 1993, changing the Net Worth ratio of Consolidated Total Liabilities to Consolidated Tangible Net Worth. (x) Data General Corporation Supplemental Retirement Benefit Plan dated as of October 1, 1989, between the company and its highly compensated employees, providing the employees with additional pensions benefits and Trust Agreement with Boston Safe Deposit and Trust Company for the Plan. (y) Supplemental Pension and Retiree Medical Agreement dated as of December 7, 1994, between the company and it's current president and Chief Executive Officer, providing the Executive with appropriate pension and post-employment welfare benefits and Trust Agreement with Boston Safe Deposit and Trust Company for the Supplemental Pension and Retiree Medical Agreement. (z) Amendments dated April 18, 1994 to Revolving Credit Agreement and Letter of Credit Agreement dated December 30, 1993, changing the Consolidated Tangible Net Worth limitation and ratio. (aa) 1994 Non-Employee Director Stock Option Plan, Appendix A to the prospectus included in the company's Registration Statement on Form S-8, Registration Number 33-53039, which is incorporated herein by reference. (bb) Form of 1994 Non-Employee Director Stock Option Agreement. 11. Computation of primary and fully diluted earnings per share. 13. Annual report to stockholders for the fiscal year ended Sep- tember 24, 1994, certain portions of which have been incorpo- rated herein by reference. 22. Subsidiaries of the registrant. 24. Consent of independent accountants. Exhibits, other than those incorporated by reference, have been included in copies of this Report filed with the Securities and Exchange Commission. Stockholders of the company will be provided with copies of these exhibits upon written request to the company. EX-10 2 2ND AMENDMENT TO REVOLVING CREDIT AND LETTER OF CREDIT AGREEMENT Exhibit 10(w) SECOND AMENDMENT TO (I) AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT AND (II) LETTER OF CREDIT AGREEMENT This SECOND AMENDMENT, dated as of September 16, 1994 (this "Amendment"), among the parties hereto amends each of the (i) December 30, 1993 (as heretofore amended, the "Credit Agreement"), and (ii) LETTER OF CREDIT AGREEMENT, dated as of December 30, 1993 (as heretofor amended, the "L/C Agreement"; the Credit Agreement and the L/C Agreement, the "Agreements"), each of which Agreements is among DATA GENERAL CORPORATION, a Delaware corporation (the "Borrower"), NATIONAL WESTMINSTER BANK PLC ("NWB"), THE BANK OF NOVA SCOTIA ("BNS"), FLEET BANK OF MASSACHUSETTS, NATIONAL ASSOCIATION ("Fleet"), NATIONSBANK OF NORTH CAROLINA, N.A. ("NationsBank"), and CANADIAN IMPERIAL BANK OF COMMERCE (NEW YORK) ("CIBC" and, together with NWB, BNS, FLEET and NATIONSBANK, the "Lenders") and NWB, as Agent (the "Agent"), for the Lenders of the agreements. WHEREAS, the Borrower, the Lenders and the Agent desire to amend the Credit Agreement as set forth herein. NOW, THEREFORE, it is agreed: 1. As used herein all terms which are defined in the Credit Agreement shall have the same meanings herein. 2. Section 5.02(j) of each of the Credit Agreement is hereby amended in its entirety to read as follows: (j) Net Worth, Permit the ratio of Consolidated Total Liabilities to Consolidated Tangible Net Worth to be greater than 1.25 to 1 at the end of any fiscal quarter, provided that such ratio shall be no greater than (x) 1.30 to 1 at the end of the fiscal quarters ending on March 26, 1994 and June 25, 1994 and (y) 1.35 to 1 at the end of the fiscal quarter ending on September 24, 1994. 3. All representations and warranties contained in Article IV of each of the Agreements are ture and correct as of the date hereof. 4. This Amendment shall not become effective until the date on which this Amendment shall have been executed by the Borrower, Lenders constituting the Majority Lenders under each of the Agreements and the Agent, and the Agent shall have received evidence satisfactory to such execution. 5. The Borrower agrees to pay on demand all out-of-pocket costs and expenses of the Agent in connection with the negotiation, preparation, execution and delivery of this Amendment, including (without limitation) the reasonable fees and out-of-pocket expenses of counsel for the Agent in connection therewith. 6. This Amendment shall be limited precisely as written and shall not be deemed (a) to be a consent granted pursuant to, or a waiver or modification of, any other term or condition of either of the Agreements or any of the instruments or agreements referred to thereof or (b) to prejudice any right or rights which the Agent or the Lenders may now have or have in the future under or in connection with either Agreements or any of the instruments, agreements or other documents or papers contemplated in connection with either therof, and any reference therein to the Credit Agreement or the L/C Agreement, as the case may be, shall be deemed to mean the Credit Agreement or L/C Agreement as modified by this Amendment. 7. This Amendment may be executed in any number of counterparts and by the different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same instrument. 8. This Amendment shall be governed by, and construed in accordance with, the laws of the State of New York. IN WITNESS HEREOF, the parties hereto have caused this Amendment to be duly executed as of the day and the year first above written. DATA GENERAL CORPORATION By: _____________________________ Treasurer NATIONAL WESTMINSTER BANK PLC, as Lender and as Agent By: _____________________________ Vice President THE BANK OF NOVA SCOTIA By:______________________________ Vice President FLEET BANK OF MASSACHUSETTS, NATIONAL ASSOCIATION By:_____________________________ Vice President NATIONSBANK, formerly known as NCNB NATIONAL BANK OF NORTH CAROLINA By:______________________________ Vice President CANADIAN IMPERIAL BANK OF COMMERCE (New York) By:______________________________ Vice President EX-10 3 SUPPLEMENTAL RETIREMENT BENEFIT PLAN Exhibit 10(x) DATA GENERAL CORPORATION SUPPLEMENTAL RETIREMENT BENEFIT PLAN Effective: October 1, 1989 TABLE OF CONTENTS Article and Section Page I. Introduction . . . . . . . . . . . . . . . . 1 1.1 Name . . . . . . . . . . . . . . . . . 1 1.2 Purpose . . . . . . . . . . . . . . . . 1 1.3 Effective Date . . . . . . . . . . . . 1 II. Definitions . . . . . . . . . . . . . . . . 2 III. Eligibility to Participate . . . . . . . . 9 3.1 Eligibility Requirement . . . . . . . . 9 3.2 Participation . . . . . . . . . . . . . 9 IV. Supplemental Retirement Benefits. . . . . . 10 4.1 Supplemental Retirement Benefit . . . . 10 4.2 Form of Payment . . . . . . . . . . . . 10 4.3 Commencement of Supplemental Retirement Benefits at Retirement . . . . . . . . 11 4.4 Accrued Supplemental Retirement Benefit 11 4.5 Vested Supplemental Retirement Benefit. 11 4.6 Supplemental Pre-Retirement Death Benefit . . . . . . . . . . . . . . . . 11 4.7 Allocation of Surplus Assets of the Trust Upon Change In Control of the Company . . . . . . . . . . . . . . . . 11 4.8 Forfeiture of Benefits. . . . . . . . . 12 4.9 Accrual of Benefits Upon Termination of Plan. . . . . . . . . . . . . . . . . 13 4.10 Medical Benefits. . . . . . . . . . . . 13 V. Trust . . . . . . . . . . . . . . . . . . . 14 5.1 Administration and Management of the Trust Fund. . . . . . . . . . . . . 14 5.2 Valuation of the Trust Fund . . . . . . 14 VI. Administration . . . . . . . . . . . . . . 15 6.1 The Committee . . . . . . . . . . . . . 15 6.2 Administrative Rules . . . . . . . . . 15 6.3 Decisions and Actions of Committee . . . . . . . . . . . . . . 15 6.4 Authorization of Payments . . . . . . . 15 6.5 Administrative and Professional Assistance . . . . . . . . . . . . . 16 6.6 Appointment of Investment Managers . . . . . . . . . . . . . . 16 6.7 Reliance on Actuary . . . . . . . . . . 16 6.8 Agent for Service of Legal Process . . . . . . . . . . . . . . . 16 6.9 Plan Expenses . . . . . . . . . . . . . 16 6.10 Records and Reports . . . . . . . . . . 17 6.11 Multiple Fiduciary Capacities . . . . . 17 6.12 Indemnification . . . . . . . . . . . . 17 VII. Adoption of Plan By Affiliated Company . . . 18 VIII. Miscellaneous . . . . . . . . . . . . . . . 19 8.1 Non-Guarantee of Employment . . . . . 19 8.2 Rights Under the Retirement Plan . . . 19 8.3 Payment of Benefits to Incompetent . 19 8.4 Missing Person . . . . . . . . . . . 19 8.5 Forms . . . . . . . . . . . . . . . . 20 8.6 Notices . . . . . . . . . . . . . . . 20 8.7 Amendment . . . . . . . . . . . . . . . 21 8.8 Right to Terminate Plan . . . . . . . . 21 8.9 Merger/Consolidation of Plan and Trust. 21 8.10 Controlling Law . . . . . . . . . . . . 21 8.11 Rights to Trust Fund Assets . . . . . . 21 8.12 Nonassignability . . . . . . . . . . . 21 8.13 Separability . . . . . . . . . . . . . 22 8.14 Captions . . . . . . . . . . . . . . . 22 8.15 Terminology . . . . . . . . . . . . . . 22 ARTICLE I INTRODUCTION 1.1. Name. The Plan set forth herein shall be known as the Data General Corporation Supplemental Retirement Benefit Plan. 1.2 Purpose. The Data General Corporation Supplemental Retirement Benefit Plan is established by the Data General Corporation to provide its employees with certain benefits that cannot be provided under the Data General Corporation Retirement Plan. 1.3 Effective Date. The Plan shall be effective October 1, 1989. ARTICLE II DEFINITIONS Whenever used in this Plan, unless the context clearly indicates otherwise, the following terms shall have the following meanings: 2.1 "Actuarial Present Value" means the value of the benefit to the Participant payable at age sixty-five (65) calculated in accordance with the most recently published rates set by the Pension Benefit Guaranty Corporation. 2.2 "Affiliated Company" means any corporation which is a member of the controlled group of corporations of which the Company is a member. For purposes hereof, a "controlled group of corporations" shall mean a controlled group of corporations as defined in Section 1563(a) of the Code, determined without regard to Section 1563(a)(4) and (e)(3)(C) of the Code, or any trade or business (whether or not incorporated) which is under common control with the Company within the meaning of Section 414(c) of the Code. 2.3 "Beneficiary" or "Beneficiaries" means any qualified individual or individuals designated by a Participant to receive amounts payable hereunder if such individual or individuals survive(s) the Participant. In the absence of any such designation the "Beneficiary" shall be the Participant's Eligible Spouse or if there is no Eligible Spouse, the Participant's estate. 2.4 "Board" means the board of directors of the Company. 2.5 "Change in Control of the Company" shall mean: (i) The acquisition, other than from the Company, by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 25% or more of either the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"), provided, however, that any acquisition by the Company or any of its subsidiaries, or by any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its subsidiaries, or by any corporation with respect to which, following such acquisition, more than 60% of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such acquisition in substantially the same proportion as their ownership, immediately prior to such acquisition, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, shall not constitute a Change of Control; or (ii) Individuals who, as of January 1, 1989, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board, provided that any individual becoming a director subsequent to January 1, 1989 whose election, or nomination for election, by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the Directors of the Company (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act); or (iii) Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company or of the sale or other disposition of all or substantially all of the assets of the Company, or of a reorganization, merger or consolidation, in each case, with respect to which all or substantially all of the individuals and entities who were the respective beneficial owners of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such reorganization, merger or consolidation do not, following such reorganization, merger or consolidation, beneficially own, directly or indirectly, more than 60% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such reorganization, merger or consolidation. 2.6 "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. 2.7 "Committee" means the person, persons or entity appointed by the Board to administer the Plan. 2.8 "Company" means Data General Corporation, a Delaware corporation, and any successor thereto which agrees to continue the Plan. 2.9 "Compensation" means the annual regular base rate of pay paid by a Participating Company to a Participant, determined as of the first day of the Plan Year (or, if the Participant was not an Employee on the first day of the Plan Year, the annual regular base rate of pay of such Participant on the first day during such Plan Year on which he performs an Hour of Service), excluding overtime, shift differential, group leader differential, bonuses, and all other special payments and commissions. Compensation, for Participants who are eligible to earn sales incentives and commissions, means the annual regular base rate of pay paid by a Participating Company to a Participant, determined as of the first day of the immediately prior Plan Year (or, if the Participant was not an Employee on the first day of the Plan Year, the annual regular base rate of pay of such Participant on the first day during the Plan Year on which such Participant performs an Hour of Service) plus the aggregate incentives and commissions paid to the Participant for the twelve (12) month period ending with the September 30th immediately preceding the first day of the Plan Year, or guaranteed commissions and draws, if applicable, but not to exceed one hundred and twenty five percent (125%) of the target salary of Employees in the same job classification as the Participant (as determined by the Participating Company) for the Plan Year. Notwithstanding the foregoing, in no event shall a Participant's Compensation be less than the annual regular base rate of pay determined as of the first day of the Plan Year. Compensation shall not include any Contributions made by a Participating Company to fund a Participant's benefits under the Plan, and shall not include amounts contributed by a Participating Company on behalf of a Participant under any other employee benefit plan other than contributions resulting from compensation deferred by Participants under the Data General Corporation Savings and Investment Plan and the Data General Corporation Flexible Benefits Plan. 2.10 "Credited Service" shall have the same meaning as that expression is used in the Data General Corporation Retirement Plan. 2.11 "Early Retirement Date" means the first day of the calendar month coincident with or next following the date on which a Participant has attained age fifty-five (55) and completed five (5) Years of Service. 2.12 "Effective Date" means October 1, 1989. 2.13 "Eligible Spouse" means the spouse to whom a Participant is married on the date payment of such Participant's benefits is made under the Plan for purposes of a joint and survivor annuity or the spouse to whom a Participant is married on the date such Participant dies if the Participant dies before payment of benefits commence under the Plan. 2.14 "Employee" means any person who is employed by one or more Participating Companies or is a United States citizen employed by an Affiliated Company which is a domestic subsidiary engaged in business outside of the United States within the meaning of Section 407 of the Code or a foreign subsidiary within the meaning of Section 406 of the Code. The term "Employee" shall include any person on an authorized leave of absence, but shall not include: (i) any person included in a unit of employees covered by a collective bargaining agreement (as so determined by the Secretary of Labor) between employee representatives and one or more Participating Companies if retirement benefits were the subject of good faith bargaining between such employee representatives and any such Participating Company unless such collective bargaining agreement expressly provides for the inclusion of such persons as Participants in the Plan, or (ii) any person who is a nonresident alien and who received no earned income (within the meaning of Section 911(b) of the Code) from a Participating Company which constitutes income from sources within the United States (within the meaning of Section 861(a)(3) of the Code). 2.15 "Existing Board of Directors" means the persons constituting the Company's Board of Directors on October 1, 1989, together with each new director whose election, or nomination for election by the Company's stockholders, was previously approved, or is approved within thirty (30) days after his election or nomination, by a vote of at least two-thirds (2/3) of the directors in office prior to his election as a director. 2.16 "FICA Wage Base" means the maximum taxable earnings for the calendar year under the Federal Insurance Contributions Act of 1935, as amended from time to time. 2.17 "Hours of Service" shall be based on the records maintained by a Participating Company or an Affiliated Company and shall include the following: (a) Performance of Duties. Each hour for which an Employee is paid, or entitled to payment, by a participating Company or an Affiliated Company for the performance of duties. (b) Back Pay. Each hour for which back pay (irrespective of mitigation of damages) has been either awarded or agreed to by a Participating Company or an Affiliated Company. (c) Non-Working Time Pay. Each hour for which an Employee is paid, or entitled to payment, by a Participating Company or an Affiliated Company for reasons other than for the performance of duties during a period of service with a Participating Company or Affiliated Company (irrespective of whether the employment relationship has terminated), such as vacation, holiday, sickness, disability, jury duty, military duty or compensated leave of absence and similar paid periods; provided, however, that if such compensated leave of absence is for a Maternity or a Paternity Leave then such Hours of Service will be credited in accordance with Section 2.17(g) hereof. However, no more than 1170 Hours of Service will be credited under this Section 2.17(c) for any single continuous period during which the Employee performs no duties. (d) Uncompensated Leaves of Absence. Solely for purposes of determining whether an Employee has incurred a One-Year Break in Service and subject to the provisions of Sections 4.3 and 4.4 of the Retirement Plan regarding foreign service assignment and Authorized Leaves of Absence, Hours of Service shall include each hour during which an Employee is on an uncompensated leave of absence; provided, however, that if such uncompensated leave of absence is for a Maternity or Paternity Leave, then such Hours of Service shall be credited in accordance with Section 2.17(g) hereof. (e) Non-Working Time and Computation Periods. The rules for determining Hours of Service for periods during which an Employee performs no duties and for determining the manner in which an Employee's Hours of Service will be credited to computation periods shall be the rules contained in Sections 2530.200-2(b) and 2(c) of the regulations promulgated by the Secretary of Labor regarding Hours of Service which are hereby incorporated by reference. (f) Determination of Service To Be Credited to Employees. The number of Hours of Service to be credited to Employees in a computation period shall be based on weeks of employment. An Employee shall be credited with forty-five (45) Hours of Service for each week which the Employee would be required to be credited with at least one (1) Hour of Service in accordance with the rules set forth in Section 1.28(a), (b), (c) or (d) of the Retirement Plan. (g) Maternity and Paternity Leaves. Solely for purposes of determining whether an Employee has incurred a One-Year Break in Service with respect to participation and vesting, during a Maternity or Paternity Leave, an Employee will be credited with each hour for which he or she normally would have been paid, or entitled to payment, by a Participating Company or an Affiliated Company, or if such number of hours cannot be determined, then eight (8) hours for each day of such Maternity of Paternity Leave, up to a maximum of five hundred one (501) hours for any single continuous period (whether or not such period occurs in a single Plan Year); provided, however, that the Employee must supply the Committee with such timely information as is reasonably required to establish (i) that such absence from work is a bona fide Maternity or Paternity Leave and (ii) the number of days during such Maternity or Paternity Leave. Each such Hour of Service shall be credited to the Plan Year in which such Maternity or Paternity Leave begins if needed to prevent a One-Year Break in Service which might otherwise occur during such Plan Year, or if not, then to the following Plan Year. 2.18 "Normal Retirement Date" means the date on which a Participant has attained age sixty-five (65) and completed five Years of Service. 2.19 "Participant" shall mean an eligible Employee who becomes a Participant in the Plan as provided in Article III hereof. 2.20 "Participating Company" shall mean the Company and any Affiliated Company which adopts the Plan pursuant to Article VII hereof. 2.21 "Plan" means the Data General Corporation Supplemental Retirement Benefit Plan as set forth herein, including any amendments hereafter adopted. 2.22 "Plan Year" means the period of twelve (12) months beginning on October 1 of each calendar year and ending on the following September 30 beginning on or after the Effective Date. 2.23 "Predecessor Company" means any person, firm or corporation not previously controlled by, or under common control with, the Company or any Affiliated Company prior to the time such entity merges with or into, or consolidates with or is acquired by, the Company or any Affiliated Company. 2.24 "Retirement Plan" means the Data General Corporation Retirement Plan, as amended from time to time. 2.25 "Supplemental Retirement Benefit" means the amount determined in accordance with the provisions of Section 4.1 of Article IV of this Plan. 2.26 "Termination of Employment" or "Terminates Employment" means termination of employment with any Participating Company or Affiliated Company, whether voluntarily or involuntarily, other than by reason of a Participant's retirement on or after his Early Retirement Date or Normal Retirement Date, death, Total and Permanent Disability or transfer to a Participating Company or Affiliated Company. 2.27 "Total and Permanent Disability" means the total and permanent incapacity of a Participant to perform the usual duties of his employment because of a mental, physical or emotional condition. Such incapacity shall be deemed to exist only when (i) a Participant's condition satisfies the definition of disability used to determine eligibility for disability benefits under the Federal Social Security Act and (ii) such Participant is receiving disability benefits under such Act. 2.28 "Trust" means the legal entity organized pursuant to the Trust Agreement between the Company and the Trustee to hold and administer the Trust Fund in which Contributions made hereunder are to be held, invested and disbursed to or for the benefit of Participants, their Eligible Spouses, dependents or Beneficiaries. 2.29 "Trust Agreement" means the trust agreement between the Company and the Trustee together with any amendments thereto. 2.30 "Trust Fund" means the total of Contributions made by the Participating Companies to the Trust pursuant to the Plan, increased by profits, gains, income and recoveries received, and decreased by losses, depreciation, benefits paid and expenses incurred in the administration of the Plan and Trust, all in accordance with the provisions of the Trust Agreement. 2.31 "Trustee" means the person, persons or entity selected by the Board to serve as Trustee pursuant to the Trust Agreement and any successor or successors thereof. 2.32 "Valuation Date" shall mean the last day of any Plan Year, and as the Committee in its sole discretion may from time to time determine, the last business day of any quarter of any Plan Year. 2.33 "Years of Service" shall have the same meaning as that expression is used in the Retirement Plan. ARTICLE III ELIGIBILITY TO PARTICIPATE 3.1 Eligibility Requirement. Each Employee of the Company shall be eligible to participate in the Plan if he/she is a highly compensated employee as that term is defined by Section 414(q) of the Code and he/she earns Compensation equal to or greater than two times the FICA Wage Base. 3.2 Participation. Each eligible Employee shall become a Participant in the Plan as of the date he satisfies the following: a. meets the requirements of Section 3.1 hereunder and is a participant in the Retirement Plan and either Sections 3.2(b) or 3.2(c) below; b. the eligible Employee's pension benefit under the Retirement Plan is in excess of the limitations contained in Sections 415(b), 415(c) and/or 415(e) of the Code or is otherwise reduced due to the limitations under 401(a)(17) of the Code; c. the eligible Employee's pension benefit under the Retirement Plan would be greater if calculated by an amount equal to one percent (1%) of his Compensation not in excess of the FICA Wage Base for each year of Credited Service, plus two percent (2%) of such Compensation (as defined in the Retirement Plan) in excess of the FICA Wage Base for each year of Credited Service than the one and one half percent (1 1/2%) of his Compensation for each year of Credited Service as provided for in the Retirement Plan; ARTICLE IV SUPPLEMENTAL RETIREMENT BENEFIT 4.1 Supplemental Retirement Benefit. At his commencement date specified in Section 4.3, a Participant's annual Supplemental Pension Benefit shall equal (a) less (b) below: a. the Participant's accrued benefit through September 30, 1989 plus the Participant's annual retirement benefit calculated in an amount equal to one percent (1%) of his Compensation up to the FICA Wage Base for each year of Credited Service plus two percent (2%) of such Compensation in excess of the FICA Wage Base for each year of Credited Service beginning October 1, 1989, for each active Participant as of October 1, 1991, the active Participant's accrued benefit through September 30, 1989 and annual retirement benefit shall be calculated based on the Participant's Compensation on October 1, 1991 multiplied by the Participant's years of Credited Service as of September 30, 1991, applied to the formula set forth above in this Section 4.1(a) less b. the actual amount of annual benefit that is payable from the Retirement Plan under the normal form of payment applicable to such Participant after application of any restrictions imposed by Article IX of the Retirement Plan (or such other provision as contains the Code Sections 415(b) and 415(e) limitations) or any dollar limitation imposed by Code Section 401(a)(17). To the extent that the Participant's accrued benefit payable under the Retirement Plan is increased at any time due to increases in the limitations on benefits under the Code, whether by statute, regulations, actions of the Secretary of Treasury or his delegate, or otherwise, the Participant's benefits hereunder shall be reduced correspondingly. 4.2 Form of Payment. A Participant or Beneficiary will receive his Supplemental Retirement Benefit under this Plan in the same manner and form as he receives his pension benefits pursuant to Article V of the Retirement Plan, except that in the event the Participant's monthly benefit under this plan is one hundred dollars ($100.00) or less, the Participant shall receive a lump-sum distribution of the Participant's benefit under this Plan. Such Supplemental Retirement Benefit paid under this Plan shall be subject to the withholding and other similar requirements of any applicable governmental law or regulation with respect to taxes or similar provisions. 4.3 Commencement of Supplemental Retirement Benefit at Retirement. A Participant's Supplemental Retirement Benefit shall commence as of the date the Participant commences benefits under the Retirement Plan. 4.4 Accrued Supplemental Retirement Benefit. A Participant's accrued Supplemental Retirement Benefit at any point in time prior to retirement shall be equal to the amount determined under Section 4.1 of this Plan based on the Participant's Compensation and Credited Service as of the date of determination. 4.5 Vested Supplemental Retirement Benefit. Subject to the forfeiture of benefits provisions of Section 4.8 hereunder, a Participant's right to a benefit under this Plan shall be accrued, subject to the provisions of the Trust, if he is credited with five (5) Years of Service. 4.6 Supplemental Pre-Retirement Death Benefit. Upon the death of a Participant prior to commencement of benefits, the Plan shall provide such Participant's surviving Eligible Spouse with the Participant's accrued Supplemental Pre-Retirement Death Benefit under the same terms and in the same manner as provided by the applicable death benefit provision of the Retirement Plan. 4.7 Allocation of Surplus Assets of the Trust Upon Change in Control of the Company. In the event of a Change in Control of the Company a Participant's right to a benefit under this Plan shall become immediately fully vested and nonforfeitable. Subsequent to a Change in Control of the Company and upon the occurance of any of the following: (i) Amendment to reduce the benefits under the Plan, (ii) Plan termination, (iii) merger or consolidation of the Plan or Trust, or (iv) discontinuance of contributions subsequent to a Change in Control of the Company, all assets and credits in the Trust Fund shall accrue to the benefit of the Participant and be allocated in the manner described in Section 4.1 hereof as if the Plan were terminated as of the date of any event described in clauses (i) through (iv) above (the "Allocation Date"), and if any surplus in the Trust Fund remains in the Trust Fund, such surplus shall accrue to the benefit of, and be allocated to, all such Participants in the manner hereinafter described. The portion of such surplus that is allocable to each such Participant shall be determined by multiplying the entire surplus by a fraction, the numerator of which is the actuarial present value of the Participant's benefit under the Plan (determined without regard to the allocation of any surplus) as of the Allocation Date and the denominator of which is the actuarial present value of all Participants' benefits under the Plan (determined without regard to the allocation of any surplus) as of the Allocation Date. The Committee shall direct the Trustee, as soon as reasonably practicable following the Allocation Date, to pay in the form of a lump-sum payment to all persons who were Participants on the Allocation Date, all amounts sufficient to satisfy the pension obligations of the Plan as of such date in respect to all such Participants, taking into account the allocation of any surplus in the Fund as hereinabove described. Each person who is a Participant on the Allocation Date shall have a fully vested and nonforfeitable interest in his entire pension benefits then accrued under the Plan, including any pension benefit accrued by reason of this Paragraph. Notwithstanding anything contained in this Plan to the contrary, the foregoing provisions of this Paragraph may not be amended following a Change in Control of the Company without the written consent of a majority in both number and interest of the Participants and their Beneficiaries under this Plan. 4.8 Forfeiture of Benefits. Subject to the provisions of Sections 4.7 and 4.9 hereof, all benefits for which a Participant would otherwise be eligible hereunder may be forfeited, at the discretion of the Board, under the following circumstances: (a) The Participant is discharged by a Participating Company or Affiliate for cause; or (b) The Participant is discharged by a Participating Company or Affiliate subsequent to conviction for the commission of a felony. (c) Determination by the Board that the Participant engaged in misconduct in connection with his employment with the Company, a Participating Company or Affiliate; or (d) The Participant has at any time disclosed directly or indirectly any secret or other confidential information of the Company to any competitor of the Company or to any person not authorized to receive such information. 4.9 Accrual of Benefits Upon Termination of Plan. In the event a Participating Company or Affiliate terminates the Plan, the rights of all Participants of the terminated Plan of such Participating Company or Affiliate to their accrued benefits shall thereupon become nonforfeitable, to the extent permitted under the Trust Agreement, notwithstanding any other provisions of the Plan. 4.10 Medical Benefits. For each Key Employee (as defined in the Retirement Plan) and his Dependents (as defined in the Data General Corporation Retiree Medical Plan) who is eligible for Medical Benefits as provided in Article II under the Data General Retiree Medical Plan and whose separate account under the Medical Plan has been depleted, the Trust Fund shall pay to the Data General Medical Plan the amounts set forth on Schedule A of the Retirement Plan. ARTICLE V TRUST 5.1 Administration and Management of the Trust Fund. All contributions shall be paid to the Trustee, who shall be appointed by the Board, and who shall deposit such contributions in the Trust Fund. Pursuant to and in accordance with the terms of the Trust Agreement the Trustee shall have exclusive authority and discretion, as permitted by the Trust Agreement and the provisions of this Plan, to administer the Trust and manage the assets held in the Trust Fund, except those assets which are managed by any Investment Manager appointed by the Committee, and shall have all the duties and responsibilities set forth in the Trust Agreement. 5.2 Valuation of the Trust Fund. The Trustee shall value the Trust Fund at its fair market value as of each Valuation Date. In making such valuation, the Trustee shall deduct all charges, expenses and other liabilities then chargeable against such Trust Fund in order to give effect to income, expenses, or losses, including appreciation or depreciation in the value of theTrust Fund since the last previous Valuation Date. As soon as practicable after each Valuation Date, the Trustee shall deliver in writing to the Committee a valuation of the Trust Fund together with a statement of the amount of net income or loss (including appreciation or depreciation in the value of Trust investments) since the last previous Valuation Date. ARTICLE VI ADMINISTRATION 6.1 The Committee. The Board shall appoint a Committee consisting of not less than two (2) nor more than five (5) members and shall designate one member as the Chairman thereof and one member as the Secretary thereof. The initial Committee shall consist of three (3) members, and thereafter the number of members which shall constitute the whole Committee may be increased or decreased by resolution of the Executive Committee of the Board, but shall in no case be less than two (2) members nor more than five (5) members. All members of the Committee shall serve until their resignation or dismissal by the Board, and vacancies shall be filled in the same manner as the original appointments. The Committee shall be the Plan administrator and any member or members of the Committee designated by the Chairman shall be authorized to sign any reports in representation of all members. The Board may dismiss any member of the Committee at any time without cause. 6.2 Administrative Rules. The Committee shall, from time to time, establish rules for the administration of the Plan and shall have the sole responsibility and authority for the control and management of the operation and administration of the Plan. The Committee shall determine all questions arising in the administration, interpretation and application of the Plan, and such determination shall be conclusive and binding on all persons. All rules and decisions of the Committee shall be uniformly and consistently applied to all Participants, Eligible Spouses, dependents and Beneficiaries in similar circumstances. 6.3 Decisions and Actions of Committee. The Committee may act at a meeting or in writing without a meeting. All decisions and actions of the Committee shall be made by vote of the majority, including actions in writing taken without a meeting. Any member of the Committee who shall not concur with any action or failure to act by the majority of the Committee shall deliver written notice of his nonconcurrence to the Committee promptly after such action or failure to act or notification to him of such action or failure to act. 6.4 Authorization of Payments. The Committee shall establish all necessary rules for payment of benefits. Periodically, the Committee shall notify the Trustee of the amount of money necessary to provide benefits to Participants, Eligible Spouses, dependents and Beneficiaries who qualify for such payments. The Committee shall keep a record of each Participant's name, address, social security number, benefit commencement date and amount of benefit. 6.5 Administrative and Professional Assistance. The Committee shall appoint accountants, an Actuary and any other persons required to be appointed for the operation and administration of the Plan and may appoint counsel and other persons, including Employees of the Company, as it deems necessary or advisable for the operation and administration of the Plan. The Committee may delegate any or all of its powers or duties to such persons or agents unless specifically prohibited from doing so in the Plan or Trust. In the event of an authorized delegation, the delegate shall assume the full burden of performing the duties or exercising the powers delegated and the Committee shall thereafter be responsible only for having made an appropriate and prudent delegation and for changing or revoking the delegation if the performance of the delegate is not appropriate under the Plan. 6.6 Appointment of Investment Managers. The Committee may appoint one or more Investment Managers (as defined in the Retirement Plan) to manage and invest (including the power to acquire or dispose of) that portion of the assets of the Trust as provided in the Trust Agreement. The functions of the Investment Manager shall be limited to the specific services and duties for which he is engaged, and such person shall have no other duties, obligations or responsibilities under the Plan or Trust. Such person shall exercise no discretionary authority or discretionary control respecting the management of the Plan. The Committee may remove any Investment Manager at any time and upon such removal or upon the resignation of any Investment Manager, the Committee may designate a successor Investment Manager. The fees and costs of such services shall be an administrative cost of the Plan. 6.7 Reliance on Actuary. The Committee shall be entitled to rely conclusively upon all reports, opinions, tables, valuations, certificates and computations furnished by the Actuary. 6.8 Agent for Service of Legal Process. The Chairman of the Committee shall serve as agent for service of legal process. 6.9 Plan Expenses. The Participating Companies shall pay all expenses reasonably incurred in the administration of the Plan and Trust; provided, however, that the Trustee may pay such expenses from the assets of the Trust upon request of the Committee, to the extent such expenses have not been paid by the Participating Companies. The Participating Companies shall reimburse the Trust Fund for any Trust Fund assets used by the Trustee to pay expenses incurred in administration of the Plan. The members of the Committee shall serve without compensation for their services as such, but all expenses of the Committee shall be expenses of the Plan. No Employee shall receive compensation from the Plan regardless of the nature of his services to the Plan. 6.10 Records and Reports. The Committee shall exercise such authority and responsibility as it deems appropriate relating to records of Participants' service; accrued benefits and the percentage of such benefits which are accrued under the Plan; notifications to Participants. 6.11 Multiple Capacities. Any person or group of persons may serve in more than one capacity with respect to the Plan. 6.12 Indemnification. The Company shall indemnify each member of the Board and the Committee, and agents thereof, under the Plan against any and all claims, losses, damages, expenses (including reasonable attorneys' fees) and liabilities for anything done or omitted to be done in connection with the Plan (including the Trust Agreement), except when the same is due to the willful misconduct of such person. ARTICLE VII ADOPTION OF PLAN BY AFFILIATED COMPANY 7.1 Any Affiliated Company, whether or not presently existing, may, with the written approval of the Board, adopt the Plan pursuant to appropriate written resolutions of the board of directors of such Affiliated Company. Any such Affiliated Company shall also execute such documents with the Trustee as may be necessary to make such Affiliated Company a party to the Trust as a Participating Company. An Affiliated Company which adopts the Plan shall thereafter be a Participating Company with respect to its Employees for purposes of the Plan. ARTICLE VIII MISCELLANEOUS 8.1 Non-Guarantee of Employment. Neither the establishment of the Plan nor the making of contributions by any Participating Company nor any action of any Participating Company, Board, Committee or the Trustee, shall be held or construed to confer upon any person any right to be continued as an Employee of any Participating Company. All Participants shall be subject to discharge to the same extent as if the Plan had never been adopted, and each Participating Company expressly reserves the right to discharge any Employee without any liability on the part of the Participating Company, the Trustee or any member of the Board or the Committee. 8.2 Rights Under the Retirement Plan. Nothing in this Plan shall be construed to limit, broaden, restrict or grant to a Participant, Employee, Eligible Spouse, dependent or any Beneficiary thereof under the Retirement Plan, nor grant any additional rights or benefits to any such Participant, Employee, Eligible Spouse, dependent or Beneficiary thereof under the Retirement Plan, nor in any way to limit, modify, repeal or otherwise affect the Company's or its Board's right to amend or modify the Retirement Plan. 8.3 Payment of Benefits to Incompetent. If the Committee receives evidence that (a) a person entitled to receive any benefit under the Plan is legally, physically or mentally incompetent to receive such benefit and to give a valid release therefor and (b) another person or an institution is then maintaining or has custody of such person and no guardian, committee or other representative of the estate of such person has been duly appointed by a court of competent jurisdiction, the payment of such benefit may be made to such other person or institution as the Committee may determine. Any such payment shall be a payment on behalf of such person and shall, to the extent thereof, be a complete discharge of any liability under the Plan to such person and neither any Participating Company, the Trustee nor any member of the Board or the Committee shall be liable to any person or individual by reason of such payment. 8.4 Missing Person. In the event any benefit shall become payable to any person or upon his death to his legal representative and, if after written notice from the Committee mailed to such person's last-known address as shown in the Participating Company's records, such person or his legal representatives shall not have presented himself to the Committee within six (6) years after the mailing of such notice, then the Committee may, in its sole discretion, distribute such amount, including any benefit thereafter becoming due to such person or legal representative, among the Eligible Spouse and blood relatives of such person, or the Committee may, but it is not required to, direct that said benefit be paid to the Trustee to form a part of the Trust Fund. When any benefit may be payable to the spouse or blood relative of a Participant by reason of his failure or the failure of his legal representative to present himself to the Committee within such six (6) year period, such spouse or blood relative shall have an additional four (4) year period in which to present himself to the Committee. Payments made in good faith to any person, to a person's legal representative or to any individual(s) who have, on the presentation of reasonable proof, established to the satisfaction of the Committee that he is the Eligible Spouse or blood relative of such person, whether or not made before the expiration of the periods provided for herein for presentation of himself, shall, to the extent of such payments, be a complete discharge of all obligations arising pursuant to the Plan and neither any Participating Company, the Trustee nor any member of the Board or the Committee shall be liable to any person or individual by reasons of such payments. 8.5 Forms. The Committee shall provide such appropriate forms as it may deem expedient in the administration of the Plan and no instrument for which a form is so provided shall be valid unless upon such form. 8.6 Notices. (a) Any notice required to be given by a Participating Company, Affiliated Company or the Committee to a Participant, Eligible Spouse, dependent or Beneficiary shall be in writing and shall be deemed satisfactorily given if such notice is mailed by first-class mail to the last known address of the person entitled to the same as reflected on the records of the Participating Company or Affiliated Company. The foregoing sentence shall not preclude notice from effectively being given if actually received by the person entitled to the same in any other way. (b) Any notice or other communication required to be given by a Participant, spouse, dependent or Beneficiary to the Committee shall be in writing and shall be mailed by first-class mail to the Committee in care of the Company. The foregoing sentence shall not preclude notice from effectively being given if actually received by the Committee in any other way. Notwithstanding any other provision of the Plan, no notice or other communication sent by a Participant, spouse, dependent or Beneficiary to the Committee shall be effective for any purpose unless received by the Committee. 8.7 Amendment. The provisions of the Plan may be amended in any respect at any time by the Board, and retroactively if deemed advisable by it; provided, however, that no such amendment shall (i) in any way alter the provisions of Section 4.7 hereof without the written consent of a majority in both number and interest of the Participants of the Plan and their Beneficiaries, (ii) reduce the benefits payable under the Plan with respect to periods of service prior to such amendment, (iii) eliminate an optional form of benefit, if any, provided under the Plan, (iv) reduce or eliminate any early benefits or (v) make it possible for any part of the Trust Fund to be used for purposes other than for the exclusive benefit of Participants, Eligible Spouses, dependents or Beneficiaries under the Plan and defraying reasonable expenses of administering the Plan. 8.8 Right to Terminate Plan. Each Participating Company contemplates that the Plan shall be permanent and that it shall be able to make Contributions to the Plan. Nevertheless, in recognition of the fact that future conditions and circumstances cannot now be entirely foreseen, each Participating Company, subject to approval of the Board, reserves the right to terminate (as to such Participating Company) either the Plan or both the Plan and the Trust. 8.9 Merger or Consolidation of Plan and Trust. Neither the Plan nor the Trust may be merged or consolidated with, nor may its assets or liabilities be transferred to, any other plan or trust, unless each Participant would (if the Plan then terminated) receive a benefit immediately after the merger, consolidation or transfer which is equal to or greater than the benefit he would have been entitled to receive immediately before the merger, consolidation or transfer (if the Plan had then terminated). 8.10 Controlling Law. The provisions of the Plan shall be construed, interpreted, administered and enforced according to the laws of the Commonwealth of Massachusetts and all applicable Federal laws. 8.11 Rights to Trust Fund Assets. No Employee shall have any right to, or interest in, any assets of the Trust Fund upon his Termination of Employment or otherwise, except as provided in the Plan, and then only to the extent of the benefits payable under the Plan to such Employee out of the assets of the Trust Fund. 8.12 Nonassignability. The benefits payable under this Plan shall not be subject to alienation, assignment, garnishment, execution or levy of any kind until such benefits are payable to the Participant at which time the benefits become the property of the Participant, Eligible Spouse, dependent or Beneficiary thereof and any attempt to cause any benefits hereunder to be so subjected shall not be recognized, except to the extent required by applicable law. 8.13 Separability. If any provision of the Plan proves to be, or is finally held by a court, tribunal, board or authority of proper jurisdiction to be invalid such invalid or violative provision shall be disregarded, null and void and no part of the Plan, but such nullification of such provision shall not otherwise impair or affect the Plan or any other provision or term hereof. 8.14 Captions. The captions at the beginning of the several numbered sections and paragraphs of the Plan are not part of its context, but are only guides and labels to assist in the reading thereof, and are to be ignored in construing it. 8.15 Terminology. Whenever appropriate, words used in the Plan in the singular may mean the plural, the plural may mean the singular and the masculine pronoun shall be deemed to include the feminine or neuter, unless the context clearly indicates otherwise. TRUST AGREEMENT FOR THE DATA GENERAL CORPORATION SUPPLEMENTAL RETIREMENT BENEFIT PLAN THIS AGREEMENT is made as of the First day of October, 1989, by and between Data General Corporation, a Delaware corporation having its principal office at 4400 Computer Drive, Westboro, Massachusetts 01580 (the "Company") and Boston Safe Deposit and Trust Company, a Massachusetts trust company having its principal office at One Boston Place, Boston, Massachusetts 02108 (the "Trustee"). W I T N E S S E T H WHEREAS, the Company [and certain of its affiliates and/or subsidiaries, (each such affiliate and/or subsidiary being included in the definition of Company where the context so requires)] has adopted a Supplemental Retirement Benefit Plan (hereinafter the "Plan") for the purpose of providing its employees with certain benefits that cannot be provided under the Company's Retirement Plan; WHEREAS, the Company desires to provide additional assurances to the participants in the Plan (the "Participants") and the beneficiaries or estates under the Plan (collectively the "Beneficiaries") that their benefits under the Plan will in the future be met by the application of the procedures set forth herein; WHEREAS, the Trustee has agreed to act as Trustee of the trust fund created hereunder and to hold and administer such assets as may be delivered to it as hereinafter provided; WHEREAS, the Plan provides that it is to be administered by a group of individuals appointed by the Company which has established the Plan, (hereinafter referred to as the "Committee"); WHEREAS, contributions delivered to the Trust as determined by the Company from time to time in its sole discretion, and the earnings thereon shall be used by the Trustee solely in satisfaction of the liabilities of the Company with respect to the Participants and Beneficiaries, unless otherwise provided for herein; WHEREAS, upon satisfaction of all liabilities of the Company with respect to a Participant or Beneficiary under the Plan, including liabilities to the Participants and Beneficiaries arising from Section 4.7 of the Plan ("Allocation of Surplus Assets of the Trust Upon Change in Control of the Company"), the balance, if any, remaining in such Trust Fund shall revert to the Company, except that all amounts in such Trust Fund shall at all times be subject under this Agreement to the claims of the Company's creditors as hereinafter provided; NOW, THEREFORE, in consideration of the premises and mutual and independent promises herein, the parties hereto covenant and agree as follows: ARTICLE I Section 1.1 Establishment of Trust. The Company hereby establishes with the Trustee a grantor trust consisting solely of such sums of money and such property acceptable to the Trustee as shall from time to time be paid or delivered to the Trustee in such amounts and on such dates as the Company, in its sole discretion, may determine and the earnings and profits thereon. The trust established hereunder shall be known as the Trust Agreement for the Data General Corporation Supplemental Retirement Benefit Plan (the "Trust"). All such money and property, all investments made therewith and proceeds thereof, less the payments or other distributions which, at the time of reference, shall have been made by the Trustee, as authorized herein, are referred to herein as the "Trust Fund" and shall be held by the Trustee, IN TRUST, in accordance with the provisions of this Agreement. Section 1.2 Trustee Responsibility. The Trustee shall hold, manage, invest and otherwise administer the Trust Fund pursuant to the terms of this Agreement. The Trustee shall be responsible only for the contributions actually received by it hereunder. The amount of each contribution made by the Company to the Trust Fund shall be determined in the sole discretion of the Company, and the Trustee shall have no duty or responsibility with respect thereto. Except as otherwise specifically agreed to by the Trustee, the Trustee shall not be responsible for the administration of the Plan (including without limitation the determination of Plan participation rights of employees of the Company and determination of benefits of the Participants or Beneficiaries of the Plan); provided, however, that upon a Change in Control of the Company and any of the following; (i) amendment of the Plan to reduce the benefits under the Plan; (ii) Plan termination; (iii) merger or consolidation of the Plan or Trust; or (iv) discontinuance of contributions subsequent to a Change in Control of the Company; the Trustee shall allocate the assets of the Trust Fund as provided in Section 4.7 of the Plan and make payments to Participants and Beneficiaries as provided in Section 4.7 of the Plan. The Trustee shall not have any authority or obligation to determine the adequacy of or to enforce the collection from the Company of any contribution to the Trust Fund, provided, however, that upon a Change in Control of the Company the Trustee shall, following a valuation by an actuary indicating that a contribution is necessary to fund the benefits set forth herein and failure of the Company to make such contribution within 60 days notice that such contribution is necessary, notify the Company that the Trustee has determined that contributions have been discontinued subsequent to a Change in Control and shall allocate the assets of the Trust Fund and make payments to Participants and Beneficiaries as provided in Section 4.7 of the Plan. Except to the extent that the Trustee has otherwise specifically agreed in writing, the Trustee shall not be responsible, directly or indirectly, for the investment or reinvestment of the assets of the Trust Fund, which investment and reinvestment shall be the sole responsibility of the Company unless otherwise delegated by the Company as provided in ARTICLE IV hereof; provided, however, that upon a Change in Control of the Company and any of the following: (i) amendment of the Plan to reduce the benefits under the Plan; (ii) Plan termination; (iii) merger or consolidation of the Plan or Trust; (iv) discontinuance of contributions subsequent to a Change in Control of the Company; or (v) investment of the assets or any part thereof in the securities, loans, investments, indebtedness or financial vehicles offered by, from or of affiliates, or persons or entities affiliated with, or related to the Company, its officers, directors or principal stockholders; the Trustee shall at that time become solely responsible for the investment and reinvestment of the assets of the Trust Fund until the distribution of the assets in accordance with the provisions of Section 4.7 of the Plan, by agreement of the parties hereto. Notwithstanding anything in the Plan or this Agreement to the contrary, the agreement of the parties hereto that the Trustee shall assume the sole responsibility for the investment and reinvestment of the assets of the Trust Fund upon a Change in Control of the Company and any of the following: (i) amendment of the Plan to reduce the benefits under the Plan; (ii) Plan termination; (iii) merger or consolidation of the Plan or Trust; (iv) discontinuance of contributions subsequent to a Change in Control of the Company; or (v) investment of the assets or any part thereof in the securities, loans, investments, indebtedness or financial vehicles offered by, from or of affiliates, or persons or entities affiliated with or related to the Company, its officers, directors, or principal stockholders; shall not be amended or modified without the written consent of a majority in both number and interest of the Participants and their Beneficiaries under the Plan. Section 1.3 Payments from Trust Fund. Subject to the provisions of Section 2.1 of this Agreement, the Trustee shall make payments from the Trust Fund as directed by the Committee which administers the Plan or the Committee's designee. The Committee, in directing the Trustee to make payments, shall follow the provisions of the Plan so that it shall be impossible, except as provided in Section 2.1 of this Agreement, at any time prior to the satisfaction of all liabilities under the Plan with respect to the Participants and Beneficiaries covered under the Plan, for any part of the Trust Fund to be used for or diverted to, purposes other than for the benefit of such participants or beneficiaries or in the event the Company enters into bankruptcy under the Bankruptcy Act of the United States or the bankruptcy laws of any state alleging that the Company is insolvent or bankrupt, to the creditors of the Company. Subject to the foregoing, the Committee may direct such payments to be made to any person, including any member of such Committee, or to the Company, or to any paying agent designated by the Company, and in such amounts as the Committee shall direct. The Trustee shall have no responsibility with respect to any payment made, pursuant to such an authorized direction, to any Employer, any Committee or member thereof, to any paying agent, or to any other person, and any payment so made shall be held in trust by the recipient until disbursed in accordance with the Plan or ruling body in a bankruptcy proceeding. Each direction of the Committee shall be in writing signed by at least a majority of the members of the Committee or signed by a designee of the Committee whose appointment has been confirmed to the Trustee in writing and signed by at least a majority of the members of the Committee. Each direction of the Committee or its designee shall be deemed to include a certification that any payment directed thereby is one which the Committee is authorized to direct, and the Trustee may conclusively rely on such certification without further investigation. Payments by the Trustee may be made by its check to the order of the payee and mailed to the payee at the address last furnished to the Trustee by the Committee or by the payee, or if no such address has been so furnished, to the payee in care of the Company. Section 1.4 Change in Control of the Company. For purposes of this Agreement, the term "Change in Control of the Company", shall mean: (i) The acquisition, other than from the Company, by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 25% or more of either the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"), provided, however, that any acquisition by the Company or any of its subsidiaries, or by any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its subsidiaries, or by any corporation with respect to which, following such acquisition, more than 60% of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such acquisition in substantially the same proportion as their ownership, immediately prior to such acquisition, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, shall not constitute a Change in Control; (ii) Individuals who, as of January 1, 1989, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board, provided that any individual becoming a Director subsequent to January 1, 1989 whose election, or nomination for election, by the Company's shareholders, was approved by a vote of at least a majority of the Directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the Directors of the Company (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act); or (iii) Approval by the stockholders of the Company of a reorganization, merger or consolidation, in each case, with respect to which all or substantially all of the individuals and entities who were the respective beneficial owners of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such reorganization, merger or consolidation do not, following such reorganization, merger or consolidation, beneficially own, directly or indirectly, more than 60% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of Directors, as the case may be, of the corporation resulting from such reorganization, merger or consolidation, or a complete liquidation or dissolution of the Company or of the sale or other disposition of all or substantially all of the assets of the Company. The Trustee may request that the Company furnish evidence to determine, or to enable the Trustee to determine, whether a Change in Control of the Company has occurred. In performing any of its obligations or taking any discretionary action under the provisions of the Plan or this Agreement which is dependent upon a Change in Control of the Company having occurred, the Trustee may rely on its determination, including an opinion of counsel (who may be counsel engaged by the Trustee solely to render an opinion as to whether or not a Change in Control of the Company has occurred and whose fees are considered expenses of administering the Plan), that a Change in Control has occurred, unless such a determination arises out of the Trustee's gross negligence or willful misconduct. The Trustee's determination as to whether a Change in Control of the Company has occurred shall be binding and conclusive on all persons. ARTICLE II Section 2.1 Company Insolvency. Notwithstanding any provision in this Agreement to the contrary, if at any time while the Trust is still in existence the Company becomes insolvent (as defined herein), the Trustee shall upon written notice thereof suspend the payment of all benefits from the Trust Fund and shall thereafter hold the Trust Fund in suspense until it receives a court order directing the disposition of the Trust Fund; provided, however, the Trustee may deduct or continue to deduct its fees and expenses and other expenses of the Trust, including taxes, pending the receipt of such court order. The Company shall be considered to be insolvent if bankruptcy or insolvency proceedings are initiated by its creditors or the Company or any third party under the Bankruptcy Act of the United States of America or the bankruptcy laws of any State having appropriate jurisdiction over the Company, alleging that the Company is insolvent or bankrupt. By its approval and execution of this Agreement, the Company represents and agrees that its Board of Directors and Chief Executive Officer, as from time to time acting, shall have the duty to inform the Trustee in writing of the Company's insolvency (as defined herein) and the Trustee shall be entitled to rely thereon to the exclusion of all directions or claims to pay benefits thereafter made. Absent such notice, the Trustee shall have no responsibility for determining whether or not the Company has become insolvent unless the Trustee receives written allegations of the event of insolvency from a third party considered by the Trustee to be reliable and responsible. If after an event of insolvency, the Company later becomes solvent without the entry of a court order concerning the disposition of the Trust Fund, the Company shall by written notice so inform the Trustee and the Trustee shall thereupon resume all its duties and responsibilities under this Agreement without regard for this Section 2.1 until and unless the Company again becomes insolvent as such term is defined herein. Section 2.2 Funding of Trust and Plan. The Company represents and agrees that the Trust established under this Agreement does not fund and is not intended to fund the Plan or any other employee benefit plan or program of the Company. This Trust is and is intended to be a depository arrangement with the Trustee for the setting aside of cash and other assets of the Company as and when it so determines in its sole discretion for the meeting of part or all of its future retirement obligations to the Participants and their Beneficiaries under the Plan. Contributions by the Company to the Trust shall be in amounts determined solely by the Company. The Company shall make its contributions to the Trust in accordance with appropriate corporate action and the Trustee shall have no responsibility with respect thereto, except to add such contributions to the Trust Fund. The purpose of this Trust is to provide a fund from which retirement benefits may be payable under the Plan and as to which Participants and their Beneficiaries may, by exercising the procedures set forth herein, have access to some or all of their benefits as such become due without having the payment of such benefits subject to the administrative control of the Company unless the Company becomes insolvent as defined in Section 2.1. Section 2.3 Company as Owner. Nothing provided in this Agreement shall relieve the Company of its liabilities to pay the retirement benefits provided under the Plan except to the extent such liabilities are met by application of the Trust Fund's assets. It is the intent of the Company to have the Trust Fund established hereunder designed to satisfy in whole or in part the Company's legal liability under the Plan. All assets of the Trust Fund remain the assets of the Company. All expenses of administering the Plan and the Trust Fund are expenses of the Company. All income, deductions and credits of the Trust Fund belong to the Company as owner for income tax purposes and will be included on the Company's income tax return. Section 2.4 Non-ERISA Plan. The Company further represents that the Plan is an excess benefit plan and as such is exempt from the application of the Employee Retirement Income Security Act of 1974 ("ERISA"). The Company further represents that the Plan is not qualified under Section 401 of the Internal Revenue Code of 1986 (the "Code") and therefore is not subject to any of the Code requirements applicable to tax-qualified plans. Section 2.5 Participants as Unsecured Creditors. Participants and their Beneficiaries shall have the rights under this Agreement of unsecured general creditors of the Company and shall not have any preferred claim on, or any beneficial ownership interest in, the Trust Fund prior to the time amounts in the Trust Fund are paid to such Participants or Beneficiaries as benefits under Section 3.3. ARTICLE III Section 3.1 Information to be Provided to Trustee. The Company shall maintain and furnish the Trustee with such reports, documents and information as shall be required by the Trustee to perform its duties and discharge its responsibilities under this Agreement, including without limitation a certified copy of the Plan and any and all amendments thereto, and written reports setting forth the name, address, date of birth and social security or tax identification number of each Participant and Beneficiary, a listing of the adjusted value of each separate Participant amount as of each valuation date prior to a distribution following a Change in Control of the Company as required pursuant to Section 4.7 of the Plan, and a listing of each Participant's accrued benefit (determined as of the most recent September 30 or such other date as may be determined by the Company prior to a distribution following a Change in Control of the Company as required pursuant to Section 4.7 of the Plan.) The Trustee shall be entitled to rely on the most recent reports, documents and information furnished to it by the Company. The Company shall be required to notify the Trustee as to the termination of employment of any Participant by reason of death, retirement or otherwise. Notwithstanding the foregoing, at any time after a Change in Control of the Company, the Trustee may rely upon the information provided to the Trustee by the Participant (or the Beneficiary of a deceased Participant). The Company shall arrange for each Investment Manager, if someone other than the Trustee is appointed Investment Manager, appointed pursuant to Section 4.5, and each insurance company issuing contracts held by the Trustee pursuant to Section 4.6, to furnish the Trustee with such valuations and reports as are necessary to enable the Trustee to fulfill its obligations under this Agreement, and the Trustee shall be fully protected in relying upon such valuations and reports. After the execution of this Agreement, the Company shall promptly file with the Trustee a certified list of names and specimen signatures of the Committee members administering the Plan and any delegee designated by written notice signed by a majority of the member of the Committee to act for the Committee and the Company with respect to the Plan and Trust. Such certified list shall describe the powers delegated by the Committee to such persons and the limits on such powers so delegated, if any. The Company, by written notice signed by a majority of the members of the Committee administering the Plan, shall promptly notify the Trustee of the addition or deletion of any person's name to or from the list, respectively. Until receipt by the Trustee of notice that any person is no longer authorized so to act, the Trustee may continue to rely on the authority of the person. All certifications, notices and directions by any such person or persons to the Trustee, within the authority delegated to such person or persons by the whole Committee as provided above, shall be in writing signed by such person or persons. The Trustee may rely on any such certification, notice or direction, within the authority delegated to such person or persons by the Committee as provided above, purporting to have been signed by or on behalf of such person or persons that the Trustee believes to have been signed thereby. The Trustee may rely on any certification, notice or direction of the Committee that the Trustee believes to have been signed by a duly authorized delegee of the Committee. The Trustee shall have no responsibility for acting in reliance upon any notification believed by the Trustee to have been signed by a duly authorized delegee of the Committee. If at any time there is no person authorized to act under this Agreement in behalf of the Committee or the Company, the Board of Directors of the Company (or if the Board has ceased to exist, the individuals who last served as Directors) shall have the authority to act hereunder. Section 3.2 Payments to Participants and/or Beneficiaries. Subject to Sections 2.1, 3.5 and 10.7, the Trustee shall commence distributions to a Participant under the Plan upon written notification by the Committee or the Trustee's own determination that a distribution is required by Section 4.7 of the Plan, that such Participant (or Beneficiary) has become entitled to receive benefit payments under the Plan. Notification from the Committee shall include the amount of such benefits, the manner of payment and the name, address and social security number of the recipient. The Trustee may take such reasonable steps as it, in its sole discretion, determines are necessary to verify any claim by a Participant (or Beneficiary) that such Participant (or Beneficiary) has become entitled to receive benefit payments under the Plan or a lump-sum distribution as provided in Section 4.7 of the Plan and to verify any information provided by such Participant (or Beneficiary) as to the amount of such benefits and the manner of their payment. Upon receipt of proper notification and appropriate Federal, state and local tax withholding information, the Trustee shall commence distributions of cash or property, if applicable, from the Trust Fund in accordance with the terms of the Plan. Payment shall be mailed to the person to whom such distributions or payment is to be made, at such address as may have been last furnished to the Trustee. The Trustee shall have no responsibility for and shall incur no liability with respect to any payment made pursuant to a direction received in accordance with this Section 3.2 or, in the event of a dispute, an arbitrator's award issued pursuant to Section 10.7 hereof. Section 3.3 Satisfaction of Plan Liabilities. Upon the satisfaction of all the Company's liabilities under the Plan to all the Participants (and such Participants' Beneficiaries) the Trustee shall thereupon hold and distribute the balance, if any, remaining in the Trust Fund in accordance with the written instructions of the Committee. At no time prior to the Company's release from bankruptcy proceedings, in the event of the Company's insolvency (as defined in Section 2.1 hereof), or the satisfaction of all liabilities of the Company under the Plan in respect of all Participants and Beneficiaries shall any part of the Trust Fund revert to the Company. Section 3.4 Tax Withholding. The Trustee shall withhold from any payment to a Participant (or a Beneficiary) hereunder the amount required by law to be so withheld under Federal, state and local wage withholding requirements or otherwise, and shall pay over to the appropriate government authority the amount so withheld. The Trustee may rely on instructions from the Committee as to any required withholding and shall be fully protected under Section 5.3 in relying on such instructions. For purposes of the preceding sentence, a failure by the Committee to provide any instructions as to required withholding may be deemed by the Trustee to be an instruction by the Committee to withhold the full amount required by law. Section 3.5 Election Upon Taxation of Benefit. In the event any Participant (or Beneficiary) is determined to be subject to Federal income tax on any amount prior to the time of payment hereunder, the Participant (or Beneficiary) may elect to be advised of the amount of tax payable or to have distributed to such Participant (or Beneficiary) the entire amount determined to be so taxable. A Participant (or Beneficiary) is determined to be subject to Federal income tax on the amount provided for under the Plan upon the earliest of: (a) a final determination by the United States Internal Revenue Service addressed to the Participant (or Beneficiary) which is not appealed to the courts; (b) a final determination by the United States Tax Court or United States District Court affirming any such determination by the Internal Revenue Service that amounts provided such Participant (or Beneficiary) under the Plan are subject to Federal income tax, unless such determination has been appealed to a higher United States Court or; (c) a final determination of the appeal or refusal of the higher court to hear the appeal. Any distribution from the Trust Fund to a Participant (or Beneficiary) under this Section 3.5 shall be applied in an equitable manner to reduce the Company's liabilities to such Participant (and/or Beneficiary) under the Plan. ARTICLE IV Section 4.1 Standard of Care. The Trustee and each Investment Manager appointed pursuant to Section 4.5, if any, shall act with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims; provided, however, that the Trustee shall incur no liability to anyone for any action taken or failure to take any action pursuant to a direction, request or approval given in writing by a properly authorized delegee of the Committee and contemplated by and complying with the terms of this Agreement or the Plan or for failure to take any action in the absence of such a direction, request or approval. The duties of the Trustee shall be only those specifically undertaken pursuant to this Agreement or by means of a separate written agreement. The Trustee may consult with legal counsel (who may be counsel for the Trustee) with respect to any of its duties or obligations hereunder. Section 4.2 Investment of Trust Assets. Unless an Investment Manager has been appointed pursuant to Section 4.5, or the Committee and Trustee have mutually agreed in a separate writing that the Trustee shall have and exercise investment discretion, in either case with respect to all or a portion of the assets of the Trust, the Committee shall have complete discretion with respect to the investment of such assets at all times prior to both (i) a Change in Control of the Company and (ii) any of the following; (a) Amendment to the Plan to reduce the benefits under the Plan, (b) Plan termination, (c) merger or consolidation of the Plan or Trust, or (d) discontinuance of contributions subsequent to a Change in Control of the Company, and shall direct the Trustee accordingly. After both a Change in Control of the Company and one of the above enumerated events, the Trustee shall allocate and distribute the assets of the Trust Fund as provided in Section 4.7 of the Plan. Subject to the foregoing, the Trustee shall have the power: (a) to deposit securities with custodians or securities clearing corporations or depositories or similar organizations, whether located within the Commonwealth of Massachusetts or elsewhere in the United States or abroad, except that the indicia of ownership of any property shall not be maintained outside the jurisdiction of the district courts of the United States; (b) to retain any property at any time received by the Trustee; (c) to register securities in its name or in the name of any nominee with or without indication of the capacity in which the securities shall be held, or to hold securities in bearer form; (d) to employ suitable agents and legal counsel, who may be counsel for the Company, and, as a part of its reimbursable expenses under this Agreement, to pay their reasonable compensation and expenses; (e) to appoint one or more individuals or corporations as a custodian of any property and, as a part of its reimbursable expenses under this Agreement, to pay the reasonable compensation and expenses of any such custodian; (f) generally to do all acts, exclusive of acts involving investment management discretion, which the Trustee may deem necessary or desirable for the protection of the Trust Fund; (g) to commence or defend suits, legal proceedings or arbitration proceedings; and to represent the Trust Fund in all suits, legal proceedings or arbitration proceedings in any court or before any other body or tribunal (provided, however, that the Trustee shall have no obligation to take any legal action for the benefit of the Trust Fund unless it is specifically requested or directed to by the Committee and unless it shall be first indemnified for all expenses in connection therewith, including counsel fees). Upon notification of the Trustee's intention to commence suits, legal proceedings or arbitration proceedings or the commencement of suits, legal proceedings or arbitration proceedings against the Trust Fund, the Committee shall be entitled, but not obligated to participate therein and, to the extent that it may wish, jointly with the Trustee pursue or defend the suit or proceeding with counsel satisfactory to the Committee and the Trustee; The Trustee shall exercise the following administrative duties only upon the specific direction of the Committee or an Investment Manager: (h) to vote in person or by proxy, or to refrain from voting, in respect of any securities held by the Trust Fund, and to give general or special proxies or powers of attorney, with or without power of substitution, and to exercise any conversion privileges, subscription rights or other options; to participate in reorganizations, recapitalizations, consolidations, mergers and similar transactions with respect to such securities; and generally to exercise any of the powers of an owner with respect to any property held by the Trust Fund; (i) with respect to any investment, to consent or object to any action or nonaction of any corporation or other business organization, or of the directors, officers or stockholders of any corporation or equivalent of any other business organization; (j) to settle, compromise or submit to arbitration any claims, debts or damages due or owing to or from the Trust Fund; (k) to deposit any property with any protective, reorganization or similar committee; to delegate power thereto; and to pay or agree to pay part of its expenses and compensation and any assessments levied with respect to any property so deposited; (l) to form a corporation or corporations under the laws of any jurisdiction or to participate in the forming of any such corporation or corporations or to acquire an interest in or otherwise make use of any corporation or corporations already formed, for the purpose of facilitating the Trust Fund's investing in and holding title to any property; (m) for the purpose of facilitating the Trust Fund's investing in and holding title to real or personal property or part interests therein, wherever situate, to appoint one or more individuals or corporations as a subtrustee or subtrustees, and to pay reasonable compensation and expenses of each such subtrustee. Any such subtrustee, upon being appointed, shall act with such one or more or all of the powers, authorities, discretions, duties and functions of the Trustee under this Section 4.2 as shall be designated in the instrument establishing such subtrust including, without limitation, the power to receive and hold property, real or personal, or part interest therein, oil, mineral or gas properties, royalty interests or rights, including equipment pertaining thereto, leaseholds, mortgages and other interests in realty, situated in any state of the United States in which the subtrustee is authorized to act as a trustee; and (n) to lease any property, to sell or acquire any property (at public or private sale and for cash or on credit), to grant or acquire options to purchase of any property and generally make, execute, acknowledge and deliver any and all deeds, leases, assignments and instruments whenever such action may be required to perform its obligations hereunder. 4.3 Securities; Property. Wherever used in this Agreement, the term "securities" shall include bonds, mortgages, notes, obligations, warrants and stocks of any class, certificates of participation or shares of any mutual investment company, trust or fund, and such other evidences of indebtedness and certificates of interest as are usually referred to by the term "securities," and the term "property" shall include real, personal and mixed property, tangible or intangible, of any kind and wherever located, including without limitation securities, depository accounts in any bank, trust company or similar financial institution (including depository accounts in the banking department of the Trustee or an affiliate of the Trustee or any custodian or an affiliate of any custodian). Section 4.4 Proxies. In order to permit the Committee or an Investment Manager, as the case may be, to make timely and informed decisions regarding the management of those assets in the Trust Fund subject to its respective control, the Trustee shall forward to the Committee or each such Investment Manager, as the case may be, for appropriate action any and all proxies, proxy statements, notices, requests, advice or other communications received by the Trustee (or its nominee) as the record owner of such assets. Section 4.5 Investment Managers. The Committee may from time to time appoint one or more Investment Managers to manage any portion of the Trust Fund and, with respect to such portion, to direct the Trustee with respect to effecting investment transactions on behalf of the Trust Fund and exercising such other powers as may be granted to Investment Managers hereunder. The Committee shall give prompt written notice to the Trustee of any such appointment, signed by a majority of the members of the Committee, upon which the Trustee shall rely until it receives from the Committee written notice of the termination of such appointment, signed by a majority of the members of the Committee. In each case where such an appointment is made, the Committee shall determine the assets of the Trust Fund to be allocated to the Investment Manager from time to time and the Committee shall issue appropriate instructions to the Trustee with respect thereto. The Trustee shall not be liable for the acts or omissions of such Investment Manager, shall be under no duty to question any direction of an Investment Manager with respect to the portion of the Trust Fund managed by such Investment Manager, to review any securities or property held in such portion, to make any suggestions with respect to the investment and reinvestment of such portion, or to evaluate the performance of any Investment Manager, and shall be fully protected in acting in accordance with the directions of an Investment Manager or for failing to act in the absence of such directions. Section 4.6 Life Insurance. The Committee reserves the right to transfer to the Trust Fund life insurance, retirement income or annuity policies or contracts on or for the life of any Participant or to direct the Trustee to purchase any such policies or contracts on or for the life of any such Participant. Any such policy or contract shall be an asset of the Trust Fund subject to the claims of the Company's creditors in the event of insolvency, as specified in Section 2.1 hereof. The proceeds of any life insurance policy shall upon the death of the insured Participant be credited to the Trust Fund under the Plan and shall be an additional source of benefits payable to his Beneficiary. The Trustee shall be under no duty to question any direction of the Committee or to review the form of any such policies or contracts or of the selection of the issuer thereof, or to make suggestions to the Committee with respect to the form of such policies or contracts or to the issuer thereof. The Committee may direct the Trustee to exercise or may exercise directly the powers of the contract holder under any such policies or contracts, and the Trustee shall exercise such powers only upon the direction of the Committee. Notwithstanding anything to the contrary contained in the Plan, the Trustee shall be fully protected in acting in accordance with written directions of the Committee, and shall be under no liability for any loss of any kind which may result by reason of any action taken or omitted by it in accordance with any direction of the Committee, or by reason of inaction in the absence of written directions from the Committee. No insurance carrier shall for any purpose be deemed a party to this Agreement or be responsible for the validity or sufficiency hereof. Notwithstanding the fact that it may have knowledge of the terms of this Trust Fund, the obligations of such insurance carrier shall be measured and determined solely by the terms and conditions of the policies or contracts issued by it, and there shall be no obligations to any person, partnership, corporation, trust or association other than as stated in such policies or contracts. ARTICLE V Section 5.1 Trust Taxes. The Company shall pay any and all Federal, state or local taxes on the Trust Fund, or any part thereof, and on the income therefrom. Section 5.2 Trust Expenses. The Company shall pay to the Trustee its reasonable expenses for the management and administration of the Trust Fund, including without limitation advances for or prompt reimbursement of reasonable expenses of counsel, custodians and other agents employed by the Trustee, and reasonable compensation for its services as Trustee hereunder, the amount of which shall be agreed upon from time to time by the Committee and the Trustee in writing. Such expenses and compensation shall be a charge on the Trust Fund and shall constitute a lien on the Trust Fund in favor of the Trustee unless and until paid by the Company. Section 5.3 Indemnification. The Company hereby agrees to indemnify and hold harmless the Trustee from and against any losses, costs, damages, claims or expenses, including without limitation reasonable attorneys' fees, which the Trustee may incur or pay out in connection with, or otherwise arising out of, the performance by the Trustee of its duties hereunder. Any amount payable to the Trustee under Section 5.2 or this Section 5.3 and not previously paid by the Company pursuant to this Agreement shall be paid by the Company promptly upon demand therefor by the Trustee or, if the not paid by the Company within forty-five (45)days of demand therefor, from the Trust Fund. In the event that payment is made hereunder to the Trustee from the Trust Fund, the Trustee shall promptly notify the Company in writing of the amount of such payment. The Company agrees that, upon receipt of such notice, it will deliver to the Trustee to be held in the Trust Fund an amount in cash (or marketable securities having a fair market value equal to such amount, or some combination thereof) equal to any payments made from the Trust Fund to the Trustee pursuant to Section 5.2 or this Section 5.3. The failure of the Company to transfer any such amount shall not in any way impair the Trustee's right to indemnification, reimbursement and payment pursuant to Section 5.2 hereof or this Section 5.3. ARTICLE VI Section 6.1 Trustee Records and Accounts. The Trustee shall keep accurate and detailed accounts of all investments, receipts, disbursements and other transactions hereunder, and all accounts, books and records relating thereto shall be open to inspections and audit at all reasonable times by any persons designated by the Committee. Within ninety (90) days following the close of each Plan Year, as defined in Section 2.22 of the Plan, and within ninety (90) days after the removal or resignation of the Trustee as provided in ARTICLE VII hereof, the Trustee shall file with the Committee a written account setting forth all investments, receipts, disbursements and other transactions effected by the Trustee or reported to it by such Investment Managers, if any, as may be appointed hereunder during each Plan Year or during the period from the close of the last such Plan Year to the date of such removal or resignation. Upon the expiration of ninety (90) days from the date of filing such annual or other account, the Trustee shall be forever released and discharged from all liability and accountability to anyone with respect to the propriety of all acts and transactions shown in such account, except with respect to any such acts or transactions as to which the Committee shall within such ninety (90) day period file with the Trustee written objections. The Trustee shall from time to time make such other reports and furnish such other information concerning the Trust Fund as the Committee may reasonably request or as may be required by the Plan. Section 6.2 Settlement of Accounts. Notwithstanding the foregoing Section 6.1, the Trustee shall have the right to apply at any time to a court of competent jurisdiction for the judicial settlement of the Trustee's account, and in any case it shall be necessary to join as parties thereto only the Trustee and the Committee; and any judgment or decree which may be entered therein shall be conclusive upon all persons having or claiming to have any interest in the Trust Fund or under the Plan. ARTICLE VII Section 7.1 Resignation and Removal of Trustee. The Trustee may resign at any time by delivering written notice thereof to the Committee; provided, however, that no such resignation shall take effect until the earlier of (i) thirty (30) days from the date of delivery of such notice to the Committee, unless such notice period is waived in whole or in part by the Committee or (ii) the appointment of a successor trustee pursuant to Section 7.2. The Trustee may be removed at any time by the Committee, pursuant to a resolution of the Committee, by delivering to the Trustee a certified copy of such resolution. Such removal shall take effect upon the earlier of (i) thirty (30) days from the date of delivery of such resolution, unless such notice period is waived in whole or in part by the Trustee or (ii) the appointment of a successor trustee pursuant to Section 7.2. Notwithstanding the foregoing, after a Change in Control of the Company, any such removal of the Trustee shall be effective only with the written consent of Participants (or Beneficiaries of deceased Participants) having at least a majority (on the basis of the present value of the benefits accrued) of all amounts then held in the Trust Fund. If, within thirty (30) days of the delivery of written notice of resignation or removal, a successor trustee shall not have been appointed, the provisions of Section 7.2 shall apply. Section 7.2 Successor Trustee. Upon the resignation or removal of the Trustee, a successor trustee shall be appointed by the Committee; provided, however, that after a Change in Control of the Company such appointment shall be effective only with the written consent of Participants (or Beneficiaries of deceased Participants) having at least a majority (on the basis of the present value of benefits accrued) of all amounts then held in the Trust Fund. If the Committee (and, after a Change in Control of the Company, such Participants and Beneficiaries) are unable to so agree upon a successor trustee within thirty (30) days after such notice, the Trustee shall be entitled, at the expense of the Company, to petition a United States District Court or any of the courts of the Commonwealth of Massachusetts having jurisdiction to appoint its successor. The Trustee shall continue to serve, and to receive its compensation and reimbursement of its expenses, until its successor accepts the trust and receives delivery of the Trust Fund. Such successor trustee shall be a commercial bank or trust company which is established under the laws of the United States or a State within the United States and which is not an affiliate of the Company. Such appointment shall take effect upon the delivery to the Trustee of (a) a written appointment of such successor trustee, duly executed by the Committee, and (b) a written acceptance by such successor trustee, duly executed by an authorized officer. Any successor trustee shall have all the rights, powers and duties granted the Trustee hereunder. Upon the resignation or removal of the Trustee and the appointment of a successor trustee, and after the acceptance and approval of its account, the Trustee shall transfer and deliver the Trust Fund to such successor. Under no circumstances shall the Trustee transfer or deliver the Trust Fund to any successor which is not a bank or trust company as hereinabove defined. ARTICLE VIII Section 8.1 Termination of Trust. The Trust established pursuant to this Agreement shall terminate upon the earlier of (i) the exhaustion of the Trust Fund, or (ii) the satisfaction of all Company liabilities under the Plan with respect to all Participants (and Beneficiaries); provided however, that the Trust shall terminate in any event upon the expiration of twenty-one (21) years after the death of the last survivor of the group of persons consisting of all employees of the Company who are living on the date of the execution of this Agreement. Section 8.2 Liquidation of Trust. Upon the termination of the Trust in accordance with Section 8.1, the Trustee shall, after the acceptance and approval of its account, distribute the remaining Trust Fund assets, if any, to the Company. Upon completing such distribution, the Trustee shall be relieved and discharged of all liabilities and obligations hereunder. The powers of the Trustee shall continue as long as any part of the Trust Fund remains in its possession. ARTICLE IX Section 9.1 Amendment of Trust. This Agreement may be amended, in whole or in part, at any time and from time to time, by the Committee, pursuant to a resolution of the Committee, by delivery to the Trustee of a certified copy of such resolution and a written instrument duly executed and acknowledged in the same form as this Agreement; provided, however, that the duties and responsibilities of the Trustee shall not be increased without the Trustee's written consent; and provided further that, after a Change in Control of the Company any such amendment affecting any Participant's or Beneficiaries' rights hereunder, the Trust Fund or the procedures for distribution thereof shall not become effective until sixty (60) days after a copy of such amendment has been delivered by registered mail by the Committee or the Trustee to each Participant or Beneficiary entitled to benefits under the Plan. In the event the Committee or the Trustee receives written objections to such amendment from such person within such sixty (60) day period, such amendment shall be ineffective and void in respect of the Participant (or Beneficiary) so objecting. ARTICLE X Section 10.1 Governing Law. This Agreement shall be construed and interpreted under, and the Trust hereby created shall be governed by, the laws of the Commonwealth of Massachusetts. Section 10.2 Gender. Neither the gender nor the number (singular or plural) of any word shall be construed to exclude another gender or number when a different gender or number would be appropriate. Section 10.3. Non-Alienation. No right or interest of any Participant or Beneficiary under the Plan or in the Trust Fund shall be transferable or assignable or subject to alienation, anticipation or encumbrance, and no right or interest of any Participant or Beneficiary in the Plan or in the Trust Fund shall be subject to any garnishment, attachment or execution. Notwithstanding the foregoing, the Trust Fund shall at all times remain subject to the claims of creditors of the Company in the event the Company becomes insolvent as provided in Section 2.1. Section 10.4 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of any successor to the Company as the result of merger, consolidation, reorganization, or otherwise. In the event of any such merger, consolidation, reorganization, or other similar transaction, the successor to the Company shall promptly notify the Trustee in writing of its successorship and furnish the Trustee with the information specified in Section 3.1 of this Agreement. Section 10.5 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all of which shall together constitute only one Agreement. Section 10.6 Addresses of Parties. Communications to the Trustee shall be sent to Boston Safe Deposit and Trust Company One Boston Place Boston, MA 02108 Attn: David Crawford or to such other address as the Trustee may specify in writing. Communications to the Committee shall be sent to the Company's principal office or to such other address as the Company may specify in writing. Section 10.7 Arbitration. Any dispute between any Participant (or Beneficiary of a deceased Participant) and the Trustee as to the interpretation or application of the provisions of this Trust and amounts payable hereunder shall be determined exclusively by binding arbitration in the Commonwealth of Massachusetts in accordance with the rules of the American Arbitration Association then in effect. Judqment may be entered on the arbitrator's award in any court of competent jurisdiction. All fees and expenses of such arbitration shall be paid by the Trustee and considered an expense of the Trust under Section 5.2 hereof. Section 10.8 Severability. In the event that any provision of this Trust or the application thereof to any person or circumstances shall be determined by a court of proper jurisdiction to be invalid or unenforceable to any extent, the remainder of this Trust, or the application of such provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each provision of this Trust shall be valid and enforced to the fullest extent permitted by law. 10.9 Trust Beneficiaries. Each Participant (and Beneficiary of a deceased Participant) is an intended beneficiary under this Trust, and shall be entitled to enforce all terms and provisions hereof with the same force and effect as if such person had been a party hereto. IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to be duly executed and their respective corporate seals to be hereto affixed this day of , 19 Attest: BOSTON SAFE DEPOSIT AND TRUST COMPANY By ____________________________ Attest: DATA GENERAL CORPORATION SUPPLEMENTAL RETIREMENT BENEFIT PLAN COMMITTEE By _________________________________ By _________________________________ By _________________________________ EX-10 4 SUPPLEMENTAL PENSION AND RETIREE MEDICAL AGREEMENT Exhibit 10(y) SUPPLEMENTAL PENSION AND RETIREE MEDICAL AGREEMENT AGREEMENT between Data General Corporation, a Delaware corporation (the "Company") and Ronald L. Skates (the "Executive") dated as of December 7, 1994. WHEREAS, the Executive serves as President and Chief Executive of the Company. WHEREAS, the Board of Directors of the Company desires the Executive to continue in such capacities until retirement and desires to provide the Executive with appropriate pension and post-employment welfare benefits. NOW, THEREFORE, IT IS AGREED: 1. Supplemental Pension Benefit. a) General. The Company agrees to provide the Executive with an annual supplemental retirement benefit ("Supplemental Benefit") equal to 60% of his Final Average Salary payable as provided below and subject to the reductions described below. Except as provided below, no benefit will be payable in the event the Executive terminates employment prior to attaining age 55. b) Reduction in Benefit. In the event the Executive terminates employment with the Company prior to attaining 65 years old, the Supplemental Benefit will be reduced by 2% of the Final Average Salary for each year prior to the year in which the Executive would attain age 65 the Executive's termination of employment with the Company occurs. Thus, the Supplemental Benefit will be as follows: Executive's Age on Termination % of Final Average Salary 65 60 64 58 63 56 62 54 61 52 60 50 59 48 58 46 57 44 56 42 55 40 <55 0 (c) Certain Terminations. For purposes of this Agreement, in the event that the Executive's employment is terminated by the Company without Cause or by reason of death or Disability prior to attaining age 55, he shall be deemed to be age 55. (d) Offsets. The Supplemental Benefit shall be reduced by amounts received by the Executive pursuant to the SRP and the Retirement Plan, as determined on an actuarially equivalent basis by William M. Mercer Incorporated or such other actuary as may be acceptable to the Executive. (e) Form of Benefit. The Supplemental Benefit shall be payable in equal monthly installments to the Executive until his death; and in the event he predeceases his Spouse, shall continue to be payable to his Spouse until the death of such Spouse. 2. Retiree Medical Benefit. During the period that the Executive or his Spouse are receiving the Supplemental Benefit, the Executive and his Spouse and their respective dependents shall be entitled to medical, dental and similar welfare benefits offered to active officers of the Company as of the date hereof, on the same terms (including deductibles and co-pay obligations) as such benefits are provided to active officers as of the date hereof. 3. Coordination with Change of Control Agreement. For purposes of the Employment Agreement, the Supplemental Benefit shall constitute a SERP (as defined therein). 4. Definitions. The following terms shall have the following meanings hereunder: "Cause" shall have the same meaning as ascribed to it in the Employment Agreement between the Company and the Executive dated February 10, 1989 as amended September 1, 1993 (the "Change of Control Agreement"). "Disability" shall have the same meaning as ascribed to in the Change of Control Agreement. "Final Average Salary" means the average of the three highest years of annual salary, which does not include bonuses awarded the Executive, paid to the Executive during the five years prior to the Executive's termination of employment with the Company. "Retirement Plan" means the Data General Corporation Retirement Plan, as amended from time to time. "Spouse" means the spouse to whom the Executive is married on the date payment of the Executive's benefits are made hereunder or to whom the Executive is married on the date of his death. "SRP" means the Data General Corporation Supplemental Retirement Benefit Plan, as amended from time to time. 5. FICA Gross-Up. The Company shall make additional payments to the Executive during the term of his employment in order to put him in the same after-tax position that he would have been in had the benefits hereunder not been "wages" within the meaning of the Section 3121 (v) of the Internal Revenue Code of 1986, as amended (the "Code") prior to commencement of payment and therefore not been subject to the tax imposed by Section 3101 of the Code. 6. Governing Law. This Agreement shall be construed, interpreted, administered and enforced according to the laws of the Commonwealth of Massachusetts and all applicable federal laws. 7. Nonassignability. The benefits payable under this Agreement shall not be subject to alienation, assignment, garnishment, execution or levy of any kind until such benefits are payable to the Executive or his Spouse at which time the benefits become the property of the Executive or his Spouse and any attempt to cause any benefits hereunder to be so subjected shall not be recognized, except to the extent required by applicable law. IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand, and pursuant to the authorization from its Board of Directors, the Company has caused these presents to be executed in its name of its behalf, all as of the day and year first written. _____________________ Ronald L. Skates DATA GENERAL CORPORATION By __________________________ Exhibit 10(y) TRUST AGREEMENT FOR THE DATA GENERAL CORPORATION SUPPLEMENTAL PENSION and RETIREE MEDICAL BENEFIT FOR RONALD L. SKATES THIS TRUST AGREEMENT is made as of the 16th day of December, 1994, by and between Data General Corporation, a Delaware corporation having its principal office at 4400 Computer Drive, Westboro, Massachusetts 01580 (the "Company") and Boston Safe Deposit and Trust Company, a Massachusetts trust company having its principal office at One Boston Place, Boston, Massachusetts 02108 (the "Trustee"). W I T N E S S E T H WHEREAS, the Company has entered into a Supplemental Pension and Retiree Medical Agreement (the "Agreement") with Ronald L. Skates for the purpose of providing Mr. Skates with certain benefits that cannot be provided under the Company's retirement plans; WHEREAS, the Company desires to provide additional assurances to Mr. Skates and his beneficiaries or estate under the Agreement (collectively the "Beneficiaries") that their benefits under the Agreement will in the future be met by the application of the procedures set forth herein; WHEREAS, the Trustee has agreed to act as Trustee of the trust fund created hereunder and to hold and administer such assets as may be delivered to it as hereinafter provided; WHEREAS, contributions delivered to the Trust as determined by the Company from time to time in its sole discretion, and the earnings thereon shall be used by the Trustee solely in satisfaction of the liabilities of the Company with respect to the Agreement with Mr. Skates and his Beneficiaries, unless otherwise provided for herein; WHEREAS, upon satisfaction of all liabilities of the Company with respect to Mr. Skates and his Beneficiaries under the Trust Agreement, including liabilities to Mr. Skates and his Beneficiaries arising from Section 1(c) of the Agreement ("Certain Terminations) and Section 3 ("Coordination with Change in Control Agreement"), the balance, if any, remaining in such Trust Fund shall revert to the Company, except that all amounts in such Trust Fund shall at all times be subject under this Trust Agreement to the claims of the Company's creditors as hereinafter provided; NOW, THEREFORE, in consideration of the premises and mutual and independent promises herein, the parties hereto covenant and agree as follows: ARTICLE I Section 1.1 Establishment of Trust. The Company hereby establishes with the Trustee a grantor trust consisting solely of such sums of money and such property acceptable to the Trustee as shall from time to time be paid or delivered to the Trustee in such amounts and on such dates as the Company, in its sole discretion, may determine and the earnings and profits thereon. The trust established hereunder shall be known as the Trust Agreement for the Data General Corporation Supplemental Pension and Retiree Medical Benefit for Ronald L. Skates (the "Trust"). All such money and property, all investments made therewith and proceeds thereof, less the payments or other distributions which, at the time of reference, shall have been made by the Trustee, as authorized herein, are referred to herein as the "Trust Fund" and shall be held by the Trustee, IN TRUST, in accordance with the provisions of this Trust Agreement. Section 1.2 Trustee Responsibility. The Trustee shall hold, manage, invest and otherwise administer the Trust Fund pursuant to the terms of this Trust Agreement. The Trustee shall be responsible only for the contributions actually received by it hereunder. The amount of each contribution made by the Company to the Trust Fund shall be determined in the sole discretion of the Company, and the Trustee shall have no duty or responsibility with respect thereto. Except as otherwise specifically agreed to by the Trustee, the Trustee shall not be responsible for the administration of the Trust Agreement. The Trustee shall not have any authority or obligation to determine the adequacy of or to enforce the collection from the Company of any contribution to the Trust Fund, provided, however, that upon a Change in Control of the Company the Trustee shall, following a valuation by an actuary indicating that a contribution is necessary to fund the benefits set forth herein and failure of the Company to make such contribution within 60 days notice that such contribution is necessary, notify the Company that the Trustee has determined that contributions have been discontinued subsequent to a Change in Control and shall allocate the assets of the Trust Fund and make payments to Mr. Skates and his Beneficiaries as provided in Section 3 of the Agreement. Except to the extent that the Trustee has otherwise specifically agreed in writing, the Trustee shall not be responsible, directly or indirectly, for the investment or reinvestment of the assets of the Trust Fund, which investment and reinvestment shall be the sole responsibility of the Company unless otherwise delegated by the Company as provided in ARTICLE IV hereof; provided, however, that upon a Change in Control of the Company; the Trustee shall at that time become solely responsible for the investment and reinvestment of the assets of the Trust Fund until the distribution of the assets in accordance with the provisions of Section 3 of the Agreement. Notwithstanding anything in the Agreement with Mr. Skates or this Trust Agreement to the contrary, the agreement of the parties hereto that the Trustee shall assume the sole responsibility for the investment and reinvestment of the assets of the Trust Fund upon a Change in Control of the Company shall not be amended or modified without the written consent of Mr. Skates. Section 1.3 Payments from Trust Fund. Subject to the provisions of Section 2.1 of this Trust Agreement, the Trustee shall make payments from the Trust Fund as directed by the Company upon Mr. Skates retirement from the Company, prior to a Change in Control of the Company (as defined below). Upon a Change in Control of the Company (as defined below), the Trustee shall make payments from the Trust Fund in accordance with the payment terms of the Agreement. The Trustee may consult the Company's retirement plan actuary, William M. Mercer, Inc., or such other expert as it deems necessary to determine the payments due Mr. Skates under the Agreement. The fees of such expert for such services to the Trustee are expenses of the Company, as provided in Section 2.3 of this Trust Agreement. The Company, in directing the Trustee to make payment shall follow the provisions of the Agreement so that it shall be impossible, except as provided in Section 2.1 of this Trust Agreement, at any time prior to the satisfaction of all liabilities under the Agreement with respect to Mr. Skates and his Beneficiaries covered under the Agreement, for any part of the Trust Fund to be used for or diverted to, purposes other than for the benefit of Mr. Skates or his beneficiaries or in the event the Company enters into bankruptcy under the Bankruptcy Act of the United States or the bankruptcy laws of any state alleging that the Company is insolvent or bankrupt, to the creditors of the Company. Payments by the Trustee may be made by its check to the order of the payee and mailed to the payee at the address last furnished to the Trustee by the payee, or if no such address has been so furnished, to the payee in care of the Company. Section 1.4 Change in Control of the Company. For purposes of this Trust Agreement, the term "Change in Control of the Company", shall mean: (i) The acquisition, other than from the Company, by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 25% or more of either the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"), provided, however, that any acquisition by the Company or any of its subsidiaries, or by any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its subsidiaries, or by any corporation with respect to which, following such acquisition, more than 60% of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such acquisition in substantially the same proportion as their ownership, immediately prior to such acquisition, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, shall not constitute a Change of Control; or (ii) Individuals who, as of January 1, 1991, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board, provided that any individual becoming a director subsequent to January 1, 1991 whose election, or nomination for election, by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the Directors of the Company (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act); or (iii) Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company or of the sale or other disposition of all or substantially all of the assets of the Company, or of a reorganization, merger or consolidation, in each case, with respect to which all or substantially all of the individuals and entities who were the respective beneficial owners of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such reorganization, merger or consolidation do not, following such reorganization, merger or consolidation, beneficially own, directly or indirectly, more than 60% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such reorganization, merger or consolidation. The Trustee may request that the Company furnish evidence to determine, or to enable the Trustee to determine, whether a Change in Control of the Company has occurred. In performing any of its obligations or taking any discretionary action under the provisions of the Agreement or this Trust Agreement which is dependent upon a Change in Control of the Company having occurred, the Trustee may rely on its determination, including an opinion of counsel (who may be counsel engaged by the Trustee solely to render an opinion as to whether or not a Change in Control of the Company has occurred and whose fees are considered expenses of administering the Trust Agreement), that a Change in Control has occurred, unless such a determination arises out of the Trustee's gross negligence or willful misconduct. The Trustee's determination as to whether a Change in Control of the Company has occurred shall be binding and conclusive on all persons. ARTICLE II Section 2.1 Company Insolvency. Notwithstanding any provision in this Trust Agreement to the contrary, if at any time while the Trust is still in existence the Company becomes insolvent (as defined herein), the Trustee shall upon written notice thereof suspend the payment of all benefits from the Trust Fund and shall thereafter hold the Trust Fund in suspense until it receives a court order directing the disposition of the Trust Fund; provided, however, the Trustee may deduct or continue to deduct its fees and expenses and other expenses of the Trust, including taxes, pending the receipt of such court order. The Company shall be considered to be insolvent if bankruptcy or insolvency proceedings are initiated by its creditors or the Company or any third party under the Bankruptcy Act of the United States of America or the bankruptcy laws of any State having appropriate jurisdiction over the Company, alleging that the Company is insolvent or bankrupt. By its approval and execution of this Trust Agreement, the Company represents and agrees that its Board of Directors and Chief Executive Officer, as from time to time acting, shall have the duty to inform the Trustee in writing of the Company's insolvency (as defined herein) and the Trustee shall be entitled to rely thereon to the exclusion of all directions or claims to pay benefits thereafter made. Absent such notice, the Trustee shall have no responsibility for determining whether or not the Company has become insolvent unless the Trustee receives written allegations of the event of insolvency from a third party considered by the Trustee to be reliable and responsible. If after an event of insolvency, the Company later becomes solvent without the entry of a court order concerning the disposition of the Trust Fund, the Company shall by written notice so inform the Trustee and the Trustee shall thereupon resume all its duties and responsibilities under this Trust Agreement without regard for this Section 2.1 until and unless the Company again becomes insolvent as such term is defined herein. Section 2.2 Funding of Trust. The Company represents and agrees that the Company shall make an annual contribution to the Trust Fund, and in the event of a Change in Control of the Company make a contribution to fully fund the Trust Fund, in the amount determined by the actuary for the Agreement as necessary to fulfill the Company's liabilities and obligations to Mr. Skates and his Beneficiaries under the Agreement. The Trustee shall have no responsibility with respect to the determination of amounts to be contributed or the failure of the Company to make the mandatory contribution, except to add such contributions to the Trust Fund. The purpose of this Trust is to provide a fund from which retirement benefits may be payable under the Agreement and as to which Mr. Skates and his Beneficiaries may, by exercising the procedures set forth herein, have access to some or all of their benefits as such become due without having the payment of such benefits subject to the administrative control of the Company unless the Company becomes insolvent as defined in Section 2.1. Section 2.3 Company as Owner. Nothing provided in this Trust Agreement shall relieve the Company of its liabilities to pay the retirement benefits provided under the Agreement except to the extent such liabilities are met by application of the Trust Fund's assets. It is the intent of the Company to have the Trust Fund established hereunder designed to satisfy in whole or in part the Company's legal liability under the Agreement. All assets of the Trust Fund remain the assets of the Company. All expenses of administering the Trust Fund are expenses of the Company. All income, deductions and credits of the Trust Fund belong to the Company as owner for income tax purposes and will be included on the Company's income tax return. Section 2.4 Non-ERISA Plan. The Company further represents that the Agreement is an excess benefit plan and as such is exempt from the application of the Employee Retirement Income Security Act of 1974 ("ERISA"). The Company further represents that the Agreement is not qualified under Section 401 of the Internal Revenue Code of 1986, as amended (the "Code") and therefore is not subject to any of the Code requirements applicable to tax-qualified plans. Section 2.5 Mr. Skates and his Beneficiaries as Unsecured Creditors. Mr. Skates and his Beneficiaries shall have the rights under this Trust Agreement of unsecured general creditors of the Company and shall not have any preferred claim on, or any beneficial ownership interest in, the Trust Fund prior to the time amounts in the Trust Fund are paid to Mr. Skates or his Beneficiaries as benefits under Section 3.3. ARTICLE III Section 3.1 Information to be Provided to Trustee. The Company shall maintain and furnish the Trustee documents and information as shall be required by the Trustee to perform its duties and discharge its responsibilities under this Trust Agreement, including without limitation a copy of the Agreement and any and all amendments thereto. The Trustee shall be entitled to rely on the most recent documents and information furnished to it by the Company. The Company shall be required to notify the Trustee as to the termination of employment of Mr. Skates by reason of death, retirement or otherwise. Notwithstanding the foregoing, at any time after a Change in Control of the Company, the Trustee may rely upon the information provided to the Trustee by Mr. Skates (or his Beneficiary if Mr. Skates is deceased). The Company shall arrange for each Investment Manager, if someone other than the Trustee is appointed Investment Manager, appointed pursuant to Section 4.5, and each insurance company issuing contracts held by the Trustee pursuant to Section 4.6, to furnish the Trustee with such valuations and reports as are necessary to enable the Trustee to fulfill its obligations under this Trust Agreement, and the Trustee shall be fully protected in relying upon such valuations and reports. Section 3.2 Payments to Mr. Skates and/or His Beneficiaries. Subject to Sections 2.1, 3.5 and 10.7, the Trustee shall commence distributions to Mr. Skates or his Beneficiaries under the Agreement upon written notification by the Company or the Trustee's own determination that a distribution is required by Section 1 of the Agreement, that Mr. Skates (or his Beneficiary if Mr. Skates is deceased) has become entitled to receive benefit payments under the Agreement. Upon receipt of proper notification and appropriate Federal, state and local tax withholding information, the Trustee shall commence distributions of cash or property, if applicable, from the Trust Fund in accordance with the terms of the Agreement. The Trustee shall have no responsibility for and shall incur no liability with respect to any payment made pursuant to a direction received in accordance with this Section 3.2 or, in the event of a dispute, an arbitrator's award issued pursuant to Section 10.7 hereof. Section 3.3 Satisfaction of Agreement Liabilities. Upon the satisfaction of all the Company's liabilities under the Agreement with Mr. Skates (and Mr. Skates' Beneficiaries) the Trustee shall thereupon hold and distribute the balance, if any, remaining in the Trust Fund in accordance with the written instructions of the Company. At no time prior to the Company's release from bankruptcy proceedings, in the event of the Company's insolvency (as defined in Section 2.1 hereof), or the satisfaction of all liabilities of the Company under the Agreement in respect of Mr. Skates and his Beneficiaries shall any part of the Trust Fund revert to the Company. Section 3.4 Tax Withholding. The Trustee shall withhold from any payment to Mr. Skates (or his Beneficiary) hereunder the amount required by law to be so withheld under Federal, state and local wage withholding requirements or otherwise, and shall pay over to the appropriate government authority the amount so withheld. The Trustee may rely on instructions from the Company as to any required withholding and shall be fully protected under Section 5.3 in relying on such instructions. For purposes of the preceding sentence, a failure by the Company to provide any instructions as to required withholding may be deemed by the Trustee to be an instruction by the Company to withhold the full amount required by law. Section 3.5 Election Upon Taxation of Benefit. In the event Mr. Skates (or his Beneficiary) is determined to be subject to Federal income tax on any amount prior to the time of payment hereunder, Mr. Skates (or his Beneficiary) may elect to be advised of the amount of tax payable or to have distributed to Mr. Skates (or his Beneficiary) the entire amount determined to be so taxable. Mr. Skates (or his Beneficiary) is determined to be subject to Federal income tax on the amount provided for under the Agreement upon the earliest of: (a) a final determination by the United States Internal Revenue Service addressed to Mr. Skates (or his Beneficiary) which is not appealed to the courts; (b) a final determination by the United States Tax Court or United States District Court affirming any such determination by the Internal Revenue Service that amounts provided Mr. Skates (or his Beneficiary) under the Agreement are subject to Federal income tax, unless such determination has been appealed to a higher United States Court or; (c) a final determination of the appeal or refusal of the higher court to hear the appeal. Any distribution from the Trust Fund to Mr. Skates (or his Beneficiary) under this Section 3.5 shall be applied in an equitable manner to reduce the Company's liabilities to Mr. Skates (and/or his Beneficiary) under the Agreement. ARTICLE IV Section 4.1 Standard of Care. The Trustee and each Investment Manager appointed pursuant to Section 4.5, if any, shall act with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims; provided, however, that the Trustee shall incur no liability to anyone for any action taken or failure to take any action pursuant to a direction, request or approval given in writing by a properly authorized delegee of the Company and contemplated by and complying with the terms of this Trust Agreement or the Agreement with Mr. Skates or for failure to take any action in the absence of such a direction, request or approval. The duties of the Trustee shall be only those specifically undertaken pursuant to this Trust Agreement or by means of a separate written agreement. The Trustee may consult with legal counsel (who may be counsel for the Trustee) with respect to any of its duties or obligations hereunder. Section 4.2 Investment of Trust Assets. Unless an Investment Manager has been appointed pursuant to Section 4.5, or the Company and Trustee have mutually agreed in a separate writing that the Trustee shall have and exercise investment discretion, in either case with respect to all or a portion of the assets of the Trust, the Company shall have complete discretion with respect to the investment of such assets at all times prior to a Change in Control of the Company. After a Change in Control of the Company, the Trustee shall allocate and distribute the assets of the Trust Fund as provided in Agreement. Subject to the foregoing, the Trustee shall have the power: (a) to deposit securities with custodians or securities clearing corporations or depositories or similar organizations, whether located within the Commonwealth of Massachusetts or elsewhere in the United States or abroad, except that the indicia of ownership of any property shall not be maintained outside the jurisdiction of the district courts of the United States; (b) to retain any property at any time received by the Trustee; (c) to register securities in its name or in the name of any nominee with or without indication of the capacity in which the securities shall be held, or to hold securities in bearer form; (d) to employ suitable agents and legal counsel, who may be counsel for the Company, and, as a part of its reimbursable expenses under this Trust Agreement, to pay their reasonable compensation and expenses; (e) to appoint one or more individuals or corporations as a custodian of any property and, as a part of its reimbursable expenses under this Trust Agreement, to pay the reasonable compensation and expenses of any such custodian; (f) generally to do all acts, exclusive of acts involving investment management discretion, which the Trustee may deem necessary or desirable for the protection of the Trust Fund; (g) to commence or defend suits, legal proceedings or arbitration proceedings; and to represent the Trust Fund in all suits, legal proceedings or arbitration proceedings in any court or before any other body or tribunal (provided, however, that the Trustee shall have no obligation to take any legal action for the benefit of the Trust Fund unless it is specifically requested or directed to by the Company and unless it shall be first indemnified for all expenses in connection therewith, including counsel fees). Upon notification of the Trustee's intention to commence suits, legal proceedings or arbitration proceedings or the commencement of suits, legal proceedings or arbitration proceedings against the Trust Fund, the Company shall be entitled, but not obligated to participate therein and, to the extent that it may wish, jointly with the Trustee pursue or defend the suit or proceeding with counsel satisfactory to the Company and the Trustee; The Trustee shall exercise the following administrative duties only upon the specific direction of the Company or an Investment Manager: (h) to vote in person or by proxy, or to refrain from voting, in respect of any securities held by the Trust Fund, and to give general or special proxies or powers of attorney, with or without power of substitution, and to exercise any conversion privileges, subscription rights or other options; to participate in reorganizations, recapitalizations, consolidations, mergers and similar transactions with respect to such securities; and generally to exercise any of the powers of an owner with respect to any property held by the Trust Fund; (i) with respect to any investment, to consent or object to any action or nonaction of any corporation or other business organization, or of the directors, officers or stockholders of any corporation or equivalent of any other business organization; (j) to settle, compromise or submit to arbitration any claims, debts or damages due or owing to or from the Trust Fund; (k) to deposit any property with any protective, reorganization or similar committee; to delegate power thereto; and to pay or agree to pay part of its expenses and compensation and any assessments levied with respect to any property so deposited; and (l) to form a corporation or corporations under the laws of any jurisdiction or to participate in the forming of any such corporation or corporations or to acquire an interest in or otherwise make use of any corporation or corporations already formed, for the purpose of facilitating the Trust Fund's investing in and holding title to any property. 4.3 Securities; Property. Wherever used in this Trust Agreement, the term "securities" shall include bonds, notes, obligations, warrants and stocks of any class, certificates of participation or shares of any mutual investment company, trust or fund, and such other evidences of indebtedness and certificates of interest as are usually referred to by the term "securities," and the term "property" shall include personal and mixed property, tangible or intangible, of any kind and wherever located, including without limitation securities, depository accounts in any bank, trust company or similar financial institution (including depository accounts in the banking department of the Trustee or an affiliate of the Trustee or any custodian or an affiliate of any custodian), however, the term "property" as used herein, shall not include any direct or indirect interest in real estate. For this purpose "real estate" includes, but is not limited to, real property, mortgages, leaseholds, mineral interests and any form of asset which is secured by any of the above. Section 4.4 Proxies. In order to permit the Company or an Investment Manager, as the case may be, to make timely and informed decisions regarding the management of those assets in the Trust Fund subject to its respective control, the Trustee shall forward to the Company or each such Investment Manager, as the case may be, for appropriate action any and all proxies, proxy statements, notices, requests, advice or other communications received by the Trustee (or its nominee) as the record owner of such assets. Section 4.5 Investment Managers. Mr. Skates may from time to time appoint one or more Investment Managers to manage any portion of the Trust Fund and, with respect to such portion, to direct the Trustee with respect to effecting investment transactions on behalf of the Trust Fund and exercising such other powers as may be granted to Investment Managers hereunder. Mr. Skates shall give prompt written notice to the Trustee of any such appointment, upon which the Trustee shall rely until it receives from Mr. Skates written notice of the termination of such appointment. In each case where such an appointment is made, Mr. Skates shall determine the assets of the Trust Fund to be allocated to the Investment Manager from time to time and Mr. Skates shall issue appropriate instructions to the Trustee with respect thereto. The Trustee shall not be liable for the acts or omissions of such Investment Manager, shall be under no duty to question any direction of an Investment Manager with respect to the portion of the Trust Fund managed by such Investment Manager, to review any securities or property held in such portion, to make any suggestions with respect to the investment and reinvestment of such portion, or to evaluate the performance of any Investment Manager, and shall be fully protected in acting in accordance with the directions of an Investment Manager or for failing to act in the absence of such directions. Section 4.6 Life Insurance. Mr. Skates reserves the right to direct the Trustee to purchase any such policies or contracts on or for the life of any Mr. Skates or his Beneficiary. Any such policy or contract shall be an asset of the Trust Fund subject to the claims of the Company's creditors in the event of insolvency, as specified in Section 2.1 hereof. The proceeds of any life insurance policy shall upon the death of the insured be credited to the Trust Fund and shall be an additional source of benefits payable to his Beneficiary. The Trustee shall be under no duty to question any direction of Mr. Skates or to review the form of any such policies or contracts or of the selection of the issuer thereof, or to make suggestions to Mr. Skates with respect to the form of such policies or contracts or to the issuer thereof. Mr. Skates may direct the Trustee to exercise or may exercise directly the powers of the contract holder under any such policies or contracts, and the Trustee shall exercise such powers only upon the direction of Mr. Skates. Notwithstanding anything to the contrary contained in the Trust Agreement, the Trustee shall be fully protected in acting in accordance with written directions of Mr. Skates and shall be under no liability for any loss of any kind which may result by reason of any action taken or omitted by it in accordance with any direction of Mr. Skates or by reason of inaction in the absence of written directions from Mr. Skates. No insurance carrier shall for any purpose be deemed a party to this Agreement or be responsible for the validity or sufficiency hereof. Notwithstanding the fact that it may have knowledge of the terms of this Trust Fund, the obligations of such insurance carrier shall be measured and determined solely by the terms and conditions of the policies or contracts issued by it, and there shall be no obligations to any person, partnership, corporation, trust or association other than as stated in such policies or contracts. ARTICLE V Section 5.1 Trust Taxes. The Company shall pay any and all Federal, state or local taxes on the Trust Fund, or any part thereof, and on the income therefrom. Section 5.2 Trust Expenses. The Company shall pay to the Trustee its reasonable expenses for the management and administration of the Trust Fund, including without limitation advances for or prompt reimbursement of reasonable expenses of counsel, custodians and other agents employed by the Trustee, and reasonable compensation for its services as Trustee hereunder, the amount of which shall be agreed upon from time to time by the Company and the Trustee in writing. Such expenses and compensation shall be a charge on the Trust Fund and shall constitute a lien on the Trust Fund in favor of the Trustee unless and until paid by the Company. Section 5.3 Indemnification. The Company hereby agrees to indemnify and hold harmless the Trustee from and against any losses, costs, damages, claims or expenses, including without limitation reasonable attorneys' fees, which the Trustee may incur or pay out in connection with, or otherwise arising out of, the performance by the Trustee of its duties hereunder. Any amount payable to the Trustee under Section 5.2 or this Section 5.3 and not previously paid by the Company pursuant to this Trust Agreement shall be paid by the Company promptly upon demand therefor by the Trustee or, if the not paid by the Company within forty-five (45)days of demand therefor, from the Trust Fund. In the event that payment is made hereunder to the Trustee from the Trust Fund, the Trustee shall promptly notify the Company in writing of the amount of such payment. The Company agrees that, upon receipt of such notice, it will deliver to the Trustee to be held in the Trust Fund an amount in cash (or marketable securities having a fair market value equal to such amount, or some combination thereof) equal to any payments made from the Trust Fund to the Trustee pursuant to Section 5.2 or this Section 5.3. The failure of the Company to transfer any such amount shall not in any way impair the Trustee's right to indemnification, reimbursement and payment pursuant to Section 5.2 hereof or this Section 5.3. ARTICLE VI Section 6.1 Trustee Records and Accounts. The Trustee shall keep accurate and detailed accounts of all investments, receipts, disbursements and other transactions hereunder, and all accounts, books and records relating thereto shall be open to inspections and audit at all reasonable times by any persons designated by the Company. Within ninety (90) days following the close of the calendar year, and within ninety (90) days after the removal or resignation of the Trustee as provided in ARTICLE VII hereof, the Trustee shall file with the Company a written account setting forth all investments, receipts, disbursements and other transactions effected by the Trustee or reported to it by such Investment Managers, if any, as may be appointed hereunder during each calendar year or during the period from the close of the last such calendar year to the date of such removal or resignation. Upon the expiration of ninety (90) days from the date of filing such annual or other account, the Trustee shall be forever released and discharged from all liability and accountability to anyone with respect to the propriety of all acts and transactions shown in such account, except with respect to any such acts or transactions as to which the Company shall within such ninety (90) day period file with the Trustee written objections. The Trustee shall from time to time make such other reports and furnish such other information concerning the Trust Fund as the Company may reasonably request or as may be required by the Agreement. Section 6.2 Settlement of Accounts. Notwithstanding the foregoing Section 6.1, the Trustee shall have the right to apply at any time to a court of competent jurisdiction for the judicial settlement of the Trustee's account, and in any case it shall be necessary to join as parties thereto only the Trustee and the Company; and any judgment or decree which may be entered therein shall be conclusive upon all persons having or claiming to have any interest in the Trust Fund or under the Agreement. ARTICLE VII Section 7.1 Resignation and Removal of Trustee. The Trustee may resign at any time by delivering written notice thereof to the Company; provided, however, that no such resignation shall take effect until the earlier of (i) thirty (30) days from the date of delivery of such notice to the Company, unless such notice period is waived in whole or in part by the Company or (ii) the appointment of a successor trustee pursuant to Section 7.2. The Trustee may be removed at any time by the Company, pursuant to a resolution of the Company, by delivering to the Trustee a certified copy of such resolution. Such removal shall take effect upon the earlier of (i) thirty (30) days from the date of delivery of such resolution, unless such notice period is waived in whole or in part by the Trustee or (ii) the appointment of a successor trustee pursuant to Section 7.2. Notwithstanding the foregoing, after a Change in Control of the Company, any such removal of the Trustee shall be effective only with the written consent of Mr. Skates (or his Beneficiaries, if Mr. Skates is deceased). If, within thirty (30) days of the delivery of written notice of resignation or removal, a successor trustee shall not have been appointed, the provisions of Section 7.2 shall apply. Section 7.2 Successor Trustee. Upon the resignation or removal of the Trustee, a successor trustee shall be appointed by the Company; provided, however, that after a Change in Control of the Company such appointment shall be effective only with the written consent of Mr. Skates (or his Beneficiaries, if Mr. Skates is deceased). If the Company (and, after a Change in Control of the Company, Mr. Skates and his Beneficiaries, [if Mr. Skates is deceased]) are unable to so agree upon a successor trustee within thirty (30) days after such notice, the Trustee shall be entitled, at the expense of the Company, to petition a United States District Court or any of the courts of the Commonwealth of Massachusetts having jurisdiction to appoint its successor. The Trustee shall continue to serve, and to receive its compensation and reimbursement of its expenses, until its successor accepts the trust and receives delivery of the Trust Fund. Such successor trustee shall be a commercial bank or trust company which is established under the laws of the United States or a State within the United States and which is not an affiliate of the Company. Such appointment shall take effect upon the delivery to the Trustee of (a) a written appointment of such successor trustee, duly executed by the Company, and (b) a written acceptance by such successor trustee, duly executed by an authorized officer. Any successor trustee shall have all the rights, powers and duties granted the Trustee hereunder. Upon the resignation or removal of the Trustee and the appointment of a successor trustee, and after the acceptance and approval of its account, the Trustee shall transfer and deliver the Trust Fund to such successor. Under no circumstances shall the Trustee transfer or deliver the Trust Fund to any successor which is not a bank or trust company as hereinabove defined. ARTICLE VIII Section 8.1 Termination of Trust. The Trust established pursuant to this Trust Agreement shall terminate upon the earlier of (i) the exhaustion of the Trust Fund, or (ii) the satisfaction of all Company liabilities under the Agreement with respect to Mr. Skates (and his Beneficiaries); provided however, that the Trust shall terminate in any event upon the expiration of twenty-one (21) years after the death of the last survivor of the group of persons consisting of Mr. Skates and his Beneficiaries, living on the date of the execution of this Trust Agreement. Section 8.2 Liquidation of Trust. Upon the termination of the Trust in accordance with Section 8.1, the Trustee shall, after the acceptance and approval of its account, distribute the remaining Trust Fund assets, if any, to the Company. Upon completing such distribution, the Trustee shall be relieved and discharged of all liabilities and obligations hereunder. The powers of the Trustee shall continue as long as any part of the Trust Fund remains in its possession. ARTICLE IX Section 9.1 Amendment of Trust. This Trust Agreement may be amended, in whole or in part, at any time and from time to time, by the Company, pursuant to a resolution of the Board of Directors of the Company, by delivery to the Trustee of a certified copy of such resolution and a written instrument duly executed and acknowledged in the same form as this Trust Agreement; provided, however, that the duties and responsibilities of the Trustee shall not be increased without the Trustee's written consent; and provided further that, after a Change in Control of the Company any such amendment affecting Mr. Skates or his Beneficiaries' rights hereunder, the Trust Fund or the procedures for distribution thereof shall not become effective until sixty (60) days after a copy of such amendment has been delivered by registered mail by the Company or the Trustee to Mr. Skates and his Beneficiary entitled to benefits under the Agreement. In the event the Company or the Trustee receives written objections to such amendment from such person within such sixty (60) day period, such amendment shall be ineffective and void. ARTICLE X Section 10.1 Governing Law. This Trust Agreement shall be construed and interpreted under, and the Trust hereby created shall be governed by, the laws of the Commonwealth of Massachusetts. Section 10.2 Gender. Neither the gender nor the number (singular or plural) of any word shall be construed to exclude another gender or number when a different gender or number would be appropriate. Section 10.3. Non-Alienation. No right or interest of any Mr. Skates or his Beneficiary under the Agreement or in the Trust Fund shall be transferable or assignable or subject to alienation, anticipation or encumbrance, and no right or interest of Mr. Skates or his Beneficiary under the Agreement or in the Trust Fund shall be subject to any garnishment, attachment or execution. Notwithstanding the foregoing, the Trust Fund shall at all times remain subject to the claims of creditors of the Company in the event the Company becomes insolvent as provided in Section 2.1. Section 10.4 Successors and Assigns. This Trust Agreement shall be binding upon and inure to the benefit of any successor to the Company as the result of merger, consolidation, reorganization, or otherwise. In the event of any such merger, consolidation, reorganization, or other similar transaction, the successor to the Company shall promptly notify the Trustee in writing of its successorship and furnish the Trustee with the information specified in Section 3.1 of this Trust Agreement. Section 10.5 Counterparts. This Trust Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all of which shall together constitute only one agreement. Section 10.6 Addresses of Parties. Communications to the Trustee shall be sent to Boston Safe Deposit and Trust Company One Cabot Road 028-002B Medford, MA 02155-5159 Attn: Georgia P. Sakorafos or to such other address as the Trustee may specify in writing. Communications to the Company shall be sent to the Company's principal office or to such other address as the Company may specify in writing. Section 10.7 Arbitration. Any dispute between Mr. Skates (or his Beneficiary if Mr. Skates is deceased) and the Trustee as to the interpretation or application of the provisions of this Trust and amounts payable hereunder shall be determined exclusively by binding arbitration in the Commonwealth of Massachusetts in accordance with the rules of the American Arbitration Association then in effect. Judqement may be entered on the arbitrator's award in any court of competent jurisdiction. All fees and expenses of such arbitration shall be paid by the Trustee and considered an expense of the Trust under Section 5.2 hereof. Section 10.8 Severability. In the event that any provision of this Trust or the application thereof to any person or circumstances shall be determined by a court of proper jurisdiction to be invalid or unenforceable to any extent, the remainder of this Trust, or the application of such provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each provision of this Trust shall be valid and enforced to the fullest extent permitted by law. 10.9 Trust Beneficiaries. Mr. Skates (and his Beneficiary if he is deceased) is an intended beneficiary under this Trust, and shall be entitled to enforce all terms and provisions hereof with the same force and effect as if such person had been a party hereto. IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to be duly executed and their respective corporate seals to be hereto affixed this 16th day of December, 1994. Attest: BOSTON SAFE DEPOSIT AND TRUST COMPANY By ____________________________ Title:______________________________ Attest: DATA GENERAL CORPORATION By _________________________________ Title:______________________________ EX-10 5 AMENDMENT TO REVOLVING CREDIT AND LETTER OF CREDIT AGREEMENT Exhibit 10(z) AMENDMENT TO AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT This FIRST AMENDMENT, dated as of April 18, 1994 (this "Amendment"), among the parties hereto amends the AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT, dated December 30, 1993 (the "Credit Agreement"), and among DATA GENERAL CORPORATION, a Delaware corporation (the "Borrower"), NATIONAL WESTMINSTER BANK PLC ("NWB"), THE BANK OF NOVA SCOTIA ("BNS"), FLEET BANK OF MASSACHUSETTS, NATIONAL ASSOCIATION ("Fleet"), NATIONSBANK OF NORTH CAROLINA, N.A. ("NationsBank"), and CANADIAN IMPERIAL BANK OF COMMERCE (NEW YORK) ("CIBC" and, together with NWB, BNS, FLEET and NATIONSBANK, the "Lenders") and NWB, as Agent (the "Agent"). WHEREAS, pursuant to the Credit Agreement, each of NWB, BNS, Fleet, NationsBank and CIBC has agreed to make Loans to the Borrower in an aggregate amount not to exceed the amount set forth opposite such Lender's name on the signature pages hereof, as such amount may be reduced pursuant to Section 2.04 of the Credit Agreement; and WHEREAS, the Borrower, the Lenders and the Agent desire to amend the Credit Agreement as set forth herein. NOW, THEREFORE, it is agreed: 1. As used herein all terms which are defined in the Credit Agreement shall have the same meanings herein. 2. Section 5.02(i) of the Credit Agreement is hereby amended in its entirety to provide as follows: (i) Consolidated Tangible Net Worth, Fail to maintain a Consolidated Tangible Net Worth, determined in accordance with U.S. GAAP of at lease (w) $351,500,000 at any time during the quarterly period ending March 26, 1994, (x) $340,000,000 at any time during the quarterly period ending June 25, 1994, (y) $345,000,000 at any time during the quarterly period ending September 24, 1994 and $400,000,000 at any time thereafter, provided that, in the event that the Borrower incurs losses from restructuring expenses (determined in accordance with GAAP), during the quarterly period ending March 26, 1994 (the "Charges") in an amount not in excess of $35,000,000, the aforementioned amounts for each period set forth above shall be increased by an amount equal to the amount by which $35,000,000 exceeds the amount of Charges. 3. Section 5.02(j) is hereby amended, on the third line thereof, by the insertion of the following phrase: , provided that, for the quarterly periods ending March 26, 1994 and June 25, 1994 only, the aforementioned ratio of "1.25 to 1" will be replaced with the ratio of "1.30 to 1." 4. Section 5.02(k) of the Credit Agreement is hereby amended, on the seventh line thereof, by the substitution of the date "September 24, 1993" for the date of "September 30, 1990" and immediately after such date by the insertion of the following phrase: , provided that, during the quarterly period beginning on June 26, 1994 and ending on September 24, 1994 only, the aforementioned ration of "5 to 1" will be replaced with the ratio of "4 to 1." 5. All representations and warranties contained in Article IV of the Credit Agreement are true and correct as of the date hereof. 6. This Amendment shall not become effective until the date on which (i) this Amendment shall have been executed by the Borrower, Lenders constitution the Majority Lenders and the Agent and the Agent shall have received evidence satisfactory to it such execution, (ii) the Borrower shall have paid to the Agent for the account of the Lenders an amendment fee in the amount of $87,500, (iii) the Effective Date shall have occurred and (iv) the Borrower provides evidence, satisfactory to the Agent, that the Charges were not in excess of $35,000,000. 7. The Borrower agrees to pay on demand all out-of-pocket costs and expenses of the Agent in connection with the negotiation, preparation, execution and delivery of this Amendment, including (without limitation) the reasonable fees and out-of-pocket expenses of counsel for the Agent in connection therewith. 8. This Amendment shall be limited precisely as written and shall not be deemed (a) to be a consent granted pursuant to, or a waiver or modification of, any other term or condition of either of the Agreements or any of the instruments or agreements referred to thereof or (b) to prejudice any right or rights which the Agent or the Lenders may now have or have in the future under or in connection with either Agreements or any of the instruments, agreements or other documents or papers contemplated in connection therewith, and any reference therein to the Credit Agreement shall be deemed to mean the Credit Agreement as modified by this Amendment. 9. This Amendment may be executed in any number of counterparts and by the different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same instrument. 10. This Amendment shall be governed by, and construed in accordance with, the laws of the State of New York. IN WITNESS HEREOF, the parties hereto have caused this Amendment to be duly executed as of the day and the year first above written. DATA GENERAL CORPORATION By: _____________________________ Treasurer 4400 Computer Drive Westborough, MA 01580 Attn.: Treasurer (Telecopy: 508-366-8016) Commitment $8,571,428.50 NATIONAL WESTMINSTER BANK PLC, as Lender and as Agent By: _____________________________ Vice President Prime Rate Advance Lending Office National Westminister Bank PLC New York Branch 175 Water Street New York, New York 10038 Attn.: Manager's Department Level 21 Telephone: (212) 602-4193 Telecopy: (212) 602-4118 With a copy to: National Westminster Bank PLC\ New York Branch 175 Water Street New York, New York 10038 Attn.: New York Marketing Occive - Level 29 Telephone: (212) 602-4395 Telecopy: (212) 602-4256 NATIONAL WESTMINSTER BANK PLC, through its LIBOR Rate Advance Lending Office By: _____________________________ Vice President National Westminister Bank PLC Nassau Branch 175 Water Street New York, New York 10038 Attn.: Manager's Department Level 21 Telephone: (212) 602-4193 Telecopy: (212) 602-4118 $8,571,428,50 THE BANK OF NOVA SCOTIA 101 Federal Street Boston, Massachusetts 02208 Telephone: (617) 737-6310 Telecopy: (617) 951-2177 By:______________________________ Vice President $8,571,428.50 FLEET BANK OF MASSACHUSETTS, NATIONAL ASSOCIATION 28 State Street Boston, Massachusetts 02109 Telephone: (617) 573-6524 Telecopy: (617) 573-5045 By:_____________________________ Vice President $5,714,286.00 NATIONS BANK OF NORTH CAROLINA, N.A. 767 Fifth Avenue New York, New York 10153 Telephone: (212) 644-4449 Telecopy: (212) 593-1083 By:_____________________________ Vice President $8,571,428.50 CANADIAN IMPERIAL BANK OF COMMERCE (New York) 425 Lexington Avenue New York, New York 10017 Telephone: (212) 856-3825 Telecopy: (212) 845-3600 By:_____________________________ Vice President AMENDMENT TO LETTER OF CREDIT AGREEMENT This FIRST AMENDMENT, dated as of April 18, 1994 (this "Amendment"), among the parties hereto amends the LETTER OF CREDIT AGREEMENT, dated as of December 30, 1993 (the "L/C Agreement"), and among DATA GENERAL CORPORATION, a Delaware corporation (the "Borrower"), NATIONAL WESTMINSTER BANK PLC ("NWB"), THE BANK OF NOVA SCOTIA ("BNS"), FLEET BANK OF MASSACHUSETTS, NATIONAL ASSOCIATION ("Fleet"), NATIONSBANK OF NORTH CAROLINA, N.A. ("NationsBank"), and CANADIAN IMPERIAL BANK OF COMMERCE (NEW YORK) ("CIBC" and, together with NWB, BNS, FLEET and NATIONSBANK, the "Lenders") and NWB, as Agent (the "Agent"). WHEREAS, the Borrower, the Lenders and the Agent desire to amend the Letter of Credit Agreement as set forth herein. NOW, THEREFORE, it is agreed: 1. As used herein all terms which are defined in the Letter of Credit Agreement shall have the same meanings herein. 2. Section 5.02(i) of each of the L/C Agreement is hereby amended in its entirety to provide as follows: (i) Consolidated Tangible Net Worth, Fail to maintain a Consolidated Tangible Net Worth, determind in accordance with U.S. GAAP of at lease (w) $351,500,000 at any time during the quarterly period ending March 26, 1994, (x) $340,000,000 at any time during the quarterly period ending June 25, 1994, (y) $345,000,000 at any time during the quarterly period ending September 24, 1994 and $400,000,000 at any time thereafter, provided that, in the event that the Borrower incurs losses from restructuring expenses (determined in accourdance with GAAP), during the quarterly period ending March 26, 1994 (the "Charges") in an amount not in excess of $35,000,000, the aforementioned amounts for each period set forth above shall be increased by an amount equal to the amount by which $35,000,000 exceeds the amount of Charges. 3. Section 5.02(j) of the L/C Agreement is hereby amended, on the third line thereof, by the insertion of the following phrase: , provided that, for the quarterly periods ending March 26, 1994 and June 25, 1994 only, the aforementioned ratio of "1.25 to 1" will be replaced with the ratio of "1.30 to 1." 4. Section 5.02(k) of the L/C Agreement is hereby amended, on the seventh line thereof, by the substitution of the date "September 24, 1993" for the date of "September 30, 1990" and immediately after such date by the insertion of the following phrase: , provided that, during the quarterly period beginning on June 26, 1994 and ending on September 24, 1994 only, the aforementioned ration of "5 to 1" will be replaced with the ratio of "4 to 1." 5. All representations and warranties contained in Article IV of the Letter of Credit Agreement are ture and correct as of the date hereof. 6. This Amendment shall not become effective until the date on which (i) this Amendment shall have been executed by the Borrower, Lenders constitution the Majority Lenders and the Agent and the Agent shall have received evidence satisfactory to it such execution, (ii) the Borrower shall have paid to the Agent for the account of the Lenders an amendment fee in the amount of $87,500, (iii) the Effective Date shall have occurred and (iv) the Borrower provides evidence, satisfactory to the Agent, that the Charges were not in excess of $35,000,000. 7. The Borrower agrees to pay on demand all out-of-pocket costs and expenses of the Agent in connection with the negotiation, preparation, execution and delivery of this Amendment, including (without limitation) the reasonable fees and out-of-pocket expenses of counsel for the Agent in connection therewith. 8. This Amendment shall be limited precisely as written and shall not be deemed (a) to be a consent granted pursuant to, or a waiver or modification of, any other term or condition of the Agreement or any of the instruments or agreements referred to thereof or (b) to prejudice any right or rights which the Agent or the Lenders may now have or have in the future under or in connection with either Agreements or any of the instruments, agreements or other documents or papers contemplated in connection therewith, and any reference therein to the Letter of Credit Agreement shall be deemed to mean the Letter of Credit Agreement as modified by this Amendment. 9. This Amendment may be executed in any number of counterparts and by the different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same instrument. 10. This Amendment shall be governed by, and construed in accordance with, the laws of the State of New York. IN WITNESS HEREOF, the parties hereto have caused this Amendment to be duly executed as of the day and the year first above written. DATA GENERAL CORPORATION By: _____________________________ Treasurer 4400 Computer Drive Westboro, MA 01580 Attn.: Treasurer (Telecopier: 508-366-8016) NATIONAL WESTMINSTER BANK PLC, as Lender and as Agent By: _____________________________ Vice President Prime Rate Advance Lending Office National Westminister Bank PLC New York Branch 175 Water Street New York, New York 10038 Attn.: Manager's Department Level 21 Telephone: (212) 602-4193 Telecopy: (212) 602-4118 With a copy to: NATIONAL WESTMINSTER BANK PLC, New York Branch 175 Water Street New York, New York 10038 Attn.: New York Marketing Occive - Level 29 Telephone: (212) 602-4395 Telecopy: (212) 602-4256 NATIONAL WESTMINSTER BANK PLC, through its LIBOR Rate Advance Lending Office By: _____________________________ Vice President National Westminister Bank PLC Nassau Branch 175 Water Street New York, New York 10038 Attn.: Manager's Department Level 21 Telephone: (212) 602-4193 Telecopy: (212) 602-4118 THE BANK OF NOVA SCOTIA 101 Federal Street Boston, Massachusetts 02208 Telephone: (617) 737-6310 Telecopy: (617) 951-2177 By:______________________________ Vice President FLEET BANK OF MASSACHUSETTS, NATIONAL ASSOCIATION 28 State Street Boston, Massachusetts 02109 Telephone: (617) 573-6524 Telecopy: (617) 573-5045 By:_____________________________ Vice President NATIONS BANK OF NORTH CAROLINA, N.A. 767 Fifth Avenue New York, New York 10153 Telephone: (212) 644-4449 Telecopy: (212) 593-1083 By:_____________________________ Vice President CANADIAN IMPERIAL BANK OF COMMERCE (New York) 425 Lexington Avenue New York, New York 10017 Telephone: (212) 856-3825 Telecopy: (212) 845-3600 By:_____________________________ Vice President EX-10 6 1994 NON-EMPLOYEE DIRECTOR STOCK OPTION AGREEMENT Exhibit 10(bb) Plan 8, Grant 1 99932 DATA GENERAL CORPORATION 1994 NON-EMPLOYEE DIRECTOR STOCK OPTION AGREEMENT * * * OPTION AGREEMENT made this day of between DATA GENERAL CORPORATION, a Delaware corporation (hereinafter called the "Company"), and , a Director of the Company (hereinafter called the "Participant"); WITNESSETH WHEREAS, the Company desires, by affording the Participant an opportunity to purchase shares of its common stock, as hereinafter provided, to carry out the purpose of the "Non-employee Director Stock Option Plan" (hereinafter referred to as the "Plan"), approved by its stockholders and directors: NOW, THEREFORE, in consideration of the premises and of the mutual promises hereinafter contained, the parties hereto have agreed as follows: 1. Grant of Option. The Company hereby grants to the Participant an option (hereinafter called the "Option") to purchase all or part of an aggregate of Four Thousand * * shares of stock (hereinafter referred to as the "Stock") (such number being subject to adjustment as provided in Paragraph 11 hereof) on the terms and conditions hereinafter set forth. 2. Incorporation of Plan. Except as hereinafter provided, this Agreement shall be governed by and be subject to all the terms and conditions set forth in the Plan as in effect on the date hereof. A copy of the Plan has been delivered to the Participant and is hereby incorporated by reference. In the event of any discrepancy or inconsistency between the terms and conditions of this Agreement and the Plan, the terms and conditions of the Plan shall control. 3. Purchase Price. The purchase price of the shares of Stock covered by the Option shall be $ per share. Payment shall be made in cash, by certified check, cashier's check or in shares of Common Stock in the manner prescribed in Paragraph 9 hereof. 4. Term of Option. The term of the Option shall be for a period commencing on the date hereof and ending ten years thereafter. The right of Participant to purchase Stock through the exercise of this Option, wholly or in part, shall be available to the Participant at any time during the term of this Option subject to restrictions on disposition as provided in Paragraph 6 hereof and to the obligation of resale of said Stock as provided in Paragraph 7 hereof. 5. Nontransferability. The Option shall not be transferable otherwise than by will or the laws of descent and distribution, and the Option may be exercised, during the lifetime of the Participant only by him, more particularly (but without limiting the generality of the foregoing), the Option may not be assigned, transferred (except as provided above), pledged, hypothecated in any way, shall not be assignable by operation of law, and shall not be subject to execution, attachment or similar process. Any attempted assignment, transfer, pledge, hypothecation or other disposition of the Option contrary to the provision hereof, and the levy of any execution, attachment, or similar process upon the Option, shall be null and void and without effect; provided however, that if Participant shall die while serving as a Director of the Company, his executor, personal representative, or beneficiary shall have the right to exercise the Option (to the extent that the Participant would have been entitled to do so at the date of his death) at any time within twelve (12) months from the date of death in respect of the total number of shares as to which he would be entitled to exercise his Option at the date of his death. 6. Restrictions on Disposition. Stock acquired by Participant pursuant to the exercise of an Option is subject to certain restrictions on dispositions and obligations of resale to the Company as provided in Section 7 of the Plan and such Stock shall not be sold, transferred, or otherwise disposed of and shall not be pledged or otherwise hypothecated until such restrictions lapse. Participant understands and agrees that, if the Stock is subject to restrictions which have not yet lapsed, certificates representing such Stock will contain a legend to the effect that the Stock is subject to certain restrictions on disposition and obligations of resale as contained in Section 7 of the Plan. Such restrictions against the disposition of the Stock shall lapse in accordance with the provisions of Exhibit A attached hereto. Upon the occurrence of the earlier of the death of Participant or the Participant's cessation of service as a Director with the consent of the Company, the restrictions against disposition which have not otherwise lapsed under the Plan shall immediately lapse. 7. Obligation of Resale. In the event of Participant's cessation of service as a Director for any reason except death or with the consent of the Company, then the Stock for which Participant has paid the purchase price but on which restrictions against disposition have not lapsed shall be offered for resale to the Company at the price paid by Participant. This offer of resale must be in writing and must be delivered to the Company within thirty (30) days following termination and certificates for such Stock shall be delivered to the Company within such thirty-day period. If such Stock is not delivered to the Company within thirty (30) days following termination of Participant's employment, such Stock shall remain subject to the restrictions against disposition and such restrictions shall not lapse as otherwise provided herein and in the Plan. Within sixty (60) days following a timely delivery of the Stock, the Company will compensate Participant (at the original purchase price) for such number of shares of the Stock as the Company elects to repurchase and will return to the Participant any such shares not so purchased. In the event that the Company declines in writing to repurchase such Stock, such Stock shall remain the property of Participant and the restrictions against disposition shall lapse at the rate stated in this Agreement. 8. Service as a Director. Subject to the provisions of Paragraph 5 hereof, this Option shall be exercisable only by Participant while he is serving as a Director of the Company or upon his cessation of service as a Director with the consent of the Company. If Participant shall cease to serve as a Director with the consent of the Company before his Option shall have terminated, he must exercise the Option within ninety (90) days after the date on which he ceases to serve as a Director the Company. Participant acknowledges and agrees that the Company is not obligated by this Agreement or the Plan to continue the Participant as a Director of the Company, and this Agreement does not in any manner create any rights, benefits, or obligations not specifically set forth herein. 9. Method of Exercising Option. Subject to the terms and conditions of this Option Agreement, the Option may be exercised by written notice to the Company at its office at 4400 Computer Drive, Westboro, MA 0l580, Attn: Treasurer. Such notice shall state the election to exercise the Option, and the number of shares of Stock in respect of which it is being exercised. It shall be signed by the person or persons so exercising the Option and shall be accompanied by payment of the full purchase price of such Stock in cash, by certified check, cashier's check or in shares of Common Stock. If shares of Common Stock are tendered as payment of the Option exercise price, the value of such shares shall be their fair market value as the date of exercise. If such tender would result in the issuance of fractional shares of Common Stock, the Participant shall purchase at the price which reflects the fair market value of the Stock as of the date of exercise, in cash, by certified check or cashier's check such additional fractional shares of Common Stock as are necessary to result in the issuance to the Participant of an additional whole share of Common Stock. The Company shall issue, in the name of the person or persons exercising the Option, and deliver a certificate or certificates representing such shares as soon as practicable after the notice and payment shall be received. In the event the Option shall be exercised, pursuant to Paragraph 5 hereof, by any person or persons other than the Participant, such notice shall be accompanied by appropriate proof of the right of such person or persons to exercise the Option. Until Participant (or his representative as provided in Paragraph 5 hereof) has been issued a certificate or certificates for the shares as acquired, Participant shall possess no stockholder rights with respect to any such Stock. 10. Tax Information. Information with respect to the ordinary income recognized by Participant in any year on account of the exercise of the Option, whether such income arises from the receipt of Stock not subject to restrictions or from the lapse of restrictions, shall be reported by the Company to the Internal Revenue Service to the extent required by law. A copy of any election statement filed by Participant with the Internal Revenue Service in order to elect, in accordance with Section 83(b) of the Internal Revenue Code of 1954, as amended, to recognize ordinary income in the year of exercise with respect to the Stock being purchased upon exercise of the Option, shall be provided by the Participant to the Company. 11. Changes in Capital Structure. If all or any portion of the Option shall be exercised subsequent to any stock dividend, split-up, recapitalization, merger, consolidation, combination or exchange of shares, or otherwise, occurring after the date hereof, the aggregate number of shares of the Stock subject to this Agreement and the Option price may be proportionately adjusted, and any other appropriate changes may be made by the Board of Directors, whose determination shall be conclusive. No fractional share shall be issued upon any such exercise, and the aggregate price shall be appropriately reduced on account of any fractional share not issued. In no event, however, shall adjustment be made in the rate at which restrictions against disposition lapse and Participant's obligation of resale, as fixed by Paragraph 6 and 7 hereof. 12. Termination of Option. In the event of the institution of any legal proceedings directed to the validity of the Plan pursuant to which the Option is granted, or to any option granted under it, the Company may, in its discretion, and without incurring any liability therefor to any Participant, terminate the Option. 13. Enforceability. This Agreement shall be binding upon the Participant, his estate, his personal representatives and beneficiaries. 14. Notices. Each notice relating to this Agreement shall be in writing and delivered in person or by first class mail, postage prepaid, to the adress as hereinafter provided. Each notice shall be deemed to have been given on the date it is received. Each notice to the Company shall be addressed to it at its offices at 4400 Computer Drive, Westboro, MA 01580 (Attention: Treasurer). Each notice to the Participant or other person or persons then entitled to exercise the Option shall be addressed to the Participant or such other person or persons at the Participant's last known address. 15. Successors, Etc. For purposes of this Agreement, the "Company" shall also mean any successor to Data General Corporation, whether by merger, acquisition or otherwise. IN WITNESS WHEREOF, the Company has caused this Option Agreement to be executed by its duly authorized officer, and the Participant has hereunto set his hand and seal, all on the day and year first above written. DATA GENERAL CORPORATION By:_________________________ Authorized Officer I have read and understood this Agreement and agree to be bound by its terms. ____________________________ * * EXHIBIT A TO DATA GENERAL CORPORATION 1994 NON-EMPLOYEE DIRECTOR STOCK OPTION AGREEMENT Dated: During the term of this Option, the restrictions against disposition of the Stock and the obligaton of resale to the Company shall lapse so the shares become freely tradeable ("Free Shares") in accordance with the following schedule: # of Years From Date of Percentage Free of Restrictions Option Agreement Per Time Period Cumulative 1 year or on 25% = shs. 25% = shs. 2 years or on 25% = shs. 50% = shs. 3 years or on 25% = shs. 75% = shs. 4 years or on 25% = shs. 100% = shs. EX-11 7 FY94 EARNINGS PER SHARE EXHIBIT 11 DATA GENERAL CORPORATION COMPUTATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE (In thousands except per share amounts) Fiscal Year Ended Sept. 24, Sept. 25, Sept. 26, Sept. 28, Sept. 29, 1994 1993 1992 1991 1990 Primary earnings per share: Net income (loss) $ (87,693) $ (60,479) $ (62,512) $ 85,641 $(139,775) Weighted average shares outstanding 35,774 34,453 32,788 31,160 30,047 Incremental shares from use of treasury stock method for stock options. . . . . . -- 423 -- 1,508 -- Common and common equivalent shares, where applicable. . 35,774 34,876 32,788 32,688 30,047 Net income (loss) per share . . . . . $(2.45) $(1.73) $(1.91) $2.62 $(4.65) Earnings per share assuming full dilution: Net income (loss) $ (87,693) $ (60,479) $ (62,512) $ 85,641 $(139,775) Interest on convertible debentures, net of income taxes . . . . . . . --(a) --(a) --(a) 2,634 -- Net income (loss) for purposes of calculating earnings per share assuming full dilution. . . . . $ (87,693) $ (60,479) $ (62,512) $ 88,275 $(139,775) Weighted average shares outstanding 35,774 34,453 32,788 31,247 30,047 Incremental shares from use of treasury stock method for stock options. . -- 423 -- 3,022 -- Incremental shares from assumed conversion of convertable debentures -- -- -- 1,807 -- Common shares, assuming issuance of all dilutive contingent shares, where applicable 35,774(a) 34,876(a) 32,788(a) 36,076 30,047 Net income (loss) per share . . . . $(2.45) $(1.73) $(1.91) $2.45 $(4.65) (a) For the years ended September 24, 1994, September 25, 1993 and September 26, 1992, the assumed conversion of convertible debentures, giving effect to the incremental shares and the adjustment to reduce interest expense, results in anti-dilution and has therefore been excluded from the computation. EX-13 8 FY94 ANNUAL REPORT to our stockholders, customers, and employees: In fiscal 1994, Data General completed the fifth year of a business transition which has changed the course of our company. When the transition began, more than 90 percent of our product revenues were derived from our ECLIPSE(R) MV family of proprietary minicomputers. Today, we are an open systems company with nearly 90 percent of fiscal 1994 fourth quarter product revenues coming from commercial UNIX systems based on our AViiON servers, CLARiiON storage products, DG/UX software, and associated systems and workstations. A customer base of more than 26,000 AViiON installations, with a total value of more than $1.5 billion, has been established since 1989. The journey has been challenging. Our company has made as significant a transition as any in the industry. In the proprietary minicomputer business, Data General designed and manufactured in house virtually all products. The open systems business of today operates with a new set of dynamics: buy rather than make, and form alliances that complement our capabilities. These dynamics apply to all aspects of our business from product development to the delivery of solutions and services to customers. To compete in open systems, where gross margins are substantially lower than proprietary systems, Data General has restructured its operations. We have incurred $388 million in restructuring costs over the past 10 years. We are now positioned for a return to profitability as open systems product revenues continue to grow. FISCAL 1994 RESULTS Fiscal 1994 marked our first year-over-year revenue increase since 1991. Revenues were $1.12 billion, compared with $1.08 billion for the previous year, an increase of four percent. Revenues increased sequentially in each of the last three quarters of fiscal 1994, and were higher than in the comparable periods of fiscal 1993. The major reason for this growth is our AViiON product family, where revenues increased nearly 20 percent over last year, coupled with the increasing acceptance of our Open CLARiiON storage systems. For fiscal 1994, Data General reported a net loss of $87.7 million, or $2.45 per share, including a restructuring charge of $35 million recorded in the second quarter, primarily for costs associated with a workforce reduction. In fiscal 1993, we reported a net loss of $60.5 million, or $1.73 per share, including a restructuring charge of $25 million. The key to reaching our goal of returning to profitability is straightforward: we must continue to grow revenues while keeping our costs in line. FINANCIAL STRENGTH Our balance sheet remains strong. Cash as a percentage of revenues continues to be among the highest in our industry. Our inventory turn rate is among the best in the industry. We were able to maintain our strong cash position in the face of operating losses during fiscal 1994. Our cash position was helped by $17 million in proceeds from a sale and leaseback transaction for our Westboro facilities, and improved receivable collections. In addition, as announced in October 1994, we further strengthened our cash position after fiscal 1994 ended as the result of a $53 million settlement of a six-year-old copyright and trade secret infringement lawsuit with Northrop Grumman Corporation. The settlement will result in a pre-tax gain, net of related legal fees and other expenses, of $44.5 million which will be included in the financial results for the first quarter of our 1995 fiscal year. STRATEGIC FOCUS Data General has focused its products and services on large commercial enterprises that need high-availability systems, such as our high-end AViiON servers and CLARiiON storage products, to support large numbers of users, handle large volumes of transactions, and support large databases. As a result, revenues from high-end AViiON servers grew 59 percent in fiscal 1994. We introduced new high-end models late in fiscal 1994 and added features that are required by enterprise customers. These features include AV Clusters(TM) that allow 24-hour, 365-day applications availability and continuous data center operation with graphical Windows-based products for storage, systems, and network management. AViiON servers, which currently include models with up to 16 processors, have consistently ranked among the leaders in database performance, scalability, and price/performance. These attributes, together with reliability and high availability, are key selling points of AViiON systems. They have helped Data General rank among the leading suppliers of medium-scale UNIX based systems in both 1992 and 1993, according to reports from International Data Corporation. We continue to forge strategic alliances with leading software firms. We are focusing on partners that deliver integrated business applications, databases, development tools, and management software needed for enterprise-wide solutions. We provide additional applications through industry-specific software vendors and computer resellers. In 1994, we turned working relationships into closer strategic partnerships with such companies as Oracle, Sybase, Informix, and Computer Associates - companies that focus on enterprise needs. We formed new alliances with other leading vendors such as SAP AG. We also expanded our worldwide position in several key markets by signing strategic distribution agreements with a number of companies including Avnet Inc., the largest computer reseller in the United States. In addition to CLARiiON storage products that are sold with Data General AViiON and ECLIPSE computers, Open CLARiiON products are available for use with systems from IBM, Digital Equipment Corporation, and Sun Microsystems, as well as with systems running on Novell NetWare, NT, OS/2, and SCO UNIX. Open CLARiiON products are sold through OEM agreements with Storage Technology Corporation, Amdahl, Memorex Telex, Convex Computer, Bull SA, and other systems vendors. They are also sold through distribution agreements with Access Graphics, Gates/FA, and Dickens Data in the U.S., Daou in Korea, Omron in Japan, and a number of European firms. Collectively, these agreements provide an opportunity for strong Open CLARiiON sales growth in 1995 and future years. In fiscal 1994, we consolidated our customer services and systems integration operations into a single Worldwide Services organization. The consolidation will lower our infrastructure costs while providing more efficient services to our customers. Services represent approximately $400 million in revenues for Data General. They also represent growth opportunities, particularly in systems integration where we can provide customers with added value through networking, software customization, training, and other professional services. Our products, technology direction, strategic partnerships, solutions, and services come together in a common sense approach to our business. "Bringing Common Sense to Computing" is a theme you will see highlighted in this annual report and in our worldwide advertising during fiscal 1995. OUTLOOK We enter fiscal 1995 as a financially strong company with a solid balance sheet, an experienced and cost-conscious management team, and talented employees. We have an excellent product family and we are developing new products that respond to customer needs and provide new opportunities for Data General. Our alliances with leading software companies continue to increase the number of business applications available on the AViiON platform. All of this translates into value for our customers and business for Data General. We are confident that continued growth in revenues, combined with aggressive management of our cost structure, will lead to a return to profitability. Respectfully submitted, Ronald L. Skates President and Chief Executive Officer December 14, 1994 BRINGING COMMON SENSE TO COMPUTING Corporate computing has become complex and confusing. Choosing from the plethora of computing alternatives is becoming more difficult for information technology executives. Many new "solutions" often fail to improve business operations or justify their cost. Today, information technology executives are demanding straightforward, common sense solutions to computing issues. In the new world of open systems, the rules of computing have changed dramatically. Historically the computer industry has delivered a continuous stream of new technologies, new cost parameters, new performance metrics, and new solutions options, but never at today's pace or with such a pervasive impact on business. Data General Corporation has taken a common sense approach to resolve these issues for customers. We have structured our business based on our experience in high-end commercial computing. We do not waste time and money duplicating existing commodity technology. Rather, we create advanced computer servers and storage systems that incorporate the best commodity technologies available. We use these technologies in our systems, and add value in the systems software to ensure industry-leading price/performance, systems management, and high availability. We work with leading software partners to provide the applications, databases, and software tools customers want. And we offer complete services to design, implement, and support computing solutions. The result is a reasonably priced computing solution that is capable, flexible, scalable, and highly available. OUR FOCUS enterprise-wide, business-critical applications supporting: * large numbers of users * large transaction rates * large databases OUR APPROACH * large-scale computing systems based on commodity economics * open solutions from leading suppliers * services to match technology to the customers' business needs DESIGNING ADVANCED SYSTEMS USING THE BEST COMMODITY TECHNOLOGIES AVAILABLE One important lesson we have learned since our founding in 1968 is that commodity economics overwhelm proprietary economics. We found that the best way to build leading-edge systems is to take inexpensive, off-the-shelf components from commodity semiconductor vendors, and add value at the system level with contemporary architectures, excellent software, and strong strategic partnerships. We believe that the issue for systems vendors today is not how to design the fastest chip, disk, or box. Rather, the challenge is to integrate the latest commodities into a product line ahead of competitors. A large percentage of Data General's intellectual resources is invested in software that enables us to get very high performance from off-the-shelf chips, disk drives, and other commodity devices. In short, we choose software elegance over hardware complexity, and commodity components over proprietary. As a result, our systems are inexpensive and open, rather than exotic and proprietary. Data General's differentiators today are in the software and architecture that enable us to deliver data center capabilities using multiple commodity devices. We believe that our expertise in enterprise-capable software provides a significant advantage. This architectural approach has enabled us to build successive generations of AViiON systems, increasing performance by 44 times since the first models in 1989, while preserving customer investments in the software and business practices that are tied to their computing systems. A similar architectural approach enabled us to build CLARiiON storage systems- fault-tolerant disk arrays that use commodity disk drives and leverage commodity economics and commodity technology advances. The disk drives in CLARiiON systems have increased in capacity eight-fold in two years. Users can take continual advantage of the increased storage capacity. And because CLARiiON subsystems support multiple vendors' UNIX based systems, as well as NetWare, NT, and most legacy platforms, the customer's investment in storage is not lost when computer systems are replaced or upgraded. Data General's operating system, DG/UX, is optimized to take advantage of the best features of AViiON and CLARiiON systems in a commercial computing environment. DG/UX is a sophisticated, commercial implementation of the UNIX System V Release 4 operating system. Data General has been enhancing DG/UX for over a decade to provide a state-of-the-art platform for running core business applications. We have added significant value to UNIX without compromising adherence to existing standards. DG/UX provides a robust file system, open connectivity, comprehensive systems and storage management, standards compliance, and applications scalability. Near-linear performance scalability is achieved through the design of both DG/UX and the AViiON hardware. When more processors are added in an AViiON server, system performance increases proportionately so that moving from a two-processor AViiON server to a four-processor server doubles the performance, and so on up the line with six, eight, twelve, or sixteen processors. To support mission-critical applications, DG/UX supports a range of high-availability solutions including single-system fast recovery and redundancy capabilities, dual-system fail-over configurations, and multi-system AV Clusters. These high-availability systems can be combined with "lights out" systems management enabling 24-hour a day data center operations with minimal operator intervention. In addition, with the recent introduction of the DSO Defense Security Option, DG/UX became the first multi-processor UNIX operating system to support B2 level security, complying with strict security standards set by US government agencies. Finally, DG/UX was designed to be largely instruction-set independent and easily portable, a cornerstone of our strategy to ensure that our customers' software investments on Data General platforms are preserved. BUILDING SOFTWARE ALLIANCES FOR ENTERPRISE SOLUTIONS Today, customers decide on a particular software solution, whether it be an integrated application or a database on which to develop a custom application. They then choose the hardware platform on which to deploy the application. For general-purpose system vendors, this means that a wide range of software packages must be able to run on their systems. The strengths and market share leadership of the AViiON platform have caught the attention of many independent software vendors. Since Data General announced AViiON in February, 1989, over 3,000 UNIX software applications have been added to the company's software portfolio. Another 3,000 solutions are available through our comprehensive support of the PICK/UNIX operating environment. Data General uses a common sense approach to forming software alliances that deliver solutions to large enterprise customers. This approach is based on maintaining an industry-leading software portfolio which divides and targets software solutions addressing particular enterprise customer needs: ENTERPRISE RESOURCE MANAGEMENT: Packages that allow better business management through tools which integrate financial, human resources, manufacturing, and distribution applications into a single view. Examples: Oracle Applications, SAP R/3, CA-Masterpiece, PeopleSoft, FourGen, and Platinum Software. ENTERPRISE REENGINEERING AND REHOSTING: Packages that allow enterprises to move applications to lower-cost, higher-performance open systems; augment existing applications with easier-to-use interfaces or enhanced functionality; or develop new applications based on state-of-the-art architectures such as client/server computing. Examples: AV Image and Forte. DATABASE MANAGEMENT: Packages that allow customers to build new applications or purchase off-the-shelf solutions, and provide data security and integrity. Examples: Advanced Pick, Cincom, Informix, CA-Ingres, Oracle, PI/open, Progress, Sybase, uniVerse, and Unidata. ENTERPRISE MANAGEMENT: Packages that facilitate the management of complex computing environments including systems, security, databases, users, operations, and network management. Examples: HP OpenView, CA-UNICENTER, Tivoli Management Environment, and OS/EYE*NODE. CORPORATE INFRASTRUCTURE SOLUTIONS: Packages that integrate the office infrastructure into the enterprise. Examples: AV onGO, GroupWise, Saros, and Soft*Switch. Among our enterprise solutions, Data General provides the AV Image(TM) product set that includes document imaging software, an Imaging Toolkit for adding images to existing applications, and related imaging peripherals. AV Image software has been recognized as a standardsetter in the growing imaging market. During the past year, we signed almost 50 new or enhanced agreements with leading software firms. We recently announced significant agreements with two of the industry's leading software manufacturers - Oracle Corporation and SAP AG. Data General's Systems Integration unit will sell, install, and support the full set of Oracle Applications worldwide. The Oracle product includes more than 25 integrated software modules for accounting, manufacturing, distribution, human resources, and project control. Our AViiON line is the first standard UNIX based server family to support the database for SAP's popular R/3 client/server applications running in a Windows NT environment, and at the time of announcement, recorded the highest performance ever for the NT R/3 application. To provide customers with full applications support, Data General established a dedicated enterprise application laboratory in our Research Triangle Park, North Carolina, facility. PROVIDING COMPLETE SERVICES TO DESIGN, IMPLEMENT, AND SUPPORT TOTAL COMPUTING SOLUTIONS Years ago, computers helped to manage business. Today, they are an integral part of business. Managers rely on computers to be there, up and running, always available. Our philosophy on high availability is a reflection of that fact. We address availability on three different levels: components, operating systems, and through customer service. Through AV/Alert(SM) software, our AViiON and CLARiiON systems diagnose themselves and automatically notify Data General if service is needed. We eliminate failure through hot repair and redundant components, and provide knowledgeable support people available to handle any problem the system cannot solve itself. It is an integrated approach that focuses on the system as a whole and not on an individual hardware or software component. AViiON servers, CLARiiON storage systems, and the DG/UX operating system offer a highly integrated set of system resources dedicated to minimizing downtime. If a system should fail, a second system can automatically take over. The Data General Customer Support Center operates 24 hours a day, 365 days a year, supplementing our expert field service force which specializes in on-site problem solving. Our optional OMNiiSERVICE(SM) program guarantees 99.5 percent operating system uptime for mission-critical systems. In May 1994, Data General received the ISO 9001 certificate of compliance for its U.S. service and support operations from Underwriters Laboratories, Inc. Data General is the first major computer systems manufacturer to have its entire U.S. customer service and support operation certified under the international ISO 9001 quality standard. In addition to its customer service and worldwide manufacturing operations, ISO certification also has been recommended for, or received by, many of the company's research and development operations, its Special Systems Division, and its European Logistics organization. ISO certification has been earned by Data General subsidiary operations in Austria, Belgium, Denmark, Finland, France, Germany, Holland, Ireland, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom. Data General provides complete services to design, implement, and support commercial computing environments. These include systems integration, professional services, technical services, and maintenance. In January 1994, Data General became the first vendor in the open systems business to offer professional services packages with fixed prices and statements of work. The company's Systems Integration Business Unit offers more than 50 packages, including implementation services for AViiON, CLARiiON, CA-UNICENTER, PICK/UNIX, AV Image, NetWare, Healthcare, and World-Wide Web (Internet) applications. These packaged services are designed to help customers become productive quickly. We also offer a worldwide telecommunications service for customers with global information needs. The network currently serves more than 20 countries, with major hubs in North America, Australia, Hong Kong, and the United Kingdom. Data General designs the customer network and implements a network topology tailored to user needs. Monitoring, management, and service restoration functions are performed through the centralized Network Control Center, operated by Data General in Westboro, Massachusetts. For customers of our ECLIPSE MV family of computers, we provided more than 70 ECLIPSE software releases and a dozen new professional services packages in the past year. We also introduced the MV/9800 and the MV/25000, powerful and cost-effective board upgrades for earlier MV systems. In addition to our AViiON, CLARiiON, and ECLIPSE MV product families, we offer a full line of personal computers, ranging from notebooks to towers, all based on the latest microprocessor technologies. Other products and solutions are offered through Data General strategic alliances with a worldwide network of distributors, resellers, and other businesses. Data General Plus, our newly consolidated catalog and telephone sales support operation, provides customers with convenient access to Data General products and services, and to a full complement of networking products, computer supplies, and accessories. Our service portfolio also includes an extensive education curriculum, and attractive leasing programs and options for customers, distributors, and resellers from Data General Leasing. As a service to customers, strategic partners, solution providers, and others interested in Data General, we launched The Common Sense Connection,(SM) a comprehensive, interactive information library available on the Internet. The Common Sense Connection offers news re-leases, product and service information, the company's solutions directory, white papers on critical issues in computing, and a wide range of other company information. Financial Review 1994 Five year summary of selected financial data ............................. 13 Management's discussion and analysis of financial condition and results of operations ......................................................... 14 Consolidated statements of operations .................................... 17 Consolidated balance sheets .............................................. 18 Consolidated statements of cash flows .................................... 19 Consolidated statements of stockholders'equity ........................... 20 Notes to consolidated financial statements ............................... 21 Report of independent accountants ........................................ 30 Supplemental financial information ....................................... 30 Facilities ............................................................... 31 Officers and directors ................................................... 32 Corporate information .................................................... 33 FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA DATA GENERAL CORPORATION YEAR ENDED SEPT. 24, SEPT. 25, SEPT. 26, SEPT. 28, SEPT. 29, IN THOUSANDS EXCEPT PER 1994 1993 1992 1991 1990 SHARE AMOUNTS Total revenues . . . ..$1,120,505 $1,077,869 $1,115,947 $1,228,854 $1,216,401 Total cost of revenues. 733,114 654,718 655,047 659,559 692,015 Research and development . . . . . 90,826 100,172 111,336 101,986 140,743 Selling, general, and administrative. . . . 341,343 346,740 357,528 384,317 444,583 Restructuring charge .. 35,000 25,000 48,000 -- 71,700 Total costs and expenses. . . . . . 1,200,283 1,126,630 1,171,911 1,145,862 1,349,041 Income (loss) from operation . . . . . . (79,778) (48,761) (55,964) 82,992 (132,640) Interest expense, net.. 8,168 6,734 3,448 4,451 3,905 Other income, net . . . 2,353 416 -- 13,000 -- Income (loss) before income. . . . . . . . (85,593) (55,079) (59,412) 91,541 (136,545) Income tax provision .. 2,100 5,400 3,100 5,900 3,230 Net income (loss) . . .$ (87,693) $ (60,479)$ (62,512) $ 85,641 $ (139,775) Primary net income (loss) per share. . . ($2.45) ($1.73) ($1.91) $2.62 ($4.65) Net income (loss) per share assuming full dilution. . . . . . . ($2.45) ($1.73) ($1.91) $2.45 ($4.65) AS OF SEPT. 24, SEPT. 25, SEPT. 26, SEPT. 28, SEPT. 29, DOLLARS IN THOUSANDS 1994 1993 1992 1991 1990 Current assets. . . . ..$ 598,076 $ 611,660 $ 671,307 $ 684,480 $ 589,124 Current liabilities. . . 326,865 302,908 307,172 265,816 429,080 Working capital. . . . .$ 271,211 $ 308,752 $ 364,135 $ 418,664 $ 160,044 Total assets. . . . . ..$ 821,864 $ 866,329 $ 940,454 $ 944,046 $ 909,437 Annual expenditures for property, plant, and equipment . . . . . ..$ 92,955 $ 94,968 $ 93,607 $ 82,766 $ 85,066 Long-term debt. . . . ..$ 156,942 $ 158,352 $ 162,258 $ 164,911 $ 56,918 Other liabilities. . . .$ 29,445 $ 27,992 $ 20,988 $ 18,878 $ 17,947 Stockholders' equity. ..$ 308,612 $ 377,077 $ 450,036 $ 494,441 $ 405,492 Employees. . . . . . . . 5,800 6,500 7,100 8,500 10,600 The company has not declared or paid cash dividends since inception. Results of Operations The company reported a net loss of $88 million for fiscal 1994 compared with a net loss of $60 million for fiscal 1993 and a net loss of $63 million for fiscal 1992. Included in these fiscal year losses are restructuring charges of $35 million, $25 million, and $48 million, respectively. Total revenues were $1.12 billion in fiscal 1994, compared with $1.08 billion in the prior fiscal year. Revenue trends improved in fiscal year 1994 with each of the last three quarters of the fiscal year showing revenue growth compared to the same quarter of the prior fiscal year. The growth was achieved in both the domestic and other international marketplaces. The European marketplace continues to be negatively impacted by the transition from proprietary to open systems, generally weak economic conditions, and competitive pricing pressures. In addition, the effect of a stronger U.S. dollar in relation to European currencies during the fiscal year resulted in lower revenues from this marketplace. Increases in sales of the company's AViiON and CLARiiON open systems families of products more than offset the decline in revenues from the company's proprietary ECLIPSE MV family. Revenues from personal computers reflected considerable growth from the prior year while service revenues showed a slight decrease from 1993 levels. Product revenues, which accounted for 65% of total revenues in fiscal 1994, 62% in fiscal 1993 and 61% in fiscal 1992, increased more than 7% to $722 million from $673 million in fiscal 1993, following a slight decrease from $678 million in fiscal 1992. ECLIPSE MV revenues decreased 48% during fiscal 1994 and 34% in fiscal 1993. For the year, proprietary revenues represented less than 14% of the company's total product revenues. In fiscal 1994, the fifth year of shipments of the company's open systems, revenues from the AViiON family were approximately $470 million, nearly 20% more than fiscal 1993. In fiscal 1993, AViiON systems revenues grew 30% from fiscal 1992. In its second year of shipments, the Open CLARiiON line of mass storage systems grew considerably, accounting for more than 7% of overall product revenues in the current fiscal year. The domestic market represented 55% of total product revenues in fiscal 1994, and 52% and 51% in fiscal years 1993 and 1992, respectively. Domestic product revenues for fiscal 1994 increased 17% from fiscal 1993, following a modest increase from fiscal 1992. Nearly 60% of this growth was attributable to increases from sales of Open CLARiiON mass storage systems. European product revenues, including U.S. direct export sales, decreased 12% to $192 million for the current fiscal year from $219 million in fiscal 1993. Foreign exchange accounted for approximately 3% of the total 12% decrease. Fiscal 1993 European product revenues represented a 4% decrease from $228 million in fiscal 1992. European product revenues continue to reflect the effects of the general economic weakness in this marketplace, the continuing transition from proprietary to open systems products, and the strengthening of the U.S. dollar in relation to European currencies. Other international product revenues, including U.S. direct export sales, increased 16% to $130 million for the current fiscal year from $112 million in fiscal 1993. Fiscal 1993 reflected a 20% decrease from $139 million in fiscal 1992. The increase in other international product revenues is largely due to stronger revenues from the South Pacific area and an increase in U.S. direct export sales to Japan. Total service revenues decreased 2% to $398 million from $405 million for fiscal 1993. Fiscal 1993 had shown an 8% decrease from $438 million in fiscal 1992. Domestic service revenues remained relatively unchanged at $230 million compared to $229 million in fiscal 1993 and $227 million in fiscal 1992. European service revenues dropped 7% in fiscal 1994 to $122 million from $131 million in the prior year. Foreign exchange accounted for 3% of the total 7% decrease. Other international service revenues of $46 million remained relatively unchanged in fiscal 1994 compared to fiscal 1993. Fiscal 1993 other international service revenues reflected an 18% decrease from $55 million in fiscal 1992. A decline in hardware maintenance revenue in the domestic marketplace was more than offset by an increase in professional service revenues. Cost of revenues accounted for 65% of total revenues in fiscal 1994 as compared with 61% in fiscal 1993. For the year ended September 26, 1992, total cost of revenues amounted to 59% of total revenues. Cost of product revenues increased to 67% of product revenues in fiscal 1994, compared with 62% and 58% in fiscal years 1993 and 1992, respectively. Competitive pricing pressures worldwide, a continuing shift in the composition of product revenues from international to domestic, where pricing patterns are generally lower, and the transition to the lower-margin industry-standard AViiON family of open systems and CLARiiON family of mass storage systems, more than offset benefits resulting from the company's cost reduction and restructuring programs. Cost of service revenues was 63% of service revenues in fiscal year 1994, an increase from 59% in both fiscal years 1993 and 1992. The increase in cost of service revenues as a percentage of total service revenues was primarily a result of increases in revenues from systems integration activities which yield a lower margin than traditional service contract revenues. In fiscal 1994, research and development expenses were $91 million or 8% of total revenues, compared to $100 million and $111 million or 9% and 10% of total revenues for fiscal years 1993 and 1992, respectively. The company continues to focus its research and development efforts on its core business technology, multi-user computer systems, servers, and mass storage devices. In addition, a change in product mix to open systems architectures has increased the use of industry-standard components purchased from third parties, which has reduced the requirement for research and development in hardware. Selling, general and administrative expenses continue to decrease due to the company's worldwide cost reduction and containment programs. Selling, general and administrative costs decreased 2% to $341 million in fiscal 1994 when compared to fiscal 1993. Fiscal 1993 costs represented a 3% decrease from $358 million in fiscal year 1992. The company has responded to increasingly competitive industry conditions through ongoing cost reduction and containment programs. From fiscal 1990 to fiscal 1994, annual selling, general, and administrative expenses have been reduced by more than $100 million. While the company has made significant progress towards becoming a supplier of open systems products and services, the company believes that its cost structure must continue to improve to that of an open systems business model. In the second quarter of the current fiscal year, the company identified additional cost reduction steps which include further realignment of the company's worldwide sales and service organizations. Consequently, results of operations for fiscal 1994 included a charge of $35 million primarily for estimated costs associated with a worldwide workforce reduction and the writedown of net book value of fixed assets associated with consolidating certain activities in the European marketplace. The provision relating to the workforce reduction was primarily for salary and benefit continuation and outplacement service. Fiscal 1993 and 1992 included similar charges of $25 million and $48 million, respectively, for estimated costs associated with worldwide workforce reductions, real estate and other costs associated with the company's restructuring actions. At the close of fiscal 1994, the number of employees totaled 5,800, a reduction of 700 employees from September 25, 1993. There were 7,100 employees as of September 26, 1992. Peak employment was 17,700 in fiscal 1984. There have been no material changes in the company's original estimates of the costs associated with the previously announced restructuring actions. During fiscal 1993, the company sold three of the facilities that it had previously closed as a result of cost reduction programs. The company sold its Westbrook, Maine, its Portsmouth, New Hampshire, and a portion of its Woodstock, Connecticut facilities for proceeds of $8.7 million, $5.1 million and $1.9 million, respectively. In fiscal 1992, the company sold Data General Thailand, its Thailand manufacturing subsidiary, for net proceeds of $4.0 million in cash and a $6.0 million note receivable. Any excess proceeds from these sales over the net book value of properties was included in the restructuring reserve to offset anticipated costs associated with vacant properties. Loss from operations of $80 million in fiscal 1994 was comprised of $45 million from the domestic marketplace, $18 million from Europe and $17 million from other international. These losses include restructuring charges of $21 million, $12 million, and $2 million for domestic, Europe, and other international, respectively. Interest income for fiscal 1994 decreased 27% from fiscal 1993, following a 27% decrease from fiscal 1992 to fiscal 1993. The current year decrease was primarily due to lower average levels of invested funds. Interest expense in the current fiscal year remained relatively unchanged from both fiscal 1993 and 1992. The income tax provision for fiscal 1994 was $2.1 million, compared to $5.4 million in fiscal 1993 and $3.1 million in fiscal 1992. The provisions primarily resulted from foreign and state taxes. The company continues to have significant operating loss carryforwards and unused tax credits available to minimize future tax liabilities. During the first quarter of fiscal 1994, the company adopted Statement of Financial Accounting Standards ("SFAS") 109, "Accounting for Income Taxes". SFAS 109 is an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the company's financial statements or tax returns. Previously, the company used the SFAS 96 asset and liability approach that gave no recognition to future events other than the recovery of assets and settlement of liabilities at their carrying amounts. The implementation of SFAS 109 did not have a material effect on either the company's consolidated financial position or results of operations. In November 1992, the Financial Accounting Standards Board ("FASB") issued SFAS 112, "Employers' Accounting for Post-Employment Benefits". In May 1993, the FASB issued SFAS 114 and 115, "Accounting by Creditors for Impairment of a Loan" and "Accounting for Certain Investments in Debt and Equity Securities", respectively. SFAS 112 and SFAS 115 are effective for fiscal years beginning after December 15, 1993. SFAS 114 is effective for fiscal years commencing after December 15, 1994. The company will implement these statements as required. The future adoption of SFAS 112, SFAS 114, and SFAS 115 are not expected to have a material effect on the company's consolidated financial position or results of operations. Liquidity and Capital Resources The company's financial position remains strong. Cash and temporary cash investments as of September 24, 1994 were $142 million, an increase of $23 million from fiscal 1993. In addition, the company holds $48 million in marketable securities, a net decrease of $25 million from the prior fiscal year, which supplemented cash and temporary cash investments. These securities are primarily invested in United States Treasury bills and notes. Net cash provided from operations in fiscal 1994 was $74 million, expenditures for property, plant and equipment were $93 million, capitalized software development costs totaled $18 million, and cash provided from stock plans equaled $7 million. The company received $26 million relating to the sale of its corporate headquarters facilities and the sale of various investments net of a disbursement of $2 million in connection with the investment in an unaffiliated entity. Repayment of long-term debt was $2 million. The effect of currency fluctuations on cash and temporary cash investments was an increase of $4 million for fiscal year 1994. Net receivables decreased $27 million to $259 million at September 24, 1994, primarily as a result of increased collection efforts worldwide, partially offset by the increase in fourth quarter fiscal 1994 revenues when compared to the same prior year period. The company's worldwide days sales outstanding decreased 13 days when compared to the prior fiscal year as a result of the increased collection efforts. Inventory levels increased $17 million during fiscal 1994, primarily as a result of the timing of inventory procurements during the fourth quarter. Net property, plant and equipment decreased $13 million principally due to the sale of the company's corporate headquarters complex. Accounts payable increased $7 million primarily attributable to the increase in end of quarter inventory procurements. Current and other liabilities increased $18 million to $261 million at September 24, 1994, as a result of the $35 million provision recorded in the company's second quarter for estimated costs of the company's continuing restructuring program and increased personnel and commission related accruals. These increases were partially offset by payment of a portion of previously accrued restructuring charges. For the three year period ending September 24, 1994, cash and temporary cash investments decreased $7 million. Net cash provided from operations was $232 million. The sale of the company's corporate headquarters, other facilities, and net investments provided $47 million. The fiscal 1992 sale of the company's Thailand manufacturing subsidiary generated proceeds of $4 million. The company's employee stock plans provided $29 million. Long-term debt decreased $7 million, primarily due to repayment of Industrial Revenue Bonds applicable to the sales of the company's Portsmouth, New Hampshire and Woodstock, Connecticut facilities. Net proceeds from maturity of marketable securities was $44 million. Expenditures for property, plant and equipment totaled $282 million and the company's investment in capitalized software development costs was $61 million. The company paid $1 million of notes and disbursed $10 million in connection with the acquisition of the Customer Service Management Group division of HBO & Company in October of 1991. The effect of foreign exchange on this three year period was a $2 million decrease in cash. Operations have generally been the primary source of the company's cash. Cash provided from operations has been augmented by proceeds from sales of stock under the company's stock plans, from sales of facilities, and from sales of other non-operating assets. The company has not paid cash dividends since its inception in order to reinvest available cash in operations. The company is currently holding two facilities for future sale: Milford, Massachusetts and the remaining portion of Woodstock, Connecticut. As sales of these facilities occur, the net proceeds will supplement the net cash generated from operating activities. During fiscal year 1993, the company had a $70 million unsecured revolving credit facility with a group of banks. This facility was replaced in the first quarter of fiscal year 1994 with a $40 million revolving credit facility and an unsecured $30 million letter of credit facility with the same group of banks. The revolving credit facility has a duration of one year. The letter of credit facility has a duration of 364 days and provides for automatic renewal on a daily basis. Both of these facilities expire on December 31, 1994. The company is currently in the process of establishing a replacement letter of credit facility. The existing facilities contain certain covenants, including restrictions on the sale or pledge of certain assets, the declaration of dividends, and the incurrence of other debt. The interest rate on the borrowings under the revolving credit facility is 1.5% per annum above the London Interbank Offered Rate. The interest rate for borrowings under the letter of credit facility is .5% per annum above the prime rate. During fiscal years 1994 and 1993, there were no borrowings under any of these facilities. At September 24, 1994 and September 25, 1993, there were letters of credit totaling $11.6 million and $12.6 million, respectively, secured by the current and previous facilities. The company believes it is important to maintain a conservative capital structure and a strong cash position. Cash is invested in liquid temporary investments pending its utilization. The company's investment policy is to minimize risk while maximizing return on cash, and to keep uninvested cash at a minimum. Cash is generally centralized domestically, although some cash is also held at various subsidiaries around the world to meet local operating funding requirements. With minor exceptions, all cash is freely remittable to the United States. Although the actual level of spending will be influenced by many factors, the company anticipates that expenditures for property, plant and equipment will continue to be the primary use of cash during fiscal year 1995. Most of the expenditures will be for capital assets directly related to the company's open systems product sales, marketing, support and development. Net fixed assets associated with the company's proprietary ECLIPSE MV family of products represent less than 20% of the company's total net fixed assets. Such assets are primarily spare parts employed to support the company's MV service base of over 19,000 installed units worldwide, as well as those MVs which are serviced by third parties. The writedown of net book value of property, plant, and equipment during fiscal 1994 totaled $15.2 million, primarily as a result of sales of demonstration equipment to end-users and includes a writedown of approximately $4.0 million of net book value of fixed assets to their realizable value as part of the consolidation of certain activities in the European marketplace. Management expects that sales of demonstration equipment will continue. Also during fiscal 1995, cash totaling $25 million is expected to be utilized in relation to the company's restructuring programs. Subsequent to the end of the fiscal year, the company settled with Northrup Grumman Corporation its six-year software copyright infringement and trade secrets litigation against Grumman Systems Support Corporation ("Grumman"). Under the terms of this settlement, which was approved by the U.S. District Court, Grumman has paid to the company $53 million and the parties have dismissed all pending litigation. These proceeds further strengthen the company's financial condition and will be used to fund future operating activities and other cash requirements. The settlement will result in a pre-tax gain, net of related legal fees and other expenses, of $44.5 million which the company will recognize in its first quarter fiscal 1995 financial statements. The company believes it has sufficient resources to provide for its current operations and to continue to invest in the future. CONSOLIDATED STATEMENTS OF OPERATIONS DATA GENERAL CORPORATION YEAR ENDED SEPT. 24, SEPT. 25, SEPT. 26, IN THOUSANDS EXCEPT PER SHARE AMOUNTS 1994 1993 1992 REVENUES Product . . . . . . . . . . . . . . $ 722,423 $ 672,965 $ 677,804 Service. . . . . . . . . . .. . . . 398,082 404,904 438,143 Total revenues . . . . .. . . . 1,120,505 1,077,869 1,115,947 COSTS AND EXPENSES Cost of product revenues . .. . . . 483,808 415,128 395,839 Cost of service revenues . .. . . . 249,306 239,590 259,208 Research and development. . . . . . 90,826 100,172 111,336 Selling, general, and administrative. . . . . . . . . . 341,343 346,740 357,528 Restructuring charge . . . .. . . . 35,000 25,000 48,000 Total costs and expenses . . . 1,200,283 1,126,630 1,171,911 Loss from operations . . . .. . . . (79,778) (48,761) (55,964) Interest income. . . . . . .. . . . 5,881 8,032 11,022 Interest expense . . . . . .. . . . 14,049 14,766 14,470 Other income, net . . . . . . . . . 2,353 416 -- Loss before income taxes. . . . . . (85,593) (55,079) (59,412) Income tax provision . . . .. . . . 2,100 5,400 3,100 Net loss. . . . . . . . . . . . . . $ (87,693) $ (60,479) $ (62,512) PRIMARY NET LOSS PER SHARE: Net loss per share. . . . . . . . ($2.45) ($1.73) ($1.91) Weighted average shares outstanding . . . . . . . . . . 35,774 34,876 32,788 NET LOSS PER SHARE ASSUMING FULL DILUTION: Net loss per share. . . . . . . . ($2.45) ($1.73) ($1.91) Weighted average shares outstanding . . . . . . . . . . 35,774 34,876 32,788 The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements. CONSOLIDATED BALANCE SHEETS DATA GENERAL CORPORATION SEPT. 24, SEPT. 25, DOLLARS IN THOUSANDS EXCEPT PAR VALUE 1994 1993 ASSETS Current assets: Cash and temporary cash investments. . . $ 142,448 $ 119,560 Marketable securities. . .. . . .. . . . 47,865 72,395 Receivables, less allowances of $13,752 at Sept. 24, 1994 and $12,992 at Sept. 25, 1993 . . . . . . . . . . . . . . . . . 258,709 285,481 Inventories. . . . . . . .. . . .. . . . 118,412 101,827 Other current assets . . .. . . .. . . . 30,642 32,397 Total current assets . .. . . .. . . . 598,076 611,660 Property, plant, and equipment, net. . . . 164,777 177,551 Other assets . . . . . . . .. . . .. . . . 59,011 77,118 $ 821,864 $ 866,329 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable. . . . . . .. . . .. . . . $ 2,461 $ 2,267 Accounts payable . . . . .. . . .. . . . 92,338 85,571 Other current liabilities.. . . .. . . . 232,066 215,070 Total current liabilities . . .. . . . 326,865 302,908 Long-term debt . . . . . . .. . . .. . . . 156,942 158,352 Other liabilities . . . . . . . . .. . . . 29,445 27,992 Commitments and Contingencies Stockholders' equity: Common stock, $.01 par value: Outstanding -- 36,457,000 shares at Sept. 24, 1994 and 35,267,000 shares at Sept. 25, 1993 (net of deferred compensation of $9,348 at Sept. 24, 1994 and $11,619 at Sept. 25, 1993. . . . 434,757 422,589 Accumulated deficit . . . . . .. . . . (116,923) (29,230) Cumulative translation adjustment. . . (9,222) (16,282) Total stockholders' equity. .. . . . 308,612 377,077 $ 821,864 $ 866,329 The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements. CONSOLIDATED STATEMENTS OF CASH FLOWS DATA GENERAL CORPORATION YEAR ENDED SEPT. 24, SEPT. 25, SEPT. 26, IN THOUSANDS 1994 1993 1992 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss . . . . . . . . . . . . . . . $ (87,693) $ (60,479) $ (62,512) Adjustments to reconcile net loss to net cash provided from operating activities: Depreciation. . . . . . . . . .. . . 76,957 78,756 84,172 Amortization of capitalized software development costs . . . . 21,448 17,768 15,273 Amortization of deferred compensation . . . . . . . . . . . 5,329 5,344 5,548 Increase in other liabilities .. . . 1,453 7,004 2,110 Writedown of net book value of property, plant, and equipment. . . . . . . . . . . . . 15,233 20,917 12,559 Gain on sale of investment. . .. . . (4,653) (3,216) -- Other non-cash items, net. . . . . . 11,714 6,157 (13,072) Changes in operating assets and liabilities, net of effects from acquisition and sale of non-operating assets: (Increase) decrease in receivables . . . . . . . . . . 31,757 (12,171) (15,498) (Increase) decrease in inventories . . . . . . . . . . (15,735) 15,895 16,656 (Increase) decrease in other current assets. . . . . . . . . 3,727 (255) 4,461 Increase in accounts payable . . . 3,837 1,812 11,772 Increase (decrease) in other current liabilities, excluding debt. . . . . . .. . . 10,753 (2,901) 21,793 Net cash provided from operating activities . . . . . . . . . . . . 74,127 74,631 83,262 CASH FLOWS FROM INVESTING ACTIVITIES: Expenditures for property, plant, and equipment. . . . . . . . . . . . (92,955) (94,968) (93,607) Purchase of marketable securities. . . (90,788) (110,470) (198,721) Proceeds from maturity of marketable securities. . . . . . . . 115,318 114,953 213,829 Capitalized software development . . . costs. . . . . . . . . . . . . . . . (17,582) (23,078) (20,555) Net proceeds from sale of subsidiary . . . . . . . . . . . . . -- -- 4,002 Net proceeds from sale of facilities and other assets. . . . . 28,314 21,284 -- Investment in equity securities .. . . (2,000) -- -- Cash disbursed for acquisition. .. . . -- -- (10,254) Net cash used by investing activities . . . . . . . . . . . . (59,693) (92,279) (105,306) CASH FLOWS FROM FINANCING ACTIVITIES: Cash provided from stock plans, net. . 6,901 9,575 12,241 Borrowings (repayments) of notes payable. . . . . . . . . . . . . . . -- (1,234) 546 Repayment of long-term debt . . .. . . (2,034) (3,599) (1,709) Net cash provided from financing activities . . . . . . . . . . . . 4,867 4,742 11,078 Effect of foreign currency rate fluctuations on cash and temporary cash investments . . . . . . 3,587 (6,979) 1,334 Increase (decrease) in cash and temporary cash investments. . . .. . . 22,888 (19,885) (9,632) Cash and temporary cash investments -- beginning of the period. . . . . . . . 119,560 139,445 149,077 Cash and temporary cash investments -- end of the period. . . . . . . . . . . $ 142,448 $ 119,560 $ 139,445 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest paid. . . . . . . . . . . . $ 13,422 $ 13,983 $ 13,553 Income taxes paid . . . . . . . . . $ 3,444 $ 3,098 $ 4,086 The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY DATA GENERAL CORPORATION YEAR ENDED SEPT. 24, SEPT. 25, SEPT. 26, IN THOUSANDS 1994 1993 1992 COMMON STOCK: Beginning balance. . . . . . . .. . . . $ 422,589 $ 407,798 $ 391,827 Shares issued under stock plans, net. . 6,839 9,447 10,423 Amortization of deferred compensation . 5,329 5,344 5,548 Ending balance . . . . . . . . .. . . . 434,757 422,589 407,798 ACCUMULATED EARNINGS (DEFICIT): Beginning balance. . . . . . . .. . . . (29,230) 31,249 93,761 Net loss for year . . . . . . . . . . . (87,693) (60,479) (62,512) Ending balance . . . . . . . . .. . . . (116,923) (29,230) 31,249 CUMULATIVE TRANSLATION ADJUSTMENT: Beginning balance. . . . . . . .. . . . (16,282) 10,989 8,853 Net translation adjustment for year . . 7,060 (27,271) 2,136 Ending balance . . . . . . . . .. . . . (9,222) (16,282) 10,989 Total stockholders' equity . . . . . . . . $ 308,612 $ 377,077 $ 450,036 The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DATA GENERAL CORPORATION NOTE 1. ACCOUNTING POLICIES FISCAL YEAR. The company's fiscal year ends on the last Saturday in September. PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include the accounts of Data General Corporation and its domestic and foreign subsidiaries (the "company"). All significant intercompany transactions have been eliminated. In October 1991, the company sold Data General Thailand ("DGT"), its Thailand manufacturing subsidiary, for net proceeds of $4.0 million in cash and a $6.0 million note receivable. No gain or loss was recorded on the sale. In October 1991, the company purchased certain assets of the Customer Service Management Group ("CSMG"), a division of HBO & Company, for $10.3 million. CSMG is a multi-vendor equipment service provider for over 350 hospitals throughout the United States. The acquisition was accounted for by the purchase method of accounting and accordingly, the purchase price has been allocated to the assets acquired and the liabilities assumed based on the estimated fair values at the date of acquisition. The statements of operations and of cash flows include the accounts of DGT until the date of sale, and the accounts of CSMG from the date of purchase. TRANSLATION OF FOREIGN CURRENCIES. The functional currencies for the company's operations in Australia, Canada, Europe, Japan, and New Zealand are the local currencies. Assets and liabilities of these operations are translated into U.S. dollars at exchange rates in effect at the balance sheet date. Income and expense items are translated at average exchange rates for the period. Accumulated net translation adjustments are included in stockholders' equity. For the company's other foreign operations, the U.S. dollar is the functional currency. Assets and liabilities of these operations are remeasured into U.S. dollars at exchange rates in effect at the balance sheet date, except for inventories and property, plant, and equipment, which are remeasured at historical exchange rates. Income and expense items are remeasured at average rates for the period, except for cost of sales and depreciation, which are remeasured at historical exchange rates. Gains and losses resulting from remeasurement, not material in amount, are included in the results of operations. The company enters into foreign exchange contracts as a hedge against exposure to fluctuations in exchange rates associated with certain transactions denominated in foreign currencies, principally accounts receivable. Market value gains or losses on these contracts are included in the results of operations and generally offset exchange gains or losses on the related transactions. Foreign exchange transaction gains and losses, not material in amount, are included in the results of operations. CONSOLIDATED STATEMENTS OF CASH FLOWS. Temporary cash investments consist of highly liquid time deposits and commercial paper with original maturities of 90 days or less. Marketable securities consist primarily of U.S. Treasury bills and notes with original maturities of greater than 90 days. These investments are valued at cost plus accrued interest, which approximates market value. Cash flows from foreign exchange contracts that are accounted for as hedges of identifiable foreign exchange transactions are classified as cash flows from operating activities in accordance with the nature of the transactions being hedged. INVENTORIES. Inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out method. PROPERTY, PLANT, AND EQUIPMENT. Property, plant, and equipment is stated at cost, less accumulated depreciation. Depreciation is computed using the straight-line method, based on the following estimated useful lives: land improvements, 10-12 years; buildings and building improvements, 3-25 years; equipment, 3-10 years. Included in property, plant, and equipment are computer equipment spares which are not available for resale. These spares are used to support systems the company has sold or is using internally. Spares are depreciated over a 3 year estimated useful life. REVENUE RECOGNITION. Product revenues are recognized at the time of shipment. Service revenues, including postcontract customer support, are recognized ratably over applicable contractual periods or as services are performed. The costs of these service revenues are charged to expense when incurred. RESEARCH, DEVELOPMENT, AND WARRANTY COSTS. Research, engineering, and product development costs are expensed as incurred. Software development costs incurred after reaching technological feasibility are capitalized and amortized to cost of product revenues over a period not to exceed 3 years, which approximates the estimated economic lives of the software products. Unamortized software development costs were $39.2 million at September 24, 1994 and $43.0 million at September 25, 1993. Amortization of capitalized software development costs for fiscal 1994 included approximately $2.7 million related to the writedown of certain capitalized software costs to net realizable value. Estimated direct on-line support and warranty costs are accrued at the time of shipment. ADVERTISING. Advertising costs are charged to operations when incurred. The company has not incurred any costs associated with direct-response advertising during fiscal 1994 and fiscal 1993 and there were no capitalized advertising costs at September 24, 1994 and September 25, 1993. Advertising expenses for fiscal 1994, 1993, and 1992 were $18.1 million, $17.1 million, and $23.3 million, respectively. RETIREMENT/POST-EMPLOYMENT BENEFITS. Net pension cost for the company's domestic defined benefit pension plan is funded as accrued, to the extent that current pension cost is deductible for U.S. Federal tax purposes. The plan's transition surplus is amortized over 19 years. Net pension cost for the company's international defined benefit pension plans is generally funded as accrued. The net transition surplus or obligation for these plans is amortized over periods ranging from 15 to 21 years. Net postretirement benefit costs for the company's domestic postretirement benefits plan are generally funded as accrued, to the extent that current cost is deductible for U.S. Federal tax purposes. The net transition obligation for the plan is amortized over 20 years. In November 1992, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") 112, "Employers' Accounting for Post-Employment Benefits". This standard is effective for fiscal years beginning after December 15, 1993. The company will implement this statement in its first quarter of fiscal 1995. The future adoption of SFAS 112 is not expected to have a material effect on the company's consolidated financial position or results of operations. INCOME TAXES. In the first quarter of fiscal 1994, the company adopted SFAS 109, "Accounting for Income Taxes". SFAS 109 is an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the company's financial statements or tax returns. Deferred tax expense represents the change in the net deferred tax asset or liability balance. In estimating future tax consequences, SFAS 109 generally considers all expected expected future events other than enactments of changes in the tax law or rates. Previously, the company used the SFAS 96 asset and liability approach that gave no recognition to future events other than the recovery of assets and settlement of liabilities at their carrying amounts. The implementation of SFAS 109 did not have a material effect on either the company's consolidated financial position or results of operations. The company has a valuation allowance which offsets substantially all net deferred tax assets existing as of September 24, 1994. EARNINGS PER SHARE. Primary net income (loss) per share is based upon the weighted average number of common shares outstanding, including dilutive common stock equivalents. Common stock equivalents represent the net additional shares resulting from the assumed exercise of options outstanding under the company's stock option plans, using the "treasury stock" method. Net income (loss) per share assuming full dilution is based upon the weighted average number of common shares outstanding, including dilutive common stock equivalents and assumed conversion of the company's 7 3/4% Convertible Subordinated Debentures, if dilutive. For fiscal 1994, 1993 and 1992, these debentures are anti-dilutive and have been excluded from the calculation. OTHER RECENT PRONOUNCEMENTS. In May 1993, the FASB issued SFAS 114, "Accounting by Creditors for Impairment of a Loan" and SFAS 115, "Accounting for Certain Investments in Debt and Equity Securities". SFAS 114 and 115 are effective for fiscal years beginning after December 15, 1994 and December 15, 1993, respectively. The company will implement these statements as required. The future adoption of these standards is not expected to have a material effect on the company's consolidated financial position or results of operations. NOTE 2. RESTRUCTURING During fiscal years 1994, 1993, and 1992, the company recorded restructuring charges of $35 million, $25 million, and $48 million, respectively. The amounts accrued and charged against the liabilities during the current fiscal year were as follows: Balance Fiscal Fiscal Balance Sept 25, 1994 1994 Sept 24, IN MILLIONS 1993 Provision Charges 1994 Provisions related to terminated employees: Termination payments . . . . . . . . . . . . $15.4 $18.9 $(19.1) $15.2 Pension and OPEB costs (curtailment loss). . .7 1.5 (.7) 1.5 Other costs. . . . . . . . . . . . . . . . . .8 1.0 (.7) 1.1 Provisions related to employees not terminated . . . . . . . . . . . . . . . . . -- 2.1 (.2) 1.9 Provisions for leases. . . . . . . . . . . . . 19.1 4.2 (9.3) 14.0 Writedowns of assets to be sold or discarded . 1.3 4.3 (4.9) .7 Other. . . . . . . . . . . . . . . . . . . . . 2.1 3.0 (2.8) 2.3 Total. . . . . . . . . . . . . . . . . . . $39.4 $35.0 $(37.7) $36.7 The 1994 restructuring charge included provisions for the termination of approximately 570 employees as part of a further realignment of the company's worldwide sales and service organizations. The 1993 and 1992 restructuring charges included provisions for the termination of 580 and 1,100 employees, respectively. The termination payments relate primarily to salary and benefit continuation costs. Other provisions for terminated employees are for outplacement costs. At September 24, 1994, approximately 200 terminations related to the fiscal 1994 restructuring charge had occured and all terminations relating to the fiscal 1993 and fiscal 1992 restructuring charges had been completed. Provisions for employees not terminated relate primarily to relocation costs where the company has consolidated or closed various facilities and costs associated with the company's relocation and consolidation of European operations. The writedown of fixed assets was primarily associated with consolidating certain activities in the European marketplace. The remaining accrual for leases is primarily for the closure of various domestic branch sales offices and excess vacant rental properties, located primarily in the United Kingdom. There were no material changes in estimates included in the restructuring liability during the latest fiscal year. In connection with prior restructuring actions during fiscal 1993, the company sold its facilities in Westbrook, Maine, and Portsmouth, New Hampshire, as well as a portion of its Woodstock, Connecticut facility, for net proceeds of $15.7 million. In fiscal 1992, the company sold Data General Thailand, its Thailand manufacturing subsidiary, for net proceeds of $4.0 million in cash and a $6.0 million note receivable. In each of these transactions, any excess proceeds from these sales over the net book value of properties was included in the restructuring reserve to offset anticipated costs associated with vacant properties and properties held for sale. NOTE 3. CONSOLIDATED BALANCE SHEET DETAILS IN THOUSANDS SEPT. 24, SEPT. 25, 1994 1993 INVENTORIES: Raw materials. . . . . . . . . . . . . . . . . . . . $ 11,791 $ 6,665 Work in process. . . . . . . . . . . . . . . . . . . 36,282 27,778 Finished systems . . . . . . . . . . . . . . . . . . 35,521 31,566 Field engineering parts and components . . . . . . . 34,818 35,818 Total inventories. . . . . . . . . . . . . . . . . $118,412 $101,827 PROPERTY, PLANT, AND EQUIPMENT: Land . . . . . . . . . . . . . . . . . . . . . . . . $ 3,433 $ 6,127 Buildings and improvements . . . . . . . . . . . . . 78,685 115,139 Manufacturing and design equipment . . . . . . . . . 103,537 104,973 Data processing, office, and other equipment . . . . 331,100 304,323 Computer equipment spares. . . . . . . . . . . . . . 126,169 128,877 Total property, plant, and equipment . . . . . . . 642,924 659,439 Accumulated depreciation . . . . . . . . . . . . . . (478,147) (481,888) Total property, plant, and equipment, net. . . . . $164,777 $177,551 OTHER CURRENT LIABILITIES: Accrued employee compensation and benefits . . . . . $ 59,857 $ 51,709 Deferred revenues. . . . . . . . . . . . . . . . . . 43,260 38,023 Accrued restructuring charges. . . . . . . . . . . . 36,696 39,377 Other accrued expenses . . . . . . . . . . . . . . . 90,833 83,927 Current portion of long-term debt. . . . . . . . . . 1,420 2,034 Total other current liabilities. . . . . . . . . . $232,066 $215,070 Property, plant, and equipment at September 24, 1994 includes assets which are held for sale as a result of the company's corporate-wide restructuring programs. The original cost and net book value of these assets is $12,243 and $5,021 respectively. In September 1994, the company sold its Westboro, Massachusetts land and facilities for net proceeds of $16.7 million. It has entered into a 10-year sale leaseback arrangement for a portion of the property. This arrangement has been accounted for as an operating lease. No gain was recognized on this sale leaseback transaction. NOTE 4. NOTES PAYABLE Notes payable at September 24, 1994 and September 25, 1993 consisted of borrowings by Data General SARL (France) of $2.5 and $2.3 million, respectively. The borrowings are from various banks, are unsecured, and involve no commitment fees or compensating balances. The interest rate on the borrowings is .5% per annum above the Paris Interbank Offered Rate (PIBOR), and was 6.2% and 8.1% at September 24, 1994 and September 25, 1993, respectively. During fiscal 1993, the company had a $70 million unsecured revolving credit facility from a group of banks. Effective December 30, 1993, the company replaced the $70 million revolving credit facility with an unsecured $40 million revolving credit facility and an unsecured $30 million letter of credit facility with the same group of banks. The facilities contain certain covenants, including restrictions on the sale or pledge of certain assets, the declaration of dividends and the incurrence of other debt. The interest rate for borrowings under the revolving credit facility is 1.5% per annum above the London Interbank Offered Rate (LIBOR). The LIBOR rates at September 24, 1994 ranged from 4.9% to 6.1%. The interest rate for borrowings under the letter of credit facility is .5% per annum above the prime rate. Commitment fees paid on available funds are not material and there were $11.6 million of letters of credit secured by the letter of credit facility at September 24, 1994. At September 25, 1993, there were $12.6 million of letters of credit secured by the previous revolving credit facility. During fiscal years 1994 and 1993, there were no borrowings under any of these facilities. The revolving credit facility has a duration of one year; the letter of credit facility has a duration of 364 days and provides for automatic renewal on a daily basis. Both of these facilities expire on December 31, 1994. The company is currently in the process of establishing a replacement letter of credit facility. NOTE 5. INCOME TAXES Domestic and foreign loss before taxes, and details of the income tax provision (benefit) are as follows: YEAR ENDED SEPT. 24, SEPT. 25, SEPT. 26, IN THOUSANDS 1994 1993 1992 LOSS BEFORE TAXES: Domestic. . . . . . . . . . . . . . . . . . . $(54,201) $(15,119) $(19,172) Foreign . . . . . . . . . . . . . . . . . . . (31,392) (39,960) (40,240) $(85,593) $(55,079) $(59,412) INCOME TAX PROVISION (BENEFIT): Current: Foreign . . . . . . . . . . . . . . . . . . $ 1,896 $ 2,955 $ 2,278 State . . . . . . . . . . . . . . . . . . . 700 850 600 Total current . . . . . . . . . . . . . . 2.596 3,805 2,878 Deferred: Federal . . . . . . . . . . . . . . . . . . -- 919 -- Foreign . . . . . . . . . . . . . . . . . . (496) 676 222 Total deferred. . . . . . . . . . . . . . (496) 1,595 222 $ 2,100 $ 5,400 $ 3,100 Deferred income taxes reflect the tax impact of temporary differences between the amount of assets and liabilities for financial reporting purposes and such amounts as measured by tax laws and regulations. Under SFAS 109, the benefit associated with future deductible temporary differences is recognized if it is more likely than not that a benefit will be realized. Based on historical evidence, the company has recorded a valuation allowance that offsets substantially all net deferred tax assets. Principal components of the deferred tax assets and liabilities included on the balance sheet at September 24, 1994 and as of the date of adoption were as follows: YEAR ENDED SEPT. 24, SEPT. 25, IN THOUSANDS 1994 1993 Deferred tax asssets: Inventory . . . . . . . . . . . . . . . . . . . . . . .$ 10,881 $ 9,985 Operating expenses. . . . . . . . . . . . . . . . . . . 44,750 26,338 Intercompany profit in inventory & fixed assets . . . . 9,574 11,311 Depreciation. . . . . . . . . . . . . . . . . . . . . . 8,086 5,775 Restructuring . . . . . . . . . . . . . . . . . . . . . 15,414 16,548 Stock option plans. . . . . . . . . . . . . . . . . . . 7,548 8,352 Interest on convertible debentures. . . . . . . . . . . 1,293 1,293 Net operating losses. . . . . . . . . . . . . . . . . . 119,809 101,474 Tax credits . . . . . . . . . . . . . . . . . . . . . . 11,230 12,120 Gross deferred tax assets . . . . . . . . . . . . . . . 228,585 193,196 Less: valuation allowance . . . . . . . . . . . . . . . 209,936 172,893 Total deferred tax assets . . . . . . . . . . . . . . . 18,649 20,303 Deferred tax liabilities: Capitalized software development costs. . . . . . . . . (16,449) (15,061) Other . . . . . . . . . . . . . . . . . . . . . . . . . (1,938) (2,464) Total deferred tax liabilities. . . . . . . . . . . . . (18,387) (20,537) Net deferred tax asset (liability). . . . . . . . . . . $ 262 $ (234) Reconciliation of the U.S. Federal statutory rate to the company's effective tax rate is as follows: YEAR ENDED SEPT. 24, SEPT. 25, SEPT. 26, 1994 1993 1992 U.S. Federal statutory rate . . . . . . . . (35.0)% (34.7)% (34.0)% State income taxes. . . . . . . . . . . . . .8 1.5 1.0 Net domestic and foreign losses without . . 38.2 42.3 40.4 tax benefits. . . . . . . . . . . . . . . Net operating loss carryforwards utilized . (2.2) (1.4) (2.4) Foreign income taxed at different rates . . .1 .7 1.1 Other . . . . . . . . . . . . . . . . . . . .6 1.4 (.9) Effective tax rate. . . . . . . . . . . . . 2.5% 9.8% 5.2% The company has U.S. Federal and foreign operating loss carryforwards of approximately $320 million and tax credit carryforwards of approximately $11 million. The operating loss carryforwards expire in the years 1995 through 2009. The tax credit carryforwards expire in the years 2000 through 2005. Provision has not been made for U.S. or additional foreign taxes on approximately $78 million of undistributed earnings of foreign subsidiaries, as those earnings are considered to be permanently reinvested. Such earnings would become taxable upon the sale or liquidation of these foreign subsidiaries or upon the remittance of dividends. It is not practicable to estimate the amount of the deferred tax liability on such earnings. Upon remittance, certain foreign countries impose withholding taxes that are then available, subject to certain limitations, for use as credits against the company's U.S. tax liability, if any. The amount of withholding tax that would be payable upon remittance of the entire amount of undistributed earnings would approximate $2.5 million. NOTE 6. LONG-TERM DEBT SEPT. 24, SEPT. 25, IN THOUSANDS 1994 1993 7-3/4% Convertible Subordinated Debentures due 2001. . . $125,000 $125,000 8-3/8% Sinking Fund Debentures due 2002. . . . . . . . . 32,562 32,552 Industrial revenue bonds . . . . . . . . . . . . . . . . 800 2,834 158,362 160,386 Less current portion . . . . . . . . . . . . . . . . . . (1,420) (2,034) $156,942 $158,352 Maturities and sinking fund requirements for the next five fiscal years are as follows: 1995 - $1,420; 1996 - $3,500; 1997 - $3,500; 1998 - $3,500; 1999 - $3,500. The 7 3/4% Convertible Subordinated Debentures are convertible at the option of the holder, at any time prior to redemption or repurchase, into shares of Common Stock of the company at a conversion price of $19.20 per share, subject to adjustment for certain events. The debentures are subordinated to all Senior Indebtedness (as defined in the indenture under which the bonds were issued). At the option of the company, the bonds may be redeemed at any time after June 1, 1994 at decreasing redemption prices, and may be redeemed at the option of the holder if there is a Fundamental Change (as defined in the indenture) in the company's operations. The indenture does not contain any financial covenants or any restrictions on the payment of dividends or the repurchase of the company's securities. Deferred debt issuance costs at September 24, 1994 of $2.7 million are being amortized to interest expense over the life of the debentures. The 8 3/8% Sinking Fund Debentures are subject to mandatory sinking fund payments which provide for annual principal retirements of $3.5 million through 2001. The company has the option, under certain conditions, to increase the sinking fund payments or to redeem the debentures prior to maturity. Prior to fiscal 1992, the company reacquired a total of $27.4 million principal amount of the debentures. Of these reacquired debentures, $24.5 million principal amount was used to satisfy sinking fund requirements through fiscal 1994. Subsequent to September 24, 1994, the company reacquired an additional $2.7 million principal amount of the debentures. The remainder of all acquired debentures may be used to satisfy future sinking fund requirements. The debentures are subject to covenants which include certain limitations on the incurrence of additional debt, and the payment of dividends. The industrial revenue bonds are to be repaid in varying installments, with the final payments due in 1995. The remaining bonds have fixed interest rates of 81/4%. During fiscal 1993, the company repaid its Portsmouth and a portion of its Woodstock Industrial Revenue Bonds in the amounts of $0.3 million and $2.4 million, respectively, as a result of the sales of all or a portion of these facilities. During fiscal 1994, the company repaid the remainder of the Woodstock and Milford Industrial Revenue Bonds according to their scheduled repayment dates. NOTE 7. FINANCIAL INSTRUMENTS, COMMITMENTS AND CONTINGENCIES FINANCIAL INSTRUMENTS. The company enters into various types of financial instruments in the normal course of business. Fair values for certain financial instruments are based on quoted market prices. For other financial instruments, fair values are estimated based on assumptions concerning the amount and timing of estimated future cash flows and assumed discount rates reflecting varying degrees of perceived risk. Accordingly, the fair values may not represent actual values of the financial instruments that could have been realized as of year end or that will be realized in the future. Fair values for cash and temporary cash investments, marketable securities, accounts receivable, notes payable, and accounts payable approximate carrying value at September 24, 1994 and September 25, 1993, due to the relatively short maturity of these financial instruments. The fair value of investments and notes receivable, included in other assets, was $4.0 million and $16.2 million at September 24, 1994 and September 25, 1993, respectively, compared to carrying values of $4.0 million and $6.7 million, respectively. The fair value of long-term debt, including debt due within one year, at September 24, 1994 and September 25, 1993 was $134.9 million and $157.7 million, respectively, compared to carrying values of $158.4 million and $160.4 million, respectively. Included in other income, net, in the fiscal 1994 Statement of Operations is a gain of $4.7 million on the sale of an investment held by the company in an unaffiliated entity. This amount was offset, in part, by a $2.3 million provision for certain other non-operating charges taken by the company. Included in other income, net, in fiscal 1993 is a gain of $3.2 million on the sale of an investment held by the company in the same unaffiliated entity. This amount was offset, in part, by a $2.8 million provision for certain other non-operating charges taken by the company. The company enters into various forward contracts to limit its exposure to fluctuations in foreign currency exchange rates. As of September 24, 1994, in connection with the company's foreign exchange hedging programs, the company had entered into forward exchange contracts to purchase $53.4 million and to sell $105.9 million in various foreign currencies. The exposure to credit risk is believed to be minimal since the counterparties are major financial institutions. The market risk exposure is limited to risk related to currency rate movements. As substantially all of these contracts were entered into shortly before year end, the fair value of outstanding contracts at September 24, 1994 approximates the original value of the forward contracts. Between the end of the fiscal year and September 27, 1994, forward exchange contracts to purchase $51.8 million and to sell $58.8 million in various foreign currencies matured and were settled. The remaining contracts mature at various dates through January 25, 1995. The company's temporary cash investments, marketable securities and accounts receivable are subject to potential concentrations of credit risk. The company's investment policies limit the amount of investments in a single institution and restrict investments to low-risk, highly liquid securities. A portion of the company's trade receivables are concentrated in the U.S. government and in the health care industry. Management does not believe that the company is subject to any unusual risk beyond the normal credit risk attendant to operating its business. In the normal course of business, the company enters into certain sales-type lease arrangements with customers. These leases are generally sold to third party financing institutions. A portion of these arrangements contain certain recourse provisions. The company's maximum exposure under the recourse provisions was approximately $12.8 million, net of related reserves. A portion of these receivables are secured by security interests in the related equipment. The fair value of the recourse obligation at September 24, 1994 was not determinable as no market exists for these obligations. LEASE COMMITMENTS. Lease agreements are primarily for sales and service offices and the company's corporate headquarters. The leases expire at various dates through 2014 and some contain options for renewal. Rental expense, including amounts charged against previously established restructuring reserves for vacant properties, was $32.5 million, $34.4 million, and $36.2 million for fiscal years 1994, 1993, and 1992, respectively. Future minimum rental payments under existing non-cancelable operating leases as of September 24, 1994 are as follows: FISCAL YEAR IN MILLIONS 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 38.2 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.4 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . 23.4 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.0 1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.4 Subsequent to 1999 . . . . . . . . . . . . . . . . . . . . 61.6 $182.0 A majority of the leases contain escalation clauses which provide for increases in base rentals to recover increases in future operating costs. The future minimum rental payments shown above include base rentals, exclusive of any future escalation. Approximately $59 million, prior to amounts expected to be recovered through subleases, of the future minimum rental payments shown above relate to facilities which have been closed or are expected to be closed as the result of the company's restructuring and cost reduction program. A portion of the future rental obligations for these facilities, net of amounts expected to be recovered through existing and future subleases, has been accrued as part of the restructuring charges. LITIGATION. The company and certain of its subsidiaries are involved in various patent infringement, contractual, and proprietary rights suits. In the opinion of management, the conclusion of these suits will not have a material adverse effect on the financial condition or results of operations and cash flows of the company and its subsidiaries. NOTE 8. STOCKHOLDERS' EQUITY The company has 100,000,000 authorized shares of common stock. As of September 24, 1994, 36,677,000 shares of common stock have been issued, of which 220,000 shares with a cost of $6.5 million are held by the company as treasury shares. During fiscal 1994, 1,190,000 additional shares were issued. As of September 25, 1993, 35,487,000 shares of common stock were issued, of which 220,000 shares with a cost of $6.5 million were held by the company as treasury shares. The company has 1,000,000 authorized shares of $.01 par value preferred stock. The company's Board of Directors (the "Board") is authorized to issue shares of preferred stock in such series and with such terms and conditions as the Board may determine. In connection with the adoption of the company's Stockholder Rights Plan (see below), 400,000 shares of preferred stock have been designated as Series A Junior Participating Preferred Stock. No shares of preferred stock have been issued as of September 24, 1994. Under the Stockholder Rights Plan adopted in 1986, as amended, a dividend of Stock Purchase Rights (the "Rights") was paid. The Rights enable common stockholders to purchase from the company shares of Series A Junior Participating Preferred Stock under certain circumstances following the acquisition of, or attempt to acquire, 20% or more of the company's common stock or a determination that an "adverse person" has purchased 15% or more of the common stock. The Rights also entitle common stockholders to purchase shares of the company's or an acquiror's common stock at one-half of market value under circumstances which include certain transactions by or with a potential acquiror, including "adverse persons," and mergers and certain asset sales. The Rights may be redeemed by the company under certain circumstances. The Rights will expire in October 1996. NOTE 9. STOCK PLANS EMPLOYEE QUALIFIED STOCK PURCHASE PLAN. This plan covers substantially all employees and authorizes the issuance of a maximum of 8,600,000 shares of common stock upon exercise of nontransferable options granted semiannually. The options are exercisable six months after grant, at the lower of 85% of market value at the beginning or end of the six-month period, through accumulation of payroll deductions of up to 10% of each participating employee's regular base pay during such period. During fiscal 1994, 2,000,000 additional shares of common stock were authorized for issuance under the plan, and options were exercised to purchase 729,000 shares at an average price of $6.96 per share. Unissued shares of common stock reserved for future issuance under this plan were 1,864,000 shares at September 24, 1994 and 593,000 shares at September 25, 1993. EMPLOYEE STOCK OPTION PLAN. This plan authorized the grant of either incentive stock options or non-qualified stock options to key employees, including officers and directors, to purchase up to 4,000,000 shares of common stock. For incentive options, the purchase price is equal to the fair market value on the date of grant. For non-qualified options the purchase price is determined by the Employee Stock Option Plan Committee within limits as set forth in the plan. Options granted under the plan generally are immediately exercisable and include restrictions against disposition of the shares and a requirement, upon termination of employment, to offer unvested shares for resale to the company at their original purchase price. The periods over which restrictions lapse are determined by the Employee Stock Option Plan Committee. Options may expire up to ten years after date of grant. Additional information concerning activity during fiscal 1994 is as follows: SHARES RESERVED FOR OPTIONS AVERAGE FUTURE GRANTS OUTSTANDING PRICE (000's) (000's) PER SHARE September 25, 1993. . . . . . 1,536 1,462 $ 8.40 Options granted . . . . . . (1,111) 1,111 5.27 Options exercised . . . . . -- (82) 4.52 Options cancelled . . . . . 172 (172) 8.54 September 24, 1994. . . . . . 597 2,319 $ 7.03 RESTRICTED STOCK OPTION PLAN. This plan authorized the grant of options to key employees, including officers, directors, and consultants, to purchase up to 11,000,000 shares of the company's common stock. Option prices are determined by the Restricted Stock Option Plan Committee within limits as set forth in the plan. Options granted are immediately exercisable and include restrictions against disposition of the shares and a requirement, upon termination of employment, to offer unvested shares for resale to the company at their original purchase price. The periods over which restrictions lapse are determined by the Restricted Stock Option Plan Committee. Employees may use previously acquired shares of the company's common stock to pay the exercise price of shares purchased. Company policy requires that shares tendered by an employee to exercise an option be held by the employee for a minimum period of three months prior to the exercise date. Additional information concerning activity during fiscal 1994 is as follows: SHARES RESERVED FOR OPTIONS AVERAGE FUTURE GRANTS OUTSTANDING PRICE (000's) (000's) PER SHARE September 25, 1993. . . . . . 490 2,941 $ 4.27 Options granted . . . . . . (268) 268 3.84 Options exercised . . . . . -- (379) 3.68 Options cancelled . . . . . 199 (199) 6.13 September 24, 1994. . . . . . 421 2,631 $ 4.17 NON-EMPLOYEE DIRECTOR RESTRICTED STOCK OPTION PLAN. This plan authorized the grant of an option to purchase 4,000 shares of common stock to each non-employee director upon his initial election to the Board of Directors. The exercise price of options granted is the lesser of 50% of the book value per share of common stock at the end of the fiscal year preceding the date of grant or 25% of the fair market value per share on the date of grant. An aggregate of 32,000 shares of common stock may be issued under the plan. Options granted are immediately exercisable and include restrictions against disposition of the shares. Should the optionee cease to serve as a director, except under certain circumstances, any restricted shares must be offered to the company at their original purchase price. Restrictions lapse cumulatively to the extent of 25% of the grant on each anniversary of the date of grant. During fiscal 1994, options to purchase 4,000 shares at an average price of $1.81 per share were issued. At September 24, 1994, options to purchase 12,000 shares at an average purchase price of $5.56 per share were outstanding, and 8,000 shares were reserved for future grants. This plan will terminate on December 31, 1994. NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN. This plan authorizes the grant of an option to purchase 4,000 shares of common stock to each non-employee director on the date of his annual election(s) to the Board of Directors. The exercise price of options granted is 100% of the closing price per share of common stock on the date of grant. An aggregate of 150,000 shares of common stock may be issued under the plan. The plan was adopted in fiscal 1994 and will terminate on December 31, 2004. Options granted are immediately exercisable and include restrictions against disposition of the shares. Should the optionee cease to serve as a director, except under certain circumstances, any restricted shares must be offered to the company at their original purchase price. Restrictions lapse cumulatively to the extent of 25% of the grant on each anniversary of the date of grant. During fiscal 1994, 16,000 options were granted at an average price of $8.50 per share. At September 24, 1994, options to purchase 16,000 shares at an average price of $8.50 per share were outstanding and 134,000 shares were reserved for future grants. In connection with the Restricted Stock Option Plan, the Non-Employee Director Restricted Stock Option Plan, and non-qualified options issued under the Employee Stock Option Plan, the aggregate excess of fair market value over option price on the dates of grant is treated as deferred compensation. Such deferred compensation is amortized to expense over the period of the restrictions and is credited to additional paid-in capital. NOTE 10. BENEFIT PLANS IN THOUSANDS The company has a noncontributory defined benefit pension plan which covers substantially all U.S. employees. The company also has a supplemental retirement benefit plan, which covers certain U.S. employees. Benefits under the plans are based on an employee's regular base pay and creditable years of service, as defined in the plans. Certain of the company's foreign subsidiaries also have retirement plans covering substantially all of their employees. Benefits under these plans are generally based on either career average or final average salaries and creditable years of service, as defined in the plans. Prior service costs are amortized over the average remaining service period of employees expected to receive benefits under the plan. Funds contributed to the plans are invested primarily in common stocks, mutual funds, insurance contracts and cash equivalent securities. The components of net pension expense are as follows: YEAR ENDED SEPT. 24, SEPT. 25, SEPT. 26, 1994 1993 1992 Service cost . . . . . . . . . . . . . . . . .$ 8,608 $ 7,835 $ 7,770 Interest on projected benefit obligation . . . 10,506 9,380 8,443 Actual return on plan assets . . . . . . . . . (3,286) (12,629) (6,566) Deferral of net actuarial gains (losses) and amortization of transition surplus and prior service cost. . . . . . . . . . . (6,083) 5,636 (285) Curtailment loss, net of settlement gain . . . 533 -- -- Net pension expense . . . . . . . . . . . .$10,278 $10,222 $ 9,362 The funded status of the plans is as follows: SEPT. 24, SEPT. 25, 1994 1993 ACTUARIAL PRESENT VALUE OF BENEFIT OBLIGATIONS: Vested benefit obligation . . . . . . . . . . . . . $116,057 $116,176 Accumulated benefit obligation. . . . . . . . . . . $121,602 $122,288 Projected benefit obligation. . . . . . . . . . . . $137,777 $140,822 Market value of plan assets. . . . . . . . . . . . . . 104,449 98,779 Excess of projected benefit obligation over plan assets. . . . . . . . . . . . . . . . . . . . . . . 33,328 42,043 Unrecognized actuarial gain (loss) . . . . . . . . . . 1,370 (10,300) Unrecognized prior service cost. . . . . . . . . . . . (17,072) (20,714) Unrecognized transition surplus, net . . . . . . . . . 9,125 10,053 Adjustment required to recognize minimum liability . . -- 6,307 Net pension liability included in current and other. . liabilities . . . . . . . . . . . . . . . . . . . . $ 26,751 $ 27,389 ASSUMPTIONS USED IN COMPUTING THE FUNDED STATUS OF THE PLANS: Weighted average discount rate. . . . . . . . . . . 8.04% 7.68% Expected long-term weighted average rate of return. on assets. . . . . . . . . . . . . . . . . . . . 9.57% 8.82% Weighted average rate of increase in compensation . levels . . . . . . . . . . . . . . . . . . . . . 4.49% 4.45% The assumptions used to compute the funded status of certain plans were changed in fiscal 1994. The changes in assumptions resulted in decreases of $8,500, $8,500, and $10,100, in the vested benefit obligation, accumulated benefit obligation, and projected benefit obligation, respectively. The assumptions used to compute the funded status of certain plans were changed in fiscal 1993. The changes in assumptions resulted in increases of $8,200, $8,400, and $8,200, in the vested benefit obligation, accumulated benefit obligation, and projected benefit obligation, respectively. SFAS 87 requires recognition of a minimum pension liability to reflect the excess of accumulated benefits over the fair value of pension plan assets for defined benefit plans. As a result, the company recorded a minimum pension liability of $6,307 in fiscal 1993, with an offsetting intangible asset. Since the fair value of the pension plan assets and accrued liability exceeds accumulated benefits, no minimum pension liability was required at September 24, 1994. As a result of the company's restructuring and cost containment programs, a pension curtailment loss of $652 was recognized in fiscal 1994. This amount had been previously reserved as part of the fiscal 1993 restructuring charge. The company also has foreign defined contribution pension plans. Total pension cost charged to expense for these plans was $1,464 in fiscal 1994, $2,288 in fiscal 1993, and $1,722 in fiscal 1992. The company's postretirement benefit plan provides certain medical and life insurance benefits for retired employees. Substantially all U.S. employees of the company may become eligible for these benefits if they remain employed until normal retirement age and fulfill other eligibility requirements as specified by the plan. With the exception of certain participants who retired prior to 1986, the medical benefit plan requires monthly contributions by retired participants in amounts equal to insured equivalent costs less a fixed company contribution which is dependent on the participant's length of service and Medicare eligibility. Benefits are continued to dependents of eligible retiree participants for 39 weeks after the death of the retiree. The life insurance benefit plan is noncontributory. Funds contributed to the plan are invested primarily in common stocks, mutual funds and cash equivalent securities. The components of net periodic postretirement benefit cost are as follows: YEAR ENDED SEPT. 24, SEPT. 25, SEPT. 26, 1994 1993 1992 Service cost . . . . . . . . . . . . . . . . . $ 345 $ 316 $ 294 Interest on accumulated benefit obligation . . 676 680 677 Actual return on plan assets . . . . . . . . . (339) (212) (366) Deferral of net actuarial gains and amortization of transition obligation and prior service costs . . . . . . . . . . . 482 407 564 Net periodic postretirement benefit cost. . $1,164 $1,191 $1,169 The funded status of the plan is as follows: SEPT. 24, SEPT. 25, 1994 1993 ACCUMULATED POSTRETIREMENT BENEFIT OBLIGATION: Retirees. . . . . . . . . . . . . . . . . . . . . . . . $4,217 $4,008 Fully eligible active plan participants . . . . . . . . 1,194 1,515 Other active plan participants. . . . . . . . . . . . . 3,229 4,095 Total accumulated postretirement benefit obligation. . . . 8,640 9,618 Market value of plan assets. . . . . . . . . . . . . . . . 955 622 Excess of accumulated postretirement benefit obligation. . over plan assets. . . . . . . . . . . . . . . . . . . . . 7,685 8,996 Unrecognized transition obligation . . . . . . . . . . . . (2,821) (2,997) Unrecognized prior service cost. . . . . . . . . . . . . . (934) (1,006) Unrecognized actuarial gain (loss) . . . . . . . . . . . . 454 (1,065) Net postretirement benefit liability included. . . . . . . $4,384 $3,928 in current and other liabilities. . . . . . . . . . . . . ASSUMPTIONS USED IN COMPUTING THE FUNDED STATUS OF THE PLAN: Discount rate . . . . . . . . . . . . . . . . . . . . . 8.0% 7.5% Expected long-term rate of return on assets . . . . . . 10.0% 9.0% The assumptions used to compute the funded status of the plan were changed in fiscal 1994 and fiscal 1993. The change in assumptions did not result in a material change in the accumulated postretirement benefit obligation in either year. Prior service cost results from a plan amendment effective October 1, 1991, which increased amounts payable for employees who retire after December 31, 1985. Prior service costs are amortized over the average remaining service period of the employees expected to receive benefits under the plan. For participants who receive full retiree medical benefits, the medical premium rates were assumed to increase at the following rates: fiscal year 1994 - 11%; thereafter - 7%. A 1% increase in the medical trend rate would not have a significant impact on the accumulated postretirement benefit obligation as of October 1, 1994. During fiscal 1994, the company dissolved the Voluntary Employees' Beneficiary Association trust which funded the cost of employee medical, life, long-term disability, and dental insurance benefits for the company's full-time permanent U.S. employees. Administration and funding of these benefit plans is now handled directly by the company with no changes in the coverages provided to employees. Amounts charged to expense are based on projected benefit levels determined on an annual basis. NOTE 11. GEOGRAPHIC SEGMENT DATA IN THOUSANDS The company's operations involve a single industry segment - the design, manufacture, sale and support of multi-user computer systems, servers, and mass storage devices. Financial information, summarized by geographic area, is presented below. OTHER UNITED INTER- ELIMINA- CONSOLI- STATES EUROPE NATIONAL TIONS DATED YEAR ENDED SEPTEMBER 24, 1994: Total revenues: Unaffiliated customers. . $691,516 $303,754 $125,235 $1,120,505 Interarea transfers . . . 149,008 -- 18,084 $(167,092) -- Total . . . . . . . . . $840,524 $303,754 $143,319 $(167,092) $1,120,505 Restructuring charge. . . . $ 20,800 $ 12,000 $ 2,200 $ 35,000 Income (loss) from operations. . . . . . . . $(48,555) $(18,282) $(16,951) $ 4,010 $ (79,778) Identifiable assets . . . . $559,893 $239,669 $101,110 $(179,389) $ 721,283 Corporate assets. . . . . . 100,581 Total assets. . . . . . . $ 821,864 YEAR ENDED SEPTEMBER 25, 1993: Total revenues: Unaffiliated customers. . $614,823 $342,945 $120,101 $1,077,869 Interarea transfers . . . 208,675 -- 20,859 $(229,534) -- Total . . . . . . . . . $823,498 $342,945 $140,960 $(229,534) $1,077,869 Restructuring charge. . . . $ 7,300 $ 15,300 $ 2,400 $ 25,000 Income (loss) from operations. . . . . . . . $(11,213) $(22,760) $(21,148) $ 6,360 $ (48,761) Identifiable assets . . . . $561,921 $297,923 $ 96,602 $(194,630) $ 761,816 Corporate assets. . . . . . 104,513 Total assets. . . . . . . $ 866,329 YEAR ENDED SEPTEMBER 26, 1992: Total revenues: Unaffiliated customers. . $613,406 $384,465 $118,076 $1,115,947 Interarea transfers . . . 199,249 -- 27,105 $(226,354) -- Total . . . . . . . . . $812,655 $384,465 $145,181 $(226,354) $1,115,947 Restructuring charge. . . . $ 21,000 $ 25,700 $ 1,300 $ 48,000 Income (loss) from operations. . . . . . . . $(18,415) $(30,185) $(13,519) $ 6,155 $ (55,964) Identifiable assets . . . . $563,147 $299,614 $ 95,898 $(152,092) $ 806,567 Corporate assets. . . . . . 133,887 Total assets. . . . . . . $ 940,454 United States interarea transfers primarily represent shipments of equipment and parts to international subsidiaries. Other International interarea transfers primarily represent shipments of work in process and finished goods inventory from manufacturing facilities to domestic operations. These interarea shipments are made at transfer prices which approximate prices charged to unaffiliated customers and have been eliminated from consolidated net revenues. United States revenues from unaffiliated customers include direct export sales. Corporate assets consist primarily of temporary cash investments and marketable securities. Total liabilities of international subsidiaries, before intercompany eliminations, were $295,651 at September 24, 1994 and $296,892 at September 25, 1993. Cumulative retained earnings of international subsidiaries were $109,541 at September 24, 1994 and $109,070 at September 25, 1993. NOTE 12. SUBSEQUENT EVENT Subsequent to the end of the fiscal year, the company settled with Northrup Grumman Corporation its six-year software copyright infringement and trade secrets litigation against Grumman Systems Support Corporation ("Grumman"). Under the terms of the settlement, Grumman paid the company $53 million and the parties have dismissed all pending litigation. The settlement will result in a pre-tax gain, net of related legal fees and other expenses, of $44.5 million which the company will recognize in its first quarter fiscal 1995 financial statements. TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF DATA GENERAL CORPORATION In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of cash flows, and of stockholders' equity present fairly, in all material respects, the financial position of Data General Corporation and its subsidiaries at September 24, 1994 and September 25, 1993, and the results of their operations and their cash flows for each of the three years in the period ended September 24, 1994, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. PRICE WATERHOUSE LLP Boston, Massachusetts October 26, 1994 SUPPLEMENTAL FINANCIAL INFORMATION DATA GENERAL CORPORATION QUARTERLY FINANCIAL DATA (UNAUDITED) FIRST SECOND THIRD FOURTH FISCAL IN MILLIONS, EXCEPT PER SHARE QUARTER QUARTER QUARTER QUARTER YEAR AMOUNTS FISCAL 1994: Total revenues . . . . . . . . . . $261.2 $282.9 $283.8 $292.6 $1,120.5 Total cost of revenues . . . . . . 169.2 185.8 187.8 190.3 733.1 Net loss . . . . . . . . . . . . . (21.1) (48.0)(a) (12.4) (6.2) (87.7) Net loss per share . . . . . . . . $ (.60) $(1.35) $ (.34) $ (.17) $ (2.45) Net loss per share assuming full dilution. . . . . . $ (.60) $(1.35) $ (.34) $ (.17) $ (2.45) FISCAL 1993: Total revenues . . . . . . . . . . $279.6 $267.5 $252.4 $278.4 $1,077.9 Total cost of revenues . . . . . . 163.3 160.4 156.7 174.3 654.7 Net income (loss). . . . . . . . . 0.8 (7.6) (16.4) (37.3)(a) (60.5) Net income (loss) per share. . . . $ .02 $ (.22) $ (.47) $(1.06) $ (1.73) Net income (loss) per share assuming full dilution. . . . . . $ .02 $ (.22) $ (.47) $(1.06) $ (1.73) (a) Includes $35.0 million and $25.0 million provision in fiscal years 1994 and 1993, respectively, for estimated expenses resulting from corporate-wide restructuring and cost reduction programs (See Note 2 of Notes to Consolidated Financial Statements). STOCK PRICE RANGE FISCAL 1994 FISCAL 1993 HIGH LOW HIGH LOW First quarter . . . . . . . . . . 10-3/4 8-3/4 13 9-5/8 Second quarter. . . . . . . . . . 10 7-3/8 13-7/8 10-7/8 Third quarter . . . . . . . . . . 8 6-3/4 12-5/8 8-3/4 Fourth quarter. . . . . . . . . . 10 7-3/8 9-7/8 7-3/4 Data General does business in more than 70 countries through direct sales, subsidiaries, distributors and representatives. The company has 29 subsidiaries and approximately 250 sales and service offices. Major administrative, development, manufacturing and support facilities, and subsidiaries' headquarter locations are listed below. FACILITY LOCATION (Approximate Square Feet) Westboro, Massachusetts corporate headquarters; administration; (850,000/Leased)* product development; special systems Southboro, Massachusetts manufacturing service division; software (545,000)** reproduction; distribution center; refurbished equipment; major unit repair; custom product manufacturing; field engineering services and logistics Apex, North Carolina assembly, test and systems integration facility (300,000) Research Triangle Park, advanced systems research and development North Carolina (174,000) Norcross, Georgia customer support center (105,000/Leased) Mississauga, Ontario sales; field engineering; administration Canada (35,000/Leased) Etobicoke, Ontario, Canada product repair center (15,000/Leased) Chihuahua, Mexico product repair center (67,000/Leased) Schwalbach, Germany sales; customer education; services; (45,200/Leased) administration Brentford, England sales; services; administration; customer (120,000/Leased)*** education Manila, Philippines power supply and transformer manufacturing; (68,000) communications products assembly and test Melbourne, Australia product repair center; logistics and refurbished (31,000/Leased) equipment * Ongoing space reductions during fiscal 1995 will result in a maximum of 490,000 square feet of occupied lease space. ** Includes 40,000 square-feet of space leased to a third party, and 200,000 square feet available for lease. ***Includes 26,000 square-feet of sub-leased space. As part of its consolidation efforts, Data General has for sale, facilities in Woodstock, Connecticut and Milford, Massachusetts. SUBSIDIARY HEADQUARTERS Canada Toronto/Mississauga ASIA/PACIFIC Australia Sydney Hong Kong Japan Tokyo Korea Seoul New Zealand Wellington Singapore EUROPE Austria Vienna Belgium Brussels Denmark Copenhagen/Glostrup Finland Helsinki/Espoo France Paris/Meudon-la-Foret Germany Frankfurt/Schwalbach Italy Milan Netherlands Amsterdam Norway Olso/Voyenenga Portugal Lisbon/Amadora Spain Madrid Sweden Stockholm/Kista Switzerland Zurich United Kingdom and Ireland London/Brentford LATIN AMERICA Argentina Buenos Aires Brazil Rio de Janeiro Chile Santiago Mexico Monterrey Peru Lima Puerto Rico San Juan Venezuela Caracas Frederick R. Adler Director, Chairman of the Executive Committee; Retiring Senior Partner, Fulbright & Jaworski L.L.P., Attorneys at Law, New York, New York Ethan Allen Jr. Vice President, Customer Services Stephen P. Baxter Vice President, General International Area Sales Ferdinand Colloredo- Director; Chairman of the Board, Cabot Mansfeld Partners Limited Partnership, Boston, Massachusetts William J. Cunningham Vice President, Manufacturing and Corporate Quality Arthur W. DeMelle Vice President; Chief Financial Officer Jacob Frank Vice President and General Counsel John J. Gavin Jr. Treasurer Stephen Gardner Vice President, Strategic Alliances Angelo Guadagno Vice President, U.S. Sales Robert C. Hughes Vice President, Worldwide Sales Carl E. Kaplan Secretary; Senior Partner, Fulbright & Jaworski L.L.P., Attorneys at Law, New York, New York Robert C. McBride Vice President; Controller John G. McElwee Director; Retired Chairman, John Hancock Mutual Life Insurance Company, Boston, Massachusetts Anthony C. Nicoletti Vice President, Asia/Pacific Sales Claes L. Nordwall Vice President, Europe Sales James J. Ryan Vice President, Information Management Group Joel Schwartz Vice President, AViiON Business Unit Ronald L. Skates President and Chief Executive Officer; Director W. Nicholas Thorndike* Director; Corporate Director and Trustee Donald H. Trautlein Director; Retired Chairman, Bethlehem Steel Corporation, Bethlehem, Pennsylvania Richard L. Tucker* Director; Managing Director, Trinity Investment Management Corporation, Boston, Massachusetts J. Thomas West Senior Vice President, Advanced Development William L. Wilson* Vice President Donald P. Zereski Vice President, Worldwide Services *Elected during 1994 DIVISION VICE PRESIDENTS Anthony P. DiBona ECLIPSE Business Unit David J. Ellenberger AViiON Marketing Larry D. Hemmerich CLARiiON Business Unit Lee D. Henning Sales Methodologies Edward F. Pensel Manufacturing Operations James Rothnie** Software Development Michael I. Schneider Special Systems Robert Van Steenberg AViiON Systems Development William L. Zastrow Imaging Business Unit **Appointed during 1994 CORPORATE HEADQUARTERS Data General Corporation 4400 Computer Drive Westboro, Mass. 01580 (508) 898-5000 LEGAL COUNSEL Fulbright & Jaworski L.L.P New York, New York INDEPENDENT ACCOUNTANTS Price Waterhouse LLP Boston, Mass. DEBENTURE TRUSTEES Fleet National Bank 63 Wall Street New York, New York 10005 State Street Bank and Trust 225 Franklin Street Boston, Mass. 02110 TRANSFER AGENT AND REGISTRAR First Chicago Trust Company of New York Inquiries related to address changes, consolidations or legal transfers should be directed to: First Chicago Trust Company of New York Post Office Box 2500 Jersey City, NJ 07303 or call (201) 324-0498 STOCK EXCHANGE LISTING New York Stock Exchange London Stock Exchange Unlisted trading privileges on Boston, Midwest, Philadelphia, Pacific and Cincinnati exchanges TRADING SYMBOL DGN ANNUAL MEETING The Annual Meeting of Stockholders will be held at 1:00 p.m., Wednesday, January 25, 1995 in the Enterprise Room, State Street Bank Building, 225 Franklin Street, Boston, Mass. NUMBER OF STOCKHOLDERS As of September 24, 1994 there were approximately 12,500 stockholders of record. This number excludes individual stockholders holding stock under nominee security position listings. DIVIDEND POLICY No cash dividends have been declared or paid by the company since its inception. It is the policy of the company to retain any cash flow for future business expansion. The company anticipates no changes in this policy in the foreseeable future. AVAILABLE PUBLICATIONS The company's Annual Report and Interim Reports are distributed regularly to stockholders. The Annual Report on Form 10-K and Quarterly Reports on Form 10-Q as filed with the Securities and Exchange Commission, and other information is available on written request to: Corporate Communications Department, MS-B221, Data General Corporation, 4400 Computer Drive, Westboro, Mass. 01580 THE COMMON SENSE CONNECTION: As a service to stockholders, customers, partners, and others interested in Data General, the company provides a comprehensive, interactive information library available on the Internet. Called "The Common Sense Connection," this service offers the latest news releases, product and service information, and a wide range of other information about Data General. To access this service, you can: * Log on to our public server at www.dg.com or gopher.dg.com * Request information using e-mail to commonsense@dg.com * Dial our FAX-back system at 1-800-99-DGFAX (North America only) and press 411 to receive a faxed menu of publications * Call Data General Corporation at 1-800-DATAGEN EX-22 9 FY94 SUBSIDIARIES OF REGISTRANT Exhibit 22 Subsidiaries of Registrant. The following are the company's subsidiaries as of the close of the fiscal year ended September 24, 1994. All beneficial interests are wholly-owned, directly or indirectly, by the company, with the exception of Data General Technology (1990) Limited which is 45% owned. All subsidiaries are included in the company's consolidated financial statements. State or Jurisdiction of Name Organization Asia Data General Corporation Delaware China Data General Corporation Delaware Clariion Storage Systems, Inc. Delaware DG Argentina S.A. Argentina DG Foreign Sales Corp., Inc. Virgin Islands DG Venezuela C.A. Venezuela Data General A.G. Switzerland Data General A/S Norway Data General A/S Denmark Data General Africa SARL France Data General Australia Pty., Ltd. Australia Data General Bahamas, Ltd. Bahamas Data General Chile S.A. Chile Data General (Canada) Inc. Canada Data General Computers Sdn, Bhd. Malaysia Data General Gesellschaft mbH Austria Data General AB Sweden Data General Costa Rica, S.A. Costa Rica Data General de Mexico, S.A. de C.V. Mexico Data General del Peru, S.A. Peru Data General Europe, Inc. Delaware Data General France SARL France Data General GmbH Germany Data General Graphics, Inc. Delaware Data General Nederland BV The Netherlands Data General Hong Kong, Ltd. Hong Kong Data General Hong Kong Sales and Service, Ltd. Hong Kong Data General Hungary Hungary Data General International, Inc. Delaware Data General International Manufacturing Pte., Ltd. Singapore Data General International Sales Corporation Delaware Data General Investment Corporation Delaware Data General Ireland, Ltd. Ireland Data General Israel, Ltd. Israel Data General Japan YK Japan Data General Korea Ltd. Korea Data General Ltda. Brazil Data General Latin America, Inc. Delaware Data General Limited United Kingdom Data General New Zealand, Limited New Zealand Data General OY Finland Data General Philippines, Inc. Philippines Data General (Portugal) Sociedade de Computadores Lda. Portugal Data General Puerto Rico, Inc. Delaware Data General S.A. Belgium Data General S.A. Spain Data General S.p.A. Italy Data General Singapore Pte., Ltd. Singapore Data General Technology (1990) Limited Israel Data General Telecommunications, Inc. Delaware Data General Systems (Thailand) Limited Thailand Datagen, Inc. Delaware Datagen Investment Trust Delaware Digital Computer Controls, Inc. Delaware General Risk Insurance Company Ltd. Bermuda EX-24 10 FY94 INDEPENDENT ACCOUNTANTS Exhibit 24 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectuses constituting part of the Registration Statements on Form S-8 (Nos. 2-91481, 33-11527, 33-19759, 33-33300, 33-53039, and 33-53041) of Data General Corporation of our report dated October 26, 1994 appearing on page 30 of the 1994 Annual Report to Stockholders which is incorporated in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report on the Financial Statement Schedules, which appears on page 19 of this Form 10-K. PRICE WATERHOUSE LLP /s/ Price Waterhouse LLP Boston, Massachusetts December 16, 1994 EX-27 11 ARTICLE 5 OF REGULATION S-X
5 1,000 SEP-24-1994 SEP-24-1994 YEAR 142,448 47,865 272,461 13,752 118,412 30,642 642,924 478,147 821,864 232,066 156,942 0 0 434,757 (126,125) 821,864 722,423 1,120,505 483,808 1,165,283 35,000 9,919 8,168 (85,593) 2,100 (87,693) 0 0 0 (87,693) (2.45) (2.45)
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