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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13E-4/A
(AMENDMENT NO. 2)
ISSUER TENDER OFFER STATEMENT
(Pursuant to Section 13(e)(1) of the Securities Exchange Act of 1934)
DELL COMPUTER CORPORATION
(Name of Issuer)
DELL COMPUTER CORPORATION
(Name of Person(s) Filing Statement)
SERIES A CONVERTIBLE PREFERRED STOCK
(Title of Class of Securities)
247025-50-5
247025-40-6
U24702-10-9
(CUSIP Number of Class of Securities)
MICHAEL S. DELL
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
DELL COMPUTER CORPORATION
2112 KRAMER LANE, BUILDING 1
AUSTIN, TEXAS 78758-4012
(512) 338-4400
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications on Behalf of the Person(s) Filing Statement)
Copies to:
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LARRY W. SONSINI THOMAS B. GREEN
WILSON, SONSINI, GENERAL COUNSEL
GOODRICH & ROSATI DELL COMPUTER CORPORATION
650 PAGE MILL ROAD 2112 KRAMER LANE, BUILDING 1
PALO ALTO, CALIFORNIA 94304 AUSTIN, TEXAS 78758-4012
(415) 493-9300 (512) 338-4400
</TABLE>
FEBRUARY 21, 1995
(Date Tender Offer First Published, Sent or Given to Security Holders)
CALCULATION OF FILING FEE
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TRANSACTION AMOUNT OF
VALUATION(1) FILING FEE(1)
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$125,000,000 $25,000
</TABLE>
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(1) The filing fee was paid upon filing by Dell Computer Corporation of the
Schedule 13E-4 on February 21, 1995. The fee was calculated as one-fiftieth
of one percent of the market value of 1,250,000 shares of Series A
Convertible Preferred Stock of Dell Computer Corporation. In accordance with
Rule 0-11(a)(4) under the Securities Exchange Act of 1934, as amended, the
value of Series A Convertible Preferred Stock is based on the book value of
the securities computed as of October 30, 1994, which is the latest
practicable date.
/X/ Check box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting fee was previously
paid. Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
Amount Previously Paid: $25,000.
Form or Registration No.: Schedule 13E-4 (File No. 005-42053)
Filing Party: Dell Computer Corporation
Date Filed: February 21, 1995
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<PAGE> 2
This Amendment No. 2 to the Issuer Tender Offer Statement on Schedule 13E-4
(this "Amendment No. 2") amends the Issuer Tender Offer Statement on Schedule
13E-4 (the "Statement") filed with the Securities and Exchange Commission on
February 21, 1995 by Dell Computer Corporation, a Delaware corporation (the
"Issuer"), and amended by Amendment No. 1 thereto on February 24, 1995, and
relates to the offer by the Issuer to pay a cash premium of $8.25 for each share
of its Series A Convertible Preferred Stock (the "Series A Preferred Stock")
that is converted to common stock, par value $.01 per share, of the Issuer on
the terms and subject to the conditions set forth in the Offer of Premium Upon
Conversion and the related Special Conversion Notice and Registration Agreement.
An amended copy of the Offer of Premium Upon Conversion is attached to this
Amendment No. 2 as Exhibit (a)(1) and copies of the related Special Conversion
Notice and Registration Agreement were attached to the Statement as Exhibits
(a)(2) and (a)(3), respectively. Capitalized terms not otherwise defined herein
shall have the meanings ascribed to them in the Statement.
The purpose of this Amendment No. 2 is to amend the Offer of Premium Upon
Conversion.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
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(a)(1) -- Offer of Premium Upon Conversion dated February 21, 1995, as
amended
(a)(2)* -- Special Conversion Notice
(a)(3)* -- Registration Agreement
(a)(4)* -- Notice of Guaranteed Delivery
(a)(5)* -- Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees
(a)(6)* -- Letter to Clients for use by Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees
(a)(7)* -- Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9
(a)(8)* -- Form of Press Release dated February 21, 1995
(a)(9)* -- Annual Report on Form 10-K for the Fiscal Year Ended January 30,
1994, of Dell Computer Corporation
(a)(10)* -- Quarterly Report on Form 10-Q for the Quarterly Period Ended
October 30, 1994, of Dell Computer Corporation
(a)(11)* -- Current Report on Form 8-K, dated February 21, 1995
(a)(12)* -- Notice to Holders of Series A Convertible Preferred Stock, dated
February 22, 1995
(b) -- Not applicable
(c) -- See Exhibit (a)(3)
(d)* -- Opinion of Baker & McKenzie dated February 21, 1995
(e) -- Not applicable
(f)* -- Question and Answer -- For Use by Dell Computer Corporation
Employees Only
</TABLE>
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* Previously Filed
2
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SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this Amendment No. 2 is true, complete and
correct.
DELL COMPUTER CORPORATION
By: /s/ THOMAS J. MEREDITH
Name: Thomas J. Meredith
Title: Chief Financial Officer
Dated: March 2, 1995
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INDEX TO EXHIBITS
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EXHIBIT
NUMBER DESCRIPTION PAGE NUMBER
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(a)(1) -- Offer of Premium Upon Conversion dated February 21, 1995, as
amended
(a)(2)* -- Special Conversion Notice
(a)(3)* -- Registration Agreement
(a)(4)* -- Notice of Guaranteed Delivery
(a)(5)* -- Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees
(a)(6)* -- Letter to Clients for use by Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees
(a)(7)* -- Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9
(a)(8)* -- Form of Press Release dated February 21, 1995
(a)(9)* -- Annual Report on Form 10-K for the Fiscal Year Ended January 30,
1994, of Dell Computer Corporation
(a)(10)* -- Quarterly Report on Form 10-Q for the Quarterly Period Ended
October 30, 1994, of Dell Computer Corporation
(a)(11)* -- Current Report on Form 8-K, dated February 21, 1995
(a)(12)* -- Notice to Holders of Series A Convertible Preferred Stock, dated
February 22, 1995
(b) -- Not applicable
(c) -- See Exhibit (a)(3)
(d)* -- Opinion of Baker & McKenzie dated February 21, 1995
(e) -- Not applicable
(f)* -- Question and Answer -- For Use by Dell Computer Corporation
Employees Only
</TABLE>
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* Previously Filed
<PAGE> 1
OFFER OF PREMIUM UPON CONVERSION
OF ANY AND ALL OF THE OUTSTANDING
SERIES A CONVERTIBLE PREFERRED STOCK
OF
DELL COMPUTER CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT MIDNIGHT,
NEW YORK CITY TIME, ON WEDNESDAY, MARCH 22, 1995,
UNLESS EXTENDED BY THE COMPANY.
Dell Computer Corporation, a Delaware corporation (the "Company" or
"Dell"), hereby offers to pay a cash premium of $8.25 (the "Conversion Premium")
for each share of its Series A Convertible Preferred Stock (the "Series A
Preferred Stock") that is converted to common stock, par value $.01 per share
("Common Stock"), of the Company from the date of this Offer of Premium through
12:00 midnight, New York City time, on Wednesday, March 22, 1995, unless
extended (the "Special Conversion Period"). A holder of Series A Preferred Stock
who elects to convert during the Special Conversion Period will receive 4.2105
shares of Common Stock (equivalent to a conversion price of $23.75 per share of
Common Stock) and the Conversion Premium of $8.25 in cash for each share of
Series A Preferred Stock converted. At the conclusion of the Special Conversion
Period, a holder of shares of Series A Preferred Stock who did not convert those
shares to Common Stock during the Special Conversion Period will not be entitled
to the Conversion Premium upon conversion.
The Company will register under the Securities Act of 1933, as amended (the
"Securities Act"), and applicable U.S. state securities laws, the resale of the
shares of Common Stock to be issued upon conversion of Series A Preferred Stock
pursuant to this offer by the holders thereof (the "Resale Registration") if and
to the extent those holders enter into a Registration Agreement with the Company
and subject to the terms and conditions of the Registration Agreement. Under the
Resale Registration, resales of such Common Stock may be made for 30 calendar
days (the "Resale Window") only in ordinary brokerage transactions and
transactions in which brokers solicit purchasers. The Company currently intends
to use its reasonable commercial efforts to have the Resale Registration
declared effective as soon as reasonably practicable following completion of the
Conversion Offer. However, the Company may delay the effectiveness of the Resale
Registration in its discretion until a later date as the Company determines may
be required or advisable. There can be no assurance about when the Resale
Registration will become effective. Shares of Common Stock issued upon
conversion of Series A Preferred Stock and not sold pursuant to the Resale
Registration will remain restricted securities under the Securities Act. See
"Special Considerations -- Restrictions on Resale." Holders of Series A
Preferred Stock who elect to convert Series A Preferred Stock pursuant to the
Conversion Offer will not receive future, regular dividend payments with respect
to Series A Preferred Stock, including any amount in respect of periods since
January 27, 1995.
The offer is made on the terms and subject to the conditions set forth in
this Offer of Premium and any supplements or amendments thereto (the "Offer of
Premium"), in the related Special Conversion Notice, and in the related
Registration Agreement (which together constitute the "Conversion Offer"). The
Conversion Offer is not conditioned on any minimum number of shares of Series A
Preferred Stock being tendered for conversion.
BEFORE MAKING A DECISION WHETHER TO ACCEPT THE CONVERSION OFFER, EACH
HOLDER OF SERIES A PREFERRED STOCK SHOULD CAREFULLY CONSIDER THE FACTORS
DESCRIBED IN "SPECIAL CONSIDERATIONS."
---------------------
NEITHER THIS TRANSACTION NOR THE SECURITIES TO BE ISSUED UPON CONVERSION OF THE
SERIES A PREFERRED STOCK HAVE BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE FAIRNESS OR MERITS OF THIS TRANSACTION OR UPON THE
ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN THIS
DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------------
The date of this Offer of Premium is February 21, 1995.
<PAGE> 2
THE SERIES A PREFERRED STOCK AND SHARES OF COMMON STOCK ISSUABLE UPON
CONVERSION THEREOF HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, EXCEPT THAT SUCH COMMON
STOCK MAY BE REGISTERED FOR RESALE DURING THE RESALE WINDOW ON THE TERMS AND
SUBJECT TO THE CONDITIONS OF THE REGISTRATION AGREEMENT. OTHER THAN PURSUANT TO
THE RESALE REGISTRATION, THE SHARES OF SERIES A PREFERRED STOCK AND THE COMMON
STOCK ISSUABLE UPON CONVERSION MAY NOT BE OFFERED, RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT (A) BY THE INITIAL INVESTOR IN THE SERIES A PREFERRED STOCK
(1) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A OR TO THE COMPANY, (2) IN AN OFFSHORE
TRANSACTION IN ACCORDANCE WITH RULE 903 OR 904 OF REGULATION S UNDER THE
SECURITIES ACT, OR (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY
RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), OR (B) BY SUBSEQUENT
INVESTORS, AS SET FORTH IN (A) ABOVE AND, IN ADDITION, TO AN INSTITUTIONAL
ACCREDITED INVESTOR WITHIN THE MEANING OF RULE 501 UNDER THE SECURITIES ACT IN A
TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, IN
EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES.
---------------------
TABLE OF CONTENTS
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The Conversion Offer.................... 1
Special Considerations.................. 5
Capitalization.......................... 9
Summary Consolidated Financial Data..... 10
Beneficial Ownership and Market Prices.. 11
Dividend Policy......................... 12
Procedures for Conversion and
Registration.......................... 12
Certain Federal Income Tax
Considerations........................ 17
Description of Capital Stock............ 20
Available Information................... 24
Incorporation of Certain Documents
by Reference.......................... 25
Conversion Agent........................ 26
</TABLE>
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The Conversion Offer is being made by the Company in reliance on the
exemption from the registration requirements of the Securities Act of 1933, as
amended (the "Securities Act"), afforded by Section 3(a)(9) thereof. The Company
will not pay any commission or other remuneration to any broker, dealer,
salesman or other person for soliciting conversion of the Series A Preferred
Stock. Regular employees of the Company may solicit holders concerning the
Conversion Offer to holders of the Series A Preferred Stock, but they will not
receive additional compensation for doing so.
THE COMPANY HAS MADE NO ARRANGEMENTS FOR AND HAS NO UNDERSTANDING WITH ANY
DEALER, SALESMAN OR OTHER PERSON REGARDING THE SOLICITATION OF HOLDERS OF SERIES
A PREFERRED STOCK TO TENDER SERIES A PREFERRED STOCK FOR CONVERSION, AND NO
PERSON HAS BEEN AUTHORIZED BY THE COMPANY TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THE CONVERSION OFFER AND, IF GIVEN OR MADE,
SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THE DELIVERY OF THIS OFFER OF PREMIUM SHALL NOT,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION THEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
THE CONVERSION OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY OR THE
CONVERSION AGENT ACCEPT SERIES A PREFERRED STOCK TENDERED FOR CONVERSION FROM,
HOLDERS OF SERIES A PREFERRED STOCK IN ANY JURISDICTION IN WHICH THE CONVERSION
OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE SECURITIES
OR BLUE SKY LAWS OF SUCH JURISDICTION. THE COMPANY WILL MAKE A GOOD FAITH EFFORT
TO COMPLY WITH APPLICABLE SECURITIES AND BLUE SKY LAWS IN ORDER TO PREVENT THE
EXCLUSION OF HOLDERS OF SERIES A PREFERRED STOCK FROM THE CONVERSION OFFER.
ii
<PAGE> 3
THE CONVERSION OFFER
PURPOSE
The purpose of the Conversion Offer is to induce conversion of the Series A
Preferred Stock into Common Stock. The Company believes the effects of
conversion will be to strengthen the Company's balance sheet, to eliminate or
reduce the future dividend payments on the Series A Preferred Stock, and to
eliminate or reduce the uncertainty and potential effects on the market price of
the Common Stock associated with the possible future conversion of the Series A
Preferred Stock.
NO RECOMMENDATION OR FAIRNESS OPINION
THE BOARD OF DIRECTORS OF THE COMPANY HAS NOT EXPRESSED A VIEW WITH RESPECT
TO THE FAIRNESS OF THE CONVERSION OFFER TO HOLDERS OF SERIES A PREFERRED STOCK.
NEITHER THE COMPANY NOR THE BOARD OF DIRECTORS OF THE COMPANY HAS SOUGHT OR
RECEIVED A FAIRNESS OPINION ABOUT THE TERMS OF THE CONVERSION OFFER TO HOLDERS
OF SERIES A PREFERRED STOCK. NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS HAS
RECOMMENDED THAT HOLDERS OF SERIES A PREFERRED STOCK TENDER THEIR SERIES A
PREFERRED STOCK FOR CONVERSION PURSUANT TO THE CONVERSION OFFER OR REFRAIN FROM
TENDERING SERIES A PREFERRED STOCK FOR CONVERSION PURSUANT TO THE CONVERSION
OFFER. NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS HAS RECOMMENDED THAT
HOLDERS OF SERIES A PREFERRED STOCK ACCEPT OR REFUSE TO INCLUDE SHARES IN THE
RESALE REGISTRATION OR TO RESELL THEIR COMMON STOCK PURSUANT TO THE RESALE
REGISTRATION. EACH HOLDER OF SERIES A PREFERRED STOCK SHOULD CAREFULLY REVIEW
THIS OFFER OF PREMIUM AND DETERMINE FOR ITSELF WHETHER TO TENDER SERIES A
PREFERRED STOCK PURSUANT TO THE CONVERSION OFFER, WHETHER TO SIGN THE
REGISTRATION AGREEMENT, AND WHETHER TO RESELL SHARES OF COMMON STOCK PURSUANT TO
THE RESALE REGISTRATION.
CONVERSION
The Company hereby offers to pay a cash Conversion Premium of $8.25 for
each share of its Series A Preferred Stock that is converted to Common Stock
during the Special Conversion Period. A holder of Series A Preferred Stock who
elects to convert during the Special Conversion Period will receive 4.2105
shares of Common Stock (equivalent to a conversion price of $23.75 per share of
Common Stock) and the Conversion Premium of $8.25 in cash for each share of
Series A Preferred Stock converted. The Conversion Premium will be funded from
the working capital of the Company. As of January 29, 1995, the Company had
approximately $719 million in working capital, including approximately $527
million in cash and short-term investments. Assuming all of the outstanding
shares of Series A Preferred Stock are converted during the Special Conversion
Period, the holders of Series A Preferred Stock will receive an aggregate of
5,263,125 shares of Common Stock and $10,312,500 in cash (subject to applicable
income taxes and back-up withholding obligations). At the conclusion of the
Special Conversion Period, a holder of shares of Series A Preferred Stock who
did not convert those shares to Common Stock in the Conversion Offer will not be
entitled to the Conversion Premium upon conversion. Holders may elect to convert
some or all of their shares of Series A Preferred Stock pursuant to the
Conversion Offer.
In establishing the Conversion Premium being offered to the holders of
Series A Preferred Stock as an inducement to tender their Series A Preferred
Stock for conversion, the Company considered (i) an estimated present value of
dividend payments (using a discount rate based on the Company's estimated
weighted average cost of capital) that are expected to be declared after
February 15, 1995, through August 25, 1996, which is the first date the Company
may call the Series A Preferred Stock for redemption; (ii) the prices at which
Series A Preferred Stock has been
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<PAGE> 4
sold in private transactions, to the extent the Company could obtain that
information, and the increase in those prices since the date the Series A
Preferred Stock was issued; (iii) recent trading prices for Common Stock on the
Nasdaq National Market; (iv) the potential benefits of increased liquidity in a
public market that the Resale Registration could afford holders of Series A
Preferred Stock who convert Series A Preferred Stock pursuant to the Conversion
Offer; and (v) potential transaction costs that may be incurred by holders in
connection with the sale of shares of Common Stock under the Resale
Registration.
The number of shares of Common Stock to be issued for each share of Series
A Preferred Stock converted in the Conversion Offer is the number originally
provided in the Certificate of Designation with respect to the Series A
Preferred Stock. No adjustment of the conversion ratio of the Series A Preferred
Stock has been made. No adjustment in the conversion ratio of the Series A
Preferred Stock or in the number of shares of Common Stock issuable upon
conversion thereof will be necessary as a result of the Conversion Offer.
Shares of Series A Preferred Stock that the Company receives on conversion
will be restored to the status of authorized but unissued shares of preferred
stock, without designation as to class, and may thereafter be issued (but not as
Series A Preferred Stock). Shares of Series A Preferred Stock that are not
converted pursuant to the Conversion Offer or otherwise will continue to retain
their original rights, preferences and limitations as provided in the
Certificate of Designation relating to those shares.
RESALE REGISTRATION
The Company will register under the Securities Act and applicable U.S.
state securities laws the resale of the shares of Common Stock to be issued upon
conversion of Series A Preferred Stock pursuant to the Conversion Offer by the
holders thereof, if the holders enter into a Registration Agreement with the
Company and subject to the terms and conditions of the Registration Agreement.
The Resale Registration will be made through a Registration Statement to be
filed with the Securities and Exchange Commission (the "Commission"). After the
Commission declares the Registration Statement effective, holders of Common
Stock that are identified in the Registration Statement may resell their Common
Stock during the 30-day Resale Window only in ordinary brokerage transactions
and transactions in which the broker solicits purchasers. The Company currently
intends to use its reasonable commercial efforts to have the Commission declare
the Registration Statement effective as soon as reasonably practicable following
completion of the Conversion Offer. However, the Company may delay the
effectiveness of the Registration Statement in its discretion until a later date
as the Company determines may be required or advisable. The Registration
Statement will not be available for resales until the Commission has declared
the Registration Statement to be, or allowed it to become, effective. There can
be no assurance about when the Registration Statement will become effective.
The Resale Registration will be governed by the terms and conditions of the
Registration Agreement, which holders should read and consider carefully. The
Company will register only those shares of Common Stock that have been issued in
this Conversion Offer and only if the Conversion Agent has received a properly
completed and manually signed Registration Agreement with respect to those
shares. Holders of Series A Preferred Stock desiring to have such Common Stock
registered in the Resale Registration must deliver to the Conversion Agent, on
or before the Expiration Date (hereafter defined), a duly completed and signed
Registration Agreement. In the Registration Agreement, the Company will agree to
indemnify holders signing the Registration Agreement for certain liabilities
under the Securities Act relating to the Resale Registration, and the holders
will agree to indemnify the Company for certain liabilities under the Securities
Act arising from information provided by such holders for use in the Resale
Registration. In the Registration Agreement, holders will also agree to comply
with applicable securities laws, including prospectus delivery requirements,
prohibitions against using Common Stock issued upon conversion of
2
<PAGE> 5
Series A Preferred Stock to cover any short position in the Common Stock
established by that holder, and the provisions of Rule 10b-6 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). In addition, holders who
sell shares of Common Stock pursuant to the Resale Registration may be deemed to
be statutory "underwriters" under the Securities Act, subject to the liability
provisions thereof. See "Special Considerations -- Registration Agreement
Provisions." Holders may elect to have some or all of their Common Stock issued
upon conversion of Series A Preferred Stock in the Conversion Offer registered
for resale pursuant to the Resale Registration.
The purpose of the Resale Registration is to encourage conversion of the
Series A Preferred Stock by providing holders with increased liquidity during a
30-day period for the shares of Common Stock issued upon conversion of the
Series A Preferred Stock. Shares of Common Stock issued upon conversion of
Series A Preferred Stock will be restricted securities within the meaning of
Rule 144 of the Securities Act and will be subject to restrictions on
transferability. See "Special Considerations -- Restrictions on Resale."
Accordingly, the Resale Registration is expected to be the only opportunity for
holders to sell the Common Stock issued on conversion in a public market until
the holding period for restricted securities specified in Rule 144 under the
Securities Act has expired. See "Special Considerations -- Market for Restricted
Common Stock."
REGULAR DIVIDEND PAYMENTS
Holders of Series A Preferred Stock who elect to convert Series A Preferred
Stock pursuant to the Conversion Offer will not receive future, regular dividend
payments with respect to Series A Preferred Stock, including any amount in
respect of periods since January 27, 1995, the last record date for payment of
regularly scheduled dividends.
EXPIRATION AND EXTENSION
The Company will pay the Conversion Premium with respect to any and all
shares of Series A Preferred Stock tendered for conversion and not withdrawn
before 12:00 midnight, New York City time, on Wednesday, March 22, 1995, unless
extended by the Company in its sole discretion (such date, as may be extended,
the "Expiration Date"). In order to extend the Conversion Offer, the Company
will notify the Conversion Agent and make a public announcement of the extension
before 9:00 a.m., New York City time, on the next business day after the
previously scheduled Expiration Date. Tenders of Series A Preferred Stock for
conversion may be withdrawn at any time before the Expiration Date.
If the Company accepts Series A Preferred Stock for conversion pursuant to
the Conversion Offer, the Company will proceed with the Resale Registration with
respect to shares of Common Stock for which a properly completed and duly signed
Registration Agreement has been received by the Conversion Agent and not
withdrawn before the Expiration Date. Registration Agreements may be withdrawn
at any time before the Expiration Date.
CONDITIONS
The Conversion Offer is not conditioned upon any minimum number of shares
of Series A Preferred Stock being tendered for conversion pursuant to the
Conversion Offer. The Conversion Offer is subject to certain customary
conditions. See "Procedures for Conversion and Registration." The Resale
Registration is subject to the Company's acceptance of Series A Preferred Stock
for conversion pursuant to the Conversion Offer, the Conversion Agent's receipt
of a properly completed and duly signed Registration Agreement with respect to
the shares to be included in the Registration Statement, and other customary
terms and conditions specified in the Registration Agreement. A holder's ability
to resell Common Stock pursuant to the Resale Registration is subject to the
Commission's declaring the Registration Statement effective and to compliance
with state securities laws. See "Procedures for Conversion and Registration."
There can be no assurance about when the Registration Statement will become
effective.
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<PAGE> 6
The Conversion Offer is made on the terms and subject to the conditions set
forth in this Offer of Premium, in the related Special Conversion Notice, and in
the related Registration Agreement. The Company intends to conduct the
Conversion Offer in accordance with the applicable requirements of the Exchange
Act and the rules and regulations of the Commission thereunder.
MODIFICATION AND TERMINATION
The Company expressly reserves the right, at its sole discretion, in each
case subject to applicable law, to (i) delay payment of the Conversion Premium,
or terminate the Conversion Offer and not pay the Conversion Premium and
promptly return all Series A Preferred Stock to the holders of Series A
Preferred Stock who elected to convert pursuant to the Conversion Offer by
giving oral or written notice of the delay or termination to the Conversion
Agent prior to the Expiration Date, (ii) waive any condition to the Conversion
Offer and pay the Conversion Premium on all Series A Preferred Stock tendered
for conversion pursuant thereto, (iii) waive any condition to the Resale
Registration, (iv) extend the Expiration Date and retain all Series A Preferred
Stock tendered pursuant to the Conversion Offer, and not withdrawn, until the
expiration thereof, (v) amend the terms of the Conversion Offer, (vi) modify the
form or amount of the consideration to be paid pursuant to the Conversion Offer,
or (vi) delay the effectiveness of the Registration Statement for the Resale
Registration as the Company determines may be required or advisable. Any
amendment to the Conversion Offer will apply to all Series A Preferred Stock
tendered for conversion pursuant to the Conversion Offer, and any amendment to
the Registration Agreement will apply to all Common Stock subject to a
Registration Agreement.
FEES AND EXPENSES
The holders of Series A Preferred Stock who elect to convert pursuant to
the Conversion Offer will not be obligated to pay brokerage commissions, fees or
transfer taxes upon conversion of Series A Preferred Stock pursuant to the
Conversion Offer. The Company will pay all its charges and expenses in
connection with the Conversion Offer. Holders will be responsible for their own
income taxes, administrative expenses, and the fees and expenses of their own
advisors.
The holders of Series A Preferred Stock who elect to have the Common Stock
issuable upon conversion registered in the Resale Registration will not be
obligated to pay fees and expenses of the Resale Registration. However, such
holders will be obligated to pay any transfer taxes, income taxes, and brokerage
fees upon resale of that Common Stock.
The Company estimates that the aggregate amount of fees and expenses it
will incur in connection with the Conversion Offer is approximately $300,000.
ACCEPTANCE PROCEDURES
TO RECEIVE THE CONVERSION PREMIUM OFFERED HEREBY, YOU MUST COMPLETE THE
SPECIAL CONVERSION NOTICE PROVIDED WITH THIS OFFER OF PREMIUM AND RETURN IT TO
THE CONVERSION AGENT OR, IF YOUR SHARES ARE HELD IN BOOK-ENTRY FORM THROUGH THE
DEPOSITORY TRUST COMPANY ("DTC"), YOU MUST COMPLY WITH THE BOOK-ENTRY TENDER
PROCEDURES, IN EACH CASE BY THE EXPIRATION DATE OF 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON WEDNESDAY, MARCH 22, 1995, UNLESS EXTENDED BY THE COMPANY. See
"Procedures for Conversion and Registration" and the Special Conversion Notice.
To have shares of Common Stock issued upon conversion of shares of Series A
Preferred Stock in the Conversion Offer registered for resale in the Resale
Registration, you must complete the Registration Agreement provided with this
Offer of Premium and deliver a manually signed copy to the Conversion Agent
before the Expiration Date. EVEN IF YOUR SHARES ARE HELD IN BOOK-ENTRY FORM, YOU
MUST COMPLETE AND TIMELY DELIVER A MANUALLY SIGNED REGISTRATION AGREEMENT TO THE
CONVERSION AGENT BEFORE THE EXPIRATION DATE IN ORDER TO HAVE SHARES OF COMMON
STOCK INCLUDED IN THE REGISTRATION STATEMENT. See "Procedures for Conversion and
Registration" and the Registration Agreement.
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The Company will be deemed to have accepted valid Special Conversion
Notices and Registration Agreements when, as and if the Company has given oral
or written notice thereof to the Conversion Agent. The acceptance for conversion
of Series A Preferred Stock validly tendered for conversion pursuant to the
Conversion Offer and not properly withdrawn will be made as promptly as
practicable after the Expiration Date. If any tendered Series A Preferred Stock
is not accepted for conversion because of an invalid or late Special Conversion
Notice or otherwise, certificates for the unaccepted Series A Preferred Stock
will be returned, without expense, to the tendering holders thereof as soon as
practicable after the Expiration Date.
SPECIAL CONSIDERATIONS
In addition to the other information contained in this Offer of Premium,
holders of Series A Preferred Stock should consider carefully the following
factors before tendering Series A Preferred Stock pursuant to the Conversion
Offer.
RESTRICTIONS ON RESALE
The shares of Series A Preferred Stock were originally issued on August 26,
1993, in a private placement exempt from the registration requirements of the
Securities Act pursuant to Section 4(2) and Regulation D under the Securities
Act. The shares were resold by the purchaser in transactions exempt from the
registration requirements of the Securities Act in reliance on Rule 144A and
Regulation S under the Securities Act. The Series A Preferred Stock and shares
of Common Stock issuable upon conversion thereof have not been and will not be
registered under the Securities Act or any state securities laws, except that
Common Stock issued upon conversion in the Conversion Offer may be registered
for resale during the 30-day Resale Window pursuant to the Resale Registration.
Other than pursuant to the Resale Registration, the shares of Series A Preferred
Stock and the Common Stock issuable upon conversion may not be offered, resold,
pledged or otherwise transferred except (a) by the initial investor in the
Series A Preferred Stock (1) to a person who the seller reasonably believes is a
qualified institutional buyer within the meaning of Rule 144A under the
Securities Act in a transaction meeting the requirements of Rule 144A or to the
Company, (2) in an offshore transaction in accordance with Rule 903 or 904 of
Regulation S under the Securities Act, or (3) pursuant to an exemption from
registration provided by Rule 144 under the Securities Act (if available), or
(b) by subsequent investors, as set forth in (a) above and, in addition, to an
institutional accredited investor within the meaning of Rule 501 under the
Securities Act in a transaction exempt from the registration requirements of the
Securities Act, in each case in accordance with any applicable securities laws
of any state of the United States.
MARKET FOR THE SERIES A PREFERRED STOCK
Although the Series A Preferred Stock is subject to various restrictions on
transfer, trades occur from time to time through the Private Offerings, Resales
and Trading through Automated Linkages ("PORTAL") system of the National
Association of Securities Dealers, Inc. in which only qualified institutional
buyers (as defined in Rule 144A under the Securities Act) may participate and in
other private transactions. Private trading in the Series A Preferred Stock is
limited, and there is currently no established trading market for the Series A
Preferred Stock. To the extent that shares of Series A Preferred Stock are
converted as a result of the Conversion Offer, the number of outstanding shares
of Series A Preferred Stock will be reduced. Accordingly, the Company
anticipates that the private market could be substantially reduced for shares of
Series A Preferred Stock remaining outstanding after the Conversion Offer.
Shares of Series A Preferred Stock that are not converted may not continue to be
eligible for trading on the PORTAL system or be eligible for book-entry
transfer. The shares of Series A Preferred Stock are not "margin securities"
under the regulations of the Board of Governors of the Federal Reserve System
(the "Federal Reserve Board"), meaning that, among other things, brokers may not
extend credit on the collateral of the Series A Preferred Stock. Following the
Conversion Offer, the shares of Series A Preferred Stock would continue not to
5
<PAGE> 8
constitute "margin securities" for the purposes of the Federal Reserve Board
and, therefore, could not be used as collateral for loans made by brokers.
MARKET FOR THE RESTRICTED COMMON STOCK
Shares of Common Stock issued upon conversion of Series A Preferred Stock
will be restricted securities within the meaning of Rule 144 under the
Securities Act and will be subject to limitations on transferability as
described in "Special Considerations -- Restrictions on Resale." Based on
current law and assuming that the holding period of the Common Stock may tack
back to the date of original issuance of the Series A Preferred Stock, the
Company believes that shares of Common Stock issued upon conversion of Series A
Preferred Stock may be resold publicly after August 26, 1995, pursuant to Rule
144. In general, under Rule 144 as currently in effect, if two years have
elapsed since the later of the date of acquisition of restricted shares from the
Company or any "affiliate" (as defined below) of the Company, the acquiror or
subsequent holder (including an affiliate) is entitled to sell, within any
three-month period, that number of shares that does not exceed the greater of 1%
of the then outstanding shares of Common Stock or the average weekly trading
volume of the shares of Common Stock on all exchanges and/or reported through
the automated quotation system of a registered securities association during the
four calendar weeks preceding the date on which notice of the sale is filed with
the Commission. Sales under Rule 144 are also subject to certain restrictions
relating to manner of sale, notice requirements and the availability of current
public information about the Company. If three years have elapsed since the
later of the date of acquisition of restricted shares from the Company or from
any affiliate of the Company, and the acquiror or subsequent holder thereof is
deemed not to have been an affiliate of the Company at any time during the 90
days preceding a sale, such person would be entitled to sell such shares in the
public market under Rule 144(k) without regard to the volume limitations, manner
of sale provisions, public information requirements or notice requirements. As
defined in Rule 144, an "affiliate" of an issuer is a person that directly, or
indirectly through the use of one or more intermediaries, controls, or is
controlled by, or is under common control with, such issuer.
REGISTRATION AGREEMENT PROVISIONS
The holders of Series A Preferred Stock do not currently have registration
rights with respect to their shares or the Common Stock issuable upon conversion
of Series A Preferred Stock.
Certain provisions of the Registration Agreement are intended to provide
the Company and the holders of Common Stock issued upon conversion of Series A
Preferred Stock pursuant to the Conversion Offer with certain rights and
obligations comparable to those typically found in registration rights
agreements. In the Registration Agreement, the Company will agree to indemnify
such holders who sign the Registration Agreement for certain liabilities under
the Securities Act relating to the Resale Registration, and those holders will
agree to indemnify the Company for certain liabilities under the Securities
arising from information provided by those holders for use in the Resale
Registration. In the Registration Agreement, those holders will also agree to
comply with applicable securities laws, including prospectus delivery
requirements. The Registration Agreement also contains covenants intended to
assure that holders comply with certain other securities laws applicable to a
secondary distribution of securities. See "Special Considerations -- Short
Sales" and "Special Considerations -- Cooling Off Period."
The Company currently intends to use its reasonable commercial efforts to
have the Resale Registration declared effective as soon as reasonably
practicable following completion of the Conversion Offer. However, the Company
may delay the effectiveness of the Resale Registration in its discretion until a
later date as the Company determines may be required or advisable. There can be
no assurance about when the Resale Registration will become effective.
6
<PAGE> 9
SHORT SALES
In order to avoid violation of the registration requirements of the
Securities Act, holders of Series A Preferred Stock may not use Common Stock
issuable upon conversion to cover short positions in the Company's Common Stock.
Sales of Common Stock issuable upon conversion may be made only after the
conversion has occurred and only in accordance with the applicable legal and
contractual transfer restrictions. See "Special Considerations -- Restrictions
on Resale." Sales of Common Stock covered by the Resale Registration may be made
only after the holder has received notice from the Company that the Commission
has declared the Registration Statement for such resales effective under the
Securities Act, and then during the Resale Window for so long as the
Registration Statement is effective. HOLDERS ARE URGED TO CONSULT THEIR LEGAL
COUNSEL FOR ADVICE ABOUT COMPLIANCE WITH FEDERAL AND STATE SECURITIES LAWS.
COOLING OFF PERIOD
Rule 10b-6 under the Exchange Act prohibits persons (subject to some
exceptions) who are engaged in a distribution of Common Stock from bidding for
or purchasing, or inducing other persons to bid for or purchase, Common Stock or
any right to purchase the Common Stock until they have completed their
participation in the distribution. Under Rule 10b-6 and Commission
interpretations of that rule, a selling shareholder in the Resale Registration
and affiliates of that selling shareholder must cease bidding for and purchasing
Common Stock and Series A Preferred Stock at least two business days before the
selling shareholder offers or sells Common Stock pursuant to the Registration
Statement in the Resale Registration. Such bids and purchases may not be made
for so long as the shares of Common Stock registered in the Resale Registration
and held by that selling shareholder (or persons acting in concert or affiliated
with that selling shareholder) remain unsold. Broker-dealers may also be subject
to this cooling-off period if their activities are deemed to be participation in
the distribution, such as if the broker-dealer purchases securities as principal
from a selling shareholder or sells securities as agent for a selling
shareholder. Consequently, the Registration Agreement provides that the Resale
Registration will be available only in ordinary brokerage transactions,
including ordinary transactions in which brokers solicit purchasers. HOLDERS ARE
URGED TO CONSULT THEIR LEGAL COUNSEL FOR ADVICE ABOUT COMPLIANCE WITH RULE 10B-6
IF THEY DETERMINE TO INCLUDE SHARES IN THE RESALE REGISTRATION.
NO DETERMINATION ABOUT THE FAIRNESS OF THE CONVERSION OFFER
The Board of Directors of the Company has not expressed a view with respect
to the fairness of the Conversion Offer to holders of Series A Preferred Stock.
Neither the Company nor the Board of Directors of the Company has sought or
received a fairness opinion about the terms of the Conversion Offer to holders
of Series A Preferred Stock. Neither the Company nor its Board of Directors has
recommended that holders of Series A Preferred Stock tender their Series A
Preferred Stock for conversion pursuant to the Conversion Offer or refrain from
tendering Series A Preferred Stock for conversion pursuant to the Conversion
Offer. Neither the Company nor its Board of Directors has recommended that
holders of Series A Preferred Stock accept or refuse to include shares in the
Resale Registration or to resell their Common Stock pursuant to the Resale
Registration. Each holder of Series A Preferred Stock should carefully review
this Offer of Premium and determine for itself whether to tender Series A
Preferred Stock pursuant to the Conversion Offer, whether to sign the
Registration Agreement, and whether to resell shares of Common Stock pursuant to
the Resale Registration.
FEDERAL INCOME TAX CONSIDERATIONS
It is more likely than not that the payment of the cash Conversion Premium
will be treated for tax purposes as ordinary dividend income to a recipient,
provided that the recipient makes no dispositions of Common Stock or Series A
Preferred Stock that are considered to be part of the same integrated plan as
the conversion of the Series A Preferred Stock. The Conversion Premium may be
taxable as ordinary dividend income or capital gain to recipients who dispose of
Common
7
<PAGE> 10
Stock or Series A Preferred Stock as part of the same integrated plan as the
conversion of the Series A Preferred Stock, depending on their individual
circumstances. See "Certain Federal Income Tax Considerations."
NO APPRAISAL RIGHTS
Holders of Series A Preferred Stock are not entitled to appraisal under
applicable law in connection with the Conversion Offer.
SUBORDINATED STATUS OF COMMON STOCK
The Common Stock received upon conversion of any Series A Preferred Stock
will rank junior in right of payment of dividends and liquidating distributions
to all existing and future indebtedness of the Company, including the Company's
11% Senior Notes Due August 15, 2000, and will also rank junior in right of
payment to other debentures, notes or preferred stock of the Company, whether
now or hereafter issued (including the shares of Series A Preferred Stock that
are not converted).
VOLATILITY OF STOCK PRICE
The Common Stock is currently quoted on the Nasdaq National Market. The
Company believes that factors including but not limited to new product or other
announcements by the Company, its competitors or suppliers and quarterly
fluctuations in the Company's and competitors' results of operations have caused
significant fluctuations in the market price of the Common Stock and could
continue to do so in the future. In addition, substantial sales of the Company's
Common Stock in excess of historical trading volumes, as may be occasioned by
the sale of shares of Common Stock in the Resale Registration, are likely to
have an adverse effect on the trading price of the Company's Common Stock.
Further, the Company competes in a highly dynamic industry which may result in
increased volatility of the Company's Common Stock price.
8
<PAGE> 11
CAPITALIZATION
The following table sets forth the actual capitalization of the Company at
October 30, 1994, and the pro forma capitalization adjusted to reflect the
assumed conversion of all of the outstanding shares of Series A Preferred Stock
to Common Stock and the payment of the aggregate Conversion Premium and the
estimated expenses of the Conversion Offer. This table should be read in
conjunction with the Company's Annual Report on Form 10-K for the Fiscal Year
Ended January 30, 1994, and Quarterly Report on Form 10-Q for the Quarterly
Period Ended October 30, 1994, incorporated herein by reference.
<TABLE>
<CAPTION>
OCTOBER 30, 1994
----------------------
ACTUAL PRO FORMA
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Long-term debt(1)..................................................... $ 100,000 $ 100,000
Stockholders' equity:
Preferred Stock, $.01 par value (liquidation preference $100.00 per
share); shares authorized: 5,000,000; shares issued and
outstanding: 1,250,000 actual and no shares outstanding pro
forma............................................................ 13 --
Common Stock, $.01 par value; shares authorized: 100,000,000; shares
issued and outstanding: 39,086,664 actual and 44,349,789 pro
forma (2)........................................................ 391 444
Additional paid-in capital.......................................... 342,909 342,869
Unrealized loss on short-term investments........................... (2,451) (2,451)
Retained earnings................................................... 253,114 242,501
Translation adjustment.............................................. (12,155) (12,155)
--------- ---------
Total stockholders' equity....................................... 581,821 571,208
--------- ---------
Total capitalization........................................ $ 681,821 $ 671,208
========= =========
</TABLE>
- ---------------
(1) Consists of the Company's 11% Senior Notes Due August 15, 2000.
(2) Excludes 10,262,391 shares of Common Stock reserved for issuance under the
Company's employee benefit plans. Options for 6,203,033 shares under such
plans were outstanding at October 30, 1994.
9
<PAGE> 12
SUMMARY CONSOLIDATED FINANCIAL DATA
The following table sets forth summary consolidated financial data of the
Company. The table also sets forth summary pro forma financial information that
gives effect to the conversion of the Series A Preferred Stock (assuming all
shares are converted) and the payment of the aggregate Conversion Premium and
the estimated expenses of the Conversion Offer. The payment of the Conversion
Premium and the expenses of the Conversion Offer will be treated as an
additional dividend on the Series A Preferred Stock for financial reporting
purposes. Accordingly, the aggregate amount of the Conversion Premium and
expenses paid will be deducted from net income to determine the net income
applicable to common stockholders in the period in which the Conversion Offer is
completed, which will be the first quarter of fiscal 1996 unless the Conversion
Offer is extended or withdrawn. In addition, the weighted average shares
outstanding used to calculate primary earnings per common share will include the
shares of Common Stock issued upon conversion from the Expiration Date to the
end of the period. The summary historical information in this table should be
read in conjunction with the Company's Annual Report on Form 10-K for the Fiscal
Year Ended January 30, 1994, and Quarterly Report on Form 10-Q for the Quarterly
Period Ended October 30, 1994, incorporated herein by reference.
<TABLE>
<CAPTION>
PRO FORMA
-------------------------
YEAR ENDED NINE MONTHS ENDED NINE MONTHS
------------------------- ------------------------- YEAR ENDED ENDED
JANUARY 31, JANUARY 30, OCTOBER 31, OCTOBER 30, JANUARY 30, OCTOBER 30,
1993 1994 1993 1994 1994 1994
----------- ----------- ----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT RATIO AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.............................. $ 2,013,924 $ 2,873,165 $ 2,130,217 $ 2,442,680 $ 2,873,165 $2,442,680
Gross profit........................... 449,452 432,816 294,466 520,892 432,816 520,892
Operating income (loss)................ 139,112 (39,024) (66,180) 170,592 (39,024) 170,592
Net income (loss)...................... 101,642 (35,833) (53,541) 88,886 (35,833) 88,886
Preferred stock dividends.............. -- (3,743) (1,556) (6,562) -- --
----------- ----------- ----------- ----------- ----------- ----------
Net income (loss) applicable to common
stockholders......................... $ 101,642 $ (39,576) $ (55,097) $ 82,324 $ (35,833) $ 88,886
=========== =========== =========== =========== =========== ==========
Earnings (loss) per common share(1):
Primary.............................. $ 2.59 $ (1.06) $ (1.48) $ 2.01 $ (0.84) $ 1.92
Fully diluted........................ -- -- -- $ 1.89 -- --
Weighted average shares used to compute
earnings per share(1):
Primary.............................. 39,235 37,333 37,227 41,009 42,596 46,272
Fully diluted........................ -- -- -- 46,944 -- --
Ratio of earnings to combined fixed
charges and preferred stock
dividends(2)......................... 10.11 --(3) --(3) 5.5 --(3) 8.5
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA
-------------------------
JANUARY 31, JANUARY 30, OCTOBER 31, OCTOBER 30, JANUARY 30, OCTOBER 30,
1993 1994 1993 1994 1994 1994
----------- ----------- ----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF FINANCIAL POSITION
DATA(4):
Working capital........................ $ 358,948 $ 510,397 $ 487,533 $ 624,589 $ 499,784 $ 613,976
Total assets........................... 927,005 1,140,480 1,119,610 1,389,795 1,129,867 1,379,182
Long-term debt......................... 48,373 100,000 100,000 100,000 100,000 100,000
Total stockholders' equity............. 369,200 471,108 448,545 581,821 460,495 571,208
Book value per share................... 10.02 12.42 11.96 14.89 10.66 12.88
</TABLE>
- ---------------
(1) Pro forma primary earnings per share have been computed assuming the
issuance of 5,263,125 shares of Common Stock pursuant to the Conversion
Offer and net income (loss) before the Conversion Premium and the estimated
expenses of the Conversion Offer. The effect of the payment of the
Conversion Premium and the expenses of the Conversion Offer will be treated
as an additional dividend on the Series A Preferred Stock for financial
reporting purposes in the period in which the Conversion Offer is completed.
(2) For purposes of computing the ratio of earnings to combined fixed charges
and preferred stock dividends, earnings consist of income before income
taxes plus fixed charges excluding capitalized interest. Fixed charges
consist of interest incurred, an appropriate portion of rent expense
representative of the interest factor, and preferred stock dividend
requirements equal to the pre-tax earnings that would be required to cover
such dividend requirements based on the Company's effective income tax rates
for the respective periods.
(3) Earnings were inadequate to cover combined fixed charges and preferred
dividend requirements by $43 million for the year ended January 30, 1994,
$70 million for the nine months ended October 31, 1993, and $39 million for
the pro forma year ended January 30, 1994.
(4) Pro Forma Statement of Financial Position Data is adjusted to reflect the
payment of the aggregate Conversion Premium (assuming all shares are
converted) and the estimated expenses of the Conversion Offer.
10
<PAGE> 13
BENEFICIAL OWNERSHIP AND MARKET PRICES
PREFERRED STOCK
As of February 14, 1995, there were 1,250,000 shares of Series A Preferred
Stock outstanding held by 4 record holders. This Offer of Premium, together with
the Special Notice of Conversion and Registration Agreement, is being sent to
those registered holders and to others believed to have beneficial interests in
the Series A Preferred Stock. No officer, director or affiliate of the Company
holds any shares of Series A Preferred Stock.
The Series A Preferred Stock is traded in the PORTAL system of the National
Association of Securities Dealers, Inc. and in other private transactions.
Trading on the PORTAL system is limited, and transaction prices are not readily
available. Accordingly, there is currently no established trading market for the
Series A Preferred Stock. Based on information received from broker-dealers that
purchase or sell the Series A Preferred stock from time to time, the Company
believes that the Series A Preferred Stock currently trades at prices
approximating the market value of the number of shares of Common Stock into
which Series A Preferred Stock is convertible. Holders of Series A Preferred
Stock are urged to obtain current market quotations. To the extent that shares
of Series A Preferred Stock are converted, it is anticipated that the limited
private trading market for unconverted Series A Preferred Stock will become more
limited. There can be no assurance that the Series A Preferred Stock will
continue to be traded in the PORTAL system following the Conversion Offer. See
"Special Considerations -- Market for the Series A Preferred Stock."
COMMON STOCK
If all the shares of Series A Preferred Stock are converted, the Company
will have 44,958,736 shares of Common Stock issued and outstanding (assuming no
additional issuance of shares of Common Stock after February 14, 1995, other
than upon conversion of the Series A Preferred Stock). The Common Stock is
traded in the over-the-counter market and quoted on the Nasdaq National Market
under the symbol DELL. On February 14, 1995, the last reported sale price of the
Common Stock was $45 3/8 per share. The Common Stock issuable upon conversion of
the Series A Preferred Stock will not be eligible for trading in the Nasdaq
National Market and will be subject to the transfer restrictions described in
"Special Considerations -- Restrictions on Resale," except as provided in the
Resale Registration.
The following table sets forth, for the fiscal quarters indicated, the high
and low bid prices for the Common Stock as reported on the Nasdaq National
Market.
<TABLE>
<CAPTION>
HIGH LOW
----- -----
<S> <C> <C>
Fiscal Year Ending January 28, 1996
First Quarter
(January 30, 1995, through February 14, 1995................ $45 5/8 $39 1/2
Fiscal Year Ended January 29, 1995
Fourth Quarter................................................. $47 3/4 $36 3/4
Third Quarter.................................................. $44 $27 1/2
Second Quarter................................................. $30 3/4 $21 1/2
First Quarter.................................................. $30 1/8 $19 1/8
Fiscal Year Ended January 30, 1994
Fourth Quarter................................................. $28 1/8 $20 1/8
Third Quarter.................................................. $21 5/8 $15 1/8
Second Quarter................................................. $34 3/4 $13 7/8
First Quarter.................................................. $49 1/4 $27 5/8
</TABLE>
11
<PAGE> 14
DIVIDEND POLICY
PREFERRED STOCK
Holders of shares of Series A Preferred Stock are entitled to receive,
when, as and if declared by the Board of Directors out of funds legally
available therefore, cash dividends at an annual rate of $7.00 per share,
payable quarterly in arrears. Dividends are cumulative and are payable to the
holders of record as they appear on the stock transfer books on such record
dates as are fixed by the Board of Directors. The Series A Preferred Stock has
priority as to dividends over the Common Stock.
COMMON STOCK
Dividends on the Common Stock are payable when, as and if declared by the
Board of Directors of the Company. The Company has never paid cash dividends on
its Common Stock. The Company intends to retain earnings for use in its business
and, therefore, does not anticipate paying any cash dividends on the Common
Stock for at least the next twelve months. In addition, the Company's current
credit facility generally prohibits the payment of cash dividends by the Company
on the Common Stock except in certain circumstances.
PROCEDURES FOR CONVERSION AND REGISTRATION
The acceptance of the Conversion Offer by a holder of Series A Preferred
Stock pursuant to the procedure set forth below will constitute an agreement
between the holder of Series A Preferred Stock and the Company in accordance
with the terms and subject to the conditions set forth in this Offer of Premium.
CONVERSION OFFER
Except as set forth under "Procedures for Conversion and
Registration -- Book-Entry Transfer," to tender Series A Preferred Stock validly
for conversion pursuant to the Conversion Offer, the Special Conversion Notice
provided herewith, properly completed and duly executed, and any required
signature guarantees and any other required documents must be received on or
before the Expiration Date by the Conversion Agent at its address set forth in
this Offer of Premium. In addition, either (i) the certificates for Series A
Preferred Stock tendered for conversion pursuant to the Conversion Offer must be
received by the Conversion Agent along with such executed Special Conversion
Notice (or facsimile thereof) on or prior to the Expiration Date, or (ii) the
tendering holder must comply with the guaranteed delivery procedures described
below. NO SPECIAL CONVERSION NOTICES AND NO CERTIFICATES FOR SERIES A PREFERRED
STOCK SHOULD BE SENT TO THE COMPANY.
All signatures on a Special Conversion Notice or a notice of withdrawal, as
the case may be, must be guaranteed by an Eligible Institution (as hereinafter
defined), unless the Series A Preferred Stock delivered or withdrawn, as the
case may be, pursuant thereto are delivered (i) by a registered holder (which
term, for the purposes described above, shall include any participant in The
Depository Trust Company (the "Book-Entry Transfer Facility") whose name appears
on a security position listing as the owner of Series A Preferred Stock) or (ii)
for the account of an Eligible Institution. If shares of Series A Preferred
Stock are registered in the name of a person other than the signer of a Special
Conversion Notice or a notice of withdrawal, as the case may be, or if
certificates for shares of Common Stock or certificates for unconverted shares
of Series A Preferred Stock are to be issued or returned to a person other than
the registered holder, then the Series A Preferred Stock must be endorsed by the
registered holder, or be accompanied by a written instrument or instruments of
transfer or conversion in form satisfactory to the Company duly executed by the
registered holder, with such signatures guaranteed by an Eligible Institution.
If signatures on a Special Conversion Notice are required to be guaranteed, such
guarantees must be
12
<PAGE> 15
by a bank, a trust company or a member firm of the New York Stock Exchange (each
of the foregoing being referred to as an "Eligible Institution").
Issuance of Common Stock and payment of the Conversion Premium upon
conversion of the Series A Preferred Stock pursuant to the Conversion Offer will
be made only against delivery of Series A Preferred Stock actually tendered for
conversion. If fewer than all of the shares of Series A Preferred Stock
evidenced by a submitted certificate are converted, the holder of such shares
should fill in the number of shares tendered for conversion in the appropriate
boxes on the Special Conversion Notice with respect to the tender being made.
The Conversion Agent will then reissue and return to the holder of such shares
(unless otherwise requested by the holder of such shares pursuant to the Special
Conversion Notice), as promptly as practicable following the Expiration Date, a
certificate evidencing the number of shares of Series A Preferred Stock not
tendered for conversion. The entire number of shares of Series A Preferred Stock
deposited with the Conversion Agent will be deemed to have been tendered for
conversion unless otherwise indicated.
Holders of Series A Preferred Stock who are not registered holders of, and
seek to convert, Series A Preferred Stock should (i) obtain a properly completed
Special Conversion Notice for such Series A Preferred Stock from the registered
holder with signatures guaranteed by an Eligible Institution, or (ii) obtain and
include with the Special Conversion Notice certificates representing shares of
Series A Preferred Stock properly endorsed for transfer by the registered holder
or accompanied by a written instrument or instruments of transfer or conversion
from the registered holder with signatures on the endorsement or written
instrument or instruments of transfer or conversion guaranteed by an Eligible
Institution, or (iii) effect a record transfer of such Series A Preferred Stock
and comply with the requirements applicable to registered holders for Series A
Preferred Stock being converted prior to the Expiration Date. The Company has no
obligation to transfer any Series A Preferred Stock from the name of the
registered holder thereof if the Company does not accept for conversion pursuant
to the Conversion Offer any of the shares of such Series A Preferred Stock.
If a registered holder desires to deliver Series A Preferred Stock pursuant
to the Conversion Offer but is unable to locate the certificates representing
shares of Series A Preferred Stock to be delivered, the holder should write to
or telephone the transfer agent for the Series A Preferred Stock, American Stock
Transfer Company, Attention: Carolyn O'Neil, 40 Wall Street, New York, New York
10005, telephone (212) 936-5100, about procedures for obtaining replacement
certificates representing shares of Series A Preferred Stock or arranging for
indemnification.
To prevent back-up U.S. federal income tax withholding of 31% on certain
payments, each converting holder of Series A Preferred Stock must properly
complete a Form W-9 as set forth in the Special Conversion Notice. Holders who
do not properly complete Form W-9 may be subject to a $50 penalty imposed by the
Internal Revenue Service and may be subject to backup withholding. Exempt
holders (including among others, corporations and certain foreign individuals)
are not subject to these requirements if they satisfactorily establish their
status as such. See "Certain Federal Income Tax Considerations."
Holders of Series A Preferred Stock desiring to convert their Series A
Preferred Stock pursuant to the terms thereof, and not pursuant to the terms and
conditions of the Conversion Offer, may do so by preparing a conversion notice
and endorsing for transfer to the Company the certificates representing the
Series A Preferred Stock, all in accordance with the Certificate of Designation
related to the Series A Preferred Stock. Series A Preferred Stock delivered to
the Conversion Agent and endorsed for transfer on the reverse side of the
certificate without the Special Conversion Notice provided herewith will not be
deemed to have been delivered pursuant to the Conversion Offer, and no
Conversion Premium will be paid with respect thereto.
13
<PAGE> 16
RESALE REGISTRATION
Holders of Series A Preferred Stock desiring to have shares of Common Stock
issued pursuant to the Conversion Offer included in the Resale Registration must
deliver to the Conversion Agent, on or before the Expiration Date, a duly
completed and signed Registration Agreement. Pursuant to the Registration
Agreement, the Company will agree to indemnify holders signing the Registration
Agreement from certain liabilities under the Securities Act relating to the
Resale Registration, and the holders will agree to indemnify the Company from
certain liabilities under the Securities arising from information provided by
such holders for use in the Resale Registration. Holders of Series A Preferred
Stock should carefully consider the terms of the Registration Agreement before
determining whether to include shares in the Resale Registration. Holders may
elect to have some or all of their Common Stock issued upon conversion of Series
A Preferred Stock registered for resale pursuant to the Resale Registration.
VALIDITY AND FORM
All questions as to the form of all documents and the validity (including
the time of receipt), eligibility, acceptance and withdrawal of Series A
Preferred Stock tendered for conversion pursuant to the Conversion Offer will be
determined by the Company, in its sole discretion, which determination shall be
final and binding. The Company expressly reserves the absolute right to reject
any and all Series A Preferred Stock tendered for conversion pursuant to the
Conversion Offer not in proper form and to determine whether the acceptance of
or payment by it for such conversions would be unlawful. The Company expressly
reserves the absolute right to reject any and all Registration Agreements not in
proper form and to determine whether the acceptance of or performance thereunder
by it for such shares sought to be registered would be unlawful. The Company
also reserves the absolute right, subject to applicable law, to waive or amend
any of the conditions of the Conversion Offer or to waive any defect or
irregularity in the conversion of any particular Series A Preferred Stock. None
of the Company, the Conversion Agent, or any other person will be under any duty
to give notification of any defects or irregularities in Series A Preferred
Stock tendered for conversion pursuant to the Conversion Offer or in the
Registration Agreement or any other document or will incur any liability for
failure to give any such notification. No conversion of Series A Preferred Stock
will be deemed to have been validly made until all defects and irregularities
with respect to such Series A Preferred Stock have been cured or waived. Any
Series A Preferred Stock received by the Conversion Agent that are not properly
converted and as to which irregularities have not been cured or waived will be
returned by the Conversion Agent to the holder submitting such Series A
Preferred Stock as soon as practicable following the Expiration Date. The
Company's interpretation of the terms and conditions of the Conversion Offer
will be final and binding on all parties.
THE METHOD OF DELIVERY OF SERIES A PREFERRED STOCK AND ALL OTHER REQUIRED
DOCUMENTS TO THE CONVERSION AGENT IS AT THE ELECTION AND RISK OF HOLDERS OF
SERIES A PREFERRED STOCK. IF SENT BY MAIL, IT IS RECOMMENDED THAT HOLDERS OF
SERIES A PREFERRED STOCK USE PROPERLY INSURED REGISTERED MAIL WITH RETURN
RECEIPT REQUESTED, AND THAT THE MAILING BE MADE SUFFICIENTLY IN ADVANCE OF THE
EXPIRATION DATE TO PERMIT DELIVERY TO THE CONVERSION AGENT ON OR BEFORE THE
EXPIRATION DATE.
BOOK-ENTRY TRANSFER
The Conversion Agent will make a request to establish an account with
respect to the Series A Preferred Stock at the Book-Entry Transfer Facility for
purposes of the Conversion Offer within two business days after the date of this
Offer of Premium, and any financial institution that is a participant in the
Book-Entry Transfer Facility's systems may make book-entry delivery of the
Series A Preferred Stock being tendered by causing the Book-Entry Transfer
Facility to transfer such Series A Preferred Stock into the Conversion Agent's
account at the Book-Entry Transfer
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Facility in accordance with the Book-Entry Transfer Facility's procedures for
transfer. However, although delivery of Series A Preferred Stock may be effected
through book-entry transfer at the Book-Entry Transfer Facility, the Special
Conversion Notice and the Registration Agreement or copy thereof, with any
required signatures, signature guarantees and any other required documents,
must, in any case other than as set forth in the following paragraph, be
transmitted to and received by the Conversion Agent at the address set forth
herein on or before the Expiration Date. Otherwise, the guaranteed delivery
procedures described hereafter must be complied with.
DTC's Automated Tender Offer Program ("ATOP") is the only method of
processing conversion offers through the DTC. To accept the Conversion Offer
through ATOP, participants in DTC must send electronic instructions to DTC
through DTC's communication system in place of sending a signed, hard copy
Special Conversion Notice. DTC is obligated to communicate those electronic
instructions to the Conversion Agent. To submit Series A Preferred Stock for
conversion through ATOP, the electronic instructions sent to DTC and transmitted
by DTC to the Conversion Agent must contain the character by which the
participant acknowledges its receipt of and agrees to be bound by the Special
Conversion Notice. WHETHER OR NOT A HOLDER ACCEPTS THE CONVERSION OFFER THROUGH
ATOP, A HOLDER DESIRING TO HAVE SHARES OF COMMON STOCK INCLUDED IN THE RESALE
REGISTRATION MUST DELIVER A COMPLETED, MANUALLY SIGNED COPY OF THE REGISTRATION
AGREEMENT TO THE CONVERSION AGENT.
GUARANTEED DELIVERY PROCEDURES
If a holder of Series A Preferred Stock desires to tender Series A
Preferred Stock for conversion pursuant to the Conversion Offer and the holder's
Series A Preferred Stock are not immediately available or time will not permit
the holder's Series A Preferred Stock or other required documents to reach the
Conversion Agent on or prior to the Expiration Date, the tender of Series A
Preferred Stock for conversion pursuant to the Conversion Offer may be effected
if all of the following conditions are satisfied:
(a) delivery is made by or through an Eligible Institution; and
(b) on or prior to the Expiration Date, the Conversion Agent receives
from such Eligible Institution a properly completed and duly executed
Notice of Guaranteed Delivery (by telegram, facsimile transmission, mail or
hand delivery), substantially in the form provided by the Company with this
Offer of Premium, which contains a signature guaranteed by an Eligible
Institution in the form set forth in such in such Notice of Guaranteed
Delivery (unless such tender for conversion is for the account of an
Eligible Institution), which sets forth the name and address of the holder
of the Series A Preferred Stock and the amount of Series A Preferred Stock
tendered, which states that the tender is being made thereby, and which
guarantees that within five New York Stock Exchange ("NYSE") trading days
after the Expiration Date, the Special Conversion Notice (or facsimile
thereof), properly completed and duly executed, together with the Series A
Preferred Stock and any required signature guarantees and any other
documents required by the Special Conversion Notice, will be deposited by
the Eligible Institution with the Conversion Agent; and
(c) all Series A Preferred Stock tendered for conversion pursuant to
the Conversion Offer as well as the Special Conversion Notice (or facsimile
thereof), properly completed and duly executed, with any required signature
guarantees and any other documents required by the Special Conversion
Notice, are received by the Conversion Agent within five NYSE trading days
after the Expiration Date.
A Notice of Guaranteed Delivery may be delivered by hand or transmitted by
telegram, facsimile transmission or mail to the Conversion Agent and must
include a signature guarantee by an Eligible Institution in the form set forth
in such Notice of Guaranteed Delivery.
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Notwithstanding any other provision hereof, except as provided with respect
to ATOP the conversion of Series A Preferred Stock accepted pursuant to the
Conversion Offer will in all cases be made only after timely receipt by the
Conversion Agent of certificates for such Series A Preferred Stock, the Special
Conversion Notice (or a facsimile thereof), properly completed and duly
executed, with any required signature guarantees and any other required
documents.
ACCEPTANCES OF SERIES A PREFERRED STOCK; DELIVERY OF COMMON STOCK AND CONVERSION
PREMIUM
The acceptance for conversion of Series A Preferred Stock validly tendered
for conversion pursuant to the Conversion Offer and not properly withdrawn will
be made as promptly as practicable after the Expiration Date. Subject to rules
promulgated pursuant to the Exchange Act, however, the Company reserves the
right to delay payment of the Conversion Premium or terminate the Conversion
Offer and not pay the Conversion Premium for any reason, subject to any
applicable law. For purposes of the Conversion Offer, the Company will be deemed
to have accepted for conversion Series A Preferred Stock tendered and not
properly withdrawn if, as and when the Company gives oral or written notice to
the Conversion Agent of its acceptance of such shares for conversion. Subject to
the terms and conditions of the Conversion Offer, delivery of Common Stock and
the payment of the Conversion Premium for Series A Preferred Stock converted
pursuant to the Conversion Offer will be made by the Conversion Agent as soon as
practicable after receipt of such notice. Under no circumstances will interest
be paid by the Company by reason of any delay in making payment of the
Conversion Premium. The Conversion Agent will act as agent for the converting
holder of Series A Preferred Stock for the purpose of receiving Common Stock and
cash from the Company and transmitting the Common Stock and cash to the
converting holders. Series A Preferred Stock not accepted for conversion and
payment of the Conversion Premium, will be returned without expense to the
converting holder of such Series A Preferred Stock as promptly as practicable
following the Expiration Date.
No alternative, conditional or contingent deliveries of Special Conversion
Notices will be accepted. All converting holders, by execution of a Special
Conversion Notice, or facsimile thereof, waive any right to receive notice of
acceptance of their Series A Preferred Stock for conversion and payment pursuant
to the Conversion Offer.
WITHDRAWAL RIGHTS
Conversion of Series A Preferred Stock pursuant to the Conversion Offer is
irrevocable except that Series A Preferred Stock tendered for conversion
pursuant to the Conversion Offer may be withdrawn at any time prior to the
Expiration Date.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmitted notice of withdrawal must be timely received by the Conversion Agent
at its address set forth herein. Any notice of withdrawal must specify the name
of the person who tendered the Series A Preferred Stock to be withdrawn, the
principal amount of Series A Preferred Stock to be withdrawn and the name of the
registered holder(s) of the Series A Preferred Stock as set forth in the
certificates, if different from that of the person who tendered such Series A
Preferred Stock. If certificates for Series A Preferred Stock have been tendered
to the Conversion Agent, then, prior to the physical release of such
certificates, the withdrawing holder must also submit to the Conversion Agent
the serial numbers of the particular certificates evidencing the Series A
Preferred Stock to be withdrawn and a signed notice of withdrawal with
signature(s) guaranteed by an Eligible Institution, except in the case of Series
A Preferred Stock tendered by an Eligible Institution. If shares of Series A
Preferred Stock have been tendered pursuant to the procedure for book-entry
transfer, the notice of withdrawal must specify the name and number of the
account at the applicable Book-Entry Transfer Facility to be credited with the
withdrawn shares and otherwise comply with the Book-Entry Transfer Facility's
procedures.
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If the Company extends the Conversion Offer or is delayed in its payment of
the Conversion Premium pursuant to the Conversion Offer for any reason, then,
without prejudice to the Company's rights under the Conversion Offer, the
Conversion Agent may, subject to applicable law, retain Series A Preferred Stock
tendered for conversion pursuant to the Conversion Offer on behalf of the
Company and such Series A Preferred Stock may not be withdrawn except to the
extent converting holders are entitled to withdrawal rights as described in this
section.
Any permitted withdrawal of Series A Preferred Stock tendered for
conversion may not be rescinded, and any Series A Preferred Stock withdrawn will
thereafter be deemed not validly tendered for purposes of the Conversion Offer;
however, withdrawn Series A Preferred Stock may be redelivered by following one
of the procedures described herein at any time on or prior to the Expiration
Date.
All questions as to validity, form and eligibility (including time of
receipt) of notices of withdrawal will be determined by the Company in its sole
discretion, which determination will be final and binding on all parties. None
of the Company, the Conversion Agent, or any other person will be under any duty
to give notification of any defects or irregularities in any notice of
withdrawal, nor will they incur any liability for failure to give any such
notification.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
Baker & McKenzie has served as tax counsel to the Company in connection
with the Conversion Offer. The following expresses Baker & McKenzie's opinion to
the Company as to the material Federal income tax consequences that, under
currently applicable law, should arise from the Conversion Offer. The following
discussion is based upon the Internal Revenue Code of 1986, as amended (the
"Code"), and Treasury Regulations, Internal Revenue Service rulings and judicial
decisions now in effect, all of which are subject to change at any time by
legislative, judicial or administrative action, and any such changes may be
retroactively applied in a manner that could adversely affect a stockholder.
Except as otherwise discussed below, this discussion is applicable only to
stockholders who are citizens or residents of the United States for U.S. tax
purposes and to domestic corporations. The discussion may not be applicable with
respect to Series A Preferred Stock held as other than a capital asset.
Moreover, the discussion is not applicable to stockholders who hold, or who are
related within the meaning of Section 318 of the Internal Revenue Code to
stockholders who hold, employee stock options of the Company. Furthermore,
state, local and foreign tax consequences of the Conversion Offer are not
addressed in this discussion. Stockholders should note that the opinions of
counsel are not binding on the Internal Revenue Service or any court, and the
Company has not sought, and does not intend to seek, a ruling from the Internal
Revenue Service as to the Federal income tax consequences of the Conversion
Offer.
STOCKHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH REGARD TO THE
APPLICATION OF THE FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATION, AS
WELL AS TO THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS
TO WHICH THEY MAY BE SUBJECT.
CONVERSION AND RECEIPT OF CONVERSION PREMIUM
Recognition of Gain or Loss on Conversion
The conversion of Series A Preferred Stock into Common Stock and the
Conversion Premium (the "Conversion") will constitute a "recapitalization" of
the Company within the meaning of Section 368(a)(1)(E) of the Code. Accordingly,
the Conversion will not be a taxable transaction to the Company, but may be a
taxable transaction to the stockholders to the extent of the cash received, with
the consequences described below.
A stockholder whose shares of Series A Preferred Stock are converted into
Common Stock and the Conversion Premium will be taxable to the extent of the
lesser of (i) the excess of the fair market value of the total amount received
in the Conversion (i.e., the sum of the value of the
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Common Stock and the Conversion Premium) over such stockholder's tax basis in
the Series A Preferred Stock converted, or (ii) the amount of the Conversion
Premium. To the extent the Conversion Premium exceeds the amount specified in
clause (i) of the preceding sentence, such amount will not be currently taxable
but will reduce a stockholder's basis in the Common Stock received in the
Conversion as discussed below. A stockholder is not allowed to recognize (i.e.,
take into account for tax purposes) loss on the Conversion.
Character of Gain
The character of any gain recognized by a stockholder in the Conversion
will depend upon whether the receipt of the Conversion Premium by the
stockholder has the effect of a dividend distribution as to such stockholder or
is treated as a sale or exchange. If the conversion of Series A Preferred Stock
and receipt of the Conversion Premium is treated as a sale or exchange, any gain
recognized will be capital gain that, in general, will be long-term capital gain
if the shares of Series A Preferred Stock have been held for more than one year
at the Expiration Date and short-term capital gain, if the shares of Series A
Preferred Stock have been held for one year or less at that time.
If the conversion has the effect of a dividend distribution to a
stockholder, the gain recognized by that stockholder will be treated as ordinary
dividend income to the extent of the stockholder's ratable share of the
Company's accumulated earnings and profits, and the remainder, if any, of the
recognized gain will be taxed as gain from the exchange of the Series A
Preferred Stock. The Company believes that its accumulated earnings and profit
are sufficient to treat all recognized gain as ordinary dividend income.
Whether the conversion of Series A Preferred Stock in the Conversion has
the effect of a dividend distribution as to a stockholder or is treated as a
sale or exchange will be determined by applying the principles described in
Section 302 of the Code. Under Section 302, a distribution will not have the
effect of the distribution of a dividend, and any gain recognized will be
capital gain rather than a dividend, if the distribution is not "essentially
equivalent to a dividend" or one of several other safe harbor tests is
satisfied.
The conversion of Series A Preferred Stock in the Conversion will not be
"essentially equivalent to a dividend" if it results in a "meaningful reduction"
of the stockholder's proportionate stock interest in the Company. The
determination of whether a stockholder's proportionate interest in a corporation
has been meaningfully reduced ordinarily is based on an evaluation of the
reduction in the stockholder's right to vote, participate in earnings and
participate in proceeds of liquidation. For this purpose, under Section 318 of
the Code, a stockholder is deemed to constructively own Series A Preferred Stock
and Common Stock that are actually owned, and in some cases, constructively
owned, by certain related individuals and entities or that may be acquired by
such stockholder or such related individuals or entities by option or
conversion, including through employee stock options. Furthermore, the Section
302 tests are applied after taking into account any related transactions that
are part of a single integrated plan. Thus, it is possible that dispositions or
acquisitions by a stockholder of shares of Series A Preferred Stock, Common
Stock acquired upon conversion, or other Common Stock contemporaneous with the
Conversion may be considered to be part of the same integrated plan.
The Conversion itself will not cause an immediate decrease in a
stockholder's voting power, but rather will cause an increase in voting rights.
Tax counsel to the Company has opined that the conversion of Series A Preferred
Stock more likely than not has the effect of a dividend distribution with
respect to stockholders who do not dispose of Series A Preferred Stock, Common
Stock acquired upon conversion, or other Common Stock in related transactions
that are considered to be part of a single integrated plan (including shares
constructively owned under Section 318), other than pursuant to the Conversion
Offer. Tax counsel has not opined as to the character of any gain that other
stockholders may realize in the Conversion because of the inherently factual
nature of the determination that each such stockholder must make. Accordingly,
such stockholders should consult
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their tax advisors concerning the application of the "meaningful reduction" and
other safe harbor tests to their particular facts and circumstances.
If the conversion of Series A Preferred Stock is treated to any extent as a
dividend distribution as to a corporate stockholder, the amount of the
distribution which is taxable as a dividend should generally be eligible for the
70 percent dividends received deduction, subject to the limitations of sections
1059, 246A and 246 of the Code.
Basis and Holding Period of Common Stock Received
A stockholder's tax basis in the Common Stock received in the Conversion
will be equal to the stockholder's tax basis in the Series A Preferred Stock
converted in the Conversion, increased by the amount of any gain recognized by
the stockholder and decreased by the amount of the Conversion Premium received.
The holding period of the Common Stock will include the holding period of the
Series A Preferred Stock converted in the Conversion, provided that the Series A
Preferred Stock is held as a capital asset. Gain, loss and tax basis, determined
as described above, must be calculated separately for each block of Series A
Preferred Stock (i.e., Series A Preferred Stock acquired at the same time in a
single transaction) held by a stockholder.
Cash in Lieu of Fractional Shares
Stockholders who receive cash in lieu of fractional shares of Common Stock
should be treated as having received the cash in redemption of the fractional
share interest. The character of the cash received by a stockholder will depend
upon whether the redemption is essentially equivalent to a dividend to such
stockholder or is treated as a sale or exchange, determined under Section 302 of
the Code. Stockholders should consult their tax advisors regarding the
appropriate treatment of any cash that is received in exchange for fractional
share interests.
Special Tax Considerations for Non-United States Stockholders
For purposes of the following discussion, a non-United States stockholder
includes a non-resident alien individual (other than certain former United
States citizens or residents), a foreign corporation, a foreign partnership and
a foreign trust or estate. Each non-United States stockholder is urged to
consult a tax advisor with respect to the tax consequences of the Conversion as
applied to such stockholder's specific facts and circumstances.
In general, a non-United States stockholder is not subject to United States
federal income tax with respect to gain realized on a sale or other disposition
of shares of the Company. The Code generally requires withholding at a 30% rate
on dividends paid by the Company to non-United States stockholders, unless a
treaty applies which reduces or eliminates such withholding. In certain
circumstances, backup withholding, as discussed below, at a rate of 31% may
apply to payments to non-United States stockholders. If a non-United States
stockholder has not provided a properly completed IRS Form W-8, the Company will
withhold 31% of the Conversion Premium and of the cash paid in lieu of
fractional shares. Because the Company will not know whether the payment of the
Conversion Premium or the payment of cash in lieu of fractional shares to a
particular non-United States stockholder will be treated as a dividend or an
exchange, the Company will, where a non-United States stockholder has provided a
properly completed IRS Form W-8, treat the payment of the Conversion Premium and
the cash paid in lieu of fractional shares as a dividend and will withhold 30%,
or lower treaty rate, if applicable, of such payment. Non-United States
stockholders should consult their tax advisors regarding these withholding rules
and the procedures for obtaining a refund if the amount withheld exceeds the
non-United States stockholder's final tax liability.
BACKUP WITHHOLDING
A holder of Series A Preferred Stock participating in the Conversion may be
subject, under certain circumstances, to "backup withholding" at a 31% rate on
certain payments. This withholding
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generally applies only if the holder (i) fails to furnish its social security or
other taxpayer identification number ("TIN"), (ii) furnishes an incorrect TIN,
(iii) fails to properly report interest or dividends and the Internal Revenue
Service has notified the Company that the holder is subject to withholding, or
(iv) fails, under certain circumstances, to provide a certified statement,
signed under penalty of perjury, that the TIN provided is its correct number and
that it is not subject to backup withholding. The backup withholding rules may
apply to the payment of the Conversion Premium and cash paid in lieu of
fractional shares. Any amount withheld from a payment to a holder under the
backup withholding rules is allowable as a credit against such holder's federal
income tax liability, provided that the required information is furnished to the
Internal Revenue Service. Certain holders of Series A Preferred Stock
(including, among others, corporations and certain foreign individuals) are not
subject to backup withholding. Holders of Series A Preferred Stock should
consult their tax advisors as to their qualification for exemption from backup
withholding and the procedure for obtaining such an exemption.
THE FEDERAL INCOME TAX CONSEQUENCES SET FORTH ABOVE ARE FOR GENERAL
INFORMATION ONLY. EACH STOCKHOLDER SHOULD CONSULT A TAX ADVISOR AS TO THE
PARTICULAR CONSEQUENCES OF THE CONVERSION THAT MAY BE APPLICABLE TO SUCH
STOCKHOLDER, INCLUDING THE APPLICATION OF STATE, LOCAL, AND FOREIGN TAX LAWS.
DESCRIPTION OF CAPITAL STOCK
The following summary description is qualified in its entirety by reference
to the Company's Certificate of Incorporation, as amended. The authorized
capital stock of the Company consists of 100,000,000 shares of Common Stock, par
value $.01 per share, and 5,000,000 shares of preferred stock, par value $.01
per share (the "Preferred Stock").
COMMON STOCK
The Company is authorized to issue up to 100,000,000 shares of Common
Stock. As of February 14, 1995, there were 39,695,611 shares of Common Stock
outstanding. The holders of Common Stock are entitled to one vote for each share
held of record on all matters submitted to a vote of stockholders. Because
holders of Common Stock do not have cumulative voting rights, the holders of a
majority of the shares of Common Stock represented at a meeting have the power
to elect all of the directors to be elected at that meeting. Subject to the
prior rights of holders of Preferred Stock, the holders of Common Stock are
entitled to dividends, when and as declared by the Board of Directors out of
funds legally available therefor. The terms of the Company's line of credit
restrict payment of cash dividends except in certain circumstances. See
"Dividend Policy." If the Company dissolves or is liquidated, the holders of
Common Stock are entitled to share ratably in all assets remaining after payment
of liabilities and the liquidation preferences of any outstanding shares of
Preferred Stock.
Holders of Common Stock have no preemptive rights and have no right to
convert their Common Stock into any other securities. All of the outstanding
shares of Common Stock are, and all shares of Common Stock offered hereby are or
will be, upon conversion of Series A Preferred Stock, fully paid and
nonassessable.
The Certificate of Incorporation of the Company divides the Board of
Directors of the Company into three classes, each class to be as nearly equal in
number of directors as possible. At each annual meeting of stockholders,
directors in each class are elected for three year terms to succeed the
directors of that class whose terms are expiring. Paul O. Hirschbiel, Donald J.
Carty and Thomas W. Luce, III, are Class I directors with their terms of office
expiring in 1995. Michael S. Dell and Michael H. Jordan are Class II directors
with their terms of office expiring in 1996. George Kozmetsky and Claudine B.
Malone are Class III directors with their terms of office expiring in 1997. The
Certificate of Incorporation and Bylaws of the Company also provide that
directors may be removed from office only for cause (as defined in the
Certificate of Incorporation), that stockholder
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action must be taken at a duly called annual or special meeting (and not by
written consent), and that stockholders follow an advance notification procedure
for certain stockholder nominations of candidates for the Board of Directors and
for certain other stockholder business to be conducted at an annual meeting.
The existence of these provisions of the Company's Certificate of
Incorporation and Bylaws may be disadvantageous to the extent they discourage
takeovers in which stockholders might receive a substantial premium for some or
all of their shares. Therefore, stockholders not affiliated with management who
desire to participate in such a takeover may not be afforded the opportunity to
do so, even when such stockholders believe participation to be in their best
interest. Also, such provisions may reduce temporary fluctuations in the market
price of the Common Stock that may accompany the accumulation of large blocks of
Common Stock and thereby deprive stockholders of an opportunity to sell their
stock at a temporarily higher price. In addition to reducing temporary market
fluctuations, such provisions could potentially depress the market price of
shares of Common Stock and may have the effect of discouraging changes in
control, particularly those that are opposed by the Company's incumbent
management, even if a majority of stockholders desire the change in control.
Such provisions thereby could also prevent the removal of management.
In addition, the ability of the Board of Directors to issue shares of
Preferred Stock and to fix the voting, redemption, conversion and other rights
thereof without stockholder approval could hinder any proposed tender offer,
merger or other attempt to gain control of the Company. See "Description of
Capital Stock -- Blank Check Preferred Stock."
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is American Stock
Transfer & Trust Company.
BLANK CHECK PREFERRED STOCK
Pursuant to the Certificate of Incorporation of the Company, the Board of
Directors has the authority, without further stockholder approval, to provide
for the issuance of up to 5,000,000 shares of Preferred Stock in one or more
series and to determine the dividend rights, conversion rights, voting rights,
rights and terms of redemption, liquidation preferences, the number of shares
constituting any such series, and the designation of such series. Because the
Board of Directors has the power to establish the preferences and rights of each
series, it may afford the holders of any Preferred Stock preferences, powers and
rights (including voting rights) senior to the rights of the holders of Common
Stock. Other than the shares of Series A Preferred Stock described below, no
shares of Preferred Stock have been issued and remain outstanding before the
date of this Offer of Premium. The issuance of shares of Preferred Stock or the
issuance of rights to purchase shares of stock may have the effect of delaying,
deferring or preventing a change in control of the Company.
SERIES A PREFERRED STOCK
The Series A Preferred Stock has been authorized as a series of preferred
stock, consisting of 1,250,000 shares. As of February 14, 1995, 1,250,000 shares
of Series A Convertible Preferred Stock were issued and outstanding. The terms
and provisions of the Series A Preferred Stock are set forth in the Certificate
of Designation creating the Series A Preferred Stock. A copy of the Certificate
of Designation may be obtained from Dell Computer Corporation, 2112 Kramer Lane,
Building 1, Austin, Texas 78758-4012, Attention: Investor Relations.
Dividends. Holders of shares of Series A Preferred Stock are entitled to
receive, when, as and if declared by the Board of Directors out of funds legally
available therefore, cash dividends at an annual rate of $7.00 per share,
payable quarterly in arrears. Dividends are cumulative and are payable to the
holders of record as they appear on the stock transfer books on such record
dates as are fixed by the Board of Directors.
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The Series A Preferred Stock has priority as to dividends over the Common
Stock and any other series or class of the Company's stock thereafter issued
that ranks junior as to dividends to the Series A Preferred Stock, when and if
issued (collectively, "Junior Dividend Stock"), and no dividend (other than
dividends payable solely in stock that is Junior Dividend Stock and that ranks
junior to the Series A Preferred Stock as to distribution of assets upon
liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary (such stock that is junior as to liquidation rights, "Junior
Liquidation Stock") (the Common Stock and any other capital stock of the Company
that is both Junior Dividend Stock and Junior Liquidation Stock, "Junior Stock")
may be paid on any Junior Dividend Stock, and no payment may be made on account
of the purchase redemption, retirement, or other acquisition of Junior Dividend
Stock or Junior Liquidation Stock (other than such acquisitions pursuant to
employee or director incentive or benefit plans or arrangements, or acquisitions
or exchanges solely for Junior Stock), unless all accrued and unpaid dividends
on the Series A Preferred Stock for all dividend payment periods ending on or
before the date of payment of such dividends on Junior Dividend Stock, or such
payment for such Junior Dividend Stock or Junior Liquidation Stock, as the case
may be, have been paid or declared and set apart for payment. The Company may
not pay dividends on any other series or class of Company's stock hereafter
issued that ranks on a parity with the Series A Preferred Stock as to dividends
("Parity Dividend Stock"), and may not make any payment on account of the
purchase, redemption, retirement or other acquisition of shares of Parity
Dividend Stock or any other series or class of the Company's stock hereafter
issued that ranks on a parity with the Series A Preferred Stock as to
distributions of assets upon liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary (such stock that has parity with the
Series A Preferred Stock as to liquidation rights, "Parity Liquidation Stock")
(other than such acquisitions pursuant to employee or director incentive or
benefit plans or arrangements, or acquisitions or exchanges solely for Junior
Stock), unless all accrued and unpaid dividends on the Series A Preferred Stock
for all dividend payment periods ending on or before the date of payment of such
dividends on Parity Dividend Stock, or such payment for such Parity Dividend
Stock or Parity Liquidation Stock, as the case may be, have been paid or
declared and set apart for payment.
Liquidation Rights. In the case of the voluntary or involuntary
liquidation, dissolution or winding up of the Company, holders of shares of
Series A Preferred Stock are entitled to receive the liquidation preference of
$100.00 per share, plus an amount equal to any accrued and unpaid dividends to
the payment date, before any payment or distribution is made to the holders of
Common Stock or any other series or class of the Company's stock hereafter
issued that ranks junior to the Series A Preferred Stock as to distributions of
assets upon such liquidation, dissolution or winding up, but the holders of the
shares of the Series A Preferred Stock will not be entitled to receive the
liquidation preference of such shares until the liquidation preference of any
other series or class of the Company's stock hereafter issued that ranks senior
to the Series A Preferred Stock as to distributions of assets upon such
dissolution, liquidation or winding up ("Senior Liquidation Stock") has been
paid in full. The holders of Series A Preferred Stock and all series or classes
of the Company's stock hereafter issued that rank on a parity with the Series A
Preferred Stock as to distributions of assets upon such liquidation, dissolution
or winding up of the Company are entitled to share ratably, in accordance with
the respective preferential amounts payable on such stock, in any distribution
(after payment of the liquidation preference of the Senior Liquidation Stock)
which is not sufficient to pay in full the aggregate of the preferential amounts
payable thereon. After payment in full of the liquidation preference of the
shares of the Series A Preferred Stock, the holders of such shares will not be
entitled to any further participation in any distribution of assets by the
Company. Neither a consolidation or merger of the Company with another
corporation nor a sale or transfer of all or part of the Company's assets for
cash, securities or other property will be considered a liquidation, dissolution
or winding up of the Company.
Voting Rights. The holders of the Series A Preferred Stock have no voting
rights except as described below or as required by law. In exercising any such
vote, each outstanding share of
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<PAGE> 25
Series A Preferred Stock will be entitled to one vote, excluding shares held by
the Company or any affiliate of the Company, which shares have no voting rights.
Whenever dividends on the Series A Preferred Stock or on any outstanding
shares of Parity Dividend Stock have not been paid in an aggregate amount equal
to at least six quarterly dividends on such shares (whether or not consecutive),
the number of members of the Company's Board of Directors will be increased by
two, and the holders of the Series A Preferred Stock, voting separately as a
class with the holders of Parity Dividend Stock on which like voting rights have
been conferred and are exercisable, will be entitled to elect such two
additional directors at any meeting of stockholders at which directors are to be
elected held during the period such dividends remain in arrears. Such voting
rights will terminate when all such accrued and unpaid dividends have been
declared and paid or set apart for payment. The term of office of all directors
so elected will terminate immediately upon the termination of such voting
rights.
In addition, so long as any Series A Preferred Stock is outstanding, the
Company may not, without the affirmative vote or consent of the holders of at
least 66 2/3% (unless a higher percentage shall then be required by applicable
law) of all outstanding shares of Series A Preferred Stock, voting separately as
a class, (i) amend, alter or repeal any provision of the Company's Certificate
of Incorporation or Bylaws so as to affect adversely the relative rights,
preferences, qualifications, limitations, or restrictions of the Series A
Preferred Stock, (ii) create, authorize or issue, or reclassify any authorized
stock of the Company into, or increase the authorized amount of, any series or
class of stock that ranks senior to the Series A Preferred Stock as to dividends
or distributions of assets upon liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary, or any security convertible into any
such class or series of such stock, or (iii) enter into a share exchange that
affects the Series A Preferred Stock, consolidate with or merge into another
entity, or permit another entity to consolidate with or merge into the Company,
unless in each such case each share of Series A Preferred Stock remains
outstanding and unaffected or is converted into or exchanged for convertible
preferred stock of the surviving entity having powers, preferences and relative
participating optional or other rights and qualification limitations and
restrictions thereof identical to that of a share of Series A Preferred Stock
(except for changes that do not affect the holders of the Series A Preferred
Stock adversely).
Redemption at Option of the Company. The Series A Preferred Stock may not
be redeemed before August 25, 1996. On and after that date, the Series A
Preferred Stock may be redeemed by the Company, at its option, in whole or in
part at any time, subject to the limitations, if any, imposed by applicable law,
at a redemption price per share of $104.67 if redeemed at any time during the
period from August 25, 1996, through August 15, 1997, and at the following
redemption prices per share, if redeemed during the 12-month period ending
August 15:
<TABLE>
<CAPTION>
PRICE PER
YEAR SHARE
---- ---------
<S> <C>
1998.............................................................. $103.89
1999.............................................................. 103.11
2000.............................................................. 102.33
2001.............................................................. 101.56
2002.............................................................. 100.78
</TABLE>
and thereafter at $100 per share, plus, in each case, accrued and unpaid
dividends to but excluding the redemption date.
Conversion Rights. The holder of any shares of Series A Preferred Stock has
the right, at the holder's option, to convert any or all shares into Common
Stock at any time at the rate of 4.2105 shares of Common Stock for each share of
Series A Preferred Stock (equivalent to a conversion price of $23.75 for each
share of Common Stock), subject to adjustment in certain circumstances except
that if the Series A Preferred Stock is called for redemption, the conversion
right will terminate at the close of business on the fifth business day prior to
the date fixed for such redemption.
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<PAGE> 26
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). In accordance with the
Exchange Act, the Company files reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). The reports,
proxy statements and other information can be inspected and copied at the public
reference facilities that the Commission maintains at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's regional offices
located at 7 World Trade Center, 13th Floor, New York, New York 10048, and Suite
1400, Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois
60661. Copies of these materials can be obtained at prescribed rates from the
Public Reference Section of the Commission at the principal offices of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549.
The Company has filed with the Commission an Issuer Tender Offer Statement
on Schedule 13E-4 (the "Schedule 13E-4") under the Exchange Act, with respect to
the Conversion Offer. This Offer of Premium does not contain all of the
information set forth in the Schedule 13E-4, certain parts of which have been
omitted in accordance with the rules and regulations of the Commission. For
further information with respect to the Company and the Conversion Offer,
reference is made to the Schedule 13E-4, including the exhibits filed as part
thereof or incorporated by reference therein. Statements made in this Offer of
Premium about the contents of any contract, agreement, or other document are not
necessarily complete; with respect to each such contract, agreement or other
document filed as an exhibit to the Schedule 13E-4, reference is made to that
exhibit for a more complete description of the matter involved, and each such
statement is qualified in its entirety by that reference. Copies of the Schedule
13E-4 and its exhibits may be inspected, without charge, at the offices of the
Commission, or obtained at prescribed rates from the Public Reference Section of
the Commission, at the address previously set forth.
The address of the Company's principal executive offices is Dell Computer
Corporation, 2112 Kramer Lane, Austin, Texas 78758-4012, and its telephone
number at that address is (512) 338-4400.
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<PAGE> 27
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission (File No.
0-17017) pursuant to the Exchange Act are incorporated in this Offer of Premium
by reference:
1. The Company's Annual Report on Form 10-K for the Fiscal Year Ended
January 30, 1994;
2. The Company's Quarterly Report on Form 10-Q for the Quarterly Period
Ended October 30, 1994;
3. The Company's Current Report on Form 8-K, dated February 21, 1995;
4. All other documents filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this Offer of
Premium and before the termination of the Conversion Offer.
The Company will provide without charge to each person to whom a copy of
this Offer of Premium is delivered, upon the written or oral request of any such
person, a copy of any or all of the documents that are incorporated by
reference, other than exhibits to such documents not specifically incorporated
by reference. Requests for such copies should be directed to Dell Computer
Corporation, 2112 Kramer Lane, Austin, Texas 78758-4012, Attention: Investor
Relations, telephone (512) 728-8315.
Any statement contained in a document incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Offer of
Premium to the extent that a statement contained herein modifies or supersedes
such statement. Any such statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this Offer
of Premium.
25
<PAGE> 28
CONVERSION AGENT
Citibank, N.A., will act as Conversion Agent for the Conversion Offer. The
Conversion Agent will act as agent for the holders of Series A Preferred Stock
accepting the Conversion Offer for the purpose of receiving Common Stock and the
Conversion Premium from the Company. If you require assistance, please contact
the Conversion Agent at (800) 422-2066 or the address below. All correspondence
in connection with the Conversion Offer should be addressed to the Conversion
Agent as follows:
The Conversion Agent:
CITIBANK, N.A.
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
Citibank, N.A. Citibank, N.A. Citibank, N.A.
c/o Citicorp Data Distribution, c/o Citicorp Data Distribution, Corporate Trust Window
Inc. Inc. 111 Wall Street, 5th Floor
P.O. Box 7072 404 Sette Drive New York, New York
Paramus, New Jersey 07653 Paramus, New Jersey 07652
Confirm by Telephone:
(800) 422-2066
</TABLE>
The Company will pay the Conversion Agent reasonable and customary
compensation, which the Company estimates will total approximately $5,000, for
services in connection with the Conversion Offer. In addition, the Company will
reimburse the Conversion Agent for its out-of-pocket expenses, and will
indemnify the Conversion Agent against certain liabilities and expenses in
connection with its services, including liabilities under the federal securities
laws. The Company also will pay brokerage houses and other custodians, nominees
and fiduciaries the reasonable out-of-pocket expenses incurred by them in
forwarding copies of this Offer of Premium and related documents to beneficial
holders of Series A Preferred Stock, and in handling or forwarding tenders of
Series A Preferred Stock for their customers.
---------------------
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
OFFER OF PREMIUM AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS OFFER
OF PREMIUM DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO PURCHASE, SECURITIES TO ANY PERSON TO WHOM OR FROM WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION OF AN OFFER. NEITHER THE DELIVERY OF THIS OFFER
OF PREMIUM NOR ANY ISSUANCE OF SECURITIES PURSUANT TO THE CONVERSION OFFER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE INFORMATION SET FORTH OR INCORPORATED HEREIN BY REFERENCE OR IN
THE AFFAIRS OF THE COMPANY SINCE THE DATE OF THIS OFFER OF PREMIUM. HOWEVER, IF
ANY MATERIAL CHANGE OCCURS DURING THE PERIOD THAT THIS OFFER OF PREMIUM IS
REQUIRED TO BE DELIVERED, THIS OFFER OF PREMIUM WILL BE AMENDED AND SUPPLEMENTED
ACCORDINGLY.
26
