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DELL INC (4331)
10-K
Annual report pursuant to section 13 and 15(d)
Filed on 04/12/2004
Filed Period 01/30/2004

Table of contents

  • Page 1
    DELL INC (4331) 10-K Annual report pursuant to section 13 and 15(d) Filed on 04/12/2004 Filed Period 01/30/2004

  • Page 2
    ... 30, 2004 Commission File Number: 0-17017 Dell Inc. (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) One Dell Way, Round Rock, Texas 78682 (Address, including Zip Code, of registrant's principal executive offices) (512...

  • Page 3
    ... IV ITEM 15 -- EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K SIGNATURES Amended and Restated 401(k) Plan Amended and Restated Deferred Compensation Plan Subsidiaries Consent of PricewaterhouseCoopers LLP Certification of Chairman and CEO-Rule 13a-14(a) Certification of SVP and CFO...

  • Page 4
    ... General Dell Inc. (formerly Dell Computer Corporation), with annual revenue of $41.4 billion, is a premier provider of computing products and services. As a result of its direct business model, Dell was the leading seller of computer systems worldwide and the number one seller in all customer...

  • Page 5
    ..., markets, sells, and supports a wide range of computer systems that are customized to customer requirements. These include enterprise systems (servers, storage, networking products, and workstations), client systems (notebook and desktop computer systems), printing and imaging systems, and software...

  • Page 6
    .... Dimension customers include corporate and institutional customers as well as small businesses and home users. Dell ranked number one in the U.S. and worldwide in desktop shipments in calendar 2003. • Printing and Imaging Systems. Dell offers a wide array of Dell-branded printers, ranging...

  • Page 7
    ...allows customers to return desktop and notebook systems to Dell for any reason within 30 days of purchase. In addition, Dell provides a limited warranty for all computer systems for a period generally ranging from 90 days to three years and offers 24 hour telephone and online technical support. Dell...

  • Page 8
    ... in person and purchase online from Dell with the assistance of a Dell expert. Manufacturing Dell manufactures most of the products it sells. Dell has six manufacturing locations worldwide to service its global customer base. Dell believes that its manufacturing processes and supply-chain management...

  • Page 9
    ... patents and patent applications cover aspects of Dell's current and possible future computer system products, manufacturing processes, and related technologies. Dell is developing a portfolio of patents that it anticipates will be of value in negotiating intellectual property rights with others...

  • Page 10
    ... Statements and Supplementary Data." Dell's corporate headquarters are located in Round Rock, Texas. Its manufacturing facilities are located in Austin, Texas; Eldorado do Sul, Brazil; Nashville, Tennessee; Limerick, Ireland; Penang, Malaysia; and Xiamen, China. See "Item 2 - Properties." Factors...

  • Page 11
    ... to Dell's business could be accentuated if it occurs during a disproportionately heavy demand or shipping cycle during any quarterly period. • A failure on the part of Dell to effectively manage a product transition will directly affect the demand for Dell's products and the profitability of Dell...

  • Page 12
    ... business success may be largely dependent on its ability to obtain licenses to intellectual property developed by others on commercially reasonable and competitive terms. If Dell or its suppliers are unable to obtain desirable technology licenses, Dell could be prohibited from marketing products...

  • Page 13
    ...accessible through Dell's Investor Relations website at www.dell.com/investor, free of charge, as soon as reasonably practicable after these reports are filed electronically with the SEC. Executive Officers of Dell The following table sets forth the name, age, and position of each of the persons who...

  • Page 14
    ... in January 2003. In this role, he is responsible for all sales, marketing, and customer service activities for the consumer market in the U.S. Prior to his current role, Mr. Hamlin served as Vice President, Home and Small Business in Japan and managed Dell's Preferred Accounts segment in Japan. Mr...

  • Page 15
    ...was named Senior Vice President, Product Group in January 2003. In this role, he is responsible, along with Mr. Clarke, for the worldwide development, marketing, quality, and delivery into manufacturing of all Dell client, workstation, networking, server and storage systems, as well as the strategic...

  • Page 16
    ... in Xiamen, China. Dell also leases approximately 645,000 square feet of office space in Bangalore and Hyderabad, India, where it is expanding its customer phone support and back-office capabilities. Dell has recently established technical and customer support and related operations in India, Panama...

  • Page 17
    ... As of March 26, 2004, Dell's closing stock price was $33.40 and there were 46,495 holders of record of Dell's common stock. Dividends Dell has never declared or paid any cash dividends on shares of its common stock and currently does not anticipate paying any cash dividends in the immediate future...

  • Page 18
    ...related to employee termination benefits and facilities closure costs. Includes a pre-tax charge of $194 million related to a purchase of in-process research and development. Effective January 29, 2000, Dell changed its accounting for revenue recognition in accordance with the SEC's Staff Accounting...

  • Page 19
    ...), client systems (notebooks and desktops), software and peripherals, and service and support programs. Dell markets and sells its products and services directly to its customers, which include large corporate, government, healthcare and education accounts, as well as small-to-medium businesses and...

  • Page 20
    ...year decline in average revenue per-unit sold for Dell during fiscal 2004. Dell's general practice is to aggressively pass on declines in costs to its customers in order to enhance customer value while increasing market share. Management expects that the competitive pricing environment will continue...

  • Page 21
    ...Annual market share data represents personal computer units for the full calendar year and is based upon information provided by IDC. Americas - Dell increased its No. 1 market share position during calendar 2003 by almost 3 points to 27.6%. Year-over-year net unit growth was 23% during fiscal 2004...

  • Page 22
    ...add customer value while increasing market share. Dell currently expects the component cost and competitive pricing environment will continue to be challenging. However, management believes that the strength of Dell's direct-to-customer business model, as well as its strong liquidity position, makes...

  • Page 23
    ... quarter for other-than-temporary declines in fair value of Dell's venture investments due to market conditions as well as the investees' inability to execute their business plans. Income Taxes Dell's effective tax rate was 29.0% in fiscal 2004 compared to 29.9% for fiscal 2003 and 28.0% for fiscal...

  • Page 24
    ... ability to lease certain real property, buildings, and equipment to be constructed or acquired. These leases have historically been accounted for as operating leases by Dell. During fiscal 2004, Dell paid $636 million to purchase all of the assets covered by its master lease facilities. Accordingly...

  • Page 25
    ...: Fiscal Year Ended January 30, 2004 January 31, 2003 February 1, 2002 Days of sales outstanding(a) Days of supply in inventory Days in accounts payable Cash conversion cycle 31 3 70 (36) 28 3 68 (37) 29 4 69 (36) (a) Days of sales outstanding include the effect of product costs related to...

  • Page 26
    ... make a limited number of strategic equity investments. Capital Commitments Share Repurchase Program - Dell has a share repurchase program that authorizes the purchase of up to 1.25 billion shares of common stock to manage the dilution resulting from shares issued under Dell's employee stock plans...

  • Page 27
    Table of Contents Capital Expenditures - During fiscal 2004, Dell spent $329 million on property, plant, and equipment and $636 million to purchase all of the assets covered by its master lease facilities. Product demand and mix, as well as ongoing efficiencies in operating and information ...

  • Page 28
    ...during fiscal 2004, 2003, and 2002. Cash and Investments At January 30, 2004, Dell had $11.9 billion of total cash and investments (including investments in equity securities discussed below), all of which are stated at fair value. Dell's investment policy is to manage its total cash and investments...

  • Page 29
    ...appropriate timing of revenue recognition. Dell offers extended warranty and service contracts to customers that extend and/or enhance the technical support, parts, and labor coverage offered as part of the base warranty included with the product. Revenue from extended warranty and service contracts...

  • Page 30
    ... limited warranty. The specific warranty terms and conditions vary depending upon the product sold and country in which Dell does business, but generally includes technical support, repair parts, labor, and a period ranging from 90 days to three years. Factors that affect Dell's warranty liability...

  • Page 31
    Table of Contents ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Response to this item is included in "Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Market Risk." 28

  • Page 32
    ... of the three fiscal years ended January 30, 2004 Notes to Consolidated Financial Statements Financial Statement Schedule: Schedule II - Valuation and Qualifying Accounts for each of the three fiscal years ended January 30, 2004 All other schedules are omitted because they are not applicable. 29 30...

  • Page 33
    ...accompanying index, presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of Dell's management; our responsibility is...

  • Page 34
    ... DELL INC. CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (in millions) January 30, January 31, 2004 2003 ASSETS Current assets: Cash and cash equivalents Short-term investments Accounts receivable, net Inventories Other Total current assets Property, plant and equipment, net Investments Other...

  • Page 35
    ... DELL INC. CONSOLIDATED STATEMENTS OF INCOME (in millions, except per share amounts) Fiscal Year Ended January 30, 2004 January 31, 2003 February 1, 2002 Net revenue Cost of revenue Gross margin Operating expenses: Selling, general and administrative Research, development and engineering Special...

  • Page 36
    ... working capital Non-current assets and liabilities Net cash provided by operating activities Cash flows from investing activities: Investments: Purchases Maturities and sales Cash assumed in consolidation of Dell Financial Services L.P. Capital expenditures Purchase of assets held in master lease...

  • Page 37
    ... Change in net unrealized loss on derivative instruments, net of taxes of $42 Total comprehensive income Stock issuances under employee plans, including tax benefits Purchases Other Balances at January 31, 2003 Net income Change in net unrealized gain on investments, net of taxes of $19 Foreign...

  • Page 38
    ...), client systems (notebooks and desktops), software and peripherals, and service and support programs. Dell markets and sells its products and services directly to its customers, which include large corporate, government, healthcare and education accounts, as well as small-to-medium businesses and...

  • Page 39
    ... at fair value. Treasury Stock - Effective with the beginning of the second quarter of fiscal 2002, Dell began holding repurchased shares of its common stock as treasury stock. Prior to that date, Dell retired all such repurchased shares which were recorded as a reduction to retained earnings. Dell...

  • Page 40
    ... limited warranty. The specific warranty terms and conditions vary depending upon the product sold and country in which Dell does business, but generally includes technical support, repair parts, labor, and a period ranging from 90 days to three years. Factors that affect Dell's warranty liability...

  • Page 41
    ... Effects of Stock-Based Compensation - As of January 30, 2004, Dell had four stock-based compensation plans and an employee stock purchase plan where stock options or purchase rights were outstanding. See Note 5 of "Notes to Consolidated Financial Statements." Dell currently applies the recognition...

  • Page 42
    ...to stock-based employee compensation: Fiscal Year Ended January 30, 2004 January 31, February 1, 2003 2002 (in millions, except per share amounts) Net income - as reported Deduct: Total stock-based employee compensation determined under fair value method for all awards, net of related tax effects...

  • Page 43
    ...-term investments in the accompanying consolidated statement of financial position. January 30, 2004 Fair Market Value Unrealized Gain Fair Market Value January 31, 2003 Unrealized Gain (Loss) Cost Cost (in millions) Debt securities: U.S. government and agencies U.S. corporate International...

  • Page 44
    ...as a component of net revenue or cost of revenue in the same period the hedged transaction affects earnings. The ineffective portion of the change in the fair value of cash flow hedge is recognized currently in earnings and is reported as a component of investment and other income (loss), net. Hedge...

  • Page 45
    ... net of taxes. At January 31, 2003, Dell held forward contracts with a notional amount of approximately $2.0 billion, a net liability value of $140 million and a net unrealized loss of $25 million, net of taxes. Long-Term Debt and Interest Rate Risk Management In April 1998, Dell issued $200 million...

  • Page 46
    ... of Dell's net deferred tax asset are as follows: Fiscal Year Ended January 30, 2004 (in millions) January 31, 2003 Deferred tax assets: Inventory and warranty provisions Capital loss carry back Deferred revenue Leasing Investment impairments and unrealized gains Provisions for product returns and...

  • Page 47
    ... common stock, par value $.01 per share. Share Repurchase Program - Dell has a share repurchase program that authorizes the purchase of up to 1.25 billion shares of common stock to manage the dilution resulting from shares issued under Dell's employee stock plans. As of the end of fiscal 2004, Dell...

  • Page 48
    ... Section 422 of the Internal Revenue Code or nonqualified options. The right to purchase shares pursuant to existing stock option agreements typically vests pro-rata at each option anniversary date over a five-year period. The options are generally granted at fair market value and must be exercised...

  • Page 49
    ... the Internal Revenue Code and permits substantially all employees to purchase shares of Dell's common stock. Participating employees may purchase common stock through payroll deductions at the end of each participation period at a purchase price equal to 85% of the lower of the fair market value of...

  • Page 50
    ... and servicing provisions. The limited recourse provision is fully funded by DFS through restricted cash escrow accounts which are included in other current assets on Dell's consolidated statement of financial position as of January 30, 2004. CIT has no recourse or rights of return to Dell, except...

  • Page 51
    ... than five years. Management believes that no significant concentration of credit risk for investments exists for Dell. Dell markets and sells its products and services to large corporate clients, governments, healthcare and education accounts, as well as small-to-medium businesses and individuals...

  • Page 52
    ...Corporate assets primarily include cash and cash equivalents, investments, deferred tax assets, and other assets. The table below presents information about Dell's reportable segments: Fiscal Year Ended January 30, 2004 January 31, 2003 (in millions) February 1, 2002 Net revenue Americas: Business...

  • Page 53
    ...than 10% of Dell's total net revenues or long-lived assets during fiscal 2004, 2003, and 2002. The following is net revenue by product groups: Fiscal Year Ended January 30, 2004 January 31, 2003 (in millions) February 1, 2002 Desktop computer systems Notebook computers Enterprise systems Total net...

  • Page 54
    ... 30, 2004 (in millions) January 31, 2003 Supplemental Consolidated Statements of Financial Position Information: Accounts receivable: Gross accounts receivable Allowance for doubtful accounts $ 3,719 (84) 3,635 $ 2,657 (71) 2,586 $ Inventories: Production materials Work-in-process Finished...

  • Page 55
    ... quarter of fiscal 2004 and 2003: Fiscal Year 2004 4th Quarter 3rd Quarter 2nd Quarter 1st Quarter (in millions, except per share data) Net revenue Gross margin Net income Earnings per common share(a): Basic Diluted Weighted average shares outstanding: Basic Diluted Stock sales prices per share...

  • Page 56
    Table of Contents Fiscal Year 2003 4th Quarter 3rd Quarter 2nd Quarter 1st Quarter (in millions, except per share data) Net revenue Gross margin Net income Earnings per common share(a): Basic Diluted Weighted average shares outstanding: Basic Diluted Stock sales prices per share: High Low $ $ $ ...

  • Page 57
    ... Relationships and Related Transactions, and Item 14 - Principal Accountant Fees and Services), to the extent not set forth herein under "Item 1 - Business - Executive Officers of Dell," is incorporated by reference from Dell's definitive proxy statement, which will be filed with the Securities...

  • Page 58
    ... Based Stock Option Plan (incorporated by reference to Exhibit 99 to Dell's Registration Statement on Form S-8, filed October 31, 2000, Registration No. 333-49016) 10.4* - Dell Computer Corporation 2002 Long Term Incentive Plan (incorporated by reference to Exhibit 10.1 to Dell's Quarterly Report on...

  • Page 59
    ... of or includes a management contract or compensatory plan or arrangement. †Filed herewith. Reports on Form 8-K On November 13, 2003, Dell filed a current report on Form 8-K reporting that it had issued a press release regarding its financial results for the fiscal quarter ended October 31...

  • Page 60
    Table of Contents SCHEDULE II DELL INC. VALUATION AND QUALIFYING ACCOUNTS Fiscal Year Description Balance at Beginning of Period Charged to Bad Debt Expense (in millions) Write-Offs Charged to Allowance Balance at End of Period 2004 2003 2002 Allowance for doubtful accounts Allowance for ...

  • Page 61
    ...Executive Officer Date: April 12, 2004 Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Name Title Date /s/ MICHAEL S. DELL Michael S. Dell...

  • Page 62
    Robert W. Davis 58

  • Page 63
    Exhibit 10.5 Dell Inc. 401(k) Plan As Amended and Restated Effective January 1, 2003

  • Page 64
    ... the Dell Inc. 401(k) Plan (the "Plan") for the benefit of eligible employees of the Company and participating affiliates; and WHEREAS, the Company desires to restate the Plan and to amend the Plan in several respects, intending thereby to provide an uninterrupted and continuing program of benefits...

  • Page 65
    ... Application of Forfeitures 4.5 Valuation of Accounts 4.6 Code Section 415 Limitations and Corrections INVESTMENT OF ACCOUNTS 5.1 Investment of Accounts by Participants 5.2 Restriction on Acquisition of Company Stock 5.3 Pass-Through Voting of Company Stock 5.4 Stock Rights, Stock Splits, and Stock...

  • Page 66
    ... Service Prior to Retirement TIME AND FORM OF PAYMENT OF BENEFITS 8.1 Time of Payment 8.2 Determination of Benefit Commencement Date 8.3 Forms of Benefits 8.4 Cash-Out of Benefit 8.5 Direct Rollover Election 8.6 Payee of Benefits 8.7 Benefits from Account Balances 8.8 Unclaimed Benefits 8.9 Claims...

  • Page 67
    ... Property 11.5 Distributions from Participants' Accounts 11.6 Payments Solely from Trust Fund 11.7 No Benefits to the Employer XII. FIDUCIARY PROVISIONS 12.1 Article Controls 12.2 General Allocation of Fiduciary Duties 12.3 Fiduciary Duty 12.4 Delegation of Fiduciary Duties 12.5 Investment Manager...

  • Page 68
    ... Uniformed Services Employment and Reemployment Rights Act Requirements 16.4 Payments to Minors and Incompetents 16.5 Acquisition and Holding of Company Stock 16.6 Participant's and Beneficiary's Addresses 16.7 Severability 16.8 Jurisdiction 16.9 Incorrect Information or Error 16.10 Merged Plans TOP...

  • Page 69
    ...Annual Incentive Bonus Plan. All other bonus payments, if any, including "sign-on bonuses," "on the spot awards," and other customized bonus programs shall not be considered a Bonus under the Plan and will be included in that Participant's Considered Compensation. (d) Code: The Internal Revenue Code...

  • Page 70
    ...'s behalf by the Employer that are not includable in income under Code Sections 125, 402(e)(3), 402(h), 403(b), or 457; (viii) Any amounts that are not includable in the gross income of a Participant under a salary reduction agreement by reason of the application of Code Section 132(f); (ix...

  • Page 71
    ...and (ii) Prorated for a Plan Year of less than twelve months and to the extent otherwise required by applicable law. (4) For purposes of this Section, amounts under Code Section 125 include any amounts not available to a Participant in cash in lieu of group health coverage because the Participant is...

  • Page 72
    ... a controlled group of corporations (within the meaning of Code Sections 414(b) and 414(c)) or an affiliated service group (within the meaning of Code Sections 414(m) or 414(o)) of which the Employer is a member. (k) Direct Rollover: A payment by the Plan to an Eligible Retirement Plan designated by...

  • Page 73
    ... 4.6(b), and (vii) any other distribution so designated by the Internal Revenue Service in revenue rulings, notices, and other guidance of general applicability. Further, a distribution pursuant to Section 6.2 from the Salary Reduction Account of a Participant who has not attained age 591/2 shall...

  • Page 74
    ...Company. (dd) Investment Fund: Investment funds made available from time to time by the Committee for the investment of Plan assets as described in Article V. (ee) Leased Employee: Each person who is not an employee of the Employer or a Controlled Entity but who performs services for the Employer or...

  • Page 75
    ...Period of Service by federal law, but only under the conditions and to the extent so required by such federal law. (3) If an individual terminates his Service (at a time other than during a leave of absence) and subsequently resumes his Service, if his Reemployment Commencement Date is within twelve...

  • Page 76
    ... an Employee immediately following the date of his or her termination of employment with Dell Financial Services, L.P. (jj) Period of Severance: Each period of time commencing on an individual's Severance from Service Date and ending on a Reemployment Commencement Date. (kk) Plan: The Dell Inc...

  • Page 77
    ...under the Trust Agreement at any time. (xx) Valuation Date: Each day that the New York Stock Exchange is open for business. (yy) Vested Interest: The percentage of a Participant's Accounts that, pursuant to the Plan, is nonforfeitable. (zz) Vesting Service: The measure of service used in determining...

  • Page 78
    ... and all provisions herein shall be construed in accordance with such intent. 1.5 Profit Sharing Plan. The Plan is intended to qualify as a profit sharing plan for purposes of Code Sections 401(a), 402, 412, and 417. Contributions to this Plan are not dependent on profits by an Employer. ***** -10-

  • Page 79
    ... the Effective Date. (c) The following groups of Employees are not eligible to participate in the Plan: (1) An Employee whose terms and conditions of employment are governed by a collective bargaining agreement, unless such agreement provides for his coverage under the Plan; (2) A nonresident alien...

  • Page 80
    ... In the event that, after application of Section 3.3(b), the group of Employees covered by the Plan do not satisfy the ratio percentage test in accordance with Code Section 410(b), certain employees of Spherion Corporation who provide services to Dell (the "Spherion Employees") shall be permitted to...

  • Page 81
    ...Section 3.2, the Employer may make an Employer Matching Contribution to the Employer Matching Contribution sub-account of each Spherion Employee permitted to Participate in the Plan pursuant to Section 2.4 of the Plan in an amount determined by multiplying the Employee's Compensation by the "average...

  • Page 82
    ... election percentage to his Employer in the manner and within the time period prescribed by the Committee. For the 2003 Plan Year, a Participant may change his deferral election percentage for his Bonus deferrals, effective as of the next following Bonus payment date, by communicating such new...

  • Page 83
    ... first day of any subsequent pay period by communicating his new deferral election to his Employer in the manner and within the time period prescribed by the Committee. For the 2003 Plan Year, a Participant may cancel his Bonus deferral election effective as of the next following Bonus payment date...

  • Page 84
    ... not in excess of 3% of each such Participant's Considered Compensation and Bonus, as applicable, for such pay period. (b) In addition to the Employer Matching Contributions made pursuant to Subsection 3.2(a), for each calendar quarter the Employer may in its discretion contribute to the Trust an...

  • Page 85
    ... requirements Article II and (b) any Employee who incurs a separation from service during the Plan Year. 3.4 Employer Fail Safe Contributions. (a) In addition to the Employer Matching Contributions made pursuant to Section 3.2 and the Employer Retirement Savings Contribution made pursuant to Section...

  • Page 86
    ... written demand of the Employer, be returned to the Employer by the Trustee within one year after the payment thereof, reduced by any net losses of the Trust Fund attributable thereto but not increased by any net earnings of the Trust Fund attributable thereto, which net earnings shall be treated as...

  • Page 87
    ... loss allocated thereto in the manner determined by the Committee in accordance with any method permissible under applicable Treasury regulations. Any forfeiture pursuant to the provisions of this Section shall be considered to have occurred on the date that is 21/2 months after the end of the Plan...

  • Page 88
    ... is in fact eligible for rollover to the Plan and is made pursuant to and in accordance with applicable provisions of the Code and Treasury regulations. All Rollover Contributions to the Plan must be made in cash. (b) An Eligible Employee who has made a Rollover Contribution in accordance with...

  • Page 89
    ... smallest amount of Compensation for such Plan Year until the limitation set forth in Section 4.6 has been reached as to such Eligible Participant, and continuing in such manner until the Employer Fail Safe Contribution for such Plan Year has been completely allocated or the limitation set forth in...

  • Page 90
    ... 4.2(f)). In determining the application of the limitations set forth in Section 4.6 to the allocations of Employer Fail Safe Contributions, all Annual Additions (as such term is defined in Section 4.6) to a Participant's Accounts other than Employer Fail Safe Contributions shall be considered...

  • Page 91
    ...by the Trustee until the time of distribution. Such daily pricing shall include the valuation of assets of the Investment Funds in which each such Account is invested, the earnings and losses attributable to such Investment Fund allocable to each such Account, and the payment of any expenses or fees...

  • Page 92
    ... reduced on a pro rata basis and allocated, reallocated, or returned in accordance with applicable plan provisions regarding Annual Additions in excess of Maximum Annual Additions. (c) For purposes of this Section, the following terms and phrases when capitalized shall have these respective meanings...

  • Page 93
    ... by Code Section 415(d)) or (ii) 100% of such Participant's Compensation during such Limitation Year. (d) If the Committee determines that a reduction of the Considered Compensation and Bonus deferral elections, if any, made pursuant to Section 3.1 is necessary to ensure that the limitations set...

  • Page 94
    ... permitted by section 404(a) of ERISA, at each annual meeting and special meeting of the shareholders of the Company, a Participant may direct the voting of the number of whole shares of Company Stock attributable to his Accounts as of the Valuation Date coinciding with or, if none, next preceding...

  • Page 95
    ... a stock split, stock dividend, or recapitalization shall be appropriately allocated to the Accounts of each affected Participant. 5.5 Participant Rights. For purposes of Article V only, the beneficiary of a deceased Participant and any alternate payee under a qualified domestic relations order (as...

  • Page 96
    ... available loans pursuant to Article IX and pursuant to the provisions of any other plans of the Employer and any Controlled Entities of which he is a member may withdraw from his Employer Contribution Account, his Rollover Contribution Account, and his Salary Reduction Contribution Account amounts...

  • Page 97
    ...of Internal Revenue may deem to be immediate and heavy financial needs through the publication of revenue rulings, notices, and other documents of general applicability. (c) The above Subsections of this Section notwithstanding, in addition to the restrictions on all in-service withdrawals set forth...

  • Page 98
    ... Fund in which such Account is invested. (d) All withdrawals under this Article shall be paid in cash. (e) Any withdrawal hereunder that constitutes an Eligible Rollover Distribution shall be subject to the Direct Rollover election described in Article VII. (f) This Article shall not be applicable...

  • Page 99
    ... on or after his Normal Retirement Date shall be entitled to a "retirement benefit," payable at the time and in the form provided in Article VIII. A Participant's retirement benefit shall be equal to the value of his Accounts on his Benefit Commencement Date. 7.2 Disability Benefits. In the event...

  • Page 100
    ... From Service Prior to Retirement. Each Participant whose employment with the Employer and all Controlled Entities is terminated prior to his Normal Retirement Date for any reason other than total and permanent disability or death shall be entitled to a "termination benefit," payable at the time and...

  • Page 101
    ...Periods of Service are completed consecutively. The completion of 365 days of Periods of Service shall constitute one year of Vesting Service. (c) Forfeiture of Vesting Service. (1) In the case of an individual who terminates employment with the Employer and all Controlled Entities at a time when he...

  • Page 102
    ...the nonvested portion of his Employer Contribution Account shall be forfeited as of the earlier of (i) the date the Participant completes a Period of Severance of five consecutive years or (ii) the date of the terminated Participant's death. (e) Restoration of Forfeited Account Balance. In the event...

  • Page 103
    ... Participants, and any additional amount needed to restore such forfeited amounts shall be a minimum required Employer Retirement Savings Contribution (which shall be made without regard to current or accumulated earnings and profits). (f) Special Formula for Determining Vested Interest for Partial...

  • Page 104
    ... employment after December 31, 2001. (h) Special Rules for Alternate Payees. The Committee may direct the Trustee under the nondiscriminatory policy adopted by the Committee to immediately pay benefits to an alternate payee designated under a Qualified Domestic Relations Order as defined in Code...

  • Page 105
    ... FORM OF PAYMENT OF BENEFITS 8.1 Time of Payment. A Participant's benefit shall be paid or commence, as applicable, on his Benefit Commencement Date. Any amount allocable to a Participant's Accounts after his Benefit Commencement Date shall be distributed, as soon as administratively feasible after...

  • Page 106
    ...Subject to the provisions of Subsection 8.2(d), a Participant (other than a Participant who dies or whose Vested Interest in his Accounts is not in excess of $5,000) must request and file a claim for benefits in the manner prescribed by the Committee before payment of his benefit will commence. -38-

  • Page 107
    ... 1984, in accordance with section 242(b)(2) of the Tax Equity and Fiscal Responsibility Act ("TEFRA") and the provisions of the plan that relate to section 242(b)(2) of TEFRA. (2) Time and Manner of Distribution. (A) Required Beginning Date. The Participant's entire interest will be distributed, or...

  • Page 108
    ...purchased from an insurance company or in a single sum on or before the required beginning date, as of the first distribution calendar ...calendar year is the Participant's spouse, the quotient obtained by dividing the Participant's account balance by the number in the Joint and Last Survivor Table set...

  • Page 109
    ...the Participant dies on or after the date distributions begin and there is a designated beneficiary, the minimum amount that will be distributed for each distribution calendar year after the year of the Participant's death is the quotient obtained by dividing the Participant's account balance by the...

  • Page 110
    ...'s entire interest will be completed by December 31 of the calendar year containing the fifth anniversary of the Participant's death. (III) Death of Surviving Spouse Before Distributions to Surviving Spouse Are Required to Begin. If the Participant dies before the date distributions begin, the...

  • Page 111
    ... valuation calendar year. (E) Required beginning date. The date specified in Section 8.2(d)(1) of the Plan. 8.3 Forms of Benefits. A Participant's benefit shall be paid (or transferred pursuant to Section 8.5, if applicable) in a single lump sum payment. Benefits shall be paid or transferred in cash...

  • Page 112
    ...the Participant or beneficiary to whom such benefit is payable makes a valid claim for such benefit, such forfeited benefit shall be restored to the Plan in the manner provided in Section 7.4(e). 8.9 Claims Review. (a) In any case in which a claim for Plan benefits of a Participant or beneficiary is...

  • Page 113
    ... period. (c) Timely completion of the claims procedures described in this Section shall be a condition precedent to the commencement of any legal or equitable action in connection with a claim for benefits under the Plan by a Participant or by any other person or entity claiming rights through such...

  • Page 114
    ... on the day before the date on which the loan is to be made, over (ii) the outstanding balance of Outstanding Loans on the date on which the loan is to be made); or (2) One-half of the present value of the Participant's nonforfeitable accrued benefit under all qualified plans of the Employer and...

  • Page 115
    ... of each loan. 9.5 Repayment Terms of Loan. (a) A Participant who is an Employee receiving compensation from the Employer at the time of receipt of a loan shall be required, as a condition to receiving a loan, to enter into an irrevocable agreement authorizing the Employer to make payroll deductions...

  • Page 116
    ... of Treas. Reg. Section 1.72(p)-1, Q&A-10, the Employer may adopt a nondiscriminatory policy which permits Participants who have failed to make one or more loan payments to make addition payments to the Plan's Trust prior to the end of the applicable "cure period" in the amount necessary to permit...

  • Page 117
    ...offset and used to satisfy the payment of a defaulted outstanding loan (including interest) prior to the earliest time the amounts in any such Account are otherwise permitted to be distributed under applicable law. In the event an offset of a defaulted loan is not permitted pursuant to the preceding...

  • Page 118
    ... "named fiduciary" with respect to the general administration of the Plan (except as to the investment of the assets of the Trust Fund). 10.2 Term, Vacancies, Resignation, and Removal. Each member of the Committee shall serve until he resigns, dies, or is removed by the Directors. At any time during...

  • Page 119
    ...; (b) To construe in its discretion all terms, provisions, conditions, and limitations of the Plan, and, in all cases, the construction necessary for the Plan to qualify under the applicable provisions of the Code shall control; (c) To correct any defect or to supply any omission or to reconcile any...

  • Page 120
    ...To amend the Plan in accordance with and to the extent provided in Article XIII. 10.8 Employer to Supply Information. The Employer shall supply full and timely information to the Committee, including, but not limited to, information relating to each Participant's compensation, age, retirement, death...

  • Page 121
    ... or judgment, costs, counsel fees, and related charges reasonably incurred in connection with a claim asserted or a proceeding brought or settlement thereof. 10.10 Temporary Restrictions. In order to ensure an orderly transition in the transfer of assets to or from the Trust Fund associated with...

  • Page 122
    ... of Plan and Trust administration, whether or not the signatory to such contract is, as a matter of convenience, the Employer. 11.4 Trust Fund Property. All income, profits, recoveries, contributions, forfeitures, and any and all moneys, securities, and properties of any kind at any time received...

  • Page 123
    ....6 Payments Solely from Trust Fund. All benefits payable under the Plan shall be paid or provided for solely from the Trust Fund, and neither the Employer nor the Trustee assumes any liability or responsibility for the adequacy thereof. The Committee or the Trustee may require execution and delivery...

  • Page 124
    ...the risk of large losses, unless under the circumstances it is prudent not to do so; and (d) In accordance with the documents and instruments governing the Plan insofar as such documents and instruments are consistent with applicable law. No fiduciary shall cause the Plan or Trust Fund to enter into...

  • Page 125
    ... registered as an investment adviser under the laws of the state (referred to in such section 203A(a) in which it maintains its principal office and place of business, and, at the time it last filed the registration form most recently filed by it with such state in order to maintain its registration...

  • Page 126
    ... to acquire or maintain the Plan's qualified status under the Code, whether or not retroactive. 13.2 Limitation on Amendments. No amendment of the Plan shall be made that would vest in the Employer, directly or indirectly, any interest in or control of the Trust Fund. No amendment shall be made...

  • Page 127
    ...balance of the Accounts of a Participant for whom the Plan is so terminated, or who is affected by such partial termination, to such Participant, subject to the time of payment, form of payment, and consent provisions of Article VIII. 14.3 Merger, Consolidation, or Transfer. This Plan and Trust Fund...

  • Page 128
    thereafter each Participant would, in the event such other plan terminated, be entitled to a benefit equal to or greater than the benefit to which he would have been entitled if the Plan were terminated immediately before the merger, consolidation, or transfer. ***** -60-

  • Page 129
    ..., that each Employer shall contribute to the Trust Fund its share of the Employer Retirement Savings Contribution for a Plan Year based on the Participants in its employ during such Plan Year who will receive such contribution for such Plan Year. (d) Transfer of employment among Employers shall not...

  • Page 130
    ... Company and the designated Employer. 15.2 Single Plan. For purposes of the Code and ERISA, the Plan as adopted by the Employers shall constitute a single plan rather than a separate plan of each Employer. All assets in the Trust Fund shall be available to pay benefits to all Participants and their...

  • Page 131
    ... any fiduciary of the Plan with respect to such benefit. 16.5 Acquisition and Holding of Company Stock. The Plan is specifically authorized to acquire and hold up to 100% of its assets in Company Stock so long as Company Stock is a "qualifying employer security," as such term is defined in section...

  • Page 132
    ... current mailing address and the current mailing address of his designated beneficiary, neither the Committee, the Trustee, the Employer, nor any fiduciary under the Plan shall be responsible for any late or lost payment of a benefit or for failure of any notice to be provided timely under the terms...

  • Page 133
    ...Date. (b) Accrued Benefit: As of any Valuation Date, the present value (computed on the basis of the Assumptions) of the cumulative accrued benefit (excluding the portion thereof that is attributable to employee contributions that were deductible pursuant to Code Section 219, to rollover or transfer...

  • Page 134
    ... of any defined benefit plan, the most recent date within a twelve-month period ending on a Determination Date as of which the plan assets were valued for purposes of computing plan costs for purposes of the requirements imposed under Code Section 412. 17.3 Top-Heavy Status. The Plan shall be deemed...

  • Page 135
    ... on the applicable Determination Date shall not be considered. 17.4 Top-Heavy Vesting Schedule. If the Plan is determined to be top-heavy for a Plan Year, the Vested Interest in the Employer Contribution Account of each Participant who is credited with an Hour of Service during such Plan Year shall...

  • Page 136
    ... the benefit described in Code Section 416(c)(1). 17.6 Termination of Top-Heavy Status. If the Plan has been deemed to be top-heavy for one or more Plan Years and thereafter ceases to be top-heavy, the provisions of this Article shall cease to apply to the Plan effective as of the Determination Date...

  • Page 137
    ... of the Plan. (a) "Key employee" shall mean any employee or former employee (including any deceased employee) who at any time during the Plan Year that includes the determination date was an officer of the Employer having annual compensation greater than $130,000 (as adjusted under Code Section 416...

  • Page 138
    ... guidance of general applicability issued thereunder. (b) The following provisions shall apply for purposes of determining the present values of accrued benefits and the amounts of account balances of employees as of the determination date. (1) The present values of accrued benefits and the amounts...

  • Page 139
    ... Effective January 1, 2002, all employees who are eligible to make elective deferrals under this Plan and who have attained age 50 before the close of the Plan Year shall be eligible to make catch-up contributions in accordance with, and subject to the limitations of, Code Section 414(v). Such catch...

  • Page 140
    ... of the Plan regarding distributions, other than provisions that require a separation from service before such amounts may be distributed. Executed this 19th day of December, 2003. Dell Inc. By: /s/ KATHLEEN ANGEL Kathleen Angel, Director of Global Benefits & International Compensation -72-

  • Page 141
    Exhibit 10.6 DELL COMPUTER CORPORATION DEFERRED COMPENSATION PLAN AMENDED AND RESTATED EFFECTIVE AS OF JANUARY 1, 2002

  • Page 142
    ... or Loss and Changes in Value HYPOTHETICAL INVESTMENT OF ACCOUNTS 5.1 Hypothetical Investment of Accounts 5.2 Designation of Investment Funds VESTED INTEREST 6.1 Vesting of Compensation Deferrals Account 6.2 Vesting of Company Credits Account 6.3 Forfeitures IN-SERVICE WITHDRAWALS AND LOANS 7.1 In...

  • Page 143
    ... 8.6 Payments Pursuant to a QDRO 8.7 Payer of Benefits 8.8 Unclaimed Benefits ADMINISTRATION OF PLAN 9.1 Appointment of Committee 9.2 Term, Vacancies, Resignation, and Removal 9.3 Self-Interest of Committee Members 9.4 Committee Powers and Duties 9.5 Claims Review 9.6 Company to Supply Information...

  • Page 144
    .... (1) Account(s): A Participant's Compensation Deferrals Account and Company Credits Account, if any. (2) Affiliate: Each trade or business (whether or not incorporated), which together with Dell Computer Corporation would be deemed to be a "single employer" within the meaning of Code Section 414...

  • Page 145
    ... any acquisition directly from Dell Computer Corporation, (ii) any acquisition by Dell Computer Corporation, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by Dell Computer Corporation or any corporation controlled by Dell Computer Corporation, (iv) any...

  • Page 146
    ...), (ii) no person (excluding any employee benefit plan (or related trust) of Dell Computer Corporation, such corporation resulting from such Business Combination, and Michael Dell) beneficially owns, directly or indirectly, 20% or more of the then outstanding shares of common stock of the...

  • Page 147
    ...be included: • The total of all wages, salaries, fees for professional services, and other amounts received by a Participant in cash or in kind for services actually rendered in the course of employment with the Employer while a Participant and an Employee to the extent such amounts are includable...

  • Page 148
    ... from engaging in any substantial or gainful employment; provided, however, that an individual shall be deemed to be disabled if he is determined to be disabled under the terms of the Dell Computer Corporation 401(k) Plan. (19) Effective Date: January 1, 2001, except as otherwise provided herein...

  • Page 149
    ... time to time for the hypothetical investment of a Participant's Accounts pursuant to Article V. (25) Participant: An Employee participating in the Plan in accordance with the provisions of Section 2.1. (26) Plan: The Dell Computer Corporation Deferred Compensation Plan, as amended from time to time...

  • Page 150
    ...Stock Exchange is open for business. (34) Vested Interest: The percentage of a Participant's Accounts that, pursuant to Article VI, is vested. (35) Vesting Service: With respect to each Participant, "Vesting Service" as defined and credited under the Dell Computer Corporation 401(k) Plan. 1.2 Number...

  • Page 151
    ... the time period required by the Committee. (2) A Participant's election to defer Base Salary for any Plan Year under the Plan must be made on or prior to the Election Date for Base Salary deferrals. (3) If an Employee becomes initially eligible under the Plan following an Election Date, he may make...

  • Page 152
    ... (30)-day period following the date of his initial eligibility, and such election shall be irrevocable for such Bonus Year. Notwithstanding the preceding, an Employee who becomes initially eligible to participate in the Plan after the first day of the fourth quarter of the Company's fiscal year...

  • Page 153
    ... is at least twelve (12) months after the effective date of such cancellation by complying with the procedural requirements set forth in Subsection (a)(1) or (b)(1), as applicable. (c) Ongoing Election. A Participant's election to make Base Salary Deferrals shall remain in force and effect while he...

  • Page 154
    ... made by a Participant pursuant to the terms of Article V. 4.3 Allocation of Net Income or Loss and Changes in Value. (a) As of each Valuation Date, the Committee shall determine the fair market value and the net income (or net loss) of each Investment Fund for the period elapsed since the next...

  • Page 155
    ..., and the frequency of such changes may be limited by the Committee. (c) If the Committee elects to establish a hypothetical investment fund that holds shares of the Company's common stock, a Participant may elect to invest his Accounts in such fund. The Committee may in its sole discretion refuse...

  • Page 156
    .... Such benefit shall be paid in a single lump sum payment as soon as administratively practicable after the Committee has made its determination with respect to the availability and amount of such withdrawal. If the Participant's Accounts are deemed to be invested in more than one Investment Fund...

  • Page 157
    ... anything contained in the Plan to the contrary, if at any time any Participant is finally determined by the Internal Revenue Service or the U.S. Department of Labor not to qualify as a member of a select group of "management or highly compensated employees" as such term is used in ERISA...

  • Page 158
    ... Interest in his Accounts as of the Valuation Date next preceding the date the payment of such benefit is to be paid or commence pursuant to Section 8.3. 8.3 Payee and Time of Payment. Payment of a Participant's benefit shall be paid or commence as soon as administratively practicable following the...

  • Page 159
    ... in the form elected of a single lump sum payment, unless such Participant elects to file a new election under Subsection (a) above. (d) If a Participant dies prior to the date the payment of his benefit begins or is completed, such benefit shall be paid to such Participant's beneficiary designated...

  • Page 160
    ... benefit is payable makes a valid claim for such benefit within a reasonable (as determined by and in the discretion of the Committee) period of time following the date such benefit became payable, such forfeited benefit shall be payable pursuant to the Plan provisions. ARTICLE IX. ADMINISTRATION...

  • Page 161
    ...To employ and compensate such accountants, attorneys, investment advisors, and other agents, employees, and independent contractors as the Committee may deem necessary or advisable for the proper and efficient administration of the Plan; (e) To determine in its sole discretion all questions relating...

  • Page 162
    ... To make a determination in its sole discretion as to the right of any person to a benefit under the Plan and to prescribe procedures to be followed by distributees in obtaining benefits hereunder; and (i) To receive and review reports from the Trustee as to the financial condition of the Trust Fund...

  • Page 163
    ... group of management or highly compensated employees of the Company. Further, it is the intention of the Company that the Plan be "unfunded" for purposes of the Code and Title I of ERISA. The Plan constitutes a mere promise by the Company to make benefit payments in the future. Plan benefits herein...

  • Page 164
    ... and all moneys, securities, and properties of any kind at any time received or held by the Trustee, if any, shall be held for investment purposes as a commingled Trust Fund pursuant to the terms of the Trust Agreement. The Committee shall maintain Accounts in the name of each Participant, but the...

  • Page 165
    ...at any time by giving written notice to such participating entity and the Company. ARTICLE XII. MISCELLANEOUS 12.1 Not Contract of Employment. The adoption and maintenance of the Plan shall not be deemed to be a contract between the Company and any person or to be consideration for the employment of...

  • Page 166
    ... never been included herein. 12.6 Governing Laws. All provisions of the Plan shall be construed in accordance with the laws of the State of Texas except to the extent preempted by federal law. Executed this 10th day of December, 2002. DELL COMPUTER CORPORATION By: Name: Title: /s/ KATHLEEN O. ANGEL...

  • Page 167
    ... Dell N.V. Dell Computer spol. sro Dell A/S Oy Dell A.B. Dell S.A. Dell GmbH Dell Computer Trading S.A Dell Distribution (EMEA) Limited Magyarorszagi Kereskedelmi Kepviselet - Rep. Office Dell Computer Limited Dell Direct Dell Financial Services International Limited Dell Products Dell Research Dell...

  • Page 168
    ... India Private Limited Dell Computer Limited Dell PTY. Limited Dell Products (Asia) B.V., Taiwan Branch Dell Computer Corporation, Taiwan Representative Office Slovakia South Africa Spain Sweden Switzerland U.A.E. United Kingdom United Kingdom United Kingdom United Kingdom Morocco Portugal Ireland...

  • Page 169
    ...Receivables LP L.L.C. Dell Products L.P. Dell Services L.P. Dell Auction L.P. Dell World Trade L.P. Dell Catalog Sales L.P. Dell Marketing L.P. Dell USA L.P. Dell Receivables L.P. CPS Channel Partner Solutions L.P. Dell Computer Holdings Corporation Dell Computer Holdings L.P. Dell Ventures L.P. DCC...

  • Page 170
    Dell Products (Mexico) L.L.C. Dell International Holdings I L.L.C. Dell International Holdings II L.L.C. Dell International Holdings III L.L.C. Delaware Delaware Delaware Delaware

  • Page 171
    ...69726, 333-100342, 333-111214 and 333-111215) of Dell Inc. (formerly Dell Computer Corporation) of our report dated February 12, 2004, relating to the consolidated financial statements and financial statement schedule which appears in this Form 10-K. PRICEWATERHOUSECOOPERS LLP Austin, Texas April 12...

  • Page 172
    ... financial information; and Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. April 12, 2004 /s/ MICHAEL S. DELL Michael S. Dell Chairman of the Board and Chief Executive Officer

  • Page 173
    ... OF 1934 I, James M. Schneider, certify that: 1. 2. 3. 4. I have reviewed this Annual Report on Form 10-K of Dell Inc.; Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the...

  • Page 174
    ... in the Report fairly presents, in all material respects, the financial condition and results of operations of Dell. /s/ MICHAEL S. DELL Date: April 12, 2004 Michael S. Dell Chairman of the Board and Chief Executive Officer, Dell Inc. /s/ JAMES M. SCHNEIDER Date: April 12, 2004 James M. Schneider...