<PAGE> 1
Filed Pursuant to Rule 424(b)(2)
Registration No. 333-47861
PROSPECTUS SUPPLEMENT
(To Prospectus dated April 3, 1998)
$500,000,000
(DELL LOGO)
Dell Computer Corporation
$200,000,000 6.55% SENIOR NOTES DUE 2008
$300,000,000 7.10% SENIOR DEBENTURES DUE 2028
------------------------
Interest payable April 15 and October 15
------------------------
THE SENIOR NOTES WILL MATURE ON APRIL 15, 2008, AND THE SENIOR DEBENTURES WILL
MATURE ON APRIL 15, 2028. THE SENIOR NOTES AND THE SENIOR DEBENTURES
(COLLECTIVELY, THE "OFFERED SECURITIES") WILL BE REDEEMABLE, IN WHOLE OR FROM
TIME TO TIME IN PART, AT THE OPTION OF THE COMPANY AT ANY TIME AT A REDEMPTION
PRICE EQUAL TO THE GREATER OF (A) 100% OF THE PRINCIPAL AMOUNT OF THE OFFERED
SECURITIES TO BE REDEEMED AND (B) THE SUM OF THE PRESENT VALUES OF THE REMAINING
SCHEDULED PAYMENTS OF PRINCIPAL AND INTEREST THEREON (EXCLUSIVE OF INTEREST
ACCRUED TO THE DATE OF REDEMPTION) DISCOUNTED TO THE DATE OF REDEMPTION ON A
SEMIANNUAL BASIS (ASSUMING A 360-DAY YEAR CONSISTING OF TWELVE 30-DAY MONTHS) AT
THE TREASURY RATE (AS DEFINED HEREIN) PLUS 12.5 BASIS POINTS (IN THE CASE OF THE
SENIOR NOTES) OR 15 BASIS POINTS (IN THE CASE OF THE SENIOR DEBENTURES), PLUS,
IN EITHER CASE, ACCRUED AND UNPAID INTEREST ON THE PRINCIPAL AMOUNT BEING
REDEEMED TO THE DATE OF REDEMPTION. THE OFFERED SECURITIES WILL NOT BE SUBJECT
TO ANY SINKING FUND. THE OFFERED SECURITIES WILL BE REPRESENTED BY GLOBAL
SECURITIES REGISTERED IN THE NAME OF THE DEPOSITORY TRUST COMPANY (THE
"DEPOSITARY") OR ITS NOMINEE. INTERESTS IN SUCH GLOBAL SECURITIES WILL BE SHOWN
ON, AND TRANSFERS THEREOF WILL BE EFFECTED ONLY THROUGH, RECORDS MAINTAINED BY
THE DEPOSITARY AND ITS PARTICIPANTS. EXCEPT AS DESCRIBED HEREIN, OFFERED
SECURITIES IN DEFINITIVE FORM WILL NOT BE ISSUED. SEE "DESCRIPTION OF OFFERED
SECURITIES."
------------------------
THESE SECURITIES HAVE NOT 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
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
PRICE OF SENIOR NOTES 99.845% AND ACCRUED INTEREST
PRICE OF SENIOR DEBENTURES 99.762% AND ACCRUED INTEREST
------------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC(1) COMMISSIONS(2) COMPANY(1)(3)
--------- -------------- -------------
<S> <C> <C> <C>
Per Senior Note........................... 99.845% .650% 99.195%
Total................................ $199,690,000 $1,300,000 $198,390,000
Per Senior Debenture...................... 99.762% .875% 98.887%
Total................................ $299,286,000 $2,625,000 $296,661,000
</TABLE>
--------------------
(1) Plus accrued interest from April 15, 1998.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriters."
(3) Before deducting expenses payable by the Company estimated at $450,000.
------------------------
The Offered Securities are offered, subject to prior sale, when, as and if
accepted by the Underwriters. It is expected that delivery of the Offered
Securities will be made on or about April 27, 1998 through the book-entry
facilities of the Depositary against payment therefor in immediately available
funds.
------------------------
MORGAN STANLEY DEAN WITTER GOLDMAN, SACHS & CO.
April 22, 1998
<PAGE> 2
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY THE UNDERWRITERS.
NEITHER THIS PROSPECTUS SUPPLEMENT NOR THE ACCOMPANYING PROSPECTUS CONSTITUTES
AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER
THAN THE SECURITIES DESCRIBED IN THIS PROSPECTUS SUPPLEMENT OR AN OFFER TO SELL
OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY JURISDICTION TO
ANY PERSONS TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. THE
DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS OR ANY
SALE MADE HEREUNDER DOES NOT IMPLY THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS
OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN OR
THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE ON WHICH SUCH
INFORMATION IS GIVEN.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
The Company................................................. S-3
Use of Proceeds............................................. S-5
Capitalization.............................................. S-6
Selected Financial Data..................................... S-7
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. S-8
Description of Offered Securities........................... S-13
Underwriters................................................ S-15
Legal Opinions.............................................. S-16
PROSPECTUS
Available Information....................................... 2
Information Incorporated by Reference....................... 2
The Company................................................. 3
Use of Proceeds............................................. 3
Ratio of Earnings to Fixed Charges.......................... 3
Selected Financial Data..................................... 4
Description of Debt Securities.............................. 5
Plan of Distribution........................................ 16
Legal Opinions.............................................. 16
Experts..................................................... 17
</TABLE>
------------------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICES OF THE OFFERED
SECURITIES. SPECIFICALLY, THE UNDERWRITERS MAY BID FOR AND PURCHASE OFFERED
SECURITIES IN THE OPEN MARKET. FOR A DISCUSSION OF THESE ACTIVITIES, SEE
"UNDERWRITERS."
S-2
<PAGE> 3
THE COMPANY
GENERAL
Dell Computer Corporation (the "Company") is the world's leading direct
computer systems company and one of the top three computer systems companies in
the world. The Company was founded in 1984 by Michael Dell on a simple
concept -- by selling computers directly to customers, the Company could most
efficiently understand and satisfy the computing needs of customers. The Company
offers its customers a full range of computer systems, including desktop PCs,
notebooks, workstations and network servers, as well as an extended selection of
peripheral hardware and computing software. The Company's "direct model" offers
in-person relationships with corporate and institutional customers; telephone
and Internet purchasing; build-to-order computer systems; telephone and on-line
technical support and next-day, on-site product service. The Company sells to
large corporations, government agencies and educational institutions, as well as
medium and small businesses and home PC users.
The Dell(R) line of computer systems includes OptiPlex(R) and Dell
Dimension(R) desktop computers, Latitude(R) and Inspiron(TM) notebook computers,
PowerEdge(R) network servers and Dell WorkStation 400 products. The Company's
computers are manufactured on a build-to-order basis at facilities in Austin,
Texas; Limerick, Ireland; and Penang, Malaysia.
BUSINESS STRATEGY
The Company's business strategy, centered around its direct business model,
is customer-focused and aims to deliver the best customer experience through
direct, comprehensive customer relationships, cooperative research and
development with technology partners, custom-built computer systems and service
and support programs tailored to customer needs. The Company believes that this
approach provides it with several competitive advantages. The approach
eliminates the need to support an extensive network of wholesale and retail
dealers, thereby avoiding typical dealer mark-ups; avoids the higher inventory
costs associated with the wholesale/retail channel and the competition for
retail shelf space; and reduces the obsolescence risk associated with products
in a rapidly changing technological market. In addition, direct customer contact
allows the Company to maintain, monitor and update a database of information
about customers and their current and future products and service needs, which
can be used to shape future product offerings and post-sale service and support
programs. This direct approach, combined with the Company's efficient
procurement, manufacturing and distribution processes, allows the Company to
bring relevant technology to its customers faster and more competitively priced
than many of its competitors.
- Comprehensive customer relationships -- The Company develops and utilizes
direct customer relationships to understand end-users' needs and to
deliver high quality computer products and services tailored to meet
those needs. The type of relationship depends on the type of customer.
For large corporate and institutional customers, the relationship may
begin prior to sale, when the Company works with the customer to plan a
strategy to meet that customer's current and future technology needs. The
direct relationship continues after the sale, as dedicated account teams
consisting of sales, customer service and technical personnel continue to
support the customer's technology objectives. The Company also
establishes direct relationships with medium and small businesses and
home users, either through account representatives, through telephone
sales representatives or through Internet contact. All of these direct
customer relationships provide the Company with a flow of information
about its customers' plans and requirements and enable it to weigh their
needs against emerging technologies.
- Cooperative research and development -- The Company also develops
cooperative, meaningful relationships with the world's most advanced
technology companies. Working with these companies, the Company's
engineers manage quality, integrate technologies and design and manage
system architecture. This cooperative approach allows the Company to
determine the best method and timing for delivering new technologies to
the market. The Company's goal is to deliver relevant technology to its
customers at the right time.
S-3
<PAGE> 4
- Custom-built computers -- The Company was founded on the principle that
delivering computers custom-built to specific customer orders is the best
business model for providing solutions that are truly relevant to
end-user needs. This build-to-order, flexible manufacturing process
enables the Company to achieve faster inventory turnover and reduced
inventory levels and allows the Company to rapidly incorporate new
technologies and components into its product offerings.
- Custom-tailored service and support programs -- In the same way that the
Company's computer products are built-to-order, service and support
programs are designed to fit specific customer requirements. The Company
offers a broad range of service and support programs through its own
technical personnel and its direct management of specialized service
suppliers. These services range from telephone and Internet support to
on-site customer-dedicated systems engineers.
The Company is committed to refining and extending the advantages of its
direct approach to manufacturing, selling and servicing computer systems.
Current Company initiatives include moving even greater volumes of product
sales, service and support to the Internet and further expanding an already
broad range of value-added services to enhance computing solutions for, and
simplify the system buying decisions of, current and potential customers. The
Internet, perhaps the purest and most efficient form of the direct model,
provides greater convenience and efficiency to customers and, in turn, to the
Company. Currently, the Company receives in excess of 800,000 visits per week to
its World Wide Web site at www.dell.com, where it maintains nearly 42 country-
specific sites, and Company revenue generated through the Internet exceeds $4
million a day. Through the Web site, customers and potential customers can
access a wide range of information about the Company's product offerings, can
configure and purchase systems on-line and can access volumes of support and
technical information. The Company also utilizes the Internet to enhance the
direct relationships with its customers. The Company designs and implements
custom Internet sites, called Premier Pages(SM), for various large customers,
allowing these customers to simplify and accelerate procurement and support
processes. Through these custom sites, the Company is able to provide the
customer with on-line configuration, pricing and purchasing capability; on-line
detailed order, purchasing and inventory reports; and critical account team
information.
The Company believes that it has significant opportunities for continued
growth in all parts of the world, in all customer segments and in all product
categories ranging from enterprise systems, such as network servers and high-end
workstations, to home PCs. While the Company believes that its business strategy
provides it with competitive advantages and significant opportunities for
growth, there are many factors that may affect the Company's business and the
success of its operations. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Factors Affecting the Company's
Business and Prospects" below.
PRODUCT PORTFOLIO
The Company offers a wide range of computer systems, including desktops,
notebooks, workstations and network servers, as well as software, peripherals
and service and support programs.
Desktop Computer Systems. The Company's OptiPlex(R) line of desktop
computer systems is the Company's mainstream offering for corporate and
institutional customers who require highly reliable systems optimized for use in
networked environments. All systems within the OptiPlex line are "Managed PCs,"
enabling remote manageability and control using industry-standard systems
management tools. Some OptiPlex systems are designed for optimal performance
with 32-bit operating systems, and some are available as Net PCs. All OptiPlex
systems utilize the Company's no-tool OptiFrame(TM) chassis, easing
serviceability and upgradability. The OptiFrame chassis is built entirely from
recyclable materials.
The Dell Dimension(R) line of desktop computer systems is designed for
small businesses, workgroups and individuals, who generally demand fast
performance and the latest technology without the need for remote manageability.
Some systems within the Dimension line contain the latest, state-of-the-art
technology and are targeted at technologically sophisticated users, while others
are designed for more value-oriented users.
Notebook Computers. The Company offers two lines of notebook computer
systems, each designed for targeted customer needs. The Latitude(R) line is
targeted at business customers who require highly reliable and durable systems
with maximum connectivity for use in networked environments. The Inspiron(TM)
line, which was
S-4
<PAGE> 5
introduced in September 1997, is targeted at technologically sophisticated users
who require the latest technology and high-end multimedia performance.
Workstations. During fiscal 1998, the Company entered the workstation
market when it began offering the Dell Workstation 400. These Windows
NT(R)-based systems incorporate highly advanced technology and are designed
specifically to run sophisticated, intensive professional applications, such as
computer-aided design, financial service and software development programs.
Network Servers. The PowerEdge(R) line of network servers consists of
systems that can operate as file servers, database servers, applications servers
and communications/groupware servers in a networked computing environment.
PowerEdge systems can be configured as desired for use in a range of networked
environments, from single workgroups to entire enterprises. The Company also
offers rack-mountable chassis for its network servers and a Scalable Disk System
for increasing network storage capacity.
Software and Accessories. In addition to its own branded products, the
Company offers a wide range of software, peripherals and other accessories
through its DellWare(R) program. Through its DellPlus software integration
program, the Company can factory-install a customer's proprietary applications
or hard-disk images at the time of system manufacture and deliver other
customer-specific solutions. Through the ReadyWare(R) program, the Company can
factory-install off-the-shelf software applications and interface cards in any
computer system the Company sells.
Service and Support. The Company enhances its product offerings with a
number of specialized services, including custom hardware and software
integration, leasing and asset management and network installation and support.
The Company offers next-business-day delivery, as well as an extended training
and support program on many of its software offerings.
USE OF PROCEEDS
The Company expects to use the net proceeds from the sale of the Offered
Securities (estimated to be $494.6 million, after deducting expenses) for
general corporate purposes, including capital expenditures. Pending such uses,
the Company intends to invest the net proceeds in marketable securities.
S-5
<PAGE> 6
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company as of February 1, 1998 and as adjusted to give effect to the sale by the
Company of the Offered Securities (as if such sale occurred on such date). This
table should be read in conjunction with the Company's consolidated financial
statements, including the related notes, incorporated by reference into the
accompanying Prospectus.
<TABLE>
<CAPTION>
FEBRUARY 1, 1998
---------------------
ACTUAL AS ADJUSTED
------ -----------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Long-term debt:
6.55% Senior Notes Due 2008............................... $ -- $ 200
7.10% Senior Debentures Due 2028.......................... -- 300
Other long-term debt, less current portion................ 17 17
------ ------
Total long-term debt.............................. 17 517
------ ------
Stockholders' equity:
Preferred stock and capital in excess of $.01 par value;
shares issued and outstanding: none.................... -- --
Common stock and capital in excess of $.01 par value;
shares issued and outstanding: 643,622,796 (a)......... 747 747
Retained earnings......................................... 607 607
Other..................................................... (61) (61)
------ ------
Total stockholders' equity........................ 1,293 1,293
------ ------
Total capitalization.............................. $1,310 $1,810
====== ======
</TABLE>
- ---------------
(a) Shares issued and outstanding does not include (1) shares that may be
issued as, or upon the exercise of, awards made pursuant to the Company's
stock option and incentive compensation plans, under which options to
purchase approximately 110 million shares were outstanding at February 1,
1998, or (2) approximately 13 million shares reserved for future issuance
under the Company's employee stock purchase plan.
S-6
<PAGE> 7
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with
the "Management's Discussion and Analysis of Financial Condition and Results of
Operations" below and the Company's consolidated financial statements, including
the related notes, incorporated by reference into the accompanying Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------------------------------------------------------------
FEBRUARY 1, FEBRUARY 2, JANUARY 28, JANUARY 29, JANUARY 30,
1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- -----------
(IN MILLIONS, EXCEPT PER SHARE DATA AND RATIOS)
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS DATA:
Net revenue.................... $12,327 $7,759 $5,296 $3,475 $2,873
Gross margin................... $ 2,722 $1,666 $1,067 $ 738 $ 433
Operating income (loss)........ $ 1,316 $ 714 $ 377 $ 249 $ (39)
Income (loss) before
extraordinary loss.......... $ 944 $ 531 $ 272 $ 149 $ (36)
Net income (loss).............. $ 944 $ 518 $ 272 $ 149 $ (36)
Income (loss) before
extraordinary loss per
common share (a)(b):
Basic....................... $ 1.44 $ 0.75 $ 0.36 $ 0.23 $(0.07)
Diluted..................... $ 1.28 $ 0.68 $ 0.33 $ 0.19 $(0.07)
Weighted average shares (a):
Basic....................... 658 710 716 618 597
Diluted..................... 738 782 790 750 597
Ratio of Earnings to Fixed
Charges (c)................. 93.1x 41.0x 16.7x 10.9x (d)
BALANCE SHEET DATA:
Working capital................ $ 1,215 $1,089 $1,018 $ 718 $ 510
Total assets................... $ 4,268 $2,993 $2,148 $1,594 $1,140
Long-term debt................. $ 17 $ 18 $ 113 $ 113 $ 100
Total stockholders' equity..... $ 1,293 $ 806 $ 973 $ 652 $ 471
</TABLE>
- ---------------
(a) The Company adopted Statement of Financial Accounting Standards No. 128,
"Earnings Per Share," in the fiscal year ended February 1, 1998. All
historical earnings per share data have been restated to conform to this
presentation. Additionally, all share and per share information has been
retroactively restated to reflect the two-for-one splits of the common
stock in March 1998 and July 1997.
(b) Excludes extraordinary loss of $0.02 basic per common share and $0.02
diluted per common share for fiscal 1997.
(c) For the purpose of calculating these ratios, "earnings" consist of income
from continuing operations before income taxes plus fixed charges, and
"fixed charges" consist of interest expense, amortization of debt expense
and discount or premium and the portion of rental expense deemed to be
representative of the interest component.
(d) Earnings were inadequate to cover fixed charges during the fiscal year
ended January 30, 1994. The amount of the deficiency was $19 million.
S-7
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company's objective is to maximize stockholder value by executing a
strategy that focuses on a balance of three priorities: growth, profitability
and liquidity. The following discussion highlights the Company's performance in
the context of these priorities. This discussion should be read in conjunction
with the consolidated financial statements, including the related notes,
incorporated by reference into the accompanying Prospectus.
RESULTS OF OPERATIONS
The following table summarizes the results of the Company's operations for
each of the past three fiscal years. All percentage amounts were calculated
using the underlying data in thousands.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------------------------------------------------------
FEBRUARY 1, FEBRUARY 2, JANUARY 28,
1998 INCREASE 1997 INCREASE 1996
----------- -------- ----------- -------- -----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Net revenue........................... $12,327 59% $7,759 47% $5,296
Gross margin.......................... $ 2,722 63% $1,666 56% $1,067
Percentage of net revenue........... 22.1% 21.5% 20.2%
Operating expenses.................... $ 1,406 48% $ 952 38% $ 690
Percentage of net revenue........... 11.4% 12.3% 13.1%
Operating income...................... $ 1,316 84% $ 714 90% $ 377
Percentage of net revenue........... 10.7% 9.2% 7.1%
Net income available to common
stockholders........................ $ 944 83% $ 518 99% $ 260
</TABLE>
Net Revenue
The Company has become one of the top three computer vendors in the world
as a result of its continued revenue growth. The increases in consolidated net
revenue for both fiscal 1998 and fiscal 1997 were principally due to increased
units sold. Unit shipments grew 60% and 55% for fiscal years 1998 and 1997,
respectively.
The unit volume growth in fiscal 1998 resulted from increased demand for
the Company's products across all product lines. This growth was driven by the
Company's continued sales efforts to win new customer accounts through
aggressive pricing actions and to increase market penetration of new and
higher-end products, including products incorporating Intel's Pentium(R) Pro and
Pentium II processors of speeds greater than 200MHz. While desktop products
continue to be the primary driver of unit volumes (comprising 84% of total unit
shipments in fiscal 1998), the growth rates in both the enterprise (the
combination of servers and workstations) and notebook product lines exceeded the
growth rate in desktops during fiscal 1998. Unit sales of desktop computers
increased 55%, while unit sales of enterprise and notebook computers increased
265% and 66%, respectively, during fiscal 1998.
Average revenue per unit in fiscal 1998 remained relatively stable compared
to fiscal 1997. Although aggressive pricing in the desktop product line
adversely affected average revenue per unit, this was partially offset by
increases in the enterprise and notebook product lines, primarily due to a
migration to higher-end enterprise and higher-platform notebook systems.
The unit volume increase in fiscal 1997 was also a result of increased
demand for the Company's products across all product lines. In particular,
demand for enterprise products resulted in unit growth of 160% in fiscal 1997,
compared to a 37% decrease in units in fiscal 1996. Additionally in fiscal 1997,
the Company continued to introduce products utilizing latest technology,
including products incorporating Intel's Pentium and Pentium Pro processors with
speeds at the 200MHz level.
S-8
<PAGE> 9
The Company experienced growth in net revenue in all geographic regions in
both fiscal 1998 and fiscal 1997. The following table summarizes the Company's
net revenue by geographic region for each of the past three fiscal years:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------------------------------
FEBRUARY 1, 1998 FEBRUARY 2, 1997 JANUARY 28, 1996
---------------- ----------------- -----------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Net revenue:
Americas................... $ 8,531 69% $5,279 68% $3,474 66%
Europe..................... 2,956 24 2,004 26 1,478 28
Asia-Pacific and Japan..... 840 7 476 6 344 6
------- ---- ------ ---- ------ ----
Consolidated net revenue..... $12,327 100% $7,759 100% $5,296 100%
======= ==== ====== ==== ====== ====
</TABLE>
In the Americas region, where efforts have allowed the Company to build
valuable supplier and customer relationships, net revenue grew 62% and 52% in
fiscal 1998 and fiscal 1997, respectively. In the European region, substantially
all countries experienced revenue growth in both fiscal 1998 and fiscal 1997.
This allowed Europe to increase revenue 48% and 36% in fiscal 1998 and fiscal
1997, respectively. Asia-Pacific and Japan revenues increased 77% in fiscal 1998
compared to a 38% increase in fiscal 1997.
Management believes that opportunity exists for continued worldwide growth
by increasing the Company's market presence in existing markets, entering new
markets and pursuing additional product opportunities. In fiscal 1998, the
Company continued to drive revenue growth through its Internet Web site located
at www.dell.com. By fiscal year-end, revenue generated through this venue
exceeded $4 million a day. Management believes that the Internet will continue
to be a significant sales and service medium for the Company in the future.
Additionally in fiscal 1998, the Company expanded its product offerings to
include high-performance workstations, and formed a business unit dedicated to
workstations in order to grow this product line. As a result of these and other
opportunities, the Company has announced plans to acquire an additional
manufacturing facility in Limerick, Ireland and to construct an additional
manufacturing facility in Austin, Texas and a manufacturing facility in Xiamen,
China.
Gross Margin
The increase in gross margin as a percentage of net revenue in fiscal 1998
over fiscal 1997 was the result of several factors, including component cost
declines (which were partially offset by price reductions), manufacturing
efficiencies and an overall shift in mix to higher-end servers and higher-priced
notebook platforms. Additionally in fiscal 1998, the Company experienced a
higher mix of Intel's Pentium Pro and Pentium II processors with speeds greater
than 200MHz. This contributed to the demand for higher-performance products,
which typically carry higher gross margins. The Company's direct business model
involves the maintenance of low levels of inventory. Consequently, component
cost declines can have a significant impact on overall product costs and gross
margin. During fiscal 1998, significant component cost declines occurred
(particularly mid-year, in memory components), causing a decline in overall
product costs. However, the Company's aggressive pricing strategies mitigated
the impact of these cost declines on gross margin. Gross margin also benefited
as the Company successfully migrated customers to higher-end enterprise systems
with additional options for external storage capacity and higher-platform
notebook computers. The mix of enterprise and notebook products increased to 9%
and 20% of system revenue, respectively, compared with 4% and 18%, respectively,
during the prior fiscal year.
The gross margin increase as a percentage of consolidated net revenue in
fiscal 1997 resulted primarily from component cost declines (which were
partially offset by price reductions) and a product mix shift to notebooks,
servers and higher-end desktop products. Additionally, during fiscal 1996 the
Company experienced a problematic product transition involving certain of its
OptiPlex desktop products, which had an adverse effect on gross margin.
S-9
<PAGE> 10
Operating Expenses
The following table presents certain information regarding the Company's
operating expenses during each of the last three fiscal years:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------------------------------
FEBRUARY 1, FEBRUARY 2, JANUARY 28,
1998 1997 1996
----------- ----------- -----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Operating expenses:
Selling, general and administrative............ $1,202 $ 826 $ 595
Percentage of net revenue................... 9.8% 10.7% 11.3%
Research, development and engineering.......... $ 204 $ 126 $ 95
Percentage of net revenue................... 1.6% 1.6% 1.8%
Total operating expenses......................... $1,406 $ 952 $ 690
Percentage of net revenue................... 11.4% 12.3% 13.1%
</TABLE>
Selling, general and administrative expenses increased in absolute dollar
amounts but declined as a percentage of net revenue for both fiscal 1998 and
1997. The increase in absolute dollars was due primarily to the Company's
increased staffing worldwide and increased infrastructure expenses, including
information systems, to support the Company's continued growth. The decline in
selling, general and administrative expense as a percentage of net revenue
resulted from significant net revenue growth.
The Company continues to fund research, development and engineering
activities to meet the demand for swift product cycles. As a result, research,
development and engineering expenses have increased each year in absolute
dollars due to increased staffing levels and product development costs. The
Company expects to continue to increase research, development and engineering
spending in absolute dollar amounts in order to invest in new products.
The Company believes that its ability to manage operating costs is an
important factor in its ability to remain competitive and successful. The
Company will continue to invest in information systems, personnel and other
infrastructure, and in research, development and engineering activities, to
support its growth and to provide for new, competitive products. Although
operating expenses are expected to increase in absolute dollar terms, the
Company's goal is to manage these expenses, over time, relative to its net
revenue and gross margin.
Operating Income
While delivering annual revenue growth of 59% and 47% in fiscal years 1998
and 1997, respectively, the Company has grown operating income by 84% in fiscal
1998 and 90% in fiscal 1997. This reflects the Company's ability to manage
operating expenses in relation to growth in gross margin to deliver strong
operating performance.
Financing and Other
Financing and other increased $19 million in fiscal 1998 from fiscal 1997
to $52 million primarily as a result of increased investment income due to
increased average marketable securities balances. Also, financing and other
increased $27 million in fiscal 1997 from fiscal 1996 to $33 million due to
increased investment income and decreased interest expense.
Income Taxes
The Company's effective tax rate was 31% for fiscal 1998 compared to 29%
for both fiscal 1997 and 1996. The increase in the effective tax rate resulted
from changes in the geographical distribution of income and losses. As a result
of the Company's geographical distribution of income, the Company's effective
tax rate is lower than the U.S. federal statutory rate of 35%.
S-10
<PAGE> 11
LIQUIDITY AND CAPITAL RESOURCES
The following table presents selected financial statistics and information
for each of the past three fiscal years:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------------------------------
FEBRUARY 1, FEBRUARY 2, JANUARY 28,
1998 1997 1996
----------- ----------- -----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Cash and marketable securities................... $1,844 $1,352 $ 646
Working capital.................................. $1,215 $1,089 $1,018
Days of sales in accounts receivable............. 36 37 42
Days of supply in inventory...................... 7 13 31
Days in accounts payable......................... 51 54 33
</TABLE>
During fiscal 1998, the Company generated $1.6 billion in cash flows from
operating activities, which represents the Company's principal source of cash.
Cash flows from operating activities benefited from increased net income and
continued asset management focus.
During fiscal 1998, the Company repurchased 69 million shares of its common
stock for an aggregate cost of $1.0 billion. The Company is currently authorized
to repurchase up to 100 million additional shares of its common stock and
anticipates that repurchases under this program will constitute a significant
use of future cash resources. At February 1, 1998, the Company held equity
instrument contracts that relate to the purchase of 50 million additional shares
of its common stock for an average cost of $44 per share exercisable at various
times in the first quarter of fiscal 1999 through the third quarter of fiscal
2000. For additional information regarding the Company's stock repurchase
program, see the notes to the Company's consolidated financial statements
incorporated by reference into the accompanying Prospectus.
The Company utilized $187 million in cash during fiscal 1998 to construct
and equip manufacturing and office facilities. The Company expects to spend
approximately $330 million to purchase capital items for manufacturing and
office facilities during fiscal 1999 to support the Company's continued growth.
During fiscal 1998, the Company replaced two revolving credit facilities
with one $250 million 5-year revolving credit facility. Additionally, during
fiscal 1996, the Company entered into a transaction that gives the Company the
ability to raise up to $150 million through a receivables securitization
facility. At both February 1, 1998 and February 2, 1997, these facilities were
unused.
During fiscal 1998, the Company entered into a $227 million master lease
facility, which allows the Company to lease certain real property, buildings and
equipment to be constructed or acquired. At February 1, 1998, $43 million of
this facility had been utilized.
Management believes that the Company has sufficient resources from cash
provided from operations and available borrowings to support its operations and
capital requirements for at least the next twelve months.
MARKET RISK
The Company is exposed to a variety of risks, including foreign currency
fluctuations and changes in the market value of its investments. In the normal
course of business, the Company employs established policies and procedures to
manage its exposure to fluctuations in foreign currency values and changes in
the market value of its investments.
Foreign Currency Hedging Activities
The Company's objective in managing its exposure to foreign currency
exchange rate fluctuations is to reduce the impact of adverse fluctuations in
earnings and cash flows associated with foreign currency exchange rate changes.
Accordingly, the Company utilizes foreign currency option contracts and forward
contracts to hedge its exposure on anticipated transactions and firm
commitments. The principal currencies hedged are the British pound, Japanese
yen, German mark, French franc and Canadian dollar. The Company monitors its
foreign
S-11
<PAGE> 12
exchange exposures daily to ensure the overall effectiveness of its foreign
currency hedge positions. However, there can be no assurance the Company's
foreign currency hedging activities will substantially offset the impact of
fluctuations in currency exchange rates on its results of operations and
financial position.
Based on the Company's foreign exchange instruments outstanding at February
1, 1998, the Company estimates a maximum potential one-day loss in fair value of
$12 million, using a Value-at-Risk ("VAR") model. The VAR model estimates were
made assuming normal market conditions and a 95% confidence level. There are
various types of modeling techniques that can be used in a VAR computation; the
Company used a Monte Carlo simulation type model that valued its foreign
currency instruments against a thousand randomly generated market price paths.
Anticipated transactions, firm commitments, receivables and accounts payable
denominated in foreign currencies were excluded from the model. The VAR model is
a risk estimation tool, and as such is not intended to represent actual losses
in fair value that will be incurred by the Company. Additionally, as the Company
utilizes foreign currency instruments for hedging anticipated and firmly
committed transactions, a loss in fair value for those instruments is generally
offset by increases in the value of the underlying exposure. Foreign currency
fluctuations did not have a material impact on the Company during fiscal years
1998, 1997 and 1996.
Marketable Securities
The fair value of the Company's investments in marketable securities at
February 1, 1998 was $1.5 billion. The Company's investment policy is to manage
its marketable securities portfolio to preserve principal and liquidity while
maximizing the return on the investment portfolio through the full investment of
available funds. The Company diversifies the marketable securities portfolio by
investing in multiple types of investment-grade securities and through the use
of different investment brokers. The Company's marketable securities portfolio
is primarily invested in short-term securities with at least an investment grade
rating to minimize interest rate and credit risk as well as to provide for an
immediate source of funds. Based on the Company's marketable securities
portfolio and interest rates at February 1, 1998, a 175 basis point increase or
decrease in interest rates would result in a decrease or increase of $17
million, respectively, in the fair value of the marketable securities portfolio.
Although changes in interest rates may affect the fair value of the marketable
securities portfolio and cause unrealized gains or losses, such gains or losses
would not be realized unless the investments are sold.
FACTORS AFFECTING THE COMPANY'S BUSINESS AND PROSPECTS
There are numerous factors that may affect the Company's business and the
results of its operations. These factors include general economic and business
conditions; the level of demand for personal computers; the level and intensity
of competition in the personal computer industry and the pricing pressures that
may result; the ability of the Company to timely and effectively manage periodic
product transitions and component availability; the ability of the Company to
develop new products based on new or evolving technology and the market's
acceptance of those products; the ability of the Company to manage its inventory
levels to minimize excess inventory, declining inventory values and
obsolescence; the product, customer and geographic sales mix of any particular
period; the Company's ability to continue to improve its infrastructure
(including personnel and systems) to keep pace with the growth in its overall
business activities; and the Company's ability to ensure its products and
information systems and those of its third party providers will be Year 2000
compliant. For a discussion of these and other factors affecting the Company's
business and prospects, see "Item 1 -- Business -- Factors Affecting the
Company's Business and Prospects" in the Company's Annual Report on Form 10-K
for the fiscal year ended February 1, 1998, which is incorporated by reference
into the accompanying Prospectus.
S-12
<PAGE> 13
DESCRIPTION OF OFFERED SECURITIES
The following description of the particular terms of the Offered Securities
(referred to in the Prospectus as the "Debt Securities") supplements, and to the
extent inconsistent therewith replaces, the description of the general terms and
provisions of the Debt Securities set forth in the Prospectus, to which
description reference is hereby made. The following summary of the Offered
Securities is qualified in its entirety by reference to the Indenture referred
to in the Prospectus. Capitalized terms not otherwise defined herein or in the
accompanying Prospectus have the meanings given to them in the Indenture.
GENERAL
The Senior Notes and the Senior Debentures offered hereby each constitute a
series of Debt Securities under the Indenture, limited, with respect to the
Senior Notes, to $200 million aggregate principal amount and, with respect to
the Senior Debentures, to $300 million aggregate principal amount. The Senior
Notes will mature on April 15, 2008, and the Senior Debentures will mature on
April 15, 2028. The Senior Notes and the Senior Debentures will bear interest at
the rate shown in their respective titles from April 15, 1998 or from the most
recent Interest Payment Date to which interest has been paid or provided for,
payable semiannually on April 15 and October 15 of each year, commencing October
15, 1998, to the persons in whose names the Offered Securities are registered at
the close of business on the April 1 or October 1, as the case may be, next
preceding such Interest Payment Date. The Offered Securities are not entitled to
the benefit of any sinking fund. The Offered Securities will be sold in
denominations of $1,000 and integral multiples of $1,000 in excess thereof.
The covenant provisions of the Indenture described under the caption
"Description of Debt Securities -- Covenants of the Company" in the accompanying
Prospectus will apply to the Offered Securities. The defeasance and covenant
defeasance provisions of the Indenture described under the caption "Description
of Debt Securities -- Defeasance and Covenant Defeasance" in the accompanying
Prospectus will apply to the Offered Securities.
RANKING
The Offered Securities will be unsecured general obligations of the Company
that will rank on a parity with all other unsecured and unsubordinated
indebtedness of the Company from time to time outstanding. Because the Company
is a holding company, the Offered Securities will be effectively subordinated to
the obligations of the Company's subsidiaries. The Company has not allowed, and
currently does not expect to permit, its subsidiaries to incur any significant
amount of indebtedness for borrowed money, and the Company (on a consolidated
basis) does not have any material amount of contingent liabilities.
Nevertheless, the Indenture does not restrict the ability of the Company's
subsidiaries to incur indebtedness, and those subsidiaries may in the future
incur other types of liabilities, including contingent liabilities.
Substantially all of the Company's operating income and cash flows are
generated by its subsidiaries. Consequently, funds necessary to meet debt
service obligations on the Offered Securities will be provided by distributions
or advances from the Company's subsidiaries. Under certain circumstances, the
Company's ability to obtain cash from its subsidiaries for the purpose of
meeting those debt service obligations could be limited.
REDEMPTION AT THE OPTION OF THE COMPANY
The Offered Securities will be redeemable, in whole or in part, at the
option of the Company on any date (a "Redemption Date"), at a redemption price
equal to the greater of (a) 100% of the principal amount of the Offered
Securities to be redeemed and (b) the sum of the present values of the remaining
scheduled payments of principal and interest thereon (exclusive of interest
accrued to such Redemption Date) discounted to such Redemption Date on a
semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at
the Treasury Rate plus 12.5 basis points (in the case of the Senior Notes) or 15
basis points (in the case of the Senior Debentures), plus, in either case,
accrued and unpaid interest on the principal amount being redeemed to such
Redemption Date; provided, however, that installments of interest on Offered
Securities that are due and payable on an Interest Payment Date falling on or
prior to the relevant Redemption Date shall be payable to the
S-13
<PAGE> 14
holders of such Offered Securities, or one or more Predecessor Securities,
registered as such at the close of business on the relevant Regular Record Date
according to their terms and the provisions of the Indenture.
"Treasury Rate" means, with respect to any Redemption Date for the Offered
Securities, (a) the yield, under the heading that represents the average for the
immediately preceding week, appearing in the most recently published statistical
release designated "H.15(519)" or any successor publication that is published
weekly by the Board of Governors of the Federal Reserve System and that
establishes yields on actively traded United States Treasury securities adjusted
to constant maturity under the caption "Treasury Constant Maturities," for the
maturity corresponding to the Comparable Treasury Issue (if no maturity is
within three months before or after the Maturity Date, yields for the two
published maturities most closely corresponding to the Comparable Treasury Issue
shall be determined and the Treasury Rate shall be interpolated or extrapolated
from such yields on a straight-line basis, rounding to the nearest month) or (b)
if such release (or any successor release) is not published during the week
preceding the calculation date or does not contain such yields, the rate per
annum equal to the semi-annual equivalent yield to maturity of the Comparable
Treasury Issue, calculated using a price for the Comparable Treasury Issue
(expressed as a percentage of its principal amount) equal to the Comparable
Treasury Price for such Redemption Date. The Treasury Rate shall be calculated
on the third Business Day preceding the Redemption Date.
"Comparable Treasury Issue" means the United States Treasury security
selected by the Independent Investment Banker as having a maturity comparable to
the remaining term of the Offered Securities to be redeemed that would be
utilized, at the time of selection and in accordance with customary financial
practice, in pricing new issues of corporate debt securities of comparable
maturity to the remaining term of the Offered Securities.
"Independent Investment Banker" means Morgan Stanley & Co. Incorporated or,
if such firm is unwilling or unable to select the Comparable Treasury Issue, an
independent investment banking institution of national standing appointed by the
Trustee after consultation with the Company.
"Comparable Treasury Price" means, with respect to any Redemption Date, (a)
the average of four Reference Treasury Dealer Quotations for such Redemption
Date, after excluding the highest and lowest such Reference Treasury Dealer
Quotations, or (b) if the Trustee obtains fewer than four such Reference
Treasury Dealer Quotations, the average of all such Quotations.
"Reference Treasury Dealer" means each of Morgan Stanley & Co. Incorporated
and Goldman, Sachs & Co. and their respective successors; provided, however,
that if either of the foregoing shall cease to be a primary U.S. Government
securities dealer in New York City (a "Primary Treasury Dealer"), the Company
will substitute therefor another Primary Treasury Dealer.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any Redemption Date, the average, as determined by
the Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m., New York
City time, on the third Business Day preceding such Redemption Date.
Notice of any redemption by the Company will be mailed at least 30 days but
not more than 60 days before any Redemption Date to each holder of Offered
Securities to be redeemed. If less than all the Senior Notes or the Senior
Debentures are to be redeemed at the option of the Company, the Trustee shall
select, in such manner as it shall deem fair and appropriate, the Offered
Securities of such series to be redeemed in whole or in part.
Unless the Company defaults in payment of the redemption price, on and
after any Redemption Date interest will cease to accrue on the Offered
Securities or portions thereof called for redemption.
BOOK-ENTRY SYSTEM
The Offered Securities will be represented by one or more Global Securities
registered in the name of a nominee of The Depository Trust Company, as
Depositary. The provisions set forth under "Description of Debt
Securities -- Book-Entry System" in the accompanying Prospectus will be
applicable to the Offered Securities.
S-14
<PAGE> 15
TRUSTEE
The Trustee under the Indenture will be the Chase Bank of Texas, National
Association. The Chase Manhattan Bank ("Chase"), an affiliate of the Trustee,
currently is a Co-Agent under the Company's revolving line of credit, is a party
to the Company's master lease facility and is the Rights Agent with respect to
the Company's Preferred Share Purchase Rights. In addition, Chase provides
certain banking and financial services to the Company in the ordinary course of
business and may provide such services in the future.
UNDERWRITERS
Under the terms and subject to the conditions contained in an Underwriting
Agreement, dated the date hereof, the Underwriters named below have severally
agreed to purchase, and the Company has agreed to sell to them, severally, the
respective principal amount of the Offered Securities set forth opposite their
respective names below:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
PRINCIPAL AMOUNT OF SENIOR
NAME OF SENIOR NOTES DEBENTURES
- ---- ---------------- ----------------
<S> <C> <C>
Morgan Stanley & Co. Incorporated........................... $100,000,000 $150,000,000
Goldman, Sachs & Co......................................... 100,000,000 150,000,000
------------ ------------
Total............................................. $200,000,000 $300,000,000
============ ============
</TABLE>
The Underwriting Agreement provides that the obligation of the several
Underwriters to pay for and accept delivery of the Offered Securities is subject
to the approval of certain legal matters by their counsel and to certain other
conditions. The Underwriters are obligated to take and pay for all of the
Offered Securities if any are taken.
The Underwriters initially propose to offer part of the Offered Securities
directly to the public at the public offering price set forth on the cover page
hereof and part to certain dealers at a price that represents a concession not
in excess of .400% of the principal amount in the case of the Senior Notes and
.500% of the principal amount in the case of the Senior Debentures. Any
Underwriter may allow, and any such dealers may reallow, a concession to certain
other dealers not in excess of .250% of the principal amount in the case of the
Senior Notes and .250% of the principal amount in the case of the Senior
Debentures. After the initial offering of the Offered Securities, the offering
price and other selling terms may from time to time be varied by the
Underwriters.
The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended.
The Company does not intend to apply for listing of any of the Offered
Securities on a national securities exchange, but has been advised by the
Underwriters that they presently intend to make a market in the Offered
Securities, as permitted by applicable laws and regulations. The Underwriters
are not obligated, however, to make a market in the Offered Securities and any
such market-making may be discontinued at any time at the sole discretion of the
Underwriters. Accordingly, no assurance can be given as to the liquidity of, or
trading markets for, the Offered Securities
In order to facilitate the offering of the Offered Securities, the
Underwriters may engage in transactions that stabilize, maintain or otherwise
affect the price of the Offered Securities. In addition, to stabilize the price
of the Offered Securities, the Underwriters may bid for, and purchase, the
Offered Securities in the open market. Finally, the Underwriters may reclaim
selling concessions allowed to an Underwriter or a dealer for distributing the
Offered Securities in the offering, if the Underwriter repurchases previously
distributed Offered Securities in transactions to cover Underwriter short
positions, in stabilization transactions or otherwise. Any of these activities
may stabilize or maintain the market price for the Offered Securities above
independent market levels. The Underwriters are not required to engage in these
activities and may end any of these activities at any time.
From time to time, the Underwriters or their affiliates engage in
transactions with and perform services for the Company and its affiliates in the
ordinary course of business.
S-15
<PAGE> 16
LEGAL OPINIONS
The validity of the Offered Securities is being passed upon for the Company
by Vinson & Elkins L.L.P., Dallas, Texas. Certain legal matters in connection
with the offering of the Offered Securities will be passed upon for the
Underwriters by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo
Alto, California.
S-16
<PAGE> 17
PROSPECTUS
(DELL LOGO)
Dell Computer Corporation
DEBT SECURITIES
------------------------
Dell Computer Corporation, a Delaware corporation (the "Company"), from
time to time may offer its debt securities consisting of senior debentures,
notes, bonds or other evidences of indebtedness in one or more series ("Debt
Securities") with an aggregate initial public offering price of up to $500
million or the equivalent thereof in one or more foreign currencies or composite
currencies, including European Currency Units ("ECU"). The Debt Securities may
be offered in separate series in amounts, at prices and on terms to be set forth
in a supplement to this Prospectus (a "Prospectus Supplement").
The Debt Securities may be sold for U.S. Dollars, one or more foreign
currencies or composite currencies, and the principal of and any interest on the
Debt Securities may likewise be payable in U.S. Dollars, one or more foreign
currencies, composite currencies or amounts determined by reference to an index.
The Debt Securities will rank equally with all other unsubordinated and
unsecured indebtedness of the Company. See "Description of Debt Securities."
The specific terms of the Debt Securities with respect to which this
Prospectus is being delivered, such as (where applicable) the specific
designation, aggregate principal amount, currency, denomination, maturity,
premium, rate (or manner of calculation thereof) and time of payment of
interest, terms for redemption at the option of the Company or the holder or for
sinking fund payments, and the initial public offering price, will be set forth
in an accompanying Prospectus Supplement. See "Description of Debt Securities."
The Debt Securities may be sold through underwriting syndicates led by one
or more managing underwriters or through one or more underwriters acting alone.
The Debt Securities may also be sold directly by the Company or through agents
designated from time to time. If any underwriters or agents are involved in the
sale of the Debt Securities, their names, the principal amount of Debt
Securities to be purchased by them and any applicable fee, commission or
discount arrangements with them will be set forth in the Prospectus Supplement.
See "Plan of Distribution."
------------------------
THESE SECURITIES HAVE NOT 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
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
This Prospectus may not be used to consummate sales of Debt Securities
unless accompanied by a Prospectus Supplement.
April 3, 1998
<PAGE> 18
CERTAIN PERSONS PARTICIPATING IN AN OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE DEBT SECURITIES,
INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH
DEBT SECURITIES, AND THE IMPOSITION OF A PENALTY BID, DURING AND AFTER AN
OFFERING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "PLAN OF DISTRIBUTION."
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act"), and in accordance therewith files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "SEC"). Such reports, proxy statements and other information
filed by the Company can be inspected and copied at the public reference
facilities maintained by the SEC at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the SEC's Regional Offices located at Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and at 7
World Trade Center, Suite 1300, New York, New York 10048. Copies of such
material can be obtained from the Public Reference Section of the SEC, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The SEC maintains a
World Wide Web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the SEC.
The address of the World Wide Web site is http://www.sec.gov. Reports and other
information concerning the Company may be also inspected at the offices of The
Nasdaq Stock Market, 1735 K Street, N.W., Washington, D.C. 20006.
The Company has filed with the SEC a registration statement on Form S-3
(together with all amendments and exhibits, the "Registration Statement") under
the Securities Act of 1933 (the "Securities Act") with respect to the Debt
Securities. This Prospectus, which constitutes part of the Registration
Statement, does not contain all of the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the SEC. For further information with respect to the Company and
the Debt Securities offered hereby, reference is made to the Registration
Statement and the exhibits and the financial statements, notes and schedules
filed as a part thereof or incorporated by reference therein, which may be
inspected at the public reference facilities of the SEC at the addresses set
forth above or through the SEC's World Wide Web site.
Statements contained in this Prospectus as to the contents of any contract
or other document referred to herein are not necessarily complete and in each
instance are qualified in all respects by reference to the copy of such contract
or document filed as an exhibit to the Registration Statement.
INFORMATION INCORPORATED BY REFERENCE
The following documents have been filed by the Company with the SEC, are
incorporated by reference into this Prospectus and are deemed to be a part of
this Prospectus:
(a) The Company's Annual Report on Form 10-K for the fiscal year ended
February 2, 1997; and
(b) The Company's Quarterly Reports on Form 10-Q for the fiscal
periods ended May 4, 1997, August 3, 1997 and November 2, 1997.
All 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 Prospectus and prior to the
termination of the offering of the Debt Securities offered hereby shall be
deemed to be incorporated by reference into this Prospectus and be a part hereof
from the date of filing such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein,
in a Prospectus Supplement or in any other document subsequently filed with the
SEC that also is or is deemed to be incorporated by reference 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
Prospectus.
2
<PAGE> 19
The Company will furnish without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, on the written or oral
request of such person, a copy of any or all of the documents incorporated by
reference, other than exhibits to such documents (unless such exhibits are
specifically incorporated by reference into such documents). Requests should be
directed to Dell Computer Corporation, Investor Relations, One Dell Way, Round
Rock, Texas 78682-2244 (telephone: (512) 338-4400).
THE COMPANY
Dell Computer Corporation (the "Company") is the world's leading direct
computer systems company and one of the top three computer vendors in the world.
The Company designs, develops, manufactures, markets, services and supports a
wide range of computer systems, including desktops, notebooks, workstations and
network servers, and also markets software, peripherals and service and support
programs.
The Company is a Delaware corporation that was incorporated in 1987,
succeeding to the business of a predecessor Texas corporation that was
originally incorporated in 1984. Based in Round Rock, Texas, the Company
conducts operations worldwide through wholly-owned subsidiaries. Unless
otherwise specified, references herein to the "Company" are references to the
Company and its consolidated subsidiaries.
The Company's principal executive offices are located at One Dell Way,
Round Rock, Texas 78682-2244, and its telephone number at that location is (512)
338-4400. The Company's World Wide Web address is www.dell.com.
USE OF PROCEEDS
Unless otherwise indicated in an accompanying Prospectus Supplement, the
net proceeds to be received by the Company from the sale of the Debt Securities
will be used for general corporate purposes, including capital expenditures.
Pending such uses, the Company intends to invest the net proceeds in marketable
securities.
RATIO OF EARNINGS TO FIXED CHARGES
Set forth below is the ratio of earnings to fixed charges for each of the
periods stated. For the purpose of calculating such ratios, "earnings" consist
of income from continuing operations before income taxes plus fixed charges, and
"fixed charges" consist of interest expense, amortization of debt expense and
discount or premium and the portion of rental expense deemed to be
representative of the interest component.
<TABLE>
<CAPTION>
NINE
MONTHS FISCAL YEAR ENDED
ENDED -------------------------------------------------------------------
NOVEMBER 2, FEBRUARY 2, JANUARY 28, JANUARY 29, JANUARY 30, JANUARY 31,
1997 1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to
Fixed Charges.......... 99.2x 41.0x 16.7x 10.9x (a) 10.1x
</TABLE>
- ---------------
(a) Earnings were inadequate to cover fixed charges during the fiscal year
ended January 30, 1994. The amount of the deficiency was $19 million.
3
<PAGE> 20
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with
the Company's Annual Report on Form 10-K for the fiscal year ended February 2,
1997 and the Quarterly Report on Form 10-Q for the fiscal period ended November
2, 1997. The Company has adopted Statement of Financial Accounting Standards No.
128, "Earnings per Share" ("SFAS 128"). The basic and diluted earnings per
common share information presented below has been restated for SFAS 128.
<TABLE>
<CAPTION>
NINE MONTHS ENDED TWELVE MONTHS ENDED
------------------------- -------------------------------------------------------------------
NOVEMBER 2, OCTOBER 27, FEBRUARY 2, JANUARY 28, JANUARY 29, JANUARY 30, JANUARY 31,
1997 1996 1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ----------- ----------- -----------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net revenue............... $8,590 $5,347 $7,759 $5,296 $3,475 $2,873 $2,014
Gross margin.............. 1,899 1,142 1,666 1,067 738 433 449
Operating income (loss)... 919 464 714 377 249 (39) 139
Income (loss) before
extraordinary loss...... 659 343 531 272 149 (36) 102
Net income (loss)......... $ 659 $ 330 $ 518 $ 272 $ 149 $ (36) $ 102
Income (loss) before
extraordinary loss per
common share(a)(b):
Basic................. $ 1.00 $ 0.48 $ 0.75 $ 0.36 $ 0.23 $ (.07) $ 0.18
Diluted............... $ 0.89 $ 0.45 $ 0.68 $ 0.33 $ 0.19 $ (.07) $ 0.16
Weighted average shares
outstanding(a):
Basic................. 663 716 710 716 618 597 580
Diluted............... 738 775 782 790 750 597 628
STATEMENT OF FINANCIAL
POSITION DATA:
Working capital......... $1,228 $1,023 $1,089 $1,018 $ 718 $ 510 $ 359
Total assets............ 3,921 2,724 2,993 2,148 1,594 1,140 927
Long-term debt.......... 18 18 18 113 113 100 48
Total stockholders'
equity................ $1,207 $ 851 $ 806 $ 973 $ 652 $ 471 $ 369
</TABLE>
- ---------------
(a) All share and per share information has been retroactively restated to
reflect the two-for-one split of the common stock paid in March 1998 and
the two-for-one split of the common stock paid in July 1997.
(b) Excludes extraordinary loss of $0.02 basic per common share and $0.02
diluted per common share for fiscal 1997.
4
<PAGE> 21
DESCRIPTION OF DEBT SECURITIES
The following statements with respect to the Debt Securities are summaries
of, and are subject to, the detailed provisions of an indenture (the
"Indenture") to be entered into by the Company and one or more commercial banks,
as trustee (the "Trustee"), a copy of which is filed as an exhibit to the
Registration Statement. The following summary of certain provisions of the
Indenture does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all of the provisions of the Indenture, including
the definitions therein of certain terms. Wherever defined terms of the
Indenture are referred to herein or in a Prospectus Supplement, such defined
terms are incorporated herein or therein by reference.
The Debt Securities may be issued from time to time in one or more series.
The particular terms of each series of Debt Securities will be described in a
Prospectus Supplement relating to such series.
GENERAL
The Indenture does not limit the aggregate principal amount of Debt
Securities that can be issued thereunder. The Debt Securities may be issued in
one or more series as may be authorized from time to time by the Company. The
Debt Securities will be senior unsecured obligations of the Company.
The applicable Prospectus Supplement will describe the following terms of
the series of Debt Securities with respect to which this Prospectus is being
delivered:
(a) The title of the Debt Securities of the series;
(b) Any limit on the aggregate principal amount of the Debt Securities
of the series that may be authenticated and delivered under the Indenture;
(c) The person to whom any interest on a Debt Security shall be
payable, if other than the person in whose name that Debt Security is
registered on the Regular Record Date;
(d) The date or dates on which the principal and premium, if any, of
the Debt Securities of the series are payable;
(e) The rate or rates (which may be fixed or variable) at which the
Debt Securities will bear interest, if any, or the method of determining
the rate or rates, the date or dates from which such interest will accrue,
the Interest Payment Dates on which any such interest will be payable or
the method by which the dates will be determined, the Regular Record Date
for any interest payable on any Interest Payment Date and the basis upon
which interest will be calculated if other than that of a 360-day year of
twelve 30-day months;
(f) The place or places where the principal of and any premium and
interest on the Debt Securities of the series will be payable if other than
the Borough of Manhattan, The City of New York;
(g) The period or periods within which, the price or prices at which
and the terms and conditions upon which the Debt Securities of the series
may be redeemed, in whole or in part, at the option of the Company or
otherwise;
(h) The obligation of the Company, if any, to redeem, purchase or
repay the Debt Securities of the series pursuant to any sinking fund or
analogous provisions or at the option of the holders and the period or
periods within which, the price or prices at which and the terms and
conditions upon which such Debt Securities shall be redeemed, purchased or
repaid, in whole or in part, pursuant to such obligation, and any
provisions for the remarketing of such Debt Securities;
(i) The terms, if any, upon which the Debt Securities of the series
may be convertible into or exchanged for other Debt Securities of the
Company and the terms and conditions upon which the conversion or exchange
shall be effected, including the initial conversion or exchange price or
rate, the conversion or exchange period and any other additional
provisions;
(j) The denominations in which any Debt Securities will be issuable,
if other than denominations of $1,000 and any integral multiple thereof;
5
<PAGE> 22
(k) The currency, currencies or currency units in which payment of
principal of and any premium and interest on Debt Securities of the series
shall be payable if other than United States dollars;
(l) Any index, formula or other method used to determine the amount of
payments of principal of and any premium and interest on the Debt
Securities;
(m) If the principal amount payable at the stated maturity of Debt
Securities of the series will not be determinable as of any one or more
dates prior to the stated maturity, the amount that will be deemed to be
the principal amount as of any date for any purpose, including the
principal amount thereof which will be due and payable upon any maturity
other than the stated maturity or which will be deemed to be outstanding as
of any date (or, in any such case, the manner in which the deemed principal
amount is to be determined), and if necessary, the manner of determining
the equivalent thereof in United States currency;
(n) If the principal of or any premium or interest on any Debt
Securities is to be payable, at the election of the Company or the holders,
in one or more currencies or currency units other than that or those in
which such Debt Securities are stated to be payable, the currency,
currencies or currency units in which payment of the principal of and any
premium and interest on such Debt Securities shall be payable, and the
periods within which and the terms and conditions upon which such election
is to be made;
(o) If other than the principal amount thereof, the portion of the
principal amount of the Debt Securities which will be payable upon
declaration of the acceleration of the maturity thereof or provable in
bankruptcy;
(p) The applicability of, and any addition to or change in, the
covenants and definitions then set forth in the Indenture or in the terms
then set forth in the Indenture relating to permitted consolidations,
mergers or sales of assets;
(q) Any changes or additions to the provisions of the Indenture
dealing with defeasance, including the addition of additional covenants
that may be subject to the Company's covenant defeasance option;
(r) Whether any of the Debt Securities are to be issuable in permanent
global form and, if so, the Depositary or Depositaries for such Global
Security and the terms and conditions, if any, upon which interests in such
Debt Securities in global form may be exchanged, in whole or in part, for
the individual Debt Securities represented thereby in definitive registered
form, and the form of any legend or legends to be borne by the Global
Security in addition to or in lieu of the legend referred to in the
Indenture;
(s) The Trustee and any authenticating or paying agents, transfer
agents or registrars;
(t) The terms, if any, of any guarantee of the payment of principal,
premium and interest with respect to Debt Securities of the series and any
corresponding changes to the provisions of the Indenture as then in effect;
(u) The terms, if any, of the transfer, mortgage, pledge or assignment
as security for the Debt Securities of the series of any properties,
assets, moneys, proceeds, securities or other collateral, including whether
certain provisions of the Trust Indenture Act are applicable and any
corresponding changes to provisions of the Indenture as then in effect;
(v) Any addition to or change in the Events of Default with respect to
the Debt Securities of the series and any change in the right of the
Trustee or the holders to declare the principal, premium and interest with
respect to the Debt Securities due and payable; and
(w) Any other terms of the Debt Securities not inconsistent with the
provisions of the Indenture.
Debt Securities may be issued as Original Issue Discount Securities to be
sold at a substantial discount from their principal amount. United States
federal income tax consequences and other special considerations applicable to
any such Original Issue Discount Securities will be described in the Prospectus
Supplement relating thereto.
If any of the Debt Securities are sold for any foreign currency or currency
unit or if principal of, premium, if any, or interest, if any, on any of the
Debt Securities is payable in any foreign currency or currency unit, the
6
<PAGE> 23
restrictions, elections, tax consequences, specific terms and other information
with respect to such Debt Securities and such foreign currency or currency unit
will be specified in the Prospectus Supplement relating thereto.
EXCHANGE, REGISTRATION, TRANSFER AND PAYMENT
Unless otherwise indicated in the applicable Prospectus Supplement, payment
of principal, premium, if any, and interest, if any, on the Debt Securities will
be payable, and the exchange of and the transfer of Debt Securities will be
registrable, at the office or agency of the Company maintained for such purpose
in the Borough of Manhattan, The City of New York and at any other office or
agency maintained for such purpose. Unless otherwise indicated in the applicable
Prospectus Supplement, the Debt Securities will be issued in denominations of
$1,000 or integral multiples thereof. No service charge will be made for any
registration of transfer or exchange of Debt Securities, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge imposed in connection therewith.
All moneys paid by the Company to a Paying Agent for the payment of
principal, premium, if any, or interest, if any, on any Debt Security which
remain unclaimed for two years after such principal, premium or interest has
become due and payable may be repaid to the Company, and thereafter the holder
of such Debt Security may look only to the Company for payment thereof.
In the event of any redemption, the Company shall not be required to (a)
issue, register the transfer of or exchange Debt Securities of any series during
a period beginning at the opening of business 15 days before the day of the
mailing of a notice of redemption of Debt Securities of that series to be
redeemed and ending at the close of business on the day of such mailing or (b)
register the transfer of or exchange any Debt Security, or portion thereof,
called for redemption, except the unredeemed portion of any Debt Security being
redeemed in part.
BOOK-ENTRY SYSTEM
The provisions set forth below in this section headed "Book-Entry System"
will apply to the Debt Securities of any series if the Prospectus Supplement
relating to such series so indicates.
Unless otherwise indicated in the applicable Prospectus Supplement, the
Debt Securities of such series will be represented by one or more global
securities (collectively, a "Global Security") registered in the name of The
Depository Trust Company (the "Depositary") or a nominee of the Depositary
identified in the Prospectus Supplement relating to such series. Except as set
forth below, a Global Security may be transferred, in whole but not in part,
only to the Depositary or another nominee of the Depositary.
Upon the issuance of a Global Security, the Depositary will credit, on its
book-entry registration and transfer system, the respective principal amounts of
the Debt Securities represented by such Global Security to the accounts of
institutions that have accounts with the Depositary or its nominee
("participants"). The accounts to be credited will be designated by the
underwriters, dealers or agents. Ownership of beneficial interests in a Global
Security will be limited to participants or persons that may hold interests
through participants. Ownership of interests in such Global Security will be
shown on, and the transfer of those ownership interests will be effected only
through, records maintained by the Depositary (with respect to participants'
interests) and such participants (with respect to the owners of beneficial
interests in such Global Security). The laws of some jurisdictions may require
that certain purchasers of securities take physical delivery of such securities
in definitive form. Such limits and laws may impair the ability to transfer
beneficial interests in a Global Security.
So long as the Depositary, or its nominee, is the registered holder and
owner of such Global Security, the Depositary or such nominee, as the case may
be, will be considered the sole owner and holder of the related Debt Securities
for all purposes of such Debt Securities and for all purposes under the
Indenture. Except as set forth below or as otherwise provided in the applicable
Prospectus Supplement, owners of beneficial interests in a Global Security will
not be entitled to have the Debt Securities represented by such Global Security
registered in their names, will not receive or be entitled to receive physical
delivery of Debt Securities in definitive form and will not be considered to be
the owners or holders of any Debt Securities under the Indenture or such Global
Security. Accordingly, each person owning a beneficial interest in a Global
Security must rely on the procedures
7
<PAGE> 24
of the Depositary and, if such person is not a participant, on the procedures of
the participant through which such person owns its interest, to exercise any
rights of a holder of Debt Securities under the Indenture of such Global
Security. The Company understands that under existing industry practice, in the
event the Company requests any action of holders of Debt Securities or if an
owner of a beneficial interest in a Global Security desires to take any action
that the Depositary, as the holder of such Global Security is entitled to take,
the Depositary would authorize the participants to take such action, and that
the participants would authorize beneficial owners owning through such
participants to take such action or would otherwise act upon the instructions of
beneficial owners owning through them.
The Depositary has advised the Company as follows: The Depositary is a
limited purpose trust company organized under the laws of the State of New York,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered under the Exchange Act. The Depositary was created to hold securities
of its participants and to facilitate the clearance and settlement of securities
transactions among its participants in such securities through electronic
book-entry changes in accounts of the participants, thereby eliminating the need
for physical movement of securities certificates. The Depositary's participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations, some of whom (or their
representatives) own the Depositary. Access to the Depositary's book-entry
system is also available to others such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly. The Depositary agrees with and
represents to its participants that it will administer its book-entry system in
accordance with its rules and by-laws and requirements of law.
Payment of principal of and premium, if any, and interest, if any, on Debt
Securities represented by a Global Security will be made to the Depositary or
its nominee, as the case may be, as the registered owner and holder of such
Global Security.
The Company expects that the Depositary, upon receipt of any payment of
principal, premium, if any, or interest, if any, in respect of a Global
Security, will credit immediately participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of such Global Security as shown on the records of the Depositary. The
Company expects that payments by participants to owners of beneficial interests
in a Global Security held through such participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name," and
will be the responsibility of such participant. Neither the Company nor the
Trustee nor any agent of the Company or the Trustee will have any responsibility
or liability for any aspect of the records relating to, or payments made on
account of, beneficial ownership interests in a Global Security or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests or for any other aspect of the relationship between the
Depositary and its participants or the relationship between such participants
and the owners of beneficial interests in such Global Security owning through
such participants.
Unless and until it is exchanged in whole or in part for Debt Securities in
definitive form, a Global Security may not be transferred except as a whole by
the Depositary to a nominee of such Depositary or by a nominee of such
Depositary to such Depositary or another nominee of such Depositary.
Unless otherwise provided in the applicable Prospectus Supplement, Debt
Securities represented by a Global Security will be exchangeable for Debt
Securities in definitive form of like tenor as such Global Security in
denominations of $1,000 and in any greater amount that is an integral multiple
thereof if (a) the Depositary notifies the Company and the Trustee that it is
unwilling or unable to continue as Depositary for such Global Security or if at
any time the Depositary ceases to be a clearing agency registered under the
Exchange Act and a successor Depositary is not appointed by the Company within
90 days, (b) the Company in its sole discretion determines not to have all of
the Debt Securities represented by a Global Security and notifies the Trustee
thereof or (c) there shall have occurred and be continuing an Event of Default
or an event which, with the giving of notice or lapse of time, or both, would
constitute an Event of Default with respect to the Debt Securities. Any Debt
Security that is exchangeable pursuant to the preceding sentence is exchangeable
for Debt Securities registered in such names as the Depositary shall instruct
the Trustee. It is expected that such instructions may be based upon directions
received by the Depositary from its participants with respect to ownership of
beneficial interests in
8
<PAGE> 25
such Global Security. Subject to the foregoing, a Global Security is not
exchangeable except for a Global Security or Global Securities of the same
aggregate denominations to be registered in the name of the Depositary or its
nominee.
COVENANTS OF THE COMPANY
Except as set forth below or as otherwise provided in the applicable
Prospectus Supplement with respect to any series of Debt Securities, the Company
is not restricted by the Indenture from incurring, assuming or becoming liable
for any type of debt or other obligations, from paying dividends or making
distributions on its capital stock or purchasing or redeeming its capital stock.
The Indenture does not require the maintenance of any financial ratios or
specified levels of net worth or liquidity. In addition, the Indenture does not
contain any provision that would require the Company to repurchase or redeem or
otherwise modify the terms of any of its Debt Securities upon a change in
control or other events involving the Company that may adversely affect the
creditworthiness of the Debt Securities.
Unless otherwise indicated in the applicable Prospectus Supplement, certain
covenants contained in the Indenture, which are summarized below, will be
applicable (unless waived or amended) to the series of Debt Securities to which
such Prospectus Supplement relates so long as any of the Debt Securities of such
series are outstanding.
Limitations on Liens. The Company covenants that it will not issue, incur,
create, assume or guarantee, and will not permit any Restricted Subsidiary to
issue, incur, create, assume or guarantee, any debt for borrowed money secured
by a mortgage, security interest, pledge, lien, charge or other encumbrance
("liens") upon any Principal Property of the Company or any Restricted
Subsidiary or upon any shares of stock or indebtedness of any Restricted
Subsidiary (whether such Principal Property, shares or indebtedness are now
existing or owed or hereafter created or acquired) without in any such case
effectively providing concurrently with the issuance, incurrence, creation,
assumption or guaranty of any such secured debt that the Debt Securities
(together with, if the Company shall so determine, any other indebtedness of or
guarantee by the Company or such Restricted Subsidiary ranking equally with the
Debt Securities) shall be secured equally and ratably with (or, at the option of
the Company, prior to) such secured debt. The preceding provisions shall not
require the Company to secure the Debt Securities if the liens consist of either
Permitted Liens or liens securing excepted indebtedness (as described below).
Limitations on Sale and Lease-Back Transactions. The Company covenants
that it will not, nor will it permit any Restricted Subsidiary to, enter into
any Sale and Lease-Back Transaction with respect to any Principal Property
unless (a) the Company or such Restricted Subsidiary would be entitled to incur
indebtedness secured by a lien on the Principal Property involved in such
transaction at least equal in amount to the Attributable Debt with respect to
such Sale and Lease-Back Transaction without equally and ratably securing the
Debt Securities pursuant to the limitation in the Indenture on liens, or (b) the
Company shall apply an amount equal to the Attributable Debt with respect to
such Sale and Lease-Back Transaction within six months of such sale to the
defeasance or retirement (other than any mandatory retirement, mandatory
prepayment or sinking fund payment or by payment at maturity) of Debt Securities
or other debt for borrowed money of the Company or a Restricted Subsidiary that
matures more than one year after the creation of such debt or to the purchase,
construction or development of other comparable property.
Excepted Indebtedness. Notwithstanding the foregoing limitations on liens
and Sale and Lease-Back Transactions, the Company or any Restricted Subsidiary
will be permitted to issue, incur, create, assume or guarantee indebtedness
secured by a lien or may enter into a Sale and Lease-Back Transaction, in either
case, without regard to the restrictions contained in the preceding two
paragraphs if the sum of the aggregate principal amount of all such indebtedness
(or, in the case of a lien, the lesser of such principal amount and the fair
market value of the property subject to such lien, as determined in good faith
by the Company's Board of Directors) and the Attributable Debt of all such Sale
and Lease-Back Transactions, in each case not otherwise permitted in the
preceding two paragraphs, does not exceed the greater of 10% of the Consolidated
Net Tangible Assets of the Company or $350 million.
9
<PAGE> 26
Certain Definitions Applicable to Covenants. The term "Attributable Debt"
when used in connection with a Sale and Lease-Back Transaction involving a
Principal Property shall mean, at the time of determination, the lesser of (a)
the fair market value of such property (as determined in good faith by the
Company's Board of Directors), (b) the present value of the total net amount of
rent required to be paid under such lease during the remaining term thereof
(including any renewal term or period for which such lease has been extended),
discounted at the rate of interest set forth or implicit in the terms of such
lease or, if not practicable to determine such rate, the weighted average
interest rate per annum borne by the Debt Securities of each series outstanding
pursuant to the Indenture compounded semi-annually, or (c) if the obligation
with respect to the Sale and Lease-Back Transaction constitutes an obligation
that is required to be classified and accounted for as a capitalized lease for
financial reporting purposes in accordance with generally accepted accounting
principles, the amount equal to the capitalized amount of such obligation
determined in accordance with generally accepted accounting principles and
included in the financial statements of the lessee. For purposes of the
foregoing definition, rent shall not include amounts required to be paid by the
lessee, whether or not designated as rent or additional rent, on account of or
contingent upon maintenance and repairs, insurance, taxes, assessments, water
rates and similar charges. In the case of any lease that is terminable by the
lessee upon the payment of a penalty, such net amount shall be the lesser of the
net amount determined assuming termination upon the first date such lease may be
terminated (in which case the net amount shall also include the amount of the
penalty, but no rent shall be considered as required to be paid under such lease
subsequent to the first date upon which it may be so terminated) or the net
amount determined assuming no such termination.
The term "Consolidated Net Tangible Assets" shall mean, as of any
particular time, the aggregate amount of assets (less applicable reserves and
other properly deductible items) after deducting therefrom (a) all current
liabilities, except for (1) notes and loans payable, (2) current maturities of
long-term debt and (3) current maturities of obligations under capital leases;
and (b) certain intangible assets, to the extent included in such aggregate
amount of assets, all as set forth on the most recent consolidated balance sheet
of the Company and its consolidated subsidiaries and computed in accordance with
generally accepted accounting principles.
The term "Nonrecourse Obligation" shall mean indebtedness or other
obligations substantially related to (a) the acquisition of assets not
previously owned by the Company or any Restricted Subsidiary or (b) the
financing of a project involving the development or expansion of properties of
the Company or any Restricted Subsidiary, as to which the obligee with respect
to such indebtedness or obligation has no recourse to the Company or any
Restricted Subsidiary or any assets of the Company or any Restricted Subsidiary
other than the assets which were acquired with the proceeds of such transaction
or the project financed with the proceeds of such transaction (and the proceeds
thereof).
The term "Permitted Liens" shall mean (a) liens on property, shares of
stock, indebtedness or other assets of any corporation existing at the time such
corporation becomes a Restricted Subsidiary, provided that such liens are not
incurred in anticipation of such corporation becoming a Restricted Subsidiary;
(b)(i) liens on property, shares of stock, indebtedness or other assets existing
at the time of acquisition thereof by the Company or a Restricted Subsidiary, or
liens thereon to secure the payment of all or any part of the purchase price
thereof or (ii) liens on property, shares of stock, indebtedness or other assets
to secure any indebtedness for borrowed money incurred prior to, at the time of,
or within one year after, the latest of the acquisition thereof, or, in the case
of property, the completion of construction, the completion of improvements or
the commencement of substantial commercial operation of such property for the
purpose of financing all or any part of the purchase price thereof, such
construction or the making of such improvements; (c) liens to secure
indebtedness owing to the Company or to a Restricted Subsidiary; (d) liens
existing at the date of the initial issuance of the Debt Securities of such
series; (e) liens on property or other assets of a corporation (which is not a
Subsidiary) existing at the time such corporation is merged into or consolidated
with the Company or a Restricted Subsidiary or at the time of a sale, lease or
other disposition of the properties of a corporation as an entirety or
substantially as an entirety to the Company or a Restricted Subsidiary; (f)
liens in favor of the United States of America or any State, territory or
possession thereof (or the District of Columbia), or any department, agency,
instrumentality or political subdivision of the United States of America or any
State, territory or possession thereof (or the District of Columbia), to secure
partial, progress, advance or other payments pursuant to any contract or statute
or to secure any indebtedness incurred for the purpose of financing all or any
part of the purchase price or the cost of
10
<PAGE> 27
constructing or improving the property subject to such liens; (g) liens created
in connection with a project financed with, and created to secure, a Nonrecourse
Obligation; (h) liens on any property to secure bonds for the construction,
installation or financing of pollution control or abatement facilities, or other
forms of industrial revenue bond financing, or indebtedness issued or guaranteed
by the United States, any state or any department, agency or instrumentality
thereof; and (i) extensions, renewals or replacements of any lien referred to in
the foregoing clauses (a) through (h); provided, however, that any liens
permitted by any of the foregoing clauses (a) through (h) shall not extend to or
cover any property of the Company or such Restricted Subsidiary, as the case may
be, other than the property specified in such clauses and improvements thereto.
The term "Principal Property" shall mean the land, land improvements,
buildings and fixtures (to the extent they constitute real property interests)
(including any leasehold interest therein) constituting the principal corporate
office, any manufacturing plant or any manufacturing facility (whether now owned
or hereafter acquired) and the equipment located thereon which (a) is owned by
the Company or any Subsidiary; (b) is located within any of the present 50
States of the United States of America (or the District of Columbia); (c) has
not been determined in good faith by the Board of Directors of the Company not
to be materially important to the total business conducted by the Company and
its Subsidiaries taken as a whole; and (d) has a net book value on the date as
of which the determination is being made in excess of 1% of Consolidated Net
Tangible Assets of the Company as most recently determined on or prior to such
date (including for purposes of such calculation the land, land improvements,
buildings and such fixtures compromising such office, plant or facilities, as
the case may be).
The term "Restricted Subsidiary" shall mean any Subsidiary that owns any
Principal Property; provided, however, that the term "Restricted Subsidiary"
shall not include (a) any Subsidiary that is principally engaged in financing
receivables or that is principally engaged in financing the Company's operations
outside the United States of America or (b) any Subsidiary less than 80% of the
voting stock of which is owned, directly or indirectly, by the Company or by one
or more other Subsidiaries, or by the Company and one or more other Subsidiaries
if the common stock of such Subsidiary is traded on any national securities
exchange or quoted on The Nasdaq National Market or in the over-the-counter
market.
The term "Sale and Lease-Back Transaction" shall mean any arrangement with
any person providing for the leasing by the Company or any Restricted Subsidiary
of any Principal Property, which property has been or is to be sold or
transferred by the Company or such Restricted Subsidiary to such person, other
than (a) any such transaction involving a lease for a term of not more than
three years, (b) any such transaction between the Company and a Restricted
Subsidiary or between Restricted Subsidiaries, or (c) any such transaction
executed by the time of or within one year after the latest of the acquisition,
the completion of construction or improvement or the commencement of commercial
operation of such Principal Property.
The term "Subsidiary" shall mean (a) any corporation of which at least
66 2/3% of the outstanding voting stock is at the time owned, directly or
indirectly, by the Company or by one or more other Subsidiaries or (b) any other
person (other than a corporation) in which the Company or one or more other
Subsidiaries directly or indirectly has at least 66 2/3% equity ownership and
power to direct the policies, management and affairs thereof. "Voting stock"
means stock that ordinarily has voting power for the election of directors,
whether at all times or only so long as no senior class of stock has such voting
power by reason of any contingency.
DEFEASANCE AND COVENANT DEFEASANCE
The Indenture provides that, if such provision is made applicable to the
Debt Securities of any series pursuant to the provisions of the Indenture, the
Company may elect (a) to defease and be discharged from any and all obligations
in respect of such Debt Securities except for certain obligations to register
the transfer or exchange of such Debt Securities, to replace temporary,
destroyed, stolen, lost or mutilated Debt Securities, to maintain paying
agencies and to hold monies for payment in trust ("defeasance") or (b) (i) to
omit to comply with certain restrictive covenants (including the covenants
referred to above under "Covenants of the Company") and (ii) to deem the
occurrence of any event referred to in clauses (d) and (e) under "Events of
Default" below not to be or result in an Event of Default if, in each case with
respect to the Outstanding Debt Securities of such series on or after the date
certain conditions are satisfied ("covenant defeasance"), in either case upon
the deposit with the
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Trustee (or other qualifying trustee), in trust, of money or U.S. Government
Obligations, which through the payment of interest and principal with respect
thereto in accordance with their terms will provide money in an amount
sufficient to pay the principal of and any premium and interest on the Debt
Securities of such series on the respective stated maturities and any mandatory
sinking fund payments or analogous payments on the days payable, in accordance
with the terms of the Indenture and the Debt Securities of such series. Such a
trust may only be established if, among other things, the Company has delivered
to the Trustee an opinion of counsel to the effect that the holders of the
outstanding Debt Securities of such series will not recognize income, gain or
loss for federal income tax purposes as a result of such deposit, defeasance or
covenant defeasance and will be subject to federal income tax on the same
amount, and in the same manner and at the same times as would have been the case
if such deposit, defeasance or covenant defeasance had not occurred. Such
opinion, in the case of defeasance under clause (a) above, must refer to and be
based upon a ruling of the Internal Revenue Service or a change in applicable
federal income tax laws occurring after the date of the Indenture. The
Prospectus Supplement relating to a series may further describe the provisions,
if any, permitting such defeasance or covenant defeasance with respect to the
Debt Securities of a particular series.
EVENTS OF DEFAULT
The following events are defined in the Indenture as "Events of Default"
with respect to a series of Debt Securities (unless such event is specifically
inapplicable to a particular series as described in the Prospectus Supplement
relating thereto): (a) failure to pay any interest on any Debt Security of that
series when due, continued for 30 days; (b) failure to pay principal of or any
premium on any Debt Security of that series when due; (c) failure to deposit any
sinking fund payment, when due, in respect of any Debt Security of that series;
(d) with respect to each series of Debt Securities, failure to perform any other
covenant of the Company applicable to that series, continued for 90 days after
written notice to the Company by the Trustee or to the Company and the Trustee
by the Holders of at least 25% in principal amount of the outstanding Debt
Securities of that series specifying such failure, requiring it to be remedied
and stating that such notice is a "Notice of Default"; (e) (i) failure of the
Company to make any payment by the end of any applicable grace period after
maturity of indebtedness, which term as used in the Indenture means obligations
(other than Nonrecourse Obligations or the Debt Securities of such series) of
the Company for borrowed money or evidenced by bonds, debentures, notes or
similar instruments ("Indebtedness") in an amount in excess of $50,000,000 and
continuance of such failure, or (ii) the acceleration of Indebtedness in an
amount in excess of $50,000,000 because of a default with respect to such
Indebtedness without such Indebtedness having been discharged or such
acceleration having been cured, waived, rescinded or annulled, in the case of
(i) or (ii) above, for a period of 30 days after written notice to the Company
by the Trustee or to the Company and the Trustee by the holders of at least 25%
in principal amount of the outstanding Debt Securities of that series specifying
such failure or acceleration, requiring it to be remedied and stating that such
notice is a "Notice of Default"; provided, however, that if any such failure or
acceleration referred to in (i) or (ii) above shall cease or be cured, waived,
rescinded or annulled, then the Event of Default by reason thereof shall be
deemed not to have occurred; (f) certain events of bankruptcy, insolvency or
reorganization involving the Company; and (g) any other Event of Default
provided with respect to Debt Securities of that series.
Subject to the provisions of the Indenture relating to the duties of the
Trustee during default to act with the required standard of care, the Trustee
will be under no obligation to exercise any of its rights or powers under the
Indenture at the request or direction of any of the holders, unless such holders
shall have offered to the Trustee reasonable indemnity. Subject to such
provisions for the indemnification of the Trustee, the holders of a majority in
principal amount of the outstanding Debt Securities of any series will have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power conferred on
the Trustee, with respect to the Debt Securities of that series.
The Indenture provides that the Company will deliver to the Trustee, within
120 days after the end of each fiscal year, a brief certificate from the
principal executive, financial or accounting officer or treasurer of the Company
as to his or her knowledge of the Company's compliance (without regard to any
period of grace or requirement of notice) with all conditions and covenants of
the Indenture.
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If an Event of Default with respect to Debt Securities of any series at the
time outstanding occurs and is continuing, either the Trustee or the holders of
at least 25% in principal amount of the outstanding Debt Securities of that
series by notice as provided in the Indenture may declare the principal amount
(or, if the Debt Securities of that series are Original Issue Discount
Securities, such portion of the principal amount as may be specified in the
terms of that series) of all the Debt Securities of that series to be due and
payable immediately. At any time after a declaration of acceleration with
respect to Debt Securities of any series has been made, but before a judgment or
decree for payment of money has been obtained by the Trustee, the holders of a
majority in principal amount of the outstanding Debt Securities of that series
may, under certain circumstances, rescind and annul such acceleration.
No holder of any Debt Security of any series will have any right to
institute any proceeding with respect to the Indenture or for any remedy
thereunder, unless such holder shall have previously given to the Trustee
written notice of a continuing Event of Default and unless the holders of at
least 25% in principal amount of the outstanding Debt Securities of that series
shall have made written request, and offered reasonable indemnity, to the
Trustee to institute such proceeding as trustee, and the Trustee shall not have
received from the holders of a majority in principal amount of the outstanding
Debt Securities of that series a direction inconsistent with such request and
shall have failed to institute such proceeding within 60 days. Such limitations
generally do not apply, however, to a suit instituted by a holder of a Debt
Security for the enforcement of payment of the principal or interest on such
Debt Security on or after the respective due dates expressed in such Debt
Security.
MODIFICATION, WAIVER AND MEETINGS
The Company and the Trustee may enter into supplemental indentures without
the consent of the holders of Debt Securities for one or more of the following
purposes:
(a) To evidence the succession of another person to the Company
pursuant to the provisions of the Indenture relating to consolidations,
mergers and sales of assets and the assumption by the successor of the
covenants, agreements and obligations of the Company in the Indenture and
in the Debt Securities;
(b) To surrender any right or power conferred upon the Company by the
Indenture, to add to the covenants of the Company such further covenants,
restrictions, conditions or provisions for the protection of the holders of
all or any series of Debt Securities as the Board of Directors of the
Company shall consider to be for the protection of the holders of the Debt
Securities, and to make the occurrence, or the occurrence and continuance,
of a default in any of the additional covenants, restrictions, conditions
or provisions a default or an Event of Default under the Indenture
(provided, however, that with respect to any such additional covenant,
restriction, condition or provision, the supplemental indenture may provide
for a period of grace after default, which may be shorter or longer than
that allowed in the case of other defaults, may provide for an immediate
enforcement upon the default, may limit the remedies available to the
Trustee upon the default, or may limit the right of holders of a majority
in aggregate principal amount of any or all series of Debt Securities to
waive the default);
(c) To cure any ambiguity or omission or to correct or supplement any
provision contained in the Indenture, in any supplemental indenture or in
any Debt Securities that may be defective or inconsistent with any other
provision contained therein, to convey, transfer, assign, mortgage or
pledge any property to or with the Trustee, or to make such other
provisions in regard to matters or questions arising under the Indenture,
in each case as shall not adversely affect the interests of any holders of
Debt Securities of any series in any material respect;
(d) To modify or amend the Indenture in such a manner as to permit the
qualification of the Indenture or any supplemental indenture under the
Trust Indenture Act as then in effect;
(e) To add guarantees with respect to any or all of the Debt
Securities or to secure any or all of the Debt Securities;
(f) To make any change that does not adversely affect the rights of
any holder;
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(g) To add to, change or eliminate any of the provisions of the
Indenture with respect to one or more series of Debt Securities, so long as
any such addition, change or elimination not otherwise permitted under the
Indenture shall (1) neither apply to any Debt Security of any series
created prior to the execution of the supplemental indenture and entitled
to the benefit of the provision nor modify the rights of the holders of any
Debt Security with respect to the provision, or (2) become effective only
when there is no such Debt Security outstanding;
(h) To evidence and provide for the acceptance of appointment by a
successor or separate Trustee with respect to the Debt Securities of one or
more series and to add to or change any of the provisions of the Indenture
as shall be necessary to provide for or facilitate the administration of
the Indenture by more than one Trustee;
(i) To establish the form or terms of Debt Securities of any series;
and
(j) To provide for uncertificated Debt Securities in addition to or in
place of certificated Debt Securities (provided that the uncertificated
Debt Securities are issued in registered form for purposes of Section
163(f) of the Internal Revenue Code or in a manner such that the
uncertificated Debt Securities are described in Section 163(f)(2)(B) of
such code).
Modifications and amendments of the Indenture may be made by the Company
and the Trustee with the consent of the holders of a majority in principal
amount of the outstanding Debt Securities of each series affected by such
modification or amendment; provided, however, that no such modification or
amendment may, without the consent of the holder of each outstanding Debt
Security affected thereby, (a) change the stated maturity of the principal of,
or any installment of principal of or interest on, any Debt Security, (b) reduce
the principal amount of, rate of interest on or any premium payable upon the
redemption of any Debt Security, (c) reduce the amount of principal of an
Original Issue Discount Security payable upon acceleration of the maturity
thereof, (d) change the place of payment where, or the coin or currency in
which, any Debt Security or any premium or interest thereon is payable, (e)
impair the right to institute suit for the enforcement of any payment on or with
respect to any Debt Security after the stated maturity, redemption date or
repayment date, (f) reduce the percentage in principal amount of outstanding
Debt Securities of any series, the consent of whose holders is required for
modification or amendment of the Indenture or for waiver of compliance with
certain provisions of the Indenture or for waiver of certain defaults or (g)
modify any of the provisions set forth in this paragraph except to increase any
such percentage or to provide that certain other provisions of the Indenture may
not be modified or waived without the consent of the holder of each outstanding
Debt Security affected thereby.
The holders of a majority in principal amount of the outstanding Debt
Securities of each series may, on behalf of the holders of all the Debt
Securities of that series, waive, insofar as that series is concerned,
compliance by the Company with certain restrictive provisions of the Indenture.
The holders of a majority in principal amount of the outstanding Debt Securities
of each series may, on behalf of all holders of Debt Securities of that series
and any coupons appertaining thereto, waive any past default under the Indenture
with respect to Debt Securities of that series, except a default (a) in the
payment of principal of or any premium or interest on any Debt Security of such
series or (b) in respect of a covenant or provision of the Indenture which
cannot be modified or amended without the consent of each holder of outstanding
Debt Securities of the affected series.
The Indenture provides that in determining whether the holders of the
requisite principal amount of the outstanding Debt Securities have given any
request, demand, authorization, direction, notice, consent or waiver thereunder
or whether a quorum is present at a meeting of holders of Debt Securities (a)
the principal amount of an Original Issue Discount Security that shall be deemed
to be outstanding shall be the amount of the principal thereof that would be due
and payable as of the date of such determination upon acceleration of the
maturity thereof, (b) the principal amount of a Debt Security denominated in
other than U.S. dollars shall be the U.S. dollar equivalent, determined on the
date of original issuance of such Debt Security, of the principal amount of such
Debt Security (or, in the case of an Original Issue Discount Security, the U.S.
dollar equivalent on the date of original issuance of such Debt Security of the
amount determined as provided in (a) above of such Debt Security) and (c) Debt
Securities owned by the Company or any Subsidiary of the Company shall be
disregarded and deemed not to be Outstanding.
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CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company may not consolidate with or merge with or into any person, or
convey, transfer or lease all or substantially all of its assets, or permit any
person to consolidate with or merge into the Company, unless the following
conditions have been satisfied:
(a) Either (1) the Company shall be the continuing person in the case
of a merger or (2) the resulting, surviving or transferee person, if other
than the Company (the "Successor Company"), shall be a corporation
organized and existing under the laws of the United States, any State or
the District of Columbia and shall expressly assume all the obligations of
the Company under the Debt Securities and the Indenture;
(b) Immediately after giving effect to the transaction (and treating
any indebtedness that becomes an obligation of the Successor Company or any
Subsidiary of the Company as a result of the transaction as having been
incurred by the Successor Company or the Subsidiary at the time of the
transaction), no default, Event of Default or event that, after notice or
lapse of time, would become an Event of Default under the Indenture would
occur or be continuing; and
(c) The Company shall have delivered to the Trustee an officers'
certificate and an opinion of counsel, each stating that the consolidation,
merger, transfer or lease complies with the Indenture.
Upon any consolidation by the Company with, or merger by the Company into,
any other person or any conveyance, transfer or lease of the properties and
assets of the Company as an entirety or substantially as an entirety as
described in the preceding paragraph, the Successor Company resulting from such
consolidation or into which the Company is merged or the transferee or lessee to
which such conveyance, transfer or lease is made, will succeed to, and be
substituted for, and may exercise every right and power of, the Company under
the Indenture, and thereafter, except in the case of a lease, the predecessor
(if still in existence) will be released from its obligations and covenants
under the Indenture and all outstanding Debt Securities.
NOTICES
Except as otherwise provided in the Indenture, notices to holders of Debt
Securities will be given by mail to the addresses of such holders as they appear
in the Debt Security Register.
TITLE
Prior to due presentment of a Debt Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the person in whose name such Debt Security is registered as the owner of such
Debt Security for the purpose of receiving payment of principal of and any
premium and any interest (other than defaulted interest or as otherwise provided
in the applicable Prospectus Supplement) on such Debt Security and for all other
purposes whatsoever, whether or not such Debt Security be overdue, and neither
the Company, the Trustee nor any agent of the Company or the Trustee shall be
affected by notice to the contrary.
REPLACEMENT OF DEBT SECURITIES
Any mutilated Debt Security will be replaced by the Company at the expense
of the Holder upon surrender of such Debt Security to the Trustee. Debt
Securities that become destroyed, stolen or lost will be replaced by the Company
at the expense of the Holder upon delivery to the Trustee of the Debt Security
or evidence of the destruction, loss or theft thereof satisfactory to the
Company and the Trustee. In the case of a destroyed, lost or stolen Debt
Security, an indemnity satisfactory to the Trustee and the Company may be
required at the expense of the holder of such Debt Security before a replacement
Debt Security will be issued.
GOVERNING LAW
The Indenture and the Debt Securities will be governed by, and construed in
accordance with, the laws of the State of New York.
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REGARDING THE TRUSTEE
The Company may appoint a separate Trustee for any series of Debt
Securities. As used herein in the description of a series of Debt Securities,
the term "Trustee" refers to the Trustee appointed with respect to the series of
Debt Securities.
The Indenture contains certain limitations on the right of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases or to realize for its own account on certain property received in
respect of any such claim as security or otherwise. The Trustee will be
permitted to engage in certain other transactions; however, if it acquires any
conflicting interest and there is a default under the Debt Securities of any
series for which the Trustee serves as trustee, the Trustee must eliminate such
conflict or resign.
The Trustee or its affiliate may provide certain banking and financial
services to the Company in the ordinary course of business.
PLAN OF DISTRIBUTION
The Company may sell the Debt Securities (a) to one or more underwriters or
dealers for public offering and sale by them and (b) to investors directly or
through agents. The distribution of the Debt Securities may be effected from
time to time in one or more transactions at a fixed price or prices (which may
be changed from time to time), at market prices prevailing at the time of sale,
at prices related to such prevailing market prices or at negotiated prices. Each
Prospectus Supplement will describe the method of distribution of the Debt
Securities offered thereby.
In connection with the sale of the Debt Securities, underwriters, dealers
or agents may receive compensation from the Company or from purchasers of the
Debt Securities for whom they may act as agents, in the form of discounts,
concessions or commissions. The underwriters, dealers or agents which
participate in the distribution of the Debt Securities may be deemed to be
underwriters under the Securities Act and any discounts or commissions received
by them and any profit on the resale of the Debt Securities received by them may
be deemed to be underwriting discounts and commissions thereunder. Any such
underwriter, dealer or agent will be identified and any such compensation
received from the Company will be described in the Prospectus Supplement. Any
initial public offering price and any discounts or concessions allowed or
reallowed or paid to dealers may be changed from time to time.
Under agreements that may be entered into with the Company, underwriters,
dealers and agents may be entitled to indemnification by the Company against
certain civil liabilities, including liabilities under the Securities Act, or to
contribution with respect to payments that the underwriters, dealers or agents
may be required to make with respect thereto.
The Company may grant underwriters who participate in the distribution of
Debt Securities an option to purchase additional Debt Securities to cover
over-allotments, if any.
All Debt Securities will be new issues of securities with no established
trading market. Any underwriters to whom Debt Securities are sold by the Company
for public offering and sale may make a market in such Debt Securities, but such
underwriters will not be obligated to do so and may discontinue any market
making at any time without notice. No assurance can be given as to the liquidity
of the trading market for any such Debt Securities.
Certain of the underwriters or agents and their affiliates may be customers
of, engage in transactions with or perform services for the Company in the
ordinary course of business.
LEGAL OPINIONS
The validity of the Debt Securities is being passed upon for the Company by
Vinson & Elkins L.L.P., Dallas, Texas.
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EXPERTS
The financial statements incorporated in this Prospectus by reference to
the Company's Annual Report on Form 10-K for the year ended February 2, 1997,
have been so incorporated in reliance on the report of Price Waterhouse LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
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