-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QM0zvhGrrU4lbJPI1pTRdH2irzCfvThwKm1wbEUFB/9Mu8jVhJ0wh7g+kLYVbqxs Rz9WNFJl9BRUtPu/5V097g== 0000950134-95-003263.txt : 19951211 0000950134-95-003263.hdr.sgml : 19951211 ACCESSION NUMBER: 0000950134-95-003263 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19951029 FILED AS OF DATE: 19951208 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: DELL COMPUTER CORP CENTRAL INDEX KEY: 0000826083 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPUTERS [3571] IRS NUMBER: 742487834 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-17017 FILM NUMBER: 95600469 BUSINESS ADDRESS: STREET 1: 2214 W BRAKER LN STREET 2: STED CITY: AUSTIN STATE: TX ZIP: 78758 BUSINESS PHONE: 5123384400 MAIL ADDRESS: STREET 1: 2112 KRAMER LN - BLDG 1 CITY: AUSTIN STATE: TX ZIP: 78758 10-Q 1 FORM 10-Q FOR THE QUARTER ENDED OCTOBER 29, 1995 1 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED OCTOBER 29, 1995 COMMISSION FILE NUMBER:0-17017 DELL COMPUTER CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 74-2487834 (State of incorporation) (I.R.S. Employer ID No.) 2214 WEST BRAKER LANE, SUITE D AUSTIN, TEXAS 78758-4053 (Address of principal executive offices) (512) 338-4400 (Telephone number) 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 TWELVE MONTHS AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES [X] NO [ ] AS OF DECEMBER 6, 1995, 93,081,168 SHARES OF THE REGISTRANT'S COMMON STOCK, PAR VALUE $.01 PER SHARE, WERE OUTSTANDING. ================================================================================ 2 PART I -- FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS DELL COMPUTER CORPORATION CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION (IN THOUSANDS, EXCEPT SHARE DATA) (UNAUDITED)
ASSETS OCTOBER 29, JANUARY 29, 1995 1995 ----------------- ----------------- Current assets: Cash $ 69,586 $ 42,953 Short-term investments 501,186 484,294 Accounts receivable, net 772,835 537,974 Inventories 463,640 292,925 Other current assets 135,892 112,215 ----------------- ----------------- Total current assets 1,943,139 1,470,361 Property, plant and equipment, net 158,534 116,981 Other assets 11,250 6,658 ----------------- ----------------- $ 2,112,923 $ 1,594,000 ================= ================= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 531,739 $ 402,682 Accrued and other liabilities 431,538 323,791 Income taxes 33,919 24,937 ----------------- ----------------- Total current liabilities 997,196 751,410 Long-term debt 113,242 113,429 Other liabilities 109,189 77,425 Commitments and contingencies Stockholders' equity: Preferred stock: $.01 par value; shares authorized: 5,000,000; shares issued and outstanding: 60,000 and 1,250,000, respectively 1 13 Common stock: $.01 par value; shares authorized: 300,000,000 and 100,000,000, respectively; shares issued and outstanding: 92,999,232 and 79,359,276, respectively 930 794 Additional paid-in capital 420,824 360,784 Unrealized loss on short-term investments (383) (2,628) Retained earnings 500,663 311,217 Unearned compensation (18,585) (4,413) Cumulative translation adjustment (10,154) (14,031) ----------------- ----------------- Total stockholders' equity 893,296 651,736 ----------------- ----------------- $ 2,112,923 $ 1,594,000 ================= =================
The accompanying notes are an integral part of these condensed consolidated financial statements. 1 3 DELL COMPUTER CORPORATION CONDENSED CONSOLIDATED STATEMENT OF INCOME (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED ----------------------------- ---------------------------- OCTOBER 29, OCTOBER 30, OCTOBER 29, OCTOBER 30, 1995 1994 1995 1994 ------------- ------------- ------------- ------------- Net sales $ 1,415,699 $ 884,552 $ 3,757,225 $ 2,442,680 Cost of sales 1,125,175 703,129 2,967,907 1,921,788 ------------- ------------- ------------- ------------- Gross margin 290,524 181,423 789,318 520,892 Operating expenses: Selling, general and administrative 160,060 104,861 434,998 302,384 Research, development and engineering 25,980 17,016 71,506 47,916 ------------- ------------- ------------- ------------- Total operating expenses 186,040 121,877 506,504 350,300 ------------- ------------- ------------- ------------- Operating income 104,484 59,546 282,814 170,592 Financing and other income (expense), net 1,735 (1,418) 1,954 (43,620) ------------- ------------- ------------- ------------- Income before income taxes 106,219 58,128 284,768 126,972 Provision for income taxes 30,803 16,774 82,579 38,086 ------------- ------------- ------------- ------------- Net income 75,416 41,354 202,189 88,886 Preferred stock dividends 105 2,187 11,848 6,562 ------------- ------------- ------------- ------------- Net income available to common stockholders $ 75,311 $ 39,167 $ 190,341 $ 82,324 ============= ============= ============= ============= Earnings per common share: Primary $ 0.75 $ 0.47 $ 1.98 $ 1.00 ============= ============= ============= ============= Fully diluted $ 0.75 $ 0.43 $ 1.92 $ 0.95 ============= ============= ============= =============
The accompanying notes are an integral part of these condensed consolidated financial statements. 2 4 DELL COMPUTER CORPORATION CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
NINE MONTHS ENDED ------------------------------------ OCTOBER 29, OCTOBER 30, 1995 1994 ---------------- ---------------- Cash flows from operating activities: Net income $ 202,189 $ 88,886 Charges to income not requiring cash outlays: Depreciation and amortization 27,708 23,624 Net (gain) loss on short-term investments (302) 21,218 Other 3,977 1,825 Changes in: Operating working capital (179,819) (34,389) Non-current assets and liabilities 23,185 21,257 ---------------- ---------------- Net cash provided by operating activities 76,938 122,421 Cash flows from investing activities: Short-term investments: Purchases (3,036,884) (3,202,716) Maturities and other redemptions 2,996,090 3,011,348 Sales 28,651 113,406 Capital expenditures (66,501) (47,007) ---------------- ---------------- Net cash used in investing activities (78,644) (124,969) Cash flows from financing activities: Preferred stock dividends paid (12,743) (6,562) Issuance of common stock under employee plans 42,146 21,580 Other (502) (147) ---------------- ---------------- Net cash provided by financing activities 28,901 14,871 Effect of exchange rate changes on cash (562) 2,476 ---------------- ---------------- Net increase in cash 26,633 14,799 Cash at beginning of period 42,953 3,355 ---------------- ---------------- Cash at end of period $ 69,586 $ 18,154 ================ ================
The accompanying notes are an integral part of these condensed consolidated financial statements. 3 5 DELL COMPUTER CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1 -- BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto filed with the Securities and Exchange Commission (the "Commission") in the Company's Annual Report on Form 10-K for the fiscal year ended January 29, 1995, as amended. In the opinion of management, the accompanying condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring accruals) considered necessary to present fairly the financial position of Dell Computer Corporation and its consolidated subsidiaries at October 29, 1995 and January 29, 1995 and the results of their operations for the three-month and nine-month periods ended October 29, 1995 and October 30, 1994. Reclassification of certain prior period amounts has been made for comparative purposes. NOTE 2 -- STOCK SPLIT On October 9, 1995, the Company's Board of Directors declared a 2-for-1 stock split of the Company's common stock in the form of a 100% stock dividend to stockholders of record as of October 20, 1995. The distribution of such dividend occurred on October 27, 1995. All share and per share information has been retroactively restated in the condensed consolidated financial statements to reflect the stock split. NOTE 3 -- PREFERRED SHARE PURCHASE RIGHTS On November 29, 1995, the Company's Board of Directors declared a dividend of one Preferred Share Purchase Right (a "Right") for each outstanding share of the Company's common stock. The distribution of the Rights will be made on December 13, 1995 to the stockholders of record on that date. Each Right entitles the holder to purchase one one-thousandth of a share of a new series of preferred stock at an exercise price of $225. The Rights will be exercisable only if a person or group acquires 15% or more of the Company's common stock or announces a tender offer, the consummation of which would result in such person or group owning 15% or more of the Company's common stock. If a person or group acquires 15% or more of the outstanding Company common stock, each Right will entitle all the holders (other than such person or any member of such group) to purchase, at the Right's then current exercise price, a number of shares of the Company's common stock having a market value of twice the exercise price of the Right. In addition, if the Company is involved in a merger or other business combination transaction at any time after the Rights have become exercisable, each Right will entitle its holder to purchase, at the Right's then current exercise price, a number of the acquiring company's common shares having a market value at that time of twice the exercise price of the Right. Furthermore, at any time after a person or group acquires 15% or more of the outstanding Company common stock but prior to the acquisition of 50% of such stock, the Board of Directors may, at its option, exchange part or all of the Rights (other than Rights held by the acquiring person or group) for shares of the Company's common stock at an exchange rate of one share of common stock for each Right. The Company will be entitled to redeem the Rights at $.001 per Right at any time before a 15% or greater position has been acquired by any person or group. Additionally, the Company may lower the 15% threshold to not less than the greater of (a) any percentage greater than the largest percentage of common stock known by the Company to be owned by any person (other than Michael S. Dell) or (b) 10%. The Rights expire on November 29, 2005. Neither the ownership nor the further acquisition of Company common stock by Michael S. Dell will cause the Rights to become exercisable or nonredeemable or will trigger the other features of the Rights. The Company has 5,000,000 shares of $.01 par value preferred stock authorized for issuance, of which 200,000 shares have been designated by the Board of Directors as Series A Junior Participating Preferred Stock 4 6 and reserved for issuance upon exercise of the Rights. Each of such preferred shares will be entitled to an aggregate dividend equal to the greater of $1.00 per share or 1,000 times the dividend declared on the common stock. Upon liquidation, the holders of such preferred shares will be entitled to receive an aggregate liquidation payment equal to the greater of $1,000 or 1,000 times the payment made per share of common stock. Each of such preferred shares will have 1,000 votes, voting together with the common shares. In the event of any merger, consolidation or other transaction in which common stock is exchanged, each of such preferred shares will be entitled to receive 1,000 times the amount received per common share. Such preferred shares will be nonredeemable. At December 7, 1995, none of these preferred shares was issued or outstanding. NOTE 4 -- PREFERRED STOCK CONVERSION On February 21, 1995, the Company offered to pay a cash premium of $8.25 for each outstanding share of its Series A Convertible Preferred Stock (the "Convertible Preferred Stock") that was converted to common stock. The offer of premium upon conversion was available to holders of the Convertible Preferred Stock through the closing of the special conversion period on March 22, 1995. The Company also offered to register the resale of the shares of common stock issued upon conversion of the Convertible Preferred Stock with the Commission for a 50-day period, which ended June 15, 1995. Holders of 1,190,000 shares of Convertible Preferred Stock elected to convert and, as a result, received an aggregate of approximately 10.0 million shares of common stock and $9.8 million in cash during the first quarter of fiscal 1996. The $9.8 million conversion premium and $0.5 million of expenses of the conversion offer were treated as an additional dividend on the Convertible Preferred Stock for financial reporting purposes. Accordingly, $11.8 million, comprised of the conversion premium, conversion offer expenses and dividends, were deducted from net income for the first nine months of fiscal 1996 to determine the net income available to common stockholders. In addition, the weighted average shares outstanding used to compute primary earnings per common share for the first nine months of fiscal 1996 includes the shares of common stock issued upon conversion from the closing of the conversion period until the end of the nine-month period. NOTE 5 -- INCREASE IN THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK On July 21, 1995, the Company's stockholders approved an amendment to the Company's Certificate of Incorporation to increase the number of shares of common stock, par value $.01 per share, that the Company is authorized to issue from 100 million to 300 million. The amendment was filed in the office of the Secretary of State of the State of Delaware on August 3, 1995. In accordance with the provisions of the Delaware General Corporation Law, such amendment became effective upon filing. NOTE 6 -- RESTRICTED STOCK As discussed in the Company's Annual Report on Form 10-K for the fiscal year ended January 29, 1995, as amended, the Company granted certain restricted stock during fiscal 1995 that typically vests over a seven-year period. During the first nine months of fiscal 1996, the Company granted approximately 660,000 additional shares of restricted stock to employees pursuant to its long-term incentive plan. The unearned compensation associated with restricted stock at October 29, 1995 has been presented separately in the Condensed Consolidated Statement of Financial Position. Prior to the second quarter of fiscal 1996, the unearned compensation was combined with additional paid-in capital, but the amount at January 29, 1995 has been reclassified in the accompanying Condensed Consolidated Statement of Financial Position to conform with the current period presentation. NOTE 7 -- COMMITMENTS AND CONTINGENCIES The Company has been named as a defendant in approximately 30 repetitive stress injury lawsuits, most of which are in New York state courts or United States District Courts for the New York City area. Several are in state courts in New Jersey. One is in the Federal District Court for the Eastern District of Pennsylvania, and one is in Federal District Court in Kansas. Two cases have been dismissed; the remainder are at various stages of the process leading to trial. The allegations in all of these lawsuits are similar. Each plaintiff alleges that he or she suffers from symptoms generally known as "repetitive stress injury," which allegedly were caused by the design or manufacture of the keyboard supplied with the computer the plaintiff used. The Company has denied or is in the process of denying the claims and intends to vigorously defend the suits. The suits naming the Company are just a 5 7 few of many lawsuits of this type that have been filed, often naming Apple, Atex, Compaq, IBM, Keytronic and other major suppliers of keyboard products. The Company currently is not able to predict the outcome of these suits. It is possible that the Company may be named in additional suits. Ultimate resolution of the litigation against the Company may depend on progress in resolving this type of litigation overall. However, the Company does not believe that the outcome of these matters will have a material adverse effect on the Company's financial condition or results of operations. On August 11, 1993, the Company received a subpoena from the United States Department of Commerce, Office of Export Enforcement of the Bureau of Export Administration, requiring the Company to provide all documents relative to any and all exports of 486/66 personal computers or related components to Russia, Ireland, Iran or Iraq during the period from January 1992 through August 1993 in connection with an investigation to enforce regulations under the Export Administration Act of 1979, as amended. In September 1995, the Company received a letter from the Dallas Field Office of the Department of Commerce closing out the investigation into the shipments to Russia and Ireland. The Department of Commerce found no wrongdoing by the Company with regard to these destinations. The Company is still awaiting a response from the Department of Commerce regarding its voluntary self disclosure of certain shipments to Iran in June 1992. If the Office of Export Enforcement's investigators determine that the Company has violated applicable regulations, the government could potentially file civil or criminal charges. The Company has fully responded to the subpoena and, in accordance with its policy to comply fully with export laws and regulations, intends to cooperate with the Office of Export Enforcement. The Company does not believe that this investigation or its outcome will have a material adverse effect on the Company's financial condition or results of operations. The Company received a subpoena from the Federal Trade Commission (the "FTC"), dated July 18, 1994, in connection with an inquiry with respect to whether the Company may have misrepresented or improperly failed to disclose patent rights that would conflict with open use of a local high-speed personal computer bus standard promulgated by the Video Electronics Standards Association. On November 2, 1995, the Company and the FTC announced that they had entered into a consent agreement under which the Company will ensure that any Company employees who are members of standards committees fully understand and disclose patents that may be related to standards under consideration by those committees. In agreeing to the consent decree, the Company did not admit to any wrongdoing, nor did the FTC find that the Company had violated any law or regulation. In addition, the FTC did not impose any fines or sanctions against the Company. The consent decree is subject to public comment until January 1996 before it becomes final. In March 1995, the Company was named along with twelve other personal computer or computer monitor manufacturers in a complaint filed by the District Attorney for Merced County, California. The complaint alleges that each of the defendants has engaged in false or misleading advertising with regard to the size of computer monitor screens and seeks unspecified damages and injunctive relief. In May 1995, several other district attorneys in other California counties joined this lawsuit as co-plaintiffs. On September 27, 1995, a settlement was reached and a Stipulated Judgment was entered by the court under which the Company and the other defendants have agreed to new guidelines in future monitor screen size advertising and to pay an aggregate amount of $1.5 million in retail value of computer equipment and $200,000 in aggregate cash payments to the State of California. The Company's share of the settlement costs has not had, and the cost of adopting and following the new advertising guidelines will not have, a material adverse effect on the Company's financial condition or results of operations. In May 1995, the Company was named, along with two other personal computer manufacturers and one computer monitor vendor, in a class action complaint filed in the California Superior Court for Marin County. The case has been transferred to Orange County, California. A second class action complaint, naming the Company and 47 other manufacturers or vendors of personal computer monitors, was filed in Santa Clara County, California and was served on the Company in August 1995. Two other similar class action complaints naming the Company and others as defendants have been filed in Orange County, California. A motion has been filed by all defendants in all of the cases to consolidate all of the cases before a single judge in Santa Clara County, California. All proceedings in all of the cases have been stayed pending resolution of the motion to consolidate. The complaints allege that each of the defendants has engaged in false or misleading advertising with regard to the size of computer monitor screens. The plaintiffs seek restitution in the form of refunds or product exchange, damages, punitive damages and attorneys' fees. The Company plans to vigorously contest the allegations of the complaints. 6 8 This litigation is currently at a preliminary stage and no discovery has occurred to date. As such, it is too early for the Company to adequately evaluate the likelihood of the plaintiffs prevailing on their claims. There can be no assurance that an adverse determination in this litigation would not have a material adverse effect on the Company's financial condition or results of operations. In June 1995, the Company was served with a class action complaint filed in State District Court in Travis County, Texas. The complaint alleges that the Company has included "used parts" in its "new" computer systems and has failed to adequately inform its customers and prospective customers of that practice. According to the complaint, these facts constitute fraud, negligent misrepresentation, breach of contract and breach of warranty. The plaintiffs seek refund of the purchase price for computer systems purchased from the Company, damages in an unspecified amount, injunctive relief, interest and attorneys' fees. The Company plans to vigorously contest the allegations of the complaint. This litigation is currently at a preliminary stage, and no discovery has occurred to date. As such, it is too early for the Company to adequately evaluate the likelihood of the plaintiffs prevailing on their claims. There can be no assurance that an adverse determination in this litigation would not have a material adverse effect on the Company's financial condition or results of operations. NOTE 8 -- EARNINGS PER COMMON SHARE Primary earnings per common share are computed by dividing net income available to common stockholders by the weighted average number of common shares and common stock equivalents (if dilutive) outstanding during each period. Common stock equivalents include stock options. The Convertible Preferred Stock is not a common stock equivalent for purposes of computing earnings per common share. The number of common stock equivalents outstanding is computed using the treasury stock method. The weighted average shares outstanding used to compute primary earnings per common share for the first nine months of fiscal 1996 includes the shares of common stock issued upon conversion of the Convertible Preferred Stock from the closing of the conversion period until the end of the nine-month period. Shares used in the calculation of fully diluted earnings per common share have been adjusted for the assumed conversion of all of the Company's outstanding Convertible Preferred Stock for all periods presented. NOTE 9 -- SUPPLEMENTAL FINANCIAL INFORMATION (IN THOUSANDS) Supplemental Condensed Consolidated Statement of Financial Position Information:
OCTOBER 29, JANUARY 29, 1995 1995 ------------- ------------- Inventories: Production materials $ 416,932 $ 262,150 Work-in-process and finished goods 46,708 30,775 ------------- ------------- $ 463,640 $ 292,925 ============= ============= Accrued and other liabilities: Accrued warranty costs $ 79,218 $ 65,468 Royalties and licensing 81,107 34,815 Taxes other than income taxes 63,411 39,873 Book overdraft 48,697 44,389 Other liabilities 159,105 139,246 ------------- ------------- $ 431,538 $ 323,791 ============= =============
7 9 Supplemental Condensed Consolidated Statement of Income Information:
THREE MONTHS ENDED NINE MONTHS ENDED -------------------------- -------------------------- OCTOBER 29, OCTOBER 30, OCTOBER 29, OCTOBER 30, 1995 1994 1995 1994 ----------- ----------- ----------- ----------- Financing and other income (expense), net: Investment income (loss), net: Short-term investments $ 6,558 $ 3,679 $ 17,708 $ (12,393) Investment derivatives -- -- -- (23,948) Interest expense (3,493) (3,450) (11,331) (8,008) Foreign currency transactions (406) (605) (2,493) 1,999 Other (924) (1,042) (1,930) (1,270) ----------- ---------- ---------- ---------- $ 1,735 $ (1,418) $ 1,954 $ (43,620) =========== ========== ========== ========== Weighted average shares used to compute earnings per common share: Primary 100,060 84,182 96,338 82,018 =========== ========== ========== ========== Fully diluted 100,976 95,680 99,804 93,888 =========== ========== ========== ==========
Supplemental Condensed Consolidated Statement of Cash Flows Information:
NINE MONTHS ENDED ----------------------------------- OCTOBER 29, OCTOBER 30, 1995 1994 -------------- --------------- Changes in operating working capital accounts: Accounts receivable, net $ (218,608) $ (69,520) Inventories (171,067) (53,486) Accounts payable 127,315 78,822 Accrued and other liabilities 97,674 12,820 Other current assets (24,441) (26,858) Income taxes payable 9,048 15,954 Other, net 260 7,879 -------------- --------------- $ (179,819) $ (34,389) ============== =============== Changes in non-current assets and liabilities: Other assets $ (4,370) $ 55 Other liabilities 27,555 21,202 -------------- --------------- $ 23,185 $ 21,257 ============== ===============
The Company accounts for highly liquid investments with maturities of three months or less at date of acquisition as short-term investments and reflects the related cash flows as investing cash flows. As a result, significant portions of the Company's gross investment maturities and purchases disclosed as investing cash flows are related to highly liquid investments. 8 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS All percentage amounts used in describing operating results are based on the related dollar amounts rounded to the nearest thousand which are set forth in the Condensed Consolidated Financial Statements and related notes thereto. Operating results for the three-month and nine-month periods ended October 29, 1995 are not necessarily indicative of the results that may be expected for the full fiscal year. RESULTS OF OPERATIONS The following table sets forth for the periods indicated the percentage of consolidated net sales represented by certain items in the Company's condensed consolidated statement of income.
PERCENTAGE OF CONSOLIDATED NET SALES ----------------------------------------------------------- THREE MONTHS ENDED NINE MONTHS ENDED --------------------------- -------------------------- OCTOBER 29, OCTOBER 30, OCTOBER 29, OCTOBER 30, 1995 1994 1995 1994 ----------- ----------- ----------- ----------- Net sales: Americas 70.4% 72.3% 66.1% 70.0% Europe 24.1 23.5 27.0 26.8 Other international 5.5 4.2 6.9 3.2 ----- ----- ----- ----- Consolidated net sales 100.0 100.0 100.0 100.0 Cost of sales 79.5 79.5 79.0 78.7 ----- ----- ----- ----- Gross margin 20.5 20.5 21.0 21.3 Operating expenses: Selling, general and administrative 11.3 11.9 11.6 12.4 Research, development and engineering 1.8 1.9 1.9 2.0 ----- ----- ----- ----- Total operating expenses 13.1 13.8 13.5 14.4 ----- ----- ----- ----- Operating income 7.4 6.7 7.5 6.9 Financing and other income (expense), net 0.1 (0.2) 0.1 (1.8) ----- ----- ----- ----- Income before income taxes 7.5 6.5 7.6 5.2 Provision for income taxes 2.2 1.9 2.2 1.6 ----- ----- ----- ----- Net income 5.3 4.6 5.4 3.6 Preferred stock dividends 0.0 0.2 0.3 0.3 ----- ----- ----- ----- Net income available to common stockholders 5.3% 4.4% 5.1% 3.3% ===== ===== ===== =====
Net Sales The third quarter of fiscal 1996 marked the Company's seventh consecutive quarter of sequential growth in consolidated net sales. Consolidated net sales increased 60% and 54% in the third quarter and the first nine months, respectively, of fiscal 1996 over the comparable periods of fiscal 1995, and increased 17% over the second quarter of fiscal 1996. These increases were due primarily to an increase in units sold. Unit volumes increased 57% in the third quarter and 47% in the first nine months of fiscal 1996 over the comparable periods of the prior year mainly as a result of strong demand for the Company's Pentium(R) processor-based products, its desktop product offerings and its Latitude(TM) family of notebook computers. Additionally, because the Company's Pentium processor-based products are generally higher priced than its 486-based products, and the Company's notebook products are generally higher priced than the rest of the Company's product portfolio (excluding servers which account for a relatively small percentage of system revenue), average total revenue per unit increased 2% in the third quarter and 5% in the first nine months of fiscal 1996 as compared with the respective periods of fiscal 1995. The Company believes that its future success is largely dependent upon continued expansion of its notebook product line, its ability to expand its presence in the network server market and its ability to continue to efficiently manage the transition to Pentium processor-based computers and other technological advancements as they become commercially available. There can be no assurance that the Company's development activities will be successful, that product technologies will be available to the Company, that the Company will be able to deliver commercial quantities of computer products in a timely manner or that such products will achieve market acceptance. Some new products introduced by the Company are intended to replace existing products. Although 9 11 the Company monitors the products that are intended to be replaced and attempts to phase out the manufacture of those products in a timely manner, there can be no assurance that such transitions will be executed without adversely affecting the Company's results of operations or financial condition. Growth in consolidated net sales was experienced in all geographic regions, with other international net sales comprising a significantly increased percentage of consolidated net sales during the third quarter and the first nine months of fiscal 1996 compared with the same periods of fiscal 1995. Sequential growth was experienced in both the Americas and in Europe, but other international net sales declined from the prior quarter due in part to a more competitive pricing environment in Japan. After taking into account the results of the Company's foreign currency hedging activities, consolidated net sales (expressed in United States dollars) were not significantly affected in the third quarter or in the first nine months of fiscal 1996 as a result of fluctuations in foreign currency exchange rates from the comparable periods of the prior year. The Company believes that a significant opportunity exists for continued growth in international operations. In October 1995, the Company completed construction of a 238,000 square foot combination office and manufacturing facility on a nine-acre site in Penang, Malaysia to meet the needs of its expanding Asia-Pacific business. This manufacturing facility began production in November 1995. The Company intends to continue to expand its international activities by increasing its market presence in existing markets through ongoing revisions and improvement of its marketing and sales compensation programs to more effectively reach its customers, by improving its support systems, by pursuing additional distribution opportunities and by entering new markets. There can be no assurance that the Company will be successful in its efforts to expand its international activities. The Company was affected by component shortages during the third quarter and by demand levels that exceeded its internal forecasts, which contributed to the backlog of $179.0 million at quarter-end. Backlog was $186.5 million at the end of the second quarter of fiscal 1996 and was $78.2 million at the end of the third quarter of fiscal 1995. There can be no assurance that the backlog at the end of a quarter will translate into sales in any subsequent quarter, particularly in light of the Company's policy of allowing customers to cancel or reschedule orders without penalty prior to commencement of manufacturing. The Company anticipates that industry-wide shortages of component parts will continue to be a factor affecting its business operations. In early November, Sony Corporation, the Company's sole supplier of lithium ion batteries used in Latitude XP and XPi notebook computers, had a fire in the testing area of its lithium ion battery plant in Koriyama, Japan. The Company currently has an inventory of lithium ion batteries on hand and in transit and is actively managing its current battery supply. The Company believes that Sony Corporation is aggressively working its recovery plan for the plant, but at this time the Company is not certain what impact the plant fire will have on its sales of notebook computers during the fourth quarter. In the third quarter of fiscal 1996, approximately 80% of notebook computer sales, or 12% of consolidated net sales, were attributable to notebook computers utilizing lithium ion batteries. Gross Margin Gross margin increased $109.1 million in the third quarter of fiscal 1996 and $268.4 million in the first nine months of fiscal 1996 from the comparable periods in the prior year primarily as a result of the increase in unit volumes. The Company's gross margin as a percentage of consolidated net sales remained relatively stable at 20.5% and 21.0% for the third quarter and the first nine months of fiscal 1996, respectively, compared to 20.5% and 21.3% in the third quarter and the first nine months of fiscal 1995, respectively. The third quarter gross margin percentage decreased, however, from the 21.8% reported in the second quarter of fiscal 1996 due primarily to a more aggressive pricing environment in Europe in the third quarter, an unfavorable shift in the desktop mix to lower margin desktops and an unfavorable seasonal shift in the geographic mix of the Company's net sales from Europe, where margins are generally higher, to the Americas. This seasonal shift in geographic mix is the result of increased sales in the United States to the government sector in the third fiscal quarter, which the Company believes reflects the budgetary spending practices of the U.S. federal government, and decreased sales in Europe in the third fiscal quarter, which the Company believes is the result of the holiday schedule in European countries in the late summer months. The gross margin percentages for the third quarter and the first nine months of fiscal 1996 were negatively impacted by the Company's more aggressive pricing strategy in comparison to the prior year, offset by lower warranty and inventory obsolescence costs and certain economies of scale. 10 12 The Company may take pricing actions as it attempts to maintain a competitive mix of price, performance and customer services while managing its liquidity, profitability and growth. The Company attempts to mitigate the effects of price reductions by improving product mix, further reducing component costs and lowering operating costs. There can be no assurance that pricing actions, if taken, will be effective in stimulating higher levels of sales or that cost reduction efforts will offset the effects of pricing actions on the Company's gross margins. The Company's manufacturing process requires a high volume of quality components that are procured from third party suppliers. Reliance on suppliers, as well as industry supply conditions, generally involves several risks, including the possibility of defective parts, a shortage of components, increases in component costs and reduced control over delivery schedules, any or all of which could have a material adverse effect on the Company's financial results. The Company has several single supplier relationships, and the lack of availability of timely and reliable supply of components from any of these sources could have a material adverse effect on the Company's business. Alternative sources of supply are not available for some of the Company's single sourced components. Even when multiple suppliers are available, the Company may establish a working relationship with a single source when the Company believes it is advantageous due to performance, quality, support, delivery, capacity or price considerations. While the Company has supply agreements with certain suppliers, such agreements typically only specify general terms and conditions, subject to release of purchase orders by the Company and acceptance thereof by the component supplier. Where alternative sources are available, qualification of the alternative suppliers and establishment of reliable supplies of components from such sources may result in delays and could have a material adverse effect on the Company's manufacturing processes and results of operations. The Company occasionally experiences delays in receiving certain components, which can cause delays in the shipment of some products to customers, thereby increasing backlog. Additionally, the Company has occasionally experienced certain defective components, which can affect the reliability and reputation of its products. There can be no assurance that the Company will be able to continue to obtain supplies of reliable components in a timely or cost-effective manner. In particular, the Company obtains its supply of microprocessors from Intel Corporation, although certain comparable microprocessors are available from other sources. Operating Expenses The Company's goal is to manage operating expenses, over time, relative to gross margin. Over the last year, the Company has strengthened its management team and increased staffing worldwide to meet the demands of its growth and to expand its international presence, resulting in increased compensation-related expenses. The Company also expended additional resources relating to its investment in global information systems. These infrastructure expenditures resulted in an increase in selling, general and administrative expenses of 53% and 44% in the third quarter and the first nine months, respectively, of fiscal 1996 from the comparable periods of the prior year. However, selling, general and administrative expenses as a percentage of consolidated net sales decreased in both the third quarter and the first nine months of fiscal 1996 over the same periods of the prior year. The Company increased headcount to support increased product development activities and improved quality and time-to-market of its products as well as to support the growth of its business. Furthermore, the Company incurred additional development costs in conjunction with the development of new notebook computer products. These expenditures resulted in an increase in research, development and engineering expenses of 53% and 49% in the third quarter and the first nine months, respectively, of fiscal 1996 over the comparable periods of the prior year. The Company believes that its ability to manage operating costs is an important factor in its ability to remain price competitive. However, the Company will continue to invest in information systems and infrastructure to manage and support its growth. The Company is currently investing in a key global information systems project which it expects to complete in fiscal 1999. No assurance can be given that the Company's efforts to manage future operating expenses will be successful. 11 13 Financing and Other Income (Expense), net Financing and other income (expense), net was $1.8 million for the third quarter of fiscal 1996 compared with ($1.4) million for the third quarter of fiscal 1995 and was $2.0 million for the first nine months of fiscal 1996 compared with ($43.6) million for the comparable period in the prior year. The table below sets forth for the periods indicated the components of financing and other income (expense), net (in thousands):
THREE MONTHS ENDED NINE MONTHS ENDED ------------------------- -------------------------- OCTOBER 29, OCTOBER 30, OCTOBER 29, OCTOBER 30, 1995 1994 1995 1994 ----------- ----------- ----------- ----------- Financing and other income (expense), net: Investment income (loss), net: Short-term investments $ 6,558 $ 3,679 $ 17,708 $ (12,393) Investment derivatives -- -- -- (23,948) Interest expense (3,493) (3,450) (11,331) (8,008) Foreign currency transactions (406) (605) (2,493) 1,999 Other (924) (1,042) (1,930) (1,270) ---------- ---------- ---------- ---------- $ 1,735 $ (1,418) $ 1,954 $ (43,620) ========== ========== ========== ==========
The short-term investment losses for the first nine months of fiscal 1995 were primarily due to recognized losses during the first half of fiscal 1995 of $23.1 million on certain of the Company's short-term investments as a result of interest rate increases in the United States, Canadian, Japanese and European interest rate markets, partially offset by investment income of approximately $10.7 million for the first nine months of fiscal 1995. The increase in investment income in the first nine months of fiscal 1996 over the $10.7 million for the comparable period of the prior year was primarily due to higher average investment balances and higher effective yields. Realized and unrealized net losses on interest rate derivatives recognized in the first nine months of fiscal 1995 were primarily a result of interest rate increases in the United States, Canadian, Japanese and European interest rate markets. The Company closed all remaining investment derivatives during the second quarter of fiscal 1995. Consequently, no gains or losses associated with investment derivatives have been recognized in fiscal 1996. The Company intends to use derivative financial instruments only to manage its exposure to fluctuations in foreign currency exchange rates and to manage market risk on components of its debt and equity. All of the Company's foreign exchange and interest rate derivative instruments involve elements of market and credit risk in excess of the amounts recognized in the financial statements. The counterparties to 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, the Company regularly monitors the credit quality of the financial institutions that are counterparties to these financial instruments. The Company does not anticipate nonperformance by the counterparties. Interest expense in the third quarter of fiscal 1996 was relatively flat in comparison with the third quarter of fiscal 1995. Interest expense increased in the first nine months of fiscal 1996 from the comparable period of the prior year primarily due to higher borrowings and higher interest rates in fiscal 1996. Concurrently with the issuance of the 11% Senior Notes Due August 15, 2000 (the "Notes") in the third quarter of fiscal 1994, the Company entered into interest rate swap agreements to manage the interest costs associated with the Notes. The swap agreements effectively changed the Company's interest rate exposure from a fixed-rate to a floating-rate basis. However, in response to increasing interest rates, in August 1994, the Company entered into offsetting swap agreements to effectively change its interest rate exposure back to a fixed-rate basis. The interest rate swap agreements mature on August 15, 1998, the first available redemption date of the Notes. At the end of the third quarter of fiscal 1996, the Company had outstanding receive fixed/pay floating interest rate swaps with an aggregate notional amount of $100 million offset by receive floating/pay fixed interest rate swaps with an aggregate notional amount of $100 million. The weighted average interest rate on the Notes, adjusted by the swaps, was 13.8% for the third quarter and the first nine months of fiscal 1996 compared with 12.9% and 11.4% for the third quarter and the first nine months of fiscal 1995, respectively. 12 14 Income Tax The Company's effective tax rate was 29% for the third quarter and the first nine months of fiscal 1996 compared with 29% for the third quarter and 30% for the first nine months of fiscal 1995. The change in the effective tax rate resulted from changes in the geographical distribution of income and losses. Fluctuations in Operating Results The Company's operating results may fluctuate from period to period and will depend on numerous factors, including customer demand and market acceptance of the Company's products, new product introductions, product obsolescence, component supply, component price fluctuations, varying product mix, foreign currency exchange rates, foreign currency and interest rate hedging and other factors. Net sales in a given quarter are primarily dependent on customer orders received in that quarter, and operating expenditures are primarily based on forecasts of customer demand. As a result, if demand does not meet the Company's expectations in any given period, the sales shortfall may result in an increased adverse effect on operating results due to the Company's inability to adjust operating expenditures quickly enough to compensate for the shortfall. The Company's business is sensitive to the spending patterns of its customers, which in turn are subject to prevailing economic conditions and other factors beyond the Company's control. Changes in economic conditions or customer spending patterns for personal computer products could have a material adverse effect on the Company's results of operations. HEDGING ACTIVITIES The results of the Company's international operations are affected by changes in exchange rates between certain foreign currencies and the United States dollar. The financial statements of the Company's international sales subsidiaries have generally been measured using the local currency as the functional currency. An increase in the value of the United States dollar increases costs incurred by the Company's international operations because many of its component purchases are denominated in the United States dollar. Changes in exchange rates may negatively affect the Company's consolidated net sales (as expressed in United States dollars) and gross margins from international operations. Effective January 30, 1995, most of the Company's European sales are made from a U.S. dollar functional currency entity. The purpose of the Company's hedging program is to reduce the Company's exposure to the risk that the dollar-value equivalent of anticipated cash flows will be adversely affected by changes in foreign currency exchange rates. The Company attempts to reduce its exposure to currency fluctuations involving anticipated, but not firmly committed, transactions and involving transactions with firm foreign currency commitments through the use of purchased foreign currency option contracts and forward contracts. Realized and unrealized gains or losses and premiums on foreign currency purchased option contracts that are designated and effective as hedges of probable anticipated, but not firmly committed, foreign currency transactions are deferred and recognized in income in the same period as the hedged transaction. The risk of loss associated with purchased options is limited to premium amounts paid for the option contracts, which could be significant. Forward contracts designated as hedges of anticipated transactions are accounted for on a mark-to-market basis and included in income as a component of net sales or cost of sales, depending upon which transaction is hedged. Transaction exposures representing firm foreign currency commitments are generally hedged using foreign exchange forward contracts. Forward contracts related to transaction exposures are accounted for on a mark-to-market basis with realized and unrealized gains or losses included in financing and other income (expense) as an offset to the underlying hedged transaction. The risk of loss associated with forward contracts is limited to the exchange rate differential from the time the contract is made until the time it is settled. The Company enters into foreign currency purchased options and, to a lesser extent, forward contracts to hedge a portion of its anticipated, but not firmly committed, transactions including sales by international subsidiaries, which includes international sales by a U.S. dollar functional currency entity and intercompany shipments to certain international subsidiaries, and foreign currency denominated purchases of certain components. Foreign currency purchased options generally expire in twelve months or less and forward contracts 13 15 generally mature in three months or less. The principal hedge currencies are the German mark, the British pound and the Japanese yen. At October 29, 1995, the Company held purchased option contracts that were designated and effective as hedges of anticipated sales by international subsidiaries with a total notional amount of $826.2 million and a combined net realized and unrealized loss of $11.4 million. During the third quarter of fiscal 1996, the Company closed option contracts that were designated and effective as hedges of anticipated foreign currency denominated purchases. At October 29, 1995, the net realized loss relating to these contracts was $4.9 million. Forward contracts with maturity dates of less than three months designated to hedge foreign currency transaction exposures of $167.2 million were outstanding at October 29, 1995. LIQUIDITY AND CAPITAL RESOURCES The Company's cash flow from operating activities for the first nine months of fiscal 1996 was $76.9 million and represented the Company's primary source of cash during the nine-month period, along with $42.1 million from the issuance of common stock under employee plans. Working capital totaled $945.9 million at October 29, 1995 compared with $719.0 million at January 29, 1995. Days in accounts receivable at the end of the third quarter of fiscal 1996 increased to 49 days from 47 days at the end of fiscal 1995. Days in accounts payable decreased slightly to 43 days at the end of the third quarter of fiscal 1996 from 44 days at the end of fiscal 1995. Inventory levels increased to 37 days of supply at the end of the third quarter of fiscal 1996 from 32 days at the end of fiscal 1995. Maintaining a low inventory level is dependent upon the Company's ability to achieve targeted revenue and product mix, to further minimize complexities in its product line and to maximize commonality of parts. There can be no assurance that the Company will be able to maintain low inventory levels in future periods. The Company used $66.5 million of cash during the first nine months of fiscal 1996 to construct facilities and to acquire information systems and personal computer office equipment. Capital expenditures for the fourth quarter of fiscal 1996 are expected to be approximately $20 million, primarily related to the construction of facilities, the acquisition and development of an integrated management information system and the acquisition of equipment, including computer equipment for internal use. The Company believes that its cash and short-term investments and its cash flow from operating activities will be adequate to fund its capital expenditures planned for the remainder of fiscal 1996. The Company has entered into a series of line of credit facilities, each of which bears interest at a defined Base Rate or Eurocurrency Rate and has a covenant based on quarterly maintenance of net worth. Maximum aggregate amounts available under the new credit facilities are limited to $200 million less the aggregate of outstanding letters of credit under these facilities. During the commitment period, the Company is obligated to pay a fee on the unused portion of the credit facilities. No borrowings or letters of credit were outstanding under these credit facilities as of October 29, 1995, and the maximum available totaled $200 million. On November 30, 1995, several of the Company's subsidiaries entered into a transaction pursuant to which Dell Receivables L.P. ("Dell Receivables"), a newly-formed wholly-owned subsidiary of the Company, purchases certain accounts receivable and related assets from other Company subsidiaries and in turn transfers such accounts receivable and related assets to the Dell Trade Receivables Master Trust (the "Master Trust"). The Master Trust will issue certificates evidencing fractional undivided interests therein, which certificates may be sold to investors. This arrangement will give Dell Receivables the ability to raise up to $150 million through the sale of certificates of interest in the Master Trust and replaces the Company's receivables securitization arrangement that was scheduled to expire on June 22, 1996. At December 7, 1995, this facility was unused. Dell Receivables is obligated to pay a commitment fee on the unused portion of the facility. On October 9, 1995, the Company's Board of Directors declared a 2-for-1 stock split of the Company's common stock in the form of a 100% stock dividend to stockholders of record as of October 20, 1995. The distribution of such dividend occurred on October 27, 1995. On November 29, 1995, the Company's Board of Directors declared a dividend of one Preferred Share Purchase Right (a "Right") for each outstanding share of the Company's common stock. The distribution of the Rights will be made on December 13, 1995 to the stockholders of record on that date. Each Right entitles the holder to purchase one one-thousandth of a share of a new series of preferred stock at an exercise price of $225. 14 16 The Rights will be exercisable only if a person or group acquires 15% or more of the Company's common stock or announces a tender offer, the consummation of which would result in such person or group owning 15% or more of the Company's common stock. Once exercisable and under specified circumstances, each Right (a) may be exercised to purchase one one-thousandth of a share of a new series of preferred stock at an exercise price of $225, (b) may be exercised to purchase a number of the Company's common shares having a market value of twice the exercise price, (c) may be exercised to purchase common stock of any acquiring company having a market value of twice the exercise price or (d) may be exchanged for the Company's common stock on the basis of one common share for each Right. The Rights expire on November 29, 2005 and may be redeemed by the Company under certain circumstances at a price of $.001 per Right. Neither the ownership nor the further acquisition of Company common stock by Michael S. Dell, the Company's founder, Chairman and Chief Executive Officer and largest stockholder, will cause the Rights to become exercisable or nonredeemable or will trigger the other features of the Rights. The Rights are designed to protect the Company's stockholders in the event of an unsolicited attempt to acquire the Company. On July 21, 1995, the Company's stockholders approved a proposed amendment to the Company's Certificate of Incorporation to increase the number of shares of common stock, par value $.01 per share, that the Company is authorized to issue from 100 million to 300 million. The additional authorized shares can be used for any proper purpose approved by the Company's Board of Directors and will provide the Company with the flexibility it may need in the future to raise capital, negotiate acquisitions, restructure debt, issue stock dividends, consummate stock splits or for other corporate purposes. On February 21, 1995, the Company offered to pay a cash premium of $8.25 for each outstanding share of its Convertible Preferred Stock that was converted to common stock. The offer of premium upon conversion was available to holders of the Convertible Preferred Stock through the closing of the special conversion period on March 22, 1995. The Company also offered to register the resale of the shares of common stock issued upon conversion of the Convertible Preferred Stock with the Securities and Exchange Commission for a 50-day period, which ended June 15, 1995. Holders of 1,190,000 shares of Convertible Preferred Stock elected to convert and, as a result, received an aggregate of approximately 10.0 million shares of common stock and $9.8 million in cash during the first quarter of fiscal 1996. The $9.8 million conversion premium and $0.5 million of expenses of the conversion offer were treated as an additional dividend on the Convertible Preferred Stock for financial reporting purposes. During the first nine months of fiscal 1996, the Company granted approximately 660,000 shares of restricted stock to employees pursuant to its long-term incentive plan. Due to the granting of these additional shares, the unearned compensation associated with restricted stock grants has increased from $4.4 million at January 29, 1995 to $18.6 million at October 29, 1995. Such unearned compensation is being amortized to expense over the vesting period of the underlying restricted stock. Repayment of the Company's $100 million in Notes, repayment of a loan in the original amount of $14 million secured by one of its facilities in Round Rock, Texas and payment of its operating lease commitments constitute the Company's long-term commitments to use cash. Management believes that sufficient resources will be available to meet the Company's cash requirements through at least the next twelve months. Cash requirements for periods beyond the next twelve months depend on the Company's profitability, its ability to manage working capital requirements and its rate of growth. 15 17 PART II -- OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company has been named as a defendant in approximately 30 repetitive stress injury lawsuits, most of which are in New York state courts or United States District Courts for the New York City area. Several are in state courts in New Jersey. One is in the Federal District Court for the Eastern District of Pennsylvania, and one is in Federal District Court in Kansas. Two cases have been dismissed; the remainder are at various stages of the process leading to trial. The allegations in all of these lawsuits are similar. Each plaintiff alleges that he or she suffers from symptoms generally known as "repetitive stress injury," which allegedly were caused by the design or manufacture of the keyboard supplied with the computer the plaintiff used. The Company has denied or is in the process of denying the claims and intends to vigorously defend the suits. The suits naming the Company are just a few of many lawsuits of this type that have been filed, often naming Apple, Atex, Compaq, IBM, Keytronic and other major suppliers of keyboard products. The Company currently is not able to predict the outcome of these suits. It is possible that the Company may be named in additional suits. Ultimate resolution of the litigation against the Company may depend on progress in resolving this type of litigation overall. However, the Company does not believe that the outcome of these matters will have a material adverse effect on the Company's financial condition or results of operations. On August 11, 1993, the Company received a subpoena from the United States Department of Commerce, Office of Export Enforcement of the Bureau of Export Administration, requiring the Company to provide all documents relative to any and all exports of 486/66 personal computers or related components to Russia, Ireland, Iran or Iraq during the period from January 1992 through August 1993 in connection with an investigation to enforce regulations under the Export Administration Act of 1979, as amended. In September 1995, the Company received a letter from the Dallas Field Office of the Department of Commerce closing out the investigation into the shipments to Russia and Ireland. The Department of Commerce found no wrongdoing by the Company with regard to these destinations. The Company is still awaiting a response from the Department of Commerce regarding its voluntary self disclosure of certain shipments to Iran in June 1992. If the Office of Export Enforcement's investigators determine that the Company has violated applicable regulations, the government could potentially file civil or criminal charges. The Company has fully responded to the subpoena and, in accordance with its policy to comply fully with export laws and regulations, intends to cooperate with the Office of Export Enforcement. The Company does not believe that this investigation or its outcome will have a material adverse effect on the Company's financial condition or results of operations. The Company received a subpoena from the Federal Trade Commission (the "FTC"), dated July 18, 1994, in connection with an inquiry with respect to whether the Company may have misrepresented or improperly failed to disclose patent rights that would conflict with open use of a local high-speed personal computer bus standard promulgated by the Video Electronics Standards Association. On November 2, 1995, the Company and the FTC announced that they had entered into a consent agreement under which the Company will ensure that any Company employees who are members of standards committees fully understand and disclose patents that may be related to standards under consideration by those committees. In agreeing to the consent decree, the Company did not admit to any wrongdoing, nor did the FTC find that the Company had violated any law or regulation. In addition, the FTC did not impose any fines or sanctions against the Company. The consent decree is subject to public comment until January 1996 before it becomes final. In March 1995, the Company was named along with twelve other personal computer or computer monitor manufacturers in a complaint filed by the District Attorney for Merced County, California. The complaint alleges that each of the defendants has engaged in false or misleading advertising with regard to the size of computer monitor screens and seeks unspecified damages and injunctive relief. In May 1995, several other district attorneys in other California counties joined this lawsuit as co-plaintiffs. On September 27, 1995, a settlement was reached and a Stipulated Judgment was entered by the court under which the Company and the other defendants have agreed to new guidelines in future monitor screen size advertising and to pay an aggregate amount of $1.5 million in retail value of computer equipment and $200,000 in aggregate cash payments to the State of California. The Company's share of the settlement costs has not had, and the cost of adopting and following the new advertising guidelines will not have, a material adverse effect on the Company's financial condition or results of operations. 16 18 In May 1995, the Company was named, along with two other personal computer manufacturers and one computer monitor vendor, in a class action complaint filed in the California Superior Court for Marin County. The case has been transferred to Orange County, California. A second class action complaint, naming the Company and 47 other manufacturers or vendors of personal computer monitors, was filed in Santa Clara County, California and was served on the Company in August 1995. Two other similar class action complaints naming the Company and others as defendants have been filed in Orange County, California. A motion has been filed by all defendants in all of the cases to consolidate all of the cases before a single judge in Santa Clara County, California. All proceedings in all of the cases have been stayed pending resolution of the motion to consolidate. The complaints allege that each of the defendants has engaged in false or misleading advertising with regard to the size of computer monitor screens. The plaintiffs seek restitution in the form of refunds or product exchange, damages, punitive damages and attorneys' fees. The Company plans to vigorously contest the allegations of the complaints. This litigation is currently at a preliminary stage and no discovery has occurred to date. As such, it is too early for the Company to adequately evaluate the likelihood of the plaintiffs prevailing on their claims. There can be no assurance that an adverse determination in this litigation would not have a material adverse effect on the Company's financial condition or results of operations. In June 1995, the Company was served with a class action complaint filed in State District Court in Travis County, Texas. The complaint alleges that the Company has included "used parts" in its "new" computer systems and has failed to adequately inform its customers and prospective customers of that practice. According to the complaint, these facts constitute fraud, negligent misrepresentation, breach of contract and breach of warranty. The plaintiffs seek refund of the purchase price for computer systems purchased from the Company, damages in an unspecified amount, injunctive relief, interest and attorneys' fees. The Company plans to vigorously contest the allegations of the complaint. This litigation is currently at a preliminary stage, and no discovery has occurred to date. As such, it is too early for the Company to adequately evaluate the likelihood of the plaintiffs prevailing on their claims. There can be no assurance that an adverse determination in this litigation would not have a material adverse effect on the Company's financial condition or results of operations. ITEM 2. CHANGES IN SECURITIES Adoption of Rights Plan. On November 29, 1995, the Company's Board of Directors adopted a Preferred Share Purchase Rights Plan that is designed to protect the Company's stockholders in the event of an unsolicited attempt to acquire the Company. The terms of such plan, the Preferred Share Purchase Rights that will be issued in connection with the implementation of such plan and the new series of preferred stock that was created in connection therewith are described in the Company's Current Report on Form 8-K, dated November 29, 1995 and filed with the Securities and Exchange Commission on November 30, 1995, which description is incorporated herein by reference. Amendments to Bylaws. On November 29, 1995, the Board of Directors approved certain amendments to the Company's Bylaws. Such amendments (a) permit the Board of Directors to postpone a previously scheduled meeting of stockholders by giving public notice of such postponement prior to the date previously scheduled for such meeting, (b) permit the chairman of a meeting of stockholders to fix and announce the date and time of the opening and closing of the polls for each matter upon which the stockholders will vote at the meeting, (c) permit the Board of Directors to designate the chairman of any meeting of stockholders and (d) permit the chairman of a meeting of stockholders to determine the rules of order and procedure to be followed in the conduct of such meeting. The complete text of such amendments is filed as Exhibit 3.2 to this Report. In addition, the Board of Directors, on November 29, 1995, adopted Restated Bylaws for the Company, which Restated Bylaws incorporate the amendments described above, as well as other Bylaw amendments previously approved by the Board since the original adoption of the Bylaws. The complete text of the Restated Bylaws is filed as Exhibit 3.3 to this Report. 17 19 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. The following exhibits are filed as a part of this Report:
EXHIBIT NO. DESCRIPTION OF EXHIBIT ----------- ---------------------- 3.1 Certificate of Designations of Series A Junior Participating Preferred Stock, dated November 29, 1995 and filed December 4, 1995 3.2 Amendments to Bylaws, adopted November 29, 1995 3.3 Restated Bylaws, as adopted on November 29, 1995 4 Rights Agreement, dated as of November 29, 1995, between the Company and Chemical Bank, as Rights Agent (incorporated by reference to Exhibit 4 to the Company's Current Report on Form 8-K, dated November 29, 1995 and filed with the Securities and Exchange Commission on November 30, 1995, Commission File No. 0-17017) 10 Supplement to Schedule of Similar Agreements, listing additional agreements substantially identical to the Committed Credit Line Agreement filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended July 30, 1995 11 Statement Re Computation of Per Share Earnings 27 Financial Data Schedule
(b) Reports on Form 8-K The Company did not file any Current Reports on Form 8-K during the fiscal quarter to which this Report relates. On November 30, 1995, the Company filed a Current Report on Form 8-K reporting under Item 5 the adoption by the Board of Directors of the Preferred Share Purchase Rights Plan referred to in Item 2 of this Report. 18 20 SIGNATURE Pursuant to the requirements 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 COMPUTER CORPORATION December 8, 1995 /s/ Thomas J. Meredith ---------------------------------------- Thomas J. Meredith Senior Vice President (On behalf of the registrant and as principal financial officer) 19 21 INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBIT ----------- ---------------------- 3.1 Certificate of Designations of Series A Junior Participating Preferred Stock, dated November 29, 1995 and filed December 4, 1995 3.2 Amendments to Bylaws, adopted November 29, 1995 3.3 Restated Bylaws, as adopted on November 29, 1995 4 Rights Agreement, dated as of November 29, 1995, between the Company and Chemical Bank, as Rights Agent (incorporated by reference to Exhibit 4 to the Company's Current Report on Form 8-K, dated November 29, 1995 and filed with the Securities and Exchange Commission on November 30, 1995, Commission File No. 0-17017) 10 Supplement to Schedule of Similar Agreements, listing additional agreements substantially identical to the Committed Credit Line Agreement filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended July 30, 1995 11 Statement Re Computation of Per Share Earnings 27 Financial Data Schedule
EX-3.1 2 CERTIFICATE OF DESIGNATIONS 1 EXHIBIT 3.1 CERTIFICATE OF DESIGNATIONS of SERIES A JUNIOR PARTICIPATING PREFERRED STOCK of DELL COMPUTER CORPORATION (Pursuant to Section 151 of the Delaware General Corporation Law) Dell Computer Corporation, a corporation organized and existing under the General Corporation Law of the State of Delaware (hereinafter called the "Corporation", hereby certifies that the following resolution was adopted by the Board of Directors of the Corporation as required by Section 151 of the General Corporation Law at a meeting duly called and held on November 29, 1995: RESOLVED, that pursuant to the authority granted to and vested in the Board of Directors of this Corporation (hereinafter called the "Board of Directors" or the "Board") in accordance with the provisions of the Certificate of Incorporation, the Board of Directors hereby creates a series of Preferred Stock, par value $.01 per share (the "Preferred Stock"), of the Corporation and hereby states the designation and number of shares, and fixes the relative rights, preferences, and limitations thereof as follows: Series A Junior Participating Preferred Stock: Section I. Designation and Amount. The shares of such series shall be designated as "Series A Junior Participating Preferred Stock" (the "Series A Preferred Stock") and the number of shares constituting the Series A Preferred Stock shall be 200,000. Such number of shares may be increased or decreased by resolution of the Board of Directors; provided, that no decrease shall reduce the number of shares of Series A Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Corporation convertible into Series A Preferred Stock. Section II. Dividends and Distributions. A. Subject to the rights of the holders of any shares of any series of Preferred Stock (or any similar 2 stock) ranking prior and superior to the Series A Preferred Stock with respect to dividends, the holders of shares of Series A Preferred Stock, in preference to the holders of Common Stock, par value $.01 per share (the "Common Stock"), of the Corporation, and of any other junior stock, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the first day of March, June, September and December in each year (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $1 or (b) subject to the provision for adjustment hereinafter set forth, 1000 times the aggregate per share amount of all cash dividends, and 1000 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions, other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Preferred Stock. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. B. The Corporation shall declare a dividend or distribution on the Series A Preferred Stock as provided in paragraph (A) of this Section immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment -2- 3 Date, a dividend of $1 per share on the Series A Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. C. Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series A Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than 60 days prior to the date fixed for the payment thereof. Section III. Voting Rights. The holders of shares of Series A Preferred Stock shall have the following voting rights: A. Subject to the provision for adjustment hereinafter set forth, each share of Series A Preferred Stock shall entitle the holder thereof to 1000 votes on all matters submitted to a vote of the stockholders of the Corporation. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the number of votes per share to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of -3- 4 Common Stock that were outstanding immediately prior to such event. B. Except as otherwise provided herein, in any other Certificate of Designations creating a series of Preferred Stock or any similar stock, or by law, the holders of shares of Series A Preferred Stock and the holders of shares of Common Stock and any other capital stock of the Corporation having general voting rights shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation. C. Except as set forth herein, or as otherwise provided by law, holders of Series A Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action. Section IV. Certain Restrictions. A. Whenever quarterly dividends or other dividends or distributions payable on the Series A Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Preferred Stock outstanding shall have been paid in full, the Corporation shall not: 1. declare or pay dividends, or make any other distributions, on any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock; 2. declare or pay dividends, or make any other distributions, on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except dividends paid ratably on the Series A Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; 3. redeem or purchase or otherwise acquire for consideration shares of any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any stock of the Corporation ranking junior (either -4- 5 as to dividends or upon dissolution, liquidation or winding up) to the Series A Preferred Stock; or 4. redeem or purchase or otherwise acquire for consideration any shares of Series A Preferred Stock, or any shares of stock ranking on a parity with the Series A Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. B. The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner. Section V. Reacquired Shares. Any shares of Series A Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock subject to the conditions and restrictions on issuance set forth herein, in the Certificate of Incorporation, or in any other Certificate of Designations creating a series of Preferred Stock or any similar stock or as otherwise required by law. Section VI. Liquidation, Dissolution or Winding Up. Upon any liquidation, dissolution or winding up of the Corporation, no distribution shall be made (1) to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock unless, prior thereto, the holders of shares of Series A Preferred Stock shall have received $1000 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, provided that the holders of shares of Series A Preferred Stock shall be entitled to receive an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to 1000 times the aggregate amount to be distributed per share to holders of shares of Common Stock, or (2) to the holders of shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except distributions made ratably on the -5- 6 Series A Preferred Stock and all such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the aggregate amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under the proviso in clause (1) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. Section VII. Consolidation, Merger, etc. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case each share of Series A Preferred Stock shall at the same time be similarly exchanged or changed into an amount per share, subject to the provision for adjustment hereinafter set forth, equal to 1000 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series A Preferred Stock shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. Section VIII. No Redemption. The shares of Series A Preferred Stock shall not be redeemable. Section IX. Rank. The Series A Preferred Stock shall rank, with respect to the payment of dividends and the distribution of assets, junior to all series of any other class of the Corporation's Preferred Stock. -6- 7 Section X. Amendment. The Certificate of Incorporation of the Corporation shall not be amended in any manner which would materially alter or change the powers, preferences or special rights of the Series A Preferred Stock so as to affect them adversely without the affirmative vote of the holders of at least two-thirds of the outstanding shares of Series A Preferred Stock, voting together as a single class. IN WITNESS WHEREOF, this Certificate of Designations is executed on behalf of the Corporation by its Chairman of the Board and attested by its Secretary this 29th day of November, 1995. /s/ Michael S. Dell --------------------------------------- Chairman of the Board Attest: /s/ Thomas B. Green - --------------------------------------- Secretary -7- EX-3.2 3 AMENDMENTS TO BYLAWS 1 EXHIBIT 3.2 DELL COMPUTER CORPORATION AMENDMENTS TO BYLAWS AND ADOPTION OF RESTATED BYLAWS WHEREAS, the Board of Directors of the Company deems it advisable and in the best interests of the Company and its stockholders to amend the Bylaws of the Company (the "Bylaws"); WHEREAS, in accordance with Article IX of the Bylaws, the Board of Directors is (subject to certain exceptions specified therein) authorized to amend the Bylaws, without any action by the stockholders, by a vote of a majority of the directors; WHEREAS, the Board of Directors deems it desirable and convenient for the administration of the Company to restate the Bylaws, incorporating therein the amendments set forth below and all amendments to the Bylaws previously adopted by the Board of Directors and making various non-substantive changes therein (such as page numbers and references thereto in the Table of Contents); NOW, THEREFORE BE IT RESOLVED AS FOLLOWS: (a) The Bylaws are amended as follows: (1) Section 2 of Article II is hereby amended by deleting the title thereof and replacing it with the following title (making the corresponding change to the Table of Contents): Section 2. Quorum; Adjournment and Postponement of Meetings; Vote Required. (2) Section 2 of Article II is hereby amended by adding the following sentence to the end of the second paragraph thereof: Any previously scheduled meeting of stockholders may be postponed by resolution of the Board of Directors upon public notice given prior to the date previously scheduled for such meeting of stockholders. (3) Section 9 of Article II is hereby amended by adding the following sentence to the end of the second paragraph thereof: The chairman of the meeting shall fix and announce at the meeting the date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at the meeting. 2 (4) Section 10 of Article II is hereby amended by deleting such provision in its entirety and replacing it with the following: Section 10. Conduct of Meetings. Unless otherwise determined by resolution of the Board of Directors, the Chairman of the Board shall, or shall designate an appropriate officer of the Corporation to, call any annual or special meeting of stockholders to order, act as chairman of any such meeting and determine the rules of order and procedure to be followed in the conduct of any such meeting. The Secretary or an Assistant Secretary (if the Secretary is absent, is otherwise unable to act or delegates such duties to such Assistant Secretary) shall act as Secretary of each meeting of stockholders. (b) The Restated Bylaws attached hereto as Exhibit A (including any and all additional amendments effected thereby) are hereby approved and adopted as the Bylaws of the Company and henceforth may be referred to as, and may be presented as, the Bylaws of the Company; and the Secretary is authorized and directed to insert a copy thereof into the records of the Company where the Company's organizational documents are held. EX-3.3 4 RESTATED BYLAWS 1 EXHIBIT 3.3 RESTATED BYLAWS OF DELL COMPUTER CORPORATION A DELAWARE CORPORATION DATE OF ADOPTION -- OCTOBER 22, 1987 DATE OF RESTATEMENT -- NOVEMBER 29, 1995 2 RESTATED BYLAWS OF DELL COMPUTER CORPORATION TABLE OF CONTENTS ARTICLE I -- OFFICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 1. Registered Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 2. Other Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 ARTICLE II -- STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 1. Place of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 2. Quorum; Adjournment and Postponement of Meetings; Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 3. Annual Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Section 4. Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Section 5. Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Section 6. Notice of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Section 7. Stock List . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Section 8. Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Section 9. Voting; Elections; Inspectors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Section 10. Conduct of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Section 11. Treasury Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Section 12. Action Without Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 ARTICLE III -- BOARD OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Section 1. Power; Number; Term of Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Section 2. Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Section 3. Place of Meeting; Order of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Section 4. First Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Section 5. Regular Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 6. Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 7. Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 8. Vacancies; Increases in the Number of Directors . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 9. Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 10. Action Without a Meeting; Telephone Conference Meeting . . . . . . . . . . . . . . . . . . . . . 8
ii 3 Section 11. Approval or Ratification of Acts or Contract by Stockholders . . . . . . . . . . . . . . . . . . 9 Section 12. Nomination of Directors; Stockholder Business at Annual Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 ARTICLE IV -- COMMITTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Section 1. Designation; Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Section 2. Procedure; Meetings; Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 3. Substitution of Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 ARTICLE V -- OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 1. Number, Titles and Term of Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 2. Salaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 3. Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 4. Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 5. Powers and Duties of the Chief Executive Officer . . . . . . . . . . . . . . . . . . . . . . . 13 Section 6. Powers and Duties of the Chairman of the Board . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 7. Powers and Duties of the President . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 8. Vice Presidents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 9. Treasurer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 10. Assistant Treasurers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 11. Secretary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 12. Assistant Secretaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 13. Action with Respect to Securities of Other Corporations . . . . . . . . . . . . . . . . . . . . 14 ARTICLE VI -- INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 1. Right to Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 2. Indemnification of Employees and Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 3. Right of Claimant to Bring Suit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 4. Nonexclusivity of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Section 5. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Section 6. Savings Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 ARTICLE VII -- CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Section 1. Certificates of Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Section 2. Transfer of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Section 3. Ownership of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Section 4. Regulations Regarding Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Section 5. Lost or Destroyed Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
iii 4 ARTICLE VIII -- MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 1. Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 2. Corporate Seal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 3. Notice and Waiver of Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 4. Resignations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 5. Facsimile Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 6. Reliance upon Books, Reports and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 ARTICLE IX -- AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
iv 5 RESTATED BYLAWS OF DELL COMPUTER CORPORATION A DELAWARE CORPORATION ARTICLE I OFFICES SECTION 1. REGISTERED OFFICE. The registered office of the Corporation required by the General Corporation Law of the State of Delaware to be maintained in the State of Delaware, shall be the registered office named in the original Certificate of Incorporation of the Corporation, or such other office as may be designated from time to time by the Board of Directors in the manner provided by law. Should the Corporation maintain a principal office within the State of Delaware such registered office need not be identical to such principal office of the Corporation. SECTION 2. OTHER OFFICES. The Corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine or the business of the Corporation may require. ARTICLE II STOCKHOLDERS SECTION 1. PLACE OF MEETINGS. All meetings of the stockholders shall be held the principal office of the Corporation, or, if the meeting is called by the Chairman of the Board, or by a majority of the Board of Directors, at the principal office of the Corporation or at such other place within or without the State of Delaware as shall be specified or fixed in the notices or waivers of notice thereof. SECTION 2. QUORUM; ADJOURNMENT AND POSTPONEMENT OF MEETINGS; VOTE REQUIRED. Unless otherwise required by law or provided in the Certificate of Incorporation or these bylaws, the presence, in person or represented by proxy, of the holders of a majority of the voting power of the shares of capital stock of the Corporation entitled to vote on any matter shall constitute a quorum for the purpose of considering such matter at a meeting of the stockholders. If a meeting of stockholders cannot be organized because a quorum has not attended, the stockholders entitled to vote thereat, present in person or represented by 6 proxy, shall have the power to adjourn such meeting from time to time, without notice other than announcement at the meeting at which the adjournment is taken of the time and place of the adjourned meeting, until a quorum shall be present and represented. Furthermore, after a meeting has been duly organized, the chairman of the meeting or the holders of a majority of the voting power of the shares of capital stock of the Corporation present in person or represented by proxy at the meeting shall have the power to adjourn the meeting from time to time, without notice other than announcement at the meeting at which the adjournment is taken of the time and place of the adjourned meeting. When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at such meeting. At any adjourned meeting at which a quorum shall be present or represented, the Corporation may transact any business which might have been transacted at the original meeting. The stockholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal from the meeting of a sufficient number of stockholders such that the number of stockholders that continue to be present or represented by proxy at the meeting is less than a quorum. Any previously scheduled meeting of stockholders may be postponed by resolution of the Board of Directors upon public notice given prior to the date previously scheduled for such meeting of stockholders. Unless otherwise required by law or provided in the Certificate of Incorporation or these bylaws, in all matters other than the election of directors, the affirmative vote of the holders of a majority of the voting power of the shares of capital stock of the Corporation present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders. Directors of the Corporation shall be elected by a plurality of votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors. SECTION 3. ANNUAL MEETINGS. An annual meeting of the stockholders shall be held for the election of directors on such date in each year and at such time as shall be designated by the Board of Directors. An annual meeting shall be held at such place, within or without the State of Delaware, as shall be determined by the Board of Directors. At each annual meeting, the stockholders shall elect by a plurality vote the successors of the directors whose terms expire at such meeting, and shall transact such other business as may be properly brought before the meeting. A failure to hold the annual meeting at the designated time or to elect a sufficient number of directors to conduct the business of the Corporation shall not affect otherwise valid corporate acts or work a forfeiture or dissolution of the Corporation, except as otherwise required by law. SECTION 4. SPECIAL MEETINGS. Unless otherwise provided in the Certificate of Incorporation, special meetings of the stockholders for any purpose or purposes may be called at any time by the Chairman of the Board (if any), or by a majority of the Board of 2 7 Directors, and shall be called by the Chief Executive Officer, the President or the Secretary upon the written request therefor, stating the purpose or purposes of the meeting, delivered to such officer, signed by the holders of at least fifty percent (50%) of the issued and outstanding stock entitled to vote at such meeting. SECTION 5. RECORD DATE. For the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders, or any adjournment thereof, or entitled to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors of the Corporation may fix, in advance, a date as the record date for any such determination of stockholders, which date shall not be more than sixty (60) days nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action. If the Board of Directors does not fix a record date for any meeting of the stockholders, the record date for determining stockholders entitled to notice of or to vote at such meeting shall be at the close of business on the day next preceding the day on which notice is given, or, if in accordance with Article VIII, Section 3 of these bylaws notice is waived, at the close of business on the day next preceding the day on which the meeting is held. If, in accordance with Section 12 of this Article II, corporate action without a meeting of stockholders is to be taken, the record date for determining stockholders entitled to express consent to such corporate action in writing, when no prior action by the Board of Directors is necessary, shall be the day on which the first written consent is expressed. The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. SECTION 6. NOTICE OF MEETINGS. Written notice of the place, date and hour of all meetings, and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall be given by or at the direction of the Chairman of the Board (if any) or the President, the Secretary or the other person(s) calling the meeting to each stockholder entitled to vote thereat not less than ten (10) nor more than sixty (60) days before the date of the meeting. Such notice may be delivered either personally or by mail. If mailed, notice is given when deposited in the United States mail, postage prepaid, directed to the stockholder at his address as it appears on the records of the Corporation. SECTION 7. STOCK LIST. A complete list of stockholders entitled to vote at any meeting of stockholders, arranged in alphabetical order for each class of stock and showing the address of each such stockholder and the number of shares registered in the name of such stockholder, shall be open to the examination of any stockholder, for any 3 8 purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or if not so specified, at the place where the meeting is to be held. The stock list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. SECTION 8. PROXIES. Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to a corporate action in writing without a meeting may authorize another person or persons to act for him by proxy. Proxies for use at any meeting of stockholders shall be filed with the Secretary, or such other officer as the Board of Directors may from time to time determine by resolution, before or at the time of the meeting. All proxies shall be received and taken charge of and all ballots shall be received and canvassed by the secretary of the meeting who shall decide all questions touching upon the qualification of voters, the validity of the proxies, and the acceptance or rejection of votes, unless an inspector or inspectors shall have been appointed by the chairman of the meeting, in which event such inspector or inspectors shall decide all such questions. No proxy shall be valid after three (3) years from its date, unless the proxy provides for a longer period. Each proxy shall be revocable unless expressly provided therein to be irrevocable and coupled with an interest sufficient in law to support an irrevocable power. Should a proxy designate two or more persons to act as proxies, unless such instrument shall provide the contrary, a majority of such persons present at any meeting at which their powers thereunder are to be exercised shall have and may exercise all the powers of voting or giving consents thereby conferred, or if only one be present, then such powers may be exercised by that one; or, if an even number attend and a majority do not agree on any particular issue, each proxy so attending shall be entitled to exercise such powers in respect of the same portion of the shares as he is of the proxies representing such shares. SECTION 9. VOTING; ELECTIONS; INSPECTORS. Unless otherwise required by law or provided in the Certificate of Incorporation, each stockholder shall have one vote for each share of stock entitled to vote which is registered in his name on the record date for the meeting. Shares registered in the name of another corporation, domestic or foreign, may be voted by such officer, agent or proxy as the bylaw (or comparable instrument) of such corporation may prescribe, or in the absence of such provision, as the Board of Directors (or comparable body) of such corporation may determine. Shares registered in the name of a deceased person may be voted by his executor or administrator, either in person or by proxy. All voting, except as required by the Certificate of Incorporation or where otherwise required by law, may be by a voice vote; provided, however, that upon demand therefor 4 9 by stockholders holding a majority of the issued and outstanding stock present in person or by proxy at any meeting a stock vote shall be taken. Every stock vote shall be taken by written ballots, each of which shall state the name of the stockholder or proxy voting and such other information as may be required under the procedure established for the meeting. All elections of directors shall be by ballot, unless otherwise provided in the Certificate of Incorporation. The chairman of the meeting shall fix and announce at the meeting the date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at the meeting. At any meeting at which a vote is taken by ballots, the chairman of the meeting may appoint one or more inspectors, each of whom shall subscribe an oath or affirmation to execute faithfully the duties of inspector at such meeting with strict impartiality and according to the best of his ability. Such inspector shall receive the ballots, count the votes and make and sign a certificate of the result thereof. The chairman of the meeting may appoint any person to serve as inspector, except no candidate for the office of director shall be appointed as an inspector. Unless otherwise provided in the Certificate of Incorporation, cumulative voting for the election of directors shall be prohibited. SECTION 10. CONDUCT OF MEETINGS. Unless otherwise determined by resolution of the Board of Directors, the Chairman of the Board shall, or shall designate an appropriate officer of the Corporation to, call any annual or special meeting of stockholders to order, act as chairman of any such meeting and determine the rules of order and procedure to be followed in the conduct of any such meeting. The Secretary or an Assistant Secretary (if the Secretary is absent, is otherwise unable to act or delegates such duties to such Assistant Secretary) shall act as secretary of each meeting of stockholders. SECTION 11. TREASURY STOCK. The Corporation shall not vote, directly or indirectly, shares of its own stock owned by it and such shares shall not be counted for quorum purposes. SECTION 12. ACTION WITHOUT MEETING. Any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of such holders and may not be effected by any consent in writing by such holders. ARTICLE III BOARD OF DIRECTORS SECTION 1. POWER; NUMBER; TERM OF OFFICE. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors, and subject to the restrictions imposed by law or the Certificate of Incorporation, they may exercise all the powers of the Corporation. 5 10 The number of directors which shall constitute the whole Board of Directors, shall be determined from time to time by resolution of the Board of Directors (provided that no decrease in the number of directors which would have the effect of shortening the term of an incumbent director may be made by the Board of Directors). If the Board of Directors makes no such determination, the number of directors shall be the number set forth in the Certificate of Incorporation. Each director shall hold office for the term for which he is elected, and until his successor shall have been elected and qualified or until his earlier death, resignation or removal. Unless otherwise provided in the Certificate of Incorporation, directors need not be stockholders nor residents of the State of Delaware. SECTION 2. QUORUM. Unless otherwise provided in the Certificate of Incorporation, a majority of the total number of directors shall constitute a quorum for the transaction of business of the Board of Directors and the vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. SECTION 3. PLACE OF MEETING; ORDER OF BUSINESS. The directors may hold their meetings and may have an office and keep the books of the Corporation, except as otherwise provided by law, in such place or places, within or without the State of Delaware, as the Board of Directors may from time to time determine by resolution. At all meetings of the Board of Directors business shall be transacted in such order as shall from time to time be determined by the Chairman of the Board (if any) , or by resolution of the Board of Directors. SECTION 4. FIRST MEETING. Each newly elected Board of Directors may hold its first meeting for the purpose of organization and the transaction of business, if a quorum is present, immediately after and at the same place as the annual meeting of the stockholders. Notice of such meeting shall not be required. At the first meeting of the Board of Directors in each year at which a quorum shall be present, held next after the annual meeting of stockholders, the Board of Directors shall proceed to the election of the officers of the Corporation. SECTION 5. REGULAR MEETINGS. Regular meetings of the Board f Directors shall be held at such times and places as shall be designated from time to time by resolution of the Board of Directors. Notice of such regular meetings shall not be required. SECTION 6. SPECIAL MEETINGS. Special Meetings of the Board of Directors may called by the Chairman of the Board (if any), or, on the written request of any two directors, by the Secretary, in each case upon the giving of personal, written, telephone, telegraphic, or facsimile notice to each director. Such notice, or any waiver thereof pursuant to Article VIII, Section 3 hereof, need not state the purpose or purposes of such meeting, except as may otherwise be required by law or provided for in the Certificate of Incorporation or these bylaws. 6 11 SECTION 7. REMOVAL. Any director or the entire Board of Directors may be removed, but only for cause, by a vote of the holders of a majority of the shares then issued and outstanding. Cause shall mean willful and gross misconduct by the director that is materially adverse to the best interests of the Corporation, as determined conclusively by a majority of the disinterested directors of the Corporation. SECTION 8. VACANCIES; INCREASES IN THE NUMBER OF DIRECTORS. Unless otherwise provided in the Certificate of Incorporation, vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, although less than a quorum, or a sole remaining director; and any director so chosen shall hold office until the next annual election and until his successor shall be duly elected and shall qualify, unless sooner displaced. If the directors of the Corporation are divided into classes, any directors elected to fill vacancies or newly created directorships shall hold office until the next election of the class for which such directors shall have been chosen, and until their successors shall be duly elected and shall qualify. SECTION 9. COMPENSATION. Unless otherwise restricted by the Certificate of Incorporation, the Board of Directors shall have the authority to fix the compensation of directors. SECTION 10. ACTION WITHOUT A MEETING; TELEPHONE CONFERENCE MEETING. Unless otherwise restricted by the Certificate of Incorporation, any action required or permitted to be taken at any meeting of the Board of Directors, or any committee designated by the Board of Directors, may be taken without a meeting if all members of the Board of Directors or committee, as the case may be consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Directors or committee. Such consent shall have the same force and effect as a unanimous vote at a meeting, and may be stated as such in any document or instrument filed with the Secretary of State of Delaware. Unless otherwise restricted by the Certificate of Incorporation, subject to the requirement for notice of meetings, members of the Board of Directors, or members of any committee designated by the Board of Directors, may participate in a meeting of such Board of Directors or committee, as the case may be, by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in such a meeting shall constitute presence in person at such meeting, except where a person participates in the meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened. SECTION 11. APPROVAL OR RATIFICATION OF ACTS OR CONTRACT BY STOCKHOLDERS. The Board of Directors in its discretion may submit any act or contract for approval or 7 12 ratification at any annual meeting of the stockholders, or at any special meeting of the stockholders called for the purpose of considering any such act or contract, and any act or contract that shall be approved or be ratified by the vote of the stockholders holding a majority of the issued and outstanding shares of stock of the Corporation entitled to vote and present in person or by proxy at such meeting (provided that a quorum is present) , shall be as valid and as binding upon the Corporation and upon all the stockholders as if it has been approved or ratified by every stockholder of the Corporation. In addition, any such act or contract may be approved or ratified by the written consent of stockholders holding a majority of the issued and outstanding shares of capital stock of the Corporation entitled to vote and such consent shall be as valid and as binding upon the Corporation and upon all the stockholders as if it had been approved or ratified by every stockholder of the Corporation. SECTION 12. NOMINATION OF DIRECTORS; STOCKHOLDER BUSINESS AT ANNUAL MEETINGS. Subject to the rights of holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation, nominations for the election of Directors may be made by the Board of Directors or any Nominating Committee appointed by the Board of Directors or by any stockholder entitled to vote in the election of Directors generally. However, any stockholder generally entitled to vote in the election of Directors may nominate one or more persons for election as Directors at a meeting only if written notice of such stockholder's intent to make such nomination or nominations has been given, either by personal delivery or by United States mail, postage prepaid, to the Secretary of the Corporation not later than (i) with respect to an election to be held at an annual meeting of stockholders, 60 days in advance of such meeting, and (ii) with respect to an election to be held at a special meeting of stockholders for the election of Directors, the close of business on the seventh day following the date on which notice of such meeting is first given to stockholders. Each such notice shall set forth: (a) the name and address of the stockholder who intends to make the nomination and of the person or persons to be nominated; (b) a representation that the stockholder is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (c) a description of all arrangements or understandings between the stockholder, each nominee or any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder; (d) such other information regarding each nominee proposed by such stockholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission, had the nominee been nominated, or intended to be nominated, by the Board of Directors; and (e) the consent of each nominee to serve as a Director of the Corporation if so elected. At the request of the Board of Directors any person nominated by the Board of Directors for election as a Director shall furnish to the Secretary of the Corporation that information required to be set forth in a stockholder's notice of nomination which pertains to the nominee. No person shall be eligible for election as a Director of the Corporation unless nominated in accordance with the procedures set forth herein. A majority of the Board of Directors may reject any nomination by a stockholder 8 13 not timely made or otherwise not in accordance with the terms of this Section 12. If a majority of the Board of Directors reasonably determines that the information provided in a stockholder's notice does not satisfy the informational requirements of this Section 12 in any material respect, the Secretary of the Corporation shall promptly notify such stockholder of the deficiency in writing. The stockholder shall have an opportunity to cure the deficiency by providing additional information to the Secretary within such period of time, not to exceed ten days from the date such deficiency notice is given to the stockholder, as a majority of the Board of Directors shall reasonably determine. If the deficiency is not cured within such period, or if a majority of the Board of Directors reasonably determines that the additional information provided by the stockholder, together with the information previously provided, does not satisfy the requirements of this Section 12 in any material respect, then a majority of the Board of Directors may reject such stockholder's nomination. The Secretary of the Corporation shall notify a stockholder in writing whether the stockholder's nomination has been made in accordance with the time and information requirements of this Section 12. At an annual meeting of the stockholders, only such business shall be conducted as shall have been brought before the meeting (a) by or at the direction of the chairman of the meeting or (b) by any stockholder of the Corporation who complies with the notice procedures set forth in this Section 12. For business to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a stockholder's notice must be delivered to or mailed and received at the principal executive offices of the Corporation not less than 60 days prior to the meeting; provided, however that in the event that less than 70 days notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be received not later than the close of business on the tenth day following the earlier of the day on which such notice of the date of the annual meeting was mailed or such public disclosure was made. A stockholder's notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the annual meeting (a) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (b) the name and address, as they appear on the Corporation's books, of the stockholder proposing such business, (c) the class and number of shares of the Corporation which are beneficially owned by the stockholder and (d) any material direct or indirect interest, financial or otherwise of the stockholder or its affiliates or associates in such business. The Board of Directors may reject any stockholder proposal not timely made in accordance with this Section 12. If the Board of Directors determines that the information provided in a stockholder's notice does not satisfy the informational requirements hereof, the Secretary of the Corporation shall promptly notify such stockholder of the deficiency in the notice. The stockholder shall then have an opportunity to cure the deficiency by providing additional information to the Secretary within such period of time, not to exceed ten days from the date such deficiency notice is given to the stockholder, as the Board of Directors shall determine. If the deficiency is not cured within such period, or if the Board of Directors determines that the additional information provided 9 14 by the stockholder, together with the information previously provided, does not satisfy the requirements of this Section 12, then the Board of Directors may reject such stockholder's proposal. The Secretary of the Corporation shall notify a stockholder in writing whether the stockholder's proposal has been made in accordance with the time and information requirements hereof. This provision shall not prevent the consideration and approval or disapproval at an annual meeting of reports of officers, directors and committees of the Board of Directors, but in connection therewith no new business shall be acted upon at any such meeting unless stated, filed and received as herein provided. Notwithstanding anything in these bylaws to the contrary, no business shall be conducted at an annual meeting except in accordance with procedures set forth in this Section 12. ARTICLE IV COMMITTEES SECTION 1. DESIGNATION; POWERS. The Board of Directors may, by resolution passed by a majority of the whole board, designate one or more committees, including, if they shall so determine, an executive committee, each such committee to consist of one or more of the directors of the Corporation and the Board of Directors shall designate the chairman of such committee. Any such designated committee shall have and may exercise such of the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation as may be provided in such resolution, except that no such committee shall have the power or authority of the Board of Directors in reference to amending the Certificate of Incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution of the Corporation, or amending, altering or repealing the bylaws or adopting new bylaws for the Corporation and, unless such resolution or the Certificate of Incorporation expressly so provides, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock. Any such designated committee may authorize the seal of the Corporation to be affixed to all papers which may require it. In addition to the above such committee or committees shall have such other powers and limitations of authority as may be determined from time to time by resolution adopted by the Board of Directors. SECTION 2. PROCEDURE; MEETINGS; QUORUM. Any committee designated pursuant to Section 1 of this Article shall keep regular minutes of its proceedings and report the same to the Board of Directors when requested, shall fix its own rules or procedures, and shall meet at such times and at such place or places as may be provided by such rules, or by resolution of the such committee or resolution of the Board of Directors. At every meeting of any such committee, the presence of a majority of all the members thereof shall 10 15 constitute a quorum and the affirmative vote of a majority of the members present shall be necessary for the adoption by it of any resolution. SECTION 3. SUBSTITUTION OF MEMBERS. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of such committee. In the absence or disqualification of a member of a committee, the member or members present at any meeting and not disqualified from voting, whether or not constituting a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of the absent or disqualified member. ARTICLE V OFFICERS SECTION 1. NUMBER, TITLES AND TERM OF OFFICE. The officers of the Corporation shall be a Chief Executive Officer, President, one or more Vice Presidents (any one or more of whom may be designated Executive Vice President or Senior Vice President), a Treasurer, a Secretary and, if the Board of Directors so elects, a Chairman of the Board and such other officers as the Board of Directors may from time to time elect or appoint. Each officer shall hold office until his successor shall be duly elected and shall qualify or until his death or until he shall resign or shall have been removed in the manner hereinafter provided. Any number of offices may he held by the same person, unless the Certificate of Incorporation provides otherwise. Except for the Chairman of the Board, if any, no officer need be a director. SECTION 2. SALARIES. The salaries or other compensation of the officers and agents of the Corporation shall be fixed from time to time by the Board of Directors. SECTION 3. REMOVAL. Any officer or agent elected or appointed by the Board of Directors may be removed, either with or without cause, by the vote of a majority of the whole Board of Directors at a special meeting called for the purpose, or at any regular meeting of the Board of Directors, provided the notice for such meeting shall specify that the matter of any such proposed removal will be considered at the meeting but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Election or appointment of an officer or agent shall not of itself create contract rights. SECTION 4. VACANCIES. Any vacancy occurring in any office of the Corporation may be filled by the Board of Directors. SECTION 5. POWERS AND DUTIES OF THE CHIEF EXECUTIVE OFFICER. The Chairman of the Board shall be the chief executive officer of the Corporation unless the Board of Directors designates the President as chief executive officer. Subject to the control of the 11 16 Board of Directors and the executive committee (if any) , the chief executive officer shall have general executive charge, management and control of the properties, business and operations of the Corporation with all such powers as may be reasonably incident to such responsibilities; he may agree upon and execute all leases, contracts, evidences of indebtedness and other obligations in the name of the Corporation and may sign all certificates for shares of capital stock of the Corporation; and shall have such other powers and duties as designated in accordance with these bylaws and as from time to time may be assigned to him by the Board of Directors. SECTION 6. POWERS AND DUTIES OF THE CHAIRMAN OF THE BOARD. If elected, the Chairman of the Board shall preside at all meetings of the stockholders and of the Board of Directors; and he shall have such other powers and duties as designated in these bylaws and as from time to time may be assigned to him by the Board of Directors. SECTION 7. POWERS AND DUTIES OF THE PRESIDENT. Unless the Board of Directors otherwise determines, the President shall have the authority to agree upon and execute all leases, contracts, evidences of indebtedness and other obligations in the name of the Corporation; and, unless the Board of Directors otherwise determines, he shall, in the absence of the Chairman of the Board and the Chief Executive Officer or if there be no Chairman of the Board or Chief Executive Officer, preside at all meetings of the stockholders and (should he be a director) of the Board of Directors; and he shall have such other powers and duties as designated in accordance with these bylaws and as from time to time may be assigned to him by the Board of Directors. SECTION 8. VICE PRESIDENTS. The Vice Presidents shall perform such duties and have such other powers as the Board of Directors may from time to time prescribe. SECTION 9. TREASURER. The Treasurer shall have responsibility for the custody and control of all the funds and securities of the Corporation, and he shall have such other powers and duties as designated in these bylaws and as from time to time may be assigned to him by the Board of Directors. He shall perform all acts incident to the position of Treasurer, subject to the control of the chief executive officer and the Board of Directors; and he shall, if required by the Board of Directors, give such bond for the faithful discharge of his duties in such form as the Board of Directors may require. SECTION 10. ASSISTANT TREASURERS. Each Assistant Treasurer shall have the usual powers and duties pertaining to his office, together with such other powers and duties as designated in these bylaws and as from time to time may be assigned to him by the chief executive officer or the Board of Directors. SECTION 11. SECRETARY. The Secretary shall keep the minutes of all-meetings or the Board of Directors, committees of directors and the stockholders, in books provided for that purpose; he shall attend to the giving and serving of all notices; he may in the name of the Corporation affix the seal of the Corporation to all contracts of the Corporation 12 17 and attest the affixation of the seal of the Corporation thereto; he may sign with the other appointed officers all certificates for shares of capital stock of the Corporation; he shall have charge of the certificate books, transfer books and stock ledgers, and such other books and papers as the Board of Directors may direct, all of which shall at all reasonable times be open to inspection of any director upon application at the office of the Corporation during business hours; he shall have such other powers and duties as designated in these bylaws and as from time to time may be assigned to him by the Board of Directors; and he shall in general perform all acts incident to the office of Secretary, subject to the control of the chief executive officer and the Board of Directors. SECTION 12. ASSISTANT SECRETARIES. Each Assistant Secretary shall have the usual powers and duties pertaining to his office, together with such other powers and duties designated in these bylaws and as from time to time may be assigned to him by the chief executive officer or the Board of Directors. The Assistant Secretaries shall exercise the powers of the Secretary during that officer's absence or inability or refusal to act. SECTION 13. ACTION WITH RESPECT TO SECURITIES OF OTHER CORPORATIONS. Unless otherwise directed by the Board of Directors, the chief executive officer shall have power to vote and otherwise act on behalf of the Corporation, in person or by proxy, at any meeting of security holders of or with respect to any action of security holders of any other corporation in which this Corporation may hold securities and otherwise to exercise any and all rights and powers which this Corporation may possess by reason of its ownership of securities in such other corporation. ARTICLE VI INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS SECTION 1. RIGHT TO INDEMNIFICATION. Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding") , by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was or has agreed to become a director or officer of the Corporation or is or was serving or has agreed to serve at the request of the Corporation as a director or officer of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director or officer or in any other capacity while serving or having agreed to serve as a director or officer, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended, (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment) against all expense, liability and loss (including, without 13 18 limitation, attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to serve in the capacity which initially entitled such person to indemnity hereunder and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the board of directors of the Corporation. The right to indemnification conferred in this Article VI shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that, if the Delaware General Corporation Law requires, the payment of such expenses incurred by a current, former or proposed director or officer in his or her capacity as a director or officer or proposed director or officer (and not in any other capacity in which service was or is or has been agreed to be rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding, shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such indemnified person, to repay all amounts so advanced if it shall ultimately be determined that such indemnified person is not entitled to be indemnified under this Section or otherwise. SECTION 2. INDEMNIFICATION OF EMPLOYEES AND AGENTS. The Corporation may, by action of its Board of Directors, provide indemnification to employees and agents of the Corporation, individually or as a group, with the same scope and effect as the indemnification of directors and officers provided for in this Article. SECTION 3. RIGHT OF CLAIMANT TO BRING SUIT. If a written claim received by the Corporation from or on behalf of an indemnified party under this Article VI is not paid in full by the Corporation within ninety days after such receipt, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Corporation) that the claimant has not met the standards of conduct which make it permissible under the Delaware General Corporation Law for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the 14 19 claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. SECTION 4. NONEXCLUSIVITY OF RIGHTS. The right to indemnification and the advancement and payment of expenses conferred in this Article VI shall not be exclusive of any other right which any person may have or hereafter acquire under any law (common or statutory), provision of the Certificate of incorporation of the Corporation, bylaw, agreement, vote of stockholders or disinterested directors or otherwise. SECTION 5. INSURANCE. The Corporation may maintain insurance, at its expense, to protect itself and any person who is or was serving as a director, officer, employee or agent of the Corporation or is or was Serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the Delaware General Corporation Law. SECTION 6. SAVINGS CLAUSE. If this Article VI or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify and hold harmless each director and officer of the Corporation as to costs, charges and expenses (including attorneys' fees) , judgments, fines, and amounts paid in settlement with respect to any action, suit or proceeding, whether civil, criminal, administrative or investigative to the full extent permitted by any applicable portion of this Article VI that shall not have been invalidated and to the fullest extent permitted by applicable law. ARTICLE VII CAPITAL STOCK SECTION 1. CERTIFICATES OF STOCK. The certificates for shares of the capital stock of the Corporation shall be in such form, not inconsistent with that required by law and the Certificate of Incorporation, as shall be approved by the Board of Directors. The Chairman of the Board (if any), President or a Vice President shall cause to be issued to each stockholder one or more certificates, under the seal of the Corporation or a facsimile thereof if the Board of Directors shall have provided for such seal, and signed by the Chairman of the Board (if any) , President or a Vice President and the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer certifying the number of shares (and, if the stock of the Corporation shall be divided into classes or series, the class and series of such shares) owned by such stockholder in the Corporation; provided, however, that any of or all the signatures on the certificate may be facsimile. The stock record books and the blank stock certificate books shall be kept by the Secretary, or at the office of such transfer agent or transfer agents as the Board of Directors may from time to 15 20 time by resolution determine. In case any officer, transfer agent or registrar who shall have signed or whose facsimile signature or signatures shall have been placed upon any such certificate or certificates shall have ceased to be such officer, transfer agent or registrar before such certificate is issued by the Corporation, such certificate may nevertheless be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue. The stock certificates shall be consecutively numbered and shall be entered in the books of the Corporation as they are issued and shall exhibit the holder's name and number of shares. SECTION 2. TRANSFER OF SHARES. The shares of stock of the corporation shall be transferable only on the books of the Corporation by the holders thereof in person or by their duly authorized attorneys or legal representatives upon surrender and cancellation of certificates for a like number of shares. Upon surrender to the Corporation or a transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. SECTION 3. OWNERSHIP OF SHARES. The Corporation shall be entitled to treat the holder of record of any share or shares of capital stock of the Corporation as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State of Delaware. SECTION 4. REGULATIONS REGARDING CERTIFICATES. The Board of Directors shall have the power and authority to make all such rules and regulations as they may deem expedient concerning the issue, transfer and registration or the replacement of certificates for shares of capital stock of the Corporation. SECTION 5. LOST OR DESTROYED CERTIFICATES. The Board of Directors may determine the conditions upon which a new certificate of stock may be issued in place of a certificate which is alleged to have been lost, stolen or destroyed; and may, in their discretion, require the owner of such certificate or his legal representative to give bond, with sufficient surety, to indemnify the Corporation and each transfer agent and registrar against any and all losses or claims which may arise by reason of the issue of a new certificate in the place of the one so lost, stolen or destroyed. 16 21 ARTICLE VIII MISCELLANEOUS PROVISIONS SECTION 1. FISCAL YEAR. The fiscal year of the Corporation shall be such as established from time to time by the Board of Directors. SECTION 2. CORPORATE SEAL. The Board of Directors may provide a suitable seal, containing the name of the Corporation. The Secretary shall have charge of the seal (if any). If and when so directed by the Board of Directors or a committee thereof, duplicates of the seal may be kept and used by the Treasurer or by the Assistant Secretary or Assistant Treasurer. SECTION 3. NOTICE AND WAIVER OF NOTICE. Whenever any notice is required to be given by law, the Certificate of Incorporation or under the provisions of these bylaws, said notice shall be deemed to be sufficient if given (i) by telegraphic, cable or wireless transmission or (ii) by deposit of the same in a post office box in a sealed prepaid wrapper addressed to the person entitled thereto at his post office address, as it appears on the records of the Corporation, and such notice shall be deemed to have been given on the day of such transmission or mailing, as the case may be. Whenever notice is required to be given by law, the Certificate of Incorporation or under any of the provisions of these bylaws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, directors, or members of a committee of directors need be specified in any written waiver of notice unless so required by the Certificate of incorporation or the bylaws. SECTION 4. RESIGNATIONS. Any director, member of a committee or officer may resign at any time. Such resignation shall be made in writing and shall take effect at the time specified therein, or if no time be specified, at the time of its receipt by the chief executive officer or secretary. The acceptance of a resignation shall not be necessary to make it effective, unless expressly so provided in the resignation. SECTION 5. FACSIMILE SIGNATURES. In addition to the provisions for the use of facsimile signatures elsewhere specifically authorized in these bylaws, facsimile signatures of any officer or officers of the Corporation may be used whenever and as authorized by the Board of Directors. 17 22 SECTION 6. RELIANCE UPON BOOKS, REPORTS AND RECORDS. Each director and each member of any committee designated by the Board of Directors shall, in the performance of his duties, be fully protected in relying in good faith upon the books of account or reports made to the Corporation by any of its officers, or by, an independent certified public accountant, or by an appraiser selected with reasonable care by the Board of Directors or by any such committee, or in relying in good faith upon other records of the Corporation. ARTICLE IX AMENDMENTS The Board of Directors is hereby expressly authorized to adopt, amend or repeal the bylaws of the Corporation or adopt new bylaws, without any action on the part of the stockholders, by the vote of a majority of the directors; provided, however, that no such adoption, amendment, or repeal shall be valid with respect to bylaw provisions which have been adopted, amended, or repealed by the stockholders; and further provided, that bylaws adopted or amended by the Directors and any powers thereby conferred may be amended, altered, or repealed by the stockholders. Notwithstanding the foregoing and anything in these bylaws to the contrary, Article II Section 1, Article II Section 4, Article II Section 12, Article III Section 6, Article III Section 7, Article III Section 12 and Article IX of these bylaws shall not be amended, repealed, altered or added to by the stockholders, and no provision inconsistent therewith shall be adopted by the stockholders without the affirmative vote of the holders of at least 66-2/3 % of the Corporation's voting stock issued and outstanding. 18 EX-10 5 SUPPLEMENT TO SCHEDULE OF SIMILAR AGREEMENTS 1 EXHIBIT 10 SUPPLEMENT TO SCHEDULE OF SIMILAR AGREEMENTS The following is a schedule of other Committed Credit Line Agreements entered into by the Company, each of which agreements is substantially identical to the Committed Credit Line Agreement filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended July 30, 1995 (and the additional Committed Credit Line Agreements identified in the "Schedule of Similar Agreements" filed therewith), except as to the identity of the Bank that is a party thereto (which is indicated below):
Name of Agreement Identity of Bank ----------------- ---------------- Committed Credit Line Agreement, dated as of September 8, 1995 . . . . . . . . . Bank of Tokyo, Ltd. Committed Credit Line Agreement, dated as of September 8, 1995 . . . . . . . . . Sanwa Bank Limited
EX-11 6 STATEMENT RE:COMPUTATION OF PER SHARE EARNINGS 1 EXHIBIT 11 DELL COMPUTER CORPORATION STATEMENT RE COMPUTATION OF PER SHARE EARNINGS (IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED NINE MONTHS ENDED ---------------------------- ---------------------------- OCTOBER 29, OCTOBER 30, OCTOBER 29, OCTOBER 30, 1995 1994 1995 1994 ----------- ----------- ----------- ----------- Primary earnings per common share: Calculation of weighted average shares: Weighted average shares of common stock outstanding 92,081 77,475 88,909 76,758 Weighted average shares of common stock equivalents, utilizing the treasury stock method 7,979 6,707 7,429 5,260 ----------- ----------- ----------- ----------- Weighted average shares outstanding 100,060 84,182 96,338 82,018 =========== =========== =========== =========== Earnings: Net income available to common stockholders $ 75,311 $ 39,167 $ 190,341 $ 82,324 =========== =========== =========== =========== Earnings per common share $ 0.75 $ 0.47 $ 1.98 $ 1.00 =========== =========== =========== =========== Fully diluted earnings per common share: Calculation of weighted average shares: Weighted average shares of common stock outstanding 92,081 77,475 88,909 76,758 Weighted average shares of common stock equivalents, utilizing the treasury stock method 8,390 7,679 8,481 6,604 Assumed conversion of Convertible Preferred Stock 505(a) 10,526 2,414(a) 10,526 ----------- ----------- ----------- ----------- Weighted average shares outstanding 100,976 95,680 99,804 93,888 =========== =========== =========== =========== Earnings: Net income available to common stockholders $ 75,311 $ 39,167 $ 190,341 $ 82,324 Add: preferred dividends 105 2,187 1,502(b) 6,562 ----------- ----------- ----------- ----------- Adjusted net income available to common stockholders $ 75,416 $ 41,354 $ 191,843 $ 88,886 =========== =========== =========== =========== Earnings per common share $ 0.75 $ 0.43 $ 1.92 $ 0.95 =========== =========== =========== ===========
__________ (a) Assumes conversion of the 60,000 shares of outstanding Convertible Preferred Stock at the beginning of the third quarter and the nine-month period and assumes conversion of the remaining Convertible Preferred Stock (those shares which were converted in March 1995) from the beginning of the nine-month period to the actual conversion date. (b) Preferred dividends are exclusive of the conversion premium and expenses of the conversion offer. EX-27 7 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM DELL COMPUTER CORPORATION FINANCIAL STATEMENTS AS OF AND FOR THE NINE MONTH PERIOD ENDED OCTOBER 29, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS JAN-28-1996 OCT-29-1995 69,586 501,186 772,835 0 463,640 1,943,139 158,534 0 2,112,923 997,196 0 930 0 1 892,365 2,112,923 3,757,225 3,757,225 2,967,907 2,967,907 0 0 11,331 284,768 82,579 202,189 0 0 0 202,189 1.98 1.92
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