<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED FEBRUARY 1, 1998
COMMISSION FILE NUMBER: 0-17017
DELL COMPUTER CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 74-2487834
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
ONE DELL WAY, ROUND ROCK, TEXAS 78682-2244
(Address, including Zip Code, of registrant's principal executive offices)
(512) 338-4400
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, par value $.01 per share
Preferred Stock Purchase Rights
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
<TABLE>
<S> <C>
AGGREGATE MARKET VALUE OF COMMON STOCK HELD BY
NON-AFFILIATES OF THE REGISTRANT AS OF MARCH 31, 1998..... $36,352,865,736
NUMBER OF SHARES OF COMMON STOCK OUTSTANDING AS OF MARCH 31,
1998...................................................... 640,316,904
</TABLE>
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<PAGE> 2
ITEM 11 -- EXECUTIVE COMPENSATION
All common stock information has been adjusted to take into account the
two-for-one split of the common stock paid in July 1997 and the two-for-one
split of the common stock paid in March 1998.
COMPENSATION OF DIRECTORS
The following is a description of the compensation arrangements for the
Company's non-employee directors. The compensation arrangements for the
non-employee directors are based on a "Service Year," which is the annual period
commencing at an annual meeting of the Company's stockholders and ending at the
next annual meeting of stockholders. Mr. Dell, who is the only director who is
also an employee of the Company, does not receive any additional compensation
for serving on the Board of Directors.
Annual Cash Payments -- Currently, each non-employee director (other than Mr.
Mandl) receives an annual retainer fee of $30,000 and an additional $1,000 for
each Board of Directors meeting attended in person. In November 1997, the Board
of Directors changed its non-employee director compensation arrangement,
increasing the annual retainer fee to $40,000 and eliminating the $1,000 meeting
fees. Any new non-employee director whose term begins during a Service Year will
be entitled to the full amount of the annual retainer fee if 50% or more of the
scheduled Board of Directors meetings for that Service Year are scheduled to
occur after the director's election; otherwise, the new non-employee director is
entitled to receive 50% of the annual retainer fee for that Service Year. The
annual retainer fee for a Service Year is payable at the first Board of
Directors meeting during the Service Year. For all non-employee directors other
than Mr. Mandl, this new arrangement will be effective for the Service Year that
begins in 1998 and for subsequent Service Years. Mr. Mandl, who was appointed to
the Board of Directors in November 1997, at the same time that the new
compensation arrangement was approved, is currently being compensated based on
the new arrangement.
The Company maintains a deferred compensation plan for the non-employee
directors, pursuant to which the directors may elect to defer all or a portion
of their annual retainer fees. A director's deferred amounts are allocated by
the director to various investment funds and, along with any earnings, are
payable to the director upon termination of service as a member of the Board of
Directors or to the director's named beneficiary in the event of death.
Distribution of the deferred amounts and any earnings may be made, at the
election of the participating director, in a lump sum or in annual, quarterly or
monthly installments over a period of up to ten years.
A non-employee director may elect to receive an option to purchase the Company's
common stock in lieu of all or a portion of the annual retainer fee. The option
is granted on the date the annual retainer fee would otherwise have been paid.
The number of shares subject to the option is determined by dividing the amount
of the annual retainer fee subject to the election by the value of an option for
one share of common stock (calculated pursuant to the Black-Scholes model). The
exercise price of the option is the average of the high and low reported sales
price of the Company's common stock on the date of grant. The option vests and
becomes exercisable with respect to 20% of the shares on each of the first five
anniversaries of the date of grant and terminates on the tenth anniversary of
the date of grant.
Option Awards -- As noted above, the Board of Directors changed its non-employee
director compensation arrangements in November 1997. Prior to that change,
non-employee directors were entitled to receive an initial option award covering
a specified number of shares of the Company's common stock upon election to the
Board of Directors and an annual option award covering a specified number of
shares for each year of service. The Company's Incentive Plan, which was
approved by the stockholders in June 1994 and which specified the compensation
arrangements for non-employee directors, originally provided that the non-
employee directors' initial option award was to cover 15,000 shares of common
stock and that each annual award was to cover 6,000 shares. The Incentive Plan
also provided, however, that those numbers were to be adjusted to take stock
splits into account. As a result of adjustments for the two-for-one split of the
common stock paid in October 1995 and the two-for-one split of the common stock
paid in December 1996, the size of the initial and annual option awards had
grown to 60,000 shares and 24,000 shares, respectively. After the announcement
of an additional two-for-one split of the common stock in May 1997 (to be paid
in July 1997), the Board of Directors decided to review the Company's
non-employee director compensation arrangement
1
<PAGE> 3
and, pending completion of that review, unanimously elected to forego the
adjustment in their annual option awards for the July 1997 stock split.
Consequently, each non-employee director who was serving immediately after the
stockholders' meeting in 1997 received an annual option award covering 24,000
shares (rather than 48,000, which would have been the award had the split
adjustment been made).
In November 1997, after completing a thorough review and analysis of
non-employee director compensation plans at various companies deemed comparable
for this purpose, the Board of Directors unanimously determined that it was in
the best interests of the Company and its stockholders to modify the terms of
the compensation paid to non-employee directors, including the size of the
automatic option awards, and adopted new non-employee director compensation
arrangements. Under the new arrangements, the number of shares of common stock
subject to each annual option award for a Service Year will be equal to the
"Annual Award Base Number" for that Service Year divided by the fair market
value of the common stock on the date of grant. The number of shares subject to
an initial option award for a new non-employee director will be equal to the
"Initial Award Base Number" divided by the fair market value of the common stock
on the date of grant, and the first annual option award for a new non-employee
director will be prorated on the same basis as the director's annual retainer
fee, as described above. The Annual Award Base Number will be $650,000 (subject
to an annual escalation factor of 10%), and the Initial Award Base Number at any
given time will be 300% of the then-applicable Annual Award Base Number. The
annual option awards for each Service Year are to be granted as of the first day
of that Service Year, and an initial option award is to be granted to a new non-
employee director as of the date of the first Board of Directors meeting
attended. Under the new arrangements, the method of computing the number of
shares subject to the initial and annual option awards will not be adjusted to
take into account future stock splits (including the two-for-one split of the
common stock paid in March 1998); however, once an option has been issued, the
number of shares subject to the option and the exercise price of the option will
be adjusted to take into account any subsequent stock splits.
As a result of these new non-employee director compensation arrangements, each
of the Company's current non-employee directors will receive, effective as of
the date of the upcoming annual meeting of stockholders (which is scheduled for
July 17, 1998), an annual option award covering a number of shares equal to
$650,000 divided by the fair market value of the common stock on the date of
grant. It is not possible to compute the size of the award at the present time;
however, if the number were computed on the basis of the fair market value of
the common stock as of March 31, 1998, the size of the award would be
approximately 9,600 shares, which is substantially smaller than it would have
been (96,000 shares) had the non-employee director compensation arrangements not
been changed.
In the case of both initial awards and annual awards, the exercise price of the
option is equal to the "fair market value" of the common stock on the date of
grant, which is defined as the average of the high and low reported sales price
of the common stock on that date. The option vests and becomes exercisable with
respect to 20% of the shares on each of the first five anniversaries of the date
of grant, so long as the director remains a member of the Board of Directors
through those dates. The option terminates when the director ceases to be a
member of the Board of Directors (if the Board of Directors demands or requests
the director's resignation), 90 days after the director ceases to be a member of
the Board of Directors (if the director resigns for any other reason) or one
year after the director ceases to be a member of the Board of Directors because
of death or permanent disability. In any event, the option terminates on the
tenth anniversary of the date of grant.
Because Mr. Mandl was appointed to the Board of Directors at the time that the
new compensation arrangement was approved, his compensation is based on the new
arrangement. Consequently, effective November 21, 1997, the date of the first
Board of Directors meeting that Mr. Mandl attended, Mr. Mandl received an option
covering 61,356 shares of common stock, 46,017 were attributable to his initial
award and 15,339 were attributable to the annual award for the Service Year that
commenced in 1997. Had the Board of Directors not changed the non-employee
director compensation arrangement, Mr. Mandl would have received an option
covering 240,000 shares.
Other Benefits -- The Company reimburses non-employee directors for their
reasonable expenses associated with attending Board of Directors meetings and
provides the directors with liability insurance coverage with respect to their
activities as directors of the Company.
2
<PAGE> 4
Compensation During Fiscal 1998 -- The following table describes the fiscal 1998
fees and stock option grants for each of the Company's non-employee directors.
<TABLE>
<CAPTION>
CASH
NAME PAYMENTS OPTIONS GRANTED(A)
---- -------- ------------------
<S> <C> <C>
Mr. Carty.............................................. $35,000(b) 48,000 shares
Mr. Hirschbiel......................................... $34,000 48,000 shares
Mr. Jordan............................................. $34,000(b) 48,000 shares
Mr. Luce(c)............................................ $ 5,000 49,722 shares
Mr. Luft............................................... $35,000 48,000 shares
Ms. Malone............................................. $34,000 48,000 shares
Mr. Mandl(d)........................................... $40,000 61,356 shares
Mr. Miles(c)........................................... $ 5,000 49,722 shares
</TABLE>
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(a) Effective July 18, 1997 (the date of the first Board of Directors meeting
following last year's annual meeting of stockholders), each non-employee
director received an option to purchase 24,000 shares with an exercise
price of $74.08 per share, which upon payment of the two-for-one split of
the common stock on March 6, 1998, is now the equivalent of an option to
purchase 48,000 shares at an exercise price of $37.04 per share.
(b) Elected to defer $30,000 of this amount pursuant to the deferred
compensation plan described above.
(c) Mr. Luce and Mr. Miles elected to receive options in lieu of the $30,000
annual retainer fee. Accordingly, in addition to the options referred to in
note (a) above, on July 18, 1997 (the date of the first Board of Directors
meeting following last year's annual meeting of stockholders), each of Mr.
Luce and Mr. Miles received an option to purchase 861 shares with an
exercise price of $74.08 per share, which as a result of the March 1998
stock split, is now the equivalent of an option to purchase 1,722 shares at
an exercise price of $37.04.
(d) Mr. Mandl's compensation reflects the new non-employee director
compensation arrangements approved by the Board of Directors in November
1997.
COMPENSATION OF EXECUTIVE OFFICERS
General -- The compensation paid to the Company's executive officers is
administered by the Compensation Committee of the Board of Directors and
consists of base salaries, annual bonuses, awards made pursuant to the Incentive
Plan, contributions to the Company-sponsored 401(k) retirement plan and deferred
compensation plan and miscellaneous benefits. The following table summarizes the
total compensation for each of the last three fiscal years awarded to, earned by
or paid to the Company's Chief Executive Officer and the four most highly
compensated executive officers of the Company (other than the Chief Executive
Officer) who were serving as executive officers at the end of fiscal 1998 (the
"Named Executive Officers").
3
<PAGE> 5
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
---------------------------------- -----------------------
OTHER SHARES ALL OTHER
ANNUAL RESTRICTED UNDER- OTHER
NAME AND FISCAL COMPEN- STOCK LYING COMPEN-
PRINCIPAL POSITION YEAR SALARY BONUS SATION(A) AWARDS(B) OPTIONS(C) SATION(D)
------------------ ------ -------- ---------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
MICHAEL S. DELL....................... 1998 $788,462 $2,000,000 $ 1,650 $ 0 3,200,000 $65,549
Chairman of the Board, 1997 688,461 1,304,910 17,448 0 3,200,000 34,379
Chief Executive Officer 1996 568,629 731,421 92,541 0 480,000 21,303
MORTON L. TOPFER...................... 1998 616,346 2,000,000(e) 7,749 0 150,000 28,681
Vice Chairman 1997 544,276 1,031,622 17,567 0 360,000 35,576
1996 490,892 631,429 112,348 640,000 2,200,000 28,856
KEVIN B. ROLLINS...................... 1998 450,381 1,125,953(e) 141,206 0 400,000 34,320
Vice Chairman 1997 342,310 486,610 125,099 0 2,680,000 3,530
1996 -- -- -- -- -- --
THOMAS J. MEREDITH.................... 1998 408,288 1,020,719(e) 825 0 80,000 11,315
Senior Vice President, 1997 383,547 545,232 14,314 0 240,000 20,198
Chief Financial Officer 1996 327,635 316,075 41,534 320,000 224,000 19,746
PHILLIP E. KELLY...................... 1998 308,892 579,173(e) 405,538 0 60,000 7,833
Vice President and 1997 266,923 379,444 422,616 0 200,000 12,287
President -- Asia Pacific 1996 223,397 166,243 288,275 731,200 400,000 9,709
</TABLE>
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(a) The amounts shown in this column include amounts paid by the Company for
personal financial counseling and tax planning services and (prior to
fiscal 1997) reimbursement for the related tax liability (Mr. Dell, $1,650
in fiscal 1998, $17,448 in fiscal 1997 and $92,541 in fiscal 1996; Mr.
Topfer, $5,008 in fiscal 1998, $17,567 in fiscal 1997 and $34,031 in fiscal
1996; Mr. Rollins, $12,390 in fiscal 1998 and $643 in fiscal 1997; Mr.
Meredith, $825 in fiscal 1998, $14,314 in fiscal 1997 and $39,485 in fiscal
1996; and Mr. Kelly, $3,350 in fiscal 1998 and $5,693 in fiscal 1997) and
relocation expenses paid by the Company and reimbursement for the related
tax liability (Mr. Topfer, $2,741 in fiscal 1998 and $78,317 in fiscal
1996; and Mr. Rollins, $128,816 in fiscal 1998 and $34,456 in fiscal 1997).
For Mr. Rollins, the amount shown for fiscal 1997 also includes the amount
of bonus paid on commencement of employment ($90,000). For Mr. Meredith,
the amount shown for fiscal 1996 also includes imputed interest on
below-market loans that have since been repaid ($2,049). For Mr. Kelly, the
amounts shown also include expat allowances ($335,406 in fiscal 1998,
$365,709 in fiscal 1997 and $245,948 in fiscal 1996) and reimbursement for
miscellaneous goods and services ($66,782 in fiscal 1998, $51,214 in fiscal
1997 and $42,327 in fiscal 1996).
(b) For Mr. Topfer, the amount shown represents the value of 160,000 shares of
the Company's common stock awarded on July 24, 1995 (calculated using the
closing sales price of the common stock on the date of grant, which was
$4.00). The shares are subject to vesting and transfer restrictions that
will lapse with respect to all of the shares on the fourth anniversary of
the date of grant. In addition, the shares are subject to forfeiture (and
any gain realized on the sale of the shares is subject to repayment to the
Company) if Mr. Topfer competes with the Company within two years after his
employment with the Company is terminated.
For Mr. Meredith, the amount shown represents the value of 80,000 shares of
the Company's common stock awarded on July 24, 1995 (calculated using the
closing sales price of the common stock on the date of grant, which was
$4.00). The shares are subject to vesting and transfer restrictions that
will lapse with respect to one-seventh of the shares on each of the first
seven anniversaries of the date of grant. In addition, the shares are
subject to forfeiture (and any gain realized on the sale of the shares is
subject to repayment to the Company) if Mr. Meredith competes with the
Company within two years after his employment with the Company is
terminated.
For Mr. Kelly, the amount shown represents the value of 160,000 shares of
the Company's common stock awarded on February 7, 1995 (calculated using
the closing sales price of the common stock on the date of grant, which was
$2.57) and the value of 80,000 shares of the Company's common stock awarded
on July 24, 1995 (calculated using the closing sales price of the common
stock on the date of grant, which was $4.00). With respect to each award,
the shares are subject to vesting and transfer restrictions that will lapse
with respect to one-seventh of the shares on each of the first seven
anniversaries of the date of grant. In addition, the shares are subject to
forfeiture (and any gain realized on the sale of the shares is subject to
repayment to the Company) if Mr. Kelly competes with the Company within two
years after his employment with the Company is terminated.
4
<PAGE> 6
The total number and value of the shares of restricted stock held by the
Named Executive Officers as of the end of fiscal 1998 are as follows, with
the values based on the closing sales price of the Company's common stock on
the last trading day of fiscal 1998 ($49.72):
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
--------- ----------
<S> <C> <C>
Mr. Dell.................................................... 0 $ 0
Mr. Topfer.................................................. 160,000 7,955,040
Mr. Rollins................................................. 0 0
Mr. Meredith................................................ 57,120 2,839,949
Mr. Kelly................................................... 194,160 9,653,441
</TABLE>
When and if the Board of Directors declares and pays dividends on the
Company's common stock, such dividends will be paid on the outstanding
shares of restricted stock described in this note at the same rate as they
are paid to all stockholders.
(c) Does not include options granted under the Executive Stock Ownership
Incentive Program described below (the "ESOIP"), pursuant to which a Named
Executive Officer may elect to receive discounted stock options in lieu of
all or a portion of annual bonus. See note (e) below for information
regarding ESOIP elections made for fiscal 1998 annual bonuses. For
information regarding the stock option grants made during fiscal 1998
(including information with respect to options granted pursuant to ESOIP
elections made for fiscal 1997 annual bonuses), see the table titled "Option
Grants in Last Fiscal Year" under "Item 11 -- Executive
Compensation -- Compensation of Executive Officers -- Incentive Plan Awards"
below.
(d) Includes the value of the Company's contributions to the Company-sponsored
401(k) retirement savings plan that is available to all Company employees,
the amount of the Company's contributions to the deferred compensation plan
that is available to certain members of the Company's management and the
amount paid by the Company for term life insurance coverage under health and
welfare plans available to all Company employees.
(e) In accordance with the terms of the ESOIP, Mr. Topfer, Mr. Rollins and Mr.
Meredith each elected to receive discounted stock options in lieu of 100% of
his annual bonus, and Mr. Kelly elected to receive discounted stock options
in lieu of 30% of his annual bonus. The amount shown represents the amount
of the annual bonus awarded, whether paid or foregone in lieu of discounted
options. In lieu of the foregone amounts, those persons received options
covering the following number of shares: Mr. Topfer, 157,016; Mr. Rollins,
88,396; Mr. Meredith, 80,134; and Mr. Kelly, 13,640. The options were
granted on March 20, 1998 and have an exercise price of $50.95 (which was
80% of the market value of the common stock on that date). These options are
subject to a one-year vesting period and, accordingly, do not vest and are
not exercisable until the first anniversary of the date of grant.
Incentive Plan Awards -- The Company's Incentive Plan provides for the granting
of incentive awards in the form of stock options, stock appreciation rights,
stock and cash to directors, executive officers and key employees of the Company
and its subsidiaries and certain other persons who provide consulting or
advisory services to the Company. Pursuant to an amendment to the Incentive Plan
that was approved by the stockholders at last year's annual meeting, the number
of shares of the Company's common stock that may be issued pursuant to awards
under the Incentive Plan is automatically increased at the beginning of each
fiscal year, beginning with fiscal 1999 and ending with fiscal 2003. The number
of additional shares that will be available for awards at the beginning of any
such fiscal year will be equal to 4% of the following amount: the total number
of issued and outstanding shares of common stock as of the end of the
immediately preceding fiscal year, plus the total number of shares of common
stock repurchased by the Company during the immediately preceding fiscal year
under the Company's stock repurchase program. That percentage will be increased
to 5% if the total shareholder return (consisting of increase in stock price
plus dividends paid) achieved by the Company during the immediately preceding
fiscal year exceeds the average total shareholder return achieved by the
companies included in the S&P Computer Systems Index during the immediately
preceding fiscal year. As of the beginning of fiscal 1999, an aggregate of
162,701,660 shares of common stock were authorized for issuance pursuant to
awards under the Incentive Plan (including 35,654,140 shares that were added at
the beginning of fiscal 1999 under the formula described above) and 45,728,576
shares remained available for issuance under Incentive Plan awards.
5
<PAGE> 7
No restricted stock was awarded to any of the Named Executive Officers during
fiscal 1998. The following table sets forth information about stock option
grants made to the Named Executive Officers during fiscal 1998. The Company has
not made any awards of stock appreciation rights to any of the Named Executive
Officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------------------------
NUMBER PERCENTAGE OF
OF SHARES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE GRANT DATE
OPTIONS EMPLOYEES IN PRICE GRANT EXPIRATION PRESENT
NAME GRANTED(A) FISCAL YEAR PER SHARE DATE DATE VALUE(B)
---- ---------- ------------- --------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Mr. Dell................. 2,000,000 9.16% $ 18.531 3-5-97 3-5-07 $15,622,350
1,200,000 5.49 37.040 7-18-97 7-18-07 17,892,405
Mr. Topfer............... 309,388(c) 1.42 13.338 3-21-97 3-21-07 3,147,373
150,000 0.69 37.040 7-18-97 7-18-07 2,236,551
Mr. Rollins.............. 100,000 0.46 37.040 7-18-97 7-18-07 1,491,034
300,000 1.37 40.625 12-22-97 12-22-07 5,010,008
Mr. Meredith............. 163,516(c) 0.75 13.338 3-21-97 3-21-07 1,663,432
80,000 0.37 37.040 7-18-97 7-18-07 1,192,827
Mr. Kelly................ 45,516(c) 0.21 13.338 3-21-97 3-21-07 463,030
60,000 0.27 37.040 7-18-97 7-18-07 894,620
</TABLE>
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(a) Unless otherwise noted, these options will vest and become exercisable with
respect to one-fifth of the underlying shares on each of the first five
anniversaries of the date of grant.
(b) Calculated using the Black-Scholes model. The material assumptions and
adjustments incorporated into the Black-Scholes model in making such
calculations include the following: (1) an interest rate representing the
interest rate on U.S. Treasury securities with a maturity date
corresponding to the option term; (2) volatility determined using daily
prices for the Company's common stock during the five-year period
immediately preceding date of grant; (3) a dividend rate of $0; and (4) in
each case (other than the ESOIP options described in note (c) below), a
reduction of 25% to reflect the probability of forfeiture due to
termination of employment prior to vesting and the probability of a
shortened option term due to termination of employment prior to the option
expiration date. The ultimate values of the options will depend on the
future market prices of the common stock, which cannot be forecast with
reasonable accuracy. The actual value, if any, that an optionee will
recognize upon exercise of an option will depend on the difference between
the market value of the common stock on the date the option is exercised
and the applicable exercise price.
(c) These options were granted as a part of the ESOIP, which is described
below. These options were fully vested when granted but were not
exercisable until the first anniversary of the date of grant. These options
were received in lieu of fiscal 1997 annual bonuses in the following
amounts: Mr. Topfer, $1,031,622 (100%); Mr. Meredith, $545,232 (100%); and
Mr. Kelly, $151,682 (40%). Those amounts are shown in the Bonus column of
the "Summary Compensation Table" above.
6
<PAGE> 8
The following table sets forth, for each Named Executive Officer, information
concerning the exercise of stock options during fiscal 1998 and the value of
unexercised stock options at the end of fiscal 1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END(B)
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED(A) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mr. Dell............... 0 $ 0 832,000 6,048,000 $36,214,480 $200,467,820
Mr. Topfer............. 1,241,000 37,519,304 0 3,698,388 0 163,012,986
Mr. Rollins............ 408,000 13,921,321 128,000 2,544,000 5,786,558 102,532,852
Mr. Meredith........... 620,000 19,910,401 472,670 1,134,990 22,126,660 49,392,046
Mr. Kelly.............. 28,000 734,414 250,376 543,916 11,309,826 22,043,709
</TABLE>
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(a) Calculated using the difference between (1) the actual sales price of the
underlying shares (if the underlying shares were sold immediately upon
exercise) or the closing sales price of the common stock on the date of
exercise (if the underlying shares were not sold immediately upon exercise)
and (2) the exercise price.
(b) Amounts were calculated by multiplying the number of unexercised options by
the closing sales price of the common stock on the last trading day of
fiscal 1998 ($49.72) and subtracting the exercise price.
Under the ESOIP, which is a program implemented under the Incentive Plan,
certain members of the Company's management (including the executive officers)
may elect, on an annual basis, to receive stock options in lieu of all or a
portion of the annual bonus that they would otherwise receive. The exercise
price of the options is 80% of the fair market value of the Company's common
stock on the date of issuance. The number of shares subject to the options is
dependent on the amount of bonus a participant designates for the program and is
calculated by dividing the designated bonus amount by 20% of the fair market
value of the common stock on the date of issuance. For the first two years of
the program (fiscal 1996 and fiscal 1997), the options were fully vested at the
time of issuance but were not exercisable for a period of one year. Effective
for fiscal 1998, the options are subject to a one-year vesting period and do not
vest and become exercisable until the first anniversary of the date of grant.
All decisions regarding participation in the program and the amount of bonus to
designate must be made several months in advance of the anticipated bonus
payment date. With respect to fiscal 1998, 240 persons (including four of the
Named Executive Officers) elected to participate in the program with respect to
their bonuses for such year.
401(k) Retirement Plan -- The Company maintains a defined contribution
retirement plan that complies with the provisions of Section 401(k) of the
Internal Revenue Code. Substantially all U.S. employees are eligible to
participate in the plan, and eligibility for participation commences upon
hiring. Under the terms of the plan, the Company currently matches 100% of each
employee participant's voluntary contributions, subject to a maximum Company
contribution of 3% of the employee's compensation. The Company's matching
contributions are used to purchase the Company's common stock and vest at the
rate of 20% on each of the first five anniversaries of the date of hire. After
the completion of five years of service with the Company, a participant may
elect to transfer the portion of his or her funds held in the form of common
stock to another available investment fund. During fiscal 1998, the Company made
a discretionary contribution for every eligible employee, regardless of whether
the employee was a plan participant, equal to 2% of the employee's actual
earnings during calendar 1997.
Deferred Compensation Plan -- The Company maintains a deferred compensation
plan, pursuant to which certain members of management (including the executive
officers) may elect to defer a portion of annual compensation. The Company
matches 100% of the employee's voluntary contributions not in excess of 3% of
annual compensation. The funds attributable to a participant (including
voluntary contributions and matching contributions) are invested among various
funds designated by the plan administrator. Upon the death or retirement of a
participant, the funds attributable to the participant (including any earnings
on contributions) are distributed to the participant or the participant's
beneficiary in a lump sum or in annual, quarterly or
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monthly installments over a period of up to ten years. A participant whose
employment with the Company is terminated prior to death or retirement is
entitled to receive his or her contributions to the plan (and any earnings
thereon) but is entitled to receive the Company's matching contributions only if
he or she has completed four years of service with the Company.
Employee Stock Purchase Plan -- The Company maintains an employee stock purchase
plan that qualifies under Section 423 of the Internal Revenue Code and permits
substantially all employees to purchase shares of the Company's common stock.
Participating employees may purchase common stock at the end of each
participation period at a purchase price equal to 85% of the lower of the fair
market value of the common stock at the beginning or the end of the
participation period. Participation periods are semi-annual and begin on January
1 and July 1 of each year. Employees may designate up to 15% of their base
compensation for the purchase of common stock under the plan.
Employment Agreements and Change-in-Control Arrangements -- Each of the Named
Executive Officers has entered into an employment agreement with the Company.
For the Named Executive Officers other than Mr. Dell, such employment agreements
do not contain any provisions regarding compensation or continued employment and
are identical in all material respects to those contained in the employment
agreement entered into by all the Company's employees upon the commencement of
their employment with the Company. Mr. Dell's employment agreement provides for
continued employment for successive one-year terms, subject to termination at
any time at the option of Mr. Dell upon 30 days' written notice.
Under the terms of the Incentive Plan and the Company's prior stock option
plans, the Compensation Committee, if it so chooses, may issue awards with
provisions that accelerate vesting and exercisability in the event of a
change-in-control of the Company and may amend existing awards to provide for
such acceleration. To date, the Compensation Committee has not elected to
include such acceleration provisions in any awards.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Miles, Mr. Hirschbiel and Mr. Jordan served as members of the Compensation
Committee of the Company's Board of Directors during all of fiscal 1998, and Mr.
Mandl has been serving as a member of the Compensation Committee since his
election to the Board of Directors in November 1997. None of such persons is an
officer or employee, or former officer or employee, of the Company or any of its
subsidiaries. No interlocking relationship exists between the members of the
Company's Board of Directors or Compensation Committee and the board of
directors or compensation committee of any other company, nor has any such
interlocking relationship existed in the past.
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SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf the undersigned, thereunto duly authorized.
DELL COMPUTER CORPORATION
Date: May 26, 1998 /s/ JAMES M. SCHNEIDER
------------------------------------
Vice President -- Finance
(Principal Accounting Officer)
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