10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)
þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended: February 1, 2008
or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from                 to

Commission file number: 0-17017

Dell Inc.

(Exact name of registrant as specified in its charter)

Delaware	74-2487834
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

One Dell Way, Round Rock, Texas 78682

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (512) 338-4400

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock, par value $.01 per share		The NASDAQ Stock Market LLC

Securities Registered Pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o  No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o  No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  þ  No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check One):

Large accelerated filer þ	Accelerated filer o
Non-accelerated filer o (do not check if smaller reporting company)	Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o  No þ

Approximate aggregate market value of the registrant’s common stock held by non-affiliates as of August 3, 2007, based upon the closing price reported for such date on The NASDAQ Stock Market	$54.0 billion
Number of shares of common stock outstanding as of March 14, 2008	2,042,291,533

DOCUMENTS INCORPORATED BY REFERENCE

The information required by Part III of this report, to the extent not set forth herein, is incorporated by reference from the registrant’s proxy statement relating to the 2008 annual meeting of stockholders. Such proxy statement will be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year to which this report relates.

Table of Contents

Part I			Page
	Item 1.	Business		1
	Item 1A.	Risk Factors		11
	Item 1B.	Unresolved Staff Comments		15
	Item 2.	Properties		15
	Item 3.	Legal Proceedings		17
	Item 4.	Submission of Matters to a Vote of Security Holders		17
	Part II
	Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		17
	Item 6.	Selected Financial Data		19
	Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		21
	Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		44
	Item 8.	Financial Statements and Supplementary Data		45
	Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		95
	Item 9A.	Controls and Procedures		95
	Item 9B.	Other Information		98
	Part III			98
	Part IV
	Item 15.	Exhibits, Financial Statement Schedules		99
Signatures				101
Exhibit Index				103
	Exhibits	(attached to the Report on Form 10-K)
Amended and Restated 401(k) Plan
Form of Performance Based Stock Unit Agreement for Executive Officers
Form of Nonstatutory Stock Option Agreement for Executive Officers
Form of Restricted Stock Unit Agreement for Executive Officers
Subsidiaries
Consent of PricewaterhouseCoopers LLP
Certification of Chairman and CEO, Pursuant to Section 302
Certification of Vice Chairman and CFO, Pursuant to Section 302
Certifications Pursuant to Section 906
Item 4 - Submission of Matters to a Vote of Security Holders

This report contains forward-looking statements that are based on Dell’s current expectations. Actual results in future periods may differ materially from those expressed or implied by those forward-looking statements because of a number of risks and uncertainties. For a discussion of risk factors affecting our business and prospects, see “Part I — Item 1A — Risk Factors.”

All percentage amounts and ratios were calculated using the underlying data in thousands. Unless otherwise noted, all references to industry share and total industry growth data are for personal computers (including desktops, notebooks, and x86 servers), and are based on information provided by IDC Worldwide Quarterly PC Tracker, March 3, 2008. Share data is for the full calendar year and all our growth rates are on a fiscal year-over-year basis. Unless otherwise noted, all references to time periods refer to our fiscal periods.

ITEM 1 — BUSINESS

General

Dell listens to customers and delivers innovative technology and services they trust and value. As a leading technology company, we offer a broad range of product categories, including desktop PCs, servers and networking products, storage, mobility products, software and peripherals, and services. According to IDC, we are the number one supplier of personal computer systems in the United States, and the number two supplier worldwide.

Our company is a Delaware corporation and was founded in 1984 by Michael Dell on a simple concept: by selling computer systems directly to customers, we can best understand their needs and efficiently provide the most effective computing solutions to meet those needs. Our corporate headquarters are located in Round Rock, Texas, and we conduct operations worldwide through subsidiaries. When we refer to our company and its business in this report, we are referring to the business and activities of our consolidated subsidiaries. We operate principally in one industry, and we manage our business in three geographic regions: the Americas; Europe, Middle East and Africa (“EMEA”); and Asia Pacific-Japan (“APJ”). See “Part I — Item 1 — Business — Geographic Areas of Operations.”

We are committed to managing and operating our business in a responsible and sustainable manner around the globe. This includes our commitment to environmental responsibility in all areas of our business. In June 2007, we announced an ambitious long-term goal to be the “greenest technology company on the planet” and have a number of efforts that take the environment into account at every stage of the product lifecycle. See “Part I — Item 1— Business — Sustainability.” This also includes our focus on maintaining a strong control environment, high ethical standards, and financial reporting integrity. See “Part II — Item 9A — Controls and Procedures.”

Business Strategy

Our core business strategy is built around our direct customer model, relevant technologies and solutions, and highly efficient manufacturing and logistics; and we are expanding that core strategy by adding new distribution channels to reach even more commercial customers and individual consumers around the world. Using this strategy, we strive to provide the best possible customer experience by offering superior value; high-quality, relevant technology; customized systems and services; superior service and support; and differentiated products and services that are easy to buy and use. Historically, our growth has been driven organically from our core businesses. Recently, we have begun to pursue a targeted acquisition strategy designed to augment select areas of our business with more products, services, and technology that our customers value. For example, with our recent acquisition of EqualLogic, Inc., a leading provider of high-performance storage area network solutions, and the subsequent expansion of Dell’s PartnerDirect channel, we are ready to deliver customers an easier and more affordable solution for storing and processing data.

Our core values include the following:

•   We simplify information technology for customers.  Making quality personal computers, servers, storage, and services affordable is Dell’s legacy. We are focused on making information technology affordable for millions of customers around the world. As a result of our direct relationships with customers, or “customer intimacy”, we are best positioned to simplify how customers implement and maintain information technology and deliver hardware, services, and software solutions tailored for their businesses and homes.

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•   We offer customers choice.  Customers can purchase systems and services from Dell via telephone, at a growing number of retail stores, and through our website, www.dell.com, where they may review, configure, and price systems within our entire product line; order systems online; and track orders from manufacturing through shipping. Customers may offer suggestions for current and future Dell products and services through an interactive portion of our website called Dell IdeaStorm. Commercial customers also can interact with dedicated account teams. We plan to continue to expand our recently launched indirect initiative by adding new distribution channels to reach additional consumers and small businesses through retail partners and value-added resellers globally.

•   Customers can purchase custom-built products and custom-tailored services.  Historically our flexible, build-to-order manufacturing process enabled us to turn over inventory quickly, thereby reducing inventory levels, and rapidly bring the latest technology to our customers. The global IT industry and our competition have evolved, and we are continuing to expand our utilization of original design manufacturers, manufacturing outsourcing relationships, and new distribution strategies to better meet customer needs and reduce product cycle times. Our goal is to introduce the latest relevant technology more quickly and to rapidly pass on component cost savings to a broader set of our customers worldwide.

•   We are committed to being environmentally responsible in all areas of our business.  We have built environmental consideration into every stage of the Dell product life cycle — from developing and designing energy-efficient products, to reducing the footprint of our manufacturing and operations, to customer use and product recovery.

Product Development

We focus on developing standards-based technologies that incorporate highly desirable features and capabilities at competitive prices. We employ a collaborative approach to product design and development, where our engineers, with direct customer input, design innovative solutions and work with a global network of technology companies to architect new system designs, influence the direction of future development, and integrate new technologies into our products. Through this collaborative, customer-focused approach, we strive to deliver new and relevant products and services to the market quickly and efficiently. Our research, development, and engineering expenses were $693 million for Fiscal 2008, $498 million for Fiscal 2007, and $458 million for Fiscal 2006, including in-process research and development of $83 million related to acquisitions in Fiscal 2008.

Products and Services

We design, develop, manufacture, market, sell, and support a wide range of products that in many cases are customized to individual customer requirements. Our product categories include desktop PCs, servers and networking products, storage, mobility products, and software and peripherals. In addition, we offer a wide range of services. See “Part II — Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Revenue by Product and Service Categories” and Note 11 of Notes to Consolidated Financial Statements included in “Part II — Item 8 — Financial Statements and Supplementary Data.”

•   Desktop PCs — The XPS^tm and Alienware lines are targeted at customers seeking the best experiences and designs available, from multimedia capability to the highest gaming performance. The OptiPlex^tm line is designed to help business, government, and institutional customers manage their total cost of ownership by offering a portfolio of secure, manageable, and stable lifecycle products. The Inspiron^tm line of desktop computers is designed for mainstream PC users requiring the latest features for their productivity and entertainment needs. In July 2007, we introduced the Vostro^tm line, which is designed to provide technology and services to suit the specific needs of small businesses.

Dell Precision^tm desktop workstations are intended for professional users who demand exceptional performance from hardware platforms optimized and certified to run sophisticated applications, such as those needed for three-dimensional computer-aided design, digital content creation, geographic information systems, computer animation, software development, computer-aided engineering, game development, and financial analysis.

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•   Servers and Networking — Our standards-based PowerEdge^tm line of servers is designed to offer customers affordable performance, reliability, and scalability. Options include high performance rack, blade, and tower servers for enterprise customers and aggressively priced tower servers for small organizations, networks, and remote offices. We also offer customized Dell server solutions for very large data center customers.

Our PowerConnect^tm switches connect computers and servers in small-to-medium-sized networks. PowerConnect^tm products offer customers enterprise-class features and reliability at a low cost.

•   Storage — We offer a comprehensive portfolio of advanced storage solutions, including storage area networks, network-attached storage, direct-attached storage, disk and tape backup systems, and removable disk backup. With our advanced storage solutions for mainstream buyers, we offer customers functionality and value while reducing complexity in the enterprise. Our storage systems are easy to deploy, manage, and maintain. The flexibility and scalability offered by Dell PowerVault^tm, Dell EqualLogic, and Dell  EMC storage systems helps organizations optimize storage for diverse environments with varied requirements.

•   Mobility — The XPS^tm and Alienware lines of laptop computers are targeted at customers seeking the best experiences and designs available from sleek, elegant, thin, and light laptops to the highest performance gaming systems. In Fiscal 2008, we introduced the XPS M1330, an innovative mobile platform featuring a 13.3-inch high definition display and ultra-portable form factor that received awards for its unique design. The Inspiron^tm line of laptop computers is designed for users seeking the latest technology and high performance in a stylish and affordable package. The Latitude^tm line is designed to help business, government, and institutional customers manage their total cost of ownership through managed product lifecycles and the latest offerings in performance, security, and communications. The Vostro^tm line, introduced in July 2007, is designed to customize technology, services, and expertise to suit the specific needs of small businesses. The Precision^tm line of mobile workstations is intended for professional users who demand exceptional performance to run sophisticated applications.

•   Software and Peripherals — We offer Dell-branded printers and displays and a multitude of competitively priced third-party peripheral products, including software titles, printers, televisions, laptop accessories, networking and wireless products, digital cameras, power adapters, scanners, and other products.

–   Software.  We sell a wide range of third-party software products, including operating systems, business and office applications, anti-virus and related security software, entertainment software, and products in various other categories. We finalized the acquisition of ASAP Software Express Inc., a leading software solutions and licensing services provider, in the fourth quarter of Fiscal 2008. As a result of this acquisition, we now offer products from over 2,000 software publishers.

–   Printers.  We offer a wide array of Dell-branded printers, ranging from ink-jet all-in-one printers for consumers to large multifunction devices for corporate workgroups. All of our printers feature the Dell Ink and Toner Management System^tm, which simplifies the purchasing process for supplies by displaying ink or toner levels on the status window during every print job and proactively prompting users to order replacement cartridges directly from Dell.

–   Displays.  We offer a broad line of branded and non-branded display products, including flat panel monitors and projectors. In Fiscal 2008, we extended our consumer monitor line-up and introduced new innovations such as “True Life” and integrated camera and microphone into some of our monitors. We added the 1201MP projector to our existing projector portfolio. Across our monitors and projector product lines, we continue to win awards for quality, performance, and value.

•   Services — Our global services business offers a broad range of configurable IT services that help commercial customers and channel partners plan, implement and manage IT operations and consumers install, protect, and maintain their PCs and accessories. Our service solutions help customers simplify IT, maximizing the performance, reliability, and cost-effectiveness of IT operations. During Fiscal 2008, we acquired a number of service technologies and capabilities through strategic acquisitions of certain companies. These are being used to build-out our service capabilities.

–   Infrastructure Consulting Services.  Our consulting services help customers evaluate, design, and implement standards-based IT infrastructures. These customer-oriented consulting services are designed to be

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focused and efficient, providing customers access to our experience and guidance on how to best architect and operate IT operations.

–   Deployment Services.  Our deployment services simplify and accelerate the deployment of new systems, PCs, and TV’s in customers’ environments. Our processes and deployment technologies enable customers to get systems up and running quickly and reliably, with minimal end-user disruption.

–   Asset Recovery and Recycling Services.  We offer a variety of flexible services for the secure and environmentally safe recovery and disposal of owned and leased IT equipment. Various options, including resale, recycling, donation, redeployment, employee purchase, and lease return, help customers retain value while facilitating regulatory compliance and minimizing storage costs.

–   Training Services.  We help customers develop the skills and knowledge of key technologies and systems needed to increase their productivity. Courses include hardware and software training as well as PC skills and professional development classes available through instructor-led, virtual, or self-directed online courses.

–   Support Services.  Our suite of scalable support services is designed for IT professionals and end-users whose needs range from basic phone support to rapid response and resolution of complex problems. We offer flexible levels of support that span from desktop and laptop PCs to complex servers and storage systems, helping customers maximize uptime and stay productive. Our support services include warranty services and proactive maintenance offerings to help prevent problems as well as rapid response and resolution of problems. These services are supported by our network of Global Command Centers in the U.S., Ireland, China, Japan, and Malaysia, providing rapid, around-the-clock support for critical commercial systems.

–   Managed Services.  We offer a full suite of managed service solutions for companies who desire outsourcing of some or all of their IT management. From planning to deployment to ongoing technical support, our managed services are modular in nature so that customers can customize a plan based on their current and future needs. We can manage a portion of their IT tasks or provide an end-to-end solution.

Financial Services

We offer or arrange various customer financial services for our business and consumer customers in the U.S. through Dell Financial Services L.P. (“DFS”), a wholly-owned subsidiary of Dell as of January 2008. DFS was formerly a joint venture between Dell and CIT Group Inc. (“CIT”), and has been included in our consolidated financial statements since the third quarter of Fiscal 2004. On December 31, 2007, we purchased CIT’s remaining 30% interest in DFS, making it a wholly-owned subsidiary. Financing through DFS is one of many sources of funding that our customers may select. For additional information about our financing arrangements, see “Part II — Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Off-Balance Sheet Arrangements” and Note 6 of Notes to Consolidated Financial Statements included in “Part II — Item 8 — Financial Statements and Supplementary Data.”

Sales and Marketing

We sell our products and services directly to customers through dedicated sales representatives, telephone-based sales, online at www.dell.com, and through a variety of indirect sales channels. Our customers include large corporate, government, healthcare, and education accounts, as well as small-to-medium businesses and individual consumers. Within each of our geographic regions, we have divided our sales and marketing resources among these various customer groups. No single customer accounted for more than 10% of our consolidated net revenue during any of the last three fiscal years.

Our sales and marketing efforts are organized around the needs, trends, and characteristics of our customers. Our direct business model provides direct and continuous feedback from customers, thereby allowing us to develop and refine our products and marketing programs for specific customer groups. Customers may offer suggestions for current and future Dell products, services, and operations on an interactive portion of our website called Dell IdeaStorm. This constant flow of communication allows us to rapidly gauge customer satisfaction and target new or existing products.

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For large business and institutional customers, we maintain a field sales force throughout the world. Dedicated account teams, which include field-based system engineers and consultants, form long-term relationships to provide our largest customers with a single source of assistance and develop specific tailored solutions for these customers. For large, multinational customers, we offer several programs designed to provide single points of contact and accountability with global account specialists, special global pricing, and consistent service and support programs across all global regions. We also maintain specific sales and marketing programs targeted at federal, state, and local governmental agencies, as well as at specific healthcare and educational customers.

We market our products and services to small-to-medium businesses and consumers primarily by advertising on television and the Internet, advertising in a variety of print media, and mailing a broad range of direct marketing publications, such as promotional pieces, catalogs, and customer newsletters.

Our business strategy also includes indirect sales channels. Outside the U.S., we sell products indirectly through selected partners to benefit from the partner’s existing customer relationships and valuable knowledge of traditional customs and logistics in the country, to mitigate credit and country risk, and because sales in some countries may be too small to warrant a direct sales business unit. In the U.S., we sell products indirectly through third-party solution providers, system integrators, and third-party resellers. In Fiscal 2008, we announced PartnerDirect, a global program that brings our existing partner initiatives under one umbrella in the U.S. PartnerDirect includes partner training and certification, deal registration, dedicated sales and customer care, and a dedicated web portal. We intend to expand the program globally. Continuing our strategy and efforts of better meeting customers’ needs and demands, we began offering select products in retail stores in several countries in the Americas, EMEA, and APJ during Fiscal 2008. These actions represent the first steps in our retail strategy, which will allow us to extend our business model to reach customers that we have not been able to reach directly.

Competition

We face intense price and product feature competition from branded and generic competitors when selling our services. In addition to several large branded companies, there are other smaller branded and generic competitors. Historically, we competed primarily based on the customer value that a direct relationship can bring — technology, performance, customer service, quality, and reliability. Our general practice is to rapidly pass on cost declines to our customers to enhance customer value.

As a result of the intensely competitive environment, we lost 1.9 points of share during calendar 2007. We lost share, both in the U.S. and internationally, as our growth did not meet overall personal computer systems growth. This was mainly due to intense competitive pressure in our U.S. Consumer business, particularly in lower priced desktops and notebooks, as well as a slight decline in our worldwide desktop shipments (compared to 5% worldwide industry growth in desktops). At the end of calendar 2007, we remained the number one supplier of personal computer systems in the U.S. and the number two supplier worldwide.

We expect that the competitive pricing environment will continue to be challenging. However, we believe that the strength of our evolving business strategy and indirect distribution channels, as well as our strong liquidity position, makes us well positioned to continue profitable growth over the long term in any business climate. For consumers, we recognize the increasing importance of product “ID”, which is the appearance, ease of use, and ability to interact with peripheral products like cameras and MP3 players, and we are focusing more resources to improve in this area.

In our financial services business we compete with the captive financing businesses of some of our competitors as well as with banks and financial institutions. While DFS is one of the many potential sources for arranging funding that may be available to our customers, we believe that our ability to offer or arrange financing for products, services, and solutions makes us competitive with banks and financial institutions.

Manufacturing and Materials

We manufacture many of the products we sell and have manufacturing locations worldwide to service our global customer base. See “Part I — Item 2 — Properties” for information about our manufacturing locations. We believe that our manufacturing processes and supply-chain management techniques provide us a competitive advantage.

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Our manufacturing process consists of assembly, software installation, functional testing, and quality control. Testing and quality control processes are also applied to components, parts, sub-assemblies, and systems obtained from third-party suppliers. Quality control is maintained through the testing of components, subassemblies, and systems at various stages in the manufacturing process. Quality control also includes a burn-in period for completed units after assembly, on-going production reliability audits, failure tracking for early identification of production and component problems, and information from customers obtained through services and support programs. We are certified, worldwide, by the International Standards Organization to the requirements of ISO 9001: 2000. This certification includes our design, manufacture, and service of computer products in all of our locations.

We have relationships with third-party original equipment manufacturers that build some of our products to our specifications. In addition, we are continuing to expand our use of original design manufacturing partnerships and manufacturing outsourcing relationships in order to generate cost efficiencies, deliver products faster, and better serve our customers in certain segments and geographical areas.

We purchase materials, supplies, product components, and products from a large number of vendors. In some cases, multiple sources of supply are not available and we have to rely on single-source vendors. In other cases, we may establish a working relationship with a single source or a limited number of sources if we believe it is advantageous due to performance, quality, support, delivery, capacity, or price considerations. This relationship and dependency has not caused material disruptions in the past, and we believe that any disruptions that may occur because of our dependency on single- or limited-source vendors would not disproportionately disadvantage us relative to our competitors. See “Part I — Item 1A — Risk Factors” for information about the risks associated with single- or limited-sourced suppliers.

Patents, Trademarks, and Licenses

As of February 1, 2008, we held a worldwide portfolio of 1,954 patents and had an additional 2,196 patent applications pending. We also hold licenses to use numerous third party patents. To replace expiring patents, we obtain new patents through our ongoing research and development activities. The inventions claimed in our patents and patent applications cover aspects of our current and possible future computer system products, manufacturing processes, and related technologies. Our product, business method, and manufacturing process patents may establish barriers to entry in many product lines. While we use our patented inventions and also license them to others, we are not substantially dependent on any single patent or group of related patents. We have entered into a variety of intellectual property licensing and cross-licensing agreements. We have also entered into various software licensing agreements with other companies. We anticipate that our worldwide patent portfolio will be of value in negotiating intellectual property rights with others in the industry.

We have obtained U.S. federal trademark registration for the DELL word mark and the Dell logo mark. We own registrations for 66 of our other marks in the U.S. At February 1, 2008, we had pending applications for registration of 47 other trademarks. We believe that establishment of the DELL word mark and logo mark in the U.S. is material to our operations. We have also applied for or obtained registration of the DELL mark and several other marks in approximately 184 other countries.

We have entered into a variety of intellectual property licensing and cross-licensing agreements. We have also entered into various software licensing agreements with a variety of other companies.

From time to time, other companies and individuals assert exclusive patent, copyright, trademark, or other intellectual property rights to technologies or marks that are important to the technology industry or our business. We evaluate each claim relating to our products and, if appropriate, seek a license to use the protected technology. The licensing agreements generally do not require the licensor to assist us in duplicating its patented technology, nor do these agreements protect us from trade secret, copyright, or other violations by us or our suppliers in developing or selling these products.

Employees

At the end of Fiscal 2008, we had approximately 88,200 total employees (consisting of 82,700 regular employees and 5,500 temporary employees), compared to approximately 91,500 total employees (consisting of 83,100 regular

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employees, 7,200 temporary employees, and 1,200 DFS employees) at the end of Fiscal 2007. In December 2007, we purchased CIT Group Inc.’s 30% interest in DFS. As such, the total of regular employees at February 1, 2008, includes DFS employees. Approximately 29,300 of the regular employees at the end of Fiscal 2008 were located in the U.S., and approximately 53,400 were located in other countries.

In the first quarter of Fiscal 2008, we initiated a comprehensive review of costs across all processes and organizations, from product development and procurement through service and support delivery, with the goal to simplify structure, eliminate redundancies, and better align operating expenses with the current business environment and strategic growth opportunities. As part of this overall effort, we expect to further reduce headcount, exclusive of additions due to acquisitions.

Government Regulation and Environment

Our business is subject to regulation by various federal and state governmental agencies. Such regulation includes the radio frequency emission regulatory activities of the U.S. Federal Communications Commission; the anti-trust regulatory activities of the U.S. Federal Trade Commission, the Department of Justice, and the European Union; the consumer protection laws of the Federal Trade Commission; the export regulatory activities of the U.S. Department of Commerce and the U.S. Department of Treasury; the import regulatory activities of U.S. Customs and Border Protection; the product safety regulatory activities of the U.S. Consumer Product Safety Commission; and environmental regulation by a variety of regulatory authorities in each of the areas in which we conduct business. We are also subject to regulation in other countries where we conduct business. We were not assessed any environmental fines, nor did we have any material environmental remediation or other environmental costs during Fiscal 2008.

Sustainability

Our focus on business efficiencies and customer satisfaction drives our environmental stewardship program in all areas of our business — reducing product energy consumption, reducing or eliminating materials for disposal, prolonging product life spans, and providing effective and convenient equipment recovery solutions. We are committed to becoming the “greenest technology company on the planet”, a long-term initiative we announced in June 2007. This multi-faceted campaign focuses on driving internal business innovations and efficiencies, enhancing customer satisfaction, and partnering with suppliers and people of all ages who care about the environment.

In Fiscal 2008, we announced our commitment to becoming carbon neutral in calendar year 2008. In partnership with The Conservation Fund and Carbonfund.org, we launched the “Plant a Tree for Me” program, which enables customers to offset the electricity required to power their computers. We also extended our commitment to design the most energy efficient products in our industry. Several of our workstations, desktops and laptops met Energy Star 4.0 ahead of a deadline set by the EPA. We are a founding partner of Green Grid, a global consortium dedicated to developing and promoting energy efficiency for data centers and information services.

We are committed to making recycling free and easy, and remain focused on raising consumer awareness about the importance of recycling and increasing the volume of products we recover from consumers. During Fiscal 2007, we voluntarily initiated a no-charge recycling program for our U.S. customers. This recycling offer is designed for consumers and includes responsible recycling of used Dell-branded computers and peripheral equipment at no-charge; this service does not require a replacement purchase. We also help commercial customers responsibly and securely manage the retirement of used information technology through our product recovery services. Since November 2003, we have offered a no-charge recycling program for Dell-branded products in Europe and also currently offer no-charge consumer recycling in Canada. Since 2004, we have offered U.S. consumers no-charge recycling of any brand of used computer or printer with the purchase of a new Dell computer or printer.

Backlog

We believe that backlog is not a meaningful indicator of net revenue that can be expected for any period. There can be no assurance that the backlog at any point in time will translate into net revenue in any subsequent period, as unfilled orders can generally be canceled at any time by the customer. Our business model generally gives us

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flexibility to manage backlog at any point in time by expediting shipping or prioritizing customer orders toward products that have shorter lead times, thereby reducing backlog and increasing current period revenue. Even though backlog at the end of Fiscal 2008 was considerably higher than at the end of Fiscal 2007 and 2006, it was not material.

Geographic Areas of Operations

We conduct operations worldwide, and we manage our business in three geographic regions: the Americas, EMEA, and APJ. The Americas region, which is based in Round Rock, Texas, covers the U.S., Canada, and Latin America. Within the Americas, our business is further segmented into Americas Business and U.S. Consumer. The Americas Business segment includes sales to corporate, government, healthcare, and education customers, while the U.S. Consumer segment includes sales primarily to individual consumers and selected retailers within the U.S. We have developed and started implementing a plan to combine the consumer business of both EMEA and APJ with the U.S. Consumer business and re-align our management and financial reporting structure. We will begin reporting worldwide Consumer once we complete the global consolidation of this business, which we expect to be the first quarter of Fiscal 2009. The changes have had no impact on our operating segment structure to date. This segment will include worldwide sales to individual consumers and select retailers.

The EMEA region, which is based in Bracknell, England, encompasses Europe, the Middle East, and Africa. The APJ region, based in Singapore, covers the Asian countries of the Pacific Rim as well as Australia, New Zealand, and India.

We have invested in high growth countries such as Brazil, Russia, India, and China to design, manufacture, and support our customers, and we expect to continue our global expansion in the years ahead. Our investment in international growth opportunities contributed to an increase in non-U.S. revenue, as a percentage of consolidated net revenue, from 44% in Fiscal 2007 to 47% during Fiscal 2008, representing 14% year-over-year growth. Our continued expansion outside of the U.S. creates additional complexity in coordinating the design, development, procurement, manufacturing, distribution, and support of our increasingly complex product and service offerings. As a result, we plan to continue to add additional resources to our offices in Singapore to better coordinate certain global activities, including the management of our original design manufacturers and utilization of non-U.S. Dell and supplier production capacity where most needed in light of product demand levels that vary by region. The expanded global operations in Singapore also coordinate product design and development efforts with procurement activities and sources of supply. We intend to continue to expand our global infrastructure as our international business continues to grow. For financial information about the results of our reportable operating segments for each of the last three fiscal years, see Note 11 of Notes to Consolidated Financial Statements included in “Part II — Item 8 — Financial Statements and Supplementary Data.”

Our corporate headquarters are located in Round Rock, Texas. Our manufacturing and distribution facilities are located in Austin, Texas; Winston-Salem, North Carolina; Lebanon and Nashville, Tennessee; Reno, Nevada; West Chester, Ohio; Miami, Florida; Limerick and Athlone, Ireland; Penang, Malaysia; Xiamen, China; Hortolândia, Brazil; Chennai, India; and Lodz, Poland. During Fiscal 2008, we opened business centers in Quezon City, Philippines and Kuala Lumpur, Malaysia. For additional information see “Part I — Item 2 — Properties.”

Trademarks and Service Marks

Unless otherwise noted, trademarks appearing in this report are trademarks owned by us. We disclaim proprietary interest in the marks and names of others. EMC is a registered trademark of EMC Corporation.

Available Information

We maintain an Internet website at www.dell.com. All of our reports filed with the Securities and Exchange Commission (“SEC”) (including annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and Section 16 filings) are accessible through the Investor Relations section of our website at www.dell.com/investor, free of charge, as soon as reasonably practicable after electronic filing. The public may read and copy any materials that we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Room 1580, Washington, DC 20549. You may obtain information on the operation of the Public Reference

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Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov. Information on our website is not incorporated by reference into this report.

Executive Officers of Dell

The following table sets forth the name, age, and position of each of the persons who were serving as our executive officers as of March 1, 2008:

Name	Age	Title
Michael S. Dell	43	Chairman of the Board and Chief Executive Officer
Donald J. Carty	61	Vice Chairman and Chief Financial Officer
Bradley R. Anderson	48	Senior Vice President, Business Product Group
Paul D. Bell	47	Senior Vice President and President, Americas
Michael R. Cannon	55	President, Global Operations
Jeffrey W. Clarke	45	Senior Vice President, Business Product Group
Andrew C. Esparza	49	Senior Vice President, Human Resources
Stephen J. Felice	50	Senior Vice President and President, Asia Pacific-Japan
Ronald G. Garriques	44	President, Global Consumer Group
Mark Jarvis	44	Senior Vice President, Chief Marketing Officer
David A. Marmonti	48	Senior Vice President and President, Europe, Middle East, and Africa
Stephen F. Schuckenbrock	47	Senior Vice President and President, Global Services and Chief Information Officer
Lawrence P. Tu	53	Senior Vice President, General Counsel and Secretary

Set forth below is biographical information about each of our executive officers.

•   Michael S. Dell — Mr. Dell currently serves as Chairman of the Board of Directors and Chief Executive Officer. He has held the title of Chairman of the Board since he founded the Company in 1984. Mr. Dell served as Chief Executive Officer of Dell from 1984 until July 2004 and resumed that role in January 2007. He serves on the Foundation Board of the World Economic Forum, serves on the executive committee of the International Business Council, and is a member of the U.S. Business Council. He also serves on the U.S. President’s Council of Advisors on Science and Technology and sits on the governing board of the Indian School of Business in Hyderabad, India.

•   Donald J. Carty — Mr. Carty joined us as Vice Chairman and Chief Financial Officer in January 2007. In that role, he is responsible for all finance functions, including controller, corporate planning, tax, treasury operations, investor relations, corporate development, risk management, and internal audit. Mr. Carty has served as a member of our Board of Directors since 1992 and continues to serve in that capacity. Mr. Carty was the Chairman and Chief Executive Officer of AMR Corporation and American Airlines from 1998 until his retirement in 2003. Prior to that, he served in a variety of executive positions with AMR Airline Group and American Airlines from 1978 to 1985 and from 1987 to 1999. Mr. Carty was President and Chief Executive Officer of CP Air in Canada from 1985 to 1987. After his retirement from AMR and American in 2003, Mr. Carty engaged in numerous business and private investment activities with a variety of companies. Mr. Carty is a graduate of Queen’s University in Kingston, Ontario and of the Harvard Graduate School of Business Administration. He is also a director of CHC Helicopter Corp. and Barrick Gold Corporation and serves as Chairman of the Board of Virgin America Airlines.

•   Bradley R. Anderson — Mr. Anderson joined us in July 2005 and serves as Senior Vice President, Business Product Group. In this role, he is responsible for worldwide engineering, design, development, and marketing of our enterprise products, including servers, networking, and storage systems. Prior to joining Dell, Mr. Anderson was Senior Vice President and General Manager of the Industry Standard Servers business at Hewlett-Packard Company (“HP”), where he was responsible for HP’s server solutions. Previously, he was Vice President of Server, Storage, and Infrastructure for HP, where he led the team responsible for server, storage, peripheral, and infrastructure products. Before joining HP in 1996, Mr. Anderson held top management positions at Cray Research in executive staff, field marketing, sales, finance, and corporate marketing. Mr. Anderson earned a

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bachelor of science in Petroleum Engineering from Texas A&M University and a Master of Business Administration from Harvard University. He serves on the Texas A&M Look College of Engineering Advisory Council.

•   Paul D. Bell — Mr. Bell has been with us since 1996 and has served as Senior Vice President and President, Americas since March 2007. In this role, Mr. Bell is responsible for all sales and customer support operations across the Americas region other than our consumer business. From February 2000 until March 2007, Mr. Bell served as Senior Vice President and President, Europe, Middle East, and Africa. Prior to this, Mr. Bell served as Senior Vice President, Home and Small Business. Prior to joining Dell in July 1996, Mr. Bell was a management consultant with Bain & Company for six years, including two years as a consultant on our account. Mr. Bell received bachelor’s degrees in Fine Arts and Business Administration from Pennsylvania State University and a Master of Business Administration degree from the Yale School of Organization and Management.

•   Michael R. Cannon — Mr. Cannon joined us in February 2007 as President, Global Operations. In this role, he is responsible for our manufacturing, procurement, supply chain, and facilities activities worldwide. Prior to joining Dell, Mr. Cannon was President, Chief Executive Officer, and a director of Solectron Corporation from January 2003 to February 2007, and President, Chief Executive Officer, and a director of Maxtor Corporation (now a part of Seagate Technology) from July 1996 to January 2003. Mr. Cannon has also worked at IBM’s Storage Systems Division. He began his career in engineering at The Boeing Company, where he held a management position with the Manufacturing Research and Development organization. Mr. Cannon studied mechanical engineering at Michigan State University and completed Harvard Business School’s Advanced Management Program. He currently serves on the board of Adobe Systems.

•   Jeffrey W. Clarke — Mr. Clarke has served as Senior Vice President, Business Product Group since January 2003. In this role, he is responsible for worldwide engineering, design, development, and marketing of our business client products, including Dell OptiPlex^tm desktops, Latitude^tm notebooks, Precision^tm workstations, and Vostro^tm desktops and notebooks. Mr. Clarke joined Dell in 1987 as a quality engineer and has served in a variety of engineering and management roles. In 1995 Mr. Clarke became the director of desktop development, and from November 2001 to January 2003 he served as Vice President and General Manager, Relationship Product Group. Mr. Clarke received a bachelor’s degree in Electrical Engineering from the University of Texas at San Antonio.

•   Andrew C. Esparza — Mr. Esparza joined us in 1997 as a director of Human Resources in the Product Group. He was named Senior Vice President, Human Resources in March 2007 and was named an executive officer in September 2007. In this role, he is responsible for driving the strategy and supporting initiatives to attract, motivate, develop, and retain world-class talent in support of our business goals and objectives. He also has responsibility for corporate security and corporate responsibility on a worldwide basis. He currently is an executive sponsor for aDellante, our internal networking group responsible for the development of Hispanic employees within the company. Prior to joining Dell, he held human resource positions with NCR Corporation from 1985 until 1997 and Bechtel Power Corporation from 1981 until 1985. Mr. Esparza earned a bachelor’s degree in business administration with a concentration in human resource management from San Diego State University.

•   Stephen J. Felice — Mr. Felice serves as Senior Vice President and President, Asia Pacific-Japan. He was named Senior Vice President in March 2007, after having served as Vice President, Asia Pacific-Japan since August 2005. Mr. Felice leads our operations throughout the APJ region, including sales and customer service centers in Penang, Malaysia, and Xiamen, China. Mr. Felice joined us in February 1999 and has held various executive roles in our sales and consulting services organizations. From February 2002 until July 2005, Mr. Felice was Vice President, Corporate Business Group, Dell Americas. Prior to joining Dell, Mr. Felice served as Chief Executive Officer and President of DecisionOne Corp. Mr. Felice also served as Vice President, Planning and Development, with Bell Atlantic Customer Services. He spent five years with Shell Oil in Houston. Mr. Felice holds a bachelor’s degree in business administration from the University of Iowa and a Master of Business Administration degree from the University of Houston.

•   Ronald G. Garriques — Mr. Garriques joined us in February 2007 as President, Global Consumer Group. In this role he is responsible for all aspects of our consumer business, including sales, marketing, and product design.

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Before joining Dell, Mr. Garriques served in various leadership roles at Motorola from February 2001 to February 2007, where he was most recently Executive Vice President and President, responsible for the Mobile Devices division. He was also Senior Vice President and General Manager of the Europe, Middle East, and Africa region for the Personal Communications Services division, and Senior Vice President and General Manager of Worldwide Products Line Management for the Personal Communications Services division. Prior to joining Motorola, Mr. Garriques held management positions at AT&T Network Systems, Lucent Technologies, and Philips Consumer Communications. Mr. Garriques holds a master’s degree in business administration from The Wharton School at the University of Pennsylvania, a master’s degree in mechanical engineering from Stanford University, and a bachelor’s degree in mechanical engineering from Boston University.

•   Mark Jarvis — Mr. Jarvis joined us in October 2007 as Senior Vice President, Chief Marketing Officer. He is responsible for our global marketing efforts, spanning the consumer and commercial businesses, and including global brand, online, and communications. From April 2007 until October 2007, Mr. Jarvis served as a consultant to Dell in the Chief Marketing Officer role. Prior to joining Dell, Mr. Jarvis spent 14 years at Oracle, where he launched numerous products and drove highly innovative marketing programs, including Oracle’s E-Business Network and Oracle Technology Network, and also managed Oracle’s showcase OpenWorld Conference.

•   David A. Marmonti — Mr. Marmonti serves as Senior Vice President and President, Europe, Middle East, and Africa, having been appointed to that position in March 2007. In this role, he is responsible for all business operations across the EMEA region, including sales and customer call centers in the region. Mr. Marmonti joined us in 1998 and has held a variety of roles, including Vice President and General Manager of our Public Business Group; Vice President and General Manager of our Mid-Markets and Preferred Corporate Accounts segments; Vice President and General Manager of our EMEA Home and Small Business division; Vice President of Marketing & e-business for the U.S. Consumer segment; and Director and General Manager of the U.S. Asset Recovery Business. Prior to joining Dell, Mr. Marmonti spent 16 years at AT&T in a variety of senior roles, including executive positions in sales and marketing, serving corporate customers. Mr. Marmonti holds a bachelor’s degree in business administration and marketing from the University of Missouri at St. Louis.

•   Stephen F. Schuckenbrock — Mr. Schuckenbrock joined us in January 2007 as Senior Vice President and President, Global Services. In September 2007, he assumed the additional role of Chief Information Officer. He is responsible for all aspects of our services business, with worldwide responsibility for Dell enterprise service offerings, and is also responsible for our global information systems and technology structure. Prior to joining us, Mr. Schuckenbrock served as Co-Chief Operating Officer and Executive Vice President of Global Sales and Services for Electronic Data Systems Corporation (“EDS”). Before joining EDS in 2003, he was Chief Operating Officer of The Feld Group, an information technology consulting organization. Mr. Schuckenbrock served as Global Chief Information Officer for PepsiCo from 1998 to 2000. Mr. Schuckenbrock earned a bachelor’s degree in business administration from Elon University.

•   Lawrence P. Tu — Mr. Tu joined us as Senior Vice President, General Counsel and Secretary in July 2004, and is responsible for overseeing Dell’s global legal department and governmental affairs. Before joining Dell, Mr. Tu served as Executive Vice President and General Counsel at NBC Universal for three years. Prior to his position at NBC, he was a partner with the law firm of O’Melveny & Myers LLP, where he focused on high technology, internet, and media related transactions. He also served five years as managing partner of the firm’s Hong Kong office. Mr. Tu’s prior experience also includes serving as General Counsel Asia-Pacific for Goldman Sachs, attorney for the U.S. State Department, and law clerk for U.S. Supreme Court Justice Thurgood Marshall. Mr. Tu holds Juris Doctor and bachelor of arts degrees from Harvard University, as well as a master’s degree from Oxford University, where he was a Rhodes Scholar.

ITEM 1A — RISK FACTORS

There are many risk factors that affect our business and results of operations, some of which are beyond our control. The following is a description of some of the important risk factors that may cause our actual results in future periods to differ substantially from those we currently expect or desire.

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•   Declining general economic, business, or industry conditions may cause reduced net revenue.  We are a global company with customers in virtually every business and industry. If the economic climate in the U.S. or abroad deteriorates, customers or potential customers could reduce or delay their technology investments, which could impact our ability to manage inventory levels, collect customer receivables, and ultimately decrease our net revenue and profitability.

•   Failure to reestablish a cost advantage may result in reduced market share, revenue, and profitability.  Our success has historically been based on our ability to profitably offer products at a lower price than our competitors. However, we compete with many companies globally in all aspects of our business. If our increasing reliance on third-party original equipment manufacturers, original design manufacturing partnerships, and manufacturing outsourcing relationships fails to generate cost efficiencies, our profitability could be adversely impacted. Our profitability is also affected by our ability to negotiate favorable pricing with our vendors, including vendor rebates, marketing funds, and other vendor funding. Because these supplier negotiations are continuous and reflect the ongoing competitive environment, the variability in timing and amount of incremental vendor discounts and rebates can affect our profitability. An inability to reestablish our cost advantage or determine alternative means to deliver value to our customers may adversely affect our market share, revenue, and profitability.

•   Our ability to generate substantial non-U.S. net revenue faces many additional risks and uncertainties.  Sales outside the U.S. accounted for approximately 47% of our consolidated net revenue in Fiscal 2008. Our future growth rates and success are dependent on continued growth outside the U.S., including the key developing countries of Brazil, Russia, India, and China (“BRIC”). Our international operations face many risks and uncertainties, including varied local economic and labor conditions, political instability, and unexpected changes in the regulatory environment, trade protection measures, tax laws (including U.S. taxes on foreign operations), copyright levies, and foreign currency exchange rates. Any of these factors could adversely affect our operations and profitability.

•   Our profitability may be affected by our product, customer, and geographic sales mix and by seasonal sales trends.  Our profit margins vary among products, customers, and geographies. In addition, our business is subject to certain seasonal sales trends. For example, sales to government customers (particularly the U.S. federal government) are typically stronger in our third fiscal quarter, sales in EMEA are often weaker in our third fiscal quarter, and consumer sales are typically strongest during our fourth fiscal quarter. As a result of these factors, our overall profitability for any particular period will be affected by the mix of products, customers, and geographies reflected in our sales for that period, as well as by seasonality trends.

•   Infrastructure failures and breaches in data security could harm our business.  We depend on our information technology and manufacturing infrastructure to achieve our business objectives. If a problem, such as a computer virus, intentional disruption by a third party, natural disaster, manufacturing failure, or telephone system failure impairs our infrastructure, we may be unable to book or process orders, manufacture, and ship in a timely manner, or otherwise carry on our business. An infrastructure disruption could damage our reputation and cause us to lose customers and revenue, result in the unintentional disclosure of company or customer information, and require us to incur significant expense to eliminate these problems and address related data security concerns. The harm to our business could be even greater if it occurs during a period of disproportionately heavy demand.

•   Our failure to effectively manage a product transition could reduce the demand for our products and the profitability of our operations.  Continuing improvements in technology mean frequent new product introductions, short product life cycles, and improvement in product performance characteristics. Product transitions present execution challenges and risks for any company. If we are unable to effectively manage a product transition, our business and results of operations could be unfavorably affected.

•   Disruptions in component or product availability could unfavorably affect our performance.  Our manufacturing and supply chain efficiencies give us the ability to operate with reduced levels of component and finished goods inventories. Our financial success is partly due to our supply chain management practices, including our ability to achieve rapid inventory turns. Because we maintain minimal levels of component and product

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inventories, a disruption in component or product availability, such as the current industry shortage of laptop batteries, could harm our financial performance and our ability to satisfy customer needs.

•   Our reliance on vendors creates risks and uncertainties.  Our manufacturing process requires a high volume of quality components from third-party suppliers. Defective parts received from these suppliers could reduce product reliability and harm the reputation of our products. Reliance on suppliers subjects us to possible industry shortages of components and reduced control over delivery schedules (which can harm our manufacturing efficiencies), as well as increases in component costs (which can harm our profitability).

•   We could experience manufacturing interruptions, delays, or inefficiencies if we are unable to timely and reliably procure components and products from single-source or limited-source suppliers.  We maintain several single-source or limited-source supplier relationships, either because multiple sources are not available or the relationship is advantageous due to performance, quality, support, delivery, capacity, or price considerations. If the supply of a critical single- or limited-source product or component is delayed or curtailed, we may not be able to ship the related product in desired quantities and in a timely manner. For example, the current industry shortage of notebook batteries could prevent us from meeting customer demand for notebooks. Even where multiple sources of supply are available, qualification of the alternative suppliers, and establishment of reliable supplies, could result in delays and a possible loss of sales, which could harm operating results.

•   Our business is increasingly dependent on our ability to access the capital markets.  We are increasingly dependent on access to debt and capital sources to provide financing for our customers and to obtain funds in the U.S. for general corporate purposes, including share repurchases and acquisitions. Additionally, we have customer financing relationships with companies whose business models rely on accessing the capital markets. The inability of these companies to access such markets could force us to self-fund transactions or forgo customer financing opportunities, potentially harming our financial performance. We believe that we will be able to obtain appropriate financing from third parties even in light of the current market conditions; nevertheless, changes in our credit ratings, deterioration in our business performance, or adverse changes in the economy could limit our ability to obtain financing from debt or capital sources or could adversely affect the terms on which we may be able to obtain any such financing, which could unfavorably affect our net revenue and profitability. See “Part II — Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity, Capital Commitments, and Contractual Cash Obligations — Liquidity.”

•   We face risks relating to our internal controls.  If management is not successful in maintaining a strong internal control environment, material weaknesses could reoccur, causing investors to lose confidence in our reported financial information. This could lead to a decline in our stock price, limit our ability to access the capital markets in the future, and require us to incur additional costs to improve our internal control systems and procedures.

•   Unfavorable results of legal proceedings could harm our business and result in substantial costs — We are involved in various claims, suits, investigations, and legal proceedings that arise from time to time in the ordinary course of our business and that are not yet resolved, including those that are set forth under Note 10 of Notes to Consolidated Financial Statements included in “Part II — Item 8 — Financial Statements and Supplementary Data,” and additional claims may arise in the future. Litigation is inherently unpredictable. Regardless of the merit of the claims, litigation may be both time-consuming and disruptive to our business. Therefore, we could incur judgments or enter into settlements of claims that could adversely affect our operating results or cash flows in a particular period. For example, we could be exposed to enforcement or other actions with respect to the continuing investigation into certain accounting and financial reporting matters being conducted by the SEC. In addition, if any infringement or other intellectual property claim made against us by any third party is successful, or if we fail to develop non-infringing technology or license the proprietary rights on commercially reasonable terms and conditions, our business, operating results, and financial condition could be materially and adversely affected.

•   The acquisition of other companies may present new risks.  We have begun to acquire companies as a part of our overall growth strategy. These acquisitions may involve significant new risks and uncertainties, including distraction of management attention away from our current business operations, insufficient new revenue to offset expenses, inadequate return of capital, integration challenges, new regulatory requirements, and issues not

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discovered in our due diligence process. No assurance can be given that such acquisitions will be successful and will not adversely affect our profitability or operations.

•   Failure to properly manage the distribution of our products and services may result in reduced revenue and profitability.  We use a variety of distribution methods to sell our products and services, including directly to customers and through select retailers and third-party value-added resellers. As we sell through an increasing number of indirect channels, inventory management becomes more challenging as successful demand forecasting becomes more difficult. Our inability to properly manage and balance inventory levels and potential conflicts among these various distribution methods could harm our operating results.

•   If our cost cutting measures are not successful, we may become less competitive.  A variety of factors could prevent us from achieving our goal of better aligning our product and service offerings and cost structure with customer needs in the current business environment through reducing our operating expenses; reducing total costs in procurement, product design, and transformation; simplifying our structure; and eliminating redundancies. For example, we may experience delays in the anticipated timing of activities related to our cost savings plans and higher than expected or unanticipated costs to implement them. As a result, we may not achieve our expected costs savings in the time anticipated, or at all. In such case, our results of operations and profitability may be negatively impaired, making us less competitive and potentially causing us to lose market share.

•   Failure to effectively hedge our exposure to fluctuations in foreign currency exchange rates and interest rates could unfavorably affect our performance.  We utilize derivative instruments to hedge our exposure to fluctuations in foreign currency exchange rates and interest rates. Some of these instruments and contracts may involve elements of market and credit risk in excess of the amounts recognized in our financial statements.

•   Our continued business success may depend on obtaining licenses to intellectual property developed by others on commercially reasonable and competitive terms.  If we or our suppliers are unable to obtain desirable technology licenses, we may be prevented from marketing products; could be forced to market products without desirable features; or could incur substantial costs to redesign products, defend legal actions, or pay damages. While our suppliers may be contractually obligated to indemnify us against such expenses, those suppliers could be unable to meet their obligations. In addition, our operating costs could increase because of copyright levies or similar fees by rights holders and collection agencies in European and other countries. For a description of potential claims related to copyright levies, see Note 10 of Notes to Consolidated Financial Statements included in “Part II — Item 8 — Financial Statements and Supplementary Data — Copyright Levies.”

•   Our success depends on our ability to attract, retain, and motivate our key employees.  We rely on key personnel to support anticipated continued rapid international growth and increasingly complex product and service offerings. There can be no assurance that we will be able to attract, retain, and motivate the key professional, technical, marketing, and staff resources we need.

•   Loss of government contracts could harm our business.  Government contracts are subject to future funding that may affect the extension or termination of programs and are subject to the right of the government to terminate for convenience or non-appropriation. In addition, if we violate legal or regulatory requirements, the government could suspend or disbar us as a contractor, which would unfavorably affect our net revenue and profitability.

•   The expiration of tax holidays or favorable tax rate structures could result in an increase of our effective tax rate in the future.  Portions of our operations are subject to a reduced tax rate or are free of tax under various tax holidays that expire in whole or in part during Fiscal 2010 through Fiscal 2021. Many of these holidays may be extended when certain conditions are met. If they are not extended, then our effective tax rate would increase in the future. See Note 3 of Notes to Consolidated Financial Statements included in “Part II — Item 8 — Financial Statements and Supplementary Data.”

•   Current environmental laws, or laws enacted in the future, may harm our business.  Our operations are subject to environmental regulation in all of the areas in which we conduct business. Our product design and procurement operations must comply with new and future requirements relating to the materials composition, energy efficiency and collection, recycling, treatment, and disposal of our electronics products, including restrictions on lead, cadmium, and other substances. If we fail to comply with the rules and regulations regarding

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the use and sale of such regulated substances, we could be subject to liability. While we do not expect that the impact of these environmental laws and other similar legislation adopted in the U.S. and other countries will have a substantial unfavorable impact on our business, the costs and timing of costs under environmental laws are difficult to predict.

•   Armed hostilities, terrorism, natural disasters, or public health issues could harm our business.  Armed hostilities, terrorism, natural disasters, or public health issues, whether in the U.S. or abroad, could cause damage or disruption to us, our suppliers or customers, or could create political or economic instability, any of which could harm our business. These events could cause a decrease in demand for our products, could make it difficult or impossible for us to deliver products or for our suppliers to deliver components, and could create delays and inefficiencies in our supply chain.

ITEM 1B — UNRESOLVED STAFF COMMENTS

Not Applicable.

ITEM 2 — PROPERTIES

At February 1, 2008, we owned or leased a total of approximately 17.9 million square feet of office, manufacturing, and warehouse space worldwide, approximately 8.2 million square feet of which is located in the U.S. and the remainder of which is located in other countries. We believe our existing properties are suitable and adequate for our current needs and that we can readily meet our requirements for additional space at competitive rates by extending expiring leases or by finding alternative space.

Our principal executive offices, including global headquarters, are located at One Dell Way, Round Rock, Texas, United States of America. The locations of our headquarters of geographic operations at February 1, 2008 were as follows:

Americas	Europe, Middle East, Africa	Asia Pacific, including Japan
Round Rock, Texas	Bracknell, England	Singapore

Americas Properties

		Owned	Leased
Description	Principal Locations	(square feet)	(square feet)
Headquarters	•   Round Rock, Texas	2.1 million	—
Business Centers(a)	•   Canada – Edmonton and Ottawa •   El Salvador – San Salvador •   Oklahoma – Oklahoma City •   Panama – Panama City •   Tennessee – Nashville •   Texas – Austin and Round Rock	1.1 million	1.9 million
Manufacturing and Distribution	•   Brazil – Hortolândia •   Florida – Miami (Alienware) •   North Carolina – Winston-Salem •   Ohio – West Chester •   Tennessee – Lebanon and Nashville •   Texas – Austin	2.9 million	700,000
Design Centers	•   Texas – Austin and Round Rock	700,000	100,000

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EMEA Properties

		Owned	Leased
Description	Principal Locations	(square feet)	(square feet)
Headquarters	•   Bracknell, England	100,000	100,000
Business Centers(a)	•   Germany – Halle •   France – Montpellier •   Ireland – Dublin and Limerick •   Morocco – Casablanca •   Slovakia – Bratislava	400,000	1.5 million
Manufacturing and Distribution	•   Ireland – Limerick and Athlone (Alienware) •   Poland – Lodz	1.0 million	—

APJ Properties

		Owned	Leased
Description	Principal Locations	(square feet)	(square feet)
Headquarters	•   Singapore	—	50,000
Business Centers(a)	•   China – Dalian and Xiamen •   India – Bangalore, Gurgaon, Hyderabad, and Mohali •   Japan – Kawasaki •   Malaysia – Penang and Kuala Lumpur •   Philippines – Metro Manila	300,000	3.2 million
Manufacturing and Distribution	•   China – Xiamen •   Malaysia – Penang •   India – Chennai	1.1 million	150,000
Design Centers	•   China – Shanghai •   India – Bangalore •   Singapore •   Taiwan – Taipei	—	500,000

(a) Business center locations include facilities with capacity greater than 1,000 people. Operations within these centers include sales, technical support, administrative, and support functions. Locations of smaller business centers are not listed; however, the smaller centers are included in the square footage.

In general, our Americas, EMEA, and APJ regions use properties within their geographies. However, business centers in the Philippines and India, which house sales, customer care, technical support, and administrative support functions, are used by each of our geographic regions. During Fiscal 2008, Dell opened manufacturing plants in Hortolândia, Brazil; Chennai, India; and Lodz, Poland. In addition, business centers were opened in Quezon City, Philippines and Kuala Lumpur, Malaysia. Manufacturing operations in El Dorado Do Sul, Brazil were relocated to the new plant in Hortolândia; however, the site continues in use as a business center. Business centers in McGregor, Texas and Roseburg, Oregon were closed during Fiscal 2008. Plans to open a second business center in Ottawa, Canada have been abandoned and our business center in Edmonton, Canada will be closed in early Fiscal 2009. At the end of Fiscal 2008 there were no major construction projects underway.

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ITEM 3 — LEGAL PROCEEDINGS

The information required by this item is set forth under Note 10 of Notes to Consolidated Financial Statements included in “Part II — Item 8 — Financial Statements and Supplementary Data”, and is incorporated herein by reference.

ITEM 4 — SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Information regarding our annual meeting of stockholders held on December 4, 2007, was set forth under Item — 4 in our Quarterly Report on Form 10-Q for the fiscal period ended November 2, 2007, and is incorporated herein by reference.

PART II

ITEM 5 — MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our common stock is listed on The NASDAQ Stock Market under the symbol DELL. Information regarding the market prices of our common stock may be found in Note 13 of Notes to Consolidated Financial Statements included in “Part II — Item 8 — Financial Statements and Supplementary Data.”

Holders

At March 14, 2008, there were 30,117 holders of record of Dell common stock.

Dividends

We have never declared or paid any cash dividends on shares of our common stock and currently do not anticipate paying any cash dividends in the immediate future. Any future determination to pay cash dividends will be at the discretion of our Board of Directors.

Issuance of Unregistered Securities

As a result of our inability to timely file our Annual Report on Form 10-K for Fiscal 2007, we suspended our sale of Dell securities under our various employee benefit plans. In preparing for that suspension, we discovered that we had inadvertently failed to file with the SEC certain registration statements relating to securities under certain of those plans, as described below.

•   Employee Stock Purchase Plan — Until February 2008, we maintained an Employee Stock Purchase Plan (the “ESPP”) that was available to substantially all of our employees worldwide. In 1994, stockholders approved additional shares for issuance under the ESPP, and we discovered that the issuance of these additional shares was never registered. Consequently, we have inadvertently issued approximately 54 million unregistered shares under this plan since 1996.

•   Retirement Plans — We maintain a 401(k) retirement savings plan that is available to substantially all of our U.S. employees and a separate retirement plan that is available to our employees in Canada. Both of those plans contain a “Dell Stock Fund”, and both plans allow participants to allocate some or all of their account balances to interests in the Dell Stock Fund. The Dell common stock held in the Dell Stock Funds is not purchased from Dell; rather, the plan trustees accumulate the plan contributions that are directed to the Dell Stock Funds and purchase for the Dell Stock Funds shares of Dell common stock in open market transactions. Nevertheless, because we sponsor the plans, we may have been required to register certain transactions in the plans related to shares of Dell common stock. We discovered that we may be deemed to have been required to file a Form S-8 in July 2003 to register additional share transactions in the 401(k) plan and a Form S-8 to register share transactions in the Canada retirement plan in 1999. Consequently, we may have inadvertently failed to register transactions in the two plans relating to up to approximately 37 million shares.

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In December 2007, we filed a registration statement on Form S-8 to register future transactions in the U.S. 401(k) plan and began allowing participants in that plan to allocate some or all of their account balances to interests in the related Dell Stock Fund. The Dell Stock Fund within the Canada retirement plan remains suspended, and we are currently evaluating whether to continue to offer the Dell Stock Fund in that plan. If we do, we will file a registration statement on Form S-8 to register future transactions in that plan as soon as practicable. We have implemented monitoring and reporting procedures to ensure that in the future we timely meet our registration obligations with respect to these and other employee benefit plans.

The failure to file the registration statements noted above was inadvertent, and we have always treated the shares issued under the ESPP or held in the Dell Stock Funds under the retirement plans as outstanding for financial reporting purposes. Consequently, these unregistered transactions do not represent any additional dilution. We believe that we have always provided the employee-participants in these plans with the same information they would have received had the registration statements been filed. Nonetheless, we may be subject to civil and other penalties by regulatory authorities as a result of the failure to register.

Certain purchasers of shares in the unregistered transactions may have the right to rescind their purchases for an amount equal to the purchase price for the shares (or if the shares have been disposed of, to receive damages with respect to any loss on such disposition) plus interest from the date of purchase. The outstanding shares subject to potential rescission rights (representing 4 million shares outstanding as of February 1, 2008) are reflected as redeemable common stock on our Consolidated Statements of Financial Position. See Note 4 of Notes to Consolidated Financial Statements included in “Part II — Item 8 — Financial Statements and Supplementary Data” for additional information.

Purchases of Common Stock

Share Repurchase Program

We have a share repurchase program that authorizes us to purchase shares of common stock in order to increase shareholder value and manage dilution resulting from shares issued under our equity compensation plans. However, we do not currently have a policy that requires the repurchase of common stock in conjunction with share-based payment arrangements. On December 3, 2007, our Board of Directors approved a new authorization for an additional $10.0 billion for share repurchases. The following table sets forth information regarding our repurchases or acquisitions of common stock during the fourth quarter of Fiscal 2008:

					Total		Approximate
					Number of		Dollar Value
					Shares		of Shares that
					Repurchased		May Yet Be
					as Part of		Repurchased
	Total Number		Average		Publicly		Under the
	of Shares		Price Paid		Announced		Announced
Period	Repurchased		per Share		Plans		Plans(a)
	(in thousands, except average price paid per share)
Repurchases from November 3, 2007 through November 30, 2007		33	$	26.85		—	$	1,415,438
Repurchases from December 1, 2007 through December 28, 2007		60,390	$	24.40		60,352	$	9,942,709
Repurchases from December 29, 2007 through February 1, 2008		118,224	$	21.39		118,166	$	7,415,634
Total		178,647	$	22.41		178,518

(a) On December 3, 2007, our Board of Directors approved a new authorization for an additional $10.0 billion for share repurchases.

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Stock Performance Graph

The following graph compares the cumulative total return on Dell’s common stock during the last five fiscal years with the S&P 500 Index and the Dow Jones Computer 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 Dell common stock or the indices on February 1, 2003, and assumes the reinvestment of all dividends. The graph depicts the change in the value of common stock relative to the indices at 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.

	End of Fiscal Year
	2003		2004		2005		2006		2007		2008
Dell Inc.	$	100	$	140	$	172	$	123	$	99	$	85
S&P 500 Index		100		135		143		158		181		177
Dow Jones US Computer Hardware Index		100		139		150		171		196		204

ITEM 6 — SELECTED FINANCIAL DATA

The following selected financial data should be read in conjunction with “Part II — Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Part II — Item 8 — Financial Statements and Supplementary Data.”

The Audit Committee of our Board of Directors completed an independent investigation into certain accounting and financial reporting matters during Fiscal 2008. As a result of issues identified during the investigation, and during additional reviews and procedures conducted by management, the Audit Committee, in consultation with management and PricewaterhouseCoopers LLP, our independent registered public accounting firm, concluded on August 13, 2007 that our previously issued financial statements for Fiscal 2003, 2004, 2005, and 2006 (including the interim periods within those years), and the first quarter of Fiscal 2007, should no longer be relied upon because of certain accounting errors and irregularities in those financial statements. Accordingly, we restated our previously issued financial statements for those periods. Restated financial information is presented in our Annual Report on Form 10-K for Fiscal 2007 and is reflected in this report. That document also contains a discussion of the investigation, the accounting errors and irregularities identified, and the adjustments made as a result of the restatement.

The following balance sheet data as of February 1, 2008, February 2, 2007, and February 3, 2006, and results of operations for Fiscal 2008, 2007, 2006, and 2005 are derived from our audited financial statements included in

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“Part II — Item 8 — Financial Statements and Supplementary Data” and from our previously filed Annual Report on Form 10-K for Fiscal 2007. The data for the remaining periods are derived from our unaudited financial statements for the respective periods.

	Fiscal Year Ended
			February 2,		February 3,		January 28,		January 30,
	February 1, 2008(c)		2007(c)		2006(a)		2005(b)		2004
									unaudited
	(in millions, except per share data)
Results of Operations:
Net revenue	$	61,133	$	57,420	$	55,788	$	49,121	$	41,327
Gross margin	$	11,671	$	9,516	$	9,891	$	9,018	$	7,563
Operating income	$	3,440	$	3,070	$	4,382	$	4,206	$	3,525
Income before income taxes	$	3,827	$	3,345	$	4,608	$	4,403	$	3,711
Net income	$	2,947	$	2,583	$	3,602	$	3,018	$	2,625
Earnings per common share:
Basic	$	1.33	$	1.15	$	1.50	$	1.20	$	1.02
Diluted	$	1.31	$	1.14	$	1.47	$	1.18	$	1.00
Number of weighted-average shares outstanding:
Basic		2,223		2,255		2,403		2,509		2,565
Diluted		2,247		2,271		2,449		2,568		2,619
Cash Flow & Balance Sheet Data:
Net cash provided by operating activities	$	3,949	$	3,969	$	4,751	$	5,821	$	4,064
Cash, cash equivalents and investments	$	9,532	$	12,445	$	11,756	$	14,101	$	11,921
Total assets	$	27,561	$	25,635	$	23,252	$	23,318	$	19,340
Short-term borrowings	$	225	$	188	$	65	$	74	$	157
Long-term debt	$	362	$	569	$	625	$	662	$	645
Total stockholders’ equity	$	3,735	$	4,328	$	4,047	$	6,412	$	6,238

(a)	Results for Fiscal 2006 include charges aggregating $421 million ($338 million of other product charges and $83 million in selling, general and administrative expenses) related to the cost of servicing or replacing certain OptiPlextm systems that included a vendor part that failed to perform to our specifications, workforce realignment, product rationalizations, excess facilities, and a write-off of goodwill recognized in the third quarter. The related tax effect of these items was $96 million. Fiscal 2006 also includes an $85 million income tax benefit related to a revised estimate of taxes on the repatriation of earnings under the American Jobs Creation Act of 2004 recognized in the second quarter.
(b)	Results for Fiscal 2005 include an income tax charge of $280 million related to the repatriation of earnings under the American Jobs Creation Act of 2004 recorded in the fourth quarter.
(c)	Results for Fiscal 2008 and Fiscal 2007 include stock-based compensation expense pursuant to Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment (“SFAS 123(R)”). See Note 5 of Notes to Consolidated Financial Statements included in “Part II — Item 8 — Financial Statements and Supplementary Data.”

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ITEM 7 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

SPECIAL NOTE:  This section, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements that are based on our current expectations. Actual results in future periods may differ materially from those expressed or implied by those forward-looking statements because of a number of risks and uncertainties. For a discussion of risk factors affecting our business and prospects, see “Part I — Item 1A  — Risk Factors.” This section should be read in conjunction with “Part II — Item 8 — Financial Statements and Supplementary Data.”

Overview

Our Company

As a leading technology company, we offer a broad range of product categories, including desktop PCs, servers and networking products, storage, mobility products, software and peripherals, and services. We are the number one supplier of personal computer systems in the United States, and the number two supplier worldwide.

We manufacture many of the products we sell and have manufacturing locations worldwide to service our global customer base. We believe that our manufacturing processes and supply-chain management techniques provide us a competitive advantage. We have relationships with third-party original equipment manufacturers that build some of our products to our specifications. In addition, we are continuing to expand our use of original design manufacturing relationships and manufacturing outsourcing relationships in order to generate cost efficiencies, deliver products faster and better serve our customers in certain segments and geographies.

Our core business strategy is built around our direct customer model, relevant technologies and solutions, and highly efficient manufacturing and logistics; and we are expanding that core strategy by adding new distribution channels to reach even more commercial customers and individual consumers around the world. Using this strategy, we strive to provide the best possible customer experience by offering superior value; high-quality, relevant technology; customized systems and services; superior service and support; and differentiated products and services that are easy to buy and use. Historically, our growth has been driven organically from our core businesses. Recently, we have begun to pursue a targeted acquisition strategy designed to augment select areas of our business with more products, services, and technology that our customers value.

We also offer various financing alternatives, asset management services, and other customer financial services for business and consumer customers. To reach even more customers globally we have launched new distribution channels to reach commercial customers and individual consumers around the world; we sell products indirectly through third-party solution providers, systems integrators, and third-party value-added resellers. In Fiscal 2008, we announced PartnerDirect, a global program that brings our existing partner initiatives under one umbrella in the U.S. PartnerDirect includes partner training and certification, deal registration, dedicated sales and customer care, and a dedicated web portal. We intend to expand the program globally.

We sell our products and services directly to customers and through a variety of indirect sales channels. Continuing our strategy and efforts of better meeting customers’ needs and demands, we began offering select products in retail stores in several countries in the Americas, EMEA, and APJ during Fiscal 2008. These actions represent the first steps in our retail strategy, which will allow us to extend our business model to reach customers that we have not been able to reach directly.

We have always strived to simplify and lower costs for our customers while expanding our business opportunities. To continue to meet this goal, sustain our business strategy, and improve our business, we are focused on improving our current state and reigniting growth. We believe these actions will help position us for sustainable long-term profitable growth.

•   Improving our current state — We are focused on eliminating bureaucracy and improving competitiveness by enhancing our productivity and becoming more efficient while strengthening our operating processes and internal controls. Our new and experienced executive leadership team is working together to increase productivity and efficiency across all functions. We are focused on improving product innovation by

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shortening our product development cycle time and examining our supply chain models. Lastly, we are examining our pricing and margin strategies to improve our profitability.

•   Reigniting growth — We are enabling our growth strategy by focusing on five key areas:

–   Global Consumer — In Fiscal 2009, our consumer segment will expand beyond the U.S. to include worldwide sales to individual consumers and select retailers as a part of an internal consolidation of our consumer business. The consolidation will improve our global sales execution and coverage through better customer alignment, targeted sales force investments in rapidly growing countries, and improved marketing tools. We are also designing new, innovative products with faster development cycles and competitive features. Lastly, we have rapidly expanded our retail business in order to reach more consumers.

–   Enterprise — We are focused on simplifying IT for our customers to allow customers to deploy IT faster, run IT at a total lower cost, and grow IT smarter. As a result of our “simplify IT” focus, we have become the industry leader in server virtualization, power, and cooling performance.

–   Notebooks — Our goal is to reclaim notebook leadership by creating the best products while shortening our development cycle and being the most innovative developer of notebooks. To help meet this goal, we have recently separated our consumer and commercial design functions and launched several notebook products. We expect to launch more notebook products in Fiscal 2009.

–   Small and Medium Business — We are focused on providing small and medium businesses the simplest and most complete IT solution by extending our channel direct program (PartnerDirect) and expanding our offerings to mid-sized businesses. We are committed to improving our storage products and services as evidenced by our new Building IT-as-a-Service solution, which provides businesses with remote and lifecycle management, e-mail backup, and software license management.

–   Emerging countries — As a part of our growth strategy, we are focusing on and investing resources in emerging countries — with an emphasis on Brazil, Russia, India, and China. We are also creating custom products and services to meet the preferences and demands of individual countries and various regions.

We continue to grow our business organically and through strategic acquisitions. During Fiscal 2008, we acquired five companies, among which the two largest were EqualLogic, Inc. (“EqualLogic”) and ASAP Software Express, Inc. (“ASAP”), and we purchased CIT Group Inc.’s (“CIT”) 30% interest in Dell Financial Services, L.P. (“DFS”). We expect to continue to periodically make strategic acquisitions in the future.

Fiscal 2008 Performance

Share position

•  We shipped 40 million units for calendar year 2007 according to IDC, resulting in a worldwide PC share position of 14.9%. After leading the worldwide PC market for the past six years, we fell to the second position for calendar year 2007. We lost share, both in the U.S. and internationally, as our growth did not meet the overall PC growth. Our U.S. Consumer segment continued to underperform, which slowed our overall growth in unit shipments, revenue, and profitability. This was mainly due to intense competitive pressure, particularly in the lower priced desktops and notebooks where competitors offered aggressively priced products with better product recognition and more relevant feature sets. A slight decline in our worldwide desktop shipments also was a factor in our losing worldwide PC share position; worldwide desktop shipments grew 5% during calendar year 2007.

Net revenue

•  Fiscal 2008 net revenue increased 6% year-over-year to $61.1 billion, with unit shipments up 5% year-over-year, as compared to Fiscal 2007 net revenue which increased 3% year-over-year to $57.4 billion on unit growth of 2% over Fiscal 2006 net revenue of $55.8 billion.

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Operating income	•  Operating income was $3.4 billion for Fiscal 2008, or 5.6% of net revenue compared to $3.1 billion for Fiscal 2007, or 5.4% of net revenue, and $4.4 billion or 7.9% of net revenue in Fiscal 2006.
Net income	•  Net income was $2.9 billion for Fiscal 2008, or 4.8% of net revenue compared to $2.6 billion for Fiscal 2007, or 4.5% of net revenue, and $3.6 billion or 6.5% of net revenue in Fiscal 2006.
Earnings per share	•  Earnings per share increased 15% to $1.31 for Fiscal 2008, compared to $1.14 for Fiscal 2007 and $1.47 for Fiscal 2006.

Results of Operations

The following table summarizes our consolidated results of operations for each of the past three fiscal years:

	Fiscal Year Ended
	February 1, 2008(a)				February 2, 2007(a)				February 3, 2006(b)
	Dollars		% of Revenue		Dollars		% of Revenue		Dollars		% of Revenue
	(in millions, except per share amounts and percentages)
Net revenue	$	61,133		100.0%	$	57,420		100.0%	$	55,788		100.0%
Gross margin	$	11,671		19.1%	$	9,516		16.6%	$	9,891		17.7%
Operating expenses	$	8,231		13.5%	$	6,446		11.2%	$	5,509		9.8%
Operating income	$	3,440		5.6%	$	3,070		5.4%	$	4,382		7.9%
Income tax provision	$	880		1.4%	$	762		1.3%	$	1,006		1.8%
Net income	$	2,947		4.8%	$	2,583		4.5%	$	3,602		6.5%
Earnings per share — diluted	$	1.31		N/A	$	1.14		N/A	$	1.47		N/A

(a)

Results for Fiscal 2008 include stock-based compensation expense of $436 million, or $309 million ($0.14 per share) net of tax, and results for Fiscal 2007 include stock-based compensation expense of $368 million, or $258 million ($0.11 per share) net of tax, due to the implementation of Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment, (“SFAS 123(R)”). We implemented SFAS 123(R) using the modified prospective method effective February 4, 2006. For additional information, see Note 5 of Notes to Consolidated Financial Statements included in “Part II — Item 8 — Financial Statements and Supplementary Data”.

(b)

Results for Fiscal 2006 include charges aggregating $421 million ($338 million of other product charges and $83 million in selling, general, and administrative expenses) related to the cost of servicing or replacing certain OptiPlextm systems that include a vendor part that failed to perform to our specifications, workforce realignment, product rationalizations, excess facilities, and a write-off of goodwill recognized in the third quarter. The related tax effect of these items was $96 million. Fiscal 2006 also includes an $85 million income tax benefit related to a revised estimate of taxes on the repatriation of earnings under the American Jobs Creation Act of 2004 recognized in the second quarter.

Consolidated Operations

Fiscal 2008 revenue increased 6% year-over-year to $61.1 billion, with unit shipments up 5% year-over-year. Revenue grew across all regions: Asia Pacific-Japan (“APJ”) grew 15%; Europe, Middle East, and Africa (“EMEA”) increased 12%; and the Americas grew 3%. Revenue outside the U.S. represented approximately 47% of Fiscal 2008 net revenue, compared to approximately 44% in the prior year. Outside the U.S., we produced 14% year-over-year revenue growth for Fiscal 2008; however, our unit growth was below the overall unit growth rate of the international PC market. During Fiscal 2008, the U.S. dollar weakened relative to the other principal currencies in which we transact business; however, as a result of our hedging activities, foreign currency fluctuations did not have a significant impact on our consolidated results of operations. Combined Brazil, Russia, India, and China (“BRIC”) revenue growth during Fiscal 2008 was 27%. To continue to capitalize on and increase international growth, we are tailoring solutions to meet specific regional needs, enhancing relationships to provide customer choice and flexibility, and expanding into these and other emerging countries that represent 85% of the world’s population. Within the Americas, Americas Business revenue grew by 6% and U.S. Consumer revenue declined by 12% during Fiscal 2008. Worldwide, all product categories grew revenue over the prior year other than desktop PCs, which declined 1% as consumers continue to migrate to mobility products. Desktop PC revenue in the Americas and EMEA regions declined 4% and 3% year-over-year, respectively, as opposed to desktop PC revenue in APJ, which increased 12%.

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Fiscal 2007 revenue increased 3% year-over-year to $57.4 billion, with unit shipments up 2% year-over-year. Revenue grew across the EMEA and APJ regions by 6% and 12%, respectively, while the Americas region revenue remained flat year-over-year. Revenue outside the U.S. represented approximately 44% of Fiscal 2007 net revenue, compared to approximately 41% in the prior year. Outside the U.S., we produced 10% year-over-year revenue growth for Fiscal 2007. During Fiscal 2007, Americas Business revenue grew by 3% and U.S. Consumer revenue declined by 11%. All product categories grew revenue over the prior year periods, other than desktop PCs. Desktop PC revenue in the Americas and EMEA regions declined 12% and 6% year-over-year, respectively. We believe that this decline in desktop PC revenue reflected an industry-wide shift to mobility products. Our growth underperformed the industry’s growth in Fiscal 2007, particularly in our U.S. Consumer segment, as we were out of product feature set and price position.

Operating income and net income increased 12% and 14% year-over-year to $3.4 billion and $2.9 billion, respectively, for Fiscal 2008. The increased profitability was mainly a result of strength in mobility, solid demand for enterprise products, and a favorable component-cost environment. In Fiscal 2007 and Fiscal 2006, operating and net income were $3.1 billion and $2.6 billion, and $4.4 billion and $3.6 billion, respectively. Net income for Fiscal 2006 includes an income tax repatriation benefit of $85 million pursuant to a favorable tax incentive provided by the American Jobs Creation Act of 2004. This tax benefit is related to the Fiscal 2006 repatriation of $4.1 billion in foreign earnings.

Our average selling price (total revenue per unit sold) in Fiscal 2008 increased 2% year-over-year, which primarily resulted from our pricing strategy, compared to a 1% year-over-year increase for Fiscal 2007. Our recent pricing strategy has been to concentrate on solutions sales, realign pricing, and drive a better mix of products and services, while aggressively pricing our products to remain competitive in the marketplace. In Fiscal 2008, we continued to see intense competitive pressure, particularly for lower priced desktops and notebooks, as competitors offered aggressively priced products with better product recognition and more relevant feature sets. As a result, particularly in the U.S., we lost share in the U.S. consumer segment in notebooks and desktops, which slowed our overall growth in unit shipments, revenue, and profitability. We expect that this competitive pricing environment will continue for the foreseeable future.

Revenues by Segment

We conduct operations worldwide and manage our business in three geographic regions: the Americas, EMEA, and APJ. The Americas region covers the U.S., Canada, and Latin America. Within the Americas, we are further segmented into Business and U.S. Consumer. The Americas Business (“Business”) segment includes sales to corporate, government, healthcare, small and medium business, and education customers, while the U.S. Consumer segment includes sales primarily to individual consumers and selected retailers within the U.S. We have developed and started implementing a plan to combine the consumer business of both EMEA and APJ with the U.S. Consumer business and re-align our management and financial reporting structure. We will begin reporting worldwide Consumer once we complete the global consolidation of this business, which we expect to be the first quarter of Fiscal 2009. The changes have had no impact on our operating segment structure to date. The EMEA region covers Europe, the Middle East, and Africa. The APJ region covers the Asian countries of the Pacific Rim as well as Australia, New Zealand, and India.

During the second half of Fiscal 2008, we began selling desktop and notebook computers, printers, ink, and toner through retail channels in the Americas, EMEA, and APJ in order to expand our customer base. Our goal is to have strategic relationships with a number of major retailers in our larger geographic regions. In the U.S., we currently have relationships with retailers such as Staples, Wal-Mart, and Best Buy; and in Latin America, we have relationships with retailers, including Wal-Mart and Pontofrio. Additionally, some of our relationships include Carphone Warehouse, Carrefour, Tesco, and DSGi in EMEA; and in APJ, we are working with retailers such as Gome, HiMart, Courts, and Bic Camera.

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The following table summarizes our net revenue by reportable segment for each of the past three fiscal years:

	Fiscal Year Ended
	February 1, 2008				February 2, 2007				February 3, 2006
			% of				% of				% of
	Dollars		Revenue		Dollars		Revenue		Dollars		Revenue
	(in millions, except percentages)
Net revenue
Americas:
Business	$	31,144		50.9%	$	29,311		51.1%	$	28,365		50.8%
U.S. Consumer		6,224		10.2%		7,069		12.3%		7,960		14.3%
Americas		37,368		61.1%		36,380		63.4%		36,325		65.1%
EMEA		15,267		25.0%		13,682		23.8%		12,887		23.1%
APJ		8,498		13.9%		7,358		12.8%		6,576		11.8%
Net revenue	$	61,133		100.0%	$	57,420		100.0%	$	55,788		100.0%

•   Americas — Americas Business represented the majority of our absolute dollar revenue growth in both Fiscal 2008 and Fiscal 2007. During Fiscal 2008, Americas revenues increased 3% year-over-year representing 61.1% of our total net sales as compared to 63.4% in Fiscal 2007. Revenue from sales of software and peripherals and mobility products led the region’s growth during Fiscal 2008. The overall increase in net sales was partially offset by a decline in net sales of desktops. Revenue from the sale of mobility products led the region’s growth and grew by single digits in both Americas Business and U.S. Consumer in Fiscal 2007. However, this growth was also offset by the continuing trend of declines in desktop PC sales as wireless capabilities, falling prices, and a growing need for mobility have increased the preference and demand for notebooks.

–   Business — Americas Business grew revenue as well as units by 6% in Fiscal 2008, compared to 3% revenue growth on flat unit growth in Fiscal 2007. The increase in revenue in Fiscal 2008 resulted primarily from the sale of mobility products, which grew 11% in Fiscal 2008 compared to Fiscal 2007. The unit volume increases resulted from strong growth in laptops. Americas International, which includes countries in North America and Latin America other than the U.S., drove the majority of the increase in revenue in the Americas in both years. Americas International produced revenue growth of 17% year-over-year for Fiscal 2008 as compared to 19% revenue growth year-over-year in Fiscal 2007. In Fiscal 2007, the slow down of net revenue growth was due to desktop weakness, lower demand, and a significant decline in our Public business.

–  U.S. Consumer — U.S. Consumer revenue and unit volume decreased 12% and 20%, respectively, in Fiscal 2008, compared to revenue and unit decreases of 11% and 14%, respectively, in Fiscal 2007. U.S. Consumer revenue declined as compared to Fiscal 2007 primarily due to a 19% and 29% decline in desktop revenue and unit volume, respectively. In Fiscal 2008, this segment’s average selling price increased 10% year-over-year compared to a 3% year-over-year increase from a year ago, mainly due to realigning prices and selling a more profitable product mix. We continue to see a shift to mobility products in U.S. Consumer and our other segments as notebooks become more affordable. In response to this environment, we have updated our business model for U.S. Consumer and have entered into a limited number of retail distribution arrangements to complement and extend the existing direct business. In the fourth quarter of Fiscal 2008, the U.S. Consumer business began to improve and posted revenue growth of 12% over the fourth quarter of Fiscal 2007, which reflects changes we have made to the business to reignite growth, including introducing four notebook families for consumers in six months. In Fiscal 2009, we expect to continue to expand our product offerings by launching 50% more new notebooks than in Fiscal 2008. U.S. Consumer revenue and unit volume decreased 11% and 14%, respectively, in Fiscal 2007 compared to revenue growth of 5% on unit growth of 9% in Fiscal 2006. U.S. Consumer revenue growth slowed as compared to Fiscal 2006 primarily due to a 25% decline in both desktop revenue and unit volume.

•   EMEA — During Fiscal 2008, EMEA represented 25% of our total consolidated net revenue as compared to 24% in Fiscal 2007. EMEA had 12% year-over-year net revenue growth as a result of unit shipment growth of

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7%. Average price per unit increased 4%, which reflects the mix of products sold and a benefit from the strengthening of the Euro and British Pound against the U.S. dollar during Fiscal 2008, offset by our pricing strategy. The revenue growth was primarily a result of higher demand for mobility products, represented by a 20% increase in revenue on a unit shipment increase of 24%. Growth in services revenue also contributed to EMEA’s strong Fiscal 2008 performance as EMEA’s services revenue grew 30% year-over-year. These increases were partially offset by a 3% decrease in desktop sales. At a country level, Poland, Austria, Greece, France, and Germany experienced strong growth in Fiscal 2008. We recently reorganized our EMEA operations to focus our sales teams on specific customer types, as opposed to our previous country focus, to reignite growth and provide more consistent offerings to our customers.

In Fiscal 2007, the segment’s performance was largely attributed to growth in mobility products, where year-over-year unit volumes and revenue grew 29% and 15%, respectively, compared to 49% and 23%, respectively, in Fiscal 2006. This growth occurred primarily in France and Germany in Fiscal 2007, with Germany leading the region’s progress. The United Kingdom experienced weak demand in its consumer business, resulting in a 2% year-over-year decline in revenue for Fiscal 2007. With the exception of desktop PCs, all product categories in this region experienced growth for Fiscal 2007 compared to Fiscal 2006, with mobility, storage, and services revenues posting strong gains.

•   Asia Pacific-Japan — During Fiscal 2008, APJ’s revenue continued to improve, with 15% revenue growth year-over-year. Consistent with the EMEA segment, these increases were mainly a result of strong growth in mobility. Sales of mobility products increased 33% year-over-year and unit volume increased 32% in Fiscal 2008. Sales of mobility products grew due to a shift in customer preference from desktops to notebooks as well as the strong reception of our Inspiron^tm and Vostro^tm notebooks. APJ also reported 20% growth in servers and networking revenue on unit growth of 5% primarily due to our focus on delivering greater value within customer data centers with our rack optimized server platforms, whose average selling prices are higher than our tower servers. These increases were partially offset by a 10% decrease in services revenue. From a country perspective, India, Thailand, Taiwan, Malaysia, and China experienced significant revenue growth during Fiscal 2008. Significant growth in India and China during Fiscal 2008 contributed to a revenue growth rate of approximately 27% for our targeted BRIC countries.

In Fiscal 2007, APJ reported 12% revenue growth on 20% unit growth. The region was led by 26% year-over-year revenue growth in China during Fiscal 2007. Fiscal 2007’s improved performance was partially offset by Japan’s results, which saw revenue decline of 5% year-over-year. In Fiscal 2007, India, South Korea, Singapore, and Malaysia produced significant year-over-year revenue growth at a higher rate than the overall region. All product categories in this region experienced revenue growth during Fiscal 2007 with mobility leading the growth with a revenue increase of 12% on unit growth of 31% during Fiscal 2007. Also driving this growth were increases in services, software and peripherals, and storage.

For additional information regarding our reportable segments, see Note 11 of Notes to Consolidated Financial Statements included in “Part II — Item 8 — Financial Statements and Supplementary Data.”

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Revenue by Product and Services Categories

The following table summarizes our net revenue by product category:

	Fiscal Year Ended
	February 1, 2008				February 2, 2007				February 3, 2006
			% of				% of				% of
	Dollars		Revenue		Dollars		Revenue		Dollars		Revenue
	(in millions, except percentage)
Net revenue:
Desktop PCs	$	19,573		32%	$	19,815		34%	$	21,568		39%
Mobility		17,423		28%		15,480		27%		14,372		25%
Software and peripherals		9,908		16%		9,001		16%		8,329		15%
Servers and networking		6,474		11%		5,805		10%		5,449		10%
Services		5,320		9%		5,063		9%		4,207		8%
Storage		2,435		4%		2,256		4%		1,863		3%
Net revenue	$	61,133		100%	$	57,420		100%	$	55,788		100%

•   Desktop PCs — During Fiscal 2008, revenue from desktop PCs (which includes desktop computer systems and workstations) decreased slightly from Fiscal 2007 revenue on a unit decline of 2% even though worldwide industry unit sales grew 5% during calendar 2007. The decline was primarily due to us being out of product feature and price position and consumers’ migration to mobility products. Our U.S. Consumer segment continued to perform below expectation in Fiscal 2008 with a 19% decrease in desktop revenue year-over-year; however, in the fourth quarter of Fiscal 2008, desktop revenues for U.S. Consumers grew 5% over the fourth quarter of Fiscal 2007. U.S. Consumer was the primary contributor to our worldwide full year decline in desktop revenue with EMEA also contributing to the decline with a 3% decrease in revenue during Fiscal 2008 as compared to Fiscal 2007. The decline in revenue in our U.S. Consumer and EMEA segments was offset by a strong performance in APJ, where desktop sales increased 12% during Fiscal 2008 over prior year, while desktop sales in our Americas Business segment remained relatively flat during the same time period. We will likely see rising user demand for mobility products in the foreseeable future that will contribute to a slowing demand for desktop PCs as mobility growth is expected to outpace desktop growth at a rate of approximately six-to-one. In Fiscal 2008, we introduced Vostro^tm desktops specifically designed to meet the needs of small business customers.

In Fiscal 2007, revenue from desktop PCs decreased 8% year-over-year on unit decline of 5%. Desktop PCs in the Americas declined year-over-year during Fiscal 2007, but was offset by single-digit growth in the APJ region during the same period. Desktop PCs, as compared to mobility products, led Fiscal 2007 in volume; however, our desktop PC average selling price decreased 3% from Fiscal 2006 to Fiscal 2007, which contributed to the overall revenue decline.

•   Mobility — In Fiscal 2008, revenue from mobility products (which includes notebook computers and mobile workstations) grew 13% year-over-year on unit growth of 16%. All segments experienced strong growth except U.S. Consumer, whose revenue and units declined 10% during Fiscal 2008 as compared to Fiscal 2007. During the same period mobility revenue in APJ grew 33% on unit growth of 32%; EMEA revenue grew 20% on unit growth of 24%; and Americas Business revenue grew 11% on 17% unit growth. Even though we posted double-digit mobility growth during Fiscal 2008, according to IDC, industry mobility shipments grew 34% during calendar 2007. To capitalize on the industry growth in mobility, we have separated our consumer and commercial design functions — focusing our consumer team on innovation and shorter design cycles. As a result, we have launched four consumer notebook families in the past six months, including Inspiron^tm color laptops and XPS^tm laptops, for which the demand has been better than expected. As a result, the fourth quarter of Fiscal 2008 mobility revenues for U.S. Consumer grew 25% over the fourth quarter of Fiscal 2007. We also introduced Vostro^tm laptops, specifically designed to meet the needs of small business customers. During the fourth quarter of Fiscal 2008, we launched our first tablet — the Latitude^tm XT, the industry’s only sub-four pound convertible tablet with pen and touch capability. As notebooks become more affordable and wireless

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products become standardized, demand for our mobility products continues to be strong, producing robust year-over-year revenue and unit growth. We are likely to see sustained growth in our mobility products in the foreseeable future due to the continued industry-wide migration from desktop PCs to mobility products.

In Fiscal 2007, revenue from mobility products grew by 8% year-over-year as compared to 20% in the previous year. The impact of the diminished growth was particularly acute in the U.S. and led to a loss of share as compared to Fiscal 2006. The slow growth resulted from both our product feature set and related value offering, particularly in the consumer business, as well as our inability to reach certain customer sets. Our EMEA region led the growth in our mobility product category with a 15% increase in Fiscal 2007.

•   Software and Peripherals — In Fiscal 2008, revenue from software and peripherals (“S&P”) (which includes Dell-branded printers, monitors not sold with systems, plasma and LCD televisions, projectors, and a multitude of competitively priced third-party printers, televisions, software, digital cameras, and other products) increased 10% year-over-year. EMEA lead S&P revenue growth with a year-over-year increase of 14%, and Americas Business and APJ revenue growth was 11% and 10%, respectively, during Fiscal 2008 as compared to Fiscal 2007. The increase in S&P revenue is primarily attributable to strength in imaging and printing, digital displays, and software licensing. With the acquisition of ASAP, a leading software solutions and licensing services provider, in the fourth quarter of Fiscal 2008, we now offer products from over 2,000 software publishers.

In Fiscal 2007, revenue from software and peripherals increased 8% year-over-year. The overall increase in Fiscal 2007 S&P revenue was led by the APJ region with growth of 38%, while U.S. consumer sales declined 8%. This increase was primarily attributable to a 12% year-over-year increase in software revenue that was offset by declines in our imaging product revenue.

•   Servers and Networking — In Fiscal 2008, servers and networking revenue grew 12% on unit growth of 6% year-over-year as compared to industry unit growth of 8%. Our unit growth was slightly behind the growth in the overall industry, while we improved our product feature sets by transitioning to new platforms, and as we managed through the realignment of certain portions of our sales force to address sales execution deficiencies. A significant portion of the revenue growth is due to higher average selling prices, which increased 5% during Fiscal 2008 as compared to the prior year. Fourth quarter year-over-year revenue growth of 2% was below industry growth and our expectations as conservatism in the U.S. commercial sectors affected sales of our server products. All regions experienced strong year-over-year revenue growth with APJ leading the way with 20% growth on unit growth of 5%; additionally, server and networking revenue increased 16% and 8% in EMEA and the Americas, respectively. For Fiscal 2008, we were again ranked number one in the United States with a 34% share in server units shipped; worldwide we were second with a 25% share. Servers and networking remains a strategic focus area. Late in the fourth quarter, we launched our 10G blade servers — the most energy efficient blade server solution on the market. Our PowerEdge servers are ranked number one in server benchmark testing for overall performance, energy efficiency, and price.

In Fiscal 2007, servers and networking revenue grew 7% on unit growth of 6% year-over-year. During Fiscal 2007 we introduced our new ninth generation (9G) PowerEdge servers with Intel’s Xeon 5100 series processors, and we began shipping two new PowerEdge servers featuring AMD Opteron^tm processors, providing our customers with an additional choice for high-performance two-socket and four-socket systems. We also launched the industry’s first standards-based Quad-Core processors for two-socket blade, rack, and tower servers. These additions contributed to the 6% year-over-year revenue increase in Fiscal 2007 in the Americas Business segment.

•   Services — In Fiscal 2008, revenue from services (which includes the sale and servicing of our extended product warranties) increased 5% year-over-year compared to a 20% increase in Fiscal 2007. EMEA drove services revenue growth with a 30% increase in Fiscal 2008 as compared to Fiscal 2007, and Americas Business contributed with 3% revenue growth. This growth was offset by revenue declines in U.S. Consumer and APJ of 16% and 10%, respectively. Strong Fiscal 2008 services sales increased our deferred service revenue balance by approximately $1.0 billion in Fiscal 2008, a 25% increase to approximately $5.3 billion. In Fiscal 2007, our deferred service revenue increased $514 million or 14% to approximately $4.2 billion. During Fiscal 2008, we acquired a number of service technologies and capabilities through strategic acquisitions of certain companies. These capabilities are being used to build-out our mix of service offerings. In the first quarter of Fiscal 2009, we

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introduced ProSupport, which distilled ten service offerings down to two customizable packages spanning our commercial product and solutions portfolios with flexible options for service level and proactive management.

In Fiscal 2007, revenue from services increased 20% year-over-year including a 26% year-over-year growth in revenues outside the Americas. We introduced our new Platinum Plus offering during Fiscal 2007, which contributed to an increase in our premium service contracts.

•   Storage — In Fiscal 2008, storage revenue increased 8% as compared to a 21% increase in Fiscal 2007. All regions contributed to the revenue growth, led by EMEA, which experienced strong growth of 18%; additionally, APJ and the Americas increased 10% and 5%, respectively. In Fiscal 2008, we expanded both our PowerVault and Dell  EMC solutions that drove both additional increases in performance and customer value. During the fourth quarter of Fiscal 2008, we completed the acquisition of EqualLogic, Inc., an industry leader in iSCSI SANs. With this acquisition, we now provide much broader product offerings for small and medium business consumers. Industry analysts believe that the iSCSI SAN space is expected to grow over 125% annually over the next five years.

In Fiscal 2007, storage revenue sustained double-digit growth with a 21% year-over-year increase. The Americas led the revenue growth in Fiscal 2007 with a year-over-year increase of 21%. In Fiscal 2007, we also announced a five-year extension to our partnership with EMC. These portfolio enhancements continue to deliver lower cost solutions for our customers.

Gross Margin

The following table presents information regarding our gross margin during each of the past three fiscal years:

	Fiscal Year Ended
	February 1, 2008				February 2, 2007				February 3, 2006
			% of				% of				% of
	Dollars		Revenue		Dollars		Revenue		Dollars		Revenue
	(in millions, except percentages)
Net revenue	$	61,133		100.0%	$	57,420		100.0%	$	55,788		100.0%
Gross margin	$	11,671		19.1%	$	9,516		16.6%	$	9,891		17.7%

During Fiscal 2008, our gross margin increased in absolute dollars and as a percentage of revenue from Fiscal 2007, driven by greater cost declines. The cost environment was more favorable in the first half of Fiscal 2008 than the second half. Our gross margin percentage was 18.8% in the fourth quarter of Fiscal 2008 as compared to 19.3% in the first quarter of Fiscal 2008. The fourth quarter was positively impacted by a $58 million reduction in accrued liabilities for a one-time adjustment related to a favorable ruling by the German Federal Supreme Court on a copyright levy case. We continue to evolve our inventory and manufacturing business model to capitalize on component cost declines, and we continuously negotiate with our suppliers in a variety of areas including availability of supply, quality, and cost. We continue to expand our utilization of original design manufacturers, manufacturing outsourcing relationships, and new distribution strategies to better meet customer needs and reduce product cycle times. Our goal is to introduce the latest relevant technology more quickly and to rapidly pass on component cost savings to a broader set of our customers worldwide. As we continue to evolve our inventory and manufacturing business model to capitalize on component cost declines, we continuously negotiate with our suppliers in a variety of areas including availability of supply, quality, and cost. These real-time continuous supplier negotiations support our business model, which is able to respond quickly to changing market conditions due to our direct customer model and real-time manufacturing. Because of the fluid nature of these ongoing negotiations, the timing and amount of supplier discounts and rebates vary from time to time. In addition, a focus on more richly configured customer solutions and a better mix of products and services yielded a better balance of profitability and revenue growth. In general, gross margin and margins on individual products will remain under downward pressure due to a variety of factors, including continued industry wide global pricing pressures, increased competition, compressed product life cycles, potential increases in the cost and availability of raw materials, and outside manufacturing services. In response to these competitive pricing pressures, we expect to continue to take pricing actions with respect to our products. We are continuing to identify opportunities to improve our competitiveness, including lowering costs and improving productivity. One example of these opportunities is our announcement on March 31, 2008, that we will close our desktop manufacturing facility in Austin, Texas. In addition, we will take

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further actions to reduce total costs in design, materials, and operating expenses. Initial benefits of these opportunities are expected in the second half of Fiscal 2009.

In Fiscal 2007, our gross margin declined as compared to Fiscal 2006, while revenue increased year-over-year. Throughout Fiscal 2007, industry-wide competition put pressure on average selling prices while our pricing and product strategy evolved. In Fiscal 2007, we added a second source of micro processors (“chip sets”) ending a long-standing practice of sourcing from only one manufacturer. We believe that moving to more than one supplier of chip sets is beneficial for customers long-term, as it adds choice and ensures access to the most current technologies. During the transition from sole to dual sourcing of chip sets, gross margin was negatively impacted as we re-balanced our product and category mix. In addition, commodity price declines stalled during Fiscal 2007.

Operating Expenses

The following table presents information regarding our operating expenses during each of the past three fiscal years:

	Fiscal Year Ended
									February 3, 2006
	February 1, 2008				February 2, 2007						% of
	Dollars		% of Revenue		Dollars		% of Revenue		Dollars		Revenue
	(in millions, except percentages)
Operating expenses:
Selling, general, and administrative	$	7,538		12.4%	$	5,948		10.3%	$	5,051		9.0%
Research, development, and engineering		610		1.0%		498		0.9%		458		0.8%
In-process research and development		83		0.1%		-		-		-		-
Operating expenses	$	8,231		13.5%	$	6,446		11.2%	$	5,509		9.8%

•   Selling, General, and Administrative — During Fiscal 2008, selling, general, and administrative expenses increased 27% to $7.5 billion. The increase was primarily due to investigation costs, higher compensation and benefits expense, and increased outside consulting fees. Expenses related to the United States Securities and Exchange Commission (“SEC”) and Audit Committee investigations were $160 million and $100 million for Fiscal 2008 and Fiscal 2007, respectively. Fiscal 2008 results also include $76 million (of the total of $107 million) of additional expense for cash payments for expiring stock options, and selling, general, and administrative expenses related to headcount and infrastructure reductions were $92 million. In addition, compensation related expenses, which includes the aforementioned expiring stock options expense and headcount reductions, increased in Fiscal 2008 compared to Fiscal 2007. Employee bonus expense also increased substantially in Fiscal 2008 compared to Fiscal 2007 when bonuses were paid at a reduced amount.

During Fiscal 2007, selling, general, and administrative expenses increased 18% to $5.9 billion, compared to $5.1 billion for Fiscal 2006. The increase in Fiscal 2007 as compared to Fiscal 2006 was primarily attributed to increased compensation costs and outside consulting services. The compensation increase was largely due to increased stock-based compensation expense due to the adoption of SFAS 123(R) ($272 million), and the higher outside consulting services costs were mainly due to the SEC and Audit Committee investigations ($100 million). In addition, during Fiscal 2007, we made incremental customer experience investments of $150 million to improve customer satisfaction, repurchase preferences, as well as technical support. As a result, we increased our headcount through direct hiring and replacing of temporary staff with regular employees.

•   Research, Development, and Engineering — Research, development, and engineering expenses increased 22% to $610 million compared to $498 million in Fiscal 2007. The increase in research, development, and engineering was primarily driven by significantly higher compensation costs. The higher compensation costs are partially attributed to increased focused investments in research and development (“R&D”), which are critical to our future growth and competitive position in the marketplace. During Fiscal 2008, we implemented our “Simplify IT” initiative for our customers. R&D is the foundation for this initiative, which is aimed at allowing customers to deploy IT faster, run IT at a lower total cost, and grow IT smarter. In Fiscal 2007, research, development, and engineering expense increased in absolute dollars compared to Fiscal 2006 due to increased staffing levels, product development costs, and stock-based compensation expense resulting from the adoption of SFAS 123(R).

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We manage our research, development, and engineering spending by targeting those innovations and products most valuable to our customers, and by relying upon the capabilities of our strategic partners. We will continue to invest in research, development, and engineering activities to support our growth and to provide for new, competitive products. We obtained 1,954 worldwide patents and have applied for 2,196 additional worldwide patents at February 1, 2008.

•   In-Process Research and Development — We recognized in-process research and development (“IPR&D”) charges in connection with acquisitions accounted for as business combinations, as more fully described in Note 7 of Notes to Consolidated Financial Statements included in “Part II — Item 8 — Financial Statements and Supplementary Data.” During Fiscal 2008, we recorded IPR&D charges of $83 million. Prior to Fiscal 2008, there were no IPR&D charges related to acquisitions.

On May 31, 2007, we announced that we had initiated a comprehensive review of costs across all processes and organizations with the goal to simplify structure, eliminate redundancies, and better align operating expenses with the current business environment and strategic growth opportunities. These efforts are continuing. Since this announcement and through the end of Fiscal 2008, we have reduced headcount by 3,200, excluding acquisitions, and strategically closed some of our facilities. As noted above, we expect to take further action to continue to reduce our cost structure in Fiscal 2009 to improve our competitiveness and increase productivity.

Stock-Based Compensation

We use the 2002 Long-Term Incentive Plan, amended in December 2007, for stock-based incentive awards. These awards can be in the form of stock options, stock appreciation rights, stock bonuses, restricted stock, restricted stock units, performance units, or performance shares.

Stock-based compensation expense totaled $436 million for Fiscal 2008, compared to $368 million and $17 million for Fiscal 2007 and Fiscal 2006, respectively. The increase in Fiscal 2008 and Fiscal 2007 as compared to Fiscal 2006 is due to the implementation of SFAS 123(R) and cash payments of $107 million made for expired in-the-money stock options discussed below. We adopted SFAS 123(R) using the modified prospective transition method under SFAS 123(R) effective the first quarter of Fiscal 2007. Included in stock-based compensation for Fiscal 2008 and Fiscal 2007 is the fair value of stock-based awards earned during the year, including restricted stock, restricted stock units, and stock options, as well as the discount associated with stock purchased under our employee stock purchase plan (“ESPP”). The ESPP was discontinued effective February 2008 as part of an overall assessment of our benefits strategy. Prior to the adoption of SFAS 123(R), we accounted for our equity incentive plans under the intrinsic value recognition and measurement principles of Accounting Principles Board Opinion (APB) No. 25, Accounting for Stock Issued to Employees, (“APB 25”) and its related interpretations. Accordingly, stock-based compensation for the fair value of employee stock options with no intrinsic value at the grant date and the discount associated with the stock purchase under our ESPP was not recognized in net income prior to Fiscal 2007. For further discussion on stock-based compensation, see Note 5 of Notes to Consolidated Financial Statements included in “Part II — Item 8 — Financial Statements and Supplementary Data.”

At February 1, 2008 there was $93 million and $600 million of total unrecognized stock-based compensation expense related to stock options and non-vested restricted stock, respectively, with the unrecognized stock-based compensation expense expected to be recognized over a weighted-average period of 2.0 years and 1.9 years, respectively. At February 2, 2007 there was $139 million and $356 million of total unrecognized stock-based compensation expense related to stock options and non-vested restricted stock, respectively, with the unrecognized stock-based compensation expense expected to be recognized over a weighted-average period of 1.7 years and 2.4 years, respectively.

Due to our inability to timely file our Annual Report on Form 10-K for Fiscal 2007, we suspended the exercise of employee stock options, the vesting of restricted stock units, and the purchase of shares under the ESPP on April 4, 2007. As a result, we agreed to pay cash to current and former employees who held in-the-money stock options (options that had an exercise price less than the then current market price of the stock) that expired during the period of unexercisability. We made payments of approximately $107 million in Fiscal 2008 relating to expired in-the-money stock options. We are now current in our periodic reporting obligations and, accordingly, are permitting the

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exercise of employee stock options by employees and the vesting of restricted stock units. As options have again become exercisable, we do not expect to pay cash for expired in-the-money stock options in the future.

Investment and Other Income, net

The table below provides a detailed presentation of investment and other income, net for Fiscal 2008, 2007, and 2006.

	Fiscal Year Ended
	February 1,			February 2,			February 3,
	2008			2007			2006
	(in millions)
Investment and other income, net:
Investment income, primarily interest	$	496		$	368		$	308
Gains (losses) on investments, net		14			(5	)		(2	)
Interest expense		(45	)		(45	)		(29	)
CIT minority interest		(29	)		(23	)		(27	)
Foreign exchange		(30	)		(37	)		3
Gain on sale of building		-			36			-
Other		(19	)		(19	)		(27	)
Investment and other income, net	$	387		$	275		$	226

The increase in investment income from Fiscal 2007 to Fiscal 2008 is primarily due to earnings on higher average balances of cash equivalents and investments, partially offset by lower interest rates. In Fiscal 2007, investment income increased from the prior year primarily due to rising interest rates, partially offset by a decrease in interest income earned on lower average balances of cash equivalents and investments. The gains in Fiscal 2008 as compared to losses in Fiscal 2007 and Fiscal 2006 are mainly the result of sales of securities. The increase from Fiscal 2006 to Fiscal 2007 in interest expense is due to an increase in the effective rate on the debt swap agreements and the start of the commercial paper program in Fiscal 2007. The increase in foreign exchange loss in Fiscal 2008 and Fiscal 2007 relative to Fiscal 2006 is mainly due to higher net losses on derivative instruments. The gain on sale of building relates to the sale of a building in EMEA.

Income Taxes

Our effective tax rate was 23.0%, 22.8%, and 21.8% for Fiscal 2008, 2007, and 2006, respectively. The differences between our effective tax rate and the U.S. federal statutory rate of 35% principally result from our geographical distribution of taxable income and permanent differences between the book and tax treatment of certain items. We reported an effective tax rate of approximately 23.0% for Fiscal 2008, as compared to 22.8% for Fiscal 2007. In the fourth quarter of Fiscal 2008, we were able to access $5.3 billion in cash from a subsidiary outside of the U.S. to fund share repurchases, acquisitions, and the continued growth of DFS. Accessing the cash slightly increased our effective tax rate. The taxes related to accessing the foreign cash and nondeductibility of the in-process research and development acquisition charges were offset primarily by the increase of our consolidated profitability in lower tax rate jurisdictions during Fiscal 2008. For Fiscal 2007, we reported an effective tax rate of approximately 22.8%, as compared to 21.8% for Fiscal 2006. The increase in our Fiscal 2007 effective tax rate compared to Fiscal 2006 is due to the $85 million tax reduction in the second quarter of Fiscal 2006 discussed below, offset by a higher proportion of our operating profits being generated in lower foreign tax jurisdictions during Fiscal 2007. Our foreign earnings are generally taxed at lower rates than in the United States. As a result, sales growth and related profit earned outside of the U.S. in lower tax jurisdictions is expected to lower our operational effective tax rate in future periods.

We adopted Financial Accounting Standards Board (FASB) Interpretation No. 48, Accounting for Uncertainty in Income Taxes —  an Interpretation of FASB Statement No. 109 (“FIN 48”) effective February 3, 2007. FIN 48 clarifies the accounting and reporting for uncertainties in income taxes recognized in our financial statements in accordance with SFAS No. 109, Accounting for Income Taxes (“SFAS 109”). FIN 48 prescribes a comprehensive model for the financial statement recognition, measurement, presentation, and disclosure of uncertain tax positions

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taken or expected to be taken in income tax returns. The adoption of FIN 48 resulted in a decrease to stockholders’ equity of approximately $62 million in the first quarter of Fiscal 2008. For a further discussion of the impact of FIN 48, see Note 3 of Notes to Consolidated Financial Statements included in “Part II — Item 8 — Financial Statements and Supplementary Data.”

On October 22, 2004, the American Jobs Creation Act of 2004 was signed into law. Among other items, that act created a temporary incentive for U.S. multinationals to repatriate accumulated income earned outside the U.S. at an effective tax rate of 5.25%, versus the U.S. federal statutory rate of 35%. In the fourth quarter of Fiscal 2005, we recorded an initial estimated income tax charge of $280 million based on the decision to repatriate $4.1 billion of foreign earnings. This tax charge included an amount relating to a drafting oversight that Congressional leaders expected to correct in calendar year 2005. On May 10, 2005, the Department of Treasury issued further guidance that addressed the drafting oversight. In the second quarter of Fiscal 2006, we reduced our original estimate of the tax charge by $85 million as a result of the guidance issued by the Treasury Department. At February 3, 2006, we had completed the repatriation of the $4.1 billion in foreign earnings

Financing Receivables and Off-Balance Sheet Arrangements

Financing Receivables — At February 1, 2008, our financing receivables balance was $2.1 billion of which $1.6 billion represents customer receivables. Customer receivables increased 16% from our balance at February 2, 2007. This increase primarily reflects our contractual right to fund a greater percentage of customer receivables as CIT’s funding rights decrease. As our funding rights increase, we expect continued growth in customer financing receivables, subject to the outcome of the strategic review noted below. To manage this growth, we will continue to balance the use of our own working capital and other sources of liquidity. The key decision factors in the analysis are the cost of funds, required credit enhancements, and the ability to access the capital markets. Of the customer receivables balance, $444 million represented balances which were due from CIT in connection with specified promotional programs. Given the recent volatility in the credit markets, we are closely monitoring all of our financing receivables and are actively pursuing alternative strategies to mitigate any potential balance sheet risk. Based on our assessment of these customer financing receivables and the associated risks, we believe that we are adequately reserved. See Note 6 of Notes to Consolidated Financial Statements included in “Part II — Item 8 — Financial Statements and Supplementary Data” for additional information about our financing receivables and our promotional programs.

We closely monitor credit risk of our entire portfolio. Our investment in credit risk management resources and tools allow us to constantly evaluate our portfolio credit risk. During Fiscal 2008, we took underwriting actions, including reducing our credit approval rate of subprime customers, in order to protect our portfolio from the deteriorating credit environment. We will continue to assess our portfolio risk and take additional underwriting actions, as we deem necessary. Subprime consumer receivables comprise less than 20% of the net customer financing receivables balance at February 1, 2008.

We maintain an allowance for losses to cover probable financing receivable credit losses. The allowance for losses is determined based on various factors, including historical experience, past due receivables, receivable type, and customer risk profile. Substantial changes in the economic environment or any of the factors mentioned above could change the expectation of anticipated credit losses. As of February 1, 2008 and February 2, 2007, the allowance for financing receivable losses was $96 million and $39 million, respectively. A 10% change in this allowance would not be material to our consolidated results. See Note 6 of Notes to Consolidated Financial Statements included in “Part II — Item 8 — Financial Statements and Supplementary Data” for additional information.

We announced on March 31, 2008, that we are undertaking a strategic assessment of ownership alternatives for DFS financing activities. The assessment will primarily focus on the consumer and small-and-medium business revolving credit financing receivables and operations in the U.S., but may also include commercial leasing. The outcome of the assessment will depend on the customer, capital, and economic impact of alternative ownership structures. It is possible the assessment will result in no change to the ownership and/or operating structure. We expect to complete our assessment in the third quarter of Fiscal 2009.

Asset Securitization — During Fiscal 2008, we continued to sell customer financing receivables to unconsolidated qualifying special purpose entities. The qualifying special purpose entities are bankruptcy remote legal entities with

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assets and liabilities separate from ours. The sole purpose of the qualifying special purpose entities is to facilitate the funding of customer receivables in the capital markets. Once sold, these receivables are off-balance sheet. We determined the amount of receivables to securitize based on our funding requirements in conjunction with specific selection criteria designed for the transaction.

Off-balance sheet securitizations involve the transfer of customer financing receivables to unconsolidated qualifying special purpose entities that are accounted for as a sale in accordance with SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities, (“SFAS 140”). Upon the sale of the customer receivables, we recognize a gain on the sale and retain an interest in the assets sold. The gain on sale ranges from 1% to 3% of the customer receivables sold. The unconsolidated qualifying special purpose entities have entered into financing arrangements with various multi-seller conduits that, in turn, issue asset-backed debt securities in the capital markets. During Fiscal 2008 and Fiscal 2007, we sold $1.2 billion and $1.1 billion, respectively, of customer receivables to unconsolidated qualifying special purpose entities. The principal balance of the securitized receivables at the end of Fiscal 2008 and Fiscal 2007 was $1.2 billion and $1.0 billion, respectively.

We provide credit enhancement to the securitization in the form of over-collateralization. Receivables transferred to the qualified special purpose entities exceed the level of debt issued. We retain the right to receive collections for assets securitized exceeding the amount required to pay interest, principal, and other fees and expenses (referred to as retained interest). Our retained interest in the securitizations is determined by calculating the present value of these excess cash flows over the expected duration of the transactions. Our risk of loss related to securitized receivables is limited to the amount of our retained interest. We service securitized contracts and earn a servicing fee. Our securitization transactions generally do not result in servicing assets and liabilities, as the contractual fees are adequate compensation in relation to the associated servicing cost.

In estimating the value of the retained interest, we make a variety of financial assumptions, including pool credit losses, payment rates, and discount rates. These assumptions are supported by both our historical experience and anticipated trends relative to the particular receivable pool. We review our investments in retained interests periodically for impairment, based on their estimated fair value. All gains and losses are recognized in income immediately. Retained interest balances and assumptions are disclosed in Note 6 of Notes to Consolidated Financial Statements included in “Part II — Item 8 — Financial Statements and Supplementary Data.”

Our securitization programs contain standard structural features related to the performance of the securitized receivables. These structural features include defined credit losses, delinquencies, average credit scores, and excess collections above or below specified levels. In the event one or more of these features are met and we are unable to restructure the program, no further funding of receivables will be permitted and the timing of expected retained interest cash flows will be delayed which would impact the valuation of our retained interest. Should these events occur, we do not expect a material adverse affect on the valuation of the retained interest or on our ability to securitize financing receivables.

Current capital markets are experiencing an unusual period of volatility and reduced liquidity that we expect will result in higher costs and increasing credit enhancements for funding of financial assets. Our exposure to the capital markets will increase as we continue to fund additional financing receivables. We do not expect current capital market conditions to limit our ability to access liquidity for funding financing receivables in the future, as we continue to find funding sources in the capital markets.

Liquidity, Capital Commitments, and Contractual Cash Obligations

Liquidity

Our cash balances are held in numerous locations throughout the world, including substantial amounts held outside of the U.S.; however, the majority of our cash and investments that are located outside of the U.S. are denominated in the U.S. dollar. Most of the amounts held outside of the U.S. could be repatriated to the U.S., but, under current law, would be subject to U.S. federal income taxes, less applicable foreign tax credits. Repatriation of some foreign balances is restricted by local laws. We have provided for the U.S. federal tax liability on these amounts for financial statement purposes except for foreign earnings that are considered indefinitely reinvested outside of the U.S. Repatriation could result in additional U.S. federal income tax payments in future years. We utilize a variety of tax

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planning and financing strategies with the objective of having our worldwide cash available in the locations in which it is needed. In the fourth quarter of Fiscal 2008, we were able to access $5.3 billion in cash from a subsidiary outside of the U.S. The cash was used to fund shares repurchases, acquisitions, and the growth of DFS.

We use cash generated by operations as our primary source of liquidity and believe that internally generated cash flows are sufficient to support business operations. However, to further supplement domestic liquidity, we anticipate that we will access the capital markets in the first half of Fiscal 2009. This action is contingent upon appropriate market conditions. We intend to establish the appropriate debt levels based upon cash flow expectations, cash requirements for operations, discretionary spending—including items such as share repurchases and acquisitions—and the overall cost of capital. We do not believe that the overall credit concerns in the markets would impede our ability to access the capital markets because of the overall strength of our financial position.

We ended Fiscal 2008 with $9.5 billion in cash and investments compared to $12.4 billion at the end of Fiscal 2007. The decrease in cash and investments from Fiscal 2007 was a result of spending $4.0 billion on share repurchases and a net $2.2 billion on acquisitions, partially offset by internally generated cash flows. See “Market Risk” for discussion related to exposure to changes in the market value of our investment portfolio. In Fiscal 2008, we continued to maintain strong liquidity with cash flows from operations of $3.9 billion, compared to $4.0 billion in Fiscal 2007. The following table summarizes our ending cash, cash equivalents, and investments balances and contains a summary of our Consolidated Statements of Cash Flows for the past three fiscal years:

	Fiscal Year Ended
	February 1,		February 2,
	2008		2007
	(in millions)
Cash, cash equivalents, and investments:
Cash and cash equivalents	$	7,764	$	9,546
Debt securities		1,657		2,784
Equity and other securities		111		115
Cash, cash equivalents and investments	$	9,532	$	12,445

	Fiscal Year Ended
	February 1,			February 2,			February 3,
	2008			2007			2006
	(in millions)
Net cash flow provided by (used in):
Operating activities	$	3,949		$	3,969		$	4,751
Investing activities		(1,763	)		1,003			4,149
Financing activities		(4,120	)		(2,551	)		(6,252	)
Effect of exchange rate changes on cash and cash equivalents		152			71			(73	)
Net (decrease) increase in cash and cash equivalents	$	(1,782	)	$	2,492		$	2,575

•   Operating Activities — Cash flows from operating activities during Fiscal 2008, 2007, and 2006 resulted primarily from net income, which represents our principal source of cash. In Fiscal 2008, the slight decrease in operating cash flows was primarily due to changes in working capital slightly offset by the increase in net income. In Fiscal 2007, the decrease in operating cash flows was primarily led by a decrease in net income, slightly offset by changes in working capital. See discussion of our cash conversion cycle in “Key Performance Metrics” below.

Upon adopting SFAS 123(R) in the first quarter of Fiscal 2007, the excess tax benefits associated with employee stock compensation are classified as a financing activity; however, the offset reduces cash flows from operations. In Fiscal 2008 and 2007, the excess tax benefit was $12 million and $80 million, respectively. Prior to adopting SFAS 123(R), operating cash flows were impacted by income tax benefits that resulted from the exercise of employee stock options. These tax benefits totaled $224 million in Fiscal 2006. These benefits

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are the tax effects of corporate income tax deductions (that are considered taxable income to the employee) that represent the amount by which the fair value of our stock exceeds the option strike price on the day the employee exercises a stock option. The decline in tax benefits in Fiscal 2008 and Fiscal 2007 from Fiscal 2006 is due to fewer stock option exercises.

Key Performance Metrics — Our direct business model allows us to maintain an efficient asset management system in comparison to our major competitors. We are capable of minimizing inventory risk while collecting amounts due from customers before paying vendors, thus allowing us to generate annual cash flows from operating activities that typically exceed net income. The following table presents the components of our cash conversion cycle for the fourth quarter of each of the past three fiscal years:

	February 1,			February 2,			February 3,
	2008			2007			2006
Days of sales outstanding(a)		36			31			29
Days of supply in inventory(b)		8			5			5
Days in accounts payable(c)		(80	)		(78	)		(77	)
Cash conversion cycle		(36	)		(42	)		(43	)

(a)	Days of sales outstanding (“DSO”) calculates the average collection period of our receivables. DSO is based on the ending net trade receivables and the most recent quarterly revenue for each period. DSO also includes the effect of product costs related to customer shipments not yet recognized as revenue that are classified in other current assets. DSO is calculated by adding accounts receivable, net of allowance for doubtful accounts, and customer shipments in transit and dividing that sum by average net revenue per day for the current quarter (90 days). At February 1, 2008, February 2, 2007, and February 3, 2006, DSO and days of customer shipments not yet recognized were 33 and 3 days, 28 and 3 days, and 26 and 3 days, respectively.
(b)	Days of supply in inventory (“DSI”) measures the average number of days from procurement to sale of our product. DSI is based on ending inventory and most recent quarterly cost of sales for each period. DSI is calculated by dividing inventory by average cost of goods sold per day for the current quarter (90 days).
(c)	Days in accounts payable (“DPO”) calculates the average number of days our payables remain outstanding before payment. DPO is based on ending accounts payable and most recent quarterly cost of sales for each period. DPO is calculated by dividing accounts payable by average cost of goods sold per day for the current quarter (90 days).

Our cash conversion cycle worsened by six days at February 1, 2008 as compared to February 2, 2007. This deterioration was driven by a five day increase in DSO largely attributed to timing of payments from customers, a continued shift in sales mix from domestic to international, and an increased presence in the retail channel. In addition, DSI increased by three days, which was primarily due to strategic materials purchases. The DSO and DSI declines were offset by a two-day increase in DPO largely attributed to an increase in the amount of strategic material purchases in inventory at the end of Fiscal 2008 and the number of suppliers with extended payment terms as compared to Fiscal 2007.

Our cash conversion cycle deteriorated one day at February 2, 2007 from February 3, 2006. This decline was driven by a two-day increase in DSO largely attributed to higher percentage of our revenue coming from outside the U.S., where payment terms are customarily longer and a higher percentage of revenue occurring at the end of the period. This decline was offset by a one-day increase in DPO largely attributed to an increase in the number of suppliers with extended payment terms as compared to Fiscal 2006.

We defer the cost of revenue associated with customer shipments not yet recognized as revenue until they are delivered. These deferred costs are included in our reported DSO because we believe it presents a more accurate presentation of our DSO and cash conversion cycle. These deferred costs are recorded in other current assets in our Consolidated Statements of Financial Position and totaled $519 million, $424 million, and $417 million at February 1, 2008, February 2, 2007, and February 3, 2006, respectively.

•   Investing Activities — Cash used in investing activities during Fiscal 2008 was $1.8 billion, as compared to $1.0 billion cash provided by investing activities during Fiscal 2007 and $4.1 billion provided in Fiscal 2006. Cash generated or used in investing activities principally consists of net maturities and sales or purchases of investments; net capital expenditures for property, plant, and equipment; and cash used to fund strategic acquisitions, which was approximately $2.2 billion during Fiscal 2008. In Fiscal 2008 as compared to Fiscal 2007, we re-invested a lower amount of our proceeds from the maturity or sales of investments to build liquidity

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for share repurchases and for cash payments made in connection with acquisitions. In Fiscal 2007 compared to Fiscal 2006, we had a lower amount of proceeds from maturities and sales of investments, and this was partially offset by an increase in capital expenditures as we continued to focus on investing in our global infrastructure in order to support our rapid global growth.

•   Financing Activities — Cash used in financing activities during Fiscal 2008 was $4.1 billion, as compared to $2.6 billion in Fiscal 2007 and $6.3 billion in Fiscal 2006. Financing activities primarily consist of the repurchase of our common stock, partially offset by proceeds from the issuance of common stock under employee stock plans and other items. In Fiscal 2008, the year-over-year increase in cash used in financing activities was due primarily to the repurchase of our common stock as the temporary suspension of our share repurchase program ended in the fourth quarter of Fiscal 2008. In Fiscal 2008, we repurchased approximately 179 million shares at an aggregate cost of $4.0 billion. In Fiscal 2007, the year-over-year decrease in cash used in financing activities was due primarily to the suspension of our share repurchase program in September 2006. During Fiscal 2007, we repurchased approximately 118 million shares at an aggregate cost of $3.0 billion compared to 204 million shares at an aggregate cost of $7.2 billion in Fiscal 2006.

We believe our ability to generate cash flows from operations on an annual basis will continue to be strong, driven mainly by our profitability, efficient cash conversion cycle, and the growth in our deferred service offerings. In order to augment our liquidity and provide us with additional flexibility, we implemented a commercial paper program with a supporting credit facility on June 1, 2006. Under the commercial paper program, we issue, from time-to-time, short-term unsecured notes in an aggregate amount not to exceed $1.0 billion. We use the proceeds for general corporate purposes. At February 1, 2008, there were no outstanding amounts or advances under the commercial paper program or supporting credit facility.

We are increasingly relying upon access to the capital markets to fund financing for our customers and to provide sources of liquidity in the U.S. for general corporate purposes, including share repurchases. We believe we will be able to access the capital markets to increase the size of our existing commercial paper program and to meet our liquidity needs. Although we believe that we will be able to maintain sufficient access to the capital markets, even in light of the current market conditions, changes in our credit ratings, deterioration in our business performance, or adverse changes in the economy could limit our access to these markets. We intend to establish the appropriate debt levels based upon cash flow expectations, cash requirements for operations, discretionary spending, including items such as share repurchases and acquisitions, and the overall cost of capital. We do not believe that the overall credit concerns in the markets would impede our ability to access the capital markets because of the overall strength of our financial position. See Note 2 of Notes to Consolidated Financial Statements included in “Part II — Item 8 — Financial Statements and Supplementary Data” for further discussion of our commercial paper program.

Capital Commitments

Redeemable Common Stock — In prior years, we inadvertently failed to register with the SEC the issuance of some shares under certain employee benefit plans. As a result, certain purchasers of common stock pursuant to those plans may have the right to rescind their purchases for an amount equal to the purchase price paid for the shares, plus interest from the date of purchase. At February 1, 2008 and February 2, 2007, we have classified approximately 4 million shares ($94 million) and 5 million shares ($111 million), respectively, that are subject to potential rescission rights outside of stockholders’ equity because the redemption features are not within our control. We may also be subject to civil and other penalties by regulatory authorities as a result of the failure to register. These shares have always been treated as outstanding for financial reporting purposes. See “Item 5 — Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities — Issuance of Unregistered Securities.”

Share Repurchase Program — We have a share repurchase program that authorizes us to purchase shares of common stock in order to increase shareholder value and manage dilution resulting from shares issued under our equity compensation plans. However, we do not currently have a policy that requires the repurchase of common stock in conjunction with share-based payment arrangements. On December 3, 2007, our Board of Directors approved a new authorization for an additional $10.0 billion for share repurchases.

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We typically repurchase shares of common stock through a systematic program of open market purchases. During Fiscal 2008, we repurchased approximately 179 million shares of common stock for an aggregate cost of $4.0 billion as compared to 118 million shares at an aggregate cost of $3.0 billion in Fiscal 2007 and 204 million shares at an aggregate cost of $7.2 billion in Fiscal 2006. This significant decrease in share repurchases during Fiscal 2008 and Fiscal 2007 as compared to Fiscal 2006 is due to the temporary suspension of our share repurchase program in September 2006. We recommenced our share repurchase program in the fourth quarter of Fiscal 2008. For more information regarding share repurchases, see “Part II — Item 5 — Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.”

Capital Expenditures — During Fiscal 2008 and Fiscal 2007, we spent $831 million and $896 million, respectively, on property, plant, and equipment primarily on our global expansion efforts and infrastructure investments in order to support future growth. Product demand and mix, as well as ongoing efficiencies in operating and information technology infrastructure, influence the level and prioritization of our capital expenditures. Capital expenditures for Fiscal 2009, related to our continued expansion worldwide, are currently expected to reach approximately $850 million. These expenditures are expected to be funded from our cash flows from operating activities.

Restricted Cash — Pursuant to an agreement between DFS and CIT, we are required to maintain escrow cash accounts that are held as recourse reserves for credit losses, performance fee deposits related to our private label credit card, and deferred servicing revenue. Restricted cash in the amount of $294 million and $418 million is included in other current assets at February 1, 2008 and February 2, 2007, respectively.

Contractual Cash Obligations

The following table summarizes our contractual cash obligations at February 1, 2008.

			Payments Due by Period
			Fiscal		Fiscal 2010-		Fiscal 2012-
	Total		2009		2011		2013		Beyond
	(in millions)
Contractual cash obligations:
Debt(a)	$	529	$	227	$	2	$	-	$	300
Operating leases		487		92		138		92		165
Advances under credit facilities		23		23		-		-		-
Purchase obligations		893		544		348		1		-
Interest		451		33		45		43		330
Current portion of uncertain tax positions(b)		98		98		-		-		-
Contractual cash obligations	$	2,481	$	1,017	$	533	$	136	$	795

(a)	Changes in the fair value of the debt where the interest rate is hedged with interest rate swap agreements are not included in the contractual cash obligations for debt as the debt is expected to be settled at par at its scheduled maturity date.
(b)	The current portion of uncertain tax positions does not include approximately $1.5 billion in additional liabilities associated with uncertain tax positions that are not expected to be liquidated in Fiscal 2009. We are unable to reliably estimate the expected payment dates for these additional non-current liabilities.

Debt — At February 1, 2008, we had outstanding $200 million in Senior Notes with the principal balance due April 15, 2008, and $300 million in Senior Debentures with the principal balance due April 15, 2028. For additional information regarding these issuances, see Note 2 of Notes to Consolidated Financial Statements included in “Part II — Item 8 — Financial Statements and Supplementary Data,” which Note 2 is incorporated herein by reference.

Concurrent with the issuance of the Senior Notes and Senior Debentures, we entered into interest rate swap agreements converting our interest rate exposure from a fixed rate to a floating rate basis to better align the associated interest rate characteristics to our cash and investments portfolio. The interest rate swap agreements have an aggregate notional amount of $200 million maturing April 15, 2008, and $300 million maturing April 15, 2028.

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The floating rates are based on three-month London Interbank Offered Rates plus 0.41% and 0.79% for the Senior Notes and Senior Debentures, respectively. As a result of the interest rate swap agreements, our effective interest rates for the Senior Notes and Senior Debentures were 5.9% and 6.2%, respectively, for Fiscal 2008.

Operating Leases — We lease property and equipment, manufacturing facilities, and office space under non-cancellable leases. Certain of these leases obligate us to pay taxes, maintenance, and repair costs.

Advances Under Credit Facilities — Dell India Pvt Ltd., our wholly-owned subsidiary, maintains unsecured short-term credit facilities with Citibank N.A. Bangalore Branch India (“Citibank India”) that provide a maximum capacity of $30 million to fund Dell India’s working capital and import buyers credit needs. Financing is available in both Indian Rupees and foreign currencies. The borrowings are extended on an unsecured basis based on our guarantee to Citibank U.S. Citibank India can cancel the facilities in whole or in part without prior notice, at which time any amounts owed under the facilities will become immediately due and payable. Interest on the outstanding loans is charged monthly and is calculated based on Citibank India’s internal cost of funds plus 0.25%. At February 1, 2008, outstanding advances from Citibank India totaled $23 million, which are included in short-term borrowings on our Consolidated Statement of Financial Position.

Purchase Obligations — Purchase obligations are defined as contractual obligations to purchase goods or services that are enforceable and legally binding on us. These obligations specify all significant terms, including fixed or minimum quantities to be purchased; fixed, minimum, or variable price provisions; and the approximate timing of the transaction. Purchase obligations do not include contracts that may be cancelled without penalty.

We utilize several suppliers to manufacture sub-assemblies for our products. Our efficient supply chain management allows us to enter into flexible and mutually beneficial purchase arrangements with our suppliers in order to minimize inventory risk. Consistent with industry practice, we acquire raw materials or other goods and services, including product components, by issuing to suppliers authorizations to purchase based on our projected demand and manufacturing needs. These purchase orders are typically fulfilled within 30 days and are entered into during the ordinary course of business in order to establish best pricing and continuity of supply for our production. Purchase orders are not included in the table above as they typically represent our authorization to purchase rather than binding purchase obligations.

Purchase obligations increased to $893 million at February 1, 2008, from $570 million at February 2, 2007. The significant increase is mainly due to the signing of a $450 million marketing services agreement with a vendor during the fourth quarter of Fiscal 2008, partially offset by a $99 million decrease in purchase commitments related to the improvement and construction of facilities as several projects were finished during Fiscal 2008, and a net decrease in our other purchase commitments.

Interest — See Note 2 of Notes to the Consolidated Financial Statements included in “Part II — Item 8 — Financial Statements and Supplementary Data” for further discussion of our debt and related interest expense.

Market Risk

We are exposed to a variety of risks, including foreign currency exchange rate fluctuations and changes in the market value of our investments. In the normal course of business, we employ established policies and procedures to manage these risks.

Foreign Currency Hedging Activities

Our objective in managing our exposures to foreign currency exchange rate fluctuations is to reduce the impact of adverse fluctuations on earnings and cash flows associated with foreign currency exchange rate changes. Accordingly, we utilize foreign currency option contracts and forward contracts to hedge our exposure on forecasted transactions and firm commitments in over 20 currencies in which we transact business. The principal currencies hedged during Fiscal 2008 were the Euro, British Pound, Japanese Yen, and Canadian Dollar. We monitor our foreign currency exchange exposures to ensure the overall effectiveness of our foreign currency hedge positions. However, there can be no assurance that our foreign currency hedging activities will substantially offset the impact of fluctuations in currency exchange rates on our results of operations and financial position. During Fiscal 2008, the U.S. dollar weakened relative to the other principal currencies in which we transact business.

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However, as a result of our hedging activities, foreign currency fluctuations did not have a significant impact on our results of operations and financial position during Fiscal 2008, 2007, and 2006.

Based on our foreign currency cash flow hedge instruments outstanding at February 1, 2008 and February 2, 2007, we estimate a maximum potential one-day loss in fair value of approximately $57 million and $41 million, respectively, using a Value-at-Risk (“VAR”) model. The VAR model estimates were made assuming normal market conditions and a 95% confidence level. We used a Monte Carlo simulation type model that valued our foreign currency instruments against a thousand randomly generated market price paths. Forecasted transactions, firm commitments, fair value hedge instruments, and accounts receivable and 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. Additionally, as we utilize foreign currency instruments for hedging forecasted and firmly committed transactions, a loss in fair value for those instruments is generally offset by increases in the value of the underlying exposure.

Cash and Investments

At February 1, 2008, we have $9.5 billion of total cash, cash equivalents, and investments. Our investment policy is to manage our total cash and investments balances to preserve principal and maintain liquidity while maximizing the return on the investment portfolio through the full investment of available funds. We diversify our investment portfolio by investing in multiple types of investment-grade securities and through the use of third-party investment managers.

Of the $9.5 billion, $7.8 billion is classified as cash and cash equivalents. Due to the nature of these investments, we consider it reasonable to expect that their fair market values will not be significantly impacted by a change in interest rates, and that these investments can be liquidated for cash at short notice. As of February 1, 2008, the carrying value of our cash equivalents approximated fair value.

The remaining $1.7 billion is primarily invested in fixed income securities including government, agency, asset-backed, mortgage-backed and corporate debt securities of varying maturities at the date of acquisition. The fair value of our portfolio is affected primarily by interest rates more so than by the credit and liquidity issues currently facing the capital markets. We attempt to mitigate these risks by investing primarily in high credit quality securities with AAA and AA ratings and short-term securities with an A-1 rating, limiting the amount that can be invested in any single issuer, and by investing in short to intermediate term investments whose market value is less sensitive to interest rate changes. As of February 1, 2008, we did not hold any auction rate securities; at February 2, 2007, we held auction rate securities that had a carrying value of $255 million. The total carrying value of investments in asset-backed and mortgage-backed debt securities was approximately $550 million. Based on our investment portfolio and interest rates at February 1, 2008, a 100 basis point increase or decrease in interest rates would result in a decrease or increase of approximately $33 million in the fair value of the investment portfolio.

We periodically review our investment portfolio to determine if any investment is other-than-temporarily impaired due to changes in credit risk or other potential valuation concerns. At February 1, 2008, the fair value of securities below their carrying value was $155 million. The unrealized loss of $9 million related to these securities has been recorded in other comprehensive income (loss), as we believe the investments are not other-than-temporarily impaired. While certain available-for-sale securities have market values below cost, we believe it is probable that the principal and interest will be collected in accordance with the contractual terms, and that the decline in the market value is exacerbated by the overall credit concerns in the market. Factors considered in determining whether a loss is other-than-temporary include the length of time and extent to which fair value has been less than the cost basis; the underlying collateral, agency ratings, and future cash flows; and our intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in fair value. Our assessment that an investment is not other-than-temporarily impaired could change in the future due to new developments or changes in any particular investment.

The fair value of our portfolio was based on quoted market prices, which we currently believe are indicative of fair value. We will continue to evaluate whether the inputs are market observable as we implement SFAS No. 157, Fair Value Measurements (“SFAS 157”).

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Debt

We have entered into interest rate swap arrangements that convert our fixed interest rate expense to a floating rate basis to better align the associated interest rate characteristics to our cash and investments portfolio. The interest rate swaps qualify for hedge accounting treatment pursuant to SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended. We have designated the issuance of the Senior Notes and Senior Debentures and the related interest rate swap agreements as an integrated transaction. The changes in the fair value of the interest rate swaps are reflected in the carrying value of the interest rate swap on the balance sheet. The carrying value of the debt on the balance sheet is adjusted by an equal and offsetting amount. The differential to be paid or received on the interest rate swap agreements is accrued and recognized as an adjustment to interest expense as interest rates change.

At February 1, 2008, we had a $1.0 billion commercial paper program with a supporting $1.0 billion senior unsecured revolving credit facility. This program allows us to obtain favorable short-term borrowing rates. There were no outstanding advances under the commercial paper program at February 1, 2008. At February 2, 2007, $100 million was outstanding under the program, and the weighted-average interest rate on those outstanding short-term borrowings was 5.3%. We use the proceeds of the program and facility for general corporate purposes. We believe we will be able to access the capital markets to increase the size of our existing commercial paper program and meet our liquidity needs.

Risk Factors Affecting Our Business and Prospects

There are numerous risk factors that affect our business and the results of our operations. Some of these risks are beyond our control. These risk factors include:

•   general economic, business, and industry conditions;

•   our ability to reestablish a cost advantage over our competitors;

•   local economic and labor conditions, political instability, unexpected regulatory changes, trade protection measures, tax laws, copyright levies, and fluctuations in foreign currency exchange rates;

•   our ability to accurately predict product, customer, and geographic sales mix and seasonal sales trends;

•   information technology and manufacturing infrastructure failures;

•   our ability to effectively manage periodic product transitions;

•   our ability to maintain a strong internal control environment;

•   disruptions in component or product availability could unfavorably affect our performance;

•   our reliance on third-party suppliers for quality product components, including reliance on several single-source or limited-source suppliers;

•   our ability to access the capital markets;

•   risks relating to our internal controls;

•   unfavorable results of legal proceedings could harm our business and result in substantial costs;

•   our acquisition of other companies may present new risks;

•   our ability to properly manage the distribution of our products and services;

•   our success in achieving the benefits of our cost cutting measures;

•   effective hedging of our exposure to fluctuations in foreign currency exchange rates and interest rates;

•   obtaining licenses to intellectual property developed by others on commercially reasonable and competitive terms;

•   our ability to attract, retain, and motivate key personnel;

•   loss of government contracts;

•   expiration of tax holidays or favorable tax rate structures;

•   changing environmental laws; and

•   the effect of armed hostilities, terrorism, natural disasters, and public health issues.

For a discussion of these risk factors affecting our business and prospects, see “Part I — Item 1A — Risk Factors.”

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Critical Accounting Policies

We prepare our financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of financial statements in accordance with GAAP requires certain estimates, assumptions, and judgments to be made that may affect our Consolidated Statement of Financial Position and Consolidated Statement of Income. We believe our most critical accounting policies relate to revenue recognition, business combinations, warranty accruals, income taxes, stock-based compensation, and loss contingencies. We have discussed the development, selection, and disclosure of our critical accounting policies with the Audit Committee of our Board of Directors. These critical accounting policies and our other accounting policies are also described in Note 1 of Notes to Consolidated Financial Statements included in “Part II — Item 8 — Financial Statements and Supplementary Data.”

Revenue Recognition and Related Allowances — We frequently enter into sales arrangements with customers that contain multiple elements or deliverables such as hardware, software, peripherals, and services. Judgments and estimates are necessary to ensure compliance with GAAP. These judgments relate to the allocation of the proceeds received from an arrangement to the multiple elements, the determination of whether any undelivered elements are essential to the functionality of the delivered elements, and the appropriate timing of revenue recognition. We offer extended warranty and service contracts to customers that extend and/or enhance the technical support, parts, and labor coverage offered as part of the base warranty included with the product. Revenue from extended warranty and service contracts, for which we are obligated to perform, is recorded as deferred revenue and subsequently recognized over the term of the contract or when the service is completed. Revenue from sales of third-party extended warranty and service contracts, for which we are not obligated to perform, is recognized on a net basis at the time of sale, as we do not meet the criteria for gross recognition under Emerging Issues Task Force 99-19, “Reporting Revenue Gross as a Principal versus Net as an Agent.”

Estimates also related to revenue recognition relate primarily to customer sales returns and allowance for doubtful accounts. Generally, estimates are reasonably predictable based on historical experience. The primary factors affecting our accrual for estimated customer returns include estimated return rates as well as the number of units shipped that still have a right of return as of the balance sheet date. For sales to retailers, our accrual for estimated returns is generally based on the contractual caps specified in the sales arrangements. In the absence of contractual caps, revenue is deferred until the product has been sold by the retailer, the return rights expire, or a reliable estimate of returns can be made. Factors affecting our allowance for doubtful accounts include historical and anticipated customer default rates of the various aging categories of accounts receivable and financing receivables. Each quarter, we reevaluate our estimates to assess the adequacy of our recorded accruals for customer returns and allowance for doubtful accounts, and adjust the amounts as necessary. The expense associated with the allowance for doubtful accounts is recognized as selling, general, and administrative expense.

We report revenue net of any revenue-based taxes assessed by governmental authorities that are imposed on and concurrent with specific revenue-producing transactions.

Business Combinations and Intangible Assets Including Goodwill — We account for business combinations using the purchase method of accounting and accordingly, the assets and liabilities of the acquired entities are recorded at their estimated fair values at the acquisition date. Goodwill represents the excess of the purchase price over the fair value of net assets, including the amount assigned to identifiable intangible assets. Given the time it takes to obtain pertinent information to finalize the acquired company’s balance sheet, it may be several quarters before we are able to finalize those initial fair value estimates. Accordingly, it is not uncommon for the initial estimates to be subsequently revised. The results of operations of acquired businesses are included in the Consolidated Financial Statements from the acquisition date.

Identifiable intangible assets with finite lives are amortized over their estimated useful lives. They are generally amortized on a non-straight-line approach based on the associated projected cash flows in order to match the amortization pattern to the pattern in which the economic benefits of the assets are expected to be consumed. They are reviewed for impairment if indicators of potential impairment exist. Goodwill and indefinite lived intangibles assets are tested for impairment on an annual basis in the second fiscal quarter, or sooner if an indicator of impairment occurs.

42

Warranty — We record warranty liabilities at the time of sale for the estimated costs that may be incurred under the terms of the limited warranty. The specific warranty terms and conditions vary depending upon the product sold and country in which we do business, but generally include technical support, parts, and labor over a period ranging from one to three years. Factors that affect our warranty liability include the number of installed units currently under warranty, historical and anticipated rates of warranty claims on those units, and cost per claim to satisfy our warranty obligation. The anticipated rate of warranty claims is the primary factor impacting our estimated warranty obligation. The other factors are less significant due to the fact that the average remaining aggregate warranty period of the covered installed base is approximately 20 months, repair parts are generally already in stock or available at pre-determined prices, and labor rates are generally arranged at pre-established amounts with service providers. Warranty claims are reasonably predictable based on historical experience of failure rates. If actual results differ from our estimates, we revise our estimated warranty liability to reflect such changes. Each quarter, we reevaluate our estimates to assess the adequacy of the recorded warranty liabilities and adjust the amounts as necessary.

Income Taxes — We calculate a provision for income taxes using the asset and liability method, under which deferred tax assets and liabilities are recognized by identifying the temporary differences arising from the different treatment of items for tax and accounting purposes. In determining the future tax consequences of events that have been recognized in our financial statements or tax returns, judgment is required. Differences between the anticipated and actual outcomes of these future tax consequences could have a material impact on our consolidated results of operations or financial position.

Stock-Based Compensation — Effective February 4, 2006, we adopted SFAS 123(R) using the modified prospective transition method which does not require revising the presentation in prior periods for stock-based compensation. Under this transition method, stock-based compensation expense for Fiscal 2008 and Fiscal 2007 includes compensation expense for all stock-based compensation awards granted prior to February 4, 2006, but not yet vested at February 3, 2006, based on the grant date fair value estimated in accordance with the original provisions of SFAS No. 123, Accounting for Stock-Based Compensation (“SFAS 123”). Stock-based compensation expense for all stock-based compensation awards granted after February 3, 2006 is based on the grant-date fair value estimated in accordance with the provisions of SFAS 123(R). We recognize this compensation expense net of an estimated forfeiture rate over the requisite service period of the award, which is generally the vesting term of three-to-five years for stock options and three-to-five years for restricted stock awards. In March 2005, the SEC issued Staff Accounting Bulletin No. 107 (“SAB 107”) regarding the SEC’s interpretation of SFAS 123(R) and the valuation of share-based payments for public companies. We have applied the provisions of SAB 107 in our adoption of SFAS 123(R).

SFAS 123(R) requires the use of a valuation model to calculate the fair value of stock option awards. We have elected to use the Black-Scholes option pricing model, which incorporates various assumptions, including volatility, expected term, and risk-free interest rates. The volatility is based on a blend of implied and historical volatility of our common stock over the most recent period commensurate with the estimated expected term of our stock options. We use this blend of implied and historical volatility, as well as other economic data, because we believe such volatility is more representative of prospective trends. The expected term of an award is based on historical experience and on the terms and conditions of the stock awards granted to employees. The dividend yield of zero is based on the fact that we have never paid cash dividends and have no present intention to pay cash dividends.

The cost of restricted stock awards is determined using the fair market value of our common stock on the date of grant.

Prior to the adoption of SFAS 123(R), we measured compensation expense for our employee stock-based compensation plan using the intrinsic value method prescribed by APB 25. We applied the disclosure provisions of SFAS 123 such that the fair value of employee stock-based compensation was disclosed in the notes to our consolidated financial statements. Under APB 25, when the exercise price of our employee stock options equaled the market price of the underlying stock at the date of the grant, no compensation expense was recognized.

Loss Contingencies — We are subject to the possibility of various losses arising in the ordinary course of business. We consider the likelihood of loss or impairment of an asset or the incurrence of a liability, as well as our ability to reasonably estimate the amount of loss, in determining loss contingencies. An estimated loss contingency is accrued

43

when it is probable that an asset has been impaired or a liability has been incurred and the amount of loss can be reasonably estimated. We regularly evaluate current information available to us to determine whether such accruals should be adjusted and whether new accruals are required. Third parties have in the past and may in the future assert claims or initiate litigation related to exclusive patent, copyright, and other intellectual property rights to technologies and related standards that are relevant to us. If any infringement or other intellectual property claim made against us by any third party is successful, or if we fail to develop non-infringing technology or license the proprietary rights on commercially reasonable terms and conditions, our business, operating results, and financial condition could be materially and adversely affected.

Recently Issued Accounting Pronouncements

In September 2006, the FASB issued SFAS 157, which defines fair value, provides a framework for measuring fair value, and expands the disclosures required for assets and liabilities measured at fair value. SFAS 157 applies to existing accounting pronouncements that require fair value measurements; it does not require any new fair value measurements. SFAS 157 is effective for fiscal years beginning after November 15, 2007 and is required to be adopted by us beginning in the first quarter of Fiscal 2009. We are currently evaluating the impact that SFAS 157 may have on our results of operations, financial position, and cash flows, and we do not expect the impact to be material.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS 159”), which provides companies with an option to report selected financial assets and liabilities at fair value with the changes in fair value recognized in earnings at each subsequent reporting date. SFAS 159 provides an opportunity to mitigate potential volatility in earnings caused by measuring related assets and liabilities differently, and it may reduce the need for applying complex hedge accounting provisions. If elected, SFAS 159 is effective for fiscal years beginning after November 15, 2007, which is our Fiscal 2009. We are currently evaluating the impact that this statement may have on our results of operations and financial position and have yet to make a decision on the elective adoption of SFAS 159.

In December 2007, the FASB issued SFAS No. 141(R), Business Combinations (“SFAS 141(R)”). SFAS 141(R) requires that the acquisition method of accounting be applied to a broader set of business combinations and establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, liabilities assumed, any noncontrolling interest in the acquiree, and the goodwill acquired. SFAS 141(R) also establishes the disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. SFAS 141(R) is effective for fiscal years beginning after December 15, 2008 and is required to be adopted by us beginning in the first quarter of Fiscal 2010. We are currently evaluating the impact that SFAS 141(R) may have on our results of operations, financial position, and cash flows.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51 (“SFAS 160”). SFAS 160 requires that the noncontrolling interest in the equity of a subsidiary be accounted for and reported as equity, provides revised guidance on the treatment of net income and losses attributable to the noncontrolling interest and changes in ownership interests in a subsidiary, and requires additional disclosures that identify and distinguish between the interests of the controlling and noncontrolling owners. SFAS 160 also establishes disclosure requirements that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. SFAS 160 is effective for fiscal years beginning after December 15, 2008 and is required to be adopted by us beginning in the first quarter of Fiscal 2010. We do not expect SFAS 160 to have an impact on our results of operations, financial position, and cash flows.

ITEM 7A — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Response to this item is included in “Part II — Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Market Risk” and is incorporated herein by reference.

44

ITEM 8 — FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Financial Statements:
Report of Independent Registered Public Accounting Firm		46
Consolidated Statements of Financial Position at February 1, 2008 and February 2, 2007		47
Consolidated Statements of Income for the fiscal years ended February 1, 2008, February 2, 2007, and February 3, 2006		48
Consolidated Statements of Cash Flows for the fiscal years ended February 1, 2008, February 2, 2007, and February 3, 2006		49
Consolidated Statements of Stockholders’ Equity for the fiscal years ended February 1, 2008, February 2, 2007, and February 3, 2006		50
Notes to Consolidated Financial Statements		51
Financial Statement Schedule:
Schedule II — Valuation and Qualifying Accounts for the fiscal years ended February 1, 2008, February 2, 2007, and February 3, 2006		100
All other schedules are omitted because they are not applicable.

45

Report of Independent Registered Public Accounting Firm

To the Board of Directors and

Shareholders of Dell Inc.:

In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Dell Inc. and its subsidiaries (“Company”) at February 1, 2008 and February 2, 2007, and the results of their operations and their cash flows for each of the three years in the period ended February 1, 2008 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of February 1, 2008, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements and the financial statement schedule, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Company’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

As discussed in Note 1, the Company changed the manner in which it accounts for uncertain tax positions in Fiscal 2008 and the manner in which it accounts for stock-based compensation in Fiscal 2007. As discussed in Note 6, the Company changed the manner in which it accounts for certain hybrid financial instruments in Fiscal 2008.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PRICEWATERHOUSECOOPERS LLP

Austin, Texas

March 31, 2008

46

DELL INC.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(in millions)

	February 1,			February 2,
	2008			2007
ASSETS
Current assets:
Cash and cash equivalents	$	7,764		$	9,546
Short-term investments		208			752
Accounts receivable, net of allowance		5,961			4,622
Financing receivables, net of allowance		1,732			1,530
Inventories, net of allowance		1,180			660
Other		3,035			2,829
Total current assets		19,880			19,939
Property, plant, and equipment, net of depreciation		2,668			2,409
Investments		1,560			2,147
Long-term financing receivables, net of allowance		407			323
Goodwill		1,648			110
Intangible assets, net of amortization		780			45
Other non-current assets		618			662
Total assets	$	27,561		$	25,635
LIABILITIES AND EQUITY
Current liabilities:
Short-term borrowings	$	225		$	188
Accounts payable		11,492			10,430
Accrued and other		4,323			5,141
Short-term deferred service revenue		2,486			2,032
Total current liabilities		18,526			17,791
Long-term debt		362			569
Long-term deferred service revenue		2,774			2,189
Other non-current liabilities		2,070			647
Total liabilities		23,732			21,196
Commitments and contingencies (Note 10)
Redeemable common stock and capital in excess of $.01 par value; shares issued and outstanding: 4 and 5, respectively (Note 4)		94			111
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 authorized: 7,000; shares issued: 3,320 and 3,307, respectively; shares outstanding: 2,060 and 2,226, respectively		10,589			10,107
Treasury stock at cost: 785 and 606 shares, respectively		(25,037	)		(21,033	)
Retained earnings		18,199			15,282
Accumulated other comprehensive loss		(16	)		(28	)
Total stockholders’ equity		3,735			4,328
Total liabilities and stockholders’ equity	$	27,561		$	25,635

The accompanying notes are an integral part of these consolidated financial statements.

47

DELL INC.

CONSOLIDATED STATEMENTS OF INCOME

(in millions, except per share amounts)

	Fiscal Year Ended
	February 1,		February 2,		February 3
	2008		2007		2006
Net revenue	$	61,133	$	57,420	$	55,788
Cost of net revenue(1)		49,462		47,904		45,897
Gross margin		11,671		9,516		9,891
Operating expenses:
Selling, general, and administrative(1)		7,538		5,948		5,051
In-process research and development		83		-		-
Research, development, and engineering(1)		610		498		458
Total operating expenses		8,231		6,446		5,509
Operating income		3,440		3,070		4,382
Investment and other income, net		387		275		226
Income before income taxes		3,827		3,345		4,608
Income tax provision		880		762		1,006
Net income	$	2,947	$	2,583	$	3,602
Earnings per common share:
Basic	$	1.33	$	1.15	$	1.50
Diluted	$	1.31	$	1.14	$	1.47
Weighted-average shares outstanding:
Basic		2,223		2,255		2,403
Diluted		2,247		2,271		2,449

(1) Cost of net revenue and operating expenses for the fiscal years ended February 1, 2008 and February 2, 2007, include stock-based compensation expense pursuant to Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment, (“SFAS 123(R)”). See Note 5 of Notes to Consolidated Financial Statements for additional information.

The accompanying notes are an integral part of these consolidated financial statements.

48

DELL INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

	Fiscal Year Ended
	February 1,			February 2,			February 3,
	2008			2007			2006
Cash flows from operating activities:
Net income	$	2,947		$	2,583		$	3,602
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		607			471			394
Stock-based compensation		329			368			17
In-process research and development charges		83			-			-
Excess tax benefits from stock-based compensation		(12	)		(80	)		-
Tax benefits from employee stock plans		-			-			224
Effects of exchange rate changes on monetary assets and liabilities denominated in foreign currencies		30			37			(3	)
Other		133			61			157
Changes in:
Operating working capital		(519	)		397			(53	)
Non-current assets and liabilities		351			132			413
Net cash provided by operating activities		3,949			3,969			4,751
Cash flows from investing activities:
Investments:
Purchases		(2,394	)		(8,343	)		(6,796	)
Maturities and sales		3,679			10,320			11,692
Capital expenditures		(831	)		(896	)		(747	)
Acquisition of business, net of cash received		(2,217	)		(118	)		-
Proceeds from sale of building		-			40			-
Net cash (used in) provided by investing activities		(1,763	)		1,003			4,149
Cash flows from financing activities:
Repurchase of common stock		(4,004	)		(3,026	)		(7,249	)
Issuance of common stock under employee plans		136			314			1,051
Excess tax benefits from stock-based compensation		12			80			-
(Repayment) issuance of commercial paper, net		(100	)		100			-
Repayments of borrowings		(165	)		(63	)		(81	)
Proceeds from borrowings		66			52			55
Other		(65	)		(8	)		(28	)
Net cash used in financing activities		(4,120	)		(2,551	)		(6,252	)
Effect of exchange rate changes on cash and cash equivalents		152			71			(73	)
Net (decrease) increase in cash and cash equivalents		(1,782	)		2,492			2,575
Cash and cash equivalents at beginning of year		9,546			7,054			4,479
Cash and cash equivalents at end of year	$	7,764		$	9,546		$	7,054

The accompanying notes are an integral part of these consolidated financial statements.

49

DELL INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in millions)

	Common Stock and													Accumulated
	Capital in Excess of													Other
	Par Value					Treasury Sock								Comprehensive
	Issued Shares		Amount			Shares		Amount			Retained Earnings			Loss			Other			Total
Balances at January 28, 2005		2,769	$	8,195			284	$	(10,758	)	$	9,097		$	(78	)	$	(44	)	$	6,412
Net income		-		-			-		-			3,602			-			-			3,602
Change in net unrealized loss on investments, net of taxes		-		-			-		-			-			(24	)		-			(24	)
Foreign currency translation adjustments		-		-			-		-			-			(8	)		-			(8	)
Change in net unrealized loss on derivative instruments, net of taxes		-		-			-		-			-			9			-			9
Total comprehensive income		-		-			-		-			-			-			-			3,579
Stock issuances under employee plans, including tax benefits		49		1,308			-		-			-			-			-			1,308
Repurchases		-		-			204		(7,249	)		-			-			-			(7,249	)
Other		-		-			-		-			-			-			(3	)		(3	)
Balances at February 3, 2006		2,818	$	9,503			488	$	(18,007	)	$	12,699		$	(101	)	$	(47	)	$	4,047
Net income		-		-			-		-			2,583			-			-			2,583
Change in net unrealized loss on investments, net of taxes		-		-			-		-			-			31			-			31
Foreign currency translation adjustments		-		-			-		-			-			(11	)		-			(11	)
Change in net unrealized gain on derivative instruments, net of taxes		-		-			-		-			-			30			-			30
Valuation of retained interests in securitized assets, net of taxes		-		-			-		-			-			23			-			23
Total comprehensive income		-		-			-		-			-			-			-			2,656
Stock issuances under employee plans(b)		14		196			-		-			-			-			-			196
Repurchases		-		-			118		(3,026	)		-			-			-			(3,026	)
Stock-based compensation expense under SFAS 123(R)		-		368			-		-			-			-			-			368
Tax benefit from employee stock plans		-		56			-		-			-			-			-			56
Other and shares issued to subsidiaries		475		(16	)		-		-			-			-			47			31
Balances at February 2, 2007		3,307	$	10,107			606	$	(21,033	)	$	15,282		$	(28	)	$	-		$	4,328
Net income		-		-			-		-			2,947			-			-			2,947
Impact of adoption of SFAS 155		-		-			-		-			29			(23	)					6
Change in net unrealized gain on investments, net of taxes		-		-			-		-			-			56			-			56
Foreign currency translation adjustments		-		-			-		-			-			17			-			17
Change in net unrealized loss on derivative instruments, net of taxes		-		-			-		-			-			(38	)		-			(38	)
Total comprehensive income		-		-			-		-			-			-			-			2,988
Impact of adoption of FIN 48		-		(3	)		-		-			(59	)		-						(62	)
Stock issuances under employee plans(a)		13		153			-		-			-			-			-			153
Repurchases		-		-			179		(4,004	)		-			-			-			(4,004	)
Stock-based compensation expense under SFAS 123(R)		-		329			-		-			-			-			-			329
Tax benefit from employee stock plans		-		3			-		-			-			-			-			3
Balance at February 1, 2008		3,320	$	10,589			785	$	(25,037	)	$	18,199		$	(16	)	$	-		$	3,735

(a)	Includes 1 million shares and $17 million related to redeemable common stock. See Note 4 of Notes to Consolidated Financial Statements.
(b)	Excludes 5 million shares and $111 million related to redeemable common stock. See Note 4 of Notes to Consolidated Financial Statements.

The accompanying notes are an integral part of these consolidated financial statements.

50

DELL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business — Dell Inc., a Delaware corporation (both individually and together with its consolidated subsidiaries, “Dell”), offers a broad range of product categories, including desktop PCs, servers and networking products, storage, mobility products, software and peripherals, and services. Dell sells its products and services directly to customers through dedicated sales representatives, telephone-based sales, and online at www.dell.com, and through a variety of indirect sales channels. Dell’s customers include large corporate, government, healthcare, and education accounts, as well as small-to-medium businesses and individual consumers.

Fiscal Year — Dell’s fiscal year is the 52- or 53-week period ending on the Friday nearest January 31. The fiscal years ending February 1, 2008 and February 2, 2007 included 52 weeks, and the fiscal year ending February 3, 2006 included 53 weeks.

Principles of Consolidation — The accompanying consolidated financial statements include the accounts of Dell Inc. and its wholly-owned subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). All significant intercompany transactions and balances have been eliminated.

Dell was formerly a partner in Dell Financial Services L.P. (“DFS”), a joint venture with CIT Group Inc. (“CIT”). Dell purchased the remaining 30% interest in DFS from CIT effective December 31, 2007; therefore, DFS is a wholly-owned subsidiary at February 1, 2008. DFS’ financial results have previously been consolidated by Dell in accordance with Financial Accounting Standards Board (“FASB”) Interpretation No. 46R (“FIN 46R”), as Dell was the primary beneficiary. DFS allows Dell to provide its customers with various financing alternatives. See Note 6 of Notes to Consolidated Financial Statements for additional information.

Use of Estimates — The preparation of financial statements in accordance with GAAP requires the use of management’s estimates. These estimates are subjective in nature and involve judgments that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at fiscal year-end, and the reported amounts of revenues and expenses during the fiscal year. Actual results could differ from those estimates.

Cash and Cash Equivalents — All highly liquid investments, including credit card receivables, with original maturities of three months or less at date of purchase are carried at cost, which approximates fair value, and are considered to be cash equivalents. All other investments not considered to be cash equivalents are separately categorized as investments.

Investments — Dell’s investments in debt securities and publicly traded equity securities are classified as available-for-sale and are reported at fair value (based on quoted prices and market prices) using the specific identification method. Unrealized gains and losses, net of taxes, are reported as a component of stockholders’ equity. Realized gains and losses on investments are included in investment and other income, net when realized. All other investments are initially recorded at cost. Any impairment loss to reduce an investment’s carrying amount to its fair market value is recognized in income when a decline in the fair market value of an individual security below its cost or carrying value is determined to be other than temporary.

Financing Receivables — Financing receivables consist of customer receivables, residual interest and retained interest in securitized receivables. Customer receivables include fixed-term loans and leases and revolving loans resulting from the sale of Dell products and services. Financing receivables are presented net of the allowance for losses. See Note 6 of Notes to Consolidated Financial Statements for additional information.

Asset Securitization — Dell sells certain financing receivables to unconsolidated qualifying special purpose entities in securitization transactions. These receivables are removed from the Consolidated Statement of Financial Position at the time they are sold in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities — a Replacement of SFAS No. 125 (“SFAS 140”). Receivables are considered sold when the receivables are transferred beyond the reach

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of Dell’s creditors, the transferee has the right to pledge or exchange the assets, and Dell has surrendered control over the rights and obligations of the receivables. Gains and losses from the sale of fixed-term loans and leases and revolving loans are recognized in the period the sale occurs, based upon the relative fair value of the assets sold and the remaining retained interests. Subsequent to the sale, retained interest estimates are periodically updated based upon current information and events to determine the current fair value. In estimating the value of retained interest, Dell makes a variety of financial assumptions, including pool credit losses, payment rates, and discount rates. These assumptions are supported by both Dell’s historical experience and anticipated trends relative to the particular receivable pool.

Allowance for Financing Receivables Losses — Dell recognizes an allowance for losses on financing receivables in an amount equal to the probable future losses net of recoveries. The allowance for losses is determined based on a variety of factors, including historical experience, past due receivables, receivable type, and risk composition. Financing receivables are charged to the allowance at the earlier of when an account is deemed to be uncollectible or when the account is 180 days delinquent. Recoveries on receivables previously charged off as uncollectible are recorded to the allowance for doubtful accounts. See Note 6 of Notes to Consolidated Financial Statements for additional information.

Inventories — Inventories are stated at the lower of cost or market with cost being determined on a first-in, first-out basis.

Property, Plant, and Equipment — Property, plant, and equipment are carried at depreciated cost. Depreciation is provided using the straight-line method over the estimated economic lives of the assets, which range from ten to thirty years for buildings and two to five years for all other assets. Leasehold improvements are amortized over the shorter of five years or the lease term. Gains or losses related to retirements or disposition of fixed assets are recognized in the period incurred. Dell performs reviews for the impairment of fixed assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Dell capitalizes eligible internal-use software development costs incurred subsequent to the completion of the preliminary project stage. Development costs are amortized over the shorter of the expected useful life of the software or five years.

Impairment of Long-Lived Assets — In accordance with the provisions SFAS 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” Dell reviews long-lived assets for impairment when circumstances indicate the carrying amount of an asset may not be recoverable based on the undiscounted future cash flows of the asset. If the carrying amount of the asset is determined not to be recoverable, a write-down to fair value is recorded. Fair values are determined based on quoted market values, discounted cash flows, or external appraisals, as applicable. Dell reviews long-lived assets for impairment at the individual asset or the asset group level for which the lowest level of independent cash flows can be identified. During Fiscal 2008 and 2007, there were no significant impairments to long-lived assets.

Business Combinations and Intangible Assets Including Goodwill — Dell accounts for business combinations using the purchase method of accounting and accordingly, the assets and liabilities of the acquired entities are recorded at their estimated fair values at the acquisition date. Goodwill represents the excess of the purchase price over the fair value of net assets, including the amount assigned to identifiable intangible assets. Given the time it takes to obtain pertinent information to finalize the fair value of the acquired assets and liabilities, it may be several quarters before Dell is able to finalize those initial fair value estimates. Accordingly, it is not uncommon for the initial estimates to be subsequently revised. The results of operations of acquired businesses are included in the Consolidated Financial Statements from the acquisition date.

Identifiable intangible assets with finite lives are amortized over their estimated useful lives. They are generally amortized on a non-straight line approach based on the associated projected cash flows in order to match the amortization pattern to the pattern in which the economic benefits of the assets are expected to be consumed. They are reviewed for impairment if indicators of potential impairment exist. Goodwill and indefinite lived intangible

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assets are tested for impairment on an annual basis in the second fiscal quarter, or sooner if an indicator of impairment occurs.

Foreign Currency Translation — The majority of Dell’s international sales are made by international subsidiaries, most of which have the U.S. dollar as their functional currency. Dell’s subsidiaries that do not have the U.S. dollar as their functional currency translate assets and liabilities at current rates of exchange in effect at the balance sheet date. Revenue and expenses from these international subsidiaries are translated using the monthly average exchange rates in effect for the period in which the items occur. The resulting gains and losses from these foreign currency translation adjustments totaled a $16 million loss, $33 million loss, and $22 million loss at February 1, 2008, February 2, 2007, and February 3, 2006, respectively, and are included as a component of accumulated other comprehensive income (loss) in stockholders’ equity.

Local currency transactions of international subsidiaries that have the U.S. dollar as the functional currency are remeasured into U.S. dollars using current rates of exchange for monetary assets and liabilities and historical rates of exchange for nonmonetary assets and liabilities. Gains and losses from remeasurement of monetary assets and liabilities are included in investment and other income, net.

Hedging Instruments — Dell uses derivative financial instruments, primarily forwards, options, and swaps to hedge certain foreign currency and interest rate exposures. Dell also uses other derivative instruments not designated as hedges such as forwards to hedge foreign currency balance sheet exposures. Dell does not use derivatives for speculative purposes.

Dell applies SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, (“SFAS 133”) as amended, which establishes accounting and reporting standards for derivative instruments and hedging activities. SFAS 133 requires Dell to recognize all derivatives as either assets or liabilities in its Consolidated Statements of Financial Position and measure those instruments at fair value. See Note 2 of Notes to Consolidated Financial Statements for a full description of Dell’s derivative financial instrument activities and related accounting policies.

Treasury Stock — Effective with the beginning of the second quarter of Fiscal 2002, Dell began holding repurchased shares of its common stock as treasury stock. Prior to that date, Dell retired all such repurchased shares, which were recorded as a reduction to retained earnings. Dell accounts for treasury stock under the cost method and includes treasury stock as a component of stockholders’ equity.

Revenue Recognition — Dell’s revenue recognition policy is in accordance with the requirements of Staff Accounting Bulletin (“SAB”) No. 104, Revenue Recognition, (“SAB 104”), Emerging Issues Task Force (“EITF”) 00-21, Accounting for Revenue Arrangements with Multiple Deliverables, AICPA Statement of Position (“SOP”) No. 97-2, Software Revenue Recognition, EITF 01-09, Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products) (“EITF 01-09”) and other applicable revenue recognition guidance and interpretations. Net revenues include sales of hardware, software and peripherals, and services (including extended service contracts and professional services). Dell recognizes revenue for these products when it is realized or realizable and earned. Revenue is considered realized and earned when:

•   persuasive evidence of an arrangement exists;

•   delivery has occurred or services have been rendered;

•   Dell’s fee to its customer is fixed or determinable; and

•   collection of the resulting receivable is reasonably assured.

Revenue from the sale of products are recognized when title and risk of loss passes to the customer. Delivery is considered complete when products have been shipped to Dell’s customer or services have been rendered, title and risk of loss has transferred to the customer, and customer acceptance has been satisfied through obtaining acceptance from the customer, the acceptance provision lapses, or Dell has evidence that the acceptance provisions have been satisfied.

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During Fiscal 2008, Dell began selling its products through retailers. Sales to Dell’s retail customers are generally made under agreements allowing for limited rights of return, price protection, rebates, and marketing development funds. Dell has generally limited these rights through contractual caps within Dell’s agreements with its retailers. Dell’s policy on sales to retailers is to recognize revenue and related costs of revenue, net of returns and price adjustments, which are estimated using the contractual caps specified in the sales arrangement. To the extent return rights or price adjustments are not limited by a contractual cap, the revenue and related cost are deferred until the product has been sold by the retailer, the rights expire, or a reliable estimate of such amounts can be made. Dell records estimated reductions to revenue or an expense for retail customer programs at the time revenue is recognized. Dell’s customer programs primarily involve rebates, which are designed to serve as sales incentives to resellers of Dell products and marketing development funds, which represent monies paid to retailers that are generally earmarked for market segment development and expansion and are designed to support Dell retail partners’ activities while also promoting Dell products. Dell accounts for customer programs in accordance with EITF 01-09.

Dell sells its products and services either separately or as part of a multiple-element arrangement. Dell allocates revenue from multiple-element arrangements to the elements based on the relative fair value of each element, which is generally based on the relative sales price of each element when sold separately. The allocation of fair value for a multiple-element arrangement involving software is based on vendor specific objective evidence (“VSOE”), or in the absence of VSOE for delivered elements, the residual method. Under the residual method, Dell allocates the residual amount of revenue from the arrangement to software licenses at the inception of the license term when VSOE for all undelivered elements, such as Post Contract Customer Support (“PCS”), exists and all other revenue recognition criteria have been satisfied. In the absence of VSOE for undelivered elements, revenue is deferred and subsequently recognized over the term of the arrangement. For sales of extended warranties with a separate contract price, Dell defers revenue equal to the separately stated price. Revenue associated with undelivered elements is deferred and recorded when delivery occurs. Product revenue is recognized, net of an allowance for estimated returns, when both title and risk of loss transfer to the customer, provided that no significant obligations remain. Revenue from extended warranty and service contracts, for which Dell is obligated to perform, is recorded as deferred revenue and subsequently recognized over the term of the contract or when the service is completed. Revenue from sales of third-party extended warranty and service contracts or other products or software PCS, for which Dell is not obligated to perform, and for which Dell does not meet the criteria for gross revenue recognition under EITF 99-19, Reporting Revenue Gross as a Principal versus Net as an Agent, is recognized on a net basis. All other revenue is recognized on a gross basis.

Dell defers the cost of shipped products awaiting revenue recognition until revenue is recognized. These deferred costs totaled $519 million and $424 million at February 1, 2008 and February 2, 2007, respectively, and are included in other current assets on Dell’s Consolidated Statement of Financial Position.

Dell records revenue from the sale of equipment under sales-type leases as product revenue at the inception of the lease. Sales-type leases also produce financing income, which Dell recognizes at consistent rates of return over the lease term. Customer revolving loan financing income is recognized when billed to the customer.

Dell reports revenue net of any revenue-based taxes assessed by governmental authorities that are imposed on and concurrent with specific revenue-producing transactions.

Warranty — Dell records warranty liabilities at the time of sale for the estimated costs that may be incurred under its limited warranty. The specific warranty terms and conditions vary depending upon the product sold and country in which Dell does business, but generally includes technical support, parts, and labor over a period ranging from one to three years. Factors that affect Dell’s warranty liability include the number of installed units currently under warranty, historical and anticipated rates of warranty claims on those units, and cost per claim to satisfy Dell’s warranty obligation. The anticipated rate of warranty claims is the primary factor impacting the estimated warranty obligation. The other factors are less significant due to the fact that the average remaining aggregate warranty period of the covered installed base is approximately 20 months, repair parts are generally already in stock or available at

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pre-determined prices, and labor rates are generally arranged at pre-established amounts with service providers. Warranty claims are relatively predictable based on historical experience of failure rates. If actual results differ from the estimates, Dell revises its estimated warranty liability. Each quarter, Dell reevaluates its estimates to assess the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary.

Vendor Rebates — Dell may receive consideration from vendors in the normal course of business. Certain of these funds are rebates of purchase price paid and others are related to reimbursement of costs incurred by Dell to sell the vendor’s products. Dell’s policy for accounting for these funds is in accordance with EITF 02-16, Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor. The funds are recognized as a reduction of cost of goods sold and inventory if the funds are a reduction of the price of the vendor’s products. If the consideration is a reimbursement of costs incurred by Dell to sell or develop the vendor’s products, then the consideration is classified as a reduction of that cost in the income statement, most often operating expenses. In order to be recognized as a reduction of operating expenses, the reimbursement must be for a specific, incremental, identifiable cost incurred by Dell in selling or developing the vendor’s products or services.

Loss Contingencies — Dell is subject to the possibility of various losses arising in the ordinary course of business. Dell considers the likelihood of loss or impairment of an asset or the incurrence of a liability, as well as Dell’s ability to reasonably estimate the amount of loss, in determining loss contingencies. An estimated loss contingency is accrued when it is probable that an asset has been impaired or a liability has been incurred and the amount of loss can be reasonably estimated. Dell regularly evaluates current information available to determine whether such accruals should be adjusted and whether new accruals are required. Third parties have in the past and may in the future assert claims or initiate litigation related to exclusive patent, copyright, and other intellectual property rights to technologies and related standards that are relevant to Dell. If any infringement or other intellectual property claim made against Dell by any third party is successful, or if Dell fails to develop non-infringing technology or license the proprietary rights on commercially reasonable terms and conditions, Dell’s business, operating results, and financial condition could be materially and adversely affected.

Shipping Costs — Dell’s shipping and handling costs are included in cost of sales in the accompanying Consolidated Statements of Income for all periods presented.

Selling, General, and Administrative — Selling expenses include items such as sales commissions, marketing and advertising costs, and contractor services. Advertising costs are expensed as incurred and were $943 million, $836 million, and $773 million, during Fiscal 2008, 2007, and 2006 respectively. General and administrative expenses include items for Dell’s administrative functions, such as Finance, Legal, Human Resources, and Information Technology support. These functions include costs for items such as salaries, maintenance and supplies, insurance, depreciation expense, and allowance for doubtful accounts.

Research, Development, and Engineering Costs — Research, development, and engineering costs are expensed as incurred, in accordance with SFAS 2, Accounting for Research and Development Costs. Research, development, and engineering expenses primarily include payroll and headcount related costs, contractor fees, infrastructure costs, and administrative expenses directly related to research and development support.

In Process Research and Development (“IPR&D”) — IPR&D represents the fair value of the technology acquired in a business combination where technological feasibility has not been established and no future alternative uses exist. IPR&D is expensed immediately upon completion of the associated acquisition.

Website Development Costs — Dell expenses, as incurred, the costs of maintenance and minor enhancements to the features and functionality of its websites.

Income Taxes — Deferred tax assets and liabilities are recorded based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Dell calculates a provision for income taxes using the asset and liability method, under which deferred tax assets and liabilities are recognized by identifying the temporary differences arising from the

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different treatment of items for tax and accounting purposes. In determining the future tax consequences of events that have been recognized in the financial statements or tax returns, judgment is required. Differences between the anticipated and actual outcomes of these future tax consequences and changes in enacted tax rates could have a material impact on Dell’s consolidated results of operations or financial position.

Comprehensive Income — Dell’s comprehensive income is comprised of net income, unrealized gains and losses on marketable securities classified as available-for-sale, unrealized gains and losses related to the change in valuation of retained interests in securitized assets, foreign currency translation adjustments, and unrealized gains and losses on derivative financial instruments related to foreign currency hedging. Upon the adoption of SFAS No. 155, Accounting for Certain Hybrid Financial Instruments — an amendment of FASB Statements No. 133 and 140, (“SFAS 155”), beginning the first quarter of Fiscal 2008, all gains and losses in valuation of retained interests in securitized assets are recognized in income immediately and no longer included as a component of accumulated other comprehensive income (loss).

Earnings Per Common Share — Basic earnings per share is based on the weighted-average effect of all common shares issued and outstanding, and is calculated by dividing net income by the weighted-average shares outstanding during the period. Diluted earnings per share is calculated by dividing net income by the weighted-average number of common shares used in the basic earnings per share calculation plus the number of common shares that would be issued assuming exercise or conversion of all potentially dilutive common shares outstanding. Dell excludes equity instruments from the calculation of diluted earnings per share if the effect of including such instruments is antidilutive. Accordingly, certain stock-based incentive awards have been excluded from the calculation of diluted earnings per share totaling 230 million, 268 million, and 127 million, shares during Fiscal 2008, 2007, and 2006 respectively.

In December 2006, Dell modified the organizational structure of certain subsidiaries to achieve more integrated global operations and to provide various financial, operational, and tax efficiencies. In connection with this internal restructuring, Dell issued 475 million shares of common stock to a wholly-owned subsidiary. Pursuant to Accounting Research Bulletin 51, Consolidated Financial Statements (as amended), these shares are not considered to be outstanding.

The following table sets forth the computation of basic and diluted earnings per share for each of the past three fiscal years:

	Fiscal Year Ended
	February 1,		February 2,		February 3,
	2008		2007		2006
	(in millions, except per share amounts)
Numerator:
Net income	$	2,947	$	2,583	$	3,602
Denominator:
Weighted-average shares outstanding:
Basic		2,223		2,255		2,403
Effect of dilutive options, restricted stock units, restricted stock, and other		24		16		46
Diluted		2,247		2,271		2,449
Earnings per common share:
Basic	$	1.33	$	1.15	$	1.50
Diluted	$	1.31	$	1.14	$	1.47

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Stock-Based Compensation — At February 1, 2008, Dell has stock-based compensation plans and an employee stock purchase plan with outstanding stock or stock options; however, Dell discontinued the employee stock purchase plan effective February 2, 2008, as part of an overall assessment of its benefits strategy.

Effective February 4, 2006, Dell adopted SFAS 123(R) using the modified prospective transition method which does not require revising the presentation in prior periods for stock-based compensation. Under this transition method, stock-based compensation expense for Fiscal 2008 and Fiscal 2007 includes compensation expense for all stock-based compensation awards granted prior to February 4, 2006, but not yet vested at February 3, 2006, based on the grant date fair value estimated in accordance with the original provisions of SFAS No. 123, Accounting for Stock-Based Compensation (“SFAS 123”). Stock-based compensation expense for all stock-based compensation awards granted after February 3, 2006 is based on the grant-date fair value estimated in accordance with the provisions of SFAS 123(R). Dell recognizes this compensation expense net of an estimated forfeiture rate over the requisite service period of the award, which is generally the vesting term of three to five years for stock options and restricted stock awards. In March 2005, the United States Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin No. 107 (“SAB 107”) regarding the SEC’s interpretation of SFAS 123(R) and the valuation of share-based payments for public companies. Dell has applied the provisions of SAB 107 in its adoption of SFAS 123(R). See Note 5 of Notes to Consolidated Financial Statements for further discussion of stock-based compensation.

Prior to the adoption of SFAS 123(R), Dell measured compensation expense for its employee stock-based compensation plan using the intrinsic value method prescribed by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (“APB 25”). Dell applied the disclosure provisions of SFAS 123 such that the fair value of employee stock-based compensation was disclosed in the notes to its financial statements. Under APB 25, when the exercise price of Dell’s employee stock options equaled the market price of the underlying stock at the date of the grant, no compensation expense was recognized.

Recently Issued Accounting Pronouncements — In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS 157”), which defines fair value, provides a framework for measuring fair value, and expands the disclosures required for assets and liabilities measured at fair value. SFAS 157 applies to existing accounting pronouncements that require fair value measurements; it does not require any new fair value measurements. SFAS 157 is effective for fiscal years beginning after November 15, 2007 and is required to be adopted by Dell beginning in the first quarter of Fiscal 2009. Management is currently evaluating the impact that SFAS 157 may have on Dell’s results of operations, financial position, and cash flows and does not expect the impact to be material.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS 159”), which provides companies with an option to report selected financial assets and liabilities at fair value with the changes in fair value recognized in earnings at each subsequent reporting date. SFAS 159 provides an opportunity to mitigate potential volatility in earnings caused by measuring related assets and liabilities differently, and it may reduce the need for applying complex hedge accounting provisions. If elected, SFAS 159 is effective for fiscal years beginning after November 15, 2007, which is Dell’s Fiscal 2009. Management is currently evaluating the impact that this statement may have on Dell’s results of operations and financial position and has yet to make a decision on the elective adoption of SFAS 159.

In December 2007, the FASB issued SFAS No. 141(R), Business Combinations (“SFAS 141(R)”). SFAS 141(R) requires that the acquisition method of accounting be applied to a broader set of business combinations and establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, liabilities assumed, any noncontrolling interest in the acquiree, and the goodwill acquired. SFAS 141(R) also establishes the disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. SFAS 141(R) is effective for fiscal years beginning after December 15, 2008 and is required to be adopted by Dell beginning in the first quarter of Fiscal 2010. Management is currently evaluating the impact that SFAS 141(R) may have on Dell’s results of operations, financial position, and cash flows.

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In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51 (“SFAS 160”). SFAS 160 requires that the noncontrolling interest in the equity of a subsidiary be accounted for and reported as equity, provides revised guidance on the treatment of net income and losses attributable to the noncontrolling interest and changes in ownership interests in a subsidiary and requires additional disclosures that identify and distinguish between the interests of the controlling and noncontrolling owners. SFAS 160 also establishes disclosure requirements that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. SFAS 160 is effective for fiscal years beginning after December 15, 2008 and is required to be adopted by Dell beginning in the first quarter of Fiscal 2010. Management does not expect SFAS 160 to have an impact on Dell’s results of operations, financial position, and cash flows.

NOTE 2 — FINANCIAL INSTRUMENTS

Disclosures About Fair Values of Financial Instruments

The fair value of investments and related interest rate derivative instruments has been estimated based upon quoted rates and pricing models. The fair value of foreign currency forward contracts has been estimated using market quoted rates of foreign currencies at the applicable balance sheet date. The estimated fair value of foreign currency purchased option contracts is based on market quoted rates at the applicable balance sheet date and the Black-Scholes option pricing model. The estimates presented herein are not necessarily indicative of the amounts that Dell could realize in a current market exchange. Changes in assumptions could significantly affect the estimates.

Cash and cash equivalents, accounts receivable, accounts payable, and accrued and other liabilities are reflected in the accompanying Consolidated Statements of Financial Position at cost, which approximates fair value because of the short-term maturity of these assets and liabilities.

See Note 6 of Notes to Consolidated Financial Statements for a discussion on financing receivables and retained interest.

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Investments

The following table summarizes, by major security type, the fair value and cost of Dell’s investments. All investments with remaining maturities in excess of one year are recorded as long-term investments in the accompanying Consolidated Statements of Financial Position.

	February 1, 2008									February 2, 2007
	Fair				Unrealized		Unrealized			Fair				Unrealized		Unrealized
	Value		Cost		Gain		(Loss)			Value		Cost		Gain		(Loss)
	(in millions)
Debt securities:
U.S. government and agencies	$	1,013	$	991	$	23	$	(1	)	$	1,424	$	1,449	$	-	$	(25	)
U.S. corporate		571		569		10		(8	)		1,163		1,170		-		(7	)
International corporate		68		67		1		-			156		159		-		(3	)
State and municipal governments		5		5		-		-			41		41		-		-
Debt securities		1,657		1,632		34		(9	)		2,784		2,819		-		(35	)
Equity and other securities		111		111		-		-			115		109		6		-
Investments	$	1,768	$	1,743	$	34	$	(9	)	$	2,899	$	2,928	$	6	$	(35	)
Short-term	$	208	$	206	$	2	$	-		$	752	$	756	$	-	$	(4	)
Long-term		1,560		1,537		32		(9	)		2,147		2,172		6		(31	)
Investments	$	1,768	$	1,743	$	34	$	(9	)	$	2,899	$	2,928	$	6	$	(35	)

The fair value of Dell’s portfolio is affected primarily by interest rates more than the credit and liquidity issues currently facing the capital markets. Dell attempts to mitigate these risks by investing primarily in high credit quality securities with AAA and AA ratings and short-term securities with an A-1 rating, limiting the amount that can be invested in any single issuer, and by investing in short to intermediate term investments whose market value is less sensitive to interest rate changes. As part of its cash and risk management processes, Dell performs periodic evaluations of the credit standing of the institutions in accordance with its investment policy. Dell’s investments in debt securities have effective maturities of less than five years. Management believes that no significant concentration of credit risk for investments exists for Dell.

As of February 1, 2008, Dell did not hold any auction rate securities. At February 2, 2007, Dell held auction rate securities that had a carrying value of $255 million. The total carrying value of investments in asset-backed and mortgage-backed debt securities was approximately $550 million.

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The following table summarizes Dell’s debt securities that had unrealized losses at February 1, 2008:

	Less Than 12 Months
			Unrealized			12 Months or Greater					Total
	Fair Value		Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
	(in millions)
Debt securities:
U.S. government and agencies	$	29	$	(1	)	$	59	$	(0	)	$	88	$	(1	)
U.S. corporate		38		(8	)		27		(0	)		65		(8	)
International corporate		-		-			2		-			2		-
State and municipal governments		-		-			-		-			-		-
Total debt securities	$	67	$	(9	)	$	88	$	(0	)	$	155	$	(9	)

At February 1, 2008, Dell had 40 debt securities that had fair values below their carrying values for a period of less than 12 months and 51 debt securities that had fair values below their carrying values for a period of more than 12 months. The unrealized losses are due to changes in interest rates and are expected to be recovered over the contractual term of the instruments.

Dell periodically reviews its investment portfolio to determine if any investment is other-than-temporarily impaired due to changes in credit risk or other potential valuation concerns. The unrealized loss of $9 million has been recorded in other comprehensive income (loss), as Dell believes that the investments are not other-than-temporarily impaired. While certain available-for-sale securities have market values below cost, Dell believes it is probable that the principal and interest will be collected in accordance with the contractual terms, and that the decline in the market value is exacerbated by the overall credit concerns in the market. Factors considered in determining whether a loss is other-than-temporary include the length of time and extent to which fair value has been less than the cost basis, the underlying collateral, agency ratings, future cash flows, and Dell’s intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in fair value. Dell’s assessment that an investment is not other-than-temporarily impaired could change in the future due to new developments or changes in any particular investment.

The fair value of Dell’s portfolio was based on quoted market prices, which Dell currently believes are indicative of fair value. Dell will continue to evaluate whether the inputs are market observable as it implements SFAS 157.

The following table summarizes Dell’s realized gains and losses on investments:

	Fiscal Year Ended
	February 1,			February 2,			February 3,
	2008			2007			2006
	(in millions)
Gains	$	17		$	9		$	13
Losses		(3	)		(14	)		(15	)
Net realized gain (loss)	$	14		$	(5	)	$	(2	)

Dell routinely enters into securities lending agreements with financial institutions in order to enhance investment income. Dell requires that the loaned securities be collateralized in the form of cash or securities for values which generally exceed the value of the loaned security. At February 1, 2008 and February 2, 2007, there were no securities on loan.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Foreign Currency Instruments

As part of its risk management strategy, Dell uses derivative instruments, primarily forward contracts and options, to hedge certain foreign currency exposures. Dell’s objective is to offset gains and losses resulting from these exposures with gains and losses on the derivative contracts used to hedge them, thereby reducing volatility of earnings and protecting fair values of assets and liabilities. Dell does not use derivative contracts for speculative purposes. Dell applies hedge accounting based upon the criteria established by SFAS 133, whereby Dell designates its derivatives as fair value hedges or cash flow hedges. Dell estimates the fair values of derivatives based on quoted market prices or pricing models using current market rates and records all derivatives in the Consolidated Statements of Financial Position at fair value.

Cash Flow Hedges

Dell uses a combination of forward contracts and options designated as cash flow hedges to protect against the foreign currency exchange rate risks inherent in its forecasted transactions denominated in currencies other than the U.S. dollar. The risk of loss associated with purchased options is limited to premium amounts paid for the option contracts. The risk of loss associated with forward contracts is equal to the exchange rate differential from the time the contract is entered into until the time it is settled. These contracts typically expire in 12 months or less. For derivative instruments that are designated and qualify as cash flow hedges, Dell records the effective portion of the gain or loss on the derivative instrument in accumulated other comprehensive income (loss) as a separate component of stockholders’ equity and reclassifies these amounts into earnings in the period during which the hedged transaction is recognized in earnings. Dell reports the effective portion of cash flow hedges in the same financial statement line item, within earnings, as the changes in value of the hedged item.

For foreign currency option and forward contracts designated as cash flow hedges, Dell assesses hedge effectiveness both at the onset of the hedge as well as at the end of each fiscal quarter throughout the life of the derivative. Dell measures hedge ineffectiveness by comparing the cumulative change in the fair value of the hedge contract with the cumulative change in the fair value of the hedged item, both of which are based on forward rates. Dell recognizes any ineffective portion of the hedge, as well as amounts not included in the assessment of effectiveness, currently in earnings as a component of investment and other income, net. Hedge ineffectiveness for cash flow hedges was not material for Fiscal 2008, 2007 and 2006. During Fiscal 2008, 2007, and 2006, Dell did not discontinue any cash flow hedges that had a material impact on Dell’s results of operations as substantially all forecasted foreign currency transactions were realized in Dell’s actual results.

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Changes in the aggregate unrealized net gain (loss) of Dell’s cash flow hedges that are recorded as a component of comprehensive income (loss), net of tax are presented in the table below. Dell expects to reclassify substantially all of the unrealized net loss recorded in accumulated other comprehensive income (loss) at February 1, 2008 into earnings during the next fiscal year providing an offsetting economic impact against the underlying transactions.

	Fiscal Year Ended
	February 1,			February 2,			February 3,
	2008			2007			2006
	(in millions)
Aggregate unrealized net gain (loss) at beginning of year	$	13		$	(17	)	$	(26	)
Net (losses) gains reclassified to earnings		(392	)		(260	)		225
Change in fair value of cash flow hedges		354			290			(216	)
Aggregate unrealized net (loss) gain at end of year	$	(25	)	$	13		$	(17	)

Other Foreign Currency Derivative Instruments

Dell uses forward contracts to hedge monetary assets and liabilities, primarily receivables and payables, denominated in a foreign currency. The change in the fair value of these instruments represents a natural hedge as their gains and losses offset the changes in the underlying fair value of the monetary assets and liabilities due to movements in currency exchange rates. These contracts generally expire in three months or less. These contracts are not designated as hedges under SFAS 133, and therefore, the change in the instrument’s fair value is recognized currently in earnings as a component of investment and other income, net.

The gross notional value of foreign currency derivative financial instruments and the related net asset or liability were as follows:

	February 1, 2008						February 2, 2007
	Gross						Gross
	Notional			Net Asset (Liability)			Notional			Net Asset (Liability)
	(in millions)
Cash flow hedges	$	7,772		$	(9	)	$	7,443		$	80
Other derivatives		(1,338	)		8			(1,125	)		(5	)
	$	6,434		$	(1	)	$	6,318		$	75

Commercial Paper

On June 1, 2006, Dell implemented a $1.0 billion commercial paper program with a supporting $1.0 billion senior unsecured revolving credit facility. This program allows Dell to obtain favorable short-term borrowing rates. Dell pays facility commitment and letter of credit participation fees at rates based upon Dell’s credit rating. Unless extended, this facility expires on June 1, 2011, at which time any outstanding amounts under the facility will be due and payable. The facility requires compliance with conditions that must be satisfied prior to any borrowing, as well as ongoing compliance with specified affirmative and negative covenants, including maintenance of a minimum interest coverage ratio. Amounts outstanding under the facility may be accelerated for typical defaults, including failure to pay principal or interest, breaches of covenants, non-payment of judgments or debt obligations in excess of $200 million, occurrence of a change of control, and certain bankruptcy events. Dell believes it will be able to access the capital markets to increase the size of its existing commercial paper program.

There were no outstanding advances under the commercial paper program as of February 1, 2008. At February 2, 2007, $100 million was outstanding under the program, and the weighted-average interest rate on those outstanding short-term borrowings was 5.3%. Dell uses the proceeds of the program and facility for general corporate purposes.

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DFS Credit Facilities

Prior to Dell’s purchase of CIT’s 30% ownership interest in DFS in December 2007, DFS maintained credit facilities with CIT that provided a maximum capacity of $750 million to fund leased equipment. These borrowings were secured by DFS’ assets and contained certain customary restrictive covenants. Interest on the outstanding loans was paid quarterly and calculated based on an average of the two- and three-year U.S. Treasury Notes plus 4.45%. DFS was required to make quarterly payments if the value of the leased equipment securing the loans was less than the outstanding principal balance. At February 1, 2008, there were no outstanding advances from CIT as the credit facilities terminated upon Dell’s acquisition of the remaining ownership interest in DFS. At February 2, 2007, outstanding advances from CIT totaled $122 million, of which $87 million was included in short-term borrowings, and $35 million was included in long-term debt on Dell’s Consolidated Statements of Financial Position.

India Credit Facilities

Dell India Pvt Ltd., Dell’s wholly-owned subsidiary, maintains unsecured short-term credit facilities with Citibank N.A. Bangalore Branch India (“Citibank India”) that provide a maximum capacity of $30 million to fund Dell India’s working capital and import buyers’ credit needs. Financing is available in both Indian rupees and foreign currencies. The borrowings are extended on an unsecured basis based on Dell’s guarantee to Citibank U.S. Citibank India can cancel the facilities in whole or in part without prior notice, at which time any amounts owed under the facilities will become immediately due and payable. Interest on the outstanding loans is charged monthly and is calculated based on Citibank India’s internal cost of funds plus 0.25%. At February 1, 2008, outstanding advances from Citibank India totaled $23 million, which is included in short-term borrowings on Dell’s Consolidated Statement of Financial Position.

Long-Term Debt and Interest Rate Risk Management

In April 1998, Dell issued $200 million 6.55% fixed rate senior notes with the principal balance due April 15, 2008 (the “Senior Notes”) and $300 million 7.10% fixed rate senior debentures with the principal balance due April 15, 2028 (the “Senior Debentures”). Interest on the Senior Notes and Senior Debentures is paid semi-annually, on April 15 and October 15. The Senior Notes and Senior Debentures rank equally and are redeemable, in whole or in part, at the election of Dell for principal, any accrued interest, and a redemption premium based on the present value of interest to be paid over the term of the debt agreements. The Senior Notes and Senior Debentures generally contain no restrictive covenants, other than a limitation on liens on Dell’s assets and a limitation on sale-leaseback transactions involving Dell property. In early Fiscal 2009, we plan to obtain additional long-term debt financing.

Concurrent with the issuance of the Senior Notes and Senior Debentures, Dell entered into interest rate swap agreements converting Dell’s interest rate exposure from a fixed rate to a floating rate basis to better align the associated interest rate characteristics to its cash and investments portfolio. The interest rate swap agreements have an aggregate notional amount of $200 million maturing April 15, 2008 and $300 million maturing April 15, 2028. The floating rates are based on three-month London Interbank Offered Rates plus 0.41% and 0.79% for the Senior Notes and Senior Debentures, respectively. As a result of the interest rate swap agreements, Dell’s effective interest rates for the Senior Notes and Senior Debentures were 5.9% and 6.2%, respectively, for Fiscal 2008.

The interest rate swap agreements are designated as fair value hedges. Although the Senior Notes and Senior Debentures allow for settlement before their stated maturity, such settlement would always be at an amount greater than the fair value of the Senior Notes and Senior Debentures. Accordingly, the Senior Notes and Senior Debentures are not considered to be pre-payable as defined by SFAS 133 and related interpretations. The changes in the fair value of the interest rate swaps are assessed in accordance with SFAS 133 and reflected in the carrying value of the interest rate swaps on the balance sheet. The estimated fair value is based primarily on projected future swap rates. The carrying value of the debt is adjusted by an equal and offsetting amount. The estimated fair value of the short

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and long-term debt was approximately $563 million at February 1, 2008, compared to a carrying value of $497 million at that date.

NOTE 3 — INCOME TAXES

The provision for income taxes consists of the following:

	Fiscal Year Ended
	February 1,			February 2,			February 3,
	2008			2007			2006
	(in millions)
Current:
Domestic	$	901		$	846		$	1,141
Foreign		287			178			263
Tax repatriation benefit		-			-			(85	)
Deferred		(308	)		(262	)		(313	)
Provision for income taxes	$	880		$	762		$	1,006

Income before income taxes included approximately $3.2 billion, $2.6 billion, and $3.0 billion related to foreign operations in Fiscal 2008, 2007, and 2006 respectively. On October 22, 2004, the American Jobs Creation Act of 2004 (the “Act”) was signed into law. Among other items, the Act created a temporary incentive for U.S. multinationals to repatriate accumulated income earned outside the U.S. at an effective tax rate of 5.25%, versus the U.S. federal statutory rate of 35%. In the fourth quarter of Fiscal 2005, Dell recorded an initial estimated income tax charge of $280 million based on the decision to repatriate $4.1 billion of foreign earnings. This tax charge included an amount relating to a drafting oversight that Congressional leaders expected to correct in calendar year 2005. On May 10, 2005, the Department of Treasury issued further guidance that addressed the drafting oversight. In the second quarter of Fiscal 2006, Dell reduced its original estimate of the tax charge by $85 million as a result of the guidance issued by the Treasury Department in May 2005. As of February 3, 2006, Dell had completed the repatriation of the $4.1 billion in foreign earnings. No foreign income was repatriated during Fiscal 2007 or Fiscal 2008.

Deferred tax assets and liabilities for the estimated tax impact of temporary differences between the tax and book basis of assets and liabilities are recognized based on the enacted statutory tax rates for the year in which Dell expects the differences to reverse. Deferred taxes have not been recorded on the excess book basis in the amount of approximately $10.8 billion in the shares of certain foreign subsidiaries because these basis differences are not expected to reverse in the foreseeable future and are expected to be permanent in duration. These basis differences arose primarily through the undistributed book earnings of substantially all of the subsidiaries that Dell intends to reinvest indefinitely. The basis differences could reverse through a sale of the subsidiaries, the receipt of dividends from the subsidiaries as well as various other events. Net of available foreign tax credits, residual income tax of approximately $3.5 billion at February 1, 2008, would be due upon reversal of this excess book basis.

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The components of Dell’s net deferred tax asset are as follows:

	Fiscal Year Ended
	February 1,			February 2,
	2008			2007
	(in millions)
Deferred tax assets:
Deferred revenue	$	597		$	440
Inventory and warranty provisions		46			128
Investment impairments and unrealized gains		10			-
Provisions for product returns and doubtful accounts		61			51
Capital loss		7			13
Leasing and financing		302			222
Credit carryforwards		3			22
Stock-based and deferred compensation		188			145
Operating accruals		58			34
Other		134			125
Deferred tax assets		1,406			1,180
Deferred tax liabilities:
Property and equipment		(105	)		(96	)
Acquired intangibles		(199	)		(16	)
Other		(21	)		(39	)
Deferred tax liabilities		(325	)		(151	)
Valuation allowance		-			(28	)
Net deferred tax asset	$	1,081		$	1,001
Current portion (included in other current assets)	$	596		$	445
Non-current portion (included in other non-current assets)		485			556
Net deferred tax asset	$	1,081		$	1,001

A portion of Dell’s foreign operations operate at a reduced tax rate or free of tax under various tax holidays which expire in whole or in part during Fiscal 2010 through 2021. Many of these holidays may be extended when certain conditions are met. The income tax benefits attributable to the tax status of these subsidiaries were estimated to be approximately $502 million ($0.23 per share) in Fiscal 2008, $282 million ($0.13 per share) in Fiscal 2007, and $368 million ($0.15 per share) in Fiscal 2006.

In March 2007, China announced a broad program to reform tax rates and incentives, effective January 1, 2008, including introduction of phased-in transition rules that could significantly alter the Chinese tax structure for U.S. companies operating in China. Clarification of the rules, which phase in higher statutory tax rates over a five year period, was issued in late Fiscal 2008. As a result, Dell increased the relevant deferred tax assets to reflect the enacted statutory rates for the year in which it expects the differences to reverse.

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The effective tax rate differed from the statutory U.S. federal income tax rate as follows:

	Fiscal Year Ended
	February 1,			February 2,			February 3,
	2008			2007			2006
Effective tax rate:
U.S. federal statutory rate		35.0	%		35.0	%		35.0	%
Foreign income taxed at different rates		(18.2	)		(17.8	)		(13.9	)
Tax repatriation benefit		-			-			(1.9	)
Foreign earnings subject to U.S. taxation		4.6			2.9			1.6
Imputed intercompany charges		-			2.0			1.2
In-process research and development		0.8			-			-
Other		0.8			0.7			(0.2	)
Effective tax rate		23.0	%		22.8	%		21.8	%

The increase in Dell’s Fiscal 2008 effective tax rate, compared to Fiscal 2007, is due to the tax related to accessing foreign cash and the nondeductibility of acquisition-related IPR&D charges offset primarily by the increase of consolidated profitability in lower foreign tax jurisdictions during Fiscal 2008 as compared to a year ago. The increase in Dell’s Fiscal 2007 effective tax rate, compared to Fiscal 2006, is due to the $85 million tax reduction in the second quarter of Fiscal 2006 discussed above, offset by a higher proportion of its operating profits being generated in lower foreign tax jurisdictions during Fiscal 2007.

Dell adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109 (“FIN 48”), effective February 3, 2007. The cumulative effect of adopting FIN 48 was a $62 million increase in tax liabilities and a corresponding decrease to the February 2, 2007 stockholders’ equity balance of which $59 million related to retained earnings and $3 million related to additional-paid-in-capital. In addition, consistent with the provisions of FIN 48, Dell changed the classification of $1.1 billion of income tax liabilities from current to non-current because payment of cash is not anticipated within one year of the balance sheet date. These non-current income tax liabilities are recorded in other non-current liabilities in the Consolidated Statements of Financial Position. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

	Total
	(in millions)
Balance at February 3, 2007	$	1,096
Increases related to tax positions of the current year		390
Increases related to tax positions of prior years		34
Reductions for tax positions of prior years		(13	)
Lapse of statue of limitations		(6	)
Settlements		(18	)
Balance at February 1, 2008	$	1,483

Associated with the unrecognized tax benefits of $1.5 billion at February 1, 2008, are interest and penalties as well as $171 million of offsetting tax benefits associated with estimated transfer pricing, the benefit of interest deductions, and state income tax benefits. The net amount of $1.6 billion, if recognized, would favorably affect Dell’s effective tax rate.

Interest and penalties related to income tax liabilities are included in income tax expense. The balance of gross accrued interest and penalties recorded in the Consolidated Statements of Financial Position at February 1, 2008

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and February 2, 2007, was $288 million and $200 million, respectively. During Fiscal 2008, $88 million related to interest and penalties was included in income tax expense.

Dell is currently under audit in various jurisdictions, including the United States. The tax periods open to examination by the major taxing jurisdictions to which Dell is subject include fiscal years 1997 through 2008. Dell does not anticipate a significant change to the total amount of unrecognized benefits within the next 12 months.

NOTE 4 — CAPITALIZATION

Preferred Stock

Authorized Shares — Dell has the authority to issue five million shares of preferred stock, par value $.01 per share. At February 1, 2008 and February 2, 2007, no shares of preferred stock were issued or outstanding.

Redeemable Common Stock

In prior years, Dell inadvertently failed to register with the SEC the issuance of some shares under certain employee benefit plans. As a result, certain purchasers of common stock pursuant to those plans may have the right to rescind their purchases for an amount equal to the purchase price paid for the shares, plus interest from the date of purchase. At February 1, 2008 and February 2, 2007, Dell has classified 4 million shares ($94 million) and 5 million shares ($111 million), respectively, which are subject to potential rescission rights outside stockholders’ equity, because the redemption features are not within the control of Dell. No shareholder exercised these rescission rights in Fiscal 2008. Dell may also be subject to civil and other penalties by regulatory authorities as a result of the failure to register. These shares have always been treated as outstanding for financial reporting purposes.

Common Stock

Authorized Shares — At February 1, 2008, Dell is authorized to issue 7.0 billion shares of common stock, par value $.01 per share.

Share Repurchase Program — Dell has a share repurchase program that authorizes it to purchase shares of common stock in order to increase shareholder value and manage dilution resulting from shares issued under Dell’s equity compensation plans. However, Dell does not currently have a policy that requires the repurchase of common stock in conjunction with stock-based payment arrangements. On December 3, 2007, Dell’s Board of Directors approved a new authorization for an additional $10.0 billion for share repurchases. Dell suspended its repurchase program in September 2006, and after recommencing the program during the fourth quarter of Fiscal 2008, Dell repurchased 179 million shares for an aggregate cost of approximately $4.0 billion.

NOTE 5 — BENEFIT PLANS

Description of the Plans

Employee Stock Plans — Dell is currently issuing stock grants under the Dell Amended and Restated 2002 Long-Term Incentive Plan (“the 2002 Incentive Plan”), which was approved by shareholders on December 4, 2007. There are previous plans that have been terminated except for options previously granted under those plans that are still outstanding. These are all collectively referred to as the “Stock Plans”.

The 2002 Incentive Plan provides for the granting of stock-based incentive awards to Dell’s employees, non-employee directors, and certain consultants and advisors to Dell. Awards may be incentive stock options within the meaning of Section 422 of the Internal Revenue Code, nonqualified stock options, restricted stock, or restricted stock units. There were approximately 292 million, 271 million, and 272 million shares of Dell’s common stock available for future grants under the Stock Plans at February 1, 2008, February 2, 2007, and February 3, 2006, respectively. To satisfy stock option exercises, Dell has a policy of issuing new shares as opposed to repurchasing shares on the open market.

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Stock Option Agreements — The right to purchase shares pursuant to existing stock option agreements typically vests pro-rata at each option anniversary date over a three- to five-year period. The options, which are granted with option exercise prices equal to the fair market value of Dell’s common stock on the date of grant, generally expire within ten to twelve years from the date of grant. Dell has not issued any options to consultants or advisors to Dell since Fiscal 1999. In conjunction with the adoption of SFAS 123(R) in the first quarter of Fiscal 2007, Dell changed its method of attributing the value of stock-based compensation expense from an accelerated approach to a straight-line method. Compensation expense for all stock option awards granted on or prior to February 3, 2006, uses the accelerated approach with an exception of stock options granted in Fiscal 2002 and Fiscal 2003, for which the straight-line method is used.

Restricted Stock Awards — Awards of restricted stock may be either grants of restricted stock, restricted stock units, or performance-based stock units that are issued at no cost to the recipient. For restricted stock grants, at the date of grant, the recipient has all rights of a stockholder, subject to certain restrictions on transferability and a risk of forfeiture. Restricted stock grants typically vest over a three- to seven-year period beginning on the date of grant. For restricted stock units, legal ownership of the shares is not transferred to the employee until the unit vests, which is generally over a three-to five-year period. Dell also grants performance-based restricted stock units as a long-term incentive in which an award recipient receives shares contingent upon Dell achieving performance objectives and the employees’ continuing employment through the vesting period, which is generally over a three- to five-year period. Compensation expense recorded in connection with these performance-based restricted stock units is based on Dell’s best estimate of the number of shares that will eventually be issued upon achievement of the specified performance criteria and when it becomes probable that certain performance goals will be achieved. The cost of these awards is determined using the fair market value of Dell’s common stock on the date of the grant. Compensation expense for restricted stock awards with a service condition is recognized on a straight-line basis over the vesting term. Compensation expense for performance-based restricted stock awards is recognized on an accelerated multiple-award approach based on the most probable outcome of the performance condition. In accordance with SFAS 123(R), deferred compensation related to restricted stock awards issued prior to Fiscal 2007, which was previously classified as “other” in stockholders’ equity, was classified as capital in excess of par value upon adoption.

Temporary Suspension of Option Exercises, Vesting of Restricted Stock Units, and Employee Stock Purchase Plan (“ESPP”) Purchases — As a result of Dell’s inability to timely file its Annual Report on Form 10-K for Fiscal 2007, Dell suspended the exercise of employee stock options, settlement vesting of restricted stock units, and the purchase of shares under the ESPP on April 4, 2007. Dell resumed allowing the exercise of employee stock options by employees and the settlement of restricted stock units on October 31, 2007. The purchase of shares under the ESPP will not be resumed as the plan has been discontinued effective the first quarter of Fiscal 2009.

Dell agreed to pay cash to current and former employees who held in-the-money stock options (options that have an exercise price less than the current market stock price) that expired during the period of unexercisability due to Dell’s inability to timely file its Annual Report on Form 10-K for Fiscal 2007. Dell has made payments of approximately $107 million relating to in-the-money stock options that expired in the second and third quarters of Fiscal 2008. Of the $107 million total, $17 million is included in cost of net revenue and $90 million in operating expenses. As options have again become exercisable, Dell does not expect to pay cash for expired in-the-money stock options in the future.

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General Information

Stock Option Activity — The following table summarizes stock option activity for the Stock Plans during Fiscal 2008:

						Weighted-
				Weighted-		Average
	Number			Average		Remaining		Aggregate
	of			Exercise		Contractual		Intrinsic
	Options			Price		Term		Value
	(in millions)			(per share)		(in years)		(in millions)
Options outstanding — February 2, 2007		314		$	32.16
Granted		12			24.45
Exercised		(7	)		18.99
Forfeited		(5	)		26.80
Cancelled/expired		(50	)		32.01
Options outstanding — February 1, 2008		264		$	32.30
Vested and expected to vest (net of estimated forfeitures) — February 1, 2008(a)		259		$	32.43		4.5	$	13
Exercisable — February 1, 2008		242		$	32.89		4.2	$	12

The following table summarizes stock option activity for the Stock Plans during Fiscal 2007:

						Weighted-
				Weighted-		Average
	Number			Average		Remaining		Aggregate
	of			Exercise		Contractual		Intrinsic
	Options			Price		Term		Value
	(in millions)			(per share)		(in years)		(in millions)
Options outstanding — February 3, 2006		343		$	31.86
Granted		10			25.97
Exercised		(13	)		14.09
Forfeited		(4	)		25.84
Cancelled/expired		(22	)		36.43
Options outstanding — February 2, 2007		314		$	32.16
Vested and expected to vest (net of estimated forfeitures) — February 2, 2007(a)		309		$	32.26		5.2	$	148
Exercisable — February 2, 2007(a)		284		$	32.74		5.1	$	145

(a) For options vested and expected to vest and options exercisable, the aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between Dell’s closing stock price on February 1, 2008 and February 2, 2007, and the exercise price multiplied by the number of in-the-money options) that would have been received by the option holders had the holders exercised their options on February 1, 2008 and February 2, 2007. The intrinsic value changes based on changes in the fair market value of Dell’s common stock.

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Other information pertaining to stock options for Fiscal 2008, Fiscal 2007, and Fiscal 2006 is as follows:

	Fiscal Years Ended
	February 1,		February 2,		February 3,
	2008		2007		2006
	(in millions, except per option data)
Weighted-average grant date fair value of stock options granted per option	$	6.29	$	6.90	$	10.22
Total fair value of options vested(a)	$	208	$	415	$	2,029
Total intrinsic value of options exercised(b)	$	64	$	171	$	688

(a)	Includes the Fiscal 2006 acceleration of vesting of certain unvested and “out-of-the-money” stock options with exercise prices equal to or greater than the $30.75 per share previously awarded under equity compensation plans.
(b)	The total intrinsic value of options exercised represents the total pre-tax intrinsic value (the difference between the stock price at exercise and the exercise price multiplied by the number of options exercised) that was received by the option holders who exercised their options during the fiscal year.

At February 1, 2008, $93 million of total unrecognized stock-based compensation expense, net of estimated forfeitures, related to stock options is expected to be recognized over a weighted-average period of approximately 2.0 years.

Non-vested Restricted Stock Activity — Non-vested restricted stock awards at February 1, 2008 and February 2, 2007, and activities during Fiscal 2008 and Fiscal 2007 were as follows:

				Weighted-
	Number			Average
	of			Grant Date
	Shares			Fair Value
	(in millions)			(per share)
Non-vested restricted stock — February 2, 2007		17		$	28.76
Granted		26			22.85
Vested		(3	)		28.79
Forfeited		(4	)		24.71
Non-vested restricted stock — February 1, 2008		36		$	24.90

				Weighted-
	Number			Average
	of			Grant Date
	Shares			Fair Value
	(in millions)			(per share)
Non-vested restricted stock — February 3, 2006		2		$	34.66
Granted		21			28.36
Vested		(1	)		28.84
Forfeited		(5	)		29.29
Non-vested restricted stock — February 2, 2007		17		$	28.76

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	Fiscal Years Ended
	February 1,		February 2,		February 3,
	2008		2007		2006
	(in millions, except per share data)
Weighted-average grant date fair value of restricted stock awards granted	$	22.85	$	28.36	$	39.70
Total estimated fair value of restricted stock awards vested	$	103	$	16	$	-

At February 1, 2008, $600 million of unrecognized stock-based compensation expense, net of estimated forfeitures, related to non-vested restricted stock awards is expected to be recognized over a weighted-average period of approximately 1.9 years.

Expense Information under SFAS 123(R)

For Fiscal 2008 and Fiscal 2007, stock-based compensation expense, net of income taxes, was allocated as follows:

	Fiscal Year Ended
	February 1,			February 2,
	2008			2007
	(in millions)
Stock-based compensation expense:
Cost of net revenue	$	62		$	59
Operating expenses		374			309
Stock-based compensation expense before taxes		436			368
Income tax benefit		(127	)		(110	)
Stock-based compensation expense, net of income taxes	$	309		$	258

Stock-based compensation in the table above includes $107 million of cash expense in Fiscal 2008 for expired stock options as previously discussed.

Prior to the adoption of SFAS 123(R), net income included compensation expense related to restricted stock awards but did not include stock-based compensation expense for employee stock options or the purchase discount under Dell’s ESPP. As a result of adopting SFAS 123(R), income before income taxes and net income were lower by $272 million and $191 million, respectively, for Fiscal 2007 as compared to Fiscal 2006, than if Dell had not adopted SFAS 123(R). The impact on both basic and diluted earnings per share for the fiscal year ended February 2, 2007, was $0.08 per share. The remaining $96 million of pre-tax stock compensation expense for the fiscal year ended February 2, 2007, is associated with restricted stock awards that, consistent with APB 25, are expensed over the associated vesting period. Stock-based compensation expense is based on awards expected to vest, reduced for estimated forfeitures. SFAS 123(R) requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. In the pro forma information required under SFAS 123, forfeitures were accounted for as they occurred.

Prior to the adoption of SFAS 123(R), tax benefits resulting from tax deductions in excess of the stock-based compensation expense recognized for those options were classified as operating cash flows. The excess windfall tax benefits are now classified as a source of financing cash flows, with an offsetting amount classified as a use of operating cash flows. This amount was $12 million in Fiscal 2008 and $80 million in Fiscal 2007. In addition, there was no material stock-based compensation expense capitalized as part of the cost of an asset.

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Pro Forma Information under SFAS 123 for Periods Prior to Fiscal 2007

Prior to the adoption of SFAS 123(R), Dell measured compensation expense for its employee stock-based compensation plan using the intrinsic value method prescribed by APB 25. Under APB 25, when the exercise price of Dell’s employee stock options equaled or exceeded the market price of the underlying stock on the date of the grant, no compensation expense was recognized. Dell applied the disclosure provisions of SFAS 123, as amended by SFAS 148, as if the fair-value based method had been applied in measuring compensation expense.

The following table illustrates the effect on net income and earnings per share for the fiscal year ended February 3, 2006, as if Dell had applied the fair value recognition provisions of SFAS 123 to stock options and stock purchase plans:

	Fiscal Year Ended
(in millions, except per share data)	February 3, 2006
Net income	$	3,602
Deduct: Total stock options and stock purchase plans employee compensation determined under fair value method for these awards, net of related tax effects		(1,094	)
Net income — pro forma	$	2,508
Earnings per common share:
Basic	$	1.50
Basic — pro forma	$	1.04
Diluted	$	1.47
Diluted — pro forma	$	1.02

On January 5, 2006, Dell’s Board of Directors approved the acceleration of vesting of certain unvested and “out-of-the-money” stock options with exercise prices equal to or greater than $30.75 per share previously awarded under equity compensation plans. Options to purchase approximately 101 million shares of common stock, or 29% of the outstanding unvested options, were subject to the acceleration. The weighted-average exercise price of the options that were accelerated was $36.37. The purpose of the acceleration was to enable Dell to reduce future compensation expense associated with these options upon the adoption of SFAS 123(R).

Valuation Information

SFAS 123(R) requires the use of a valuation model to calculate the fair value of stock option awards. Dell has elected to use the Black-Scholes option pricing model, which incorporates various assumptions, including volatility, expected term, and risk-free interest rates. The volatility is based on a blend of implied and historical volatility of Dell’s common stock over the most recent period commensurate with the estimated expected term of Dell stock options. Dell uses this blend of implied and historical volatility because management believes such volatility is more representative of prospective trends. The expected term of an award is based on historical experience and on the terms and conditions of the stock awards granted to employees. The dividend yield of zero is based on the fact that Dell has never paid cash dividends and has no present intention to pay cash dividends.

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The weighted-average fair value of stock options and purchase rights under the employee stock purchase plan was determined based on the Black-Scholes option pricing model weighted for all grants during Fiscal 2008, 2007, and 2006 utilizing the assumptions in the following table:

	Fiscal Years Ended
	February 1,	February 2,	February 3,
	2008	2007	2006
Expected term:
Stock options	3.5 years	3.6 years	3.8 years
Employee stock purchase plan	N/A(a)	3 months	3 months
Risk-free interest rate (U.S. Government Treasury Note)	4.4%	4.8%	3.9%
Volatility	27%	26%	25%
Dividends	0%	0%	0%

(a) No purchase rights were granted under the ESPP in Fiscal 2008 due to Dell suspending the ESPP on April 4, 2007, and subsequently discontinuing the plan effective the first quarter of Fiscal 2009 as a part of an overall assessment of its benefits strategy.

401(k) Plan — Dell has a defined contribution retirement plan (the “401(k) Plan”) that complies with Section 401(k) of the Internal Revenue Code. Substantially all employees in the U.S. are eligible to participate in the Plan. Effective January 1, 2008, Dell matches 100% of each participant’s voluntary contributions, subject to a maximum contribution of 5% of the participant’s compensation, and participants vest immediately in all Dell contributions to the Plan. From January 1, 2005 to December 31, 2007, Dell matched 100% of each participant’s voluntary contributions, subject to a maximum contribution of 4% of the participant’s compensation. Prior to January 1, 2005, Dell matched 100% of each participant’s voluntary contributions, subject to a maximum contribution of 3% of the participant’s compensation. Dell’s contributions during Fiscal 2008, 2007, and 2006 were $76 million, $70 million, and $66 million, respectively. Dell’s contributions are invested according to each participant’s elections in the investment options provided under the Plan. Investment options include Dell stock, but neither participant nor Dell contributions are required to be invested in Dell stock. As a result of Dell’s failure to file its Annual Report on Form 10-K for fiscal 2007 by the original due date, April 3, 2007, Dell suspended the right of Plan participants to invest additional contributions in Dell stock on April 4, 2007. Effective December 7, 2007, with the filing of a registration statement on Form S-8, Dell ended the suspension and began allowing Plan participants to invest contributions in Dell stock.

Deferred Compensation Plan — Dell has a nonqualified deferred compensation plan (the “Deferred Compensation Plan”) for the benefit of certain management employees and non-employee directors. The Deferred Compensation Plan permits the deferral of base salary and annual incentive bonus. The deferrals are held in a separate trust, which has been established by Dell to administer the Plan. The assets of the trust are subject to the claims of Dell’s creditors in the event that Dell becomes insolvent. Consequently, the trust qualifies as a grantor trust for income tax purposes (i.e. a “Rabbi Trust”). In accordance with the provisions of EITF No. 97-14, Accounting for Deferred Compensation Arrangements Where Amounts Earned are Held in a Rabbi Trust and Invested (“EITF 97-14”), the assets and liabilities of the Plan are presented in investments and accrued and other liabilities in the accompanying Consolidated Statements of Financial Position, respectively. The assets held by the trust are classified as trading securities with changes recorded to investment and other income, net, and changes in the deferred compensation liability recorded to compensation expense.

Employee Stock Purchase Plan — Dell discontinued its shareholder approved employee stock purchase plan during the first quarter of Fiscal 2009. Prior to discontinuance, the ESPP allowed participating employees to purchase common stock through payroll deductions at the end of each three-month participation period at a purchase price equal to 85% of the fair market value of the common stock at the end of the participation period. Upon adoption of SFAS 123(R) in Fiscal 2007, Dell began recognizing compensation expense for the 15% discount received by the participating employees. No common stock was issued under this plan in Fiscal 2008 due to Dell suspending the

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ESPP on April 4, 2007, and subsequently discontinuing the ESPP as part of an overall assessment of its benefits strategy. Common stock issued under the ESPP totaled 6 million shares in Fiscal 2007 and 5 million shares in Fiscal 2006. The weighted-average fair value of the purchase rights under the ESPP during Fiscal 2007 and Fiscal 2006 was $3.89 and $6.30 per right, respectively.

NOTE 6 — FINANCIAL SERVICES

Dell Financial Services L.P.

Dell offers or arranges various financing options and services for its business and consumer customers in the U.S. through DFS, a wholly-owned subsidiary of Dell. DFS was formerly a joint venture between Dell and CIT, but on December 31, 2007, Dell purchased CIT’s remaining 30% interest in DFS, making it a wholly-owned subsidiary. DFS is a full service financial services entity; key activities include the origination, collection, and servicing of customer receivables related to the purchase of Dell products.

Dell utilizes DFS to facilitate financing for a significant number of customers who elect to finance products sold by Dell. New financing originations, which represent the amounts of financing provided to customers for equipment and related software and services through DFS, were $5.7 billion, $6.1 billion, and $6.5 billion during the fiscal year ended February 1, 2008, February 2, 2007, and February 3, 2006, respectively.

CIT continues to have the right to purchase a minimum percentage of DFS’ customer receivables until January 29, 2010 (Fiscal 2010), with the option to accelerate all or a portion of the Fiscal 2010 funding rights into Fiscal 2009. CIT’s minimum funding right is approximately 35% of the new customer receivables facilitated by DFS, but could be as much as 60% if CIT fully accelerates its Fiscal 2010 minimum funding right.

DFS services the receivables purchased by CIT. However, Dell’s obligation related to the performance of the DFS originated receivables purchased by CIT is limited to the cash funded credit reserves established at the time of funding.

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Financing Receivables

The following table summarizes the components of Dell’s financing receivables, net of the allowance for doubtful accounts:

	Fiscal Year Ended
	February 1,			February 2,
	2008			2007
	(in millions)
Financing receivables, net:
Customer receivables:
Revolving loans, gross	$	1,063		$	805
Fixed-term leases and loans, gross		654			632
Customer receivables, gross		1,717			1,437
Customer receivables allowance		(96	)		(39	)
Customer receivables, net		1,621			1,398
Residual interest		295			296
Retained interest		223			159
Financing receivables, net	$	2,139		$	1,853
Short-term	$	1,732		$	1,530
Long-term		407			323
Financing receivables, net	$	2,139		$	1,853

Financing receivables consist of customer receivables, residual interest, and retained interest in securitized receivables. Customer receivables include fixed-term loans and leases and revolving loans resulting from the sale of Dell products and services. For customers who desire lease financing, Dell enters into sales-type lease arrangements with the customers. Of the customer receivables balance, $444 million represent balances which are due from CIT in connection with specified promotional programs.

•   Customer receivables are presented net of allowance for uncollectible accounts. The allowance is based on factors including historical experience, past due receivables, receivable type, and the risk composition of the receivables. The composition and credit quality varies from investment grade commercial customers to subprime consumers. Subprime receivables comprise less than 20% of the net customer receivable balance at February 1, 2008. Financing receivables are charged to the allowance at the earlier of when an account is deemed to be uncollectible or when an account is 180 days delinquent. Recoveries on customer receivables previously charged off as uncollectible are recorded to the allowance for uncollectible accounts. The following is a description of the components of financing receivables.

–  Revolving loans offered under private label credit financing programs provide qualified customers with a revolving credit line for the purchase of products and services offered by Dell. Revolving loans bear interest at a variable annual percentage rate that is tied to the prime rate. From time to time, account holders may have the opportunity to finance their Dell purchases with special programs during which, if the outstanding balance is paid in full, no interest is charged. These special programs generally range from 3 to 12 months and have an average original term of approximately 11 months. At February 1, 2008 and February 2, 2007, $668 million and $694 million, respectively, were receivables under these special programs.

–  Leases with business customers generally have fixed terms of two to three years. Future maturities of minimum lease payments at February 1, 2008, are as follows: 2009: $137 million; 2010: $74 million; 2011:

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$30 million; and 2012: $4 million. Fixed-term loans are also offered to qualified small businesses and primarily consist of loans with short-term maturities.

The following table presents the net credit losses and accounts 60 days or more past due of customer receivables. Net credit losses on leases and loans represent net investment balances. Net credit losses on revolving loans represent principal losses, net of recoveries. Net credit losses increased in Fiscal 2008 due to higher delinquencies driven by deterioration in the credit environment.

	Fiscal Year Ended
	February 1, 2008					February 2, 2007
	Dollars		%			Dollars		%
	(in millions, except percentages)
Net credit losses of customer financing receivables	$	40		2.7	%(a)	$	20		1.5	%(a)
Customer financing receivables 60 days or more delinquent	$	34		2.1	%(b)	$	10		0.7	%(b)

(a)	Net credit losses as a percentage of the outstanding average customer receivables balance over the year.
(b)	Customer financing receivables 60 days or more delinquent divided by the ending customer financing receivables balance.

•   Dell retains a residual interest in the leased equipment. The amount of the residual interest is established at the inception of the lease based upon estimates of the value of the equipment at the end of the lease term using historical studies, industry data, and future value-at-risk demand valuation methods. On a periodic basis, Dell assesses the carrying amount of its recorded residual values for impairment. Anticipated declines in specific future residual values that are considered to be other-than-temporary are recorded in current earnings.

•   Retained interests represent the residual beneficial interest Dell retains in certain pools of securitized financing receivables. Retained interests are stated at the present value of the estimated net beneficial cash flows after payment of all senior interests. In estimating the value of retained interests, Dell makes a variety of financial assumptions, including pool credit losses, payment rates, and discount rates. These assumptions are supported by both Dell’s historical experience and anticipated trends relative to the particular receivable pool. Dell reviews its investments in retained interests periodically for impairment, based on estimated fair value. In the first quarter of Fiscal 2008, Dell adopted SFAS 155, and as a result, all gains and losses are recognized in income immediately.

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The following table summarizes the components of retained interest balances and related cash flows:

	Fiscal Year Ended
	February 1,			February 2,			February 3,
	2008			2007			2006
	(in millions)
Retained interest:
Retained interest at beginning of year	$	159		$	90		$	24
New sales		173			167			97
Distributions from conduits		(132	)		(142	)		(37	)
Net accretion		31			17			4
Change in fair value for the period		(8	)		27			2
Retained interest at end of year	$	223		$	159		$	90
Cash flows during the periods:
Proceeds from new securitizations	$	538		$	607		$	446
Other cash flows received on retained interests		132			142			36
Servicing and administration fees received		15			9			-
Repurchases of ineligible contracts		(11	)		(7	)		(4	)
Cash flows during the period	$	674		$	751		$	478

The table below summarizes the key assumptions used to measure the retained interest at the date of the securitizations for transactions completed in Fiscal 2008 and the assumptions used in calculating the fair value of the retained interest in securitized assets at February 1, 2008.

	Weighted Average Key Assumptions
	Monthly Payment		Credit		Discount
	Rates		Losses		Rates		Life
			(lifetime)		(annualized)		(months)
Time of sale valuation of retained interest		9%		8%		14%		14
Valuation of retained interests		8%		10%		16%		12

The impact of adverse changes to the key valuation assumptions to the fair value of retained interest at February 1, 2008 and February 2, 2007 is shown in the following table:

	Fiscal Year Ended
	February 1,			February 2,
	2008			2007
	(in millions)
Adverse change of:
Expected prepayment speed: 10%	$	(17	)	$	(2	)
Expected prepayment speed: 20%	$	(27	)	$	(4	)
Expected credit losses: 10%	$	(8	)	$	(7	)
Expected credit losses: 20%	$	(15	)	$	(14	)
Discount rate: 10%	$	(7	)	$	(4	)
Discount rate: 20%	$	(13	)	$	(8	)

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These sensitivity analyses are hypothetical in nature and should be used with caution. The analyses utilized 10% and 20% adverse variation in assumptions to assess the sensitivities in fair values of the retained interest. However, these changes generally cannot be extrapolated because the relationship of the change in assumptions to the change in fair value may not be linear. Further, the effect of a variation in a particular assumption on the fair value is calculated without giving effect to any other assumption changes. It should be noted that changes in one factor may result in changes in another factor (for example, increases in market interest rates may result in lower prepayments and increased credit losses) that may magnify or counteract the other factor’s sensitivities. The effect of multiple factor changes were not considered in this analysis.

Asset Securitization

During Fiscal 2008 and Fiscal 2007, Dell sold $1.2 billion and $1.1 billion, respectively, of fixed-term leases and loans and revolving loans to unconsolidated qualifying special purpose entities. The qualifying special purpose entities are bankruptcy remote legal entities with assets and liabilities separate from those of Dell. The sole purpose of the qualifying special purpose entities is to facilitate the funding of financing receivables in the capital markets. Dell determines the amount of receivables to securitize based on its funding requirements in conjunction with specific selection criteria designed for the transaction. The qualifying special purpose entities have entered into financing arrangements with three multi-seller conduits that, in turn, issue asset-backed debt securities in the capital markets. Transfers of financing receivables are recorded in accordance with the provisions of SFAS 140. The principal balance of the securitized receivables at the end of Fiscal 2008 and Fiscal 2007 was $1.2 billion and $1.0 billion, respectively.

Dell retains the right to receive collections on securitized receivables in excess of amounts needed to pay interest and principal as well as other required fees. Upon the sale of the financing receivables, Dell records the present value of the excess cash flows as a retained interest, which typically results in a gain that ranges from 1% to 3% of the customer receivables sold. Dell services the securitized contracts and earns a servicing fee. Dell’s securitization transactions generally do not result in servicing assets and liabilities, as the contractual fees are adequate compensation in relation to the associated servicing cost.

Dell securitization programs contain standard structural features related to the performance of the securitized receivables. These structural features include defined credit losses, delinquencies, average credit scores, and excess collections above or below specified levels. In the event one or more of these features are met and Dell is unable to restructure the program, no further funding of receivables will be permitted and the timing of expected retained interest cash flows will be delayed, which would impact the valuation of the retained interest. Should these events occur, Dell does not expect a material adverse affect on the valuation of the retained interest or on Dell’s ability to securitize financing receivables.

The following table presents the net credit losses and accounts 60 days or more past due of the securitized financing receivables:

	Fiscal Year Ended
	February 1, 2008					February 2, 2007
	Dollars		%			Dollars		%
	(in millions, except percentages)
Net credit losses of securitized financing receivables	$	81		7.0%	(a)	$	31		3.8%	(a)
Securitized financing receivables 60 days or more delinquent	$	54		4.4%	(b)	$	33		3.4%	(b)

(a)	Net credit losses as a percentage of the average outstanding securitized financing receivables over the year.
(b)	Securitized financing receivables 60 days or more delinquent divided by ending securitized financing receivables balance.

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NOTE 7 — ACQUISITIONS

Dell has recorded all of its acquisitions using the purchase method of accounting in accordance with SFAS No. 141, Business Combinations (“SFAS 141”). Accordingly, the results of operations of the acquired companies have been included in Dell’s consolidated results since the date of each acquisition. Dell allocates the purchase price of its acquisitions to the tangible assets, liabilities, and intangible assets acquired, which include in-process research & development (“IPR&D”) charges, based on their estimated fair values. The excess of the purchase price over the fair value of the identified assets and liabilities has been recorded as goodwill. The fair value assigned to the assets acquired is based on valuations using management’s estimates and assumptions. Dell does not expect the majority of goodwill related to these acquisitions to be deductible for tax purposes. Dell has not presented pro forma results of operations because these acquisitions are not material to Dell’s consolidated results of operations, financial position or cash flows on either an individual or an aggregate basis.

The purchase price allocations for these acquisitions are preliminary and subject to revision as more detailed analyses are completed and additional information about the fair value of assets and liabilities becomes available. Any change in the estimated fair value of the net assets of the acquired companies will change the amount of the purchase price allocable to goodwill.

EqualLogic Acquisition

On January 25, 2008, Dell completed its acquisition of EqualLogic Inc. (“EqualLogic”), a provider of high performance Internet Protocol (IP) iSCSI storage area network (SAN) solutions uniquely designed for virtualization and ease-of-use. Dell acquired 100% of the common shares of EqualLogic for approximately $1.4 billion in cash. Dell recorded approximately $969 million of goodwill and $486 million of amortizable intangible assets. This acquisition will strengthen Dell’s product and channel position and assist Dell in its strategic efforts to simplify and virtualize IT for its customers globally. Dell also expensed IPR&D of $75 million resulting from the EqualLogic acquisition.

Based on valuations prepared using estimates and assumptions developed by management, the preliminary purchase price allocation as of the date of acquisition are as follows:

	(in millions)
Cash, cash equivalents and short-term investments	$	21
Other tangible assets		57
Liabilities		(243	)
Total net liabilities assumed		(165	)
Amortizable intangible assets		486
Goodwill		969
IPR&D		75
Total purchase price	$	1,365

Dell has included EqualLogic in its storage line of business for product revenue reporting purposes. Goodwill, which represents the excess of the purchase price over the net tangible and intangible assets acquired, is not

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deductible for tax purposes. The amortizable intangible assets are being amortized over their estimated useful lives based upon their expected future cash flows, as follows:

			Weighted-Average
			Useful Life
	(in millions)		(years)
Technology	$	424		6.0
Customer relationships		46		7.6
Covenants not-to-compete		16		4.2
Total amortizable intangible assets	$	486		6.1

ASAP Software Acquisition

On November 9, 2007, Dell completed its acquisition of ASAP Software Express, Inc., (“ASAP”), a provider of software solutions and licensing services for approximately $353 million in cash. This acquisition will help Dell to simplify information technology by combining Dell’s reach as a leading supplier of commercial technology and services and ASAPs expertise in software licensing and license management. In connection with the acquisition, Dell recorded approximately $130 million of goodwill and $171 million of amortizable intangible assets. Dell did not record any IPR&D in connection with the ASAP acquisition.

Based on valuations prepared using estimates and assumptions prepared by management, the purchase price allocation as of the date of acquisition are as follows:

	(in millions)
Cash, cash equivalents and short-term investments	$	2
Other tangible assets		175
Liabilities		(125	)
Total net assets acquired		52
Amortizable intangible assets		171
Goodwill		130
Total purchase price	$	353

Dell has included ASAP in its software and peripherals line of business for product revenue reporting purposes. Goodwill, which represents the excess of the purchase price over the net tangible and intangible assets acquired, is expected to be deductible for tax purposes. The amortizable intangible assets are being amortized over their estimated useful lives based upon their projected cash flows as follows:

			Weighted-Average
			Useful Life
	(in millions)		(years)
Technology	$	18		4.9
Customer relationships		144		10.8
Tradenames		8		5.3
Covenants not-to-compete		1		1.1
Total amortizable intangible assets	$	171		9.9

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Other Acquisitions in Fiscal 2008

Dell acquired three other companies in Fiscal 2008, Everdream Corporation, Silverback Technologies Inc., and Zing Systems Inc. Dell also purchased CIT Group Inc.’s remaining 30% interest in DFS during Fiscal 2008. Total consideration for these purchases was approximately $553 million, which included direct transaction costs, and certain liabilities recorded in connection with these acquisitions. The largest of these transactions was the purchase of CIT’s 30% minority interest in DFS for approximately $306 million, which resulted in recognition of $245 million of goodwill and now gives Dell 100% ownership in DFS. With these acquisitions Dell expects to be able to broaden its services and financing offerings to customers while simplifying IT.

Dell recorded approximately $438 million of goodwill and $78 million of amortizable intangible assets in connection with these other acquisitions. Dell also expensed approximately $8 million of IPR&D related to these acquisitions in Fiscal 2008. Based on valuations prepared using estimates and assumptions developed by management, the preliminary purchase price allocations as of the date of acquisitions are as follows:

	(in millions)
Cash and short-term investments	$	9
Other tangible assets		7
Liabilities		(14	)
Total net assets acquired		2
Amortizable intangible assets		78
Indefinite lived intangible assets(a)		27
Total purchased intangibles		105
Goodwill		438
IPR&D		8
Total purchase price	$	553

(a) Indefinite-lived intangible assets represent tradename related to DFS, which is valued at approximately $27 million at February 1, 2008.

Goodwill, which represents the excess of the purchase price over the net tangible and intangible assets acquired, is not deductible for tax purposes for most of these acquisitions. The amortizable intangible assets are being amortized over their estimated useful lives as follows:

			Weighted-Average
			Useful Life
	(in millions)		(years)
Technology	$	42		3.8
Customer relationships		30		5.0
Covenants not-to-compete		5		3.4
Other		1		3.4
Total amortizable intangible assets	$	78		4.2

Dell has included the results of operations of these transactions prospectively from the respective date of the transaction.

Acquisitions in Fiscal 2007

Dell completed two acquisitions during Fiscal 2007. Total consideration for these acquisitions was approximately $146 million, which included direct transaction costs. The purchase of Alienware Corporation, the larger of the two

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acquisitions, satisfied the growing number of consumers and businesses seeking the highest-performance PC products, including those used for gaming and multimedia digital content management. Dell recorded approximately $110 million of goodwill and $50 million of amortizable intangible assets in connection with these acquisitions.

Dell has included the results of operations of these transactions prospectively from the respective date of transaction. Supplemental pro forma information is not provided, as the acquisitions did not have a material effect on Dell’s results of operations, cash flows, or financial position individually or in aggregate.

NOTE 8 — GOODWILL AND INTANGIBLE ASSETS

Goodwill

Dell records the excess of an acquisition’s purchase price over the fair value of the identified assets and liabilities as goodwill. Changes in the carrying amount of goodwill during Fiscal 2008 and Fiscal 2007 are as follows:

	Fiscal Year Ended
	February 1,		February 2,
	2008		2007
	(in millions)
Balance at beginning of the year	$	110	$	-
Goodwill acquired during the period		1,538		110
Balance at end of the year	$	1,648	$	110

Goodwill acquired during Fiscal 2008 has not yet been allocated to Dell’s segments. Allocations will be completed as the preliminary purchase price allocations are finalized. Based on the results of its annual impairment tests, Dell determined that no impairment of goodwill existed as of February 1, 2008 or February 2, 2007. However, future goodwill impairment tests could result in a charge to earnings. Dell will continue to evaluate goodwill on an annual basis during its second fiscal quarter and whenever events and changes in circumstances indicate that there may be a potential impairment.

Intangible Assets

Dell’s intangible assets associated with completed acquisitions for each of the following fiscal years at February 1, 2008 and February 2, 2007, are as follows:

Fiscal 2008:

			Accumulated
As of February 1, 2008	Gross		Amortization			Net
	(in millions)
Technology	$	491	$	(15	)	$	476
Customer relationships		231		(9	)		222
Tradenames		39		(6	)		33
Covenants not-to-compete		23		(1	)		22
Other		1		(1	)		-
Amortizable intangible assets	$	785	$	(32	)	$	753
Indefinite lived intangible assets		27		-			27
Total intangible assets	$	812	$	(32	)	$	780

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Fiscal 2007:

			Accumulated
As of February 2, 2007	Gross		Amortization			Net
	(in millions)
Technology	$	7	$	(2	)	$	5
Customer relationships		11		(1	)		10
Tradenames		31		(2	)		29
Covenants not-to-compete		1		-			1
Total amortizable intangible assets	$	50	$	(5	)	$	45

During Fiscal 2008 and Fiscal 2007, Dell recorded additions to intangible assets of $762 million and $50 million, respectively. Amortization expense related to finite-lived intangible assets was approximately $27 million in Fiscal 2008 and $5 million in Fiscal 2007. During the year ended February 1, 2008, Dell did not record any impairment charges as a result of its analysis of its intangible assets.

Estimated future annual pre-tax amortization expense of finite-lived intangible assets as of February 1, 2008, over the next five fiscal years and thereafter is as follows:

Fiscal Years	(in millions)
2009	$	102
2010		154
2011		135
2012		113
2013		92
Thereafter		157
Total	$	753

NOTE 9 — WARRANTY LIABILITY AND RELATED DEFERRED SERVICE REVENUE

Revenue from extended warranty and service contracts, for which Dell is obligated to perform, is recorded as deferred revenue and subsequently recognized over the term of the contract or when the service is completed. Dell records warranty liabilities at the time of sale for the estimated costs that may be incurred under its limited warranty. Changes in Dell’s deferred revenue for extended warranties, and warranty liability for standard warranties which are

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included in other current and non-current liabilities on Dell’s Consolidated Statements of Financial Position, are presented in the following tables:

	Fiscal Year Ended
	February 1,			February 2,			February 3,
	2008			2007			2006
	(in millions)
Deferred service revenue:
Deferred service revenue at beginning of year	$	4,221		$	3,707		$	2,904
Revenue deferred for new extended warranty and service contracts sold		3,646			3,135			2,830
Revenue recognized		(2,607	)		(2,621	)		(2,027	)
Deferred service revenue at end of year	$	5,260		$	4,221		$	3,707
Current portion	$	2,486		$	2,032		$	1,842
Non-current portion		2,774			2,189			1,865
Deferred service revenue at end of year	$	5,260		$	4,221		$	3,707

	Fiscal Year Ended
	February 1,			February 2,			February 3,
	2008			2007			2006
	(in millions)
Warranty liability:
Warranty liability at beginning of year	$	958		$	951		$	722
Costs accrued for new warranty contracts and changes in estimates for pre-existing warranties(a)		1,141			1,242			1,391
Service obligations honored		(1,170	)		(1,235	)		(1,162	)
Warranty liability at end of year	$	929		$	958		$	951
Current portion	$	690		$	768		$	714
Non-current portion		239			190			237
Warranty liability at end of year	$	929		$	958		$	951

(a) Changes in cost estimates related to pre-existing warranties are aggregated with accruals for new warranty contracts. Dell’s warranty liability process does not differentiate between estimates made for pre-existing warranties and new warranty obligations.

NOTE 10 — COMMITMENTS AND CONTINGENCIES

Lease Commitments — Dell leases property and equipment, manufacturing facilities, and office space under non-cancelable leases. Certain of these leases obligate Dell to pay taxes, maintenance, and repair costs. At February 1, 2008, future minimum lease payments under these non-cancelable leases are as follows: $92 million in Fiscal 2009; $73 million in Fiscal 2010; $65 million in Fiscal 2011; $53 million in Fiscal 2012; $39 million in Fiscal 2013; and $165 million thereafter.

Rent expense under all leases totaled $118 million, $78 million, and $70 million for Fiscal 2008, 2007, and 2006 respectively.

Restricted Cash — Pursuant to an agreement between DFS and CIT, Dell is required to maintain escrow cash accounts that are held as recourse reserves for credit losses, performance fee deposits related to Dell’s private label credit card, and deferred servicing revenue. Restricted cash in the amount of $294 million and $418 million is

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included in other current assets on Dell’s Consolidated Statements of Financial Position at February 1, 2008 and February 2, 2007, respectively.

Legal Matters — Dell is involved in various claims, suits, investigations, and legal proceedings. As required by SFAS No. 5, Accounting for Contingencies (“SFAS 5”), Dell accrues a liability when it believes that it is both probable that a liability has been incurred and that it can reasonably estimate the amount of the loss. The following is a discussion of Dell’s significant legal matters.

•   Investigations and Related Litigation — In August 2005, the SEC initiated an inquiry into certain of Dell’s accounting and financial reporting matters and requested that Dell provide certain documents. The SEC expanded that inquiry in June 2006 and entered a formal order of investigation in October 2006. The SEC’s requests for information were joined by a similar request from the United States Attorney for the Southern District of New York (“SDNY”), who subpoenaed documents related to Dell’s financial reporting from and after Fiscal 2002. In August 2006, because of potential issues identified in the course of responding to the SEC’s requests for information, Dell’s Audit Committee, on the recommendation of management and in consultation with PricewaterhouseCoopers LLP, Dell’s independent registered public accounting firm, initiated an independent investigation, which was completed in the third quarter of Fiscal 2008. Although the Audit Committee investigation has been completed, the investigations being conducted by the SEC and the SDNY are ongoing. Dell continues to cooperate with the SEC and the SDNY.

Dell and several of its current and former directors and officers are parties to securities, Employee Retirement Income Security Act of 1974 (“ERISA”), and shareholder derivative lawsuits all arising out of the same events and facts. Four putative securities class actions that were filed in the Western District of Texas, Austin Division, against Dell and certain of its current and former officers have been consolidated, as In re Dell Securities Litigation, and a lead plaintiff has been appointed by the court. The lead plaintiff has asserted claims under sections 10(b), 20(a), and 20A of the Securities Exchange Act of 1934 based on alleged false and misleading disclosures or omissions regarding Dell’s financial statements, governmental investigations, internal controls, known battery problems, business model, and insiders’ sales of its securities. This action also includes Dell’s independent registered public accounting firm, PricewaterhouseCoopers LLP, as a defendant. Four other putative class actions that were also filed in the Western District by purported participants in the Dell 401(k) Plan have been consolidated, as In re Dell ERISA Litigation, and lead plaintiffs have been appointed by the court. The lead plaintiffs have asserted claims under ERISA based on allegations that Dell, certain current officers, and certain current and former directors imprudently invested and managed participants’ funds and failed to disclose information regarding its stock held in the 401(k) Plan. In addition, seven shareholder derivative lawsuits that were filed in three separate jurisdictions (the Western District of Texas, Austin Division; the Delaware Chancery Court; and the state district court in Travis County, Texas) have been consolidated into three actions, one in each of the respective jurisdictions, as In re Dell Derivative Litigation, and name various current and former officers and directors as defendants and Dell as a nominal defendant. The Travis County, Texas action has been transferred to the state district court in Williamson County, Texas. By an order filed October 9, 2007, the shareholder derivative action filed in the Western District of Texas, Austin Division, was dismissed without prejudice. The shareholder derivative lawsuits assert claims derivatively on behalf of Dell under state law, including breaches of fiduciary duties. Dell intends to defend all of these lawsuits vigorously.

•   Copyright Levies — Proceedings against the IT industry in Germany seek to impose levies on equipment, such as personal computers and multifunction devices that facilitate making private copies of copyrighted materials. The total levies due, if imposed, would be based on the number of products sold and the per-product amounts of the levies, which vary. Dell, along with other companies and various industry associations are opposing these levies and instead are advocating compensation to rights holders through digital rights management systems.

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On December 29, 2005, Zentralstelle Für private Überspielungrechte (“ZPÜ”), a joint association of various German collection societies, instituted arbitration proceedings against Dell’s German subsidiary before the Arbitration Body in Munich. ZPÜ claims a levy of €18.4 per PC that Dell sold in Germany from January 1, 2002 through December 31, 2005. On July 31, 2007, the Arbitration Body recommended a levy of €15 on each PC sold during that period, for audio and visual copying capabilities. Dell and ZPÜ rejected the recommendation and on February 21, 2008, ZPÜ filed a lawsuit in the German Regional Court in Munich. Dell plans to continue to defend this claim vigorously. In the fourth quarter of Fiscal 2008, the German Federal Supreme Court decided that printers are not leviable. Dell is currently not aware of any other pending levy cases before the German Federal Supreme Court that could reasonably be expected to have a material adverse impact on Dell.

•   Lucent v. Dell — In February 2003, Lucent Technologies, Inc. filed a lawsuit against Dell in the United States District Court for Delaware, and the lawsuit was subsequently transferred to the United States District Court for the Southern District of California. The lawsuit alleges that Dell infringed 12 patents owned by Lucent and seeks monetary damages and injunctive relief. In April 2003, Microsoft Corporation filed a declaratory judgment action against Lucent in the United States District Court for the Southern District of California, asserting that Microsoft products do not infringe patents held by Lucent, including 10 of the 12 patents at issue in the lawsuit involving Dell and Microsoft. These actions were consolidated for discovery purposes with a previous suit that Lucent filed against Gateway, Inc. In September 2005, the court granted a summary judgment of invalidity with respect to one of the Lucent patents asserted against Dell. In subsequent decisions, the court granted summary judgment of non-infringement with respect to five more of the Lucent patents asserted against Dell. Fact and expert discovery has closed, and the three actions have been consolidated. The asserted patents are owned by two parties: Alcatel-Lucent and Multimedia Patent Trust (MPT). Prior to trial, Gateway settled with both Alcatel-Lucent and MPT. Dell settled with MPT, licensing the patents asserted by MPT in the lawsuit, but not with Alcatel-Lucent. Dell has satisfactorily resolved its indemnity coverage related to Microsoft products it uses or distributes and has determined that, in conjunction with the MPT license, such indemnity substantially reduces Dell’s exposure to the Alcatel-Lucent lawsuit. Trial as to those Alcatel-Lucent owned patents began February 20, 2008, in San Diego federal court. Microsoft and Dell are defending these claims at trial, which is scheduled to end no later the April 4, 2008. Separately, Dell filed a lawsuit against Lucent in the United States District Court for the Eastern District of Texas, alleging that Lucent infringes two patents owned by Dell and seeking monetary damages and injunctive relief. That case went to trial ending in a jury verdict on February 1, 2008, that the patents were valid but not infringed. Dell is considering its options for challenging the verdict and appeal.

Dell is involved in various other claims, suits, investigations, and legal proceedings that arise from time to time in the ordinary course of its business. Although Dell does not expect that the outcome in any of these other legal proceedings, individually or collectively, will have a material adverse effect on its financial condition or results of operations, litigation is inherently unpredictable. Therefore, Dell could incur judgments or enter into settlements of claims that could adversely affect its operating results or cash flows in a particular period.

Certain Concentrations — All of Dell’s foreign currency exchange and interest rate derivative instruments involve elements of market and credit risk in excess of the amounts recognized in the consolidated financial statements. The counterparties to the financial instruments consist of a number of major financial institutions. In addition to limiting the amount of agreements and contracts it enters into with any one party, Dell monitors its positions with, and the credit quality of the counterparties to, these financial instruments. Dell does not anticipate nonperformance by any of the counterparties.

Dell’s investments in debt securities are in high quality financial institutions and companies. As part of its cash and risk management processes, Dell performs periodic evaluations of the credit standing of the institutions in

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accordance with its investment policy. Dell’s investments in debt securities have effective maturities of less than five years. Management believes that no significant concentration of credit risk for investments exists for Dell.

Dell markets and sells its products and services to large corporate clients, governments, healthcare and education accounts, as well as small-to-medium businesses and individuals.

Dell purchases a number of components from single or limited sources. In some cases, alternative sources of supply are not available. In other cases, Dell may establish a working relationship with a single source or a limited number of sources if Dell believes it is advantageous due to performance, quality, support, delivery, capacity, or price considerations. If the supply of a critical single- or limited-source product or component is delayed or curtailed, Dell may not be able to ship the related product in desired quantities and in a timely manner. Even where multiple sources of supply are available, qualification of the alternative suppliers and establishment of reliable supplies could result in delays and a possible loss of sales, which could harm operating results.

NOTE 11 — SEGMENT INFORMATION

Dell conducts operations worldwide and is managed in three geographic regions: the Americas; Europe, Middle East and Africa (“EMEA”); and Asia Pacific-Japan (“APJ”). The Americas region, which is based in Round Rock, Texas, covers the U.S., Canada, and Latin America. Within the Americas, Dell is further segmented into Business and U.S. Consumer. The Americas Business (“Business”) segment includes sales to corporate, government, healthcare, and education customers, while the U.S. Consumer segment includes sales primarily to individual consumers and selected retailers within the U.S. Dell has developed and started implementing a plan to combine the consumer business of both EMEA and APJ with the U.S. Consumer business and re-align its management and financial reporting structure. Dell will begin reporting worldwide Consumer once it completes the global consolidation of this business, which is expected to be the first quarter of Fiscal 2009. The changes have had no impact on Dell’s operating segment structure to date. This segment will include worldwide sales to individual consumers and select retailers. The EMEA segment, based in Bracknell, England, covers Europe, the Middle East, and Africa. The APJ region, based in Singapore, covers the Asian countries of the Pacific Rim as well as Australia, New Zealand, and India.

Corporate expenses are included in Dell’s measure of segment operating income for management reporting purposes; however, with the adoption of SFAS 123(R), beginning in Fiscal 2007, stock-based compensation expense is not allocated to Dell’s reportable segments. Beginning in the fourth quarter of Fiscal 2008, acquisition-related charges such as in-process research and development and amortization of intangibles are not allocated to Dell’s reportable segments. The asset totals disclosed by geography are directly managed by those regions and include accounts receivable, inventory, certain fixed assets, and certain other assets. Assets are not allocated specifically to the Business and U.S. Consumer segment within the Americas. Corporate assets primarily include cash and cash equivalents, investments, deferred tax assets, goodwill, intangible assets, and other assets.

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The following tables present revenue by Dell’s reportable segments as well as a reconciliation of consolidated segment operating income to Dell’s consolidated operating income for Fiscal 2008, Fiscal 2007, and Fiscal 2006:

	Fiscal Year Ended
	February 1,		February 2,		February 3,
Net revenue	2008		2007		2006
	(in millions)
Americas:
Business	$	31,144	$	29,311	$	28,365
U.S. Consumer		6,224		7,069		7,960
Americas		37,368		36,380		36,325
EMEA		15,267		13,682		12,887
APJ		8,498		7,358		6,576
Net revenue	$	61,133	$	57,420	$	55,788

	Fiscal Year Ended
	February 1,			February 2,			February 3,
Consolidated operating income	2008			2007			2006
	(in millions)
Americas:
Business	$	2,549		$	2,388		$	2,956
U.S. Consumer		(59	)		135			452
Americas		2,490			2,523			3,408
EMEA		1,009			583			871
APJ		471			332			524
Consolidated segment operating income		3,970			3,438			4,803
Stock-based compensation expense(a)		(436	)		(368	)		-
Other product charges(b)		-			-			(338	)
Selling, general, and administrative charges(c)		-			-			(83	)
In-process research and development(d)		(83	)		-			-
Amortization of intangible assets(d)		(11	)		-			-
Consolidated operating income	$	3,440		$	3,070		$	4,382

(a)	Stock compensation of $17 million for Fiscal 2006 is included in the total consolidated segment operating income. Stock-based compensation expense for Fiscal 2008 includes $107 million of cash expense for expired stock options. See Note 5 of Notes to Consolidated Financial Statements for additional information.
(b)	Other product charges include $307 million for estimated warranty costs of servicing or replacing certain OptiPlextm systems that include a vendor part that failed to perform to Dell’s specifications, as well as additional charges for product rationalizations and workforce realignment.
(c)	Charges relate to workforce realignment expenses, primarily for severance and related costs of $50 million, cost of operating leases on office space no longer utilized of $4 million, and a write-off of goodwill of $29 million.
(d)	Prior to the fourth quarter of Fiscal 2008, amortization of intangibles and IPR&D expenses of $16 million and $5 million are included in total consolidated segment operating income in Fiscal 2008 and 2007, respectively.

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The following tables present depreciation and amortization expense and capital expenditures by Dell’s reportable segments for Fiscal 2008, Fiscal 2007, and Fiscal 2006 and assets for Fiscal 2008 and Fiscal 2007:

	Fiscal Year Ended
	February 1,		February 2,		February 3,
Depreciation and amortization expense:	2008		2007		2006
	(in millions)
Americas:
Business	$	254	$	211	$	156
U.S. Consumer		108		62		53
Americas		362		273		209
EMEA		140		114		106
APJ		97		84		79
Depreciation and amortization expense	$	599	$	471	$	394

	Fiscal Year Ended
	February 1,		February 2,		February 3,
Capital expenditures:	2008		2007		2006
	(in millions)
Americas:
Business	$	332	$	489	$	408
U.S. Consumer		151		141		140
Americas		483		630		548
EMEA		200		144		91
APJ		148		122		108
Capital expenditures	$	831	$	896	$	747

	Fiscal Year Ended
	February 1,		February 2,
Assets:	2008		2007
	(in millions)
Corporate	$	15,336	$	16,694
Americas		6,524		4,981
EMEA		3,597		2,401
APJ		2,104		1,559
Total assets	$	27,561	$	25,635

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The following is net revenue and long-lived asset information allocated between the United States and foreign countries:

	Fiscal Year Ended
	February 1,		February 2,		February 3,
Net revenue:	2008		2007		2006
	(in millions)
United States	$	32,687	$	32,361	$	32,949
Foreign countries		28,446		25,059		22,839
Net revenue	$	61,133	$	57,420	$	55,788

	Fiscal Year Ended
	February 1,		February 2,		February 3,
Long-lived assets:	2008		2007		2006
	(in millions)
United States	$	1,622	$	1,538	$	1,440
Foreign countries		1,046		871		553
Long-lived assets	$	2,668	$	2,409	$	1,993

The allocation between domestic and foreign net revenue is based on the location of the customers. Net revenue and long-lived assets from any single foreign country did not comprised more than 10% of Dell’s consolidated net revenues or long-lived assets during Fiscal 2008, 2007, and 2006. No single customer accounted for more than 10% of Dell’s consolidated net revenue during Fiscal 2008, 2007, and 2006.

The following is net revenue by product groups:

	Fiscal Year Ended
	February 1,		February 2,		February 3,
	2008		2007		2006
	(in millions)
Net revenue:
Desktop PCs	$	19,573	$	19,815	$	21,568
Mobility		17,423		15,480		14,372
Software and peripherals		9,908		9,001		8,329
Servers and networking		6,474		5,805		5,449
Enhanced services		5,320		5,063		4,207
Storage		2,435		2,256		1,863
Net revenue	$	61,133	$	57,420	$	55,788

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NOTE 12 — SUPPLEMENTAL CONSOLIDATED FINANCIAL INFORMATION

	Fiscal Year Ended
Supplemental Consolidated Statements of	February 1,			February 2,
Financial Position Information:	2008			2007
	(in millions)
Accounts receivable:
Gross accounts receivable	$	6,064		$	4,748
Allowance for doubtful accounts		(103	)		(126	)
Accounts receivable	$	5,961		$	4,622
Inventories:
Production materials	$	744		$	353
Work-in-process		160			106
Finished goods		276			201
Inventories	$	1,180		$	660
Property, plant, and equipment:
Computer equipment	$	1,968		$	1,596
Land and buildings		1,635			1,480
Machinery and other equipment		1,011			973
Total property, plant, and equipment		4,614			4,049
Accumulated depreciation and amortization		(1,946	)		(1,640	)
Property, plant, and equipment	$	2,668		$	2,409
Accrued and other current liabilities:
Warranty liability		690			768
Income taxes		99			1,141
Compensation		1,131			861
Other		2,403			2,371
Accrued and other current liabilities	$	4,323		$	5,141
Other non-current liabilities:
Warranty liability		239			190
Tax liability		1,463			-
Other		368			457
Other non-current liabilities	$	2,070		$	647

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The tables below provide a detailed presentation of investment and other income, net and supplemental cash flow information for Fiscal 2008, Fiscal 2007, and Fiscal 2006:

	Fiscal Year Ended
Supplemental Consolidated Statements of	February 1,			February 2,			February 3,
Income Information:	2008			2007			2006
	(in millions)
Investment and other income, net:
Investment income, primarily interest	$	496		$	368		$	308
Gains (losses) on investments, net		14			(5	)		(2	)
Interest expense		(45	)		(45	)		(29	)
CIT minority interest		(29	)		(23	)		(27	)
Foreign exchange		(30	)		(37	)		3
Gain on sale of building		-			36			-
Other		(19	)		(19	)		(27	)
Investment and other income, net	$	387		$	275		$	226

	Fiscal Year Ended
Supplemental Consolidated Statements of	February 1,			February 2,			February 3,
Cash Flows Information:	2008			2007			2006
	(in millions)
Changes in operating working capital accounts:
Accounts receivable, net	$	(990	)	$	(542	)	$	(602	)
Short-term financing receivables, net		(310	)		(165	)		(378	)
Inventories		(498	)		(72	)		(72	)
Accounts payable		837			505			1,018
Accrued and other liabilities		787			955			853
Other, net		(345	)		(284	)		(872	)
Changes in operating working capital accounts	$	(519	)	$	397		$	(53	)
Income taxes paid	$	767		$	652		$	996
Interest paid	$	54		$	57		$	39

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NOTE 13 — UNAUDITED QUARTERLY RESULTS AND STOCK PRICES

Unaudited Quarterly Results — The following tables present selected unaudited Consolidated Statements of Income and stock sales price data for each quarter of Fiscal 2008 and Fiscal 2007:

	Fiscal Year 2008
	First		Second		Third		Fourth
	Quarter		Quarter		Quarter		Quarter
	(in millions except per share data)
Net revenue	$	14,722	$	14,776	$	15,646	$	15,989
Gross margin	$	2,838	$	2,951	$	2,888	$	2,994
Net income	$	756	$	746	$	766	$	679
Earnings per common share:
Basic	$	0.34	$	0.33	$	0.34	$	0.31
Diluted	$	0.34	$	0.33	$	0.34	$	0.31
Weighted-average shares outstanding:
Basic		2,234		2,237		2,236		2,184
Diluted		2,254		2,264		2,266		2,201
Stock sales price per share:
High	$	25.95	$	29.61	$	30.77	$	30.37
Low	$	21.61	$	24.64	$	24.96	$	18.87

	Fiscal Year 2007
	First		Second		Third		Fourth
	Quarter		Quarter		Quarter		Quarter
	(in millions except per share data)
Net revenue	$	14,320	$	14,211	$	14,419	$	14,470
Gross margin	$	2,508	$	2,138	$	2,391	$	2,479
Net income	$	776	$	480	$	601	$	726
Earnings per common share:
Basic	$	0.34	$	0.21	$	0.27	$	0.33
Diluted	$	0.33	$	0.21	$	0.27	$	0.32
Weighted-average shares outstanding:
Basic		2,297		2,264		2,229		2,230
Diluted		2,318		2,278		2,238		2,251
Stock sales price per share:
High	$	32.00	$	26.43	$	24.62	$	27.62
Low	$	25.32	$	19.91	$	20.99	$	23.52

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NOTE 14 — SUBSEQUENT EVENTS

On February 12, 2008, Dell agreed to acquire MessageOne Inc., a provider of Software-as-a-Service (SaaS) enabled enterprise-class e-mail business continuity, compliance, archiving, and disaster recovery services. The acquisition, for approximately $155 million in cash plus an additional $10 million to be used for management retention, has been approved by the board of directors of each company and is subject to regulatory approvals and customary closing conditions. Upon completion, MessageOne operations will be integrated into Dell’s Global Services organization.

The acquisition of MessageOne was identified and acknowledged by Dell’s Board of Directors as a related party transaction because Michael Dell and his family hold indirect ownership interests in MessageOne. Consequently, Dell’s Board directed management to implement a series of measures designed to ensure that the transaction was considered, analyzed, negotiated, and approved objectively and independent of any control or influence from the related parties.

In addition, on March 31, 2008, Dell announced that it will close its desktop manufacturing facility in Austin, Texas.

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ITEM 9 — CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

ITEM 9A — CONTROLS AND PROCEDURES

This Report includes the certifications of our Chief Executive Officer and Chief Financial Officer required by Rule 13a-14 of the Securities Exchange Act of 1934 (the “Exchange Act”). See Exhibits 31.1 and 31.2. This Item 9A includes information concerning the controls and control evaluations referred to in those certifications.

Background

During Fiscal 2008, the Audit Committee of our Board of Directors completed an independent investigation into certain accounting and financial reporting matters. As a result of issues identified in that investigation, as well as issues identified in additional reviews and procedures conducted by management, the Audit Committee, in consultation with management and PricewaterhouseCoopers LLP, our independent registered public accounting firm, concluded on August 13, 2007 that our previously issued financial statements for Fiscal 2003, 2004, 2005, and 2006 (including the interim periods within those years), and the first quarter of Fiscal 2007, should no longer be relied upon because of certain accounting errors and irregularities in those financial statements. Accordingly, we restated our previously issued financial statements for those periods. Restated financial information is presented in our Annual Report on Form 10-K for Fiscal 2007, which also contains a discussion of the investigation, the accounting errors and irregularities identified, and the adjustments made as a result of the restatement.

As a result of management’s review of the investigation issues and its other internal reviews, we identified several deficiencies in our internal control over financial reporting, including our control environment and period-end financial reporting process. The control deficiencies failed to prevent or detect a number of accounting errors and irregularities, which led to the restatement described above. Certain of the identified control deficiencies represented material weaknesses in our internal control over financial reporting as of February 2, 2007 and required corrective and remedial actions. As noted below, we believe those material weaknesses have been corrected and remediated as of February 1, 2008. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to management, including the chief executive officer and the chief financial officer, to allow timely decisions regarding required disclosures.

In connection with the preparation of this Report, our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of February 1, 2008. Based on that evaluation, our management has concluded that our disclosure controls and procedures were effective as of February 1, 2008.

Management’s Report on Internal Control Over Financial Reporting

Management, under the supervision of the Chief Executive Officer and the Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting (as defined in Rules 13a-15(f) and 15d(f) under the Exchange Act) is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America (“GAAP”). Internal control over financial reporting includes those policies and procedures which (a) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of

95

assets, (b) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, (c) provide reasonable assurance that receipts and expenditures are being made only in accordance with appropriate authorization of management and the board of directors, and (d) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of assets that could have a material effect on the financial statements.

In connection with the preparation of this Report, our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our internal control over financial reporting as of February 1, 2008 based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). As a result of that evaluation, management has concluded that our internal control over financial reporting was effective as of February 1, 2008. The effectiveness of our internal control over financial reporting as of February 1, 2008 has also been audited by PricewaterhouseCoopers LLP, our independent registered public accounting firm, as stated in their report, which is included in “Part II — Item 8 — Financial Statements and Supplementary Data.”

Changes in Internal Control Over Financial Reporting

During Fiscal 2008, our management was actively engaged in the implementation of remediation efforts to address the material weaknesses that were identified as of February 2, 2007. Those remediation efforts were designed both to address the identified material weaknesses and to enhance our overall financial control environment. The plan to remediate those material weaknesses was described in detail in our Annual Report on Form 10-K for Fiscal 2007, and our efforts to implement that plan are summarized below:

•  Our senior management renewed its commitment to achieving and maintaining a strong control environment, high ethical standards, and financial reporting integrity. This commitment has been communicated to and reinforced with every Dell employee and to external stakeholders. In this regard:

–  We developed, adopted, and communicated an accounting code of conduct to serve as a set of guiding principles emphasizing our commitment to accounting and financial reporting integrity, as well as transparency and robust and complete communications with, and disclosures to, internal and external auditors.

–  We reemphasized and invigorated our communications to all employees regarding the availability of our Ethics Hotline, as well as other reporting avenues or forums, through which employees at all levels can submit information or express concerns regarding accounting, financial reporting, or other irregularities they have become aware of or have observed.

–  We effected various personnel actions in our accounting and financial reporting functions. These actions included terminations, reassignments, reprimands, increased supervision, training, and imposition of financial penalties in the form of compensation adjustments.

–  We implemented personnel resource plans, as well as training and retention programs, designed to ensure that we have sufficient personnel with knowledge, experience, and training in the application of GAAP commensurate with our financial reporting requirements. We developed and implemented comprehensive training programs for finance personnel globally covering fundamental accounting and financial reporting matters, including accounting policies, financial reporting requirements, income statement classification, revenue recognition, vendor funding, accounting for reserves and accrued liabilities, and account reconciliation and documentation requirements. As of March 31, 2008, we have delivered that training to a majority of the accounting organization worldwide.

•  We reorganized the Finance Department, segregating accounting and financial reporting responsibility from other finance functions, with a renewed commitment to accounting and financial reporting integrity. We appointed a new Chief Accounting Officer in May 2007 and strengthened that position, making it directly responsible for all accounting and financial reporting functions worldwide. Under the supervision and oversight of the Chief Accounting Officer:

96

–  We centralized the development, oversight, and monitoring of accounting policies, and standardized processes in critical accounting areas.

–  We implemented new, and refreshed and reemphasized existing, global accounting and finance policies regarding the proper maintenance of accrued liability and other balance sheet reserve accounts.

–  We created a revenue recognition accounting resource function to coordinate complex revenue recognition matters and to provide global oversight and guidance on the design of controls and processes to enhance and standardize revenue recognition accounting procedures.

–  We developed, implemented, and communicated processes and controls to ensure that appropriate account reconciliations are performed, documented, and reviewed as part of standardized procedures.

–  We improved the processes and procedures around the completion and review of quarterly management representation letters, in which our various business and finance leaders make full and complete representations concerning, and assume accountability for, the accuracy and integrity of their submitted financial results.

•  We extended the time between the end of a financial reporting period and the public release of financial and operating data with respect to that period, giving our accounting organization more time to appropriately process the close of the accounting records and analyze the reported results prior to public announcement.

•  The internal audit organization and the Chief Accounting Officer enhanced their review and monitoring of key accounting processes, including journal entries and supporting documentation, revenue recognition processes, account reconciliations, and management representation letter controls and processes.

During the fourth quarter of Fiscal 2008, the remediation plan was fully implemented and operationalized. Our remediation activities during that period included continued focus on all remediation efforts and further testing to ensure the effectiveness of new and existing controls and procedures, as well as the following specific activities: continued GAAP training for additional accounting and finance personnel; further standardization of processes in critical accounting areas; continued operationalization of the revenue recognition accounting resource function; continued training and testing on account reconciliation processes and controls; and implementation of the accounting code of conduct, with compliance certifications from all accounting personnel.

Our efforts to remediate the identified material weaknesses and to enhance our overall control environment have been regularly reviewed with, and monitored by, our Audit Committee.

We believe the remediation measures described above have been successful in correcting and remediating the material weaknesses previously identified and have further strengthened and enhanced our internal control over financial reporting. As noted above, management is committed to maintaining a strong control environment, high ethical standards, and financial reporting integrity. In that regard, management will continue to improve, strengthen, and enhance our internal control processes and will continue to diligently and vigorously review our financial reporting controls and procedures. Furthermore, we have enhanced our control monitoring processes so that we can better assess on an ongoing basis the continuing effectiveness of the remediation and other control enhancement measures we have implemented. In addition, we are investing in the design and implementation of additional and enhanced information technology systems and user applications commensurate with the complexity of our business and our financial reporting requirements. Our goal is to reduce the need for manual processes, subjective assumptions, and management discretion; reduce the opportunity for errors and omissions; and decrease our reliance on manual controls to detect and correct accounting and financial reporting inaccuracies.

Inherent Limitations over Internal Controls

Our system of controls is designed to provide reasonable, not absolute, assurance regarding the reliability and integrity of accounting and financial reporting. Management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control

97

system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system will be met. These inherent limitations include the following:

•  Judgments in decision-making can be faulty, and control and process breakdowns can occur because of simple errors or mistakes.

•  Controls can be circumvented by individuals, acting alone or in collusion with each other, or by management override.

•  The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

•  Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with associated policies or procedures.

•  The design of a control system must reflect the fact that resources are constrained, and the benefits of controls must be considered relative to their costs.

Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.

ITEM 9B — OTHER INFORMATION

None.

PART III

The information called for by Part III of Form 10-K (Item 10 — Directors, Executive Officers and Corporate Governance, Item 11 — Executive Compensation, Item 12 — Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters, Item 13 — Certain Relationships and Related Transactions, and Director Independence, and Item 14 — Principal Accountant Fees and Services), to the extent not set forth herein under “Item 1 — Business — Executive Officers of Dell,” is incorporated by reference from Dell’s proxy statement relating to the 2008 annual meeting of stockholders. Such proxy statement will be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year to which this report relates.

98

PART IV

ITEM 15 — EXHIBITS, FINANCIAL STATEMENT SCHEDULES

Financial Statements

The following financial statements are filed as a part of this report under “Part II — Item 8 — Financial Statements and Supplementary Data”:

	Page
Financial Statements:
Report of Independent Registered Public Accounting Firm		46
Consolidated Statements of Financial Position at February 1, 2008 and February 2, 2007		47
Consolidated Statements of Income for the fiscal years ended February 1, 2008, February 2, 2007, and February 3, 2006		48
Consolidated Statements of Cash Flows for the fiscal years ended February 1, 2008, February 2, 2007, and February 3, 2006		49
Consolidated Statements of Stockholders’ Equity for the fiscal years ended February 1, 2008, February 2, 2007 and February 3, 2006		50
Notes to Consolidated Financial Statements		51

A list of the exhibits filed or furnished with this report (or incorporated by reference to exhibits previously filed or furnished) is provided in the Exhibit index on page 101 of this report.

99

Financial Statement Schedule

The following financial statement schedule is filed as a part of this report under Schedule II immediately preceding the signature page: Schedule II — Valuation and Qualifying Accounts for the three fiscal years ended February 1, 2008, February 2, 2007, and February 3, 2006. All other schedules called for by Form 10-K are omitted because they are inapplicable or the required information is shown in the consolidated financial statements, or notes thereto, included herein.

SCHEDULE II

DELL INC.

VALUATION AND QUALIFYING ACCOUNTS

			Balance at		Charged to		Write-Offs		Balance
Fiscal			Beginning		Income		Charged to		at End of
Year		Description	of Period		Statement		Allowance		Period
Trade Receivables:
	2008	Allowance for doubtful accounts		$ 126		$ 82		$ 105		$ 103
	2007	Allowance for doubtful accounts		$ 96		$ 107		$ 77		$ 126
	2006	Allowance for doubtful accounts		$ 79		$ 101		$ 84		$ 96
Customer Financing Receivables:
	2008	Allowance for doubtful accounts		$ 39		$ 105		$ 48		$ 96
	2007	Allowance for doubtful accounts		$ 22		$ 40		$ 23		$ 39
	2006	Allowance for doubtful accounts		$ 1		$ 22		$ 1		$ 22
Trade Receivables:
	2008	Allowance for customer returns		$ 53		$ 475		$ 437		$ 91
	2007	Allowance for customer returns		$ 57		$ 387		$ 391		$ 53
	2006	Allowance for customer returns		$ 45		$ 384		$ 372		$ 57

100

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

DELL INC.

By:  /s/  MICHAEL S. DELL

Michael S. Dell

Chairman and Chief Executive Officer

Date: March 31, 2008

101

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Name	Title	Date
/s/  MICHAEL S. DELL Michael S. Dell	Chairman and Chief Executive Officer (principal executive officer)	March 31, 2008
/s/  DONALD J. CARTY Donald J. Carty	Vice Chairman and Chief Financial Officer	March 31, 2008
/s/  WILLIAM H. GRAY, III William H. Gray, III	Director	March 31, 2008
/s/  SALLIE L. KRAWCHECK Sallie L. Krawcheck	Director	March 31, 2008
/s/  ALAN G. LAFLEY Alan G. Lafley	Director	March 31, 2008
/s/  JUDY C. LEWENT Judy C. Lewent	Director	March 31, 2008
/s/  THOMAS W. LUCE III Thomas W. Luce III	Director	March 31, 2008
/s/  KLAUS S. LUFT Klaus S. Luft	Director	March 31, 2008
/s/  ALEX J. MANDL Alex J. Mandl	Director	March 31, 2008
/s/  MICHAEL A. MILES Michael A. Miles	Director	March 31, 2008
/s/  SAMUEL A. NUNN, Jr. Samuel A. Nunn, Jr.	Director	March 31, 2008
/s/  THOMAS W. SWEET Thomas W. Sweet	Vice President, Corporate Finance (principal accounting officer)	March 31, 2008

102

        Exhibits

Exhibit
No.				Description of Exhibit
	2	.1	—	Agreement and Plan of Merger, dated November 4, 2007, by and among Dell International Incorporated, DII — Elephant Inc. and EqualLogic, Inc. (incorporated by reference to Exhibit 2.1 of Dell’s Current Report on Form 8-K filed on November 8, 2007, Commission File No. 0-17017)
	3	.1	—	Restated Certificate of Incorporation, filed February 1, 2006 (incorporated by reference to Exhibit 3.3 of Dell’s Current Report on Form 8-K filed on February 2, 2006, Commission File No. 0-17017)
	3	.2	—	Restated Bylaws, as amended and effective March 8, 2007 (incorporated by reference to Exhibit 3.1 of Dell’s Current Report on Form 8-K filed on March 13, 2007, Commission File No. 0-17017)
	4	.1	—	Indenture, dated as of April 27, 1998, between Dell Computer Corporation and Chase Bank of Texas, National Association (incorporated by reference to Exhibit 99.2 of Dell’s Current Report on Form 8-K filed April 28, 1998, Commission File No. 0-17017)
	4	.2	—	Officers’ Certificate pursuant to Section 301 of the Indenture establishing the terms of Dell’s 6.55% Senior Notes Due 2008 (incorporated by reference to Exhibit 99.3 of Dell’s Current Report on Form 8-K filed April 28, 1998, Commission File No. 0-17017)
	4	.3	—	Officers’ Certificate pursuant to Section 301 of the Indenture establishing the terms of Dell’s 7.10% Senior Debentures Due 2028 (incorporated by reference to Exhibit 99.4 of Dell’s Current Report on Form 8-K filed April 28, 1998, Commission File No. 0-17017)
	4	.4	—	Form of Dell’s 6.55% Senior Notes Due 2008 (incorporated by reference to Exhibit 99.5 of Dell’s Current Report on Form 8-K filed April 28, 1998, Commission File No. 0-17017)
	4	.5	—	Form of Dell’s 7.10% Senior Debentures Due 2028 (incorporated by reference to Exhibit 99.6 of Dell’s Current Report on Form 8-K filed April 28, 1998, Commission File No. 0-17017)
	10	.1*	—	Amended and Restated Dell Computer Corporation 1994 Incentive Plan (incorporated by reference to Exhibit 99 of Dell’s Registration Statement on Form S-8, filed October 31, 2000, Registration No. 333-49014)
	10	.2*	—	Amended and Restated Dell Computer Corporation 1998 Broad Based Stock Option Plan (incorporated by reference to Exhibit 99 of Dell’s Registration Statement on Form S-8, filed October 31, 2000, Registration No. 333-49016)
	10	.3*	—	Dell Computer Corporation 2002 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.1 of Dell’s Quarterly Report on Form 10-Q for the fiscal quarter ended August 2, 2002, Commission File No. 0-17017)
	10	.4*	—	Dell Inc. Amended and Restated 2002 Long-Term Incentive Plan (incorporated by reference to Appendix A of Dell’s 2007 proxy statement filed on October 31, 2007, Commission File No. 0-17017)
	10	.5*†	—	Amended and Restated Dell Inc. 401(k) Plan, adopted effective as of January 1, 2007
	10	.6*	—	Amended and Restated Dell Computer Corporation Deferred Compensation Plan (incorporated by reference to Exhibit 10.6 to Dell’s Annual Report on Form 10-K for the fiscal year ended January 30, 2004, Commission File No. 0-17017)
	10	.7*	—	Executive Incentive Bonus Plan, adopted July 18, 2003 (incorporated by reference to Exhibit 10.1 of Dell’s Quarterly Report on Form 10-Q for the fiscal quarter ended August 1, 2003, Commission File No. 0-17017)
	10	.8*	—	Form of Indemnification Agreement between Dell and each Non-Employee Director of Dell (incorporated by reference to Exhibit 10.11 to Dell’s Annual Report on Form 10-K for the fiscal year ended January 31, 2003, Commission File No. 0-17017)
	10	.9*	—	Form of Performance Based Stock Unit Agreement for employees under the 2002 Long-Term Incentive Plan (incorporated by reference to Exhibit 99.2 of Dell’s Current Report on Form 8-K filed March 14, 2006, Commission File No. 0-17017)
	10	.10*	—	Form of Restricted Stock Agreement for Non-Employee Directors under the 2002 Long-Term Incentive Plan (incorporated by reference to Exhibit 99.1 of Dell’s Current Report on Form 8-K filed July 27, 2006, Commission File No. 0-17017)

103

Exhibit
No.				Description of Exhibit
	10	.11*	—	Form of Restricted Stock Unit Agreement for Non-Employee Directors under the 2002 Long-Term Incentive Plan (incorporated by reference to Exhibit 99.2 of Dell’s Current Report on Form 8-K filed July 27, 2006, Commission File No. 0-17017)
	10	.12	—	Form of Nonstatutory Stock Option Agreement for Non-Employee Directors under the 2002 Long-Term Incentive Plan (incorporated by reference to Exhibit 99.3 of Dell’s Current Report on Form 8-K filed July 27, 2006, Commission File No. 0-17017)
	10	.13*	—	Form of Nonstatutory Stock Option Agreement for grant to Donald J. Carty under the 2002 Long-Term Incentive Plan (incorporated by reference to Exhibit 99.1 of Dell’s Current Report on Form 8-K filed December 20, 2006, Commission File No. 0-17017)
	10	.14*	—	Form of Stock Unit Agreement for grant to Donald J. Carty under the 2002 Long-Term Incentive Plan (incorporated by reference to Exhibit 99.2 of Dell’s Current Report on Form 8-K filed December 20, 2006, Commission File No. 0-17017)
	10	.15*	—	Form of Restricted Stock Unit Agreement for Non-Employee Directors under the Amended and Restated 2002 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.10 of Dell’s Quarterly Report on Form 10-Q filed October 30, 2007, Commission File No. 0-17017)
	10	.16*	—	Form of Nonstatutory Stock Option Agreement for Non-Employee Directors under the Amended and Restated 2002 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.11 of Dell’s Quarterly Report on Form 10-Q filed October 30, 2007, Commission File No. 0-17017)
	10	.17*†	—	Form of Performance Based Stock Unit Agreement for Executive Officers under the Amended and Restated 2002 Long-Term Incentive Plan
	10	.18*†	—	Form of Nonstatutory Stock Option Agreement for Executive Officers under the Amended and Restated 2002 Long-Term Incentive Plan
	10	.19*†	—	Form of Restricted Stock Unit Agreement for Executive Officers under the Amended and Restated 2002 Long-Term Incentive Plan
	10	.20*	—	Form of Protection of Sensitive Information, Noncompetition and Nonsolicitation Agreement for Executive Officers (incorporated by reference to Exhibit 10.1 of Dell’s Current Report on Form 8-K filed on July 16, 2007, Commission file No. 0-17017)
	10	.21*	—	Form of Release Agreement between Dell and Current and Former Executive Officers with respect to Expired Stock Options (incorporated by reference to Exhibit 10.1 of Dell’s Current Report on Form 8-K filed July 16, 2007, Commission file No. 0-17017)
	10	.22*	—	Protection of Sensitive Information, Noncompetition and Nonsolicitation Agreement between Kevin B. Rollins and Dell Inc. (incorporated by reference to Exhibit 99.2 of Dell’s Current Report on Form 8-K filed February 20, 2007, Commission File No. 0-17017)
	10	.23*	—	Letter Agreement regarding Severance Benefits between Michael R. Cannon and Dell Inc. (incorporated by reference to Exhibit 99.1 of Dell’s Current Report on Form 8-K filed February 21, 2007, Commission File No. 0-17017)
	10	.24*	—	Letter Agreement regarding Severance Benefits between Ronald G. Garriques and Dell Inc. (incorporated by reference to Exhibit 99.2 of Dell’s Current Report on Form 8-K filed February 21, 2007, Commission File No. 0-17017)
	10	.25*	—	Form of Protection of Sensitive Information, Noncompetition and Nonsolicitation Agreement (incorporated by reference to Exhibit 99.3 of Dell’s Current Report on Form 8-K filed February 21, 2007, Commission File No. 0-17017)
	10	.26*	—	Form of Protection of Sensitive Information, Noncompetition and Nonsolicitation Agreement for Executive Officers (incorporated by reference to Exhibit 10.1 of Dell’s Current Report on Form 8-K filed on September 12, 2007, Commission file No. 0-17017)
	10	.27*	—	Separation Agreement and Release between Kevin B. Rollins and Dell Inc. (incorporated by reference to Exhibit 99.1 of Dell’s Current Report on Form 8-K filed February 20, 2007, Commission File No. 0-17017)
	21	†	—	Subsidiaries of Dell
	23	†	—	Consent of PricewaterhouseCoopers LLP

104

Exhibit
No.				Description of Exhibit
	31	.1†	—	Certification of Michael S. Dell, Chairman and Chief Executive Officer, pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	31	.2†	—	Certification of Donald J. Carty, Vice Chairman and Chief Financial Officer, pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	32	.1††	—	Certifications of Michael S. Dell, Chairman and Chief Executive Officer, and Donald J. Carty, Vice Chairman and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
	99	.1†	—	Item 4 — Submission of Matters to a Vote of Security Holders from page 34 of Dell’s Quarterly Report on Form 10-Q filed December 10, 2007, Commission File No. 0-17017

*	Identifies Exhibit that consists of or includes a management contract or compensatory plan or arrangement.
†	Filed herewith.
††	Furnished herewith.

105

EX-10.5

Exhibit 10.5

Dell Inc. 401(k) Plan

As Amended and Restated
Effective January 1, 2007

TABLE OF CONTENTS

article and section	page
ARTICLE I DEFINITIONS		2
1.1. Account Balance		2
1.2. Accounting Date		2
1.3. Administrator		2
1.4. Agreement		2
1.5. Alternate Payee		2
1.6. Allocation Date		2
1.7. Anniversary Date		3
1.8. Annual Additions Limit		3
1.9. Annual Compensation		3
1.10. Beneficiary		5
1.11. Break In Service		7
1.12. Catch-up Contributions		8
1.13. Code		8
1.14. Committee		8
1.15. Computation Period		8
1.16. Determination Date		8
1.17. Effective Date		8
1.18. Employee		9
1.19. Employment Commencement Date		9
1.20. Employer		9
1.21. Employer Securities		9
1.22. ERISA		10
1.23. Five Percent Owner		10
1.24. Forfeiture		10
1.25. Former Employee		10
1.26. Former Participant		10
1.27. Highly Compensated Employee		11
1.28. Hour Of Service		11
1.29. Individual Accounts		12
1.30. Limitation Year		13
1.31. Named Fiduciary		13
1.32. Nonforfeitable		14
1.33. Non-Highly Compensated Employee		14
1.34. Normal Retirement Age		14
1.35. Normal Retirement Date		14
1.36. Participant		14
1.37. Participating Employer		14
1.38. Plan		14
1.39. Plan Sponsor		14
1.40. Plan Year		14
1.41. Predecessor Employer		15
1.42. Related Employer		15
1.43. Service		15
1.44. Severance from Employment		16
1.45. Total and Permanent Disability		16
1.46. Trust Agreement		16
1.47. Trust Fund		16
1.48. Trustee		16

i

article and section	page
1.49. Valuation Date		16
ARTICLE II ELIGIBILITY AND PARTICIPATION		1
2.1. Eligibility Conditions		1
2.2. Participation Election		2
2.3. Participant Re-Entry		3
ARTICLE III CONTRIBUTIONS		1
3.1. Salary Reduction Contributions		1
3.2. Safe Harbor Matching Contributions		3
3.3. Employer Retirement Savings Contributions		5
3.4. Rules Governing Deposits of Contributions		5
3.5. Participant Voluntary After Tax Contributions		6
ARTICLE IV INVESTMENT OF ACCOUNTS		6
4.1. Investment of Accounts by Participants		6
4.2. Restriction on Acquisition of Employer Securities		6
4.3. Pass-Through Voting of Employer Securities		7
4.4. Stock Rights, Stock Splits, and Stock Dividends		7
4.5. Participant Rights		7
ARTICLE V ALLOCATION OF EMPLOYER CONTRIBUTIONS TO INDIVIDUAL ACCOUNTS		1
5.1. Allocation of Safe Harbor Matching Contributions		1
5.2. Allocation of Employer Retirement Savings Contributions		1
5.3. Suspension of the Allocation Rules Applicable to Employer Retirement Savings Contributions in order to Satisfy Code Section 410(b) Requirements		2
5.4. Limitations on Allocations under Code Section 415		3
5.5. Post-Allocation Adjustments to Accounts		7
5.6. Employer Contribution Accounts Defined		8
ARTICLE VI IN-SERVICE DISTRIBUTIONS		9
6.1. Withdrawal from Certain Individual Accounts Upon Attainment of Age 591/2		9
6.2. Withdrawal from Certain Accounts Prior to Attainment of Age 591/2 or Account of Financial Hardship		9
6.3. Additional Restrictions on In-Service Withdrawals		12
ARTICLE VII DISTRIBUTIONS AFTER TERMINATION OF EMPLOYMENT		13
7.1. Eligibility Due to Retirement, Death or Total and Permanent Disability		13
7.2. Eligibility Due to Termination of Employment		13
7.3. Payment of Benefits		14
ARTICLE VIII MANDATORY DISTRIBUTION OF BENEFITS		16
8.1. General		16
8.2. Form of Distribution		16
8.3. Limits on Distribution Periods		16
8.4. Mandatory Distribution of Benefits During a Participant’s Lifetime		17
8.5. Mandatory Distribution of Benefits Upon a Participant’s Death		18
8.6. Definitions		20
ARTICLE IX OPTIONAL FORMS OF DISTRIBUTION		22
9.1. Forms of Payment of Benefits		22
9.2. Direct Rollover Benefit		22
9.3. Election to Receive Benefits		23
9.4. Minority or Disability		24
9.5. Unclaimed Account Procedure		25
9.6. Qualified Joint And Survivor Annuity Requirements		26

ii

article and section	page
ARTICLE X PLAN SPONSOR AND PARTICIPATING EMPLOYERS		27
10.1. Employer Action		27
10.2. Plan Amendment		27
10.3. Discontinuance, Termination of Plan		28
10.4. Prohibition Against Reversion to Plan Sponsor or a Participating Employer		29
10.5. Adoption by Related Employers		29
10.6. Authority of Administrator over Participating Employers		32
10.7. Deficiency of Earnings or Profits		32
ARTICLE XI THE COMMITTEE		34
11.1. Committee Appointment		34
11.2. Committee Action and Procedure		34
11.3. Committee Powers and Duties		34
11.4. Committee Reliance		36
11.5. Committee Authority		36
11.6. Conflicts in Interest		36
11.7. Appointment of Agent and Legal Counsel		36
11.8. Appointment of Investment Manager		36
11.9. Annual Accounting		37
11.10. Funding Policy		38
11.11. Indemnification		38
ARTICLE XII ADMINISTRATION		39
12.1. Administrator Appointment		39
12.2. Summary Plan Description		39
12.3. Summary Annual Report		39
12.4. Individual Benefit Statements		39
12.5. Copies of Additional Documents		40
12.6. Documents Available for Examination		40
12.7. Notice of Participant Rights under ERISA		40
12.8. Notice to Participant on Participant Termination		40
12.9. Notice to Trustee on Participant Termination		40
12.10. Claim for Benefits		41
12.11. Appeal for Decision of Committee		41
ARTICLE XIII INVESTMENT OF TRUST ASSETS		43
13.1. Appointment of Trustee		43
13.2. Investment of Accounts		43
13.3. Investment in Employer Securities		44
13.4. Income and Expenses		45
13.5. Exclusive Benefit		46
13.6. Valuation		46
13.7. Investment Policy		46
13.8. Valuation of the Trust Fund		47
ARTICLE XIV PARTICIPANT LOANS		48
14.1. General Rules Regarding the Participant Loan Program		48
ARTICLE XV ROLLOVERS, MERGERS, DIRECT TRANSFERS		50
15.1. Participant Rollover Contributions		50
15.2. Merger and Direct Transfer		51
15.3. Rules Concerning Certain Rollovers, Mergers and Direct Transfers		52
ARTICLE XVI TOP HEAVY PROVISIONS		53
16.1. Top-Heavy Plan Status/Super Top-Heavy Plan Status		53

iii

article and section	page
16.2. Top-Heavy Allocations		57
ARTICLE XVII EXCLUSIVE BENEFIT		60
17.1. Exclusive Benefit		60
17.2. Denial of Request for Initial Approval		60
17.3. Mistake of Fact		60
17.4. Disallowance of Deduction		60
17.5. Spendthrift Clause		61
17.6. Termination		62
ARTICLE XVIII CONSTRUCTION		64
18.1. Headings		64
18.2. Context		64
18.3. Employment not Guaranteed		64
18.4. Waiver of Notice		64
18.5. State Law		64
18.6. Parties Bound		64
18.7. Severance		65
18.8. Employees In Qualified Military Service		65
APPENDIX A EGTRRA PROVISIONS		66
APPENDIX B MODEL AMENDMENT FOR COMPLIANCE WITH FINAL TREASURY REGULATIONS UNDER CODE SECTION 401(A)(9)		71
APPENDIX C SPECIAL VESTING PROVISIONS FOR REEMPLOYED FORMER PARTICIPANTS WHO ARE NOT CREDITED WITH AN HOUR OF SERVICE ON JANUARY 1, 2005		75

iv

Dell Inc.
401(k) Plan

     Dell Inc., (the “Employer”), hereby adopts this 401(k) Plan, effective January 1, 2007.

RECITALS:

     A. The Employer has previously established a 401(k) Plan for the exclusive benefit of its eligible Employees and their Beneficiaries;

     B. The Employer recognizes the lasting contribution made by its Employees to its successful operation and wants to reward their contribution by continuing the 401(k) Plan;

     C. The Employer wishes to amend and restate the existing 401(k) Plan;

     D. The Employer has authorized the execution of this Agreement intended to continue the 401(k) Plan to qualify under Sections 401(a) and 501(a) of the Internal Revenue Code of 1986, as amended and the regulations promulgated thereunder;

     E. The provisions of this Plan, as amended and restated, shall apply solely to an Employee who terminates employment with the Employer on or after the restated Effective Date of this Plan; and

     F. If an Employee terminates employment with the Employer prior to the restated Effective Date, that Employee shall be entitled to benefits under the Plan as the Plan existed on the Employee’s termination date.

     NOW, THEREFORE, considering the premises and their mutual covenants, the Employer agrees as follows:

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ARTICLE I
Definitions

The following terms used in this Agreement shall have the meanings set forth in this Article unless a different meaning is clearly indicated by the context:

1.1.	Account Balance
	Account Balance means the amount held in a Participant’s Individual Account(s) as of any date derived from both Employer Contributions and Employee Contributions, if any.
1.2.	Accounting Date
	Accounting Date means the Anniversary Date of the Plan Year or such other date as may be designated by the Employer, but only if the Employer has specifically requested the Trustee to prepare an accounting on or before such date.
1.3.	Administrator
	Administrator means the Employer unless the Employer designates another person to hold the position of Administrator by written Employer action. In addition to its other duties, the Employer has full responsibility for compliance with the reporting and disclosure rules under ERISA pertaining to this Agreement.
1.4.	Agreement
	Agreement means this Plan Agreement and all amendments or addenda to this Agreement.
1.5.	Alternate Payee
	Alternate Payee means any spouse, former spouse, child, or other dependent of a Participant who is recognized by a domestic relations order as having a right to receive all, or a portion of, the benefits payable under the Plan with respect to such Participant.
1.6.	Allocation Date
	Allocation Date means with respect to Employer Contributions the Anniversary Date of each Plan Year. The Allocation Date for Participant Salary Reduction Contributions is the last day of each payroll period. Notwithstanding the foregoing, the Employer may, at its election, concurrently allocate its Safe Harbor Matching Contributions with Participant Salary Reduction Contributions on the Allocation Date of each payroll period, provided that the total amount contributed to the Plan on behalf of each Participant eligible to share in the Safe Harbor Matching Contribution for a Plan Year conforms to the requirements of Code Section 401(k)(12).

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1.7.	Anniversary Date
	Anniversary Date means the last day of each Plan Year. The Anniversary Date is an Allocation Date.
1.8.	Annual Additions Limit
	Annual Additions Limit means the annual contribution limit described in Section 5.4.
1.9.	Annual Compensation

(a) For the Plan Year ending December 31, 2007, Annual Compensation, pursuant to the safe harbor definition of Treas. Reg. § 1.415-2(d)(11), means wages as defined in Code Section 3401(a) and all other payments of compensation to an Employee in the course of the Employer’s or Participating Employer’s trade or business for which the Employer or Participating Employer is required to furnish the Employee a written statement under Code Section 6041(d) and 6051(a)(3). Compensation must be determined without regard to any rules under Code Section 3401(a) that limit the remuneration included in wages based on the nature or location of the employment or the services performed such as the exception for agricultural labor in Code Section 3401(a)(2). “Annual Compensation” shall not include the following:

(i)	contributions by the Employer to any deferred compensation plan (to the extent the contributions are not included in the Participant’s gross income for the taxable year in which contributed) or Simplified Employees Pension defined in Code Section 408(k) (to the extent the contributions are excludable from the Participant’s gross income);
(ii)	distributions from any plan of deferred compensation regardless of whether such amounts are includable in the gross income of the Employee when distributed;
(iii)	amounts realized from the exercise of any nonqualified stock option, or, when restricted stock becomes freely transferable or is no longer subject to a substantial risk of forfeiture;
(iv)	amounts realized from the sale, exchange, or other disposition of stock acquired under a qualified stock option described in Part II, Subchapter D, Chapter I of the Code;
(v)	premiums paid by the Employer for group term life insurance (to the extent the premiums are not includable in the Participant’s gross income), contributions by the Employer to an annuity under Code Section 403(b) (to the extent not includable in the Participant’s gross income), and any other amounts received under any Employer sponsored fringe benefit plan (to the extent no includable in the Participant’s gross income);

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(vi)	Reimbursements and other expense allowances;
(vii)	Cash and noncash fringe benefits;
(viii)	Moving expenses;
(ix)	Welfare benefits;
(x)	Noncash awards such as gifts and trips;
(xi)	Earned income (as defined in Code Section 911(d)(2)) from the Employer that does not constitute United States source income (as defined in Code Section 861(a)(3));
(xii)	For any individual who is a nonresident alien and who has received earned income (including income defined in Code Section 911(d)(2)) from the Employer that constitutes United States source income (as defined in Code Section 861(a)(3), all income received from the Employer;
(xiii)	Cash retention awards made under the Company’s Long Term Incentive Program; and

Notwithstanding the foregoing, Annual Compensation includes contributions that are made by the Employer on behalf of its Employees that are not includable in gross income under Code Section 125 relating to a cafeteria plan; Code Section 402(g) relating to a “401(k)” plan; and Code Section 132(f)(4) relating to a qualified transportation fringe benefit.

For Plan Years commencing on or after January 1, 2008, Annual Compensation means the sum of:

(i)	Base salary;
(ii)	Hourly pay;
(iii)	Overtime pay and shift differential pay
(iv)	Commissions and similar incentive compensation payments;
(v)	Incentive Cash Plan payments;
(vi)	Incentive Bonus Plan payments;
(vii)	cash patent awards;
(viii)	on the spot awards; and
(ix)	friends for hire payments which are paid in cash.

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	Notwithstanding the foregoing, Annual Compensation includes contributions that are made by the Employer on behalf of its Employees that are not includable in gross income under Code Section 125 relating to a cafeteria plan; Code Section 402(g) relating to a “401(k)” plan; and Code Section 132(f)(4) relating to a qualified transportation fringe benefit. For purposes of the foregoing, these amounts are payable as part of a Participant’s base salary and/or hourly pay.
(b)	In addition to other applicable limitations set forth in the Plan, and notwithstanding any other provision of the Plan to the contrary, the Annual Compensation of each Employee taken into account under the Plan shall not exceed $200,000, pursuant to Appendix A.1.3, as adjusted by the Commissioner for increases in the cost of living in accordance with Code Section 401(a)(17)(B). The cost-of-living adjustment in effect for a calendar year applies to any period, not exceeding twelve (12) months, over which compensation is determined (“determination period”) beginning in such calendar year. If a determination period consists of fewer than twelve (12) months, the Annual Compensation limit will be multiplied by a fraction, the numerator of which is the number of months in the determination period, and the denominator of which is twelve (12).
(c)	For purposes of determining whether the Plan discriminates in favor of Highly Compensated Employees, Annual Compensation means Annual Compensation defined in this Section, except any exclusions from Annual Compensation other than the exclusions described in clauses (a)(i), (ii), (iii), (iv), and (v), if applicable, do not apply.

1.10. Beneficiary

(a)

Beneficiary means any person or fiduciary designated by a Participant or Former Participant who is or may become entitled to receive benefits under Article VII following the death of the Participant or Former Participant. A Beneficiary who becomes entitled to a benefit under the Plan shall remain a Beneficiary under the Plan until the Trustee has fully distributed the benefits to the Beneficiary. A Beneficiary’s right to information or data concerning the Plan, and the respective duties of the Administrator, the Committee and the Trustee to provide to the Beneficiary information or data concerning the Plan, shall not arise until the Beneficiary first becomes entitled to receive a benefit under the Plan. For purposes of determining whether the Plan is a Top-Heavy Plan, a Beneficiary of a deceased Participant shall be considered a Key Employee or a Non-Key Employee in accordance with the applicable Treasury Regulations.

(b)

Each Participant and Former Participant may from time to time designate one or more Beneficiaries to receive benefits under this Plan on the death of the Participant or Former Participant. The selection shall be made in writing on a form provided by the Committee and shall be filed with the Committee. Subject to Subsection (c) below, the last selection filed with the Committee shall control.

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A married Participant’s Beneficiary designation is not valid unless the Participant’s spouse consents, in writing, to the Beneficiary designation. The spouse’s consent must acknowledge the effect of that consent and a notary public or the Administrator (or Plan representative) must witness that consent. The spousal consent requirements of this Subsection do not apply if:

(i)	the Participant and spouse are not married throughout the one year period ending on the date of the Participant’s death;
(ii)	the Participant’s spouse is the Participant’s sole primary beneficiary;
(iii)	the Administrator is not able to locate the Participant’s spouse;
(iv)	the Participant is legally separated or has been abandoned (within the meaning of State law) and the Participant has a court order to that effect; or
(v)	other circumstances exist under which the Secretary of the Treasury will excuse the consent requirement.

	If the Participant’s spouse is legally incompetent to give consent, the spouse’s legal guardian (even if the guardian is the Participant) may give consent.
(c)	Unless elected in accordance with Subsection (d) below, a Participant’s Beneficiary shall be his spouse. Notwithstanding the foregoing, the Participant may designate a Beneficiary other than the spouse if

(i) the Participant has no spouse; or

(ii) the spouse cannot be located.

(d) In the case of a married Participant or Former Participant, the designation of a non-spouse as Beneficiary shall be valid only if:

(i) the spouse consents in writing to the designation;

      (ii) the designation specifies the beneficiary and the method of payment of benefits and may not be changed without spousal consent (or the spouse’s consent expressly permits designations by the Participant without any requirement of further spousal consent); and

      (iii) the spouse’s consent acknowledges the effect of the election and the written consent is witnessed by a Plan representative or by a Notary Public.

(e) If a Participant dies without a spouse or alternative Beneficiary surviving; if the alternative Beneficiary (other than the spouse) does not survive until final distribution of the Participant’s balance; if a Participant who is not married dies

6

without having designated a Beneficiary and/or alternative Beneficiary; or if a Participant who is not married dies after having made and revoked a designation but prior to having made a subsequent designation, then the amount remaining in the deceased Participant’s Individual Account shall be payable to (i) the Participant’s executor or administrator, or (ii) his heirs at law (as determined by reference to Texas law) if there is no administration of such Participant’s estate.

	Payment made pursuant to the power conferred on the Committee in this Section shall operate as a complete discharge of all obligations under the Plan concerning the share of a deceased Participant and shall not be subject to review by anyone but shall be final, binding and conclusive on all persons for all purposes.
1.11.	Break In Service

(a)	A Break in Service means a Period of Severance of at least 365 days. A Period of Severance means a continuous period of time during which an Employee is not employed by the Employer. Such period shall begin on the date the Employee retires, quits, is discharged, or dies, or, if earlier, the twelve (12) month anniversary of the date on which the Employee was otherwise first absent from work.
(b)	An Employee shall receive credit for purposes of determining whether he has incurred a Break in Service under Subsection (a) above for the aggregate of all time period(s) commencing with such Employee’s Employment Commencement Date (including such day following reemployment) and ending on the date a Break in Service begins. An Employee shall also receive credit for any Period of Severance of less than 365 days. Fractional periods of a year shall be expressed in terms of days.
(c)	In the case of an Employee who is absent from work for “authorized reasons” or for “maternity or paternity reasons,” the 365-day period beginning on the first anniversary of the first day of such absence shall not be a Break in Service.

(i)

For purposes of this Subsection (c), absence from work for “authorized reasons” means an unpaid temporary cessation from active employment with the Employer pursuant to an established nondiscriminatory policy, whether occasioned by illness, military service or any other reason.

(ii)

For purposes of this Subsection (c), absence from work for “maternity or paternity reasons” means an absence from work for any period because of the pregnancy of the individual, the birth of a child of the individual, the placement of a child with the individual relating to the adoption of such child by such individual, or for the purpose of caring for such child for a period beginning immediately following such birth or placement. In the case of absence from work for “maternity or paternity reasons,” the period between the first and second anniversaries of the first date of absence due

7

to said leave shall be treated as neither a Period of Service nor a Period of Severance.

(iii)

For purposes of this Subsection (c), a Period of Service means each period of an individual’s Service, commencing on his Employment Commencement Date or Reemployment Commencement Date, if applicable, and ending on the date of termination of employment. A Period of Service shall include any period required to be credited under this Section 1.11, Section 1.28, Section 1.43, Appendix C.1.1 and by federal law, but only under the conditions and to the extent so required by federal law.

1.12.	Catch-up Contributions
	Catch-up Contributions are those Salary Reduction Contributions which: (1) exceed an applicable limit; (2) are treated by the Plan as Catch-up Contributions; and (3) do not exceed the annual catch-up limit effective for the calendar year ($5,000 for 2006). An “applicable limit” is a statutory limit described in Code Sections 402(g) or 415, a Plan limit described in Section 3.1(a) or, with respect to Highly Compensated Employees, the limit resulting from the application of the nondiscrimination requirements described in Code Section 401(k)(3).
1.13.	Code
	Code means the Internal Revenue Code of 1986, as amended from time to time. A reference to a Code Section in this Agreement means the provisions or successor provisions of the particular Code Section, as amended or replaced from time to time.
1.14.	Committee
	Committee means the Plan Committee as from time to time constituted pursuant to Article XI.
1.15.	Computation Period
	Computation Period means the period of time used to calculate a Participant’s Years of Vesting Service under the terms of the Plan in effect prior to January 1, 2005. For purposes of determining a Participant’s Years of Vesting Service under Appendix C.1.1, the Computation Period shall be 365 days of credited Service, measured from the Participant’s Employment Commencement Date, which shall equal one (1) Year of Vesting Service. Such periods of credited Service need not be consecutive.
1.16.	Determination Date
	Determination Date means (i) the last day of the preceding Plan Year or (ii) in the case of the first Plan Year, the last day of the first Plan Year.
1.17.	Effective Date

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	The original Effective Date of this Plan is June 1, 1989. Except as otherwise noted herein, the Effective Date of this Plan as restated is January 1, 2007.
1.18.	Employee

(a)	Employee means any individual currently employed by the Employer maintaining the Plan or of any other Employer required to be aggregated with the Employer under Code Sections 414(b), (c), (m) or (o) and any Leased Employee treated as an Employee of the Employer.
(b)	The Plan treats any Leased Employee as an Employee of the Employer. A Leased Employee is an individual, who otherwise is not an Employee of the Employer, who, pursuant to a leasing agreement between the Employer and a Participating Employer, has performed services for the Participating Employer (or for the Participating Employer and any persons related to the Participating Employer within the meaning of Code Section 144(a)(3)) on a substantially full time basis for at least one (1) year (unless such individual is otherwise earlier considered a Leased Employee treated as an Employee of the Employer pursuant to the eligibility conditions elected by a Participating Employer in the Participation Agreement) and such services are performed under the primary direction or control of the Participating Employer. If a Leased Employee is treated as an Employee because of this Section, Annual Compensation includes compensation from the Employer which is attributable to services performed for the Participating Employer.
(c)	Notwithstanding the preceding, the term “Employee” shall not include any individual who is designated as an “Independent Contractor” by the Employer, even if the status of such individual subsequently is changed from that of an Independent Contractor to that of an Employee as a result of administrative or legal proceedings.

1.19.	Employment Commencement Date
	Employment Commencement Date means the date on which an Employee is first entitled to credit for an Hour of Service.
1.20.	Employer
	Employer means the Plan Sponsor, and any other Participating Employer under this Agreement.
1.21.	Employer Securities

(a) Employer Securities means any common or preferred stock issued by the Employer or by a corporation which is a member of the same controlled group of corporations.

(b) Qualifying Employer Securities means:

9

(i)	Common stock issued by the Employer (or by a corporation which is a member of the same controlled group) which is readily tradeable on an established securities market; or
(ii)	If there is no common stock which meets the requirements of (i) above, then common stock issued by the Employer (or by a corporation which is a member of the same controlled group) having a combination of voting power and dividend rights equal to or in excess of:
(iii)	that class of common stock of the Employer (or any other such corporation) having the greatest voting power; and
(iv)	that class of common stock of the Employer (or of any other such corporation) having the greatest dividend rights; or
(v)	Noncallable preferred stock, if such stock is convertible at any time into stock which meets the requirements of (i) or (ii) above (whichever is applicable) and if such conversion is at a conversion price that is reasonable. A preferred stock will be considered noncallable if after the call there will be a reasonable opportunity for a conversion which meets the requirements of the preceding sentence in accordance with the applicable Treasury Regulations.

1.22.	ERISA
	ERISA means the Employee Retirement Income Security Act of 1974, as amended.
1.23.	Five Percent Owner
	A “Five Percent Owner” is a Participant who owns, or is considered as owning within the meaning of Code Section 318, more than five percent (5%) of the outstanding stock of the Employer or stock possessing more than five percent (5%) of the total combined voting power of all stock of the Employer; or in the case of an unincorporated business, any person who owns more than five percent (5%) of the capital or profits interest in the Employer.

1.24.	Forfeiture
	Forfeiture means the loss, by a Participant or Beneficiary of that part of the benefit which the Participant or Beneficiary otherwise would have received under the Plan at any time prior to the termination of the Plan or the complete discontinuance of benefits under the Plan, arising from the Participant’s termination of employment.
1.25.	Former Employee
	Former Employee means any individual who is no longer employed by the Employer.
1.26.	Former Participant

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	Former Participant means any individual who has been a Participant in the Plan, but who is either no longer employed by the Employer or is otherwise no longer eligible to participate and has not yet received the entire benefit to which the individual is entitled under the Plan or incurred five (5) consecutive one year Breaks in Service.
1.27.	Highly Compensated Employee
	Highly Compensated Employee means any Participant or Former Participant who is a Highly Compensated Employee, as defined in Code Section 414(q). Generally, any Participant or Former Participant is considered a Highly Compensated Employee if:

(a)	during the Plan Year (the “Determination Year”) or during the twelve month period immediately preceding the Determination Year (the “Look Back Year”), the Participant or Former Participant was a Five Percent Owner at any time; or
(b)	for the Look Back Year the Participant or Former Participant had Annual Compensation from the Employer in excess of $80,000, as adjusted by the Secretary of the Treasury for the relevant year $100,000 for the 2006 Look Back Year).
	For purposes of the preceding sentence, (i) all employers aggregated with the Employer under Code Section 414(b), (c), (m), or (o) shall be treated as a single employer and (ii) a former Employee who had a separation year (generally, the Determination Year such Employee terminates employment) prior to the Determination Year and who was an active Highly Compensated Employee for either such termination year or any Determination Year ending on or after such Employee’s fifty-fifth birthday shall be deemed to be a Highly Compensated Employee. To the extent that the provisions of this paragraph are inconsistent or conflict with the definition of a “highly compensated employee” set forth in Code Section 414(q) and the Treasury Regulations thereunder, the relevant terms and provisions of Code Section 414(q) and the Treasury Regulations thereunder shall govern and control.
(c)	For purposes of this Section, “Annual Compensation” means Annual Compensation as defined in Section 1.9(c).

1.28.	Hour Of Service
	For purposes of crediting Hours of Service, the Plan will be treated as a single plan and Service with any Related Employer of the Employer and with any Participating Employer and its Related Employers shall be considered Service for the Employer.

(a) Any Employee or Participant who is compensated on an hourly-rated basis shall be credited with an Hour of Service for:

(i) each hour for which the Employee or Participant is either directly or indirectly paid or entitled to payment by the Employer for the performance of duties or for reasons other than for the performance of duties due to

11

	vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence, whether or not the employment relationship was terminated; and
(ii)	each hour for which back pay has been awarded to the Employee or Participant or agreed to by the Employer, irrespective of mitigation of damages.

(b) Any Employee or Participant who is compensated on a basis other than an hourly-rated basis and who, if hourly-rated, would be credited with one (1) Hour of Service pursuant to the preceding sentence, shall be credited with the number of Hours of Service as follows:

(i)	ten (10) hours of service per day, if compensated on a daily basis;
(ii)	forty-five (45) hours of service per week, if compensated on a weekly basis;
(iii)	ninety (90) hours of service per bi-weekly period, if compensated on a bi-weekly basis;
(iv)	ninety-five (95) hours of service per semi-monthly period, if compensated on a semi-monthly basis; or
(v)	one hundred ninety (190) hours of service per month, if compensated on a monthly basis.

(c)

The number of Hours of Service which shall be credited to an Employee or Participant for being entitled to payment for reasons other than for the performance of duties shall be determined under Sections 2530.200b-2(b) and (c) of the Department of Labor Regulations which are incorporated herein by this reference. The method for crediting Hours of Service under Subsection (b) above for each Participant shall be the same method used for crediting Hours of Service for which the Participant received compensation. Notwithstanding the foregoing, not more than five hundred one (501) Hours of Service shall be credited to any Employee or Participant during any Computation Period for any single, continuous period during which the Employee or Participant performs no duties.

(d)

An Hour of Service performed for any other entity that is a Related Employer with respect to the Employer shall be considered an Hour of Service performed for the Employer.

1.29.	Individual Accounts
	Individual Accounts means accounts or records maintained by the Committee or its agent indicating the monetary value of the total interest in the Trust Fund of each Participant, each Former Participant, and each Beneficiary. The types of Individual Accounts under this Plan are:

12

(a) Employer Contribution Accounts. The types of Employer Contribution Accounts maintained by this Plan are:

(i)	Safe Harbor Matching Contribution Accounts holding Employer Matching Contributions made to the Plan for Plan Years beginning on and after January 1, 2005, for the benefit of an Employee because of a Salary Reduction Contribution made with respect to the Employee or a contribution by the Employee that satisfy the requirements of Code Section 401(k)(12). Safe Harbor Matching Contributions, if any, shall be maintained separately for the benefit of the Participant so that all applicable distribution restrictions may be strictly observed. Safe Harbor Matching Contributions shall be 100% vested at all times.
(ii)	Matching Contribution Accounts holding discretionary Employer Matching Contributions made to the Plan for Plan Years beginning prior to January 1, 2005, for the benefit of an Employee because of a Salary Reduction Contribution made with respect to the Employee or a contribution by the Employee.
(iii)	Retirement Savings Contribution Accounts holding the Employer’s discretionary Retirement Savings Contributions made to the Plan for the benefit of an Employee, which the Employee could not have elected to receive in the form of cash or other taxable benefit, if any.

(b) Participant Contribution Accounts. The types of Participant Contribution Accounts maintained by this Plan are:

(i)

Rollover Accounts holding the Participant’s qualified rollover to the Plan pursuant to Article XVI.

(ii)

Salary Reduction Contribution Accounts, holding the amount contributed by the Employer as the result of an election by a Participant to have that amount contributed to the Plan rather than paid as cash or other taxable benefit plus any Failsafe Contributions that may have been made by the Employer to the Plan for Plan Years beginning prior to January 1, 2005. A Failsafe Contribution is a 100% vested Matching Contribution or a Retirement Savings Contribution that the Employer contributed to the Plan on behalf of certain Nonhighly Compensated Employees to satisfy nondiscrimination requirements under Code Section 401(k) or 401(m).

Participant Contribution Accounts shall be 100% vested at all times.

1.30.	Limitation Year
	Limitation Year means the Plan Year, as such term is defined in this Article I.
1.31.	Named Fiduciary

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	Named Fiduciary means one or more fiduciaries named in this Agreement who jointly and severally shall have authority to control or manage the operation and administration of the Plan. The Committee shall be the Named Fiduciary unless the Employer designates another person by written Plan Sponsor action.
1.32.	Nonforfeitable
	Nonforfeitable means a vested interest attained by a Participant or Beneficiary in that part of the Participant’s benefit under the Plan arising from the Participant’s Service, which claim is unconditional and legally enforceable against the Plan.
1.33.	Non-Highly Compensated Employee
	Non-Highly Compensated Employee means an Employee, Former Employee or Beneficiary who is not a Highly Compensated Employee.
1.34.	Normal Retirement Age
	Normal Retirement Age means, for each Participant, the date the Participant attains age 65.
1.35.	Normal Retirement Date
	Normal Retirement Date means, for each Participant, the date the Participant attains Normal Retirement Age.
1.36.	Participant
	Participant means an Employee of the Employer who has met the eligibility requirements of this Plan and who has been enrolled as a Participant in this Plan.
1.37.	Participating Employer
	Participating Employer means any entity that is related to the Employer or that is a recipient of the services of a Leased Employees pursuant to a written agreement with the Employer and who elects to adopt this Plan pursuant to Article X.
1.38.	Plan
	Plan means the qualified retirement plan embodied in this Agreement, as amended from time to time, designated as the Dell Inc. 401(k) Plan.
1.39.	Plan Sponsor
	Plan Sponsor means Dell Inc., and any successor corporation or business organization that may be substituted for the Plan Sponsor under this Agreement.
1.40.	Plan Year

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	Plan Year means the twelve (12) consecutive month period from January 1 of each year to the next following December 31.
1.41.	Predecessor Employer
	Predecessor Employer means a business organization, all or a portion of whose assets and business has been acquired by the Employer or a Participating Employer, whether by merger, stock purchase or acquisition of the assets and business of the business organization.
1.42.	Related Employer
	A related group of employers is a controlled group of corporations (defined in Code Section 414(b)), trades or businesses (whether or not incorporated) which are under common control (defined in Code Section 414(c)) or an affiliated service group (defined in Code Section 414(m) or in Code Section 414(o)). If the Employer is a member of a related group, the term “Employer” includes the related group members for purposes of crediting Hours of Service, determining Years of Service and Breaks in Service under Articles II and VII, applying the minimum coverage test of Code Section 410(b), applying the limitations on allocations in Article V, applying the top-heavy rules and the minimum allocation requirements of Article V, the definitions of Employee, Highly Compensated Employee, Annual Compensation and Leased Employee, and for any other purpose required by the applicable Code Section or by a Plan provision. However, an Employer may contribute to the Plan only by being a signatory to a Participation Agreement to the Plan. If one or more of the Employer’s related group members become Participating Employers by executing a Participation Agreement to the Plan, the term “Employer” includes the participating related group members for all purposes of the Plan, and Administrator means the Employer that is the signatory to the Plan. For Plan allocation purposes, Annual Compensation does not include Annual Compensation received from a Related Employer that is not participating in this Plan.
1.43.	Service

(a)

Service means any period of time the Employee is in the employ of the Employer. Service in all cases includes periods during which the Employee is on an “authorized leave of absence” or a “maternity or paternity leave of absence” relating to a Break in Service. Leaves of absence also shall include periods of absence in connection with military service during which the Employee’s re-employment rights are legally protected. Except for absence by reason of military service, leaves of absence shall be for a maximum period of two (2) years, unless the Employer has adopted a policy that specifies a lesser period. Leaves of absence shall be granted on a uniform and nondiscriminatory basis.

Notwithstanding the foregoing, an Employee who is absent from Service due to an authorized leave of absence described in the preceding paragraph and who does not recommence Service at the end of such authorized leave shall not receive credit for Service for such leave if a Break in Service would otherwise have

15

	occurred and shall be deemed to have terminated employment with the Employer on the first date on which the authorized leave of absence commenced.
(b)	If the Employer maintains the plan of a Predecessor Employer, Service shall include service for the Predecessor Employer. To the extent it may be required under applicable Treasury Regulations under Code Section 414, Service shall include all service for any Predecessor Employer.

1.44.	Severance from Employment
	Severance from Employment means an Employee no longer is an Employee of the Employer or any Related Employer and the Employee’s new employer does not maintain the plan of the Employer or Related Employer. The terms Severance from Employment and “termination of employment” when used herein shall have the same meaning.
1.45.	Total and Permanent Disability
	Total and Permanent Disability means the physical or mental incapacity of a Participant which, in the opinion of a physician approved by the Committee (unless such evaluation is waived by the Committee as unnecessary), will render the Participant permanently incapable of performing his job for physical or mental reasons and such Participant has incurred a “disability” within the meaning of Code Section 401(k)(2)(B)(i)(I).
1.46.	Trust Agreement
	Trust Agreement means the agreement, entered into by the Employer and the Trustee, or any successor Trustee, establishing the Trust and specifying the duties of the Trustee.
1.47.	Trust Fund
	Trust Fund means all assets of any kind and nature from time to time held by the Trustee or its agent under the Trust Agreement without distinction between income and principal. This Plan contemplates a single Trust for all Employers participating under the Dell Inc. 401(k) Plan. However, the Trustee will maintain separate records of account to reflect properly each Participant’s Account Balance from each Participating Employer, if any.
1.48.	Trustee
	Trustee means at any particular time, the then acting Trustee or, collectively, if there is more than one, the then acting Trustees of the Trust.
1.49.	Valuation Date
	Valuation Date means any day the NYSE is open.

* * * *

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ARTICLE II

Eligibility And Participation

2.1. Eligibility Conditions

(a)	Each Employee shall be eligible to participate in this Plan on his Employment Commencement Date.
(b)	Notwithstanding the preceding sentence, an Employee who satisfied the eligibility conditions of Section 2.1(a) prior to the Effective Date of this Plan shall be eligible to participate in this Plan on the Effective Date.
(c)	The following Employees and individuals are not eligible to participate in the Plan:

(i)	All Employees of Alienware Corporation or for periods prior to January 1, 2008, Dell Financial Service, L.P.;
(ii)	Each Employee who is a member of a collective bargaining unit shall not be eligible to participate in this Plan unless the collective bargaining agreement provides otherwise. An Employee is a member of a collective bargaining unit if the Employee is included in a unit of Employees covered by an agreement which the Secretary of Labor finds to be a collective bargaining agreement between Employee representatives and one or more employers if there is evidence that retirement benefits were the subject of good faith bargaining between the Employee representatives and the employer or employers. The term “Employee representatives” does not include an organization of which more than one-half (1/2) the members are owners, officers or executives of the Employer;
(iii)	A nonresident alien who receives no earned income (as defined in Code Section 911(d)(2)) from the Employer that constitutes United States source income (as defined in Code Section 861(a)(3)), unless otherwise specifically covered by a Participating Employer pursuant to the provisions of Article X;
(iv)	An individual classified as a Leased Employee;
(v)	Any individual that is not included on the payroll records of the Employer or a Related Employer as a common law employee or is otherwise classified or treated by an Employer as an independent contractor or other non-common law employee, and it is expressly intended that such individuals are to be excluded from Plan participation even if a court of administrative agency determines that such individuals are common law employees;

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(vi)	Any individual on the payroll of Spherion Corporation;
(vii)	Any individual who is classified as a college or high school intern by the Employer (including, but not limited to, individuals with job codes ADIN001, ADIN002, ADIN003), other than any individual who has submitted an election to make Salary Reduction Contributions to the Plan on or before July 31, 2003;
(viii)	Any individual who is classified as a security guard by the Employer and who also is employed by a law enforcement agency or a security firm (other than any individual who has submitted an election to make Salary Reduction Contributions to the Plan on or before July 31, 2003); or
(ix)	Any individual who is not on either the Company’s or a subsidiary’s U.S. payroll, as documented in the Employer’s HR Direct personnel system.
	Any individual designated by the Company as having a “permanent transfer” to a business location outside of the United States shall not be considered to be on the Company’s US payroll for purposes of this Plan. Such individuals qualifying under this group are not eligible to participate in the Plan and their ability to take either hardship distributions or loans is suspended due to potential foreign exchange issues.

(d) If a Participant is no longer a member of an eligible class of Employees and becomes ineligible to participate but has not incurred a Break in Service, such Employee will participate immediately upon returning to an eligible class of Employees. If a Participant incurs a Break in Service, eligibility will be determined as provided in the definition of Break in Service in Article I. Conversely, if an Employee who is not a member of an eligible class of Employees subsequently becomes a member of an eligible class, such Employee shall participate immediately upon entering such class.

2.2.	Participation Election
	Each Employee who is not otherwise excluded under Section 2.1(c) will automatically become a Participant upon meeting the eligibility conditions of Section 2.1(a).
	Whenever a new Employee is hired by the Employer and such Employee is a member of an eligible class of Employees under Section 2.1 of the Plan, the Employer immediately shall give notice to the Committee of the new Employee. The Committee shall notify in writing each new Employee of his eligibility not later than thirty (30) days following his Employment Commencement Date and shall furnish the Employee a copy of this Agreement or any other explanation of the Plan that the Committee shall provide for that purpose. Each Employee so notified automatically will become a Participant upon meeting the requirements of Section 2.1(a).

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2.3.

Participant Re-Entry

If the employment of a Participant is terminated and the Participant subsequently is re-employed, the re-employed Employee shall become a Participant on the date of re-employment, provided such rehired Employee is not a member of an ineligible class of Employees under Section 2.1(c) of the Plan. Should such Employee not be immediately eligible to participate in the Plan because of an ineligible job classification, such Employee shall become eligible to participate in the Plan as provided in Section 2.1(d).

* * * * *

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ARTICLE III

Contributions

3.1. Salary Reduction Contributions

(a)	Basic Salary Reduction Contributions. For each Plan Year, the amount of the basic Salary Reduction Contribution to the Trust Fund will equal the amount determined under this Section. Each Participant may elect to defer, in whole percentages, from 0% to 50% of his or her Annual Compensation, but shall not elect to defer an amount to cause the Plan to violate the limitations of this Section or Code Section 415, or to exceed the applicable maximum amount allowable as a deduction to the Employer or the Participating Employer under Code Section 404. A Participant may elect to defer Annual Compensation under this Section only in an amount which the Participant otherwise could elect to receive in cash and which is currently available to the Participant. Annual Compensation is not currently available to the Participant if the Participant is not eligible to receive it at the time of the deferral election. The amounts by which a Participant elects to reduce Annual Compensation under this Plan shall be his Salary Reduction Contribution. The Employer shall contribute to the Trust Fund the amount of the Salary Reduction Contributions which shall be treated as Employer Contributions and credited to the Salary Reduction Contribution Account of each Participant.
(b)	Catch-up Contributions. Notwithstanding the foregoing and pursuant to Appendix A.1.8, all Participants who are eligible to make basic Salary Reduction Contributions under this Plan and who have attained age 50 before the close of the Plan Year shall be eligible to make Catch-up Contributions in accordance with, and subject to the limitations of, Code Section 414(v). Such Catch-up Contributions shall not be taken into account for purposes of the provisions of the Plan implementing the required limitations of Code Sections 402(g) and 415 and if not otherwise limited by such sections may exceed the Plan’s percentage limitation described in Section 3.1(a). The Plan shall not be treated as failing to satisfy the provisions of the Plan implementing the requirements of Code Sections 401(k)(3), 401(k)(11), 401(k)(12), 410(b) or 416, as applicable, by reason of the making of such Catch-up Contributions. The Participant’s election under this paragraph shall be submitted as a separate Salary Reduction Election from the Participant’s deferral election for Salary Reduction Contributions.
(c)	Salary Reduction Election

(i) The Employer and the Committee shall adopt a procedure necessary to implement the Salary Reduction Elections. Any contributions made pursuant to a Salary Reduction Election shall not be made before the earlier of (1) the Participant’s performance of Service with respect to which the contribution is made and (2) when the compensation that is

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	subject to the election would be currently available to the Employee in the absence of an election to defer.
(ii)	A Participant’s Salary Reduction Election shall remain in force and effect for all periods following its implementation until modified or revoked by the Participant. The Employer shall permit a Participant to modify or revoke his Salary Reduction Election as of any calendar day during the Plan Year, such change to become effective as soon as administratively feasible thereafter. A Participant may file a new Salary Reduction Election as of any calendar day during the Plan Year.
(iii)	Salary Reduction Contributions means for any taxable year the sum of:

(A)	any Employer contribution under a qualified cash or deferred arrangement defined in Code Section 401(k), determined without regard to the dollar limitation under Code Section 402(g);
(B)	any Employer contribution under a simplified employee pension as defined in Code Section 408(k)(6), pursuant to a salary reduction agreement; and
(C)	any employer contribution toward the purchase of a tax sheltered annuity contract as defined in Code Section 403(b), if any, pursuant to a salary reduction agreement.

Salary Reduction Contributions shall not include any deferrals properly distributed as excess Annual Additions.

(d) Annual Dollar Limit on Salary Reduction Contributions. A Participant’s Salary Reduction Contributions under Section 3.1(a) shall not exceed the statutory dollar limitation under Code Section 402(g) for the taxable year of the Participant. The statutory dollar limitation is the amount of the dollar limitation under Code Section 402(g) in effect on January 1 of each calendar year, as adjusted annually by the Secretary of the Treasury ($15,500 for 2007). “Excess Salary Deferrals” are Salary Reduction Contributions that exceed the statutory dollar limitation and are includable in a Participant’s gross income under Code Section 402(g). Excess Salary Deferrals shall be treated as Annual Additions under the Plan, unless such amounts are distributed no later than the first April 15 following the close of the Participant’s taxable year.

(i)	If the statutory dollar limitation under Code Section 402(g) is exceeded, the Committee shall direct the Trustee to distribute the Excess Salary Deferrals, and any income or loss allocable to the Excess Salary Deferrals, to the Participant not later than the first April 15 following the close of the Participant’s taxable year.
(ii)	If there is a loss allocable to a Participant’s Excess Salary Deferral, the distribution shall in no event be less than the lesser of the Participant’s

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	Salary Reduction Contribution Account or the Participant’s Salary Reduction Contributions for the Plan Year. The amount of Excess Salary Deferrals to be distributed to a Participant for a taxable year will be reduced by Excess Contributions previously distributed or recharacterized for the Plan Year beginning in the taxable year of the Employee.
(iii)	If a Participant is also a participant in (A) another qualified cash or deferred arrangement defined in Code Section 401(k); (B) a simplified employee pension defined in Code Section 408(k); or (C) a salary reduction arrangement pursuant to which an employer purchases a tax sheltered annuity contract defined in Code Section 403(b), and such Participant’s Salary Reduction Contributions made under the other arrangement(s) and this Plan cumulatively exceed the amount of the statutory dollar limitation under Code Section 402(g) in effect on January 1 of each calendar year, as adjusted annually by the Secretary of the Treasury ($15,500 for 2007), then the Participant may, not later than March 1 following the close of the Participant’s taxable year in which such excess occurred, notify the Administrator in writing of the excess and request that his Salary Reduction Contributions under this Plan be reduced by an amount specified by the Participant. The specified amount then shall be distributed in the same manner as provided in clause (i) above. A Participant is deemed to notify the Administrator of any Excess Salary Deferrals that arise by taking into account only those Salary Reduction Contributions made to this Plan and any other plans of this Employer.
(iv)	If any of the foregoing provisions of this Section do not conform with applicable Treasury Regulations, the nonconforming provisions may be amended retroactively to assure conformity.

3.2.	Safe Harbor Matching Contributions
	For each Plan Year, the Employer shall contribute a Safe Harbor Matching Contribution to the Trust Fund equal to 100% of each Participant’s Salary Reduction Contributions for the Plan Year that do not exceed (i) for Plan Years ending on or before December 31, 2007, four percent (4%) of each such Participant’s Annual Compensation for the Plan Year; and (ii) for Plan Years commencing on or after January 1, 2008, five percent (5%) of each such Participant’s Annual Compensation for the Plan Year. The Safe Harbor Matching Contribution on behalf of each Participant shall be credited to each Participant’s Safe Harbor Matching Contribution Account and shall be 100% vested at all times.
	The Employer may, at its election, credit the Safe Harbor Matching Contribution for each Participant based on the portion of each Participant’s Annual Compensation that is paid each payroll period; provided, however, that in no event shall the Safe Harbor Matching Contribution be contributed to the Plan prior to such Participant’s Salary Reduction Contribution to which the Safe Harbor Matching Contribution relates. Further, pursuant to the safe harbor requirements of Code Section 401(k)(3), the Employer shall be

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required to contribute before the due date of the Employer’s tax return, as extended, such additional amount as may be necessary to ensure that each Participant eligible to receive an allocation of the Safe Harbor Matching Contribution for the Plan Year shall receive an amount for such Plan Year equal to the lesser of 100% of the amount deferred by such Participant for such Plan Year or (i) for Plan Years ending on or before December 31, 2007, four percent (4%) of such Participant’s Annual Compensation for such Plan Year, and (ii) for Plan Years beginning on or after January 1, 2008, five percent (5%) of such Participant’s Annual Compensation for such Plan Year. The Participant shall not be required to complete a specified Period of Service or be employed on the last day of the Plan Year in order to share in this additional amount.

The Safe Harbor Matching Contribution for any Plan Year shall not exceed the maximum amount allowable as a deduction to the Employer under Code Section 404. The Safe Harbor Matching Contribution for any Plan Year on behalf of a Participant shall not exceed the Participant’s Annual Additions Limit, even if the contribution formula otherwise would require a larger contribution. The Safe Harbor Matching Contribution on behalf of each Participant shall be credited to each Participant’s Safe Harbor Matching Contribution Account and shall be 100% vested at all times.

The Employer shall provide written notice to each Employee, who is eligible to participate in the Plan under Section 2.1, that this Plan is exempt from the general nondiscrimination rules of Code Sections 401(k)(3) and 401(m)(2) prior to (i) the Employee’s Employment Commencement Date or as soon as administratively feasible thereafter, and (ii) the beginning of each Plan Year. This notice shall be provided at least 30 days, but not more than 90 days, before the beginning of each Plan Year, shall provide a comprehensive description of each Employee’s rights and obligations under the Plan, and shall be written in a manner calculated to be understood by the average Employee.

Notwithstanding the foregoing, the Employer may amend the Plan during a Plan Year to reduce or eliminate prospectively, any safe harbor contribution which is a basic matching or enhanced matching contribution provided: (i) the Administrator provides a notice to the Participants which explains the effect of the amendment, specifies the amendment’s effective date and informs Participants they will have a reasonable opportunity to modify their salary reduction agreements, and if applicable, Employee contributions; (ii) Participants have a reasonable opportunity and period prior to the effective date of the amendment to modify their salary reduction agreements, and if applicable, Employee contributions; and (iii) the amendment is not effective earlier than the later of: (a) 30 days after the Administrator gives notice of the amendment; or (b) the date the Employer adopts the amendment. If the Employer amends the Plan to eliminate or reduce the Safe Harbor Matching Contribution under this Section, it shall continue to apply all of the safe harbor requirements of this Section until the amendment or termination becomes effective, and shall also apply for the entire Plan Year, using the current year testing method, the nondiscrimination tests described in Code Sections 401(k)(3) and 401(m)(2).

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3.3.	Employer Retirement Savings Contributions
	For each Plan Year, the amount of the Employer Retirement Savings Contribution to the Trust Fund will equal the amount that the Employer may from time to time determine and authorize. Although the Employer may authorize contributions to this Plan whether or not the Employer or the Participating Employers, if any, have net profits, the Employer intends the Plan to be a profit sharing plan including a qualified cash or deferred arrangement for all purposes of the Code. The Employer shall not authorize contributions at such times or in such amounts that the Plan in operation discriminates in favor of Highly Compensated Employees. Notwithstanding the foregoing, the Employer Retirement Savings Contributions for any Plan Year shall not exceed the applicable maximum amount allowable as a deduction to the Employer or a Participating Employer under Code Section 404. The Employer Retirement Savings Contributions allocated to each Participant shall be credited to such individual’s Retirement Savings Contribution Account under the formula provided in Section 5.2(b).
3.4.	Rules Governing Deposits of Contributions

(a)	Salary Reduction Contributions accumulated through payroll deductions shall be paid to the Trustee with reasonable promptness and not later than the fifteenth (15th) working day of the succeeding month following the payroll deductions.
(b)	The Employer shall pay to the Trustee the Employer Contributions (other than Salary Reduction Contributions) at any time and from time to time; except that the total Employer Contribution for any Plan Year shall be paid in full not later than the time prescribed by Code Section 404(a)(6) to enable the Employer to obtain a deduction on its federal income tax return for the Employer’s taxable year. The total Employer Contribution (other than Salary Reduction Contributions) for any Plan Year shall be deemed made on the Anniversary Date of that Plan Year immediately following such contribution, except for contributions made after the end of the Plan Year, but within the time prescribed by Code Section 404(a)(6) which shall be deemed made on the last day of the Plan Year.
(c)	On payment to the Trustee, all Employer Contributions shall be added immediately to and become a part of the Trust Fund.
(d)	All Salary Reduction Contributions and Safe Harbor Matching Contributions shall be credited to the Salary Reduction Contribution Account and the Safe Harbor Matching Contribution Account, respectively, of each Participant as of each Allocation Date. All Employer Retirement Savings Contributions, if any, shall be credited to the Employer Retirement Savings Contribution Account of each Participant as of each Anniversary Date.

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3.5.	Participant Voluntary After Tax Contributions
	This Plan does not permit or accept Participant Voluntary After Tax Contributions.

* * * * *

ARTICLE IV

Investment of Accounts

4.1.	Investment of Accounts by Participants
	Each Participant shall designate, in accordance with the following subsections and the procedures established from time to time by the Committee, the manner in which the amounts allocated to each of his Individual Accounts shall be invested among the investment funds made available from time to time by the Committee for this purpose.

(a)

A Participant may designate one of such Investment Funds for all amounts allocated to his Individual Accounts, or he may split the investment of such amounts among such Investment Funds in such increments as the Committee may prescribe. If a Participant fails to make a designation with respect to all or any of such amounts, then such non-designated amounts shall be invested in the Investment Fund designated by the Committee as the default Investment Fund from time to time in a uniform and nondiscriminatory manner.

(b)

A Participant may (i) change his investment designation for future contributions to be allocated to his Individual Accounts or (ii) convert his investment designation with respect to amounts already allocated to his Individual Accounts. Any such change shall be made in accordance with the procedures established by the Committee, and the frequency of such changes may be limited by the Committee.

	A Participant shall be responsible for reviewing the information concerning investment directives and earnings allocations on his or her Participant statement. If there is any inaccuracy in the information contained on such statement, the Participant shall report such inaccuracies to the Committee or the Trustee within the ninety (90)-day period immediately following the date such statement was received. If a Participant fails to report an inaccuracy within this ninety (90)-day period, the Plan shall not be required to make retroactive adjustments to the Participant’s Individual Account but shall rectify any errors on a prospective basis.
4.2.	Restriction on Acquisition of Employer Securities
	Notwithstanding any other provision hereof, it is specifically provided that the Trustee shall not purchase Employer Securities during any period in which such purchase is, in the opinion of counsel for the Employer or the Committee, restricted by any law or

6

	regulation applicable thereto. During such period, amounts that would otherwise be invested in Employer Securities pursuant to an investment designation shall be invested in such other assets as the Trustee may in its discretion determine, or the Trustee may hold such amounts uninvested for a reasonable period pending the purchase of such securities.
4.3.	Pass-Through Voting of Employer Securities
	To the extent permitted by Section 404(a) of ERISA, at each annual meeting and special meeting of the shareholders of the Employer, a Participant may direct the voting of the number of whole shares of Employer Securities attributable to his Individual Accounts as of the Valuation Date coinciding with or, if none, next preceding the record date for such meeting. The Committee shall forward or cause to be forwarded to each such Participant copies of pertinent proxy solicitation materials provided by the Employer together with a request for such Participant’s confidential instructions as to the manner in which such shares are to be voted. The Committee shall direct the Trustee to vote such shares in accordance with such instructions and, to the extent permitted by Section 404(a) of ERISA, shall also direct the Trustee as to the manner in which to vote any shares of Employer Securities at any such meeting for which the Committee has not received, or is not subject to receiving, such voting instructions.
4.4.	Stock Rights, Stock Splits, and Stock Dividends
	No Participant shall have any right to request, direct, or demand that the Committee or the Trustee exercise on his behalf rights or privileges to acquire, convert, or exchange Employer Securities. The Trustee shall exercise or sell any such rights or privileges as directed by the Committee. Employer Securities received by the Trustee by reason of a stock split, stock dividend, or recapitalization shall be appropriately allocated to the Individual Accounts of each affected Participant.
4.5.	Participant Rights
	For purposes of this Article IV only, the Beneficiary of a deceased Participant and any Alternate Payee under a Qualified Domestic Relations Order (as defined in Code Section 414(p)) shall have the rights of a Participant.

* * * * *

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ARTICLE V

Allocation of Employer Contributions to Individual Accounts

5.1. Allocation of Safe Harbor Matching Contributions

(a)	Allocation Rules. As of each Anniversary Date, but after the adjustment of Individual Accounts as provided in Article IV, the Safe Harbor Matching Contributions, allocated as of the Anniversary Date for the Plan Year which ends on the Anniversary Date, shall be allocated and credited to the Safe Harbor Matching Contribution Account of each Participant who was an eligible Participant, as determined under Section 2.1, at any time during the Plan Year and who made Salary Reduction Contributions under Section 3.1 for one or more payroll periods during the Plan Year for which the Safe Harbor Matching Contribution is made.
(b)	Allocation Formula. Safe Harbor Matching Contributions shall be allocated to each eligible Participant’s Safe Harbor Matching Contribution Account under the formula described in Section 3.2 of the Plan.
	As provided under Section 3.2, the Employer may elect to pre-fund the Safe Harbor Matching Contribution for a Plan Year by allocating the Safe Harbor Matching Contribution to the Individual Accounts of eligible Participants as of the Allocation Date of each payroll period during the Plan Year. The amount of the Safe Harbor Matching Contribution to be allocated for any payroll period on behalf of a Participant shall be determined under the contribution formula described in Section 3.2, taking into account only the Participant’s eligible compensation paid for such payroll period and the Participant’s Salary Reduction Contribution for such payroll period; provided, however, that no later than the due date of the Employer’s tax return for the Plan Year, the Employer shall make an additional Safe Harbor Matching Contribution to the Individual Accounts of any Participant or Former Participant who failed to receive a Safe Harbor Matching Contribution for such Plan Year that is equal to the amount provided by the contribution formula described in Section 3.2, based on such Participant’s Annual Compensation and Salary Reduction Contributions for such Plan Year.

5.2. Allocation of Employer Retirement Savings Contributions

(a) Allocation Rules. As of each Anniversary Date, the Employer Retirement Savings Contributions, allocated as of the Anniversary Date, for the Plan Year which ends on the Anniversary Date shall be allocated and credited to the Employer Retirement Savings Contribution Account of each eligible Participant in the Plan on the Anniversary Date. A Participant who is employed by the Employer on the Anniversary Date for the Plan Year will be allocated Employer Retirement Savings Contributions and Participant Forfeitures under the allocation formula of Subsection (b) below. No Participant, other than one who terminated employment

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	with the Employer during the Plan Year on account of death, Total and Permanent Disability or retiring after attaining his Normal Retirement Date, shall be entitled to have any Employer Retirement Savings Contributions allocated to his Individual Account, unless the Participant shall be employed by the Employer on the Anniversary Date for the Plan Year.
(b)	Allocation Formula. The Committee shall allocate the Employer Retirement Savings Contributions and Participant Forfeitures, if any, to each eligible Participant’s Employer Retirement Savings Contribution Account in the same ratio that each Participant’s Annual Compensation for the Plan Year bears to the total Annual Compensation of all Participants for the Plan Year.

5.3.

Suspension of the Allocation Rules Applicable to Employer Retirement Savings Contributions in order to Satisfy Code Section 410(b) Requirements

For any Plan Year, if the allocation of the Employer Retirement Savings Contribution to eligible Participants fails to satisfy the ratio percentage test under Code Section 410(b)(1)(B) for the Plan Year, the Employer may elect to suspend the requirements to share in the allocation of such contribution for such Plan Year. If this paragraph applies for a Plan Year, the Committee will suspend the requirements to share in the allocation of the Employer Retirement Savings Contribution for a given Plan Year in the following manner.

(a)	The Committee will identify the termination date for each Participant who terminated employment with the Employer during the Plan Year. The Committee shall then designate as “Includable Employees” all such Participants other than: (i) those individuals excluded from participating in the Plan for the entire Plan Year under Section 2.1(c) and (ii) any Participant who terminates employment with the Employer during the Plan Year and fails to complete at least 91 consecutive calendar days for such Plan Year.
(b)	The Committee will suspend the accrual requirements for Includable Employees who are Participants, beginning first with the Includable Employee(s) employed with the Employer on the next to last day of the Plan Year.
(c)	If the Plan does not satisfy the ratio percentage test under Code Section 410(b)(1) once the accrual requirements for the individuals identified in (b) above are suspended, the Committee shall suspend the accrual requirements for the Includable Employee(s) who have the next latest termination of employment date during the Plan Year, and continuing to suspend in descending order the accrual requirements for each Includable Employee who terminated employment, from the latest to the earliest termination date, until the Plan satisfies the ratio percentage test under Code Section 410(b)(1) the Plan Year.
(d)	If two or more Includable Employees terminated employment on the same day, the Committee will suspend the accrual requirements for all such Includable Employees, irrespective of whether the Plan can satisfy the ratio percentage test

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	under Code Section 410(b)(1) by accruing benefits for fewer than all such Includable Employees.
(e)	If the Plan suspends the accrual requirements for an Includable Employee, that Employee will share in the allocation of Employer contributions and Participant Forfeitures, if any, without regard to whether he is employed by the Employer on the last day of the Plan Year.
(f)	If the Employer’s Plan includes Employer matching contributions subject to Code Section 401(m), this suspension of accrual requirements shall apply separately to the Code Section 401(m) portion of the Plan, and the Committee will treat an Employee as benefiting under that portion of the Plan if the Employee is an “eligible employee” for purposes of the Code Section 401(m) nondiscrimination test.
(g)	For purposes of the ratio percentage test under Code Section 410(b)(1), an Employee is benefiting under the Plan on a particular date if he or she is entitled to an allocation for the Plan Year under this Section or as otherwise provided under applicable Treasury Regulations.

5.4. Limitations on Allocations under Code Section 415

(a)

Defined Contribution Plan Limits. The amount of Annual Additions which the Committee may allocate under this Plan on a Participant’s behalf for a Limitation Year may not exceed the Maximum Permissible Amount. If the amount the Employer otherwise would contribute to the Participant’s Individual Account would cause the Annual Additions for the Limitation Year to exceed the Maximum Permissible Amount, the Employer will reduce the amount of its contribution so the Annual Additions for the Limitation Year will equal the Maximum Permissible Amount. If an allocation of Employer contributions pursuant to Article V would result in an Excess Amount (other than an Excess Amount resulting from the circumstances described in Subsection 5.4(c)) to the Participant’s account, the Committee will reallocate the Excess Amount to the remaining Participants who are eligible for an allocation of Employer contributions for the Plan Year in which the Limitation Year ends. The Committee will make this reallocation on the basis of the allocation method under the Plan as if the Participant whose Individual Account otherwise would receive the Excess Amount is not eligible for an allocation of Employer contributions.

(b)

Estimation. Prior to the determination of the Participant’s actual 415 Compensation for a Limitation Year, the Committee may determine the Maximum Permissible Amount on the basis of the Participant’s estimated 415 Compensation (as defined in Subsection 5.4(e) for the Limitation Year). The Committee must make this determination on a reasonable and uniform basis for all Participants similarly situated. The Committee must reduce any Employer contributions (including any allocation of Forfeitures) based on estimated 415 Compensation by any Excess Amounts carried over from prior years. As soon as

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	administratively feasible after the end of the Limitation Year, the Committee will determine the Maximum Permissible Amount for the Limitation Year based on the Participant’s actual 415 Compensation for the Limitation Year.
(c)	Disposition of Excess Amount. If pursuant to Subsection 5.4(b) or because of an allocation of Forfeitures, there is an Excess Amount attributable to a Participant for a Limitation Year, then the Committee will dispose of the Excess Amount as follows:

(i)	The Committee shall return any nondeductible Participant Voluntary After Tax Contributions to the Participant to the extent that the return would reduce the Excess Amount.
(ii)	If, after the application of clause (i) an Excess Amount still exists, and the Plan covers the Participant at the end of the Limitation Year, then the Committee will use the Excess Amounts to reduce future Employer contributions (including any allocation of Forfeitures) under the Plan for the next Limitation Year and for each succeeding Limitation Year, as is necessary, for the Participant. The Participant may elect to limit 415 Compensation for allocation purposes to the extent necessary to reduce the allocation for the Limitation Year to the Maximum Permissible Amount and eliminate the Excess Amount.
(iii)	If, after the application of clause (i) an Excess Amount still exits and the Plan does not cover the Participant at the end of the Limitation Year, then the Committee shall hold the Excess Amount in a suspense account and use the Excess Amount to reduce Employer contributions on behalf of remaining Participants and shall allocate and reallocate to the Individual Accounts of remaining Participants in succeeding Limitation Years to the extent permissible under the foregoing limitations, prior to any further Annual Additions to the Plan. If the Plan should be terminated or contributions should be completely discontinued, the funds in the suspense account will be allocated to the extent not prohibited by Code Section 415. Any suspense account shall not be adjusted for investment gains or losses of the Trust Fund.
(iv)	The Committee will not distribute any Excess Amount(s) to Participants or to Former Participants.
(v)	Notwithstanding the foregoing sentence and the foregoing clauses (i) through (iv), the Committee may distribute Salary Reduction Contributions or return Voluntary After Tax Contributions, to the extent the distribution or return would reduce the excess amounts in the Participant’s Individual Accounts.

(d) Multiple Defined Contribution Plan Limits. If the Employer, Participating Employer and any Related Employers maintain any other qualified defined

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contribution plan, the amount of the Annual Addition which may be allocated to a Participant’s Individual Accounts in this Plan shall not exceed the Maximum Permissible Amount, reduced by the amount of Annual Additions to such Participant’s accounts for the same Limitation Year in the other plan(s). The Excess Amount attributed to this Plan equals the product of:

(i)	the total Excess Amount allocated as of such date (including any amount the Committee would have allocated but for the limitations of Code Section 415), multiplied by
(ii)	the ratio of

(A)	the amount allocated to the Participant as of such date under this Plan, divided by
(B)	the total amount allocated as of such date under all qualified defined contribution plans (determined without regard to the limitations of Code Section 415).

(e) Definitions. For purposes of the limitations of Code Section 415 set forth in this Section, the following definitions shall apply:

(i) Annual Additions means the sum of the following amounts allocated on behalf of a Participant for a Limitation Year:

(A)	all Employer contributions;
(B)	all Forfeitures;
(C)	all Voluntary After Tax Contributions;
(D)	excess contributions described in Code Section 401(k) and excess aggregate contributions described in Code Section 401(m), irrespective of whether the Plan distributes or forfeits such Excess Amounts, and Excess Salary Deferrals described in Code Section 402(g), unless the Excess Salary Deferrals are distributed no later than the first April 15 following the close of the Participant’s taxable year;
(E)	Excess Amounts reapplied to reduce Employer contributions under this Section 5.4.
(F)	amounts allocated to an individual medical account, as defined in Code Section 415(l)(2), included as part of a pension or annuity plan maintained by the Employer;
(G)	contributions which are attributable to post-retirement medical benefits allocated to the separate account of a Key Employee as

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	defined in Code Section 419A(d)(3), under a welfare benefit fund, as described in Code Section 419(e), maintained by the Employer, Participating Employer, and any Related Employers; and
(H)	allocations under a simplified employee pension plan.

(ii) 415 Compensation means the total amount of salary, wages, commissions, bonuses and overtime, paid or otherwise includable in the gross income of a Participant during the Limitation Year plus any amounts excluded from a Participant’s income pursuant to Code Sections 125, 401(k) and Code Section 132(f)(4), but excluding:

(A)	contributions by the Employer, a Participating Employer, and any Related Employer to any deferred compensation plan (to the extent the contributions are not included in the Participant’s gross income for the taxable year in which contributed) or simplified employee pension under Code Section 408(k), to the extent the contributions are excludable form the Participant’s gross income (other than amounts excluded from a Participant’s income pursuant to Code Sections 125, 132(f)(4) or 401(k));
(B)	distributions from any plan of deferred compensation, whether or not such amounts are includable in the gross income of the Employees when distributed;
(C)	amounts realized from the exercise of any nonqualified stock option, or when restricted stock becomes freely transferable or is no longer subject to a substantial risk of forfeiture;
(D)	amounts realized from the sale, exchange, or other disposition of stock acquired under a qualified stock option described in Part II, Subchapter D, Chapter 1 of the Code;
(E)	premiums paid by the Employer, a Participating Employer, and any Related Employer, for group term life insurance (to the extent the premiums are not includable in the Participant’s gross income); contributions by the Employer, a Participating Employer, and any Related Employer, to an annuity under Code Section 403(b) (to the extent not includable in the Participant’s gross income); and any other amounts received under any Employer fringe benefit plan sponsored by the employers, a Participating Employer or any Related Employer (to the extent not includable in the Participant’s gross income);
(F)	any contribution for medical benefits, within the meaning of Code Section 419A(f)(2), after termination of employment which is otherwise treated as an Annual Addition; and

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(G) any amount otherwise treated as an Annual Addition under Code Section 415(l)(1).

(iii)	Employer means the Plan Sponsor and any successor corporation or business organization which may be substituted for the Plan Sponsor under this Agreement. All Related Employers shall be considered a single entity for purposes of applying the limitations of this Section. However, Participating Employers who are not Related Employers, but receive services of Employees of the Employer under an employee leasing arrangement shall be treated as separate employers for purposes of these top-heavy rules.
(iv)	Excess Amount means the excess of the Participant’s Annual Additions for the Limitation Year over the Maximum Permissible Amount, less administrative charges allocable to such Excess Amount.
(v)	Limitation Year means the Limitation Year specified in the Plan.
(vi)	Maximum Permissible Amount means, pursuant to Appendix A.1.2., the lesser of:

(A)	the Defined Contribution Dollar Limitation, or
(B)	one hundred percent (100%) of the Participant’s 415 Compensation, within the meaning of Code Section 415(c)(3) for a Limitation Year with respect to any Participant.

Defined Contribution Dollar Limitation means $40,000, as adjusted for increases in the cost of living under Code Section 415(d). The compensation limit referred to in (B) shall not apply to any contribution for medical benefits after separation from service (within the meaning of Code Section 401(h) or 419A(f)(2)).

5.5.

Post-Allocation Adjustments to Accounts

After the amount or amounts have been allocated and credited to each Participant’s Employer Contribution Account, as provided in this Article, the then value of each Employer Contribution Account shall remain unchanged until the next Accounting Date. Notwithstanding the foregoing, the Participant’s Employer Contribution Account may be adjusted prior to the next Accounting Date under other provisions in this Agreement authorizing the Committee to reduce the Participant’s Individual Accounts by disbursements properly chargeable to them or increased by funds received and credited to them.

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5.6.	Employer Contribution Accounts Defined
	For purposes of this Article, reference to the Employer Contribution Accounts of Participants shall include the Employer Contribution Accounts of those Participants who die, become disabled or retire during the Plan Year considered.

* * * * *

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ARTICLE VI

In-Service Distributions

6.1.

Withdrawal from Certain Individual Accounts Upon Attainment of Age 591/2

Prior to termination of employment and upon attainment of age 591/2, a Participant shall have the right to request withdrawal of all or any portion from the Participant’s fully vested and Nonforfeitable Individual Accounts. Amounts withdrawn shall come, first, from the Participant’s Rollover Account; second, from his Employer Retirement Savings Contribution Account; third, from his Matching Contribution Account; and finally, from his Salary Reduction Contribution Account. All determinations of the amount credited to such accounts shall be made as of the most recent Valuation Date. A Participant shall make an election under this Section in the manner and format prescribed by the Committee, including electronic delivery, at any time during the Plan Year for which the election will be effective. In the election, whether written or electronic, the Participant shall specify the desired percentage or dollar amount to be distributed by the Trustee to the Participant. Furthermore, the Participant’s election shall relate solely to the dollar amount specified in the election form. The Participant’s right to elect to receive an amount, if any, for a particular Plan Year greater than the dollar amount specified in the election form shall terminate on the Anniversary Date. The Trustee shall distribute to a Participant as elected under this Section within the ninety (90) day period, or as soon as administratively feasible, after the Participant files the election with the Committee. The Trustee shall distribute the balance of the Participant’s Individual Accounts not distributed pursuant to the election(s) according to the form of distribution selected under Article IX when the Participant terminates employment with the Employer.

6.2. Withdrawal from Certain Accounts Prior to Attainment of Age 59¹/2 or Account of Financial Hardship

(a)

General Order of Distribution. Prior to termination of employment and before attainment of age 591/2, a Participant shall have the right to request a withdrawal in an amount sufficient to satisfy a financial hardship, as defined in Subsection (b), from the Participant’s fully vested and Nonforfeitable in the following priority: (1) Rollover Account, (2) Employer Retirement Savings Contribution Account, (3) Matching Contribution Account, other than Safe Harbor Matching Contribution Account. If the amounts available to the Participant from these accounts are not sufficient to satisfy the Participant’s financial hardship, the remainder may be withdrawn from the Participant’s Salary Reduction Contribution Account, other than accumulated earnings, Qualified Non-Elective Contributions and Qualified Matching Contributions.

(b)

Hardship Distribution Rules. Distribution may be made to a Participant in the event of financial hardship. For purposes of this Section, a “hardship distribution” is a distribution that is necessary to satisfy an immediate and heavy financial need of an Employee who lacks other available resources to satisfy such need.

9

(i) A distribution will be considered to satisfy an immediate and heavy need of a Participant if the distribution is for:

(A)	expenses incurred for or necessary to obtain medical care that would be deductible under Code Section 213(a) (determined without regard to whether the expenses exceed 7.5% of adjusted gross income), of the Participant, the Participant’s spouse, children, or dependents;
(B)	costs directly related to the purchase, excluding mortgage payments, of a principal residence for the Employee;
(C)	payment of tuition, related educational fees, and room and board expenses, for up to the next twelve (12) months of post-secondary education for the Participant, the Participant’s spouse, children or dependents (as defined in Code Section 152, and, for taxable years beginning on or after January 1, 2005, without regard to Code Section 152(b)(1), (b)(2) and (d)(1)(B));
(D)	payment necessary to prevent the eviction of the Employee from, or a foreclosure on the mortgage of, the Employee’s principal residence;
(E)	payment for burial or funeral expenses for the Participant’s deceased parent, spouse, children or dependents (as defined in Code Section 152, and, for taxable years beginning on or after January 1, 2005, without regard to Code Section 152(d)(1)(B)); or
(F)	expenses for the repair of damage to the Participant’s principal residence that would qualify for the casualty deduction under Code Section 165 (determined without regard to whether the loss exceeds 10% of adjusted gross income).

(ii) A distribution will be considered necessary to satisfy an immediate and heavy financial need of a Participant who lacks other available resources only if:

(A)	the Participant has obtained all distributions, other than hardship distributions, and all nontaxable loans under all plans maintained by the Employer; and
(B)	the distribution is not in excess of the amount of an immediate and heavy financial need, including amounts necessary to pay any federal, state or local income taxes or penalties reasonably anticipated to result from the distribution.

(iii) In addition to the conditions above:

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(A)	each plan maintained by the Employer or a legally enforceable arrangement provide that the Employee’s Salary Reduction Contributions and Voluntary After Tax Contributions, if any, will be suspended for six (6) months, pursuant to Appendix A.1.9, after the receipt of the hardship distribution.
(B)	Any hardship withdrawal to a Participant made pursuant to this Section shall be increased by an amount equal to the lesser of:

(1)	all federal, state, and local income taxes and associated penalties (including, if applicable, the additional income tax described in Code Section 72(t)) imposed with respect to such hardship withdrawal; or
(2)	the amount, if any, in such Participant’s Salary Reduction Contribution Account in excess of such hardship withdrawal.

(C)	All distributions that may be made pursuant to this Section are subject to the spousal and participant consent requirements, if applicable, of Code Sections 401(a)(11) and 417 (which currently do not apply to this Plan)
(D)	Hardship distributions shall not be made to any individual who (i) is not included on the U.S. payroll of the Company or any Subsidiary, or (ii) has been designated by the Company as having a “permanent transfer” outside the United States.

(c) Statutory Restriction on Disbursements. Amounts held in the Salary Reduction Contribution Account of a Participant, including Qualified Non-Elective Contributions and Qualified Matching Contributions, if any, may not be distributable prior to the earliest of:

(i)	Severance from Employment, Total and Permanent Disability or death. For purposes of these distribution restrictions, “Severance from Employment” means when an Employee ceases to be an Employee of the Employer maintaining the Plan. An Employee does not have a Severance from Employment if, in connection with a change of employment, the Employee’s new employer maintains the Plan with respect to the Employee, by assuming sponsorship of the Plan or by accepting a transfer of Plan assets and liabilities (within the meaning of Code Section 414(l)) with respect to the Employee;
(ii)	Attainment of age fifty-nine and one-half (591/2) years;
(iii)	Plan termination without establishment of an alternative defined contribution plan, other than an employee stock ownership plan (as defined in Code Sections 4975(e) or 409), a simplified employee pension

11

	plan as defined in Code Section 408(k), a tax sheltered annuity plan under Code Section 403(b), a deferred compensation plan maintained by state and local governments and tax-exempt organizations under Code Section 457(b), or a SIMPLE IRA under Code Section 408(p);
(iv)	proven financial hardship, subject to the limitations in Subsection (b).

All distributions that may be made pursuant to one or more of the foregoing distributable events are subject to the spousal and participant consent requirements, if applicable, of Code Sections 401(a)(11) and 417 (but which currently do not apply to this Plan). In addition, distributions that are by reason of Plan termination, as described in paragraph (iii) above, shall be in the form of a lump sum distribution. Notwithstanding the foregoing, distributions of amounts attributable to Safe Harbor Matching Contributions shall not be permitted for any reason prior to Severance from Employment.

6.3. Additional Restrictions on In-Service Withdrawals

(a)	All withdrawals pursuant to this Article shall be made only in the manner and within the time prior to the proposed date of withdrawal prescribed by the Committee.
(b)	No withdrawal shall be made from an Individual Account to the extent such Individual Account has been pledged to secure a loan from the Plan.
(c)	If a Participant’s Individual Account from which a withdrawal is made is invested in more than one Investment Fund, the withdrawal shall be made pro rata from each Investment Fund in which such Individual Account is invested.
(d)	All withdrawals under this Article shall be paid in cash.
(e)	Any withdrawal hereunder that constitutes an Eligible Rollover Distribution shall be subject to the Direct Rollover election described in Article IX.
(f)	This Article shall not be applicable to a Participant following termination of employment with the Employer, and the amounts in such Participant’s Individual Accounts shall be distributable only in accordance with the provisions of Article VII.

* * * * *

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ARTICLE VII

Distributions after Termination of Employment

7.1. Eligibility Due to Retirement, Death or Total and Permanent Disability

(a)	Retirement. At Normal Retirement Age, a Participant shall be fully vested in the Participant’s Individual Accounts and the Trustee shall hold such Individual Accounts for the Participant’s benefit. If a Participant retires (or otherwise terminates employment) on or after the Participant’s Normal Retirement Date, the Committee shall credit and adjust the Participant’s Individual Accounts as provided in Articles IV and V, as of the Valuation Date immediately preceding a distribution pursuant to Section 7.3 below.
(b)	Death. Upon death, a Participant shall be fully vested in his Individual Accounts and the Trustee shall hold such Individual Accounts for the benefit of the Participant’s Designated Beneficiary or Beneficiaries. The Committee shall credit and adjust the deceased Participant’s Individual Accounts as provided in Articles IV and V, as of the Valuation Date immediately preceding the date of a distribution pursuant to Section 7.3 below. A Participant’s Designated Beneficiary or Beneficiaries shall be entitled to benefits under Section 7.3 after the death of the Participant or Former Participant. This provision shall only apply to an individual who is employed by the Employer at the time of his or her death.
(c)	Total and Permanent Disability. Upon termination of employment due to Total and Permanent Disability, a Participant shall be fully vested in his or her Individual Accounts and the Trustee shall hold the Individual Accounts for the Participant’s benefit. The Committee shall credit and adjust the Individual Accounts of a disabled Participant, as provided in Articles IV and V, as of the Valuation Date immediately preceding the date of a distribution pursuant to Section 7.3 below. A disabled Participant shall be entitled to benefits under Section 7.3 after the Participant’s date of Total and Permanent Disability.

7.2. Eligibility Due to Termination of Employment

(a) General. If a Participant’s employment by the Employer shall terminate for any reason other than retirement, death or Disability, the Participant shall become vested in his or her Individual Accounts as provided in Subsection (b) below, and the Trustee shall hold the Nonforfeitable portion of the Participant’s Account Balance in his Individual Accounts for the Participant’s benefit. The Committee shall credit and adjust the Individual Accounts of the terminated Participant, as provided in Articles IV and V, as of the Valuation Date immediately preceding the date of the distribution pursuant to Section 7.3 below. A terminated Participant shall be entitled to benefits under this Section 7.2 and Section 7.3 after the Participant’s date of termination of employment.

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(b)

Vesting for Participants with Service Credited on and after January 1, 2005. A Participant to whom Subsection 7.2(a) applies shall be 100% vested at all times in amounts credited to his Participant Contribution Accounts. In addition, the Participant shall also be entitled to receive 100% of the balance credited to the Participant’s Employer Contribution Accounts, provided the Employer’s HR Direct personnel system classified such Participant as actively employed by the Employer or a Related Employer on January 1, 2005. For this purpose, the term “actively employed” includes both a Participant who completed at least one (1) Hour of Service on January 1, 2005 as an Employee of the Employer or a Related Employer and a Participant who on January 1, 2005 was on an authorized leave of absence or a maternity or paternity leave of absence and who did not incur a Break in Service during the 2005 Plan Year.

(c)

Transfers between Employers. A Participant’s transfer of employment from the Employer to a Related Employer, or any transfer from one Related Employer to another Related Employer, shall not be considered to be a termination of employment for purposes of this Plan. This provision shall apply without regard to whether such Related Employer is classified as a Participating Employer under this Plan’s terms.

7.3. Payment of Benefits

(a)

Retirement, Death, Disability and Termination Benefits. As soon as administratively feasible after a Participant terminates employment, and the Committee has credited and adjusted the Individual Accounts of a Participant as provided in Sections 7.1 and 7.2, the Trustee shall make payments to the Participant or his Designated Beneficiary or Beneficiaries pursuant to Article IX, subject to the mandatory distribution requirements of Article VIII and the Qualified Joint and Survivor Annuity requirements of Section 9.6, if applicable. The Committee shall charge each payment to the Participant’s Individual Accounts and payments shall continue until the Nonforfeitable Account Balance is paid to the Participant in full. Notwithstanding the preceding, in the event of a Participant’s death, the Committee shall distribute the Participant’s Individual Accounts no less rapidly than is required under Article VIII.

(b)

Commencement of Payments, Automatic Distribution. Unless a Participant elects otherwise, payment of benefits shall commence not later than the sixtieth (60th) day after the end of the Plan Year in which the latest of the following events occurs: (i) the date on which the Participant attains the earlier of age sixty-five (65) or Normal Retirement Age under the Plan; (ii) the tenth (10th) anniversary of the year in which the Participant commenced participation in the Plan; or (iii) the date on which the Participant terminates employment with the Employer. These payments shall commence after the Plan has satisfied all applicable notification and election requirements contained herein and in the Plan’s standard administrative procedures. Notwithstanding the foregoing, a Participant may not defer commencement of benefits or elect a form of installment payment which

14

	would result in the Participant receiving less than fifty-one percent (51%) of the total benefits to be paid during the Participant’s life expectancy.
(c)	Cash Out Distributions.

(i)	Notwithstanding the foregoing paragraph (b), if a Participant terminates employment with the Employer and the Participant’s Nonforfeitable Account Balance determined under Sections 7.1 or 7.2 is $1,000 or less after excluding amounts attributable to the Participant’s Rollover Account in accordance with Appendix A.1.7, the Committee may direct the Trustee to make immediate distribution to the Participant in the form of a lump sum distribution; provided, however, the Trustee shall not make a lump sum distribution after benefit distributions have commenced, without the written consent of the Participant and, if required by law, his spouse’s consent.
(ii)	If a Participant terminates employment with the Employer and the Participant’s Nonforfeitable Account Balance determined under Sections 7.1 or 7.2 is greater than $1,000 but less than $5,000, after including amounts attributable to the Participant’s Rollover Account, and the Participant does not elect to have such distribution paid directly to an Eligible Retirement Plan specified by the Participant in a Direct Rollover or to receive the distribution directly in accordance with Article IX, then the Plan shall pay the distribution in a Direct Rollover to an individual retirement account designated by the Committee. The Committee shall cause the Plan to satisfy any and all applicable notification requirements prior to the occurrence of any distribution under this provision.
(iii)	Notwithstanding any contrary provision, if the Participant’s Nonforfeitable Account Balance is greater than $5,000, the Trustee shall make no distribution without the Participant’s and the spouse’s consent pursuant to Article IX until the later of attainment of age sixty-two (62) years or attainment of Normal Retirement Age. The foregoing sentence shall not apply after the death of the Participant.
(iv)	The provisions of this Section 7.3 shall apply to any Alternate Payee immediately following the date that such individual’s Qualified Domestic Relations Order is approved and implemented by the Administrator.

* * * * *

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ARTICLE VIII

Mandatory Distribution of Benefits

8.1.

General

Pursuant to and in accordance with the minimum distribution requirements under Code Section 401(a)(9) and the applicable Treasury Regulations, as adopted by the Plan Sponsor and set forth in Appendix B attached hereto, the Committee shall direct the Trustee to distribute a Participant’s Nonforfeitable Account Balance to the Participant or, if the Participant is deceased, to the Participant’s Designated Beneficiary under a method of payment, which as of the Required Beginning Date, satisfies the minimum distribution requirements under Code Section 401(a)(9) and the applicable Treasury Regulations.

8.2.

Form of Distribution

Under no circumstances may a Participant elect payment of benefits in the form of an annuity; provided, however, that any individual who is eligible to receive a distribution in the form of an annuity may direct the Administrator to distribute his entire account in the form of an annuity contract which contains distribution terms that satisfy the requirements of Code Section 401(a)(9) and the applicable Treasury Regulations on his Required Beginning Date. All distributions required under this Article shall be determined in the manner set forth herein and made under Code Section 401(a)(9) and the applicable Treasury Regulations, including the minimum distribution incidental benefit requirements of Treas. Reg. § 1.401(a)(9)-2. A mandatory distribution at the Participant’s Required Beginning Date will be in lump sum unless the Participant, pursuant to this Article, makes a valid election to receive an alternative form of payment.

8.3.	Limits on Distribution Periods
	As of the first Distribution Calendar Year, distributions, if not make in a lump sum, may only be made over one of the following periods or a combination of such periods:

(i)	the life of the Participant;
(ii)	the life of the Participant and a Designated Beneficiary, subject to the requirements of Code Section 401(a)(9) and the applicable Treasury Regulations;
(iii)	a period certain not extending beyond the life expectancy of the Participant; or
(iv)	a period certain not extending beyond the joint and last survivor expectancy of the Participant and a Designated Beneficiary.

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8.4. Mandatory Distribution of Benefits During a Participant’s Lifetime

(a) Commencement of Benefits. The Trustee must distribute or begin to distribute the entire interest of a Participant no later than the Participant’s Required Beginning Date. The minimum distribution for the first Distribution Calendar Year is due by the Participant’s Required Beginning Date. The minimum distribution for each subsequent Distribution Calendar Year is due by the Participant’s Required Beginning Date. The minimum distribution for each subsequent Distribution Calendar Year, including the calendar year of the Participant’s Required Beginning Date, is due by December 31 of that year. A Participant’s “Required Beginning Date” shall be as follows:

(i) For a Participant who is a Five Percent Owner, the Required Beginning Date shall commence on the first day of April following the later of:

(A)	the calendar year in which the Participant attains age seventy and one-half (701/2) years; or
(B)	the earlier of the calendar year with or within which ends during the Plan Year in which the Participant becomes a Five Percent Owner, or the calendar year in which the Participant retires.

(ii) For a Participant who is not a Five Percent Owner, the Required Beginning Date is the first day of April of the calendar year immediately following the later of:

(A)	the calendar year in which the Participant attains age seventy and one-half (701/2); or
(B)	the calendar year in which the Participant terminates employment with the Employer.

Once distributions have begun to a Five Percent Owner under this Section, they must continue to be distributed, even if the Participant ceases to be a Five Percent Owner in a subsequent year. The Trustee must distribute or begin to distribute the entire interest of a Participant no later than the Participant’s Required Beginning Date. The minimum distribution for the first Distribution Calendar Year is due by the Participant’s Required Beginning Date. The minimum distribution for each subsequent Distribution Calendar Year, including the calendar year of the Participant’s Required Beginning date, is due by December 31 of that year. Except as provided in clause (ii) above, a Participant’s Required Beginning Date is the April 1 following the close of the calendar year in which the Participant attains age seventy and one-half (701/2) years.

(b)

Minimum Distribution Amount. The required minimum distribution for each calendar year is the lesser of: (1) the quotient obtained by dividing the Participant’s Account Balance as of the last Valuation Date preceding the beginning of the Distribution Calendar Year by the applicable distribution period

17

	in the Uniform Lifetime Table set forth in Treas. Reg. § 1.401(a)(9)-9, Q&A-2, using the Participant’s age as of the Participant’s birthday in the Distribution Calendar Year; or (2) if the Participant’s sole Designated Beneficiary for the Distribution Calendar Year is the Participant’s spouse and the spouse is more than ten (10) years younger than the Participant, the quotient obtained by dividing the Participant’s Account Balance by the number in the Joint and Last Survivor Table set forth in Treas. Reg. § 1.401(a)(9)-9, Q&A-3, using the Participant’s and Spouse’s attained ages as of the Participant’s and Spouse’s birthdays in the Distribution Calendar Year.
(c)	Distribution Period. The applicable distribution period for a Distribution Calendar Year, including the calendar year of the Participant’s death, is either the period stated in the Uniform Lifetime Table, set forth in Treas. Reg. § 1.401(a)(9)-9, Q&A-2, based on the Participant’s attained age, as recalculated, in each Distribution Calendar Year or, if the Participant’s spouse is the Participant’s sole Designated Beneficiary for the entire Distribution Calendar Year and the Spouse is more than ten (10) years younger than the Participant, then the applicable distribution period is the joint life expectancy factor determined under Treas. Reg. § 1.401(a)(9)-9, Q&A-3, using the Participant’s and Spouse’s attained ages, as recalculated, as of the Participant’s and Spouse’s birthdays in the Distribution Calendar Year.
	The Committee will increase the Participant’s Nonforfeitable Account Balance, as determined on the relevant Valuation Date, for contributions or Forfeitures allocated after the Valuation Date by December 31 of the Valuation Calendar Year. For purposes of this valuation, the Committee will treat any portion of the minimum distribution for the first Distribution Calendar Year made after the close of that year as a distribution occurring in the first Distribution Calendar Year.

8.5. Mandatory Distribution of Benefits Upon a Participant’s Death

(a) Death Occurs On or After a Participant’s Required Beginning Date. If the Participant or Former Participant dies after distribution has commenced, the Trustee shall continue to distribute the remaining portion of the Participant’s or Former Participant’s Nonforfeitable Account Balance at least as rapidly as under the method of distribution used prior to the Participant’s death. The minimum distribution amount for the year of death is determined in the manner described in Section 8.4(b). The “applicable distribution period” for Distribution Calendar Years after the Distribution Calendar Year of the Participant’s death is determined as follows:

(i) Designated Beneficiary. If the Participant has a Designated Beneficiary, determined as of September 30 of the calendar year following the calendar year of the Participant’s death, the “applicable distribution period” is the greater of: (1) the Participant’s remaining life expectancy; or (2) the Designated Beneficiary’s remaining life expectancy.

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(A)

Spouse is Designated Beneficiary. If the Participant’s Designated Beneficiary is the surviving Spouse, the “applicable distribution period” is the Spouse’s life expectancy, as determined under the Single Lifetime Table, described in Treas. Reg. § 1.401(a)(9)-9, for each Distribution Calendar Year beginning after the Participant’s death based on the Spouse’s attained age, as recalculated, in each calendar year.

(B)

Nonspouse Designated Beneficiary. If the Participant’s Designated Beneficiary is not his surviving Spouse, then the “applicable distribution period” is determined under the Single Lifetime Table described in Treas. Reg. § 1.401(a)(9)-9, using the nonspouse beneficiary’s age as of the beneficiary’s birthday in the calendar year immediately following the calendar year of the Participant’s death, reducing the “applicable distribution period” by one for each calendar year thereafter. The nonspouse Designated Beneficiary’s age shall not be recalculated.

(ii)

Designated Beneficiary is Older than the Participant. If the Participant’s remaining life expectancy is greater than the Designated Beneficiary’s life expectancy, the Participant’s remaining life expectancy is the “applicable distribution period”. The remaining life expectancy is the Participant’s unrecalculated life expectancy determined under the Single Lifetime Table, described in Treas. Reg. § 1.401(a)(9)-9, using the Participant’s attained age in the year of death, and reduced by one for each calendar year thereafter.

(iii)

No Designated Beneficiary. If a Participant dies without a Designated Beneficiary, the “applicable distribution period” is the remaining life expectancy of the Participant. The remaining life expectancy is the Participant’s unrecalculated life expectancy determined under the Single Lifetime Table of Treas. Reg. § 1.401(a)(9)-9, using the Participant’s attained age in the year of death, reduced by one for each calendar year thereafter.

(b) Death Occurs Before a Participant’s Required Beginning Date.

(i) Designated Beneficiary. If the Participant or Former Participant dies before the Participant’s Required Beginning date, the Trustee shall complete distribution of the Participant’s or Former Participant’s Nonforfeitable Account Balance by December 31 of the calendar year containing the fifth (5th) anniversary of the Participant’s or Former Participant’s death. If the Participant’s surviving Spouse is the Participant’s sole Designated Beneficiary and the surviving spouse dies after the Participant but before distributions to either the Participant or the surviving spouse begin, this paragraph (b) shall apply as if the surviving spouse were the Participant.

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(ii) No Designated Beneficiary. If the Participant or Former Participant dies before the Participant’s Required Beginning date and there is no Designated Beneficiary as of September 30 of the year following the year of the Participant’s death, distribution of the Participant’s entire Nonforfeitable Account Balance will be completed by December 31 of the calendar year containing the fifth (5^th) anniversary of the Participant’s death.

(iii) Death of Surviving Spouse before Distributions to Surviving Spouse are Required to Begin. If the Participant dies before his Required Beginning Date, the Participant’s surviving Spouse is the Participant’s sole Designated Beneficiary, and the surviving Spouse dies before distributions are required to begin to the surviving Spouse under this Section 8.5(b), distribution shall commence at the time specified under Section 8.5(b)(i) as if the surviving Spouse were the Participant.

(c) Time and Manner of Distribution. Distributions under this Section 8.5 are considered to begin on the Participant’s Required Beginning Date. If the Participant’s surviving Spouse is the Participant’s sole Designated Beneficiary and the surviving Spouse dies after the Participant but before distributions to either the Participant or the surviving spouse begin, the distributions are considered to begin on the date distributions are required to begin to the surviving Spouse. If distributions under an annuity purchased from an insurance company irrevocably commence to the Participant before the Participant’s Required Beginning Date (or to the Participant’s surviving Spouse before the date distributions are required to begin to the surviving Spouse), the date distributions are considered to begin is the date distributions actually commence.

8.6. Definitions

(a)

Designated Beneficiary means, pursuant to Appendix B.5.1, the individual who is designated as the Beneficiary under the Plan and is the designated beneficiary under Code Section 401(a)(9) and the applicable Treasury Regulations.

(b)

Distribution Calendar Year means, pursuant to Appendix B.5.2., a calendar year for which a minimum distribution is required. For distributions beginning before the Participant’s death, the first Distribution Calendar Year is the calendar year immediately preceding the calendar year which contains the Participant’s Required Beginning Date. For distributions beginning after the Participant’s death, the first distribution calendar year is the calendar year in which distributions are required to begin under Section 8.5. The required minimum distribution for the Participant’s first distribution calendar year will be made on or before the Participant’s Required Beginning Date. The required minimum distribution for other distribution calendar years, including the required minimum distribution for the distribution calendar year in which the Participant’s required Beginning Date occurs, will be made on or before December 31 of that Distribution Calendar Year.

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(c)

Life expectancy, means the period of time during which minimum distributions are required to be made to the Participant or the Participant and his Designated Beneficiary based on the Uniform Lifetime Table or the Single Lifetime Table, as applicable, described in Treas. Reg. § 1.401(a)(9)-9.

(d)

Nonforfeitable Account Balance means the Account Balance as of the last Valuation Date in the calendar year immediately preceding the Distribution Calendar Year (Valuation Calendar Year), increased by the amount of any contributions or Forfeitures allocated to the Account Balance as of the dates in the Valuation Calendar Year after the Valuation Date and decreased by distributions made in the Valuation Calendar Year after the Valuation Date. If any portion of the minimum distribution for the first Distribution Calendar Year is made in the second Distribution Calendar Year on or before the Required Beginning Date, the amount of the minimum distribution made in. the second Distribution Calendar Year shall be treated as if it had been made in the immediately preceding Distribution Calendar Year.

* * * * *

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ARTICLE IX

Optional Forms of Distribution

9.1. Forms of Payment of Benefits

(a)	Subject to the survivor annuity requirements of Section 9.6 below, if applicable, a Participant, Former Participant or Beneficiary shall receive a distribution of his or her benefits in a single lump sum, payable in cash at the fair market value when distributed.
(b)	Notwithstanding the above, a Participant shall have the right to receive payment of his benefits in any optional form of benefit payment to which that Participant would have been entitled under a plan sponsored by a Predecessor Employer in which that Participant was a Participant.
(c)	Notwithstanding the foregoing, a distribution made pursuant to this Section shall be subject to the immediate distribution provisions of Subsection 7.3(c).

9.2. Direct Rollover Benefit

(a)

Direct Rollover. Notwithstanding any provision of the Plan to the contrary that would otherwise limit a Distributee’s election under this Section, a Distributee may elect, at the time and in the manner prescribed by the Administrator, to have any portion of an Eligible Rollover Distribution paid directly to an Eligible Retirement Plan specified by the Distributee in a Direct Rollover. However, if the Eligible Retirement Plan contains a cash or deferred arrangement, the Trustee must reasonably conclude, prior to permitting a Direct Rollover, that the transferee plan will continue the distribution restrictions described in Section 6.2(b) on any amounts included in the Direct Rollover that are attributable to the Participant’s Salary Reduction Contributions.

(b)

Definitions

(i) Eligible Rollover Distribution. An Eligible Rollover Distribution is any distribution of all or any portion of the balance to the credit of the Distributee, except that an Eligible Rollover Distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the Distributee or the joint lives (or joint life expectancies) of the Distributee and the Distributee’s Designated Beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under Code Section 401(a)(9), the portion of any distribution that is not includable in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities) and any distribution pursuant to Section 6.2(c) hereof. Notwithstanding the foregoing, a portion of a distribution shall not

22

	fail to be an eligible rollover distribution merely because the portion consists of after-tax employee contributions which are not includable in gross income. However, such portion may be transferred only to an individual retirement account or annuity described in Code Sections 408(a) or 408(b), or to a qualified defined contribution plan described in Code Sections 401(a) or 403(a) that agrees to separately account for amounts so transferred, including separately accounting for the portion of such distribution which is includable in gross income and the portion of such distribution which is not so includable.
(ii)	Eligible Retirement Plan is an individual retirement account described in Code Section 408(a) an individual retirement annuity plan described in Code Section 408(b) an annuity plan described Code Section 403(a), an annuity contract described in Code Section 403(b) and an eligible plan under Code Section 457(b) which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state and which agrees to separately account for amounts transferred into such plan from this Plan, or a qualified trust described in Code Section 401(a) that accepts the Distributee’s Eligible Rollover Distribution. The definition of eligible retirement plan shall also apply in the case of a distribution to a surviving spouse, or to a spouse or former spouse who is the alternate payee under a Qualified Domestic Relations Order.
(iii)	Distributee. A Distributee includes an Employee or former Employee. In addition, the Employee’s or former Employee’s Surviving Spouse and the Employee’s or former Employee’s spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in Code Section 414(p) are Distributees with regard to the interest of the spouse or former spouse.
(iv)	Direct Rollover. A Direct Rollover is a payment by the plan to the Eligible Retirement Plan specified by the Distributee.

9.3. Election to Receive Benefits

(a) Notwithstanding the foregoing, a Participant who leaves the employment of the Employer before his or her Normal Retirement Date may elect to leave his or her Nonforfeitable Account Balance until Normal Retirement Date. The Trustee shall, subject to the Participant’s direction, if any, invest and reinvest and shall credit and charge the Individual Accounts with their proportionate share of gains and losses of the Trust Fund pursuant to Article V until the Nonforfeitable Account Balance is paid out to the Former Participant under this Article. Any election made under this Section shall be irrevocable and shall be made no later than fourteen (14) days before the electing Participant becomes entitled to receive his or her Nonforfeitable Account Balance in the Plan. Notwithstanding the foregoing, a Participant who has elected to leave his or her Nonforfeitable

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Account Balance under the management of the Trustee may later elect to have the Account Balance transferred to any pension or profit sharing plan maintained by another Employer in which the Participant has, at the time of the later election, become a Participant under the transferee plan.

(b)

The Participant, Former Participant, or Beneficiary shall elect the form or forms of payment of benefits permitted in Section 9.1 which the Committee and Trustee shall implement. Not earlier than ninety (90) days, but not later than thirty (30) days, before the Participant’s Annuity Starting Date, the Committee must provide a benefit notice to a Participant who is eligible to make an election under this Section. The Participant’s Annuity Starting Date means the first day of the first period for which an amount is paid as an annuity or any other form. The benefit notice must explain the optional forms of benefit in the Plan, including the material features and relative values of those options, and the Participant’s right to defer distribution until he or she attains Normal Retirement Age (provided such age is at least age 62).

(i) If a distribution is one to which Code Sections 401(a)(11) and 417 do not apply, such distribution may commence less than thirty (30) days after the notice required under Treas. Reg. § 1.411(a)-11(c) is given, provided that:

(A)	the Plan Administrator clearly informs the Participant that he or she has a right to a period of at least thirty (30) days after receiving the notice to consider the decision of whether or not to elect a distribution (and, if applicable, a particular distribution option), and
(B)	the Participant, after receiving the notice, affirmatively elects a distribution.

(ii) If a Participant, Former Participant, or Beneficiary makes an election prescribed by this Section, the Committee will direct the Trustee to distribute the Participant’s Nonforfeitable Account Balance pursuant to that election. Any election under this Section is subject to the mandatory distribution requirements of Article VIII and the survivor annuity requirements of Section 9.6 if applicable. The Participant, Former Participant or Beneficiary must make an election under this Section by filing an election form with the Committee at any time before the Trustee otherwise would commence to pay a Participant’s Account Balance under the applicable requirements of Article VII.

9.4. Minority or Disability

During the minority or disability of an individual entitled to receive benefits under this Plan, the court may direct the Committee to instruct the Trustee to make payments due the individual directly to the individual or to the spouse or a relative or to any individual or institution having custody of the individual. Neither the Committee nor the Trustee

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shall be required to cause or to verify the application of any payments so made, and the receipt of the payee, including the endorsement of a check or checks, shall be conclusive to all interested parties.

9.5. Unclaimed Account Procedure

The Plan does not require either the Trustee or the Committee to search for, or to ascertain the whereabouts of, any Participant or Beneficiary. At the time the Participant’s or Beneficiary’s benefit becomes distributable under Article VII, the Committee, by certified or registered mail addressed to his or her last known address of record with the Committee or the Employer, must notify any Participant or Beneficiary, that he or she is entitled to a distribution under this Plan. The notice must quote the provisions of this Section and otherwise must comply with the applicable notice requirements of Article VII. If the Participant, or Beneficiary, fails to claim his or her distributive share or make his or her whereabouts known in writing to the Committee within six (6) months from the date of mailing of the notice, the Committee will treat the Participant’s or Beneficiary’s unclaimed payable Account Balance as forfeited and will reallocate the unclaimed payable Account Balance in accordance with this Article IX. A Forfeiture under this paragraph will occur at the end of the notice period or, if later, the earliest date applicable Treasury Regulations would permit the Forfeiture. Pending Forfeiture, the Committee, following the expiration of the notice period, may direct the Trustee to segregate the Nonforfeitable Account Balance in a segregated account and to invest that segregated account in Federally insured interest bearing savings accounts or time deposits (or in a combination of both), or in other fixed income investments.

If a Participant or Beneficiary who has incurred a Forfeiture of his or her Account Balance under the provisions of the first paragraph of this Section makes a claim, at any time, for the forfeited Account Balance, the Committee must restore the Participant’s or Beneficiary’s forfeited Account Balance to the same dollar amount as the dollar amount of the Account Balance forfeited, unadjusted for any gains or losses occurring subsequent to the date of the forfeiture. The Committee will make the restoration during the Plan Year in which the Participant or Beneficiary makes the claim, first from the amount, if any, of Participant forfeitures the Committee otherwise would allocate for the Plan Year, then from the amount, if any, of the Trust Fund net income or gain for the Plan Year, and then from the amount, or additional amount, the Employer contributes to enable the Committee to make the required restoration. The Committee must direct the Trustee to distribute the Participant’s or Beneficiary’s restored Account Balance not later than 60 days after the close of the Plan Year in which the Committee restores the forfeited Account Balance. The forfeiture provisions of this Section apply solely to the Participant’s, or the Beneficiary’s Account Balance derived from Employer contributions.

Upon termination of the Plan, in lieu of the unclaimed account procedure set forth in this Section, Section 17.6 shall apply.

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9.6. Qualified Joint And Survivor Annuity Requirements

The Qualified Joint and Survivor Annuity requirements do not apply to this Plan. The Plan does not provide any annuity distributions to Participants nor to Surviving Spouses. A transfer agreement described in Section 15.2 may not permit a plan which is subject to Code Section 417 to transfer assets to this Plan, unless the transfer is an elective transfer as described in Section 15.3.

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ARTICLE X

Plan Sponsor and Participating Employers

10.1. Employer Action

Whenever the Employer is permitted or required to do or perform any act under this Agreement, it shall be done and performed by the Benefits Administration Committee or where applicable a person duly authorized to do or perform the act by its legally constituted authority.

10.2. Plan Amendment

(a)	At any time the Plan Sponsor, by formal written action, may amend or modify this Agreement in any manner it deems necessary or desirable, retroactively or prospectively, subject to the following provisions of this Article. The Trustee need only join in an amendment if it affects any duty of such Trustee.
(b)	The Plan Sponsor must make all amendments in writing, signed by the duly authorized person(s) with the legally constituted authority of the Plan Sponsor and joined in, if required by the last sentence of subparagraph (a), by the Trustee. An amendment shall become effective upon execution by the duly authorized person(s), and if required by the last sentence of subparagraph (a), by execution of the Trustee. Each amendment must state the date on which it is either retroactively or prospectively effective.
(c)	Unless it is made to secure the approval of the Commissioner of the Internal Revenue Service or other governmental bureau or agency, no amendment or modification of this Agreement by the Plan Sponsor shall:

(i)	operate retroactively to reduce or divest the then vested interest in any Individual Accounts or to reduce or divest any benefit then payable hereunder unless all Participants, Former Participants and Beneficiaries then having Individual Accounts or benefit payments affected thereby shall consent to the amendments or modifications;
(ii)	directly or indirectly affect any Participant’s Nonforfeitable percentage outside the protection of Treas. Reg. § 1.411(a)(8);
(iii)	decrease a Participant’s accrued benefit, except to the extent permitted under Code Section 412(c)(8), and reduce or eliminate Code Section 411(d)(6) protected benefits determined immediately prior to the adoption date (or, if later, the effective date) of the amendment, except as permitted by applicable Treasury Regulations. (An amendment reduces or eliminates Code Section 411(d)(6) protected benefits if the amendment has the effect of either: (A) eliminating or reducing an early retirement benefit or a retirement-type subsidy (as defined in applicable Treasury Regulations);

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or (B) except as provided by applicable Treasury Regulations, eliminating an optional form of benefit. The Committee must disregard an amendment to the extent application of the amendment would fail to satisfy this paragraph. If the Committee must disregard an amendment because the amendment would violate clause (A) or clause (B), the Committee must maintain a schedule of the early retirement option or other optional forms of benefit the Plan must continue for the affected Participant); or

(iv)

affect the rights, duties or responsibilities of the Trustees, the Plan Administrator or the Committee without the written consent or approval of the Trustee, Administrator, or affected Committee member.

(d) If the vesting schedule described in Section 7.2 is amended, a Participant’s vested interest in any contribution to which the vesting schedule in Section 7.2 applied, shall not be less than the Nonforfeitable percentage determined as of the later of the effective date of the amendment or the date of its adoption. A Participant with at least three (3) Years of Service on the last day of the election period described in this paragraph, may elect to have the Nonforfeitable percentage of the Employer Contribution Accounts determined without regard to the amendment. If a Participant fails to make an election, then the Participant shall be subject to the new vesting schedule. The election period shall commence on the date the amendment is adopted or deemed to be made and shall end sixty (60) days after the latest of:

(i)	the date of the adoption of the amendment;
(ii)	the effective date of the amendment; or
(iii)	the date the Participant receives written notice of the amendment from the Employer or Administrator.

(e) The Employer as Plan Sponsor, without the consent of any Participating Employer, may amend the Plan and Trust, from time to time, in order to conform the Plan and Trust to any requirement for qualification of the Plan and Trust under the Code. The Plan Sponsor may not amend the Plan in any manner which would modify any election made by a Participating Employer in its Participation Agreement without the Participating Employer’s written consent. Furthermore, the Plan Sponsor may not amend the Plan in any manner which would violate the proscriptions of this Section 10.2. The Trustee does not have the power to amend the Plan and Trust.

10.3. Discontinuance, Termination of Plan

(a) The Plan Sponsor has the right, at any time, to suspend or discontinue its contributions under the Plan to the Trust Fund, and to terminate, at any time, the Plan and the Trust created under this Agreement. The Plan will terminate on the first to occur of the following events:

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(i)	the date the Plan is terminated by action of the Employer;
(ii)	the date the Employer is judicially declared bankrupt or insolvent, unless the proceeding authorized continued maintenance of the Plan; or
(iii)	the dissolution, merger, consolidation or reorganization of the Employer or the sale by the Employer of all or substantially all of its assets, unless the successor or purchaser elects and makes provision to continue the Plan, in which event the successor or purchaser will substitute itself as the Employer under this Plan.

(b)

Upon either full or partial termination of the Plan, or, if applicable, upon complete discontinuance of contributions to the Plan, the Individual Accounts of all Participants, Former Participants and Beneficiaries shall be and become fully vested and Nonforfeitable, if not otherwise fully vested under Section 7.2 of the Plan. The Trustee, in its discretion, may convert some or all of the Trust Fund to cash and shall deduct therefrom all unpaid charges and expenses, except as the same may be paid by the Employer. The Committee then shall adjust the balance of all Individual Accounts on the basis of the net cash balance and fair market value of all property in the Trust Fund. Thereafter, the Trustee shall distribute the amount to the credit of each Participant, Former Participant and Beneficiary in cash, in kind, or partly in cash and partly in kind, as the Committee shall direct. Notwithstanding the foregoing, a distribution made because of a termination of the Plan shall be subject to the mandatory distribution requirements of Article VIII, the survivor annuity requirements of Section 9.6, if applicable, and the immediate distribution provisions of Subsection 7.3(c).

(c)

To the extent that this Plan is maintained as a multiple employer plan, the provisions governing the discontinuance or termination of the Plan with respect to a Participating Employer which is not a Related Employer will be governed under Section 10.5.

10.4. Prohibition Against Reversion to Plan Sponsor or a Participating Employer

Under no circumstances or conditions, other than those specifically provided herein, shall the Trust Fund or any portion thereof revert to the Plan Sponsor or any Participating Employer or be used for or diverted to purposes other than the exclusive benefit of the Participants, Former Participants and Beneficiaries. No amendment or revocation by the Plan Sponsor of this Section may cause or permit any portion of the Trust Fund to revert to or become a property of the Plan Sponsor or any Participating Employer.

10.5. Adoption by Related Employers

(a) With the written consent of the Plan Sponsor, any other association, corporation, or other business organization, may adopt this Plan and Trust in its entirety, participate herein and be known as a Participating Employer, by executing a properly authorized document (a “Participation Agreement”) evidencing the intent and will of the Participating Employer. The participation of a Participating

29

	Employer that is a recipient of Leased Employee services from the Plan Sponsor shall be limited to such Leased Employees unless otherwise provided in the Participating Employer’s Participation Agreement.
(b)	The following requirements shall apply to any Participating Employer who elects to adopt this Plan pursuant to this Article:

(i)	Each Participating Employer shall be required to use the same Trustee as provided in this Agreement.
(ii)	The Trustee may, but shall not be required to, commingle, hold and invest as one (1) Trust Fund all contributions made by Participating Employers and all increments thereof.
(iii)	The transfer of any Participant from or to any corporation participating in this Plan, whether the Participant is an Employee of the Plan Sponsor or a Participating Employer, shall not affect the Participant’s rights under the Plan; all amounts credited to the Participant’s Individual Accounts, all accumulated service with the transferor or Predecessor Employer, and the length of participation in the Plan shall continue to the Participant’s credit.

(c)	All rights and values forfeited by termination of employment shall inure only to the benefit of the Employees and Participants of the Participating Employer which employed the forfeiting Participant, except, if the Forfeiture is for an Employee whose Employer is a Related Employer, then the Forfeiture shall be allocated based on Annual Compensation to all Individual Accounts of Participating Employers who are Related Employers. Should an Employee of one (“First”) Employer be transferred to a Related (“Second”) Employer the transfer shall not cause the Employee’s Account Balance, generated while an Employee of the First Employer, in any manner or by any amount, to be forfeited. The Employee’s Account Balance for all purposes of the Plan, including length of service, shall be considered as though the Employee had always been employed by the Second Employer and as such had received contributions, forfeitures, earnings or losses, and appreciation or depreciation in value of assets totaling the amount so transferred.
(d)	Upon an Employee’s transfer between Participating Employers, the Employee involved shall carry accumulated Years of Vesting Service. No transfer shall effect a termination of employment under this Agreement and the Participating Employer to which the Employee transfers shall thereupon become obligated under this Agreement to the Employee in the same manner as the Participating Employer from whom the Employee transfers.
(e)	Any expenses of the Plan and Trust which are to be paid by the Employer or borne by the Trust Fund shall be paid by each Participating Employer in the same proportion that the total amount standing to the credit of all Participants employed

30

	by the Participating Employer bears to the total amount standing to the credit of all Participants.
(f)	Any contribution made by a Participating Employer that is a Related Employer of the Employer shall be paid to and held by the Trustee for the exclusive benefit of the Employees of the Participating Employer and the Beneficiaries of the Employees, subject to all the terms and conditions of this Plan. Any payment to the Employer made by a Participating Employer that is a recipient of the services of Leased Employees pursuant to a written agreement with the Employer to the Trustee and held by the Trustee for the exclusive benefit of the Participants providing leased employee services to the Participating Employer and their Beneficiaries, subject to all the terms and conditions of this Plan.
	All contributions or payments made by a Participating Employer shall be determined separately on the basis of its net profit and total Annual Compensation paid.
(g)	Based on information furnished by the Administrator, and each Participating Employer, the Committee and the Trustee shall keep separate books and records concerning the affairs of each Participating Employer and of the Account Balances of the Participants of each Participating Employer.
(h)	Each Participating Employer indemnifies and saves harmless the Employer, the Plan Sponsor, the Administrator, the members of the Committee, the Trustee, and each of their employees and agents from and against any and all loss resulting from liability to which the Employer, the Plan Sponsor, the Administrator, the Trustees or the members of the Committee, or their employees and agents, may be subjected by reason of the failure by the deemed separate plan of such Participating Employer to satisfy the minimum coverage requirements under Code Section 410(b), the nondiscrimination requirements under Code Sections 401(a)(4), 401(k), and 401(m), Code Section 415 limitations, Code Section 416 top-heavy requirements, and any other qualification requirements applicable to the Participating Employer on a deemed separate plan basis. Further, the Employer, the Plan Sponsor and each Participating Employer indemnify and save harmless the Administrator, the members of the Committee, the Trustee or their employees and agents, from and against any and all loss resulting from liability to which the Administrator and the Committee, or the members of the Committee, and each of their employees and agents, may be subjected by reason of any act or conduct (except willful misconduct or gross negligence) in their official capacities in the administration of this Trust or Plan or both, including all expenses reasonably incurred in their defense, in case the Employer, the Plan Sponsor, or the Participating Employers fail to provide such defense. The indemnification provisions of this Section do not relieve the Administrator, any Committee member, or the Trustee, or their employees and agents, from any liability he may have under ERISA for breach of a fiduciary duty. Moreover, the Administrator, the Committee members, the Trustee, the Plan Sponsor, the Participating Employers, and their employees and agents, may execute a letter agreement

31

	further delineating the indemnification agreement of this Section, provided the letter agreement is consistent with and does not violate ERISA.
(i)	Each Participating Employer shall be deemed to be a part of this Plan; however, each Participating Employer shall be deemed to have designated irrevocably the Plan Sponsor as its agent in all of its relations with the Trustee, the Committee and the Administrator under this Agreement.
(j)	Any Participating Employer shall be permitted to discontinue or revoke its participation in this Plan. Upon any discontinuance or revocation, satisfactory evidence thereof and of any applicable conditions imposed shall be delivered to the Trustee. The Trustee shall thereafter transfer, deliver and assign Contracts and other Trust Fund assets allocable to the Participants of the Participating Employer to the new plan as shall have been designated by the Participating Employer, if it has established a separate employee benefit pension plan for its employees. If no successor plan is designated, the Trustee shall retain the assets for the Employees of the Participating Employer under this Article X. No part of the corpus or income of the Trust Fund relating to the Participating Employer shall be used for or diverted to purposes other than the exclusive benefit of the Employees of the Participating Employer and the Beneficiaries of the Employees.
(k)	A withdrawal by any Participating Employer without any provision for the continuation of a plan for its Employees or, if the Participating Employer is a recipient of the services of Leased Employees, for its Leased Employees, shall constitute a termination of the Plan with respect to that Participating Employer. Withdrawal from the Plan by any Participating Employer shall not affect the continued operation of the Plan with respect to the other Employers; provided, however, in the event of the withdrawal of a Participating Employer which is a member of a group of Related Employers with respect to which the Plan constitutes a single plan and in the event that provision is made for the continuation of a defined contribution plan for its Employers separate and distinct from the Plan herein set forth, the share of the assets of the Trust Fund allocable to such group of Employers that is transferred to such other Plan shall be determined by the Committee subject to the provisions of Section 15.2.
(l)	If the Plan Sponsor discontinues or terminates the Plan under Subsection 10.3(a) above, the provisions of Subsection 10.5(d) shall govern the portion of the Plan which covers employees of a Participating Employer.

10.6. Authority of Administrator over Participating Employers

The Administrator shall have the authority to make any and all necessary rules or regulations binding on all Participating Employers and all Participants and Beneficiaries to effectuate the purposes of this Article.

10.7. Deficiency of Earnings or Profits

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If any Participating Employer is prevented in whole or in part from making a contribution to the Trust Fund which it otherwise would have made under the Plan because of having no current or accumulated earnings or profits, or because the earnings or profits are less than the contribution which it otherwise would have made, then so much of the contribution which the Participating Employer was prevented from making may be made for the benefit of the Participating Employees of the Participating Employer by the other Participating Employers who are Related Employers. The contribution by each other Participating Employer shall be limited to the proportion of its total current and accumulated earnings or profits remaining after adjustment for its contribution to the Plan made without regard to this Section, which the total prevented contribution bears to the total current and accumulated earnings or profits of all the Participating Employers remaining after adjustment for all contributions made to the Plan without regard to this Section. A Participating Employer on behalf of whose Employees a contribution is made under this Section shall not reimburse the contributing Participating Employer unless it has otherwise agreed to do so in writing.

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ARTICLE XI

The Committee

11.1. Committee Appointment

The Plan Sponsor shall appoint a Committee consisting of one (1) or more members. The Plan Sponsor may remove any member of the Committee at any time and a member may resign by written notice to the Plan Sponsor, such resignation to become effective upon the appointment of a substitute member or, if earlier, the lapse of thirty (30) days after such resignation is effective. Any vacancy in the membership of the Committee shall be filled by appointment made by the Plan Sponsor, but pending the filling of any vacancy, the then members of the Committee may act under this Agreement as though they alone constitute the full Committee. The Plan Sponsor shall notify the Trustee promptly of the appointment of the original Committee and of any change in the membership of the Committee. Any member of the Committee who is an Employee shall automatically cease to be a member of the Committee as of the date he terminates employment with the Employer and all Related Employers.

11.2. Committee Action and Procedure

(a)	Any and all acts and decisions of the Committee shall be by at least a majority of the then members. The Committee may delegate to any one or more of its members the authority to sign notices or other documents on its behalf or to perform ministerial acts for it, in which event the Trustee and any other person may accept the notice, document or act without question as having been authorized by the Committee.
(b)	The Committee may, but need not, call or hold formal meetings, and any decisions made or actions taken pursuant to written approval of a majority of the then members shall be sufficient.
(c)	The Committee shall maintain adequate records of its decisions, which records shall be subject to inspection by the Employer and by any Participant, Former Participant, or Beneficiary, but only to the extent that they apply to the individuals.
(d)	The Committee may designate one (1) of its members as Chairman and one (1) of its members as Secretary and may establish policies and procedures governing it if they are consistent with this Agreement.

11.3. Committee Powers and Duties

The Committee shall perform the duties and may exercise the powers and discretion given to it in this Agreement, and its decisions and actions shall be final and conclusive regarding all persons affected thereby. The Committee shall exercise its discretion at all times in a nondiscriminatory manner. Subject to any limitations stated in this Agreement,

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the Committee is authorized and empowered with the following powers, rights, and duties:

(a)	To select a Secretary, who need not be a member of the Committee;
(b)	To determine the rights of eligibility of an Employee to participate in the Plan, the value of a Participant’s Account Balance and the Nonforfeitable percentage of each Participant’s Individual Accounts;
(c)	To adopt written rules of procedure and regulations necessary for the proper and efficient administration of the Plan provided the rules are consistent with the terms of this Agreement and copies of all such rules and regulations are delivered to both the Plan Sponsor and the Trustee as soon as administratively feasible but no later than the effective date of the such rules and regulations;
(d)	To construe and enforce the terms of the Plan and the rules and regulations it adopts, including interpretation of the Plan documents and documents related to the Plan’s operation;
(e)	To amend the Plan to the extent the authority to do so is delegated by the Plan Sponsor;
(f)	To direct the Trustee concerning the crediting and distribution of the Trust;
(g)	To review and render decisions respecting a claim for, or denial of a claim for, a benefit under the Plan;
(h)	To furnish the Employer with information which the Employer may require for tax or other purposes;
(i)	To engage the service of agents whom it may deem advisable to assist it with the performance of its duties;
(j)	To engage the services of an Investment Manager or Managers (as defined in ERISA Section 3(38)), each of whom will have full power and authority to manage, acquire or dispose, or direct the Trustee with respect to acquisition or disposition, of any Plan asset under its control;
(k)	To establish, in its sole discretion, a nondiscriminatory policy, pursuant to this Section, which the Trustee must observe in making loans, if any, to Participants and Beneficiaries;
(l)	To establish and maintain a funding standard account and to make credits and charges to the account to the extent required by and in accordance with applicable Code provisions;
(m)	To adopt a loan policy;

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(n)	To direct the Trustee as to the exercise of rights or privileges to acquire, convert, or exchange Employer Stock; and
(o)	To establish or designate Investment Funds as investment options under the Plan as provided in Article IV.

The Committee must exercise all of its powers, duties, and discretion under the Plan in a uniform and nondiscriminatory manner.

11.4. Committee Reliance

The Trustee may rely without question on any notices or other documents received from the Committee. The Plan Sponsor and each Participating Employer shall furnish the Committee with all data and information available to the Employer, which the Committee may reasonably require to perform its functions under this Agreement. The Committee may rely without question on any data or information furnished by the Plan Sponsor and each Participating Employer.

11.5. Committee Authority

Any and all disputes which may arise involving Participants, Former Participants, Beneficiaries and/or the Trustee shall be referred to the Committee, and its decisions shall be final and conclusive regarding all affected persons. Furthermore, if any issue arises concerning the meaning, interpretation or application of any provisions of this Agreement, the decision of the Committee on any issue shall be final.

11.6. Conflicts in Interest

Notwithstanding any other provisions of this Agreement, no member of the Committee shall vote or act on any matter involving the Committee member’s rights, benefits or other participation under this Agreement.

11.7. Appointment of Agent and Legal Counsel

The Committee may engage agents to assist it and may engage legal counsel who may be counsel for the Plan Sponsor. The Committee shall not be responsible for any action taken or omitted to be taken on the advice of counsel. All reasonable expenses incurred by the Committee shall be paid by the Plan Sponsor.

11.8. Appointment of Investment Manager

The Committee may delegate investment management authority pertaining to all or a portion of the Plan assets by appointing an Investment Manager(s) and may authorize payment of the fees and expenses of the Investment Manager(s) from the Plan assets. For purposes of this Agreement, any Investment Manager so appointed shall, during the period of appointment, possess fully and absolutely those powers, rights and duties of the Trustee (to the extent delegated by the Committee) regarding the investment or reinvestment of that portion of the Plan assets over which the Investment Manager has

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investment management authority. An Investment Manager must be one (1) of the following:

(a)	an Investment Advisor registered under the Investment Advisors Act of 1940;
(b)	a bank, as defined in the Investment Advisors Act of 1940; or
(c)	an insurance company qualified to manage, acquire, or dispose of Plan assets under the laws of more than one (1) state.

Any Investment Manager shall acknowledge in writing to the party making the appointment and to the Trustee that it is a fiduciary respecting the Plan. During any period when the Investment Manager is appointed and serving, and regarding those assets in the Plan over which the Investment Manager exercises investment management authority, the Trustee’s responsibility shall be limited to holding assets as a custodian, providing accounting services, disbursing benefits as authorized, and executing investment instructions only as directed by the Investment Manager. Any certificates or other instrument duly signed by the Investment Manager (or the authorized representative of the Investment Manager), purporting to evidence any instruction, direction or order of the Investment Manager regarding the investment of those assets of the Plan over which the Investment Manager has investment management authority, shall be accepted by the Trustee as conclusive proof thereof. The Trustee also shall be fully protected in acting in good faith on any notice, instruction, direction, order, certificate, opinion, letter, telegram or other document believed by the Trustee to be genuine and to be from the Investment Manager (or the authorized representative of the Investment Manager). The Trustee shall not be liable for any action taken or omitted by the Investment Manager or for any mistakes of judgment or other action made, taken or omitted by the Trustee in good faith on direction of the Investment Manager.

11.9. Annual Accounting

As soon as administratively feasible after the Accounting Date of each Plan Year, but within the time prescribed by ERISA and the applicable Labor regulations and at least annually, the Committee shall advise each Participant, Former Participant and Beneficiary for whom Individual Accounts are held under this Plan of the then balance in the Participant’s Individual Accounts and the other information ERISA requires to be furnished. No Participant except a member of the Committee shall have the right to inspect the records reflecting the Individual Accounts of any other Participant.

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11.10. Funding Policy

The Committee will review, not less often than annually, all pertinent Employee information and Plan data to establish the funding policy of the Plan and to determine the appropriate methods of carrying out the Plan’s objectives. The Committee must communicate periodically, as it deems appropriate, to the Trustee and to any Plan Investment Manager the Plan’s short-term and long-term financial needs so investment policy can be coordinated with Plan financial requirements.

11.11. Indemnification

The Plan Sponsor, shall, to the extent permitted by law, indemnify and hold harmless each member of the Committee and each Employee who is a fiduciary or a delegate of the Committee against any and all expenses and liabilities arising out of his administrative functions or fiduciary responsibilities, including any expenses and liabilities that are caused by or result from an act or omission constituting the negligence of such individual in the performance of such functions or responsibilities, but excluding expenses and liabilities that are caused by or result from such individual’s own gross negligence or willful misconduct. Expenses against which such individual shall be indemnified hereunder shall include, without limitation, the amounts of any settlement or judgment, costs, counsel fees, and related charges reasonably incurred in connection with a claim asserted or a proceeding brought or settlement thereof.

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ARTICLE XII

Administration

12.1.	Administrator Appointment
	The Plan Sponsor shall be the Administrator of this Plan and shall be responsible for filing all reporting and disclosure documents required by the Department of Labor and the Internal Revenue Service in accordance with ERISA, the Code and the respective regulations. The Employer may delegate any of its duties and responsibilities as Administrator to the Committee. Service of process on the Plan or Trust may be obtained by personal service on the Employer or any Committee member.
12.2.	Summary Plan Description
	The Administrator shall furnish a summary plan description to each Participant within ninety (90) days after becoming a Participant and to each Beneficiary receiving benefits under the Plan within ninety (90) days after beginning to receive benefits. Every fifth (5th) year after the Effective Date of the Plan, the Administrator shall furnish an updated summary plan description, which integrates all amendments made within the five (5) year period, to each Participant and Beneficiary receiving benefits. If no amendments have been made within the five (5) year period, the Administrator shall furnish the updated summary plan description only every tenth (10th) year. If there is a modification or change in the Plan, the Administrator shall furnish to each Participant and each Beneficiary who is receiving benefits, a summary description of the change or modification not later than two hundred ten (210) days after the end of the Plan Year in which the change is adopted.
12.3.	Summary Annual Report
	The Administrator shall furnish to each Participant and each Beneficiary receiving benefits a summary of the Annual Return/Report of the Plan containing a statement of the Plan assets and liabilities, receipts and disbursements and other information fairly summarizing the Plan’s financial statement within two hundred ten (210) days after the close of each Plan Year, or an extended period as may be permitted by the Secretary of Labor.
12.4.	Individual Benefit Statements
	The Administrator shall furnish to any Participant or Beneficiary receiving benefits, who requests in writing, a statement reporting the total benefits accrued and the Nonforfeitable benefits, if any, which have accrued or the earliest date on which benefits will become Nonforfeitable. For periods prior to January 1, 2007, a Participant or Beneficiary is not entitled to receive the report described in this Section more than once in every twelve (12) month period. Effective January 1, 2007, the Administrator shall provide this report to each Participant or Beneficiary on a quarterly basis.

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12.5.	Copies of Additional Documents
	Upon written request from a Participant or Beneficiary receiving benefits, the Administrator shall furnish a copy of any one (1) or all of the following documents: the latest updated summary plan description, the latest annual report, any terminal report, Trust agreement, contract or other instruments under which the Plan was established or is operated. The Administrator may make a reasonable charge to cover the cost of furnishing complete copies.
12.6.	Documents Available for Examination
	Copies of the Plan description and the latest annual report, Trust agreement, contract or other instruments under which the Plan was established or is operated shall be available for examination at the principal office of the Employer by any Participant or Beneficiary receiving benefits. Examination may be made during reasonable hours in person or by agent, accountant or attorney.
12.7.	Notice of Participant Rights under ERISA
	The Committee shall furnish to each Participant and to each Beneficiary receiving benefits information on their rights under the Plan and how the rights may be protected by law.
12.8.	Notice to Participant on Participant Termination
	The Administrator shall furnish a statement to a Participant who terminated Service with the Employer for any of the reasons set forth in Articles VI through IX, describing the nature, amount and form of the Nonforfeitable Account Balance, if any, to which the Participant is entitled as soon as administratively feasible after the close of the Plan Year in which the Participant terminated Service.
12.9.	Notice to Trustee on Participant Termination

(a) As soon as practicable after a Participant terminates Service with the Employer for any of the reasons set forth in Article VII, the Committee shall give written notice to the Trustee, including the following information and directions which may be necessary or advisable under the circumstances:

(i)	name and address of the Participant;
(ii)	reason the Participant terminated Service with the Employer;
(iii)	name and address of the Beneficiary or Beneficiaries of a deceased Participant;
(iv)	Nonforfeitable percentage or amount to which the Participant is entitled on termination of employment pursuant to Article VII; and

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(v) time, manner and amount of payment to be made pursuant to the Participant’s election under Article X.

	If a Former Participant or Beneficiary dies, the Committee shall give like notice to the Trustee, but only if the Committee learns of the death.
(b)	At any time and from time to time after giving the notice provided under this Section, the Committee may modify the original notice or any subsequent notice by a further written notice or notices to the Trustee, but any action taken or payments made by the Trustee pursuant to a prior notice shall not be affected by a subsequent notice.
(c)	A copy of each notice provided under this Section shall be mailed by the Committee to the Participant, Former Participant or Beneficiary involved, but the failure to send or receive the copy shall not affect the validity of any action taken or payment made pursuant thereto.
(d)	Upon receipt of any notice provided under this Section, the Trustee shall promptly take any action and make any payments directed in the notice. The Trustee may rely on the information and directions in the notice absolutely and without question. However, the Trustee may inform the Committee of any error or oversight which the Trustee believes to exist in any notice.

12.10.	Claim for Benefits
	Normally, whenever a Participant or Beneficiary becomes entitled to benefits under this Agreement, the Committee and the Trustee will automatically initiate procedures to provide for the payment of the benefits. If a Participant or Beneficiary believes that he or she is entitled to the payment of benefits under this Agreement and no action is forthcoming from the Committee or the Trustee, then the Participant or Beneficiary may file a written claim for benefits with the Committee or the Trustee.
12.11.	Appeal for Decision of Committee

(a) If any Participant or Beneficiary files a claim for benefits under this Plan (“Claimant”) and the claim is denied in whole or in part, the Administrator shall give notice of the decision to the Claimant in writing setting forth:

(i)	the specific reasons for the denial;
(ii)	a specific reference to pertinent provisions of the Plan, if any, upon which the denial is based;
(iii)	a description of any additional material or information necessary for the Claimant to perfect the claim with an explanation of the necessity therefor; and

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(iv) that any appeal the Claimant wishes to make of the adverse determination must be in writing to the Committee within ninety (90) days after receipt of the Administrator’s notice of denial of benefits. The Administrator’s notice must further advise the Claimant that failure to appeal the action to the Committee in writing within the ninety (90) day period will render the Committee’s determination final, binding and conclusive.

(b)

The written notice shall be given to the Claimant as soon as administratively feasible after the decision is made, but not later than sixty (60) days after the claim is filed. The Claimant shall have the right to be represented, to review pertinent documents and to present written and oral evidence.

(c)

If the Claimant should appeal to the Committee, the Claimant or the duly authorized representative, may submit, in writing, issues and comments the Claimant or the duly authorized representative considers pertinent. The Committee shall render the decision on the review and shall set forth the specific reasons for the decision with specific references to pertinent provisions. The Committee shall render the decision in writing within sixty (60) days after receipt of the request for review unless special circumstances, such as the need for a hearing, require an extension which shall not exceed an additional sixty (60) days.

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ARTICLE XIII

Investment of Trust Assets

13.1.	Appointment of Trustee
	The Employer shall determine the number of Trustees, shall appoint such Trustees, and may at any time and from time to time increase or decrease the number of Trustees. The Employer may remove any Trustee at any time and appoint a successor Trustee or Trustees or reduce the number of Trustees (but not to less than one). The Trustee or Trustees shall have such rights, powers and duties as shall from time to time be specified in or determined pursuant to the Trust Agreement. The Trust Agreement shall form a part of the Plan, and the Trust Assets shall be administered in accordance with the terms of the Plan and the Trust Agreement.
13.2.	Investment of Accounts

(a) All Individual Accounts shall be invested and reinvested by the Trustee in accordance with Participant direction, as provided herein.

(i)	Each Participant, in his written application for participation or through such other means as may be authorized by the Administrator, if any, shall direct the Committee and the Trustee as to which Investment Fund(s) he wishes to utilize and the percentage of his Individual Accounts he wishes to have invested in each fund.
(ii)	A Participant may change his designation of the manner for investment of such Participant’s Individual Accounts, or current contributions made on behalf of or by the Participant, or both, to any other manner permitted hereunder. This change may be made in writing to the Committee or through such other means as may be authorized by the Administrator, if any. A change shall be applicable as soon as administratively feasible following its delivery to the Trustee. In order to comply with applicable federal or state securities laws, the Committee may establish such rules with respect to the change of investment designation by Participants as it shall deem necessary or advisable to prevent possible violations of such laws.
(iii)	To the extent a Participant fails to direct the investment of all or any portion of his account, the Committee shall direct the Trustee to invest such Participant’s Individual Accounts in an age appropriate Investment Fund as more particularly described in the Committee’s written investment policy.

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The Administrator may permit a Participant to make an election under this Section through any electronic or telephonic means authorized by the Committee.

(b)

Investment Funds. The Committee will select the “Investment Funds” available under the Plan in accordance with a separate written Investment Policy. The Committee shall select and maintain such Investment Funds in accordance with the Committee’s written Investment Policy. Such Investment Funds shall be communicated to Participants in writing. All Individual Accounts shall be allocated by the Committee to the Investment Funds specified in the separate written Investment Policy. Dividends, interest and other distributions shall be reinvested in the same Investment Fund from which they are received.

The assets of each Investment Fund shall be invested exclusively in shares of the registered investment company designated by the Committee, provided that such shares constitute securities described in ERISA Section 401(b)(1). Amounts invested in any such Investment Fund in amounts estimated by the Trustee to be needed for cash withdrawals, or in amounts too small to be reasonably invested, or in amounts which the Trustee deems to be in the best interest of the Participants, may be retained by the Trustee in cash or invested temporarily.

13.3. Investment in Employer Securities

(a)	The Plan is specifically authorized to acquire and hold up to 100% of its assets of the Employer’s Common Stock (“Company Stock”) so long as the Common Stock are a “qualifying employer security,” as such term is defined in Section 407(d)(e) of ERISA. The Committee shall implement this Section 13.3 by directing the Plan’s Trustee to establish a company stock fund (the “Stock Fund”) which will hold shares of Company Stock. Investments will be made in the Stock Fund through the issuance of units in the Stock Fund, the value of which shall be established at the end of each day that shares of Company Stock are sold on the NASDAQ exchange. All purchases and sales of units in the Stock Fund will be made based on the Stock Fund’s closing value as of the close of business on the date a transaction occurs. The Stock Fund shall retain an appropriate level of cash and cash equivalent investments to permit Plan participants to sell some or all of the interests in the Stock Fund.
(b)	During any period in which the Participants are permitted to direct the Trustee to sell shares of Company Stock that are allocated to their Accounts, the Committee shall determine whether any portion of the Stock Fund may be “restricted shares” subject to trading restrictions under Rule 144 promulgated under the Securities Act of 1933. The portion of the Stock Fund and a proportionate portion of the underlying shares of Company Stock held by the Stock Fund, that are so determined by the Committee to be subject to such restrictions shall be classified as “Restricted shares” and may only be sold pursuant to Subsection 13.3 below.
(c)	The Company shall purchase any and all Restricted Shares from the Plan’s Trust on the first trading date immediately following the date on which a Participant has

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elected to liquidate a restricted portion of the Stock Fund. This sale of such Restricted Shares shall be made pursuant to the following steps;

(i)	The Committee establish a procedure that will identify the portion of the Stock Fund which constitutes Restricted Shares. This identification will be performed not less often than once each calendar quarter.
(ii)	The Trustee shall sell all such Restricted Shares to the Company that are required to liquidate a portion of the Stock Fund as a result of a Participant’s direction. The effective date of such sale shall be the trading day immediately following the date the Participant elected to sell an interest in the Stock Fund by a Participant shall occur on the trading date on which the Participant elects to sell some or all of his interest in the Stock Fund (or, if the date the election is made is a date where trading in Company Stock does not occur, the immediately following trading date).
(iii)	The purchase price for the Restricted Shares sold under Paragraph (ii) above shall be not less than adequate consideration for such shares of Company Stock on the date the purchase occurs. For this purpose, the “adequate consideration” shall be equal to the greater of (i) the weighted average of the actual sales prices obtained by the Trust in connection with other sales of shares of Company Stock sold on the NASDAQ exchange on the date the sale occurs, and (ii) the volume weighted average price for all shares of Dell’s common stock sold on the NASDAQ for such trading date.

(d) No purchase of shares of Company Stock shall be made unless the Company’s common stock is then traded on the NASDAQ exchange.

13.4. Income and Expenses

(a)

The dividends, capital gains distributions, and other earnings received on an Investment Fund that is specifically credited to a Participant’s or Former Participant’s separate Individual Accounts under the Plan shall be allocated to such separate Individual Accounts and immediately reinvested, to the extent practicable, in additional shares of such Investment Fund.

(b)

Fees charged by the Trustee and other expenses of operating the Trust shall be paid by the Employers or, in the absence of such payments (which are not obligatory), out of the general Trust assets and charged to the separate Individual Accounts of all Participants and Former Participants under the Plan in the ratio that the fair market value of each such Individual Account bears to the total fair market value of all separate Individual Accounts; provided, however, that such amounts shall be adjusted to reflect any revenue sharing payments received from an Investment Fund. However, notwithstanding the above, any brokerage fees, commissions, taxes and other costs incurred by the Trust (and not reimbursed by the Employer with respect to the purchase, sale, or distribution of Employer

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Securities pursuant to an inter-fund transfer in connection with an in-service withdrawal or a distribution made at the direction of a Participant, Former Participant, or Beneficiary shall be charged to and paid by such Participant’s, Former Participant’s, or Beneficiary’s separate Individual Accounts.

13.5.	Exclusive Benefit
	The Plan and the Trust are established and shall be maintained for the exclusive benefit of the Participants, Former Participants and their Beneficiaries. Subject to the exceptions expressly set forth in the Plan or the Trust Agreement, no part of the Trust Assets may ever revert to an Employer or be used for or diverted to purposes other than the exclusive benefit of the Participants, Former Participants and Beneficiaries.
13.6.	Valuation
	The value of each Participant’s Individual Accounts shall be determined as of each Valuation Date, on the basis of the fair market value of the assets allocated to each such Participant’s Individual Accounts, as appraised by the Trustee.

(a)	As of each Valuation Date, the Committee shall determine the fair market value of each Investment Fund being administered by the Trustee. With respect to each such Investment Fund, the Committee shall determine (i) the change in value between the current Valuation Date and the then last preceding Valuation Date, (ii) the net gain or loss resulting from expenses paid (including fees and expenses, if any, which are to be charged to such Investment Fund), and (iii) realized and unrealized gains and losses.
	The transfer of funds to or from an Investment Fund pursuant to Section 13.2(a) and payments, distributions and withdrawals from an Investment Fund to provide benefits under the Plan for Participants or Beneficiaries shall not be deemed to be gains, expenses or losses of an Investment Fund.
	As of each Valuation Date, the Committee shall allocate the net gain or loss of each Investment Fund on the Valuation Date to the accounts of Participants participating in such Investment Fund on such Valuation Date. Contributions and rollovers received and credited to Participant’s Individual Accounts as of such Valuation Date, or as of an earlier date since the last preceding Valuation Date shall not be considered in allocating gains or losses allocated to Participants’ accounts.
(b)	The reasonable and equitable decision of the Committee as to the value of each Investment Fund, and of any Individual Account as of each Valuation Date shall be conclusive and binding upon all persons having any interest, direct or indirect, in the Investment Funds or in any account.

13.7.	Investment Policy
	The Committee shall be obliged only to use good faith and to exercise its honest

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	judgment as to what investments are from time to time in the best interests of the Trust Fund and the Participants and their Beneficiaries. Furthermore, the Committee may instruct the Trustee to hold any portion of the Trust Fund in cash and uninvested whenever it deems such holding necessary or advisable.
13.8.	Valuation of the Trust Fund
	The Trustee shall value the Trust Fund as of each Accounting Date to determine the fair market value of each Participant’s Account Balance as adjusted and credited under Articles IV and V; and on such other dates as directed by the Committee.

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ARTICLE XIV

Participant Loans

14.1. General Rules Regarding the Participant Loan Program

(a)	General. Unless otherwise provided by the Plan Sponsor, the Plan authorizes the Trustee to make loans on a nondiscriminatory basis to a Participant or Beneficiary in accordance with the written loan policy established by the Committee, provided (i) the loan policy satisfies the requirements of Subsection 14.1(b); (ii) loans are available to all Participants and Beneficiaries on a reasonably equivalent basis and are not available in a greater amount for Highly Compensated Employees than for other Employees; (iii) any loan is adequately secured and bears a reasonable rate of interest; (iv) the loan provides for repayment within a specified time; (v) the default provisions of the note prohibit offset of the Participant’s Nonforfeitable Account Balance prior to the time the Trustee otherwise would distribute the Participant’s Nonforfeitable Account Balance; and (vii) the loan otherwise conforms to the exemption provided by Code Section 4975(d)(1). If the joint and survivor annuity requirements of Section 9.6 apply to a Participant, the Participant may not pledge any portion of his or her Account Balance as security for a loan unless, within the ninety (90) day period ending on the date the pledge becomes effective, the Participant’s spouse, if any, consents (in a manner described in Section 9.6 other than the requirement relating to the consent of a subsequent spouse) to the security, or, by a separate consent, to an increase in the amount of security.
(b)	Loan Policy. If the Committee adopts a loan policy, pursuant to Subsection 11.3(m), the loan policy must be a written document and must include (i) the identity of the person or positions authorized to administer the participant loan program; (ii) a procedure for applying for the loan; (iii) the criteria for approving or denying a loan; (iv) the limitations, if any, on the types and amounts of loans available; (v) the procedure for determining a reasonable rate of interest; (vi) the types of collateral which may secure the loan; and (vii) the events constituting default and the steps the Plan will take to preserve Plan assets in the event of default. This Section specifically incorporates any written loan policy adopted by the Committee as part of this Plan.
(c)	Limitations. The following limitations shall apply to the Participant Loan Program:

(i) This Plan shall not provide loans in any amount that would exceed the applicable dollar limitations contained in Code Section 72(p)(2)(A), which limitations shall be incorporated into the Plan’s loan policy and shall be treated as being applicable under this Section.

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(ii)	No loan shall be provided to a Participant unless such Participant is on the U.S. payroll of the Employer or a Subsidiary when the loan is initiated. A Participant who receives a loan and subsequently ceases to be on a U.S. payroll may continue to make loan payments by manual check.
(iii)	A Participant may have no more than two (2) loans outstanding at any one time.
(iv)	The Plan generally will not accept rollovers of loans; provided, however, that the Benefits Administration Committee (or its delegate) may authorize the Trustee to allow loan rollovers from another employer’s qualified retirement plan during a fixed period of time following the acquisition of a trade or business from the sponsor of such Plan. A rollover of a loan fro another employer’s qualified retirement Plan does not permit a Participant to have more than two loans outstanding at any one time.

(d) Special Rules under USERRA for Loan Repayments. Loan repayments will be suspended under this Plan, as permitted under Code Section 414(u)(4), on behalf of those Participants who are on an Authorized Leave of Absence pursuant to qualified military service.

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ARTICLE XV

Rollovers, Mergers, Direct Transfers

15.1. Participant Rollover Contributions

Any Participant who has the Employer’s written consent and who has filed with the Trustee the form prescribed by the Committee may contribute cash the Trust other than as a voluntary contribution if the contribution is a Rollover Contribution which the Code permits an Employee to transfer either directly or indirectly from one qualified plan to another qualified plan. Before accepting a Rollover Contribution, the Trustee may require an Employee to furnish satisfactory evidence that the proposed transfer is in fact a Rollover Contribution which the Code permits an Employee to make to a qualified plan. The Employer will not accept a Participant’s Rollover Contribution arising from an annuity contract described in Code Section 403(b) all or a portion of the assets of which are attributable to the Participant’s deductible or nondeductible contributions. In addition, the Employer will not accept Rollover Contributions which include voluntary after-tax contributions. A Rollover Contribution is not an Annual Addition.

An eligible Employee, prior to satisfying the Plan’s conditions, may make a Rollover Contribution to the Trust to the same extent and in the same manner as a Participant. If an Employee makes a Rollover Contribution to the Trust prior to satisfying the Plan’s eligibility conditions, the Committee and Trustee must treat the Employee as a Participant for all purposes of the Plan except the Employee is not a Participant for purposes of sharing in Employer contributions or Participant Forfeitures under the Plan until the Employee actually becomes a Participant in the Plan. If the Employee has a Severance from Employment prior to becoming a Participant, the Trustee will distribute the Rollover Account to the Participant as if it were an Employer Contribution Account.

For any Rollover Contribution, the following requirements shall be met:

(a)

The Committee shall maintain a Participant’s Rollover Contributions in a separate Rollover Account;

(b)

Except with respect to a Plan asset under the control or direction of a properly appointed Investment Manager or with respect to a Plan asset properly subject to Employer, Participant or Committee direction of investment, the Trustee will invest the Rollover Contribution in a segregated investment Rollover Account for the Participant’s sole benefit unless the Trustee, in its sole discretion, agrees to invest the Rollover Contribution as part of the Trust Fund. The Trustee will not have any investment responsibility for a Participant’s segregated Rollover Account. The Participant, however, from time to time, may direct the Trustee in writing on the investment of the segregated Rollover Account in property, or property interests, of any kind, real, personal or mixed; however, the Participant may not direct the Trustee to make loans to the Employer. A Participant’s segregated Rollover Account alone will bear any extraordinary expenses resulting

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	from investments made at the direction of the Participant. As of the Accounting Date, or other Valuation Date, for each Plan Year, the Committee will allocate and credit the net income or charge the net loss from a Participant’s segregated Rollover Account and credit or charge respectively the increase or decrease in the fair market value of the assets of a segregated Rollover Account solely to that Rollover Account. The Trustee is not liable nor responsible for any loss resulting to any Beneficiary, nor to any Participant, because of any sale or investment made or other action taken pursuant to and in accordance with the direction of the Participant. In all other respects, the Trustee will hold, administer and distribute a Rollover Contribution in the same manner as any Employer contribution made to the Trust Fund.
(c)	A Participant’s Rollover Contributions shall not be forfeitable nor reduce in any way the obligations of the Employer under this Agreement.
(d)	If any portion of a Participant’s Rollover Contribution is attributable to Salary Reduction Contributions made by the Participant to the transferor plan, this Plan shall continue the distributions restrictions described in Section 6.2(b) that apply to such amounts.

15.2. Merger and Direct Transfer

To the extent directed by the Committee, the Trustee possesses the specific authority to enter into merger agreements or direct transfer of assets agreements with the trustees of other retirement plans described in Code Section 401(a), including an Elective Transfer defined in Section 15.3, and to accept the direct transfer of plan assets or to transfer plan assets, as a party to any agreement. Further, the Trustee may permit the transfer of plan assets to an individual retirement account or an individual retirement annuity. However, the Trustee, before any merger or direct transfer is consummated, shall be satisfied that the holding of any transferred assets is permitted by the transferee trusts. In addition, if the transferee plan contains a cash or deferred arrangement, the Trustee must reasonably determine, prior to permitting such a transfer, that the transferee plan will continue the distribution restrictions of Code Sections 401(k)(2) and 401(k)(10) on any transferred amounts that are attributable to Salary Reduction Contributions of Participants. When the Trustee is so satisfied, the Trustee shall accept the direct transfer of plan assets or shall cause to be transferred the assets directed to be transferred and as appropriate shall direct the insurance company to transfer any contracts held by it to the new Trustee. The Trustee may accept a direct transfer of plan assets on behalf of an Employee prior to the date the Employee satisfies the Plan’s eligibility conditions. If the Trustee accepts a direct transfer of plan assets, the Committee and Trustee must treat the Employee as a Participant for all purposes of the Plan except that the Employee is not a Participant for purposes of sharing in Employer contributions or Participant Forfeitures under the Plan until the Employee actually becomes a Participant in the Plan.

The Trustee may not consent to, or be a party to, any merger or consolidation with another plan or to a transfer of assets and liabilities to another plan, unless, immediately after the merger, consolidation or transfer the surviving plan provides each Participant a

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benefit equal to or greater than the benefit each Participant would have received had the plan terminated immediately before the merger, consolidation or transfer.

15.3. Rules Concerning Certain Rollovers, Mergers and Direct Transfers

The Trustee will hold, administer and distribute the transferred assets as a part of the Trust Fund and the Trustee must maintain a separate Employer Contribution Account for the benefit of the Employee on whose behalf the Trustee accepted the transfer to reflect the value of the transferred assets.

The Plan will preserve all Code Section 411(d)(6) protected benefits with respect to those transferred assets, in the manner described in Subsection 10.2(c)(iii).

If the Plan receives a direct transfer, by merger or otherwise, of Salary Reduction Contributions, or amounts treated as Salary Reduction Contributions, under a Plan with a Code Section 401(k) arrangement, the distribution restrictions of Code Sections 401(k)(2) and 401(k)(10) continue to apply to those transferred Salary Reduction Contributions.

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ARTICLE XVI

Top Heavy Provisions

16.1. Top-Heavy Plan Status/Super Top-Heavy Plan Status

For purposes of determining Top-Heavy Plan status/super Top-Heavy Plan status, each Participating Employer and its Related Employers shall be deemed to maintain a separate plan. Related Employers shall be considered a single employer for purposes of applying the limitations of this Section. However, Participating Employers who are not Related Employers, but receive the services of Employees of the Employer under an employee leasing arrangement shall be treated as separate employers for purposes of these top-heavy rules.

A Plan shall be a Top-Heavy Plan in any Plan Year in which, as of the Determination Date, (i) the Present Value of Accrued Benefits of Key Employees, or (ii) the sum of the Aggregate Accounts of Key Employees of any plan of an Aggregation Group, exceeds sixty percent (60%) of the Present Value of Accrued Benefits or Aggregate Accounts of all Participants under this Plan and any plan of an Aggregation Group.

If any Participant is a Non-Key Employee for any Plan Year, but the Participant was a Key Employee for any prior Plan Year, the Participant’s Aggregate Account balance shall not be taken into account in determining whether this Plan is a Top-Heavy Plan (or whether any Aggregation Group which includes this Plan is a Top-Heavy Group) as further defined in Code Section 416(g) and the applicable Treasury Regulations.

For purposes of determining Top-Heavy status, the following definitions shall apply:

(a) Aggregate Account means, as of the Determination Date, the sum of:

(i)	the Participant Contribution Account and Employer Contribution Account balances as of the most recent Valuation Date occurring within a twelve (12) month period ending on the Determination Date;
(ii)	the contributions that would be allocated as of a date not later than the Determination Date, even though those amounts are not yet made or required to be made;
(iii)	any plan distributions made during the Determination Period (however, in the case of distributions made after the Valuation Date and prior to the Determination Date, such distributions are not included as distributions for Top-Heavy purposes to the extent that the distributions are already included in the Participant’s Aggregate Account balance as of the Valuation Date);
(iv)	any Employee contributions, whether voluntary or mandatory;

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(v)	Regarding unrelated rollovers and plan-to-plan transfers (those which are (A) initiated by the Employee and (B) made from a plan maintained by one employer to a plan maintained by another employer), if this Plan provides for rollovers or plan-to-plan transfers, an unrelated rollover or plan-to-plan transfer shall be considered as a distribution for purposes of this Section. If this Plan is the plan accepting an unrelated rollover or plan-to-plan transfer, an unrelated rollover or plan-to-plan transfer shall not be considered as part of the Participant’s Aggregate Account balance;
(vi)	Regarding related rollovers and plan-to-plan transfers (those either (A) not initiated by the Employee or (B) made to a plan maintained by the same Employer), if this Plan provides for rollovers or plan-to-plan transfers, a related rollover or plan-to-plan transfer shall be considered as a distribution for purposes of this Section. If this Plan is the plan accepting a related rollover or plan-to-plan transfer, a related rollover or plan-to-plan transfer shall be considered as part of the Participant’s Aggregate Account balance, irrespective of the date on which the related rollover or plan-to-plan transfer is accepted; and
(vii)	The accounts of Participants who are Leased Employees of Participating Employers, for purposes of these top-heavy rules, shall be treated as being maintained under a separate plan by each respective Participating Employer.

(b) Aggregation Group means either a Required Aggregation Group or a Permissive Aggregation Group as hereinafter determined.

(i)	Required Aggregation Group means the group of plans composed of (A) each plan of the Employer in which a Key Employee is a participant or participated at any time during the Determination Period, regardless of whether the plan has terminated; and (B) each other plan of the Employer which enables any plan in which a Key Employee participates to meet the requirements of Code Sections 401(a)(4) or 410, which shall be aggregated.
	In the case of a Required Aggregation Group, each plan in the group will be considered a Top-Heavy Plan if the Required Aggregation Group is a Top-Heavy Group. No plan in the Required Aggregation Group will be considered a Top-Heavy Plan if the Required Aggregation Group is not a Top-Heavy Group.
(ii)	Permissive Aggregation Group means the Required Aggregation Group plus any other plan not required to be included in the Required Aggregation Group, provided the resulting group, taken as a whole, would continue to satisfy Code Sections 401(a)(4) and 410.

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	In the case of a Permissive Aggregation Group, only a plan that is part of the Required Aggregation Group will be considered a Top-Heavy Plan if the Permissive Aggregation Group is a Top-Heavy Group. No plan in the Permissive Aggregation Group will be considered a Top-Heavy Plan if the Permissive Aggregation Group is not a Top-Heavy Group.
(iii)	Only those plans of the Employer in which the Determination Dates fall within the same calendar year shall be aggregated to determine whether the plans are Top-Heavy Plans.

(c)	Determination Date means for any Plan Year (i) the last day of the preceding Plan Year, or (ii) in the case of the first Plan Year of the Plan, the last day of the first Plan Year.
(d)	Determination Period means, pursuant to Appendix A.1.4(b), the one (1) year period ending on the Determination Date.
(e)	Employer means the Plan Sponsor and any successor corporation or business organization which may be substituted for the Plan Sponsor under this Agreement. Related Employers shall be considered a single employer for purposes of applying the limitations of this Section. However, Participating Employers who are not Related Employers, but receive the services of Employees of the Plan Sponsor under an employee leasing arrangement shall be treated as separate employers for purposes of these top-heavy rules.
(f)	Excluded Employees means any Employee who has not performed any Service for the Employer during the one (1) year period ending on the Determination Date. Excluded Employees shall be excluded for purposes of a Top-Heavy determination.
(g)	Key Employee means, pursuant to Appendix A.1.4(a), any Employee or Former Employee, or Beneficiary of the Employee, who, for any Plan Year in the Determination Period is:

(i)	An officer of the Employer having annual compensation from the Employer and any Related Employer greater than $130,000 (as adjusted under Code Section 416(i)(1) for Plan Years beginning after December 31, 2002;
(ii)	A Five Percent Owner; or
(iii)	A One Percent Owner of the Employer or a Participating Employer having annual compensation from the Employer of more than $150,000. (One Percent Owner means any person having annual compensation from the Employer and any Related Employer in excess of $150,000 and owning, or considered as owning within the meaning of Code Section 318, more than one percent (1%) of the outstanding stock of the Employer or stock possessing more than one percent (1%) of the total combined voting

55

	power of all stock of the Employer; or in the case of an unincorporated business, any person who owns more than one percent (1%) of the capital or profits interest in the Employer.)
(iv)	Notwithstanding the foregoing, Key Employee shall have the meaning set forth in Code Section 416(i), as amended.
(v)	For purposes of determining whether an Employee or Former Employee is an officer under this Subsection (g), an officer of the Employer shall have the meaning set forth in the regulations under Code Section 416(i).
(vi)	For purposes of this Section, annual compensation means “Compensation” as determined under the definition of Highly Compensated Employee in Section 1.27.
(vii)	For purposes of determining ownership hereunder, entities that would otherwise be aggregated as Related Employers shall be treated as separate entities.

(h)	Non-Key Employee means any Employee or Former Employee, or Beneficiary of the Employee, who is not a Key Employee.
(i)	Present Value of Accrued Benefit. Solely for the purpose of determining if the Plan, or any other plan included in a Required Aggregation Group of which this Plan is a part, is a Top-Heavy Plan, the Accrued Benefit of a Non-Key Employee shall be determined under (i) the method, if any, that uniformly applies for accrual purposes under all plans maintained by the Related Employers, or (ii) if there is no uniform method, in accordance with the slowest accrual rate permitted under the fractional accrual method described in Code Section 411(b)(1)(C). To calculate the Present Value of Accrued Benefits from a defined benefit plan, the Committee will use the actuarial assumptions for interest and mortality only, prescribed by the defined benefit plan(s) to value benefits for Top-Heavy purposes. If an aggregated plan does not have a Valuation Date coinciding with the Determination Date, the Committee must value the Accrued Benefits in the aggregated plan as of the most recent Valuation Date falling within the twelve (12) month period ending on the Determination Date, except as Code Section 416 and applicable Treasury Regulations require for the first and second plan year of a defined benefit plan. The Committee will determine whether a plan is Top-Heavy by referring to Determination Dates that fall within the same calendar year.
	Notwithstanding the foregoing, pursuant to Appendix A.1.4(b)(i) the Present Values of Accrued Benefits and the amounts of Account Balances of an Employee as of the Determination Date shall be increased by the distributions made with respect to the Employee under the Plan and any plan aggregated with the Plan under Code Section 416(g)(2) during the one (1) year period ending on the Determination Date. The preceding sentence shall also apply to distributions under a terminated plan which, had it not been terminated, would have been

56

aggregated with the Plan under Code Section 416(g)(2)(A)(i). In the case of a distribution made for a reason other than termination of employment, death or Total and Permanent Disability, this provision shall be applied by substituting “5-year period” for “1-year period”.

Pursuant to Appendix A.1.4(b)(ii), the accrued benefits and accounts of any individual who has not performed services for the Employer during the 1-year period ending on the determination date shall not be taken into account.

(j) Top-Heavy Group means an Aggregation Group in which, as of the Determination Date, the sum of:

(i)	the Present Value of Accrued Benefits of Key Employees under all defined benefit plans included in the group;
(ii)	the Aggregate Accounts of Key Employees under all defined contribution plans included in the group; and
(iii)	exceeds sixty percent (60%) of a similar sum determined for all Participants.

16.2. Top-Heavy Allocations

(a)

Minimum Allocation. Notwithstanding the foregoing, for any Plan Year in which the Plan is determined to be Top-Heavy, the amount of Employer contributions and Forfeitures allocated to the Individual Accounts of each Non-Key Employee shall be equal to the lesser of three percent (3%) of each Non-Key Employee’s Compensation or the highest contribution rate for the Plan Year made on behalf of any Key Employee. However, if a defined benefit plan maintained by the Employer which benefits a Key Employee depends on this Plan to satisfy the nondiscrimination rules of Code Section 401(a)(4) or the coverage rules of Code Section 410(b) (or another plan benefiting the Key Employee so depends on the defined benefit plan), the top heavy minimum allocation is three percent (3%) of the Non-Key Employee’s Compensation regardless of the contribution rate for the Key Employee. The minimum allocation is determined without any reference to any Social Security contribution. This minimum allocation shall be made even though, under other Plan provisions, the Participant would not otherwise be entitled to receive an allocation, or would have received a lesser allocation for the year because of (i) the Participant’s failure to complete 1,000 Hours of Service (or any equivalent provided herein), (ii) the Participant’s failure to make a mandatory employee contribution to the Plan (as provided herein), or (iii) the Participant received compensation less than a stated amount.

Pursuant to Appendix A.1.4(c), Employer Matching Contributions, including Safe Harbor Matching Contributions, shall be taken into account for purposes of satisfying the minimum contribution requirements of Code Section 416(c)(2) and the Plan. The preceding sentence shall apply with respect to matching contributions under the Plan or, if the Plan provides that the minimum

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	contribution requirement shall be met in another plan, such other plan. Employer Matching Contributions, including Safe Harbor Matching Contributions that are used to satisfy the minimum contribution requirements shall be treated as matching contributions for purposes of the Actual Contribution Percentage Test and other requirements of Code Section 401(m).
(b)	Compensation. For purposes of this Section, Compensation means Annual Compensation except (i) Compensation does not include Voluntary After Tax Contributions, and (ii) any exclusions from Annual Compensation (other than the exclusion of Voluntary After Tax Contributions and the exclusions described in clauses (i) through (v) of the definition of Annual Compensation in Article I, if any) do not apply. Notwithstanding the definition of Annual Compensation in Article I, the period preceding a Participant’s Entry Date shall be included in determining the minimum top-heavy allocation provided by this Section.
(c)	Contribution Rate. For purposes of this Section, a Participant’s contribution rate is the sum of Employer contributions (not including Employer contributions to Social Security) and Forfeitures allocated to the Participant’s Individual Accounts for the Plan Year divided by his or her Compensation for the entire Plan Year. To determine a Participant’s contribution rate, the Committee must treat all qualified top-heavy defined contribution plans maintained by the Employer (or by any Related Employers) as a single plan.
	Notwithstanding the preceding, if this plan is a plan which includes a cash or deferred arrangement, then the following rules apply:

(i)

Salary Reduction Contributions on behalf of Key Employees are taken into account in determining the minimum required contribution under Code Section 416(c)(2). However, Salary Reduction Contributions on behalf of Employees other than Key Employees may not be treated as Employer contributions for the minimum contribution or benefit requirement of Code Section 416.

(ii)

Matching Contributions allocated to Key Employees are treated as Employer contributions for determining the minimum contribution or benefit under Code Section 416. However, if a plan utilizes Matching Contributions allocated to Employees other than Key Employees as Salary Reduction Contributions to satisfy the minimum contribution requirement, the Matching Contributions are not treated as Matching Contributions for applying the requirements of Code Section 401(k) and 401(m).

(d) Participant Entitled to Top-Heavy Minimum Allocation. The minimum allocation under this Section shall not be provided to any Participant who was not employed by the Employer on the last day of the Plan Year. The provisions of this Section shall not apply to any Participant to the extent the Participant is covered under any other plan or plans of the Employer, Participating Employer, and any Related Employer under which the minimum allocation or benefit requirements under

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Code Section 416(c)(1) or (c)(2) are met for the Participant. Notwithstanding any limitations within the Plan’s definition of Annual Compensation, amounts earned during the period preceding a Participant’s Entry Date shall be included for purposes of determining the minimum top-heavy allocation provided by this Section.

(e)

Compliance. The Plan will satisfy the top-heavy minimum allocation under this Section. The Committee first will allocate the Employer contributions for the Plan Year pursuant to the allocation formula under Section 5.2. The Employer then will contribute an additional amount for the Individual Accounts of any Participant entitled under this Section to a top-heavy minimum allocation and whose contribution rate for the Plan Year, under this Plan and any other plan aggregated under this Section, is less than the top-heavy minimum allocation. The additional amount is the amount necessary to increase the Participant’s contribution rate to the top-heavy minimum allocation. The Committee will allocate the additional contribution to the Individual Accounts of the Participant on whose behalf the Employer makes the contribution.

* * * * *

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ARTICLE XVII

Exclusive Benefit

17.1.	Exclusive Benefit
	Except as provided under this Article and Article III, the Employer has no beneficial interest in any asset of the Trust and no part of any asset in the Trust may ever revert to or be repaid to an Employer, either directly or indirectly. Further, prior to the satisfaction of all liabilities with respect to the Participants and their Beneficiaries under the Plan, no part of the corpus or income of the Trust Fund, or any asset of the Trust, may be used for, or diverted to, purposes other than the exclusive benefit of the Participants or their Beneficiaries. No amendment or revocation by the Employer of this Section may cause or permit any portion of the Trust Fund to revert to or become a property of the Employer.
17.2.	Denial of Request for Initial Approval
	Any contribution to the Trust Fund associated with this Plan is conditioned on initial qualification of the Plan under applicable Code Sections 401(a), 403(a) or 405(a) and of the exemption of the Trust created under the Plan under Code Section 501(a). If the Commissioner of the Internal Revenue Service, upon the Employer’s request for initial approval of this Plan and Trust, determines that the Plan is not qualified or the Trust is not exempt, then the Trustee may return to the Employer, within one (1) year after the date of final disposition of the Employer’s request for initial approval, any contribution made by the Employer, and any increment attributable to the contribution.
17.3.	Mistake of Fact
	Notwithstanding any contrary provision in this Agreement, if a contribution is made by an Employer by a mistake of fact, the contribution may be returned to the Employer within one (1) year after the payment of the contribution. The amount of the mistaken contribution is equal to the excess of (i) the amount contributed over (ii) the amount that would have been contributed had there not occurred a mistake of fact. Earnings attributable to mistaken contributions may not be returned to the Employer, but losses attributable thereto shall reduce the amount to be returned.
17.4.	Disallowance of Deduction
	Notwithstanding any contrary provision in this Agreement, any contributions by the Employer to the Plan and Trust are conditioned on the deductibility of the contribution by the Employer under the Code. To the extent any deduction is disallowed, the Employer, within one (1) year following a final determination of the disallowance, whether by agreement with the Internal Revenue Service or by final decision in a court of competent jurisdiction, may demand repayment of the disallowed contribution, and the Trustee shall return the contribution within one (1) year following the disallowance. Earnings attributable to excess contributions may not be returned to the Employer, but losses attributable thereto shall reduce the amount to be returned.

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17.5.

Spendthrift Clause

Except as provided below, no Participant, Former Participant or Beneficiary shall have the right to anticipate, assign or alienate any benefit provided under the Plan and the Trustee will not recognize any anticipation, assignment or alienation. Furthermore, a benefit under the Plan is not subject to attachment, garnishment, levy, execution or other legal or equitable process. All provisions of this Agreement shall be for the exclusive benefit of those designated herein. These restrictions shall not apply in the following case(s):

(a)	Distributions Pursuant to Qualified Domestic Relations Orders. The Committee may direct the Trustee under the nondiscriminatory policy adopted by the Committee to pay an Alternate Payee designated under a Qualified Domestic Relations Order as defined in Code Section 414(p). To the extent provided under a Qualified Domestic Relations Order, a former spouse of a Participant shall be treated as the spouse or Surviving Spouse for all purposes of the Plan.
(b)	Participant Loans. If a Participant, Former Participant or Beneficiary who has become entitled to receive payment of benefits under this Agreement is indebted to the Trustee, by virtue of a Participant Loan, the Committee may direct the Trustee to pay the indebtedness and charge it against the Account Balance of the Participant, Former Participant or Beneficiary.
(c)	Distributions Under Certain Judgments and Settlements. Nothing contained in this Plan prevents the Trustee from complying with a judgment or settlement which requires the Trustee to reduce a Participant’s benefits under the Plan by an amount that the Participant is ordered or required to pay to the Plan if each of the following criteria are satisfied:

(i) The order or requirement must arise –

(A)	under a judgment or conviction for a crime involving the Plan;
(B)	under a civil judgment (including a consent order or decree) entered by a court in an action brought in connection with an actual or alleged violation of Part 4 of Title I of ERISA; or
(C)	under a settlement agreement with either the Secretary of Labor or the Pension Benefit Guarantee Corporation and the Participant in connection with an actual or alleged violation of Part 4 of Title I of ERISA by a fiduciary or any other person.

(ii)	The decree, judgment, order or settlement expressly provides for the offset of all or part of the amount ordered or required to be paid to the Plan against the Participant’s benefits under the Plan.
(iii)	To the extent that (A) the survivor annuity requirements of Code Section 401(a)(11) apply to the portion of the Participant’s Account Balance

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which will be reduced or offset, and (B) the Participant has a spouse at the time at which the reduction or offset is to be made.

(A)	(1) the spouse must consent to the reduction or offset in writing, as witnessed by a notary public or a plan representative, (2) it is established that such consent may not be obtained for any of the reasons outlined in Code Section 417(a)(2)(B), or (3) the spouse must previously have executed an election to waive his or her right to a Qualified Joint and Survivor Annuity or a Qualified Pre-Retirement Survivor Annuity in accordance with the requirements of Code Section 417(a);
(B)	the decree, judgment, order or settlement must require the spouse to pay an amount to the Plan in connection with a violation of Part 4 of Title I of ERISA; or
(C)	the decree, judgment, order or settlement must provide that the spouse shall retain his or her right to receive a survivor annuity calculated as provided in Code Section 401(a)(13)(D). Participant shall be treated as the spouse or Surviving Spouse for all purposes of the Plan.

17.6.

Termination

Upon termination of the Plan, in lieu of the distribution provisions of Article IX, the Committee will direct the Trustee to distribute each Participant’s Nonforfeitable Account Balance, in a single sum, as soon as administratively feasible after the later of the termination of the Plan or the receipt of a favorable determination letter from the Office of the Key District Director, if an application is filed, irrespective of the present value of the Participant’s Nonforfeitable Account Balance and whether the Participant consents to that distribution. This paragraph applies only if:

(a)	the Plan does not provide an annuity option;
(b)	the Plan is a profit sharing plan on its termination date; and
(c)	as of the period between the Plan termination date and the final distribution of assets, the Employer does not maintain any other defined contribution plan (other than an employee stock ownership plan).

For Participants or Beneficiaries who cannot be located upon Plan termination, and whose Nonforfeitable Account Balance exceeds $1,000, to liquidate the Trust, the Committee will purchase a deferred annuity contract, distribute the benefits to an individual retirement account, or transfer the account to an ongoing qualified plan of the Employer or a Related Employer. If the Committee distributes the lost Participant’s or Beneficiary’s benefits to an individual retirement account or purchases an annuity, and the Participant’s or Beneficiary’s whereabouts remain unknown for the duration of the escheat period, the benefits will ultimately escheat to the state under applicable state law.

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Notwithstanding the foregoing, distributions may not be made following termination of the Plan if the Employer establishes or maintains an alternative defined contribution plan, as more particularly described in Treasury Regulation § 1.401(k)-1(d)(4)(i).

* * * * *

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ARTICLE XVIII

Construction

18.1.	Headings
	The headings in this Agreement are for convenience only and shall not be considered in construing this Agreement.
18.2.	Context
	In this Agreement, wherever the context of the Plan dictates, words used in the masculine may be construed in the feminine, the plural includes the singular and the singular includes the plural.
18.3.	Employment not Guaranteed
	Nothing contained in this Agreement, or regarding the establishment of the Plan or Trust, or any modification or amendment to the Agreement, Plan or Trust, or in the creation of any Individual Accounts, or the payment of any benefit, shall be construed as giving any Employee, Participant or Beneficiary whomsoever any right to continue in the Service of the Employer, any legal or equitable right against the Committee, against the Employer, its stockholders, officers or directors or against the Trustee, except as expressly provided by the Agreement, the Plan, the Trust, ERISA or by separate agreement. Employment of all persons by the Employer shall remain subject to termination by the Employer to the same extent as if this Agreement had never been executed.
18.4.	Waiver of Notice
	Any person entitled to notice under the Plan may waive the notice unless the Code or Treasury Regulations prescribe the notice or ERISA specifically or impliedly prohibits a waiver.
18.5.	State Law
	This Agreement and each of its provisions shall be construed and their validity determined by the laws of the State of Texas and applicable Federal law to the extent Federal statute supersedes Texas law.
18.6.	Parties Bound
	This Agreement shall be binding on all persons entitled to benefits under the Plan, their respective heirs and legal representatives, on the Employer, its successors and assigns, and on the Trustee, the Committee and their successors.

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18.7.	Severance
	If any provisions of this Agreement shall be invalid or unenforceable, the remaining provisions shall continue to be fully effective.
18.8.	Employees In Qualified Military Service
	Notwithstanding any provision of this Plan to the contrary, contributions, benefits and service credits with respect to qualified military service will be provided in accordance with Code Section 414(u).

* * * * * * * * * *

          IN WITNESS WHEREOF, the Plan Sponsor, DELL INC., has caused this instrument to be executed on this 13th day of December, 2007 (except as otherwise stated herein).

PLAN SPONSOR:

DELL INC.

By:

Its:

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APPENDIX A

EGTRRA Provisions

A.1.1.	General
	This Article reflects certain provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 (“EGTRRA”). This Article is intended as good faith compliance with the requirements of EGTRRA and is to be construed in accordance with EGTRRA and the guidance issued thereunder. This Article shall, to the extent not otherwise consistent, supercede the foregoing provisions of the Plan to the extent those provisions are inconsistent with the provisions of this Article.
A.1.2.	Amendment to Provisions Governing Code Section 415 Limitation
	Except to the extent permitted under Section A.1.8 below and Code Section  414(v), if applicable, the Annual Addition that may be contributed or allocated to a Participant’s account under the Plan for any Limitation Year shall not exceed the lesser of:

(a)	$40,000, as adjusted for increases in the cost-of-living under Code Section 415(d), or
(b)	100 percent of the Participant’s compensation, within the meaning of Code Section 415(c)(3), for the Limitation Year.

The compensation limit referred to in (b) above shall not apply to any contribution for medical benefits after termination of employment (within the meaning of Code Section 401(h) or 419A(f)(2)), which is otherwise treated as an Annual Addition. This Section A.1.2 shall be effective for Limitation Years beginning after December 31, 2001. (For clarity, the language of this provision is also incorporated in Plan 5.4(e).)

A.1.3.

Increase in Compensation Limit

The Annual Compensation of each Participant taken into account in determining allocations for any Plan Year beginning after December 31, 2001, shall not exceed $200,000, as adjusted for cost-of-living increases in accordance with Code Section 401(a)(17)(b). Annual Compensation means compensation during the Plan Year or such other consecutive 12-month period over which compensation is otherwise determined under the Plan (the determination period). The cost-of-living adjustment in effect for a calendar year applies to Annual Compensation for the determination period that begins with or within such calendar year. (For clarity, the language of this provision is incorporated in Plan Section 1.9.)

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A.1.4.	Modification of Top-Heavy Rules
	This Section A.1.4 shall apply for purposes of determining whether the Plan is a Top-Heavy Plan under Code Section 416(g) for Plan Years beginning after December 31, 2001, and whether the Plan satisfies the minimum benefits requirements of Code Section 416(c) for such years. This Section A.1.4 amends the top-heavy provisions of the Plan as follows:

(a)

“Key employee” shall mean any Employee or former Employee (including any deceased Employee) who at any time during the Plan Year that includes the Determination Date was an officer of the Employer having Annual Compensation greater than $130,000 (as adjusted under Code Section 416(i)(1) for Plan Years beginning after December 31, 2002), a 5-percent owner of the Employer, as defined in Plan Section 1.23, or a 1-percent owner of the Employer, defined in Plan Section 16.1(g), having Annual Compensation of more than $150,000. For this purpose, Annual Compensation means compensation within the meaning of Code Section 415(c)(3). The determination of who is a key employee will be made in accordance with Code Section 416(i)(1) and the applicable regulations and other guidance of general applicability issued thereunder.

(b)

The following provisions shall apply for purposes of determining the present values of accrued benefits and the amounts of Account Balances of Employees as of the Determination Date.

(i)

The Present Values of Accrued Benefits and the amounts of Account Balances of an Employee as of the Determination Date shall be increased by the distributions made with respect to the Employee under the Plan and any plan aggregated with the Plan under Code Section 416(g)(2) during the 1-year period ending on the Determination Date. The preceding sentence shall also apply to distributions under a terminated plan which, had it not been terminated, would have been aggregated with the Plan under Code Section 416(g)(2)(A)(i). In the case of a distribution made for a reason other than termination of employment, death, or Total and Permanent Disability, this provision shall be applied by substituting “5-year period” for “1-year period.”

(ii)

The accrued benefits and accounts of any individual who has not performed services for the Employer during the 1-year period ending on the Determination Date shall not be taken into account.

(c) Matching Contributions. Employer Matching Contributions, including Safe Harbor Matching Contributions described in Plan Section 3.2, shall be taken into account for purposes of satisfying the minimum contribution requirements of Code Section 416(c)(2) and the Plan. The preceding sentence shall apply with respect to Matching Contributions under the Plan or, if the Plan provides that the minimum contribution requirement shall be met in another plan, such

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other plan. Employer Matching Contributions that are used to satisfy the minimum contribution requirements shall be treated as Matching Contributions for purposes of the Actual Contribution Percentage Test and other requirements of Code Section 401(m).

A.1.5. Amendment to Direct Rollover Rules

(a)	For purposes of the Direct Rollover provisions of Plan Section 9.2, an Eligible Retirement Plan shall also mean an annuity contract described in Code Section 403(b) and an eligible plan under Code Section 457(b) which is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state and which agrees to separately account for amounts transferred into such plan from this Plan. The definition of Eligible Retirement Plan shall also apply in the case of a distribution to a surviving spouse, or to a spouse or former spouse who is the Alternate Payee under a Qualified Domestic Relations Order, as defined in Code Section 414(p).
(b)	For purposes of the Direct Rollover provisions of Plan Section 9.2, any amount that is distributed on account of hardship shall not be an Eligible Rollover Distribution and the Distributee may not elect to have any portion of such a distribution paid directly to an Eligible Retirement Plan.
(c)	For purposes of the Direct Rollover provisions of Plan Section 9.2, a portion of a distribution shall not fail to be an Eligible Rollover Distribution merely because the portion consists of after-tax employee contributions that are not includible in gross income. However, such portion may be transferred only to an individual retirement account or annuity described in Code Section 408(a) or (b), or to a qualified defined contribution plan described in Code Sections 401(a) or 403(a) that agrees to separately account for amounts so transferred, including separately accounting for the portion of such distribution which is includible in gross income and the portion of such distribution which is not so includible.

A.1.6.	Rollovers from Other Plans
	The Employer, operationally and on a nondiscriminatory basis, may limit the source of Rollover Contributions that may be accepted by this Plan.

A.1.7.

Rollovers Disregarded in Involuntary Distributions

This Section A.1.7 shall be effective for distributions made after December 31, 2001, and shall apply to all Participants. For purposes of the sections of the Plan that provide for the involuntary distribution of vested accrued benefits of $5,000 or less, the value of a Participant’s Nonforfeitable Account Balance shall be determined without regard to that portion of the Account Balance that is attributable to Rollover Contributions (and earnings allocable thereto) within the meaning of Code Sections 402(c), 403(a)(4), 403(b)(8), 408(d)(3)(a)(ii), and 457(e)(16). If the value of the Participant’s

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Nonforfeitable Account Balance as so determined is $5,000 or less, then the Plan shall immediately distribute the Participant’s entire Nonforfeitable Account Balance.

A.1.8. Amendment to the Contribution Provisions of the Plan

(a)	Effective January 1, 2002, all Employees who are eligible to make Salary Reduction Contributions under this Plan and who have attained age 50 before the close of the Plan Year shall be eligible to make Catch-up Contributions, as defined in Plan Section 1.12, in accordance with, and subject to the limitations of, Code Section 414(v). Such Catch-up Contributions shall not be taken into account for purposes of the provisions of the Plan implementing the required limitations of Code Sections 402(g) and 415. The Plan shall not be treated as failing to satisfy the provisions of the Plan implementing the requirements of Code Sections 401(k)(3), 401(k)(11), 401(k)(12), 410(b), or 416, as applicable, by reason of the making of such Catch-up Contributions.
(b)	The multiple use test described in Treasury Regulation § 1.401(m)-2 and the Plan shall not apply for Plan Years beginning after December 31, 2001.
(c)	No Participant shall be permitted to have Salary Reduction Contributions made under this Plan, or any other qualified plan maintained by the Employer during any taxable year, in excess of the dollar limitation contained in Code Section 402(g) in effect for such taxable year, except to the extent permitted under Subsection (a) above and Code Section 414(v), if applicable.
(d)	The election made pursuant to this Section A.1.8 shall be submitted as a separate election from a Participant’s deferral election for Salary Reduction Contributions under Plan Section 3.1 above.

A.1.9.

Suspension Period Following Hardship Distribution

A Participant who receives a distribution of Salary Rreduction Contributions after December 31, 2001, on account of hardship shall be prohibited from making Salary Reduction Contributions and employee contributions under this and all other plans of the Employer for six (6) months after receipt of the distribution. A Participant who receives a distribution of Salary Reduction Contributions in calendar year 2001 on account of hardship shall be prohibited from making Salary Reduction Contributions and employee contributions under this and all other plans of the Employer for the period specified in Plan Section 6.2(c) as in effect prior to January 1, 2006.

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A.1.10.

Distributions following Termination of Employment

A Participant’s Salary Reduction Contributions, Qualified Nonelective Contributions, Qualified Matching Contributions, and earnings attributable to these contributions shall be distributed on account of the Participant’s termination of employment. However, such a distribution shall be subject to the other provisions of the Plan regarding distributions, other than provisions that require a Severance from Employment before such amounts may be distributed.

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APPENDIX B

Model Amendment for Compliance with Final Treasury Regulations
Under Code Section 401(a)(9)

Section 1. General Rules.

B.1.1.	Effective Date. The provisions of this amendment will apply for purposes of determining required minimum distributions for calendar years beginning with the 2003 calendar year.
B.1.2.	Precedence. The requirements of this amendment will take precedence over any inconsistent provisions of the plan.
B.1.3.	Requirements of Treasury Regulations Incorporated. All distributions required under this amendment will be determined and made in accordance with the Treasury Regulations under Code Section 401(a)(9).
B.1.4.	TEFRA Section 242(b)(2) Elections. Notwithstanding the other provisions of this amendment, distributions may be made under a designation made before January 1, 1984, in accordance with section 242(b)(2) of the Tax Equity and Fiscal Responsibility Act (TEFRA) and the provisions of the plan that relate to section 242(b)(2) of TEFRA.

Section 2. Time and Manner of Distribution.

B.2.1.	Required Beginning Date. The participant’s entire interest will be distributed, or begin to be distributed, to the participant no later than the participant’s required beginning date.
B.2.2.	Death of Participant Before Distributions Begin. If the participant dies before distributions begin, the participant’s entire interest will be distributed, and begin to be distributed, no later than as follows:

(a)

If the participant dies before distributions begin and there is a designated beneficiary, the participant’s entire interest will be distributed to the designated beneficiary by December 31 of the calendar year containing the fifth anniversary of the participant’s death. If the participant’s surviving spouse is the participant’s sole designated beneficiary and the surviving spouse dies after the participant but before distributions to either the participant or the surviving spouse begin, this paragraph will apply as if the surviving spouse were the participant.

(b)

If there is no designated beneficiary as of September 30 of the year following the year of the participant’s death, the participant’s entire interest will be distributed by December 31 of the calendar year containing the fifth anniversary of the participant’s death.

For purposes of this section B.2.2 and section B.4, unless the second sentence of section B.2.2(a) applies, distributions are considered to begin on the participant’s required beginning date. If the second sentence of section B.2.2(a) applies, distributions are considered to begin on the date distributions are required to begin to the surviving spouse. If distributions under an annuity purchased from an insurance company

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irrevocably commence to the participant before the participant’s required beginning date (or to the participant’s surviving spouse before the date distributions are required to begin to the surviving spouse), the date distributions are considered to begin is the date distributions actually commence.

B.2.3. Forms of Distribution. Unless the participant’s interest is distributed in the form of an annuity purchased from an insurance company or in a single sum on or before the required beginning date, as of the first distribution calendar year distributions will be made in accordance with sections B.3 and B.4 of this amendment. If the participant’s interest is distributed in the form of an annuity purchased from an insurance company, distributions thereunder will be made in accordance with the requirements of Code Section 401(a)(9) and the Treasury Regulations.

Section 3. Required Minimum Distributions During Participant’s Lifetime.

B.3.1. Amount of Required Minimum Distribution For Each Distribution Calendar Year. During the participant’s lifetime, the minimum amount that will be distributed for each distribution calendar year is the lesser of:

(a)

the quotient obtained by dividing the participant’s account balance by the distribution period in the Uniform Lifetime Table set forth in section 1.401(a)(9)-9 of the Treasury Regulations, using the participant’s age as of the participant’s birthday in the distribution calendar year; or

(b)

if the participant’s sole designated beneficiary for the distribution calendar year is the participant’s spouse, the quotient obtained by dividing the participant’s account balance by the number in the Joint and Last Survivor Table set forth in section 1.401(a)(9)-9 of the Treasury Regulations, using the participant’s and spouse’s attained ages as of the participant’s and spouse’s birthdays in the distribution calendar year.

B.3.2. Lifetime Required Minimum Distributions Continue Through Year of Participant’s Death. Required minimum distributions will be determined under this section B.3 beginning with the first distribution calendar year and up to and including the distribution calendar year that includes the participant’s date of death.

Section 4. Required Minimum Distributions After Participant’s Death.

B.4.1. Death On or After Date Distributions Begin.

(a) Participant Survived by Designated Beneficiary. If the participant dies on or after the date distributions begin and there is a designated beneficiary, the minimum amount that will be distributed for each distribution calendar year after the year of the participant’s death is the quotient obtained by dividing the participant’s account balance by the longer of the remaining life expectancy of the participant or the remaining life expectancy of the participant’s designated beneficiary, determined as follows:

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(1)	The participant’s remaining life expectancy is calculated using the age of the participant in the year of death, reduced by one for each subsequent year.
(2)	If the participant’s surviving spouse is the participant’s sole designated beneficiary, the remaining life expectancy of the surviving spouse is calculated for each distribution calendar year after the year of the participant’s death using the surviving spouse’s age as of the spouse’s birthday in that year. For distribution calendar years after the year of the surviving spouse’s death, the remaining life expectancy of the surviving spouse is calculated using the age of the surviving spouse as of the spouse’s birthday in the calendar year of the spouse’s death, reduced by one for each subsequent calendar year.
(3)	If the participant’s surviving spouse is not the participant’s sole designated beneficiary, the designated beneficiary’s remaining life expectancy is calculated using the age of the beneficiary in the year following the year of the participant’s death, reduced by one for each subsequent year.

(b) No Designated Beneficiary. If the participant dies on or after the date distributions begin and there is no designated beneficiary as of September 30 of the year after the year of the participant’s death, the minimum amount that will be distributed for each distribution calendar year after the year of the participant’s death is the quotient obtained by dividing the participant’s account balance by the participant’s remaining life expectancy calculated using the age of the participant in the year of death, reduced by one for each subsequent year.

B.4.2. Death Before Date Distributions Begin.

(a)

Participant Survived by Designated Beneficiary. If the participant dies before distributions begin and there is a designated beneficiary, the participant’s entire interest will be distributed, and begin to be distributed, to the designated beneficiary by December 31 of the calendar year containing the fifth anniversary of the participant’s death. If the participant’s surviving spouse is the participant’s sole designated beneficiary and the surviving spouse dies after the participant but before distributions to either the participant or the surviving spouse begin, this paragraph will apply as if the surviving spouse were the participant.

(b)

No Designated Beneficiary. If the participant dies before the date distributions begin and there is no designated beneficiary as of September 30 of the year following the year of the participant’s death, distribution of the participant’s entire interest will be completed by December 31 of the calendar year containing the fifth anniversary of the participant’s death.

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(c) Death of Surviving Spouse Before Distributions to Surviving Spouse Are Required to Begin. If the participant dies before the date distributions begin, the participant’s surviving spouse is the participant’s sole designated beneficiary, and the surviving spouse dies before distributions are required to begin to the surviving spouse, this section B.4.2 will apply as if the surviving spouse were the participant.

Section 5. Definitions.

B.5.1.	Designated beneficiary. The individual who is designated as the beneficiary under Plan Section 8.5 and is the designated beneficiary under Code Section 401(a)(9) and section 1.401(a)(9)-1, Q&A-4, of the Treasury Regulations.
B.5.2.	Distribution calendar year. A calendar year for which a minimum distribution is required. For distributions beginning before the participant’s death, the first distribution calendar year is the calendar year immediately preceding the calendar year which contains the participant’s required beginning date. For distributions beginning after the participant’s death, the first distribution calendar year is the calendar year in which distributions are required to begin under section B.2.2. The required minimum distribution for the participant’s first distribution calendar year will be made on or before the participant’s required beginning date. The required minimum distribution for other distribution calendar years, including the required minimum distribution for the distribution calendar year in which the participant’s required beginning date occurs, will be made on or before December 31 of that distribution calendar year.
B.5.3.	Life expectancy. Life expectancy as computed by use of the Single Life Table in section 1.401(a)(9)-9 of the Treasury Regulations.
B.5.4.	Participant’s Account Balance. The account balance as of the last valuation date in the calendar year immediately preceding the distribution calendar year (valuation calendar year) increased by the amount of any contributions made and allocated or forfeitures allocated to the account balance as of dates in the valuation calendar year after the valuation date and decreased by distributions made in the valuation calendar year after the valuation date. The account balance for the valuation calendar year includes any amounts rolled over or transferred to the plan either in the valuation calendar year or in the distribution calendar year if distributed or transferred in the valuation calendar year.
B.5.5	Required beginning date. The date specified in Plan Section 8.4(a).

* * * * *

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APPENDIX C

Special Vesting Provisions for Reemployed Former Participants
Who are not Credited with an Hour of Service on January 1, 2005

The provisions herein describe the terms of the Plan that were in effect prior to January 1, 2005, regarding the determination of a Participant’s vested interest in his Individual Accounts. The determination of Years of Vesting Service under this Appendix C shall apply only to a Former Participant or to a reemployed Participant who has amounts credited to his Individual Accounts attributable to Periods of Service completed prior to January 1, 2005.

C.1.1

Year of Vesting Service

Year of Vesting Service means 365 days of Service. An Employee shall receive credit for the aggregate of all time periods commencing on an Employee’s Employment Commencement Date, including the Re-Employment Commencement Date, and ending on the date a Break in Service begins. An Employee also shall receive credit for any Period of Severance of less than 365 days. Fractional periods of a year shall be expressed in terms of days. In computing an Employee’s Years of Vesting Service, the following rules shall apply:

(a)	For a Participant who terminates employment with the Employer and all Related Employers at a time when he has a vested interest in his Employer Contribution Account of more than 0% but less than 100% and who subsequently is re-employed after incurring five (5) consecutive Breaks in Service, Years of Vesting Service earned by the Participant after the Break in Service shall not be taken into account for purposes of determining the Nonforfeitable percentage of the Participant’s Account Balance derived from Employer Contributions which accrued before the Break in Service.
(b)	For a Participant who terminates employment with the Employer and all Related Employers at a time when he has a 0% vested interest in his Employer Contribution Account and who is re-employed after a Break in Service, Service before the Break in Service shall not be taken into account if the number of consecutive Breaks in Service equals or exceeds the greater of (A) five (5), or (B) the aggregate number of Years of Vesting Service before the Break in Service. If the Participant has made any Salary Reduction Contributions to the Plan, Service before the Break in Service shall not be disregarded under the immediately preceding sentence.
(c)	Years of Vesting Service shall include all Years of Vesting Service of the Employee with any Predecessor Employer; provided, however, that the number of years credited under this provision shall not exceed five (5).
(d)	Years of Vesting Service with the Employer before a Participant enters the Plan shall be considered for purposes of vesting.

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(e)	If the Employer is a member of a group of Related Employers, then Years of Vesting Service shall include Service with any Related Employer.
(f)	For purposes of determining Years of Vesting Service, the following definitions shall apply:

(i)	Period of Severance means the period of time commencing on the Severance from Employment Date and ending on the date on which the Employee again performs an Hour of Service for the Employer.
(ii)	Re-Employment Commencement Date means the first date, following a Period of Severance which is not required to be considered under the Service rules, on which the Employee performs an Hour of Service for the Employer.

ARTICLE II  Severance from Employment Date means the date on which occurs the earlier of: (A) the date on which an Employee quits, retires, is discharged or dies; or (B) the first anniversary of the first date of a period in which an Employee remains absent from Service, with or without pay, with the Employer for any other reason, such as vacation, holiday, sickness, disability, leave of absence or layoff. However, with respect to the timing of any distributions that include Salary Reduction Contributions, Severance from Employment Date shall have the same meaning set forth in Plan Section 6.2(b).

(g)

The Committee, in its discretion, may credit an individual with “pre-participation service” (within the meaning of Treas. Reg. § 1.401(a)(4)-11(d)(3)(ii)(A)), but only if (i) such pre-participation service would not otherwise be credited as Service and (ii) such crediting of Service (A) has a legitimate business reason, (B) does not by design or operation discriminate significantly in favor of Highly Compensated Employees, and (C) is applied to all similarly situated employees. Moreover, the Committee, in its discretion, may credit an individual with “imputed service” (within the meaning of Treas. Reg. § 1.401(a)(4)-11(d)(3)(ii)(B)), but only if (i) such imputed service would not otherwise be credited as Service, (ii) such crediting of Service (A) has a legitimate business reason, (B) does not by design or operation discriminate significantly in favor of Highly Compensated Employees, and (C) is applied to all similarly situated employees, and (iii) the individual has not permanently ceased to perform services as an Employee of the Employer or a Related Employer, provided that clause (iii) of this sentence shall not apply if (A) the individual is not performing services for the Employer or a Related Employer because of a Disability, (B) the individual is performing services for another employer which is being treated under the Plan as actual service with the Employer or a Related Employer.

(h)

Special Rules for Certain Former Dell Financial Services, L.P. Employees. A Participant or Former Participant who was a former employee of Dell Financial Services, L.P. shall receive credit for vesting purposes for Service with Dell Financial Services, L.P., provided, however, that such Participant became an

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Employee of the Employer or a Related Employer on the date next following the date of his or her termination of employment with Dell Financial Services, L.P.

C.1.2 Vesting Schedule for Service Credited Prior to January 1, 2005

(a) A Former Participant or reemployed Participant who was not “actively employed”, pursuant to the Employer’s HR Direct personnel system, by the Employer or a Related Employer on January 1, 2005, and not otherwise a member of the group of Participants described in Plan Section 7.2(b), shall be entitled to receive 100% of his Participant Contribution Account. In addition, the Participant shall be entitled to receive the Nonforfeitable percentage of the balance credited to the Participant’s Employer Contribution Account, as determined under the following vesting schedule:

YEARS OF VESTING SERVICE	NONFORFEITABLE PERCENTAGE
Less than 1 Year		0	%
1 Year		20	%
2 Years		40	%
3 Years		60	%
4 Years		80	%
5 Years or more		100	%

Notwithstanding the preceding, if a Former Participant or reemployed Participant has previously been granted credit for Years of Vesting Service with a Predecessor Employer, such participant’s Nonforfeitable Percentage shall be no less than the participant’s Nonforfeitable Percentage with his Predecessor Employer.

C.1.3.

Forfeiture

A Former Participant who is not entitled to 100% vesting in his Employer Contribution Account under Plan Section 7.2(a) shall forfeit that portion of the amount of his Individual Accounts to which the Former Participant is not entitled on the earlier of the date on which the Former Participant incurs five (5) consecutive Breaks in Service or the date on which the Former Participant receives a Cashout Distribution (the Forfeiture Event).

(i)	A Cashout Distribution means a lump sum distribution that occurs no later than the last day of the second Plan Year following the Plan Year in which the Participant terminates employment.
(ii)	A Former Participant who terminates employment without a Nonforfeitable percentage in the Former Participant’s Employer Contribution Account shall be deemed to have received a distribution of his Nonforfeitable Account Balance on the date of his termination of employment.

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(iii) The amount forfeited under this subsection, to the extent attributable to Employer Contributions, shall remain in the Trust Fund and shall be used to reduce Employer Contributions or to pay expenses incident to the administration of the Plan and Trust as of the Anniversary Date of the Plan Year during which the Forfeiture Event occurred.

C.1.4.

Determination of Amount of Vested Undistributed Account, Forfeiture

If the Trustee pays any amount outstanding to the credit of a Former Participant or Participant in the Participant’s Individual Accounts while the Former Participant or Participant is not fully vested in his Individual Accounts, other than a Cashout Distribution defined in Section C.1.3 above, and prior to the Anniversary Date on which the Former Participant or Participant shall incur five (5) consecutive Breaks in Service, the value of his or her vested and undistributed account shall be held in a separate account and shall be determined at any time prior to and including the Anniversary Date on which the Former Participant or Participant shall incur five (5) consecutive Breaks in Service under the following formula.

X P(AB (RxD)) — (RxD).

For this formula, the variables represent the following factors:

X is the value of the vested portion of the Participant’s account;

P is the Participant’s Nonforfeitable percentage at the relevant time;

AB is the Account Balance at the relevant time;

D is the amount of the distribution; and

R is the ratio of the Account Balance at the relevant time to the Account Balance after the distribution.

The nonvested portion of the Former Participant’s or Participant’s Individual Accounts shall be forfeited on the Anniversary Date on which the Former Participant or Participant incurs five (5) consecutive Breaks in Service.

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C.1.5.	Crediting Years of Vesting Service
	If a Participant’s Service with the Employer is terminated and the Former Participant receives a distribution from the Trustee and subsequently re-enters the Service of the Employer after incurring five (5) consecutive Breaks in Service, the reemployed Participant’s Service after the break shall not be taken into account to determine the Nonforfeitable percentage of the Participant’s Account Balance derived from Employer Contributions which accrued before the Break in Service.
	If a Participant’s Service with the Employer is terminated and the Participant is reemployed by the Employer prior to incurring five (5) consecutive Breaks in Service, the reemployed Participant shall continue to vest at the level in the vesting schedule in Section C.1.2 above that the Participant had attained prior to termination in his pre-separation Account Balance.

C.1.6.	Restoration of Account Balance
	If a partially vested Participant is reemployed after termination of employment, but prior to incurring five (5) consecutive Breaks in Service, the Participant shall have the right to repay the amount previously distributed pursuant to Section C.1.2. If the Participant repays the entire amount previously distributed prior to the earlier of (i) incurring five (5) consecutive Breaks in Service commencing. after the withdrawal, or (ii) five years after the first date on which the Participant is subsequently reemployed by the Employer, then the Committee shall restore to the Participant’s Individual Accounts an amount equal to the amount forfeited. The Committee will treat a non-vested Participant who is deemed to have received a distribution of the Participant’s Nonforfeitable Account Balance as having repaid the deemed distribution on the first date of the Participant’s reemployment with the Employer. Restoration of the Participant’s Account Balance includes restoration of all Code Section 411(d)(6) protected benefits pertaining to that restored Account under applicable Treasury Regulations. The restored amount shall immediately become 100% vested under Plan Section 7.2(b).
	Notwithstanding the foregoing, if the value of a re-employed Participant’s vested Employer Contribution Account was zero and the Participant had made Salary Reduction Contributions to the Plan prior to separating from Service, such Participant shall not be considered nonvested under the Plan and shall be entitled to restoration of amounts forfeited from his Employer Contribution Account only if he satisfies the repayment requirements described in this Section C.1.6.

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EX-10.17

Exhibit 10.17

EO Performance Based SU — Executive Officer
Amended & Restated 2002 Plan

DELL INC.
Performance Based Stock Unit Agreement

Dell Inc., a Delaware corporation (the “Company”), is pleased to grant you units representing the right to receive shares of the Company’s common stock (the “Shares”), subject to the terms and conditions described below. The target number of units that may be awarded to you (the “Target”) is stated in step one of the Stock Plan Administrator’s online grant acceptance process (“Grant Summary”). The number of units awarded to you (the “Units”) will be determined on the last day of each Fiscal Year during the Performance Period. Each Unit represents the right to receive one Share. As a material inducement to the Company to grant you this award, you agree to the following terms and conditions. You agree that you are not otherwise entitled to this award, that the Company is providing you this award in consideration for your promises and agreements below, and that the Company would not grant you this award absent those promises and agreements. This Stock Unit Agreement, the Grant Summary, and the Company’s Amended and Restated 2002 Long-Term (Incentive Plan (the “Plan”) set forth the terms of your Units identified in your Grant Summary.

1. Performance Based Units - The Target represents the number of Units you have the opportunity to receive based on the Company’s attainment of its annual performance goals. A portion of the Units will be awarded to you as soon as administratively feasible following each Fiscal Year during the Performance Period; the actual number of Units you receive will range from 80% to 120% of one third of the Target Units for the Performance Period, which will be determined by the Company in its sole discretion. You will be notified of the annual performance goals and the number of Units awarded to you if those goals are attained through separate written communications. Notwithstanding the preceding paragraph, if your employment is terminated during the Performance Period by reason of your death or Permanent Disability (as defined below), the number of units awarded to you will be the Target Units for the Performance Period.

2. Vesting —The Company will issue you one Share for each vested Unit to be delivered on the vesting date or as soon as administratively practicable thereafter. The Units will vest, and you will receive Shares, in accordance with the schedule in your Grant Summary.

Notwithstanding the foregoing schedule, the Company, with the approval of the Chief Executive Officer and upon written notice to you, may defer the vesting with respect to all or any portion of the Units to any date that is not more than ten years after the Date of Grant stated in your Grant Summary.

3. Expiration — If your Employment (as defined below) terminates for any reason other than your death or “Permanent Disability” (as defined in the Plan described below), any Units that have not vested as described above will expire at that time.

If your Employment is terminated by reason of your death or Permanent Disability, all Units will vest immediately and automatically upon such termination of Employment.

As used herein, the term “Employment” means your regular full-time or part-time employment with the Company or any of its Subsidiaries, and the term “Employer” means the Company (if you are employed by the Company) or the Subsidiary of the Company that employs you.

4. Rights as a Stockholder — You will have no rights as a stockholder with respect to Shares that may be received by you pursuant to this Agreement until those Shares are issued and registered in your name on the books of the Company’s transfer agent. You will have no rights to receive dividend equivalent payments with respect to Shares that may be received by you pursuant to this Agreement. Units granted to you will be satisfied wholly through the issuance and delivery of Shares.

5. Agreement With Respect to Taxes — You must pay any taxes that are required to be withheld by the Company or your Employer. You may pay such amounts in cash or make other arrangements satisfactory to the Company or your Employer for the payment of such amounts. You agree the Company or your Employer, at its sole discretion and to the fullest extent permitted by law, shall have the right to demand that you pay such amounts in cash, deduct such amounts from any payments of any kind otherwise due to you, or withhold from Shares to which you would otherwise be entitled the number of Shares having an aggregate market value at that time equal to the amount you owe. In the event the Company, in its sole discretion, determines that your tax obligations will not be satisfied under the methods described in this paragraph, you authorize the Company or the Company’s Stock Plan Administrator to sell a number of Shares that are issued under the Units, which the Company determines as having at least the market value sufficient to meet the tax withholding obligations plus additional Shares to account for rounding and market fluctuations and pay such tax withholding to the Company. The shares may be sold as part of a block trade with other participants and all participants receive an average price.

You agree that, subject to compliance with applicable law, the Company and/or your Employer may recover from you taxes which may be payable by the Company and/or your Employer in any jurisdiction in relation to this award. You agree that the Company and/or your Employer shall be entitled to use whatever method they may deem appropriate to recover such taxes including the sale of any Shares, paying you a net amount of shares (or cash), recovering the taxes via payroll and direct invoicing. You further agree that the Company and/or your Employer may, as it reasonably considers necessary, amend or vary this agreement to facilitate such recovery of taxes.

6. Leaves of Absence — If you take a leave of absence from active Employment that has been approved by the Company or your Employer or is one to which you are legally entitled regardless of such approval, the following provisions will apply:

A. Vesting During Leave — Notwithstanding the vesting schedule set forth above, no Units will vest during a leave of absence other than an approved employee medical, FMLA or military leave. Notwithstanding the preceding, vesting shall not be deferred for any approved leave of absence of less than 30 days. The vesting that would have otherwise occurred during a leave of absence other than an approved employee medical, FMLA or military leave will be deferred by the number of days you are on a leave of absence. For example, if your Units are scheduled to vest on August 1, 2007 through August 1, 2011, and you are on a 40-day leave of absence, the dates on which the vesting occurs will be deferred to September 10, 2007 through September 10, 2011.

B. Effect of Termination During Leave — If your Employment is terminated during the leave of absence, the Units will expire or vest in accordance with the terms stated in Paragraph 3 (Expiration) above.

7. Return of Share Value — By accepting this award, you agree that if the Company determines that you engaged in “Conduct Detrimental to the Company” (as defined below) during your Employment or during the one-year period following the termination of your Employment, you shall be required, upon demand, to return to the Company, in the form of a cash payment, certain share value (“Returnable Share Value”). For purposes of this provision, “Returnable Share Value” means a cash amount equal to the gross value of the Shares that were issued to you pursuant to this Agreement during the two-year period preceding the termination of your Employment, determined as of the date such Shares were issued to you and using the Fair Market Value (as defined in the Plan) of Dell stock on that date. You understand and agree that the repayment of the Returnable Share Value is in addition to and separate from any other relief available to the Company due to your Conduct Detrimental to the Company.

For purposes of this Agreement, you will be considered to have engaged in “Conduct Detrimental to the Company” if:

(1) you engage in serious misconduct (whether or not such serious misconduct is discovered by the Company prior to the termination of your Employment);

(2) you breach your obligations to the Company with respect to confidential and proprietary information or trade secrets or breach any agreement between you and Dell relating to confidential and proprietary information or trade secrets;

(3) you compete with the Company (as described below); or

(4) you solicit the Company’s employees (as described below).

For purposes of this provision, you shall be deemed to “compete” with the Company if you, directly or indirectly:

• Are a principal, owner, officer, director, shareholder or other equity owner (other than a holder of less than 5% of the outstanding shares or other equity interests of a publicly traded company) of a Direct Competitor (as defined below);

• Are a partner or joint venture in any business or other enterprise or undertaking with a Direct Competitor; or

• Serve or perform work (including consulting or advisory services) for a Direct Competitor that is similar in a material way to the work you performed for the Company in the twelve months preceding the termination of your Employment.

You understand and agree that this provision does not prohibit you from competing with the Company but only requires repayment of Returnable Share Value in the event of such competition.

For purposes of this provision, a “Company’s employee” means any person employed by the Company or any of its Subsidiaries and “solicit the Company’s employees” means that you communicate in any way with any other person regarding (a) a Company Employee leaving the employ of the Company or any of its Subsidiaries; or (b) a Company Employee seeking employments with any other employer. This provision does not apply to those communications that are within the scope of your Employment that are taken on behalf of your Employer.

The term “Direct Competitor” means any entity, or other business concern that offers or plans to offer products or services that are materially competitive with any of the products or services being manufactured, offered, marketed, or are actively developed by Dell as of the date your employment with Dell ends. By way of illustration, and not by limitation, at the time of execution of this Agreement, the following companies are currently Direct Competitors: Hewlett-Packard, Lenovo, IBM, Gateway, Apple, Acer, CDW, EDS, EMC, Software House International, Insight (Software Spectrum), Softchoice, and Digital River. You understand and agree that the foregoing list of Direct Competitors represents a current list of Dell Direct Competitors as of the date of execution of this Agreement and that other entities may become Direct Competitors in the future.

8. Transferability — The Units are not transferable except as described in this Paragraph, and the provisions of this Paragraph shall apply notwithstanding any other provision herein to the contrary.

     (a) The Units are transferable by will or the laws of descent and distribution.

     (b) The Units may be transferred to (1) one or more “Family Members” (as defined below), (2) a trust in which you or Family Members own more than 50% of the beneficial interests, (3) a foundation in which you or Family Members control the management of assets or (4) any other entity in which you or Family Members own more than 50% of the voting interests; provided, however, that in any case, (A) the transfer is by way of gift or is otherwise a donative transfer or, in the case of a transfer to an entity, the transfer is made in exchange for an interest in the entity and (B) the transferee expressly acknowledges that the terms and provisions of this Agreement will continue to apply to the Unit in the hands of the transferee. For purpose of this provision, the term “Family Member” shall mean your spouse, former spouse, child, stepchild, grandchild, parent, stepparent, grandparent, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law (including adoptive relationships) or any person sharing your household (other than a tenant or employee). Notwithstanding the provisions of this subparagraph (b), any transfer described herein must be made in compliance with such procedural rules and regulations (including those pertaining to the timing of transfers) as are established from time to time by the Committee.

     (c) The Units may be transferred under a domestic relations order in settlement of marital property rights.

9. Trading Restrictions —The Company may establish periods from time to time during which your ability to engage in transactions involving the Company’s stock is subject to specified restrictions (“ Restricted Periods”). Notwithstanding any other provisions herein, Units will not vest, and Shares will not be issued, during an applicable Restricted Period and the applicable period during which Units vest shall be extended until the end of such Restricted Period, unless such vesting is specifically permitted by the Company (in its sole discretion). You may be subject to a Restricted Period for any reason that the Company determines appropriate, including Restricted Periods generally applicable to employees or groups of employees or Restricted Periods applicable to you during an investigation of allegations of misconduct or Conduct Detrimental to the Company by you.

10. Incorporation of Plan — This award is granted under the Plan and is governed by the terms of the Plan in addition to the terms and conditions stated herein. All terms used herein with their initial letters capitalized shall have the meanings given them in the Plan unless otherwise defined herein. A copy of the Plan is available upon request from the Company’s Stock Option Administration Department. Shares of common stock that are issued pursuant to this Agreement shall be made available from authorized but unissued shares.

11. Prospectus — You may at any time obtain a copy of the prospectus related to the Dell common stock underlying the Units by accessing the prospectus at http://inside.us.dell.com/legal/corporate.htm. Additionally, you may request a copy of the prospectus free of charge from the Company by contacting Stock Option Administration in writing at Stock Option Administration, One Dell Way, Mail Stop 8038, Round Rock, Texas 78682, (512) 728-8644 or e-mail Stock_Option_Administrator @dell.com.

12. Notice — You agree that notices may be given to you in writing either at your home address as shown in the records of the Company or your Employer, or by electronic transmission (including e-mail or reference to a website or other URL) sent to you through the Company’s normal process for communicating electronically with its employees.

13. No Right to Continued Employment — The granting of Units does not confer upon you any right to expectation of employment by, or to continue in the employment of, your Employer.

14. Limitation on Rights; No Right to Future Grants; Extraordinary Item of Compensation — By accepting this Agreement and the grant of the Units evidenced hereby, you expressly acknowledge that (a) the Plan is discretionary in nature and may be suspended or terminated by the Company at any time; (b) the grant of Units is a one-time benefit that does not create any contractual or other right to receive future grants of Units, or benefits in lieu of Units; (c) all determinations with respect to future grants, if any, including the grant date, the number of Units granted and the vesting dates, will be at the sole discretion of the Company; (d) your participation in the Plan is voluntary; (e) the value of the Units is an extraordinary item of compensation that is outside the scope of your employment contract, if any, and nothing can or must automatically be inferred from such employment contract or its consequences; (f) Units are not part of normal or expected compensation for any purpose, and are not to be used for calculating any severance, resignation, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments, and you waive any claim on such basis; (g) the grant of an equity interest in the Company gives rise to the Company’s need (on behalf of itself and its stockholders) to protect itself from Conduct Detrimental to the Company, and your promises described in Paragraph7 (Return of Share Value) above are designed to protect the Company and its stockholders from Conduct Detrimental to the Company; (h) vesting of Units ceases upon termination of Employment for any reason except as may otherwise be explicitly provided in the Plan document or in this Agreement; (i) the future value of the Units is unknown and cannot be predicted with certainty; and (j) you understand, acknowledge and agree that you will have no rights to compensation or damages related to Units or Shares in consequence of the termination of your Employment for any reason whatsoever and whether or not in breach of contract. Finally, you also understand, acknowledge and agree that selling of Dell Inc.’s stock in the territory of the Russian Federation is prohibited.

15. Data Privacy Consent — As a condition of the grant of the Units, you consent to the collection, use and transfer of personal data as described in this paragraph. You understand that the Company and its Subsidiaries hold certain personal information about you, including your name, home address and telephone number, date of birth, social security number, salary, nationality, job title, any ownership interests or directorships held in the Company or its Subsidiaries and details of all Units, Shares, stock options or other equity awards awarded or cancelled (“Data”). You further understand that the Company and its Subsidiaries will transfer Data among themselves as necessary for the purposes of implementation, administration and management of your participation in the Plan, and that the Company and any of its Subsidiaries may each further transfer Data to any third parties assisting the Company in the implementation, administration and management of the Plan. You understand that these recipients may be located in the European Economic Area or elsewhere, such as the United States. You authorize them to receive, possess, use, retain and transfer such Data as may be required for the administration of the Plan or the subsequent holding of shares of common stock on your behalf, in electronic or other form, for the purposes of implementing, administering and managing your participation in the Plan, including any requisite transfer to a broker or other third party with whom you may elect to deposit any shares of common stock acquired under the Plan. You understand that you may, at any time, view such Data or require any necessary amendments to it.

17. Governing Law and Venue — This Agreement and the Plan shall be governed by, and construed in accordance with, the laws of the State of Delaware, United States of America. The venue for any and all disputes arising out of or in connection with this Agreement shall be New Castle County, Delaware, United States of America, and the courts sitting exclusively in New Castle County, Delaware, United States of America shall have exclusive jurisdiction to adjudicate such disputes. Each party hereby expressly consents to the exercise of jurisdiction by such courts and hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to such laying of venue (including the defense of inconvenient forum).

18. Effect of Invalid Provisions — If any of the promises, terms or conditions set forth herein are determined by a court of competent jurisdiction to be unenforceable, any Units that have not vested as described above will expire at that time and you agree to return to the Company an amount of cash equal to the Fair Market Value (as defined in the Plan) of all Shares theretofore issued to you pursuant to this Agreement, determined as of the date such Shares were issued.

19. Acceptance of Terms and Conditions — This award will not be effective and you may not take action with respect to the Units or the Shares until you have acknowledged and agreed to the terms and conditions set forth herein in the manner prescribed by the Company. You should print a copy of this award and your Grant Summary for your records.

Awarded subject to the terms and conditions stated above:

DELL INC.

By:	/s/ Dominick DiCosimo
	Dominick DiCosimo, VP, Global HR Operations

EX-10.18

Exhibit 10.18

Executive Officer
Amended & Restated 2002 Plan

DELL INC.
Nonstatutory Stock Option Agreement

1. Purpose — Dell Inc., a Delaware corporation (the “Company”), is pleased to grant you options to purchase shares of the Company’s common stock. The number of options awarded to you (the “Options”) and the Exercise Price per Option (the “Exercise Price”) are stated in step one of the Stock Plan Administrator’s online grant acceptance process (“Grant Summary”). Each Option entitles you to purchase, on exercise, one share of the Company’s common stock as described below. This Nonstatutory Stock Option Agreement, the Grant Summary, and the Company’s Amended and Restated 2002 Long-Term Incentive Plan (the “Plan”) set forth the terms of your Options identified in your Grant Summary. As a material inducement to the Company to grant you this award, you agree to the following terms and conditions. You agree that you are not otherwise entitled to this award, that the Company is providing you this award in consideration for your promises and agreements below, and that the Company would not grant you this award absent those promises and agreements.

2. Vesting and Exercisability — You cannot exercise the Options until they have vested and become exercisable.

A. General Vesting — The Options will vest in accordance with the schedule in your Grant Summary (subject to the further provisions stated below).

B. Deferred Vesting — Notwithstanding the foregoing paragraph, the Company, with the approval of the Chief Executive Officer and upon written notice to you, may defer the vesting of all or any portion of the Options to any date that is not more than seven years after the Date of Grant stated in your Grant Summary.

C. Exercisability — You may exercise Options at any time after they vest and before they expire as described below.

3. Method of Exercise — You may exercise Options by giving notice to the Company or in accordance with instructions generally applicable to all option holders. At the time of exercise, you must pay the Exercise Price for all Options being exercised and any taxes that are required to be withheld by the Company or your Employer (as defined below). You may pay such amounts in cash or arrange for such amounts to be paid through a brokerage firm or in another manner satisfactory to the Company. You agree that, subject to compliance with applicable law, the Company and/or your Employer may recover from you taxes which may be payable by the Company and/or your Employer in any jurisdiction in relation to this award. You agree that the Company and/or your Employer shall be entitled to use whatever method they may deem appropriate to recover such taxes including the sale of any shares, paying you a net amount of shares (or cash), recovering the taxes via payroll and direct invoicing. You further agree that the Company and/or your Employer may, as it reasonably considers necessary, amend or vary this agreement to facilitate such recovery of taxes.

4. Expiration — All Options will expire on the earlier of the tenth anniversary of the Date of Grant or any of the special expiration dates described below. Once an Option expires, you will no longer have the right to exercise it. As used below, the term “Employment” means your regular full-time or part-time employment with the Company or any of its consolidated Subsidiaries, and the term “Employer” means the Company (if you are employed by the Company) or the consolidated Subsidiary of the Company that employs you.

A. Termination of Employment for Conduct Detrimental to the Company — If your Employment is terminated by your Employer for Conduct Detrimental to the Company, all Options (whether or not vested) will expire at that time and you will be required to return option proceeds as described herein.

B. Termination of Employment for Other than Conduct Detrimental to the Company — If your Employment is terminated by you or by your Employer for reasons other than Conduct Detrimental to the Company, Options that are not vested at the time your Employment is terminated will expire at that time and Options that are vested at the time your Employment is terminated will expire at the close of business on the 90^th day following the date your Employment is terminated.

C. Death — If your Employment is terminated by reason of your death, Options that are not vested at the time your Employment is terminated will become fully vested at that time. All Options will then expire on the first anniversary of the date your Employment is terminated and, until that time will be exercisable by your legal representatives, legatees or distributees.

D. Permanent Disability — If your Employment is terminated by reason of your Permanent Disability, Options that are not vested at the time your Employment is terminated will become fully vested at that time. All Options will then expire on the third anniversary of the date your Employment is terminated and, until that time will be exercisable by you or your guardian or legal representative.

E. Retirement — If your Employment is terminated by reason of your Normal Retirement, Options that are not vested at the time your Employment is terminated will expire at that time and Options that are vested at the time your Employment is terminated will expire on the third anniversary of the date your Employment is terminated.

5. Leaves of Absence — If you take a leave of absence from active Employment that has been approved by the Company or your Employer or is one to which you are legally entitled regardless of such approval, the following provisions will apply:

A. Exercisability of Options During Leave — Your right to exercise Options that are vested at the time the leave of absence begins will be unaffected by the leave of absence.

B. Vesting of Options During Leave —Options will not vest during a leave of absence other than an approved employee medical, FMLA or military leave. Notwithstanding the preceding, vesting shall not be deferred for any approved leave of absence of less than 30 days. The vesting date for all Options that would have otherwise vested during a leave of absence other than an approved employee medical, FMLA or military leave will be deferred by the number of days you are on a leave of absence. For example, if your vesting dates are August 1, 2007 through August 1, 2011, and you are on a 40-day leave of absence, the vesting date for your options will be deferred to September 10, 2007 through September 10, 2011.

C. Effect of Termination During Leave — If your Employment is terminated during the leave of absence the Options will expire in accordance with the terms stated under “Expiration” above.

6. Return of Option Proceeds — By accepting this award, you agree that if the Company determines that you engaged in Conduct Detrimental to the Company during your Employment or during the one-year period following the termination of your Employment you shall be required to repay to the Company, in cash and upon demand, the Option Proceeds (as defined below) resulting from any exercise of Options occurring after the termination of your Employment or during the twelve-month period preceding the termination of your Employment. The term “Option Proceeds” means, with respect to any exercise of Options, an amount equal to the number of Options exercised multiplied by the difference between the market value per share of the Company’s common stock at the time of such exercise and the Exercise Price. You understand and agree that the return of Option Proceeds is in addition to and separate from any other relief available to the Company due to your Conduct Detrimental to the Company.

For purposes of this Agreement, you will be considered to have engaged in “Conduct Detrimental to the Company” if:

(1) you engage in serious misconduct (whether or not such serious misconduct is discovered by the Company prior to the termination of your Employment);

(2) you breach your obligations to the Company with respect to confidential and proprietary information or trade secrets or breach any agreement between you and Dell relating to confidential and proprietary information or trade secrets;

(3) you compete with the Company (as described below); or

(4) you solicit the Company’s employees (as described below).

For purposes of this provision, you shall be deemed to “compete” with the Company if you, directly or indirectly:

• Are a principal, owner, officer, director, shareholder or other equity owner (other than a holder of less than 5% of the outstanding shares or other equity interests of a publicly traded company) of a Direct Competitor (as defined below);

• Are a partner or joint venturer in any business or other enterprise or undertaking with a Direct Competitor; or

• Serve or perform work (including consulting or advisory services) for a Direct Competitor that is similar in a material way to the work you performed for the Company during the 12-month period preceding the termination of your Employment.

You understand and agree that this provision does not prohibit you from competing with the Company but only requires return of certain Option Proceeds in the event of such competition.

For purposes of this provision, a “Company’s employee” means any person employed by the Company or any of its Subsidiaries and “solicit the Company’s employees” means that you communicate in any way with any other person regarding (a) a Company Employee leaving the employ of the Company or any of its Subsidiaries; or (b) a Company Employee seeking employments with any other employer. This provision does not apply to those communications that are within the scope of your Employment that are taken on behalf of your Employer.

The term “Direct Competitor” means any entity, or other business concern that offers or plans to offer products or services that are materially competitive with any of the products or services being manufactured, offered, marketed, or are actively developed by Dell as of the date your employment with Dell ends. By way of illustration, and not by limitation, at the time of execution of this Agreement, the following companies are currently Direct Competitors: Hewlett-Packard, Lenovo, IBM, Gateway, Apple, Acer, CDW, EDS, EMC, Software House International, Insight (Software Spectrum), Softchoice, and Digital River. You understand and agree that the foregoing list of Direct Competitors represents a current list of Dell Direct Competitors as of the date of execution of this Agreement and that other entities may become Direct Competitors in the future.

7. Trading Restrictions — The Company may establish periods from time to time during which your ability to engage in transactions involving the Company’s stock is subject to specified restrictions (“Restricted Periods”). Notwithstanding any other provisions herein, you may not exercise Options during an applicable Restricted Period unless such exercise is specifically permitted by the Company (in its sole discretion). You may be subject to a Restricted Period for any reason that the Company determines appropriate, including Restricted Periods generally applicable to employees or groups of employees or Restricted Periods applicable to you during an investigation of allegations of misconduct or Conduct Detrimental to the Company by you.

8. Transferability — The Options are not transferable except as described in this Paragraph, and the provisions of this Paragraph shall apply notwithstanding any other provision herein to the contrary.

     (a) The Options are transferable by will or the laws of descent and distribution.

     (b) The Options may be transferred to (1) one or more “Family Members” (as defined below), (2) a trust in which you or Family Members own more than 50% of the beneficial interests, (3) a foundation in which you or Family Members control the management of assets or (4) any other entity in which you or Family Members own more than 50% of the voting interests; provided, however, that in any case, (A) the transfer is by way of gift or is otherwise a donative transfer or, in the case of a transfer to an entity, the transfer is made in exchange for an interest in the entity and (B) the transferee expressly acknowledges that the terms and provisions of this Agreement will continue to apply to the Option in the hands of the transferee. For purpose of this provision, the term “Family Member” shall mean your spouse, former spouse, child, stepchild, grandchild, parent, stepparent, grandparent, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law (including adoptive relationships) or any person sharing your household (other than a tenant or employee). Notwithstanding the provisions of this subparagraph (b), any transfer described herein must be made in compliance with such procedural rules and regulations (including those pertaining to the timing of transfers) as are established from time to time by the Committee.

     (c) The Options may be transferred under a domestic relations order in settlement of marital property rights.

9. Rights as a Stockholder — You will have no rights as a stockholder with respect to shares that may be purchased upon exercise of Options until you have exercised the Options and those shares are registered in your name on the books of the Company’s transfer agent. You may at any time obtain a copy of the prospectus related to your purchase of Dell common stock pursuant to this option award agreement by accessing the prospectus at http://inside.us.dell.com/legal/corporate.htm. Additionally, you may request a copy of the prospectus free of charge from the Company by contacting Stock Option Administration in writing at Stock Option Administration, One Dell Way, Mail Stop 8038, Round Rock, Texas 78682, (512) 728-8644 or e-mail Stock_Option_Administrator @dell.com.

10. Incorporation of Plan — This award is granted under the Plan and is governed by the terms of the Plan in addition to the terms and conditions stated herein. All terms used herein with their initial letters capitalized shall have the meanings given them in the Plan unless otherwise defined herein. A copy of the Plan is available from your Employer upon request.

11. Notice —You agree that notices may be given to you in writing either at your home address as shown in the records of the Company or your Employer, or by electronic transmission (including e-mail or reference to a website or other URL) sent to you through the Company’s normal process for communicating electronically with its employees.

12. Limitation on Rights; No Right to Future Grants; Extraordinary Item of Compensation — By accepting this Agreement and the grant of the Options evidenced hereby, you expressly acknowledge that (a) the Plan is discretionary in nature and may be suspended or terminated by the Company at any time; (b) the grant of Options is a one-time benefit that does not create any contractual or other right to receive future grants of Options, or benefits in lieu of Options; (c) all determinations with respect to future grants, if any, including the grant date, the number of Options granted, the Exercise Price and the exercise date or dates, will be at the sole discretion of the Company; (d) your participation in the Plan is voluntary; (e) the value of the Options is an extraordinary item of compensation that is outside the scope of your employment contract, if any, and nothing can or must automatically be inferred from such employment contract or its consequences ; (f) Options are not part of normal or expected compensation for any purpose and are not to be used for calculating any severance, resignation, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments, and you waive any claim on such basis; (g) the vesting of Options ceases upon termination of Employment for any reason except as may otherwise be explicitly provided in this Agreement; (h) the future value of the underlying shares is unknown and cannot be predicted with certainty; (i) the grant of options to purchase an equity interest in the Company and each exercise of options by you gives rise to the Company’s need (on behalf of itself and its stockholders) to protect itself from Conduct Detrimental to the Company and your promises in the Return of Option Proceeds provision above are designed to protect the Company and its shareholders from Conduct Detrimental to the Company; and (j) if the underlying shares do not increase in value, the Options will have no value. In addition, you understand, acknowledge and agree that you will have no rights to compensation or damages related to Option Proceeds in consequence of the termination of your Employment for any reason whatsoever and whether or not in breach of contract.

13. Data Privacy Consent — As a condition of the grant of the Shares, you consent to the collection, use and transfer of personal data as described in this paragraph. You understand that the Company and its Subsidiaries hold certain personal information about you, including your name, home address and telephone number, date of birth, social security number, salary, nationality, job title, ownership interests or directorships held in the Company or its Subsidiaries, and details of all stock options or other equity awards or other entitlements to shares of common stock awarded, cancelled, exercised, vested or unvested (“Data”). You further understand that the Company and its Subsidiaries will transfer Data amongst themselves as necessary for the purposes of implementation, administration and management of your participation in the Plan, and that the Company and any of its Subsidiaries may each further transfer Data to any third parties assisting the Company in the implementation, administration and management of the Plan. You understand that these recipients may be located in the European Economic Area or elsewhere, such as the United States. You authorize them to receive, possess, use, retain and transfer such Data as may be required for the administration of the Plan or the subsequent holding of shares of common stock on your behalf, in electronic or other form, for the purposes of implementing, administering and managing your participation in the Plan, including any requisite transfer to a broker or other third party with whom you may elect to deposit any shares of common stock acquired under the Plan. You understand that you may, at any time, view such Data or require any necessary amendments to it.

14. Governing Law and Venue — This Agreement and the Plan shall be governed by, and construed in accordance with, the laws of the State of Delaware, United States of America. The venue for any and all disputes arising out of or in connection with this Agreement shall be New Castle, County, Delaware, United States of America, and the courts sitting exclusively in New Castle County, Delaware, United States of America shall have exclusive jurisdiction to adjudicate such disputes. Each party hereby expressly consents to the exercise of jurisdiction by such courts and hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to such laying of venue (including the defense of inconvenient forum).

15. Effect of Invalid Provisions — If any of the promises, terms or conditions set forth herein are determined by a court of competent jurisdiction to be unenforceable, any Options that have not vested as described above will expire at that time and you agree to return to the Company all Option Proceeds that you have obtained pursuant to this agreement.

16. Acceptance of Terms and Conditions —This award will not be effective and you may not take action with respect to the Options until you have acknowledged and agreed to the terms and conditions set forth herein in the manner prescribed by the Company. You should print a copy of this award and your Grant Summary for your records.

Awarded subject to the terms and conditions stated above:

DELL INC.

By:	/s/ Dominick DiCosimo
	Dominick DiCosimo, VP, Global HR Operations

EX-10.19

Exhibit 10.19

Executive Officer/Stock Unit
Amended & Restated 2002 Plan

DELL INC.
Stock Unit Agreement

Dell Inc., a Delaware corporation (the “Company”), is pleased to grant you units representing the right to receive shares of the Company’s common stock (the “Shares”), subject to the terms and conditions described below. The number of units that are awarded to you (the “Units”) is stated in step one of the Stock Plan Administrator’s online grant acceptance process (“Grant Summary”). Each Unit represents the right to receive one Share. As a material inducement to the Company to grant you this award, you agree to the following terms and conditions. You agree that you are not otherwise entitled to this award, that the Company is providing you this award in consideration for your promises and agreements below, and that the Company would not grant you this award absent those promises and agreements. This Stock Unit Agreement, the Grant Summary, and the Company’s Amended and Restated 2002 Long-Term Incentive Plan (the “Plan”) set forth the terms of your Units identified in your Grant Summary.

1. Vesting — The Company will issue you one Share for each vested Unit to be delivered on the applicable vesting date or as soon as administratively practicable thereafter. The Units will vest, and you will receive Shares, in accordance with the schedule in your Grant Summary.

Notwithstanding the foregoing schedule, the Company, with the approval of the Chief Executive Officer and upon written notice to you, may defer the vesting with respect to all or any portion of the Units to any date that is not more than ten years after the Date of Grant stated in your Grant Summary.

2. Expiration — If your Employment (as defined below) terminates for any reason other than your death or “Permanent Disability” (as defined in the Plan described below), any Units that have not vested as described above will expire at that time.

If your Employment is terminated by reason of your death or Permanent Disability, all Units will vest immediately and automatically upon such termination of Employment.

As used herein, the term “Employment” means your regular full-time or part-time employment with the Company or any of its Subsidiaries, and the term “Employer” means the Company (if you are employed by the Company) or the Subsidiary of the Company that employs you.

3. Rights as a Stockholder — You will have no rights as a stockholder with respect to Shares that may be received by you pursuant to this Agreement until those Shares are issued and registered in your name on the books of the Company’s transfer agent. You will have no rights to receive dividend equivalent payments with respect to Shares that may be received by you pursuant to this Agreement. Units granted to you will be satisfied wholly through the issuance and delivery of Shares.

4. Agreement With Respect to Taxes — You must pay any taxes that are required to be withheld by the Company or your Employer. You may pay such amounts in cash or make other arrangements satisfactory to the Company or your Employer for the payment of such amounts. You agree the Company or your Employer, at its sole discretion and to the fullest extent permitted by law, shall have the right to demand that you pay such amounts in cash, deduct such amounts from any payments of any kind otherwise due to you, or withhold from Shares to which you would otherwise be entitled the number of Shares having an aggregate market value at that time equal to the amount you owe. In the event the Company, in its sole discretion, determines that your tax obligations will not be satisfied under the methods described in this paragraph, you authorize the Company or the Company’s Stock Plan Administrator to sell a number of Shares that are issued under the Units, which the Company determines as having at least the market value sufficient to meet the tax withholding obligations plus additional Shares to account for rounding and market fluctuations and pay such tax withholding to the Company. The shares may be sold as part of a block trade with other participants and all participants receive an average price.

You agree that, subject to compliance with applicable law, the Company and/or your Employer may recover from you taxes which may be payable by the Company and/or your Employer in any jurisdiction in relation to this award. You agree that the Company and/or your Employer shall be entitled to use whatever method they may deem appropriate to recover such taxes including the sale of any Shares, paying you a net amount of shares (or cash), recovering the taxes via payroll and direct invoicing. You further agree that the Company and/or your Employer may, as it reasonably considers necessary, amend or vary this agreement to facilitate such recovery of taxes.

5. Leaves of Absence — If you take a leave of absence from active Employment that has been approved by the Company or your Employer or is one to which you are legally entitled regardless of such approval, the following provisions will apply:

A. Vesting During Leave — Notwithstanding the vesting schedule set forth above, no Units will vest during a leave of absence other than an approved employee medical, FMLA or military leave. Notwithstanding the preceding, vesting shall not be deferred for any approved leave of absence of less than 30 days. The vesting that would have otherwise occurred during a leave of absence other than an approved employee medical, FMLA or military leave will be deferred by the number of days you are on a leave of absence. For example, if your Units are scheduled to vest on August 1, 2007 through August 1, 2011, and you are on a 40 day leave of absence, the dates on which the vesting occurs will be deferred to September 10, 2007 through September 10, 2011.

B. Effect of Termination During Leave — If your Employment is terminated during the leave of absence, the Units will expire or vest in accordance with the terms stated in Paragraph 2 (Expiration) above.

6. Return of Share Value — By accepting this award, you agree that if the Company determines that you engaged in “Conduct Detrimental to the Company” (as defined below) during your Employment or during the one-year period following the termination of your Employment, you shall be required, upon demand, to return to the Company, in the form of a cash payment, certain share value (“Returnable Share Value”). For purposes of this provision, “Returnable Share Value” means a cash amount equal to the gross value of the Shares that were issued to you pursuant to this Agreement, determined as of the date such Shares were issued to you and using the Fair Market Value (as defined in the Plan) of Dell stock on that date. You understand and agree that the repayment of the Returnable Share Value is in addition to and separate from any other relief available to the Company due to your Conduct Detrimental to the Company.

For purposes of this Agreement, you will be considered to have engaged in “Conduct Detrimental to the Company” if:

(1) you engage in serious misconduct (whether or not such serious misconduct is discovered by the Company prior to the termination of your Employment);

(2) you breach your obligations to the Company with respect to confidential and proprietary information or trade secrets or breach any agreement between you and Dell relating to confidential and proprietary information or trade secrets;

(3) you compete with the Company (as described below); or

(4) you solicit the Company’s employees (as described below).

For purposes of this provision, you shall be deemed to “compete” with the Company if you, directly or indirectly:

• Are a principal, owner, officer, director, shareholder or other equity owner (other than a holder of less than 5% of the outstanding shares or other equity interests of a publicly traded company) of a Direct Competitor (as defined below);

• Are a partner or joint venture in any business or other enterprise or undertaking with a Direct Competitor; or

• Serve or perform work (including consulting or advisory services) for a Direct Competitor that is similar in a material way to the work you performed for the Company in the twelve months preceding the termination of your Employment.

You understand and agree that this provision does not prohibit you from competing with the Company but only requires repayment of Returnable Share Value in the event of such competition.

For purposes of this provision, a “Company’s employee” means any person employed by the Company or any of its Subsidiaries and “solicit the Company’s employees” means that you communicate in any way with any other person regarding (a) a Company Employee leaving the employ of the Company or any of its Subsidiaries; or (b) a Company Employee seeking employments with any other employer. This provision does not apply to those communications that are within the scope of your Employment that are taken on behalf of your Employer.

The term “Direct Competitor” means any entity, or other business concern that offers or plans to offer products or services that are materially competitive with any of the products or services being manufactured, offered, marketed, or are actively developed by Dell as of the date your employment with Dell ends. By way of illustration, and not by limitation, at the time of execution of this Agreement, the following companies are currently Direct Competitors: Hewlett-Packard, Lenovo, IBM, Gateway, Apple, Acer, CDW, EDS, EMC, Software House International, Insight (Software Spectrum), Softchoice, and Digital River. You understand and agree that the foregoing list of Direct Competitors represents a current list of Dell Direct Competitors as of the date of execution of this Agreement and that other entities may become Direct Competitors in the future.

7. Transferability — The Units are not transferable except as described in this Paragraph, and the provisions of this Paragraph shall apply notwithstanding any other provision herein to the contrary.

     (a) The Units are transferable by will or the laws of descent and distribution.

     (b) The Units may be transferred to (1) one or more “Family Members” (as defined below), (2) a trust in which you or Family Members own more than 50% of the beneficial interests, (3) a foundation in which you or Family Members control the management of assets or (4) any other entity in which you or Family Members own more than 50% of the voting interests; provided, however, that in any case, (A) the transfer is by way of gift or is otherwise a donative transfer or, in the case of a transfer to an entity, the transfer is made in exchange for an interest in the entity and (B) the transferee expressly acknowledges that the terms and provisions of this Agreement will continue to apply to the Units in the hands of the transferee. For purpose of this provision, the term “Family Member” shall mean your spouse, former spouse, child, stepchild, grandchild, parent, stepparent, grandparent, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law (including adoptive relationships) or any person sharing your household (other than a tenant or employee). Notwithstanding the provisions of this subparagraph (b), any transfer described herein must be made in compliance with such procedural rules and regulations (including those pertaining to the timing of transfers) as are established from time to time by the Committee.

     (c) The Units may be transferred under a domestic relations order in settlement of marital property rights.

8. Trading Restrictions —The Company may establish periods from time to time during which your ability to engage in transactions involving the Company’s stock is subject to specified restrictions (“Restricted Periods”). Notwithstanding any other provisions herein, Units will not vest, and Shares will not be issued, during an applicable Restricted Period and the applicable period during which Units vest shall be extended until the end of such Restricted Period, unless such vesting is specifically permitted by the Company (in its sole discretion). You may be subject to a Restricted Period for any reason that the Company determines appropriate, including Restricted Periods generally applicable to employees or groups of employees or Restricted Periods applicable to you during an investigation of allegations of misconduct or Conduct Detrimental to the Company by you.

9. Incorporation of Plan — This award is granted under the Plan and is governed by the terms of the Plan in addition to the terms and conditions stated herein. All terms used herein with their initial letters capitalized shall have the meanings given them in the Plan unless otherwise defined herein. A copy of the Plan is available upon request from the Company’s Stock Option Administration Department. Shares of common stock that are issued pursuant to this Agreement shall be made available from authorized but unissued shares.

10. Prospectus — You may at any time obtain a copy of the prospectus related to the Dell common stock underlying the Units by accessing the prospectus at http://inside.us.dell.com/legal/corporate.htm. Additionally, you may request a copy of the prospectus free of charge from the Company by contacting Stock Option Administration in writing at Stock Option Administration, One Dell Way, Mail Stop 8038, Round Rock, Texas 78682, (512) 728-8644 or e-mail Stock_Option_Administrator @dell.com.

11. Notice — You agree that notices may be given to you in writing either at your home address as shown in the records of the Company or your Employer, or by electronic transmission (including e-mail or reference to a website or other URL) sent to you through the Company’s normal process for communicating electronically with its employees.

12. No Right to Continued Employment — The granting of Units does not confer upon you any right to expectation of employment by, or to continue in the employment of, your Employer.

13. Limitation on Rights; No Right to Future Grants; Extraordinary Item of Compensation — By accepting this Agreement and the grant of the Units evidenced hereby, you expressly acknowledge that (a) the Plan is discretionary in nature and may be suspended or terminated by the Company at any time; (b) the grant of Units is a one-time benefit that does not create any contractual or other right to receive future grants of Units, or benefits in lieu of Units; (c) all determinations with respect to future grants, if any, including the grant date, the number of Units granted and the vesting dates, will be at the sole discretion of the Company; (d) your participation in the Plan is voluntary; (e) the value of the Units is an extraordinary item of compensation that is outside the scope of your employment contract, if any, and nothing can or must automatically be inferred from such employment contract or its consequences; (f) Units are not part of normal or expected compensation for any purpose, and are not to be used for calculating any severance, resignation, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments, and you waive any claim on such basis; (g) the grant of an equity interest in the Company gives rise to the Company’s need (on behalf of itself and its stockholders) to protect itself from Conduct Detrimental to the Company, and your promises described in Paragraph 7 (Return of Share Value) above are designed to protect the Company and its stockholders from Conduct Detrimental to the Company; (h) vesting of Units ceases upon termination of Employment for any reason except as may otherwise be explicitly provided in the Plan document or in this Agreement; (i) the future value of the Units is unknown and cannot be predicted with certainty; and (j) you understand, acknowledge and agree that you will have no rights to compensation or damages related to Units or Shares in consequence of the termination of your Employment for any reason whatsoever and whether or not in breach of contract.

14. Data Privacy Consent — As a condition of the grant of the Units, you consent to the collection, use and transfer of personal data as described in this paragraph. You understand that the Company and its Subsidiaries hold certain personal information about you, including your name, home address and telephone number, date of birth, social security number, salary, nationality, job title, any ownership interests or directorships held in the Company or its Subsidiaries and details of all Units, Shares, stock options or other equity awards awarded or cancelled (“Data”). You further understand that the Company and its Subsidiaries will transfer Data among themselves as necessary for the purposes of implementation, administration and management of your participation in the Plan, and that the Company and any of its Subsidiaries may each further transfer Data to any third parties assisting the Company in the implementation, administration and management of the Plan. You understand that these recipients may be located in the European Economic Area or elsewhere, such as the United States. You authorize them to receive, possess, use, retain and transfer such Data as may be required for the administration of the Plan or the subsequent holding of shares of common stock on your behalf, in electronic or other form, for the purposes of implementing, administering and managing your participation in the Plan, including any requisite transfer to a broker or other third party with whom you may elect to deposit any shares of common stock acquired under the Plan. You understand that you may, at any time, view such Data or require any necessary amendments to it.

15. Governing Law and Venue — This Agreement and the Plan shall be governed by, and construed in accordance with, the laws of the State of Delaware, United States of America. The venue for any and all disputes arising out of or in connection with this Agreement shall be New Castle County, Delaware, United States of America, and the courts sitting exclusively in New Castle County, Delaware, United States of America shall have exclusive jurisdiction to adjudicate such disputes. Each party hereby expressly consents to the exercise of jurisdiction by such courts and hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to such laying of venue (including the defense of inconvenient forum).

16. Effect of Invalid Provisions — If any of the promises, terms or conditions set forth herein are determined by a court of competent jurisdiction to be unenforceable, any Units that have not vested as described above will expire at that time and you agree to return to the Company an amount of cash equal to the Fair Market Value (as defined in the Plan) of all Shares theretofore issued to you pursuant to this Agreement, determined as of the date such Shares were issued.

17. Acceptance of Terms and Conditions — This award will not be effective and you may not take action with respect to the Units or the Shares until you have acknowledged and agreed to the terms and conditions set forth herein in the manner prescribed by the Company. Failure to accept your grant prior to the first vesting date will result in cancellation of your award. You should print a copy of this award and your Grant Summary for your records.

Awarded subject to the terms and conditions stated above:

DELL INC.

By:	/s/ Dominick DiCosimo
	Dominick DiCosimo, VP, Global HR Operations

EX-21

Exhibit 21

Dell Inc. Subsidiary List

Europe, Middle East and Africa
Dell Gesm.b.H.	Austria
Dell FZ-LLC – Bahrain Branch	Bahrain
Dell N.V.	Belgium
Dell Computer spol. sro	Czech Republic
Dell A/S	Denmark
Oy Dell A.B.	Finland
Dell S.A.	France
Dell International Holdings SAS	France
Dell GmbH	Germany
Dell Halle GmbH	Germany
Dell Technology Products and Services S.A	Greece
Dell Emerging Markets (EMEA) Limited Magyarorszagi Kereskedelmi Kepviselet – Rep. Office	Hungary
Dell Direct	Ireland
Dell Products	Ireland
Dell Research	Ireland
Dell International Holdings VI (Ireland)	Ireland
Dell International Holdings VII (Ireland)	Ireland
Dell International Holdings XI	Ireland
Dell Computer Limited	Ireland
Dell Financial Services International Limited	Ireland
Dell Technology & Solutions Israel Ltd.	Israel
Dell S.p.A.	Italy
Dell Services S.r.l.	Italy
Dell SA	Luxembourg
Dell Computer Holding I, SGPS, Unipessoal Lda	Madeira
Dell Computer Holding II, SGPS, Unipessoal Lda	Madeira
Dell Computer International (II) – Comercio de   Computadores Sociedade Unipessoal Lda	Madeira, Portugal
Dell SAS	Morocco
Dell Distribution Maroc (Succ)	Morocco
Dell B.V.	Netherlands
Dell Asia B.V.	Netherlands
Dell Taiwan B.V.	Netherlands
DIH IV C.V.	Netherlands
DIH V C.V.	Netherlands
Dell International Holdings VIII B.V.	Netherlands
Dell International Holdings IX B.V.	Netherlands
Dell International Holdings X B.V.	Netherlands
Dell Global B.V.	Netherlands
Dell Products (Europe) B.V.	Netherlands
Dell Global International B.V.	Netherlands
Dell International Holdings XII Coöperatoef U.A.	Netherlands

Dell Corporation Limited – Northern Ireland Place of Business	Northern Ireland
Dell A.S.	Norway
Dell Sp.z.o.o.	Poland
Dell Products (Poland) Sp. z o.o	Poland
Dell (III) – Comercio de Computadores, Unipessoal LDA	Portugal
Dell Emerging Markets (EMEA) Limited – Representative Office	Romania
Dell L.L.C.	Russia
Dell Emerging Market (EMEA) Ltd (Russia Representative Officer	Russia
Dell Distribution (EMEA) Limited External Company (Ghana)	Ghana
Dell Emerging Markets (EMEA) Limited Trade Representative Office (Bulgaria)	Bulgaria
Dell Emerging Markets (EMEA) Limited (Uganda Representative Office)	Uganda
Dell s.r.o.	Slovakia
Dell Computer (Proprietary) Ltd	South Africa
Dell Computer S.A.	Spain
Dell A.B.	Sweden
Dell S.A.	Switzerland
Dell Emerging Markets (EMEA) Limited – Turkey (Istanbul) Liaison Office	Turkey
Dell Emerging Markets (EMEA) Limited — Representative Office Ukraine	Ukraine
LLC Dell Ukraine	Ukraine
Dell FZ – LLC	U.A.E.
Bracknell Boulevard Management Company Limited	United Kingdom
Dell Corporation Limited	United Kingdom
Dell Computer EEIG	United Kingdom
Dell Emerging Markets (EMEA) Limited	United Kingdom
Alienware Limited	Ireland
Dell Global Holdings I BV	Netherlands
Dell Global Holdings II BV	Netherlands
Dell Global Holdings III BV	Netherlands
Dell Products Manufacturing	Ireland
Dell Solutions (UK) Limited	United Kingdom
Dell Emerging Markets (EMEA) Limited — Egypt Representative Office	Egypt
Dell Teknoloji Limited Şirketi	Turkey
Dell Hungary Technology Solutions Trade LLC	Hungary
ASAP Software SAS	France
26éme Avenue	France
SCI Siman	France
SCI New-Tech	France
Dell International Holdings Kft.	Hungary
Dell International Holdings Kft. – Zurich Branch	Switzerland

2

Dell DFS Holdings Kft.	Hungary
EqualLogic UK Limited	UK
EqualLogic Deutschland GmbH	Germany
EqualLogic B.V.	Netherlands
Branch of Dell (Free Zone Company L.L.C.)	Saudi Arabia
Dell Emerging Markets (EMEA) Limited (Kazakhstan Representative Office)	Kazakhstan
Dell Emerging Markets (EMEA) Limited Representative Office — Lebanon	Lebanon
Asia-Pacific/Japan
Dell Australia Pty. Limited	Australia
Dell (China) Company Limited	China
Dell (China) Company Limited, Beijing Liaison Office	China
Dell (China) Company Limited, Chengdu Liaison Office	China
Dell (China) Co., Ltd., Guangzhou Liaison Office	China
Dell (China) Company Limited, Hangzhou Liaison Office	China
Dell (China) Company Limited, Nanjing Liaison Office	China
Dell (China) Company Limited, Shanghai Liaison Office	China
Dell (China) Company Limited, Shenzhen Liaison Office	China
Dell (China) Company Limited, Shanghai Branch	China
Dell (China) Company Limited, Dalian Branch	China
Dell (China) Company Limited, Xiamen Branch	China
Dell (China) Company Limited, Beijing Branch	China
Dell (China) Company Limited, Guangzhou Branch	China
Dell Procurement (Xiamen) Company Limited	China
Dell Procurement (Xiamen) Company Limited, Shanghai Branch	China
Dell Procurement (Xiamen) Company Limited, Shenzhen Liaison Office	China
Dell (Xiamen) Company Limited	China
Dell (Xiamen) Company Limited, Dalian Branch	China
Dell Hong Kong Limited	Hong Kong
Dell International Services India Private Limited	India
Dell India Private Ltd.	India
Dell India R&D Center Private Limited	India
ACS (India) Limited	India

3

Dell Asia Pacific Sdn. – India Liaison Office	India
Dell Asia Pacific Sdn. – Indonesia Representative Office	Indonesia
Dell Japan Inc.	Japan
Dell Asia Pacific Sdn.	Malaysia
Dell Global Procurement Malaysia Sdn. Bhd.	Malaysia
Dell New Zealand Limited	New Zealand
Dell International Services Philippines Inc.	Philippines
Dell Catalog Sales L.P. – Rep Office	Philippines
Dell Asia Pacific Sdn. Phillippines Representative Office	Philippines
Dell Asia Holdings Pte. Ltd.	Singapore
Dell Asia Pte. Ltd.	Singapore
Dell Singapore Pte. Ltd.	Singapore
Dell Global Pte. Ltd.	Singapore
Dell Global B.V., Singapore Branch	Singapore
Dell International Inc.	South Korea
Dell Taiwan B.V., Taiwan Branch	Taiwan
Dell B.V., Taiwan Branch	Taiwan
Dell Asia B.V., Taiwan Branch	Taiwan
Dell (Thailand) Co., Ltd.	Thailand
Dell Asia Pacific Sdn. – Vietnam Representative Office	Vietnam
Alienware Corporation (Pacific Rim), Pty Ltd.	Australia
Dell Global Business Center Sdn. Bhd.	Malaysia
EqualLogic Japan Company Limited	Japan
Other U.S. Entities
Dell International Incorporated	Delaware
Dell Gen. P. Corp.	Delaware
Dell Services Corporation	Delaware
Dell Marketing Corporation	Delaware
Dell USA Corporation	Delaware
Dell Ventures Corporation	Delaware
Dell DFS Corporation	Delaware
Plural Acquisition I, Inc.	Delaware
Bracknell Boulevard (Block C) L.L.C.	Delaware
Bracknell Boulevard (Block D) L.L.C.	Delaware
Dell Products Corporation	Delaware
Dell Federal Systems Corporation	Delaware
Dell World Trade Corporation	Delaware
Dell Receivables Corporation	Delaware
Dell Products GP L.L.C.	Delaware
Dell Products LP L.L.C.	Delaware
Dell Services GP L.L.C.	Delaware
Dell Services LP L.L.C.	Delaware
Dell Federal Systems GP L.L.C.	Delaware
Dell Federal Systems LP L.L.C.	Delaware
Dell World Trade GP L.L.C.	Delaware
Dell World Trade LP L.L.C.	Delaware
Dell Marketing GP L.L.C.	Delaware

4

Dell Marketing LP L.L.C.	Delaware
Dell USA GP L.L.C.	Delaware
Dell USA LP L.L.C.	Delaware
Dell Receivables GP L.L.C.	Delaware
Dell Receivables LP L.L.C.	Delaware
Dell Products L.P.	Texas
Dell Services L.P.	Texas
Dell Federal Systems L.P.	Texas
Dell World Trade L.P.	Texas
Dell Marketing L.P.	Texas
Dell USA L.P.	Texas
Dell Receivables L.P.	Texas
CPS Channel Partner Solutions L.P.	Texas
Dell Computer Holdings Corp.	Delaware
Dell Computer Holdings L.P.	Texas
Dell Ventures L.P.	Texas
DCC Executive Security Inc.	Delaware
Dell Eastern Europe Corporation	Delaware
Dell Computer India Corp.	Delaware
Dell Computer de Chile Corp.	Delaware
Dell America Latina Corp.	Delaware
Dell Colombia Inc.	Delaware
Dell International Holdings I L:.L.C.	Delaware
Dell International Holdings II L.L.C.	Delaware
Dell International Holdings III L.L.C.	Delaware
Dell Marketing USA GP L.L.C.	Delaware
Dell Marketing USA LP L.L.C.	Delaware
Dell Marketing USA L.P.	Texas
Dell Equipment GP L.L.C	Delaware
Dell Equipment Funding L.P.	Delaware
Dell Conduit GP L.L.C.	Delaware
Dell Conduit Funding L.P.	Delaware
Dell Revolver Funding L.L.C.	Nevada
Dell Funding L.L.C.	Nevada
Dell Revolver Company L.P.	Delaware
Dell Revolver GP. L.L.C.	Delaware
Dell Protective Services Inc.	Delaware
Dell Asset Securitization GP L.L.C.	Delaware
Dell Asset Securitization L.P.	Delaware
Alienware Corporation	Florida
Alienware Retail Corporation	Florida
Alienware Labs Corp.	Florida
Dell Global Holdings GP L.L.C.	Delaware
Dell Global Holdings LP L.L.C.	Delaware
Dell Global Holdings IV L.L.C.	Delaware
Dell Global Holdings L.L.C.	Delaware
Dell Asset Revolving Trust	Delaware
Dell Credit Company L.L.C.	Delaware
ASAP Software Express Inc.	Illinois
License Technologies Group, Inc.	Delaware
Dell DFS Holdings L.L.C.	Delaware

5

Equalogic Inc.	Delaware
International Americas –	Jurisdiction
Dell Export Sales Corporation	Barbados
Dell America Latina Corp., Argentina Branch	Argentina
Dell Computadores do Brasil Ltda.	Brazil
Dell Procurement International	Cayman Islands
Dell Computer de Chile Ltda.	Chile
Dell Colombia Inc., Colombia Branch	Colombia
Dell Technology Services Inc. S.R.L.	Costa Rica
Dell El Salvador S.A. DE C.V.	El Salvador
Dell Mexico, S.A. de C.V.	Mexico
Dell Computer Services de Mexico SA de CV	Mexico
Dell Canada Inc.	Ontario, Canada
Dell Panama S. de R.L.	Panama
Dell Perú, SAC	Peru
Dell Puerto Rico Corp.	Puerto Rico
Dell Quebec Inc.	Quebec
Dell Trinidad and Tobago Limited	Trinidad and Tobago
Alienware Latinoamerica, S.A	Costa Rica
Dell Global Holdings Ltd.	Cayman Islands
Dell Global Holdings L.P.	Cayman Islands
Dell Global Holdings V L.P.	Cayman Islands
Dell Jamaica Ltd.	Jamaica
Dell Venezuela
Dell St. Lucia
EqualLogic Canada	Canada

6

EX-23

Exhibit 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 33-24621, 33-54577, 33-63273, 33-54583, 333-58039, 333-69726, 333-100342, 333-111214, 333-111215, and 333-147882) of Dell Inc. (formerly Dell Computer Corporation) of our report dated March 31, 2008, relating to the financial statements, financial statement schedule, and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.

 
 
/s/ PricewaterhouseCoopers LLP

Austin, Texas
March 31, 2008

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF MICHAEL S. DELL, CHAIRMAN AND
CHIEF EXECUTIVE OFFICER, PURSUANT TO RULE 13a-14(a) UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002

I, Michael S. Dell, certify that:

1.	I have reviewed this Annual Report on Form 10-K of Dell Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

March 31, 2008	/s/ MICHAEL S. DELL
	Michael S. Dell
	Chairman and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF DONALD J. CARTY, VICE CHAIRMAN AND
CHIEF FINANCIAL OFFICER, PURSUANT TO RULE 13a-14(a) UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002

I, Donald J. Carty, certify that:

1.	I have reviewed this Annual Report on Form 10-K of Dell Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

March 31, 2008	/s/ DONALD J. CARTY
	Donald J. Carty
	Vice Chairman and Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATIONS OF MICHAEL S. DELL, CHAIRMAN AND CHIEF EXECUTIVE OFFICER,
AND DONALD J. CARTY, VICE CHAIRMAN
AND CHIEF FINANCIAL OFFICER, PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned officers of Dell Inc. hereby certify that (a) Dell’s Annual Report on Form 10-K for the fiscal year ended February 1, 2008, as filed with the Securities and Exchange Commission, fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and (b) information contained in the report fairly presents, in all material respects, the financial condition and results of operations of Dell.

	/s/ MICHAEL S. DELL
Date: March 31, 2008	Michael S. Dell
	Chairman and Chief Executive Officer
	/s/ DONALD J. CARTY
Date: March 31, 2008	Donald J. Carty
	Vice Chairman and Chief Financial Officer

EX-99.1

Exhibit 99.1

Submission of Matters to a Vote of Security Holders

The annual meeting of Dell’s stockholders was held on December 4, 2007. At that meeting, the following five proposals were submitted to a vote of Dell’s stockholders:

(1)	Proposal 1 (Election of Directors) — A proposal for the election of the persons who will serve as Dell’s directors until next year’s annual meeting.
(2)	Proposal 2 (Ratification of Independent Auditor) — A proposal for the ratification of the Audit Committee’s selection of PricewaterhouseCoopers LLP as Dell’s independent auditor for Fiscal 2008.
(3)	Proposal 3 (Approval of the Amended and Restated 2002 Long-Term Incentive Plan) — A proposal for the approval of the Amended and Restated 2002 Long-Term Incentive Plan.
(4)	Stockholder Proposal 1 (Executive Stock Ownership Guidelines) — A proposal regarding the adoption of a stock ownership requirement for executive officers.
(5)	Stockholder Proposal 2 (Declaration of Dividend) — A proposal regarding the declaration of a dividend.

At the close of business on the record date for the meeting (which was October 26, 2007), there were 2,235,845,755 shares of common stock outstanding and entitled to be voted at the meeting. Holders of 1,992,833,843 shares of common stock (representing a like number of votes) were present at the meeting, either in person or by proxy. The following table sets forth the results of the voting:

Proposal			For		Withheld
	1.	Election of Directors:
		Donald J. Carty		1,842,671,507		150,162,337
		Michael S. Dell		1,946,689,752		46,144,091
		William H. Gray, III		1,840,839,584		151,994,260
		Sallie L. Krawcheck		1,953,903,925		38,929,919
		Alan (A.G.) Lafley		1,889,157,561		103,676,283
		Judy C. Lewent		1,893,116,243		99,717,600
		Thomas W. Luce, III		1,716,997,296		275,836,548
		Klaus S. Luft		1,885,666,266		107,167,577
		Alex J. Mandl		1,903,646,695		89,187,149
		Michael A. Miles		1,867,619,136		125,214,708
		Sam Nunn		1,836,509,554		156,324,290

							Broker
	For		Against		Abstain		Non-Votes
2. Ratification of Independent Auditor		1,857,638,826		121,077,627		14,117,387
3. Approval of the Amended and Restated 2002 Long-Term Incentive Plan		1,536,953,916		130,605,368		18,068,291		307,206,268
4. Stockholder Proposal 1 (Executive Stock Ownership Guidelines)		482,602,090		1,186,755,213		16,307,630		307,168,910
5. Stockholder Proposal 2 (Declaration of Dividend)		105,972,999		1,552,367,241		27,324,695		307,168,908

Proposal 1 (Election of Directors), Proposal 2 (Ratification of Independent Auditors) and Proposal 3 (Approval of the Amended and Restated 2002 Long-Term Incentive Plan) each received more than the number of favorable votes required for approval and were therefore duly and validly approved by the stockholders. Stockholder Proposal 1 (Executive Stock Ownership Guidelines) and Stockholder Proposal 2 (Declaration of Dividend) each failed to receive a sufficient number of favorable votes and, therefore, were not approved.