-----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, TJ8xvfSr7t9bIrwXWO2aJudGmzYMGWYz9gP0KwRyZWrBflInZEdBeBcBvlDFdtMU M2qNyOHWTqA1AxAuu/QaHA== 0000950134-98-004736.txt : 19980528 0000950134-98-004736.hdr.sgml : 19980528 ACCESSION NUMBER: 0000950134-98-004736 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980201 FILED AS OF DATE: 19980527 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-K/A SEC ACT: SEC FILE NUMBER: 000-17017 FILM NUMBER: 98631746 BUSINESS ADDRESS: STREET 1: ONE DELL WAY CITY: ROUND ROCK STATE: TX ZIP: 78682-2244 BUSINESS PHONE: 5123384400 MAIL ADDRESS: STREET 1: ONE DELL WAY CITY: ROUND ROCK STATE: TX ZIP: 78682 10-K/A 1 AMENDMENT NO. 1 TO FORM 10-K FYE 2/1/98 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K/A ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED FEBRUARY 1, 1998 COMMISSION FILE NUMBER: 0-17017 DELL COMPUTER CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 74-2487834 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.)
ONE DELL WAY, ROUND ROCK, TEXAS 78682-2244 (Address, including Zip Code, of registrant's principal executive offices) (512) 338-4400 (Registrant's telephone number, including area code) SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: Common Stock, par value $.01 per share Preferred Stock Purchase Rights Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] AGGREGATE MARKET VALUE OF COMMON STOCK HELD BY NON-AFFILIATES OF THE REGISTRANT AS OF MARCH 31, 1998..... $36,352,865,736 NUMBER OF SHARES OF COMMON STOCK OUTSTANDING AS OF MARCH 31, 1998...................................................... 640,316,904
================================================================================ 2 ITEM 11 -- EXECUTIVE COMPENSATION All common stock information has been adjusted to take into account the two-for-one split of the common stock paid in July 1997 and the two-for-one split of the common stock paid in March 1998. COMPENSATION OF DIRECTORS The following is a description of the compensation arrangements for the Company's non-employee directors. The compensation arrangements for the non-employee directors are based on a "Service Year," which is the annual period commencing at an annual meeting of the Company's stockholders and ending at the next annual meeting of stockholders. Mr. Dell, who is the only director who is also an employee of the Company, does not receive any additional compensation for serving on the Board of Directors. Annual Cash Payments -- Currently, each non-employee director (other than Mr. Mandl) receives an annual retainer fee of $30,000 and an additional $1,000 for each Board of Directors meeting attended in person. In November 1997, the Board of Directors changed its non-employee director compensation arrangement, increasing the annual retainer fee to $40,000 and eliminating the $1,000 meeting fees. Any new non-employee director whose term begins during a Service Year will be entitled to the full amount of the annual retainer fee if 50% or more of the scheduled Board of Directors meetings for that Service Year are scheduled to occur after the director's election; otherwise, the new non-employee director is entitled to receive 50% of the annual retainer fee for that Service Year. The annual retainer fee for a Service Year is payable at the first Board of Directors meeting during the Service Year. For all non-employee directors other than Mr. Mandl, this new arrangement will be effective for the Service Year that begins in 1998 and for subsequent Service Years. Mr. Mandl, who was appointed to the Board of Directors in November 1997, at the same time that the new compensation arrangement was approved, is currently being compensated based on the new arrangement. The Company maintains a deferred compensation plan for the non-employee directors, pursuant to which the directors may elect to defer all or a portion of their annual retainer fees. A director's deferred amounts are allocated by the director to various investment funds and, along with any earnings, are payable to the director upon termination of service as a member of the Board of Directors or to the director's named beneficiary in the event of death. Distribution of the deferred amounts and any earnings may be made, at the election of the participating director, in a lump sum or in annual, quarterly or monthly installments over a period of up to ten years. A non-employee director may elect to receive an option to purchase the Company's common stock in lieu of all or a portion of the annual retainer fee. The option is granted on the date the annual retainer fee would otherwise have been paid. The number of shares subject to the option is determined by dividing the amount of the annual retainer fee subject to the election by the value of an option for one share of common stock (calculated pursuant to the Black-Scholes model). The exercise price of the option is the average of the high and low reported sales price of the Company's common stock on the date of grant. The option vests and becomes exercisable with respect to 20% of the shares on each of the first five anniversaries of the date of grant and terminates on the tenth anniversary of the date of grant. Option Awards -- As noted above, the Board of Directors changed its non-employee director compensation arrangements in November 1997. Prior to that change, non-employee directors were entitled to receive an initial option award covering a specified number of shares of the Company's common stock upon election to the Board of Directors and an annual option award covering a specified number of shares for each year of service. The Company's Incentive Plan, which was approved by the stockholders in June 1994 and which specified the compensation arrangements for non-employee directors, originally provided that the non- employee directors' initial option award was to cover 15,000 shares of common stock and that each annual award was to cover 6,000 shares. The Incentive Plan also provided, however, that those numbers were to be adjusted to take stock splits into account. As a result of adjustments for the two-for-one split of the common stock paid in October 1995 and the two-for-one split of the common stock paid in December 1996, the size of the initial and annual option awards had grown to 60,000 shares and 24,000 shares, respectively. After the announcement of an additional two-for-one split of the common stock in May 1997 (to be paid in July 1997), the Board of Directors decided to review the Company's non-employee director compensation arrangement 1 3 and, pending completion of that review, unanimously elected to forego the adjustment in their annual option awards for the July 1997 stock split. Consequently, each non-employee director who was serving immediately after the stockholders' meeting in 1997 received an annual option award covering 24,000 shares (rather than 48,000, which would have been the award had the split adjustment been made). In November 1997, after completing a thorough review and analysis of non-employee director compensation plans at various companies deemed comparable for this purpose, the Board of Directors unanimously determined that it was in the best interests of the Company and its stockholders to modify the terms of the compensation paid to non-employee directors, including the size of the automatic option awards, and adopted new non-employee director compensation arrangements. Under the new arrangements, the number of shares of common stock subject to each annual option award for a Service Year will be equal to the "Annual Award Base Number" for that Service Year divided by the fair market value of the common stock on the date of grant. The number of shares subject to an initial option award for a new non-employee director will be equal to the "Initial Award Base Number" divided by the fair market value of the common stock on the date of grant, and the first annual option award for a new non-employee director will be prorated on the same basis as the director's annual retainer fee, as described above. The Annual Award Base Number will be $650,000 (subject to an annual escalation factor of 10%), and the Initial Award Base Number at any given time will be 300% of the then-applicable Annual Award Base Number. The annual option awards for each Service Year are to be granted as of the first day of that Service Year, and an initial option award is to be granted to a new non- employee director as of the date of the first Board of Directors meeting attended. Under the new arrangements, the method of computing the number of shares subject to the initial and annual option awards will not be adjusted to take into account future stock splits (including the two-for-one split of the common stock paid in March 1998); however, once an option has been issued, the number of shares subject to the option and the exercise price of the option will be adjusted to take into account any subsequent stock splits. As a result of these new non-employee director compensation arrangements, each of the Company's current non-employee directors will receive, effective as of the date of the upcoming annual meeting of stockholders (which is scheduled for July 17, 1998), an annual option award covering a number of shares equal to $650,000 divided by the fair market value of the common stock on the date of grant. It is not possible to compute the size of the award at the present time; however, if the number were computed on the basis of the fair market value of the common stock as of March 31, 1998, the size of the award would be approximately 9,600 shares, which is substantially smaller than it would have been (96,000 shares) had the non-employee director compensation arrangements not been changed. In the case of both initial awards and annual awards, the exercise price of the option is equal to the "fair market value" of the common stock on the date of grant, which is defined as the average of the high and low reported sales price of the common stock on that date. The option vests and becomes exercisable with respect to 20% of the shares on each of the first five anniversaries of the date of grant, so long as the director remains a member of the Board of Directors through those dates. The option terminates when the director ceases to be a member of the Board of Directors (if the Board of Directors demands or requests the director's resignation), 90 days after the director ceases to be a member of the Board of Directors (if the director resigns for any other reason) or one year after the director ceases to be a member of the Board of Directors because of death or permanent disability. In any event, the option terminates on the tenth anniversary of the date of grant. Because Mr. Mandl was appointed to the Board of Directors at the time that the new compensation arrangement was approved, his compensation is based on the new arrangement. Consequently, effective November 21, 1997, the date of the first Board of Directors meeting that Mr. Mandl attended, Mr. Mandl received an option covering 61,356 shares of common stock, 46,017 were attributable to his initial award and 15,339 were attributable to the annual award for the Service Year that commenced in 1997. Had the Board of Directors not changed the non-employee director compensation arrangement, Mr. Mandl would have received an option covering 240,000 shares. Other Benefits -- The Company reimburses non-employee directors for their reasonable expenses associated with attending Board of Directors meetings and provides the directors with liability insurance coverage with respect to their activities as directors of the Company. 2 4 Compensation During Fiscal 1998 -- The following table describes the fiscal 1998 fees and stock option grants for each of the Company's non-employee directors.
CASH NAME PAYMENTS OPTIONS GRANTED(A) ---- -------- ------------------ Mr. Carty.............................................. $35,000(b) 48,000 shares Mr. Hirschbiel......................................... $34,000 48,000 shares Mr. Jordan............................................. $34,000(b) 48,000 shares Mr. Luce(c)............................................ $ 5,000 49,722 shares Mr. Luft............................................... $35,000 48,000 shares Ms. Malone............................................. $34,000 48,000 shares Mr. Mandl(d)........................................... $40,000 61,356 shares Mr. Miles(c)........................................... $ 5,000 49,722 shares
- --------------- (a) Effective July 18, 1997 (the date of the first Board of Directors meeting following last year's annual meeting of stockholders), each non-employee director received an option to purchase 24,000 shares with an exercise price of $74.08 per share, which upon payment of the two-for-one split of the common stock on March 6, 1998, is now the equivalent of an option to purchase 48,000 shares at an exercise price of $37.04 per share. (b) Elected to defer $30,000 of this amount pursuant to the deferred compensation plan described above. (c) Mr. Luce and Mr. Miles elected to receive options in lieu of the $30,000 annual retainer fee. Accordingly, in addition to the options referred to in note (a) above, on July 18, 1997 (the date of the first Board of Directors meeting following last year's annual meeting of stockholders), each of Mr. Luce and Mr. Miles received an option to purchase 861 shares with an exercise price of $74.08 per share, which as a result of the March 1998 stock split, is now the equivalent of an option to purchase 1,722 shares at an exercise price of $37.04. (d) Mr. Mandl's compensation reflects the new non-employee director compensation arrangements approved by the Board of Directors in November 1997. COMPENSATION OF EXECUTIVE OFFICERS General -- The compensation paid to the Company's executive officers is administered by the Compensation Committee of the Board of Directors and consists of base salaries, annual bonuses, awards made pursuant to the Incentive Plan, contributions to the Company-sponsored 401(k) retirement plan and deferred compensation plan and miscellaneous benefits. The following table summarizes the total compensation for each of the last three fiscal years awarded to, earned by or paid to the Company's Chief Executive Officer and the four most highly compensated executive officers of the Company (other than the Chief Executive Officer) who were serving as executive officers at the end of fiscal 1998 (the "Named Executive Officers"). 3 5 SUMMARY COMPENSATION TABLE
LONG-TERM ANNUAL COMPENSATION COMPENSATION AWARDS ---------------------------------- ----------------------- OTHER SHARES ALL OTHER ANNUAL RESTRICTED UNDER- OTHER NAME AND FISCAL COMPEN- STOCK LYING COMPEN- PRINCIPAL POSITION YEAR SALARY BONUS SATION(A) AWARDS(B) OPTIONS(C) SATION(D) ------------------ ------ -------- ---------- --------- ---------- ---------- --------- MICHAEL S. DELL....................... 1998 $788,462 $2,000,000 $ 1,650 $ 0 3,200,000 $65,549 Chairman of the Board, 1997 688,461 1,304,910 17,448 0 3,200,000 34,379 Chief Executive Officer 1996 568,629 731,421 92,541 0 480,000 21,303 MORTON L. TOPFER...................... 1998 616,346 2,000,000(e) 7,749 0 150,000 28,681 Vice Chairman 1997 544,276 1,031,622 17,567 0 360,000 35,576 1996 490,892 631,429 112,348 640,000 2,200,000 28,856 KEVIN B. ROLLINS...................... 1998 450,381 1,125,953(e) 141,206 0 400,000 34,320 Vice Chairman 1997 342,310 486,610 125,099 0 2,680,000 3,530 1996 -- -- -- -- -- -- THOMAS J. MEREDITH.................... 1998 408,288 1,020,719(e) 825 0 80,000 11,315 Senior Vice President, 1997 383,547 545,232 14,314 0 240,000 20,198 Chief Financial Officer 1996 327,635 316,075 41,534 320,000 224,000 19,746 PHILLIP E. KELLY...................... 1998 308,892 579,173(e) 405,538 0 60,000 7,833 Vice President and 1997 266,923 379,444 422,616 0 200,000 12,287 President -- Asia Pacific 1996 223,397 166,243 288,275 731,200 400,000 9,709
- --------------- (a) The amounts shown in this column include amounts paid by the Company for personal financial counseling and tax planning services and (prior to fiscal 1997) reimbursement for the related tax liability (Mr. Dell, $1,650 in fiscal 1998, $17,448 in fiscal 1997 and $92,541 in fiscal 1996; Mr. Topfer, $5,008 in fiscal 1998, $17,567 in fiscal 1997 and $34,031 in fiscal 1996; Mr. Rollins, $12,390 in fiscal 1998 and $643 in fiscal 1997; Mr. Meredith, $825 in fiscal 1998, $14,314 in fiscal 1997 and $39,485 in fiscal 1996; and Mr. Kelly, $3,350 in fiscal 1998 and $5,693 in fiscal 1997) and relocation expenses paid by the Company and reimbursement for the related tax liability (Mr. Topfer, $2,741 in fiscal 1998 and $78,317 in fiscal 1996; and Mr. Rollins, $128,816 in fiscal 1998 and $34,456 in fiscal 1997). For Mr. Rollins, the amount shown for fiscal 1997 also includes the amount of bonus paid on commencement of employment ($90,000). For Mr. Meredith, the amount shown for fiscal 1996 also includes imputed interest on below-market loans that have since been repaid ($2,049). For Mr. Kelly, the amounts shown also include expat allowances ($335,406 in fiscal 1998, $365,709 in fiscal 1997 and $245,948 in fiscal 1996) and reimbursement for miscellaneous goods and services ($66,782 in fiscal 1998, $51,214 in fiscal 1997 and $42,327 in fiscal 1996). (b) For Mr. Topfer, the amount shown represents the value of 160,000 shares of the Company's common stock awarded on July 24, 1995 (calculated using the closing sales price of the common stock on the date of grant, which was $4.00). The shares are subject to vesting and transfer restrictions that will lapse with respect to all of the shares on the fourth anniversary of the date of grant. In addition, the shares are subject to forfeiture (and any gain realized on the sale of the shares is subject to repayment to the Company) if Mr. Topfer competes with the Company within two years after his employment with the Company is terminated. For Mr. Meredith, the amount shown represents the value of 80,000 shares of the Company's common stock awarded on July 24, 1995 (calculated using the closing sales price of the common stock on the date of grant, which was $4.00). The shares are subject to vesting and transfer restrictions that will lapse with respect to one-seventh of the shares on each of the first seven anniversaries of the date of grant. In addition, the shares are subject to forfeiture (and any gain realized on the sale of the shares is subject to repayment to the Company) if Mr. Meredith competes with the Company within two years after his employment with the Company is terminated. For Mr. Kelly, the amount shown represents the value of 160,000 shares of the Company's common stock awarded on February 7, 1995 (calculated using the closing sales price of the common stock on the date of grant, which was $2.57) and the value of 80,000 shares of the Company's common stock awarded on July 24, 1995 (calculated using the closing sales price of the common stock on the date of grant, which was $4.00). With respect to each award, the shares are subject to vesting and transfer restrictions that will lapse with respect to one-seventh of the shares on each of the first seven anniversaries of the date of grant. In addition, the shares are subject to forfeiture (and any gain realized on the sale of the shares is subject to repayment to the Company) if Mr. Kelly competes with the Company within two years after his employment with the Company is terminated. 4 6 The total number and value of the shares of restricted stock held by the Named Executive Officers as of the end of fiscal 1998 are as follows, with the values based on the closing sales price of the Company's common stock on the last trading day of fiscal 1998 ($49.72):
NUMBER OF SHARES VALUE --------- ---------- Mr. Dell.................................................... 0 $ 0 Mr. Topfer.................................................. 160,000 7,955,040 Mr. Rollins................................................. 0 0 Mr. Meredith................................................ 57,120 2,839,949 Mr. Kelly................................................... 194,160 9,653,441
When and if the Board of Directors declares and pays dividends on the Company's common stock, such dividends will be paid on the outstanding shares of restricted stock described in this note at the same rate as they are paid to all stockholders. (c) Does not include options granted under the Executive Stock Ownership Incentive Program described below (the "ESOIP"), pursuant to which a Named Executive Officer may elect to receive discounted stock options in lieu of all or a portion of annual bonus. See note (e) below for information regarding ESOIP elections made for fiscal 1998 annual bonuses. For information regarding the stock option grants made during fiscal 1998 (including information with respect to options granted pursuant to ESOIP elections made for fiscal 1997 annual bonuses), see the table titled "Option Grants in Last Fiscal Year" under "Item 11 -- Executive Compensation -- Compensation of Executive Officers -- Incentive Plan Awards" below. (d) Includes the value of the Company's contributions to the Company-sponsored 401(k) retirement savings plan that is available to all Company employees, the amount of the Company's contributions to the deferred compensation plan that is available to certain members of the Company's management and the amount paid by the Company for term life insurance coverage under health and welfare plans available to all Company employees. (e) In accordance with the terms of the ESOIP, Mr. Topfer, Mr. Rollins and Mr. Meredith each elected to receive discounted stock options in lieu of 100% of his annual bonus, and Mr. Kelly elected to receive discounted stock options in lieu of 30% of his annual bonus. The amount shown represents the amount of the annual bonus awarded, whether paid or foregone in lieu of discounted options. In lieu of the foregone amounts, those persons received options covering the following number of shares: Mr. Topfer, 157,016; Mr. Rollins, 88,396; Mr. Meredith, 80,134; and Mr. Kelly, 13,640. The options were granted on March 20, 1998 and have an exercise price of $50.95 (which was 80% of the market value of the common stock on that date). These options are subject to a one-year vesting period and, accordingly, do not vest and are not exercisable until the first anniversary of the date of grant. Incentive Plan Awards -- The Company's Incentive Plan provides for the granting of incentive awards in the form of stock options, stock appreciation rights, stock and cash to directors, executive officers and key employees of the Company and its subsidiaries and certain other persons who provide consulting or advisory services to the Company. Pursuant to an amendment to the Incentive Plan that was approved by the stockholders at last year's annual meeting, the number of shares of the Company's common stock that may be issued pursuant to awards under the Incentive Plan is automatically increased at the beginning of each fiscal year, beginning with fiscal 1999 and ending with fiscal 2003. The number of additional shares that will be available for awards at the beginning of any such fiscal year will be equal to 4% of the following amount: the total number of issued and outstanding shares of common stock as of the end of the immediately preceding fiscal year, plus the total number of shares of common stock repurchased by the Company during the immediately preceding fiscal year under the Company's stock repurchase program. That percentage will be increased to 5% if the total shareholder return (consisting of increase in stock price plus dividends paid) achieved by the Company during the immediately preceding fiscal year exceeds the average total shareholder return achieved by the companies included in the S&P Computer Systems Index during the immediately preceding fiscal year. As of the beginning of fiscal 1999, an aggregate of 162,701,660 shares of common stock were authorized for issuance pursuant to awards under the Incentive Plan (including 35,654,140 shares that were added at the beginning of fiscal 1999 under the formula described above) and 45,728,576 shares remained available for issuance under Incentive Plan awards. 5 7 No restricted stock was awarded to any of the Named Executive Officers during fiscal 1998. The following table sets forth information about stock option grants made to the Named Executive Officers during fiscal 1998. The Company has not made any awards of stock appreciation rights to any of the Named Executive Officers. OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS ----------------------------------------------------------------- NUMBER PERCENTAGE OF OF SHARES TOTAL OPTIONS UNDERLYING GRANTED TO EXERCISE GRANT DATE OPTIONS EMPLOYEES IN PRICE GRANT EXPIRATION PRESENT NAME GRANTED(A) FISCAL YEAR PER SHARE DATE DATE VALUE(B) ---- ---------- ------------- --------- -------- ---------- ----------- Mr. Dell................. 2,000,000 9.16% $ 18.531 3-5-97 3-5-07 $15,622,350 1,200,000 5.49 37.040 7-18-97 7-18-07 17,892,405 Mr. Topfer............... 309,388(c) 1.42 13.338 3-21-97 3-21-07 3,147,373 150,000 0.69 37.040 7-18-97 7-18-07 2,236,551 Mr. Rollins.............. 100,000 0.46 37.040 7-18-97 7-18-07 1,491,034 300,000 1.37 40.625 12-22-97 12-22-07 5,010,008 Mr. Meredith............. 163,516(c) 0.75 13.338 3-21-97 3-21-07 1,663,432 80,000 0.37 37.040 7-18-97 7-18-07 1,192,827 Mr. Kelly................ 45,516(c) 0.21 13.338 3-21-97 3-21-07 463,030 60,000 0.27 37.040 7-18-97 7-18-07 894,620
- --------------- (a) Unless otherwise noted, these options will vest and become exercisable with respect to one-fifth of the underlying shares on each of the first five anniversaries of the date of grant. (b) Calculated using the Black-Scholes model. The material assumptions and adjustments incorporated into the Black-Scholes model in making such calculations include the following: (1) an interest rate representing the interest rate on U.S. Treasury securities with a maturity date corresponding to the option term; (2) volatility determined using daily prices for the Company's common stock during the five-year period immediately preceding date of grant; (3) a dividend rate of $0; and (4) in each case (other than the ESOIP options described in note (c) below), a reduction of 25% to reflect the probability of forfeiture due to termination of employment prior to vesting and the probability of a shortened option term due to termination of employment prior to the option expiration date. The ultimate values of the options will depend on the future market prices of the common stock, which cannot be forecast with reasonable accuracy. The actual value, if any, that an optionee will recognize upon exercise of an option will depend on the difference between the market value of the common stock on the date the option is exercised and the applicable exercise price. (c) These options were granted as a part of the ESOIP, which is described below. These options were fully vested when granted but were not exercisable until the first anniversary of the date of grant. These options were received in lieu of fiscal 1997 annual bonuses in the following amounts: Mr. Topfer, $1,031,622 (100%); Mr. Meredith, $545,232 (100%); and Mr. Kelly, $151,682 (40%). Those amounts are shown in the Bonus column of the "Summary Compensation Table" above. 6 8 The following table sets forth, for each Named Executive Officer, information concerning the exercise of stock options during fiscal 1998 and the value of unexercised stock options at the end of fiscal 1998. AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SHARES VALUE OF UNEXERCISED UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS SHARES OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END(B) ACQUIRED VALUE --------------------------- --------------------------- NAME ON EXERCISE REALIZED(A) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE ---- ----------- ----------- ----------- ------------- ----------- ------------- Mr. Dell............... 0 $ 0 832,000 6,048,000 $36,214,480 $200,467,820 Mr. Topfer............. 1,241,000 37,519,304 0 3,698,388 0 163,012,986 Mr. Rollins............ 408,000 13,921,321 128,000 2,544,000 5,786,558 102,532,852 Mr. Meredith........... 620,000 19,910,401 472,670 1,134,990 22,126,660 49,392,046 Mr. Kelly.............. 28,000 734,414 250,376 543,916 11,309,826 22,043,709
- --------------- (a) Calculated using the difference between (1) the actual sales price of the underlying shares (if the underlying shares were sold immediately upon exercise) or the closing sales price of the common stock on the date of exercise (if the underlying shares were not sold immediately upon exercise) and (2) the exercise price. (b) Amounts were calculated by multiplying the number of unexercised options by the closing sales price of the common stock on the last trading day of fiscal 1998 ($49.72) and subtracting the exercise price. Under the ESOIP, which is a program implemented under the Incentive Plan, certain members of the Company's management (including the executive officers) may elect, on an annual basis, to receive stock options in lieu of all or a portion of the annual bonus that they would otherwise receive. The exercise price of the options is 80% of the fair market value of the Company's common stock on the date of issuance. The number of shares subject to the options is dependent on the amount of bonus a participant designates for the program and is calculated by dividing the designated bonus amount by 20% of the fair market value of the common stock on the date of issuance. For the first two years of the program (fiscal 1996 and fiscal 1997), the options were fully vested at the time of issuance but were not exercisable for a period of one year. Effective for fiscal 1998, the options are subject to a one-year vesting period and do not vest and become exercisable until the first anniversary of the date of grant. All decisions regarding participation in the program and the amount of bonus to designate must be made several months in advance of the anticipated bonus payment date. With respect to fiscal 1998, 240 persons (including four of the Named Executive Officers) elected to participate in the program with respect to their bonuses for such year. 401(k) Retirement Plan -- The Company maintains a defined contribution retirement plan that complies with the provisions of Section 401(k) of the Internal Revenue Code. Substantially all U.S. employees are eligible to participate in the plan, and eligibility for participation commences upon hiring. Under the terms of the plan, the Company currently matches 100% of each employee participant's voluntary contributions, subject to a maximum Company contribution of 3% of the employee's compensation. The Company's matching contributions are used to purchase the Company's common stock and vest at the rate of 20% on each of the first five anniversaries of the date of hire. After the completion of five years of service with the Company, a participant may elect to transfer the portion of his or her funds held in the form of common stock to another available investment fund. During fiscal 1998, the Company made a discretionary contribution for every eligible employee, regardless of whether the employee was a plan participant, equal to 2% of the employee's actual earnings during calendar 1997. Deferred Compensation Plan -- The Company maintains a deferred compensation plan, pursuant to which certain members of management (including the executive officers) may elect to defer a portion of annual compensation. The Company matches 100% of the employee's voluntary contributions not in excess of 3% of annual compensation. The funds attributable to a participant (including voluntary contributions and matching contributions) are invested among various funds designated by the plan administrator. Upon the death or retirement of a participant, the funds attributable to the participant (including any earnings on contributions) are distributed to the participant or the participant's beneficiary in a lump sum or in annual, quarterly or 7 9 monthly installments over a period of up to ten years. A participant whose employment with the Company is terminated prior to death or retirement is entitled to receive his or her contributions to the plan (and any earnings thereon) but is entitled to receive the Company's matching contributions only if he or she has completed four years of service with the Company. Employee Stock Purchase Plan -- The Company maintains an employee stock purchase plan that qualifies under Section 423 of the Internal Revenue Code and permits substantially all employees to purchase shares of the Company's common stock. Participating employees may purchase common stock at the end of each participation period at a purchase price equal to 85% of the lower of the fair market value of the common stock at the beginning or the end of the participation period. Participation periods are semi-annual and begin on January 1 and July 1 of each year. Employees may designate up to 15% of their base compensation for the purchase of common stock under the plan. Employment Agreements and Change-in-Control Arrangements -- Each of the Named Executive Officers has entered into an employment agreement with the Company. For the Named Executive Officers other than Mr. Dell, such employment agreements do not contain any provisions regarding compensation or continued employment and are identical in all material respects to those contained in the employment agreement entered into by all the Company's employees upon the commencement of their employment with the Company. Mr. Dell's employment agreement provides for continued employment for successive one-year terms, subject to termination at any time at the option of Mr. Dell upon 30 days' written notice. Under the terms of the Incentive Plan and the Company's prior stock option plans, the Compensation Committee, if it so chooses, may issue awards with provisions that accelerate vesting and exercisability in the event of a change-in-control of the Company and may amend existing awards to provide for such acceleration. To date, the Compensation Committee has not elected to include such acceleration provisions in any awards. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION Mr. Miles, Mr. Hirschbiel and Mr. Jordan served as members of the Compensation Committee of the Company's Board of Directors during all of fiscal 1998, and Mr. Mandl has been serving as a member of the Compensation Committee since his election to the Board of Directors in November 1997. None of such persons is an officer or employee, or former officer or employee, of the Company or any of its subsidiaries. No interlocking relationship exists between the members of the Company's Board of Directors or Compensation Committee and the board of directors or compensation committee of any other company, nor has any such interlocking relationship existed in the past. 8 10 SIGNATURE Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf the undersigned, thereunto duly authorized. DELL COMPUTER CORPORATION Date: May 26, 1998 /s/ JAMES M. SCHNEIDER ------------------------------------ Vice President -- Finance (Principal Accounting Officer) 9 -----END PRIVACY-ENHANCED MESSAGE-----