<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
DELL COMPUTER CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
N/A
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or Schedule and the date of its filing.
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<PAGE> 2
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1 9 9 9
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[DELL LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
AND
PROXY STATEMENT
DELL COMPUTER CORPORATION
ONE DELL WAY
ROUND ROCK, TEXAS 78682
WWW.DELL.COM
<PAGE> 3
DELL COMPUTER CORPORATION
ONE DELL WAY
ROUND ROCK, TEXAS 78682
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Our Stockholders:
The Annual Meeting of Stockholders of Dell Computer Corporation (the
"Company") will be held at the Austin Convention Center, Exhibit Hall #2, 500 E.
Cesar Chavez, Austin, Texas, on Friday, July 16, 1999 at 9:00 a.m., local time.
At the meeting, stockholders will be asked to vote on the following proposals:
Proposal 1 -- Elect three directors, each with a term of three years, and
one director with a term of two years.
Proposal 2 -- Approve an amendment to the Company's Certificate of
Incorporation to increase the number of authorized shares of
Common Stock from three billion to seven billion.
Stockholders will also transact any other business that may properly come before
the meeting.
The Board of Directors has established May 21, 1999 as the record date for
the meeting, and only stockholders of record at the close of business on that
date are entitled to vote at the meeting.
A copy of the Company's Annual Report on Form 10-K is enclosed with this
Proxy Statement.
YOUR VOTE IS IMPORTANT!
You may vote your shares by completing and returning the accompanying proxy
card or by voting electronically via the Internet or by telephone. Please see
the accompanying instructions for more details on electronic voting. Returning
your proxy promptly will assist the Company in reducing the expenses of
additional proxy solicitation. Submitting your proxy does not affect your right
to vote in person if you attend the meeting.
By Order of the Board of Directors
/s/ THOMAS B. GREEN
Thomas B. Green
Secretary
Round Rock, Texas
June 1, 1999
<PAGE> 4
[DELL LOGO]
DELL COMPUTER CORPORATION
ONE DELL WAY
ROUND ROCK, TEXAS 78682
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
FRIDAY, JULY 16, 1999
9:00 A.M.
AUSTIN CONVENTION CENTER
EXHIBIT HALL #2
500 E. CESAR CHAVEZ
AUSTIN, TEXAS
The accompanying proxy is being solicited on behalf of the Company's Board
of Directors for use at the Company's Annual Meeting of Stockholders, the time
and place of which are noted above. At the meeting, stockholders will be asked
to vote on two proposals, which are listed in the accompanying Notice of Annual
Meeting of Stockholders and described in more detail below. Stockholders will
also consider any other proposals or business that may properly come before the
meeting, although the Board of Directors knows of no other proposals or business
to be presented.
By submitting your proxy (either by executing and returning the paper proxy
card or by voting electronically via the Internet or by telephone), you
authorize Morton L. Topfer and Thomas B. Green to represent you and vote your
shares at the meeting in accordance with your instructions. Those persons may
also vote your shares to adjourn the meeting from time to time and will be
authorized to vote your shares at any adjournments or postponements of the
meeting.
If you attend the meeting, you may vote in person, regardless of whether
you have submitted a proxy. In addition, you may revoke your proxy at any time
before its exercise at the meeting by delivering a written notice of revocation
to the Company's Secretary or by submitting a later-dated proxy.
IT IS IMPORTANT THAT PROXIES BE SUBMITTED PROMPTLY. WHETHER OR NOT YOU
EXPECT TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO SUBMIT YOUR PROXY,
EITHER IN THE ENCLOSED POSTAGE-PAID, ADDRESSED ENVELOPE, VIA THE INTERNET OR BY
TELEPHONE.
This Proxy Statement and the accompanying materials are being mailed to
stockholders and made available on the Internet
(www.dell.com/corporate/investor/index.htm) on or about June 4, 1999.
<PAGE> 5
QUORUM AND VOTING
RECORD DATE. The record date for the meeting is May 21, 1999. Only
stockholders of record at the close of business on that date are entitled to
notice of and to vote at the meeting.
VOTING STOCK. The only class of stock entitled to be voted at the meeting
is the Company's Common Stock, par value $.01 per share. At the close of
business on the record date, there were 2,539,176,586 shares of Common Stock
outstanding and entitled to be voted at the meeting, and the holders of those
shares will be entitled to one vote per share.
QUORUM. In order for any business to be conducted, holders of more than 50%
of the shares entitled to vote must be represented at the meeting, either in
person or by proxy.
ADJOURNED MEETING. If a quorum is not present at the scheduled time of the
meeting, the stockholders who are represented may adjourn the meeting until a
quorum is present. The time and place of the adjourned meeting will be announced
at the time the adjournment is taken, and no other notice will be given. An
adjournment will have no effect on the business that may be conducted at the
meeting.
TABULATION OF VOTES. The votes will be tabulated and certified by the
Company's transfer agent.
VOTING BY STREET NAME HOLDERS. If you are the beneficial owner of shares
held in "street name" by a broker, the broker, as the record holder of the
shares, is required to vote those shares in accordance with your instructions.
If you do not give instructions to the broker, the broker will nevertheless be
entitled to vote the shares with respect to "discretionary" items but will not
be permitted to vote the shares with respect to "non-discretionary" items (in
which case, the shares will be treated as "broker non-votes").
ABSTENTIONS AND BROKER NON-VOTES. If you ABSTAIN from voting on one or more
proposals, your shares will nevertheless be included in the number of shares
represented for purposes of determining whether a quorum is present. If you
ABSTAIN from voting on Proposal 2 (Amendment to Certificate of Incorporation),
your shares will also be included in the number of shares voting on the
proposal, and consequently, your abstention will have the same practical effect
as a vote AGAINST the proposal. Because directors are elected by a plurality of
the votes (see "Proposal 1 -- Election of Directors" below), an abstention will
have no effect on the outcome of the vote on Proposal 1 and, thus, is not
offered as a voting option for that proposal.
If your shares are treated as broker non-votes on one or more proposals,
they will nevertheless be included in the number of shares represented for
purposes of determining whether a quorum is present. Otherwise, however, those
shares will be treated as shares not entitled to be voted on the proposal.
Consequently, a broker non-vote with respect to Proposal 1 (Election of
Directors) will have no effect on the outcome of the vote on that proposal.
Because the approval of an amendment to the Company's Certificate of
Incorporation requires the affirmative vote of a majority of the shares
outstanding (see "Proposal 2 -- Amendment to Certificate of Incorporation"
below), a broker non-vote with respect to Proposal 2 will have the same
practical effect as a vote AGAINST that proposal.
DEFAULT VOTING. If you submit a proxy but do not indicate any voting
instructions, your shares will be voted as follows:
- Proposal 1 (Election of Directors) -- FOR all nominees
- Proposal 2 (Amendment of Certificate of Incorporation) -- FOR
If any other business properly comes before the stockholders for a vote at the
meeting, the shares will be voted in accordance with the discretion of the
holders of the proxy.
2
<PAGE> 6
PROPOSAL 1 -- ELECTION OF DIRECTORS
CURRENT NOMINEES. The three-year terms of the Company's Class II directors
will expire at the upcoming annual meeting. The Board of Directors has nominated
Michael S. Dell, Michael H. Jordan and Klaus S. Luft for reelection as Class II
directors. If they are reelected, they will continue to serve as Class II
directors with terms to expire at the annual meeting of stockholders to be held
in 2002.
In addition, the Board of Directors has nominated Mary Alice Taylor for
election to fill the remaining two years of a Class I director term. Ms. Taylor
is currently serving as a Class I director, having been elected by the directors
in March 1999 to serve until the upcoming annual meeting. If elected, Ms. Taylor
will continue to serve as a Class I director with a term to expire at the annual
meeting of stockholders to be held in 2001.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF THESE
FOUR NOMINEES.
The following is biographical information about each of the nominees.
Michael S. Dell............ Mr. Dell has been Chairman of the Board, Chief
Executive Officer and a director of the Company
since May 1984. Mr. Dell founded the Company in
1984 while attending the University of Texas at
Austin. He is a member of the Board of Directors of
the United States Chamber of Commerce and the
Computerworld/Smithsonian Awards. Mr. Dell is also
a member of the Business Council and serves on the
nominating committee for the National Technology
Medal of Honor.
Michael H. Jordan.......... Mr. Jordan has been a director of the Company since
December 1992. On December 31, 1998, Mr. Jordan
retired as the Chairman and Chief Executive Officer
of CBS Corporation (formerly Westinghouse Electric
Corporation), positions he had held since July
1993. Prior to joining Westinghouse, he was a
principal with the investment firm of Clayton,
Dubilier and Rice from September 1992 through June
1993, Chairman of PepsiCo International from
December 1990 through July 1992 and Chairman of
PepsiCo World-Wide Foods from December 1986 to
December 1990. Mr. Jordan currently serves on the
boards of directors of Aetna Inc. and
MarketWatch.com, is a member of the President's
Export Council and is Chairman of the U.S.-Japan
Business Council.
Klaus S. Luft.............. Mr. Luft has been a director of the Company since
March 1995. Mr. Luft is the founder, owner and
President of MATCH -- Market Access for Technology
Services GmbH, a private company established in
1994 and headquartered in Munich, Germany. MATCH
provides sales and marketing services to high
technology companies. Since August 1990, Mr. Luft
has served and continues to serve as Vice Chairman
and International Advisor to Goldman Sachs Europe
Limited. Mr. Luft also serves on the Board of
Directors of Sagent Technology, Inc. From March
1986 to November 1989, Mr. Luft was Chief Executive
Officer of Nixdorf Computer AG, a manufacturer of
computer systems in Paderborn, Germany, where he
also held various other executive positions for
more than 17 years in marketing, manufacturing and
finance.
Mary Alice Taylor.......... Ms. Taylor has been a director of the Company since
March 1999. Ms. Taylor currently serves as the
Corporate Executive Vice President for global
operations and technology for Citigroup, a position
she has held since January 1997. Ms. Taylor joined
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<PAGE> 7
Citigroup following a 16-year career with Federal
Express Corp., where she held a variety of finance
and operating positions, finally serving as senior
vice president for the Americas and Caribbean.
Prior to joining Federal Express, Ms. Taylor held
management positions with Shell Oil Co., Cook
Industries and Northern Telecom Inc. She also
serves on the boards of directors of Autodesk Inc.
and Perrigo Inc.
Should any nominee become unable or unwilling to accept nomination or
election, the Board of Directors will either select a substitute nominee or will
reduce the size of the Board. If you have submitted a proxy and a substitute
nominee is selected, the holders of the proxy will vote your shares FOR the
election of the substitute nominee. The Board of Directors has no reason to
believe that any nominee will be unable or unwilling to serve if elected.
In accordance with the Company's Bylaws, directors are elected by a
plurality of the votes of shares represented and entitled to vote at the
meeting. That means the four nominees will be elected if they receive more
affirmative votes than any other nominees.
CONTINUING DIRECTORS. The Company's Board of Directors is separated into
three classes, and the directors in each class are elected to serve for
three-year terms. The terms of the Class I directors expire at the annual
meeting of stockholders to be held in 2001, the terms of the Class II directors
expire at the annual meeting of stockholders to be held in 2002 and the terms of
the Class III directors expire at the annual meeting of stockholders to be held
in 2000. The following is a list of the persons who will constitute the
Company's Board of Directors following the meeting, assuming election of the
nominees named above, their ages and director class designation.
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE CLASS
---- --- --------
<S> <C> <C>
Michael S. Dell............................................. 34 II
Donald J. Carty............................................. 52 I
Paul O. Hirschbiel, Jr. .................................... 46 I
Michael H. Jordan........................................... 62 II
Thomas W. Luce III.......................................... 58 I
Klaus S. Luft............................................... 57 II
Claudine B. Malone.......................................... 63 III
Alex J. Mandl............................................... 55 III
Michael A. Miles............................................ 59 III
Mary Alice Taylor........................................... 49 I
</TABLE>
Set forth below is biographical information about each of the Company's
directors, except for Mr. Dell, Mr. Jordan, Mr. Luft and Ms. Taylor, whose
biographical information is included under "Current Nominees" above.
Donald J. Carty............ Mr. Carty has been a director of the Company since
December 1992. Mr. Carty is Chairman of the Board,
President and Chief Executive Officer of AMR
Corporation and American Airlines, Inc., a
subsidiary of AMR Corporation, positions he has
held since May 1998. From March 1995 to May 1998,
Mr. Carty was President of American Airlines Inc.,
President of AMR Airline Group and Executive Vice
President of AMR Corporation. From October 1989 to
March 1995, Mr. Carty held the positions of Chief
Financial Officer of AMR Corporation and Executive
Vice President, Finance & Planning for AMR
Corporation and American Airlines, Inc. He has held
senior vice presidential positions with American
Airlines, Inc. since 1988. Mr. Carty also serves on
the boards of directors of Sabre Group Holdings,
Inc. and Brinker International, Inc.
4
<PAGE> 8
Thomas W. Luce III......... Mr. Luce has been a director of the Company since
November 1991. Mr. Luce is of counsel with the law
firm Hughes & Luce, L.L.P., Dallas, Texas, having
co-founded the firm in 1973. From October 1991
through April 1992, Mr. Luce was Chairman of the
Board and Chief Executive Officer of First
Southwest Company, a Dallas-based investment firm
that is a member of the National Association of
Securities Dealers, Inc.
Paul O. Hirschbiel, Jr..... Mr. Hirschbiel has been a director of the Company
since October 1987. Mr. Hirschbiel is President of
Eden Capital, a position he has held since January
1, 1999. Mr. Hirschbiel was previously the Managing
Director of Cornerstone Equity Investors, L.L.C.
from December 1996 through December 1998. Prior to
that time, Mr. Hirschbiel was a Vice President of
Prudential Equity Investors, Inc., and had held the
position of Vice President or Director with that
firm since September 1983. Mr. Hirschbiel
originally became a director of the Company
pursuant to the terms of a stock purchase agreement
entered into in connection with the issuance by the
Company of a series of convertible preferred stock
in October 1987. Mr. Hirschbiel received a Bachelor
of Arts degree and a Masters of Business
Administration degree from the University of North
Carolina at Chapel Hill.
Claudine B. Malone......... Ms. Malone has been a director of the Company since
February 1993. Ms. Malone is President of Financial
& Management Consulting, Inc., a firm she founded
in 1982. She has taught at the business schools of
the University of Virginia, Harvard University and
Georgetown University. Ms. Malone is a trustee of
the Massachusetts Institute of Technology and the
Chairman of the Federal Reserve Bank of Richmond.
She is also a member of the boards of directors of
Hannaford Brothers Co.; Hasbro, Inc.; Houghton
Mifflin Corp.; Lafarge Corp.; The Limited, Inc.;
Lowe's Companies; Mallinckrodt Group Inc.; SAIC;
and Union Pacific Corporation.
Alex J. Mandl.............. Mr. Mandl has been a director of the Company since
November 1997. Since August 1996, Mr. Mandl has
been Chairman and Chief Executive Officer of
Teligent Inc., a telecommunications company that
offers local, long distance, Internet and other
advanced communication services directly to
business customers. Before joining Teligent, Mr.
Mandl was President and Chief Operating Officer of
AT&T, where he directed the long distance, wireless
and local communications services. During his
tenure at AT&T, Mr. Mandl also held the positions
of Executive Vice President and Chief Executive
Officer of the Communication Services Group, Chief
Financial Officer and Group Executive. Prior to
joining AT&T in 1991, Mr. Mandl was Chairman and
Chief Executive Officer of Sea-Land Services, Inc.,
the world's largest ocean transportation company.
Mr. Mandl is also a member of the boards of
directors of Warner-Lambert Company; Forstmann
Little & Co; and General Instruments Corporation.
Michael Miles.............. Mr. Miles has been a director of the Company since
February 1995. He is the former Chairman of the
Board and Chief Executive Officer of Philip Morris
Companies Inc., having served in that position from
September 1991 to July 1994. Prior to assuming that
5
<PAGE> 9
position, Mr. Miles was Vice Chairman and a member
of the Board of Directors of Philip Morris
Companies Inc. and Chairman and Chief Executive
Officer of Kraft General Foods, Inc., positions he
held from December 1989. Mr. Miles is also a
Special Limited Partner in the investment firm of
Forstmann Little & Co. and is the non-executive
chairman of Community Health Systems, a hospital
management company owned by Forstmann Little & Co.
He is also a member of the boards of directors of
Dean Witter Discover & Co.; Sears, Roebuck and Co.;
Time Warner Inc.; and Allstate, Inc.; and serves as
a trustee of Northwestern University.
COMMITTEES AND MEETINGS. The Board of Directors maintains the following
four standing committees:
- Audit Committee. The Audit Committee recommends the appointment of the
Company's independent accountants and determines the appropriateness of
their fees; reviews the scope and results of the audit plans of the
independent accountants and the Company's internal auditors; oversees the
scope and adequacy of the Company's internal accounting control and
record-keeping systems; reviews the objectivity, effectiveness and
resources of the internal audit function; and confers independently with
the independent accountants.
- Compensation Committee. The Compensation Committee is responsible for
determining the compensation for the Company's senior management and
establishing compensation policies for Company employees generally. The
Compensation Committee also administers the Company's stock-based
compensation and employee stock purchase plans.
- Finance Committee. The Finance Committee is responsible for considering
and recommending to the Board of Directors proposed strategies, policies
and actions related to finance and economics.
- Nominating Committee. The Nominating Committee is responsible for
recruiting and recommending candidates for membership to the Board of
Directors and for recommending to the Chairman of the Board the structure
and membership of the committees of the Board of Directors. For
information about suggesting candidates for consideration as nominees for
election to the Board of Directors, see "Additional
Information -- Stockholder Proposals" below.
The following table sets forth the committee memberships that were in
effect during fiscal 1999 and the new committee memberships that took effect in
March 1999. It is anticipated that the new committee memberships will remain in
effect for at least two fiscal years.
<TABLE>
<CAPTION>
FISCAL 1999 NEW
NAME COMMITTEE MEMBERSHIPS COMMITTEE MEMBERSHIPS
---- --------------------- ---------------------
<S> <C> <C>
Mr. Dell............................... None None
Mr. Carty.............................. Audit, Finance (Chairman), Compensation (Chairman)
Nominating
Mr. Hirschbiel......................... Compensation, Finance Audit, Finance
Mr. Jordan............................. Compensation, Nominating Audit, Nominating (Chairman)
(Chairman)
Mr. Luce............................... Finance Compensation
Mr. Luft............................... Audit, Finance Compensation
Ms. Malone............................. Audit (Chairman) Finance
Mr. Mandl.............................. Compensation Audit (Chairman), Nominating
Mr. Miles.............................. Compensation (Chairman), Finance (Chairman)
Nominating
Ms. Taylor............................. None Finance
</TABLE>
6
<PAGE> 10
During fiscal 1999, the Board of Directors and the various committees held
the following number of meetings: Board of Directors, 5; Audit Committee, 5;
Compensation Committee, 5; Finance Committee, 5; and Nominating Committee, 1.
Other than Mr. Carty, no director attended fewer than 75% of the aggregate of
the total number of meetings of the Board of Directors and the total number of
meetings held by all committees on which that director served. Mr. Carty was
unable to attend the Board and related committee meetings in June 1998 and the
Finance Committee and Nominating Committee meetings in December 1998.
PROPOSAL 2 -- AMENDMENT TO CERTIFICATE OF INCORPORATION
GENERAL. The Company's Certificate of Incorporation currently authorizes
the issuance of up to three billion shares of Common Stock. As of the record
date approximately 2,539 million shares were issued and outstanding and
approximately 358 million shares were subject to currently outstanding stock
options, leaving approximately 103 million shares available for other uses
(including issuances under the Company's stock-based employee benefits plans).
The Board of Directors is proposing an amendment to the Certificate of
Incorporation to increase the number of authorized shares of Common Stock from
three billion to seven billion. If the stockholders approve this proposal, the
first paragraph of Article Fourth of the Company's Certificate of Incorporation
will be amended to read in its entirety as follows:
"FOURTH: The total number of shares of capital stock of the
Corporation shall be seven billion and five million
(7,005,000,000), which shall consist of five million
(5,000,000) shares of Preferred Stock, of the par value of
$0.01 per share, and seven billion (7,000,000,000) shares of
Common Stock, of the par value of $0.01 per share."
PURPOSE AND EFFECT OF THE PROPOSED AMENDMENT. All authorized but unissued
shares of Common Stock will be available for issuance from time to time for any
proper purpose approved by the Board of Directors (including issuances in
connection with stock-based employee benefit plans, future stock splits or
dividends and issuances to raise capital or effect acquisitions). There are
currently no arrangements, agreements or understandings for the issuance or use
of the additional shares of authorized Common Stock (other than issuances
permitted or required under the Company's stock-based employee benefit plans or
awards made pursuant to those plans). The Board of Directors does not presently
intend to seek further stockholder approval of any particular issuance of shares
unless such approval is required by law or the rules of The Nasdaq Stock Market.
Stockholders do not have any preemptive or similar rights to subscribe for
or purchase any additional shares of Common Stock that may be issued in the
future, and therefore, future issuances of Common Stock may, depending on the
circumstances, have a dilutive effect on the earnings per share, voting power
and other interests of the existing stockholders.
The proposal could have an anti-takeover effect, although that is not its
intention. For example, if the Company were the subject of a hostile takeover
attempt, it could try to impede the takeover by issuing shares of Common Stock,
thereby diluting the voting power of the other outstanding shares and increasing
the potential cost of the takeover. The availability of this defensive strategy
to the Company could discourage unsolicited takeover attempts, thereby limiting
the opportunity for the Company's stockholders to realize a higher price for
their shares than is generally available in the public markets. The Board of
Directors is not aware of any attempt, or contemplated attempt, to acquire
control of the Company, and this proposal is not being presented with the intent
that it be utilized as a type of anti-takeover device.
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<PAGE> 11
VOTE NECESSARY TO APPROVE PROPOSAL. The affirmative vote of the holders of
a majority of the outstanding shares of Common Stock entitled to vote at the
meeting is necessary for approval of Proposal 2. Therefore, abstentions and
broker non-votes effectively count as votes against the proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE PROPOSED AMENDMENT
TO THE COMPANY'S CERTIFICATE OF INCORPORATION.
EXECUTIVE COMPENSATION
Unless otherwise noted, all Common Stock information has been adjusted to
take into account the two-for-one split of the Common Stock paid in March 1998,
the two-for-one split of the Common Stock paid in September 1998 and the
two-for-one split of the Common Stock paid in March 1999.
COMPENSATION OF DIRECTORS
The following is a description of the compensation arrangements for the
Company's non-employee directors. Mr. Dell, who is the only director who is also
an employee of the Company, does not receive any additional compensation for
serving on the Board of Directors.
ANNUAL CASH PAYMENTS. Currently, each non-employee director receives an
annual retainer fee of $40,000. Any non-employee director whose term begins
during a Service Year (a "Service Year" being the annual period commencing at an
annual meeting of the Company's stockholders and ending at the next annual
meeting of stockholders) will be entitled to the full amount of the annual
retainer fee if 50% or more of the scheduled Board of Directors meetings for the
Service Year are scheduled to occur after the director's election. Otherwise,
the new non-employee director will be entitled to receive 50% of the annual
retainer fee for that Service Year. The annual retainer fee is payable at the
first Board of Directors meeting during the Service Year.
The Company maintains a deferred compensation plan for the non-employee
directors, pursuant to which a director may elect to defer all or a portion of
his or her annual retainer fee. A director's deferred amounts are allocated by
the director to various investment funds and, along with any earnings, are
payable to the director upon termination of service as a member of the Board of
Directors or to the director's named beneficiary in the event of death.
Distribution of the deferred amounts and any earnings may be made, at the
election of the director, in a lump sum or in annual, quarterly or monthly
installments over a period of up to ten years.
A non-employee director may also elect to receive an option to purchase the
Company's Common Stock in lieu of all or a portion of the annual retainer fee.
The option is granted on the date the annual retainer fee would otherwise have
been paid. The number of shares subject to the option is determined by dividing
the amount of the annual retainer fee subject to the election by the value of an
option for one share of Common Stock (calculated pursuant to the Black-Scholes
model). The exercise price of the option is the average of the high and low
reported sales price of the Company's Common Stock on the date of grant. The
option is fully vested but becomes exercisable with respect to 20% of the shares
on each of the first five anniversaries of the date of grant and terminates on
the tenth anniversary of the date of grant.
OPTION AWARDS. Each non-employee director also receives an annual stock
option award, effective as of the date of the annual meeting of stockholders.
The number of shares covered by the option is determined by dividing the "Annual
Award Base" by the fair market value of the Common Stock on the date of grant.
The Annual Award Base was $650,000 for the awards granted in fiscal 1999 and is
subject to an annual escalation factor of 10%. In addition, each new
non-employee director receives an initial stock option award, with the number of
shares covered by the award being equal to 300% of the then-current Annual Award
Base divided by the fair market value of the Common Stock on the date of grant.
The method of computing the number of shares subject to the initial and annual
option awards will not be adjusted to take into account future stock splits;
8
<PAGE> 12
however, once an option has been issued, the number of shares subject to the
option and the exercise price of the option will be adjusted to take into
account any subsequent stock splits.
In each case, the exercise price of the option is equal to the fair market
value of the Common Stock on the date of grant. The option vests and becomes
exercisable with respect to 20% of the shares on each of the first five
anniversaries of the date of grant, so long as the director remains a member of
the Board of Directors through those dates. The option terminates when the
director ceases to be a member of the Board of Directors (if the Board of
Directors demands or requests the director's resignation), 90 days after the
director ceases to be a member of the Board of Directors (if the director
resigns for any other reason) or one year after the director ceases to be a
member of the Board of Directors because of death or permanent disability. In
any event, the option terminates on the tenth anniversary of the date of grant.
OTHER BENEFITS. The Company reimburses non-employee directors for their
reasonable expenses associated with attending Board of Directors meetings and
provides the directors with liability insurance coverage with respect to their
activities as directors of the Company.
COMPENSATION DURING FISCAL 1999. The following table describes the fiscal
1999 fees and stock option grants for each of the Company's non-employee
directors. Ms. Taylor did not become a director until March 1999 and,
consequently, did not receive any compensation during fiscal 1999.
<TABLE>
<CAPTION>
CASH
NAME PAYMENTS OPTIONS GRANTED(A)
- ---- -------- ------------------
<S> <C> <C>
Mr. Carty........................................... $40,000(b) 22,492 shares
Mr. Hirschbiel...................................... 40,000(b) 22,492 shares
Mr. Jordan.......................................... 40,000(b) 22,492 shares
Mr. Luce(c)......................................... 0 26,096 shares
Mr. Luft(c)......................................... 0 26,096 shares
Ms. Malone.......................................... 40,000 22,492 shares
Mr. Mandl(c)........................................ 0 26,096 shares
Mr. Miles(c)........................................ 0 26,096 shares
</TABLE>
- ---------------
(a) Effective July 17, 1998 (the date of last year's annual meeting of
stockholders), each non-employee director received an option to purchase
5,623 shares with an exercise price of $115.60 per share, which as a result
of the September 1998 and March 1999 stock splits, is now the equivalent of
an option to purchase 22,492 shares at an exercise price of $28.90 per
share. Such options were transferable to the holder's family members for a
limited period of time following the date of grant.
(b) Elected to defer all of this amount pursuant to the deferred compensation
plan described above.
(c) Elected to receive options in lieu of the $40,000 annual retainer fee,
consisting of an option to purchase 901 shares with an exercise price of
$115.60 per share, which as a result of the September 1998 and March 1999
stock splits, is now the equivalent of an option to purchase 3,604 shares
at an exercise price of $28.90 per share.
COMPENSATION OF EXECUTIVE OFFICERS
GENERAL. The compensation paid to the Company's executive officers is
administered by the Compensation Committee of the Board of Directors and
consists of base salaries, annual bonuses, awards made pursuant to the Company's
Incentive Plan ("Incentive Plan"), contributions to the Company-sponsored 401(k)
retirement plan and deferred compensation plan and miscellaneous benefits. The
following table summarizes the total compensation for each of the last three
fiscal years awarded to, earned by or paid to the Company's Chief Executive
Officer and the four most highly compensated executive officers of the Company
(other than the Chief Executive Officer) who were serving as executive officers
at the end of fiscal 1999 (the "Named Executive Officers").
9
<PAGE> 13
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------------- AWARDS
OTHER ------------
ANNUAL SHARES ALL OTHER
FISCAL COMPEN- UNDERLYING COMPEN-
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS SATION(A) OPTIONS(B) SATION(C)
- --------------------------- ------ -------- ---------- --------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Michael S. Dell............................. 1999 $844,231 $2,615,005 $ 11,615 12,800,000 $86,185
Chairman of the Board, 1998 788,462 2,000,000 1,650 12,800,000 65,549
Chief Executive Officer 1997 688,461 1,304,910 17,448 12,800,000 34,379
Morton L. Topfer............................ 1999 691,346 1,927,301(d) 10,231 259,540 30,227
Vice Chairman 1998 616,346 2,000,000 7,749 600,000 28,681
1997 544,276 1,031,622 17,567 1,440,000 35,576
Kevin B. Rollins............................ 1999 550,000 1,533,262(d) 17,431 259,540 6,540
Vice Chairman 1998 450,381 1,125,953 141,206 1,600,000 34,320
1997 342,310 486,610 125,099 10,720,000 3,530
Thomas J. Meredith.......................... 1999 432,115 892,318(d) 7,593 86,520 14,294
Senior Vice President, 1998 408,288 1,020,719 825 320,000 11,315
Chief Financial Officer 1997 383,547 545,232 14,314 960,000 20,198
G. Carl Everett, Jr......................... 1999 392,308 607,586(d) 190,910 4,051,920 6,894
Senior Vice President, 1998 -- -- -- -- --
Personal Systems Group 1997 -- -- -- -- --
</TABLE>
- ---------------
(a) The amounts shown in this column include amounts paid by the Company for
personal financial counseling and tax planning services (Mr. Dell, $11,615
in fiscal 1999, $1,650 in fiscal 1998 and $17,448 in fiscal 1997; Mr.
Topfer, $10,231 in fiscal 1999, $5,008 in fiscal 1998 and $17,567 in fiscal
1997; Mr. Rollins, $11,683 in fiscal 1999, $12,390 in fiscal 1998 and $643
in fiscal 1997; Mr. Meredith, $7,593 in fiscal 1999, $825 in fiscal 1998
and, $14,314 in fiscal 1997; Mr. Everett, $2,111 in fiscal 1999) and
relocation expenses paid by the Company and reimbursement for the related
tax liability (Mr. Topfer, $2,741 in fiscal 1998; Mr. Rollins, $5,748 in
fiscal 1999, $128,816 in fiscal 1998 and $34,456 in fiscal 1997; and Mr.
Everett, $88,799 in fiscal 1999). The amounts shown for Mr. Rollins and Mr.
Everett also include the amount of bonus paid on commencement of employment
(Mr. Rollins, $90,000 in fiscal 1997; and Mr. Everett, $100,000 in fiscal
1999).
(b) Does not include options granted under the Executive Stock Ownership
Incentive Program described below (the "ESOIP"), pursuant to which a Named
Executive Officer may elect to receive discounted stock options in lieu of
all or a portion of annual bonus. See note (d) below for information
regarding ESOIP elections made for fiscal 1999 annual bonuses. For
information regarding the stock option grants made during fiscal 1999
(including information with respect to options granted pursuant to ESOIP
elections made for fiscal 1998 annual bonuses), see the table that follows
entitled "Option Grants in Last Fiscal Year."
(c) Includes the value of the Company's contributions to the Company-sponsored
401(k) retirement savings plan that is available to substantially all of
the Company's U.S. employees, the amount of the Company's contributions to
the deferred compensation plan that is available to certain members of the
Company's management and the amount paid by the Company for term life
insurance coverage under health and welfare plans available to all Company
employees.
(d) In accordance with the terms of the ESOIP, Mr. Topfer, Mr. Rollins, Mr.
Meredith and Mr. Everett each elected to receive discounted stock options
in lieu of 100% of his annual bonus in fiscal 1999. The amount shown
represents the amount of the annual bonus awarded. In lieu of the foregone
cash bonuses, those persons received options covering the following number
of shares: Mr. Topfer, 253,382; Mr. Rollins, 201,577; Mr. Meredith,
117,313; and Mr. Everett 79,879. Such options were granted on March 26,
1999, and have an exercise price of $30.43 (which is 80% of the fair market
value of the Common Stock on that date). These options vest and become
exercisable over a three-year period commencing on the date of grant (50%
after the first year and 25% after each of the following two years).
INCENTIVE PLAN AWARDS. The Company's Incentive Plan provides for the
granting of incentive awards in the form of stock options, stock appreciation
rights, stock and cash to directors, executive officers and key employees of the
Company and its subsidiaries and certain other persons who provide consulting or
advisory services to the Company. The number of shares of Common Stock that may
be issued pursuant to awards under the Incentive Plan is automatically increased
at the beginning of each fiscal year, beginning with fiscal 1999 and ending with
fiscal 2003. The number of additional shares that will be available for awards
at the beginning of any such fiscal year will be equal to 4% of the following
amount: the total number of issued and outstanding shares of Common
10
<PAGE> 14
Stock as of the end of the immediately preceding fiscal year, plus the total
number of shares of Common Stock repurchased by the Company during the
immediately preceding fiscal year under the Company's stock repurchase program.
That percentage will be increased to 5% if the total shareholder return
(consisting of increase in stock price plus dividends paid) achieved by the
Company during the immediately preceding fiscal year exceeds the average total
shareholder return achieved by the companies included in the S&P Computer
Systems Index during the immediately preceding fiscal year. As of the beginning
of fiscal 2000, the Company had outstanding Incentive Plan awards covering
approximately 373 million shares and was authorized under the terms of the
Incentive Plan to issue awards covering an additional 283 million shares
(including approximately 135 million shares that were added at the beginning of
fiscal 2000 under the formula described above).
No restricted stock was awarded to any of the Named Executive Officers
during fiscal 1999. The following table sets forth information about stock
option grants made to the Named Executive Officers during fiscal 1999. The
Company has not made any awards of stock appreciation rights to any of the Named
Executive Officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------------------
NUMBER OF PERCENTAGE OF
SHARES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN PRICE GRANT EXPIRATION GRANT DATE
NAME GRANTED(A) FISCAL YEAR PER SHARE DATE DATE PRESENT VALUE(B)
---- ---------- ------------- --------- ---------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Mr. Dell............. 8,000,000(c) 13.22% $16.67 3-05-98 3-05-08 $53,100,000
4,800,000(d) 7.83 28.90 7-17-98 7-17-08 52,272,000
Mr. Topfer........... 628,064(e) 1.04 12.74 3-20-98 3-20-08 5,878,679
259,540(f) 0.43 28.90 7-17-98 7-17-08 2,826,391
Mr. Rollins.......... 353,584(e) 0.58 12.74 3-20-98 3-20-08 3,309,546
259,540(d) 0.43 28.90 7-17-98 7-17-08 2,826,391
Mr. Meredith......... 320,536(e) 0.53 12.74 3-20-98 3-20-08 3,000,217
86,520(d) 0.14 28.90 7-17-98 7-17-08 942,203
Mr. Everett.......... 4,000,000(c) 6.61 12.88 2-02-98 2-02-08 20,790,000
51,920(g) 0.09 28.90 7-17-98 7-17-08 565,409
</TABLE>
- ---------------
(a) Except for the ESOIP options described in note (e) below, such options were
transferrable to the holder's family members for a limited period of time
following the date of grant.
(b) Calculated using the Black-Scholes model. The material assumptions and
adjustments incorporated into the Black-Scholes model in making such
calculations include the following: (1) an interest rate representing the
interest rate on U.S. Treasury securities with a maturity date
corresponding to the option term; (2) volatility determined using daily
prices for the Company's Common Stock during the five-year period
immediately preceding date of grant; (3) a dividend rate of $0; and (4) in
each case (other than the ESOIP options described in note (e) below), a
reduction of 25% to reflect the probability of forfeiture due to
termination of employment prior to vesting and the probability of a
shortened option term due to termination of employment prior to the option
expiration date. The ultimate values of the options will depend on the
future market prices of the Common Stock, which cannot be forecast with
reasonable accuracy. The actual value, if any, that an optionee will
recognize upon exercise of an option will depend on the difference between
the market value of the Common Stock on the date the option is exercised
and the applicable exercise price.
(c) These options vest and become exercisable with respect to 20% of the
underlying shares on each of the first five anniversaries of the date of
grant.
(d) These options vest and become exercisable with respect to 20% of the
underlying shares on each of the third through seventh anniversaries of the
date of grant.
(e) These options were granted as a part of the ESOIP, which is described
below. These options vest and become exercisable on the first anniversary
of the date of grant. These options were received in lieu of fiscal 1998
annual
11
<PAGE> 15
bonuses in the following amounts: Mr. Topfer $2,000,000 (100%); Mr. Rollins
$1,125,953 (100%); and Mr. Meredith $1,020,719 (100%). Those amounts are
shown in the Bonus column of the "Summary Compensation Table" above.
(f) These options vest and become exercisable with respect to 100% of the
underlying shares on December 1, 2001.
(g) These options vest and become exercisable with respect to 20% of the
underlying shares on each of the fifth through the ninth anniversaries of
the grant date.
The following table sets forth, for each Named Executive Officer,
information concerning the exercise of stock options during fiscal 1999 and the
value of unexercised stock options at the end of fiscal 1999.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT FISCAL YEAR-END FISCAL YEAR-END(B)
ACQUIRED VALUE --------------------------- -----------------------------
NAME ON EXERCISE REALIZED(A) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------ ----------- ------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Mr. Dell............. -- -- 8,832,000 31,488,000 $415,371,562 $1,223,156,374
Mr. Topfer........... 4,840,000 $114,261,648 2,137,552 8,703,604 102,720,707 407,202,491
Mr. Rollins.......... 1,470,000 36,871,229 1,506,002 8,325,122 70,824,140 385,493,274
Mr. Meredith......... 1,360,000 33,553,736 2,394,466 3,083,230 115,512,969 143,933,550
Mr. Everett.......... -- -- -- 4,051,920 -- 149,595,592
</TABLE>
- ---------------
(a) Calculated using the difference between (1) the actual sales price of the
underlying shares (if the underlying shares were sold immediately upon
exercise) or the closing sales price of the Common Stock on the date of
exercise (if the underlying shares were not sold immediately upon exercise)
and (2) the exercise price.
(b) Amounts were calculated by multiplying the number of unexercised options by
the closing sales price of the Common Stock on the last trading day of
fiscal 1999 ($50) and subtracting the exercise price.
Under the ESOIP, which is a program implemented under the Incentive Plan,
certain members of the Company's management (including the executive officers)
may elect, on an annual basis, to receive stock options in lieu of all or a
portion of the annual bonus that they would otherwise receive. The exercise
price of the options is 80% of the fair market value of the Company's Common
Stock on the date of issuance. The number of shares subject to the options is
dependent on the amount of bonus a participant designates for the program and is
calculated by dividing the designated bonus amount by 20% of the fair market
value of the Common Stock on the date of issuance. The options awarded in fiscal
1999 (in lieu of fiscal 1998 bonuses) vested and became exercisable on the first
anniversary of the date of grant. The options awarded in fiscal 2000 (in lieu of
fiscal 1999 bonuses) are subject to a one-year, two-year or three-year vesting
period, depending on the holder's position. All decisions regarding
participation in the program and the amount of bonus to designate must be made
several months in advance of the anticipated bonus payment date.
401(K) RETIREMENT PLAN. The Company maintains a defined contribution
retirement plan that complies with the provisions of Section 401(k) of the
Internal Revenue Code. Substantially all U.S. employees are eligible to
participate in the plan, and eligibility for participation commences upon
hiring. Under the terms of the plan, the Company currently matches 100% of each
employee participant's voluntary contributions, subject to a maximum Company
contribution of 3% of the employee's compensation. The Company's matching
contributions vest at the rate of 20% on each of the first five anniversaries of
the date of hire.
DEFERRED COMPENSATION PLAN. The Company maintains a deferred compensation
plan, pursuant to which certain members of management (including the executive
officers) may elect to defer a portion of annual compensation. The Company
matches 100% of the employee's voluntary contributions not in excess of 3% of
annual compensation. The funds attributable to a participant (including
voluntary contributions and matching contributions) are invested among various
funds designated by the plan administrator. Upon the death or retirement of a
participant, the funds attributable to the
12
<PAGE> 16
participant (including any earnings on contributions) are distributed to the
participant or the participant's beneficiary in a lump sum or in annual,
quarterly or monthly installments over a period of up to ten years. A
participant whose employment with the Company is terminated prior to death or
retirement is entitled to receive his or her contributions to the plan (and any
earnings thereon) and the vested portion of the Company's matching
contributions, which vest ratably over the first five years of service.
EMPLOYEE STOCK PURCHASE PLAN. The Company maintains an employee stock
purchase plan that qualifies under Section 423 of the Internal Revenue Code and
permits substantially all employees to purchase shares of the Company's Common
Stock. Participating employees may purchase Common Stock at the end of each
participation period at a purchase price equal to 85% of the lower of the fair
market value of the Common Stock at the beginning or the end of the
participation period. Participation periods are semi-annual and begin on January
1 and July 1 of each year. Employees may designate up to 15% of their base
compensation for the purchase of Common Stock under the plan.
EMPLOYMENT AGREEMENTS AND CHANGE-IN-CONTROL ARRANGEMENTS. Each of the Named
Executive Officers has entered into an employment agreement with the Company.
Such employment agreements do not contain any provisions regarding compensation
or continued employment and are identical in all material respects to those
contained in the employment agreement entered into by all the Company's
employees upon the commencement of their employment with the Company.
Under the terms of the Incentive Plan and the Company's prior stock option
plans, the Compensation Committee, if it so chooses, may issue awards with
provisions that accelerate vesting and exercisability in the event of a
change-in-control of the Company and may amend existing awards to provide for
such acceleration. To date, the Compensation Committee has not elected to
include such acceleration provisions in any awards.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Hirschbiel, Mr. Jordan, Mr. Mandl and Mr. Miles served as members of
the Compensation Committee of the Company's Board of Directors during all of
fiscal 1999. None of such persons is an officer or employee, or former officer
or employee, of the Company or any of its subsidiaries. No interlocking
relationship exists between the members of the Company's Board of Directors or
Compensation Committee and the board of directors or compensation committee of
any other company, nor has any such interlocking relationship existed in the
past.
13
<PAGE> 17
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's mission is to become the leader in the personal computer
industry by providing products and services of the highest value to its
customers. To accomplish this objective, the Company has developed a
comprehensive business strategy that emphasizes maximizing long-term stockholder
value through return on invested capital, revenue and earnings growth, quality
and customer and employee satisfaction.
COMPENSATION PHILOSOPHY
The Compensation Committee of the Board of Directors (the "Committee") is
committed to implementing a compensation program that furthers the Company's
mission. The Committee therefore adheres to the following compensation policies,
which are designed to support the achievement of the Company's business
strategies:
- Executives' total compensation programs should strengthen the
relationship between pay and performance by emphasizing variable, at-risk
compensation that is dependent upon the successful achievement of
specified corporate, business unit and individual performance goals.
- A significant amount of pay for senior executives should be comprised of
long-term, at-risk pay to focus management on the long-term interests of
stockholders.
- The at-risk components of pay offered should be comprised primarily of
equity-based pay opportunities. Encouraging a personal proprietary
interest provides executives with a close identification with the Company
and aligns executives' interests with those of the stockholders. This
promotes a continuing focus on building profitability and stockholder
value.
- Total compensation opportunities should enhance the Company's ability to
attract, retain and encourage the development of exceptionally
knowledgeable and experienced executives upon whom, in large part, the
successful operation and management of the Company depends.
- Base compensation should target compensation opportunities at the median
of compensation paid to executives of similar high-tech companies.
However, if the Company's performance exceeds that of its peers, total
compensation should be paid above this amount in proportion to the level
of success achieved.
The Committee compares total compensation levels for the Company's senior
executives to the compensation paid to executives of a peer group of similar
high-tech companies. Each year, management develops the peer group based on
similar sales volumes, market capitalization, employment levels and lines of
business. The Committee reviews and approves the selection of companies used in
the peer group for compensation comparison purposes. For fiscal 1999, the peer
group consisted of approximately 30 high-tech companies, and was changed from
the prior year to reflect the Company's growth and profitability. This group is
not necessarily the same group used for the industry comparison in the
performance graph found in "Company Performance" since this group includes
additional companies that the Company competes with for people talent, in
addition to industry-product competitors.
COMPONENTS OF COMPENSATION
The key elements of the Company's executive compensation program are base
salary, short-term (annual) incentive and long-term incentive compensation.
These elements are addressed separately below.
The Committee does not exclusively use quantitative methods or mathematical
formulas in setting any element of compensation. In determining each component
of compensation, the
14
<PAGE> 18
Committee considers all elements of a senior executive's total compensation
package, including insurance and other benefits.
BASE SALARIES. Base salaries are targeted at median levels for the peer
group of companies and are adjusted by the Committee to recognize varying levels
of responsibility, individual performance, business unit performance and
internal equity issues, as well as external pay practices. The Committee reviews
each senior executive's base salary annually.
SHORT-TERM INCENTIVES. Short-term incentives for fiscal 1999 were paid
pursuant to the Company's Executive Incentive Bonus Plan (the "EIBP"). The EIBP
was designed to comply with the performance-based compensation exemption under
Section 162(m) of the Internal Revenue Code and was approved by stockholders at
the 1998 annual meeting.
Pursuant to the EBIP, each year the Committee establishes a specific annual
performance target for each executive officer. The performance target is
represented as a specific percentage of consolidated net income and may not
exceed 0.5%. Under the EIBP, the Committee has the discretion to reduce (but not
increase) an executive bonus amount from the amount that would otherwise be
payable under the established performance target. Although the EIBP does not
specify factors the Committee will evaluate, the Committee evaluates among other
things overall Company and business unit financial performance, as well as
non-financial Company performance in determining the appropriate final incentive
bonus payout amount for each executive.
For fiscal 1999, the Committee established a specific percentage of
consolidated net income for each executive officer. At the end of fiscal 1999,
the Committee certified that the performance targets had been achieved and that
incentive bonus amounts could be paid. In determining the actual incentive bonus
amount to be paid to each executive officer the Committee considered several
factors, including company and business unit revenue growth, return on invested
capital and return on sales and non-financial performance relating to
improvements in customer satisfaction. Based on an evaluation of the above
factors, the Committee modified bonus payout amounts to the Named Executive
Officers as set forth in the Summary Compensation Table.
LONG-TERM INCENTIVES. In keeping with the Company's philosophy of providing
a total compensation package that favors at-risk components of pay, long-term
incentives comprise a significant component of a senior executive's total
compensation package. These incentives are designed to motivate and reward
executives for maximizing stockholder value and encourage the long-term
employment of key employees.
When awarding long-term incentives, the Committee considers executives'
levels of responsibility, prior experience, individual performance criteria,
previous stock option grants and compensation practices at the peer group of
companies used to evaluate total compensation. The Committee's objective is to
provide executives with long-term incentive award opportunities that approximate
the market median but provide for above-market payout opportunities when the
Company's stockholder returns exceed industry norms.
The size of stock option grants is based primarily on the dollar value of
the award granted. As a result, the number of shares underlying stock option
awards varies and is dependent on the price of the Company's Common Stock on the
date of grant. The size of the award can also be adjusted based on individual
factors.
In July 1998, stock options with an exercise price set at fair market value
were granted for fiscal 1999 as part of the Company's regular annual grant of
stock options. The size of each award was determined based on the criteria for
awarding long-term incentives stated in the preceding two paragraphs. These
stock options generally vest ratably over five years (20% of the grant each
year).
Because all of the above grants were made at option prices equal to the
fair market value of the Company's Common Stock on the dates of grant, the stock
options have value only if the stock price
15
<PAGE> 19
appreciates from the value on the date the options were granted. This design is
intended to focus executives on the enhancement of stockholder value over the
long-term and to encourage equity ownership in the Company.
Also, on March 26, 1999, stock options with an exercise price set at 80% of
fair market value were granted to 12 executive officers under the Company's
Executive Stock Ownership Incentive Program. This program allows executives to
elect to forego all or a portion of their pretax Incentive Bonus Plan or EIBP
payouts and receive options granted at 80% of fair market value. Because of the
inherent risk in foregoing a cash payment to receive an option grant, the number
of shares granted is calculated by dividing the foregone bonus payment amount by
20% of the fair market value of the Common Stock on the bonus payment date.
Although the foregone cash payments would have been unrestricted, the discounted
options are subject to a three-year vesting schedule.
The Committee also approved grants of restricted stock to key employees who
joined the Company during fiscal 1999. The restricted stock was required to
attract these individuals to the Company and was intended to replace the
long-term incentives they forfeited when they left their previous employers.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
In fiscal 1999, Mr. Dell's annualized base salary was increased to $850,000
to reflect the Company's outstanding performance under his continued leadership.
The new salary remains below the median base salary earnings for chief executive
officers of the peer group of companies.
Mr. Dell also received an incentive bonus as a result of the Company's
performance in fiscal 1999. This payment equaled 308% of Mr. Dell's base salary.
In March 1998, Mr. Dell received a stock option grant of 2,000,000 shares
(now 8,000,000 shares after being adjusted for the September 1998 and March 1999
stock splits). In July 1998, Mr. Dell received a stock option grant of 1,200,000
shares (now 4,800,000 shares after being adjusted for the September 1998 and
March 1999 stock splits). The first option grant vests at the rate of 20% each
year beginning in 1999 and extending through 2003 and the second option grant
vests at the rate of 20% each year beginning in 2001 extending through 2005. All
options were granted with an exercise price set equal to the fair market value
of the Common Stock on the date of grant. The Committee granted the options to
recognize Mr. Dell's leadership and vision that has contributed significantly to
the Company's superior performance in creating stockholder value.
POLICY WITH RESPECT TO THE $1 MILLION DEDUCTION LIMIT
Section 162(m) of the Internal Revenue Code generally limits the U.S.
corporate income tax deduction for compensation paid to executive officers named
in the summary compensation table in the proxy statement of a public company to
$1 million, unless the compensation is "performance based compensation" or
qualifies under certain other exceptions. When structuring awards to the
executive officers, the Committee considers the potential loss of deduction
under Section 162(m), as well as the financial statement effect of a particular
award. In some cases, an award that qualifies as "performance based
compensation" under Section 162(m) may give rise to an accounting treatment that
results in an adverse financial statement effect. Consequently, the Committee
attempts to strike a reasonable balance between the Section 162(m)
considerations and the financial accounting or other considerations. The
Committee may authorize an award that will give rise to a loss of deduction
under Section 162(m), but only after determining that the potential adverse
financial statement effect of alternative award structures, or other
considerations, outweighs the monetary value of the lost deduction. As a result
of the Section 162(m) limitation, approximately $750,000 of the compensation
earned by the Named Executive Officers during fiscal 1999 will be nondeductible
(resulting in a cash cost to the Company of approximately $260,000).
16
<PAGE> 20
CONCLUSION
The Committee believes these executive compensation policies and programs
serve the interests of stockholders and the Company effectively. The various pay
vehicles offered are appropriately balanced to provide increased motivation for
senior executives to contribute to the Company's overall future success, thereby
enhancing the value of the Company for the stockholders' benefit.
THE COMPENSATION COMMITTEE
MICHAEL MILES, CHAIRMAN
PAUL O. HIRSCHBIEL, JR.
MICHAEL H. JORDAN
ALEX J. MANDL
17
<PAGE> 21
COMPANY PERFORMANCE
The following graph compares the cumulative total return on the Company's
Common Stock during the last five fiscal years with the S&P 500 Index and the
S&P Computer Systems Index during the same period. The graph shows the value, at
the end of each of the last five fiscal years, of $100 invested in the Company's
Common Stock or the indices on January 30, 1994 and assumes the reinvestment of
all dividends. The graph depicts the change in the value of the Company's Common
Stock relative to the noted indices as of the end of each fiscal year and not
for any interim period. Historical stock price performance is not necessarily
indicative of future stock price performance.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
[CHART]
<TABLE>
<CAPTION>
END OF FISCAL YEAR
----------------------------------------------
1994 1995 1996 1997 1998 1999
---- ---- ---- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
Dell Computer Corporation........... $100 $194 $254 $1,225 $3,681 $14,798
S&P 500 Index....................... 100 98 130 164 205 267
S&P Computer Systems Index(a)....... 100 121 172 240 324 656
</TABLE>
- ---------------
(a) The S&P Computer Systems Index currently consists of Apple Computer, Inc.;
Compaq Computer Corporation; Data General Corporation; Dell Computer
Corporation; EMC Corporation; Gateway 2000, Inc.; Hewlett-Packard Company;
International Business Machines Corporation; Seagate Technology, Inc.;
Silicon Graphics, Inc.; Sun Microsystems, Inc.; and Unisys Corporation.
18
<PAGE> 22
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table provides information about the beneficial ownership of
Common Stock (the only class of voting securities of the Company outstanding) by
the persons known to the Company to be the beneficial owners of more than 5% of
the outstanding Common Stock, by each of the Company's directors, by each Named
Executive Officer and by all of the Company's directors and executive officers
as a group. To the best of the Company's knowledge, each such person holds sole
investment and voting power over the shares shown, except as otherwise
indicated.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL PERCENTAGE
BENEFICIAL OWNER OWNERSHIP(A) OF CLASS(B)
---------------- ----------------- -----------
<S> <C> <C>
Michael S. Dell........................................... 364,978,212(c)(d) 14.3%
One Dell Way
Round Rock, Texas 78682-2244
Donald J. Carty........................................... 729,600(c) *
Paul O. Hirschbiel, Jr. .................................. 1,251,904(c)(e) *
Michael H. Jordan......................................... 2,258,030(c) *
Thomas W. Luce III........................................ 87,137(c) *
Klaus S. Luft............................................. 384,000(c) *
Claudine B. Malone........................................ 355,200 *
Alex J. Mandl............................................. 49,484(c)(f) *
Michael A. Miles.......................................... 1,909,249(c)(g) *
Mary Alice Taylor......................................... 0 *
Morton L. Topfer.......................................... 6,494,714(c)(h) *
Kevin B. Rollins.......................................... 3,391,454(c) *
Thomas J. Meredith........................................ 6,510,288(c)(i) *
G. Carl J. Everett, Jr. .................................. 57,586(c) *
Directors and executive officers as a group (25
persons)................................................ 396,236,678(c) 15.6%
</TABLE>
- ---------------
* Less than 1%.
(a) As of April 30, 1999.
(b) Based on the number of shares outstanding (2,539,122,738) at the close of
business on April 30, 1999.
(c) Includes the following number of shares subject to options that were
exercisable at or within 60 days after April 30, 1999: Mr. Dell,
12,032,000; Mr. Carty, 729,600; Mr. Hirschbiel, 878,400; Mr. Jordan,
1,977,600; Mr. Luce, 87,137; Mr. Luft, 384,000; Mr. Mandl, 49,084; Mr.
Miles, 1,200,737; Mr. Topfer, 2,197,616; Mr. Rollins 3,379,588; Mr.
Meredith, 3,040,776; and all directors and executive officers as a group,
28,261,310. Also includes the following number of shares held for the
person's account in the Company-sponsored 401(k) retirement savings plan or
deferred compensation plan: Mr. Dell, 98,878; Mr. Hirschbiel, 1,408; Mr.
Jordan, 1,408; Mr. Miles, 4,512; Mr. Topfer, 16,910; Mr. Rollins, 2,066;
Mr. Meredith, 37,808; Mr. Everett, 578; and all directors and executive
officers as a group, 214,240.
(d) Does not include 4,058,000 shares held in a trust of which Mr. Dell is the
grantor, 6,080,000 shares held in a trust of which Mr. Dell's spouse is the
grantor or 39,369,712 shares held by Mr. Dell's spouse.
(e) Includes 23,040 shares held in family trusts of which Mr. Hirschbiel is the
trustee.
(f) Includes 400 shares held by Mr. Mandl's spouse.
(g) Includes 160,000 shares held by Mr. Miles' spouse.
(h) Includes 11,776 shares held by a family limited partnership of which Mr.
Topfer is the general partner and 6,144 shares held by Mr. Topfer's spouse.
(i) Includes 2,864,984 shares held by a grantor trust of which Mr. Meredith is
the trustee and Mr. Meredith and members of his family are the
beneficiaries.
19
<PAGE> 23
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Thomas W. Luce III, a director of the Company, is affiliated with the law
firm of Hughes & Luce, L.L.P., Dallas, Texas, which provided certain legal
services to the Company during fiscal 1999. The dollar amount of fees that the
Company paid to that firm during fiscal 1999 did not exceed 5% of that firm's
gross revenues for its last full fiscal year.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Joseph A. Marengi, an executive officer of the Company, failed to report on
his Form 3 filed in March 1998 the ownership of 260 shares (prior to the March
1998, September 1998 and March 1999 stock splits). Additionally, Mr. Marengi
failed to report on his Form 4 for the month of August 1998 the purchase of 25
shares (prior to the September 1998 and March 1999 stock splits) that occurred
on August 31, 1998. Both failures to report were inadvertent and have been
corrected on Mr. Marengi's Form 4 filed for September 1998. Alex J. Mandl, a
director of the Company, failed to report on Form 4 and Form 5 the purchase of
200 shares (prior to the March 1999 stock split) in October 1999. This failure
to report was inadvertent and has been corrected on Mr. Mandl's Amended Form 5.
ADDITIONAL INFORMATION
INDEPENDENT ACCOUNTANTS. The Board of Directors has selected
PricewaterhouseCoopers LLP as the Company's independent accountants for fiscal
2000. PricewaterhouseCoopers LLP has been the Company's independent accountants
for each of the past 13 fiscal years. The Company expects that representatives
of PricewaterhouseCoopers LLP will be present at the meeting to respond to
appropriate questions and will have an opportunity to make a statement if they
desire to do so.
PROXY SOLICITATION. The Company will bear all costs of this proxy
solicitation. Proxies may be solicited by mail, in person, by telephone or by
facsimile transmission by officers, directors and regular employees of the
Company. In addition, the Company will utilize the services of D.F. King & Co.,
Inc., an independent proxy solicitation firm, and will pay $12,500 plus
reasonable expenses as compensation for those services. The Company may also
reimburse brokerage firms, custodians, nominees and fiduciaries for their
expenses to forward proxy materials to beneficial owners.
STOCKHOLDER PROPOSALS. Any stockholder of the Company who desires to
present a proposal for consideration at next year's annual meeting of
stockholders must deliver the proposal to the Company's principal executive
offices no later than February 6, 2000, unless the Company notifies the
stockholders otherwise. Only those proposals that are proper for stockholder
action may be included in the Company's proxy statement. Written requests for
inclusion should be addressed to Corporate Secretary, Dell Computer Corporation,
One Dell Way, Round Rock, Texas 78682-2244.
In recommending candidates to the Board of Directors, the Nominating
Committee seeks persons of proven judgment and experience. Stockholders who wish
to suggest qualified candidates may write to the Corporate Secretary, Dell
Computer Corporation, One Dell Way, Round Rock, Texas 78682-2244, stating in
detail the qualifications of the persons they recommend.
STOCKHOLDER LIST. The Company will maintain at its corporate offices at One
Dell Way, Round Rock, Texas, a list of the stockholders entitled to vote at the
annual meeting, and the list will be open for examination by any stockholder,
for purposes germane to the meeting, during ordinary business hours for a period
of 10 days prior the meeting. The list will also be available for examination at
the meeting itself.
ANNUAL REPORT ON FORM 10-K. A copy of the Company's Annual Report on Form
10-K, without exhibits, for the fiscal year ended January 29, 1999, is being
provided to all stockholders with this Proxy Statement. In addition, the
Company's Annual Report on Form 10-K (without exhibits) is available via the
Internet at the Company's World Wide Web site (www.dell.com), and the EDGAR
20
<PAGE> 24
version of such report (with exhibits) is available at the World Wide Web site
of the Securities and Exchange Commission (www.sec.gov).
INTERNET AND TELEPHONE VOTING. Stockholders have the opportunity to vote
via the Internet or by telephone. Votes submitted electronically via the
Internet or by telephone must be received by 4:00 p.m., New York time, on July
15, 1999. Submitting a proxy will not affect your right to vote in person should
you decide to attend the Annual Meeting.
To vote via the Internet or by telephone, please refer to the accompanying
instructions.
The Internet voting procedures are designed to authenticate stockholder
identities, to allow stockholders to give their voting instructions and to
confirm that stockholders' instructions have been recorded properly.
Stockholders voting via the Internet should understand that there may be costs
associated with electronic access, such as usage charges from Internet access
providers and telephone companies, that must be borne by the stockholder.
21
<PAGE> 25
[DELL LOGO]
www.dell.com
C/O PROXY SERVICES
P.O. BOX 9079
FARMINGDALE, NY 11735-9769
OPTIONS FOR SUBMITTING PROXY
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions. Have your
voting instruction card in hand when you call. You will be prompted to enter
your 12-digit Control Number which is located below and then follow the simple
instructions the Vote Voice provides you.
VOTE BY INTERNET - www.proxyvote.com
Use the internet to transmit your voting instructions and for electronic
delivery of information. Have your voting instruction card in hand when you
access the web site. You will be prompted to enter your 12-digit Control Number
which is located below to obtain your records and create an electronic voting
instruction form.
VOTE BY MAIL -
Mark, sign and date your voting instruction card and return it in the
postage-paid envelope we've provided or return to Dell Computer Corporation,
c/o ADP, 51 Mercedes Way, Edgewood, NY 11717
CONTROL NUMBER
ACCOUNT NUMBER
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: X DELLCO KEEP THIS PORTION FOR YOUR RECORDS
- ------------------------------------------------------------------------------------------------------------------------------------
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
- ------------------------------------------------------------------------------------------------------------------------------------
DELL COMPUTER CORPORATION
The Board of Directors Recommends a Vote FOR all
listed Proposals 1010101010 228170343697
ELECTION OF DIRECTORS For Withhold For All To withhold authority to vote for any
All All Except: individual, Mark "For All Except" and
write the nominee's number on the line below.
1. Nominee: (01) Michael S. Dell
(02) Michael H. Jordan [ ] [ ] [ ]
(03) Klaus S. Luft --------------------------------------------
(04) Mary Alica Taylor
2. Approval of an amendment to the Company's Certificate of Incorporation to For Against Abstain
increase the number of authorized shares from three billion to seven
billion. [ ] [ ] [ ]
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE ON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT(S)
THEREOF.
Each joint owner should sign. Signatures should correspond with the names
printed on this Proxy. Attorneys, executors, administrators, guardians,
trustees, corporate officers or others signing in a respective capacity should
give full title.
-------------------------------------------- --------------------------------------------
-------------------------------------------- --------------------------------------------
Signature (PLEASE SIGN WITHIN BOX) Date (Signature of Owners) Date
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 26
[DELL LOGO]
DELL COMPUTER CORPORATION
PROXY
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JULY 16, 1999
AND ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS OF DELL COMPUTER CORPORATION
By casting your voting instructions on the reverse side, you hereby (a)
acknowledge receipt of the proxy statement related to the above-referenced
meeting, (b) appoint the individuals named in such proxy statement, and each of
them, as proxies, with full power of substitution, to vote all shares of stock
of the Company that you would be entitled to cast if personally present at such
meeting and at any postponement or adjournment thereof and (c) revoke any
proxies previously given.
This proxy will be voted as specified by you. If no choice is specified, the
proxy will be voted according to the Board of Director Recommendations indicated
on the reverse side, and according to the discretion of the proxy holders for
any other matters that may properly come before the meeting or any postponement
or adjournment thereof.
