-----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, NUV7Y4TpY4i3I5a4Ifb5SELNgJY/ryatEXDVIDmTIvAo4OzpEdKVVaR0sQ9h8zBs SnZgPpk971Fjp81ciLlLdg== 0000950134-96-000963.txt : 19960329 0000950134-96-000963.hdr.sgml : 19960329 ACCESSION NUMBER: 0000950134-96-000963 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 17 CONFORMED PERIOD OF REPORT: 19960128 FILED AS OF DATE: 19960328 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-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 000-17017 FILM NUMBER: 96540390 BUSINESS ADDRESS: STREET 1: 2214 W BRAKER LN STREET 2: STED CITY: AUSTIN STATE: TX ZIP: 78758 BUSINESS PHONE: 5123384400 MAIL ADDRESS: STREET 1: 2112 KRAMER LN - BLDG 1 CITY: AUSTIN STATE: TX ZIP: 78758 10-K405 1 FORM 10-K FISCAL YEAR END 01-28-96 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED JANUARY 28, 1996 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.)
2214 WEST BRAKER LANE, SUITE D, AUSTIN, TEXAS 78758-4053 (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. /X/ AGGREGATE MARKET VALUE OF COMMON STOCK HELD BY NON-AFFILIATES OF THE REGISTRANT AS OF MARCH 22, 1996.................................... $2,347,100,735 -------------- NUMBER OF SHARES OF COMMON STOCK OUTSTANDING AS OF MARCH 22, 1996........... 90,248,455 --------------
DOCUMENTS INCORPORATED BY REFERENCE The information required by Part III of this Report is incorporated herein by reference from the Registrant's definitive proxy statement relating to the annual meeting of stockholders to be held in 1996, which definitive proxy statement shall be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year to which this Report relates. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 PART I ITEM 1 -- BUSINESS GENERAL Dell Computer Corporation (the "Company") designs, develops, manufactures, markets, services and supports a wide range of computer systems, including desktops, notebooks and network servers, and also markets software, peripherals and service and support programs. With revenue of approximately $5.3 billion for fiscal 1996 (which ended on January 28, 1996), the Company is the world's leading direct marketer of computer systems and one of the top seven computer vendors in the world. The Company is a Delaware corporation that was incorporated in October 1987, succeeding to the business of a predecessor Texas corporation (also named Dell Computer Corporation) that was originally incorporated in May 1984. Based in Austin, Texas, the Company conducts operations worldwide through wholly owned subsidiaries. See "Item 1 -- Business -- Geographic Areas of Operations" below. Unless otherwise specified, references herein to the "Company" are references to the Company and its consolidated subsidiaries. The Company operates in one principal industry segment. The Company's common stock, par value $.01 per share (the "Common Stock"), is listed on The Nasdaq National Market under the symbol "DELL." See "Item 5 -- Market for Registrant's Common Equity and Related Stockholder Matters -- Market Information" below. BUSINESS STRATEGY The Company's business strategy is customer-focused and aims to deliver the best customer experience through direct, comprehensive customer relationships, cooperative research and development with technology partners, custom-built computer systems and service and support programs tailored to customer needs. The Company believes that this approach provides it with several competitive advantages. The approach eliminates the need to support an extensive network of wholesale and retail dealers, thereby avoiding typical dealer mark-ups, the higher inventory costs associated with the wholesale/retail channel and the competition for retail shelf space, while reducing the obsolescence risk associated with products in a rapidly changing technological market. In addition, direct customer contact allows the Company to maintain, monitor and update a database of information about customers and their current and future product and service needs, which can be used to shape future product offerings and post-sale service and support programs. Comprehensive Customer Relationships. The Company seeks to develop and utilize direct customer relationships to understand end-users' needs and to deliver high quality computer products and services tailored to meet those needs. With respect to major account customers, the relationship begins prior to sale, when the Company works with the customer to plan a strategy to meet that customer's current and future technology needs. The direct relationship continues after the sale, as dedicated account teams consisting of sales, customer service and technical personnel continue to support the customer's technology objectives. The Company also establishes direct relationships with small-to-medium business and individual customers, although some of those relationships may not be as extensive as the relationships with major account customers. All of these direct customer relationships provide the Company with a flow of information about its customers' plans and requirements and enable it to weigh their needs against emerging technologies. Cooperative Research and Development. The Company also attempts to develop cooperative, meaningful relationships with the world's most advanced technology companies. Working with these companies, the Company's engineers manage quality, integrate technologies and design and manage system architecture. This cooperative approach allows the Company to determine the best 3 method and timing for delivering new technologies to the market. The Company's goal is to deliver the right technology to its customers at the right time. Custom-Built Computers. The Company was founded on the principle that delivering computers custom-built to specific customer orders is the best business model for providing solutions that are truly relevant to end-user needs. This build-to-order, flexible manufacturing process enables the Company to achieve faster inventory turnover and reduced inventory levels and allows the Company to rapidly incorporate new technologies and components into its product offerings. Custom-Tailored Service and Support Programs. In the same way that the Company's computer products are built-to-order, service and support programs are designed to fit specific customer requirements. The Company offers a broad range of service and support programs through its own technical personnel and its direct management of specialized service suppliers. These services range from telephone support to on-site customer-dedicated systems engineers. While the Company believes that its business strategy provides it with competitive advantages, there are many factors that may affect the Company's business and the success of its operations. These factors include general economic and business conditions; the level of demand for computers; the level and intensity of competition in the computer industry and the pricing pressures that may result; the ability of the Company to timely and effectively manage periodic product transitions and component availability; the ability of the Company to develop new products based on new or evolving technology and the market's acceptance of those products; the ability of the Company to manage its inventory levels to minimize excess inventory, declining inventory values and obsolescence; the product, customer and geographic sales mix of any particular period; and the Company's ability to continue to improve its infrastructure (including personnel and systems) to keep pace with the growth in its overall business activities. For a discussion of these and other factors affecting the Company's business and prospects, see "Item 1 -- Business -- Factors Affecting the Company's Business and Prospects" below. GEOGRAPHIC AREAS OF OPERATIONS The Company's products are currently sold in more than 130 countries worldwide. During fiscal 1996, the Company continued the consolidation of its worldwide operations into distinct geographic regions to support its customers in each area through fully integrated, regional business units. Under the regionalized structure, the Company's global business operations are divided into four distinct geographic regions. The Americas region, which is based in Austin, Texas, covers the United States, Canada and Latin America. The Europe region, which is based in Bracknell, England, covers the European countries and also some countries in the Middle East and Africa. The Asia Pacific region, which is based in Hong Kong, covers the Far East (exclusive of Japan), Australia and New Zealand. The Japan region covers only Japan and is based in Tokyo. The Company's corporate headquarters is located in Austin, Texas. The Company's manufacturing facilities are located in Austin, Texas; Limerick, Ireland; and Penang, Malaysia. Construction of the Malaysian facility, which also houses the Asia Pacific Customer Center, was started and completed during fiscal 1996. See "Item 2 -- Properties" below. For financial information about the results of the Company's operations by geographic region for each of the last three fiscal years, see Note 13 of Notes to Consolidated Financial Statements included in "Item 8 -- Financial Statements and Supplementary Data." The Company intends to continue to expand its international activities by increasing its market presence in existing markets through strengthening its marketing and sales compensation programs, by improving its infrastructure, by pursuing additional distribution opportunities and by entering new markets. There can be no assurance, however, that the Company will be successful in its efforts to expand geographically. In addition, international activities are subject to special risks. See "Item 1 -- Business -- Factors Affecting the Company's Business and Prospects" below. 2 4 PRODUCT PORTFOLIO The Company offers a wide range of computer systems, including desktops, notebooks and network servers, as well as software, peripherals and service and support programs. Desktop Computer Systems. The OptiPlex(TM) line of desktop computer systems is the Company's mainstream offering for corporate and other major account customers who require advanced features, performance and networkability. The OptiPlex DGX series is designed for advanced users; the OptiPlex GX series is designed for mainstream business users; and the OptiPlex G and OptiPlex X series are designed for value-oriented users. All of these systems utilize Pentium(R) processors from Intel Corporation, with the OptiPlex DGX series offering single or dual processor configurations. The Company also offers the OptiPlex 486/E series, which is based on 486 processors. The Company has two lines of desktop computer systems that are designed primarily for small-to-medium businesses and individual users. The Dell Dimension(TM) XPS line is targeted at technologically sophisticated users and includes systems based on Intel's Pentium Pro(R) processors and systems based on Pentium processors. The Dell Dimension line is designed for the more value- oriented user and is based on Pentium processors. Notebook Computers. The Company offers two lines of notebook or portable computers. The systems within the Latitude(TM) X-Series line are high performance systems optimized for corporate enterprise and network enterprise connectivity. The systems within the Latitude L-Series line are performance systems optimized for remote connectivity and highly mobile usage. Servers. The PowerEdge(R) line of network servers consists of systems that can operate as file servers, database servers, applications servers and communications/groupware servers in a networked computing environment. The PowerEdge XL series is designed for large, complex network environments of 500 or more users and includes systems that may be configured with one, two or four Pentium processors. The PowerEdge XE-2 and PowerEdge SP-2 series are designed for mid-sized networks and include systems that may be configured with one or two Pentium processors. The PowerEdge EL series is an entry-level design for small workgroups and is based on the Pentium processor. The PowerEdge Web Server is an Internet World Wide Web information server and consists of a PowerEdge EL server with preinstalled network and communications software. Software and Peripheral Products. In addition to its own branded products, the Company offers a broad range of software and peripheral products through its DellWare(R) program. Through DellWare, the Company offers more than 7,000 of the most popular software packages and hardware and communication peripherals. The Company's ReadyWare(SM) program is a collection of more than 60 popular software applications and interface cards that can be factory-installed on any computer system the Company sells. Service and Support. The Company enhances its product offerings with a number of specialized services, including custom hardware and software integration and network installation and support. The Company offers next-business-day delivery, as well as an extended training and support program from Software Support, Inc., on more than 125 of its software offerings. For additional discussion of the Company's service and support programs, see "Item 1 -- Business -- Service and Support" below. MARKETING AND SALES The Company's customers range from major accounts, which include large corporations, government agencies and medical and educational institutions, to small businesses and individuals. The Company creates specialized marketing approaches tailored to meet the needs of each type of customer. No single customer accounted for more than 10% of the Company's consolidated net sales during any of the last three fiscal years. 3 5 Major Accounts. The Company has a broad base of business among Fortune 500(R) companies and governmental, medical and educational institutions worldwide. The Company holds a U.S. General Services Administration Schedule contract, through which it sells to U.S. federal governmental agencies. The Company maintains a field sales force calling on major account customers and prospects. The Company develops direct sales marketing programs and services specifically geared to these major account customers. Account management teams, consisting of sales, customer service and technical support representatives, form long-term customer relationships to provide each major account customer with a single source of assistance on issues ranging from order placement to system configuration, connectivity and technology transitioning. To support these teams, the Company has account executives in many major cities around the world. For customers with in-house maintenance organizations, the Company offers a variety of programs, including specialized computer training programs, a repair parts assistance program and other customized programs to provide access to the Company's technical support team. Customized product delivery and service programs are available on a worldwide basis. See "Item 1 -- Business -- Service and Support" below. The Company supplements its direct marketing strategy by marketing through value-added resellers ("VARs") that customize the Company's computer systems with specific end-user applications through the addition of hardware, software or services. Because VARs frequently package complete application-specific solutions, they are able to benefit from the Company's custom manufacturing and technical and marketing support programs. To provide VARs with added flexibility, the Company offers several programs tailored directly to their needs. For example, VARs can purchase complete systems from the Company and have them shipped directly to the user's installation site, allowing VARs to reduce inventory, handling and other related costs. Net sales from major account customers totaled $3.36 billion in fiscal 1996, $2.31 billion in fiscal 1995 and $1.84 billion in fiscal 1994, representing a 45% increase from fiscal 1995 to fiscal 1996 and a 26% increase from fiscal 1994 to fiscal 1995. As a percentage of consolidated net sales, sales to this customer group represented approximately 63% in fiscal 1996, 67% in fiscal 1995 and 64% in fiscal 1994. Small-to-Medium Businesses and Individuals. The Company also has a significant base of business among small-to-medium businesses and individuals. Typically, these customers are knowledgeable computer users and are not first-time buyers of computer systems. The Company maintains a sales force that markets its products and services to these customers by advertising in trade and general business publications and by mailing a broad range of direct marketing publications, such as promotional pieces, catalogs and customer newsletters. The Company believes these customers value its ability to provide reliable, custom configured computer systems at competitive prices, knowledgeable sales assistance, post-sale support and on-site service offerings. Net sales from small-to-medium business and individual customers totaled $1.93 billion in fiscal 1996, $1.16 billion in fiscal 1995 and $1.03 billion in fiscal 1994, representing a 67% increase from fiscal 1995 to fiscal 1996 and a 12% increase from fiscal 1994 to fiscal 1995. As a percentage of consolidated net sales, sales to this customer group represented approximately 37% in fiscal 1996, 33% in fiscal 1995 and 36% in fiscal 1994. SERVICE AND SUPPORT The Company offers a variety of service and support programs in all of its geographic markets. The following is a brief description of the service and support programs offered exclusively or primarily to the Company's U.S. customers. A full line of warranty, service and support options are available in the Company's international markets, but these options can vary significantly based on the local market and customer requirements. 4 6 Standard Programs. Most of the Company's systems include a standard one-year, next-business-day, on-site service contract. In addition, basic warranty coverage includes a three-year limited warranty for OptiPlex desktop systems, Latitude notebook systems and PowerEdge server systems and a one-year limited warranty for Dell Dimension XPS and Dell Dimension desktop systems. The three-year warranties include one year of parts and labor coverage and two additional years of parts only coverage, while the one-year warranties include a year of parts and labor coverage. The Company also provides a 30-day "Total Satisfaction" money back guarantee for any U.S. end-user customer buying directly from the Company. The Company's SelectCare(SM) service and support program comes standard with all desktop and notebook systems. This program includes a toll-free hardware support line that is accessible 24 hours a day, 7 days a week for the life of all of the Company's systems. The technical specialists staffing this line maintain close contact with the Company's marketing, manufacturing and product design groups and have on-line access to each customer's original system configuration and service history. Customers purchasing notebook computer systems are provided with access to a separate, dedicated toll-free line staffed with mobile computing technicians 24 hours a day, 7 days a week. The Company's BusinessCare(SM) program comes standard with all PowerEdge server systems. This program, which is designed for corporate users with servers on local or wide area networks, includes one year of parts and labor on-site service, two additional years of parts delivery service and five assistance calls to the Company's network operating system support technicians. The Company offers alternative support avenues through the Internet and many of the on-line subscription services such as CompuServe, America Online and Prodigy. The Company also provides customers anytime access to the Company's bulletin board for technical information that is menu-driven and fully interactive, as well as access to its TechFax(SM) system (a fax-back service) and its AutoTech system (an interactive voice response unit). Many of the Company's systems include software that enables customers to diagnose and communicate system problems. Several systems also include a built-in diagnostics program that can provide on-line information about system malfunctions. Additional Options. Recognizing that customer service and support requirements vary, the Company offers customers the opportunity to customize their SelectCare or BusinessCare program by selecting additional levels of service and support to satisfy their individual needs. Customers may supplement the standard one-year service contract with extended service contracts providing up to five additional years of next-business-day, on-site service. BusinessCare customers may upgrade to BusinessCare Plus, which provides three years of four-hour on-site response, 24 hours a day. Through the DellPlus program, the Company offers specialized services designed to satisfy customers' unique hardware and software integration requirements. With this program, a customer's particular integration requirements (whether hardware related, such as specialized network cards, video and graphic boards, modems, tape drives or hard drives; or software related, such as customer proprietary software applications or drivers) can be satisfied at the time the customer's systems are manufactured. This is in addition to the Company's ReadyWare program, which is a collection of more than 60 popular software applications and interface cards that can be factory-installed. The Company offers around-the-clock software support on more than 125 of the most popular software applications. Single users may subscribe to this support on a 90-day or one-year basis, while multi-user groups can arrange for hourly blocks of access. The Company also offers a variety of on-site installation services that can be customized to meet the needs of each specific customer. These services include basic installation and orientation, system connectivity and functional testing, external peripheral installation, internal device installation and file server and advanced system installation. 5 7 Many of the Company's service and support programs, particularly the software support and on-site service programs, are provided through independent third-party contractors. In the United States, such contractors include Software Support, Inc., BancTec Service Corp. and Digital Equipment Corporation. MANUFACTURING The Company operates manufacturing facilities in Austin, Texas; Limerick, Ireland; and Penang, Malaysia. Construction of the Malaysian facility, which also houses the Company's Asia Pacific Customer Center, began in March 1995 and was completed in October 1995; this facility began production in November 1995. The Company's manufacturing process consists of assembly, functional testing and quality control of the Company's computer systems. Testing and quality control processes are also applied to components, parts and subassemblies obtained from suppliers. The Company's build-to-order manufacturing process is designed to allow the Company to quickly produce customized computer systems and to achieve rapid inventory turnover and reduced inventory levels, which lessens the Company's exposure to the risk of declining inventory values. This flexible manufacturing process also allows the Company to incorporate new technologies or components into its product offerings quickly. The build-to-order manufacturing process makes it more difficult, however, for the Company to achieve the same manufacturing efficiencies as computer manufacturers that sell standardized products in high volume. The Company contracts with Sony Corporation and Quanta Computer, Inc. to manufacture unconfigured base notebook computers. The Company then custom configures these systems for shipment to customers. Quality control is maintained through the testing of components, parts and subassemblies at various stages in the manufacturing process. Quality control also includes a burn-in period for completed units after assembly, on-going production reliability audits, failure tracking for early identification of production and component problems and information from the Company's customers obtained through its direct relationships and service and support programs. The Company conducts a voluntary vendor certification program, under which qualified vendors commit to meet defined quality specifications. Both the U.S. and Ireland manufacturing facilities have been certified as meeting ISO 9002 quality standards; the Malaysian facility, having only been in production since November 1995, is not yet eligible for this certification. PRODUCT DEVELOPMENT The Company's product development efforts are focused on designing and developing reasonably priced computer systems that adhere to industry standards and incorporate the technologies and features that the Company believes are the most desired by its customers. To accomplish this objective, the Company must evaluate, obtain and incorporate new hardware, software, communications and peripherals technologies that are primarily developed by others. The Company's product development team includes programmers, technical project managers and engineers experienced in system architecture, logic board and chip design, sub-system development, mechanical engineering, manufacturing processing and operating systems design. This cross-functional approach to product design has enabled the Company to develop systems with improved functionality, manufacturability, reliability, serviceability and performance, while keeping costs competitive. The Company takes steps to ensure that new products are compatible with industry standards and that they meet cost objectives based on competitive pricing targets. The Company bases its product development efforts on cooperative, meaningful relationships with the world's most advanced technology companies. These working relationships allow the Company to use its direct marketing model and build-to-order manufacturing process to deliver, on 6 8 a timely and cost-effective basis, those emerging technologies that are most important to its customers. The Company spent $95 million in fiscal 1996 on research, development and engineering activities, compared with $65 million in fiscal 1995 and $49 million in fiscal 1994. The amount the Company spends on research, development and engineering activities is determined as part of the annual budget process and is based on cost-benefit analyses and revenue forecasts. The Company prioritizes activities to focus on projects that it believes will have the greatest market acceptance and achieve the highest return on the Company's investment. PATENTS, TRADEMARKS AND LICENSES The Company holds 127 U.S. patents and eight foreign patents. At January 28, 1996, the Company had 334 U.S. patent applications pending and 30 foreign applications pending in several European and Asian countries. The Company's United States patents expire in years 2005 through 2013. The inventions claimed in those patents and patent applications cover aspects of the Company's current and possible future computer system products and related technologies. The Company is developing a portfolio of patents that it anticipates will be of value in negotiating intellectual property rights with others in the industry. The Company has obtained U.S. federal trademark registration for its DELL word mark and its Dell logo mark. The Company owns registrations for 19 of its other marks in the United States. As of January 28, 1996, the Company had pending applications for registration of 12 other trademarks. The DELL word mark, Dell logo and other trademark and service mark registrations in the United States may be renewed as long as the marks continue to be used in interstate commerce. The Company believes that establishment of the DELL mark and logo in the United States is material to the Company's operations. The Company has also applied for or obtained registration of the DELL mark and several other marks in approximately 91 other countries or jurisdictions where the Company conducts or anticipates expanding its international business. The Company has also taken steps to reserve corporate names and to form non-operating subsidiaries in certain foreign countries where the Company anticipates expanding its international business. The Company is precluded from obtaining a registration for trademarks consisting of or incorporating the term "Dell" in certain foreign countries, although the Company does not believe that its inability to register "Dell" as a trademark in such countries will have a material adverse effect on its business. On March 5, 1993, the Company and Texas Instruments, Inc. ("TI") entered into an agreement to cross-license their respective patent portfolios. Under the terms of the agreement, the Company makes annual royalty payments to TI. The agreement expires on January 31, 1998. In August 1993, the Company and International Business Machines Corporation ("IBM") entered into a patent license agreement, under which the parties licensed to each other, within prescribed fields of use, all current patents and all patents entitled to an effective application filing date prior to February 1, 1999 that are owned by either of the parties or any of their subsidiaries. The Company makes annual royalty payments to IBM under the agreement. The agreement terminates on the latest expiration date of the patents licensed thereunder. The Company has entered into non-exclusive licensing agreements with Microsoft Corporation giving the Company the right to distribute various software packages and the MS-DOS, Windows and Windows 95 operating system software. The Company has also entered into various other software licensing agreements with other companies. From time to time, other companies and individuals assert exclusive patent, copyright, trademark or other intellectual property rights to technologies or marks that are important to the computer industry or the Company's business. The Company evaluates each claim relating to its 7 9 products and, if appropriate, seeks a license to use the protected technology. The licensing agreements generally do not require the counterparty to assist the Company in duplicating its patented technology nor do these agreements protect the Company from trade secret, copyright or other violations by the Company or its suppliers in developing or selling these products. INFRASTRUCTURE Management Information Systems. The Company's management information systems enable the Company to track each unit sold from the initial sales contacts, through the manufacturing process to post-sale service and support. The system assists the Company in tracking key information about many of its customers. The Company is able to target marketing activities specifically to particular types of customers using its database to assess purchasing trends, advertising effectiveness and customer and product groupings. This database, unique to the Company's direct model, allows the Company to gauge customer satisfaction issues and also provides the opportunity to test new propositions in the marketplace prior to product or service introductions. The Company is in the process of transitioning its management information systems to more fully integrate them on an enterprise-wide basis, to reduce redundancy and to incorporate enhanced functionality. The Company currently expects this transition, which involves both hardware and software enhancements, to continue at least through fiscal 1999. See "Item 1 -- Business -- Factors Affecting the Company's Business and Prospects -- Strength of Infrastructure" below. Employees. At January 28, 1996, the Company had approximately 8,400 full-time employees. Approximately 5,600 of those employees were located in the United States, and approximately 2,800 were located in other countries. The Company has never experienced a work stoppage due to labor difficulties and believes that its employee relations are good. GOVERNMENT REGULATION In the United States, the Federal Communications Commission (the "FCC") regulates the radio frequency emissions of computing equipment. The FCC has established two standards for computer products, Class A and Class B. Only Class B products may be sold for use in a residential environment. Both Class A and Class B products may be sold for use in a commercial environment. All of the Company's current desktop, notebook and network server systems are sold under the more restrictive Class B certification. The Company periodically tests its products to ensure that the products satisfy applicable FCC regulations. The Company's business is also subject to regulation by various other federal and state governmental agencies. Such regulation includes the anti-trust regulatory activities of the U.S. Federal Trade Commission and Department of Justice, the import/export regulatory activities of the U.S. Department of Commerce and the product safety regulatory activities of the U.S. Consumer Products Safety Commission. The Company is also required to obtain regulatory approvals in other countries prior to the sale or shipment of products. In certain jurisdictions, such requirements are more stringent than in the United States. Many developing nations are just beginning to establish safety, environmental and other regulatory requirements, which may vary greatly from U.S. requirements. BACKLOG At the end of fiscal 1996, backlog was $102 million, compared with backlog of $95 million at the end of fiscal 1995. The Company does not believe that backlog is a meaningful indicator of sales that can be expected for any period, and there can be no assurance that the backlog at any point in time will translate into sales in any subsequent period, particularly in light of the Company's policy of 8 10 allowing customers to cancel or reschedule orders without penalty prior to commencement of manufacturing. FACTORS AFFECTING THE COMPANY'S BUSINESS AND PROSPECTS Statements in this Report that relate to future results or events are based on the Company's current expectations. There are many factors that affect the Company's business and the results of its operations. The following is a description of some of the important factors that may cause the actual results of the Company's operations in future periods to differ materially from those currently expected or desired. General Economic Conditions. The Company's business partly depends on general economic and business conditions. Most of the Company's sales are to major corporate, government, education and medical customers and small-to-medium businesses. General economic conditions that cause such customers to reduce or delay their investments in computer systems could have a negative effect on the Company's strength and profitability. Industry Growth and Demand. The strength and profitability of the Company's business also depends on the overall strength of demand for computers and growth in the computer industry. A softening of demand may result in decreased revenues (or at least declining revenue growth rates) for computer manufacturers in general and the Company in particular. Furthermore, weakening demand may result in pricing pressures for products that the Company sells, which could have a negative effect on the Company's revenues and profitability. Growth of the Direct Channel. The Company's future success party depends on the continued growth of direct channels for the distribution of computer systems and related products. While the Company's direct marketing approach has gained acceptance among a large number of customers who are comfortable purchasing directly from the manufacturer, the approach may not appeal to buyers who desire physical access to products prior to purchase. The Company believes that these buyers consist primarily of certain small-to-medium businesses and individuals, particularly those making their first computer purchase. The Company has no current plans or intention to market its products through traditional indirect distribution channels, and there can be no assurance that it would be able to establish a significant presence in those channels if it became necessary or desirable in the future. There can be no assurance that worldwide direct marketing channels will grow or that the Company's distribution strategy will continue to be successful. Competition. The computer industry is highly competitive and may become more so as the result of, among other things, the introduction of new competitors (including large multi-national, diversified companies) and possibly weakening demand. Principle competitive factors include product performance, quality and reliability, customer service and support, marketing and distribution capabilities and price. There can be no assurance that the Company will be able to maintain or improve its current competitive position with respect to any of these or other competitive factors. Some of the Company's competitors have stronger brand-recognition, greater financial, marketing, manufacturing and technological resources, broader product lines and larger installed customer bases than does the Company. This intense competition could result in loss of customers or pricing pressures, which would negatively affect the Company's results of operations. The Company and other computer manufacturers generally have access to, and make use of, many of the same components, often from the same group of suppliers. The general industry practice has been to reduce the prices of computer systems as component prices decline. The Company may take other pricing actions as it attempts to maintain a competitive mix of price, performance and customer support services while managing its liquidity, profitability and growth. Although the Company attempts to mitigate the effects of price reductions by improving product mix, further reducing component costs and lowering operating costs, there can be no assurance that pricing actions will enhance or improve the Company's competitive position or that cost-reduction efforts will offset the effects of reduced prices on profitability. 9 11 International Activities. The Company's international operations have provided a significant part of the Company's growth during recent fiscal years. The success and profitability of international operations are subject to numerous risks and uncertainties, such as economic and labor conditions, political instability, tax laws (including U.S. taxes on foreign subsidiaries) and changes in the value of the U.S. dollar versus the local currency in which products are sold. Changes in exchange rates may adversely affect the Company's consolidated net sales (as expressed in U.S. dollars) and gross margins from international operations. The Company attempts to mitigate this exposure through hedging transactions. See "Item 7 -- Management's Discussion and Analysis of Financial Condition and Results of Operations -- Hedging Activities" and Note 4 of Notes to Consolidated Financial Statements included in "Item 8 -- Financial Statements and Supplementary Data." Fluctuations in Operating Results. The Company's operating results may fluctuate from period to period and will depend on numerous factors, including customer demand and market acceptance of the Company's products, new product introductions, product obsolescence, component price fluctuations, varying product mix, foreign currency exchange rates, foreign currency and interest rate hedging and other factors. The Company's business is sensitive to the spending patterns of its customers, which in turn are subject to prevailing economic conditions and other factors beyond the Company's control. The Company's net sales in a given quarter are largely dependent on customer orders received in that quarter, and operating expenditures are primarily based on forecasts of customer demand. If demand does not meet the Company's expectations in any given period, the sales shortfall may result in an increased effect on operating results if the Company is unable to adjust operating expenditures quickly enough to compensate for such shortfall. Product, Customer and Geographic Mix. The profitability of the Company's operations for any given period is partially dependent on the mix of products that the Company sells during that period and the strength of demand for the Company's products among various types of customers and in various geographic regions. Many of the factors that affect product, customer and geographic mix are beyond the Company's control. In the United States, the Company has experienced increased sales to the government sector in the third fiscal quarter, which the Company believes reflects the budgetary spending practices of the U.S. federal government. In addition, in its third fiscal quarter, the Company has experienced decreased sales in Europe, which the Company believes is the result of the holiday schedule in European countries in the late summer months. These seasonal trends have not been material relative to the Company's level of consolidated net sales and have partially offset one another. There can be no assurance that the Company will not experience material seasonal trends in the future. Technological Changes and Product Transitions. The computer industry is characterized by continuing improvements in technology, which results in the frequent introduction of new products, short product life cycles and continual improvement in product price/performance characteristics. Computer manufacturers, including the Company, must incorporate these new technologies into their products in order to remain competitive. Although the Company's direct marketing model and build-to-order manufacturing process have allowed it to participate in these technology transitions earlier than some of its competitors, there can be no assurance that the Company will be able to continue to effectively manage technology transitions or that there will be technology improvements in the computer business sufficient to allow the Company to take advantage of its direct model and build-to-order manufacturing process. A failure on the part of the Company to effectively manage the periodic transition of its product lines to new technologies on a timely basis will directly affect the demand for the Company's products and the profitability of the Company's operations. The Company believes that its success is largely dependent upon continued growth of its notebook product line, its ability to expand its presence in the network server market and its ability to continue to efficiently manage the transition to Pentium and Pentium Pro processor-based 10 12 computers and other technological advancements as they become commercially available. There can be no assurance that product technologies will be available to the Company, that the Company will be able to deliver commercial quantities of computer products in a timely manner or that such products will achieve market acceptance. Inventory Levels. Although the Company's build-to-order strategy gives it the ability to operate with reduced levels of component and finished goods inventories, shifts in technology and market demand may nevertheless result in excess inventory, declining inventory values or even obsolescence. Maintaining a low inventory level is dependent upon the Company's ability to achieve targeted revenue and product mix, to further minimize complexities in its product line and to maximize commonality of parts. There can be no assurance that the Company will be able to maintain low inventory levels in future periods. Supply Sources. The Company's manufacturing process requires a high volume of quality components that are procured from third party suppliers. Reliance on suppliers, as well as industry supply conditions, generally involves several risks, including the possibility of defective parts, a shortage of components, increases in component costs and reduced control over delivery schedules, any or all of which could adversely affect the Company's financial results. The Company has several single supplier relationships, and the lack of availability of timely and reliable supply of components from these sources could adversely affect the Company's business. In some cases, alternative sources of supply are not available for some of the Company's single-sourced components. In other cases, the Company may establish a working relationship with a single source, even when multiple suppliers are available, if the Company believes it is advantageous to do so due to performance, quality, support, delivery, capacity or price considerations. Where alternative sources are available, qualification of the alternative suppliers and establishment of reliable supplies could result in delays, which could adversely affect the Company's manufacturing processes and results of operations. The Company occasionally experiences delays in receiving certain components, which can cause delays in the shipment of some products to customers. Also, the Company has occasionally received defective components, which can affect the reliability and reputation of its products. There can be no assurance that the Company will be able to continue to obtain additional supplies of reliable components in a timely or cost-effective manner. See "Certain Concentrations" in Note 11 of Notes to Consolidated Financial Statements included in "Item 8 -- Financial Statements and Supplementary Data." Product Development Activities. The strength of the Company's overall business is partially dependent on the Company's ability to develop products based on new or evolving technology and the market's acceptance of those products. There can be no assurance that the Company's product development activities will be successful, that new technologies will be available to the Company, that the Company will be able to deliver commercial quantities of new products in a timely manner, that those products will adhere to generally accepted industry standards or that the products will achieve market acceptance. The Company believes that it is necessary for its products to adhere to generally accepted industry standards, which are subject to change in ways that are beyond the control of the Company. Strength of Infrastructure. The Company has grown, and continues to grow, at a rapid pace. This growth has required the Company to enhance and expand its management team, information systems, manufacturing operations and other aspects of its infrastructure. The Company's success and profitability partly depends on its ability to continue to improve its infrastructure to keep pace with the growth in its overall business activities. There can be no assurance that the Company will be able to effectively manage the expansion of its infrastructure to support future growth; that needed enhancements to the Company's management information systems will be completed before the growth of the Company's business outstrips the abilities of the current systems; or that 11 13 the Company's results of operations will not be adversely affected by any such growth, expansion or enhancement. Government Regulation. Any delays or failures in obtaining necessary approvals from U.S. federal governmental agencies or from foreign jurisdictions may adversely affect the Company's ability to successfully market and sell its products and may impede or preclude the Company's efforts to penetrate new markets. There can be no assurance that such failures or delays will not occur in the future. Patent Rights. As new products are introduced, the Company's continued business success may be largely dependent on its ability to obtain licenses to intellectual property developed by others. There can be no assurance that the Company will be able to obtain those licenses on commercially reasonable terms. In addition, the Company could be at a disadvantage if its competitors obtain licenses for protected technologies with more favorable terms than does the Company. If the Company or its suppliers are unable to license protected technology used in the Company's products, the Company could be prohibited from marketing those products or may have to market products without desirable features. The Company could also incur substantial costs to redesign its products or to defend any legal action taken against the Company. If the Company's products should be found to infringe protected technology, the Company could be enjoined from further infringement and required to pay damages to the infringed party. Any of these could have a material adverse effect on the Company's business. TRADEMARKS AND SERVICEMARKS Several United States trademarks appear in this Report. Dell, DellWare and PowerEdge are registered trademarks of the Company. OptiPlex, Dell Dimension and Latitude are trademarks of the Company. BusinessCare, ReadyWare, SelectCare and TechFax are service marks of the Company. This Report also contains other trademarks and tradenames of other entities; the Company disclaims proprietary interest in the marks and names of others. ITEM 2 -- PROPERTIES The Company's principal offices and U.S. manufacturing and warehousing facilities are located in the Austin, Texas area. At January 28, 1996, the Company had a total of approximately 1.6 million square feet of office, manufacturing and warehouse space under lease in several buildings in Austin, Texas. The expiration dates of such leases range from June 1997 to April 2003. The Company owns 360 acres of land in Round Rock, Texas (just north of Austin), on which is located a 224,000-square-foot office building completed in August 1994 and a 228,000-square-foot office building completed in October 1995. The Company is in the process of constructing a third building (to contain 387,000 square feet of office space) on its Round Rock acreage and expects to occupy that building in August 1996. The buildings on the Round Rock acreage house the Company's Austin-based sales, marketing and support staff. The Company also leases a total of approximately 108,000 square feet of office and warehouse space in Canada and Mexico. As of January 28, 1996, the Company's other international facilities consisted of (a) approximately 290,000 square feet of leased office space in 17 countries (with lease expiration dates ranging from 1996 to 2010), (b) a Company owned 300,000-square-foot manufacturing and warehousing facility in Limerick, Ireland and (c) a Company owned 238,000-square-foot combination office and manufacturing facility in Penang, Malaysia. The land on which the Malaysian facility is located has been leased for a term of 60 years (commencing November 1993) from the State Authority of Penang. The Company is evaluating other opportunities to expand facilities in anticipation of increasing needs. The Company believes that it can readily obtain appropriate additional space as may be required at competitive rates. 12 14 ITEM 3 -- LEGAL PROCEEDINGS Set forth below is a discussion of certain legal proceedings involving the Company, some of which could have a material adverse effect on the Company if resolved in a manner unfavorable to the Company. The Company is also party to other legal proceedings incidental to its business, none of which the Company believes to be material. The Company has been named as a defendant in approximately 30 repetitive stress injury lawsuits, most of which are in New York state courts or United States District Courts for the New York City area. Several are in state courts in New Jersey. One is in the Federal District Court for the Eastern District of Pennsylvania, and one is in Federal District Court in Kansas. Two cases have been dismissed; the remainder are at various stages of the process leading to trial. The allegations in all of these lawsuits are similar. Each plaintiff alleges that he or she suffers from symptoms generally known as "repetitive stress injury," which allegedly were caused by the design or manufacture of the keyboard supplied with the computer the plaintiff used. The Company has denied or is in the process of denying the claims and intends to vigorously defend the suits. The suits naming the Company are just a few of many lawsuits of this type that have been filed, often naming Apple, Atex, Compaq, IBM, Keytronic and other major suppliers of keyboard products. The Company currently is not able to predict the outcome of these suits. It is possible that the Company may be named in additional suits. Ultimate resolution of the litigation against the Company may depend on progress in resolving this type of litigation overall. However, the Company does not believe that the outcome of these matters will have a material adverse effect on the Company's financial condition or results of operations. On August 11, 1993, the Company received a subpoena from the United States Department of Commerce, Office of Export Enforcement of the Bureau of Export Administration, requiring the Company to provide all documents relative to any and all exports of 486/66 computers or related components to Russia, Ireland, Iran or Iraq during the period from January 1992 through August 1993 in connection with an investigation to enforce regulations under the Export Administration Act of 1979, as amended. The investigation has been closed, with no findings of wrongdoing by the Company, with respect to the Company's shipments to Russia, Ireland and Iraq. The Company is awaiting a response from the Department of Commerce regarding its voluntary self disclosure of certain shipments to Iran in June 1992. If the Office of Export Enforcement's investigators determine that the Company has violated applicable regulations, the government could potentially file civil or criminal charges. The Company has fully responded to the subpoena and, in accordance with its policy to comply fully with export laws and regulations, intends to cooperate with the Office of Export Enforcement. The Company does not believe that this investigation or its outcome will have a material adverse effect on the Company's financial condition or results of operations. In May 1995, the Company was named, along with two other computer manufacturers and one computer monitor vendor, in a class action complaint filed in the California Superior Court for Marin County. Subsequently, several other similar actions were filed in California Superior Courts for other counties, naming a total of 48 defendants, including the Company. The complaints in all of these cases allege that each of the defendants has engaged in false or misleading advertising with regard to the size of computer monitor screens. The plaintiffs seek restitution in the form of refunds or product exchange, damages, punitive damages and attorneys' fees. The California Judicial Council, in December 1995, ordered all of these similar cases consolidated for proceedings up to and including trial and, in January 1996, appointed a single trial judge for the consolidated proceeding. The judge has ordered all proceedings stayed until March 29, 1996, when a status conference is scheduled. The Company plans to vigorously contest the allegations of the complaints. This litigation is currently at a preliminary stage and no discovery has occurred. Thus, it is too early for the Company to adequately evaluate the likelihood of the plaintiffs' prevailing on their claims. There can be no assurance that an adverse determination in this litigation would not have a material adverse effect on the Company's financial condition or results of operations. 13 15 In June 1995, the Company was served with a class action complaint filed in State District Court in Travis County, Texas. The complaint alleges that the Company has included "used parts" in its "new" computer systems and has failed to adequately inform its customers and prospective customers of that practice. According to the complaint, these facts constitute fraud, negligent misrepresentation, breach of contract and breach of warranty. The plaintiffs seek refund of the purchase price for computer systems purchased from the Company, damages in an unspecified amount, injunctive relief, interest and attorneys' fees. The Company plans to vigorously contest the allegations of the complaint. This litigation is currently at a preliminary stage, and no discovery has occurred. Thus, it is too early for the Company to adequately evaluate the likelihood of the plaintiffs' prevailing on their claims. There can be no assurance that an adverse determination in this litigation would not have a material adverse effect on the Company's financial condition or results of operations. ITEM 4 -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matter was submitted to a vote of the Company's stockholders, through the solicitation of proxies or otherwise, during the fourth quarter of fiscal 1996. 14 16 PART II ITEM 5 -- MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS MARKET INFORMATION The Common Stock is traded on The Nasdaq National Market under the symbol "DELL." The following table sets forth, for the fiscal quarters indicated, the high and low sales price for the Common Stock as reported in the consolidated transaction reporting system. Such prices have been restated, where appropriate, to reflect the two-for-one stock split discussed in "Item 5 -- Market for Registrant's Common Equity and Related Stockholder Matters -- Dividends" below.
HIGH LOW ----- ----- FISCAL YEAR 1996 Fourth Quarter (October 30, 1995, through January 28, 1996)..................... $49 3/8 $23 Third Quarter (July 31,1995, through October 29, 1995)......................... $47 13/16 $31 Second Quarter (May 1, 1995, through July 30, 1995)............................. $35 1/16 $24 1/4 First Quarter (January 30, 1995, through April 30, 1995)....................... $27 7/16 $19 3/4 FISCAL YEAR 1995 Fourth Quarter (October 31, 1994, through January 29, 1995)..................... $23 7/8 $18 3/8 Third Quarter (August 1, 1994, through October 30, 1994)....................... $22 $13 3/4 Second Quarter (May 2, 1994, through July 31, 1994)............................. $15 3/8 $10 3/4 First Quarter (January 31, 1994, through May 1, 1994).......................... $15 1/16 $9 9/16
HOLDERS As of March 22, 1996, there were 3,526 holders of record of the Common Stock. DIVIDENDS The Company has never paid cash dividends on its Common Stock. The Company intends to retain earnings for use in its business and, therefore, does not anticipate paying any cash dividends on Common Stock for at least the next twelve months. In addition, the terms of the Indenture governing the Company's 11% Senior Notes Due August 15, 2000 limit "restricted payments" by the Company, which include cash dividends. On October 9, 1995, the Company's Board of Directors declared a two-for-one split of the Company's Common Stock in the form of a 100% stock dividend to stockholders of record as of October 20, 1995. The distribution of such dividend occurred on October 27, 1995. On November 30, 1995, the Company's Board of Directors, in connection with the adoption and implementation of a stockholders' rights plan, declared a dividend of one Preferred Share Purchase Right for each outstanding share of Common Stock. The distribution of the dividend was made on December 13, 1995 to the stockholders of record on that date. For further discussion of the terms of the Preferred Share Purchase Rights, see "Item 7 -- Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources" below and 15 17 Note 10 of Notes to Consolidated Financial Statements included in "Item 8 -- Financial Statements and Supplementary Data" below. STOCK REPURCHASE PROGRAM On February 22, 1996, the Company announced a stock repurchase program under which the Company may purchase up to 12 million shares of Common Stock in open market or private transactions. The repurchase program is intended to provide shares for issuance to employees under the Company's stock-based employee benefit plans. The total number of shares to be purchased will be based on several factors, including the level of stock issuances pursuant to employee awards, the price of the Common Stock and other general market conditions. Purchases may be made in the open market or in privately negotiated transactions from time to time at management's discretion. The Company may also utilize equity options as part of the repurchase program. For information regarding the status of the program to date, see Note 8 of Notes to Consolidated Financial Statements included in "Item 8 -- Financial Statements and Supplementary Data" below. ITEM 6 -- SELECTED FINANCIAL DATA The following selected financial data should be read in conjunction with the Consolidated Financial Statements, including the related notes, and the "Management's Discussion and Analysis of Financial Condition and Results of Operations." The information set forth below is not necessarily indicative of the results of future operations.
FISCAL YEAR ENDED ----------------------------------------------------------------------- JANUARY 28, JANUARY 29, JANUARY 30, JANUARY 31, FEBRUARY 2, 1996 1995 1994(A) 1993 1992 ----------- ----------- ----------- ----------- ----------- (IN MILLIONS, EXCEPT PER SHARE DATA) Statement of Operations Data: Net sales......................... $ 5,296 $ 3,475 $ 2,873 $ 2,014 $ 890 Gross margin...................... $ 1,067 $ 738 $ 433 $ 449 $ 282 Operating income (loss)........... $ 377 $ 249 $ (39) $ 139 $ 67 Net income (loss)................. $ 272 $ 149 $ (36) $ 102 $ 51 Earnings (loss) per common share (b): Primary...................... $ 2.67 $ 1.69 $ (.53) $ 1.30 $ 0.70 Fully diluted................ $ 2.65 $ 1.58 $ -- $ -- $ -- Weighted average shares used to compute earnings (loss) per common share (b): Primary...................... 97.1 83.1 74.7 78.5 72.5 Fully diluted................ 98.7 94.6 -- -- -- Statement of Financial Position Data: Working capital................... $ 1,018 $ 718 $ 510 $ 359 $ 283 Total assets...................... $ 2,148 $ 1,594 $ 1,140 $ 927 $ 560 Long-term debt.................... $ 113 $ 113 $ 100 $ 48 $ 41 Total stockholders' equity........ $ 973 $ 652 $ 471 $ 369 $ 274
- --------------- (a) See Note 12 of Notes to Consolidated Financial Statements for a discussion of certain charges recorded in fiscal 1994 that contributed to the net loss. (b) All share and per share information has been retroactively restated to reflect the two-for-one split of the Common Stock in October 1995. See Note 8 of Notes to Consolidated Financial Statements. 16 18 ITEM 7 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The following table sets forth for the fiscal years indicated the percentage of consolidated net sales represented by certain items in the Company's Consolidated Statement of Operations. All percentage amounts and ratios were calculated using the underlying data in thousands.
PERCENTAGE OF CONSOLIDATED NET SALES ------------------------------------------- FISCAL YEAR ENDED ------------------------------------------- JANUARY 28, JANUARY 29, JANUARY 30, 1996 1995 1994 ----------- ----------- ----------- Net sales: Americas............................................. 65.6% 69.1% 70.9% Europe............................................... 27.9 27.4 27.2 Asia Pacific and Japan............................... 6.5 3.5 1.9 ----- ----- ----- Consolidated net sales....................... 100.0 100.0 100.0 Cost of sales.......................................... 79.8 78.8 84.9 ----- ----- ----- Gross margin................................. 20.2 21.2 15.1 Operating expenses: Selling, general and administrative.................. 11.3 12.2 14.7 Research, development and engineering................ 1.8 1.9 1.7 ----- ----- ----- Total operating expenses..................... 13.1 14.1 16.4 ----- ----- ----- Operating income (loss)...................... 7.1 7.1 (1.3) Financing and other income (expense), net.............. 0.1 (1.0) -- ----- ----- ----- Income (loss) before income taxes............ 7.2 6.1 (1.3) Provision for income taxes (benefit)................... 2.1 1.8 (0.1) ----- ----- ----- Net income (loss)............................ 5.1 4.3 (1.2) Preferred stock dividends.............................. (0.2) (0.3) (0.1) ----- ----- ----- Net income (loss) available to common stockholders..... 4.9% 4.0% (1.3)% ===== ===== =====
Net Sales. Consolidated net sales includes sales of computer systems (including hardware, certain software and accessories); computer peripherals; other hardware, software and accessories sold separately from computer systems; and extended service contracts. Sales of computer systems ("system revenue") amounted to 89%, 88% and 87% of consolidated net sales for fiscal 1996, 1995 and 1994, respectively. Consolidated net sales for fiscal 1996 increased 52% over fiscal 1995, compared with an increase of 21% in fiscal 1995 from fiscal 1994. The increase in sales in fiscal 1996 was due primarily to a 48% increase in units sold over the prior year, reflecting increased demand for the Company's desktop product offerings and its Latitude family of notebook computers. During fiscal 1996, sales of notebook computers represented 16% of system revenue, up from 8% of system revenue in fiscal 1995 and 3% of system revenue in fiscal 1994. The mix of system revenue generated by sales of Pentium-processor based products increased substantially in fiscal 1996, to 75% of system revenue, compared with 29% and 1% in fiscal 1995 and fiscal 1994, respectively. The increase in the mix of system revenue from Pentium-processor based products and from notebook computers (whether 486-based or Pentium-based) resulted in a 3% increase in average total revenue per unit in fiscal 1996 over the prior year. Average total revenue per unit increased 12% and unit volumes increased 8% for fiscal 1995 over fiscal 1994, primarily because of strong demand for the Company's Pentium processor-based products and notebook computers (all such notebook computers were 486-based in fiscal 1995). The Company experienced growth in consolidated net sales in all geographic regions in both fiscal 1996 and fiscal 1995, with net sales from Asia Pacific and Japan continuing to increase as a 17 19 percentage of consolidated net sales. Consolidated net sales (expressed in United States dollars) were not significantly affected during any of the last three fiscal years as a result of fluctuations in foreign currency exchange rates from the comparable periods of the prior year. The Company believes that a significant opportunity exists for continued growth in international operations. In November 1995, the Company began production in a 238,000-square-foot combination office and manufacturing facility on a nine-acre site in Penang, Malaysia, to meet the needs of its expanding Asia Pacific business. The land on which the Malaysian facility is located has been leased for a 60-year term, beginning November 1993, from the State Authority of Penang. The Company intends to continue to expand its international activities by increasing its market presence in existing markets, improving its infrastructure, pursuing additional distribution opportunities and entering new markets. The mix of the Company's business between sales to major accounts (consisting of sales to major corporate, government, medical and education accounts and value-added resellers) and sales to small-to-medium businesses and individuals shifted in fiscal 1996, with sales to small-to-medium businesses and individuals comprising 37% of consolidated net sales in fiscal 1996 compared with 33% in the prior year. In fiscal 1994, sales to small-to-medium businesses and individuals represented 36% of consolidated net sales. Gross Margin. Gross margin increased $329 million in fiscal 1996 over fiscal 1995 and increased $305 million in fiscal 1995 over the prior year. The Company's gross margin as a percentage of consolidated net sales decreased to 20.2% in fiscal 1996 from 21.2% in the prior year, mainly due to the shift in the sales mix from major accounts to small-to-medium businesses and individuals, which generally carry lower margins, and to the Company's more aggressive pricing strategy in comparison to the prior year. Additionally, in the fourth quarter of fiscal 1996, a problematic product transition involving certain of the Company's OptiPlex desktop products had an adverse effect on gross margin. These negative effects on gross margin were partially offset by lower warranty and inventory obsolescence costs as a percentage of consolidated net sales and certain economies of scale. The Company's gross margin percentage increased to 21.2% in fiscal 1995 from 15.1% in fiscal 1994. The gross margin percentage for fiscal 1994 was adversely affected by $70 million of inventory write-downs and related costs incurred during the first half of fiscal 1994 and, excluding these charges, would have been 17.5%. The increase in gross margin percentage to 21.2% in fiscal 1995 from 17.5% (as adjusted) in fiscal 1994 was due to improvements in manufacturing logistics and efficiencies, reductions in component costs and improvements in quality due to the Company's vendor certification and vendor consolidation programs, and lower charges for inventory obsolescence attributable to improved inventory management. Gross margins in fiscal 1995 compared with fiscal 1994 also benefited from higher average revenue per unit resulting from a more moderate pricing environment in the last half of fiscal 1995, a higher margin sales mix driven by notebook computers and Pentium processor-based systems, and changes in the Company's sales incentive programs. Operating Expenses. The Company's goal is to manage operating expenses, over time, in relation to gross margin. During fiscal 1996, the Company strengthened its management team and increased staffing worldwide to meet the demands of its growth and to expand its international presence, resulting in increased compensation-related expenses. The Company also expended resources on its key global information systems project, which it began in late fiscal 1995 and expects to complete in fiscal 1999, and on improving current information systems until the multi-year project is completed. These infrastructure expenditures, plus increased spending for advertising and promotion, resulted in an increase in selling, general and administrative expenses of 41% in fiscal 1996 over the prior year. However, selling, general and administrative expenses as a percentage of consolidated net sales decreased to 11.3% in fiscal 1996 from 12.2% in fiscal 1995. Selling, general and administrative expenses for fiscal 1994 included $21 million of charges for consolidating operations, write-offs of certain assets and employee severance payments. The actions were taken to reduce costs and included the closing of a subsidiary in Europe and consolidation of its former operations into another central European location. European service and 18 20 support operations were combined to reduce redundant costs. Additionally, certain headcount reductions were made due to the efficiencies created from the consolidations. Selling, general and administrative expenses as a percentage of consolidated net sales in fiscal 1994 were 14.7% but, excluding the $21 million of charges, would have been 14.0%. As a result of the cost reduction actions taken in fiscal 1994, selling, general and administrative expenses as a percentage of consolidated net sales decreased from 14.0% (as adjusted) in fiscal 1994 to 12.2% in fiscal 1995, further aided by reduced advertising and promotion expenses partially offset by increased compensation expense as the Company began to strengthen its management team. To support increased product development activities and improved quality and time-to-market of its products, the Company increased headcount during fiscal 1996, resulting in increased compensation-related expenses. Furthermore, the Company incurred additional development costs in conjunction with the development of new notebook computer products. These activities resulted in an increase in research, development and engineering expenses of 45% in fiscal 1996 over the prior year. Research, development and engineering expenses as a percentage of consolidated net sales, however, decreased slightly in fiscal 1996. Research, development and engineering expenses increased 34% in absolute dollar terms (and increased as a percentage of consolidated net sales) when comparing fiscal years 1995 and 1994 primarily due to higher compensation expense in fiscal 1995 relating to an increase in headcount and higher development costs related to notebook computers and other product development efforts. The Company believes that its ability to manage operating costs is an important factor in its ability to remain price competitive. However, the Company will continue to invest in information systems and infrastructure to manage and support its growth. As previously discussed, the Company is currently investing in a key global information systems project, which it expects to complete in fiscal 1999. Financing and Other Income (Expense), Net. The table below sets forth, for each of the past three fiscal years, the components of financing and other income (expense), net:
FISCAL YEAR ENDED ------------------------------------------- JANUARY 28, JANUARY 29, JANUARY 30, 1996 1995 1994 ----------- ----------- ----------- (IN MILLIONS) Financing and other income (expense), net: Investment income (loss), net: Marketable securities..................... $ 25 $ (7) $ 9 Investment derivatives.................... -- (24) 5 Interest expense............................. (15) (12) (9) Foreign currency transactions................ (1) 3 1 International year-end transition............ -- 6 -- Other........................................ (3) (2) (6) ---- ---- --- $ 6 $ (36) $ -- ==== ==== ===
Investment income (loss) on marketable securities increased to $25 million in fiscal 1996 from ($7) million in fiscal 1995. The $7 million investment loss in fiscal 1995 was due to realized losses of $24 million on certain of the Company's marketable securities, partially offset by investment income of approximately $17 million. The investment losses were primarily a result of interest rate increases in the United States, Canadian, Japanese and European interest rate markets. Excluding the impact of the realized losses in fiscal 1995, the increases in investment income from fiscal 1995 to fiscal 1996 and from fiscal 1994 to fiscal 1995 were primarily due to higher average investment balances and higher effective yields. The Company accounts for highly liquid investments with maturities of three months or less at date of acquisition as marketable securities and reflects the related cash 19 21 flows as investing cash flows. As a result, a significant portion of its gross marketable securities purchases and maturities disclosed as investing cash flows is related to highly liquid investments. The Company has historically employed a variety of interest rate derivative instruments to manage its principal, market and credit risks and to enhance its investment yield. Derivative instruments utilized include interest rate swaps, written and purchased interest rate options and swaptions (options to enter into interest rate swaps). Prior to June 1994, the Company structured derivative instruments in interest rate markets where it had foreign operations. Interest rate derivatives generally involve exchanges of interest payments based upon fixed and floating interest rates without exchanges of underlying notional amounts. For the first and second quarters of fiscal 1995, the average fair value of these investment derivative financial instruments totaled ($12) million and ($8) million, respectively. The Company closed all remaining investment derivatives during the second quarter of fiscal 1995, and at the end of fiscal 1995 and throughout fiscal 1996, the Company had no investment derivatives outstanding. Realized and unrealized net gains (losses) on investment derivatives recognized in income for fiscal 1995 were ($24) million compared with $5 million for fiscal 1994. All of the Company's foreign exchange and interest rate derivative instruments involve elements of market and credit risk in excess of the amounts recognized in the financial statements. The counterparties to financial instruments consist of a number of major financial institutions. In addition to limiting the amount of agreements and contracts it enters into with any one party, the Company regularly monitors the credit quality of its counterparties. The Company does not anticipate nonperformance by any of the counterparties. The increase in interest expense in fiscal years 1996 and 1995 was primarily due to higher average debt balances outstanding and higher net interest costs associated with the Company's 11% Senior Notes due August 15, 2000 (the "Senior Notes") issued in the third quarter of fiscal 1994. Concurrently with the issuance of the Senior Notes, the Company entered into interest rate swap agreements to reduce its related interest costs and, in the third quarter of fiscal 1995, entered into offsetting swap agreements to change its interest rate exposure. For further discussion of the interest rate swaps, see Note 6 of Notes to Consolidated Financial Statements. The weighted average interest rate, adjusted by the swaps, was 13.8%, 12.1% and 9.5% for fiscal years 1996, 1995 and 1994, respectively. At January 28, 1996, the Company was paying a net interest cost of 13.8% on the Senior Notes. Prior to fiscal 1995, the Company consolidated its international operating results on a one-month delay to facilitate consolidated financial reporting. In the fourth quarter of fiscal 1995, the Company eliminated this one-month delay and, consequently, included one additional month of international operations in its income before income taxes for fiscal 1995. Net earnings before taxes of $6 million for this additional month were included in financing and other income (expense), net, resulting in an additional $4 million of net income or $0.05 of primary earnings per common share. The reduction in other expense in fiscal 1995 was primarily due to higher financing-related expenses incurred in fiscal 1994 in connection with the refinancing of debt and credit facilities. Income Tax. The Company's effective tax rate was 29.0% for fiscal 1996, compared with 30.0% and 7.6% for fiscal 1995 and fiscal 1994, respectively. The changes in the effective tax rate resulted from changes in the geographical distribution of income and losses and from significant second quarter fiscal 1994 losses. HEDGING ACTIVITIES The results of the Company's international operations are affected by changes in exchange rates between certain foreign currencies and the United States dollar. Beginning in fiscal 1996, the majority of the Company's international sales are made by international subsidiaries which have the U.S. dollar as their functional currency. Principal international subsidiaries which have the U.S. dollar 20 22 as the functional currency are the Company's Irish subsidiaries, including the European manufacturing facility, and its Malaysian manufacturing, sales and support subsidiary. As the value of the U.S. dollar strengthens against other currencies, sales made in those currencies translate into lower sales in U.S. dollars; as the value of the U.S. dollar weakens against other currencies, sales made in those currencies translate into higher sales in U.S. dollars. The financial statements for the Company's other international subsidiaries are generally measured using the local currency as the functional currency. For many of these international subsidiaries, an increase in the value of the U.S. dollar increases costs incurred because many of the component purchases are denominated in the U.S. dollar. Therefore, changes in exchange rates may negatively affect the Company's consolidated net sales (as expressed in United States dollars) and gross margins from international operations. The Company conducts a foreign currency hedging program to reduce its exposure to the risk that the dollar-value equivalent of anticipated cash flows will be adversely affected by changes in foreign currency exchange rates. The Company uses foreign currency purchased option contracts and forward contracts in an effort to reduce its exposure to currency fluctuations involving anticipated, but not firmly committed, transactions and transactions with firm foreign currency commitments. For further information regarding hedging activities and their effect on the Company's financial statements, see Note 1 and Note 4 of Notes to Consolidated Financial Statements. LIQUIDITY AND CAPITAL RESOURCES The Company's cash flows from operating activities were $175 million in fiscal 1996 and represented the Company's primary source of cash. At January 28, 1996, and January 29, 1995, the Company's working capital totaled $1,018 million and $718 million, respectively. Days in accounts receivable at the end of fiscal 1996 decreased to 42 days from 47 days at the end of fiscal 1995. Days in accounts payable decreased to 33 days at the end of fiscal 1996 from 44 days at the end of fiscal 1995. Inventory levels decreased slightly to 31 days of supply at the end of fiscal 1996 from 32 days of supply at the end of fiscal 1995. The Company utilized $101 million in cash during fiscal 1996 primarily to construct facilities and to acquire information systems (principally hardware and third-party software licenses) and personal computer office equipment. Capital expenditures for fiscal 1997 are expected to be approximately $100 million, primarily related to the construction of facilities, the acquisition of information systems and the acquisition of computer equipment for internal use. The Company believes that its cash and marketable securities and cash flows from operating activities will be adequate to fund its planned fiscal 1997 capital expenditures. During fiscal 1996, the Company entered into a series of line of credit facilities, each of which bears interest at a defined Base Rate or Eurocurrency Rate and has a covenant based on quarterly maintenance of net worth. Maximum aggregate amounts available under these credit facilities are limited to $200 million less the aggregate of outstanding letters of credit under these facilities. During the commitment period, the Company is obligated to pay a fee on the unused portion of the credit facilities. No borrowings or letters of credit were outstanding under these credit facilities as of January 28, 1996, and the maximum available totaled $200 million. In November 1995, several of the Company's subsidiaries entered into a transaction pursuant to which Dell Receivables L.P. ("Dell Receivables"), a newly formed wholly owned subsidiary of the Company, purchases certain accounts receivable and related assets from other Company subsidiaries and in turn transfers such accounts receivable and related assets to the Dell Trade Receivable Master Trust (the "Master Trust"). The Master Trust will issue certificates evidencing fractional undivided interests therein, which certificates may be sold to investors. This arrangement gives Dell Receivables the ability to raise up to $150 million through the sale of certificates of interest in the Master Trust and replaced the Company's receivables securitization arrangement that was scheduled to expire in June 1996. Dell Receivables is obligated to pay a commitment fee on the unused 21 23 portion of the facility. At January 28, 1996, this facility was unused. During fiscal 1994, the Company sold $85 million of receivables pursuant to the terms of its previous receivables securitization arrangement. The discount on sale of receivables was included in financing and other income (expense), net. All such receivables sold were collected during fiscal 1994. The previous facility was unused in fiscal 1995 and 1996. In August 1993, the Company issued $100 million of 11% Senior Notes Due August 15, 2000. Interest on the Senior Notes is payable semiannually, on February 15 and August 15 of each year. The Senior Notes are redeemable, in whole or in part, at the option of the Company at any time on or after August 15, 1998, at redemption prices decreasing from 103.50% to 101.75% of principal, depending upon the redemption date, plus accrued interest to the date of redemption. In December 1994, the Company obtained a $14 million loan secured by a 224,000-square-foot office building in Round Rock, Texas (with a net book value of $23 million at January 28, 1996). The loan is for 15 years at an interest rate of 10.28%; monthly payments of principal and interest, payable in arrears, began in February 1995. The long-term portion of the loan was $13 million at January 28, 1996. In August 1993, the Company sold 1,250,000 shares of Series A Convertible Preferred Stock (the "Convertible Preferred Stock"), generating net proceeds of $120 million after deducting related issuance costs. In February 1995, the Company offered to pay a cash premium of $8.25 for each outstanding share of Convertible Preferred Stock that was converted to Common Stock. For a discussion of the terms of the Convertible Preferred Stock and the terms of the conversion offer, see Note 7 of Notes to Consolidated Financial Statements. Holders of 1,190,000 shares of Convertible Preferred Stock elected to convert and, as a result, received an aggregate of approximately 10 million shares of Common Stock and $10 million in cash during the first quarter of fiscal 1996. The $10 million conversion premium and $1 million of expenses of the conversion offer were treated as an additional dividend on the Convertible Preferred Stock for financial reporting purposes. In addition, the weighted average shares outstanding used to compute primary earnings per common share for fiscal 1996 includes the shares of Common Stock issued upon conversion from the closing of the conversion period until the end of fiscal 1996. In July 1995, the Company's stockholders approved an amendment to the Company's Certificate of Incorporation to increase the number of shares of Common Stock that the Company is authorized to issue from 100 million to 300 million. On October 9, 1995, the Company's Board of Directors declared a two-for-one Common Stock split, payable in the form of a 100% stock dividend to stockholders of record as of October 20, 1995. The distribution of such dividend occurred on October 27, 1995. All share and per share information has been retroactively restated in the Consolidated Financial Statements to reflect the stock split. In November 1995, the Company's Board of Directors declared a dividend of one Preferred Share Purchase Right (a "Right") for each outstanding share of Common Stock. The distribution of the Rights was made on December 13, 1995, to the stockholders of record on that date. Each Right entitles the holder to purchase one one-thousandth of a share of a new series of preferred stock, the Series A Junior Participating Preferred Stock, at an exercise price of $225. For a discussion of the terms of such preferred stock, see Note 7 of Notes to Consolidated Financial Statements. The Rights will be exercisable only if a person or group acquires 15% or more of the Common Stock or announces a tender offer, the consummation of which would result in such person or group owning 15% or more of the Common Stock. For further discussion of the terms of the Rights, see Note 10 of Notes to Consolidated Financial Statements. On February 22, 1996, the Company announced a stock repurchase program under which the Company may purchase up to 12 million shares of Common Stock in open market or private transactions. The repurchase program is intended to provide shares for issuance to employees under the Company's stock-based employee benefit plans. The total number of shares to be purchased will be based on several factors, including the level of stock issuances pursuant to 22 24 employee awards, the price of the Common Stock and other general market conditions. Purchases may be made in the open market or in privately negotiated transactions from time to time at management's discretion. The Company may also utilize equity options as part of the repurchase program. For information regarding the status of the program to date, see Note 8 of Notes to Consolidated Financial Statements. The Company's long-term commitments to use cash consist of the repayment of the $100 million in Senior Notes, the repayment of the outstanding balance of the $14 million secured loan and the payment of operating lease commitments. Management believes that sufficient resources will be available to meet the Company's cash requirements through at least the next twelve months. Cash requirements for periods beyond the next twelve months depend on the Company's profitability, its ability to manage working capital requirements and its rate of growth. FACTORS AFFECTING THE COMPANY'S BUSINESS AND PROSPECTS Numerous factors may affect the Company's business and the success of its operations. These factors include general economic and business conditions; the level of demand for personal computers; the level and intensity of competition in the personal computer industry and the pricing pressures that may result; the ability of the Company to timely and effectively manage periodic product transitions and component availability; the ability of the Company to develop new products based on new or evolving technology and the market's acceptance of those products; the ability of the Company to manage its inventory levels to minimize excess inventory, declining inventory values and obsolescence; the product, customer and geographic sales mix of any particular period; and the Company's ability to continue to improve its infrastructure (including personnel and systems) to keep pace with the growth in its overall business activities. For a discussion of these and other factors affecting the Company's business and prospects, see "Item 1 -- Business -- Factors Affecting the Company's Business and Prospects" above. 23 25 ITEM 8 -- FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE ---- Financial Statements: Report of Independent Accountants................................................... 25 Consolidated Statement of Financial Position at January 28, 1996 and January 29, 1995................................................................. 26 Consolidated Statement of Operations for the three fiscal years ended January 28, 1996................................................................. 27 Consolidated Statement of Cash Flows for the three fiscal years ended January 28, 1996................................................................. 28 Consolidated Statement of Stockholders' Equity for the three fiscal years ended January 28, 1996................................................................. 29 Notes to Consolidated Financial Statements.......................................... 30 Financial Statement Schedule: For the three fiscal years ended January 28, 1996 Schedule II -- Valuation and Qualifying Accounts................................. 56
All other schedules are omitted because they are not applicable. 24 26 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of Dell Computer Corporation In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Dell Computer Corporation and its subsidiaries at January 28, 1996 and January 29, 1995, and the results of their operations and their cash flows for each of the three fiscal years in the period ended January 28, 1996, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. PRICE WATERHOUSE LLP Austin, Texas February 19, 1996 25 27 DELL COMPUTER CORPORATION CONSOLIDATED STATEMENT OF FINANCIAL POSITION (IN MILLIONS, EXCEPT SHARE DATA)
ASSETS JANUARY 28, JANUARY 29, 1996 1995 ----------- ----------- Current assets: Cash.............................................................. $ 55 $ 43 Marketable securities............................................. 591 484 Accounts receivable, net.......................................... 726 538 Inventories....................................................... 429 293 Other current assets.............................................. 156 112 ------ ------ Total current assets...................................... 1,957 1,470 Property, plant and equipment, net.................................. 179 117 Other assets........................................................ 12 7 ------ ------ $2,148 $1,594 ====== ====== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable.................................................. $ 466 $ 403 Accrued and other liabilities..................................... 473 349 ------ ------ Total current liabilities................................. 939 752 ------ ------ Long-term debt...................................................... 113 113 ------ ------ Deferred profit on warranty contracts............................... 116 68 ------ ------ Other liabilities................................................... 7 9 ------ ------ Commitments and contingencies....................................... -- -- Stockholders' equity: Preferred stock and capital in excess of $.01 par value; shares authorized: 5,000,000; shares issued and outstanding: 60,000 and 1,250,000, respectively.................................... 6 120 Common Stock and capital in excess of $.01 par value; shares authorized: 300,000,000 and 100,000,000, respectively; shares issued and outstanding: 93,446,607 and 79,359,276, respectively................................................... 430 242 Retained earnings................................................. 570 311 Other............................................................. (33) (21) ------ ------ Total stockholders' equity................................ 973 652 ------ ------ $2,148 $1,594 ====== ======
The accompanying notes are an integral part of these consolidated financial statements. 26 28 DELL COMPUTER CORPORATION CONSOLIDATED STATEMENT OF OPERATIONS (IN MILLIONS, EXCEPT PER SHARE DATA)
FISCAL YEAR ENDED ------------------------------------------- JANUARY 28, JANUARY 29, JANUARY 30, 1996 1995 1994 ----------- ----------- ----------- Net sales.............................................. $5,296 $3,475 $2,873 Cost of sales.......................................... 4,229 2,737 2,440 ------ ------ ------ Gross margin................................. 1,067 738 433 Operating expenses: Selling, general and administrative.................. 595 424 423 Research, development and engineering................ 95 65 49 ------ ------ ------ Total operating expenses..................... 690 489 472 ------ ------ ------ Operating income (loss)...................... 377 249 (39) Financing and other income (expense), net.............. 6 (36) -- ------ ------ ------ Income (loss) before income taxes............ 383 213 (39) Provision for income taxes (benefit)................... 111 64 (3) ------ ------ ------ Net income (loss)............................ 272 149 (36) Preferred stock dividends.............................. (12) (9) (4) ------ ------ ------ Net income (loss) available to common stockholders..... $ 260 $ 140 $ (40) ====== ====== ====== Earnings (loss) per common share: Primary.............................................. $ 2.67 $ 1.69 $ (.53) ====== ====== ====== Fully diluted........................................ $ 2.65 $ 1.58 $ -- ====== ====== ======
The accompanying notes are an integral part of these consolidated financial statements. 27 29 DELL COMPUTER CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS (IN MILLIONS)
FISCAL YEAR ENDED ------------------------------------------- JANUARY 28, JANUARY 29, JANUARY 30, 1996 1995 1994 ----------- ----------- ----------- Cash flows from operating activities: Net income (loss).................................... $ 272 $ 149 $ (36) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization................... 38 33 31 Net loss on marketable securities............... -- 21 -- Compensation expense recognized under employee stock plans.................................. 10 4 3 Other........................................... -- -- 1 Changes in: Operating working capital......................... (183) (3) 97 Non-current assets and liabilities................ 38 39 17 ------- ------- ------- Net cash provided by operating activities.... 175 243 113 ------- ------- ------- Cash flows from investing activities: Marketable securities: Purchases......................................... (4,545) (4,644) (2,588) Maturities and other redemptions.................. 4,386 4,340 2,288 Sales............................................. 56 124 47 Capital expenditures................................. (101) (64) (48) ------- ------- ------- Net cash used in investing activities........ (204) (244) (301) ------- ------- ------- Cash flows from financing activities: Net payments for short-term borrowings............... -- -- (9) Proceeds from long-term debt......................... -- 14 97 Repayments of borrowings............................. (1) (1) (50) Net proceeds from issuance of preferred stock........ -- -- 120 Preferred stock dividends paid....................... (13) (9) (2) Issuance of Common Stock under employee plans........ 48 35 22 ------- ------- ------- Net cash provided by financing activities.... 34 39 178 ------- ------- ------- Effect of exchange rate changes on cash................ 7 2 (2) ------- ------- ------- Net increase (decrease) in cash........................ 12 40 (12) Cash at beginning of period............................ 43 3 15 ------- ------- ------- Cash at end of period.................................. $ 55 $ 43 $ 3 ======= ======= =======
The accompanying notes are an integral part of these consolidated financial statements. 28 30 DELL COMPUTER CORPORATION CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (IN MILLIONS, EXCEPT SHARE DATA)
STOCKHOLDERS' EQUITY ------------------------------------------------------------- PREFERRED STOCK COMMON STOCK AND CAPITAL AND CAPITAL IN EXCESS IN EXCESS RETAINED OF PAR VALUE OF PAR VALUE EARNINGS OTHER TOTAL --------------- ------------ -------- ----- ----- Balances at January 31, 1993............ $ -- $178 $209 $(18) $369 Net loss.............................. -- -- (36) -- (36) Issuance of 1,250,000 shares of preferred stock.................... 120 -- -- -- 120 Issuance of 2,142,166 shares of Common Stock under employee plans, including tax benefits............. -- 22 -- -- 22 Preferred stock dividends paid........ -- -- (2) -- (2) Unrealized gain on marketable securities......................... -- -- -- 3 3 Foreign currency translation adjustment......................... -- -- -- (5) (5) ----- ---- ---- ---- ---- Balances at January 30, 1994............ 120 200 171 (20) 471 Net income............................ -- -- 149 -- 149 Issuance of 3,501,214 shares of Common Stock under employee plans, including tax benefits............. -- 42 -- (4) 38 Preferred stock dividends paid........ -- -- (9) -- (9) Unrealized loss on marketable securities......................... -- -- -- (6) (6) Foreign currency translation adjustment......................... -- -- -- 9 9 ----- ---- ---- ---- ---- Balances at January 29, 1995............ 120 242 311 (21) 652 Net income............................ -- -- 272 -- 272 Issuance of 4,066,363 shares of Common Stock under employee plans, including tax benefits............. -- 74 -- (17) 57 Issuance of 10,020,968 shares of Common Stock due to preferred stock conversion......................... (114) 114 -- -- -- Amortization of unearned compensation....................... -- -- -- 2 2 Preferred stock dividends paid........ -- -- (13) -- (13) Unrealized gain on marketable securities......................... -- -- -- 3 3 ----- ---- ---- ---- ---- Balances at January 28, 1996............ $ 6 $430 $570 $(33) $973 ===== ==== ==== ==== ====
The accompanying notes are an integral part of these consolidated financial statements. 29 31 DELL COMPUTER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 -- DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Description of Business -- The Company designs, develops, manufactures, markets, services and supports a wide range of computer systems, including desktops, notebooks and network servers, and also markets software, peripherals and service and support programs. The Company markets its computer products and services under the Dell(R) brand name directly to its customers. These customers include major corporate, government, medical and education accounts, as well as small-to-medium businesses and individuals. The Company supplements its direct marketing strategy by marketing through value-added resellers. Based in Austin, Texas, the Company conducts operations worldwide through wholly owned subsidiaries; such operations are primarily concentrated in the United States and Europe. Fiscal Year -- The fiscal year of the Company ends on the Sunday nearest January 31. Principles of Consolidation -- The consolidated financial statements have been prepared in accordance with generally accepted accounting principles and include the accounts of Dell Computer Corporation and its wholly owned subsidiaries. All significant intercompany transactions and balances have been eliminated. Certain prior period amounts have been reclassified to conform with the current year presentation. Prior to fiscal 1995, the Company consolidated its international operating results on a one-month delay to facilitate consolidated financial reporting. In the fourth quarter of fiscal 1995, the Company eliminated this one-month delay and, consequently, included one additional month of international operations in its income before income taxes for fiscal 1995. Net earnings before taxes of $6 million for this additional month were included in financing and other income (expense), net and the related cash flows were included in cash flows from operating activities. Use of Estimates -- The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at fiscal year end and the reported amounts of revenues and expenses during the fiscal year. Actual results could differ from those estimates. Management believes that the estimates are reasonable. Marketable Securities -- The Company's marketable securities are classified as available-for-sale and, accordingly, are reported at fair value. Fair values are based on quoted broker prices or dealer quotes. Unrealized gains and losses are reported, net of taxes, as a component of stockholders' equity. Unrealized losses are charged against income when a decline in fair value is determined to be other than temporary. The specific identification method is used to determine the cost of securities sold. The Company accounts for highly liquid investments with maturities of three months or less at date of acquisition as marketable securities and reflects the related cash flows as investing cash flows. As a result, a significant portion of its gross marketable securities purchases and maturities disclosed as investing cash flows is related to highly liquid investments. Inventories -- Inventories are stated at the lower of cost or market, with cost being determined on a first-in, first-out basis. On a quarterly basis, the Company compares the amount of the inventory on hand and under commitment on a part-by-part basis with its latest forecasted requirements to determine whether write-downs for excess or obsolete inventory are required. Property, Plant and Equipment -- Property, plant and equipment is carried at cost. Depreciation is provided using the straight-line method over the economic lives of the assets, which range from seven to 30 years for buildings and two to five years for all other assets. Leasehold improvements are amortized over the shorter of five years or the lease term. 30 32 DELL COMPUTER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Foreign Currency Translation -- The majority of the Company's international sales are made by international subsidiaries which have the U.S. dollar as their functional currency. Principal international subsidiaries which have the U.S. dollar as the functional currency are the Company's Irish subsidiaries, including the European manufacturing facility, and its Malaysian manufacturing, sales and support subsidiary. Financial statements for international subsidiaries which have the U.S. dollar as the functional currency are remeasured into U.S. dollars using current rates of exchange for monetary assets and liabilities and historical rates of exchange for nonmonetary assets. Income and expense items for these subsidiaries are remeasured using monthly average exchange rates with resultant gains and losses included in the results of operations. The financial statements for the Company's other international subsidiaries are generally measured using the local currency as the functional currency. Accordingly, assets and liabilities of these subsidiaries are translated at current rates of exchange at the balance sheet date. The resultant gains and losses from translation are included as a component of stockholders' equity. Income and expense items for these subsidiaries are translated using monthly average exchange rates. Gains or losses resulting from remeasuring monetary asset and liability accounts that are denominated in currencies other than a subsidiary's functional currency are included as a component of financing and other income (expense), net. Foreign Currency Hedging Instruments -- The Company enters into foreign currency purchased option contracts and forward contracts to hedge its probable anticipated, but not firmly committed, transactions and transactions with firm foreign currency commitments. Realized and unrealized gains or losses and premiums on foreign currency purchased option contracts that are designated and effective as hedges of probable anticipated, but not firmly committed, foreign currency transactions are deferred and recognized in income as a component of revenue, cost of sales and/or operating expenses in the same period as the hedged transaction. Forward contracts designated as hedges of probable anticipated transactions are accounted for on a mark-to-market basis and are included in revenue, cost of sales and/or operating expenses. Foreign currency exposures related to transactions with firm foreign currency commitments are generally hedged using forward contracts, which are accounted for on a mark-to-market basis, with realized and unrealized gains and losses included in financing and other income (expense), net as an offset to the underlying hedged transaction. Interest Rate Management -- Interest rate differentials to be paid or received on interest rate swaps that are designated to specific borrowings are accrued and recognized as an adjustment to interest expense. Realized gains or losses on terminated interest rate swap positions designated to specific borrowings are recognized as an adjustment to interest expense over the original life of the interest rate swaps. Investment Derivatives -- Derivative financial instruments that are not designated to a specific asset or liability are considered investment derivatives and are accounted for on a mark-to-market basis, with realized and unrealized gains or losses recognized as incurred and included as a component of financing and other income (expense), net. The Company discontinued its investment derivative program in the second quarter of fiscal 1995. Option Contracts Indexed to the Company's Common Stock -- Put and call options utilized in connection with the Company's stock repurchase program give the Company the choice of net cash settlement or settlement in additional shares of Common Stock. Proceeds received upon the sale of options and amounts paid upon the purchase of options are recorded as a component of stockholders' equity. Subsequent changes in the fair value of the option contracts are not recognized. If the option contracts are ultimately settled in cash, the amount of cash paid or received is recorded as a component of stockholders' equity. 31 33 DELL COMPUTER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Revenue Recognition -- Sales revenue is recognized at the date of shipment to customers. Provision is made currently for estimated product returns. Revenue from separately priced extended warranty programs is deferred and recognized over the extended warranty period, and the related extended warranty costs are recognized as incurred. Warranty and Other Post-sales Support Programs -- The Company provides currently for the estimated costs that may be incurred under its warranty and other post-sales support programs. Advertising Costs -- Advertising costs, excluding the costs associated with direct-response advertising, are charged to expense the first time the advertising takes place. The costs of direct-response advertising are charged to expense upon mailing. There were no direct-response advertising costs reported as assets at January 28, 1996, and January 29, 1995. Advertising expenses for fiscal years 1996, 1995 and 1994 were $83 million, $63 million and $77 million, respectively. Income Taxes -- The provision for income taxes is based on earnings reported in the financial statements under an asset and liability approach, which requires the recognition of deferred tax assets and liabilities and their reported amounts for financial statement purposes. Earnings (Loss) Per Common Share -- Primary earnings (loss) per common share are computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares and common stock equivalents (if dilutive) outstanding during each period. Common stock equivalents include stock options. The Convertible Preferred Stock is not a common stock equivalent for purposes of computing earnings (loss) per common share. The number of common stock equivalents outstanding is computed using the treasury stock method. The weighted average shares outstanding used to compute primary earnings per common share for fiscal 1996 includes the shares of Common Stock issued upon conversion of Convertible Preferred Stock from the closing of the conversion period until the end of the fiscal year. Shares used in the calculation of fully diluted earnings (loss) per common share have been adjusted for the assumed conversion of all of the Company's outstanding Convertible Preferred Stock for all periods presented. See Note 7 -- Preferred Stock. Recently Issued Accounting Standards -- In March 1995, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" ("SFAS 121"). The Company has not elected early adoption of SFAS 121; consequently, it will become effective beginning with the Company's first quarter of fiscal 1997. Adoption of SFAS 121 will not have a material effect on the Company's financial position or results of operations. In October 1995, the FASB issued SFAS 123, "Accounting for Stock-Based Compensation." The Company has not elected early adoption of SFAS 123; consequently, it will become effective beginning with the Company's first quarter of fiscal 1997. As permitted under SFAS 123, upon adoption, the Company will continue to measure compensation expense for its stock-based employee compensation plans using the intrinsic value method prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and will provide pro forma disclosures of net income and earnings per share as if the fair value-based method prescribed by SFAS 123 had been applied in measuring compensation expense. Adoption of SFAS 123 will not have a material effect on the Company's financial position or results of operations. 32 34 DELL COMPUTER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 2 -- MARKETABLE SECURITIES The following table describes the Company's holdings of marketable securities at January 28, 1996, and January 29, 1995. Contractual maturities of debt securities, classified as available-for-sale and carried at fair value, are included as of January 28, 1996.
JANUARY 28, 1996 ------------------------------------------------------------ UNREALIZED UNREALIZED PERCENT COST GAINS LOSSES FAIR VALUE FAIR VALUE ---- ---------- ---------- ---------- ---------- (IN MILLIONS, EXCEPT PERCENT DATA) Preferred stock........................... $ 57 $-- $-- $ 57 10% Mutual funds.............................. 75 -- -- 75 13 State and municipal securities: Maturities less than 60 days............ 118 -- -- 118 20 Maturities 60 days to one year.......... 68 -- -- 68 11 Maturities one to three years........... 12 -- -- 12 2 U.S. corporate and bank debt: Maturities less than 60 days............ 138 -- -- 138 23 Maturities 60 days to one year.......... 58 -- -- 58 10 Maturities one to three years........... 17 -- -- 17 3 International corporate and bank debt: Maturities less than 60 days............ 44 -- -- 44 7 Maturities 60 days to one year.......... 4 -- -- 4 1 Maturities one to three years........... -- -- -- -- -- -- -- ---- ---- --- Total marketable securities..... $591 $-- $-- $591 100% ==== == == ==== ===
JANUARY 29, 1995 ------------------------------------------------------------ UNREALIZED UNREALIZED PERCENT COST GAINS LOSSES FAIR VALUE FAIR VALUE ---- ---------- ---------- ---------- ---------- (IN MILLIONS, EXCEPT PERCENT DATA) Preferred stock........................... $ 70 $-- $-- $ 70 14% Mutual funds.............................. 55 -- -- 55 11 State and municipal securities............ 188 1 1 188 39 U.S. corporate and bank debt.............. 138 -- 4 134 28 International corporate and bank debt..... 37 -- -- 37 8 -- -- ---- ---- --- Total marketable securities..... $488 $1 $5 $484 100% ==== == == ==== ===
The Company's gross realized gains on the sale of marketable securities were $0.3 million for fiscal 1996, $3 million for fiscal 1995 and $1 million for fiscal 1994. Gross realized losses were $0.01 million, $24 million and $1 million for fiscal years 1996, 1995 and 1994, respectively. 33 35 DELL COMPUTER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 3 -- FAIR VALUE OF FINANCIAL INSTRUMENTS The following table presents the carrying amounts and estimated fair values of the Company's financial instruments at January 28, 1996, and January 29, 1995:
JANUARY 28, 1996 JANUARY 29, 1995 ------------------- ------------------- CARRYING FAIR CARRYING FAIR AMOUNT VALUE AMOUNT VALUE --------- ----- --------- ----- (IN MILLIONS) Nonderivative financial instruments: Assets: Marketable securities..................... $ 591 $ 591 $ 484 $ 484 Liabilities: Long-term debt............................ 113 123 113 118 Receive fixed/pay floating interest rate swaps................................... -- (6) -- (9) Receive floating/pay fixed interest rate swaps................................... -- (2) -- (1) Derivative financial instruments: Foreign currency option contracts: Assets.................................... 38 33 15 15 Forward contracts for firm foreign currency commitments: Assets.................................. 25 25 5 5 Liabilities............................. 14 14 -- --
Cash, accounts receivable, accounts payable and accrued and other liabilities are reflected in the financial statements at fair value because of the short-term maturity of these instruments. The fair value of marketable securities, long-term debt and interest rate derivative instruments has been estimated by the Company based upon market quotes from brokers. The fair value of foreign currency forward contracts has been estimated using market quoted rates of foreign currencies at the applicable balance sheet date. The estimated fair value of foreign currency purchased option contracts is based on market quoted rates at the applicable balance sheet date and the Black-Scholes options pricing model. Considerable judgment is necessary in interpreting market data to develop estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange. Changes in assumptions could significantly affect the estimates. NOTE 4 -- FINANCIAL INSTRUMENTS AND RISK MANAGEMENT FOREIGN CURRENCY RISK MANAGEMENT Foreign Currency Hedging Instruments -- The results of the Company's international operations are affected by changes in exchange rates between certain foreign currencies and the United States dollar. Beginning in fiscal 1996, the majority of the Company's international sales are made by international subsidiaries which have the U.S. dollar as their functional currency. The Company uses foreign currency purchased option contracts and forward contracts in an effort to reduce its exposure to currency fluctuations involving probable anticipated, but not firmly committed, transactions and transactions with firm foreign currency commitments. The risk of loss associated with purchased options is limited to premium amounts paid for the option contracts, which could be significant. The risk of loss associated with forward contracts is equal to the exchange rate differential from the time the contract is made until the time it is settled. 34 36 DELL COMPUTER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Hedging of Probable Anticipated Transactions and Firm Foreign Currency Commitments -- The Company enters into foreign currency purchased options and, to a lesser extent, forward contracts to hedge a portion of its probable anticipated, but not firmly committed, transactions. These transactions include international sales by U.S. dollar functional currency entities, foreign currency denominated purchases of certain components and intercompany shipments to certain international subsidiaries. Foreign currency purchased options generally expire in twelve months or less, and forward contracts generally mature in three months or less. The principal currencies hedged are the German mark, the British pound and the Japanese yen. Transactions with firm foreign currency commitments are generally hedged using foreign currency forward contracts for periods not exceeding three months. At January 28, 1996, and January 29, 1995, the Company held purchased option contracts that were designated and effective as hedges of probable anticipated sales by international subsidiaries and intercompany shipments with a total notional amount of $714 million and $434 million, respectively, and a combined net realized and unrealized deferred loss of $5 million and $2 million, respectively. At January 29, 1995, the Company held option contracts that were designated and effective as hedges of probable anticipated foreign currency denominated purchases with a total notional amount of $65 million and a combined net realized and unrealized deferred gain of $2 million. During the fourth quarter of fiscal 1996, the Company closed all option contracts that were designated and effective as hedges of probable anticipated foreign currency denominated purchases. At January 28, 1996, the net realized deferred loss relating to these contracts was $7 million. Forward contracts designated to hedge foreign currency transaction exposures of $365 million and $29 million were outstanding at January 28, 1996, and January 29, 1995, respectively. INTEREST RATE RISK MANAGEMENT The Company has also entered into certain interest rate derivative instruments as a means of managing its interest rate risk and the interest costs associated with its 11% Senior Notes Due August 15, 2000. See Note 6 -- Long-term Debt and Financing Arrangements. INVESTMENT DERIVATIVES The Company has historically employed a variety of interest rate derivative instruments to manage its principal, market and credit risks and enhance its investment yield. Derivative instruments utilized included interest rate swaps, written and purchased interest rate options and swaptions (options to enter into interest rate swaps). Prior to June 1994, the Company structured derivative instruments in interest rate markets where it had foreign operations. Interest rate derivatives generally involve exchanges of interest payments based upon fixed and floating interest rates without exchanges of underlying notional amounts. For the first and second quarters of fiscal 1995, the average fair value of these investment derivative financial instruments totaled ($12) million and ($8) million, respectively. The Company closed all remaining investment derivatives during the second quarter of fiscal 1995, and at the end of fiscal 1995 and throughout fiscal 1996, the Company had no investment derivatives outstanding. Realized and unrealized net gains (losses) on investment derivatives recognized in income for fiscal 1995 were ($24) million compared with $5 million for fiscal 1994. 35 37 DELL COMPUTER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 5 -- INCOME TAXES The provision for income taxes consists of the following:
FISCAL YEAR ENDED ------------------------------------------- JANUARY 28, JANUARY 29, JANUARY 30, 1996 1995 1994 ----------- ----------- ----------- (IN MILLIONS) Current: Domestic..................................... $102 $52 $ 29 Foreign...................................... 25 16 8 Prepaid........................................ (16) (4) (40) ---- --- ---- Provision for income taxes (benefit)........... $111 $64 $ (3) ==== === ====
Income (loss) before income taxes included approximately $176 million, $126 million and ($32) million related to foreign operations in the fiscal years ended January 28, 1996, January 29, 1995 and January 30, 1994, respectively. The Company has not recorded a deferred income tax liability of approximately $70 million for additional U.S. federal income taxes that would result from the distribution of earnings of its foreign subsidiaries, if they were repatriated. The Company currently intends to reinvest indefinitely the undistributed earnings of its foreign subsidiaries. The deferred tax asset is comprised of the following principal temporary differences:
JANUARY 28, JANUARY 29, JANUARY 30, 1996 1995 1994 ----------- ----------- ----------- (IN MILLIONS) Depreciation................................... $ 5 $(5) $-- Provisions for doubtful accounts and returns... 25 23 20 Inventory and warranty provisions.............. 18 26 28 Deferred service contract revenue.............. 53 25 9 Import promotion reserve....................... (5) -- -- Other.......................................... (29) 9 7 ---- --- --- Deferred tax asset............................. $ 67 $78 $64 ==== === ===
The difference between the income tax provisions in the Consolidated Financial Statements and the tax expense computed at the U.S. federal statutory rate of 35% for each of the last three fiscal years is as follows:
FISCAL YEAR ENDED ------------------------------------------- JANUARY 28, JANUARY 29, JANUARY 30, 1996 1995 1994 ----------- ----------- ----------- (IN MILLIONS) Tax provision (benefit) at the U.S. federal statutory rate............................... $ 134 $ 75 $(14) Research and development credit................ (1) (1) (1) Foreign income taxed at different rate......... (23) (16) 10 Net operating loss carryovers.................. 1 2 4 Other.......................................... -- 4 (2) ----- ----- ---- Provision (benefit) for income taxes........... $ 111 $ 64 $ (3) ===== ===== ==== Effective tax rates............................ 29.0% 30.0% 7.6% ===== ===== ====
36 38 DELL COMPUTER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 6 -- LONG-TERM DEBT AND FINANCING ARRANGEMENTS The following table sets forth the components of the Company's long-term debt as of the end of each of the last two fiscal years:
JANUARY 28, JANUARY 29, 1996 1995 ----------- ----------- (IN MILLIONS) 11% Senior Notes Due August 15, 2000........................ $100 $100 Facility loan............................................... 14 14 ---- ---- 114 114 Less -- current portion..................................... 1 1 ---- ---- $113 $113 ==== ====
On August 26, 1993, the Company issued $100 million of 11% Senior Notes Due August 15, 2000 (the "Senior Notes"). Interest on the Senior Notes is payable semiannually, on February 15 and August 15 of each year. The Senior Notes are redeemable, in whole or in part, at the option of the Company at any time on or after August 15, 1998, at redemption prices decreasing from 103.50% to 101.75% of principal, depending upon the redemption date, plus accrued interest to the date of redemption. The Indenture governing the Senior Notes contains certain covenants, including limitations on the amount of future indebtedness and restrictions on the payment of cash dividends on Common Stock under certain circumstances. However, the covenants limiting future indebtedness may be inapplicable from time to time if the Senior Notes are assigned an investment grade rating by both of the major rating services. Concurrently with the issuance of the Senior Notes, the Company entered into interest rate swap agreements to reduce its related interest costs. The swap agreements effectively changed the Company's interest rate exposure from a fixed-rate to a floating-rate basis. However, in response to increasing interest rates, in August 1994, the Company entered into offsetting swap agreements to effectively change its interest rate exposure from a floating-rate basis to a fixed-rate basis. The interest rate swap agreements mature on August 15, 1998, the first available redemption date of the Senior Notes. At both January 28, 1996, and January 29, 1995, the Company had outstanding receive fixed/pay floating interest rate swaps with an aggregate notional amount of $100 million offset by receive floating/pay fixed interest rate swaps with an aggregate notional amount of $100 million. The weighted average interest rate, adjusted by the swaps, was 13.8%, 12.1% and 9.5% for fiscal years 1996, 1995 and 1994, respectively. At January 28, 1996, the Company was paying a net interest cost of 13.8% on the Senior Notes. In December 1994, the Company obtained a $14 million loan secured by a 224,000-square-foot office building in Round Rock, Texas (with a net book value of $23 million at January 28, 1996). The loan is for 15 years at an interest rate of 10.28%; monthly payments of principal and interest, payable in arrears, began in February 1995. The amount of principal payments due under the loan over the next five fiscal years is as follows: 1997, $.5 million; 1998, $.5 million; 1999, $.6 million; 2000, $.6 million; and 2001, $.7 million. During fiscal 1996, the Company entered into a series of line of credit facilities, each of which bears interest at a defined Base Rate or Eurocurrency Rate and has a covenant based on quarterly maintenance of net worth. Maximum aggregate amounts available under these credit facilities are limited to $200 million less the aggregate of outstanding letters of credit under these facilities. During the commitment period, the Company is obligated to pay a fee on the unused portion of the credit facilities. No borrowings or letters of credit were outstanding under these credit facilities as of January 28, 1996, and the maximum available totaled $200 million. 37 39 DELL COMPUTER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) On November 30, 1995, several of the Company's subsidiaries entered into a transaction pursuant to which Dell Receivables L.P. ("Dell Receivables"), a newly formed wholly owned subsidiary of the Company, purchases certain accounts receivable and related assets from other Company subsidiaries and in turn transfers such accounts receivable and related assets to the Dell Trade Receivable Master Trust (the "Master Trust"). The Master Trust will issue certificates evidencing fractional undivided interests therein, which certificates may be sold to investors. This arrangement gives Dell Receivables the ability to raise up to $150 million through the sale of certificates of interest in the Master Trust and replaced the Company's receivables securitization arrangement that was scheduled to expire on June 22, 1996. Dell Receivables is obligated to pay a commitment fee on the unused portion of the facility. At January 28, 1996, this facility was unused. During fiscal 1994, the Company sold $85 million of receivables pursuant to the terms of its previous receivables securitization arrangement. The discount on sale of receivables was included in financing and other income (expense), net. All such receivables sold were collected during fiscal 1994. The previous facility was unused in fiscal 1995 and 1996. In fiscal 1994, the Company repaid its borrowings under Section 84 of Ireland's Corporation Tax Act of 1976 and retired its commercial paper program. NOTE 7 -- PREFERRED STOCK The Company has the authority to issue 5,000,000 shares of preferred stock, par value $.01 per share. The rights and preferences of shares of authorized but unissued preferred stock will be established by the Company's Board of Directors at the time of issuance. Series A Convertible Preferred Stock -- On August 26, 1993, the Company sold 1,250,000 shares of Series A Convertible Preferred Stock (the "Convertible Preferred Stock"), generating net proceeds of $120 million after deducting related issuance costs. Each outstanding share of Convertible Preferred Stock entitles its holder to receive annual cumulative cash dividends of $7 and may be converted into 8.421 shares of Common Stock (equivalent to a conversion price of $11.875 per share of Common Stock), subject to adjustment to prevent dilution in certain circumstances. In the event of voluntary or involuntary liquidation, each outstanding share of Convertible Preferred Stock entitles its holder to receive up to $100 per share plus any accrued but unpaid dividends (a total of $6 million at January 28, 1996). The Convertible Preferred Stock is not redeemable before August 25, 1996. Beginning August 25, 1996, the Convertible Preferred Stock may be redeemed by the Company, at its option, in whole or in part at any time at a redemption price per share decreasing from $104.67 to $100, depending on the redemption date, together with any accrued but unpaid dividends. Dividends on the Convertible Preferred Stock are cumulative, have priority over dividends on Common Stock and must be paid in the event of liquidation and before any distribution to holders of Common Stock. So long as any Convertible Preferred Stock is outstanding, the Company may not, without the affirmative vote or consent of the holders of at least 66 2/3% (unless a higher percentage is required by applicable law) of all outstanding shares of Convertible Preferred Stock, enter into certain transactions that may adversely affect the relative rights, preferences, qualifications, limitations or restrictions of the Convertible Preferred Stock. The holders of the Convertible Preferred Stock have no voting rights unless dividends on the Convertible Preferred Stock have not been paid for six consecutive quarters. Under those circumstances, the number of members of the Company's Board of Directors will be increased by two, and the holders of the Convertible Preferred Stock will be entitled to elect such two additional directors at any meeting of stockholders at which directors are to be elected held during the period such dividends remain in arrears. 38 40 DELL COMPUTER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) On February 21, 1995, the Company offered to pay a cash premium of $8.25 for each outstanding share of Convertible Preferred Stock that was converted to Common Stock. The offer of premium upon conversion was available to holders of the Convertible Preferred Stock through the closing of the special conversion period on March 22, 1995. Holders of 1,190,000 shares of Convertible Preferred Stock elected to convert and, as a result, received an aggregate of approximately 10 million shares of Common Stock and $10 million in cash during the first quarter of fiscal 1996. The $10 million conversion premium and $1 million of expenses of the conversion offer were treated as an additional dividend on the Convertible Preferred Stock for financial reporting purposes. Accordingly, $12 million, comprised of the conversion premium, conversion offer expenses and dividends, were deducted from net income for fiscal 1996 to determine the net income available to common stockholders. In addition, the weighted average shares outstanding used to compute primary earnings per common share for fiscal 1996 includes the shares of Common Stock issued upon conversion from the closing of the conversion period until the end of fiscal 1996. Series A Junior Participating Preferred Stock -- In conjunction with the distribution of Preferred Share Purchase Rights (see Note 10 -- Preferred Share Purchase Rights), the Company's Board of Directors designated 200,000 shares of preferred stock as Series A Junior Participating Preferred Stock ("Junior Preferred Stock") and reserved such shares for issuance upon exercise of the Preferred Share Purchase Rights. Each share of Junior Preferred Stock will be entitled to an aggregate dividend equal to the greater of $1.00 per share or 1,000 times the dividend declared on the Common Stock. Upon liquidation, each share of Junior Preferred Stock will be entitled to an aggregate liquidation payment equal to the greater of $1,000 or 1,000 times the payment made per share of Common Stock. Each share of Junior Preferred Stock will have 1,000 votes, voting together with the Common Stock. In the event of any merger, consolidation or other transaction in which Common Stock is exchanged, each share of Junior Preferred Stock will be entitled to receive 1,000 times the amount received per share of Common Stock. Shares of Junior Preferred Stock will be nonredeemable. At January 28, 1996, no shares of Junior Preferred Stock were issued or outstanding. NOTE 8 -- COMMON STOCK On July 21, 1995, the Company's stockholders approved an amendment to the Company's Certificate of Incorporation to increase the number of shares of Common Stock that the Company is authorized to issue from 100 million to 300 million. The amendment became effective on August 3, 1995. On October 9, 1995, the Company's Board of Directors declared a two-for-one Common Stock split, payable in the form of a 100% stock dividend to stockholders of record as of October 20, 1995. The distribution of such dividend occurred on October 27, 1995. All share and per share information has been retroactively restated in the Consolidated Financial Statements to reflect the stock split. Stock Repurchase Program - Subsequent Event (unaudited) -- On February 22, 1996, the Company announced a stock repurchase program under which the Company may purchase up to 12 million shares of Common Stock in open market or private transactions. The repurchase program is intended to provide shares for issuance to employees under the Company's stock-based employee benefit plans. The total number of shares to be purchased will be based on several factors, including the level of stock issuances pursuant to employee awards, the price of the Common Stock and other general market conditions. Purchases may be made in the open market or in privately negotiated transactions from time to time at management's discretion. The Company may also utilize equity options as part of the repurchase program. 39 41 DELL COMPUTER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) As of March 22, 1996, the Company had repurchased a total of 3.3 million shares of Common Stock under the repurchase program, for an aggregate purchase price of $100 million (average cost of $30.50 per share). All such shares were purchased in open market transactions. In addition, as of March 22, 1996, the Company had entered into equity "collar" arrangements with respect to an aggregate of 2.8 million additional shares of Common Stock by selling put options (which entitle the holder of the option to sell shares of Common Stock to the Company at a specified price) and purchasing call options (which entitle the Company to purchase shares of Common Stock from the holder of the option at a specified price). The put prices range from $29.36 to $34.62 per share, while the call prices range from $32.30 to $38.09 per share. In some of the arrangements, the call price may be increased if the per-share market price of the Common Stock at the time of exercise exceeds a specified price. Each option is exercisable only at expiration, and the expiration dates range from September 3, 1996, to September 20, 1996. The potential cost of repurchasing the shares subject to these option arrangements ranges from $90.7 million (average cost of $32.35 per share) to $99.9 million (average cost of $35.63 per share), not taking into account any increase in the call prices described above. For a description of the accounting treatment of these options, see "Option Contracts Indexed to the Company's Common Stock" in Note 1 -- Description of Business and Summary of Significant Accounting Policies. NOTE 9 -- EMPLOYEE BENEFIT PLANS Employee Stock Purchase Plan -- The Company has an employee stock purchase plan that qualifies under Section 423 of the Internal Revenue Code and permits substantially all employees to purchase shares of 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 10% of their base compensation for the purchase of Common Stock under the plan. Common Stock reserved for future employee purchases under the plan aggregated 2,331,251 shares at January 28, 1996, and 2,741,184 shares at January 29, 1995. Shares issued under this plan were 409,933 shares in fiscal 1996, 568,888 shares in fiscal 1995 and 477,078 shares in fiscal 1994. There have been no charges to income in connection with the issuance of these shares. 401(k) Plan -- The Company has a defined contribution retirement plan that complies with Section 401(k) of the Internal Revenue Code. Substantially all employees in the U.S. are eligible to participate in the plan. Currently, eligibility for participation commences upon hire. 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. Prior to January 1, 1995, the Company matched 50% of the participant's voluntary contributions, again subject to a maximum Company contribution of 3% of the employee's compensation. The Company's matching contributions are made in the form of Common Stock. During fiscal 1996, the Company made a one-time 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 year 1995. The Company accrues for its estimated matching contributions each period. Shares are issued to the plan based on the fair market value of the Common Stock at the time of issuance. The amounts expensed for the Company's matching and other contributions during fiscal years 1996, 1995 and 1994 were $8 million, $4 million and $3 million, respectively. Stock Option and Incentive Plans -- On June 22, 1994, the Company's stockholders approved the Dell Computer Corporation Incentive Plan (the "Incentive Plan"), which effectively replaced the 1993 Stock Option Plan (the "1993 Plan") and the 1989 Stock Option Plan (the "1989 Plan"). At the time the Incentive Plan was approved, 9,001,846 shares of Common Stock were authorized for issuance under the Incentive Plan; that amount equaled the remaining shares authorized for 40 42 DELL COMPUTER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) issuance under the 1993 Plan and the 1989 Plan. On July 21,1995, the Company's stockholders approved an amendment to the Incentive Plan to increase the number of shares of Common Stock authorized for issuance under the Incentive Plan by 8 million shares. The Incentive Plan, which is administered by the Compensation Committee of the Board of Directors, provides for the granting of incentive awards in the form of stock options, stock appreciation rights ("SARs"), 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. Awards under the Incentive Plan must be granted within ten years of the plan adoption date. Options granted may be either incentive stock options within the meaning of Section 422 of the Internal Revenue Code or nonqualified options. The right to purchase shares under the existing stock option agreements typically vest over a five-year period beginning on the option's date of grant. Stock options must be exercised within ten years from date of grant. Stock options are generally issued at fair market value. For stock options that have been issued at discounted prices, the Company accrues compensation expense over the vesting period for the difference between the exercise price and the fair market value on the measurement date. In accordance with the intrinsic value method prescribed by Accounting Principles Board Opinion No. 25, no compensation expense has been recognized for options granted with an exercise price equal to market value at the date of grant. Options vesting over a ten-year period with an exercise price of $.005 per share were granted to certain key employees in fiscal 1995 and fiscal 1994 at fair market values ranging from $12.44 to $13.97 and $9.25 to $18.25 in fiscal 1995 and fiscal 1994, respectively. During fiscal 1996, the Company implemented a discounted stock option program under the Incentive Plan. Under this program, certain members of management may elect, on an annual basis, to receive discounted 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 Common Stock on the date of issuance. The number of shares subject to any such option is dependent on the amount of bonus a participant designates for the program and is calculated by dividing the designated bonus amount by 20% of the fair market value of the Common Stock on the date of issuance. The options are fully vested at the time of issuance but are not exercisable for a period of one year. 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. The program will first be effective for bonuses paid in March 1996 with respect to fiscal 1996. During fiscal 1996 and fiscal 1995, the Company granted 688,884 shares and 280,000 shares, respectively, of restricted stock. For substantially all restricted stock grants, at the date of grant, the recipient has all rights of a stockholder, subject to certain restrictions on transferability and a risk of forfeiture. Restricted shares typically vest over a seven-year period beginning on the date of grant; restrictions may not extend more than ten years from date of grant. The Company records unearned compensation equal to the market value of the restricted shares on the date of grant and charges the unearned compensation to expense over the restricted shares' vesting period. Prior to the second quarter of fiscal 1996, the unearned compensation was combined with additional paid-in capital. The unearned compensation associated with restricted stock at January 28, 1996, has been included in stockholders' equity in the Consolidated Statement of Financial Position; the prior period amount has been reclassified to conform with the current year presentation. Under the Incentive Plan, each nonemployee director of the Company automatically receives nonqualified stock options on the day after the first Board of Directors meeting he or she attends as a nonemployee director. In addition, each nonemployee director who is a member of the Board of Directors as of both the day before and the day after the Company's annual meeting of stockholders each year automatically receives nonqualified stock options on the date of the first Board of Directors meeting following the annual meeting of stockholders. 41 43 DELL COMPUTER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table summarizes stock option activity under the plans for each of the three fiscal years ended January 28, 1996:
STOCK OPTION PLANS -------------------------------- NUMBER OF PRICE RANGE SHARES ---------------- ----------- Outstanding at January 31, 1993.................... $.005-$18.155 10,087,976 Granted.......................................... $.005-$18.155 5,011,180 Canceled......................................... $.005-$15.345 (2,409,628) Exercised........................................ $.005-$11.830 (1,452,824) ---------- Outstanding at January 30, 1994.................... $.005-$18.155 11,236,704 Granted.......................................... $.005-$23.315 4,322,498 Canceled......................................... $.005-$15.345 (1,641,102) Exercised........................................ $.005-$18.155 (2,735,054) ---------- Outstanding at January 29, 1995.................... $.005-$23.315 11,183,046 Granted.......................................... $20.125-$48.500 3,987,082 Canceled......................................... $.005-$44.750 (988,967) Exercised........................................ $.005-$22.095 (2,480,912) ---------- Outstanding at January 28, 1996.................... $.005-$48.500 11,700,249 ==========
Options on 2,324,451 shares were exercisable under the plans at January 28, 1996. There were 8,480,235, 4,819,228 and 8,558,900 shares of Common Stock available for future grants under the plans at January 28, 1996, January 29, 1995, and January 30, 1994, respectively. On August 24, 1993, the Company granted 781,246 nonqualified options to purchase its Common Stock at $9.345 per share under the 1993 Plan in exchange for cancellation of outstanding options to purchase its Common Stock for $15.345 that had been previously granted under the 1989 Plan. Pursuant to the exchange agreement, vesting of those options was to occur on the earlier of August 24, 2002, or the date that the Common Stock had traded for 30 consecutive days at or above $16.345 per share; such vesting occurred in fiscal 1995. NOTE 10 -- PREFERRED SHARE PURCHASE RIGHTS On November 29, 1995, the Company's Board of Directors declared a dividend of one Preferred Share Purchase Right (a "Right") for each outstanding share of Common Stock. The distribution of the Rights was made on December 13, 1995, to the stockholders of record on that date. Each Right entitles the holder to purchase one one-thousandth of a share of Junior Preferred Stock at an exercise price of $225. See Note 7 -- Preferred Stock. The Rights will be exercisable only if a person or group acquires 15% or more of the Common Stock or announces a tender offer, the consummation of which would result in such person or group owning 15% or more of the Common Stock. If a person or group acquires 15% or more of the outstanding Common Stock, each Right will entitle the holder (other than such person or any member of such group) to purchase, at the Right's then current exercise price, the number of shares of Common Stock having a market value of twice the exercise price of the Right. In addition, if the Company is involved in a merger or other business combination transaction at any time after the Rights have become exercisable, each Right will entitle its holder to purchase, at the Right's then current exercise price, the number of the acquiring company's common shares having a market value at that time of twice the exercise price of the Right. Furthermore, at any time after a person or group acquires 15% or more of the outstanding 42 44 DELL COMPUTER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Common Stock but prior to the acquisition of 50% of such stock, the Board of Directors may, at its option, exchange part or all of the Rights (other than Rights held by the acquiring person or group) for shares of Common Stock at an exchange rate of one share of Common Stock for each Right. The Company will be entitled to redeem the Rights at $.001 per Right at any time before a 15% or greater position has been acquired by any person or group. Additionally, the Company may lower the 15% threshold to not less than the greater of (a) any percentage greater than the largest percentage of Common Stock known by the Company to be owned by any person (other than Michael S. Dell) or (b) 10%. The Rights expire on November 29, 2005. Neither the ownership nor the further acquisition of Common Stock by Michael S. Dell will cause the Rights to become exercisable or nonredeemable or will trigger the other features of the Rights. NOTE 11 -- COMMITMENTS, CONTINGENCIES AND CERTAIN CONCENTRATIONS Lease Commitments -- The Company leases property and equipment, manufacturing facilities and office space under non-cancelable leases. Certain leases obligate the Company to pay taxes, maintenance and repair costs. Future minimum payments under these leases at January 28, 1996, are as follows:
OPERATING FISCAL YEAR LEASES ----------- ------------- (IN MILLIONS) 1997.................................................................... $21 1998.................................................................... 16 1999.................................................................... 13 2000.................................................................... 9 2001.................................................................... 6 Thereafter.............................................................. 19 --- Total minimum lease payments required......................... $84 ===
Rental expense recorded under all operating leases was $22 million, $20 million and $19 million for the fiscal years ended 1996, 1995 and 1994, respectively. Royalty Commitments -- The Company is subject to certain patent royalty agreements that require fixed cash payments with scheduled increases over approximately the next three years. The Company is also subject to ongoing software royalty agreements for periods exceeding twelve months which require cash payments. Legal Matters -- Set forth below is a discussion of certain legal proceedings involving the Company, some of which could have a material adverse effect on the Company if resolved in a manner unfavorable to the Company. The Company is also party to other legal proceedings incidental to its business, none of which the Company believes to be material. The Company has been named as a defendant in approximately 30 repetitive stress injury lawsuits, most of which are in New York state courts or United States District Courts for the New York City area. Several are in state courts in New Jersey. One is in the Federal District Court for the Eastern District of Pennsylvania, and one is in Federal District Court in Kansas. Two cases have been dismissed; the remainder are at various stages of the process leading to trial. The allegations in all of these lawsuits are similar. Each plaintiff alleges that he or she suffers from symptoms generally known as "repetitive stress injury," which allegedly were caused by the design or manufacture of the keyboard supplied with the computer the plaintiff used. The Company has 43 45 DELL COMPUTER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) denied or is in the process of denying the claims and intends to vigorously defend the suits. The suits naming the Company are just a few of many lawsuits of this type that have been filed, often naming Apple, Atex, Compaq, IBM, Keytronic and other major suppliers of keyboard products. The Company currently is not able to predict the outcome of these suits. It is possible that the Company may be named in additional suits. Ultimate resolution of the litigation against the Company may depend on progress in resolving this type of litigation overall. However, the Company does not believe that the outcome of these matters will have a material adverse effect on the Company's financial condition or results of operations. On August 11, 1993, the Company received a subpoena from the United States Department of Commerce, Office of Export Enforcement of the Bureau of Export Administration, requiring the Company to provide all documents relative to any and all exports of 486/66 personal computers or related components to Russia, Ireland, Iran or Iraq during the period from January 1992 through August 1993 in connection with an investigation to enforce regulations under the Export Administration Act of 1979, as amended. The investigation has been closed, with no findings of wrongdoing by the Company, with respect to the Company's shipments to Russia, Ireland and Iraq. The Company is awaiting a response from the Department of Commerce regarding its voluntary self disclosure of certain shipments to Iran in June 1992. If the Office of Export Enforcement's investigators determine that the Company has violated applicable regulations, the government could potentially file civil or criminal charges. The Company has fully responded to the subpoena and, in accordance with its policy to comply fully with export laws and regulations, intends to cooperate with the Office of Export Enforcement. The Company does not believe that this investigation or its outcome will have a material adverse effect on the Company's financial condition or results of operations. In May 1995, the Company was named, along with two other personal computer manufacturers and one computer monitor vendor, in a class action complaint filed in the California Superior Court for Marin County. Subsequently, several other similar actions were filed in California Superior Courts for other counties, naming a total of 48 defendants, including the Company. The complaints in all of these cases allege that each of the defendants has engaged in false or misleading advertising with regard to the size of computer monitor screens. The plaintiffs seek restitution in the form of refunds or product exchange, damages, punitive damages and attorneys' fees. The California Judicial Council, in December 1995, ordered all of these similar cases consolidated for proceedings up to and including trial and, in January 1996, appointed a single trial judge for the consolidated proceeding. The judge has ordered all proceedings stayed until March 29, 1996, when a status conference is scheduled. The Company plans to vigorously contest the allegations of the complaints. This litigation is currently at a preliminary stage and no discovery has occurred. Thus, it is too early for the Company to adequately evaluate the likelihood of the plaintiffs' prevailing on their claims. There can be no assurance that an adverse determination in this litigation would not have a material adverse effect on the Company's financial condition or results of operations. In June 1995, the Company was served with a class action complaint filed in State District Court in Travis County, Texas. The complaint alleges that the Company has included "used parts" in its "new" computer systems and has failed to adequately inform its customers and prospective customers of that practice. According to the complaint, these facts constitute fraud, negligent misrepresentation, breach of contract and breach of warranty. The plaintiffs seek refund of the purchase price for computer systems purchased from the Company, damages in an unspecified amount, injunctive relief, interest and attorneys' fees. The Company plans to vigorously contest the allegations of the complaint. This litigation is currently at a preliminary stage, and no discovery has occurred. Thus, it is too early for the Company to adequately evaluate the likelihood of the plaintiffs' prevailing on their claims. There can be no assurance that an adverse determination in this litigation 44 46 DELL COMPUTER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) would not have a material adverse effect on the Company's financial condition or results of operations. Certain Concentrations -- All of the Company's foreign exchange and interest rate derivative instruments involve elements of market and credit risk in excess of the amounts recognized in the financial statements. The counterparties to financial instruments consist of a number of major financial institutions. In addition to limiting the amount of agreements and contracts it enters into with any one party, the Company monitors its positions with and the credit quality of the counterparties to these financial instruments. The Company does not anticipate nonperformance by any of the counterparties. The Company has business activities with large corporate, government, medical and education customers, small-to-medium businesses and individuals and value-added resellers. Its receivables from such parties are well diversified. The Company places its marketable securities with high quality financial institutions and other companies and currently invests primarily in equity securities and debt instruments that have maturities of less than three years. The Company's receivables, marketable securities and financial instruments holdings are subject to potential credit risk. However, in management's opinion, no significant concentration of credit risk exists for the Company. There can be no assurance that the credit quality of the financial institutions with which the Company invests or transacts business will be stable or that efforts to diversify receivables, investments or financial instrument holdings will prevent the Company from incurring material losses. The Company purchases a significant number of components from single sources. In some cases, alternative sources of supply are not available. In other cases, the Company may establish a working relationship with a single source, even when multiple suppliers are available, if the Company believes it is advantageous to do so due to performance, quality, support, delivery, capacity or price considerations. Key components currently obtained from single sources include certain of the Company's displays, application specific integrated circuits and other custom chips, microprocessors, unconfigured base notebook computers and lithium ion batteries used in certain of the Company's notebook computers. Additionally, the Company often initially uses custom components obtained from a single source in its new products until it has determined whether there is a need for additional suppliers. If the supply of a critical single-sourced material or component were delayed or curtailed, the Company's ability to ship the related product in desired quantities and in a timely manner could be adversely affected. Even where alternative sources of supply are available, qualification of the alternative suppliers and establishment of reliable supplies could result in delays and a possible loss of sales, which could affect operating results adversely. NOTE 12 -- OTHER CHARGES During the first half of fiscal 1994, the Company reevaluated and subsequently canceled its existing notebook product line, recording more than $39 million of charges due to the notebook inventory write-downs and delayed and canceled notebook projects. The Company re-entered the notebook computer market with a phased approach beginning with the introduction, on February 21, 1994, of the 486-based Dell Latitude family of notebook computers. During the first half of fiscal 1994, the Company also recorded $29 million of other costs, consisting of $14 million of inventory write-downs due to excess components, $12 million of costs incurred for the cancellation of certain contracts and a $3 million reserve established for litigation in connection with a stockholder suit. The inventory write-downs and the cancellation charges arose from the Company's determination that certain products and inventory were excess or obsolete because the products were scheduled to be replaced with newer products or because the Company 45 47 DELL COMPUTER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) otherwise had lowered its estimates of expected demand for materials in inventory or under outstanding purchase commitments. During the first half of fiscal 1994, the Company recorded $23 million for the costs of restructuring certain of its operations. The charge included $10 million for asset write-downs, $8 million related to the consolidation of operations and $5 million for employee severance payments. Most of these restructuring charges were associated with consolidating certain common functions in the European subsidiaries and creating regional business units. Approximately 60% of these charges were cash provisions, approximately half of which were incurred in fiscal 1994. During fiscal 1995, the Company completed certain of the consolidations and closure of a subsidiary. There were no reserves for restructuring remaining at January 29, 1995. NOTE 13 -- GEOGRAPHIC AREA INFORMATION The Company operates in one principal business segment across geographically diverse markets. The Americas region includes the United States, Canada and Latin America. Substantially all of Americas operating results and identifiable assets are in the United States. Transfers between geographic areas are recorded using internal transfer prices set by the Company. Certain prior year amounts have been reclassified to separately reflect general corporate expenses and assets and to allocate the operating results and assets of the Company's product development group to the geographic regions. In prior years, the operating results and assets of both the general corporate operations and the product development group were included in the Americas region.
FISCAL YEAR 1996 ------------------------------------------------------------------ ASIA PACIFIC AMERICAS EUROPE AND JAPAN ELIMINATION CONSOLIDATED -------- ------- ------------ ----------- ------------ (IN MILLIONS) Sales to unaffiliated customers...... $3,474 $1,478 $344 $ -- $5,296 Transfers between geographic areas... 66 192 -- (258) -- ------ ------ ---- ----- ------ Total sales................ $3,540 $1,670 $344 $(258) $5,296 ====== ====== ==== ===== ====== Operating income (loss).............. $ 285 $ 171 $(21) $ -- $ 435 ====== ====== ==== ===== Corporate expenses, net.............. (58) ------ Total operating income..... $ 377 ====== Identifiable assets.................. $ 867 $ 409 $123 $ -- $1,399 ====== ====== ==== ===== General corporate assets............. 749 ------ Total assets............... $2,148 ======
46 48 DELL COMPUTER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FISCAL YEAR 1995 ------------------------------------------------------------------ ASIA PACIFIC AMERICAS EUROPE AND JAPAN ELIMINATION CONSOLIDATED -------- ------- ------------ ----------- ------------ (IN MILLIONS) Sales to unaffiliated customers...... $ 2,400 $ 953 $ 122 $ -- $ 3,475 Transfers between geographic areas... 35 129 -- (164) -- ------- ------- ------ ------- -------- Total sales................ $ 2,435 $ 1,082 $ 122 $ (164) $ 3,475 ======= ======= ====== ======= ======== Operating income (loss).............. $ 174 $ 123 $ (2) $ -- $ 295 ======= ======= ====== ======= Corporate expenses, net.............. (46) -------- Total operating income..... $ 249 ======== Identifiable assets.................. $ 638 $ 286 $ 43 $ -- $ 967 ======= ======= ====== ======= General corporate assets............. 627 -------- Total assets............... $ 1,594 ========
FISCAL YEAR 1994 ------------------------------------------------------------------ ASIA PACIFIC AMERICAS EUROPE AND JAPAN ELIMINATION CONSOLIDATED -------- ------- ------------ ----------- ------------ (IN MILLIONS) Sales to unaffiliated customers...... $ 2,037 $ 782 $ 54 $ -- $ 2,873 Transfers between geographic areas... 35 109 -- (144) -- ------- ------- ------ ------- -------- Total sales................ $ 2,072 $ 891 $ 54 $ (144) $ 2,873 ======= ======= ====== ======= ======== Operating income (loss).............. $ 18 $ (15) $ (5) $ -- $ (2) ======= ======= ====== ======= Corporate expenses, net.............. (37) -------- Total operating loss....... $ (39) ======== Identifiable assets.................. $ 512 $ 198 $ 14 $ -- $ 724 ======= ======= ====== ======= General corporate assets............. 416 -------- Total assets............... $ 1,140 ========
47 49 DELL COMPUTER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 14 -- SUPPLEMENTAL CONSOLIDATED FINANCIAL INFORMATION
JANUARY 28, JANUARY 29, 1996 1995 ----------- ----------- (IN MILLIONS) SUPPLEMENTAL CONSOLIDATED STATEMENT OF FINANCIAL POSITION INFORMATION Accounts receivable: Gross accounts receivable......................................... $ 755 $ 564 Allowance for doubtful accounts................................... (29) (26) ------- ----- $ 726 $ 538 ======= ===== Inventories: Production materials.............................................. $ 390 $ 262 Work-in-process and finished goods................................ 39 31 ------- ----- $ 429 $ 293 ======= ===== Other current assets: Deferred premiums and other foreign exchange contracts............ $ 71 $ 20 Deferred income taxes............................................. 67 78 Other............................................................. 18 14 ------- ----- $ 156 $ 112 ======= ===== Property, plant and equipment: Land and buildings................................................ $ 92 $ 42 Computer equipment................................................ 92 73 Office furniture and fixtures..................................... 26 23 Machinery and other equipment..................................... 45 36 Leasehold improvements............................................ 37 34 ------- ----- Total property, plant and equipment............................... 292 208 Accumulated depreciation and amortization......................... (113) (91) ------- ----- $ 179 $ 117 ======= ===== Accrued and other liabilities: Royalties and licensing........................................... $ 51 $ 35 Accrued compensation.............................................. 52 35 Accrued warranty costs............................................ 78 66 Taxes other than income taxes..................................... 76 40 Deferred profit on warranty contracts............................. 67 22 Book overdrafts................................................... 59 44 Other............................................................. 90 107 ------- ----- $ 473 $ 349 ======= =====
48 50 DELL COMPUTER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FISCAL YEAR ENDED ------------------------------------------- JANUARY 28, JANUARY 29, JANUARY 30, 1996 1995 1994 ----------- ----------- ----------- (IN MILLIONS) SUPPLEMENTAL CONSOLIDATED STATEMENT OF OPERATIONS INFORMATION Research, development and engineering expenses: Research and development expenses.................... $ 51 $ 39 $ 36 Engineering expenses................................. 44 26 13 ------- ------- ------- $ 95 $ 65 $ 49 ======= ======= ======= Financing and other income (expense), net: Investment income (loss), net: Marketable securities............................. $ 25 $ (7) $ 9 Investment derivatives............................ -- (24) 5 Interest expense..................................... (15) (12) (9) Foreign currency transactions........................ (1) 3 1 International year-end transition.................... -- 6 -- Other................................................ (3) (2) (6) ------- ------- ------- $ 6 $ (36) $ -- ======= ======= ======= Weighted average shares used to compute earnings (loss) per common share: Primary........................................... 97.1 83.1 74.7 ======= ======= ======= Fully diluted..................................... 98.7 94.6 -- ======= ======= =======
FISCAL YEAR ENDED ------------------------------------------- JANUARY 28, JANUARY 29, JANUARY 30, 1996 1995 1994 ----------- ----------- ----------- (IN MILLIONS) SUPPLEMENTAL CONSOLIDATED STATEMENT OF CASH FLOWS INFORMATION Changes in operating working capital accounts: Accounts receivable, net............................. $ (184) $ (117) $ (45) Inventories.......................................... (138) (72) 82 Accounts payable..................................... 59 129 (4) Accrued and other liabilities........................ 126 80 66 Other, net........................................... (46) (23) (2) ------- ------- ------- $ (183) $ (3) $ 97 ======= ======= ======= Changes in non-current assets and liabilities: Other assets......................................... $ (5) $ (2) $ 1 Other liabilities.................................... 43 41 16 ------- ------- ------- $ 38 $ 39 $ 17 ======= ======= ======= Supplemental cash flow information: Income taxes paid.................................... $ 117 $ 57 $ 7 Interest paid........................................ $ 17 $ 10 $ 5
Non-cash investing and financing activities: During fiscal 1996, 1.19 million shares of Convertible Preferred Stock were converted into 10 million shares of Common Stock. See Note 7 -- Preferred Stock. Additionally, the Company issued Common Stock in conjunction with restricted stock grants and for its matching contributions to the 401(k) plan. See Note 9 -- Employee Benefit Plans. 49 51 DELL COMPUTER CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE 15 -- QUARTERLY RESULTS (UNAUDITED) The Company believes that the following information reflects all normal recurring adjustments necessary for a fair presentation of the information for the periods presented. The following tables contain selected unaudited Consolidated Statement of Operations and stock price data for each quarter of fiscal 1996 and 1995. All share and per share information has been retroactively restated to reflect the two-for-one split of the Common Stock in October 1995. See Note 8 -- Common Stock. See "Principles of Consolidation" in Note 1 for a discussion regarding the Company's transition to a common reporting date in fiscal 1995 and the impact of such transition on the Company's fourth quarter results for fiscal 1995. The operating results for any quarter are not necessarily indicative of results for any future period.
FISCAL YEAR 1996 ------------------------------------------- 4TH 3RD 2ND 1ST QUARTER QUARTER QUARTER QUARTER ------- ------- ------- ------- (IN MILLIONS, EXCEPT PER SHARE DATA) Net sales........................................... $ 1,539 $ 1,415 $ 1,206 $ 1,136 Gross margin........................................ $ 278 $ 290 $ 263 $ 236 Operating income.................................... $ 94 $ 104 $ 91 $ 88 Net income.......................................... $ 70 $ 75 $ 65 $ 62 Earnings per common share: Primary........................................... $ .70 $ .75 $ .66 $ .55 Fully diluted..................................... $ .70 $ .75 $ .66 $ .53 Weighted average shares used to compute earnings per common share: Primary........................................ 99.4 100.1 98.2 90.5 Fully diluted.................................. 99.8 101.0 99.2 97.5 Stock sales prices per share: High.............................................. $49 3/8 $47 13/16 $35 1/16 $27 7/16 Low............................................... $23 $31 $24 1/4 $19 3/4
FISCAL YEAR 1995 ------------------------------------------- 4TH 3RD 2ND 1ST QUARTER QUARTER QUARTER QUARTER ------- ------- ------- ------- (IN MILLIONS, EXCEPT PER SHARE DATA) Net sales............................................ $ 1,033 $ 884 $ 791 $ 767 Gross margin......................................... $ 217 $ 181 $ 170 $ 170 Operating income..................................... $ 79 $ 59 $ 51 $ 60 Net income........................................... $ 60 $ 41 $ 29 $ 19 Earnings per common share: Primary............................................ $ .68 $ .47 $ .32 $ .21 Fully diluted...................................... $ .63 $ .43 $ .31 $ -- Weighted average shares used to compute earnings per common share: Primary......................................... 85.7 84.2 81.2 80.6 Fully diluted................................... 96.2 95.7 92.1 -- Stock sales prices per share: High............................................... $23 7/8 $22 $15 3/8 $15 1/16 Low................................................ $18 3/8 $13 3/4 $10 3/4 $ 9 9/16
Earnings per common share are computed independently for each of the quarters presented. Therefore, the sum of the quarterly earnings per common share may not equal the annual earnings per common share. 50 52 PART III The information called for by Part III of Form 10-K (consisting of Item 10 -- Directors and Executive Officers of the Registrant, Item 11 -- Executive Compensation, Item 12 -- Security Ownership of Certain Beneficial Owners and Management and Item 13 -- Certain Relationships and Transactions) is incorporated by reference from the Company's definitive proxy statement relating to the annual meeting of stockholders to be held in 1996, which definitive proxy statement will be filed with the Securities and Exchange Commission on or before May 28, 1996. PART IV ITEM 14 -- EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K FINANCIAL STATEMENTS The following financial statements are filed as a part of this Report under "Item 8 -- Financial Statements and Supplementary Data":
PAGE ---- Report of Independent Accountants................................................ 25 Consolidated Statement of Financial Position at January 28, 1996 and January 29, 1995............................................................... 26 Consolidated Statement of Operations for the three fiscal years ended January 28, 1996............................................................... 27 Consolidated Statement of Cash Flows for the three fiscal years ended January 28, 1996............................................................... 28 Consolidated Statement of Stockholders' Equity for the three fiscal years ended January 28, 1996................................................................ 29 Notes to Consolidated Financial Statements....................................... 30
FINANCIAL STATEMENT SCHEDULES The following financial statement schedule is filed as a part of this Report under "Schedule II" immediately preceding the signature page: Schedule II -- Valuation and Qualifying Accounts for the three fiscal years ended January 28, 1996. All other schedules called for by Form 10-K are omitted because they are not applicable. EXHIBITS The following exhibits are filed as a part of this Report, with each exhibit that consists of or includes a management contract or compensatory plan or arrangement being identified with an "*":
EXHIBIT NO. DESCRIPTION OF EXHIBIT - -------------------- ------------------------------------------------------------------------ 3.1 -- Certificate of Incorporation, dated October 21, 1987 and filed October 22, 1987 (incorporated by reference to Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended July 30, 1995, Commission File No. 0-17017) 3.2 -- Certificate of Amendment to the Certificate of Incorporation, dated May 6, 1988 and filed May 9, 1988 (incorporated by reference to Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended July 30, 1995, Commission File No. 0-17017) 3.3 -- Certificate of Amendment to the Certificate of Incorporation, dated June 19, 1991 and filed June 21, 1991 (incorporated by reference to Exhibit 3.3 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended July 30, 1995, Commission File No. 0-17017)
51 53
EXHIBIT NO. DESCRIPTION OF EXHIBIT - -------------------- ------------------------------------------------------------------------ 3.4 -- Certificate of Amendment to the Certificate of Incorporation, dated June 19, 1992 and filed July 10, 1992 (incorporated by reference to Exhibit 3.4 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended July 30, 1995, Commission File No. 0-17017) 3.5 -- Certificate of Designation of Series A Convertible Preferred Stock, dated August 24, 1993 and filed August 25, 1993 (incorporated by reference to Exhibit 3.5 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended July 30, 1995, Commission File No. 0-17017) 3.6 -- Certificate of Correction Filed to Correct Certain Errors in the Certificate of Amendment of Certificate of Incorporation Filed in the Office of the Secretary of State of Delaware on May 9, 1988, and in the Certificate of Amendment of Certificate of Incorporation Filed in the Office of the Secretary of State of Delaware on July 10, 1992, dated April 27, 1994 and filed May 5, 1994 (incorporated by reference to Exhibit 3.6 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended July 30, 1995, Commission File No. 0-17017) 3.7 -- Certificate of Amendment to Certificate of Incorporation, dated July 31, 1995 and filed August 3, 1995 (incorporated by reference to Exhibit 3.7 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended July 30, 1995, Commission File No. 0-17017) 3.8 -- Certificate of Designations of Series A Junior Participating Preferred Stock, dated November 29, 1995 and filed December 4, 1995 (incorporated by reference to Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended October 29, 1995, Commission File No. 0-17017) 3.9 -- Bylaws, dated October 22, 1987 (incorporated by reference to Exhibit 3.8 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended July 30, 1995, Commission File No. 0-17017) 3.10 -- Amendments to the Bylaws, adopted June 19, 1991 (incorporated by reference to Exhibit 3.9 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended July 30, 1995, Commission File No. 0-17071) 3.11 -- Amendments to the Bylaws, adopted May 18, 1995 (incorporated by reference to Exhibit 3.10 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended July 30, 1995, Commission File No. 0-17017) 3.12 -- Amendments to Bylaws, adopted November 29, 1995 (incorporated by reference to Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended October 29, 1995, Commission File No. 0-17017) 3.13 -- Restated Bylaws, as adopted on November 29, 1995 (incorporated by reference to Exhibit 3.3 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended October 29, 1995, Commission File No. 0-17017) 4.1 -- Rights Agreement, dated as of November 29, 1995 (incorporated by reference to Exhibit 4 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended October 29, 1995, Commission File No. 0-17017) 4.2 -- Indenture, dated as of August 15, 1993, between the Company and The First National Bank of Boston regarding the Company's 11% Senior Notes Due August 15, 2000 (incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on Form S-4, Registration No. 33-69680)
52 54
EXHIBIT NO. DESCRIPTION OF EXHIBIT - -------------------- ------------------------------------------------------------------------ 4.3 -- Exchange and Registration Rights Agreement, dated as of August 15, 1993, between the Company and the purchasers of the Company's 11% Senior Notes Due August 15, 2000 (incorporated by reference to Exhibit 4.2 to the Company's Registration Statement on Form S-4, Registration No. 33-69680) 10.1* -- Dell Computer Corporation 1986 Incentive Stock Option Plan, as amended (incorporated by reference to Exhibit 4c to the Company's Registration Statement on Form S-8, Registration No. 33-24621) 10.2* -- Dell Computer Corporation 1987 Incentive Stock Option Plan, as amended (incorporated by reference to Exhibit 4d to the Company's Registration Statement on Form S-8, Registration No. 33-24621) 10.3* -- Dell Computer Corporation 1987 Non-qualified Stock Option Plan, as amended, including the UK Scheme (incorporated by reference to Exhibit 4e to the Company's Registration Statement on Form S-8, Registration No. 33-24621) 10.4* -- Dell Computer Corporation 1989 Stock Option Plan, as amended and restated (incorporated by reference to Exhibit 10.4 to the Company's Annual Report on Form 10-K for the fiscal year ended January 31, 1993, Commission File No. 0-17017) 10.5* -- Dell Computer Corporation 1993 Stock Option Plan, (incorporated by reference to Exhibit 10.36 to the Company's Registration Statement on Form S-4, Registration No. 33-69680) 10.6* -- Dell Computer Corporation Incentive Plan (incorporated by reference to Exhibit 4.6 to the Company's Registration Statement on Form S-8, Registration No. 33-54577) 10.7* -- First Amendment to Dell Computer Corporation Incentive Plan, dated as of July 21, 1995 (incorporated by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended July 30, 1995, Commission File No. 0-17071) 10.8*+ -- Second Amendment to Dell Computer Corporation Incentive Plan, dated as of November 29, 1995 10.9* -- Dell Computer Corporation Deferred Compensation Plan (incorporated by reference to Exhibit 10.8 to the Company's Annual Report on Form 10-K for the fiscal year ended February 3, 1991, Commission File No. 0-17017) 10.10*+ -- Amendment to Deferred Compensation Plan, adopted on August 25, 1995 10.11*+ -- Executive Incentive Bonus Plan, adopted March 1, 1995 10.12 -- Committed Credit Line Agreement, dated as of June 8, 1995, between NationsBank of Texas, N.A. and the Company and certain of its subsidiaries, along with schedule identifying substantially identical agreements and material differences between such other agreements and the agreement filed (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the fiscal year ended July 30, 1995, Commission File No. 0-17017) 10.13 -- Supplement to Schedule of Similar Agreements, listing additional agreements substantially identical to the Committed Credit Line Agreement filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended July 30, 1995 (incorporated by reference to Exhibit 10 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended October 29, 1995, Commission File No. 0-17017)
53 55
EXHIBIT NO. DESCRIPTION OF EXHIBIT - -------------------- ------------------------------------------------------------------------ 10.14* -- Form of Indemnity Agreement between the Company and certain of its officers, directors and key employees (incorporated by reference to Exhibit 10.23 to the Company's Registration Statement on Form S-1, Registration No. 33-21823) 10.15 -- Lease Agreement, dated January 6, 1989, for Building 12 in Braker Center (incorporated by reference to Exhibit 10s to the Company's Annual Report on Form 10-K for the fiscal year ended January 27, 1989, Commission File No. 0-17017) 10.16 -- Two Amendments to Lease Agreement for Building 12 in Braker Center (incorporated by reference to Exhibit 10.27 to the Company's Annual Report on Form 10-K for the fiscal year ended January 31, 1993, Commission File No. 0-17017) 10.17* -- Agreement, dated May 12, 1988, between the Company and Michael S. Dell, along with the Employment Agreement, dated May 3, 1984, between Michael S. Dell and the Company's predecessor (incorporated by reference to Exhibit 10.25 to the Company's Registration Statement on Form S-1, Registration No. 33-38991) 10.18+ -- Receivables Purchase Agreement, dated as of November 21, 1995, between Dell Marketing L.P. (as Seller) and Dell Receivables L.P. (as Purchaser) 10.19+ -- Receivables Purchase Agreement, dated as of November 21, 1995, between Dell Direct Sales L.P. (as Seller) and Dell Receivables L.P. (as Purchaser) 10.20+ -- Subordinated Note, dated as of November 30, 1995, payable to Dell Marketing L.P. issued by Dell Receivables L.P. 10.21+ -- Subordinated Note, dated as of November 30, 1995, payable to Dell Direct Sales L.P. issued by Dell Receivables L.P. 10.22+ -- Pooling and Servicing Agreement, dated as of November 21, 1995, among Dell Receivables L.P. (as Transferor), Dell USA L.P. (as Servicer) and Norwest Bank Minnesota, National Association (as Trustee) 10.23+ -- Series 1995-1 Supplement, dated as of November 21, 1995, to the Pooling and Servicing Agreement filed as Exhibit 10.22 to this Report 10.24+ -- Certificate Purchase Agreement, dated as of November 30, 1995, among Dell Receivables L.P. (as Seller), Corporate Receivables Corporation (as Purchaser), the financial institutions named from time to time therein (as Liquidity Providers), Citibank North America, Inc. (as Program Agent) and Norwest Bank Minnesota, National Association (as Trustee) 10.25+ -- Parent Undertaking Agreement, dated as of November 21, 1995, executed by the Company 10.26+ -- Cross-Guarantee Agreement, dated as of November 21, 1995, among Dell Marketing L.P., Dell Direct Sales L.P. and Dell USA L.P. 10.27* -- Severance Agreement, dated April 28, 1995, between the Company and L. Scott Flaig (incorporated by reference to Exhibit 10 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 1995, Commission File No. 0-17017) 10.28* -- Severance Agreement, dated June 15, 1995, between the Company and Thomas L. Thomas (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended July 30, 1995, Commission File No. 0-17017)
54 56
EXHIBIT NO. DESCRIPTION OF EXHIBIT - -------------------- ------------------------------------------------------------------------ 11+ -- Statement re Computation of Per Share Earnings 21+ -- Subsidiaries of the Company 23+ -- Consent of Price Waterhouse LLP 27+ -- Financial Data Schedule
- --------------- * Identifies Exhibit that consists of or includes a management contract or compensatory plan or arrangement. + Filed herewith. REPORTS ON FORM 8-K On November 30, 1995, the Company filed a Current Report on Form 8-K, dated November 29, 1995, reporting under Item 5 the adoption by the Board of Directors of a Preferred Share Purchase Rights Plan. A copy of the Rights Agreement, dated November 29, 1995, relating to such Preferred Share Purchase Rights Plan is filed as Exhibit 4.1 to this Report. Such Current Report did not include any financial statements. 55 57 SCHEDULE II DELL COMPUTER CORPORATION VALUATION AND QUALIFYING ACCOUNTS
BALANCE AT CHARGED TO WRITE-OFFS BALANCE AT BEGINNING BAD DEBT CHARGED TO END OF FISCAL YEAR DESCRIPTION OF PERIOD EXPENSE ALLOWANCE PERIOD - --------------- -------------------------------- ---------- ---------- ---------- ---------- (IN MILLIONS) 1996......... Allowance for doubtful accounts $ 26 $ 13 $ 10 $ 29 1995......... Allowance for doubtful accounts $ 26 $ 8 $ 8 $ 26 1994......... Allowance for doubtful accounts $ 14 $ 13 $ 1 $ 26
56 58 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. DELL COMPUTER CORPORATION Date: March 25, 1996 By: MICHAEL S. DELL -------------------------------- Michael S. Dell, Chairman of the Board and Chief Executive Officer 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 ---- ----- ---- MICHAEL S. DELL Chairman of the Board and March 25, 1996 - ---------------------------------------------- Chief Executive Officer Michael S. Dell (principal executive officer) DONALD J. CARTY Director March 25, 1996 - ---------------------------------------------- Donald J. Carty PAUL O. HIRSCHBIEL, JR. Director March 25, 1996 - ---------------------------------------------- Paul O. Hirschbiel, Jr. MICHAEL H. JORDAN Director March 25, 1996 - ---------------------------------------------- Michael H. Jordan GEORGE KOZMETSKY - ---------------------------------------------- George Kozmetsky Director March 25, 1996 THOMAS W. LUCE, III Director March 25, 1996 - ---------------------------------------------- Thomas W. Luce, III KLAUS S. LUFT Director March 25, 1996 - ---------------------------------------------- Klaus S. Luft CLAUDINE B. MALONE Director March 25, 1996 - ---------------------------------------------- Claudine B. Malone MICHAEL A. MILES Director March 25, 1996 - ---------------------------------------------- Michael A. Miles THOMAS J. MEREDITH Senior Vice President -- March 25, 1996 - ---------------------------------------------- Finance and Information Thomas J. Meredith Systems and Chief Financial Officer (principal financial officer) CATHERINE P. THOMPSON Vice President, Corporate March 25, 1996 - ---------------------------------------------- Controller (principal Catherine P. Thompson accounting officer)
57 59 INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBIT - ---------- ------------------------------------------------------------------------ 3.1 -- Certificate of Incorporation, dated October 21, 1987 and filed October 22, 1987 (incorporated by reference to Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended July 30, 1995, Commission File No. 0-17017) 3.2 -- Certificate of Amendment to the Certificate of Incorporation, dated May 6, 1988 and filed May 9, 1988 (incorporated by reference to Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended July 30, 1995, Commission File No. 0-17017) 3.3 -- Certificate of Amendment to the Certificate of Incorporation, dated June 19, 1991 and filed June 21, 1991 (incorporated by reference to Exhibit 3.3 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended July 30, 1995, Commission File No. 0-17017) 3.4 -- Certificate of Amendment to the Certificate of Incorporation, dated June 19, 1992 and filed July 10, 1992 (incorporated by reference to Exhibit 3.4 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended July 30, 1995, Commission File No. 0-17017) 3.5 -- Certificate of Designation of Series A Convertible Preferred Stock, dated August 24, 1993 and filed August 25, 1993 (incorporated by reference to Exhibit 3.5 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended July 30, 1995, Commission File No. 0-17017) 3.6 -- Certificate of Correction Filed to Correct Certain Errors in the Certificate of Amendment of Certificate of Incorporation Filed in the Office of the Secretary of State of Delaware on May 9, 1988, and in the Certificate of Amendment of Certificate of Incorporation Filed in the Office of the Secretary of State of Delaware on July 10, 1992, dated April 27, 1994 and filed May 5, 1994 (incorporated by reference to Exhibit 3.6 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended July 30, 1995, Commission File No. 0-17017) 3.7 -- Certificate of Amendment to Certificate of Incorporation, dated July 31, 1995 and filed August 3, 1995 (incorporated by reference to Exhibit 3.7 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended July 30, 1995, Commission File No. 0-17017) 3.8 -- Certificate of Designations of Series A Junior Participating Preferred Stock, dated November 29, 1995 and filed December 4, 1995 (incorporated by reference to Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended October 29, 1995, Commission File No. 0-17017) 3.9 -- Bylaws, dated October 22, 1987 (incorporated by reference to Exhibit 3.8 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended July 30, 1995, Commission File No. 0-17017) 3.10 -- Amendments to the Bylaws, adopted June 19, 1991 (incorporated by reference to Exhibit 3.9 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended July 30, 1995, Commission File No. 0-17071)
60
EXHIBIT NO. DESCRIPTION OF EXHIBIT - ---------- ------------------------------------------------------------------------ 3.11 -- Amendments to the Bylaws, adopted May 18, 1995 (incorporated by reference to Exhibit 3.10 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended July 30, 1995, Commission File No. 0-17017) 3.12 -- Amendments to Bylaws, adopted November 29, 1995 (incorporated by reference to Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended October 29, 1995, Commission File No. 0-17017) 3.13 -- Restated Bylaws, as adopted on November 29, 1995 (incorporated by reference to Exhibit 3.3 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended October 29, 1995, Commission File No. 0-17017) 4.1 -- Rights Agreement, dated as of November 29, 1995 (incorporated by reference to Exhibit 4 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended October 29, 1995, Commission File No. 0-17017) 4.2 -- Indenture, dated as of August 15, 1993, between the Company and The First National Bank of Boston regarding the Company's 11% Senior Notes Due August 15, 2000 (incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on Form S-4, Registration No. 33-69680) 4.3 -- Exchange and Registration Rights Agreement, dated as of August 15, 1993, between the Company and the purchasers of the Company's 11% Senior Notes Due August 15, 2000 (incorporated by reference to Exhibit 4.2 to the Company's Registration Statement on Form S-4, Registration No. 33-69680) 10.1* -- Dell Computer Corporation 1986 Incentive Stock Option Plan, as amended (incorporated by reference to Exhibit 4c to the Company's Registration Statement on Form S-8, Registration No. 33-24621) 10.2* -- Dell Computer Corporation 1987 Incentive Stock Option Plan, as amended (incorporated by reference to Exhibit 4d to the Company's Registration Statement on Form S-8, Registration No. 33-24621) 10.3* -- Dell Computer Corporation 1987 Non-qualified Stock Option Plan, as amended, including the UK Scheme (incorporated by reference to Exhibit 4e to the Company's Registration Statement on Form S-8, Registration No. 33-24621) 10.4* -- Dell Computer Corporation 1989 Stock Option Plan, as amended and restated (incorporated by reference to Exhibit 10.4 to the Company's Annual Report on Form 10-K for the fiscal year ended January 31, 1993, Commission File No. 0-17017) 10.5* -- Dell Computer Corporation 1993 Stock Option Plan, (incorporated by reference to Exhibit 10.36 to the Company's Registration Statement on Form S-4, Registration No. 33-69680) 10.6* -- Dell Computer Corporation Incentive Plan (incorporated by reference to Exhibit 4.6 to the Company's Registration Statement on Form S-8, Registration No. 33-54577) 10.7* -- First Amendment to Dell Computer Corporation Incentive Plan, dated as of July 21, 1995 (incorporated by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended July 30, 1995, Commission File No. 0-17071)
61
EXHIBIT NO. DESCRIPTION OF EXHIBIT - ---------- ------------------------------------------------------------------------ 10.8*+ -- Second Amendment to Dell Computer Corporation Incentive Plan, dated as of November 29, 1995 10.9* -- Dell Computer Corporation Deferred Compensation Plan (incorporated by reference to Exhibit 10.8 to the Company's Annual Report on Form 10-K for the fiscal year ended February 3, 1991, Commission File No. 0-17017) 10.10*+ -- Amendment to Deferred Compensation Plan, adopted on August 25, 1995 10.11*+ -- Executive Incentive Bonus Plan, adopted March 1, 1995 10.12 -- Committed Credit Line Agreement, dated as of June 8, 1995, between NationsBank of Texas, N.A. and the Company and certain of its subsidiaries, along with schedule identifying substantially identical agreements and material differences between such other agreements and the agreement filed (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the fiscal year ended July 30, 1995, Commission File No. 0-17017)
62
EXHIBIT NO. DESCRIPTION OF EXHIBIT - ---------- ------------------------------------------------------------------------ 10.13 -- Supplement to Schedule of Similar Agreements, listing additional agreements substantially identical to the Committed Credit Line Agreement filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended July 30, 1995 (incorporated by reference to Exhibit 10 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended October 29, 1995, Commission File No. 0-17017) 10.14* -- Form of Indemnity Agreement between the Company and certain of its officers, directors and key employees (incorporated by reference to Exhibit 10.23 to the Company's Registration Statement on Form S-1, Registration No. 33-21823) 10.15 -- Lease Agreement, dated January 6, 1989, for Building 12 in Braker Center (incorporated by reference to Exhibit 10s to the Company's Annual Report on Form 10-K for the fiscal year ended January 27, 1989, Commission File No. 0-17017) 10.16 -- Two Amendments to Lease Agreement for Building 12 in Braker Center (incorporated by reference to Exhibit 10.27 to the Company's Annual Report on Form 10-K for the fiscal year ended January 31, 1993, Commission File No. 0-17017) 10.17* -- Agreement, dated May 12, 1988, between the Company and Michael S. Dell, along with the Employment Agreement, dated May 3, 1984, between Michael S. Dell and the Company's predecessor (incorporated by reference to Exhibit 10.25 to the Company's Registration Statement on Form S-1, Registration No. 33-38991) 10.18+ -- Receivables Purchase Agreement, dated as of November 21, 1995, between Dell Marketing L.P. (as Seller) and Dell Receivables L.P. (as Purchaser) 10.19+ -- Receivables Purchase Agreement, dated as of November 21, 1995, between Dell Direct Sales L.P. (as Seller) and Dell Receivables L.P. (as Purchaser) 10.20+ -- Subordinated Note, dated as of November 30, 1995, payable to Dell Marketing L.P. issued by Dell Receivables L.P. 10.21+ -- Subordinated Note, dated as of November 30, 1995, payable to Dell Direct Sales L.P. issued by Dell Receivables L.P. 10.22+ -- Pooling and Servicing Agreement, dated as of November 21, 1995, among Dell Receivables L.P. (as Transferor), Dell USA L.P. (as Servicer) and Norwest Bank Minnesota, National Association (as Trustee) 10.23+ -- Series 1995-1 Supplement, dated as of November 21, 1995, to the Pooling and Servicing Agreement filed as Exhibit 10.22 to this Report 10.24+ -- Certificate Purchase Agreement, dated as of November 21, 1995, among Dell Receivables L.P. (as Seller), Corporate Receivables Corporation (as Purchaser), the financial institutions named from time to time therein (as Liquidity Providers), Citibank North America, Inc. (as Program Agent) and Norwest Bank Minnesota, National Association (as Trustee)
63
EXHIBIT NO. DESCRIPTION OF EXHIBIT - ---------- ------------------------------------------------------------------------ 10.25+ -- Parent Undertaking Agreement, dated as of November 30, 1995, executed by the Company 10.26+ -- Cross-Guarantee Agreement, dated as of November 30, 1995, among Dell Marketing L.P., Dell Direct Sales L.P. and Dell USA L.P. 10.27* -- Severance Agreement, dated April 28, 1995, between the Company and L. Scott Flaig (incorporated by reference to Exhibit 10 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 1995, Commission File No. 0-17017) 10.28* -- Severance Agreement, dated June 15, 1995, between the Company and Thomas L. Thomas (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended July 30, 1995, Commission File No. 0-17017) 11+ -- Statement re Computation of Per Share Earnings 21+ -- Subsidiaries of the Company 23+ -- Consent of Price Waterhouse LLP 27+ -- Financial Data Schedule
- --------------- * Identifies Exhibit that consists of or includes a management contract or compensatory plan or arrangement. + Filed herewith. EX-10.8 2 SECOND AMENDMENT TO DELL COMPUTER INCENTIVE PLAN 1 EXHIBIT 10.8 SECOND AMENDMENT TO DELL COMPUTER CORPORATION INCENTIVE PLAN Dell Computer Corporation (the "Company"), a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the "DGCL"), hereby adopts an amendment to the Dell Computer Corporation Incentive Plan (the "Incentive Plan"), as specified below. RECITALS The Board of Directors of the Company (the "Board"), acting at a meeting duly called and held on November 29, 1995 in accordance with the applicable provisions of the DGCL and the Company's Bylaws, did duly adopt resolutions (1) approving the amendment to the Incentive Plan described herein and (2) authorizing the officers of the Company to take such actions as they consider necessary, appropriate or desirable to effectuate the purposes thereof. Now, therefore, the Incentive Plan is hereby amended as follows: 1. Paragraph 1.6 of the Plan is deleted in its entirety and replaced with the following: 1.6 "Change in Control" means: (a) The acquisition by a Person of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (1) the then outstanding shares of Stock or (2) the combined voting power of the then outstanding Voting Securities of the Corporation; provided, however, that for purposes of this subparagraph (a), the following acquisitions shall not constitute a Change in Control: (i) any acquisition directly from the Corporation, (ii) any acquisition by the Corporation, (iii) any acquisition by an employee benefit plan (or related trust) sponsored or maintained by the Corporation or any corporation controlled by the Corporation, (iv) any acquisition by Mr. Michael S. Dell, his Affiliates (as defined in Rule 12b-2 promulgated under the Exchange Act) or Associates (as defined in Rule 12b-2 promulgated under the Exchange Act), his heirs or any trust or foundation to which he has transferred or may transfer Stock (collectively, "Michael Dell") or (v) any acquisition by any corporation pursuant to a transaction which complies with clauses (1), (2) and (3) of subparagraph (c) of this Paragraph; or 2 (b) Individuals who constitute the Incumbent Board cease for any reason to constitute at least a majority of the Board; or (c) Approval by the stockholders of the Corporation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Corporation or the acquisition of assets of another corporation (a "Business Combination"), in each case, unless, following such Business Combination, (1) all or substantially all of the Persons who were the beneficial owners, respectively, of the outstanding Stock and outstanding Voting Securities of the Corporation immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Corporation or all or substantially all of the Corporation's assets either directly or through one or more Subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the outstanding Stock and outstanding Voting Securities, as the case may be, (2) no Person (excluding any employee benefit Plan (or related trust) of the Corporation, such corporation resulting from such Business Combination and Michael Dell) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (3) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board of Directors, providing for such Business Combination; or (d) Approval by the stockholders of the Corporation of a complete liquidation or dissolution of the Corporation. 2. Paragraph 1.23 of the Plan is deleted and replaced in its entirety with the following: 1.23 "Incumbent Board" means the individuals who, as of the Effective Date, constitute the Board of Directors; provided, however, that any individual becoming a director subsequent to such date whose election, or nomination for election by the Corporation's stockholders, was approved by a vote of at least a majority of the directors then comprising 2 3 the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board. 3. Except as described in Paragraphs 1 and 2 above, the terms, conditions and provisions of the Incentive Plan shall remain in full force and effect and shall be unaffected by this amendment. 4. This amendment, and the changes to the provisions of the Incentive Plan effected hereby, shall be effective as of November 29, 1995. In witness whereof, the Company, acting by and through its duly authorized officer, has executed this instrument to be effective as of the date specified in Paragraph 4 above. DELL COMPUTER CORPORATION By: THOMAS B. GREEN ------------------------ Thomas B. Green, General Counsel and Secretary Attest: THOMAS H. WELCH, JR. - ------------------------------- Thomas H. Welch, Jr., Assistant Secretary 3 EX-10.10 3 AMENDMENT TO DEFERRED COMPENSATION PLAN 1 EXHIBIT 10.10 DELL COMPUTER CORPORATION AMENDMENT TO THE DEFERRED COMPENSATION PLAN RESOLVED, that the Board hereby amends Section 3.2 of the Plan effective January 1, 1996, to provide for a 100% match of Member's Deferral Account, not to exceed the maximum matched Employer Salary Reduction Contribution under the Dell Computer Corporation 401(k) Plan less the maximum limit allowed under the Internal Revenue Code 402(g)(1). RESOLVED, that the Board hereby amends the vesting schedule of the Plan effective January 1, 1996, to mirror the vesting schedule of the Dell Computer Corporation 401(k) Plan. RESOLVED, that the Board hereby amends Section 2 of the Plan effective January 1, 1996, to provide for the inclusion of Directors as eligible Members in the Plan. EX-10.11 4 EXECUTIVE INCENTIVE BONUS PLAN 1 EXHIBIT 10.11 DELL COMPUTER CORPORATION EXECUTIVE INCENTIVE BONUS PLAN SUMMARY DESCRIPTION On March 1, 1995, the Board of Directors of Dell Computer Corporation (the "Company") unanimously approved the adoption of the Executive Incentive Bonus Plan (the "Plan"). The Plan was approved by the Company's stockholders at the Company's annual meeting of stockholders held on July 21, 1995. Set forth below is a description of the terms of the plan. PURPOSE The purpose of the Plan is to unite strategic objectives and executive staff performance, provide significant cash rewards for continuing profitable growth and motivate short-term performance for each of the fiscal years during the term of the Plan. Key strategic objectives include (a) product leadership, (b) productivity, cost reduction and quality, (c) attracting, developing and retaining exceptional people, (d) improving infrastructure and systems and (e) global expansion. ADMINISTRATION The Plan will be administered by the Compensation Committee of the Board of Directors (the "Committee"), which shall consist of two or more members of the Board of Directors who are not employees of the Company and who otherwise qualify as "outside directors" within the meaning of Section 162(m) of the Internal Revenue Code and the regulations thereunder. ELIGIBILITY All corporate vice presidents who are members of the Company's executive staff are eligible to participate in the Plan. Plan participants are chosen solely at the discretion of the Committee. TARGET BONUS Promptly after the beginning of each fiscal year, the Committee establishes a target bonus opportunity for each participant based on a percentage of the participant's base salary and level of responsibility. The percentage of the target bonus actually paid is based on the extent to which corporate and key strategic objectives are achieved. Corporate objectives may include any or all of the following: profit before tax, profit after tax, return on invested capital, return on equity, return on assets, net income and revenues. With respect to key strategic objectives, the Committee has 2 determined that such information is confidential business information, disclosure of which would adversely affect the Company. Plan payments are calculated for each participant at the end of the fiscal year based on the achievement of annual corporate and key strategic objectives. The amount earned is paid in cash as soon as is practicable following the end of the Company's fiscal year to which the bonus pertains, provided that at the discretion of the Committee, a participant may, subject to such terms and conditions as the Committee may determine, elect to defer payment of all or any part of any bonus by complying with such procedures as the Committee may prescribe. The Committee must certify in writing that the performance criteria have been met prior to any payments under the Plan. Employees are not entitled to any bonus award under the Plan, however, if minimum corporate objectives are not achieved. The amount to be paid to each participant under the Plan will depend on the factors set forth above. However, the maximum bonus that any one individual may receive under the Plan in any one fiscal year is $2 million, and in no event more than 250% of the individual's target bonus amount. The committee may reduce (but not increase) a participant's bonus as its sole discretion. Generally, an executive must be actively employed by the Company or a subsidiary of the Company and on the payroll on the date the award is paid to receive the award. Certain pro rata awards may be made if termination of employment results from retirement, permanent disability or death. AMENDMENT AND TERMINATION The Committee may terminate, suspend or amend the Plan, in whole or in part, from time to time, including to adopt amendments deemed necessary or desirable to correct any defect, supply any omission or reconcile any inconsistency in the Plan or in any award granted under the Plan so long as stockholder approval required by Section 162(m) of the Internal Revenue Code has been obtained. No amendment, termination or modification may adversely affect outstanding awards under the Plan, in any manner, without the consent of the affected participants. The Committee must determine that an amendment or modification is in the best interests of all persons to whom awards have previously been granted and may not adopt an amendment or modification that would result in an increase in the amount of compensation payable under the Plan. 2 EX-10.18 5 RECEIVABLES PURCHASE AGREEMENT 1 EXHIBIT 10.18 EXECUTION COPY RECEIVABLES PURCHASE AGREEMENT between DELL MARKETING L.P., as Seller and DELL RECEIVABLES L.P., as Purchaser Dated as of November 21, 1995 2 TABLE OF CONTENTS
Page ---- ARTICLE I DEFINITIONS SECTION 1.01. Definitions............................................. 2 SECTION 1.02. Other Definitional Provisions........................... 2 SECTION 1.03. Computation of Time Periods............................. 3 ARTICLE II PURCHASE AND SALE OF RECEIVABLES SECTION 2.01. Purchase and Sale of Receivables........................ 4 SECTION 2.02. Payment of Purchase Price............................... 4 ARTICLE III CONDITIONS TO EFFECTIVENESS AND PURCHASES SECTION 3.01. Transfer Date........................................... 5 SECTION 3.02. Conditions Precedent to All Purchases................... 6 ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.01. Representations and Warranties of the Seller............ 8 SECTION 4.02. Representations and Warranties of the Purchaser......... 11 SECTION 4.03. Obligations Unaffected.................................. 12 ARTICLE V COVENANTS SECTION 5.01. Affirmative Covenants of the Seller..................... 14 SECTION 5.02. Reporting Requirements of the Seller.................... 17 SECTION 5.03. Negative Covenants of the Seller........................ 18 SECTION 5.04. Affirmative Mutual Covenant............................. 19 SECTION 5.05. Grant of Security Interest.............................. 19
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Page ---- ARTICLE VI EVENTS OF TERMINATION SECTION 6.01. Termination............................................. 21 ARTICLE VII INDEMNIFICATION SECTION 7.01. Indemnification......................................... 23 ARTICLE VIII MISCELLANEOUS SECTION 8.01. Further Assurances...................................... 25 SECTION 8.02. Payments................................................ 25 SECTION 8.03. Costs and Expenses...................................... 25 SECTION 8.04. Binding Effect; Assignability........................... 26 SECTION 8.05. Governing Law, Jurisdiction, Consent to Service of Process...................................... 27 SECTION 8.06. No Waiver; Cumulative Remedies.......................... 27 SECTION 8.07. Amendments and Waivers.................................. 27 SECTION 8.08. Severability............................................ 28 SECTION 8.09. Notices................................................. 28 SECTION 8.10. Counterparts............................................ 28 SECTION 8.11. Construction of Agreement as Security Agreement............................................... 28 SECTION 8.12. Termination............................................. 28 SECTION 8.13. Third Party Beneficiary................................. 29 SECTION 8.14. The Seller's Obligations................................ 29
ii 4 RECEIVABLES PURCHASE AGREEMENT, dated as of November 21, 1995, by and between Dell Marketing L.P., a Texas limited partnership (in its capacity as seller hereunder, the "Seller") and Dell Receivables L.P., a Texas limited partnership (the "Purchaser"). WHEREAS, the Seller desires to sell to the Purchaser, and the Purchaser desires to buy from the Seller, on the date hereof and from time to time hereafter, all of the Seller's right, title and interest in, to and under the Receivables existing on the date hereof or hereafter created; and WHEREAS, all of the partnership interests in both the Seller and the Purchaser are held indirectly by Dell Computer Corporation ("Dell") and all of the shares of the Purchaser are owned indirectly by Dell; and WHEREAS, pursuant to that certain Pooling and Servicing Agreement, dated of even date herewith (the "Pooling and Servicing Agreement"), among the Purchaser, Dell USA L.P. (the "Servicer") and Norwest Bank Minnesota, National Association, as trustee (the "Trustee"), the Purchaser has agreed to transfer to the Trust created pursuant to the Pooling and Servicing Agreement, for the benefit of the Certificateholders referred to therein, all of its right, title and interest in, to and under the Receivables; NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto agree as follows: 5 ARTICLE I DEFINITIONS SECTION 1.01. Definitions. Capitalized terms used herein but not otherwise defined herein shall have the meanings set forth in the Pooling and Servicing Agreement. In addition, the term "Agreement" shall mean this Receivables Purchase Agreement, as the same may from time to time be amended, supplemented or otherwise modified. The following capitalized terms shall have the following meanings: "Early Termination" shall have the meaning specified in Section 6.01. "Effective Period" shall mean the period beginning on the Transfer Date and terminating on (i) the earliest of (a) the close of business on the Business Day on which a Termination Event occurs, (b) the close of business on the Business Day immediately preceding the day on which any Early Amortization Event occurs and (c) the close of business on the Business Day immediately preceding the day on which the Amortization Period for the last outstanding Series begins or (ii) such later date as is agreed to by the Seller and the Purchaser. "Purchase Date" shall have the meaning specified in Section 2.02. "Purchase Percentage" shall mean initially 98%; provided, however, that the Purchase Percentage may change from time to time, on a basis consistent with that used to establish the initial Purchase Percentage, to reflect historic loss experience of the Seller's accounts receivable portfolio and prevailing interest rates, as agreed upon by the Seller and the Purchaser. "Purchase Price" shall have the meaning specified in Section 2.02. "Termination Event" shall have the meaning specified in Section 6.01. "Transfer Date" shall have the meaning specified in Section 3.01. SECTION 1.02. Other Definitional Provisions. (a) All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein. (b) As used herein and in any certificate or other document made or delivered pursuant hereto, accounting terms not defined in this Agreement, and accounting terms partly defined in this Agreement to the extent not completely defined, shall have the respective meanings given to them under generally accepted 2 6 accounting principles in effect from time to time. To the extent that the definitions of accounting terms herein are inconsistent with the meanings of such terms under generally accepted accounting principles, the definitions contained herein shall control. (c) The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement; and Section, Schedule and Exhibit references contained in this Agreement are references to Sections, Schedules and Exhibits in or to this Agreement unless otherwise specified; and the term "including" shall mean "including without limitation". SECTION 1.03. Computation of Time Periods. Unless otherwise stated in this Agreement, in the computation of a period of time from a specified date to a later specified date, the word "from" shall mean "from and including" and the words "to" and "until" shall mean "to but excluding". 3 7 ARTICLE II PURCHASE AND SALE OF RECEIVABLES SECTION 2.01. Purchase and Sale of Receivables. Subject to the terms and conditions of this Agreement, the Seller agrees to sell to the Purchaser, and the Purchaser agrees to purchase from the Seller, during the Effective Period, all right, title and interest of the Seller in, to and under all Receivables now existing or hereafter created, including, without limitation, all monies due and to become due thereunder, and all amounts received with respect thereto and all proceeds thereof. SECTION 2.02. Payment of Purchase Price. (a) On the Transfer Date, the Seller shall sell to the Purchaser, and the Purchaser shall purchase from the Seller, all of the Seller's right, title and interest in, to and under all Receivables existing at the close of business on the Business Day preceding the Transfer Date for a payment consisting of $182,726,553.45 multiplied by the Purchase Percentage. (b) On each Business Day during the Effective Period, the Seller shall determine the Receivables arising over the course of the preceding Business Day, which Receivables shall be deemed available for purchase by the Purchaser on such day (each, a "Purchase Date"). To the extent that any sale of Receivables is not reflected in the Daily Report, such Receivables will nevertheless be deemed sold to the Purchaser in every respect and all of the Seller's rights, title and interest in, to and under such Receivables will be deemed to have been sold to the Purchaser. (c) The purchase price payable to the Seller for the Receivables to be purchased on any Purchase Date shall be an amount equal to the product of (i) the aggregate Outstanding Balance of all Receivables determined pursuant to paragraph (b) above and (ii) the Purchase Percentage (such amount, the "Purchase Price"). (d) The Purchase Price shall be paid to the Seller in immediately available funds to the extent of funds available to the Purchaser. The excess, if any, of the Purchase Price over the payment therefor set forth in clause (a) or (c) above, as the case may be, shall be deemed to be a loan by the Seller to the Purchaser (a "Subordinated Loan"), evidenced by the Subordinated Note of the Purchaser substantially in the form attached hereto as Exhibit A. 4 8 ARTICLE III CONDITIONS TO EFFECTIVENESS AND PURCHASES SECTION 3.01. Transfer Date. This Agreement is effective on November 21, 1995. No purchase hereunder shall occur until November 30, 1995 or such other date agreed upon by the parties in writing (the "Transfer Date") on or before which the following conditions precedent shall have been satisfied: (a) There shall have been delivered to the Purchaser file-stamped copies of the financing statements relating to the Receivables, naming the Seller as seller/debtor, the Purchaser as purchaser/secured party, or other similar instruments or documents, as may be necessary or, in the opinion of the Purchaser, desirable under the UCC of any appropriate jurisdiction or other applicable law to perfect the Purchaser's ownership of and first priority security interest in the Receivables, that were duly filed on or prior to the Transfer Date with the Secretary of State of the State of Texas or other appropriate official. (b) There shall have been delivered to the Purchaser a copy of the limited partnership agreement of the Seller, certified by the secretary or an assistant secretary of the general partner of the Seller as of a recent date. (c) There shall have been delivered to the Purchaser a certificate of the Secretary of State of the State of Texas as to the documents relating to the Seller which are on file in the office of such Secretary of State. (d) There shall have been delivered to the Purchaser a certificate of the secretary or an assistant secretary of the general partner of the Seller, dated the Transfer Date, certifying (i) that attached thereto is a true and complete copy of resolutions adopted by the board of directors of the general partner of the Seller authorizing the transactions contemplated by this Agreement and the execution, delivery and performance of this Agreement, the Pooling and Servicing Agreement and any other documents required or contemplated hereunder, (ii) that the limited partnership agreement of the Seller has not been amended since the date of the certified copy furnished pursuant to clause (b) above and (iii) the names and true signatures of the officers of the general partner of the Seller authorized to execute this Agreement, the Pooling and Servicing Agreement and any other documents contemplated hereunder, and appropriately evidencing the incumbency of such secretary or assistant secretary. (e) There shall have been delivered to the Purchaser certified copies of Requests for Information or Copies (Form UCC- 11) (or a similar search report certified by a party acceptable to the Purchaser), dated a date reasonably near to the date of such Transfer Date, listing all effective financing statements (including those referred to in Section 3.01(a) which name the 5 9 Seller (under its present name and any previous name) as debtor and which are filed in the jurisdictions in which filings were made pursuant to Section 3.01(a), together with copies of such financing statements (none of which (except those filed pursuant to Section 3.01(a) shall cover any property which may be Receivables or Collections). (f) There shall have been delivered to the Purchaser copies of proper Financing Statements (Form UCC-3), if any, necessary to release all security interests and other rights of any Person in the Receivables previously granted by the Seller. (g) There shall have been delivered to the Purchaser a Dell Collection Account Letter substantially in the form of Exhibit C to the Pooling and Servicing Agreement, in respect of each Dell Collection Account maintained by the Servicer, duly acknowledged by the bank holding such Dell Collection Account. (h) There shall have been delivered to the Purchaser favorable opinions of Baker & Botts, L.L.P., counsel for the Seller, and of Thomas B. Green, General Counsel of the Seller, each in form and substance reasonably acceptable to the Purchaser. (i) There shall have been delivered to the Seller a certificate of the secretary or assistant secretary of the general partner of the Purchaser, dated the Transfer Date, certifying (i) that attached thereto is a true and complete copy of resolutions adopted by the board of directors of the general partner of the Purchaser authorizing the transactions contemplated by this Agreement and the execution, delivery and performance of this Agreement and any other documents required or contemplated hereunder and (ii) the names and true signatures of the officers of the general partner of the Purchaser authorized to execute this Agreement and any other documents contemplated hereunder, and appropriately evidencing the incumbency of such secretary or assistant secretary. (j) The Pooling and Servicing Agreement and all documentation to be delivered in connection therewith shall have been executed and delivered and all conditions thereto shall have been satisfied. (k) The Cross-Guarantee Agreement shall have been executed and delivered and shall be in full force and effect. (l) All legal matters incident to the execution and delivery of this Agreement and to the purchases by the Purchaser of the Receivables from the Seller shall be satisfactory to counsel for the Purchaser. SECTION 3.02. Conditions Precedent to All Purchases. The obligation of the Purchaser to pay the Purchase Price with respect to any Receivables on any Purchase Date is subject to the following conditions precedent: 6 10 (a) On or prior to such Purchase Date, the Seller shall have delivered to the Purchaser the accounts receivable trial balance of the Originators (which if in magnetic tape or diskette format shall be compatible with the Purchaser's, or, if applicable, the Servicer's, computer equipment); (b) On or prior to such Purchase Date, the Servicer shall have delivered to the Purchaser, in form and substance satisfactory to the Purchaser, a completed Determination Date Certificate, together with a listing by Obligor of all Receivables subject to such purchase, for the most recently ended reporting period for which information is required pursuant to Section 3.05(b) of the Pooling and Servicing Agreement and containing such additional information as may be reasonably requested by the Purchaser; (c) On or prior to such Purchase Date, the Seller shall have marked its master data processing records and, at the request of the Purchaser, each Contract (other than any invoice sent to the Obligor under such Contract) giving rise to Receivables and all other relevant records evidencing the Receivables which are the subject of such purchase with a legend, acceptable to the Purchaser, stating that such Receivables, and Collections with respect thereto and other proceeds thereof, have been sold in accordance with this Agreement; (d) On such Purchase Date, the following statements shall be true (and the Seller, by accepting the amount of such purchase, shall be deemed to certify that): (i) The Seller's representations and warranties contained in Section 4.01 are correct on and as of such day as though made on and as of such date; and (ii) No event has occurred and is continuing, or would result from such purchase, which constitutes a Termination Event or would constitute a Termination Event but for the requirement that notice be given or time elapse or both; (e) On or prior to such Purchase Date, the Purchaser shall have received such other approvals, opinions or documents as the Purchaser may reasonably request; and (f) On such Purchase Date the Seller shall have complied with all of its covenants hereunder and shall have fulfilled in all material respects all of its obligations hereunder. The acceptance by the Seller of any payment for any Receivables shall be deemed to be a representation and warranty by the Seller as to the matters set forth in this Section 3.02. 7 11 ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.01. Representations and Warranties of the Seller. The Seller represents and warrants to the Purchaser as of the Transfer Date and each Purchase Date that: (a) Organization. The Seller is a limited partnership duly organized and validly existing under the laws of the State of Texas and has full power, authority and legal right to own its properties and conduct its business, as presently owned or conducted and as is proposed to be conducted under this Agreement and the Cross-Guarantee Agreement, and to execute, deliver and perform its obligations under this Agreement and the Cross- Guarantee Agreement. (b) Due Qualification. The Seller is duly qualified to do business (or is exempt from such requirement), and has obtained all necessary licenses or approvals, in each jurisdiction in which failure to so qualify or to obtain such licenses or approvals would have a material adverse effect on the Seller's ability to perform its obligations under this Agreement and the Cross-Guarantee Agreement. (c) Due Authorization. The execution, delivery and performance of this Agreement and the Cross-Guarantee Agreement by the Seller, and the consummation by the Seller of the transactions contemplated by this Agreement and by the Cross-Guarantee Agreement, have been duly and validly authorized by all necessary action on the part of the Seller and this Agreement and the Cross- Guarantee Agreement and the other agreements and instruments executed or to be executed in connection herewith have been duly executed and delivered on behalf of the Seller. (d) No Conflict. The Seller's execution and delivery of this Agreement and the Cross-Guarantee Agreement, performance of the transactions contemplated hereby and thereby, and fulfillment of the terms hereof and thereof applicable to the Seller, do not contravene the Seller's limited partnership agreement, conflict with or violate any Requirements of Law applicable to the Seller, violate any provision of, or require any filing, registration, consent or approval under, any Requirement of Law presently in effect having applicability to the Seller, except for such filings, registrations, consents or approvals as have already been obtained or made and are in full force and effect, conflict with, result in any breach of any of the material terms and provisions of, or constitute (with or without notice or lapse of time or both) a default under, any indenture, contract, agreement, mortgage, deed of trust or other instrument to which the Seller is a party or by which it or its properties or assets are bound, which conflict, violation or breach would have a material adverse effect on the Seller's ability to perform its obligations hereunder or under the 8 12 Cross-Guarantee Agreement or on the ownership by the Trust of the Receivables. (e) No Proceedings Regarding the Seller. There are no proceedings, injunctions, writs, restraining orders or other orders or investigations pending or, to the best knowledge of a Responsible Officer of the Seller, threatened against the Seller before any Governmental Authority (i) asserting the illegality, invalidity or unenforceability, or seeking any determination or ruling that would affect the legality, binding effect, validity or enforceability of this Agreement, the Cross-Guarantee Agreement, the Pooling and Servicing Agreement or the Certificates, (ii) seeking to prevent the issuance of the Certificates or the consummation of any of the transactions contemplated by this Agreement, the Cross-Guarantee Agreement, the Pooling and Servicing Agreement or the Certificates, (iii) seeking any determination or ruling that is reasonably likely to materially and adversely affect the financial condition or results of operations of the Seller or the performance by the Seller of its obligations under this Agreement or the Cross-Guarantee Agreement or (iv) seeking to affect adversely the income or franchise tax attributes of the Trust under the United States federal or State of Texas income or franchise tax systems. (f) Consents. No authorization, consent, license, order or approval of or registration or declaration with any Person or Governmental Authority is required to be obtained, effected or given by the Seller in connection with the execution and delivery of this Agreement or the Cross-Guarantee Agreement by the Seller or the performance of its obligations under this Agreement or the Cross-Guarantee Agreement or the transactions contemplated hereby, except for (i) the filing of the financing statements or other documents required to have been filed on or prior to the Transfer Date pursuant to Section 2.01(a) of the Pooling and Servicing Agreement, all of which were so filed and are in full force and effect, and (ii) the filing from time to time of any amendments, assignments or continuation statements which may become applicable pursuant to Section 2.01(a) of the Pooling and Servicing Agreement. (g) Liens. Each Receivable is owned by the Seller free and clear of any Lien except as provided for herein; and no effective financing statement or other instrument similar in effect covering any Receivable or Collections with respect thereto is on file in any recording office except such as may be filed in favor of the Purchaser and the Trustee and as otherwise provided for in this Agreement and the Pooling and Servicing Agreement, including Liens that will be terminated on or before the Transfer Date. (h) Locations. The chief place of business and chief executive office of the Seller, and the offices where the Seller keeps the originals of its books, records and documents regarding the Receivables are located at the address of the Seller specified in Section 8.09. During the four months prior to the Transfer Date and prior to any Purchase Date, the chief place of business and 9 13 chief executive office of the Seller, and the offices where the Seller keeps the originals of its books, records and documents regarding the Receivables were/are located at the address of the Seller specified in Section 8.09. (i) Information. Each certificate, information, exhibit, financial statement, document, book, record or report furnished by the Seller to the Purchaser in connection with this Agreement and in connection with each Receivable is accurate in all material respects as of its date and no such document contains any material misstatement of fact. (j) Enforceability. Each of this Agreement and the Cross-Guarantee Agreement constitute a legal, valid and binding obligation of the Seller enforceable against the Seller in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, reorganization, insolvency, moratorium or other similar laws affecting creditors' rights generally, now or hereafter in effect, and except as such enforceability may be limited by general principles of equity (whether considered in a suit at law or in equity). (k) Valid Transfers. This Agreement constitutes a valid sale, transfer and assignment to the Purchaser of all right, title and interest of the Seller in and to the Receivables, whether now existing or hereafter created during the Effective Period, and the proceeds thereof. (l) Dell Collection Accounts. Schedule I to the Pooling and Servicing Agreement is a complete and accurate list of each Dell Collection Account as of each Purchase Date. (m) Solvency. The Seller is solvent and will not become insolvent after giving effect to the transactions contemplated by this Agreement or the Cross-Guarantee Agreement; the Seller is currently repaying all of its indebtedness as such indebtedness becomes due; and, after giving effect to the transactions contemplated by this Agreement and the Cross-Guarantee Agreement, the Seller will have adequate capital to conduct its business as presently conducted and as contemplated by this Agreement and the Cross-Guarantee Agreement. (n) Compliance. The Seller has complied, and will comply on each Purchase Date, in all material respects with all Requirements of Law with respect to it, its business and properties and all Receivables sold hereunder and the Contracts related thereto. The Seller has maintained and will maintain all applicable permits, certifications and licenses necessary in any material respect with respect to its business and properties and all Receivables sold hereunder and the Contracts related thereto. The Seller has filed or caused to be filed on a timely basis all tax returns required by any Governmental Authority. 10 14 (o) No Rescission. Neither any Receivable sold hereunder nor the related Contract has been satisfied, subordinated or rescinded or, except as disclosed in writing to the Purchaser, amended in any manner and the amounts billed under such Receivables have not been compromised, adjusted, extended, satisfied, subordinated, rescinded or modified, except as permitted under the Pooling and Servicing Agreement. (p) No Payment. The Seller has no knowledge of any fact which would lead it to expect that, when billed, any Receivable sold hereunder would not be paid in accordance with its terms when due. (q) No Insolvency Event. No Insolvency Event has occurred with respect to the Seller. (r) Fraudulent Conveyance. The Seller is not entering into the transactions contemplated hereby with the intent of hindering, delaying or defrauding creditors. (s) Sale and Transfer. This Agreement creates a valid sale, transfer and assignment to the Purchaser of, and the Purchaser is the legal and beneficial owner of, all right, title and interest of the Seller in and to the Receivables now existing and hereafter created during the term of this Agreement and in the proceeds thereof. (t) Eligible Receivables. Each Receivable classified as an "Eligible Receivable" by the Seller on its records or in any document or report delivered hereunder satisfied, at the time of such classification, the requirements of eligibility contained in the definition of Eligible Receivable in the Pooling and Servicing Agreement; provided, however, that this representation shall not cover Reconveyed Receivables. (u) Invoices. The Seller has submitted all necessary documents, if any, to each Obligor in connection with payments due with respect to such Obligor's Receivables. (v) No Proceedings Regarding the Receivables. There are no proceedings, injunctions, writs, restraining orders or other orders or investigations pending or, to the best knowledge of a Responsible Officer of the Seller, threatened with respect to any Receivable or Contract before any Governmental Authority asserting the illegality, invalidity or unenforceability, or seeking any determination or ruling that would affect the legality, binding effect, validity or enforceability of any Receivable or Contract. (w) Tradenames. The legal name of the Seller is as set forth on the signature page of this Agreement and the Seller has no tradenames, fictitious names, assumed names or "doing business as" names. 11 15 (x) ERISA. No Plan (as defined in Section 3(3) of ERISA) maintained by the Seller or any of its ERISA Affiliates (as defined in Section 414(b), (c), (m) or (o) of the Internal Revenue Code) has any accumulated funding deficiency (within the meaning of Section 302 of ERISA or Section 412 of the Internal Revenue Code), whether or not waived. The Seller and each ERISA Affiliate of the Seller has timely made all contributions required to be made by it to any Plan and Multiemployer Plan (as defined in Section 4001(a)(3) of ERISA) to which contributions are or have been required to be made since January 3, 1991 by the Seller or such ERISA Affiliate, and no event requiring notice to the PBGC (as defined in Section 2613.2 of the ERISA Regulations) under Section 302(f) of ERISA has occurred and is continuing or could reasonably be expected to occur with respect to any such Plan, in any case, that could reasonably be expected to result, directly or indirectly, in any Lien being imposed on the property of the Seller or the payment of any material amount to avoid such Lien. No Plan Event (as defined in Section 4043 of ERISA) with respect to the Seller or any of its ERISA Affiliates has occurred or could reasonably be expected to occur that could reasonably be expected to result, directly or indirectly, in any Lien being imposed on the property of the Seller or the payment of any material amount to avoid such Lien. (y) Accounts. All Receivables constitute "accounts", "general intangibles" or "proceeds" thereof, as each such term is defined in the UCC. (z) Sale. For federal income tax, reporting and accounting purposes, the Seller will treat the sale of each Receivable sold pursuant to this Agreement as a sale, or absolute assignment, of all its right, title and ownership interest in and to such Receivable to the Purchaser and the Purchaser has not and will not account for or treat the transactions contemplated by this Agreement in any other manner. This representation shall cease to be effective if the Seller shall have received an Opinion of Counsel that a change in applicable law occurring after the date hereof renders this representation unlawful or inadvisable. SECTION 4.02. Representations and Warranties of the Purchaser. The Purchaser represents and warrants to the Seller as of the Transfer Date and each Purchase Date that: (a) Organization and Good Standing. The Purchaser is a limited partnership duly organized and validly existing under the laws of the State of Texas and has full power, authority and legal right to own its properties and conduct its business as presently owned or conducted and as is proposed to be conducted under this Agreement. (b) No Conflict. The Purchaser's execution and delivery of this Agreement, purchase of the Receivables pursuant to this Agreement and fulfillment of the terms hereof applicable to the Purchaser, do not contravene the Purchaser's limited partnership 12 16 agreement, conflict with or violate any Requirements of Law applicable to the Purchaser, conflict with, result in a breach of any of the material terms or provisions of, or constitute (with or without notice or lapse of time or both) a default under, any indenture, contract, agreement, mortgage, deed of trust or other instrument to which the Purchaser is a party or by which it or its properties or assets are bound. Neither the execution and delivery of this Agreement nor the purchase of the Receivables pursuant to this Agreement nor the fulfillment of the terms hereof applicable to the Purchaser will result in the creation of an adverse claim against the Purchaser or any assets of the Purchaser except those created under the Pooling and Servicing Agreement. (c) Due Authorization. The execution and delivery of this Agreement by the Purchaser, and the purchase by the Purchaser of the Receivables, have been duly and validly authorized by all necessary action on the part of the Purchaser and this Agreement and the other agreements and instruments executed or to be executed in connection herewith have been duly executed and delivered on behalf of the Purchaser. (d) Enforceability. This Agreement constitutes a legal, valid and binding obligation of the Purchaser enforceable against the Purchaser in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, reorganization, insolvency, moratorium or other similar laws affecting creditors' rights generally, now or hereafter in effect, and except as such enforceability may be limited by general principles of equity (whether considered in a suit at law or in equity). SECTION 4.03. Obligations Unaffected. The obligations of the Seller to the Purchaser under this Agreement shall not be affected by reason of any invalidity, illegality or irregularity of any Receivable or the sale of any Receivable. 13 17 ARTICLE V COVENANTS SECTION 5.01. Affirmative Covenants of the Seller. The Seller hereby covenants that, until the termination of the Effective Period: (a) Compliance with Law. The Seller will comply in all material respects with all Requirements of Law applicable to it, its business and properties and the Receivables. (b) Preservation of Existence. (i) Except as otherwise permitted by subsection (ii) of this Section 5.01(b), the Seller will preserve and maintain its existence, rights, franchises and privileges in the State of Texas, and qualify and remain qualified in each jurisdiction where the failure to maintain such qualification would materially and adversely affect (A) the interests of the Purchaser hereunder or in the Receivables, (B) the collectibility of any Receivable or (C) the ability of the Seller to perform its obligations hereunder in any material respects and (ii) the Seller shall not consolidate with or merge into any other Person or convey or transfer its properties and assets substantially as an entirety to any Person unless: (1) Dell is the direct or indirect owner of all of the issued and outstanding shares of the capital stock or partnership interests or other equity interests of the Person formed by such consolidation or into which the Seller is merged or the Person which acquires by conveyance or transfer the properties and assets of the Seller substantially as an entirety; (2) the Person formed by such consolidation or into which the Seller is merged or the Person which acquires by conveyance or transfer the properties and assets of the Seller substantially as an entirety shall be, if the Seller is not the surviving entity, a corporation, limited partnership or limited liability company organized and existing under the laws of the United States of America or any State or the District of Columbia, and such corporation, limited partnership or limited liability company shall have expressly assumed, by an agreement supplemental hereto, executed and delivered to the Purchaser, in form reasonably satisfactory to the Purchaser, the performance of every covenant and obligation of the Seller hereunder and under the other Transaction Documents; (3) the Seller shall have delivered to the Purchaser an Officer's Certificate and an Opinion of Counsel each in form reasonably satisfactory to the Purchaser and stating that such consolidation, merger, conveyance or transfer complies with this Section 5.01(b) and (4) the Rating Agency Condition shall be satisfied. (c) Audits. At any time and from time to time during the Seller's regular business hours and at the Seller's expense, on reasonable prior notice and for a purpose reasonably related to this Agreement, the Seller shall, in response to any reasonable request of the Purchaser, permit the Purchaser, or its agents or representatives, (i) to examine and make copies of and abstracts 14 18 from all books, records and documents (including, without limitation, computer tapes, microfiche and disks) in the possession or under the control of the Seller relating to the Receivables and the related Contracts and (ii) to visit the offices and properties of the Seller for the purpose of examining such materials and to discuss matters relating to the Receivables or the Seller's performance hereunder with any of the officers or (after consultation with a Responsible Officer) employees of the Seller having knowledge thereof; provided, however, that, so long as no Termination Event, Partial Amortization Period or Cure Period shall have occurred and be continuing, the Purchaser shall use its best efforts to coordinate the exercise of its rights under this Section 5.01(c) with the exercise of like rights of the Trustee and the Program Agent, and the rights of the Purchaser under this Section 5.01(c) shall be at the Seller's expense only twice in any twelve-month period. (d) Keeping of Records and Books of Account. The Seller will maintain and implement administrative and operating procedures (including, without limitation, the ability to recreate records evidencing the Receivables in the event of the destruction of the originals thereof), and keep and maintain all documents, books, records and other information reasonably necessary or advisable for the collection of the Receivables (including, without limitation, records adequate to permit the daily identification of each new Receivable and all Collections of and adjustments to each existing Receivable). (e) Performance and Compliance with Receivables. The Seller will, at its expense, timely and fully perform and comply with all provisions, covenants and other promises required to be observed by it hereunder, except where the failure to so perform or comply would not have a material adverse effect on the collectibility of the Receivables or the Seller's ability to perform in all material respects its obligations hereunder. (f) Location of Records. The Seller will keep its chief place of business and chief executive office and the office where it keeps the books, records and documents regarding the Receivables, at the address of the Seller specified in Section 8.09. (g) Credit Policy and Procedures Manual. The Seller will comply in all material respects with the Credit Policy and Procedures Manual in regard to the Receivables and the related Contracts. (h) Collections. The Seller will instruct all Obligors to cause all Collections of Receivables to be deposited directly to Dell Collection Accounts. (i) Protection of Purchaser's Interest in Receivables. 15 19 (i) The Seller will not create, permit or suffer to exist, and will take such actions as are necessary to remove, any Lien, claim or right in, to or on the Receivables conveyed hereunder, other than the Liens created hereby and by the Pooling and Servicing Agreement, and will defend the right, title and interest of the Purchaser and the Trustee in and to the Receivables conveyed hereunder against any Liens thereon or the claims and demands of all persons whomsoever based on breaches of representations and warranties in this Agreement. (ii) The Seller will advise the Purchaser and the Trustee promptly, in reasonable detail, (A) of any Lien or claim asserted against any of the Receivables, other than the Liens created hereby and by the Pooling and Servicing Agreement, (B) of the occurrence of any breach by the Seller of any of its representations, warranties and covenants contained herein and (C) of the occurrence of any other event which in the case of clauses (A) or (B) would have a material adverse effect on the value of the Receivables. (iii) The Seller shall execute and file such continuation statements and any other documents reasonably requested by the Purchaser or which may be required by law to fully preserve and protect the interests of the Purchaser hereunder and of the Trustee under the Pooling and Servicing Agreement in and to the Receivables conveyed hereby. (iv) The Seller will not, without providing 45 days' prior written notice to the Purchaser and the Trustee and without filing such amendments to any previously filed financing statements as the Purchaser or the Trustee may reasonably require, (i) change the location of its chief executive office or the location of the office where the principal records relating to the Receivables are kept or (ii) change its name, identity or business structure in any manner which would, could or might make any financing statement or continuation statement filed by the Seller in accordance with this Agreement "seriously misleading" with the meaning of Section 9-402(7) of any applicable enactment of the UCC. (v) The Seller shall deliver to the Purchaser and the Trustee on or before April 30 of each year, beginning with April 30, 1996, an Opinion of Counsel to the Seller (who may be counsel employed by the Seller or an Affiliate of the Seller), dated as of a date subsequent to the end of the immediately preceding fiscal year, substantially to the effect that, in the opinion of such counsel, either (A) such action has been taken with respect to the recording, registering, filing, re-recording, re-registering and re-filing of financing statements, continuation statements or other instructions or documents as is necessary to continue the perfection of the interests of the Purchaser and the Trustee in and to the Receivables conveyed hereby (to the same extent as such interest was perfected on the Transfer Date with 16 20 respect to the Receivables then owned by the Purchaser) and reciting the details of such action or referring to prior Opinions of Counsel in which such details are given or (B) no such action is necessary to continue the perfection of such interests. (j) Separate Legal Existence. The Seller acknowledges that the Purchaser, the Trustee and the Certificateholders are entering into the agreements and consummating the transactions contemplated hereby and by the Pooling and Servicing Agreement in reliance on the identity of the Purchaser as a separate legal entity, and the rights and interests of such Persons would be prejudiced if this reliance were undermined. Accordingly, the Seller will take such steps as are necessary and within its control to maintain the Purchaser's separate legal existence and identity and to make it apparent to third parties that the Purchaser is an entity with assets and liabilities distinct from those of the Seller or any other subsidiary or Affiliate of the Seller. Such steps will include the following: (i) The Seller will conduct its business solely in its own legal name, and in such a separate manner so as not to mislead others with which it is dealing. (ii) The Seller will maintain its own separate business records, will maintain its own office with its own telephone number and will observe all legal formalities in formation and management. (iii) All financial statements of the Seller and Dell will contain notes clearly indicating that all of the Purchaser's assets are owned by the Purchaser, which is a separate legal entity. (iv) The Seller will maintain arm's-length relationships with the Purchaser. Any transaction between the Purchaser and the Seller or any of its subsidiaries will, in the reasonable judgement of the Seller, be fair and equitable to the Purchaser and on terms which are at least as favorable as could be obtained from a Person which is not an Affiliate. (v) The Seller will not agree to be, or hold itself out to be, responsible for the debts of the Purchaser or the decisions or actions with respect to the daily business and affairs of the Purchaser, except that (A) pursuant to any Enhancement Agreement, the Seller may indemnify any Enhancement Provider (and related Persons) against losses caused by actions or omissions of the Seller and (B) the Seller may guarantee the Purchaser's obligations to pay any premiums or commitment fees to an Enhancement Provider. (vi) The Seller will not cause the Purchaser to be named, directly or indirectly, as a direct or contingent beneficiary or loss payee on any insurance policy with respect to any loss 17 21 relating to the property of the Seller or any other subsidiary or Affiliate of the Seller. (k) Repurchase Obligation. In the event of any breach of the representation and warranty set forth in Section 4.01(t), if the Purchaser shall be obligated to repurchase Reconveyed Receivables pursuant to Section 2.04 of the Pooling and Servicing Agreement, the Seller shall repurchase from the Purchaser such Reconveyed Receivables and shall pay to the Purchaser on the Business Day preceding the day on which such repurchase of Reconveyed Receivables is to be made an amount equal to the purchase price for the Reconveyed Receivables paid by the Purchaser pursuant to the Pooling and Servicing Agreement, such payment, at the option of the Purchaser, to be made either in cash or through a reduction of the amount due under the Subordinated Note. The obligation of the Seller to repurchase the Reconveyed Receivables pursuant to this Section 5.01(k) shall constitute the sole remedy against the Seller respecting an event of the type specified in the first sentence of this paragraph available to the Purchaser or the Investor Certificateholders (or the Trustee on behalf of the Investor Certificateholders) or any other Indemnified Party. Reconveyed Receivables which are repurchased pursuant to Section 2.04 of the Pooling and Servicing Agreement, together with any Collections thereon, shall be promptly removed from the Trust. SECTION 5.02. Reporting Requirements of the Seller. The Seller hereby covenants that, until the termination of the Effective Period: (a) Termination Events. The Seller shall (i) within one Business Day after a Responsible Officer of the Seller obtains knowledge of the occurrence of any Termination Event or event which, with the giving of notice or lapse of time or both, would constitute a Termination Event, notify (either orally or in writing) the Purchaser of such occurrence; and (ii) as soon as possible and in any event within three Business Days after a Responsible Officer of the Seller obtains knowledge of the occurrence of any Termination Event or event which, with the giving of notice or lapse of time or both, would constitute a Termination Event, deliver to the Purchaser a statement of a Responsible Officer of the Seller setting forth details of such Termination Event or such event and the action that the Seller has taken and proposes to take with respect thereto. (b) Litigation. As soon as possible and in any event within 10 Business Days after a Responsible Officer of the Seller obtains knowledge thereof, the Seller shall notify the Purchaser of any litigation, investigation or proceeding which could reasonably be expected to impair in any material respect the ability of the Seller to perform its obligations under this Agreement; and (c) Other Information. The Seller shall promptly deliver to the Purchaser such other information, documents, records or reports regarding the Receivables as the Purchaser may from time 18 22 to time reasonably request in order to protect the Purchaser's interests under or as contemplated by this Agreement. SECTION 5.03. Negative Covenants of the Seller. The Seller hereby covenants that, until the termination of the Effective Period, it will not: (a) Sales, Liens, Etc. Except as otherwise contemplated herein, or pursuant to or as contemplated by the Pooling and Servicing Agreement, (i) sell, assign (by operation of law or otherwise) or otherwise dispose of, or create or suffer to exist any Lien upon or with respect to, any Receivable or upon or with respect to any account in the name of the Trustee for the benefit of the Certificateholders or upon or with respect to any Dell Collection Account to which any Collections of any Receivables are sent, or (ii) assign any right to receive income in respect thereof. (b) Extension or Amendment of Receivables. Except as consistent with the Credit Policy and Procedures Manual or as otherwise permitted under the Pooling and Servicing Agreement, (i) extend, amend or otherwise modify the terms of any Receivable, (ii) amend, modify or waive any payment term or condition of any invoice related thereto, which extension, amendment, modification or waiver would impair the collectibility or delay the payment of any Receivable in a manner inconsistent with the Credit Policy and Procedures Manual, or (iii) rescind or cancel any Receivable except as ordered by a court of competent jurisdiction or other Governmental Authority. (c) Change in Business or Credit Policy and Procedures Manual. Make any change in the character of its business or in the Credit Policy and Procedures Manual, which change would, in either case, materially impair the collectibility of the Receivables, except as permitted under the terms of the Pooling and Servicing Agreement. (d) Change in Dell Collection Account Banks. Except as permitted under the Pooling and Servicing Agreement, add or terminate any bank as a Dell Collection Account Bank from those listed in Schedule I attached to the Pooling and Servicing Agreement, or make any change in its instructions to Obligors regarding payments to be made to any Dell Collection Account Bank, unless the Purchaser and the Trustee shall have received notice of such addition, termination or change and executed copies of Dell Collection Account Letters to each new Dell Collection Account Bank. (e) Change in Name, Etc. Make any change to its name or structure, or use any tradenames, fictitious names, assumed names or "doing business as" names, unless, in the case of such name change or use and prior to the effective date thereof, the Seller delivers to the Purchaser such financing statements or amendments to financing statements (Form UCC-1 and UCC-3) executed by the 19 23 Seller which the Purchaser may request to reflect such name change or use, together with such other documents and instruments that the Purchaser may reasonably request in connection therewith. (f) Deposits to Dell Collection Accounts. Deposit or otherwise credit, or cause or permit to be so deposited or credited, to any Dell Collection Account cash or cash proceeds other than Collections of Receivables. (g) No Actions Against Obligors. Except in accordance with the Credit Policy and Procedures Manual and the Pooling and Servicing Agreement, commence or settle any legal action to enforce collection of any Receivable. (h) No Bankruptcy Filing Against the Purchaser or the Trust. Commence, institute or cause to be commenced or instituted any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or other proceedings under any United States federal or state bankruptcy or similar law against the Purchaser or the Trust. (i) No Claims Against the Receivables. Claim any credit on, or make any deduction from, the principal or interest payable in respect of the Certificates by reason of the payment of any taxes levied or assessed upon any part of the Receivables. (j) Locations of Subsidiaries. Permit any of the Originators to have or maintain its jurisdiction of organization or principal place of business in any of the States of Colorado, Kansas, New Mexico, Oklahoma, Utah or Wyoming. (k) Subordinated Note. Transfer or pledge the Subordinated Note to any Person. SECTION 5.04. Affirmative Mutual Covenant. The Purchaser and Seller shall record each Purchase as a purchase and sale, respectively, on its books and records and reflect each Purchase in its financial statements as a purchase and sale, respectively. SECTION 5.05. Grant of Security Interest. To secure all obligations of the Seller arising in connection with this Agreement, and each other agreement entered into in connection with this Agreement, whether now or hereafter existing, due or to become due, direct or indirect, or absolute or contingent, including, without limitation, Indemnified Amounts, payments on account of Collections received or deemed to be received, fees and any other amounts due the Purchaser hereunder, the Seller hereby assigns and grants to Purchaser a first priority security interest in all of the Seller's right, title and interest now or hereafter existing in, to and under all Receivables and Collections with regard thereto, and all books, records and computer files relating thereto. 20 24 ARTICLE VI EVENTS OF TERMINATION SECTION 6.01. Termination. If any of the following events (each, a "Termination Event") shall have occurred: (a) any failure by the Seller to make any payment, transfer or deposit required to be paid, effected or made by it hereunder on or before the date occurring two Business Days after the date such payment, transfer or deposit is required to be made hereunder; or (b) any representation, warranty, certification or written statement made or deemed made by the Seller under or in connection with this Agreement or in any statement, record, certificate, financial statement or other document delivered pursuant hereto or in connection herewith shall prove to have been incorrect in any material respect on or as of the date made or deemed made which has a material adverse effect on the Certificateholders and continues unremedied for 20 days (or, with respect to the representations and warranties made in Sections 4.01(g) and 4.01(k), continues unremedied for five days) after the earlier of (i) the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Seller by the Purchaser and (ii) the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Seller and the Trustee by Certificateholders of any outstanding Series evidencing not less than 20% of the Invested Amount for such Series; or (c) the Seller shall fail to observe or perform in any material respect any covenant or agreement applicable to it contained herein (other than as specified in clause (a) or (b) above) which has a material adverse effect on the Certificate- holders and continues unremedied for 20 days (or with respect to the covenants contained in Sections 5.03(a) and 5.03(d) shall continue for five days) after the earlier of (i) the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Seller by the Purchaser and (ii) the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Seller and the Trustee by Certificateholders of any outstanding Series evidencing not less than 20% of the Invested Amount for such Series; or (d) any Receivables transferred hereunder which constitute more than 1% of the aggregate amount of Eligible Receivables shall for any reason cease to be the valid and perfected subject of the security interest created by this Agreement; or any Receivables transferred hereunder which constitute more than 1% of the aggregate amount of Eligible Receivables shall cease to be free and clear of any Lien except as provided for herein; or 21 25 (e) an Insolvency Event shall occur with respect to the Seller or the Purchaser; provided, however, that for purposes of this Section 6.01, the definition of "Insolvency Event" shall be construed without giving effect to the 60-day grace period in clause (a) thereof (except with respect to any Controlled Affiliate that is not a party to any Transaction Document); or (f) the Internal Revenue Service shall file notice of a lien pursuant to Section 6323 of the Internal Revenue Code with regard to any of the Receivables and such lien shall not have been (x) stayed or released within 30 days or, if stayed, such lien shall not have been released within 60 days; or (y) the Pension Benefit Guaranty Corporation shall file notice of a lien pursuant to Section 4068 of ERISA with regard to any of the Receivables and such filing shall not be stayed or rescinded within 15; or (g) there shall have occurred an Early Amortization Event under the Pooling and Servicing Agreement; then, if any of the events set forth in paragraphs (a), (d), (e), (f) or (g) above shall have occurred, a "Termination Event" shall occur without any notice, demand, protest or other requirement of any kind immediately upon the occurrence of such event and, if any of the events set forth in paragraphs (b) or (c) above shall have occurred, the Purchaser may, by notice to the Seller, declare that a "Termination Event" shall occur as of the date set forth in such notice. Upon the occurrence of a Termination Event, the Effective Period shall terminate (any termination of the Effective Period pursuant to this Section 6.01 is herein referred to as an "Early Termination"). Upon any Early Termination the Purchaser shall have, in addition to any rights and remedies under this Agreement, all other rights and remedies with respect to the Receivables provided after default under the UCC of the applicable jurisdiction and under other applicable laws, which rights and remedies shall be cumulative. A Majority in Interest of each outstanding Series may, on behalf of all Certificateholders, waive any default by the Seller in the performance of its obligations hereunder and its consequences, except (1) the failure to make any distributions or payments required to be made to the Purchaser or to make any required deposits of any amounts to be so distributed or paid can be waived only (a) with respect to Indemnified Amounts, with the consent of the relevant Indemnified Party or (b) with respect to other amounts, with unanimous consent of all Certificateholders of all outstanding Series and (2) defaults arising from the events set forth in paragraphs (e), (f) and (g). No such waiver shall extend to any subsequent or other default or impair any right consequent thereon except to the extent expressly so waived. 22 26 ARTICLE VII INDEMNIFICATION SECTION 7.01. Indemnification. (a) Without limiting any other rights which the Purchaser may have hereunder or under any applicable law, the Seller hereby agrees to indemnify the Purchaser and the Trustee and their respective assignees (which shall not be deemed to include any of the Certificateholders as such) and their respective partners, officers, directors, employees and Affiliates (collectively, the "Indemnified Parties") from and against any and all damages, losses, liabilities and related costs and expenses actually incurred (excluding consequential damages and lost profits), including reasonable attorneys' fees and disbursements (all of the foregoing being collectively referred to as "Indemnified Amounts"), awarded against or incurred by any of them arising out of or resulting from this Agreement, the activities of the Seller in connection herewith or in respect of any Receivable (excluding however (A) Indemnified Amounts resulting from gross negligence or willful misconduct on the part of the Indemnified Party (other than the Purchaser) to which such Indemnified Amount would otherwise be due, (B) losses in respect of Receivables to the extent reimbursement therefor would constitute credit recourse to the Seller for nonpayment of any Receivable by the related Obligor, (C) any income or franchise or similar taxes (or any interest or penalties with respect thereto) incurred by such Indemnified Party arising out of or as a result of this Agreement or in respect of any Receivable and (D) Indemnified Amounts resulting from the acts or omissions of the Servicer (unless the Servicer is an Affiliate of Dell)), to the extent caused by: (i) reliance on any representation, warranty or covenant made or statement made or deemed made by the Seller (or any of its Responsible Officers) under or in connection with this Agreement, which shall have been incorrect in any material respect when made or deemed made or which the Seller shall have failed to perform; (ii) the failure by the Seller to comply with this Agreement or any Requirement of Law with respect to any Receivable or the related Contract; or the failure of any Receivable or the related Contract to conform to this Agreement or any such Requirement of Law; (iii) the existence of any dispute, claim, offset or defense (other than discharge in bankruptcy of the Obligor) of the Obligor to the payment of any Receivable (including, without limitation, a defense based on such Receivable or the related Contract not being a legal, valid and binding obligation of such Obligor enforceable against it in accordance with its terms), or of any other claim resulting from the sale of the products or services related to such 23 27 Receivable or from the furnishing or failure to furnish such products or services; (iv) the failure to vest in the Purchaser absolute ownership of the Receivables free and clear of any Lien; (v) the failure of the Seller to have filed, or any delay in filing, any financing statements or other similar instruments or documents under the UCC of any applicable jurisdiction or other applicable laws that are necessary for perfection or priority of the ownership and security interests created by this Agreement; (vi) any commingling by the Seller of Collections with other funds of the Seller or any Affiliate; (vii) any investigation, litigation or proceeding related to this Agreement or the use of proceeds of Purchases or the ownership of or security interest in Receivables or Collections with respect thereto, or in respect of any Contract related thereto, other than any investigation, litigation or proceeding relating to such Indemnified Party's affairs which includes matters or transactions in addition to those contemplated by the Transaction Documents; (viii) any products liability or other claim arising out of or in connection with products or services which are the subject of any Contract; (ix) any reduction in the Outstanding Balance of a Receivable (other than a Reconveyed Receivable) by reason of any defective, rejected, returned, repossessed or foreclosed merchandise or services or any cash discount or other adjustment made by the Seller; (x) any breach by the Seller of any obligation under any Receivable or any Contract; (xi) any failure of the Seller to perform its duties or obligations in accordance with the provisions of this Agreement; or (xii) any tax (other than any income or franchise or similar tax, or any interest or penalties with respect thereto) imposed by reason of ownership of the Receivables by the Purchaser. (b) Any Indemnified Amounts due hereunder shall be payable within ten Business Days of submission of a claim by the Indemnified Party. (c) Each Indemnified Party will use its best efforts to notify the Seller in advance of making any claim under this Section 7.01. 24 28 ARTICLE VIII MISCELLANEOUS SECTION 8.01. Further Assurances. (a) The Seller agrees to do and perform, from time to time, any and all acts and to execute and deliver to the Purchaser or the Trustee any and all further assignments, agreements, powers and instruments reasonably required or requested by the Purchaser more fully to effect the purposes of this Agreement and the sales of the Receivables hereunder, including, without limitation, the execution of any financing statements or continuation statements relating to the Receivables for filing under the provisions of the UCC, or any similar law, of any applicable jurisdiction. The Seller will mark its computer files in a manner reasonably calculated to indicate that the Receivables have been sold to the Purchaser. (b) The Purchaser agrees to do such further acts and things and to execute and deliver to the Seller or the Trustee such additional assignments, agreements, powers and instruments as are reasonably required by the Seller to carry into effect the purposes of this Agreement or to better assure and confirm unto the Seller or the Trustee its rights, powers and remedies hereunder. SECTION 8.02. Payments. Each payment to be made by either of the Purchaser or the Seller hereunder shall be made on the required payment date, or on the next succeeding Business Day if the required payment date is not a Business Day, in lawful money of the United States and in immediately available funds at the office of the payee set forth in Section 8.09 below or to such other office as may be specified by either party in a written notice to the other party hereto. SECTION 8.03. Costs, Expenses and Taxes. (a) In addition to the rights of indemnification granted to the Purchaser pursuant to Article VII hereof, the Seller agrees to pay on demand all costs and expenses of the Purchaser in connection with the preparation, execution and delivery of all documents to be delivered subsequent to the Transfer Date pursuant to this Agreement, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Purchaser with respect thereto and with respect to advising the Purchaser as to its rights and remedies under this Agreement, and the Seller agrees to pay all costs and expenses of the Purchaser, if any (including reasonable counsel fees and expenses), in connection with the enforcement of this Agreement and the other documents to be delivered hereunder excluding, however, any costs of enforcement or collection of any Receivables. (b) In addition, the Seller agrees to pay any and all stamp and other taxes (other than any income or franchise or similar taxes, or any interest or penalties with respect thereto) and fees payable or determined to be payable in connection with the execution, delivery, filing and recording of this Agreement and 25 29 any documents to be delivered hereunder, and the Seller agrees to indemnify the Purchaser against any liabilities with respect to or resulting from any delay in paying or omission to pay such taxes and fees. SECTION 8.04. Binding Effect; Assignability. (a) This Agreement shall be binding upon and inure to the benefit of the Seller and the Purchaser and their respective successors (whether by merger, consolidation or otherwise) and assigns. Except as otherwise permitted herein, the Seller agrees that it will not assign or transfer all or any portion of its rights or obligations hereunder to any Person (other than Dell or any of its Controlled Affiliates) without the prior written consent of the Purchaser and a Majority in Interest of each outstanding Series. In connection with any sale or assignment by the Purchaser of all or a portion of the Receivables, the buyer or assignee, as the case may be, shall, to the extent of its purchase or assignment, have all rights of the Purchaser under this Agreement(as if such buyer or assignee, as the case may be, were the Purchaser hereunder) except to the extent specifically provided in the agreement between the Purchaser and such buyer or assignee. (b) The Seller acknowledges that the Purchaser shall assign to the Trust, as collateral security for the Purchaser's obligations under the Pooling and Servicing Agreement, all of the Purchaser's rights, remedies, powers and privileges hereunder (including, without limitation, the right to give any notice which the Purchaser may provide to the Seller hereunder), provided that the Purchaser shall not assign or delegate any of its duties or obligations hereunder to the Trust. (c) This Agreement shall create and constitute the continuing obligations of the parties hereto in accordance with its terms, and shall remain in full force and effect until such time, after the last Termination Date of any Series; provided, however, that rights and remedies with respect to any breach of any representation and warranty made by the Seller pursuant to Article IV and the provisions of Article VII and Sections 5.03(h), 8.03 and 8.13 shall be continuing and shall survive any termination of this Agreement. SECTION 8.05. Governing Law, Jurisdiction, Consent to Service of Process. (a) Governing Law. THIS AGREEMENT, INCLUDING THE RIGHTS AND DUTIES OF THE PARTIES HERETO, SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, EXCEPT TO THE EXTENT THAT THE PERFECTION OF THE INTERESTS OF THE PURCHASER IN THE RECEIVABLES IS GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK. (b) Jurisdiction. Each of the parties hereto hereby irrevocably and unconditionally submits to the nonexclusive 26 30 jurisdiction of any New York State court or federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement, and each of the parties hereto hereby irrevocably and unconditionally (i) agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, such federal court and (ii) waives the defense of an inconvenient forum. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. (c) Consent to Service of Process. Each party to this Agreement irrevocably consents to service of process by personal delivery, certified mail, postage prepaid or overnight courier. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law. (d) Waiver of Jury Trial. Each party to this Agreement waives any right to a trial by jury in any action or proceeding to enforce or defend any rights under or relating to this Agreement, any other Transaction Document, the Fee Letter or any amendment, instrument, document or agreement delivered or which may in the future be delivered in connection herewith or therewith or arising from any course of conduct, course of dealing, statements (whether verbal of written), actions of any of the parties hereto or any other relationship existing in connection with this Agreement or any other Transaction Document or the Fee Letter, and agrees that any such action or proceeding shall be tried before a court and not before a jury. SECTION 8.06. No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of the Purchaser, any right, remedy, power or privilege hereunder, shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exhaustive of any rights, remedies, powers and privileges provided by law. SECTION 8.07. Amendment. (a) This Agreement may be amended from time to time by the Seller and the Purchaser without the consent of any of the Investor Certificateholders (i) to cure any ambiguity, (ii) to correct or supplement any provision herein which may be inconsistent with any other provision herein or (iii) to add any other provisions with respect to matters or questions arising under this Agreement which are not inconsistent with the provisions of this Agreement; provided that any amendment pursuant to this clause (a) shall not, as evidenced by an Opinion of Counsel, adversely affect in any material respect the interests of 27 31 any Investor Certificateholders. Notice of any amendment entered into pursuant to this clause (a) shall be given to the Rating Agencies. (b) This Agreement may be amended from time to time by the Seller and the Purchaser, so long as the Rating Agency Condition is satisfied, with the consent of a Majority in Interest of each adversely affected Series for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement or of modifying in any manner the rights of the Certificateholders. The Trustee may request an Officer's Certificate and Opinion of Counsel with respect to an amendment entered into pursuant to this clause (b) concerning compliance with the requirements of this Agreement. Any amendment to be effected pursuant to this paragraph shall be deemed to adversely affect all outstanding Series, other than any Series with respect to which such action shall not, as evidenced by an Opinion of Counsel (which counsel shall not be an employee of, or counsel for, Dell, the Seller or the Purchaser), addressed and delivered to the Trustee, adversely affect the interests of any Investor Certificateholder of such Series. SECTION 8.08. Severability. If any provision hereof is deemed void or unenforceable in any jurisdiction, such voiding or unenforceability shall not affect the validity or enforceability of such provision in any other jurisdiction or any other provision hereof in such or any other jurisdiction. SECTION 8.09. Notices. All notices and other communications provided for hereunder shall, unless otherwise stated herein, be in writing (including telex and facsimile communication) and shall be personally delivered or sent by certified mail, postage prepaid, or overnight courier or facsimile, to the intended party at the address or facsimile number of such party set forth below or at such other address or facsimile number as shall be designated by such party in a written notice to the other parties hereto. All such notices and communications shall be effective (a) if personally delivered, when received, (b) if sent by certified mail, four Business Days after having been deposited in the mail, postage prepaid, (c) if sent by overnight courier, two Business Days after having been given to such courier, unless sooner received by the addressee and (d) if transmitted by facsimile, when sent, upon receipt confirmed by telephone or electronic means. Notices and communications sent hereunder on a day that is not a Business Day shall be deemed to have been sent on the following Business Day. 28 32 (a) If to the Seller, Dell Marketing L.P. 2214 West Braker Lane, Suite D Austin, Texas 78758 Tel: (512) 728-3343 Fax: (512) 728-0043 Attn: Treasurer (b) If to the Purchaser, Dell Receivables L.P. 2112 Kramer Lane Austin, Texas 78758 Tel: (512) 728-5829 Fax: (512) 728-5986 Attn: Assistant Treasurer SECTION 8.10. Counterparts. This Agreement may be executed in any number of counterparts and by the different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original, and all of which taken together shall constitute one and the same agreement. SECTION 8.11. Construction of Agreement as Security Agreement. It is the intent of the parties that the transactions contemplated herein constitute sales of the Receivables to the Purchaser. If, however, such transactions are deemed to be loans, (a) the Seller hereby grants to the Purchaser a first priority security interest in all of the Seller's right, title and interest in and to the Receivables now existing and hereafter created, all monies due or to become due and all amounts and other proceeds received with respect thereto, to secure all of the Seller's obligations hereunder, and (b) this Agreement shall constitute a security agreement under applicable law. SECTION 8.12. Termination. This Agreement will terminate on the last Termination Date specified in any Series Supplement; provided, however, that the representations, warranties and remedies offered by or made available against the Seller, the indemnities of the Seller to the Indemnified Parties set forth in this Agreement shall survive such termination, and provided, further, that the Purchaser shall remain entitled to receive any collections on Receivables sold hereunder which have become Defaulted Receivables after it shall have completed its collection efforts in respect thereof. SECTION 8.13. Third-Party Beneficiary. The Indemnified Parties are third-party beneficiaries of all provisions of this Agreement and are entitled to enforce the provisions of Section 7.01 of this Agreement to the extent any Indemnified Amounts are due such parties. 29 33 SECTION 8.14. The Seller's Obligations. It is expressly agreed that, anything contained in this Agreement to the contrary notwithstanding, the Seller shall be obligated to perform all of its obligations under the Receivables to the same extent as if the Purchaser had no interest therein and the Purchaser shall have no obligations or liability under Receivables to any Obligor thereunder by reason of or arising out of this Agreement, nor shall the Purchaser be required or obligated in any manner to perform or fulfill any of the obligations of the Seller under or pursuant to any Receivable. 30 34 IN WITNESS WHEREOF, the parties hereto have caused this Receivables Purchase Agreement to be duly executed by their respective officers thereunto duly authorized as of the day and year first above written. DELL DIRECT SALES L.P., as Seller by DELL GEN. P. CORP., as its general partner By: /s/ Thomas J. Meredith ----------------------------------- Name: Thomas J. Meredith Title: Chief Financial Officer DELL RECEIVABLES L.P., as Purchaser by DELL RECEIVABLES GEN. P. CORP, as its general partner By: /s/ Thomas J. Meredith ----------------------------------- Name: Thomas J. Meredith Title: President 35 EXHIBITS The following Exhibit has been omitted from this filing: Exhibit A -- Subordinated Note The registrant hereby undertakes to furnish supplementally a copy of such Exhibit to the Commission upon request. The executed version of this Exhibit appears as Exhibit 10.20 to this Report. EX-10.19 6 RECEIVABLES PURCHASE AGREEMENT 1 EXHIBIT 10.19 EXECUTION COPY RECEIVABLES PURCHASE AGREEMENT between DELL DIRECT SALES L.P., as Seller and DELL RECEIVABLES L.P., as Purchaser Dated as of November 21, 1995 2 TABLE OF CONTENTS Page ---- ARTICLE I DEFINITIONS SECTION 1.01. Definitions.................................................. 2 SECTION 1.02. Other Definitional Provisions................................ 2 SECTION 1.03. Computation of Time Periods.................................. 3 ARTICLE II PURCHASE AND SALE OF RECEIVABLES SECTION 2.01. Purchase and Sale of Receivables............................. 4 SECTION 2.02. Payment of Purchase Price.................................... 4 ARTICLE III CONDITIONS TO EFFECTIVENESS AND PURCHASES SECTION 3.01. Transfer Date............................................. 5 SECTION 3.02. Conditions Precedent to All Purchases..................... 6 ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.01. Representations and Warranties of the Seller.............. 8 SECTION 4.02. Representations and Warranties of the Purchaser........... 11 SECTION 4.03. Obligations Unaffected.................................... 12 ARTICLE V COVENANTS SECTION 5.01. Affirmative Covenants of the Seller....................... 14 SECTION 5.02. Reporting Requirements of the Seller...................... 17 SECTION 5.03. Negative Covenants of the Seller.......................... 18 SECTION 5.04. Affirmative Mutual Covenant............................... 19 SECTION 5.05. Grant of Security Interest................................ 19 i 3 Page ---- ARTICLE VI EVENTS OF TERMINATION SECTION 6.01. Termination.................................................. 21 ARTICLE VII INDEMNIFICATION SECTION 7.01. Indemnification.............................................. 23 ARTICLE VIII MISCELLANEOUS SECTION 8.01. Further Assurances........................................... 25 SECTION 8.02. Payments..................................................... 25 SECTION 8.03. Costs and Expenses........................................... 25 SECTION 8.04. Binding Effect; Assignability................................ 26 SECTION 8.05. Governing Law, Jurisdiction, Consent to Service of Process........................................... 27 SECTION 8.06. No Waiver; Cumulative Remedies............................... 27 SECTION 8.07. Amendments and Waivers....................................... 27 SECTION 8.08. Severability................................................. 28 SECTION 8.09. Notices...................................................... 28 SECTION 8.10. Counterparts................................................. 28 SECTION 8.11. Construction of Agreement as Security Agreement.................................................... 28 SECTION 8.12. Termination.................................................. 28 SECTION 8.13. Third Party Beneficiary...................................... 29 SECTION 8.14. The Seller's Obligations..................................... 29 ii 4 RECEIVABLES PURCHASE AGREEMENT, dated as of November 21, 1995, by and between Dell Direct Sales L.P., a Texas limited partnership (in its capacity as seller hereunder, the "Seller") and Dell Receivables L.P., a Texas limited partnership (the "Purchaser"). WHEREAS, the Seller desires to sell to the Purchaser, and the Purchaser desires to buy from the Seller, on the date hereof and from time to time hereafter, all of the Seller's right, title and interest in, to and under the Receivables existing on the date hereof or hereafter created; and WHEREAS, all of the partnership interests in both the Seller and the Purchaser are held indirectly by Dell Computer Corporation ("Dell") and all of the shares of the Purchaser are owned indirectly by Dell; and WHEREAS, pursuant to that certain Pooling and Servicing Agreement, dated of even date herewith (the "Pooling and Servicing Agreement"), among the Purchaser, Dell USA L.P. (the "Servicer") and Norwest Bank Minnesota, National Association, as trustee (the "Trustee"), the Purchaser has agreed to transfer to the Trust created pursuant to the Pooling and Servicing Agreement, for the benefit of the Certificateholders referred to therein, all of its right, title and interest in, to and under the Receivables; NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto agree as follows: 5 ARTICLE I DEFINITIONS SECTION 1.01. Definitions. Capitalized terms used herein but not otherwise defined herein shall have the meanings set forth in the Pooling and Servicing Agreement. In addition, the term "Agreement" shall mean this Receivables Purchase Agreement, as the same may from time to time be amended, supplemented or otherwise modified. The following capitalized terms shall have the following meanings: "Early Termination" shall have the meaning specified in Section 6.01. "Effective Period" shall mean the period beginning on the Transfer Date and terminating on (i) the earliest of (a) the close of business on the Business Day on which a Termination Event occurs, (b) the close of business on the Business Day immediately preceding the day on which any Early Amortization Event occurs and (c) the close of business on the Business Day immediately preceding the day on which the Amortization Period for the last outstanding Series begins or (ii) such later date as is agreed to by the Seller and the Purchaser. "Purchase Date" shall have the meaning specified in Section 2.02. "Purchase Percentage" shall mean initially 98%; provided, however, that the Purchase Percentage may change from time to time, on a basis consistent with that used to establish the initial Purchase Percentage, to reflect historic loss experience of the Seller's accounts receivable portfolio and prevailing interest rates, as agreed upon by the Seller and the Purchaser. "Purchase Price" shall have the meaning specified in Section 2.02. "Termination Event" shall have the meaning specified in Section 6.01. "Transfer Date" shall have the meaning specified in Section 3.01. SECTION 1.02. Other Definitional Provisions. (a) All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein. (b) As used herein and in any certificate or other document made or delivered pursuant hereto, accounting terms not defined in this Agreement, and accounting terms partly defined in this Agreement to the extent not completely defined, shall have the respective meanings given to them under generally accepted 2 6 accounting principles in effect from time to time. To the extent that the definitions of accounting terms herein are inconsistent with the meanings of such terms under generally accepted accounting principles, the definitions contained herein shall control. (c) The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement; and Section, Schedule and Exhibit references contained in this Agreement are references to Sections, Schedules and Exhibits in or to this Agreement unless otherwise specified; and the term "including" shall mean "including without limitation". SECTION 1.03. Computation of Time Periods. Unless otherwise stated in this Agreement, in the computation of a period of time from a specified date to a later specified date, the word "from" shall mean "from and including" and the words "to" and "until" shall mean "to but excluding". 3 7 ARTICLE II PURCHASE AND SALE OF RECEIVABLES SECTION 2.01. Purchase and Sale of Receivables. Subject to the terms and conditions of this Agreement, the Seller agrees to sell to the Purchaser, and the Purchaser agrees to purchase from the Seller, during the Effective Period, all right, title and interest of the Seller in, to and under all Receivables now existing or hereafter created, including, without limitation, all monies due and to become due thereunder, and all amounts received with respect thereto and all proceeds thereof. SECTION 2.02. Payment of Purchase Price. (a) On the Transfer Date, the Seller shall sell to the Purchaser, and the Purchaser shall purchase from the Seller, all of the Seller's right, title and interest in, to and under all Receivables existing at the close of business on the Business Day preceding the Transfer Date for a payment consisting of $42,552,700.75 multiplied by the Purchase Percentage. (b) On each Business Day during the Effective Period, the Seller shall determine the Receivables arising over the course of the preceding Business Day, which Receivables shall be deemed available for purchase by the Purchaser on such day (each, a "Purchase Date"). To the extent that any sale of Receivables is not reflected in the Daily Report, such Receivables will nevertheless be deemed sold to the Purchaser in every respect and all of the Seller's rights, title and interest in, to and under such Receivables will be deemed to have been sold to the Purchaser. (c) The purchase price payable to the Seller for the Receivables to be purchased on any Purchase Date shall be an amount equal to the product of (i) the aggregate Outstanding Balance of all Receivables determined pursuant to paragraph (b) above and (ii) the Purchase Percentage (such amount, the "Purchase Price"). (d) The Purchase Price shall be paid to the Seller in immediately available funds to the extent of funds available to the Purchaser. The excess, if any, of the Purchase Price over the payment therefor set forth in clause (a) or (c) above, as the case may be, shall be deemed to be a loan by the Seller to the Purchaser (a "Subordinated Loan"), evidenced by the Subordinated Note of the Purchaser substantially in the form attached hereto as Exhibit A. 4 8 ARTICLE III CONDITIONS TO EFFECTIVENESS AND PURCHASES SECTION 3.01. Transfer Date. This Agreement is effective on November 21, 1995. No purchase hereunder shall occur until November 30, 1995 or such other date agreed upon by the parties in writing (the "Transfer Date") on or before which the following conditions precedent shall have been satisfied: (a) There shall have been delivered to the Purchaser file-stamped copies of the financing statements relating to the Receivables, naming the Seller as seller/debtor, the Purchaser as purchaser/secured party, or other similar instruments or documents, as may be necessary or, in the opinion of the Purchaser, desirable under the UCC of any appropriate jurisdiction or other applicable law to perfect the Purchaser's ownership of and first priority security interest in the Receivables, that were duly filed on or prior to the Transfer Date with the Secretary of State of the State of Texas or other appropriate official. (b) There shall have been delivered to the Purchaser a copy of the limited partnership agreement of the Seller, certified by the secretary or an assistant secretary of the general partner of the Seller as of a recent date. (c) There shall have been delivered to the Purchaser a certificate of the Secretary of State of the State of Texas as to the documents relating to the Seller which are on file in the office of such Secretary of State. (d) There shall have been delivered to the Purchaser a certificate of the secretary or an assistant secretary of the general partner of the Seller, dated the Transfer Date, certifying (i) that attached thereto is a true and complete copy of resolutions adopted by the board of directors of the general partner of the Seller authorizing the transactions contemplated by this Agreement and the execution, delivery and performance of this Agreement, the Pooling and Servicing Agreement and any other documents required or contemplated hereunder, (ii) that the limited partnership agreement of the Seller has not been amended since the date of the certified copy furnished pursuant to clause (b) above and (iii) the names and true signatures of the officers of the general partner of the Seller authorized to execute this Agreement, the Pooling and Servicing Agreement and any other documents contemplated hereunder, and appropriately evidencing the incumbency of such secretary or assistant secretary. (e) There shall have been delivered to the Purchaser certified copies of Requests for Information or Copies (Form UCC- 11) (or a similar search report certified by a party acceptable to the Purchaser), dated a date reasonably near to the date of such Transfer Date, listing all effective financing statements (including those referred to in Section 3.01(a) which name the 5 9 Seller (under its present name and any previous name) as debtor and which are filed in the jurisdictions in which filings were made pursuant to Section 3.01(a), together with copies of such financing statements (none of which (except those filed pursuant to Section 3.01(a) shall cover any property which may be Receivables or Collections). (f) There shall have been delivered to the Purchaser copies of proper Financing Statements (Form UCC-3), if any, necessary to release all security interests and other rights of any Person in the Receivables previously granted by the Seller. (g) There shall have been delivered to the Purchaser a Dell Collection Account Letter substantially in the form of Exhibit C to the Pooling and Servicing Agreement, in respect of each Dell Collection Account maintained by the Servicer, duly acknowledged by the bank holding such Dell Collection Account. (h) There shall have been delivered to the Purchaser favorable opinions of Baker & Botts, L.L.P., counsel for the Seller, and of Thomas B. Green, General Counsel of the Seller, each in form and substance reasonably acceptable to the Purchaser. (i) There shall have been delivered to the Seller a certificate of the secretary or assistant secretary of the general partner of the Purchaser, dated the Transfer Date, certifying (i) that attached thereto is a true and complete copy of resolutions adopted by the board of directors of the general partner of the Purchaser authorizing the transactions contemplated by this Agreement and the execution, delivery and performance of this Agreement and any other documents required or contemplated hereunder and (ii) the names and true signatures of the officers of the general partner of the Purchaser authorized to execute this Agreement and any other documents contemplated hereunder, and appropriately evidencing the incumbency of such secretary or assistant secretary. (j) The Pooling and Servicing Agreement and all documentation to be delivered in connection therewith shall have been executed and delivered and all conditions thereto shall have been satisfied. (k) The Cross-Guarantee Agreement shall have been executed and delivered and shall be in full force and effect. (l) All legal matters incident to the execution and delivery of this Agreement and to the purchases by the Purchaser of the Receivables from the Seller shall be satisfactory to counsel for the Purchaser. SECTION 3.02. Conditions Precedent to All Purchases. The obligation of the Purchaser to pay the Purchase Price with respect to any Receivables on any Purchase Date is subject to the following conditions precedent: 6 10 (a) On or prior to such Purchase Date, the Seller shall have delivered to the Purchaser the accounts receivable trial balance of the Originators (which if in magnetic tape or diskette format shall be compatible with the Purchaser's, or, if applicable, the Servicer's, computer equipment); (b) On or prior to such Purchase Date, the Servicer shall have delivered to the Purchaser, in form and substance satisfactory to the Purchaser, a completed Determination Date Certificate, together with a listing by Obligor of all Receivables subject to such purchase, for the most recently ended reporting period for which information is required pursuant to Section 3.05(b) of the Pooling and Servicing Agreement and containing such additional information as may be reasonably requested by the Purchaser; (c) On or prior to such Purchase Date, the Seller shall have marked its master data processing records and, at the request of the Purchaser, each Contract (other than any invoice sent to the Obligor under such Contract) giving rise to Receivables and all other relevant records evidencing the Receivables which are the subject of such purchase with a legend, acceptable to the Purchaser, stating that such Receivables, and Collections with respect thereto and other proceeds thereof, have been sold in accordance with this Agreement; (d) On such Purchase Date, the following statements shall be true (and the Seller, by accepting the amount of such purchase, shall be deemed to certify that): (i) The Seller's representations and warranties contained in Section 4.01 are correct on and as of such day as though made on and as of such date; and (ii) No event has occurred and is continuing, or would result from such purchase, which constitutes a Termination Event or would constitute a Termination Event but for the requirement that notice be given or time elapse or both; (e) On or prior to such Purchase Date, the Purchaser shall have received such other approvals, opinions or documents as the Purchaser may reasonably request; and (f) On such Purchase Date the Seller shall have complied with all of its covenants hereunder and shall have fulfilled in all material respects all of its obligations hereunder. The acceptance by the Seller of any payment for any Receivables shall be deemed to be a representation and warranty by the Seller as to the matters set forth in this Section 3.02. 7 11 ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.01. Representations and Warranties of the Seller. The Seller represents and warrants to the Purchaser as of the Transfer Date and each Purchase Date that: (a) Organization. The Seller is a limited partnership duly organized and validly existing under the laws of the State of Texas and has full power, authority and legal right to own its properties and conduct its business, as presently owned or conducted and as is proposed to be conducted under this Agreement and the Cross-Guarantee Agreement, and to execute, deliver and perform its obligations under this Agreement and the Cross- Guarantee Agreement. (b) Due Qualification. The Seller is duly qualified to do business (or is exempt from such requirement), and has obtained all necessary licenses or approvals, in each jurisdiction in which failure to so qualify or to obtain such licenses or approvals would have a material adverse effect on the Seller's ability to perform its obligations under this Agreement and the Cross-Guarantee Agreement. (c) Due Authorization. The execution, delivery and performance of this Agreement and the Cross-Guarantee Agreement by the Seller, and the consummation by the Seller of the transactions contemplated by this Agreement and by the Cross-Guarantee Agreement, have been duly and validly authorized by all necessary action on the part of the Seller and this Agreement and the Cross- Guarantee Agreement and the other agreements and instruments executed or to be executed in connection herewith have been duly executed and delivered on behalf of the Seller. (d) No Conflict. The Seller's execution and delivery of this Agreement and the Cross-Guarantee Agreement, performance of the transactions contemplated hereby and thereby, and fulfillment of the terms hereof and thereof applicable to the Seller, do not contravene the Seller's limited partnership agreement, conflict with or violate any Requirements of Law applicable to the Seller, violate any provision of, or require any filing, registration, consent or approval under, any Requirement of Law presently in effect having applicability to the Seller, except for such filings, registrations, consents or approvals as have already been obtained or made and are in full force and effect, conflict with, result in any breach of any of the material terms and provisions of, or constitute (with or without notice or lapse of time or both) a default under, any indenture, contract, agreement, mortgage, deed of trust or other instrument to which the Seller is a party or by which it or its properties or assets are bound, which conflict, violation or breach would have a material adverse effect on the Seller's ability to perform its obligations hereunder or under the 8 12 Cross-Guarantee Agreement or on the ownership by the Trust of the Receivables. (e) No Proceedings Regarding the Seller. There are no proceedings, injunctions, writs, restraining orders or other orders or investigations pending or, to the best knowledge of a Responsible Officer of the Seller, threatened against the Seller before any Governmental Authority (i) asserting the illegality, invalidity or unenforceability, or seeking any determination or ruling that would affect the legality, binding effect, validity or enforceability of this Agreement, the Cross-Guarantee Agreement, the Pooling and Servicing Agreement or the Certificates, (ii) seeking to prevent the issuance of the Certificates or the consummation of any of the transactions contemplated by this Agreement, the Cross-Guarantee Agreement, the Pooling and Servicing Agreement or the Certificates, (iii) seeking any determination or ruling that is reasonably likely to materially and adversely affect the financial condition or results of operations of the Seller or the performance by the Seller of its obligations under this Agreement or the Cross-Guarantee Agreement or (iv) seeking to affect adversely the income or franchise tax attributes of the Trust under the United States federal or State of Texas income or franchise tax systems. (f) Consents. No authorization, consent, license, order or approval of or registration or declaration with any Person or Governmental Authority is required to be obtained, effected or given by the Seller in connection with the execution and delivery of this Agreement or the Cross-Guarantee Agreement by the Seller or the performance of its obligations under this Agreement or the Cross-Guarantee Agreement or the transactions contemplated hereby, except for (i) the filing of the financing statements or other documents required to have been filed on or prior to the Transfer Date pursuant to Section 2.01(a) of the Pooling and Servicing Agreement, all of which were so filed and are in full force and effect, and (ii) the filing from time to time of any amendments, assignments or continuation statements which may become applicable pursuant to Section 2.01(a) of the Pooling and Servicing Agreement. (g) Liens. Each Receivable is owned by the Seller free and clear of any Lien except as provided for herein; and no effective financing statement or other instrument similar in effect covering any Receivable or Collections with respect thereto is on file in any recording office except such as may be filed in favor of the Purchaser and the Trustee and as otherwise provided for in this Agreement and the Pooling and Servicing Agreement, including Liens that will be terminated on or before the Transfer Date. (h) Locations. The chief place of business and chief executive office of the Seller, and the offices where the Seller keeps the originals of its books, records and documents regarding the Receivables are located at the address of the Seller specified in Section 8.09. During the four months prior to the Transfer Date and prior to any Purchase Date, the chief place of business and 9 13 chief executive office of the Seller, and the offices where the Seller keeps the originals of its books, records and documents regarding the Receivables were/are located at the address of the Seller specified in Section 8.09. (i) Information. Each certificate, information, exhibit, financial statement, document, book, record or report furnished by the Seller to the Purchaser in connection with this Agreement and in connection with each Receivable is accurate in all material respects as of its date and no such document contains any material misstatement of fact. (j) Enforceability. Each of this Agreement and the Cross-Guarantee Agreement constitute a legal, valid and binding obligation of the Seller enforceable against the Seller in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, reorganization, insolvency, moratorium or other similar laws affecting creditors' rights generally, now or hereafter in effect, and except as such enforceability may be limited by general principles of equity (whether considered in a suit at law or in equity). (k) Valid Transfers. This Agreement constitutes a valid sale, transfer and assignment to the Purchaser of all right, title and interest of the Seller in and to the Receivables, whether now existing or hereafter created during the Effective Period, and the proceeds thereof. (l) Dell Collection Accounts. Schedule I to the Pooling and Servicing Agreement is a complete and accurate list of each Dell Collection Account as of each Purchase Date. (m) Solvency. The Seller is solvent and will not become insolvent after giving effect to the transactions contemplated by this Agreement or the Cross-Guarantee Agreement; the Seller is currently repaying all of its indebtedness as such indebtedness becomes due; and, after giving effect to the transactions contemplated by this Agreement and the Cross-Guarantee Agreement, the Seller will have adequate capital to conduct its business as presently conducted and as contemplated by this Agreement and the Cross-Guarantee Agreement. (n) Compliance. The Seller has complied, and will comply on each Purchase Date, in all material respects with all Requirements of Law with respect to it, its business and properties and all Receivables sold hereunder and the Contracts related thereto. The Seller has maintained and will maintain all applicable permits, certifications and licenses necessary in any material respect with respect to its business and properties and all Receivables sold hereunder and the Contracts related thereto. The Seller has filed or caused to be filed on a timely basis all tax returns required by any Governmental Authority. 10 14 (o) No Rescission. Neither any Receivable sold hereunder nor the related Contract has been satisfied, subordinated or rescinded or, except as disclosed in writing to the Purchaser, amended in any manner and the amounts billed under such Receivables have not been compromised, adjusted, extended, satisfied, subordinated, rescinded or modified, except as permitted under the Pooling and Servicing Agreement. (p) No Payment. The Seller has no knowledge of any fact which would lead it to expect that, when billed, any Receivable sold hereunder would not be paid in accordance with its terms when due. (q) No Insolvency Event. No Insolvency Event has occurred with respect to the Seller. (r) Fraudulent Conveyance. The Seller is not entering into the transactions contemplated hereby with the intent of hindering, delaying or defrauding creditors. (s) Sale and Transfer. This Agreement creates a valid sale, transfer and assignment to the Purchaser of, and the Purchaser is the legal and beneficial owner of, all right, title and interest of the Seller in and to the Receivables now existing and hereafter created during the term of this Agreement and in the proceeds thereof. (t) Eligible Receivables. Each Receivable classified as an "Eligible Receivable" by the Seller on its records or in any document or report delivered hereunder satisfied, at the time of such classification, the requirements of eligibility contained in the definition of Eligible Receivable in the Pooling and Servicing Agreement; provided, however, that this representation shall not cover Reconveyed Receivables. (u) Invoices. The Seller has submitted all necessary documents, if any, to each Obligor in connection with payments due with respect to such Obligor's Receivables. (v) No Proceedings Regarding the Receivables. There are no proceedings, injunctions, writs, restraining orders or other orders or investigations pending or, to the best knowledge of a Responsible Officer of the Seller, threatened with respect to any Receivable or Contract before any Governmental Authority asserting the illegality, invalidity or unenforceability, or seeking any determination or ruling that would affect the legality, binding effect, validity or enforceability of any Receivable or Contract. (w) Tradenames. The legal name of the Seller is as set forth on the signature page of this Agreement and the Seller has no tradenames, fictitious names, assumed names or "doing business as" names. 11 15 (x) ERISA. No Plan (as defined in Section 3(3) of ERISA) maintained by the Seller or any of its ERISA Affiliates (as defined in Section 414(b), (c), (m) or (o) of the Internal Revenue Code) has any accumulated funding deficiency (within the meaning of Section 302 of ERISA or Section 412 of the Internal Revenue Code), whether or not waived. The Seller and each ERISA Affiliate of the Seller has timely made all contributions required to be made by it to any Plan and Multiemployer Plan (as defined in Section 4001(a)(3) of ERISA) to which contributions are or have been required to be made since January 3, 1991 by the Seller or such ERISA Affiliate, and no event requiring notice to the PBGC (as defined in Section 2613.2 of the ERISA Regulations) under Section 302(f) of ERISA has occurred and is continuing or could reasonably be expected to occur with respect to any such Plan, in any case, that could reasonably be expected to result, directly or indirectly, in any Lien being imposed on the property of the Seller or the payment of any material amount to avoid such Lien. No Plan Event (as defined in Section 4043 of ERISA) with respect to the Seller or any of its ERISA Affiliates has occurred or could reasonably be expected to occur that could reasonably be expected to result, directly or indirectly, in any Lien being imposed on the property of the Seller or the payment of any material amount to avoid such Lien. (y) Accounts. All Receivables constitute "accounts", "general intangibles" or "proceeds" thereof, as each such term is defined in the UCC. (z) Sale. For federal income tax, reporting and accounting purposes, the Seller will treat the sale of each Receivable sold pursuant to this Agreement as a sale, or absolute assignment, of all its right, title and ownership interest in and to such Receivable to the Purchaser and the Purchaser has not and will not account for or treat the transactions contemplated by this Agreement in any other manner. This representation shall cease to be effective if the Seller shall have received an Opinion of Counsel that a change in applicable law occurring after the date hereof renders this representation unlawful or inadvisable. SECTION 4.02. Representations and Warranties of the Purchaser. The Purchaser represents and warrants to the Seller as of the Transfer Date and each Purchase Date that: (a) Organization and Good Standing. The Purchaser is a limited partnership duly organized and validly existing under the laws of the State of Texas and has full power, authority and legal right to own its properties and conduct its business as presently owned or conducted and as is proposed to be conducted under this Agreement. (b) No Conflict. The Purchaser's execution and delivery of this Agreement, purchase of the Receivables pursuant to this Agreement and fulfillment of the terms hereof applicable to the Purchaser, do not contravene the Purchaser's limited partnership 12 16 agreement, conflict with or violate any Requirements of Law applicable to the Purchaser, conflict with, result in a breach of any of the material terms or provisions of, or constitute (with or without notice or lapse of time or both) a default under, any indenture, contract, agreement, mortgage, deed of trust or other instrument to which the Purchaser is a party or by which it or its properties or assets are bound. Neither the execution and delivery of this Agreement nor the purchase of the Receivables pursuant to this Agreement nor the fulfillment of the terms hereof applicable to the Purchaser will result in the creation of an adverse claim against the Purchaser or any assets of the Purchaser except those created under the Pooling and Servicing Agreement. (c) Due Authorization. The execution and delivery of this Agreement by the Purchaser, and the purchase by the Purchaser of the Receivables, have been duly and validly authorized by all necessary action on the part of the Purchaser and this Agreement and the other agreements and instruments executed or to be executed in connection herewith have been duly executed and delivered on behalf of the Purchaser. (d) Enforceability. This Agreement constitutes a legal, valid and binding obligation of the Purchaser enforceable against the Purchaser in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, reorganization, insolvency, moratorium or other similar laws affecting creditors' rights generally, now or hereafter in effect, and except as such enforceability may be limited by general principles of equity (whether considered in a suit at law or in equity). SECTION 4.03. Obligations Unaffected. The obligations of the Seller to the Purchaser under this Agreement shall not be affected by reason of any invalidity, illegality or irregularity of any Receivable or the sale of any Receivable. 13 17 ARTICLE V COVENANTS SECTION 5.01. Affirmative Covenants of the Seller. The Seller hereby covenants that, until the termination of the Effective Period: (a) Compliance with Law. The Seller will comply in all material respects with all Requirements of Law applicable to it, its business and properties and the Receivables. (b) Preservation of Existence. (i) Except as otherwise permitted by subsection (ii) of this Section 5.01(b), the Seller will preserve and maintain its existence, rights, franchises and privileges in the State of Texas, and qualify and remain qualified in each jurisdiction where the failure to maintain such qualification would materially and adversely affect (A) the interests of the Purchaser hereunder or in the Receivables, (B) the collectibility of any Receivable or (C) the ability of the Seller to perform its obligations hereunder in any material respects and (ii) the Seller shall not consolidate with or merge into any other Person or convey or transfer its properties and assets substantially as an entirety to any Person unless: (1) Dell is the direct or indirect owner of all of the issued and outstanding shares of the capital stock or partnership interests or other equity interests of the Person formed by such consolidation or into which the Seller is merged or the Person which acquires by conveyance or transfer the properties and assets of the Seller substantially as an entirety; (2) the Person formed by such consolidation or into which the Seller is merged or the Person which acquires by conveyance or transfer the properties and assets of the Seller substantially as an entirety shall be, if the Seller is not the surviving entity, a corporation, limited partnership or limited liability company organized and existing under the laws of the United States of America or any State or the District of Columbia, and such corporation, limited partnership or limited liability company shall have expressly assumed, by an agreement supplemental hereto, executed and delivered to the Purchaser, in form reasonably satisfactory to the Purchaser, the performance of every covenant and obligation of the Seller hereunder and under the other Transaction Documents; (3) the Seller shall have delivered to the Purchaser an Officer's Certificate and an Opinion of Counsel each in form reasonably satisfactory to the Purchaser and stating that such consolidation, merger, conveyance or transfer complies with this Section 5.01(b) and (4) the Rating Agency Condition shall be satisfied. (c) Audits. At any time and from time to time during the Seller's regular business hours and at the Seller's expense, on reasonable prior notice and for a purpose reasonably related to this Agreement, the Seller shall, in response to any reasonable request of the Purchaser, permit the Purchaser, or its agents or representatives, (i) to examine and make copies of and abstracts 14 18 from all books, records and documents (including, without limitation, computer tapes, microfiche and disks) in the possession or under the control of the Seller relating to the Receivables and the related Contracts and (ii) to visit the offices and properties of the Seller for the purpose of examining such materials and to discuss matters relating to the Receivables or the Seller's performance hereunder with any of the officers or (after consultation with a Responsible Officer) employees of the Seller having knowledge thereof; provided, however, that, so long as no Termination Event, Partial Amortization Period or Cure Period shall have occurred and be continuing, the Purchaser shall use its best efforts to coordinate the exercise of its rights under this Section 5.01(c) with the exercise of like rights of the Trustee and the Program Agent, and the rights of the Purchaser under this Section 5.01(c) shall be at the Seller's expense only twice in any twelve-month period. (d) Keeping of Records and Books of Account. The Seller will maintain and implement administrative and operating procedures (including, without limitation, the ability to recreate records evidencing the Receivables in the event of the destruction of the originals thereof), and keep and maintain all documents, books, records and other information reasonably necessary or advisable for the collection of the Receivables (including, without limitation, records adequate to permit the daily identification of each new Receivable and all Collections of and adjustments to each existing Receivable). (e) Performance and Compliance with Receivables. The Seller will, at its expense, timely and fully perform and comply with all provisions, covenants and other promises required to be observed by it hereunder, except where the failure to so perform or comply would not have a material adverse effect on the collectibility of the Receivables or the Seller's ability to perform in all material respects its obligations hereunder. (f) Location of Records. The Seller will keep its chief place of business and chief executive office and the office where it keeps the books, records and documents regarding the Receivables, at the address of the Seller specified in Section 8.09. (g) Credit Policy and Procedures Manual. The Seller will comply in all material respects with the Credit Policy and Procedures Manual in regard to the Receivables and the related Contracts. (h) Collections. The Seller will instruct all Obligors to cause all Collections of Receivables to be deposited directly to Dell Collection Accounts. (i) Protection of Purchaser's Interest in Receivables. 15 19 (i) The Seller will not create, permit or suffer to exist, and will take such actions as are necessary to remove, any Lien, claim or right in, to or on the Receivables conveyed hereunder, other than the Liens created hereby and by the Pooling and Servicing Agreement, and will defend the right, title and interest of the Purchaser and the Trustee in and to the Receivables conveyed hereunder against any Liens thereon or the claims and demands of all persons whomsoever based on breaches of representations and warranties in this Agreement. (ii) The Seller will advise the Purchaser and the Trustee promptly, in reasonable detail, (A) of any Lien or claim asserted against any of the Receivables, other than the Liens created hereby and by the Pooling and Servicing Agreement, (B) of the occurrence of any breach by the Seller of any of its representations, warranties and covenants contained herein and (C) of the occurrence of any other event which in the case of clauses (A) or (B) would have a material adverse effect on the value of the Receivables. (iii) The Seller shall execute and file such continuation statements and any other documents reasonably requested by the Purchaser or which may be required by law to fully preserve and protect the interests of the Purchaser hereunder and of the Trustee under the Pooling and Servicing Agreement in and to the Receivables conveyed hereby. (iv) The Seller will not, without providing 45 days' prior written notice to the Purchaser and the Trustee and without filing such amendments to any previously filed financing statements as the Purchaser or the Trustee may reasonably require, (i) change the location of its chief executive office or the location of the office where the principal records relating to the Receivables are kept or (ii) change its name, identity or business structure in any manner which would, could or might make any financing statement or continuation statement filed by the Seller in accordance with this Agreement "seriously misleading" with the meaning of Section 9-402(7) of any applicable enactment of the UCC. (v) The Seller shall deliver to the Purchaser and the Trustee on or before April 30 of each year, beginning with April 30, 1996, an Opinion of Counsel to the Seller (who may be counsel employed by the Seller or an Affiliate of the Seller), dated as of a date subsequent to the end of the immediately preceding fiscal year, substantially to the effect that, in the opinion of such counsel, either (A) such action has been taken with respect to the recording, registering, filing, re-recording, re-registering and re-filing of financing statements, continuation statements or other instructions or documents as is necessary to continue the perfection of the interests of the Purchaser and the Trustee in and to the Receivables conveyed hereby (to the same extent as such interest was perfected on the Transfer Date with 16 20 respect to the Receivables then owned by the Purchaser) and reciting the details of such action or referring to prior Opinions of Counsel in which such details are given or (B) no such action is necessary to continue the perfection of such interests. (j) Separate Legal Existence. The Seller acknowledges that the Purchaser, the Trustee and the Certificateholders are entering into the agreements and consummating the transactions contemplated hereby and by the Pooling and Servicing Agreement in reliance on the identity of the Purchaser as a separate legal entity, and the rights and interests of such Persons would be prejudiced if this reliance were undermined. Accordingly, the Seller will take such steps as are necessary and within its control to maintain the Purchaser's separate legal existence and identity and to make it apparent to third parties that the Purchaser is an entity with assets and liabilities distinct from those of the Seller or any other subsidiary or Affiliate of the Seller. Such steps will include the following: (i) The Seller will conduct its business solely in its own legal name, and in such a separate manner so as not to mislead others with which it is dealing. (ii) The Seller will maintain its own separate business records, will maintain its own office with its own telephone number and will observe all legal formalities in formation and management. (iii) All financial statements of the Seller and Dell will contain notes clearly indicating that all of the Purchaser's assets are owned by the Purchaser, which is a separate legal entity. (iv) The Seller will maintain arm's-length relationships with the Purchaser. Any transaction between the Purchaser and the Seller or any of its subsidiaries will, in the reasonable judgement of the Seller, be fair and equitable to the Purchaser and on terms which are at least as favorable as could be obtained from a Person which is not an Affiliate. (v) The Seller will not agree to be, or hold itself out to be, responsible for the debts of the Purchaser or the decisions or actions with respect to the daily business and affairs of the Purchaser, except that (A) pursuant to any Enhancement Agreement, the Seller may indemnify any Enhancement Provider (and related Persons) against losses caused by actions or omissions of the Seller and (B) the Seller may guarantee the Purchaser's obligations to pay any premiums or commitment fees to an Enhancement Provider. (vi) The Seller will not cause the Purchaser to be named, directly or indirectly, as a direct or contingent beneficiary or loss payee on any insurance policy with respect to any loss 17 21 relating to the property of the Seller or any other subsidiary or Affiliate of the Seller. (k) Repurchase Obligation. In the event of any breach of the representation and warranty set forth in Section 4.01(t), if the Purchaser shall be obligated to repurchase Reconveyed Receivables pursuant to Section 2.04 of the Pooling and Servicing Agreement, the Seller shall repurchase from the Purchaser such Reconveyed Receivables and shall pay to the Purchaser on the Business Day preceding the day on which such repurchase of Reconveyed Receivables is to be made an amount equal to the purchase price for the Reconveyed Receivables paid by the Purchaser pursuant to the Pooling and Servicing Agreement, such payment, at the option of the Purchaser, to be made either in cash or through a reduction of the amount due under the Subordinated Note. The obligation of the Seller to repurchase the Reconveyed Receivables pursuant to this Section 5.01(k) shall constitute the sole remedy against the Seller respecting an event of the type specified in the first sentence of this paragraph available to the Purchaser or the Investor Certificateholders (or the Trustee on behalf of the Investor Certificateholders) or any other Indemnified Party. Reconveyed Receivables which are repurchased pursuant to Section 2.04 of the Pooling and Servicing Agreement, together with any Collections thereon, shall be promptly removed from the Trust. SECTION 5.02. Reporting Requirements of the Seller. The Seller hereby covenants that, until the termination of the Effective Period: (a) Termination Events. The Seller shall (i) within one Business Day after a Responsible Officer of the Seller obtains knowledge of the occurrence of any Termination Event or event which, with the giving of notice or lapse of time or both, would constitute a Termination Event, notify (either orally or in writing) the Purchaser of such occurrence; and (ii) as soon as possible and in any event within three Business Days after a Responsible Officer of the Seller obtains knowledge of the occurrence of any Termination Event or event which, with the giving of notice or lapse of time or both, would constitute a Termination Event, deliver to the Purchaser a statement of a Responsible Officer of the Seller setting forth details of such Termination Event or such event and the action that the Seller has taken and proposes to take with respect thereto. (b) Litigation. As soon as possible and in any event within 10 Business Days after a Responsible Officer of the Seller obtains knowledge thereof, the Seller shall notify the Purchaser of any litigation, investigation or proceeding which could reasonably be expected to impair in any material respect the ability of the Seller to perform its obligations under this Agreement; and (c) Other Information. The Seller shall promptly deliver to the Purchaser such other information, documents, records or reports regarding the Receivables as the Purchaser may from time 18 22 to time reasonably request in order to protect the Purchaser's interests under or as contemplated by this Agreement. SECTION 5.03. Negative Covenants of the Seller. The Seller hereby covenants that, until the termination of the Effective Period, it will not: (a) Sales, Liens, Etc. Except as otherwise contemplated herein, or pursuant to or as contemplated by the Pooling and Servicing Agreement, (i) sell, assign (by operation of law or otherwise) or otherwise dispose of, or create or suffer to exist any Lien upon or with respect to, any Receivable or upon or with respect to any account in the name of the Trustee for the benefit of the Certificateholders or upon or with respect to any Dell Collection Account to which any Collections of any Receivables are sent, or (ii) assign any right to receive income in respect thereof. (b) Extension or Amendment of Receivables. Except as consistent with the Credit Policy and Procedures Manual or as otherwise permitted under the Pooling and Servicing Agreement, (i) extend, amend or otherwise modify the terms of any Receivable, (ii) amend, modify or waive any payment term or condition of any invoice related thereto, which extension, amendment, modification or waiver would impair the collectibility or delay the payment of any Receivable in a manner inconsistent with the Credit Policy and Procedures Manual, or (iii) rescind or cancel any Receivable except as ordered by a court of competent jurisdiction or other Governmental Authority. (c) Change in Business or Credit Policy and Procedures Manual. Make any change in the character of its business or in the Credit Policy and Procedures Manual, which change would, in either case, materially impair the collectibility of the Receivables, except as permitted under the terms of the Pooling and Servicing Agreement. (d) Change in Dell Collection Account Banks. Except as permitted under the Pooling and Servicing Agreement, add or terminate any bank as a Dell Collection Account Bank from those listed in Schedule I attached to the Pooling and Servicing Agreement, or make any change in its instructions to Obligors regarding payments to be made to any Dell Collection Account Bank, unless the Purchaser and the Trustee shall have received notice of such addition, termination or change and executed copies of Dell Collection Account Letters to each new Dell Collection Account Bank. (e) Change in Name, Etc. Make any change to its name or structure, or use any tradenames, fictitious names, assumed names or "doing business as" names, unless, in the case of such name change or use and prior to the effective date thereof, the Seller delivers to the Purchaser such financing statements or amendments to financing statements (Form UCC-1 and UCC-3) executed by the 19 23 Seller which the Purchaser may request to reflect such name change or use, together with such other documents and instruments that the Purchaser may reasonably request in connection therewith. (f) Deposits to Dell Collection Accounts. Deposit or otherwise credit, or cause or permit to be so deposited or credited, to any Dell Collection Account cash or cash proceeds other than Collections of Receivables. (g) No Actions Against Obligors. Except in accordance with the Credit Policy and Procedures Manual and the Pooling and Servicing Agreement, commence or settle any legal action to enforce collection of any Receivable. (h) No Bankruptcy Filing Against the Purchaser or the Trust. Commence, institute or cause to be commenced or instituted any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or other proceedings under any United States federal or state bankruptcy or similar law against the Purchaser or the Trust. (i) No Claims Against the Receivables. Claim any credit on, or make any deduction from, the principal or interest payable in respect of the Certificates by reason of the payment of any taxes levied or assessed upon any part of the Receivables. (j) Locations of Subsidiaries. Permit any of the Originators to have or maintain its jurisdiction of organization or principal place of business in any of the States of Colorado, Kansas, New Mexico, Oklahoma, Utah or Wyoming. (k) Subordinated Note. Transfer or pledge the Subordinated Note to any Person. SECTION 5.04. Affirmative Mutual Covenant. The Purchaser and Seller shall record each Purchase as a purchase and sale, respectively, on its books and records and reflect each Purchase in its financial statements as a purchase and sale, respectively. SECTION 5.05. Grant of Security Interest. To secure all obligations of the Seller arising in connection with this Agreement, and each other agreement entered into in connection with this Agreement, whether now or hereafter existing, due or to become due, direct or indirect, or absolute or contingent, including, without limitation, Indemnified Amounts, payments on account of Collections received or deemed to be received, fees and any other amounts due the Purchaser hereunder, the Seller hereby assigns and grants to Purchaser a first priority security interest in all of the Seller's right, title and interest now or hereafter existing in, to and under all Receivables and Collections with regard thereto, and all books, records and computer files relating thereto. 20 24 ARTICLE VI EVENTS OF TERMINATION SECTION 6.01. Termination. If any of the following events (each, a "Termination Event") shall have occurred: (a) any failure by the Seller to make any payment, transfer or deposit required to be paid, effected or made by it hereunder on or before the date occurring two Business Days after the date such payment, transfer or deposit is required to be made hereunder; or (b) any representation, warranty, certification or written statement made or deemed made by the Seller under or in connection with this Agreement or in any statement, record, certificate, financial statement or other document delivered pursuant hereto or in connection herewith shall prove to have been incorrect in any material respect on or as of the date made or deemed made which has a material adverse effect on the Certificateholders and continues unremedied for 20 days (or, with respect to the representations and warranties made in Sections 4.01(g) and 4.01(k), continues unremedied for five days) after the earlier of (i) the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Seller by the Purchaser and (ii) the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Seller and the Trustee by Certificateholders of any outstanding Series evidencing not less than 20% of the Invested Amount for such Series; or (c) the Seller shall fail to observe or perform in any material respect any covenant or agreement applicable to it contained herein (other than as specified in clause (a) or (b) above) which has a material adverse effect on the Certificate- holders and continues unremedied for 20 days (or with respect to the covenants contained in Sections 5.03(a) and 5.03(d) shall continue for five days) after the earlier of (i) the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Seller by the Purchaser and (ii) the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Seller and the Trustee by Certificateholders of any outstanding Series evidencing not less than 20% of the Invested Amount for such Series; or (d) any Receivables transferred hereunder which constitute more than 1% of the aggregate amount of Eligible Receivables shall for any reason cease to be the valid and perfected subject of the security interest created by this Agreement; or any Receivables transferred hereunder which constitute more than 1% of the aggregate amount of Eligible Receivables shall cease to be free and clear of any Lien except as provided for herein; or 21 25 (e) an Insolvency Event shall occur with respect to the Seller or the Purchaser; provided, however, that for purposes of this Section 6.01, the definition of "Insolvency Event" shall be construed without giving effect to the 60-day grace period in clause (a) thereof (except with respect to any Controlled Affiliate that is not a party to any Transaction Document); or (f) the Internal Revenue Service shall file notice of a lien pursuant to Section 6323 of the Internal Revenue Code with regard to any of the Receivables and such lien shall not have been (x) stayed or released within 30 days or, if stayed, such lien shall not have been released within 60 days; or (y) the Pension Benefit Guaranty Corporation shall file notice of a lien pursuant to Section 4068 of ERISA with regard to any of the Receivables and such filing shall not be stayed or rescinded within 15; or (g) there shall have occurred an Early Amortization Event under the Pooling and Servicing Agreement; then, if any of the events set forth in paragraphs (a), (d), (e), (f) or (g) above shall have occurred, a "Termination Event" shall occur without any notice, demand, protest or other requirement of any kind immediately upon the occurrence of such event and, if any of the events set forth in paragraphs (b) or (c) above shall have occurred, the Purchaser may, by notice to the Seller, declare that a "Termination Event" shall occur as of the date set forth in such notice. Upon the occurrence of a Termination Event, the Effective Period shall terminate (any termination of the Effective Period pursuant to this Section 6.01 is herein referred to as an "Early Termination"). Upon any Early Termination the Purchaser shall have, in addition to any rights and remedies under this Agreement, all other rights and remedies with respect to the Receivables provided after default under the UCC of the applicable jurisdiction and under other applicable laws, which rights and remedies shall be cumulative. A Majority in Interest of each outstanding Series may, on behalf of all Certificateholders, waive any default by the Seller in the performance of its obligations hereunder and its consequences, except (1) the failure to make any distributions or payments required to be made to the Purchaser or to make any required deposits of any amounts to be so distributed or paid can be waived only (a) with respect to Indemnified Amounts, with the consent of the relevant Indemnified Party or (b) with respect to other amounts, with unanimous consent of all Certificateholders of all outstanding Series and (2) defaults arising from the events set forth in paragraphs (e), (f) and (g). No such waiver shall extend to any subsequent or other default or impair any right consequent thereon except to the extent expressly so waived. 22 26 ARTICLE VII INDEMNIFICATION SECTION 7.01. Indemnification. (a) Without limiting any other rights which the Purchaser may have hereunder or under any applicable law, the Seller hereby agrees to indemnify the Purchaser and the Trustee and their respective assignees (which shall not be deemed to include any of the Certificateholders as such) and their respective partners, officers, directors, employees and Affiliates (collectively, the "Indemnified Parties") from and against any and all damages, losses, liabilities and related costs and expenses actually incurred (excluding consequential damages and lost profits), including reasonable attorneys' fees and disbursements (all of the foregoing being collectively referred to as "Indemnified Amounts"), awarded against or incurred by any of them arising out of or resulting from this Agreement, the activities of the Seller in connection herewith or in respect of any Receivable (excluding however (A) Indemnified Amounts resulting from gross negligence or willful misconduct on the part of the Indemnified Party (other than the Purchaser) to which such Indemnified Amount would otherwise be due, (B) losses in respect of Receivables to the extent reimbursement therefor would constitute credit recourse to the Seller for nonpayment of any Receivable by the related Obligor, (C) any income or franchise or similar taxes (or any interest or penalties with respect thereto) incurred by such Indemnified Party arising out of or as a result of this Agreement or in respect of any Receivable and (D) Indemnified Amounts resulting from the acts or omissions of the Servicer (unless the Servicer is an Affiliate of Dell)), to the extent caused by: (i) reliance on any representation, warranty or covenant made or statement made or deemed made by the Seller (or any of its Responsible Officers) under or in connection with this Agreement, which shall have been incorrect in any material respect when made or deemed made or which the Seller shall have failed to perform; (ii) the failure by the Seller to comply with this Agreement or any Requirement of Law with respect to any Receivable or the related Contract; or the failure of any Receivable or the related Contract to conform to this Agreement or any such Requirement of Law; (iii) the existence of any dispute, claim, offset or defense (other than discharge in bankruptcy of the Obligor) of the Obligor to the payment of any Receivable (including, without limitation, a defense based on such Receivable or the related Contract not being a legal, valid and binding obligation of such Obligor enforceable against it in accordance with its terms), or of any other claim resulting from the sale of the products or services related to such 23 27 Receivable or from the furnishing or failure to furnish such products or services; (iv) the failure to vest in the Purchaser absolute ownership of the Receivables free and clear of any Lien; (v) the failure of the Seller to have filed, or any delay in filing, any financing statements or other similar instruments or documents under the UCC of any applicable jurisdiction or other applicable laws that are necessary for perfection or priority of the ownership and security interests created by this Agreement; (vi) any commingling by the Seller of Collections with other funds of the Seller or any Affiliate; (vii) any investigation, litigation or proceeding related to this Agreement or the use of proceeds of Purchases or the ownership of or security interest in Receivables or Collections with respect thereto, or in respect of any Contract related thereto, other than any investigation, litigation or proceeding relating to such Indemnified Party's affairs which includes matters or transactions in addition to those contemplated by the Transaction Documents; (viii) any products liability or other claim arising out of or in connection with products or services which are the subject of any Contract; (ix) any reduction in the Outstanding Balance of a Receivable (other than a Reconveyed Receivable) by reason of any defective, rejected, returned, repossessed or foreclosed merchandise or services or any cash discount or other adjustment made by the Seller; (x) any breach by the Seller of any obligation under any Receivable or any Contract; (xi) any failure of the Seller to perform its duties or obligations in accordance with the provisions of this Agreement; or (xii) any tax (other than any income or franchise or similar tax, or any interest or penalties with respect thereto) imposed by reason of ownership of the Receivables by the Purchaser. (b) Any Indemnified Amounts due hereunder shall be payable within ten Business Days of submission of a claim by the Indemnified Party. (c) Each Indemnified Party will use its best efforts to notify the Seller in advance of making any claim under this Section 7.01. 24 28 ARTICLE VIII MISCELLANEOUS SECTION 8.01. Further Assurances. (a) The Seller agrees to do and perform, from time to time, any and all acts and to execute and deliver to the Purchaser or the Trustee any and all further assignments, agreements, powers and instruments reasonably required or requested by the Purchaser more fully to effect the purposes of this Agreement and the sales of the Receivables hereunder, including, without limitation, the execution of any financing statements or continuation statements relating to the Receivables for filing under the provisions of the UCC, or any similar law, of any applicable jurisdiction. The Seller will mark its computer files in a manner reasonably calculated to indicate that the Receivables have been sold to the Purchaser. (b) The Purchaser agrees to do such further acts and things and to execute and deliver to the Seller or the Trustee such additional assignments, agreements, powers and instruments as are reasonably required by the Seller to carry into effect the purposes of this Agreement or to better assure and confirm unto the Seller or the Trustee its rights, powers and remedies hereunder. SECTION 8.02. Payments. Each payment to be made by either of the Purchaser or the Seller hereunder shall be made on the required payment date, or on the next succeeding Business Day if the required payment date is not a Business Day, in lawful money of the United States and in immediately available funds at the office of the payee set forth in Section 8.09 below or to such other office as may be specified by either party in a written notice to the other party hereto. SECTION 8.03. Costs, Expenses and Taxes. (a) In addition to the rights of indemnification granted to the Purchaser pursuant to Article VII hereof, the Seller agrees to pay on demand all costs and expenses of the Purchaser in connection with the preparation, execution and delivery of all documents to be delivered subsequent to the Transfer Date pursuant to this Agreement, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Purchaser with respect thereto and with respect to advising the Purchaser as to its rights and remedies under this Agreement, and the Seller agrees to pay all costs and expenses of the Purchaser, if any (including reasonable counsel fees and expenses), in connection with the enforcement of this Agreement and the other documents to be delivered hereunder excluding, however, any costs of enforcement or collection of any Receivables. (b) In addition, the Seller agrees to pay any and all stamp and other taxes (other than any income or franchise or similar taxes, or any interest or penalties with respect thereto) and fees payable or determined to be payable in connection with the execution, delivery, filing and recording of this Agreement and 25 29 any documents to be delivered hereunder, and the Seller agrees to indemnify the Purchaser against any liabilities with respect to or resulting from any delay in paying or omission to pay such taxes and fees. SECTION 8.04. Binding Effect; Assignability. (a) This Agreement shall be binding upon and inure to the benefit of the Seller and the Purchaser and their respective successors (whether by merger, consolidation or otherwise) and assigns. Except as otherwise permitted herein, the Seller agrees that it will not assign or transfer all or any portion of its rights or obligations hereunder to any Person (other than Dell or any of its Controlled Affiliates) without the prior written consent of the Purchaser and a Majority in Interest of each outstanding Series. In connection with any sale or assignment by the Purchaser of all or a portion of the Receivables, the buyer or assignee, as the case may be, shall, to the extent of its purchase or assignment, have all rights of the Purchaser under this Agreement(as if such buyer or assignee, as the case may be, were the Purchaser hereunder) except to the extent specifically provided in the agreement between the Purchaser and such buyer or assignee. (b) The Seller acknowledges that the Purchaser shall assign to the Trust, as collateral security for the Purchaser's obligations under the Pooling and Servicing Agreement, all of the Purchaser's rights, remedies, powers and privileges hereunder (including, without limitation, the right to give any notice which the Purchaser may provide to the Seller hereunder), provided that the Purchaser shall not assign or delegate any of its duties or obligations hereunder to the Trust. (c) This Agreement shall create and constitute the continuing obligations of the parties hereto in accordance with its terms, and shall remain in full force and effect until such time, after the last Termination Date of any Series; provided, however, that rights and remedies with respect to any breach of any representation and warranty made by the Seller pursuant to Article IV and the provisions of Article VII and Sections 5.03(h), 8.03 and 8.13 shall be continuing and shall survive any termination of this Agreement. SECTION 8.05. Governing Law, Jurisdiction, Consent to Service of Process. (a) Governing Law. THIS AGREEMENT, INCLUDING THE RIGHTS AND DUTIES OF THE PARTIES HERETO, SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, EXCEPT TO THE EXTENT THAT THE PERFECTION OF THE INTERESTS OF THE PURCHASER IN THE RECEIVABLES IS GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK. (b) Jurisdiction. Each of the parties hereto hereby irrevocably and unconditionally submits to the nonexclusive 26 30 jurisdiction of any New York State court or federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement, and each of the parties hereto hereby irrevocably and unconditionally (i) agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, such federal court and (ii) waives the defense of an inconvenient forum. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. (c) Consent to Service of Process. Each party to this Agreement irrevocably consents to service of process by personal delivery, certified mail, postage prepaid or overnight courier. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law. (d) Waiver of Jury Trial. Each party to this Agreement waives any right to a trial by jury in any action or proceeding to enforce or defend any rights under or relating to this Agreement, any other Transaction Document, the Fee Letter or any amendment, instrument, document or agreement delivered or which may in the future be delivered in connection herewith or therewith or arising from any course of conduct, course of dealing, statements (whether verbal of written), actions of any of the parties hereto or any other relationship existing in connection with this Agreement or any other Transaction Document or the Fee Letter, and agrees that any such action or proceeding shall be tried before a court and not before a jury. SECTION 8.06. No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of the Purchaser, any right, remedy, power or privilege hereunder, shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exhaustive of any rights, remedies, powers and privileges provided by law. SECTION 8.07. Amendment. (a) This Agreement may be amended from time to time by the Seller and the Purchaser without the consent of any of the Investor Certificateholders (i) to cure any ambiguity, (ii) to correct or supplement any provision herein which may be inconsistent with any other provision herein or (iii) to add any other provisions with respect to matters or questions arising under this Agreement which are not inconsistent with the provisions of this Agreement; provided that any amendment pursuant to this clause (a) shall not, as evidenced by an Opinion of Counsel, adversely affect in any material respect the interests of 27 31 any Investor Certificateholders. Notice of any amendment entered into pursuant to this clause (a) shall be given to the Rating Agencies. (b) This Agreement may be amended from time to time by the Seller and the Purchaser, so long as the Rating Agency Condition is satisfied, with the consent of a Majority in Interest of each adversely affected Series for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement or of modifying in any manner the rights of the Certificateholders. The Trustee may request an Officer's Certificate and Opinion of Counsel with respect to an amendment entered into pursuant to this clause (b) concerning compliance with the requirements of this Agreement. Any amendment to be effected pursuant to this paragraph shall be deemed to adversely affect all outstanding Series, other than any Series with respect to which such action shall not, as evidenced by an Opinion of Counsel (which counsel shall not be an employee of, or counsel for, Dell, the Seller or the Purchaser), addressed and delivered to the Trustee, adversely affect the interests of any Investor Certificateholder of such Series. SECTION 8.08. Severability. If any provision hereof is deemed void or unenforceable in any jurisdiction, such voiding or unenforceability shall not affect the validity or enforceability of such provision in any other jurisdiction or any other provision hereof in such or any other jurisdiction. SECTION 8.09. Notices. All notices and other communications provided for hereunder shall, unless otherwise stated herein, be in writing (including telex and facsimile communication) and shall be personally delivered or sent by certified mail, postage prepaid, or overnight courier or facsimile, to the intended party at the address or facsimile number of such party set forth below or at such other address or facsimile number as shall be designated by such party in a written notice to the other parties hereto. All such notices and communications shall be effective (a) if personally delivered, when received, (b) if sent by certified mail, four Business Days after having been deposited in the mail, postage prepaid, (c) if sent by overnight courier, two Business Days after having been given to such courier, unless sooner received by the addressee and (d) if transmitted by facsimile, when sent, upon receipt confirmed by telephone or electronic means. Notices and communications sent hereunder on a day that is not a Business Day shall be deemed to have been sent on the following Business Day. 28 32 (a) If to the Seller, Dell Direct Sales L.P. 2214 West Braker Lane, Suite D Austin, Texas 78758 Tel: (512) 728-3343 Fax: (512) 728-0043 Attn: Treasurer (b) If to the Purchaser, Dell Receivables L.P. 2112 Kramer Lane Austin, Texas 78758 Tel: (512) 728-5829 Fax: (512) 728-5986 Attn: Assistant Treasurer SECTION 8.10. Counterparts. This Agreement may be executed in any number of counterparts and by the different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original, and all of which taken together shall constitute one and the same agreement. SECTION 8.11. Construction of Agreement as Security Agreement. It is the intent of the parties that the transactions contemplated herein constitute sales of the Receivables to the Purchaser. If, however, such transactions are deemed to be loans, (a) the Seller hereby grants to the Purchaser a first priority security interest in all of the Seller's right, title and interest in and to the Receivables now existing and hereafter created, all monies due or to become due and all amounts and other proceeds received with respect thereto, to secure all of the Seller's obligations hereunder, and (b) this Agreement shall constitute a security agreement under applicable law. SECTION 8.12. Termination. This Agreement will terminate on the last Termination Date specified in any Series Supplement; provided, however, that the representations, warranties and remedies offered by or made available against the Seller, the indemnities of the Seller to the Indemnified Parties set forth in this Agreement shall survive such termination, and provided, further, that the Purchaser shall remain entitled to receive any collections on Receivables sold hereunder which have become Defaulted Receivables after it shall have completed its collection efforts in respect thereof. SECTION 8.13. Third-Party Beneficiary. The Indemnified Parties are third-party beneficiaries of all provisions of this Agreement and are entitled to enforce the provisions of Section 7.01 of this Agreement to the extent any Indemnified Amounts are due such parties. 29 33 SECTION 8.14. The Seller's Obligations. It is expressly agreed that, anything contained in this Agreement to the contrary notwithstanding, the Seller shall be obligated to perform all of its obligations under the Receivables to the same extent as if the Purchaser had no interest therein and the Purchaser shall have no obligations or liability under Receivables to any Obligor thereunder by reason of or arising out of this Agreement, nor shall the Purchaser be required or obligated in any manner to perform or fulfill any of the obligations of the Seller under or pursuant to any Receivable. 30 34 IN WITNESS WHEREOF, the parties hereto have caused this Receivables Purchase Agreement to be duly executed by their respective officers thereunto duly authorized as of the day and year first above written. DELL DIRECT SALES L.P., as Seller by DELL GEN. P. CORP., as its general partner By: /s/ Thomas J. Meredith ------------------------------ Name: Thomas J. Meredith Title: Chief Financial Officer DELL RECEIVABLES L.P., as Purchaser by DELL RECEIVABLES GEN. P. CORP, as its general partner By: /s/ Thomas J. Meredith ---------------------- Name: Thomas J. Meredith Title: President 35 EXHIBITS The following Exhibit has been omitted from this filing: Exhibit A -- Subordinated Note The registrant hereby undertakes to furnish supplementally a copy of such Exhibit to the Commission upon request. The executed version of this Exhibit appears as Exhibit 10.21 to this Report. EX-10.20 7 SUBORDINATED NOTE 1 EXHIBIT 10.20 DELL RECEIVABLES L.P. SUBORDINATED NOTE Due: December 31, 2014 No. 1 DELL RECEIVABLES L.P. (the "Issuer"), for value received, hereby promises to pay to DELL MARKETING L.P. (the "Holder"), or its registered assigns, at its address for payments set forth in Section 8.09 of the Receivables Purchase Agreement hereinafter referred to, all principal sums owing from time to time under Section 2.02 of the Receivables Purchase Agreement, upon the earliest to occur of (i) December 31, 2014, (ii) the date upon which the aggregate Invested Amount for each series is zero (the "Stated Maturity"), unless earlier prepaid pursuant to the provisions for repayment referred to herein, and (iii) any date agreed to by the Issuer and the Holder, and to pay interest (computed on the basis of a 360-day year and the actual number of days in each calendar year) on the unpaid principal sum from the date such principal sum is advanced, such interest being payable on (i) November 30, 1995 and the last day of each month thereafter and (ii) on the earlier of (1) the date of prepayment and (2) Stated Maturity at a rate per annum equal to the one-month London Interbank Offered Rate plus 0.75%, as published in The Wall Street Journal on the last Business Day of the preceding month, until the principal hereof is paid in full. The Holder shall enter on Schedule A information reflecting the date and amount of each advance and the amount of any payments made hereon. Notwithstanding anything contained herein to the contrary, the principal sum hereof and all accrued interest thereon shall not exceed forty percent (40%) of the excess of the Net Receivables Balance over the Trust Invested Amount at any given time. Payments of the principal of and interest on this Subordinated Note (this "Note") will be made in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts by check mailed to, or wire transfer in federal funds to the account of, the Holder as directed by the Holder. If any payment on this Note shall remain unpaid on the due date thereof, the same shall thereafter be payable with interest thereon (to the extent permitted by law) at the Class A Certificate Rate, from such due date to the date of payment thereof. This Note is issued under the Receivables Purchase Agreement, dated as of November 21, 1995, between the Issuer and the Holder (the "Receivables Purchase Agreement"). This Note represents all or a portion of the Purchase Price for Receivables 2 purchased by the Issuer pursuant to the terms of the Receivables Purchase Agreement. Each capitalized term used herein which is defined in the Receivables Purchase Agreement or the Pooling and Servicing Agreement, dated as of November 21, 1995, among the Issuer, as Transferor, Dell USA L.P., as Servicer and Norwest Bank Minnesota, National Association, as Trustee (the "Pooling and Servicing Agreement") shall have the meaning ascribed to it in the Receivables Purchase Agreement or the Pooling and Servicing Agreement, as the case may be. This Note may be prepaid in whole or in part at the option of the Issuer at any time without a premium. The payment of this Note is hereby expressly subordinated in right of payment to the payment and performance of the "Senior Debt" of the Issuer, which is any indebtedness in respect of borrowed money as evidenced by bonds, notes, debentures or similar instruments or letters of credit and any obligations of the Issuer under the Pooling and Service Agreement, the Receivables Purchase Agreement and any Supplement ("Indebtedness") of the Issuer, and all renewals, extensions, refinancings or refundings thereof, except any such Indebtedness that expressly provides that it is not senior or superior in right of payment hereto, to the extent and in the manner set forth in this paragraph: (a) In the event of any dissolution, winding up, liquidation, readjustment, reorganization or other similar event relating to the Issuer, whether voluntary or involuntary, partial or complete, and whether in bankruptcy, insolvency, receivership or other similar proceedings, or upon an assignment for the benefit of creditors, or any other marshalling of the assets and liabilities of the Issuer or any sale of all or substantially all of the assets of the Issuer except pursuant to the Pooling and Servicing Agreement (such proceedings being herein collectively called "Bankruptcy Proceedings" and individually called a "Bankruptcy Proceeding"), the Senior Debt shall first be paid and performed in full and in cash before the Holder of this Note shall be entitled to receive and to retain any payment or distribution in respect of this Note. In order to implement the foregoing; (x) all payments and distributions of any kind or character in respect of this Note to which the Holder of this Note would be entitled except for this clause (a) shall be made directly to the Trustee (for the benefit of the holder of the Senior Debt); (y) if a Bankruptcy Proceeding has been commenced, the holder of this Note shall promptly file a claim or claims, in the form required in any Bankruptcy Proceedings, for the full outstanding amount of this Note, and shall use reasonable efforts to cause said claim or claims to be approved and all payments and other distributions in respect thereof to be made directly to the Trustee (for the benefit of the Holders of the Senior Debt until the Senior Debt shall have been paid and performed in full and in cash; and (z) the Holder of this Note hereby irrevocably agrees that the Trust 2 3 (or the Trustee acting on the Trust's behalf), in the name of the Holder of this Note or otherwise, may demand, sue for, collect, receive and receipt for any and all such payments or distributions, and file, prove and vote or consent in any such Bankruptcy Proceedings with respect to any and all claims of the Holder of this Note relating to this Note, in each case until the Senior Debt shall have been paid and performed in full and in cash. (b) In the event that the Holder of this Note receives any payment or other distribution of any kind or character from the Issuer or from any other source whatsoever in respect of this Note after the commencement of any Bankruptcy Proceeding, such payment or other distribution shall be received in trust for the Holders of the Senior Debt and shall be turned over by the Holder of this Note to the Trustee (for the benefit of the Holders of the Senior Debt) forthwith, until all Senior Debt shall have been paid and performed in full and in cash. All payments and distributions received by the Trustee in respect of this Note, to the extent received in or converted into cash, may be applied by the Trustee (for the benefit of the Holders of the Senior Debt) first to the payment of any and all reasonable expenses (including reasonable attorneys fees and legal expenses) paid or incurred by the Trustee or the Holders of the Senior Debt in enforcing these subordination provisions, or in endeavoring to collect or realize upon this Note, and any balance thereof shall, solely as between the Holder of this Note and the Holders of the Senior Debt, be applied by the Trustee toward the payment of the Senior Debt in a manner determined by the Trustee to be in accordance with the Pooling and Servicing Agreement; but as between the Issuer and its creditors no such payments or distributions of any kind or character shall be deemed to be payments or distributions in respect of the Senior Debt. (c) Upon the final payment in full and in cash of all Senior Debt, the Holder of this Note shall be subrogated to the rights of the Holders of the Senior Debt to receive payments or distributions from the Issuer that are applicable to the Senior Interests until this Note is paid in full. (d) These subordination provisions are intended solely for the purpose of defining the relative rights of the Holder of this Note, on the one hand, and the Holders of the Senior Debt, on the other hand. Nothing contained in these subordination provisions or elsewhere in this Note is intended to or shall impair, as between the Issuer, its creditors (other than the Holders of the Senior Debt) and the Holder of this Note, the Issuer's obligation, which is unconditional and absolute, to pay this Note as and when the same shall become due and payable in accordance with the terms hereof and of the Receivables Purchase Agreement or to affect the relative rights of the Holder of this Note and creditors of the Issuer (other than the Holders of the Senior Debt). 3 4 (e) The Holder of this Note shall not, until the Senior Debt has been finally paid and performed in full and in cash, (i) cancel, waive, forgive, transfer or assign or commence legal proceedings to enforce or collect, or subordinate to any obligation of the Issuer, howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent, or now or hereafter existing, or due or to become due, other than the Senior Debt or any rights in respect hereof or (ii) convert this Note into an equity interest in the Issuer unless, in the case of each clauses (i) and (ii) above, the Holder of this Note shall have received the prior written consent of the Trustee in each case. (f) The Holder of this Note shall not, without the advance written consent of the Trustee, commence, or join with any other Person in commencing, any Bankruptcy Proceedings with respect to the Issuer until at least one year and one day shall have passed since the Senior Debt shall have been finally paid and performed in full and in cash. (g) If, at any time, any payment (in whole or in part) made with respect to the Senior Debt is rescinded or must be restored or returned by a Holder of the Senior Debt (whether in connection with any Bankruptcy Proceedings or otherwise), these subordination provisions shall continue to be effective or shall be reinstated, as the case may be, as though such payment has not been made. (h) As between the Holder of this Note and the Holders of the Senior Debt, each of the Holders of the Senior Debt may, from time to time, at its sole discretion, without notice to the Holder of this Note, and without waiving any of its rights under these subordination provisions, take any or all of the following actions: (i) retain or obtain an interest in any property to secure any of the Senior Debt; (ii) retain or obtain the primary or secondary obligations of any other obligor or obligors with respect to any of the Senior Debt; (iii) extend or renew for one or more periods (whether or not longer than the original period), alter, increase or exchange any of the Senior Debt, or release or compromise any obligation of any nature with respect to any of the Senior Debt; (iv) amend, supplement, amend and restate, or otherwise modify any Transaction Documents; and (v) release its security interest in, or surrender, release or permit any substitution or exchange for all or any part of any rights or property; securing any of the Senior Debt, or extend or renew for one or more periods (whether or not longer than the original period), or release compromise, alter or exchange any obligations of any nature of any obligor with respect to any such rights or property. (i) By its acceptance hereof, the Holder of this Note hereby waives; (i) notice of acceptance of these subordination provisions by any of the Holders of the Senior Debt; (ii) 4 5 notice of the existence, creation, non-payment or non-performance of all or any of the Senior Debt; and (iii all diligence in enforcement, collection or protection of, or realization upon, the Senior Debt, or any thereof, or any security therefor. (j) These subordination provisions constitute a continuing offer from the Issuer to all Persons who become the holders of, or who continue to hold, Senior Debt and these subordination provisions are made for the benefit of the Holders of the Senior Debt, and the Trustee may proceed to enforce such provisions on behalf of each of such Persons. The Holder of this Note, by its acceptance hereof, hereby covenants and agrees that it will not at any time institute against the Issuer any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or other proceedings under any United States federal or state bankruptcy or similar law. This Note shall for all purposes be governed by, and construed in accordance with, the laws of the State of New York. 5 6 IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly executed manually by its undersigned officer duly authorized thereunto. Dated: November 30, 1995. DELL RECEIVABLES L.P. by DELL RECEIVABLES GEN. P. CORP, as its general partner By: /s/ Thomas Meredith -------------------------------------------- Name: Thomas Meredith Title: Cheif Executive Officer and President 7 SCHEDULE A Principal Interest Principal Interest Date Advanced Paid Paid Rate - ---- --------- -------- --------- -------- EX-10.21 8 SUBORDINATED NOTE 1 EXHIBIT 10.21 DELL RECEIVABLES L.P. SUBORDINATED NOTE Due: December 31, 2014 No. 1 DELL RECEIVABLES L.P. (the "Issuer"), for value received, hereby promises to pay to DELL DIRECT SALES L.P. (the "Holder"), or its registered assigns, at its address for payments set forth in Section 8.09 of the Receivables Purchase Agreement hereinafter referred to, all principal sums owing from time to time under Section 2.02 of the Receivables Purchase Agreement, upon the earliest to occur of (i) December 31, 2014, (ii) the date upon which the aggregate Invested Amount for each series is zero (the "Stated Maturity"), unless earlier prepaid pursuant to the provisions for repayment referred to herein, and (iii) any date agreed to by the Issuer and the Holder, and to pay interest (computed on the basis of a 360-day year and the actual number of days in each calendar year) on the unpaid principal sum from the date such principal sum is advanced, such interest being payable on (i) November 30, 1995 and the last day of each month thereafter and (ii) on the earlier of (1) the date of prepayment and (2) Stated Maturity at a rate per annum equal to the one-month London Interbank Offered Rate plus 0.75%, as published in The Wall Street Journal on the last Business Day of the preceding month, until the principal hereof is paid in full. The Holder shall enter on Schedule A information reflecting the date and amount of each advance and the amount of any payments made hereon. Notwithstanding anything contained herein to the contrary, the principal sum hereof and all accrued interest thereon shall not exceed forty percent (40%) of the excess of the Net Receivables Balance over the Trust Invested Amount at any given time. Payments of the principal of and interest on this Subordinated Note (this "Note") will be made in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts by check mailed to, or wire transfer in federal funds to the account of, the Holder as directed by the Holder. If any payment on this Note shall remain unpaid on the due date thereof, the same shall thereafter be payable with interest thereon (to the extent permitted by law) at the Class A Certificate Rate, from such due date to the date of payment thereof. This Note is issued under the Receivables Purchase Agreement, dated as of November 21, 1995, between the Issuer and the Holder (the "Receivables Purchase Agreement"). This Note represents all or a portion of the Purchase Price for Receivables 2 purchased by the Issuer pursuant to the terms of the Receivables Purchase Agreement. Each capitalized term used herein which is defined in the Receivables Purchase Agreement or the Pooling and Servicing Agreement, dated as of November 21, 1995, among the Issuer, as Transferor, Dell USA L.P., as Servicer and Norwest Bank Minnesota, National Association, as Trustee (the "Pooling and Servicing Agreement") shall have the meaning ascribed to it in the Receivables Purchase Agreement or the Pooling and Servicing Agreement, as the case may be. This Note may be prepaid in whole or in part at the option of the Issuer at any time without a premium. The payment of this Note is hereby expressly subordinated in right of payment to the payment and performance of the "Senior Debt" of the Issuer, which is any indebtedness in respect of borrowed money as evidenced by bonds, notes, debentures or similar instruments or letters of credit and any obligations of the Issuer under the Pooling and Service Agreement, the Receivables Purchase Agreement and any Supplement ("Indebtedness") of the Issuer, and all renewals, extensions, refinancings or refundings thereof, except any such Indebtedness that expressly provides that it is not senior or superior in right of payment hereto, to the extent and in the manner set forth in this paragraph: (a) In the event of any dissolution, winding up, liquidation, readjustment, reorganization or other similar event relating to the Issuer, whether voluntary or involuntary, partial or complete, and whether in bankruptcy, insolvency, receivership or other similar proceedings, or upon an assignment for the benefit of creditors, or any other marshalling of the assets and liabilities of the Issuer or any sale of all or substantially all of the assets of the Issuer except pursuant to the Pooling and Servicing Agreement (such proceedings being herein collectively called "Bankruptcy Proceedings" and individually called a "Bankruptcy Proceeding"), the Senior Debt shall first be paid and performed in full and in cash before the Holder of this Note shall be entitled to receive and to retain any payment or distribution in respect of this Note. In order to implement the foregoing; (x) all payments and distributions of any kind or character in respect of this Note to which the Holder of this Note would be entitled except for this clause (a) shall be made directly to the Trustee (for the benefit of the holder of the Senior Debt); (y) if a Bankruptcy Proceeding has been commenced, the holder of this Note shall promptly file a claim or claims, in the form required in any Bankruptcy Proceedings, for the full outstanding amount of this Note, and shall use reasonable efforts to cause said claim or claims to be approved and all payments and other distributions in respect thereof to be made directly to the Trustee (for the benefit of the Holders of the Senior Debt until the Senior Debt shall have been paid and performed in full and in cash; and (z) the Holder of this Note hereby irrevocably agrees that the Trust 2 3 (or the Trustee acting on the Trust's behalf), in the name of the Holder of this Note or otherwise, may demand, sue for, collect, receive and receipt for any and all such payments or distributions, and file, prove and vote or consent in any such Bankruptcy Proceedings with respect to any and all claims of the Holder of this Note relating to this Note, in each case until the Senior Debt shall have been paid and performed in full and in cash. (b) In the event that the Holder of this Note receives any payment or other distribution of any kind or character from the Issuer or from any other source whatsoever in respect of this Note after the commencement of any Bankruptcy Proceeding, such payment or other distribution shall be received in trust for the Holders of the Senior Debt and shall be turned over by the Holder of this Note to the Trustee (for the benefit of the Holders of the Senior Debt) forthwith, until all Senior Debt shall have been paid and performed in full and in cash. All payments and distributions received by the Trustee in respect of this Note, to the extent received in or converted into cash, may be applied by the Trustee (for the benefit of the Holders of the Senior Debt) first to the payment of any and all reasonable expenses (including reasonable attorneys fees and legal expenses) paid or incurred by the Trustee or the Holders of the Senior Debt in enforcing these subordination provisions, or in endeavoring to collect or realize upon this Note, and any balance thereof shall, solely as between the Holder of this Note and the Holders of the Senior Debt, be applied by the Trustee toward the payment of the Senior Debt in a manner determined by the Trustee to be in accordance with the Pooling and Servicing Agreement; but as between the Issuer and its creditors no such payments or distributions of any kind or character shall be deemed to be payments or distributions in respect of the Senior Debt. (c) Upon the final payment in full and in cash of all Senior Debt, the Holder of this Note shall be subrogated to the rights of the Holders of the Senior Debt to receive payments or distributions from the Issuer that are applicable to the Senior Interests until this Note is paid in full. (d) These subordination provisions are intended solely for the purpose of defining the relative rights of the Holder of this Note, on the one hand, and the Holders of the Senior Debt, on the other hand. Nothing contained in these subordination provisions or elsewhere in this Note is intended to or shall impair, as between the Issuer, its creditors (other than the Holders of the Senior Debt) and the Holder of this Note, the Issuer's obligation, which is unconditional and absolute, to pay this Note as and when the same shall become due and payable in accordance with the terms hereof and of the Receivables Purchase Agreement or to affect the relative rights of the Holder of this Note and creditors of the Issuer (other than the Holders of the Senior Debt). 3 4 (e) The Holder of this Note shall not, until the Senior Debt has been finally paid and performed in full and in cash, (i) cancel, waive, forgive, transfer or assign or commence legal proceedings to enforce or collect, or subordinate to any obligation of the Issuer, howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent, or now or hereafter existing, or due or to become due, other than the Senior Debt or any rights in respect hereof or (ii) convert this Note into an equity interest in the Issuer unless, in the case of each clauses (i) and (ii) above, the Holder of this Note shall have received the prior written consent of the Trustee in each case. (f) The Holder of this Note shall not, without the advance written consent of the Trustee, commence, or join with any other Person in commencing, any Bankruptcy Proceedings with respect to the Issuer until at least one year and one day shall have passed since the Senior Debt shall have been finally paid and performed in full and in cash. (g) If, at any time, any payment (in whole or in part) made with respect to the Senior Debt is rescinded or must be restored or returned by a Holder of the Senior Debt (whether in connection with any Bankruptcy Proceedings or otherwise), these subordination provisions shall continue to be effective or shall be reinstated, as the case may be, as though such payment has not been made. (h) As between the Holder of this Note and the Holders of the Senior Debt, each of the Holders of the Senior Debt may, from time to time, at its sole discretion, without notice to the Holder of this Note, and without waiving any of its rights under these subordination provisions, take any or all of the following actions: (i) retain or obtain an interest in any property to secure any of the Senior Debt; (ii) retain or obtain the primary or secondary obligations of any other obligor or obligors with respect to any of the Senior Debt; (iii) extend or renew for one or more periods (whether or not longer than the original period), alter, increase or exchange any of the Senior Debt, or release or compromise any obligation of any nature with respect to any of the Senior Debt; (iv) amend, supplement, amend and restate, or otherwise modify any Transaction Documents; and (v) release its security interest in, or surrender, release or permit any substitution or exchange for all or any part of any rights or property; securing any of the Senior Debt, or extend or renew for one or more periods (whether or not longer than the original period), or release compromise, alter or exchange any obligations of any nature of any obligor with respect to any such rights or property. (i) By its acceptance hereof, the Holder of this Note hereby waives; (i) notice of acceptance of these subordination provisions by any of the Holders of the Senior Debt; (ii) 4 5 notice of the existence, creation, non-payment or non-performance of all or any of the Senior Debt; and (iii all diligence in enforcement, collection or protection of, or realization upon, the Senior Debt, or any thereof, or any security therefor. (j) These subordination provisions constitute a continuing offer from the Issuer to all Persons who become the holders of, or who continue to hold, Senior Debt and these subordination provisions are made for the benefit of the Holders of the Senior Debt, and the Trustee may proceed to enforce such provisions on behalf of each of such Persons. The Holder of this Note, by its acceptance hereof, hereby covenants and agrees that it will not at any time institute against the Issuer any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or other proceedings under any United States federal or state bankruptcy or similar law. This Note shall for all purposes be governed by, and construed in accordance with, the laws of the State of New York. 5 6 IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly executed manually by its undersigned officer duly authorized thereunto. Dated: November 30, 1995. DELL RECEIVABLES L.P. by DELL RECEIVABLES GEN. P. CORP, as its general partner By: /s/ Thomas Meredith -------------------------------------------- Name: Thomas Meredith Title: Cheif Executive Officer and President 7 SCHEDULE A Principal Interest Principal Interest Date Advanced Paid Paid Rate - ---- --------- -------- --------- -------- EX-10.22 9 POOLING & SERVICING AGREEMENT 1 EXHIBIT 10.22 EXECUTION COPY DELL RECEIVABLES L.P., Transferor DELL USA L.P., Servicer and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, Trustee DELL TRADE RECEIVABLES MASTER TRUST POOLING AND SERVICING AGREEMENT Dated as of November 21, 1995 2 TABLE OF CONTENTS
Page ---- ARTICLE I DEFINITIONS SECTION 1.01. Definitions............................................... 1 SECTION 1.02. Other Definitional Provisions............................. 20 ARTICLE II TRANSFER OF RECEIVABLES SECTION 2.01. Transfer of Receivables................................... 21 SECTION 2.02. Acceptance by Trustee..................................... 21 SECTION 2.03. Representations and Warranties of the Transferor Relating to the Transferor................... 22 SECTION 2.04. Representations and Warranties of the Transferor Relating to the Trust Assets................. 26 SECTION 2.05. Affirmative Covenants of the Transferor................... 30 SECTION 2.06. Negative Covenants of the Transferor...................... 33 SECTION 2.07. Addition and Removal of Originators....................... 37 ARTICLE III ADMINISTRATION AND SERVICING OF RECEIVABLES SECTION 3.01. Acceptance of Appointment and Other Matters Relating to the Servicer........................ 39 SECTION 3.02. Servicing Compensation; Servicer's Expenses................................................ 40 SECTION 3.03. Representations and Warranties of the Servicer................................................ 41 SECTION 3.04. Covenants of the Servicer................................. 44 SECTION 3.05. Reports and Records for the Trustee....................... 48 SECTION 3.06. Annual Certificate of Servicer............................ 48 SECTION 3.07. Semi-Annual Servicing Report of Independent Public Accountants...................................... 49 SECTION 3.08. Tax Treatment............................................. 49 SECTION 3.09. Notices to Dell USA L.P................................... 50 SECTION 3.10. Adjustments............................................... 50 SECTION 3.11. Securities and Exchange Commission Filings................................................. 50
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Page ---- ARTICLE IV RIGHTS OF CERTIFICATEHOLDERS AND ALLOCATION AND APPLICATION OF COLLECTIONS SECTION 4.01. Rights of Certificateholders.............................. 51 SECTION 4.02. Establishment of Concentration Account and Dell Collection Accounts ........................... 52 SECTION 4.03. Allocation of Collections................................. 54 ARTICLE V DISTRIBUTIONS AND REPORTS TO CERTIFICATEHOLDERS SECTION 5.01. Distributions and Reports to Certificate- holders................................................. 56 ARTICLE VI THE CERTIFICATES SECTION 6.01. The Certificates.......................................... 57 SECTION 6.02. Authentication of Certificates............................ 57 SECTION 6.03. Registration of Transfer and Exchange of Certificates............................................ 58 SECTION 6.04. Mutilated, Destroyed, Lost or Stolen Certificates............................................ 60 SECTION 6.05. Persons Deemed Owners..................................... 60 SECTION 6.06. Access to List of Certificateholders' Names and Addresses..................................... 61 SECTION 6.07. Authenticating Agent...................................... 61 SECTION 6.08. New Issuances............................................. 62 ARTICLE VII OTHER MATTERS RELATING TO THE TRANSFEROR SECTION 7.01. Obligations not Assignable................................ 66 SECTION 7.02. Limitations on Liability.................................. 66 SECTION 7.03. Indemnification of the Trustee, the Trust and the Investor Certificateholders..................... 66
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Page ---- ARTICLE VIII OTHER MATTERS RELATING TO THE SERVICER SECTION 8.01. Liability of the Servicer................................. 69 SECTION 8.02. Merger or Consolidation of, or Assumption of the Obligations of, the Servicer.................... 69 SECTION 8.03. Limitations on Liability.................................. 69 SECTION 8.04. Servicer Indemnification.................................. 70 SECTION 8.05. The Servicer Not to Resign................................ 71 SECTION 8.06. Examination of Records.................................... 71 SECTION 8.07. Confidentiality........................................... 72 ARTICLE IX TRUST EARLY AMORTIZATION EVENTS SECTION 9.01. Trust Early Amortization Events........................... 73 SECTION 9.02. Additional Rights Upon the Occurrence of any Trust Early Amortization Event.................. 75 ARTICLE X SERVICER DEFAULTS SECTION 10.01. Servicer Defaults........................................ 77 SECTION 10.02. Trustee to Act; Appointment of Successor Servicer............................................... 79 SECTION 10.03. Notification to Certificateholders....................... 81 ARTICLE XI THE TRUSTEE SECTION 11.01. Duties of the Trustee.................................... 82 SECTION 11.02. Certain Matters Affecting the Trustee.................... 84 SECTION 11.03. Trustee Not Liable for Recitals in Certificates........................................... 85 SECTION 11.04. Trustee May Own Certificates............................. 85 SECTION 11.05. Compensation; Trustee's Expenses......................... 85 SECTION 11.06. Eligibility Requirements for Trustee..................... 86 SECTION 11.07. Resignation or Removal of Trustee........................ 86 SECTION 11.08. Successor Trustee........................................ 87 SECTION 11.09. Merger or Consolidation of Trustee....................... 88 SECTION 11.10. Appointment of Co-Trustee or Separate Trustee................................................ 88
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Page ---- SECTION 11.11. Tax Returns.............................................. 89 SECTION 11.12. Trustee May Enforce Claims Without Possession of Certificates............................. 90 SECTION 11.13. Suits for Enforcement.................................... 90 SECTION 11.14. Rights of Certificateholders to Direct Trustee................................................ 90 SECTION 11.15. Representations and Warranties of Trustee................ 91 SECTION 11.16. Maintenance of Office or Agency.......................... 91 ARTICLE XII TERMINATION SECTION 12.01. Termination of Trust..................................... 92 SECTION 12.02. Final Distribution....................................... 92 SECTION 12.03. Transferor's Termination Rights.......................... 93 ARTICLE XIII MISCELLANEOUS PROVISIONS SECTION 13.01. Amendment................................................ 94 SECTION 13.02. Protection of Right, Title and Interest to Trust............................................... 95 SECTION 13.03. Limitation on Rights of Certificate- holders................................................ 96 SECTION 13.04. Governing Law; Jurisdiction; Consent to Service of Process..................................... 97 SECTION 13.05. Notices; Payments........................................ 98 SECTION 13.06. Rule 144A Information.................................... 99 SECTION 13.07. Severability of Provisions............................... 99 SECTION 13.08. Assignment............................................... 99 SECTION 13.09. Certificates Nonassessable and Fully Paid................ 99 SECTION 13.10. Further Assurances....................................... 100 SECTION 13.11. Nonpetition Covenant..................................... 100 SECTION 13.12. No Waiver; Cumulative Remedies........................... 100 SECTION 13.13. Counterparts............................................. 100 SECTION 13.14. Third-Party Beneficiaries................................ 100 SECTION 13.15. Actions by Certificateholders............................ 101 SECTION 13.16. Merger and Integration................................... 101 SECTION 13.17. Headings................................................. 101 SECTION 13.18. Construction of Agreement................................ 101
iv 6 EXHIBITS Exhibit A Form of Transferor Certificate Exhibit B Form of Annual Servicer's Certificate Exhibit C Form of Dell Collection Account Letter Exhibit D Form of Rule 144A and Non-Rule 144A Letters Exhibit E Form of Daily Report Exhibit F Credit Policy and Procedures Manual Exhibit G Form of Agreed Upon Procedures Exhibit H Form of Monthly Trustee Certificate SCHEDULES Schedule I Dell Post-Office Boxes and Dell Collection Accounts Schedule II Originators v 7 POOLING AND SERVICING AGREEMENT, dated as of November 21, 1995, among DELL RECEIVABLES L.P., a Texas limited partnership, as Transferor (the "Transferor"), DELL USA L.P., a Texas limited partnership, as Servicer (the "Servicer"), and Norwest Bank Minnesota, National Association, as Trustee (the "Trustee"). In consideration of the mutual agreements herein contained, each party agrees as follows for the benefit of the other parties and the Certificateholders to the extent provided herein: ARTICLE I DEFINITIONS SECTION 1.01. Definitions. Whenever used in this Agreement, the following words and phrases shall have the following meanings, and the definitions of such terms are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such terms. All capitalized terms used herein but not defined shall have the meanings ascribed to them in the related Supplement. "Act" shall mean the Securities Act of 1933, as amended from time to time. "Additional Originator" shall have the meaning specified in Section 2.07(a). "Affiliate" shall mean, with respect to any specified Person, any other Person that, directly or indirectly, is in control of, is controlled by or is under common control with, such specified Person within the meaning of "control" as such term is used in Section 15 of the Securities Act of 1933, as amended. "Aggregate Certificateholders' Interest" shall mean the aggregate of the Certificateholders' Interests for each Series as defined in Section 4.01(a). "Agreement" shall mean this Pooling and Servicing Agreement, as the same may from time to time be amended, modified or otherwise supplemented, including, with respect to any Series or Class, the related Supplement. "Amortization Date" with respect to any Series, shall have the meaning specified in the related Supplement. "Amortization Period" shall mean, with respect to any Series, unless otherwise specified in the related Supplement, the period beginning on the related Amortization Date and ending upon the payment in full to the Investor Certificateholders of such Series of the Invested Amount with respect to such Series, all 8 accrued and unpaid interest thereon and all other amounts owed to the Investor Certificateholders hereunder. "Beneficiary" shall mean, as of any date of determination, any of the then holders of the Investor Certificates and any Enhancement Provider. "Business Day" shall mean any day other than a Saturday or Sunday or any other day on which national banking associations or state banking institutions in New York, New York, Austin, Texas or the city in which the Corporate Trust Office is located are authorized or obligated by law, executive order or governmental decree to be closed and, with respect to non-financial reporting requirements of the Servicer or the Transferor, any day on which the Servicer or the Transferor is closed. "Certificate" shall mean any one of the Investor Certificates or the Transferor Certificate. "Certificate Rate" shall mean, with respect to any Series or Class, the certificate rate specified therefor in the related Supplement. "Certificate Register" shall have the meaning specified in Section 6.03(a). "Certificateholder" or "Holder" shall mean an Investor Certificateholder or the Person in whose name the Transferor Certificate is registered in the Certificate Register. "Certificateholders' Interest" shall have the meaning specified in Section 4.01(a). "Class" shall mean, with respect to any Series, any one of the classes of Investor Certificates of that Series. "Collection Period" shall mean, with respect to any Distribution Date, the calendar month immediately preceding the calendar month in which such Distribution Date occurs. "Collections" shall mean (a) all cash payments by or on behalf of the Obligors deposited to any Dell Collection Account or the Concentration Account, or received by the Servicer, in respect of Receivables in the form of cash, checks, wire transfers, electronic transfers or any other form of cash payment, and (b) all interest and other investment earnings (net of losses and investment expenses) on Collections (including without limitation funds on deposit in the Cure Accounts) as a result of the investment thereof pursuant to Section 4.02(a). "Concentration Account" shall have the meaning specified in Section 4.02(a). 2 9 "Concentration Account Bank" shall initially be Norwest Bank Minnesota, National Association, and shall have the meaning specified in Section 4.02(a). "Concentration Amount" shall mean as of any date, with respect to each Concentration Limit, the product of (a) such Concentration Limit and (b) the aggregate amount of Eligible Receivables owned by the Trust. "Concentration Limit" with respect to any Series, shall have the meaning specified in the related Supplement. "Confidential Information" shall mean any written information delivered or made available by or on behalf of Dell (or its Affiliates or subsidiaries), the Servicer, the Transferor, Dell Marketing L.P. or Dell Direct Sales L.P. to any Person in connection with or pursuant to this Agreement or the transactions contemplated hereby which is proprietary in nature and clearly marked or identified in writing as being confidential information, other than information (i) which was publicly known, or otherwise known to such Person, at the time of disclosure (except pursuant to disclosure in connection with any Transaction Document) or (ii) which subsequently becomes publicly known through no act or omission by such Person. "Contract" shall mean an agreement between an Originator and an Obligor, containing terms pursuant to or under which such Obligor shall be obligated to pay from time to time for merchandise delivered or to be delivered or services performed or to be performed. "Controlled Affiliate" shall mean any specified Person controlled by or under common control with Dell, the Servicer or the Transferor and as to which Dell, the Servicer or the Transferor beneficially owns or holds 50% or more of any class of voting securities of such Person or 50% or more of the equity interest in such Person. For the purposes of this definition, "control" when used with respect to any specified Person shall mean the power to direct the management and policies of such specified Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Corporate Trust Office" shall have the meaning specified in Section 11.16. "Credit Policy and Procedures Manual" shall mean those credit and collection policies and practices of the Servicer described in the credit policy and procedures manual in effect on the date hereof relating to Receivables, as the same may be amended or modified from time to time in compliance with Section 3.04(j), substantially in the form of Exhibit F hereto. 3 10 "Cross-Guarantee Agreement" shall mean the agreement among the Originators, the Servicer and the Trustee, dated as of November 21, 1995, governing the terms and conditions upon which the Originators and the Servicer shall cause the performance of certain obligations of the other parties thereto. "Cure Account" with respect to each Series, shall have the meaning specified in the related Supplement and "Cure Accounts" shall refer to all the Cure Accounts established for outstanding Series in accordance with the terms of the related Supplements. "Cure Funds" shall mean Collections which, from time to time, are deposited by the Transferor pro rata to the Cure Account of each Series. "Cure Period" shall mean, if the Transferor has elected to begin depositing Cure Funds to the Cure Account of each Series, the period beginning on a Pool Non-compliance Date and continuing until the earlier of (a) the date on which the Net Receivables Balance equals or exceeds the Required Net Receivables Balance and (b) the fifth consecutive day following such Pool Non-compliance Date. "Daily Report" shall mean an Officer's Certificate of the Servicer substantially in the form of Exhibit E hereto. "Default Ratio" shall mean, as of any date, the average of the ratios for each of the three most recently ended months (each expressed as a percentage) of (i) aggregate Receivables that were 121-150 days past due at the end of each such month plus Receivables which were charged off as uncollectible during the current month which were less than 121 days past due when charged off to (ii) aggregate Receivables that were generated by the Originators during the sixth months preceding such date. "Defaulted Receivable" shall mean a Receivable (i) as to which the Obligor thereof has taken any action, or suffered any event to occur, of the type constituting an Insolvency Event, (ii) as to which any payment, or part thereof, remains unpaid by the Obligor thereof for 121 days or more from the original due date for such payment specified in the relevant invoice, or (iii) which, consistent with the Credit Policy and Procedures Manual, would be written off as uncollectible. "Dell" shall mean Dell Computer Corporation, a Delaware corporation. "Dell Collection Account" shall have the meaning specified in Section 4.02(b). "Dell Collection Account Bank" shall have the meaning specified in Section 4.02(b). 4 11 "Dell Collection Account Letter" shall have the meaning specified in Section 4.02(b). "Dell Post-Office Box" shall have the meaning specified in Section 4.02(b). "Deposit Date" shall mean each Business Day on which any Collections are deposited in the Concentration Account. "Determination Date" shall mean, with respect to any Distribution Date, the second Business Day preceding such Distribution Date. "Determination Date Certificate" shall mean, with respect to any Determination Date and any Series, a report prepared by a Servicing Officer for such Determination Date as of the end of the immediately preceding month in substantially the form set forth in the related Supplement. "Diluted Receivable" shall mean that portion of any Eligible Receivable which is either (a) reduced or cancelled as a result of (i) any failure by any Originator to deliver any merchandise or provide any services or otherwise to perform under the underlying Contract or invoice, (ii) any change in the terms of, or cancellation of, a Contract or invoice or any other adjustment by the Servicer which reduces the amount payable by the Obligor on the related Receivable or (iii) any setoff by an Obligor in respect of any claim by an Obligor as to amounts owed by it on the related Receivable or (b) subject to any specific dispute, offset, counterclaim or defense whatsoever asserted (except the discharge in bankruptcy of the Obligor thereof); provided that Diluted Receivables are calculated assuming that all disputes are resolved in the Obligor's favor and do not include contractual adjustments to the amount payable by an Obligor that are eliminated from the Receivables balance sold to the Trust through a reduction in the Purchase Price for the related Receivable. "Dilution Ratio" shall mean, as of any date, the sum of (A)(i) the aggregate Receivables that were Diluted Receivables as of the most recently ended month divided by the sum of (1) 50% of the Originators' aggregate sales during the month immediately preceding the most recently ended month and (2) 50% of sales during the second month immediately preceding the most recently ended month, multiplied by (ii) 66.7% and (B)(i) the aggregate Receivables that were Diluted Receivables as of the month immediately preceding the most recently ended month divided by the sum of (1) 50% of sales during the second month immediately preceding the most recently ended month and (2) 50% of sales during the third month immediately preceding the most recently ended month, multiplied by (ii) 33.3%. 5 12 "Dilution Volatility Factor" shall mean, as of any date, a percentage equal to the product of (a) the amount by which (i) the highest Dilution Ratio during the most recently ended twelve-month period exceeds (ii) the average of the Dilution Ratios during such twelve-month period and (b)(i) the highest Dilution Ratio during such twelve-month period divided by (ii) the average of the Dilution Ratios during such twelve-month period. "Discount Amount" shall mean, with respect to any Series, the amount set forth in the related Supplement. "Distribution Date" shall mean, with respect to any Collection Period, the fifteenth day of the calendar month immediately following such Collection Period, or, if such day is not a Business Day, the next succeeding Business Day or such other day as set forth in the Supplement for any Series. "DCR" shall mean Duff & Phelps Credit Rating Co. or its successor. "Early Amortization Period" shall mean, with respect to any Series, unless otherwise specified in the related Supplement, the period beginning at the close of business on the Business Day immediately preceding the day on which a Trust Early Amortization Event is deemed to have occurred, and ending upon the earlier to occur of (a) the payment in full to the Investor Certificateholders of such Series of the Invested Amount with respect to such Series and (b) the Termination Date with respect to such Series. "Eligible Institution" shall mean a depository institution organized under the laws of the United States of America or any State thereof, including the District of Columbia (or any domestic branch of a foreign bank), (a) whose long-term unsecured debt obligations are rated at least (i) if DCR is a Rating Agency, A- or better, (ii) if S&P is a Rating Agency, A- or better, and (iii) if Moody's is a Rating Agency, at least A3 or (b) which is subject to regulation regarding fiduciary funds on deposit substantially similar to 12 C.F.R. Section 9.10(b). "Eligible Investments" shall mean book-entry securities entered on the books of the registrar of such securities and held in the name or on behalf of the Trustee, negotiable instruments or securities represented by instruments in bearer or registered form (registered in the name of the Trustee or its nominee) which evidence: (a) direct obligations of, or obligations fully guaranteed as to timely payment by, the United States of America or any agency thereof; (b) demand deposits, time deposits or certificates of deposit (having original maturities of no more than 270 days) 6 13 of depository institutions or trust companies incorporated under the laws of the United States of America or any state thereof (or domestic branches of foreign banks), subject to supervision and examination by federal or state banking or depository institution authorities, and having, at the time of the Trust's investment or contractual commitment to invest therein, the highest short-term unsecured debt rating from each Rating Agency; (c) commercial paper (having original maturities of no more than 270 days) having, at the time of the Trust's investment or contractual commitment to invest therein, the highest short-term rating from each Rating Agency; (d) investments in no-load money market funds having a rating from each rating agency rating such fund in its highest investment category; or (e) notes or bankers' acceptances (having original maturities of no more than 270 days) issued by any depository institution or trust company described in clause (b) above. provided that securities which meet the following criteria shall not be Eligible Investments: (a) any security to which S&P has attached the symbol "r" in its rating, (b) any security that contains a noncredit risk that the "r" was intended to highlight, whether or not such security is rated, and (c) all mortgage-backed securities. "Eligible Receivable" shall mean, at any time, unless otherwise specified, each Receivable or portion thereof: (i) as to which, at the time of the Transfer of such Receivable to the Trust, the Transferor or the Trust will have good and marketable title thereto free and clear from any and all Liens except as created hereunder, and which has been the subject of either a valid transfer and assignment from the Transferor to the Trust of all the Transferor's right, title and interest therein (and in the proceeds thereof), or the grant of a first priority perfected "security interest" (within the meaning of the UCC of the jurisdiction the law of which governs the perfection of the interest in such Receivable created hereunder) therein (and in the proceeds thereof); (ii) which is not a Defaulted Receivable or a Diluted Receivable; (iii) which arose in the ordinary course of business of any Originator and is an account receivable representing all or part of the sales price of merchandise or services within 7 14 the meaning of Section 3(c)(5) of the Investment Company Act, the Obligor of which is primarily liable with respect thereto; (iv) which is an "account" (within the meaning of Section 9-106 of the UCC of the jurisdiction the law of which governs the perfection of the interest in such Receivable created hereunder); (v) which is denominated and payable only in United States dollars in the United States; (vi) the Obligor of which is a United States resident; (vii) which will at all times be the legal and assignable payment obligation of the Obligor of such Receivable, enforceable against such Obligor in accordance with its terms except as such enforceability may be limited by applicable bankruptcy, reorganization, insolvency, moratorium or other laws affecting creditors' rights generally, and except as such enforceability may be limited by general principles of equity (whether considered in a suit at law or in equity); (viii) which was created in compliance with, and which, at the time of the Transfer of such Receivable to the Trust, does not contravene in any material respect any applicable Requirements of Law, and the Obligor of which is not in violation of any such Requirements of Law in any material respect with respect to such Receivable; (ix) which satisfies in all material respects all applicable requirements of the Credit Policy and Procedures Manual; (x) with respect to which all material consents, licenses, approvals or authorizations of, or registrations or declarations with, any Governmental Authority required to be obtained, effected or given in connection with the creation of such Receivable have been duly obtained, effected or given and are in full force and effect; (xi) which is not subject to any specific waiver or modification except for a Receivable which is subject to a waiver or modification as permitted in accordance with the Credit Policy and Procedures Manual and which waiver or modification is reflected in the Servicer's records and computer files relating thereto; (xii) which is not subject to any enforceable provision prohibiting the transfer or assignment by any Originator of such payment obligation; 8 15 (xiii) the payment terms of which conform in all material respects to the provisions of the Credit Policy and Procedures Manual; (xiv) the Obligor of which is not a Controlled Affiliate of Dell, the Servicer or the Transferor; and (xv) the Obligor of which has been directed to remit payments with respect thereto to a Dell Post-Office Box or a Dell Collection Account. "Eligible Servicer" shall mean Dell USA L.P., the Trustee or another entity which, at the time of its appointment as Servicer, (a) is servicing a portfolio of trade receivables and has demonstrated the ability to professionally and competently service a portfolio of similar trade receivables with reasonable standards of skill and care and (b) is legally qualified and has the capacity to service the Receivables. "Enhancement" shall mean the rights and benefits provided to the Investor Certificateholders of any Series or Class pursuant to any letter of credit, surety bond, cash collateral account, spread account, guaranteed rate agreement, maturity liquidity facility, tax protection agreement, interest rate swap agreement or other similar arrangement. "Enhancement Agreement" shall mean any agreement, instrument or document governing the terms of any Enhancement of any Series or Class or pursuant to which any Enhancement of any Series or Class is issued or outstanding. "Enhancement Provider" shall mean a Person providing any Enhancement, other than any Certificateholders (including any holder of the Transferor Certificate) the Certificates of which are subordinated to any other Series or Class. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time. "Expected Final Payment Date" with respect to any Series, shall have the meaning specified in the related Supplement. "Extended Term Receivable" shall mean an Eligible Receivable arising under an account with an Obligor, the payment terms of which allow it to be paid in full more than 30 days but no more than 90 days after the original billing date of such Receivable. "Extended Term Receivable Reduction Amount" shall mean, at any time, the amount by which the aggregate outstanding balances of all Extended Term Receivables exceeds 5% of the aggregate principal balance of all Receivables at such time. 9 16 "FDIC" shall mean the Federal Deposit Insurance Corporation or any successor. "Floating Allocation Percentage" with respect to each Series, shall have the meaning specified in the related Supplement; provided, however, that the aggregate of the Floating Allocation Percentages with respect to all outstanding Series shall not exceed 100%. "Floorplan Receivable" shall mean a Receivable which is guaranteed by a third party obligor and which is subject to a financing arrangement with the recipient of merchandise of Dell Marketing L.P. or Dell Direct Sales L.P. "Floorplan Receivable Reduction Amount" shall mean, at any time, the product of (a) the aggregate outstanding balances of Floorplan Receivables and (b) 1.50%. "Government Receivable" shall mean a Receivable with respect to which the Obligor is a state or municipal entity or the federal government of the United States or a political, administrative or regulatory subdivision thereof. "Government Receivable Reduction Amount" shall mean, at any time, the amount by which the aggregate outstanding balances of Government Receivables exceeds 2% of the aggregate principal balance of all Receivables at such time. "Governmental Authority" shall mean any country or nation, any political subdivision, state or municipality of such country or nation, and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to the government of any country or nation or political subdivision thereof. "Indemnified Amounts" shall have the meaning specified in Section 7.03. "Indemnified Party" shall have the meaning specified in Section 7.03. "Independent Public Accountants" means any of (a) Arthur Andersen & Co., (b) Deloitte & Touche, (c) Coopers & Lybrand, (d) Ernst & Young, (e) KPMG Peat Marwick L.L.P. and (f) Price Waterhouse L.L.P. or any of their successors so long as such successor is one of the six largest national accounting firms; provided that such firm is independent with respect to the Servicer within the meaning of the Act. "Initial Invested Amount" shall mean, with respect to any Series and for any date, an amount equal to the initial invested amount specified in the related Supplement. 10 17 "Initial Issuance Date" shall mean, with respect to any Series, the Closing Date specified in the related Supplement. "Insolvency Event" shall mean, with respect to a specified Person, (a) the filing of a decree or order for relief by a court having jurisdiction in the premises in respect of such Person or any substantial part of its property in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or the appointing of a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for such Person or for all or any substantial part of its property, or the ordering of the winding-up or liquidation of such Person's business, and such decree or order shall remain unstayed and in effect for a period of 60 consecutive days; or (b) the commencement by such Person or by a Controlled Affiliate of such Person (provided that in the case of Dell or any of its Affiliates, such Controlled Affiliate is domiciled in the United States and has assets which constitute 2.5% or more of the assets of Dell) of a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or the consent by such Person to the entry of an order for relief in an involuntary case under any such law, or the consent by such Person to the appointment of or taking possession by a receiver, liquidator, assignee for the benefit of creditors, custodian, trustee, sequestrator or similar official for such Person or for all or any substantial part of its property, or the making by such Person of any general assignment for the benefit of creditors; or (c) the failure by such Person generally to pay its debts as such debts become due or the admission by such Person in writing (as to which the Trustee shall have written notice) of its inability to pay its debts generally as they become due. "Internal Revenue Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. "Invested Amount" shall mean, with respect to any Series and for any date, an amount equal to the invested amount specified in the related Supplement. "Investment Company Act" shall mean the Investment Company Act of 1940, as amended from time to time. "Investor Certificate" shall mean any one of the certificates executed by the Transferor and authenticated by or on behalf of the Trustee, in substantially the form attached to the related Supplement, other than the Transferor Certificate. "Investor Certificateholder" shall mean the Person in whose name an Investor Certificate is registered in the Certificate Register. 11 18 "Investor Collections" with respect to each Series, shall have the meaning specified in the related Supplement. "Lien" shall mean any mortgage, deed of trust, pledge, hypothecation, assignment, encumbrance, lien (statutory or other), preference, participation interest, priority or other security agreement or preferential arrangement of any kind or nature whatsoever resulting in an encumbrance against real or personal property of a Person, including, without limitation, any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing and the filing of any financing statement under the UCC or comparable law of any jurisdiction to evidence any of the foregoing. "Loss and Dilution Reserve" shall mean, with respect to any Series, the amount set forth in the related Supplement. "Loss to Liquidation Ratio" shall mean, as to any date, the ratio (expressed as a percentage) calculated by dividing (a) the aggregate Outstanding Balance of all Receivables written off as uncollectible in accordance with the Credit Policy and Procedures Manual by the Servicer during the one-month period most recently ended by (b) the aggregate amount of Collections during such one-month period. "Majority in Interest" shall mean, with respect to each Series, the Holders of Certificates evidencing 51% or more of the aggregate Certificateholders' Interest in such outstanding Series. "Moody's" shall mean Moody's Investors Service, Inc. or its successor. "Net Receivables Balance" shall mean, at any time, the excess of (a) the aggregate Outstanding Balance of Receivables over (b) the sum of (i) the aggregate Outstanding Balance of Receivables that are not Eligible Receivables at such time, plus (ii) the Overconcentration Amount at such time, plus (iii) the aggregate amount of Collections that have not been applied to the corresponding Receivables on the records of the Servicer, plus (iv) the Extended Term Receivable Reduction Amount, plus (v) the Government Receivable Reduction Amount, plus (vi) the Floorplan Receivable Reduction Amount. "Obligor" shall mean each Person who is obligated to pay for merchandise or services provided by any Originator which gave rise to a Receivable, including any guarantor of such Person's obligations. "Officer's Certificate" shall mean, unless otherwise specified in this Agreement, a certificate signed by the Chief Executive Officer, the Chief Financial Officer, the Treasurer or 12 19 the Controller of the Transferor or of the Servicer or any Successor Servicer, as the case may be, and delivered to the Trustee and each Rating Agency. "Opinion of Counsel" shall mean a written opinion of counsel, who, unless otherwise specified, may be counsel for, or an employee of, the Person providing the opinion, or an Affiliate of such Person, and who shall be reasonably acceptable to the Trustee. "Originator" shall mean the divisions of Dell Marketing L.P., an indirect wholly-owned subsidiary of Dell, and Dell Direct Sales L.P., an indirect wholly-owned subsidiary of Dell, that are listed in Schedule II and any other Person or division of any Person designated from time to time as an Originator pursuant to the terms of Section 2.07 and the Receivables Purchase Agreements. "Outstanding Balance" of any Receivable at any time shall mean the then outstanding principal balance thereof. "Overconcentration Amount" shall mean, at any time, the sum of the amounts, if any, by which the aggregate Outstanding Balance of Eligible Receivables of the types specified in clauses (a) through (g) of the definition of Concentration Limit in the related Supplement owned by the Trust exceeds the aggregate of the respective Concentration Amounts. "Parent Undertaking Agreement" shall mean the agreement among Dell and the Trustee, dated as of November 21, 1995, governing the terms and conditions upon which Dell shall cause the performance of certain obligations of the Servicer. "Partial Amortization Period" shall mean, if the Transferor has not elected to begin depositing Cure Funds to the Cure Account of each Series (thereby initiating a Cure Period) the period beginning on a Pool Non-compliance Date and continuing until the earlier of (a) the date on which the Net Receivables Balance equals or exceeds the Required Net Receivables Balance and (b) the fifth consecutive day following such Pool Non-compliance Date. "Person" shall mean any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, Governmental Authority or any other entity of similar nature. "Pool Non-compliance Date" shall mean any day on which the Net Receivables Balance falls below the Required Net Receivables Balance. "Principal Terms" shall mean, with respect to any Series: (a) the name or designation; (b) the initial principal amount (or method for calculating such amount); (c) the Certificate Rate (or method for the determination thereof); (d) the payment date or 13 20 dates and the date or dates from which interest shall accrue; (e) the method for allocating collections to Investor Certificate- holders; (f) the designation of any Series Accounts and the terms governing the operation of any such Series Accounts; (g) the issuer and terms of any form of Enhancement with respect thereto; (h) the terms on which the Investor Certificates of such Series may be exchanged for Investor Certificates of another Series, repurchased or redeemed by the Transferor or remarketed to other investors; (i) the number of Classes of Investor Certificates of such Series and, if more than one Class, the rights and priorities of each such Class; (j) the Series Servicing Fee and the Series Trustee's Fee; and (k) the Amortization Date and the Termination Date. "Purchase Price" shall have the meaning specified in each Receivables Purchase Agreement. "Rating Agency" shall mean each such nationally-recognized statistical rating organization which has rated any Series of Certificates at the request of the Transferor. "Rating Agency Condition" shall mean, with respect to any specified action, that each Rating Agency, upon the written request of the Transferor, the Servicer or the Trustee, shall have notified such parties in writing that such action in and of itself will not result in a reduction or withdrawal of the rating of any outstanding Series or Class with respect to which it is a Rating Agency. "Receivable" shall mean an account receivable shown on the records of any Originator as of the Transfer Date, and from time to time thereafter, arising from the delivery of merchandise or providing of services by any Originator in the ordinary course of business of such Originator, including without limitation all monies due or to become due and all Collections and other amounts received from time to time with respect to such Receivable and all proceeds (including, without limitation, "proceeds" as defined in the UCC of the jurisdiction the law of which governs the perfection of the interest on the Receivables transferred hereunder) thereof, including without limitation amounts on deposit in any Dell Collection Accounts, and "Receivables" shall mean all such Receivables. "Receivables Purchase Agreements" shall mean the agreement between Dell Marketing L.P., as seller, and the Transferor, as purchaser, dated as of the date hereof, and the agreement between Dell Direct Sales L.P., as seller, and the Transferor, as purchaser, dated as of the date hereof, both of which govern the terms and conditions upon which the Transferor shall have acquired the Receivables transferred to the Trust, as the same may from time to time be amended, modified or otherwise supplemented. 14 21 "Reconveyed Receivable" shall have the meaning specified in Section 2.04. "Record Date" shall mean, with respect to any Distribution Date, the last day of the preceding calendar month. "Removed Originator" shall have the meaning specified in Section 2.07(b). "Required Net Receivables Balance" shall mean as of any day of determination, the sum of (i) the aggregate of the Loss and Dilution Reserves for all outstanding Series, (ii) the aggregate of the Yield/Fee Reserves for all outstanding Series and (iii) the aggregate of all Class A Invested Amounts for all outstanding Series (computed as if reduced by (A) the amount of Cure Funds held in the Cure Account for each Series and (B) the amount of funds held at such time in the Concentration Account allocated to the Trust Partial Amortization Amount allocable to each such Series). "Requirements of Law" shall mean any law, treaty, rule or regulation, or final determination of an arbitrator or Governmental Authority, and, when used with respect to any Person, the certificate of incorporation and by-laws or other organizational or governing documents of such Person. "Responsible Officer" shall mean, (i) when used with respect to the Trustee, any officer within the corporate trust department of the Trustee including any vice president, assistant vice president, secretary, assistant secretary, treasurer, assistant treasurer, trust officer or any other officer of the Trustee who customarily performs functions similar to those performed by the Persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of such officer's knowledge of and familiarity with the particular subject, (ii) when used with respect to the Transferor, any of the Chairman, the President, any Vice President, the Treasurer, any Assistant Treasurer, the Secretary or any Assistant Secretary of its general partner, (iii) when used with respect to the Servicer, Dell Marketing L.P. or Dell Direct Sales L.P., any of the Chairman, the Chief Executive Officer, the Chief Financial Officer, the General Counsel, the Treasurer, any Assistant Treasurer, the Secretary or any Assistant Secretary of its general partner and (iv) when used with respect to Dell, any of the Chairman, the Vice Chairman, the Chief Executive Officer, the Chief Financial Officer, the Treasurer, the General Counsel or the Secretary. "Revolving Period" shall mean, with respect to any Series, the period specified in the related Supplement. 15 22 "S&P" shall mean Standard & Poor's Corporation or Standard & Poor's Ratings Group, as applicable, or the successor of either of them. "Series" shall mean any series of Investor Certificates. "Series Account" shall mean any deposit, trust, escrow, reserve or similar account maintained for the benefit of the Investor Certificateholders of any Series or Class, as specified in any Supplement. "Series Allocation Percentage" shall mean, with respect to any Series, the percentage equivalent of a fraction, the numerator of which is the sum of (a) the Class A Invested Amount for such Series (computed as if reduced by (A) the amount of Cure Funds held in the Cure Account for such Series and (B) the cumulative amount of funds held at such time in the Concentration Account allocated to the portion of the Trust Partial Amortization Amount allocable to such Series) plus (b) the Yield/Fee Reserve for such Series, plus (c) the Loss and Dilution Reserve for such Series, and the denominator of which is the aggregate of the amounts specified in clauses (a), (b) and (c) for all outstanding Series. "Series Servicing Fee" shall mean, with respect to any Series, the amount specified in the applicable Supplement. "Series Trustee's Fee" shall mean, with respect to any Series, the amount specified in the applicable Supplement. "Service Transfer" shall have the meaning specified in Section 10.01. "Servicer" initially shall mean Dell USA, L.P., and after any Service Transfer shall mean the Successor Servicer. "Servicer Default" shall have the meaning specified in Section 10.01. "Servicing Fee" shall have the meaning specified in Section 3.02(a). "Successor Servicer" shall have the meaning specified in Section 10.02(a). "Supplement" shall mean, with respect to any Series, a supplement to this Agreement, executed and delivered in connection with the original issuance of the Investor Certificates of such Series pursuant to Article VI, and all amendments, modifications or supplements to this Agreement. 16 23 "Supplemental Certificate" shall have the meaning specified in Section 6.08(c). "Tax Opinion" shall mean, with respect to any action, an Opinion of Counsel who is not an employee of the Servicer or any Affiliate of the Servicer to the effect that, for federal and Texas (and any other State where substantial servicing activities in respect of Receivables are conducted by the Transferor or the Servicer if there is a substantial change from present servicing activities) state income and franchise tax purposes, (a) such action will not adversely affect the characterization of the Investor Certificates of any outstanding Series or Class as debt of the Transferor for tax purposes, (b) such action will not cause a taxable event to any Investor Certificateholder, (c) following such action the Trust should not be treated as an association (or publicly traded partnership) taxable as a corporation, (d) in the case of the original issuance of Certificates, either (i) the Investor Certificates will properly be characterized as debt of the Transferor or (ii) the Investor Certificates should properly be characterized as debt of the Transferor, or if not debt, as an interest in a partnership and not in an association taxable as a corporation and (e) in the case of Section 6.08(b), the Investor Certificates of the new Series will be characterized as debt. "Termination Date" shall mean, with respect to any Series, the termination date specified in the related Supplement. "Termination Notice" shall have the meaning specified in Section 10.01. "Transaction Documents" shall mean the collective reference to this Agreement, any Supplement, any Certificates, the Receivables Purchase Agreements, the Cross-Guarantee Agreement, the Parent Undertaking Agreement and any Certificate Purchase Agreement. "Transfer" shall have the meanings specified in Section 2.01(a), it being understood that the date of Transfer of any Receivable or other Trust Asset shall be the date on which such Receivable or other Trust Asset shall be created or otherwise arise and, in the case of such Receivable, be acquired by the Transferor under the applicable Receivables Purchase Agreement. "Transfer Agent and Registrar" shall have the meaning specified in Section 6.03(a). "Transfer Date" shall mean the initial date of Transfer of Receivables into the Trust. "Transferor" shall mean Dell Receivables L.P., a Texas limited partnership. 17 24 "Transferor Certificate" shall mean the certificate executed by the Transferor and authenticated by or on behalf of the Trustee, in substantially the form of Exhibit A hereto. "Transferor Collections" shall mean, with respect to any date, that portion of the Collections deposited to the Concentration Account equal to the product of (i) the Transferor Percentage on such date times (ii) the aggregate amount of such Collections. "Transferor Interest" shall have the meaning specified in Section 4.01(a). "Transferor Percentage" shall mean at any time 100% minus the aggregate of the Floating Allocation Percentages of all outstanding Series at such time. "Transferor Receivable" shall mean a Receivable acquired by the Transferor pursuant to a Receivables Purchase Agreement. "Transferor's Account" shall mean the special account (account number 40685227), under the dominion and control of the Transferor, for deposits by the Servicer pursuant to the applicable Supplement, maintained at Citibank, N.A. in New York, New York, or such other account at such other bank, under the dominion and control of the Transferor, as Transferor may designate for such purpose from time to time. "Trust" shall mean the Dell Trade Receivables Master Trust created by this Agreement. "Trust Assets" shall have the meaning specified in Section 2.01(a). "Trust Early Amortization Event" shall have the meaning specified in Section 9.01. "Trust Invested Amount" shall mean, at any time, the sum of the Invested Amounts for all outstanding Series at such time. "Trust Partial Amortization Amount" shall mean, with respect to any date of determination during a Partial Amortization Period, the amount by which the Net Receivables Balance is less than the Required Net Receivables Balance. "Trustee" shall mean Norwest Bank Minnesota, National Association, in its capacity as trustee on behalf of the Trust, or its successor in interest, or any successor trustee appointed as herein provided. "Trustee's Account" with respect to each Series, shall have the meaning specified in the related Supplement. 18 25 "Trustee's Fee" shall have the meaning specified in Section 11.05(a). "Turnover Rate" shall mean, for any date, the average of the percentage equivalent of a fraction for each of the three most recently ended months the numerator of which is the Net Receivables Balance as of the last day of each such month and the denominator of which is the aggregate balance of Receivables transferred to the Trust during each such month; provided, however, that with respect to any such months, or portion thereof, occurring prior to the Transfer Date, the denominator of such fraction shall be the aggregate balance of Receivables originated by the Originators during such month or portion thereof. "UCC" shall mean the Uniform Commercial Code, as amended from time to time, as in effect in any applicable or specified jurisdiction. "Undivided Fractional Interest" with respect to each Series, shall have the meaning specified in the related Supplement. "Weighted Average Term" shall mean, as of any date, a fraction the numerator of which is the sum of the product for each Receivable generated by the Originators during the preceding month of (i) the outstanding balance of such Receivable (at the time such Receivable is transferred to the Trust) times (ii) the payment term (in days) for each such Receivable, and the denominator of which is the aggregate outstanding balance of such Receivables (at the time such Receivable is transferred to the Trust). "Yield/Fee Reserve" with respect to each Series, shall have the meaning specified in the related Supplement. SECTION 1.02. Other Definitional Provisions. (a) All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein. (b) As used herein and in any certificate or other document made or delivered pursuant hereto or thereto, accounting terms not defined in this Agreement, and accounting terms partly defined in this Agreement to the extent not completely defined, shall have the respective meanings given to them under generally accepted accounting principles or regulatory accounting principles, as applicable and in effect from time to time. To the extent that the definitions of accounting terms herein are inconsistent with the meanings of such terms under generally accepted accounting principles or regulatory accounting principles, the definitions contained herein shall control. (c) The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to 19 26 this Agreement as a whole and not to any particular provision of this Agreement; and Section, Schedule and Exhibit references contained in this Agreement are references to Sections, Schedules and Exhibits in or to this Agreement unless otherwise specified; and the term "including" means "including without limitation". 20 27 ARTICLE II TRANSFER OF RECEIVABLES SECTION 2.01. Transfer of Receivables. (a) By execution of this Agreement, the Transferor does hereby transfer, assign, set-over and otherwise convey without recourse, except as expressly provided herein (the making of such transfer, assignment, set-over and conveyance being a "Transfer", and so to transfer, assign, set-over and otherwise convey being to "Transfer") to the Trust, for the benefit of the Certificateholders: (i) all of the Transferor's right, title and interest in, to and under all Transferor Receivables existing at the close of business on the Transfer Date and thereafter created from time to time, and conveyed to the Transferor under the Receivables Purchase Agreements from time to time, until the termination of the Revolving Period of the last outstanding Series, and all monies due or to become due and all Collections and other amounts received from time to time with respect to such Transferor Receivables and all proceeds (including, without limitation, "proceeds" as defined in the UCC of the jurisdiction the law of which governs the perfection of the interest in the Transferor Receivables transferred hereunder) thereof; and (ii) all of the Transferor's rights, remedies, powers and privileges under the Receivables Purchase Agreements. Such property described in the preceding sentence, together with all monies from time to time on deposit in, and all Eligible Investments and other securities, instruments and other investments purchased from funds on deposit in, the Concentration Account, the Dell Collection Accounts and any Series Account, and any Enhancement shall constitute the assets of the Trust (collectively the "Trust Assets"). The foregoing Transfer does not constitute and is not intended to result in an assumption by the Trust, the Trustee or any Certificateholder of any obligation of the Servicer, Dell, the Transferor or any other Person in connection with the Receivables or under the Receivables Purchase Agreements or under any agreement or instrument relating thereto, including, without limitation, any obligation to any Obligor. The foregoing Transfer to the Trust shall be made to the Trustee, on behalf of the Trust, and each reference in this Agreement to such Transfer shall be construed accordingly. The Transferor agrees to record and file from time to time, at its own expense, financing statements and other documents (and amendments thereto, assignments thereof and continuation statements, when applicable) with respect to the Receivables and 21 28 the other Trust Assets now existing and hereafter created meeting the requirements of applicable law in such manner and in such jurisdictions as are necessary to perfect, and maintain perfection of, the Transfers of the Receivables and the other Trust Assets to the Trust, and to deliver a file-stamped copy of any such financing statement or other document or other evidence of such filing to the Trustee on or prior to the Transfer Date. The Trustee shall be under no obligation whatsoever to file any such financing statements, documents, amendments, assignments or continuation statements, or to make any other filing under the UCC in connection with such Transfer. The Servicer and the Transferor further agree, at their own expense, on or prior to the Transfer Date, to mark their computer records in a manner reasonably calculated to indicate that the Receivables have been conveyed, in the case of any Originator, to the Transferor in accordance with the Receivables Purchase Agreements and, in the case of the Transferor, to the Trust in accordance with this Agreement for the benefit of the Certificate- holders. (b) The Trustee agrees to use its best efforts, and shall cause its agents or representatives to use their best efforts, to hold in confidence all Confidential Information; provided that nothing herein shall prevent the Trustee from delivering copies of any financial statements and other documents constituting Confidential Information, or disclosing any other Confidential Information, (i) to a Successor Servicer or as required by a Requirement of Law applicable to the Trustee, (ii) as required in the performance of the Trustee's duties hereunder, (iii) as required in enforcing the rights of the Certificateholders hereunder or (iv) as provided in any Supplement. The Trustee agrees to take such measures as shall be reasonably requested by the Transferor to protect and maintain the security and confidentiality of all Confidential Information and, in connection therewith, will allow the Transferor to inspect the Trustee's security and confidentiality arrangements from time to time during normal business hours. The Trustee shall provide written notice to the Transferor whenever any such disclosure is made. SECTION 2.02. Acceptance by Trustee. (a) The Trustee hereby acknowledges its acceptance on behalf of the Trust of all right, title and interest in and to the Trust Assets, now existing and hereafter created and transferred to the Trust pursuant to Section 2.01 and the Trustee declares that it shall maintain such right, title and interest, upon the trust herein set forth, for the benefit of all Certificateholders. (b) The Trustee shall have no power to create, assume or incur indebtedness or other liabilities in the name of the Trust other than as contemplated in this Agreement. 22 29 SECTION 2.03. Representations and Warranties of the Transferor Relating to the Transferor. The Transferor hereby represents and warrants to the Trust as of the date hereof and, by accepting on the Transfer Date the proceeds of such Transfer, as of the Transfer Date and, with respect to any Series, as of the date of the related Supplement and the related Initial Issuance Date, unless otherwise stated in such Supplement, that: (a) Organization and Good Standing. The Transferor is a limited partnership duly organized and validly existing under the laws of the State of Texas and has full power, authority and legal right to own and convey its properties and conduct its business as presently owned or conducted, to execute, deliver and perform its obligations under this Agreement and the Receivables Purchase Agreements, and to execute and deliver to the Trustee pursuant hereto the Certificates. (b) Due Qualification. The Transferor is duly qualified to do business and has obtained all necessary licenses or approvals, in each jurisdiction in which failure to so qualify or to obtain such licenses or approvals would have a material adverse effect on the Transferor's ability to perform its obligations hereunder, under the applicable Supplement or under the Receivables Purchase Agreements. (c) Due Authorization. The execution, delivery and performance of this Agreement, the applicable Supplement and the Receivables Purchase Agreements by the Transferor, the execution and delivery by the Transferor to the Trustee of the Certificates, and the consummation by the Transferor of the transactions contemplated by this Agreement, the applicable Supplement and the Receivables Purchase Agreements, have been duly and validly authorized by all necessary action on the part of the Transferor and this Agreement and the other agreements and instruments executed or to be executed in connection herewith have been duly executed and delivered on behalf of the Transferor. (d) Enforceability. Each of this Agreement, the applicable Supplement and the Receivables Purchase Agreements constitutes a legal, valid and binding obligation of the Transferor enforceable against the Transferor in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, reorganization, insolvency, moratorium or other similar laws affecting creditors' rights generally, now or hereafter in effect, and except as such enforceability may be limited by general principles of equity (whether considered in a suit at law or in equity). Each of the Receivables Purchase Agreements is in full force and effect, and is not subject, as to any party thereto, to any specific dispute, offset, counterclaim or defense of such party. 23 30 (e) No Conflict. The Transferor's execution and delivery of this Agreement, any Supplement, the Receivables Purchase Agreements and the Certificates, performance of the transactions contemplated by this Agreement, any Supplement and the Receivables Purchase Agreements, and fulfillment of the terms hereof and thereof applicable to the Transferor, do not contravene the Transferor's limited partnership agreement, conflict with or violate any Requirements of Law applicable to the Transferor, violate any provision of, or require any filing (except for the filings under the UCC required by this Agreement, each of which has been or is being duly made and will be in full force and effect on the applicable Initial Issuance Date), registration, consent or approval under, any Requirement of Law presently in effect having applicability to the Transferor, except for such filings, registrations, consents or approvals as have already been obtained and are in full force and effect, conflict with, result in any breach of any of the material terms and provisions of, or constitute (with or without notice or lapse of time or both) a default under, any indenture, contract, agreement, mortgage, deed of trust or other instrument to which the Transferor is a party or by which it or its properties or assets are bound, or result in, or require, the creation or imposition of any Lien upon or with respect to any of the properties now owned or hereafter acquired by the Transferor other than as specifically contemplated by this Agreement. (f) No Proceedings. There are no proceedings, injunctions, writs, restraining orders or other orders or investigations pending or, to the best knowledge of the Transferor, threatened against the Transferor before any Governmental Authority. (g) Consents. No authorization, consent, license, order or approval of, registration or declaration with any Person or Governmental Authority is required to be obtained, effected or given by the Transferor in connection with the execution and delivery of this Agreement, the applicable Supplement, the Receivables Purchase Agreements, the transfer of the Trust Assets and the Certificates to the Trust by the Transferor or the performance of its obligations under this Agreement, the applicable Supplement and the Receivables Purchase Agreements or the transactions contemplated hereby and thereby and the fulfillment by the Transferor of the terms hereof, except for (i) the filing of the financing statements or other documents required to have been filed on or prior to the Transfer Date pursuant to Section 2.01, all of which were so filed and are in full force and effect, and (ii) the filing from time to time of any amendments, assignments or continuation statements which may become applicable pursuant to Section 2.01. (h) Liens on Properties. Except as created hereby, and except for Liens that will be terminated prior to the Transfer 24 31 Date, there are no Liens of any nature whatsoever on any Receivable. The Transferor is not a party to any contract, agreement, lease or instrument (other than this Agreement) the performance of which, either unconditionally or upon the happening of an event, will result in or require the creation of any Lien on any Receivable, or otherwise result in a violation of this Agreement. (i) Contractual Obligations. (i) The Transferor is not a party to any indenture, loan or credit agreement or any lease or other agreement or instrument, or subject to any Requirements of Law, that would have a material adverse effect on the ability of the Transferor to carry out its obligations under this Agreement, the applicable Supplement or the Receivables Purchase Agreements, and (ii) neither the Transferor nor, to the best of the knowledge of the Transferor, any other party is in default in any respect under or with respect to the Receivables Purchase Agreements or any other material contract, agreement, lease or other instrument to which the Transferor is a party. (j) Investment Company Act. The Transferor is not an "investment company", or an "affiliated person" of, or "promoter" or "principal underwriter" for, or a company controlled by, an "investment company", within the meaning of and as such terms are defined in the Investment Company Act. (k) Locations. The chief place of business and chief executive office of the Transferor, and the office where the Transferor keeps the originals of its books, records and documents regarding the Receivables and the other Trust Assets of the Transferor are located at the address of the Transferor specified in Section 13.05. The Transferor maintains no other business locations. (l) Tradenames. The legal name of the Transferor is as set forth on the signature page of this Agreement and the Transferor has no tradenames, fictitious names, assumed names or "doing business as" names. (m) Subsidiaries. The Transferor has no subsidiaries. (n) Information. Each certificate, information, exhibit, financial statement, document, book, record or report furnished by the Transferor to the Trustee, each Rating Agency or the Servicer in connection with this Agreement is accurate in all material respects as of its date. (o) Solvency. The Transferor is solvent and will not become insolvent after giving effect to the transactions contemplated by this Agreement; the Transferor is currently repaying all of its indebtedness as such indebtedness becomes due; and, after giving effect to the transactions contemplated by this 25 32 Agreement, the Transferor will have adequate capital to conduct its business as presently conducted and as contemplated by this Agreement. (p) Compliance. The Transferor has complied, and will comply on each Initial Issuance Date, in all material respects with all Requirements of Law with respect to it, its business and properties and all Receivables transferred to the Trust hereunder and the Contracts related thereto. (q) Taxes. The Transferor has filed all material tax returns (federal, state and local) which it reasonably believes are required to be filed and has paid or made adequate provision for the payment of all taxes, assessments and other governmental charges due from the Transferor or is contesting any such tax, assessment or other governmental charge in good faith through appropriate proceedings. The Transferor knows of no basis for any material additional tax assessment for any fiscal year for which adequate reserves have not been established. (r) Use of Proceeds. No proceeds of the issuance of any Certificate will be used by the Transferor to acquire any security in a transaction that is subject to Sections 13 and 14 of the Securities Exchange Act of 1934, as amended, or to purchase or carry any margin security in violation of any applicable law or regulation. (s) Dell Collection Accounts. The Dell Collection Account Banks are the only institutions holding Dell Collection Accounts for the receipt of payments from Dell Post-Office Boxes in respect of Receivables (subject to such changes as may be made from time to time in accordance with Section 4.02(b)) and all Obligors, and only such Obligors, have been or will be instructed to make payments only to Dell Collection Accounts and such instructions have not been modified or revoked by Transferor and such instructions are, to the best knowledge of the Transferor, in full force and effect. (t) Trust Early Amortization Event. As of the Initial Issuance Date for any Series, no Trust Early Amortization Event and no condition that with the giving of notice and/or the passage of time would constitute a Trust Early Amortization Event, has occurred and is continuing. (u) ERISA. No Plan (as defined in Section 3(3) of ERISA) maintained by the Transferor or any of its ERISA Affiliates (as defined in Section 414(b), (c), (m) or (o) of the Internal Revenue Code) has any accumulated funding deficiency (within the meaning of Section 302 of ERISA or Section 412 of the Internal Revenue Code), whether or not waived. The Transferor and each ERISA Affiliate of the Transferor has timely made all contributions required to be made by it to any Plan and Multiemployer Plan (as 26 33 defined in Section 4001(a)(3) of ERISA) to which contributions are or have been required to be made since January 3, 1991 by the Transferor or such ERISA Affiliate, and no event requiring notice to the PBGC (as defined in Section 2613.2 of ERISA Regulations) under Section 302(f) of ERISA has occurred and is continuing or could reasonably be expected to occur with respect to any such Plan, in any case, that could reasonably be expected to result, directly or indirectly, in any Lien being imposed on the property of the Transferor or the payment of any material amount to avoid such Lien. No Plan Event (as defined in Section 4043 of ERISA) with respect to the Transferor or any of its ERISA Affiliates has occurred or could reasonably be expected to occur that could reasonably be expected to result, directly or indirectly, in any Lien being imposed on the property of the Transferor or the payment of any material amount to avoid such Lien. (v) Fraudulent Conveyance. The Transferor is not entering into the transactions contemplated hereby with the intent of hindering, delaying or defrauding creditors. (w) Limited Purpose. The Transferor engages in no activities other than those contemplated by the Transaction Documents. The representations and warranties set forth in this Section 2.03 shall survive the Transfer of the Receivables to the Trust and the issuance of the Certificates, and shall cease and be of no effect upon repayment in full of the Invested Amount of the last outstanding Series and all other obligations of the Transferor hereunder. Upon discovery by the Transferor, the Servicer or the Trustee of a material breach of any of the foregoing representations and warranties, the party discovering such breach shall give prompt written notice to the other parties and to any Enhancement Provider. The Trustee's obligations in respect of any such breach are limited as provided in Section 11.02(g). SECTION 2.04. Representations and Warranties of the Transferor Relating to the Trust Assets. The Transferor hereby represents and warrants to the Trust as of the date hereof and, by accepting on the Transfer Date the proceeds of such Transfer, as of the Transfer Date and, except for the representation and warranty contained in subparagraph (j), by accepting on each date during the Revolving Period for any Series the proceeds of each Transfer of Receivables, as of such date, that: (a) Valid Transfer. Each of the Receivables Purchase Agreements creates a valid sale, transfer and assignment to the Transferor of, and the Transferor is the legal and beneficial owner of, all right, title and interest of the Originators in and to the Receivables now existing and hereafter created during the Revolving Period and the proceeds thereof. This Agreement constitutes a valid transfer and assignment to the Trust of all right, title and 27 34 interest of the Transferor in and to the Receivables now existing and hereafter created and purchased by the Transferor pursuant to the Receivables Purchase Agreements, and in and to all other Trust Assets and the proceeds thereof and such funds as are required to be deposited pursuant to this Agreement from time to time in the Concentration Account, the Dell Collection Accounts and any Series Account, or, if this Agreement does not constitute such a transfer and assignment, constitutes a valid grant to the Trust of a first priority perfected "security interest" (as defined in the UCC of the jurisdiction the law of which governs the perfection of the interest in the Receivables and other Trust Assets created hereunder) in all right, title and interest of the Transferor in and to the Receivables now existing and hereafter created and purchased by the Transferor pursuant to the Receivables Purchase Agreements, and in and to all other Trust Assets and the proceeds thereof which, in the case of existing Receivables and the other existing Trust Assets and the proceeds thereof, is enforceable (except as such enforceability may be limited by applicable bankruptcy, reorganization, insolvency, moratorium or other similar laws affecting creditors' rights generally, now or hereafter in effect, and except as such enforceability may be limited by general principles of equity, whether considered in a suit at law or in equity) by the Trustee upon execution and delivery of this Agreement, and which, in the case of the Receivables and all other Trust Assets hereafter created and the proceeds thereof, will be enforceable (except as such enforceability may be limited by applicable bankruptcy, reorganization, insolvency, moratorium or other similar laws affecting creditors' rights generally, now or hereafter in effect, and except as such enforceability may be limited by general principles of equity, whether considered in a suit at law or in equity) by the Trustee upon such creation. Upon the filing of the appropriate financing statements and, in the case of Receivables hereafter created and the proceeds thereof, upon the creation thereof and payment therefor, the Trust shall have an ownership or first priority perfected security interest in those Trust Assets and the proceeds thereof in which a security interest may be perfected by filing appropriate financing statements. The Transferor has caused the Servicer to clearly and unambiguously mark all its computer records and all its microfiche storage files, if any, regarding such Receivables as the property of the Trust and shall cause the Servicer to maintain such records in a manner such that the Trust's perfected interest of first priority in the Receivables shall not be adversely affected in any material respect. (b) No Claim or Interest. Except as otherwise provided in this Agreement or any applicable Supplement, neither the Transferor nor any Person claiming through or under the Transferor has any claim to or interest in the Concentration Account, the Dell Collection Accounts or any Series Account. Each Receivable and the Collections with respect thereto has been or will be transferred to the Trust free and clear of any adverse claim or interest of any 28 35 other Person (other than disputes with Obligors in the ordinary course of business or in connection with an Insolvency Event of the related Obligor) not holding through the Trust. (c) Outstanding Balance; Net Receivables Balance. As of the Initial Issuance Date for any Series, the Net Receivables Balance is at least equal to the sum of (i) the aggregate of the Loss and Dilution Reserves for all outstanding Series, (ii) the aggregate of the Yield/Fee Reserves for all outstanding Series and (iii) the Trust Invested Amount (computed as if reduced by (A) the aggregate amount of Cure Funds held in the Cure Accounts of all outstanding Series and (B) funds allocated to the Trust Partial Amortization Amount and held in the Concentration Account). (d) Liens. Each Receivable and all other Trust Assets have been Transferred to the Trust free and clear of any Lien except as created hereby or by the Receivables Purchase Agreements. (e) Eligibility. Each Receivable was purchased in accordance with the terms of the Receivables Purchase Agreements and each Receivable that was classified as an "Eligible Receivable" by the Transferor in any document or report delivered hereunder satisfied, at the time of such classification, the requirements of eligibility contained in the definition of Eligible Receivable; provided, however, that this representation shall not cover Reconveyed Receivables. (f) Investment Company Act. Each Transfer of Receivables to the Trust hereunder constitutes a purchase or other acquisition of notes, drafts, acceptances, open accounts receivable or other obligations representing part or all of the sales price of merchandise or services within the meaning of Section 3(c)(5) of the Investment Company Act. (g) Dell Post-Office Boxes, Dell Collection Accounts and the Concentration Account. Specified on Schedule I hereto are (i) the Dell Post-Office Box numbers, (ii) the names, addresses and ABA numbers of all the Dell Collection Account Banks, together with the account numbers of the Dell Collection Accounts and the name of a contact person at each Dell Collection Account Bank and (iii) the name, address and ABA number of the Concentration Account Bank, together with the account number and the name of a contact person for the Concentration Account. (h) No Rescission. Neither any Receivable transferred hereunder nor any Contract has been satisfied, subordinated or rescinded or except as disclosed in writing to the Trustee, amended in any manner and such Receivables have not, except as permitted hereunder, been compromised, adjusted, extended, satisfied, subordinated, rescinded or modified. 29 36 (i) No Payment. The Transferor has no knowledge of any fact which would lead it to expect that, when billed, any Receivable transferred hereunder would not be paid in accordance with its terms when due. (j) Offering of Certificates. Neither the Transferor nor any agent acting on its behalf has, directly or indirectly, offered any Certificate or any similar security of the Transferor for sale to, or solicited any offer to buy any Certificate or any similar security of the Transferor from, or otherwise approached or negotiated with respect thereto, with any Person which, and neither the Transferor nor any agent acting on its behalf has taken or will take any action which, would subject the issuance or sale of any Certificate to the provisions of Section 5 of the Act or to the qualification provisions of any securities or blue sky law of any applicable jurisdiction. In the event of a breach with respect to any Receivable of the representation and warranty set forth in Section 2.04(e) (a) which cannot be cured by the Business Day following the first day on which a Responsible Officer of the Transferor has knowledge thereof and (b) which causes the Net Receivables Balance to be less than the Required Net Receivables Balance, the Transferor shall repurchase such Receivable (a "Reconveyed Receivable") from the Trust such that the payment for such Reconveyed Receivable is sufficient to cause the Net Receivables Balance to be equal to or greater than the Required Net Receivables Balance. The Servicer shall deduct the unpaid balance of such Reconveyed Receivable from the balance of Eligible Receivables in the Trust and on and after the date of such removal, such Reconveyed Receivable shall not be included in the calculation of the Net Receivables Balance. As payment for such Reconveyed Receivable, the Transferor shall make or cause to be made a deposit in the Cure Accounts of each outstanding Series in immediately available funds in an amount equal to the aggregate of the unpaid principal balance of such Reconveyed Receivable. The Transferor shall make such deposit, or cause such deposit to be made, by the close of business on the Business Day following the day a Responsible Officer of the Transferor obtains knowledge of the existence of such Reconveyed Receivable. Such deposit shall be considered payment in full for such Reconveyed Receivable during the Collection Period in which such payment occurs. Collections related to Reconveyed Receivables shall be deposited by the Trustee to the Transferor's Account. At the expense of the Servicer or the Transferor, the Trustee shall execute such documents and instruments of transfer or assignment as shall be prepared by the Transferor or the Servicer, and shall take such other actions as shall reasonably be requested by the Transferor, to effect the removal of such Reconveyed Receivable from the Trust pursuant to this paragraph. Upon removal of a Reconveyed Receivable from the Trust, the Trust shall automatically and without further action be deemed to transfer, assign, set-over and otherwise convey to or upon the order of the Transferor, 30 37 without recourse, representation or warranty, all the right, title and interest of the Trust in and to such Reconveyed Receivable and Collections with respect thereto and all proceeds thereof. The obligation of the Transferor set forth in this paragraph shall constitute the sole remedy respecting any breach of the representations and warranties set forth in this Section 2.04(e) with respect to such Receivable available to the Investor Certificateholders (or the Trustee on behalf of the Investor Certificateholders) or any other Indemnified Party. The representations and warranties set forth in this Section 2.04 shall survive the Transfer of the Receivables to the Trust and the issuance of the Certificates, and shall cease and be of no effect upon repayment in full of the Invested Amount of the last outstanding Series and all other obligations of the Transferor hereunder. Upon discovery by the Transferor, the Servicer or the Trustee of a material breach of any of the foregoing representations and warranties, the party discovering such breach shall give prompt written notice to the other parties and to any Enhancement Provider. The Trustee's obligations in respect of any such breach are limited as provided in Section 11.02(g). SECTION 2.05. Affirmative Covenants of the Transferor. The Transferor hereby covenants and agrees that, until termination of the Trust: (a) Compliance with Law. The Transferor shall duly satisfy all obligations on its part to be fulfilled under or in connection with the Receivables, will maintain in effect all qualifications required under Requirements of Law in order to properly purchase and convey the Receivables and other Trust Assets to the Trust and will comply in all material respects with all Requirements of Law applicable to the Transferor, its business and properties and the Trust Assets, where failure to so comply would have a material adverse effect on the Trust Assets or the ability of the Transferor to perform in any material respects its obligations hereunder or under the Receivables Purchase Agreements. (b) Preservation of Legal Existence. The Transferor will preserve and maintain its legal existence, rights, franchises and privileges in the jurisdiction of its formation, and qualify and remain qualified in each jurisdiction where the failure to maintain such qualification would materially and adversely affect (i) the interests of the Trustee or of the Investor Certificate- holders hereunder or in the Trust Assets, (ii) the collectibility of any Receivable or (iii) the ability of the Transferor or the Servicer to perform its obligations hereunder or under the Receivables Purchase Agreements in any material respects. The Transferor shall provide to the Trustee access to the documentation regarding the Receivables in such cases where the Trustee is required in connection with the enforcement of the 31 38 rights of Certificateholders or by applicable statutes or regulations to review such documentation, such access being afforded without charge but only (i) upon reasonable written request, (ii) during normal business hours, (iii) subject to the Transferor's normal security and confidentiality procedures and (iv) at reasonably accessible offices in the continental United States designated by the Transferor. (c) Keeping of Records and Books of Account. The Transferor will (i) keep proper books of record and account, which shall be maintained or caused to be maintained by the Transferor and shall be separate and apart from those of any Affiliate of the Transferor, in which full and correct entries shall be made of all financial transactions and the assets and business of the Transferor in accordance with generally accepted accounting principles consistently applied, (ii) maintain and implement administrative and operating procedures (including, without limitation, the ability to recreate records evidencing the Receivables in the event of the destruction of the originals thereof) and (iii) keep and maintain all documents, books, records and other information reasonably necessary or advisable for the collection of all Receivables (including, without limitation, records adequate to permit the daily identification of each new Receivable and all Collections of and adjustments to each existing Receivable). (d) Location of Records. The Transferor will keep its chief place of business, chief executive office and the office where it keeps the books, records and documents regarding the Receivables and the other Trust Assets at the address of the Transferor referred to in Section 13.05. (e) Maintenance of Separate Director. The general partner of the Transferor will maintain at least one independent director who is not an officer, director, shareholder (holding more than a five percent interest in) or employee of (i) Dell or (ii) any Affiliate of Dell or the Transferor (other than the limited partner of the Transferor), or a parent, child, spouse or sibling of any such Person; provided, however, that if such independent director dies or resigns, the general partner of the Transferor shall have 10 Business Days to replace that Person with another independent director. The general partner of the Transferor will not, without the consent of such independent director, acquiesce, petition or otherwise invoke the process of any Governmental Authority for the purpose of commencing or sustaining a case against the Transferor under any federal or state bankruptcy, insolvency or similar law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Transferor or any substantial part of its property or ordering the winding-up or liquidation of the affairs of the Transferor. 32 39 (f) Payment of Taxes, Etc. The Transferor will pay promptly when due all taxes, assessments and governmental charges or levies imposed upon it or any Trust Asset, or in respect of its income or profits therefrom, and any and all claims of any kind, except that no such amount need be paid if (i) such nonpayment could not reasonably be expected to subject any Indemnified Party to civil or criminal penalty or liability or involve any risk of the sale, forfeiture or loss of any of the property, rights or interests covered hereunder or under the Receivables Purchase Agreements, (ii) the charge or levy is being contested in good faith through appropriate proceedings and (iii) the obligation to pay such amount is adequately reserved against in accordance with and to the extent required by generally accepted accounting principles. (g) Reporting Requirements. The Transferor will: (i) within one Business Day after a Responsible Officer obtains knowledge of the occurrence of any Trust Early Amortization Event, the commencement of a Partial Amortization Period or Cure Period or any event which, with the giving of notice or lapse of time or both, would constitute a Trust Early Amortization Event, notify (either orally or in writing) the Trustee of such occurrence; (ii) as soon as possible and in any event (A) within three Business Days after a Responsible Officer obtains knowledge of the occurrence of any Trust Early Amortization Event, the commencement of a Partial Amortization Period or Cure Period, or any event which, with the giving of notice or lapse of time or both, would constitute a Trust Early Amortization Event, furnish to the Trustee and each Rating Agency the written statement of a Responsible Officer setting forth details of such Trust Early Amortization Event, the commencement of such Partial Amortization Period or Cure Period or such event and the action which the Transferor has taken and proposes to take with respect thereto, and (B) within three Business Days after a Responsible Officer obtains knowledge thereof, give written notice to the Trustee and each Rating Agency of any other event, development or information which is reasonably likely to materially and adversely affect the ability of the Transferor to perform its obligations under this Agreement or the Receivables Purchase Agreements; (iii) promptly, from time to time, furnish to the Trustee such other information, documents, records or reports regarding the Receivables, the other Trust Assets or the condition or operations, financial or otherwise, of the Transferor as the Trustee may from time to time reasonably request; 33 40 (iv) as soon as practicable and in any event not later than the later of (A) 50 days after the close of each of its first three fiscal quarters and (B) five days after the report of Dell on Form 10-Q is required to be filed with the Securities and Exchange Commission (taking into account any extensions), deliver to the Trustee and each Rating Agency its unaudited financial statements (including balance sheets as of the end of such period, related revenue and expense statements, and a statement of cash flows) (subject to normal year-end adjustments), certified by the Chief Financial Officer or Chief Accounting Officer of the Transferor and prepared in accordance with generally accepted accounting principles consistently applied; and (v) as soon as practicable and in any event not later than the later of (A) 100 days after the close of each of its fiscal years and (B) 10 days after the report of Dell on Form 10-K is required to be filed with the Securities and Exchange Commission (taking into account any extensions), deliver to the Trustee and each Rating Agency its audited financial statements (including balance sheets as of the end of such period, related revenue and expense statements, and a statement of cash flows) certified by Independent Public Accountants and prepared in accordance with generally accepted accounting principles consistently applied. (h) Receivables Purchase Agreements. The Transferor will at its expense timely perform and comply in all material respects with all provisions, covenants and other promises required to be observed by it under the Receivables Purchase Agreements, maintain the Receivables Purchase Agreements in full force and effect, enforce its rights under the Receivables Purchase Agreements substantially in accordance with the terms thereof and comply with its obligations under all Contracts and invoices giving rise to Receivables. The Transferor shall, within one Business Day after a Responsible Officer obtains knowledge of the occurrence of any Termination Event or any event which, with the giving of notice or lapse of time or both, would constitute a Termination Event, notify (either orally or in writing) the Trustee of such occurrence. The Transferor shall promptly furnish to the Trustee copies of any notices, reports or certificates given or delivered to the Transferor under the Receivables Purchase Agreements. (i) UCC Opinion. The Transferor shall deliver to the Trustee, on or before April 30 of each year, beginning with April 30, 1996, an Opinion of Counsel to the Transferor (who may be counsel employed by the Transferor or an Affiliate of the Transferor), dated as of a date subsequent to the end of the immediately preceding fiscal year, substantially to the effect that, in the opinion of such counsel, either (A) such action has been taken with respect to the recording, registering, filing, rerecording, re-registering and re-filing of financing statements, 34 41 continuation statements or other instructions or documents as is necessary to continue the perfection of the interests of the Trustee in and to the Receivables conveyed hereby (to the same extent as such interest was perfected on the Transfer Date with respect to the Receivables then owned by the Transferor) and reciting the details of such action or referring to prior Opinions of Counsel in which such details are given or (B) no such action is necessary to continue the perfection of such interests. (j) Further Action. The Transferor shall, from time to time, execute and deliver to the Trustee any instruments, financing or continuation statements or other writings reasonably necessary to maintain the perfection or priority of the Trustee's ownership or security interest in the Receivables and the Collections under the UCC or other applicable law. The Transferor shall, from time to time, execute and deliver to the Obligors on the Receivables any bills, statements and letters or other writings necessary to carry out the terms and provisions of this Agreement and to facilitate the collection of the Receivables in a manner consistent with the Credit Policy and Procedures Manual. SECTION 2.06. Negative Covenants of the Transferor. The Transferor hereby further covenants that, unless it shall have received the written consent of a Majority in Interest of each outstanding Series and the Rating Agency Condition shall have been satisfied, until termination of the Trust: (a) No Liens. Except for the Transfer hereunder and the security interest granted pursuant to Section 2.01(a), the Transferor will not sell, pledge, assign or transfer any Receivable or any interest therein or any other Trust Asset to any other Person, or grant, create, incur, assume or suffer to exist any Lien on, any Trust Asset or any other property or asset of the Transferor (other than the Transferor Certificate, any Supplemental Certificate and funds deposited to the Transferor's Account pursuant to the applicable Supplement or the Transferor Certificate), whether now existing or hereafter created, or any interest therein, and the Transferor shall defend the right, title and interest of the Trust in and to the Trust Assets, whether now existing or hereafter created, against all claims of third parties claiming through or under the Transferor. (b) Activities of the Transferor. The Transferor will not engage in, enter into or be a party to any business, activity or transaction of any kind other than the businesses, activities and transactions contemplated and authorized by this Agreement or the Receivables Purchase Agreements or any document related hereto or thereto or incidental to its ability to carry out its obligations under such agreements. (c) Indebtedness. Except for the Subordinated Notes, the Transferor will not create, incur or assume any indebtedness 35 42 (other than operating expenses incurred in the performance of or incidental to its obligations under this Agreement which shall not exceed $50,000 per annum) or sell or transfer any receivables to a trust or other Person which issues securities in respect of any such receivables. (d) Guarantees. Except as provided herein, the Transferor will not become or remain liable, directly or indirectly, in connection with any indebtedness or other liability of any other Person, whether by guarantee, endorsement (other than endorsements of negotiable instruments for deposit or collection in the ordinary course of business), agreement to purchase or repurchase, agreement to supply or advance funds, or otherwise. (e) Investments. The Transferor will not make or suffer to exist any loans or advances to, or extend any credit to, or make any investments (by way of transfer of property, contributions to capital, purchase of stock or securities or evidences of indebtedness, acquisition of the business or assets, or otherwise) in, any Affiliate or any other Person except for purchases of Receivables pursuant to the terms of the Receivables Purchase Agreements, investments in Eligible Investments in accordance with the terms of this Agreement and holding the Transferor Certificate. (f) Extension or Amendment of Receivables. The Transferor will not extend, amend or otherwise modify (or consent or fail to object to any such extension, amendment or modification by the Servicer), except as permitted in Section 3.01(c), the terms of any Receivable, or amend, modify or waive (or consent or fail to object to any such amendment, modification or waiver by the Servicer) any payment term or condition of any invoice related thereto (other than as provided in the Credit Policy and Procedures Manual) if the effect of such amendment, modification or waiver would impair the collectibility or delay the payment of any then existing Receivable beyond 60 days from the date of the invoice. The Transferor will not rescind or cancel, or permit the rescission or cancellation of, any Receivable except as ordered by a court of competent jurisdiction or other Governmental Authority. Notwithstanding the foregoing provisions of this Section 2.06(f), each of the Transferor and the Servicer may extend, amend, modify, cancel or rescind (and the Transferor need not object to any such action by the Servicer) any Diluted Receivable in connection with a valid dispute; provided, however, that such amendment, modification, cancellation or rescission shall not have a material adverse effect on the interests of the Certificateholders. (g) Change in Legal Name. The Transferor will not (i) make any change to its legal name, identity or business structure in any manner or chief executive office or use any tradenames, fictitious names, assumed names or "doing business as" names unless, prior to the effective date of any such name change, change in chief executive office, or use, the Transferor delivers to the 36 43 Trustee such financing statements (Forms UCC-l and UCC-3) executed by the Transferor which the Trustee may reasonably request to reflect such name change, change in chief executive office, or use, together with such other documents and instruments that the Trustee may reasonably request in connection therewith or (ii) change its jurisdiction of organization unless the Trustee shall have received from the Transferor (A) written notice of such change at least 45 days prior to the effective date thereof, and (B) prior to the effective date thereof, if requested by the Trustee, an Opinion of Counsel, in form and substance reasonably satisfactory to the Trustee, as to such organization and the Transferor's valid existence and good standing and the continued perfection of the interests of the Trustee in and to the Receivables conveyed hereby (to the same extent as such interest was perfected on the Transfer Date with respect to the Receivables then owned by the Transferor). (h) Receivables Purchase Agreements. The Transferor will not (i) cancel or terminate the Receivables Purchase Agreements or consent to or accept any cancellation or termination thereof, (ii) amend or otherwise modify any term or condition of the Receivables Purchase Agreements or give any consent, waiver or approval thereunder, (iii) waive any default under or breach of the Receivables Purchase Agreements or (iv) take any other action under the Receivables Purchase Agreements not contemplated or required by the terms thereof. (i) Organization. Except as permitted by Section 2.06(k), the Transferor will not amend its limited partnership agreement. (j) Maintenance of Separate Existence. The Transferor will not (i) fail to do all things necessary to maintain its existence as a limited partnership separate and apart from the Servicer, Dell Marketing L.P., Dell Direct Sales L.P., Dell, any Affiliate of Dell, and any Affiliate of the Transferor including, without limitation, conducting business correspondence in its own name and maintaining appropriate and separate books, records and financial statements; (ii) suffer any limitation on the authority of its own partners and officers to conduct its business and affairs in accordance with their independent business judgment, or authorize or suffer any Person other than its own partners and officers to act on its behalf with respect to matters (other than matters customarily delegated to others under powers of attorney) for which a limited partnership's own partners and officers would customarily be responsible; (iii) fail to (A) maintain or cause to be maintained by an agent of the Transferor under the Transferor's control physical possession of all its books and records, (B) maintain capitalization adequate for the conduct of its business, (C) account for and manage its liabilities separately from those of any other Person, including, without limitation, payment of all payroll and other administrative expenses and taxes from its own assets, (D) segregate and identify separately all of its money and 37 44 assets from those of any other Person (including, but not limited to, maintaining separate bank accounts in its own name), and (E) maintain offices through which its business is conducted separate from those of the Servicer, Dell Marketing L.P., Dell Direct Sales L.P., Dell, any Affiliate of Dell and any Affiliate of the Transferor (other than the general partner of the Transferor) (provided that, to the extent that the Transferor and the general partner of the Transferor, on the one hand, and any of its Affiliates have offices in the same location, there shall be a fair and appropriate allocation of overhead costs and expenses among them, each such entity shall bear its fair share of such costs and expenses and each such office shall be conspicuously identified as the office of such entity); (iv) commingle its money or other assets with those of the Servicer, Dell Marketing L.P., Dell Direct Sales L.P., Dell, any Affiliate of Dell or any Affiliate of the Transferor, or use its funds for other than the Transferor's uses; (v) fail to (A) maintain its books, financial statements, accounting records and other business documents and records complete and separate from those of the Servicer, Dell Marketing L.P., Dell Direct Sales L.P., Dell or any other entity, (B) act solely in its legal name and through its authorized officers and agents or the authorized officers and agents of its general partner, (C) make investments directly or by brokers engaged and paid by the Transferor or its agents, (D) separately manage its liabilities from those of the Servicer, Dell Marketing L.P., Dell Direct Sales L.P., Dell or any Affiliate of Dell and pay its own liabilities, including all administrative expenses, from its own separate assets (provided that, to the extent employees of the Transferor participate in pension, insurance and other benefit plans of Dell or any Affiliate thereof, the Transferor will reimburse Dell or such Affiliate, as the case may be, for an appropriate share of the costs thereof), (E) pay from its assets all obligations and indebtedness of any kind incurred by it and (F) abide by all legal formalities, including the maintenance of current partnership records; (vi) assume the liabilities of the Servicer, Dell Marketing L.P., Dell Direct Sales L.P., Dell or any Affiliate of Dell; (vii) guarantee the liabilities or securities of the Servicer, Dell Marketing L.P., Dell Direct Sales L.P., Dell or any Affiliate of Dell; (viii) be involved in the day-to-day management of the Servicer, Dell Marketing L.P., Dell Direct Sales L.P. or Dell; (ix) act as agent of Dell Marketing L.P. or Dell Direct Sales L.P. or allow Dell Marketing L.P. or Dell Direct Sales L.P. to act as its agent; (x) make any advances to Dell Marketing L.P. or Dell Direct Sales L.P.; (xi) acting through its general partner, have insufficient officers and personnel to conduct its business and operations; (xii) enter into business transactions with any of its Affiliates unless the terms are not more or less favorable to the Transferor in any material respect than terms and conditions available at the time to the Transferor for comparable transactions with unaffiliated persons and a majority of the Board of Directors of the general partner of the Transferor including each director who is an independent director approve the 38 45 transaction; (xiii) if the Transferor is included within the consolidated financial statements of Dell or any Affiliate thereof, fail to disclose in a footnote in the financial reports required by Section 2.05(g) the existence of the Transferor as a separate legal entity and the participation of the Transferor in the transactions contemplated by the Transaction Documents or (xiv) fail to establish investment guidelines and criteria by a majority of the Board of Directors of its general partner including at least one director who is an independent director. (k) Ownership; Merger. The Transferor will not, unless the Rating Agency Condition is satisfied, (i) admit any partner (other than its current partners) or permit either of its current partners to transfer all or any portion of its partnership interest in the Transferor to any Person (other than the other current partner), or enter into any transaction of merger or consolidation, or convey or otherwise dispose of all or substantially all of its assets (except as contemplated herein) or (ii) terminate, liquidate or dissolve itself (or suffer any termination, liquidation or dissolution), or (iii) acquire or be acquired by any Person, except indirectly in connection with a consolidation or merger of Dell with any of its Controlled Affiliates, in connection with which the Trustee shall have received an Opinion of Counsel, which counsel shall not be an employee of the Transferor, Dell or any of their respective Affiliates, that such consolidation or merger does not affect the separate existence of Transferor. (l) ERISA. The Transferor shall promptly give the Trustee notice of the following events, as soon as possible and in any event within 30 days after a Responsible Officer of the Transferor obtains knowledge thereof: (i) the occurrence or expected occurrence of any material Reportable Event with respect to any Plan to which the Transferor or any of its ERISA Affiliates contributed, or any withdrawal from, or the termination, reorganization or Insolvency Event of any Multiemployer Plan to which the Transferor or any of its ERISA Affiliates contributes or to which contributions have been required to be made by the Transferor or such ERISA Affiliate since January 3, 1991 or (ii) the institution of proceedings or the taking of any other action by the PBGC or the Transferor or any of its ERISA Affiliates or any such Multiemployer Plan with respect to the withdrawal from, or the termination, reorganization or Insolvency Event of, any such Plan or Multiemployer Plan. SECTION 2.07. Addition and Removal of Originators. (a) At any time following the Transfer Date, the Transferor may designate any Affiliate of Dell or any division of (1) Dell Marketing L.P., (2) Dell Direct Sales L.P. or (3) any other Affiliate of Dell as an Originator (an "Additional Originator") provided that the following conditions are satisfied: (A) either (i) the average of the aggregate principal balance of Receivables generated by such Additional Originator as of the last day of each 39 46 of the immediately preceding twelve months does not exceed 5% of the average of the aggregate principal balance of Eligible Receivables owned by the Trust as of the last day of each of such twelve months or (ii) the Rating Agency Condition shall have been satisfied, (B) such Additional Originator shall be subject to the provisions of the Cross-Guarantee Agreement, (C) Dell Marketing L.P. or Dell Direct Sales L.P., as the case may be, shall guarantee all obligations of such Additional Originator pursuant to the Transaction Documents, (D) all opinions with respect to any Originator given on the Initial Issuance Date shall be affirmed on the date the Transferor designates an Additional Originator and (E) the Transferor shall not designate more than two Additional Originators in any twelve-month period unless the Rating Agency Condition is satisfied. (b) The Transferor may cause any Originator to no longer be designated as an "Originator" (a "Removed Originator"), and the Transferor shall cease purchasing Receivables from such Removed Originator, provided that (i) the average of the aggregate principal balance of Receivables generated by such Removed Originator as of the last day of each of the immediately preceding twelve months does not exceed 5% of the average of the aggregate principal balance of Eligible Receivables owned by the Trust as of the last day of each of such twelve months, (ii) the Transferor provides timely written notice of such change in designation to each Rating Agency, (iii) the Rating Agency Condition shall have been satisfied and (iv) the Transferor shall have delivered to the Trustee and any Enhancement Provider an Officer's Certificate stating that the Transferor reasonably believes that the removal of such Removed Originator will not result in the occurrence of a Trust Early Amortization Event. (c) Notwithstanding anything in this Section 2.07 to the contrary, no Originator shall be designated as an Additional Originator or a Removed Originator on any day if, as of such day, the aggregate cumulative amount of Receivables generated by Additional Originators or Removed Originators, including any Originator to be designated as an Additional Originator or a Removed Originator on such day, is greater or less than the aggregate principal balance of Eligible Receivables owned by the Trust as of the day prior to such removal or addition by 10% or more. (d) Notwithstanding anything in this Section 2.07 to the contrary, a Majority in Interest of each outstanding Series may consent to changes in the foregoing subsections (a), (b) and (c) hereof, provided that the Rating Agency Condition has been satisfied and notice has been given to the Trustee. 40 47 ARTICLE III ADMINISTRATION AND SERVICING OF RECEIVABLES SECTION 3.01. Acceptance of Appointment and Other Matters Relating to the Servicer. (a) Dell USA L.P. agrees to act as the Servicer for the benefit of the Certificateholders under this Agreement (subject to Article X) and the Certificateholders by their acceptance of the Certificates consent to Dell USA L.P. so acting as Servicer. (b) The Servicer shall (subject to Article X) enforce its respective rights and interests in, to and under the Receivables and the other Trust Assets on behalf of the Trust. The Servicer shall service, administer and collect the Receivables and, in connection therewith, the Servicer shall take or cause to be taken all such actions as may be necessary or advisable to collect each Receivable from time to time, all in accordance with applicable laws, rules and regulations, with reasonable care and diligence, and in accordance with the Credit Policy and Procedures Manual. (c) Provided that no Trust Early Amortization Event or Servicer Default shall have occurred and be continuing, and no Partial Amortization Period shall have commenced and be continuing, the Servicer may, in accordance with the Credit Policy and Procedures Manual, extend the maturity, adjust the Outstanding Balance, or otherwise modify the terms of any Defaulted Receivable or amend, modify or waive any payment term or condition of any invoice related thereto, all as it may determine to be appropriate to maximize Collections thereof; provided that, for all purposes hereunder, any such Receivable shall remain a "Defaulted Receivable" in the amount of its Outstanding Balance (without giving effect to any such extension, adjustment, amendment, modification or waiver) until paid or charged off as uncollectible. (d) The Servicer shall have full power and authority, acting alone or through any party properly designated by it hereunder, to do any and all things in connection with such servicing and administration which it may deem necessary or desirable, subject to the terms and conditions of this Agreement and the applicable Supplement. Without limiting the generality of the foregoing and subject to Section 10.01 and any limitations provided in any Supplement, the Servicer or its designee is hereby authorized and empowered (i) to instruct the Trustee to make withdrawals and payments from the Concentration Account, subject to the limitations set forth in Section 4.02(a) and as otherwise set forth in this Agreement, (ii) to instruct the Trustee to make withdrawals and payments from the Series Accounts, subject to the limitations set forth in the related Supplement and as otherwise set forth in this Agreement, (iii) to instruct the Trustee to take any action required or permitted under any Enhancement, (iv) to 41 48 make any filings, reports, notices, applications and registrations with, and to seek any consents or authorizations from, the Securities and Exchange Commission and any state securities authority on behalf of the Trust as may be necessary or advisable to comply with any federal or state securities laws or reporting requirements, and (v) only (A) with the prior consent of a Majority in Interest of each outstanding Series and (B) upon satisfaction of the Rating Agency Condition, to subcontract with any other Person (excluding the Transferor) (at the Servicer's expense) for servicing, administering or collecting the Receivables; provided that such Person shall not become Servicer hereunder and the Servicer shall remain liable for the performance of the duties and obligations of the Servicer pursuant to the terms hereof. The Trustee shall execute any documents furnished by the Servicer which are necessary or appropriate to enable the Servicer to carry out its servicing and administrative duties hereunder and acceptable in form and substance to the Trustee. The Trustee shall, upon the written request of the Servicer, furnish the Servicer with any documents then in the Trustee's possession which are necessary or appropriate to enable the Servicer to carry out its servicing and administrative duties hereunder. (e) The Servicer shall not, and no Successor Servicer shall be obligated to, use separate servicing procedures, offices, employees or accounts for servicing the Receivables from the procedures, offices, employees and accounts used by the Servicer or such Successor Servicer, as the case may be, in connection with servicing other trade receivables or its business in general. (f) The relationship of the Servicer (and of any Successor Servicer under this Agreement) to the Trustee under this Agreement is intended by the parties to be that of an independent contractor to or with the Trust and shall not be construed to be that of a joint venturer, partner, or agent, such that the acts of the Servicer (or any Successor Servicer) are in any way vicariously attributable to the Trustee in its individual capacity prior to such time as the Trustee may serve as Servicer pursuant to the provisions of Article X. SECTION 3.02. Servicing Compensation; Servicer's Expenses. (a) Compensation. As full compensation for its servicing activities hereunder, the Servicer shall be entitled to receive a monthly servicing fee (the "Servicing Fee") for each Collection Period (or portion thereof) from the Initial Issuance Date for each Series until the termination of the Amortization Period, payable in arrears on the Distribution Date with respect to such Collection Period (or portion), in an amount equal to the aggregate of the Series Servicing Fees specified in the Supplements. The Servicing Fee shall be payable only from Investor Collections pursuant to, and subject to the priority of payment set 42 49 forth in, the Supplements; provided, however, that if the Trustee is appointed Successor Servicer, and Investor Collections are insufficient to pay the Servicing Fee in full, the Trustee may seek payment of the Servicing Fee from Dell under the Parent Undertaking Agreement. (b) Expenses. The Servicer's expenses include the Trustee's Fee (to the extent not paid from Collections) and all documented expenses and liabilities (other than any liability of the Trust with respect to any amount payable solely out of Collections or any personal liability of the Trust to repay the Certificates) of the Trust not expressly stated herein to be for the account of the Certificateholders, including without limitation expenses related to enforcement of the Receivables and the other amounts due to the Trustee pursuant to Section 11.05, the reasonable fees and disbursements of the Independent Public Accountants in connection with this Agreement, any Supplement and the Receivables Purchase Agreements, and other fees and documented expenses including but not limited to the costs of filing UCC continuation statements; provided that in no event shall the Servicer be liable for any federal, state or local income or franchise tax, or any interest or penalties with respect thereto, assessed on the Trust, the Trustee or the Certificateholders except as expressly provided herein. Such expenses shall be payable first, by the Servicer out of the Servicing Fee, second, to the extent not paid by the Servicer, by the Transferor for its own account, third, to the extent the Transferor shall fail to pay any of such expenses, by the Servicer for its own account, and the Servicer shall not be entitled to any payment for any such expenses other than the Servicing Fee and reimbursement from the Transferor, and fourth, to the extent not paid by the Servicer or the Transferor, by Dell pursuant to the Parent Undertaking Agreement. In addition, to the extent not paid from the Servicing Fee, the Transferor shall pay for its own account, and, if the Transferor fails to do so, the Servicer will pay, all fees and expenses incurred by or on behalf of the Servicer in connection with its servicing activities hereunder (including without limitation expenses related to enforcement of the Receivables and the costs of a Service Transfer) or otherwise in connection herewith (including without limitation the fees and expenses set forth above), and the Servicer will not be entitled to any fee or other payment from, or claim on, any of the Trust Assets (other than the Servicing Fee and reimbursement from the Transferor). The Transferor's and Servicer's covenant to pay the expenses and disbursements provided in this Section 3.02(b) shall survive the termination of the Trust. SECTION 3.03. Representations and Warranties of the Servicer. Dell USA L.P., as Servicer, hereby represents and warrants, as of the date hereof and as of the Transfer Date, and, with respect to any Series, as of the date of the related Supplement and the related Initial Issuance Date, in each case unless otherwise stated in such Supplement: 43 50 (a) Organization. The Servicer is a limited partnership duly organized and validly existing under the applicable laws of Texas and has, in all material respects, full power, authority and legal right to own its properties and conduct its business including its receivables servicing business as such properties are presently owned and as such business is presently conducted and as is proposed to be conducted under this Agreement, any Supplement and the Cross-Guarantee Agreement, and to execute, deliver and perform its obligations under this Agreement, any Supplement and the Cross-Guarantee Agreement. (b) Due Qualification. The Servicer is duly qualified to do business (or is exempt from such requirements), and has obtained all necessary licenses and approvals, in each jurisdiction in which the servicing of the Receivables in accordance with the terms of this Agreement, any Supplement and the Cross-Guarantee Agreement requires such qualification, except where failure to so qualify or to obtain such licenses or approvals would not have a material adverse effect upon the Certificateholders or on its ability to perform its obligations as Servicer under this Agreement, any Supplement and the Cross-Guarantee Agreement. (c) Due Authorization. The Servicer's execution, delivery and performance of this Agreement, each Supplement, the Cross-Guarantee Agreement and the other agreements and instruments executed or to be executed by the Servicer as contemplated hereby or thereby, and the consummation of the transactions contemplated by this Agreement, each Supplement and the Cross-Guarantee Agreement, have been duly and validly authorized by all necessary action on the part of the Servicer. (d) Binding Obligation. Each of this Agreement, each Supplement and the Cross-Guarantee Agreement constitutes a legal, valid and binding obligation of the Servicer enforceable against it in accordance with its terms except as such enforceability may be limited by applicable bankruptcy, reorganization, insolvency, moratorium or other similar laws affecting creditors' rights generally, now and hereafter in effect, and except as such enforceability may be limited by general principles of equity (whether considered in a suit at law or in equity). (e) No Conflict. The Servicer's execution and delivery of this Agreement and the Cross-Guarantee Agreement, performance of the transactions contemplated by this Agreement, each Supplement and the Cross-Guarantee Agreement, and fulfillment of the terms hereof and thereof applicable to the Servicer, do not conflict with or violate in any material respects any Requirements of Law applicable to the Servicer, or conflict with, result in any breach of any of the material terms and provisions of, or constitute (with or without notice or lapse of time or both) a default under, any material indenture, contract, agreement, mortgage, deed of trust or 44 51 other instrument to which the Servicer is a party or by which it or its properties are bound. (f) No Proceedings. There are no proceedings or investigations pending or, to the best knowledge of the Servicer, threatened against the Servicer before any Governmental Authority (i) asserting the illegality, invalidity or unenforceability, or seeking any determination or ruling that would affect the legality, binding effect, validity or enforceability, of this Agreement, any Supplement or the Cross-Guarantee Agreement, (ii) seeking to prevent the issuance of the Certificates or the consummation of any of the transactions contemplated by this Agreement, any Supplement or the Cross-Guarantee Agreement, or (iii) seeking any determination or ruling that is reasonably likely to materially and adversely affect the financial condition or operations of the Servicer or the performance by the Servicer of its obligations under this Agreement, any Supplement or the Cross-Guarantee Agreement. (g) No Consents. No authorization, consent, license, order or approval of or registration or declaration with any Person or Governmental Authority is required to be obtained, effected or given by the Servicer in connection with the execution and delivery of this Agreement, any Supplement or the Cross-Guarantee Agreement by the Servicer or the performance of its obligations hereunder and thereunder. (h) Dell Post-Office Boxes, Dell Collection Accounts and the Concentration Account. Specified on Schedule I hereto are (i) the Dell Post-Office Box numbers, (ii) the names, addresses and ABA numbers of all the Dell Collection Account Banks, together with the account numbers of the Dell Collection Accounts and the name of a contact person at each Dell Collection Account Bank and (iii) the name, address and ABA number of the Concentration Account Bank, together with the account number and the name of a contact person for the Concentration Account. (i) Payment Instructions. The Servicer has notified the Obligor on each Receivable to make payments on such Receivable to either one of the Dell Post-Office Boxes or one of the Dell Collection Accounts. (j) Daily Reports and Determination Date Certificates. Each Daily Report and Determination Date Certificate delivered by the Servicer pursuant to this Agreement shall be true and correct in all material respects as of the date such report or certificate is delivered. (k) Servicer Default. No Servicer Default has occurred or is continuing. 45 52 (l) Trust Early Amortization Event. No Trust Early Amortization Event has occurred or is continuing. Each Successor Servicer, by acceptance of its appointment hereunder, shall, as of the date of such appointment and, with respect to any Series issued after such date, as of the date of the related Supplement and the related Initial Issuance Date, make substantially similar representations and warranties as those contained above. The representations and warranties set forth in this Section 3.03 shall survive the Transfer of the Receivables to the Trust and the issuance of the Certificates, and shall cease and be of no effect upon repayment in full of the Invested Amount of the last outstanding Series and all other obligations of the Transferor hereunder. Upon a discovery by the Transferor, the Servicer or the Trustee of a material breach of any of the foregoing representations and warranties, the party discovering such breach shall give prompt written notice to the other parties. The Trustee's obligations in respect of any such breach are limited as provided in Section 11.02(g). SECTION 3.04. Covenants of the Servicer. The Servicer hereby covenants and agrees that, until termination of the Trust: (a) Change in Accounts. The Servicer will not (i) make any changes to Schedule I hereto or (ii) amend any instruction to any Obligor or any Dell Collection Account Bank with respect to any Dell Post-Office Box or Dell Collection Account or (iii) terminate or substitute any Cure Account, in any case (A) except as otherwise required or permitted pursuant to Section 4.02 or the applicable Supplement and (B) unless the Trustee shall have received notice of such change, amendment, termination or substitution and executed copies of Dell Collection Account Letters to each new Dell Collection Account Bank. (b) Collections. (i) In the event that the Servicer receives any Collections, the Servicer agrees to hold all such Collections in trust and to deposit such Collections to the appropriate Collection Account as soon as practicable, but in no event later than two Business Days after receipt thereof. (ii) In the event that any Affiliate of the Servicer receives any Collections, the Servicer agrees to cause such Affiliate to hold all such Collections in trust and to cause such Affiliate to deposit such Collections to the appropriate Collection Account as soon as practicable, but in no event later than five Business Days after receipt thereof. (c) Compliance with Requirements of Law. The Servicer will duly satisfy in all material respects all obligations on its part to be fulfilled under or in connection with each Receivable, 46 53 will maintain in effect all qualifications required under any Requirements of Law in order to service properly each Receivable and will comply in all material respects with all other Requirements of Law in connection with servicing each Receivable. (d) Extension or Amendment of Receivables. The Servicer will not extend, amend or otherwise modify (or consent or fail to object to any such extension, amendment or modification by the Transferor), except as permitted in Section 3.01(c), the terms of any Receivable, or amend, modify or waive (or consent or fail to object to any such amendment, modification or waiver by the Transferor) any payment term or condition of any invoice related thereto (other than as provided in the Credit Policy and Procedures Manual) if the effect of such amendment, modification or waiver would impair the collectibility or delay the payment of any then existing Receivable beyond 60 days from the date of the invoice. The Servicer will not rescind or cancel, or permit the rescission or cancellation of, any Receivable except as ordered by a court of competent jurisdiction or other Governmental Authority. Notwithstanding the foregoing provisions of this Section 3.04(d), each of the Servicer and the Transferor may extend, amend, modify, cancel or rescind (and the Servicer need not object to any such action by the Transferor) any Diluted Receivable in connection with a valid dispute; provided, however, that such amendment, modification, cancellation or rescission shall not have a material adverse effect on the interests of the Certificateholders. (e) Protection of Certificateholders' Rights. The Servicer will take no action which would impair the rights of Certificateholders in any Receivable or Trust Asset, except as provided in this Agreement. (f) Deposits to Concentration Account, any Dell Collection Account or any Series Account. The Servicer will not deposit or otherwise credit, or cause to be so deposited or credited, or consent or fail to object to any such deposit or credit known to it, cash or cash proceeds other than Collections to the Concentration Account, any Dell Collection Account or any Series Account. (g) Receivables Not To Be Evidenced by Promissory Notes. The Servicer will take no action to cause any Receivable to be evidenced by any "instrument" (as defined in the UCC of the jurisdiction the law of which governs the perfection of the interest in such Receivable created hereunder), except in connection with its enforcement, in which event the Transferor shall deliver such instrument to the Trustee as soon as reasonably practicable but in no event more than three Business Days after execution thereof. (h) Reporting Requirements. The Servicer will: 47 54 (i) within one Business Day after a Responsible Officer obtains knowledge of the occurrence of a Servicer Default or a Trust Early Amortization Event, the commencement of a Partial Amortization Period or Cure Period or any event which, with the giving of notice or lapse of time or both, would constitute a Servicer Default or Trust Early Amortization Event, notify (either orally or in writing) the Trustee of such occurrence; (ii) as soon as possible and in any event (A) within three Business Days after a Responsible Officer obtains knowledge of the occurrence of a Servicer Default or any Trust Early Amortization Event, the commencement of a Partial Amortization Period or Cure Period, or any event which, with the giving of notice or lapse of time or both, would constitute a Servicer Default or a Trust Early Amortization Event, furnish to the Trustee and each Rating Agency the written statement of a Responsible Officer setting forth details of such Servicer Default or Trust Early Amortization Event, the commencement of such Partial Amortization Period or Cure Period or such event and the action which the Servicer has taken and proposes to take with respect thereto, and (B) within three Business Days after a Responsible Officer obtains knowledge thereof, give written notice to the Trustee and each Rating Agency of any other event, development or information which is reasonably likely to materially and adversely affect the ability of the Servicer to perform its obligations under this Agreement; (iii) promptly, from time to time, furnish to the Trustee such other information, documents, records or reports regarding the Receivables, the other Trust Assets or the condition or operations, financial or otherwise, of the Servicer as the Trustee may from time to time reasonably request; (iv) as soon as practicable and in any event not later than the later of (A) 50 days after the close of each of its first three fiscal quarters in any fiscal year and (B) five days after the report of Dell on Form 10-Q is required to be filed with the Securities and Exchange Commission (taking into account any extensions), deliver to the Trustee and each Rating Agency its unaudited financial statements (including balance sheets as of the end of such period, related revenue and expense statements, and a statement of cash flows) (subject to normal year-end adjustments), certified by the Chief Financial Officer or Chief Accounting Officer of the Servicer and prepared in accordance with generally accepted accounting principles consistently applied; and (v) as soon as practicable and in any event not later than the later of (A) 100 days after the close of each of its 48 55 fourth fiscal quarter in any fiscal year and (B) 10 days after the report of Dell on Form 10-K is required to be filed with the Securities and Exchange Commission (taking into account any extensions), deliver to the Trustee and each Rating Agency its unaudited financial statements (including balance sheets as of the end of such period, related revenue and expense statements, and a statement of cash flows) certified by the Chief Financial Officer or Chief Accounting Officer of the Servicer and prepared in accordance with generally accepted accounting principles consistently applied. The Servicer shall provide to the Trustee access to the documentation regarding the Receivables in such cases where the Trustee is required in connection with the enforcement of the rights of Certificateholders or by applicable statutes or regulations to review such documentation, such access being afforded without charge but only (i) upon reasonable request, (ii) during normal business hours, (iii) subject to the Servicer's normal security and confidentiality procedures and (iv) at reasonably accessible offices in the continental United States designated by the Servicer. (i) Filing of Continuation Statements. The Servicer shall prepare and file such continuation statements and any other documents reasonably requested by the Trustee, Transferor or any of the Certificateholders or which may otherwise be required by law to fully preserve and protect the interest of the Trustee, Transferor or any of the Certificateholders hereunder in and to the Receivables. (j) Change in its Credit Policy and Procedures Manual. The Servicer shall comply with and perform its servicing obligations with respect to the Receivables in accordance with the Credit Policy and Procedures Manual, except insofar as any failure to so comply or perform would not adversely affect the Certificateholders in any material respect. Subject to compliance with all Requirements of Law, the Transferor or the Servicer, as applicable, may change the terms and provisions of the Credit Policy and Procedures Manual; provided, however, that (i) with respect to a material change of collection policies, the Rating Agency Condition is satisfied with respect thereto and (ii) with respect to a change of collection procedures, no material adverse effect on any Series of Certificate would result. (k) Notification of Obligors. The Servicer will notify the Obligor on each Receivable purchased by the Trust on or after the Transfer Date to make payments on such Receivable to one of the Dell Collection Accounts. (l) Modification of Systems. The Servicer agrees, promptly after the replacement or any material modification of any computer, automation or other operating systems (in respect of 49 56 hardware or software) used to provide the Servicer's services as Servicer or to make any calculations or reports hereunder, to give notice of any such material replacement or modification to the Trustee. (m) Servicer Business Days. No later than December 1 of each year, the Servicer shall furnish the Trustee with a list of days other than Saturday and Sunday, on which the Servicer shall be closed during the immediately succeeding year, except that with respect to the calendar year 1995, the Servicer shall furnish such list to the Trustee on or before the Transfer Date. (n) Keeping of Records and Books of Account. The Servicer shall maintain and implement administrative and operating procedures (including, without limitation, the ability to recreate records evidencing the Receivables in the event of the destruction of the originals thereof), and keep and maintain all documents, books, microfiche, computer records and other information reason- ably necessary or advisable for the collection of all the Receiv- ables. Such documents, books, microfiche, and computer records shall reflect all customary facts giving rise to the Receivables, all payments and credits with respect thereto, and the computer records shall be clearly marked to show the interests of the Trust in the Receivables. The Servicer shall hold on behalf of the Trust (to the extent of its interest therein) any document evidencing or securing a Receivable and any Contract related to such Receivable and necessary to the servicing of such Receivable and the collection thereof in accordance with the terms of this Agreement. Such holding by the Servicer shall be in trust and shall be deemed to be the holding thereof by the Trustee for purposes of perfecting the Trust's rights therein as provided in the UCC. (o) Insurance. The Servicer shall use its best efforts to maintain with a responsible company, and at its own expense, its current commercial crime insurance as is commercially available at a cost that is not generally regarded as excessive by industry standards, with coverage on all officers, employees or other persons acting in any capacity requiring such persons to handle funds, money, documents or papers relating to the Receivables. SECTION 3.05. Reports and Records for the Trustee. (a) Daily Records. On each Business Day, the Servicer shall provide by telecopy to the Trustee, and upon request to any Enhancement Provider and each Investor Certificateholder, the Daily Report and, to the extent not covered in the Daily Report, a record setting forth (i) the Collections in respect of the Receivables processed by the Servicer on the immediately preceding Business Day, (ii) the amount of Eligible Receivables as of the close of business on the immediately preceding Business Day and (iii) the Floating Allocation Percentage for each Series at the close of business on the immediately preceding Business Day. To the extent 50 57 that the aggregate Invested Amount of all outstanding Series is zero, and the Discount Amount specified in the Supplement for each outstanding Series has been allocated in full, the Servicer shall be obligated to forward the Daily Report to the Trustee only on the first Business Day of each month and on each Determination Date or such other date as specified in writing by the Trustee. (b) Determination Date Certificate. On or before each Determination Date with respect to each outstanding Series, the Servicer shall deliver by telecopy to the Trustee and each Rating Agency and the Trustee shall deliver to each Investor Certificate- holder a Determination Date Certificate for such Determination Date. SECTION 3.06. Annual Certificate of Servicer. On or before April 30 of each calendar year, beginning with April 30, 1996, the Servicer shall deliver to the Trustee, each Rating Agency and each Enhancement Provider an Officer's Certificate, executed by the chief financial officer of the Servicer, substantially in the form of Exhibit B hereto. A copy of each such certificate will be sent to each Investor Certificateholder by the Trustee. On or before April 30, 1996, the Servicer shall deliver to the Rating Agencies a report in which the Servicer will recalculate, based on a sample of Receivables, the average period of time which passes between the creation of a Receivable and the point at which such Receivables becomes a Diluted Receivable. To the extent that such recalculation indicates a period of time which materially differs from 1.5 months, the Servicer will adjust its calculation of the Class A Dynamic Loss and Dilution Reserve Percentage and the Class B Dynamic Loss and Dilution Reserve Percentage under each Supplement, subject to satisfaction of the Rating Agency Condition. SECTION 3.07. Semi-Annual Servicing Report of Independent Public Accountants. Within 90 days of the Transfer Date and on a semi-annual basis on or before April 30 and October 31 of each calendar year, beginning with April 30, 1996, the Servicer shall cause the Independent Public Accountants to furnish a report (addressed to the Trustee) to the Trustee, the Servicer, each Rating Agency and each Enhancement Provider substantially to the effect set forth in Exhibit G. SECTION 3.08. Tax Treatment. The Transferor has entered into this Agreement, and the Investor Certificates have been (or will be) issued to and acquired by the Investor Certificateholders, with the intention that, for federal, state and local income and franchise tax law purposes, the Investor Certificates will be indebtedness of the Transferor secured by the Receivables. The Transferor, by entering into this Agreement, and each Certificate- holder, by the acceptance of its Certificate, agree to treat the Certificates for purposes of federal, state and local income and franchise taxes as indebtedness of the Transferor. Unless either (i) the Trustee or the Servicer shall receive an Opinion of Counsel 51 58 based on a change in applicable law occurring after the date hereof that the Internal Revenue Code requires such a filing or (ii) the Internal Revenue Service shall determine that the Trust is required to file such a return in accordance with the foregoing, the Transferor agrees that it will report its income for such federal, state and local income or franchise taxes on the basis that it is the owner of the Receivables. SECTION 3.09. Notices to Dell USA L.P. In the event that Dell USA L.P. is no longer acting as Servicer, any Successor Servicer shall deliver or make available to Dell Marketing L.P., Dell Direct Sales L.P. and the Transferor each certificate and report required to be delivered thereafter pursuant to Sections 3.05(b), 3.06 and 3.07. SECTION 3.10. Adjustments. If the Servicer makes a mistake with respect to the amount of any Collection and deposits or pays an amount that is less than or more than the actual amount of such Collection, the Servicer shall appropriately adjust the amount subsequently deposited into the Trustee's Account or Transferor's Account or paid to reflect such mistake and send written notice thereof to the Trustee. Any Receivable in respect of which a dishonored check is received shall be deemed not to have been paid. SECTION 3.11. Securities and Exchange Commission Filings. For so long as Dell or any of its Affiliates is the Servicer, the Servicer shall deliver or cause to be delivered to the Trustee, the Investor Certificateholders and each Rating Agency copies of each report of Dell, the Transferor, Dell USA L.P., Dell Marketing L.P., Dell Direct Sales L.P. and any other Affiliate of Dell which is a party to any Transaction Document filed with the Securities and Exchange Commission on Forms 10-K and 10-Q promptly after any such filing has been made. 52 59 ARTICLE IV RIGHTS OF CERTIFICATEHOLDERS AND ALLOCATION AND APPLICATION OF COLLECTIONS SECTION 4.01. Rights of Certificateholders. (a) The Investor Certificates shall represent fractional undivided beneficial interests in the Trust (with respect to each Series, the "Certificateholders' Interest"), which shall consist of the right to receive, to the extent necessary to make the required payments with respect to the Investor Certificates of such Series at the times and in the amounts specified in the related Supplement, the portion of Collections allocable to Investor Certificateholders of such Series pursuant to this Agreement and the related Supplement from funds on deposit in the Concentration Account allocable to Certificateholders of such Series and funds on deposit in any related Series Account and funds available pursuant to any related Enhancement (collectively with respect to all Series, the "Aggregate Certificateholders' Interest"), it being understood that the Investor Certificates of any Series or Class shall not represent any interest in any Series Account or Enhancement for the benefit of any other Series or Class. The Transferor Certificate shall represent the fractional undivided beneficial interest in the remainder of the Trust Assets not allocated pursuant to this Agreement or any Supplement to the Aggregate Certificateholders' Interest, including the right to receive Collections with respect to the Receivables and other amounts at the times and in the amounts specified in this Agreement or in any Supplement to be paid to the Holder of the Transferor Certificate (the "Transferor Interest"); provided, however, that the Transferor Certificate shall not represent any interest in the Concentration Account, any Dell Collection Account, any Series Account or any Enhancement, except as specifically provided in this Agreement or any Supplement. (b) The Floating Allocation Percentage for each Series, which is the percentage that determines the portion of the Aggregate Certificateholders' Interest allocable to such Series, and the Transferor Percentage, which is the percentage that determines the Transferor Interest, shall be initially computed by the Servicer as of the opening of business of the Servicer on the Initial Issuance Date for the related Series. Thereafter until the commencement of the Amortization Period or Partial Amortization Period, the Floating Allocation Percentage for each Series and the Transferor Percentage, and through the recomputations thereof the Certificateholders' Interest for each Series and the Transferor Interest, shall be recomputed by the Servicer as of the close of business of the Servicer on each Business Day. Each of the Certificateholders' Interests, the Floating Allocation Percentage for each Series, the Transferor Interest and the Transferor Percentage (i) shall remain constant from the time as of which any such computation or recomputation is made until the time as of 53 60 which the next such recomputation, if any, shall be made and (ii) as computed as of the close of business of the Servicer on the Business Day immediately preceding the commencement of the Amortization Period or a Partial Amortization Period, shall remain constant at all times during the Amortization Period or such Partial Amortization Period. SECTION 4.02. Establishment of Concentration Account and Dell Collection Accounts. (a) Concentration Account. On or prior to the Transfer Date, the Servicer, for the benefit of the Certificateholders, shall establish and maintain or cause to be established and maintained in the name of the Trustee, on behalf of the Trust, with an Eligible Institution a segregated trust account accessible by the Trustee (such account being the "Concentration Account" and such institution holding such account being the "Concentration Account Bank"), such account bearing a designation clearly indicating that the funds deposited therein are held for the benefit of the Certificateholders. The Trustee shall possess all right, title and interest in and to all funds from time to time on deposit in the Concentration Account and in all proceeds thereof. The Concentration Account shall be under the sole dominion and control of the Trustee for the benefit of the Certificateholders. Except as expressly provided in this Agreement, the Servicer agrees that it shall have no right of setoff or banker's lien against, and no right to otherwise deduct from, any funds held in the Concentration Account for any amount owed to it by the Trustee, the Trust or any Certificateholder. The Servicer shall cause Collections to be deposited into the Concentration Account by the close of business on the day of receipt thereof in a Dell Collection Account. The Transferor will cause the Originators to deposit any Collections received by any of them into a Dell Collection Account within two Business Days following the Business Day on which such Collections are so received or, if such day is not a Business Day, the next succeeding Business Day. Notwithstanding the foregoing, if and to the extent that funds that are not Collections are deposited into the Concentration Account, the Servicer may direct the Trustee to withdraw such funds from the Concentration Account and deposit them in the Transferor's Account. If, at any time, the institution holding the Concentration Account ceases to be an Eligible Institution, the Servicer, upon obtaining actual knowledge thereof, for the benefit of the Certificateholders, shall within 30 Business Days (i) establish a new Concentration Account meeting the conditions specified above with an Eligible Institution, (ii) transfer any cash and/or any investments held therein or with respect thereto to such new Concentration Account and (iii) in the case of any new Concentration Account, deliver to all Dell Collection Account Banks new Dell Collection Account Letters (with copies thereof to the Trustee) referring to such new Concentration Account, and from the 54 61 date such new Concentration Account is established, it shall be the "Concentration Account". Pursuant to the authority granted to the Servicer in Section 3.01, the Servicer shall have the power to instruct the Trustee to make withdrawals and payments from the Concentration Account for the purposes of carrying out the Servicer's or the Trustee's duties specified in this Agreement. Funds on deposit in the Concentration Account or, in the case of funds on deposit on any Deposit Date or Distribution Date, funds required pursuant to the applicable Supplement to be deposited to the Trustee's Account or the Transferor's Account on such date, shall at the direction of the Servicer be invested by the Trustee or the Eligible Institution maintaining such accounts in Eligible Investments as instructed by the Servicer in writing, or by telephone confirmed promptly in writing (which may be a standing instruction) (or if not so instructed, then invested by the Trustee or the Eligible Institution maintaining such accounts in any Eligible Investments listed in clause (d) of the definition of Eligible Investments). All such Eligible Investments shall be held by the Trustee or the Eligible Institution maintaining such accounts for the benefit of the Certificateholders. Such funds shall be invested in Eligible Investments that will mature so that funds will be available in amounts sufficient for the Servicer to make each distribution required under the applicable Supplement on the Distribution Date with respect to such Collection Period. Funds deposited in the Concentration Account on a Determination Date with respect to the next following Distribution Date are not required to be invested overnight. On each Distribution Date, all interest and other investment earnings (net of losses and investment expenses) received on funds on deposit in the Concentration Account, to the extent such investment income is not needed to pay the Certificateholders on such Distribution Date, shall be paid to the Transferor, except as otherwise specified in any Supplement. The Trustee is hereby authorized, unless otherwise directed by the Servicer, to effect transactions in Eligible Investments through a capital markets affiliate of the Trustee. (b) Dell Collection Accounts. On or prior to the Transfer Date, the Servicer, for the benefit of the Certificate- holders, shall establish and maintain or cause to be established and maintained (i) post-office boxes to which Obligors will remit payments with respect to any Receivable (each such post-office box, a "Dell Post-Office Box") and (ii) in the name of the Trustee, on behalf of the Trust, with an Eligible Institution, segregated accounts accessible by the Trustee (each such account, a "Dell Collection Account"). Obligors will be directed to remit payments with respect to their Receivables to a Dell Post-Office Box or a Dell Collection Account. The Dell Post-Office Boxes and Dell Collection Accounts shall be under the sole dominion and control of the Trustee for the benefit of the Certificateholders; provided, however, that each Dell Post-Office Box shall be accessible by the Trustee for the purpose of transferring Collections to a Dell 55 62 Collection Account and each Dell Collection Account shall be accessible by the Servicer for the purpose of transferring Collections to the Concentration Account in the manner set forth in Section 4.02(a). Specified on Schedule I hereto are (i) the Dell Post-Office Box numbers, (ii) the names, addresses and ABA numbers of all the Dell Collection Account Banks, together with the account numbers of the Dell Collection Accounts and the name of a contact person at each Dell Collection Account Bank and (iii) the name, address and ABA number of the Concentration Account Bank, together with the account number and the name of a contact person for the Concentration Account. Each Dell Collection Account shall be maintained with documentation and instructions in form and substance satisfactory to the Trustee. Such documentation shall provide, among other things, that available amounts shall be promptly transferred to the Concentration Account. The Servicer will not (i) make any changes to Schedule I hereto or (ii) amend any instruction to any Obligor or any Dell Collection Account Bank with respect to any Dell Post-Office Box or Dell Collection Account unless the Trustee shall have received notice of such change or amendment and executed copies of Dell Collection Account Letters to each new Dell Collection Account Bank. The Servicer hereby agrees and acknowledges that (i) it has executed and delivered to the Trustee a letter and executed acknowledgement thereto substantially in the form of Exhibit C hereto (each, a "Dell Collection Account Letter"), addressed to each banking institution with which the Dell Collection Account is maintained (each, a "Dell Collection Account Bank") and (ii) it shall execute and deliver a substantially similar Dell Collection Account Letter prior to the establishment by it of any additional or alternative Dell Collection Account. The Servicer hereby agrees, and the Trustee hereby acknowledges, that the execution and delivery of a Dell Collection Account Letter transfers all right, title and interest in all monies, securities and instruments in the applicable Dell Collection Account to the Trustee. The Servicer agrees to amend Schedule I hereto to reflect any change in the Dell Collection Account Banks and to execute such further documents and take such other actions as may be reasonably requested by the Trustee in order to effect such transfer. SECTION 4.03. Allocation of Collections. Collections will be allocated to each Series as specified in the related Supplement, and amounts so allocated to any Series will not, except as specified in the related Supplement, be available to the Investor Certificateholders of any other Series. Allocations thereof between the Certificateholders' Interest and the Transferor Interest, among the Series or to any Enhancement Agreement and among the Classes in any Series or to any Enhancement Provider shall be set forth in the related Supplement or Supplements. If, on any day, the sum of the Floating Allocation Percentages for all outstanding Series exceeds 100%, then the aggregate of the Investor Collections for all outstanding Series shall be allocated pro rata 56 63 among all outstanding Series on the basis of the Series Allocation Percentage for each such Series; provided, however, that if on any day the amount of Investor Collections for any Series is not sufficient to pay the full amount of interest due and payable on such day to the Investor Certificateholders of each Series on such day, then the aggregate of the Investor Collections for all outstanding Series shall be allocated pro rata among all outstanding Series on the basis of a fraction, for each Series, the numerator of which is the Invested Amount of such Series and the denominator of which is the Trust Invested Amount. 57 64 ARTICLE V DISTRIBUTIONS AND REPORTS TO CERTIFICATEHOLDERS SECTION 5.01. Distributions and Reports to Certificate- holders. Distributions shall be made to, and reports shall be provided to, Certificateholders as set forth in the applicable Supplement. 58 65 ARTICLE VI THE CERTIFICATES SECTION 6.01. The Certificates. The Investor Certificates of any Series or Class shall be issued in registered form and shall be in substantially the form of Exhibit A or Exhibit B, as the case may be, to the applicable Supplement and shall upon issue be executed and delivered by the Transferor to the Trustee for authentication and redelivery as provided in Section 6.02. The Investor Certificates shall be issued in minimum denominations of $1,000,000 and in integral multiples of $1,000 in excess thereof (except that one Certificate may be issued in a denomination that includes any residual amount), and shall be issued upon initial issuance as one or more Investor Certificates in an aggregate original principal amount equal to the Initial Invested Amount. The Transferor Certificate shall be a single certificate, substantially in the form of Exhibit A hereto, and shall represent the entire Transferor Interest. Each Certificate shall be executed by manual or facsimile signature on behalf of the Transferor by the President, any Vice President, the Chief Administrative and Credit Officer, Treasurer or the Secretary of the general partner of the Transferor, or by any other officer or assistant officer duly authorized to execute such Certificate on behalf of the Transferor. Certificates bearing the manual or facsimile signature of the individual who was, at the time when such signature was affixed, authorized to sign on behalf of the Transferor shall not be rendered invalid, notwithstanding that such individual ceased to be so authorized prior to the authentication and delivery of such Certificates or does not hold such office at the date of such Certificates. No Certificates shall be entitled to any benefit under this Agreement or the applicable Supplement or be valid for any purpose, unless there appears on such Certificate a certificate of authentication in substantially the form provided in Exhibit A hereto executed by or on behalf of the Trustee by the manual signature of a duly authorized signatory, and such certificate upon any Certificate shall be conclusive evidence, and the only evidence, that such Certificate has been duly authenticated and delivered hereunder. All Certificates shall be dated the date of their authentication. SECTION 6.02. Authentication of Certificates. The Trustee shall authenticate and deliver the Investor Certificates of each Series to, and upon the written order of, the Transferor against payment to the Transferor of the purchase price therefor. The Trustee shall authenticate and deliver the Transferor Certificate to the Transferor simultaneously with its delivery of the first Series of Investor Certificates to be issued hereunder. The Certificates of any Series or Class shall be duly authenticated by or on behalf of the Trustee, in authorized denominations equal to (in the aggregate), in the case of the Investor Certificates, the Initial Invested Amount of such Class, and, in the case of the 59 66 Transferor Certificate, in the denomination equal to the Transferor Interest from time to time, and together evidencing the entire ownership of the Trust. SECTION 6.03. Registration of Transfer and Exchange of Certificates. (a) The Trustee shall cause to be kept at its corporate trust operations office in Minneapolis, Minnesota, such office or agency to be maintained in accordance with the provisions of Section 11.16, a register (the "Certificate Register") in which, subject to such reasonable regulations as it may prescribe, a transfer agent and registrar (which may be the Trustee) (the "Transfer Agent and Registrar") shall provide for the registration of the Certificates and of transfers and exchanges of the Certificates as herein provided. The Transfer Agent and Registrar shall initially be the Trustee, and any co-transfer agent and co-registrar chosen by the Trustee and acceptable to the Servicer. Any reference in this Agreement to the Transfer Agent and Registrar shall include any co-transfer agent and co-registrar unless the context requires otherwise. The Trustee shall be permitted to resign as Transfer Agent and Registrar upon 30 days' (60 days' during an Amortization Period) written notice to the Transferor and the Servicer; provided, however, that such resignation shall not be effective and the Trustee shall continue to perform its duties as Transfer Agent and Registrar until the Servicer has appointed a successor Transfer Agent and Registrar reasonably acceptable to the Transferor. Upon surrender for registration of transfer of any Investor Certificate at any office or agency of the Transfer Agent and Registrar maintained for such purpose, the Transferor shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Investor Certificates (of the same Series and Class) in authorized denominations of like aggregate Undivided Fractional Interests in the Aggregate Certificateholders' Interest. At the option of an Investor Certificateholder, Investor Certificates may be exchanged for other Investor Certificates (of the same Series and Class) in authorized denominations of like aggregate Undivided Fractional Interests in the Certificateholders' Interest, upon surrender of the Investor Certificates to be exchanged at any such office or agency. Whenever any Investor Certificates are so surrendered for exchange, the Transferor shall execute, and the Trustee shall authenticate and deliver, the Investor Certificates which the Certificateholder making the exchange is entitled to receive. Every Investor Certificate presented or surrendered for registration of transfer or exchange shall be accompanied by a written instrument of transfer in a form satisfactory to the Trustee or the Transfer Agent and Registrar duly executed by the 60 67 Certificateholder thereof or his attorney-in-fact duly authorized in writing. Each Holder must satisfy all transfer restrictions set forth in the Certificates. Each Investor Certificate shall be registered at all times as herein provided, and any transfer or exchange of such Investor Certificate will be valid for purposes hereunder only upon registration of such transfer or exchange by the Trustee or the Transfer Agent and Registrar as provided herein. Payments on any Distribution Date shall be made to Holders of record on the immediately preceding Record Date. No service charge shall be made for any registration of transfer or exchange of Investor Certificates, but the Transfer Agent and Registrar or any co-transfer agent and co-registrar may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer or exchange of Investor Certificates. All Investor Certificates surrendered for registration of transfer or exchange, or for payment, shall be cancelled and disposed of in a manner reasonably satisfactory to the Trustee. (b) The Transfer Agent and Registrar will maintain at its expense in Minneapolis, Minnesota, an office or offices or agency or agencies where Investor Certificates may be surrendered for registration of transfer or exchange. (c) (i) Notwithstanding any other provision of this Section 6.03, no registration of transfer of any Investor Certificate shall be made unless the transferor or the transferee shall deliver, at its expense, to the Transferor, the Servicer and the Trustee either (A) a representation letter, substantially in the form attached as Exhibit D to this Agreement stating whether such transferee is a "benefit plan investor" as defined in Section 2510.3-101(f)(2) of the Labor Regulations promulgated under ERISA, or (B) if such transferee is an insurance company licensed to issue contracts of insurance in any state, the information described in (c)(ii) below. The Transfer Agent and Registrar will maintain, as a part of the Certificate Register, a list of all Investor Certificates (or the portion of any thereof) that are held by benefit plan investors on the basis of any representation provided pursuant to the foregoing clause (A) or on the basis of any information provided to the Transfer Agent and Registrar pursuant to the second sentence of clause (c)(ii) below. The Transfer Agent and Registrar will not register the transfer of any Investor Certificate if, immediately after the registration of transfer of such Investor Certificate, 25% or more of the outstanding principal balance of the Investor Certificates of all Series are held by benefit plan investors. Notwithstanding anything else to the contrary herein, any purported transfer of an Investor Certificate 61 68 to a benefit plan investor in violation of the preceding sentence shall be void and of no effect. (ii) In the event that such transferee is an insurance company licensed to issue contracts of insurance in any state, such transferee, in lieu of the representation letter described in (c)(i)(A) above, may represent that the source of funds from which its investment is to be made is a general account of such insurance company. SECTION 6.04. Mutilated, Destroyed, Lost or Stolen Certificates. If (a) any mutilated Certificate is surrendered to the Transfer Agent and Registrar, or the Transfer Agent and Registrar receives evidence to its satisfaction of the destruction, loss or theft of any Certificate and (b) there is delivered to the Transfer Agent and Registrar, the Trustee, the Transferor and the Servicer such indemnity (provided that a letter of indemnity from (i) an insurance company or (ii) an institutional investor of investment grade credit rating shall satisfy such requirement) as may be required by them to save each of them harmless, then, in the absence of notice to the Trustee that such Certificate has been acquired by a bona fide purchaser, the Transferor shall execute and the Trustee shall authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a new Certificate of like tenor and (in the case of any new Investor Certificate) Undivided Fractional Interest. In connection with the issuance of any new Certificate under this Section 6.04, the Trustee or the Transfer Agent and Registrar may require the payment by the Certificateholder of a sum sufficient to pay any tax or other governmental charge that may be imposed in relation thereto. Any duplicate Certificate issued pursuant to this Section 6.04 shall constitute complete and indefeasible evidence of ownership in the Trust, as if originally issued, whether or not the lost, stolen or destroyed Certificate shall be found at any time. SECTION 6.05. Persons Deemed Owners. At all times prior to due presentation of a Certificate for registration of transfer, the Trustee, the Transfer Agent and Registrar and any agent of any of them shall treat the Person in whose name any Certificate is registered as the owner of such Certificate for the purpose of receiving distributions pursuant to the terms of the applicable Supplement and for all other purposes whatsoever and neither the Trustee, the Transfer Agent and Registrar nor any agent of any of them shall be affected by any notice to the contrary. Notwithstanding the foregoing, in determining whether the Holders of the requisite Undivided Fractional Interests have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Certificates owned by the Transferor, the Servicer or any Affiliate thereof shall be disregarded and deemed not to be outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only 62 69 Certificates which the Trustee knows to be so owned shall be so disregarded. Certificates so owned which have been pledged in good faith shall not be disregarded and may be regarded as outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Certificates and that the pledgee is not the Transferor, the Servicer or an Affiliate thereof. SECTION 6.06. Access to List of Certificateholders' Names and Addresses. The Trustee will furnish or cause to be furnished by the Transfer Agent and Registrar to the Servicer, the Transferor or any Investor Certificateholder, within five Business Days after receipt by the Trustee of a written request therefor from the Servicer, the Transferor or any Investor Certificateholder, respectively, a list of the names and addresses of the Certificateholders. Every Certificateholder, by receiving and holding a Certificate, agrees that neither the Trustee, the Transfer Agent and Registrar, the Transferor, the Servicer, Dell, nor any of their respective agents, shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the Certificateholders hereunder, regardless of the sources from which such information was derived. SECTION 6.07. Authenticating Agent. (a) The Trustee may appoint one or more authenticating agents with respect to the Certificates which shall be authorized to act on behalf of the Trustee in authenticating the Certificates in connection with the issuance, delivery, registration of transfer, exchange or repayment of the Certificates. Whenever reference is made in this Agreement to the authentication of Certificates by the Trustee or the Trustee's certificate of authentication, such reference shall be deemed to include authentication on behalf of the Trustee by an authenticating agent and a certificate of authentication executed on behalf of the Trustee by an authenticating agent. Each authenticating agent must be acceptable to the Transferor and the Servicer. (b) Any institution succeeding to the corporate agency business of an authenticating agent shall continue to be an authenticating agent without the execution or filing of any power or any further act on the part of the Trustee or such authenticating agent. (c) An authenticating agent may at any time resign by giving written notice of resignation to the Trustee and to the Transferor. The Trustee may at any time terminate the agency of an authenticating agent by giving notice of termination to such authenticating agent and to the Transferor. Upon receiving such a notice of resignation or upon such a termination, or in case at any time an authenticating agent shall cease to be acceptable to the 63 70 Trustee or the Transferor, the Trustee may promptly appoint a successor authenticating agent. Any successor authenticating agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an authenticating agent. No successor authenticating agent shall be appointed unless acceptable to the Trustee and the Transferor. (d) The Transferor agrees to pay to each authenticating agent from time to time reasonable compensation for its services under this Section 6.07. (e) The provisions of Sections 11.01, 11.02 and 11.03 shall be applicable to any authenticating agent. (f) Pursuant to an appointment made under this Section 6.07, the Certificates may have endorsed thereon, in lieu of or in addition to the Trustee's certificate of authentication, an alternate certificate of authentication in substantially the following form: This is one of the Certificates described in the Pooling and Servicing Agreement. ------------------------------- ------------------------------- as Authenticating Agent for the Trustee By: ---------------------------- Authorized Signer SECTION 6.08. New Issuances. (a) The Transferor may from time to time direct the Trustee, on behalf of the Trust, to issue one or more new Series of Investor Certificates pursuant to a Supplement. The Investor Certificates of all outstanding Series shall be equally and ratably entitled as provided herein to the benefits of this Agreement without preference, priority or distinction, all in accordance with the terms and provisions of this Agreement and the applicable Supplement except, with respect to any Series or Class, as provided in the related Supplement. (b) On or before the Initial Issuance Date relating to any new Series, the parties hereto will execute and deliver a Supplement which will specify the Principal Terms of such new Series. The terms of such Supplement may modify or amend the terms of this Agreement solely as applied to such new Series. The obligation of the Trustee to issue the Investor Certificates of such new Series and to execute and deliver the related Supplement is subject to the satisfaction of the following conditions: 64 71 (i) on or before the tenth Business Day immediately preceding the Initial Issuance Date for such Series, the Transferor shall have given the Trustee, the Servicer, each Rating Agency and any Enhancement Provider written notice of such issuance and the Initial Issuance Date for such Series; (ii) the Transferor shall have delivered to the Trustee the related Supplement, in form satisfactory to the Trustee, executed by each party hereto other than the Trustee; (iii) the Transferor shall have delivered to the Trustee any related Enhancement Agreement executed by each party hereto other than the Trustee; (iv) each Rating Agency shall have notified the Transferor, the Servicer, the Trustee and any Enhancement Provider in writing that the issuance of such new Series of Investor Certificates will not result in a reduction or withdrawal of the rating of any outstanding Series or Class with respect to which it is a Rating Agency; (v) such issuance will not result in the occurrence of a Trust Early Amortization Event and the Transferor shall have delivered to the Trustee and any Enhancement Provider an Officer's Certificate, dated the Initial Issuance Date for such Series (upon which the Trustee may conclusively rely), to the effect that the Transferor reasonably believes that such issuance will not result in the occurrence of a Trust Early Amortization Event and is not reasonably expected to result in the occurrence of a Trust Early Amortization Event at any time in the future; (vi) the Transferor shall have delivered to the Trustee and any Enhancement Provider an Opinion of Counsel to the effect that the issuance of the Investor Certificates of such Series (A) has been, or need not be, registered under the Act and will not result in the requirement that any other Series of Investor Certificates not registered under the Act be so registered (unless the Transferor has elected, in its sole discretion, to register such Certificates), and (B) will not result in the Trust becoming subject to registration as an investment company under the Investment Company Act and (C) will not require this Agreement or the related Supplement to be qualified under the Trust Indenture Act of 1939, as amended; (vii) the Transferor shall have delivered to the Trustee a Tax Opinion, dated the Initial Issuance Date for such Series, with respect to such issuance; 65 72 (viii) such issuance will not result in the aggregate of the Floating Allocation Percentages for all outstanding Series (after giving effect to such new issuance) exceeding 100%; and (ix) the Receivables Purchase Agreements, the Parent Undertaking Agreement and the Cross-Guarantee Agreement shall be in full force and effect. Upon satisfaction of the above conditions, the Trustee shall execute the Supplement and the Transferor shall execute and deliver the Investor Certificates of such Series for authentication and redelivery to or upon the order of the Transferor. Notwithstanding the provisions of this Section 6.08(b), prior to the execution of any Supplement, the Trustee shall be entitled to receive and rely upon an Opinion of Counsel stating that the execution of such Supplement is authorized or permitted by this Agreement and any Supplement related to any outstanding Series. The Trustee may, but shall not be obligated to, enter into any such Supplement which adversely affects the Trustee's own rights, duties or immunities under this Agreement. (c) The Transferor may surrender the Transferor Certificate to the Trustee in exchange for a newly issued Transferor Certificate and a second certificate (a "Supplemental Certificate"), the terms of which shall be subject to Section 13.01 to the extent that it amends any of the terms of this Agreement, to be delivered to or upon the order of the Transferor (or the holder of a Supplemental Certificate, in the case of the transfer or exchange thereof, as provided below), upon satisfaction of the following conditions: (i) the Transferor shall have delivered to the Trustee an Officer's Certificate certifying that the result obtained by multiplying (x) an amount equal to the excess of the Net Receivables Balance over the Trust Invested Amount by (y) the percentage equivalent of the portion of the Transferor Interest represented by the Transferor Certificate, shall not be less than 2% of the aggregate balance of all Receivables owned by the Trust, in each case as of the date of, and after giving effect to, such exchange; (ii) the Rating Agency Condition shall have been satisfied with respect to such exchange (or transfer or exchange as provided below); and (iii) the Transferor shall have delivered to the Trustee and any Enhancement Provider a Tax Opinion, dated the date of such exchange (or transfer or exchange as provided below), with respect thereto. The Transferor Certificate will at all times be beneficially owned by the Transferor. Any Supplemental Certificate may be 66 73 transferred or exchanged only upon satisfaction of the conditions set forth in clauses (ii) and (iii) above. Any Supplemental Certificate may be transferred only with the consent (which consent may be unreasonably withheld) of a Majority in Interest of each Class of each outstanding Series. 67 74 ARTICLE VII OTHER MATTERS RELATING TO THE TRANSFEROR SECTION 7.01. Obligations not Assignable. The obligations of the Transferor hereunder shall not be assignable nor shall any Person succeed to the obligations of the Transferor hereunder. SECTION 7.02. Limitations on Liability. None of the directors, officers, employees or agents of the Transferor or any limited partner of the Transferor, past, present or future, shall be under any liability to the Trust, the Trustee, the Certificate- holders or any other Person for any action taken or for refraining from the taking of any action in such capacities pursuant to this Agreement or for any obligation or covenant under this Agreement; provided, however, that this provision shall not protect any such Person against any liability which would otherwise be imposed by reason of willful misconduct or bad faith, in the performance by such Person of such Person's duties or the reckless disregard by such Person of any of his, her or its obligations and duties hereunder. The Transferor and any partner, director, officer, employee or agent of the Transferor may rely in good faith on any document of any kind prima facie properly executed and submitted by any Person (other than the Transferor or any Affiliate thereof) respecting any matters arising hereunder or under any Supplement or the Receivables Purchase Agreements. SECTION 7.03. Indemnification of the Trustee, the Trust and the Investor Certificateholders. Without limiting any other rights which the Trustee, the Trust or any Investor Certificate- holder (each, an "Indemnified Party") may have hereunder or under applicable law, the Transferor hereby agrees to indemnify each Indemnified Party from and against any and all damages, losses, liabilities and related costs and expenses actually incurred (excluding consequential damages and lost profits), including reasonable attorneys' fees and disbursements (all of the foregoing being collectively referred to as "Indemnified Amounts") awarded against or incurred by any of them arising out of or resulting from this Agreement, the activities of the Trust or the Trustee in connection herewith, the Transferor's use of proceeds of Transfers of Receivables or reinvestments of Collections, the interest conveyed hereunder in Trust Assets, or in respect of any Receivable or the Receivables Purchase Agreements (excluding however (a) Indemnified Amounts resulting from gross negligence or willful misconduct on the part of such Indemnified Party to which such Indemnified Amount would otherwise be due, (b) losses in respect of Receivables to the extent reimbursement therefor would constitute credit recourse to the Transferor for nonpayment of any Receivable by any Originator, (c) any income or franchise taxes or similar taxes (or any interest or penalties with respect thereto) incurred by such Indemnified Party arising out of or as a result of this 68 75 Agreement or the interest conveyed hereunder in Trust Assets or in respect of any Receivable or the Receivables Purchase Agreements and (d) Indemnified Amounts resulting from the acts or omissions of the Servicer (unless the Servicer is Dell or any Affiliate of Dell)), to the extent caused by: (i) reliance on any representation, warranty or covenant made or statement made or deemed made by the Transferor (or any of its Responsible Officers) under or in connection with this Agreement or the Receivables Purchase Agreements which shall have been incorrect in any material respect when made or deemed made or which the Transferor shall have failed to perform; (ii) the failure by the Transferor to comply with this Agreement or any applicable Requirement of Law with respect to any Receivable or the related Contract or the Receivables Purchase Agreements, or the failure of any Receivable or the related Contract to conform to the applicable Receivables Purchase Agreement or any Requirement of Law; (iii) the failure to vest in the Trustee on behalf of the Investor Certificateholders either an undivided fractional beneficial interest, to the extent of their respective Undivided Fractional Interests, or a perfected first priority security interest in the Receivables and the other Trust Assets, free and clear of any Lien; (iv) the failure to have filed, or any delay in filing, any financing statements or other similar instruments or documents under the UCC of any applicable jurisdiction or other applicable laws that are necessary for perfection or priority of the ownership and security interest created by this Agreement; (v) any commingling of Collections by the Transferor with other funds of the Transferor or any Affiliate; (vi) any investigation, litigation or proceeding related to this Agreement or the Receivables Purchase Agreements or the Trust or the use of proceeds or reinvestments of proceeds by the Transferor, Dell Marketing L.P., Dell Direct Sales L.P. or Dell of Transfers of Receivables or the ownership of or security interest in Trust Assets or in respect of any Receivable or Contract, other than any investigation, litigation or proceeding relating to such Indemnified Party's affairs which includes matters or transactions in addition to those contemplated by the Transaction Documents; (vii) any claim brought by any Person other than an Indemnified Party arising from any activity by the Transferor 69 76 or any Affiliate of the Transferor in servicing, administering or collecting any Receivable; (viii) any failure by the Transferor to perform its duties or obligations in accordance with the provisions of this Agreement or the Receivables Purchase Agreements; or (ix) any tax (other than any income or franchise or similar tax, or any interest or penalties with respect thereto) imposed by reason of ownership of the Receivables or other Trust Assets by the Trustee. Any Indemnified Amounts due hereunder shall be payable within ten Business Days of submission of a claim by the Indemnified Party. Indemnification pursuant to this Section 7.03 shall only be payable from assets of the Transferor. The agreement contained in this Section 7.03 shall survive the collection of all Receivables, the termination of the Trust and the payment of all amounts otherwise payable hereunder. Each Indemnified Party will use its best efforts to notify the Transferor in advance of making any claim under this Section 7.03. 70 77 ARTICLE VIII OTHER MATTERS RELATING TO THE SERVICER SECTION 8.01. Liability of the Servicer. The Servicer shall be liable under this Agreement only to the extent of the obligations specifically undertaken by the Servicer in its capacity as Servicer. No implied duties or covenants shall be read into this Agreement against the Servicer. SECTION 8.02. Merger or Consolidation of, or Assumption of the Obligations of, the Servicer. The Servicer shall not consolidate with or merge into any other Person or convey or transfer its properties and assets substantially as an entirety to any Person (other than Dell or any of its Controlled Affiliates) unless: (a) (i) the Person formed by such consolidation or into which the Servicer is merged or the Person which acquires by conveyance or transfer the properties and assets of the Servicer substantially as an entirety shall be, if the Servicer is not the surviving entity, a corporation or limited partnership organized and existing under the laws of the United States of America or any State or the District of Columbia, and such corporation or limited partnership shall have expressly assumed, by an agreement supplemental hereto, executed and delivered to the Trustee, in form reasonably satisfactory to the Trustee, the performance of every covenant and obligation of the Servicer hereunder; (ii) the Servicer shall have delivered to the Trustee an Officer's Certificate and an Opinion of Counsel each in form reasonably satisfactory to the Trustee and stating that such consolidation, merger, conveyance or transfer complies with this Section 8.02 and that all conditions precedent herein provided for relating to such transaction have been complied with; and (iii) the Rating Agency Condition shall have been satisfied; and (b) the corporation or limited partnership formed by such consolidation or into which the Servicer is merged or which acquires by conveyance or transfer the properties and assets of the Servicer substantially as an entirety shall have all licenses and approvals of Governmental Authorities required to service the Receivables, except to the extent the failure to have any such license would not have a material adverse effect on its ability to perform the obligations of Servicer hereunder. SECTION 8.03. Limitations on Liability. None of the directors, officers, employees or agents of the Servicer or any limited partner of the Servicer, past, present or future, shall be under any liability to the Trust, the Trustee, the Certificate- holders or any other Person for any action taken or for refraining from the taking of any action in such capacities pursuant to this Agreement or for any obligation or covenant under this Agreement, 71 78 it being understood that, with respect to the Servicer, that this Agreement and the obligations created hereunder are solely the obligations of the Servicer; provided, however, that this provision shall not protect the Servicer or any such Person against any liability which would otherwise be imposed by reason of willful misconduct, bad faith, gross negligence or the reckless disregard by such Person of any of his, her or its obligations and duties. The Servicer and any partner, director, officer, employee or agent of the Servicer may rely in good faith on any document of any kind prima facie properly executed and submitted by any Person (other than the Servicer or any Affiliate thereof) respecting any matters arising hereunder. The Servicer shall not be under any obligation to appear in, prosecute or defend any legal action which is not incidental to its duties as Servicer in accordance with this Agreement and which in its reasonable judgment may involve it in any material expense or liability. SECTION 8.04. Servicer Indemnification. The Servicer hereby agrees to indemnify each Indemnified Party from and against Indemnified Amounts awarded against or incurred by any of them arising out of or resulting from this Agreement, the activities of the Trust or the Trustee in connection herewith, the Transferor's use of proceeds of Transfers of Receivables or reinvestments of Collections, the interest conveyed hereunder in Trust Assets, or in respect of any Receivable or the Receivables Purchase Agreements (excluding however (a) Indemnified Amounts resulting from gross negligence or willful misconduct on the part of such Indemnified Party to which such Indemnified Amount would otherwise be due, (b) losses in respect of Receivables to the extent reimbursement therefor would constitute credit recourse to the Transferor for nonpayment of any Receivable by any Originator and (c) any income or franchise taxes or similar taxes (or any interest or penalties with respect thereto) incurred by such Indemnified Party arising out of or as a result of this Agreement or the interest conveyed hereunder in Trust Assets or in respect of any Receivable or the Receivables Purchase Agreements) to the extent caused by: (i) reliance on any representation, warranty or covenant made by the Servicer (or any of its Responsible Officers) under or in connection with this Agreement which shall have been incorrect in any material respect when made or which the Servicer shall have failed to perform; (ii) the failure by the Servicer to comply with any applicable Requirement of Law with respect to any Receivable or the related Contract; (iii) any commingling by the Servicer of Collections with other funds of the Servicer or any Affiliate; (iv) any claim brought by any Person other than an Indemnified Party arising from any activity by the Servicer or 72 79 any Affiliate of the Servicer in servicing, administering or collecting any Receivable; or (v) any failure by the Servicer to perform its duties or obligations in accordance with the provisions of this Agreement. The agreement contained in this Section 8.04 shall survive the collection of all Receivables, the termination of the Trust and the payment of all amounts otherwise due hereunder. Any Indemnified Amounts due hereunder shall be payable within ten Business Days of submission of a claim by the Indemnified Party. Each Indemnified Party will use its best efforts to notify the Servicer in advance of making any claim under this Section 8.04. SECTION 8.05. The Servicer Not to Resign. The Servicer shall not resign from the obligations and duties hereby imposed on it except upon determination that (i) its performance of its duties hereunder is no longer permissible under applicable law and (ii) there is no reasonable action which the Servicer could take to make its performance of its duties hereunder permissible under applicable law. Any determination permitting the resignation of the Servicer shall be evidenced by an Opinion of Counsel who is not an employee of the Servicer or any Affiliate of the Servicer with respect to clause (i) above, delivered to, and in form reasonably satisfactory to, the Trustee. No resignation shall become effective until the Trustee or a Successor Servicer shall have assumed the responsibilities and obligations of the Servicer in accordance with Section 10.02. SECTION 8.06. Examination of Records. The Servicer shall mark its computer records that the Receivables and other Trust Assets have been Transferred to the Trustee, on behalf of the Trust, pursuant to this Agreement for the benefit of the Certificateholders. The Servicer (and the Transferor) shall, prior to the sale or transfer to a party other than the Transferor of any receivable held in its custody, examine its records to determine that such receivable is not a Receivable. SECTION 8.07. Confidentiality. The Servicer agrees to use its best efforts, and shall cause its agents or representatives to use their best efforts, to hold in confidence all Confidential Information; provided that nothing herein shall prevent the Servicer from delivering copies of any financial statements and other documents constituting Confidential Information, or disclosing any other Confidential Information, (i) to a Successor Servicer or as required by a Requirement of Law applicable to the Servicer, (ii) as required in the performance of the Servicer's 73 80 duties hereunder, (iii) as required in enforcing the rights of the Certificateholders hereunder or (iv) as provided in any Supplement. The Servicer agrees to take such measures as shall be reasonably requested by the Transferor to protect and maintain the security and confidentiality of all Confidential Information and, in connection therewith, will allow the Transferor to inspect the Servicer's security and confidentiality arrangements from time to time during normal business hours. The Servicer shall use its best efforts to provide the Transferor written notice at least five Business Days prior to any disclosure pursuant to this Section 8.07 and in any event will provide written notice whenever any such disclosure is made. 74 81 ARTICLE IX TRUST EARLY AMORTIZATION EVENTS SECTION 9.01. Trust Early Amortization Events. If any one of the following events shall occur: (a) any failure by the Transferor or the Servicer to make any payment, transfer or deposit required to be paid, effected or made by it hereunder (including pursuant to Section 3.04(b)) on or before the date occurring two Business Days after the date such payment, transfer or deposit is required to be made hereunder; or (b) any representation, warranty, certification or written statement made or deemed made by the Transferor or the Servicer under or in connection with this Agreement, or by Dell under or in connection with the Parent Undertaking Agreement, or in any statement, record, certificate, financial statement or other document delivered pursuant hereto or to the Parent Undertaking Agreement or in connection herewith or with the Parent Undertaking Agreement shall prove to have been incorrect in any material respect on or as of the date made or deemed made which has a material adverse effect on the interests of the Certificateholders of any Series and which continues unremedied for 20 days (or, with respect to the representations and warranties made in Sections 2.03(g) and 2.03(h), continues unremedied for five days, or, with respect to any representations and warranties made under Section 2.04 hereof, such longer period as may be agreed to by the Trustee and a Majority in Interest of each outstanding Series) after the earlier of (i) the date on which written notice of such failure, requiring the same to be remedied, shall have been given to Dell, the Transferor or the Servicer, as applicable, by the Trustee or any Enhancement Provider and (ii) the date on which written notice of such failure, requiring the same to be remedied, shall have been given to Dell, the Transferor or the Servicer, as applicable, and the Trustee by Certificateholders of any outstanding Series evidencing not less than 20% of the Invested Amount for such Series; or (c) the Transferor or the Servicer shall fail to observe or perform in any material respect any covenant or agreement applicable to it contained herein (other than as specified in clause (a) or (b) above), which has a material adverse effect on the Certificateholders and continues unremedied for 20 days (or, with respect to the covenants contained in Sections 3.04(a), 3.04(h) and 3.04(i) hereof, continues unremedied for five days) after the earlier of (i) the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Transferor or the Servicer, as applicable, by the Trustee or any Enhancement Provider and (ii) the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Transferor or the Servicer, as applicable, and the 75 82 Trustee by Certificateholders of any outstanding Series evidencing not less than 20% of the Invested Amount for such Series; or (d) an Event of Termination under any Receivables Purchase Agreement shall occur, and shall not be remedied within the applicable grace period, if any, or any Receivables Purchase Agreement shall for any reason cease to be in full force and effect or an Early Termination (as defined therein) shall occur; or (e) the Net Receivables Balance is less than the Required Net Receivables Balance on the sixth consecutive day following a Pool Non-compliance Date; or (f) an Insolvency Event shall occur with respect to the Transferor, the Servicer, Dell or the Trust; provided that for purposes of this Section 9.01, the definition of "Insolvency Event" shall be construed without giving effect to the 60-day grace period in clause (a) thereof (except with respect to any Controlled Affiliate that is not a party to any Transaction Document); or (g) the Securities and Exchange Commission or other regulatory body having jurisdiction reaches a final determination that the Trust is an "investment company" within the meaning of the Investment Company Act; or (h) (i) any purchase of any Receivables by the Transferor under any Receivables Purchase Agreement shall cease to create a valid sale, transfer and assignment to the Transferor of all right, title and interest of the Originator in and to such Receivables and the proceeds thereof, or (ii) any Transfer of any Receivables on any date shall for any reason cease to create a valid transfer and assignment to the Trust of all right, title and interest of the Transferor in and to such Receivables and the proceeds thereof or, if such Transfer does not constitute such a sale, transfer and assignment, cease to create a valid and perfected first priority "security interest" (as defined in the UCC of the jurisdiction the law of which governs the perfection of the interest in such Receivables created hereunder) in such Receivables and the proceeds thereof, or (iii) the Investor Certificates delivered hereunder shall for any reason (other than due to their own acts or omissions) cease to evidence the transfer to the Investor Certificateholders of, or the Investor Certificateholders shall otherwise cease to have, a beneficial interest in a trust owning or the Trustee having a perfected first priority security interest in the Receivables and the other Trust Assets now existing and hereafter arising and the proceeds thereof to the extent of their respective Undivided Fractional Interests; or (i) the Trust at any time receives a final determination that it will be treated as an association taxable as a corporation for federal income tax purposes; or 76 83 (j) a Servicer Default shall have occurred and be continuing which has a material adverse effect on the interests of the Certificateholders; or (k) the Servicer shall have resigned in accordance with the terms of this Agreement; or (l) Dell shall fail to observe or perform in any material respect any covenant or agreement applicable to it contained in Section 6 of the Parent Undertaking Agreement, or the Parent Undertaking Agreement shall cease to be in effect; or (m) the Cross-Guarantee Agreement shall cease to be in effect; then, if any of the events set forth in paragraphs (a), (d), (e), (f), (g), (h), (i), (j), (k), (l) or (m) above shall have occurred, a "Trust Early Amortization Event" shall occur without any notice, demand, protest or other requirement of any kind immediately upon the occurrence of such event and if any of the events set forth in paragraphs (b) or (c) above shall have occurred, the Trustee may, by notice to the Transferor and the Servicer, declare that a "Trust Early Amortization Event" shall occur as of the date set forth in such notice. Upon the occurrence of a Trust Early Amortization Event, additional Receivables will not be transferred to the Trust. A Majority in Interest of each outstanding Series may, on behalf of all Certificateholders, waive any default by the Servicer in the performance of its obligations hereunder and its consequences, except (1) the failure to make any distributions or payments required to be made to Certificateholders or to make any required deposits of any amounts to be so distributed or paid can be waived only (a) with respect to Indemnified Amounts, with the consent of the relevant Indemnified Party or (b) with respect to other amounts, with unanimous consent of all Certificateholders of all outstanding Series and (2) defaults arising from the events set forth in paragraph (d). No such waiver shall extend to any subsequent or other default or impair any right consequent thereon except to the extent expressly so waived. SECTION 9.02. Additional Rights Upon the Occurrence of any Trust Early Amortization Event. (a) Upon the occurrence and during the continuance of any Trust Early Amortization Event, in addition to all other rights and remedies under this Agreement or otherwise and all other rights and remedies provided under the UCC of the applicable jurisdiction and other applicable laws (which rights shall be cumulative), each of the Servicer, at the direction of the Trustee, and the Trustee may exercise any and all rights and remedies of the Transferor under or in connection with the Receivables Purchase Agreements, including, without limitation, any and all rights of the Transferor to demand or otherwise require payment of any amount under, or performance of any provision of, 77 84 the Receivables Purchase Agreements. Further, the Trustee may exercise any and all rights and remedies under the Parent Undertaking Agreement and the Cross-Guarantee Agreement. (b) If an Insolvency Event with respect to the Transferor occurs, the Transferor shall immediately cease to transfer Receivables to the Trust and shall promptly give written notice to the Trustee, who shall within two Business Days forward such notice to the Certificateholders, each Rating Agency and the Servicer of such event. Notwithstanding the above, Receivables transferred to the Trust prior to the occurrence of such Insolvency Event and collections relating to such Receivables shall continue to be part of the Trust. Unless, within 10 Business Days of the date of the notice provided for above, the Trustee receives written instructions from a Majority in Interest of each outstanding Series instructing the Trustee not to sell, dispose of or liquidate the Receivables, the Trustee shall promptly proceed to sell, dispose of, or otherwise liquidate the Receivables in a commercially reasonable manner and on commercially reasonable terms; provided, however, that if the amount available to the Trust for distribution after such sale, disposition or liquidation would be less than the aggregate principal amount of the Investor Certificates plus any unpaid Discount Amount thereon through the Distribution Date next succeeding the date of such sale, the Trustee shall not proceed with such sale, disposition or liquidation unless a Majority in Interest of each outstanding Series shall have consented in writing thereto. The proceeds from such sale, disposition or liquidation of the Receivables shall be treated as Collections on the Receivables and shall be distributed in accordance with the terms of this Agreement after being deposited in the Concentration Account. 78 85 ARTICLE X SERVICER DEFAULTS SECTION 10.01. Servicer Defaults. If any one of the following events (each being a "Servicer Default") shall occur and be continuing: (a) any failure by the Servicer to make any payment, transfer or deposit (including pursuant to Section 3.04(b)), or, if applicable, to give instructions or notice to the Trustee to make such payment, transfer or deposit, or to give notice to the Trustee as to any action to be taken under any Enhancement Agreement, or any failure to provide the Determination Date Certificate to the Trustee, which failure continues unremedied (A) in the case of payments for two Business Days and (B) in the case of the Determination Date Certificate, for three Business Days; or (b) any failure by the Servicer duly to observe or perform in any material respect any other covenant or agreement of the Servicer set forth in this Agreement, which failure has a material adverse effect on the interests of the Certificateholders and which continues unremedied for 20 days (or, with respect to any covenant contained in Sections 3.04(a), 3.04(h) and 3.04(i), continues unremedied for five days) after the earlier of (i) the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Servicer by the Trustee or any Enhancement Provider and (ii) the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Servicer and the Trustee by Certificate- holders of any outstanding Series evidencing not less than 20% of the Invested Amount for such Series; or (c) any representation, warranty or certification made by the Servicer under or in connection with this Agreement, or in any certificate or information delivered pursuant to or in connection with this Agreement, shall prove to have been incorrect in any respect when made and which has a material adverse effect on the interests of the Certificateholders of any Series and which material adverse effect continues for a period of 20 days (or, with respect to any representation and warranty made in Sections 3.03(g), continues for five days) after the earlier of (i) the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Servicer by the Trustee or any Enhancement Provider and (ii) the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Servicer and the Trustee by Certificate-holders of any outstanding Series evidencing not less than 20% of the Invested Amount for such Series; or (d) an Insolvency Event shall occur with respect to the Servicer; or 79 86 (e) the Servicer assigns its duties under this Agreement, except as specifically permitted by Section 8.02; then, as long as such Servicer Default shall not have been remedied and is continuing, either the Trustee (unless otherwise directed by a Majority in Interest of each outstanding Series) or the Majority in Interest of each Series, by notice then given in writing to the Servicer (and to the Trustee if given by such Investor Certificateholders) (each such notice being a "Termination Notice"), may terminate all but not less than all the rights and obligations of the Servicer as Servicer under this Agreement. The Trustee shall be deemed to have knowledge of a Servicer Default if it has actual knowledge or if a Responsible Officer of the Trustee has received written notice thereof. Notwithstanding the foregoing, a delay in or failure of performance referred to in Section 10.01(a) or (b) for a period of five Business Days after the applicable grace period shall not constitute a Servicer Default if such delay or failure could not have been prevented by the exercise of reasonable diligence by the Servicer and such delay or failure was caused by an act of God or the public enemy, acts of declared or undeclared war, public disorder, rebellion or sabotage, epidemics, landslides, lightning, fire, hurricanes, earthquakes, floods, union strikes, work stoppages or similar causes. The preceding sentence shall not relieve the Servicer from using its best efforts to perform its obligations in a timely manner in accordance with the terms of this Agreement, and the Servicer shall provide the Trustee, the Transferor, any Enhancement Provider and the Investor Certificate- holders with an Officer's Certificate giving prompt notice of such failure or delay by it, together with a description of its efforts so to perform its obligations. A Majority in Interest of each outstanding Series may, on behalf of all Certificateholders, waive any default by the Servicer in the performance of its obligations hereunder and its consequences, except (1) the failure to make any distributions or payments required to be made to Certificateholders or to make any required deposits of any amounts to be so distributed or paid can be waived only (a) with respect to Indemnified Amounts, with the consent of the relevant Indemnified Party or (b) with respect to other amounts, with unanimous consent of all Certificateholders of all outstanding Series and (2) defaults arising from the events set forth in paragraph (d). No such waiver shall extend to any subsequent or other default or impair any right consequent thereon except to the extent expressly so waived. After receipt by the Servicer of a Termination Notice, and on the date that a Successor Servicer shall have been appointed by the Trustee pursuant to Section 10.02, all authority and power of the Servicer under this Agreement shall pass to and be vested in such Successor Servicer (a "Service Transfer"); and, without 80 87 limitation, the Trustee is hereby authorized, empowered and instructed (upon the failure of the Servicer to cooperate) to execute and deliver, on behalf of the Servicer, as attorney-in-fact or otherwise, all documents and other instruments upon the failure of the Servicer to execute or deliver such documents or instruments, and to do and accomplish all other acts or things necessary or appropriate to effect the purposes of such Service Transfer. The Servicer agrees to cooperate, at its expense, with the Trustee and such Successor Servicer in (i) effecting the termination of the responsibilities and rights of the Servicer to conduct servicing hereunder, including, without limitation, the transfer to such Successor Servicer of all authority of the Servicer to service the Receivables as provided under this Agreement, including all authority over all Collections which shall on the date of such Service Transfer be held by the Servicer for deposit to the Concentration Account, any Dell Collection Account, the Trustee's Account or the Transferor's Account, or which have been deposited by the Servicer to the Concentration Account, any Dell Collection Account, or any other account, or which shall thereafter be received with respect to the Receivables, (ii) taking such measures as shall be reasonably requested by the Transferor to protect and maintain the security and confidentiality of all Confidential Information in accordance with Section 8.07 and, (iii) assisting the Successor Servicer until all servicing activities have been transferred to such Successor Servicer, such assistance to include, without limitation, (x) assisting any accountants selected by the Successor Servicer to verify collection records and reports made prior to the Service Transfer and (y) assisting to make the computer systems of the Servicer and the Successor Servicer compatible to the extent necessary to effect the Servicer Transfer. The Servicer shall, at its expense, within five Business Days of such Service Transfer, (A) assemble such documents, instruments and other records (including computer tapes and disks), which evidence the Receivables and the other Trust Assets, and which are necessary or desirable to collect the Receivables, and shall make the same available to the Successor Servicer or the Trustee or its designee at a place selected by the Successor Servicer or the Trustee and in such form as the Successor Servicer or the Trustee may reasonably request, and (B) segregate all cash, checks and other instruments received by it from time to time constituting Collections of Receivables in a manner acceptable to the Successor Servicer and the Trustee, and, promptly upon receipt, remit all such cash, checks and instruments to the Successor Servicer or the Trustee or its designee. At any time following a Termination Notice: (1) The Servicer shall, at the Trustee's request and at the Servicer's expense, give notice of the Trust's ownership of the Receivables to the related Obligors and direct that payments be made directly to the Trustee or its designee; 81 88 (2) If the Servicer fails to provide the notice to Obligors required in paragraph (1) above, the Trustee may direct the Obligors of Receivables, or any of them, that payment of all amounts payable under any such Receivables be made directly to the Trustee or its designee; (3) Each of the Transferor and each Certificateholder hereby authorizes the Trustee to take any and all steps in the Transferor's name and on behalf of the Transferor and the Certificateholders necessary or desirable, in the determination of the Trustee, to collect all amounts due under any and all Receivables, including, without limitation, endorsing the Transferor's name on checks and other instruments representing Collections in respect of such Receivables and enforcing such Receivables. SECTION 10.02. Trustee to Act; Appointment of Successor Servicer. (a) On and after the receipt by the Servicer of a Termination Notice pursuant to Section 10.01 or upon a resignation by the Servicer pursuant to Section 8.05, the Servicer shall continue to perform all servicing functions under this Agreement until (i) in the case of any such receipt, the date specified in such Termination Notice or otherwise specified by the Trustee in writing or, if no such date is specified in such Termination Notice or otherwise specified by the Trustee, until the earlier of a date agreed upon by the Servicer and the Trustee or a date specified by the Trustee in a written notice to the Servicer, and (ii) in the case of any such resignation, the date the Trustee or a Successor Servicer shall have assumed the responsibilities and obligations of the Servicer pursuant to this Section 10.02. The Trustee shall as promptly as possible after the giving of a Termination Notice or such a resignation appoint an Eligible Servicer as a successor servicer (the "Successor Servicer"), subject to the consent of any Enhancement Provider and if specified in any Supplement, the consent of a Majority in Interest of such Series, which consent shall not be unreasonably withheld, and such Successor Servicer shall accept its appointment by a written assumption in a form acceptable to the Trustee. In the event that a Successor Servicer has not been appointed or has not accepted its appointment by the earlier of 30 days after the date of such Termination Notice or at the time when the Servicer ceases to act as Servicer, the Trustee without further action shall automatically be appointed the Successor Servicer. The Trustee may delegate any of its servicing obligations to an affiliate or agent in accordance with the terms of this Agreement. Notwithstanding the foregoing, the Trustee shall, if it is legally unable so to act as Successor Servicer, petition a court of competent jurisdiction to appoint any established institution that is an Eligible Servicer (other than the Trustee) as the Successor Servicer hereunder. (b) Upon its appointment, the Successor Servicer shall be the successor in all respects to the Servicer with respect to 82 89 servicing functions under this Agreement and shall be subject to all the responsibilities, duties and liabilities relating thereto placed on the Servicer by the terms and provisions hereof, and all references in this Agreement to the Servicer shall be deemed to refer to such Successor Servicer; provided, however, that neither the Trustee (solely in its capacity as such) nor any Successor Servicer shall be deemed in default hereunder as a result of the predecessor Servicer's failure to deliver necessary Trust Assets, documents, or records to the Trustee (solely in its capacity as such) or to such Successor Servicer; and provided further, that the Successor Servicer shall not be liable for any acts or omissions of the Servicer occurring prior to such succession or for any breach by the Servicer of any of its representations and warranties contained herein or in any related document or agreement. The Successor Servicer shall be reimbursed for any reasonable transition expenses incurred pursuant to a Service Transfer in accordance with Section 3.02(b). Any Successor Servicer, by its acceptance of its appointment, will automatically agree to be bound by the terms and provisions of any Enhancement Agreement. (c) In connection with any Termination Notice, the Trustee shall be permitted to appoint any Eligible Servicer as a Successor Servicer for servicing compensation not in excess of the Servicing Fee. (d) All authority and power granted to the Successor Servicer under this Agreement shall automatically terminate upon termination of the Trust and shall pass to and be vested in the Transferor and, without limitation, the Transferor is hereby authorized and empowered to execute and deliver, on behalf of the Successor Servicer, as attorney-in-fact or otherwise, all documents and other instruments, and to do and accomplish all other acts or things necessary or appropriate to effect the purposes of such transfer of servicing rights. The Successor Servicer agrees to cooperate with the Transferor in effecting the termination of the responsibilities and rights of the Successor Servicer to conduct servicing of the Receivables. Upon such termination of the Trust, the Successor Servicer shall transfer its electronic records relating to the Receivables to the Transferor in such electronic form as the Transferor may reasonably request and shall transfer all other records, correspondence and documents to the Transferor in the manner and at such times and the Transferor shall reasonably request. SECTION 10.03. Notification to Certificateholders. Promptly and in any event within two Business Days after a Responsible Officer of the Servicer obtains knowledge of any Servicer Default, the Servicer shall give written notice thereof to a Responsible Officer of the Trustee, and the Trustee shall promptly deliver a copy of such notice to the Certificateholders and each Rating Agency. Upon any termination or appointment of a Successor Servicer pursuant to this Article X, the Trustee shall 83 90 give prompt written notice thereof to the Transferor and the Certificateholders. 84 91 ARTICLE XI THE TRUSTEE SECTION 11.01. Duties of the Trustee. (a) Other than while acting in its capacity as Successor Servicer, the Trustee, prior to the occurrence of a Servicer Default of which it has actual knowledge and after the curing of all Servicer Defaults which may have occurred, undertakes to perform such duties and only such duties as are specifically set forth in this Agreement and no implied duties or covenants shall be read into this Agreement against the Trustee. If a Servicer Default to the actual knowledge of the Trustee has occurred (which has not been cured or waived), the Trustee shall exercise such of the rights and powers vested in it by this Agreement and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. (b) The Trustee, upon receipt of any resolutions, certificates, statements, opinions, reports, documents, orders or other instruments furnished to the Trustee which are specifically required to be furnished pursuant to any provision of this Agreement or any Supplement, shall examine them to determine whether they substantially conform to the requirements of this Agreement or any Supplement. The Trustee shall give prompt written notice to the Certificateholders and each Rating Agency of any material lack of conformity of any such instrument to the applicable requirements of this Agreement or any Supplement discovered by the Trustee which would entitle a specified percentage of the Investor Certificateholders to take any action pursuant to this Agreement or any Supplement. (c) Subject to Section 11.01(a), no provision of this Agreement shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act or its own willful misconduct; provided, however, that: (i) the Trustee shall not be personally liable for an error of judgment made in good faith by a Responsible Officer or Responsible Officers of the Trustee, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; (ii) the Trustee shall not be personally liable with respect to any action taken, suffered or omitted to be taken by it in good faith in accordance with the direction of a Majority in Interest of each outstanding Series relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Agreement; and 85 92 (iii) the Trustee shall not be charged with knowledge of any failure by the Servicer to comply with the obligations of the Servicer referred to in Section 10.01 unless a Responsible Officer of the Trustee obtains actual knowledge of such failure or the Trustee receives written notice of such failure from the Servicer or Certificateholders of any outstanding Series evidencing not less than 20% of the Invested Amount for such Series. (d) The Trustee shall not be required to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder or under any Supplement or in the exercise of any of its rights or powers, if there is reasonable ground for believing that the repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it, and none of the provisions contained in this Agreement shall in any event require the Trustee to perform, or be responsible for the manner of performance of, any obligations of the Servicer under this Agreement except during such time, if any, as the Trustee shall be the successor to, and be vested with the rights, duties, powers and privileges of, the Servicer in accordance with the terms of this Agreement. (e) Except for actions expressly authorized by this Agreement, the Trustee shall take no action reasonably likely to impair the interests of the Trust in any Receivable now existing or hereafter created or to impair the value of any Receivable now existing or hereafter created. (f) Except as expressly provided in this Agreement, the Trustee shall have no power to vary the corpus of the Trust including, without limitation, by (i) accepting any substitute obligation for a Receivable initially Transferred to the Trust under Section 2.01, (ii) adding any other investment, obligation or security to the Trust, or (iii) withdrawing from the Trust any Receivable. (g) In the event that the Transfer Agent and Registrar shall fail to perform any obligation, duty or agreement in the manner or on the day required to be performed by the Transfer Agent and Registrar, as the case may be, under this Agreement or under any Supplement, the Trustee shall be obligated promptly upon its actual knowledge thereof to perform such obligation, duty or agreement in the manner so required. (h) The Trustee shall have no responsibility or liability for investment losses on Eligible Investments. (i) Notwithstanding any other provision contained herein, the Trustee is not acting as, and shall not be deemed to be, a fiduciary for any Enhancement Provider in its capacity as such or as a Beneficiary, and the Trustee's sole responsibility 86 93 with respect to any such Enhancement Provider shall be to perform those duties with respect to any such Enhancement Provider as are specifically set forth herein and no implied duties or obligations shall be read into this Agreement against the Trustee with respect to any such Enhancement Provider. (j) The Trustee shall notify each Rating Agency (i) of any notice which the Trustee receives pursuant to Sections 2.05(g)(i), 2.05(h) or 3.04(h)(i), (ii) of any change in any rating of the Certificates of any other Rating Agency, (iii) immediately of the occurrence of any Trust Early Amortization Event under Article IX or of any indication from the Servicer of potential Trust Early Amortization Events and (iv) monthly that no Early Amortization Events or Servicer Defaults have occurred and are continuing. (k) The Trustee shall, with respect to each Daily Report, (A) compare the Collections reported that day by the Servicer to the actual Collections deposited to the Concentration Account, (B) with respect to the reconciliation of each of the Series Accounts, compare the beginning balance as reported by the Servicer to the amount on deposit in the Series Accounts per the accounting records of the Trustee and (C) perform each of the account transfers set forth in the Daily Report, as directed by the Servicer. (l) The Trustee shall, with respect to each Determination Date Certificate, with respect to the reconciliation of each of the Series Accounts, compare the beginning and ending balances to the amounts which were on deposit in the Series Accounts per the accounting records of the Trustee as of the applicable data. (m) The Trustee shall aggregate the amount of Receivables reported in each monthly disk sent by the Servicer (i) not less than four times per year and shall compare the result against the ending total receivables as reported in the Determination Date Certificate for the corresponding Collection Period, and (ii) in the event of the occurrence and continuance of an Early Amortization Event, not less than on a monthly basis and shall compare the result against the ending total receivables as reported in the Determination Date Certificate for the corresponding Collection Period. (n) Notwithstanding any other provision of this Agreement or any Supplement, upon discovery of any material discrepancy between the amounts reported by the Servicer and the amounts calculated as provided above, the Servicer shall have ten days to resolve such discrepancy before the Trustee shall be obligated to give notice to the Certificateholders and each Rating Agency. 87 94 (o) The Trustee will deliver the Monthly Trustee Certificate (in the form of Exhibit H) to the Rating Agencies. SECTION 11.02. Certain Matters Affecting the Trustee. Except as otherwise provided in Section 11.01: (a) the Trustee may rely on and shall be protected in acting on, or in refraining from acting in accord with, any resolution, Officer's Certificate, certificate of auditors or any other certificate, statement, instrument, opinion, report, notice, request, consent, order, appraisal, bond or other paper or document believed by it to be genuine and to have been signed or presented to it pursuant to this Agreement by the proper party or parties; (b) the Trustee may consult with counsel and as a condition to taking, suffering or omitting to take any action, may demand an Opinion of Counsel, and any advice or opinion of counsel shall be full and complete authorization and protection in respect of any action taken or suffered or omitted by it hereunder in good faith and in accordance with such advice or opinion of counsel; (c) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Agreement, or to institute, conduct or defend any litigation hereunder or in relation hereto, at the request, order or direction of any of the Certificateholders, pursuant to the provisions of this Agreement, unless such Certificateholders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which may be incurred therein or thereby; provided, however, that nothing contained herein shall relieve the Trustee of the obligations, upon the occurrence of a Servicer Default (which has not been cured or waived), to exercise such of the rights and powers vested in it by this Agreement, and to use the same degree of care and skill in their exercise as a prudent man would exercise or use under the circumstances in the conduct of his own affairs; (d) the Trustee shall not be personally liable for any action taken, suffered or omitted by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Agreement; (e) the Trustee shall not be bound to make any investigation into the facts of matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, appraisal, approval, bond or other paper or document, unless requested in writing so to do by Certificateholders of any outstanding Series evidencing not less than 20% of the Invested Amount for such Series; (f) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys or a custodian, and the Trustee shall 88 95 not be responsible for any misconduct or negligence on the part of any such agent, attorney or custodian appointed with due care by it hereunder; (g) except as required by Section 11.01(b), the Trustee shall not be required to make any initial or periodic examination of any documents or records related to the Receivables for the purpose of establishing the presence or absence of defects, the compliance by the Transferor with its representations and warranties or for any other purpose; and (h) nothing in this Agreement shall be construed to require the Trustee to monitor the performance of the Servicer or act as a guarantor of the Servicer's performance. SECTION 11.03. Trustee Not Liable for Recitals in Certificates or Receivables. The Trustee assumes no responsibility for the correctness of the recitals contained herein and in the Certificates (other than the certificate of authentication on the Certificates). Except as set forth in Section 11.15, the Trustee makes no representations as to the validity or sufficiency of this Agreement or of the Certificates (other than the certificate of authentication on the Certificates) or of any Receivable or related document. The Trustee shall not be accountable for the use or application by the Transferor of any of the Certificates or of the proceeds of such Certificates, or for the use or application of any funds paid to the Transferor in respect of the Receivables or deposited in or withdrawn from the Concentration Account, any Dell Collection Account, the Transferor's Account, the Trustee's Account or any other account hereafter established to effectuate the transactions contemplated by and in accordance with the terms of this Agreement and any Supplement. The Trustee shall at no time have any responsibility or liability for or with respect to the legality, validity and enforceability of any security interest in any Receivable, or the perfection and priority of such security interest or the maintenance of any such perfection and priority or the accuracy, content or completeness of any offering documents used in connection with the sale of the Certificates. SECTION 11.04. Trustee May Own Certificates. The Trustee in its individual or any other capacity may become the owner or pledgee of Investor Certificates and may otherwise deal, and transact banking business, with the Servicer and the Transferor with the same rights as it would have if it were not the Trustee. SECTION 11.05. Compensation; Trustee's Expenses. (a) The Trustee shall be entitled to receive a monthly Trustee's fee (which shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust, such fee being the "Trustee's Fee") in respect of each Collection Period (or portion thereof) from the date hereof until the termination of the Amortization Period, payable in arrears on each Distribution Date 89 96 in an amount agreed upon in writing by the Trustee and the Transferor. The Trustee's Fee shall be the aggregate of the Series Trustee's Fees specified in the Supplements. The Trustee's Fee shall be payable, first, from Investor Collections pursuant to, and subject to the priority of payment set forth in, Section 5.01 of the applicable Supplement, second, to the extent not paid from Investor Collections, by the Transferor, third, to the extent not paid from Investor Collections or by the Transferor, by the Servicer pursuant to Section 3.02(b) and fourth, from Dell pursuant to the Parent Undertaking Agreement. (b) Expenses. The Transferor will pay or reimburse the Trustee upon its request, and if the Transferor shall fail to do so, the Servicer will so pay or reimburse the Trustee (with a right to reimbursement from the Transferor) pursuant to Section 3.02(b), and if both the Transferor and the Servicer shall fail to do so, Dell will so pay or reimburse the Trustee (with a right to reimbursement from the Transferor) pursuant to the Parent Undertaking Agreement, for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any of the provisions of this Agreement or any Supplement or in connection with any amendment hereto (including the reasonable fees and expenses of its agents, any co-trustee and counsel and fees incurred in connection with a Servicer Default or a Trust Early Amortization Event) except any such expense, disbursement or advance as may arise from its gross negligence or bad faith and except as provided in the following sentence. If the Trustee is appointed Successor Servicer pursuant to Section 10.02, the provision of this Section 11.05 shall not apply to expenses, disbursements and advances made or incurred by the Trustee in its capacity as Successor Servicer (other than any expenses incurred in connection with the Service Transfer), which shall be paid first out of the Servicing Fee and second, to the extent not paid out of the Servicing Fee, by the Transferor or Dell pursuant to Section 3.02(b). The Transferor's and Servicer's covenant provided in this Section 11.05 shall survive the termination of the Trust. SECTION 11.06. Eligibility Requirements for Trustee. The Trustee hereunder shall at all times be an Eligible Institution. If the Trustee publishes reports of condition at least annually, pursuant to law or to the requirements of any supervising or examining authority, then, for the purpose of this Section 11.06, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 11.06, the Trustee shall resign immediately in the manner and with the effect specified in Section 11.07. SECTION 11.07. Resignation or Removal of Trustee. (a) The Trustee may at any time resign and be discharged from the trust 90 97 hereby created by giving 30 days' written notice thereof to the Transferor and the Servicer. Upon receiving such notice of resignation, the Servicer shall promptly appoint a successor trustee acceptable to a Majority in Interest of each outstanding Series by written instrument, in duplicate, one copy of which instrument shall be delivered to the resigning Trustee and one copy to the successor trustee. If no successor trustee shall have been so appointed and have accepted appointment within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor trustee. (b) If at any time the Trustee shall cease to be eligible in accordance with the provisions of Section 11.06 and shall fail to resign after written request therefor by the Servicer, or if at any time the Trustee shall be legally unable to act, or shall be adjudged a bankrupt or insolvent, or if a receiver of the Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then the Servicer may remove the Trustee and promptly appoint a successor trustee acceptable to a Majority in Interest of each outstanding Series by written instrument, in duplicate, one copy of which instrument shall be delivered to the Trustee so removed and one copy to the successor trustee. (c) If at any time the Trustee shall fail to perform its obligations under this Agreement, a Majority in Interest of each outstanding Series may remove the Trustee and direct the Servicer to promptly appoint a successor trustee acceptable to a Majority in Interest of each outstanding Series by written instrument, in duplicate, one copy of which instrument shall be delivered to the Trustee so removed and one copy to the successor trustee. (d) Notwithstanding anything herein to the contrary, any resignation or removal of the Trustee and appointment of successor trustee pursuant to any of the provisions of this Section 11.07 shall not become effective until acceptance of appointment by the successor trustee as provided in Section 11.08. SECTION 11.08. Successor Trustee. (a) Any successor trustee appointed as provided in Section 11.07 shall execute, acknowledge and deliver to the Transferor, to the Servicer and to its predecessor Trustee an instrument accepting such appointment hereunder, and thereupon the resignation or removal of the predecessor Trustee shall become effective and such successor trustee, without any further act, deed or conveyance, shall become fully vested with all the rights, powers, duties and obligations of its predecessor hereunder, with like effect as if originally named as Trustee herein. The predecessor Trustee shall deliver (with the expense therefor payable out of the Trustee's Fee, and by the Transferor and the Servicer, pursuant to Sections 3.02(b) and 91 98 11.05(b)) to the successor trustee all documents or copies thereof and statements held by it hereunder; and the Transferor and the predecessor Trustee shall execute and deliver such instruments and do such other things as may reasonably be required for fully and certainly vesting and confirming in the successor trustee all such rights, powers, duties and obligations. (b) No successor trustee shall accept appointment as provided in this Section 11.08 unless at the time of such acceptance such successor trustee shall be eligible under the provisions of Section 11.06. (c) Upon acceptance of appointment by a successor trustee as provided in this Section 11.08, such successor trustee shall mail notice of such succession hereunder to all Investor Certificateholders and each Rating Agency. SECTION 11.09. Merger or Consolidation of Trustee. Any Person into which the Trustee may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any Person succeeding to the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided that such corporation shall be eligible under the provisions of Section 11.06, without the execution or filing of any paper or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding. SECTION 11.10. Appointment of Co-Trustee or Separate Trustee. (a) Notwithstanding any other provisions of this Agreement, at any time, for the purpose of meeting any legal requirements of any jurisdiction in which any part of the Trust may at the time be located, the Trustee shall have the power and may execute and deliver all instruments to appoint one or more Persons to act as a co-trustee or co-trustees, or separate trustee or separate trustees, of all or any part of the Trust, and to vest in such Person or Persons, in such capacity and for the benefit of the Certificateholders, such title to the Trust, or any part thereof, and, subject to the other provisions of this Section 11.10, such powers, duties, obligations, rights and trusts as the Trustee may consider necessary or desirable. No co-trustee or separate trustee hereunder shall be required to meet the terms of eligibility as a successor trustee under Section 11.06 and no notice to Certificateholders of the appointment of any co-trustee or separate trustee shall be required under Section 11.08. (b) Every separate trustee and co-trustee shall, to the extent permitted by law, be appointed and act subject to the following provisions and conditions: (i) all rights, powers, duties and obligations conferred or imposed upon the Trustee shall be conferred or imposed upon 92 99 and exercised or performed by the Trustee and such separate trustee or co-trustee jointly (it being understood that such separate trustee or co-trustee is not authorized to act separately without the Trustee joining in such act), except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed (whether as Trustee hereunder or as Successor Servicer hereunder), the Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations (including the holding of title to the Trust or any portion thereof in any such jurisdiction) shall be exercised and performed singly by such separate trustee or co-trustee, but solely at the direction of the Trustee; (ii) no trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder; and (iii) the Trustee may at any time accept the resignation of or remove any separate trustee or co-trustee. (c) Any notice, request or other writing given to the Trustee shall be deemed to have been given to each of the then separate trustees and co-trustees, as effectively as if given to each of them. Every instrument appointing any separate trustee or co-trustee shall refer to this Agreement and the conditions of this Article XI. Each separate trustee and co-trustee, upon its acceptance of the trusts conferred, shall be vested with the estates or property specified in its instrument of appointment, either jointly with the Trustee or separately, as may be provided therein, subject to all the provisions of this Agreement, specifically including every provision of this Agreement relating to the conduct of, affecting the liability of, or affording protection to, the Trustee. Every such instrument shall be filed with the Trustee and a copy thereof given to the Servicer. (d) Any separate trustee or co-trustee may at any time constitute the Trustee, its agent or attorney-in-fact with full power and authority, to the extent not prohibited by law, to do any lawful act under or in respect of this Agreement on its behalf and in its name. If any separate trustee or co-trustee shall die, become incapable of acting, resign or be removed, all its estates, properties, rights, remedies and trusts shall vest in and be exercised by the Trustee, to the extent permitted by law, without the appointment of a new or successor trustee. SECTION 11.11. Tax Returns. No federal income tax return shall be filed on behalf of the Trust unless either (i) the Trustee or the Servicer shall receive an Opinion of Counsel based on a change in applicable law occurring after the date hereof that the Internal Revenue Code requires such a filing or (ii) the Internal Revenue Service shall determine that the Trust is required 93 100 to file such a return. In the event the Trust shall be required to file tax returns, the Servicer shall prepare or shall cause to be prepared any tax returns required to be filed by the Trust and shall remit such returns to the Trustee for signature at least five days before such returns are due to be filed; the Trustee shall promptly sign such returns and deliver such returns after signature to the Servicer and such returns shall be filed by the Servicer. The Servicer in accordance with the Supplements shall also prepare or shall cause to be prepared all tax information required by law to be distributed to Investor Certificateholders and shall deliver such information to the Trustee at least five days prior to the date it is required by law to be distributed to the Certificateholders. The Trustee, upon request, will furnish the Servicer with all such information known to the Trustee as may be reasonably required in connection with the preparation of all tax returns of the Trust, and shall, upon request, execute such returns. In no event shall the Trustee, the Servicer or the Transferor be liable for any liabilities, costs or expenses of the Trust or the Investor Certificateholders arising out of the application of any tax law, including federal, state, foreign or local income or franchise taxes or any other tax imposed on or measured by income (or any interest, penalty or addition to tax with respect thereto or arising from a failure to comply therewith). SECTION 11.12. Trustee May Enforce Claims Without Possession of Certificates. All rights of action and claims under this Agreement or the Certificates may be prosecuted and enforced by the Trustee without the possession of any of the Certificates or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee. Any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the benefit of the Certificateholders in respect of which such judgment has been obtained. SECTION 11.13. Suits for Enforcement. (a) If a Servicer Default shall occur and be continuing, the Trustee, in its discretion may, subject to the provisions of Sections 11.01 and 11.14, proceed to protect and enforce its rights and the rights of the Certificateholders under this Agreement by suit, action or proceeding in equity or at law or otherwise, whether for the specific performance of any covenant or agreement contained in this Agreement or in aid of the execution of any power granted in this Agreement or for the enforcement of any other legal, equitable or other remedy as the Trustee, being advised by counsel, shall deem most effectual to protect and enforce any of the rights of the Trustee or the Certificateholders. (b) Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt 94 101 on behalf of any Certificateholder any plan of reorganization, arrangement, adjustment or composition affecting the Certificates or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Certificateholder in any such proceeding. SECTION 11.14. Rights of Certificateholders to Direct Trustee. A Majority in Interest of any outstanding Series shall have the right to direct the time, method, and place of conducting any proceeding for any remedy available to the Trustee under any Transaction Document, or exercising any trust or power conferred on the Trustee under any Transaction Document; provided, however, that subject to Section 11.01, the Trustee shall have the right to decline to follow any such direction if the Trustee after being advised by counsel determines that the action so directed may not lawfully be taken, or if the Trustee in good faith shall, by a Responsible Officer or Responsible Officers of the Trustee, determine that the proceedings so directed would be illegal or involve it in personal liability or be unduly prejudicial to the rights of Certificateholders not parties to such direction. SECTION 11.15. Representations and Warranties of Trustee. The Trustee represents and warrants that: (a) the Trustee is a national banking association duly organized, validly existing and in good standing under the laws of the United States of America, and has the power to own its assets and to transact the business in which it is presently engaged; (b) the Trustee has full power, authority and right to execute, deliver and perform this Agreement, and has taken all necessary action to authorize the execution, delivery and performance by it of this Agreement; and (c) this Agreement has been duly executed and delivered by the Trustee. SECTION 11.16. Maintenance of Office or Agency. The Trustee will maintain at its expense in Minneapolis, Minnesota, an office or agency (the "Corporate Trust Office") where notices and demands to or upon the Trustee in respect of the Certificates and this Agreement may be served. The Trustee initially designates its office or agency at Norwest Center, Sixth Street and Marquette Avenue, Minneapolis, Minnesota 55479, Attn: Corporate Trust Department, as such office. The Trustee will give prompt written notice to the Transferor and the Servicer and to Certificateholders of any change in the location of the Certificate Register or any such office or agency. 95 102 ARTICLE XII TERMINATION SECTION 12.01. Termination of Trust. The Trust and the respective obligations and responsibilities of the Transferor, the Servicer and the Trustee created hereby (other than the obligation of the Trustee to make payments to Certificateholders as hereinafter set forth) shall terminate, except with respect to the duties described in Sections 2.01(b), 3.02(b), 7.03, 8.04, 8.07, 11.05 and 12.02(b), upon the earlier to occur of (i) December 31, 2014 and (ii) at the option of the Transferor, the last Termination Date of any Series. SECTION 12.02. Final Distribution. (a) The Servicer shall give the Trustee and the Trustee shall give each Certificate- holder at least 20 days' prior written notice of the date on which (i) the Trust is expected to terminate in accordance with Section 12.01 and (ii) the Certificateholders may surrender their Certificates for payment of the final distribution on and cancellation of such Certificates. Such notice shall be accompanied by an Officer's Certificate setting forth the information specified in Section 3.06 covering the period during the then-current calendar year through the date of such notice. Not later than five days after the Trustee shall receive such notice, the Trustee shall mail notice to the Certificateholders specifying (i) the date upon which such final distribution will be made upon presentation and surrender of such Certificates at the office or offices therein designated, (ii) the amount of any such final distribution and (iii) that the Distribution Date otherwise applicable to such final distribution is not applicable, payments being made only upon presentation and surrender of such Certificates at the office or offices therein specified; provided, however, that such presentation and surrender shall not be required for a Certificateholder that is an insurance company or institutional investor. Each such Certificateholder shall surrender its Certificate to the Trustee following receipt of the final distribution thereon. The Trustee shall give such notice to the Transfer Agent and Registrar at the time such notice is given to the Certificateholders. (b) Notwithstanding the Servicer's delivery to the Trustee, or the Trustee's delivery to the Certificateholders, of the notices required under Section 12.02(a), all funds then on deposit in the Concentration Account, any Dell Collection Account, any Series Account, the Transferor's Account or the Trustee's Account shall continue to be held in trust for the benefit of the Certificateholders, and the Trustee shall pay such funds to the Certificateholders upon surrender of their Certificates pursuant to, and subject to the priorities set forth in, the applicable Supplement, as if such surrender date were on a Distribution Date (and any excess shall be paid in accordance with the terms of any 96 103 Enhancement Agreement). In the event that all Certificateholders do not surrender their Certificates for cancellation within six months after the date specified in the above-mentioned written notice from the Trustee, the Trustee shall give a second written notice to the remaining Certificateholders to surrender their Certificates for cancellation and receive the final distribution with respect thereto. If within one year after the second notice all the Certificates shall not have been surrendered for cancellation, the Trustee may take appropriate steps, or may appoint an agent to take appropriate steps, to contact the remaining Certificateholders concerning surrender of their Certificates, and the cost thereof shall be paid out of the funds in the Trustee's Account (if such Certificateholders are Investor Certificateholders) or the Transferor's Account (if any such Certificateholder is the Holder of the Transferor Certificate) held for the benefit of such Certificateholders. The Trustee shall pay to the Transferor any monies held by it for the payment of principal or interest that remains unclaimed for two years after the date specified in the initial above-mentioned written notice from the Trustee. After payment to the Transferor, Investor Certificateholders entitled to any monies must look to the Transferor for payment as general creditors unless an applicable abandoned property law designates another Person. SECTION 12.03. Transferor's Termination Rights. Upon the termination of the Trust, the payment in full of all amounts due to the Investor Certificateholders, payment of Trustee's fees and expenses and the surrender of the Transferor Certificate, the Trustee shall assign and convey to the Holder of the Transferor Certificate or its designee, without recourse, representation or warranty (except for the representation that each Receivable and all other Trust Assets will be free and clear of all Liens), all right, title and interest of the Trust in and to the Receivables, whether then existing or thereafter created, and all other Trust Assets, and all proceeds thereof except for amounts held in any account by the Trustee pursuant to Section 12.02(b). The Trustee at the expense of the Transferor shall execute and deliver such instruments of transfer and assignment, in each case without recourse, representation or warranty, as shall be prepared by the Transferor for execution by the Trustee which are reasonably requested by the Transferor to vest in the Transferor all right, title and interest which the Trust had in the Receivables and all other Trust Assets. 97 104 ARTICLE XIII MISCELLANEOUS PROVISIONS SECTION 13.01. Amendment. (a) This Agreement or any Supplement may be amended from time to time by the Servicer, the Transferor and the Trustee without the consent of any of the Investor Certificateholders, (i) to cure any ambiguity, (ii) to correct or supplement any provision herein which may be inconsistent with any other provision herein or (iii) to add any other provisions with respect to matters or questions arising under this Agreement or any Supplement which are not inconsistent with the provisions of this Agreement or such Supplement; provided that any amendment pursuant to this clause (a) shall not, as evidenced by an Opinion of Counsel, adversely affect in any material respect the interests of any Investor Certificateholders. Notice of any amendment entered into pursuant to this paragraph shall be given to the Rating Agencies. (b) This Agreement or any Supplement may be amended from time to time by the Servicer, the Transferor and the Trustee, so long as the Rating Agency Condition is satisfied, with the consent of a Majority in Interest of each adversely affected Series, for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement or of modifying in any manner the rights of the Certificateholders; provided, however, that no such amendment shall (i) reduce in any manner the amount of, or delay the timing of, distributions to be made to any Certificateholder or deposits of amounts to be so distributed or the amount available under any Enhancement without the consent of each such Certificateholder, (ii) change the definition of or the manner of calculating the Certificateholders' Interest or the Aggregate Certificateholders' Interest or any Investor Certificateholder's interest therein without the consent of each affected Investor Certificateholder or (iii) reduce the aforesaid percentage required to consent to any such amendment without the consent of each Investor Certificateholder. The Trustee may request an Officer's Certificate and Opinion of Counsel with respect to an amendment entered into pursuant to this Section 13.01(b) concerning compliance with the requirements of this Agreement. Any amendment to be effected pursuant to this paragraph shall be deemed to adversely affect all outstanding Series, other than any Series with respect to which such action shall not, as evidenced by an Opinion of Counsel (which counsel shall not be an employee of, or counsel for, Dell, the Servicer or the Transferor), addressed and delivered to the Trustee, adversely affect the interests of any Investor Certificateholder of such Series. (c) Promptly after the execution of any such amendment or consent (other than an amendment pursuant to Section 13.01(a)), the Trustee shall furnish written notification of the substance of 98 105 such amendment to each Investor Certificateholder and each Enhancement Provider. (d) It shall not be necessary for the consent of Investor Certificateholders under this Section 13.01 to approve the particular form of any proposed amendment, but it shall be sufficient if such consent shall approve the substance thereof. The manner of obtaining such consents and of evidencing the authorization of the execution thereof by Investor Certificate- holders shall be subject to such reasonable requirements as the Trustee may prescribe. (e) Notwithstanding anything in this Section 13.01 to the contrary, no amendment may be made to this Agreement or any Supplement which would adversely affect in any material respect the interests of any Enhancement Provider without the consent of such Enhancement Provider. (f) Any supplement executed in accordance with the provisions of Section 6.08 shall not be considered an amendment to this Agreement for the purposes of this Section 13.01. (g) Prior to the execution of any amendment to this Agreement or any Supplement, the Trustee and any Enhancement Provider shall be entitled to receive and rely upon an Opinion of Counsel stating that the execution of such amendment is authorized or permitted by this Agreement. The Trustee may, but shall not be obligated to, enter into any such amendment which adversely affects the Trustee's own rights, duties or immunities under this Agreement, any Supplement or otherwise. SECTION 13.02. Protection of Right, Title and Interest to Trust. (a) The Servicer shall cause this Agreement, all amendments hereto and all financing statements and continuation statements and any other necessary documents covering the Certificateholders' and the Trustee's right, title and interest in and to the Trust to be promptly recorded, registered and filed, and at all times to be kept recorded, registered and filed, all in such manner and in such places as may be required by law to preserve and protect fully the right, title and interest of the Certificate- holders and the Trustee hereunder in and to all property comprising the Trust. The Servicer shall deliver to the Trustee file-stamped copies of, or filing receipts for, each document recorded, registered or filed as provided above, as soon as available following such recording, registration or filing. The Transferor shall cooperate fully with the Servicer in connection with the obligations set forth above and will execute any and all documents reasonably required to fulfill the intent of this Section 13.02(a). (b) Within 45 days after the Transferor makes any change in its name, identity or legal structure which would make any financing statement or continuation statement filed in accordance 99 106 with the terms of this Agreement seriously misleading within the meaning of Section 9-402(7) (or any comparable provision) of the UCC as in effect in the jurisdiction the law of which governs the perfection of the interest in the Trust Assets created hereunder, the Transferor shall give the Trustee notice of such change and shall file such financing statements or amendments as may be necessary to continue the perfection of the Trust's interest in the Trust Assets and the proceeds thereof contemplated by Section 2.01. (c) The Transferor and the Servicer will give the Trustee prompt written notice of any relocation of the office from which it services Receivables or keeps records concerning the Receivables or of its principal executive office and whether, as a result of such relocation, the applicable provisions of the UCC would require the filing of any amendment of any previously filed financing or continuation statement or of any new financing statement and shall file such financing statements or amendments as may be necessary to perfect or to continue the perfection of the Trust's interest in the Receivables and the other Trust Assets and the proceeds thereof contemplated by Section 2.01. The Transferor and the Servicer will at all times maintain each office from which it services Receivables and its principal executive offices within the United States of America. SECTION 13.03. Limitation on Rights of Certificate- holders. (a) The death or incapacity of any Investor Certificate- holder shall not operate to terminate this Agreement or the Trust, nor shall such death or incapacity entitle such Investor Certificateholders' legal representatives or heirs to claim an accounting or to take any action or commence any proceeding in any court for a partition or winding up of the Trust, nor otherwise affect the rights, obligations and liabilities of the parties hereto or any of them. (b) No Certificateholder shall have the right to vote (except as expressly provided in this Agreement, including without limitation under Section 11.14) or in any manner otherwise control the operation and management of the Trust, or the obligations of the parties hereto, nor shall anything herein set forth, or contained in the terms of the Certificates, be construed so as to constitute the Certificateholders from time to time as partners or members of an association for any reason, nor shall any Investor Certificateholder be under any liability to any third person by reason of any action taken by the parties to this Agreement pursuant to any provision hereof. (c) No Investor Certificateholder shall have any right by virtue of any provisions of this Agreement to file or otherwise institute any suit, action or proceeding in equity or at law upon or under or with respect to this Agreement, unless such Investor Certificateholder previously shall have made, and unless a Majority in Interest of each outstanding Series shall have made, a written 100 107 request to the Trustee to institute such action, suit or proceeding in its own name as Trustee hereunder and shall have offered to the Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred therein or thereby, and the Trustee, for 60 days after such request and offer of indemnity, shall have failed to file or otherwise refused to institute any such action, suit or proceeding; it being understood and intended, and being expressly covenanted, by each Certificate- holder with every other Certificateholder and the Trustee, that no one or more Certificateholders shall have any right in any manner whatever by virtue or by availing itself or themselves of any provisions of this Agreement to affect, disturb or prejudice the rights of the Holders of any of the Investor Certificates, or to obtain or seek to obtain priority over or preference to any such Investor Certificateholder, or to enforce any right under this Agreement, except in the manner herein provided. For the protection and enforcement of the provisions of this Section 13.03, each and every Investor Certificateholder and the Trustee shall be entitled to such relief as can be given either at law or in equity. Notwithstanding any other provision of this Agreement, the Certificates or any Supplement, each Investor Certificateholder shall have the right to receive the payments of all amounts due hereunder, under the Certificates held by such Holder and under the Supplement relating to the Series of Certificates held by such Holder and the right to institute suit for the enforcement of any such payment without the consent of the Trustee or any other Holder. (d) By its acceptance of the Transferor Certificate, the Holder thereof agrees that it will take no action with respect to such Holder's rights under the Agreement that is inconsistent with, or adverse to, the interests of the Investor Certificateholders. SECTION 13.04. Governing Law; Jurisdiction; Consent to Service of Process. (a) Governing Law. THIS AGREEMENT, INCLUDING THE RIGHTS AND DUTIES OF THE PARTIES HERETO, SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, EXCEPT TO THE EXTENT THAT THE PERFECTION OF THE INTERESTS OF THE TRUSTEE IN THE TRUST ASSETS IS GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK. (b) Jurisdiction. Each of the parties hereto hereby irrevocably and unconditionally submits to the nonexclusive jurisdiction of any New York State court or federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement, and each of the parties hereto hereby irrevocably and unconditionally (i) agrees that all claims in respect of any such action or proceeding may be 101 108 heard and determined in such New York State or, to the extent permitted by law, such federal court and (ii) waives the defense of an inconvenient forum. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. (c) Consent to Service of Process. Each party to this Agreement irrevocably consents to service of process by personal delivery, certified mail, postage prepaid or overnight courier. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law. (d) Waiver of Jury Trial. Each party to this Agreement waives any right to a trial by jury in any action or proceeding to enforce or defend any rights under or relating to this Agreement, any other Transaction Document, the Fee Letter or any amendment, instrument, document or agreement delivered or which may in the future be delivered in connection herewith or therewith or arising from any course of conduct, course of dealing, statements (whether verbal of written), actions of any of the parties hereto and the Liquidity Providers or any other relationship existing in connection with this Agreement of any other Transaction Document or the Fee Letter, and agrees that any such action or proceeding shall be tried before a court and not before a jury. SECTION 13.05. Notices; Payments. (a) All notices and other communications provided for hereunder shall, unless otherwise stated herein, be in writing (including telex and facsimile communication) and shall be personally delivered or sent by certified mail, postage prepaid, or overnight courier or facsimile, to the intended party at the address or facsimile number of such party set forth below or at such other address or facsimile number as shall be designated by such party in a written notice to the other parties hereto. All such notices and communications shall be effective (a) if personally delivered, when received, (b) if sent by certified mail, four Business Days after having been deposited in the mail, postage prepaid, (c) if sent by overnight courier, two Business Days after having been given to such courier, unless sooner received by the addressee and (d) if transmitted by facsimile, when sent, upon receipt confirmed by telephone or electronic means. Notices and communications sent hereunder on a day that is not a Business Day shall be deemed to have been sent on the following Business Day. 102 109 If to the Transferor, Dell Receivables L.P. 2112 Kramer Lane Austin, Texas 78758 Tel: (512) 728-5829 Fax: (512) 728-5986 Attn: Assistant Treasurer If to the Servicer, Dell USA L.P. 2214 West Braker Lane, Suite D Austin, Texas 78758 Tel: (512) 728-3343 Fax: (512) 728-0043 Attn: Treasurer If to the Trustee, Norwest Bank Minnesota, National Association Sixth Street and Marquette Avenue Minneapolis, Minnesota 55479 Tel: (612) 667-4610 Fax: (612) 667-9825 Attn: Corporate Trust Department - Tom Wraalstad If to the Transfer Agent and Paying Registrar, Norwest Bank Minnesota, National Association Sixth Street and Marquette Avenue Minneapolis, Minnesota 55479 Tel: (612) 667-4610 Fax: (612) 667-9825 Attn: Corporate Trust Department - Tom Wraalstad If the Servicer is not Dell USA L.P., notices shall be given to the Servicer at the address designated by such Servicer, with a copy to Dell USA L.P. at the address designated above. (b) Any notice required or permitted to be mailed to an Investor Certificateholder shall be given by first-class mail, postage prepaid, at the address of such Certificateholder as shown in the Certificate Register. Notice so mailed within the time prescribed in this Agreement shall be conclusively presumed to have been duly given, whether or not the Certificateholder receives such notice. (c) If the Transferor is not the Holder of the Transferor Certificate, the Holder of the Transferor Certificate shall be entitled to receive all notices which the Investor Certificateholders receive. 103 110 SECTION 13.06. Rule 144A Information. For so long as any of the Investor Certificates of any Series or Class are "restricted securities" within the meaning of Rule 144(a)(3) under the Act, the Transferor, the Servicer and any Enhancement Provider agree to cooperate with each other to provide to each Investor Certificateholder of such Series or Class and to each prospective purchaser of Investor Certificates designated by such an Investor Certificateholder, upon the request of such Investor Certificateholder or prospective purchaser, any information required to be provided to such holder or prospective purchaser to satisfy the condition set forth in Rule 144A(d)(4) under the Act (or any successor provision). SECTION 13.07. Severability of Provisions. If any one or more of the covenants, agreements, provisions or terms of this Agreement shall for any reason whatsoever be held invalid, then such covenants, agreements, provisions or terms shall be deemed severable from the remaining covenants, agreements, provisions or terms of this Agreement and shall in no way affect the validity or enforceability of the other covenants, agreements, provisions or terms of this Agreement or of the Certificates or rights of the Certificateholders. SECTION 13.08. Assignment. Notwithstanding anything to the contrary contained herein, (i) this Agreement may not be assigned by the Transferor, and (ii) except as provided in Section 8.02, this Agreement may not be assigned by the Servicer without the prior consent of a Majority in Interest of each outstanding Series. SECTION 13.09. Certificates Nonassessable and Fully Paid. It is the intention of the parties to this Agreement that the Certificateholders shall not be personally liable for obligations of the Trust, that the interests in the Trust represented by the Certificates shall be nonassessable for any losses or expenses of the Trust or for any reason whatsoever and that Certificates upon authentication thereof by the Trustee pursuant to Section 6.02 are and shall be deemed fully paid. SECTION 13.10. Further Assurances. The Transferor and the Servicer agree to do and perform, from time to time, any and all acts and to execute any and all further instruments and documents required or reasonably requested by the Trustee more fully to effect the purposes of this Agreement, including, without limitation, the execution of any financing statements or continuation statements relating to the Receivables for filing under the provisions of the UCC of any applicable jurisdiction. SECTION 13.11. Nonpetition Covenant. Notwithstanding any prior termination of the Trust, (a) the Servicer, the Trustee and the Certificateholders shall not, prior to the date which is one year and one day after the termination of the Trust, acquiesce, 104 111 petition or otherwise invoke or cause the Trust or the Transferor to invoke the process of any Governmental Authority for the purpose of commencing or sustaining a case against the Trust or the Transferor under any federal or state bankruptcy, insolvency or similar law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Trust or the Transferor or any substantial part of its property or ordering the winding-up or liquidation of the affairs of the Trust or the Transferor and (b) the Transferor shall not, prior to the date which is one year and one day after the termination of the Trust, acquiesce, petition or otherwise invoke or cause the Trust to invoke the process of any Governmental Authority for the purpose of commencing or sustaining a case against the Trust under any federal or state bankruptcy, insolvency or similar law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Trust or any substantial part of its property or ordering the winding-up or liquidation of the affairs of the Trust. SECTION 13.12. No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of any Person, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege under this Agreement preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exhaustive of any rights, remedies, powers and privileges provided by law. SECTION 13.13. Counterparts. This Agreement may be executed in two or more counterparts and by different parties on separate counterparts, each of which shall be an original, but all of which together shall constitute one and the same instrument. SECTION 13.14. Third-Party Beneficiaries. This Agreement will inure to the benefit of and be binding upon the parties hereto, the Certificateholders and their respective successors and permitted assigns. Except as otherwise provided in this Agreement, no other person will have any right or obligation hereunder. SECTION 13.15. Actions by Certificateholders. (a) Wherever in this Agreement a provision is made that an action may be taken or a Notice given by Investor Certificateholders, such action or Notice may be taken or given by any Investor Certificate- holder, unless such provision requires a specific percentage of Investor Certificateholders. (b) Any Notice, consent, waiver or other act by the Holder of a Certificate shall bind such Holder and every subsequent Holder of such Certificate and of any Certificate issued upon the 105 112 registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done or omitted to be done by the Trustee or the Servicer in reliance thereon, whether or not notation of such action is made upon such Certificate. SECTION 13.16. Merger and Integration. Except as specifically stated otherwise herein, this Agreement sets forth the entire understanding of the parties relating to the subject matter hereof, and all prior understandings, written or oral, are superseded by this Agreement. This Agreement may not be modified, amended, waived or supplemented except as provided herein. SECTION 13.17. Headings. The headings herein are for purposes of reference only and shall not otherwise affect the meaning or interpretation of any provision hereof. SECTION 13.18. Construction of Agreement. The Transferor hereby grants to the Trustee a security interest in all of the Transferor's right, title and interest in, to and under the Receivables now existing and hereafter created, all monies due or to become due and all amounts received with respect thereto, and all other Trust Assets, and all "proceeds" thereof, to secure all the Transferor's and Servicer's obligations hereunder, including, without limitation, the Transferor's obligation to sell or transfer to the Trust all Receivables existing on the date hereof or hereafter created and transferred to the Transferor from time to time under the Receivables Purchase Agreements. This Agreement shall constitute a security agreement under applicable law. 106 113 IN WITNESS WHEREOF, the parties hereto have caused this Pooling and Servicing Agreement to be duly executed by their respective officers thereunto duly authorized as of the day and year first above written. DELL RECEIVABLES L.P., Transferor By DELL RECEIVABLES GEN. P. CORP, as its general partner By: /s/ Thomas J. Meredith ------------------------------- Name: THOMAS J. MEREDITH Title: PRESIDENT DELL USA L.P., Servicer By DELL GEN. P. CORP., as its general partner By: /s/ Thomas J. Meredith ------------------------------- Name: THOMAS J. MEREDITH Title: CHEIF FINANCIAL OFFICER NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION Trustee By: /s/ Michael G. Lugar ------------------------------- Name: MICHAEL G. LUGAR Title: CORPORATE TRUST OFFICER 114 EXHIBITS AND SCHEDULES The following Exhibits and Schedules have been omitted from this filing: Exhibit A -- Form of Transferor Certificate Exhibit B -- Form of Annual Servicer's Certificate Exhibit C -- Form of Dell Collection Account Letter Exhibit D -- Form of Rule 144A and Non-Rule 144A Letters Exhibit E -- Form of Daily Report Exhibit F -- Credit Policy and Procedures Manual Exhibit G -- Form of Agreed Upon Procedures Exhibit H -- Form of Monthly Trustee Certificate Schedule I -- Dell Post-Office Boxes and Dell Collection Accounts Schedule II -- Originators The registrant hereby undertakes to furnish supplementally a copy of any such Exhibit or Schedule to the Commission upon request. EX-10.23 10 SERIES 1995-1 SUPPLEMENT 1 EXHIBIT 10.23 EXECUTION COPY DELL RECEIVABLES L.P., Transferor DELL USA L.P., Servicer and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION Trustee SERIES 1995-1 SUPPLEMENT Dated as of November 21, 1995 to POOLING AND SERVICING AGREEMENT Dated as of November 21, 1995 DELL TRADE RECEIVABLES MASTER TRUST $100,000,000 FLOATING RATE RECEIVABLES BACKED CERTIFICATES, SERIES 1995-1, CLASS A $0 FLOATING RATE RECEIVABLES BACKED CERTIFICATES, SERIES 1995-1, CLASS B 2 TABLE OF CONTENTS
Page ---- ARTICLE I Creation of the Series 1995-1 Certificates SECTION 1.01. Designation................................................ 2 SECTION 1.02. Definitions................................................ 2 ARTICLE II Additional Covenants SECTION 2.01. Covenants of the Servicer.................................. 14 SECTION 2.02. Confidentiality............................................ 15 ARTICLE III Servicing Fee SECTION 3.01. Servicing Compensation..................................... 16 ARTICLE IV Rights of Series 1995-1 Certificateholders and Allocation and Application of Collections SECTION 4.01. Establishment of Series Accounts........................... 17 SECTION 4.02. Settlement Procedures...................................... 18 ARTICLE V Distributions and Reports to Series 1995-1 Certificateholders SECTION 5.01. Distributions.............................................. 24 SECTION 5.02. Annual Certificateholders' Statement....................... 27 ARTICLE VI Series 1995-1 Early Amortization Events SECTION 6.01. Series 1995-1 Early Amortization Events.................... 28
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Page ---- ARTICLE VII Miscellaneous Provisions SECTION 7.01. Ratification of Agreement................................. 31 SECTION 7.02. Counterparts.............................................. 31 SECTION 7.03. Governing Law; Jurisdiction............................... 31 SECTION 7.04. Appointment of Successor Servicer ........................ 31 SECTION 7.05. The Trustee............................................... 32 SECTION 7.06. Assignment by Purchasers and Liquidity Providers..................................... 32 SECTION 7.07. No Assignability by Transferor and Servicer............... 32 SECTION 7.08. Amendments................................................ 32 SCHEDULE I Series 1995-1 Accounts and Paying Agent's Account EXHIBIT A Form of Series 1995-1 Class A Certificate EXHIBIT B Form of Series 1995-1 Class B Certificate EXHIBIT C Form of Determination Date Certificate EXHIBIT D Form of Daily Report EXHIBIT E Form of Officer's Certificate
ii 4 SERIES 1995-1 SUPPLEMENT, dated as of November 21, 1995 (this "Series Supplement"), among DELL RECEIVABLES L.P., a Texas limited partnership, as Transferor (the "Transferor"), DELL USA L.P., a Texas limited partnership, as Servicer (the "Servicer"), and Norwest Bank Minnesota, National Association, as Trustee (the "Trustee"). PRELIMINARY STATEMENT Pursuant to Section 6.08 of the Pooling and Servicing Agreement, dated as of November 21, 1995 (as amended and supplemented from time to time, the "Agreement"), among the Transferor, the Servicer and the Trustee, the Transferor may from time to time direct the Trustee to issue, on behalf of the Trust, one or more Series of Investor Certificates representing fractional undivided interests in the Trust. The Principal Terms of any new Series are to be set forth in a Supplement to the Agreement. Accordingly, the Transferor hereby enters into this Series Supplement with the Servicer and the Trustee as required by Section 6.08 of the Agreement to provide for the issuance, authentication and delivery of the Floating Rate Receivables Backed Certificates, Series 1995-1, Class A (the "Class A Certificates") and the Floating Rate Receivables Backed Certificates, Series 1995-1, Class B (the "Class B Certificates") (the Class A Certificates and the Class B Certificates are referred to collectively as the "Series 1995-1 Certificates"). Pursuant to this Series Supplement, the Transferor and the Trustee shall create a Series of Investor Certificates and specify the Principal Terms thereof. 1 5 ARTICLE I Creation of the Series 1995-1 Certificates SECTION 1.01. Designation. (a) The Series 1995-1 Certificates shall be designated generally as Floating Rate Receivables Backed Certificates, Series 1995-1, Class A and as Floating Rate Receivables Backed Certificates, Series 1995-1, Class B. (b) In the event that any term or provision contained herein shall conflict with or be inconsistent with any term or provision contained in the Agreement, the terms and provisions of this Series Supplement shall govern. SECTION 1.02. Definitions. (a) Whenever used in this Series Supplement the following words and phrases shall have the following meanings. "Alternate Base Rate" shall mean a fluctuating interest rate per annum as shall be in effect from time to time, which rate per annum shall at all times be equal to the highest of: (i) the rate of interest announced publicly by the Reference Bank in New York, New York, from time to time as the Reference Bank's base rate; or (ii) 1.50% per annum above the latest three-week moving average of secondary market morning offering rates in the United States for three-month certificates of deposit of major United States money market banks, such three-week moving average being determined weekly on each Monday (or, if any such day is not a Business Day on the next succeeding Business Day) for the three-week period ending on the previous Friday by the Reference Bank on the basis of such rates reported by certificate of deposit dealers to and published by the Federal Reserve Bank of New York in Federal Reserve Statistical Release H.15(519) or, if such publication shall be suspended or terminated, on the basis of quotations for the latest three-week average of secondary market morning offering rates received by the Reference Bank from three New York certificate of deposit dealers of recognized standing selected by the Reference Bank, in either case adjusted to the nearest 1/4 of one percent or, if there is no nearest 1/4 of one percent, to the next higher 1/4 of one percent; or (iii) 1.50% per annum above the Federal Funds Rate. "Amortization Date" shall mean the last day of the 57th month following the month during which the Closing Date shall have occurred. 2 6 "Assignee Rate" shall mean an interest rate per annum equal to the Adjusted Eurodollar Rate (as defined in the Certificate Purchase Agreement); provided, however, that (i) if it shall become unlawful for the Reference Bank to obtain funds in the London interbank market in order to purchase, fund or maintain any Increase hereunder or deposits in dollars (in the applicable amounts) are not being offered by the Reference Bank in the London interbank market, then the "Assignee Rate" shall be the Alternate Base Rate in effect from time to time; and (ii) following the occurrence and during the continuation of an Early Amortization Period, the "Assignee Rate" shall be the applicable interest rate per annum determined pursuant to provisions set forth above plus 2% per annum. "Breakage Costs" shall mean (a) with respect to CRC and for each Collection Period during which the Class A Invested Amount or the Class B Invested Amount is reduced, the amount, if any, by which (i) the additional interest at the Class A Certificate Rate or the Class B Certificate Rate, as appropriate (calculated without taking into account any Breakage Costs), which would have accrued on the reduction of the Class A Invested Amount or the Class B Invested Amount, as appropriate, through the last day of such Collection Period exceeds (ii) the income received by CRC from investing the proceeds of such reductions of Class A Invested Amount or Class B Invested Amount, as appropriate; provided that if the Transferor gives five Business Days' notice to the Program Agent that it intends to reduce the Class A Invested Amount or Class B Invested Amount, as appropriate, and the Program Agent agrees to such reduction (such agreement not to be unreasonably withheld), then no Breakage Costs will arise or (b) with respect to a Liquidity Provider and for each Collection Period during which the Class A Invested Amount or the Class B Invested Amount is reduced, the amount, if any, by which (i) the additional interest at the Class A Certificate Rate or the Class B Certificate Rate, as appropriate (calculated without taking into account any Breakage Costs), which would have accrued on the reduction of the Class A Invested Amount or the Class B Invested Amount, as appropriate, or its pro rata portion thereof, through the last day of the period for which the Adjusted Eurodollar Rate has been set exceeds (ii) the income received by such Liquidity Provider from investing the proceeds of such reductions of Class A Invested Amount or Class B Invested Amount, as appropriate, or its pro rata portion of such Class A Invested Amount or Class B Invested Amount, as appropriate. "Business Day" shall mean any day other than a Saturday or Sunday or any other day on which national banking associations or state banking institutions in New York, New York, Austin, Texas or the city in which the Corporate Trust Office is located are authorized or obligated by law, executive order or governmental decree to be closed; if this definition of "Business Day" is utilized in connection with the Adjusted Eurodollar Rate (as set forth in the Certificate Purchase Agreement), "Business Day" shall mean any day other than a Saturday or Sunday on which dealings are carried out in the London interbank market. 3 7 "Capitalized Interest" means the principal amount of any CP Notes issued or other funding obtained by CRC at any time to pay any interest or discount on CP Notes or other funding of CRC allocated to the funding or maintenance of the Series 1995-1 Invested Amount. "Certificate Purchase Agreement" shall mean the Certificate Purchase Agreement, dated November 30, 1995, among the Transferor, as seller, CRC, as purchaser, the Program Agent and the Trustee. "Class" shall mean either the Class A Certificates or the Class B Certificates, as applicable. "Class A Accrued Warranty Reserve Factor" shall mean the product of (a) the ratio of the highest three-month rolling average over the past twelve months of (i) accrued warranty expenses for sales made by the Originators to (ii) Eligible Receivables and (b) six. For purposes of this calculation, accrued warranty expenses for the Originators will be calculated as the product of (A) (1) sales by the Originators for the preceding month divided by (2) sales by Dell USA Corporation for the preceding month and (B) accrued warranty expenses for Dell USA Corporation for the preceding month. "Class A Certificate" shall mean any one of the Series 1995-1 Class A Certificates executed by the Transferor and authenticated by the Trustee, substantially in the form attached as Exhibit A. "Class A Certificate Rate" shall mean (a) unless the Program Agent notifies the Transferor and the Servicer that the Series 1995-1 Invested Amount, or a portion thereof, will not be funded by the issuance of CP Notes, the CP Rate; or (b) to the extent the Program Agent has provided notice to the Transferor that funding with respect to the Class A Certificates is not being provided by the issuance of CP Notes, a per annum rate equal to the Assignee Rate. "Class A Debt Service Amount" shall mean, as of any Distribution Date, an amount equal to the aggregate amount of interest with respect to the Class A Invested Amount which has accrued and remains unpaid (including, without limitation, Capitalized Interest arising during the Collection Period to which such Distribution Date relates, if any, and any interest thereon). The accrued interest for the Series 1995-1 Invested Amount for each Collection Period used in computing the Class A Debt Service Amount for such Collection Period shall be determined by the Program Agent and the Program Agent shall give notice thereof to the Transferor and the Servicer at least four (4) Business Days prior to the Distribution Date relating to such Collection Period. "Class A Dynamic Loss and Dilution Reserve Percentage" shall mean, as of any date, the sum of (A) the sum of (a) the 4 8 product of (i) 2.5 times (ii) the average Dilution Ratio during the preceding 12 months times (iii) a fraction the numerator of which is the total sales for the past one and one-half months and the denominator of which is the aggregate outstanding balance of Eligible Receivables as of the end of the most recently ended month times (iv) a fraction the numerator of which is 7 if the Weighted Average Term is less than 40 days, 8 if the Weighted Average Term is greater than or equal to 40 days but less than 50 days, 9 if the Weighted Average Term is greater than or equal to 50 days but less than 60 days, 10 if the Weighted Average Term is greater than or equal to 60 days but less than 70 days, or 11 if the Weighted Average Term is greater than or equal to 70 days and the denominator of which is 7, plus (b) the greater of (i) the sum of (x) the product of the Dilution Volatility Factor times the fraction specified in clause (A)(a)(iii) above, (y) the Class A Accrued Warranty Reserve Factor and (z) the Class A Extended Warranty Reserve Factor and (ii) the sum of (x) the product of the 12-month rolling standard deviation of Default Ratios and 2.58 and (y) the product of (1) the 12-month rolling standard deviation of Dilution Ratios and (2) 2.58 and (3) the fraction specified in clause (A)(a)(iii) above and (z) 1.15% and (B) the product of (i) 2.5 times (ii) the highest Default Ratio during the preceding 12 months times (iii) a fraction the numerator of which is the total sales for the past five months and the denominator of which is the aggregate outstanding balance of Eligible Receivables as of the end of the most recently ended month times (iv) a fraction the numerator of which is 15 if the Weighted Average Term is less than 40 days, 16 if the Weighted Average Term is greater than or equal to 40 days but less than 50 days, 17 if the Weighted Average Term is greater than or equal to 50 days but less than 60 days, 18 if the Weighted Average Term is greater than or equal to 60 days but less than 70 days, or 19 if the Weighted Average Term is greater than or equal to 70 days and the denominator of which is 15. "Class A Extended Warranty Factor" shall mean seventy-five percent of the product of (a) the average monthly sales of the Originators for the preceding nineteen months and (b) the six-month rolling average of the ratio of (i) extended parts contract revenues for Dell USA Corporation for the preceding month to (ii) sales for Dell USA Corporation for the preceding month and (c) eighteen. "Class A Invested Amount" shall mean, when used with respect to any date, an amount equal to (a) $0 plus (b) the aggregate amount of Increases made under any Class A Certificate after the Closing Date minus (c) the aggregate amount of Series 1995-1 Investor Collections received and distributed to Class A Certificateholders in reduction of the Class A Invested Amount from time to time on or prior to such date; provided, however, that the "Class A Invested Amount" shall not be reduced by any amount of Series 1995-1 Investor Collections so received and distributed if at any time such distribution of such amount of Series 1995-1 Investor Collections is rescinded or must otherwise be returned for any reason; and provided, further, that, on any date of 5 9 determination, the Class A Invested Amount shall not exceed the Class A Purchase Limit. "Class A Loss and Dilution Reserve Percentage" shall mean, as of any date, the greater of (a) the Class A Specified Loss and Dilution Reserve Percentage and (b) the Class A Dynamic Loss and Dilution Reserve Percentage. "Class A Purchase Limit" shall mean $100,000,000 or such lesser amount as may be mutually agreed upon by the Program Agent and the Transferor pursuant to the Certificate Purchase Agreement. "Class A Specified Loss and Dilution Reserve Percentage" shall mean the sum of (a) 18% and (b) the sum of (A) the product of (i) 2.5 times (ii) the average Dilution Ratio during the preceding 12 months times (iii) a fraction the numerator of which is the total sales for the past one and one-half months and the denominator of which is the aggregate outstanding balance of Eligible Receivables as of the end of the most recently ended month times (iv) a fraction the numerator of which is 7 if the Weighted Average Term is less than 40 days, 8 if the Weighted Average Term is greater than or equal to 40 days but less than 50 days, 9 if the Weighted Average Term is greater than or equal to 50 days but less than 60 days, 10 if the Weighted Average Term is greater than or equal to 60 days but less than 70 days, or 11 if the Weighted Average Term is greater than or equal to 70 days and the denominator of which is 7, plus (B) the sum of (x) the product of the Dilution Volatility Factor times the fraction specified in clause (b)(a)(iii) above, (y) the Class A Accrued Warranty Reserve Factor and (z) the Class A Extended Warranty Reserve Factor; provided that the Transferor may reduce the Class A Specified Loss and Dilution Reserve Percentage if the Rating Agency Condition is satisfied and with the consent of a Majority in Interest of the Holders of Class A Certificates of each outstanding Series. "Class B Accrued Warranty Reserve Factor" shall mean the product of (a) the ratio of the highest three-month rolling average over the past twelve months of (i) accrued warranty expenses for sales made by the Originators to (ii) Eligible Receivables and (b) three. For purposes of this calculation, accrued warranty expenses for the Originators will be calculated as the product of (A) (1) sales by the Originators for the preceding month divided by (2) sales by Dell USA Corporation for the preceding month and (B) accrued warranty expenses for Dell USA Corporation for the preceding month. "Class B Certificate" shall mean any one of the Series 1995-1 Class B Certificates executed by the Transferor and authenticated by the Trustee, substantially in the form attached as Exhibit B. "Class B Certificate Rate" shall mean (a) unless the Program Agent notifies the Transferor and the Servicer that the Series 1995-1 Invested Amount, or a portion thereof, will not be 6 10 funded by the issuance of CP Notes, the CP Rate; or (b) to the extent the Program Agent has provided notice to the Transferor that funding with respect to the Class B Certificates is not being provided by the issuance of CP Notes, a per annum rate equal to the Assignee Rate. "Class B Debt Service Amount" shall mean, as of any Distribution Date, an amount equal to the aggregate amount of interest with respect to the Class B Invested Amount which has accrued and remains unpaid (including, without limitation, Capitalized Interest arising during the Collection Period to which such Distribution Date relates, if any, and any interest thereon). The accrued interest for the Series 1995-1 Invested Amount for each Collection Period used in computing the Class B Debt Service Amount for such Collection Period shall be determined by the Program Agent and the Program Agent shall give notice thereof to the Transferor and the Servicer at least four (4) Business Days prior to the Distribution Date relating to such Collection Period. "Class B Dynamic Loss and Dilution Reserve Percentage" shall mean, as of any date, the sum of (A) the sum of (a) the product of (i) 1.5 times (ii) the average Dilution Ratio during the preceding 12 months times (iii) a fraction the numerator of which is the total sales for the past one and one-half months and the denominator of which is the aggregate outstanding balance of Eligible Receivables as of the end of the most recently ended month times (iv) a fraction the numerator of which is 7 if the Weighted Average Term is less than 40 days, 8 if the Weighted Average Term is greater than or equal to 40 days but less than 50 days, 9 if the Weighted Average Term is greater than or equal to 50 days but less than 60 days, 10 if the Weighted Average Term is greater than or equal to 60 days but less than 70 days, or 11 if the Weighted Average Term is greater than or equal to 70 days and the denominator of which is 7, plus (b) the greater of (i) the sum of (x) the product of the Dilution Volatility Factor times the fraction specified in clause (A)(a)(iii) above, (y) the Class A Accrued Warranty Reserve Factor and (z) the Class A Extended Warranty Reserve Factor and (ii) the sum of (x) the product of the 12-month rolling standard deviation of Default Ratios and 1.96 and (y) the product of (1) the 12-month rolling standard deviation of Dilution Ratios and (2) 1.96 and (3) the fraction specified in clause (A)(a)(iii) above and (z) 0.80% and (B) the product of (i) 1.5 times (ii) the highest Default Ratio during the preceding 12 months times (iii) a fraction the numerator of which is the total sales for the past five months and the denominator of which is the aggregate outstanding balance of Eligible Receivables as of the end of the most recently ended month times (iv) a fraction the numerator of which is 15 if the Weighted Average Term is less than 40 days, 16 if the Weighted Average Term is greater than or equal to 40 days but less than 50 days, 17 if the Weighted Average Term is greater than or equal to 50 days but less than 60 days, 18 if the Weighted Average Term is greater than or equal to 60 days but less than 70 days, or 19 if the Weighted Average Term is greater than or equal to 70 days and the denominator of which is 15. 7 11 "Class B Extended Warranty Factor" shall mean fifty percent of the product of (a) the average monthly sales of the Originators for the preceding nineteen months and (b) the six-month rolling average of the ratio of (i) extended parts contract revenues for Dell USA Corporation for the preceding month to (ii) sales for Dell USA Corporation for the preceding month and (c) eighteen. "Class B Invested Amount" shall mean, when used with respect to any date, an amount equal to (a) $0 plus (b) the aggregate amount of Increases made under any Class B Certificate after the Closing Date minus (c) the aggregate amount of Series 1995-1 Investor Collections received and distributed to Class B Certificateholders in reduction of the Class B Invested Amount from time to time on or prior to such date; provided, however, that the "Class B Invested Amount" shall not be reduced by any amount of Series 1995-1 Investor Collections so received and distributed if at any time such distribution of such amount of Series 1995-1 Investor Collections is rescinded or must otherwise be returned for any reason; and provided, further, that, on any date of determination, the Class B Invested Amount shall not exceed the Class B Purchase Limit. "Class B Loss and Dilution Reserve Percentage" shall mean, as of any date, the greater of (a) the Class B Specified Loss and Dilution Reserve Percentage and (b) the Class B Dynamic Loss and Dilution Reserve Percentage. "Class B Purchase Limit" shall mean $0 or such lesser amount as may be mutually agreed upon by the Program Agent and the Transferor pursuant to the Certificate Purchase Agreement. "Class B Specified Loss and Dilution Reserve Percentage" shall mean the sum of (a) 12% and (b) the sum of (A) the product of (i) 2.5 times (ii) the average Dilution Ratio during the preceding 12 months times (iii) a fraction the numerator of which is the total sales for the past one and one-half months and the denominator of which is the aggregate outstanding balance of Eligible Receivables as of the end of the most recently ended month times (iv) a fraction the numerator of which is 7 if the Weighted Average Term is less than 40 days, 8 if the Weighted Average Term is greater than or equal to 40 days but less than 50 days, 9 if the Weighted Average Term is greater than or equal to 50 days but less than 60 days, 10 if the Weighted Average Term is greater than or equal to 60 days but less than 70 days, or 11 if the Weighted Average Term is greater than or equal to 70 days and the denominator of which is 7, plus (B) the sum of (x) the product of the Dilution Volatility Factor times the fraction specified in clause (b)(a)(iii) above, (y) the Class B Accrued Warranty Reserve Factor and (z) the Class B Extended Warranty Reserve Factor; provided that the Transferor may reduce the Class B Specified Loss and Dilution Reserve Percentage if the Rating Agency Condition is satisfied and with the consent of a Majority in Interest of the Holders of Class B Certificates of each outstanding Series. 8 12 "Closing Date" shall mean the first date on which any Class A or Class B Certificates are issued. "Collection Period" shall mean, with respect to any Distribution Date, the calendar month (or, in the case of the calendar month in which the Closing Date occurs, the portion of such calendar month following the Closing Date) immediately preceding the calendar month in which such Distribution Date occurs. "Concentration Limit" shall mean, with respect to the following types of Receivables and the Class A Certificates, the percentages of the aggregate amount of Eligible Receivables owned by the Trust set forth as follows: (a) Receivables of any single Obligor rated at least "A-1+" or its equivalent by S&P and DCR, 10%; (b) Receivables of any single Obligor rated at least "A-1" or its equivalent by S&P and DCR, 7%; (c) Receivables of any single Obligor rated below "A-1", but at least "A-2" or its equivalent by S&P and DCR, 5.5%; (d) Receivables of any single Obligor rated below "A-2" but at least "A-3" or its equivalent by S&P and DCR, 4%; (e) Receivables of any other single Obligor which is not rated by S&P or DCR, whose short term debt is not rated by S&P or DCR, or whose short term debt is rated below investment grade by S&P or DCR, 3%; and (f) in addition to the limits in clauses (a)-(e), Receivables of Obligors which are non-Controlled Affiliates of Dell USA L.P. or the Transferor, 15%; provided, however, that the Transferor may adjust the level of any Concentration Limit if such adjustment in and of itself does not violate the Rating Agency Condition. "CP Note" shall mean any commercial paper note issued by CRC. "CP Rate" shall mean, with respect to CRC for each Collection Period, the per annum rate equivalent to the weighted average of the per annum rates paid or payable by CRC from time to time as interest on or otherwise with respect to those CP Notes issued by CRC that are allocated, in whole or in part, by CRC to fund the purchase or maintenance of the Series 1995-1 Invested Amount during such Collection Period, as determined by CRC and reported to the Transferor and the Servicer, which rates shall reflect and give effect to the commissions of placement agents and dealers with respect to such CP Notes; provided, however, that if any component of such rate is a discount rate, in calculating the "CP Rate" for such Collection Period, CRC shall for such component use the rate resulting from converting such discount rate to an interest-bearing equivalent rate per annum. "CRC" shall mean Corporate Receivables Corporation, a corporation organized and existing under the laws of the State of California, and any successor or assign of CRC that is an Eligible Assignee and that is a receivables investment company which in the ordinary course of its business issues commercial paper or other securities to fund its acquisition and maintenance of receivables. 9 13 "Cure Account" shall have the meaning specified in Section 4.01(c). "Daily Report" shall mean an Officer's Certificate of the Servicer substantially in the form of Exhibit D hereto. "Determination Date Certificate" shall mean, with respect to each month, the certificate prepared by the Servicer, substantially in the form of Exhibit C hereto. "Early Amortization Event" shall mean any Trust Early Amortization Event specified in Section 9.01 of the Agreement, together with any Series 1995-1 Early Amortization Event specified in Section 6.01 of this Series Supplement. "Eligible Assignee" shall mean a Person which (i) is a bankruptcy-remote receivables investment company which customarily issues commercial paper to fund its acquisition and maintenance of receivables or a bank, insurance company or other financial institution, and (ii) has a short-term debt rating or short-term certificate of deposit rating of at least "A-1" from S&P or at least "P-1" from Moody's, or, if such Person does not have a short-term debt rating or short-term certificate of deposit rating, a long-term senior debt rating of at least "A" from S&P or "A2" from Moody's; provided that if such Person is an insurance, bonding or surety company which does not have a certificate of deposit rating or a debt rating, such Person has a claims paying rating or a surety rating of at least "A" from S&P or "A2" from Moody's; provided, further, in any case, if such Person is rated by both S&P and Moody's, it must have the prescribed minimum ratings from both S&P and Moody's. "Facility Fee" shall have the meaning specified in the Fee Letter. "Fee Letter" shall mean that certain fee letter dated the date of the Certificate Purchase Agreement between the Transferor and the Program Agent, as may be amended or modified from time to time in accordance with the terms thereof. "Increase" shall mean the amount of each increase in the Class A Invested Amount or the Class B Invested Amount funded by CP Notes or the Liquidity Providers and paid to the Transferor by the Program Agent pursuant to the terms of the Certificate Purchase Agreement. "Liquidity Providers" shall mean any liquidity providers specified in the Certificate Purchase Agreement and any of their successors and assigns that are Eligible Assignees. "Monthly Trust Expense Amount" shall mean, with respect to any Collection Period, the sum of (a) the product of the Series Allocation Percentage for Series 1995-1 times $2,500 (or, if an Early Amortization Event has occurred and is continuing, $5,000), 10 14 plus (b) the Series Trustee's Fee, plus (c) the Series Servicing Fee, plus (d) Service Transfer expenses, if any, incurred during such Collection Period. "Other Fees" shall have the meaning specified in the Fee Letter. "Program Agent" shall mean Citicorp North America, Inc., in its capacity as agent for CRC. "Program Fee" shall have the meaning specified in the Fee Letter. "Purchaser Fees" shall mean the Program Fee, the Facility Fee and Other Fees. "Rating Agency" shall mean S&P and DCR or, in the event that Moody's provides a rating with respect to any Class of the Series 1995-1 Certificates, S&P, DCR and Moody's, and "highest investment category" shall mean AAA and/or Aaa, as applicable. "Reference Bank" shall mean, for purposes of determining the Alternate Base Rate, the Class A Certificate Rate and the Class B Certificate Rate, Citibank, N.A., a national banking association or its successors and assigns. "Revolving Period" shall mean the period beginning on the Closing Date and terminating on the earliest of (a) the close of business on the Business Day immediately preceding the Amortization Date and (b) the close of business on the day on which any Early Amortization Event shall occur. "Series 1995-1" shall mean the Series of Investor Certificates, the terms of which are specified in this Series Supplement. "Series 1995-1 Accounts" shall have the meaning specified in Section 4.01(d). "Series 1995-1 Certificate" shall mean any one of the Series 1995-1 Certificates executed by the Transferor and authenticated by the Trustee, substantially in the forms attached as Exhibit A and Exhibit B. "Series 1995-1 Certificateholders" shall mean the Holders of either Class of Series 1995-1 Certificates. "Series 1995-1 Certificateholders' Interest" shall mean that portion of the Certificateholders' Interest evidenced by the Series 1995-1 Certificates. "Series 1995-1 Discount Amount" shall mean, with respect to any Collection Period, an amount equal to the sum of (i) the product of (a) (1) the CP Rate at the end of the previous 11 15 Collection Period times (2) the number of days in such Collection Period divided by (3) 360 and (b) 1.3 and (c) the largest Series 1995-1 Invested Amount on any day of such Collection Period; plus (ii) the Monthly Trust Expense Amount for the preceding Collection Period; plus (iii) the product of (1) the per annum rate used to determine the Purchaser Fees and (2) the number of days in such Collection Period divided by 360 and (3) the largest Series 1995-1 Purchase Limit on any day of such Collection Period. "Series 1995-1 Early Amortization Event" shall have the meaning specified in Section 6.01. "Series 1995-1 Floating Allocation Percentage" shall mean the fraction that determines the Series 1995-1 Certificateholders' Interest during the Revolving Period, a Partial Amortization Period a Cure Period, the Amortization Period or an Early Amortization Period, the numerator of which is the sum of (a) the Class A Invested Amount (computed as if reduced by (A) the amount of Cure Funds held in the Cure Account at such time and (B) the cumulative amount of funds held at such time in the Concentration Account allocated to the Series 1995-1 Partial Amortization Amount) plus (b) the Series 1995-1 Yield/Fee Reserve plus (c) the Series 1995-1 Loss and Dilution Reserve, and the denominator of which is the Net Receivables Balance. The Series 1995-1 Floating Allocation Percentage is calculated on each Business Day during the Revolving Period and, during the Amortization Period, an Early Amortization Period, a Partial Amortization Period or a Cure Period, remains fixed at the percentage calculated at the close of business on the last Business Day prior to the Amortization Period or such Early Amortization Period, Partial Amortization Period or Cure Period. "Series 1995-1 Invested Amount" shall mean the sum of the Class A Invested Amount and the Class B Invested Amount. "Series 1995-1 Investor Collections" shall mean, as of any date, that portion of the Collections deposited to the Concentration Account on such date equal to the product of (A) the Series 1995-1 Floating Allocation Percentage on such date and (B) the aggregate amount of such Collections. "Series 1995-1 Loss and Dilution Reserve" or "LDR" shall mean, as of any date, an amount equal to the greater of: (i) LDR = IA + YR x LDRP -------- 1 - LDRP IA = Class A Invested Amount (computed as if reduced by the amount of Cure Funds held in the Cure Account at such time and the cumulative amount of funds held in the Concentration Account at such time allocated to the Series 1995-1 Partial Amortization Amount) YR = Series 1995-1 Yield/Fee Reserve 12 16 LDRP = Class A Loss and Dilution Reserve Percentage and (ii) the sum of (a) LDR = IA + YR x LDRP -------- 1 - LDRP IA = sum of Class A Invested Amount and Class B Invested Amount (computed as if reduced by the amount of Cure Funds held in the Cure Account at such time and the cumulative amount of funds held in the Concentration Account at such time allocated to the Series 1995-1 Partial Amortization Amount) YR = Series 1995-1 Yield/Fee Reserve LDRP = Class B Loss and Dilution Reserve Percentage and (b) the Class B Invested Amount. "Series 1995-1 Partial Amortization Amount" shall mean the product of (i) the Series Allocation Percentage for Series 1995-1 times (ii) the Trust Partial Amortization Amount. "Series 1995-1 Purchase Limit" shall mean the sum of the Class A Purchase Limit and the Class B Purchase Limit. "Series 1995-1 Trustee's Account" shall have the meaning specified in Section 4.01(a). "Series 1995-1 Yield/Fee Reserve" shall mean, as of any date, the product of (a) two times the Turnover Rate for such date multiplied by (b) the Series 1995-1 Discount Amount with respect to the Collection Period in which such date occurs; provided that for the purpose of calculating the Series 1995-1 Yield/Fee Reserve, the Series 1995-1 Discount Amount shall be deemed to include (a) Trustee's expenses equal to the product of the Series Allocation Percentage for Series 1995-1 times $2,500 (or, if an Early Amortization Event has occurred and is continuing, $5,000) and (b) the Series Servicing Fee calculated on the basis of a rate of 3.00% per annum and (c) one month's interest on the Series 1995-1 Invested Amount on such date of determination calculated at a rate equal to the Alternate Base Rate plus 2% per annum. "Series Servicing Fee" shall have the meaning specified in Section 3.01. "Series Trustee's Fee" shall mean the product of (a) the Trustee's Fee and (b) the Series Allocation Percentage. "Termination Date" shall mean the date of payment in full to all of the Series 1995-1 Certificateholders of the Series 1995-1 13 17 Invested Amount, all accrued and unpaid interest thereon and any other amounts due the Series 1995-1 Certificateholders under the Transaction Documents, payment in full to the Servicer of the Series Servicing Fee, and payment in full to the Trustee of the Series Trustee's Fee and all expenses of the Trustee as contemplated by Section 11.05(b) of the Agreement. "Undivided Fractional Interest" shall mean the undivided fractional interest in the Class A or Class B Invested Amount, as applicable, evidenced by a Class A or Class B Certificate, the numerator being the principal amount of such Class A or Class B Certificate at the time of determination and the denominator being the Class A or Class B Invested Amount at such time. (b) All capitalized terms used herein and not otherwise defined herein have the meanings ascribed to them in the Agreement. Each capitalized term defined herein shall relate only to the Series 1995-1 Certificates and not to any other Series of Certificates issued by the Trust. (c) The words "hereof", "herein" and "hereunder" and words of similar import when used in this Series Supplement shall refer to this Series Supplement as a whole and not to any particular provision of this Series Supplement; references to any Article, Section, Schedule or Exhibit are references to Articles, Sections, Schedules and Exhibits in or to this Series Supplement unless otherwise specified; and the term "including" means "including without limitation". 14 18 ARTICLE II Additional Covenants SECTION 2.01. Covenants of the Servicer. The Servicer hereby covenants that, until the termination of the Amortization Period: (a) The Servicer will furnish to the Program Agent, promptly after delivery to the Trustee and each Rating Agency, all notices, reports and other information given to the Trustee and each Rating Agency under the Agreement other than the Daily Reports required thereunder. (b) At any time and from time to time during the Servicer's regular business hours and at the Transferor's expense, on reasonable prior notice and for a purpose reasonably related to the Agreement, the Servicer shall, in response to any reasonable request of the Trustee or the Program Agent, permit the Trustee or the Program Agent, or their agents or representatives, (i) to examine and make copies of and abstracts from all books, records and documents (including, without limitation, computer tapes, microfiche and disks) in the possession or under the control of the Servicer relating to the Trust Assets, the Receivables and the related Contracts and (ii) to visit the offices and properties of the Servicer for the purpose of examining such materials and to discuss matters relating to the Receivables or the Servicer's performance hereunder with any of the officers or (after consultation with a Responsible Officer) employees of the Servicer having knowledge thereof; provided, however, that, so long as no Early Amortization Event, Partial Amortization Period or Cure Period shall have occurred and be continuing, the Trustee and the Program Agent shall use their best efforts to coordinate the exercise of their rights under this Section 2.01(b) with the exercise of like rights of the Transferor, and the rights of the Trustee and the Program Agent under this Section 2.01(b) shall be at the Transferor's expense only twice in any twelve-month period. The Servicer agrees that the Program Agent will have the right to require changes in the Semi-Annual Servicing Report furnished by the Independent Public Accountants pursuant to Section 3.07 of the Agreement which are reasonably related to the Trust Assets and the matters contemplated by the Transaction Documents. SECTION 2.02. Confidentiality. The Trustee, the Program Agent and the Series 1995-1 Certificateholders agree to use their best efforts, and shall cause their agents or representatives to use their best efforts, to hold in confidence all Confidential Information; provided that nothing herein shall prevent any Series 1995-1 Certificateholder from delivering copies of any financial statements and other documents constituting Confidential Information, or disclosing any other Confidential Information, to (i) such Series 1995-1 Certificateholder's directors, officers, employees, agents and professional consultants, (ii) any other Series 1995-1 Certificateholder, (iii) any Liquidity Provider, 15 19 Enhancement Provider or any Person to which such Series 1995-1 Certificateholder offers to sell or assign or sells or assigns such Series 1995-1 Certificate or any part thereof or any rights associated therewith, provided that such Liquidity Provider, Enhancement Provider or Person shall have agreed to hold in confidence all Confidential Information, (iv) any federal or state regulatory authority having jurisdiction over such Series 1995-1 Certificateholder, (v) the National Association of Insurance Commissioners or any similar organization or (vi) any other Person to which such delivery or disclosure may be necessary or appropriate (a) in compliance with any law, rule, regulation or order applicable to such Series 1995-1 Certificateholder, (b) in response to any subpoena or other legal process or (c) in connection with any litigation to which such Series 1995-1 Certificateholder is a party. The Trustee, the Program Agent and the Series 1995-1 Certificateholders agree to allow the Transferor to inspect their security and confidentiality arrangements from time to time during normal business hours. The Trustee, the Program Agent and the Series 1995-1 Certificateholders shall provide written notice to the Transferor whenever any such disclosure is made. The Trustee, the Program Agent and the Series 1995-1 Certificateholders shall use their best efforts to provide the Transferor with five day's advance notice of any disclosure pursuant to clause (vi) of this Section 2.02. 16 20 ARTICLE III Servicing Fee SECTION 3.01. Servicing Compensation. The portion of the Servicing Fee allocable to the Series 1995-1 Certificateholders with respect to any Distribution Date (the "Series Servicing Fee") shall be equal to one-twelfth of the product of (a) 1.00% and (b) the average of the Series 1995-1 Invested Amounts on each day of the immediately preceding Collection Period; provided, however, that if the Servicer is not Dell USA L.P. or an Affiliate of Dell USA L.P., the Series Servicing Fee may be a higher fee as shall be agreed to by the Trustee in its sole discretion, but in no event in excess of a per annum fee equal to the product of 3.00% and the Series 1995-1 Invested Amount. 17 21 ARTICLE IV Rights of Series 1995-1 Certificateholders and Allocation and Application of Collections SECTION 4.01. Establishment of Series Accounts. (a) The Servicer, for the benefit of the Series 1995-1 Certificateholders, shall establish and maintain in the name of the Trustee, on behalf of the Trust, with an Eligible Institution a segregated trust account accessible only by the Trustee (the "Series 1995-1 Trustee's Account"), which shall be identified as the "Series 1995-1 Trustee's Account for the Dell Trade Receivables Master Trust, Series 1995-1" and shall bear a designation clearly indicating that the funds deposited therein are held for the benefit of the Series 1995-1 Certificateholders. The Series 1995-1 Trustee's Account initially shall be established at Norwest Bank Minnesota, National Association. (b) The Program Agent, for the benefit of CRC (for so long as CRC is the Holder of either all of the Class A Certificates or all of the Class B Certificates), shall establish and maintain in its own name, on behalf of CRC and the Liquidity Providers, with an Eligible Institution a segregated account accessible only by the Program Agent (the "Program Agent's Account"), which shall be identified as the "Program Agent's Account for the Dell Trade Receivables Master Trust, Series 1995-1" and shall bear a designation clearly indicating that the funds deposited therein are held for the benefit of CRC, as Holder of Series 1995-1 Certificates. The Program Agent's Account initially shall be established at Norwest Bank Minnesota, National Association. (c) (i) The Servicer, for the benefit of the Series 1995-1 Certificateholders, shall establish and maintain in the name of the Trustee, on behalf of the Trust, with an Eligible Institution a segregated trust account accessible only by the Trustee (the "Cure Account"), which shall be identified as the "Cure Account for the Dell Trade Receivables Master Trust, Series 1995-1" and shall bear a designation clearly indicating that the funds deposited therein are held for the benefit of the Series 1995-1 Certificateholders. (ii) At the direction of the Servicer (which may be a standing direction), funds on deposit in the Cure Account shall be invested by the Trustee in Eligible Investments selected by the Servicer. All such Eligible Investments shall be held by the Trustee for the benefit of the Series 1995-1 Certificateholders. On each Distribution Date, all interest and other investment earnings (net of losses and investment expenses) on funds on deposit in the Cure Account shall be applied as set forth in Section 4.02. Funds on deposit in the Cure Account shall be invested at the written direction of the Servicer in Eligible Investments that will mature so that such funds will be available on or before the close of business on the Business Day next preceding the following Distribution Date. Funds deposited in the 18 22 Cure Account on a Business Day which immediately precedes a Distribution Date upon the maturity of any Eligible Investments are not required to be invested overnight. (d) (i) The Trustee shall possess all right, title and interest in and to all funds on deposit from time to time in, and all Eligible Investments credited to, the Series 1995-1 Trustee's Account and the Cure Account (collectively, the "Series 1995-1 Accounts") and in all proceeds thereof. The Series 1995-1 Accounts shall be under the sole dominion and control of the Trustee for the benefit of the Series 1995-1 Certificateholders. If, at any time, any of the Series 1995-1 Accounts are held by an institution other than an Eligible Institution, the Trustee (or the Servicer, at the direction of the Trustee and on its behalf) shall within 10 Business Days establish a new Series 1995-1 Account meeting the conditions specified in paragraph (a) or (c)(i) above, as applicable, and shall transfer any cash and/or any investments to such new Series 1995-1 Account. Neither the Transferor, the Servicer nor any Person or entity claiming by, through or under the Transferor, the Servicer or any such Person or entity shall have any right, title or interest in, or any right to withdraw any amount from, any Series 1995-1 Account, except as expressly provided herein. Schedule I identifies each Series 1995-1 Account and the Program Agent's Account by setting forth the account number of each such account, the account designation of each such account and the name and location of the institution with which such account has been established. If a substitute Series 1995-1 Account or Program Agent's Account is established pursuant to this Section 4.01, the party establishing such substitute Series 1995-1 Account shall promptly provide to the Servicer or the Trustee, as applicable, an amended Schedule I, setting forth the relevant information for such substitute Series 1995-1 Account. (ii) Notwithstanding anything herein to the contrary, the Servicer shall have the power, revocable by the Trustee at the direction of a Majority in Interest of Series 1995-1 Certificateholders, to instruct the Trustee to make withdrawals and payments from the Series 1995-1 Accounts for the purposes of carrying out the Servicer's or Trustee's duties hereunder. (e) Any request by the Servicer to invest funds on deposit in any Series 1995-1 Account shall be in writing, or by telephone, confirmed promptly in writing, and shall certify that the requested investment is an Eligible Investment which matures at or prior to the time required hereby. (f) The Trustee is hereby authorized, unless otherwise directed by the Servicer, to effect transactions in Eligible Investments through a capital markets affiliate of the Trustee. SECTION 4.02. Settlement Procedures. (a) On each Deposit Date during each Collection Period during the Revolving Period, unless a Partial Amortization Period or a Cure Period shall have occurred and be continuing, the Servicer shall instruct the 19 23 Trustee by a Daily Report delivered to the Trustee by 12:00 noon (New York City time) to, and the Trustee shall, at such time and in the following order: (i) allocate Collections received since receipt of the last such Daily Report and held in the Concentration Account on such day, based on the Series 1995-1 Floating Allocation Percentage on such day and the Daily Report, either as Series 1995-1 Investor Collections, Collections allocable to another Series or Transferor Collections; (ii) out of such Series 1995-1 Investor Collections, allocate to, and hold in the Concentration Account, in trust for the Series 1995-1 Certificateholders, the Trustee and the Servicer, an amount equal to the Series 1995-1 Discount Amount for such Collection Period to the extent such amount has not been previously so allocated by the Servicer; (iii) deposit the remainder of such Series 1995-1 Investor Collections to the Transferor's Account to be invested by the Transferor in Receivables; provided that if immediately following any such deposit such Deposit Date would be a Pool Non-compliance Date, the Trustee shall retain all such remaining Series 1995-1 Investor Collections in the Concentration Account to be applied pursuant to Section 4.02(b)(iii); and (iv) deposit to the Transferor's Account the Transferor Collections; provided that if the Trust Invested Amount is zero, out of such Transferor Collections, allocate to, and hold in the Concentration Account, in trust for the Series 1995-1 Certificateholders, the Trustee and the Servicer, an amount equal to the Series 1995-1 Discount Amount for such Collection Period to the extent such amount has not been previously so allocated by the Servicer. To the extent that the Trust Invested Amount is zero, the Trustee shall allocate any Collections received in any Collection Period after the Series 1995-1 Discount Amount with respect to such Collection Period has been allocated in full to the Transferor Account whether or not the Servicer has delivered a Daily Report to the Trustee. On the Business Day immediately prior to the Distribution Date with respect to such Collection Period, the Servicer shall direct the Trustee to deposit to the Series 1995-1 Trustee's Account the amounts allocated and held in trust as described in clause (ii) above; provided, however, that the Servicer shall deposit to the Series 1995-1 Trustee's Account that portion of the Series 1995-1 Discount Amount allocable to the Trustee's expenses only to the extent of expenses actually incurred by the Trustee (as certified to the Servicer in writing by the Trustee) during the Collection Period relating to such Distribution Date or remaining unpaid with respect to any prior Collection Period. The Daily 20 24 Report delivered by the Servicer to the Trustee on the first day of each Collection Period shall set forth the Series 1995-1 Discount Amount for such Collection Period. (b) On each Deposit Date during each Collection Period if and so long as a Partial Amortization Period or a Cure Period shall have occurred and be continuing, the Servicer shall instruct the Trustee by a Daily Report delivered to the Trustee by 12:00 noon (New York City time) to, and the Trustee shall, at that time and in the following order: (i) allocate Collections received since receipt of the last such Daily Report and held in the Concentration Account on such day, based on the Series 1995-1 Floating Allocation Percentage for such Partial Amortization Period or Cure Period and the Daily Report, either as Series 1995-1 Investor Collections, Collections allocable to another Series or Transferor Collections; (ii) out of such Series 1995-1 Investor Collections, allocate to, and hold in the Concentration Account, in trust for the Series 1995-1 Certificateholders, the Trustee and the Servicer, an amount equal to the Series 1995-1 Discount Amount for such Collection Period to the extent such amount has not been previously so allocated by the Servicer; (iii) (A) in the case of a Partial Amortization Period, set aside and hold in the Concentration Account, in trust for the Series 1995-1 Certificateholders, the Trustee and the Servicer, such Series 1995-1 Investor Collections until the amount so held equals the Series 1995-1 Partial Amortization Amount and (B) in the case of a Cure Period, deposit such Series 1995-1 Investor Collections to the Cure Account in an amount sufficient (together with the amounts on deposit in the Cure Accounts of all outstanding Series) to make the Net Receivables Balance equal or exceed the Required Net Receivables Balance; (iv) deposit the remainder of such Series 1995-1 Investor Collections to the Transferor's Account to be invested by the Transferor in Receivables; provided that if immediately following any such deposit such Deposit Date would be a Pool Non-compliance Date, the Trustee shall retain all such remaining Series 1995-1 Investor Collections in the Concentration Account to be applied pursuant to Section 4.02(b)(iii); (v) deposit to the Transferor's Account the Transferor Collections. On the Business Day immediately following the day on which any Partial Amortization Period ends, the Servicer shall deposit to the Series 1995-1 Trustee's Account all amounts set aside as described in clause (iii) of this Section 4.02(b). 21 25 On the Business Day immediately prior to any Distribution Date during a Partial Amortization Period or Cure Period, the Servicer shall deposit to the Series 1995-1 Trustee's Account the amounts allocated and held in trust as described in clause (ii)(A) of this Section 4.02(b); provided, however, that the Servicer shall deposit to the Series 1995-1 Trustee's Account that portion of the Series 1995-1 Discount Amount allocable to the Trustee's expenses only to the extent of expenses actually incurred by the Trustee (as certified to the Servicer in writing by the Trustee) during the Collection Period relating to such Distribution Date or remaining unpaid with respect to any prior Collection Period. All funds held in the Concentration Account during a Partial Amortization Period as all or a portion of the Series 1995- 1 Partial Amortization Amount shall remain in the Concentration Account, without reduction, until such funds are distributed to the Series 1995-1 Certificateholders as provided in Section 5.01(c). (c) On each Deposit Date during each Collection Period during an Early Amortization Period or the Amortization Period, the Servicer shall instruct the Trustee by a Daily Report delivered to the Trustee by 12:00 noon (New York City time) to, and the Trustee shall, at that time and in the following order: (i) allocate Collections received since receipt of the last such Daily Report and held in the Concentration Account, based on the Series 1995-1 Floating Allocation Percentage for such Early Amortization Period or the Amortization Period and the Daily Report, either as Series 1995-1 Investor Collections, Collections allocable to another Series or as Transferor Collections; (ii) set aside and hold in the Concentration Account, in trust for the Series 1995-1 Certificateholders, the Trustee and the Servicer, such Series 1995-1 Investor Collections; and (iii) deposit to the Transferor's Account the Transferor Collections. On the Business Day immediately prior to the Distribution Date with respect to a Collection Period, the Trustee shall deposit to the Series 1995-1 Trustee's Account (A) all amounts set aside as described in clause (ii) of this Section 4.02(c), (B) the amount of Cure Funds on deposit in the Cure Account and (C) the amount of funds held in the Concentration Account representing all or a portion of the Series 1995-1 Partial Amortization Amount. (d) On the Business Day prior to any Distribution Date during an Early Amortization Period or the Amortization Period, the Transferor may deposit to the Series 1995-1 Trustee's Account its own funds in an amount sufficient, when added to the amounts deposited to the Series 1995-1 Trustee's Account pursuant to Section 4.02(c), to reduce the Series 1995-1 Invested Amount and to pay the Class A Debt Service Amount, if any, the Class B Debt 22 26 Service Amount, if any, any Breakage Costs and any other amounts due the Series 1995-1 Certificateholders under the Transaction Documents. Upon the termination of such Early Amortization Period or the Amortization Period, the Servicer shall instruct the Trustee to, and the Trustee shall, withdraw from the Cure Account all remaining Cure Funds on deposit therein and deposit such funds to the Series 1995-1 Trustee's Account for use by the Trustee in making the distribution required under the last paragraph of Section 5.01(d). (e) On any Business Day during the Revolving Period, unless a Partial Amortization Period or a Cure Period shall have occurred and be continuing, the Transferor may (i) instruct the Servicer to direct the Trustee (as set forth in the Daily Report) to deposit to the Series 1995-1 Trustee's Account all or a portion of (A) the Collections otherwise to be deposited into the Transferor's Account pursuant to Sections 4.02(a)(iii) and (iv) and (B) the Series 1995-1 Discount Amount held in the Concentration Account pursuant to Section 4.02(a)(ii), and (ii) deposit to the Series 1995-1 Trustee's Account its own funds, in each case for distribution on the next Business Day pursuant to Section 5.01(c) to the Series 1995-1 Certificateholders in reduction of the Class A Invested Amount and the payment of the Class A Debt Service Amount, if any, or in reduction of the Class B Invested Amount and the payment of the Class B Debt Service Amount, if any, any Breakage Costs and any other amounts due the Class 1995-1 Certificateholders under the Transaction Documents. (f) On any Business Day during the Revolving Period, the Transferor may instruct the Trustee by an Officer's Certificate (which may be a standing instruction) delivered to the Trustee by 12:00 noon (New York City time) to, and the Trustee shall, deposit to the Transferor's Account Cure Funds, if any, held in the Cure Account; provided that the Transferor shall have delivered to the Trustee at the time of such request an Officer's Certificate (in substantially the form of Exhibit E hereto) stating that, after taking account of the requested withdrawal, the Net Receivables Balance on such day is equal to or greater than the Required Net Receivables Balance and setting forth the calculation supporting such statement. 23 27 ARTICLE V Distributions and Reports to Series 1995-1 Certificateholders SECTION 5.01. Distributions. (a) During the Revolving Period, on the Distribution Date with respect to each Collection Period, the Trustee shall distribute the funds on deposit in the Series 1995-1 Trustee's Account on such Distribution Date, in the following order of priority, in accordance with the Servicer's Determination Date Certificate: (i) to the Trustee as the accrued and unpaid Series Trustee's Fee and expenses of the Trustee, not in excess of the product of (A) $2,500 (or, if an Early Amortization Event has occurred and is continuing, $5,000) and (B) the Series Allocation Percentage for Series 1995-1; (ii) to the Servicer (if the Servicer is other than Dell USA L.P.) as the accrued and unpaid Series Servicing Fee and any Service Transfer expenses incurred by a Successor Servicer which have not been paid by Dell USA L.P.; (iii) unless otherwise instructed by the Program Agent, to the Program Agent's Account: (A) for payment of the Purchaser Fees and any other amounts due under the Fee Letter other than Breakage Costs; (B) for distribution to the Class A Certificateholders, ratably in accordance with their respective Undivided Fractional Interests, of the Class A Debt Service Amount; (C) for distribution to the Class B Certificateholders, ratably in accordance with their respective Undivided Fractional Interests, of the Class B Debt Service Amount; and (D) for payment of Breakage Costs; (iv) to the Trustee as Trustee's expenses in excess of the product of (A) $2,500 (or, if an Early Amortization Event has occurred and is continuing, $5,000) and (B) the Series Allocation Percentage for Series 1995-1; (v) to the Servicer (if the Servicer is Dell USA L.P.) as the accrued and unpaid Series Servicing Fee; (vi) to amounts required to be allocated to the Series 1995-1 Discount Amount for the immediately succeeding Distribution Date; and 24 28 (vii) after the payment in full of the amounts specified in clauses (i) through (vi) above, to the Transferor. (b) On each Distribution Date during an Early Amortization Period or the Amortization Period, the Trustee shall distribute the funds on deposit in the Series 1995-1 Trustee's Account on such Distribution Date, in the following order of priority, in accordance with the Servicer's Determination Date Certificate: (i) to the Trustee as the accrued and unpaid Series Trustee's Fee and expenses of the Trustee, not in excess of the product of (A) $2,500 (or, if an Early Amortization Event has occurred and is continuing, $5,000) and (B) the Series Allocation Percentage for Series 1995-1; (ii) to the Servicer (if the Servicer is other than Dell USA L.P.) as the accrued and unpaid Series Servicing Fee and, if a default in payment to the Certificateholders shall have occurred, Service Transfer expenses incurred by a Successor Servicer which have not been paid by the initial Servicer; (iii) unless otherwise instructed by the Program Agent, to the Program Agent's Account: (A) for payment of the Purchaser Fees and any other amounts due under the Fee Letter other than Breakage Costs; (B) for distribution to the Class A Certificateholders, ratably in accordance with their respective Undivided Fractional Interests, of the Class A Debt Service Amount and any accrued and unpaid Class A Debt Service Amount; (C) for distribution to the Class B Certificateholders, ratably in accordance with their respective Undivided Fractional Interests, of the Class B Debt Service Amount and any accrued and unpaid Class B Debt Service Amount; and (D) for payment of Breakage Costs; (iv) to the Class A Certificateholders, ratably in accordance with their respective Undivided Fractional Interests, in reduction of the Class A Invested Amount until the Class A Invested Amount is reduced to zero, and any other amounts due the Class A Certificateholders under the Transaction Documents; (v) to the Class B Certificateholders, ratably in accordance with their respective Undivided Fractional Interests, in reduction of the Class B Invested Amount until the Class B Invested Amount is reduced to zero, and any other 25 29 amounts due the Class B Certificateholders under the Transaction Documents; (vi) to the Certificateholders of any other Series which is in an Early Amortization Period, Partial Amortization Period or Amortization Period on such Distribution Date; (vii) to the Trustee as Trustee's expenses in excess of the product of (A) $2,500 (or, if an Early Amortization Event has occurred and is continuing, $5,000) and (B) the Series Allocation Percentage for Series 1995-1; (viii) to the Servicer (if the Servicer is Dell USA L.P.) as the accrued and unpaid Series Servicing Fee for such Collection Period; and (ix) after the payment in full of the amounts specified in clauses (i) through (viii) above, to the Transferor. (c) In accordance with the provisions of Section 4.02(e), the Trustee shall distribute the funds on deposit in the Series 1995-1 Trustee's Account to the Program Agent's Account, unless otherwise instructed by the Program Agent, in reduction of the Class A Invested Amount and payment of the Class A Debt Service Amount, if any, or in reduction of the Class B Invested Amount and payment of the Class B Debt Service Amount, if any, any Breakage Costs and all other amounts due the Series 1995-1 Certificateholders under the Transaction Documents (d) In accordance with the provisions of the last paragraph in Section 4.02(b), the Trustee shall distribute the amount of funds representing the Trust Partial Amortization Amount that have been deposited to the Series 1995-1 Trustee's Account to the Program Agent's Account, unless otherwise instructed by the Program Agent. Upon payment in full to all of the Series 1995-1 Certificateholders of the Series 1995-1 Invested Amount, all accrued and unpaid interest thereon and all other amounts due the Series 1995-1 Certificateholders under the Transaction Documents, payment in full to the Servicer of the Series Servicing Fee, and payment in full to the Trustee of the Series Trustee's Fee and all expenses of the Trustee as contemplated by Section 11.05(b) of the Agreement, and provided that no amounts are then due and unpaid to the Holders of any other outstanding Series, all amounts remaining on deposit in the Series 1995-1 Trustee's Account shall be distributed by the Trustee to the Holder of the Transferor Certificate, and all amounts, if any, remaining in the Dell Collection Accounts, the Concentration Account and the Cure Account shall be distributed by the Trustee to the Holder of the Transferor Certificate; provided, however, that if at any time after the payment that would have otherwise resulted in such payment in full, such payment is rescinded or must otherwise be returned for any reason, effective upon such rescission or return such payment in 26 30 full shall automatically be deemed, as between the Series 1995-1 Certificate-holders and the Transferor, never to have occurred, and the Transferor shall be required, to the extent it received any amounts under this Section 5.01, to remit to the Trustee an amount equal to the rescinded or returned payment. (e) Except as provided in Section 12.02 of the Agreement with respect to a final distribution, distributions to the Series 1995-1 Certificateholders hereunder shall be made by wire transfer to the Program Agent's Account, unless otherwise instructed by the Program Agent, at such account as may be designated in writing, received by the Trustee on or prior to the relevant Record Date, by each Certificateholder without presentation or surrender of any Certificate or the making of any notation thereon. In the absence of such timely wire transfer instructions, payment will be made by check to the addresses of record of the Series 1995-1 Certificateholders. SECTION 5.02. Annual Certificateholders' Statement. On or before January 31 of each calendar year, beginning with January 31, 1996, the Servicer shall provide to the Trustee and the Trustee shall forward or cause to be forwarded to each Person who at any time during the preceding calendar year was a Certificateholder, a statement prepared by the Servicer containing the information which is required to be contained in the Determination Date Certificates provided to Certificateholders pursuant to Section 3.05(b) of the Agreement, aggregated for such calendar year or the applicable portion thereof during which such Person was a Certificateholder, together with other information as is required to be provided under the Internal Revenue Code and such other customary information as is necessary to enable the Certificateholders to prepare their tax returns. The obligation of the Servicer to provide such other information and such other customary information shall be deemed to have been satisfied to the extent that information substantially comparable to such other information and such other customary information shall be provided by the Trustee pursuant to any requirements of the Internal Revenue Code as from time to time in effect. 27 31 ARTICLE VI Series 1995-1 Early Amortization Events SECTION 6.01. Series 1995-1 Early Amortization Events. If a Trust Early Amortization Event or any one of the following events shall occur (each, an "Early Amortization Event"): (a) the Default Ratio shall exceed 10%; or (b) the average of the Dilution Ratio for the three immediately preceding Collection Periods shall exceed 13%; or (c) the average of the Loss to Liquidation Ratio for the six immediately preceding Collection Periods shall exceed 2%; then, either the Trustee or the Program Agent (unless otherwise directed by a Majority in Interest of Series 1995-1 Certificateholders) or a Majority in Interest of Series 1995-1 Certificateholders, by notice then given in writing to the Transferor and the Servicer (and to the Trustee if given by such Series 1995-1 Certificateholders), may declare (provided that such Early Amortization Event shall not have been remedied) that an Early Amortization Event has occurred as of the date of such notice, and, in the case of any Early Amortization Event, additional Receivables will not be transferred to the Trust. 28 32 ARTICLE VII Miscellaneous Provisions SECTION 7.01. Ratification of Agreement. As supplemented by this Series Supplement, the Agreement is in all respects ratified and confirmed and the Agreement as so supplemented by this Series Supplement shall be read, taken and construed as one and the same instrument. SECTION 7.02. Counterparts. This Series Supplement may be executed in two or more counterparts (and by different parties on separate counterparts), each of which shall be an original but all of which together shall constitute one and the same instrument. SECTION 7.03. Governing Law; Jurisdiction. (a) Governing Law. THIS SERIES SUPPLEMENT, INCLUDING THE RIGHTS AND DUTIES OF THE PARTIES HERETO, SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, EXCEPT TO THE EXTENT THAT THE PERFECTION OF THE INTERESTS OF THE TRUSTEE IN THE TRUST ASSETS IS GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK. (b) Jurisdiction. Each of the parties hereto hereby irrevocably and unconditionally submits to the nonexclusive jurisdiction of any New York State court or federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Series Supplement, and each of the parties hereto hereby irrevocably and unconditionally (i) agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, such federal court and (ii) waives the defense of an inconvenient forum. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. (c) Consent to Service of Process. Each party to this Series Supplement irrevocably consents to service of process by personal delivery, certified mail, postage prepaid or overnight courier. Nothing in this Series Supplement will affect the right of any party to this Series Supplement to serve process in any other manner permitted by law. (d) Waiver of Jury Trial. Each party to this Agreement waives any right to a trial by jury in any action or proceeding to enforce or defend any rights under or relating to this Agreement, any other Transaction Document, the Fee Letter or any amendment, instrument, document or agreement delivered or which may in the future be delivered in connection herewith or therewith or arising from any course of conduct, course of dealing, statements (whether 29 33 verbal of written), actions of any of the parties hereto and the Liquidity Providers or any other relationship existing in connection with this Agreement of any other Transaction Document or the Fee Letter, and agrees that any such action or proceeding shall be tried before a court and not before a jury. SECTION 7.04. Appointment of Successor Servicer. Notwithstanding anything to the contrary in Section 10.02 of the Agreement, the Trustee's appointment of a Successor Servicer shall be subject to the consent of a Majority in Interest of the Series 1995-1 Certificateholders. SECTION 7.05. The Trustee. The Trustee shall not be responsible in any manner whatsoever for or with respect to the validity or sufficiency of this Series Supplement, or for or with respect to the recitals contained herein, all of which recitals are made solely by the Transferor and the Servicer. SECTION 7.06. Assignment by CRC and Liquidity Providers. (a) At any time and from time to time, CRC may, by notice and delivery to the Program Agent of a fully executed assignment and assumption agreement (in sufficient counterparts for each party hereto), assign to any Person all or any portion of its rights and obligations hereunder; provided that such Person is an Eligible Assignee; provided, further, that the Program Agent shall have consulted with the Transferor respecting any assignee prior to CRC's contacting such assignee; and provided, further, that such assignment shall comply with any applicable legal requirements including, without limitation, the Act. The Program Agent shall, promptly upon its receipt of any such notice and assignment and assumption agreement, notify the Transferor, the Servicer and the Trustee of such assignment. The assignee shall, upon the effectiveness of such assignment and assumption agreement and delivery thereof and of such other requested documentation to the Program Agent, become entitled to the benefits hereof and subject to the obligations of CRC hereunder. (b) At any time and from time to time, CRC may assign to any Liquidity Provider, and any Liquidity Provider may assign to any other Liquidity Provider, all or any portion of its Series 1995-1 Certificateholders' Interest or its interest therein; provided that such assignee shall be an Eligible Assignee; provided, further, that the Program Agent shall have consulted with the Transferor respecting any assignee prior to CRC's or such Liquidity Provider's contacting such assignee; and provided, further, that such assignment shall comply with any applicable legal requirements including, without limitation, the Act. Each such assignment shall be upon such terms and conditions as the assignor and the assignee may mutually agree. CRC or the Liquidity Provider making any such assignment shall provide notice to the Transferor and the Servicer thereof. (c) The Program Agent agrees to cooperate with the Transferor and the Servicer to effect any assignment under this 30 34 Section 7.06, and the Transferor and the Servicer agree to execute or obtain such other documentation as may be reasonably requested by CRC or any Liquidity Provider in order to effectuate any assignment under this Section 7.06, the costs of such documentation to be borne by CRC or the Liquidity Provider, as appropriate. SECTION 7.07. No Assignability by Transferor or Servicer. Neither the Servicer nor the Transferor may assign any of its rights and obligations hereunder or any interest herein without the prior written consent of CRC and the Program Agent. SECTION 7.08. Amendments. No amendments may be made to this Series Supplement the effect of which would be to (i) change the Class A Debt Service Amount, Class A Dynamic Loss and Dilution Reserve Percentage, Class A Loss and Dilution Reserve Percentage, Class A Purchase Limit, Class A Specified Loss and Dilution Reserve Percentage, Class B Debt Service Amount, Class B Dynamic Loss and Dilution Reserve Percentage, Class B Loss and Dilution Reserve Percentage, Class B Purchase Limit, Class B Specified Loss and Dilution Reserve Percentage, Concentration Limit, Default Ratio, Dilution Ratio, Loss to Liquidation Ratio, Revolving Period, Series 1995-1 Discount Amount, Series 1995-1 Loss and Dilution Reserve, Series 1995-1 Yield/Fee Reserve or Early Amortization Events, (ii) reduce in any manner the amount of, or delay the timing of, distributions to be made to any Series 1995-1 Certificateholder or deposits of amounts to be so distributed, (iii) cause any adverse tax effect for any Series 1995-1 Certificateholder without the consent of each affected Series 1995-1 Certificateholder or (iv) adversely affect in any material respect the interests of any Series 1995-1 Certificateholder, in each case unless the Rating Agency Condition is satisfied and a Majority in Interest of the Series 1995-1 Certificateholders has consented in writing. 31 35 IN WITNESS WHEREOF, the parties hereto have caused this Series Supplement to be duly executed by their respective officers thereunto duly authorized as of the day and year first above written. DELL RECEIVABLES L.P., Transferor by DELL RECEIVABLES GEN. P. CORP, as its general partner By: /s/ Thomas J. Meredith ---------------------------------- Name: THOMAS J. MEREDITH Title: PRESIDENT DELL USA L.P., Servicer by DELL GEN. P. CORP., as its general partner By: /s/ Thomas J. Meredith ---------------------------------- Name: THOMAS J. MEREDITH Title: CHIEF FINANCIAL OFFICER NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, Trustee By: /s/ Michael G. Lugar ---------------------------------- Name: MICHAEL G. LUGAR Title: CORPORATE TRUST OFFICER 36 EXHIBITS AND SCHEDULES The following Exhibits and Schedule have been omitted from this filing: Exhibit A -- Form of Series 1995-1 Class A Certificate Exhibit B -- Form of Series 1995-1 Class B Certificate Exhibit C -- Form of Determination Date Certificate Exhibit D -- Form of Daily Report Exhibit E -- Form of Officer's Certificate Schedule I -- Series 1995-1 Accounts and Paying Agent's Account The registrant hereby undertakes to furnish supplementally a copy of any such Exhibit or schedule to the Commission upon request. EX-10.24 11 CERTIFICATE PURCHASE AGREEMENT 1 EXHIBIT 10.24 EXECUTION COPY ================================================================================ CERTIFICATE PURCHASE AGREEMENT Dated November 30, 1995 among DELL RECEIVABLES L.P. as Seller, CORPORATE RECEIVABLES CORPORATION, as Purchaser, THE LIQUIDITY PROVIDERS NAMED HEREIN, as Liquidity Providers, CITICORP NORTH AMERICA, INC., as Program Agent for Corporate Receivables Corporation and the Liquidity Providers and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee ================================================================================ 2 TABLE OF CONTENTS
Page ---- ARTICLE I DEFINITIONS SECTION 1.01 Defined Terms............................................. 1 SECTION 1.02 Other Definitional Provisions............................. 4 ARTICLE II THE PURCHASE; INCREASES SECTION 2.01 The Purchase.............................................. 4 SECTION 2.02 Increases................................................. 5 SECTION 2.03 Class A Certificates...................................... 5 SECTION 2.04 Reductions to the Class A Purchase Limit.................. 5 SECTION 2.05 Procedures for Making the Purchase and Increases............................................... 6 SECTION 2.06 Assignment by CRC to Liquidity Providers.................. 7 SECTION 2.07 Term...................................................... 8 ARTICLE III FEES AND INTEREST PROTECTION SECTION 3.01 Fees...................................................... 9 SECTION 3.02 Increased Costs........................................... 9 SECTION 3.03 Taxes..................................................... 10 SECTION 3.04 Sharing of Payments....................................... 12 ARTICLE IV CONDITIONS PRECEDENT TO THE PURCHASE AND ALL INCREASES SECTION 4.01 Conditions Precedent to the Purchase...................... 12 SECTION 4.02 Conditions Precedent to All Increases..................... 12 ARTICLE V THE PROGRAM AGENT SECTION 5.01 Authorization and Action of the Program Agent................................................... 13 SECTION 5.02 The Program Agent's Reliance, Etc......................... 13 SECTION 5.03 The Program Agent and Affiliates.......................... 13 SECTION 5.04 Amendments, Waivers and Consents.......................... 14
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Page ---- ARTICLE VI ASSIGNMENTS SECTION 6.01 Restrictions on Assignments............................... 15 SECTION 6.02 Rights of Assignee........................................ 15 SECTION 6.03 Notice of Assignment...................................... 15 ARTICLE VII MISCELLANEOUS SECTION 7.01 Participations............................................ 15 ARTICLE VIII MISCELLANEOUS SECTION 8.01 Amendments, Etc........................................... 15 SECTION 8.02 Notices, Etc.............................................. 15 SECTION 8.03 No Waiver; Remedies....................................... 16 SECTION 8.04 Binding Effect; Survival.................................. 16 SECTION 8.05 No Proceedings............................................ 17 SECTION 8.06 Captions and Cross References............................. 17 SECTION 8.07 Integration............................................... 17 SECTION 8.08 Governing Law............................................. 17 SECTION 8.09 Submission to Jurisdiction................................ 17 SECTION 8.10 Waiver of Jury Trial...................................... 18 SECTION 8.11 Execution in Counterparts................................. 18 SECTION 8.12 Replacement of Liquidity Providers........................ 18 SECTION 8.11 Reimbursement of Program Agent............................ 18 SECTION 8.12 No Conflict of Interest................................... 18 SECTION 8.13 Withholding Taxes......................................... 18
EXHIBIT A Form of Assignment and Acceptance EXHIBIT B Form of Notice of Purchase EXHIBIT C Form of Notice of Increases EXHIBIT D Form of Officer's Certificate ii 4 CERTIFICATE PURCHASE AGREEMENT dated November 30, 1995 (this "Agreement") among DELL RECEIVABLES L.P., a Texas limited partnership, as Seller (the "Seller"), CORPORATE RECEIVABLES CORPORATION ("CRC"), as purchaser (the "Purchaser"), THE FINANCIAL INSTITUTIONS LISTED FROM TIME TO TIME ON THE SIGNATURE PAGES HERETO AS LIQUIDITY PROVIDERS (individually, a "Liquidity Provider" and collectively, the "Liquidity Providers"), CITICORP NORTH AMERICA, INC., as agent (the "Program Agent") for the Purchaser and the Liquidity Providers, and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as trustee (the "Trustee"). W I T N E S S E T H: WHEREAS, the Dell Trade Receivables Master Trust may issue the Series 1995-1 Certificates (as hereinafter defined) at the direction of the Seller; WHEREAS, subject to the terms and conditions of this Agreement and of the Series 1995-1 Supplement, the Seller may sell the Class A Certificates to CRC or the Liquidity Providers; WHEREAS, subject to the terms and conditions of this Agreement, CRC may and the Liquidity Providers shall fund from time to time Increases in the Class A Invested Amount; and WHEREAS, the Class A Certificates will be held by the Program Agent for CRC and the Liquidity Providers; NOW THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto hereby agree as follows: 1 5 ARTICLE I DEFINITIONS Section 1.01. Defined Terms. As used in this Agreement, terms defined in the foregoing paragraphs shall have their defined meanings when used herein and the following terms shall have the following meanings: "Adjusted Eurodollar Rate" shall mean, for any period selected by the Transferor and consented to by the Program Agent (including, but not limited to, one-month or three-month LIBOR), an interest rate per annum obtained by dividing (i) the rate per annum at which deposits in U.S. Dollars are offered by the principal office of Citibank in London to prime banks in the London interbank market at 11:00 a.m. (London time) two Eurodollar Business Days (as defined below) before the first day of such period by (ii) the percentage equal to 100% minus the Eurodollar Reserve Percentage (as defined below) for such Collection Period. "Eurodollar Business Day" means a day on which dealings are carried on in the London interbank market and banks are open for business in London and are not required or authorized to close in New York City. "Eurodollar Reserve Percentage" for Citibank in London for any period means the reserve percentage applicable during such period under regulations issued from time to time by the Board of Governors of the Federal Reserve System (or any successor) (or, if more than one such percentage shall be so applicable, the daily average of such percentages for those days in such period during which any such percentage shall so be applicable) for determining the maximum reserve requirement (including, without limitation, any emergency, supplemental or other marginal reserve requirement) for Citibank in London in respect of liabilities or assets consisting of or including Eurocurrency liabilities as that term is used in Regulation D of the Board of Governors of the Federal Reserve System (or any successor), having a term equal to such period. "Assignment and Acceptance" shall mean an assignment and acceptance in substantially the form of Exhibit A pursuant to which a Liquidity Provider assigns all or a portion of its rights and obligations under this Agreement in accordance with the terms of Section 6.01. "Class A Certificate Interest" shall mean each interest in the Class A Certificates acquired by CRC or a Liquidity Provider in connection with the Purchase or any Increase in the Class A Invested Amount. "Class A Certificateholder" shall mean CRC or the Liquidity Providers, as applicable. "CRC" shall mean Corporate Receivables Corporation and its successors and assigns, but shall not include the Liquidity Providers as assignee under Section 2.06. "Dell" shall mean Dell Computer Corporation. 2 6 "Extension Term" shall have the meaning assigned to such term in Section 2.07. "Initial Term" shall mean, with respect to each Liquidity Provider Commitment, the period which commences on the date such Liquidity Provider enters into this Agreement and ends on the date which is three years from the date of this Agreement. "Liquidity Provider Commitment" shall mean, as to any Liquidity Provider, the obligation of such Liquidity Provider to (i) make the Purchase pursuant to Section 2.01, (ii) purchase the Class A Certificate Interests of CRC pursuant to Section 2.06 and (iii) fund Increases in the Class A Invested Amount, in each instance up to the amount set forth opposite such Liquidity Provider's name on the signature pages hereto, subject to Section 2.02, or as otherwise set forth in an Assignment and Acceptance in connection with an assignment from a Liquidity Provider of its obligations hereunder in accordance with the terms of Section 6.01, as such amount may be reduced from time to time pursuant to Section 2.04. "Liquidity Provider Commitment Percentage" shall mean, on any day and as to any Liquidity Provider, a fraction, the numerator of which is such Liquidity Provider's Liquidity Provider Commitment and the denominator of which is the Class A Purchase Limit on such day, as such percentage may be modified by assignments made from time to time pursuant to Section 6.01. "Liquidity Providers" shall mean the banks and financial institutions party hereto from time to time as "Liquidity Providers" hereunder, as their names appear on the signature pages hereto under the heading "Liquidity Providers" or as otherwise set forth in an Assignment and Acceptance in connection with an assignment from a Liquidity Provider of its rights and obligations hereunder in accordance with the terms of Section 6.01. "Majority of Class A Certificate Interests" shall mean holders of Class A Certificate Interests evidencing 51% of more of the aggregate Class A Certificate Interests; provided that, solely for purposes of this computation, (i) Liquidity Providers shall be deemed to hold Class A Certificate Interests equal to their respective Liquidity Provider Commitment Percentages of such aggregate Class A Certificate Interests, whether or not they have made the Purchase or funded any Increases, and (ii) CRC's Class A Certificate Interest will be reduced by the amount set forth in clause (i) and also by the amount of any Class A Certificate Interests held by Persons other than Liquidity Providers. "Obligations" shall mean all obligations of any Originator, the Seller, the Servicer or Dell to the Trustee, the Trust, the Purchaser, the Liquidity Providers, any Enhancement Provider, the other Indemnified Parties and their respective successors, permitted transferees and assigns, arising under or in connection with the Transaction Documents and the Fee Letter, 3 7 howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent, now or hereafter existing, or due or to become due. "Pooling and Servicing Agreement" shall mean the Pooling and Servicing Agreement, dated as of November 15, 1995, among the Seller, as transferor, the Servicer and the Trustee, as amended, supplemented or otherwise modified from time to time. "Purchase" shall mean the purchase of the Class A Certificates, whether by CRC or the Liquidity Providers. "Purchase Date" shall mean the date of the Purchase. "Purchase Price" shall mean the price specified in the notice from the Seller (substantially in the form of Exhibit B) delivered pursuant to Section 2.01. "Purchaser" shall mean either CRC or the Liquidity Providers, as provided in Section 2.01. "Series 1995-1 Supplement" shall mean the Series 1995-1 Supplement dated as of November 15, 1995 among the Seller, the Servicer and the Trustee. "Term" shall mean, with respect to each Liquidity Provider Commitment, the Initial Term and each Extension Term as provided in Section 2.07. SECTION 1.02. Other Definitional Provisions. (a) All capitalized terms not otherwise defined herein are defined in the Series 1995-1 Supplement. (b) As used herein, in the Class A Certificates and in any certificate or other document made or delivered pursuant hereto, accounting terms not defined in Section 1.01 and accounting terms partly defined in Section 1.01 to the extent not defined, shall have the respective meanings given to them under generally accepted accounting principles as in effect in the United States from time to time. (c) The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, subsection, Schedule and Exhibit references are to this Agreement unless otherwise specified. (d) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. 4 8 ARTICLE II THE PURCHASE; INCREASES SECTION 2.01. The Purchase. (a) CRC may, in its sole discretion, make the Purchase. CRC's election to make the Purchase is subject to the satisfaction of the conditions precedent set forth in Section 4.01. (b) If CRC shall elect not to make the Purchase on the Purchase Date, the Liquidity Providers shall, subject to the satisfaction of the conditions precedent set forth in Section 4.01, make the Purchase and shall become "the Purchaser" in all respects hereunder. Each Liquidity Provider shall make the Purchase in an amount equal to its Liquidity Provider Commitment Percentage of the Purchase Price. (c) Under no circumstances shall CRC or the Liquidity Providers make the Purchase if, as a result thereof, the Class A Invested Amount would exceed the Class A Purchase Limit or, in the case of a Liquidity Provider, such Liquidity Provider's Liquidity Provider Commitment. SECTION 2.02. Increases. (a) CRC may, in its sole discretion, from time to time during the period from the date of this Agreement to the last day of the Revolving Period, upon the request of the Seller and subject to the satisfaction of the conditions precedent set forth in Section 4.01, fund Increases, and, upon so funding an Increase, shall acquire Class A Certificate Interests in an amount corresponding to the amount of such Increase. (b) If CRC elects not to fund a requested Increase, each Liquidity Provider shall, upon the request of the Seller and subject to the satisfaction of the conditions precedent set forth in Section 4.01, fund such Increase in an amount equal to its Liquidity Provider Commitment Percentage of the amount of such requested Increase, and shall acquire CRC's Class A Certificate Interest pursuant to Section 2.06. All Increases funded by the Liquidity Providers shall be at the Assignee Rate and shall be made on a pro rata basis in accordance with the Liquidity Provider Commitments. (c) Under no circumstances shall CRC or any Liquidity Provider fund any Increase to the extent that, after giving effect to such Increase and the other Increases to be funded by the other Liquidity Providers concurrently therewith, (i) the Class A Invested Amount would exceed the Class A Purchase Limit or (ii) with respect to any Liquidity Provider, the funding of such Increase would exceed its Liquidity Provider Commitment. SECTION 2.03. Class A Certificates. On the Purchase Date, on each date an Increase in the Class A Invested Amount is funded hereunder and on each date the Class A Invested Amount is reduced, a duly authorized officer or employee of the Program Agent 5 9 shall make appropriate notations in its books and records of the Purchase Price, the amount of such Increase and the amount of such reduction, as applicable. Each of the Servicer, the Seller and the Trustee hereby authorizes each duly authorized officer and employee of the Program Agent to make such notations on the books and records as aforesaid and every such notation made in accordance with the foregoing authority shall be prima facie evidence of the accuracy of the information so recorded and shall be binding on the Seller and the Trustee absent manifest error. All Increases in the Class A Invested Amount shall be subject to reduction in accordance with the provisions of this Agreement and the Series 1995-1 Supplement. SECTION 2.04. Reductions to the Class A Purchase Limit. The Seller may, from time to time, upon at least 10 Business Days' prior written notice to the Program Agent, elect to reduce the Class A Purchase Limit by an amount up to the difference between the Class A Purchase Limit at such time and the Class A Invested Amount at such time. Any such reduction shall be permanent and shall reduce the Liquidity Provider Commitments of the Liquidity Providers hereunder ratably in accordance with the Liquidity Provider Commitment Percentages. SECTION 2.05. Procedures for Making the Purchase and Increases. (a) Notice of the Purchase and Increases. The Purchase and each Increase shall occur on a Business Day and shall be made or funded on notice from the Seller (substantially in the form of Exhibit B, in the case of the Purchase, or Exhibit C, in the case of an Increase) to the Program Agent received by the Program Agent not later than 12:00 noon (New York City time) on, in the case of the Purchase, the fifth Business Day immediately preceding the Purchase Date or, in the case of an Increase, on the Business Day immediately preceding the date of such increase (with a copy provided to the Trustee); provided that if the Class A Certificate Rate for the initial Collection Period for the resulting Increase is to be calculated at a rate based on the Adjusted Eurodollar Rate, then such notice must be received not later than 12:00 noon (New York City time) on the third Business Day next preceding the date of such Increase. Each notice shall specify the Purchase Price or the amount of the Increase (in each case, not to be less than $5,000,000) and the Purchase Date or date of the Increase. The Program Agent shall promptly notify the Seller and each Liquidity Provider if CRC elects in its discretion not to make the Purchase or fund an Increase. (b) Delivery of the Class A Certificates. On the Purchase Date, the Seller will deliver to the Program Agent, on behalf of the Purchaser, the Class A Certificates, dated the Purchase Date, registered in the name of the Purchaser and duly authenticated in accordance with the provisions of the Pooling and Servicing Agreement against delivery by the Program Agent, on behalf of the Purchaser, to the Seller of the Purchase Price. 6 10 (c) Funding of the Purchase and Increases. On the Purchase Date and any date on which the an Increase is funded, CRC or the Liquidity Providers, as applicable, shall, upon satisfaction of the applicable conditions set forth in Article IV, deposit to the Program Agent's account, which shall be identified as "Dell Master Trust CRC Remittance Account No. 4067-5766", established at Citibank, N.A., the Purchase Price or amount of the Increase (in the case of CRC) or its Liquidity Provider Commitment Percentage of the Increase (in the case of each Liquidity Provider) in same day funds, and after receipt by the Program Agent of such funds, the Program Agent will deposit the same into the Seller's account, which shall be identified as "Dell Receivables L.P. Account No. 4068-5227", established at Citibank, N.A., the Program Agent to use its best efforts to make such deposit by not later than 12:00 noon (New York City time). SECTION 2.06. Assignments by CRC to Liquidity Providers. (a) On any date during the Term (including, without limitation, any date on which CRC has elected in its discretion not to fund an Increase hereunder pursuant to Section 2.02), CRC may, in its own discretion, upon written notice given to the Program Agent and the Seller, assign to the Liquidity Providers (in accordance with their respective Liquidity Provider Commitment Percentages) and the Liquidity Providers shall purchase all of the right and title to and interest in all Class A Certificate Interests which are then owned by CRC. Such assignment of Class A Certificate Interests shall be made upon receipt of consideration (in cash) from the Liquidity Providers equal to the lesser of: (i) the aggregate amount of outstanding Class A Invested Amount plus accrued but unpaid interest thereon, and (ii) FAP x (OB-Writeoffs) -------------------- LDRA Where: FAP = the Class A Certificates' pro rata portion of the Series 1995-1 Floating Allocation Percentage OB = the Outstanding Balance of the Receivables Writeoffs = the Outstanding Balance of any Receivables which have been or should have been written off, determined by the Program Agent (which determination shall be conclusive absent manifest error) in accordance with CRC's practices and policies, which practices and policies are in accordance with generally accepted accounting principles 7 11 LDRA = a loss and dilution reserve adjustment, computed by adding to the number 1 an amount (expressed as a fraction) equal to 50% of the Class A Specified Loss and Dilution Reserve Percentage; provided that no Liquidity Provider shall be required to purchase any Class A Certificate Interest to the extent that, after giving effect thereto, its Liquidity Provider Commitment Percentage of the then outstanding Class A Invested Amount would exceed its Liquidity Provider Commitment. For purposes of the foregoing computations, Outstanding Balance shall be calculated on the date, and Writeoffs shall be computed since the date, the Series 1995-1 Floating Allocation Percentage was last computed or deemed computed. (b) Upon the assignment described in subsection (a) above, (i) all Class A Certificate Interests previously owned by CRC and so assigned shall become Class A Certificate Interests owned by the Liquidity Providers, (ii) the Program Agent will present the Class A Certificates to the Trustee for transfer to the Liquidity Providers and the Trustee shall register new Class A Certificates in the name of the Liquidity Providers and the Program Agent shall make appropriate notations in its books and records of such assignment and (iii) the Program Agent shall, to the extent provided under the Series 1995-1 Supplement, pay to CRC on the date of such assignment if such assignment occurs on a Distribution Date, or on the next succeeding Distribution Date, out of Collections available for such payments as provided in the Series 1995-1 Supplement, (A) to the extent CRC received the amount described in clause (ii) of Section 2.06(a) above, all accrued and unpaid interest with respect to the Class A Invested Amount related to the Class A Certificate Interests so assigned and (B) any Breakage Costs. (c) The assignment of Class A Certificate Interests and the Class A Certificates from CRC to the Liquidity Providers pursuant to this Section 2.06 shall be without recourse or warranty, express or implied, except that such Class A Certificate Interests and the Class A Certificates are free and clear of adverse claims created by or arising as a result of claims against the Program Agent or CRC. Nothing in this Section 2.06 shall be deemed to limit any rights of CRC under any other provisions of this Agreement to assign its right, title to and interest in and to any portion of the Class A Certificate Interests or the Class A Certificates owned by it. SECTION 2.07. Term. (a) The Initial Term of each Liquidity Provider Commitment hereunder shall be for a period commencing on the date such Liquidity Provider enters into this Agreement and ending on the date that is three years after the date of this Agreement. Prior to the expiration of the Initial Term or any Extension Term, the Program Agent may request an extension of such Term (such extended period being an "Extension Term") and each Liquidity Provider may, in its sole and absolute discretion, extend 8 12 its Liquidity Provider Commitment by delivering to the Program Agent a written notice of such Liquidity Provider's commitment to extend, provided, however, that any such extension shall be ineffective if an Early Amortization Event has occurred and is continuing at the time of the proposed commencement of such Extension Term. Failure of a Liquidity Provider to deliver a notice of such Liquidity Provider's intent to grant an Extension Term shall be deemed to be an election by such Liquidity Provider not to grant an Extension Term. If less than all of the Liquidity Providers have elected to grant an Extension Term and the Program Agent has been unable to replace any Liquidity Provider which has declined to grant an Extension Term, such request for an Extension Term shall be withdrawn and the Program Agent will so notify the Liquidity Providers prior to the day on which the Term expires. 9 13 ARTICLE III FEES AND INTEREST PROTECTION SECTION 3.01. Fees. The Seller shall pay to the Program Agent such fee for its own account and for the account of CRC and the Liquidity Providers in such amounts and at such times as set forth in the Fee Letter. SECTION 3.02. Increased Costs. (a) If CRC or any Liquidity Provider (each, an "Affected Person") determines that compliance with any law or regulation or any guideline or request from any central bank or other governmental authority (whether or not having the force of law) affects or would affect the amount of capital required or expected to be maintained by such Affected Person and such Affected Person determines that the amount of such capital is increased by or based upon the existence of any commitment to make the Purchase or fund Increases or otherwise to maintain its investment in the Class A Certificates or Class A Certificate Interests, then, upon demand by such Affected Person (with a copy to the Program Agent and the Seller), the Seller shall immediately pay to the Program Agent, for the account of such Affected Person (as a third party beneficiary), additional amounts sufficient to compensate such Affected Person, in light of the circumstances, for such increase in capital. A certificate as to such amounts submitted to the Seller and the Program Agent by such Affected Person shall be conclusive and binding for all purposes, absent manifest error. (b) If, due to either (i) the introduction or any change (other than any change by way of imposition or increase of reserve requirements referred to in the definition of Eurodollar Reserve Percentage) in or in the interpretation of any law or regulation or (ii) compliance with any guideline or request from any central bank or other governmental authority (whether or not having the force of law), there shall be an increase in the cost to any Liquidity Provider of any commitment to make the Purchase or to fund Increases or otherwise to maintain the investment in the Class A Certificates or Class A Certificate Interests in respect of which the Class A Certificate Rate is the Adjusted Eurodollar Rate, then, upon demand by such Liquidity Provider (with a copy to the Program Agent and the Seller), the Seller shall immediately pay to the Program Agent, for the account of such Liquidity Provider (as a third party beneficiary), additional amounts sufficient to compensate such Liquidity Provider for such increase in cost. A certificate as to such amounts submitted to the Seller and the Program Agent by such Affected Person, shall be conclusive and binding for all purposes, absent manifest error. (c) CRC and each Liquidity Provider will promptly notify the Seller and the Program Agent of any event of which it has knowledge which is reasonably likely to entitle such Liquidity Provider to compensation pursuant to this Section 3.02; provided, however, that no failure to give or delay in giving such 10 14 notification shall adversely affect the rights of CRC or any Liquidity Provider to such compensation. SECTION 3.03. Taxes. (a) Any and all payments and deposits required to be made hereunder or under any other Transaction Document by the Seller or the Trustee to or for the benefit of CRC or any Liquidity Provider shall be made free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding taxes imposed on, or measured by reference to, the net income of, franchise taxes imposed on, and taxes (other than withholding taxes) imposed on the receipts or gross receipts that are imposed on CRC or such Liquidity Provider by any of (i) the United States or any State thereof, (ii) the state jurisdiction under the laws of which CRC or such Liquidity Provider is organized or in which it is otherwise doing business or (iii) any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If the Seller or the Trustee shall be required by law to deduct any Taxes from or in respect of any sum required to be paid or deposited hereunder or under any instrument delivered hereunder to or for the benefit of CRC or any Liquidity Provider, (A) such sum shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums required to be paid or deposited under this Section 3.03) the amount received by CRC or the relevant Liquidity Provider, or otherwise deposited hereunder or under such instrument, shall be equal to the sum which would have been so received or deposited had no such deductions been made, (B) the Seller or the Trustee (as appropriate) shall make such deductions and (C) the Seller or the Trustee (as appropriate) shall pay the full amount of such deductions to the relevant taxation authority or other authority in accordance with applicable law. (b) The Seller will indemnify CRC and each Liquidity Provider for the full amount of Taxes (including, without limitation, any Taxes imposed by any jurisdiction on amounts payable under this Section 3.03) paid by CRC or such Liquidity Provider and any liability (including penalties, interest and expenses) arising therefrom or required to be paid with respect thereto. CRC and each Liquidity Provider agrees to promptly notify the Seller of any payment of Taxes made by it and, if practicable, any request, demand or notice received in respect thereof prior to such payment. CRC and each Liquidity Provider shall be entitled to payment of this indemnification, as owner of Class A Certificate Interests pursuant to the terms of the Series 1995-1 Supplement, within 30 days from the date CRC or such Liquidity Provider makes written demand therefor to the Program Agent and the Seller. A certificate as to the amount of such indemnification submitted to the Seller and the Program Agent by CRC or such Liquidity Provider, setting forth the calculation thereof, shall (absent manifest error) be conclusive and binding for all purposes. 11 15 (c) Within 30 days after the date of any payment of Taxes, the Seller or the Trustee (as the case may be) will furnish to the Program Agent the original or a certified copy of a receipt evidencing payment thereof. (d) Notwithstanding the foregoing and any other provisions of this Section 3.03, the obligations of the Trustee under this Section 3.03 shall be payable only out of the Trust Assets. (e) Each Liquidity Provider that is organized under the laws of a jurisdiction other than the United States or a state thereof hereby agrees to complete, execute and deliver to the Trustee from time to time prior to the initial Distribution Date on which such Liquidity Provider will be entitled to receive distributions pursuant to the Series 1995-1 Supplement and this Agreement, Internal Revenue Service Forms 1001 or 4224 (or any successor form), as applicable, or such other forms or certificates as may be required under the laws of any applicable jurisdiction in order to permit the Seller or the Trustee to make payments to, and deposit funds to or for the account of, such Liquidity Provider hereunder and under the other Transaction Documents without any deduction or withholding for or on account of any tax or with such withholding or deduction at a reduced rate. SECTION 3.04. Sharing of Payments. If CRC or any Liquidity Provider shall obtain any payment or other recovery (whether voluntary, involuntary, by application of set-off or otherwise) on account of any Obligation (other than pursuant to Section 3.02 of this Agreement) which is in excess of its pro rata share of the sum of payments then or theretofore obtained by CRC and the Liquidity Providers, CRC or any such Liquidity Provider shall purchase from the Liquidity Providers or CRC, as applicable, such participations in Obligations held by them as shall be necessary to cause such purchaser to share the excess payment or other recovery ratably with each of them; provided, however, that if all or any portion of the excess payment or other recovery is thereafter recovered from such purchasing Liquidity Provider or CRC, as the case may be, the purchase of such participations shall be rescinded and the seller of such participation shall repay to such purchaser the purchase price of such participation to the ratable extent of such recovery together with an amount equal to such Liquidity Provider's or CRC's ratable share (according to the proportion of the amount of such seller's required repayment to such purchaser to the total amount so recovered from such purchaser) of any interest or other Amount payable by such purchaser in respect of the total amount so recovered. 12 16 ARTICLE IV CONDITIONS PRECEDENT TO THE PURCHASE AND ALL INCREASES SECTION 4.01. Conditions Precedent to the Purchase. (a) The making of the Purchase is subject to the following conditions precedent: (i) the Seller shall have furnished to the Purchaser an opinion of Baker & Botts, L.L.P., counsel for the Seller, dated the Purchase Date and satisfactory in form and substance to the Purchaser, as to such matters as the Purchaser may reasonably require; (ii) the Seller shall have furnished to the Purchaser an opinion of Thomas B. Green, counsel for the Seller, dated the Purchase Date and satisfactory in form and substance to the Purchaser, as to such matters as the Purchaser may reasonably require; (iii) the Purchaser shall have received an opinion of Brown & Wood, counsel for the Purchaser, dated the Purchase Date and satisfactory in form and substance to the Purchaser, as to such matters as the Purchaser may reasonably require; (iv) the Purchaser shall have received an opinion of in-house counsel for the Trustee, dated the Purchase Date and satisfactory in form and substance to the Purchaser, as to such matters as the Purchaser may reasonably require; (v) the Purchaser shall have received a certificate, dated the Purchase Date, of the Chairman of the Board, the President, any Vice President, the Treasurer, any Assistant Treasurer, the principal financial officer or the principal accounting officer of the Seller in which such officer shall state that the representations and warranties of the Seller contained in this Agreement and the other Transaction Documents are true and correct, and the Seller has complied with all agreements and satisfied all conditions on its part to be performed or satisfied under such agreements at or prior to such date; (vi) the Purchaser shall have received evidence satisfactory to it that, on or before the Purchase Date, UCC-1 financing statements have been or are being filed in the office of the Secretary of State of the State of Texas reflecting the grant of the security interest by the Originators in the Receivables to the Transferor and the grant of the security interest by the Transferor in the Trust Assets to the Trustee, for the benefit of the Certificateholders; (vii) the Class A Certificates shall have been rated "AAA" by S&P and DCR; 13 17 (viii) no Termination Event (as defined in the Receivables Purchase Agreement), Early Amortization Event or Servicer Default, and no event that (a) if notice of such event were given or (b) after a specified amount of time had elapsed would become a Termination Event, Early Amortization Event or Servicer Default, shall have occurred and be continuing; (ix) the Revolving Period shall not have ended and an Early Amortization Period shall not have occurred and be continuing; (x) any and all representations and warranties made by the Transferor and by the Servicer in the Series 1995-1 Supplement shall be true and correct in all material respects, as if repeated on such date with respect to the facts and circumstances then existing; (xi) the Pooling and Servicing Agreement, Series 1995-1 Supplement, Receivables Purchase Agreement and Parent Undertaking Agreement shall be in full force and effect; (xii) after making the Purchase or funding such Increase, the Class A Invested Amount shall not exceed the Class A Purchase Limit; (xiii) the Program Agent shall have received by 12:00 noon (New York City time), on the Purchase Date or the date of such Increase the Daily Report, which shall be prepared on a pro forma basis and shall show that the Seller is in compliance with all of the Transaction Documents (after giving effect to the Purchase or such Increase); and (xiv) the Seller shall have delivered to CRC and the Liquidity Providers an Officer's Certificate in the form of Exhibit D hereto. (b) If CRC is the Purchaser, the making of the Purchase and the funding of Increases are subject to the following additional conditions precedent: (i) Dell shall have a long-term senior unsecured debt rating of at least "B" from S&P and Moody's or, if Dell does not have such a rating from both S&P and Moody's, Dell shall have a long-term senior unsecured debt rating deemed by the Program Agent, in its sole discretion, to be of credit quality equivalent to at least "B+" by S&P and at least "B1" by Moody's; and (ii) the Program Agent shall not have given notice that CRC will not make the Purchase or fund an Increase. SECTION 4.02. Conditions Precedent to All Increases. The funding of all Increases is subject to the conditions precedent specified in subsections (viii)-(xiv) of Section 4.01 and to the 14 18 conditions precedent that (a) CRC shall have made the assignment contemplated in Section 2.06(a) of all Class A Certificate Interests it then holds and (b) all Obligors shall have been directed to remit, and shall be remitting, Collections with respect to Floorplan Receivables directly to a Dell Collection Account. 15 19 ARTICLE V THE PROGRAM AGENT SECTION 5.01. Authorization and Action of the Program Agent. CRC and each Liquidity Provider hereby appoints and authorizes the Program Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the other Transaction Documents as are delegated to the Program Agent by the terms hereof and thereof, together with such powers as are reasonably incidental thereto. SECTION 5.02. The Program Agent's Reliance, Etc. Neither the Program Agent nor any of its directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or the Program Agent under or in connection with the Transaction Documents or the Fee Letter, except for its or their own gross negligence or willful misconduct. Without limiting the generality of the foregoing, the Program Agent (a) may consult with independent legal counsel (including counsel for the Trust, the Seller or the Servicer), independent certified public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts, (b) makes no representation or warranty to CRC, any Liquidity Provider or any such other holder of any interest in the Trust Assets and shall not be responsible to CRC, any Liquidity Provider or any other holder for any statements, representations or warranties made in or in connection with this Agreement, (c) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of the Transaction Documents or the Fee Letter on the part of the Trust, the Seller or the Servicer or to inspect the property (including the books and records) of the Trust, the Seller or the Servicer, (d) shall not be responsible to CRC, any Liquidity Provider or any other holder of any interest in Trust Assets for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of any Transaction Document or the Fee Letter (except for the execution by the Program Agent of, and legality, validity and enforceability against the Program Agent of its obligations under, the Transaction Documents to which the Program Agent is a party and the Fee Letter), and (e) shall incur no liability under or in respect of the Transaction Documents or the Fee Letter by acting upon any notice (including notice by telephone), consent, certificate or other instrument or writing (which may be by facsimile or telex believed by it to be genuine and signed or sent by the proper party or parties; except in each case for gross negligence or wilful misconduct on the part of the Program Agent. SECTION 5.03. The Program Agent and Affiliates. Citicorp North America, Inc. and its Affiliates (including Citibank, N.A.) may generally engage in any kind of business with the Seller or the Servicer or any Obligor, any of their respective Affiliates and any Person who may do business with or own securities of the Servicer or any Obligor or any of their 16 20 respective Affiliates, all as if Citicorp North America, Inc. were not the Program Agent and without any duty to account therefor to CRC, any Liquidity Provider or any other holder of an interest in Trust Assets. SECTION 5.04. Amendments, Waivers and Consents. CRC and the Program Agent each reserves the right, in its sole discretion (subject to the next following sentence), to exercise any rights and remedies available to the Purchaser or the Program Agent under the Transaction Documents or pursuant to applicable law, and also to agree to any amendment, modification or waiver of any Transaction Document, to the extent such Transaction Document provides for, or requires, the Purchaser's or the Program Agent's agreement, modification or waiver. Notwithstanding the foregoing, each of CRC and the Program Agent agrees for the benefit of the Liquidity Providers that it shall not, subject to the terms of the Transaction Documents: (a) without the prior written consent of each of the Liquidity Providers, (i) reduce in any manner the amount of, or delay the timing of, distributions to be made to any Class A Certificateholder or deposits of amounts to be so distributed, or (ii) reduce any fees payable to the Program Agent or CRC which relate to payments to Liquidity Providers or delay the dates on which such fees are payable, or (iii) modify any provision relating to the Series 1995-1 Loss and Dilution Reserve, the Series 1995-1 Yield/Fee Reserve or extend the Revolving Period, or (iv) release Dell from its obligations under the Parent Undertaking Agreement, or (v) amend or waive any Event of Termination or Early Amortization Event under any Transaction Document relating to the bankruptcy of the Seller, the Servicer or Dell. (b) without the prior written consent of the Majority of Class A Certificate Interests, (i) amend, modify or waive any provision of any Transaction Document which would impair any rights expressly granted to an assignee or participant, or (ii) change the definitions of Defaulted Receivable, Default Ratio, Eligible Receivable, Loss to Liquidation Ratio, Net Receivables Balance, Required Net Receivables Balance, Dilution Ratio or Concentration Limit, or 17 21 (iii) amend any Series 1995-1 Early Amortization Event to increase the maximum permitted Default Ratio, Dilution Ratio or Loss to Liquidation Ratio, or (iv) waive violations of the maximum permitted levels for the Default Ratio, Dilution Ratio or Loss to Liquidation Ratio which violations occur for more than two consecutive months or by more than 10% of such permitted levels for any time. 18 22 ARTICLE VI ASSIGNMENTS SECTION 6.01. Assignment. (a) At any time and from time to time, CRC or any Liquidity Provider may assign its interests hereunder in accordance with the provisions of Section 7.06 of the Series 1995-1 Supplement. SECTION 6.02. Rights of Assignee. Upon any assignment in accordance with this Article VI, (a) the assignee receiving such assignment shall have all of the rights of such assignor hereunder with respect to the Class A Certificate or Class A Certificate Interest (or portion thereof) or rights associated therewith being assigned and (b) all references to such assignor in the Transaction Documents shall be deemed to apply to such assignee to the extent of its interest in the related Collections. SECTION 6.03. Notice of Assignment. Each assignor shall provide notice to the Seller, the Program Agent and the Trustee of any assignment of any Class A Certificate or Class A Certificate Interest (or portion thereof) or rights associated therewith by such assignor to any assignee. 19 23 ARTICLE VII PARTICIPATIONS SECTION 7.01. Participations. Each Liquidity Provider may sell participations, in minimum amounts of $1,000,000, to one or more banks or other entities in or to all or a portion of its rights and obligations under this Agreement (including, without limitation, all or a portion of its Liquidity Provider Commitment and the Class A Certificate Interests owned by it); provided, however, that (i) such Liquidity Provider's obligations under this Agreement (including, without limitation, its Liquidity Provider Commitment) shall remain unchanged and (ii) such Liquidity Provider shall remain solely responsible to the other parties hereto for the performance of such obligations. The Seller, the Program Agent and the other Liquidity Providers shall continue to deal solely and directly with such Liquidity Provider in connection with such Liquidity Provider's rights and obligations under this Agreement. 20 24 ARTICLE VIII MISCELLANEOUS SECTION 8.01. Amendments, Etc. Subject to Section 5.04, no amendment of any provision of this Agreement shall in any event be effective unless the same shall be in writing and signed by the parties hereto. Any waiver or consent shall be effective only if signed by the party waiving any right, in the specific instance and for the specific purpose for which given. SECTION 8.02. Notices, Etc. All notices and other communications provided for hereunder shall, unless otherwise stated herein, be in writing (including telex and facsimile communication) and shall be personally delivered or sent by certified mail, postage prepaid, or overnight courier or facsimile, to the intended party at the address or facsimile number of such party set forth under its name on the signature pages hereof or at such other address or facsimile number as shall be designated by such party in a written notice to the other parties hereto. All such notices and communications shall be effective (a) if personally delivered, when received, (b) if sent by certified mail, four Business Days after having been deposited in the mail, postage prepaid, (c) if sent by overnight courier, two Business Days after having been given to such courier, unless sooner received by the addressee and (d) if transmitted by facsimile, when sent, upon receipt confirmed by telephone or electronic means, except that notices and communications pursuant to Article III shall not be effective until received. Notices and communications sent hereunder on a day that is not a Business Day shall be deemed to have been sent on the following Business Day. SECTION 8.03. No Waiver; Remedies. No failure on the part of the Program Agent, any Liquidity Provider, any Indemnified Party, CRC or any other holder of any Class A Certificate Interest to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. Without limiting the foregoing, the Program Agent and each Liquidity Provider is hereby authorized by the Seller at any time and from time to time, to the fullest extent permitted by law, to set-off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by the Program Agent and each Liquidity Provider to or for the credit or the account of the Seller, now or hereafter existing under this Agreement, to the Program Agent, any Liquidity Provider, any Indemnified Party or CRC, or their respective successors and assigns; provided, however, that no such Person shall exercise any such right of set-off without the prior written consent of the Program Agent. Each set-off by CRC or any Liquidity Provider under this Section 8.03 against the Class A Invested Amount shall reduce the Class A Invested Amount accordingly. 21 25 SECTION 8.04. Binding Effect; Survival. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, and the provisions of Section 3.02 shall inure to the benefit of the Liquidity Providers and their respective successors and assigns; provided, however, that nothing in the foregoing shall be deemed to authorize any assignment not permitted by Section 6.01. This Agreement shall create and constitute the continuing obligation of the parties hereto in accordance with its terms, and shall remain in full force and effect until one year and one day after the earlier of the date on which all Obligations are paid in full or the Trust shall terminate in accordance with the Pooling and Servicing Agreement. The provisions of Section 3.02 shall be continuing and shall survive any termination of this Agreement. SECTION 8.05. No Proceedings. Each of CRC, the Seller (on its own behalf and on behalf of its Affiliates), the Trustee, Citicorp North America, Inc., individually and as Program Agent, and each Liquidity Provider hereby agrees that it will not institute against CRC, or join any other Person in instituting against CRC, any insolvency proceeding (namely, any proceeding of the type referred to in the definition of "Insolvency Event") so long as any CP Notes issued by CRC shall be outstanding or there shall not have elapsed one year plus one day since the last day on which any such CP Notes shall have been outstanding. The foregoing shall not limit the right of CRC, the Seller, the Trustee, Citicorp North America, Inc., individually or as the Program Agent, or any Liquidity Provider to file any claim in or otherwise take any action with respect to any such insolvency proceeding that was instituted against CRC by any Person other than CRC, the Seller, the Trustee, Citicorp North America, Inc., individually or as the Program Agent, or any Liquidity Provider. SECTION 8.06. Captions and Cross References. The various captions (including, without limitation, the table of contents) in this Agreement are provided solely for convenience of reference and shall not affect the meaning or interpretation of any provision of this Agreement. SECTION 8.07. Integration. This Agreement, together with the other Transaction Documents and the Fee Letter, contains a final and complete integration of all prior expressions by the parties hereto with respect to the subject matter hereof and, together with all the other Transaction Documents and the Fee Letter, shall constitute the entire agreement among the parties hereto with respect to the subject matter hereof, superseding all prior oral or written understandings. SECTION 8.08. Governing Law. THIS AGREEMENT, INCLUDING THE RIGHTS AND DUTIES OF THE PARTIES HERETO, SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, EXCEPT TO THE EXTENT THAT THE PERFECTION OF THE INTERESTS OF CRC OR 22 26 THE LIQUIDITY PROVIDERS IN THE TRUST ASSETS IS GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK. SECTION 8.09. Submission to Jurisdiction. Each of the parties hereto hereby irrevocably and unconditionally submits to the nonexclusive jurisdiction of any New York State court or federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Series Supplement, and each of the parties hereto hereby irrevocably and unconditionally (i) agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, such federal court and (ii) waives the defense of an inconvenient forum. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. SECTION 8.10. Consent to Service of Process. Each party to this Agreement irrevocably consents to service of process by personal delivery, certified mail, postage prepaid or overnight courier. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law. SECTION 8.11. Waiver of Jury Trial. Each party to this Agreement waives any right to a trial by jury in any action or proceeding to enforce or defend any rights under or relating to this Agreement, any other Transaction Document, the Fee Letter or any amendment, instrument, document or agreement delivered or which may in the future be delivered in connection herewith or therewith or arising from any course of conduct, course of dealing, statements (whether verbal of written), actions of any of the parties hereto and the Liquidity Providers or any other relationship existing in connection with this Agreement of any other Transaction Document or the Fee Letter, and agrees that any such action or proceeding shall be tried before a court and not before a jury. SECTION 8.12. Execution in Counterparts. This Agreement may be executed in any number of counterparts and by the different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same Agreement. SECTION 8.13. Replacement of Liquidity Providers. The Program Agent shall have the right, in its sole discretion, to terminate the rights and obligations of the Liquidity Providers to make the Purchase or fund Increases in the event that the applicable rating described in the definition of "Eligible Assignee" shall be downgraded. Such termination shall be effective upon written notice to such effect delivered by the Program Agent to such Liquidity Provider, whereupon the Term of such Liquidity 23 27 Provider's Commitment shall be deemed to have terminated. Upon such termination, the Liquidity Provider shall cease to have any rights or obligations with respect to future Increases under this Agreement but shall continue to have the rights and obligations of a Liquidity Provider with respect to any Increases funded by it under this Agreement prior to such termination. SECTION 8.14. Reimbursement of Program Agent. Each Liquidity Provider will on demand reimburse the Program Agent its Liquidity Provider Commitment Percentage of any and all reasonable costs and expenses (including, without limitation, reasonable fees and disbursements of counsel) which may be incurred in connection with collecting amounts owed with respect to any Certificate in which such Liquidity Provider purchases Class A Certificate Interests for which the Program Agent is not promptly reimbursed by the Seller or otherwise. Should the Program Agent later be reimbursed by the Seller or CRC for any such amount, the Program Agent shall immediately pay to each Liquidity Provider its Liquidity Provider Commitment Percentage of such amount. SECTION 8.15. No Conflict of Interest. The Program Agent and its Affiliates may accept deposits from, lend money or otherwise extend credit to, act as trustee under indentures of, and generally engage in any kind of business with, the Seller and any of its Affiliates and any Person who may do business with or own securities of the Seller or any of its Affiliates, all as though this Agreement had not been entered into and without any duty to account therefor to CRC or any Liquidity Provider. SECTION 8.16. Withholding Taxes. Each Liquidity Provider warrants that it is not subject to any taxes, charges, levies or withholdings with respect to payments under this Agreement that are imposed by means of withholding by any applicable taxing authority ("Withholding Tax"). Each Liquidity Provider agrees to provide the Program Agent, from time to time upon the Program Agent's request, completed and signed copies of any documents that may be required by any applicable taxing authority to certify such Liquidity Provider's exemption from Withholding Tax with respect to payments to be made to such Liquidity Provider under this Agreement. Each Liquidity Provider agrees to hold the Program Agent and the Seller harmless from any Withholding Tax imposed due to such Liquidity Provider's failure to establish that it is not subject to Withholding Tax. 24 28 IN WITNESS WHEREOF, the parties hereto have caused this Certificate Purchase Agreement to be duly executed by their respective officers thereunto duly authorized as of the date first above written. DELL RECEIVABLES L.P., as Seller by DELL RECEIVABLES GEN. P. CORP, as its general partner By /s/ THOMAS J. MEREDITH -------------------------------------- Name: THOMAS J. MEREDITH Title: PRESIDENT 2112 Kramer Lane, Suite D Austin, Texas 78758 Tel: (512) 728-5829 Fax: (512) 728-5986 CORPORATE RECEIVABLES CORPORATION, as Purchaser By: Citicorp North America, Inc., as Attorney-in-Fact By/s/ RAYMOND F. DIZON -------------------------------------- Name: RAYMOND F. DIZON Title: V. P. 399 Park Avenue New York, New York 10043 Tel: (212) Fax: (212) CITICORP NORTH AMERICA, INC., as Program Agent By/s/ RAYMOND F. DIZON -------------------------------------- Name: RAYMOND F. DIZON Title: V. P. 399 Park Avenue New York, New York 10043 Tel: (212) Fax: (212) 29 EXHIBITS The following Exhibits have been omitted from this filing: Exhibit A -- Form of Assignment and Acceptance Exhibit B -- Form of Notice of Purchase Exhibit C -- Form of Notice of Increase Exhibit D -- Form of Officer's Certificate The registrant hereby undertakes to furnish supplementally a copy of any such Exhibit to the Commission upon request. EX-10.25 12 PARENT UNDERTAKING AGREEMENT 1 EXHIBIT 10.25 EXECUTION COPY PARENT UNDERTAKING AGREEMENT PARENT UNDERTAKING AGREEMENT, dated as of November 21, 1995, made by DELL COMPUTER CORPORATION, a corporation organized and existing under the laws of the State of Delaware ("Dell"), in favor of Norwest Bank Minnesota, National Association, as Trustee (the "Trustee") on behalf of the Certificateholders. WHEREAS, Dell Marketing L.P., as seller, and Dell Receivables L.P., as purchaser (the "Transferor") have entered into a Receivables Purchase Agreement dated as of November 21, 1995; and WHEREAS, Dell Direct Sales L.P., as seller, and the Transferor have entered into a Receivables Purchase Agreement dated as of November 21, 1995; and WHEREAS, Dell USA L.P. (the "Servicer"), the Transferor and the Trustee have entered into a Pooling and Servicing Agreement dated as of November 21, 1995 (said Agreement, as it may hereafter be modified from time to time, the "Pooling and Servicing Agreement"); and WHEREAS, it is a condition precedent to the transfer of the Receivables to the Trust and the issuance of the Certificates under the Pooling and Servicing Agreement that Dell shall have executed and delivered this Agreement; NOW, THEREFORE, in consideration of the premises and in order to induce Investor Certificateholders to make purchases of Certificates and to fund Increases, Dell hereby agrees as follows: SECTION 1. Definitions. Capitalized terms used herein but not otherwise defined herein shall have the meanings set forth in the Pooling and Servicing Agreement. In addition, the term "Agreement" shall mean this Parent Undertaking Agreement, as the same may from time to time be amended, supplemented or otherwise modified. SECTION 2. Unconditional Undertaking. Dell hereby unconditionally and irrevocably undertakes and agrees with and for the benefit of the Trustee to cause the due and punctual performance and observance by the Servicer (for as long as Dell USA L.P., or any Person who assumes the role of Servicer pursuant to a merger or consolidation permitted under Section 8.02 of the Pooling and Servicing Agreement, is the Servicer) of all of the covenants, agreements and undertakings under Sections 3.02, 3.04 and 11.05 of 2 the Pooling and Servicing Agreement (such covenants, agreements, and other obligations under the Pooling and Servicing Agreement being the "Servicing Undertakings"), and agrees to pay any and all expenses (including reasonable counsel fees and expenses) incurred by the Trustee in enforcing any of their rights under this Agreement. In the event that the Servicer shall fail in any manner whatsoever to perform or observe any of the Servicing Undertakings when the same shall be required to be performed, then Dell will itself duly and punctually perform or observe, or cause to be duly and punctually performed and observed, such Servicing Undertaking, and it shall not be a condition to the accrual of the obligation of Dell hereunder to perform or observe any Servicing Undertaking (or to cause the same to be performed or observed) that the Trustee shall have first made any request of or demand upon or given any notice to Dell or the Servicer or their respective successors or assigns, or have instituted any action or proceedings against Dell or the Servicer or their respective successors or assigns in respect thereof; provided, however, that nothing contained herein shall affect any requirement set forth in any Transaction Document that notice be given or time elapse prior to the giving of a Termination Notice or the occurrence of a Termination Event or a Trust Early Amortization Event. The parties hereto agree that nothing contained in this Agreement shall in any manner expand the obligations of Dell under the Servicing Undertakings beyond the covenants, agreements and undertakings of the Servicer under Sections 3.02, 3.04 and 11.05 of the Pooling and Servicing Agreement. SECTION 3. Obligation Absolute. Dell undertakes that the Servicing Undertakings will be performed strictly in accordance with the terms of the Pooling and Servicing Agreement or any document delivered in connection therewith. The obligations of Dell under this Agreement are independent of the Servicing Undertakings, and a separate action or actions may be brought and prosecuted against Dell to enforce this Agreement, irrespective of whether any action is brought against the Servicer or whether the Servicer is joined in any such action. This Agreement shall continue to be effective or be reinstated, as the case may be, if at any time any payment in connection with any of the Servicing Undertakings is rescinded or must otherwise be returned by the Trustee upon the insolvency, bankruptcy or reorganization of any party to any Transaction Document, all as though payment had not been made. SECTION 4. Subrogation. Dell will not, during the Amortization Period or any Early Amortization Period, Partial Amortization Period or Cure Period, or if it has knowledge of any event that, with the giving of notice or passage of time or both, would become an Early Amortization Event or Cure Period, exercise any rights which it may acquire by way of subrogation under this Agreement, by any payment made hereunder or otherwise, until all 2 3 amounts in connection with the Servicing Undertakings and all other amounts payable under this Agreement shall have been paid in full and the Trust shall have been terminated. If any amount shall be paid to Dell on account of such subrogation rights at any time prior to the later of (i) the payment in full of the Servicing Undertakings and all other amounts payable under this Agreement and (ii) termination of the Trust, such amount shall be held in trust for the benefit of the Trustee and shall forthwith be paid to the Trustee to be credited and applied upon the Servicing Undertakings, whether matured or unmatured, in accordance with the terms of the Transaction Documents or to be held by the Trustee as collateral security for any Servicing Undertakings thereafter existing. SECTION 5. Representations and Warranties. Dell hereby represents and warrants as follows: (a) Organization and Good Standing. Dell is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has, in all material respects, full corporate power, authority and legal right to own its properties and conduct its business as such properties are presently owned and as such business is presently conducted and as is proposed to be conducted, and to execute, deliver and perform its obligations under this Agreement. (b) Due Qualification. Dell is duly qualified to do business and is in good standing as a foreign corporation (or is exempt from such requirements), and has obtained all necessary licenses and approvals, in each jurisdiction in which the nature of its business requires such qualification, except where failure to so qualify or to obtain such licenses or approvals would not have a material adverse effect on its ability to perform its obligations hereunder. (c) Due Authorization. Dell's execution, delivery and performance of this Agreement, and the consummation of the transactions contemplated by this Agreement, have been duly and validly authorized by all necessary corporate action on the part of Dell. (d) Binding Obligation. This Agreement constitutes a legal, valid and binding obligation of Dell, enforceable against it in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, reorganization, insolvency, moratorium or other similar laws affecting creditors' rights generally, now and hereafter in effect, and except as such enforceability may be limited by general principles of equity (whether considered in a suit at law or in equity). 3 4 (e) No Conflict. Dell's execution and delivery of this Agreement, its performance of the transactions contemplated by this Agreement, and its fulfillment of the terms hereof, do not (i) conflict with or violate in any material respects (A) Dell's certificate of incorporation or by-laws, (B) any Requirements of Law applicable to Dell or (C) any order, writ, judgment, award, injunction or decree binding on or affecting Dell or its properties, (ii) conflict with, result in any breach of any of the material terms and provisions of, or constitute (with or without notice or lapse of time or both) a default under, any material indenture, contract, agreement, mortgage, deed of trust or other instrument to which it is a party or by which it or its properties are bound or (iii) result in or require the creation of any Lien with respect to its properties. (f) No Proceedings. There are no proceedings or investigations pending or, to the best knowledge of Dell, threatened against Dell before any Governmental Authority (i) asserting the illegality, invalidity or unenforceability, or seeking any determination or ruling that would affect the legality, binding effect, validity or enforceability, of this Agreement, (ii) seeking to prevent the consummation of any of the transactions contemplated by this Agreement, or (iii) seeking any determination or ruling that is reasonably likely to materially and adversely affect the financial condition or operations of Dell or the performance by it of its obligations under this Agreement. (g) No Consents. No authorization, consent, license, order or approval of or registration or declaration with any Person or Governmental Authority is required to be obtained, effected or given by Dell in connection with its execution and delivery of this Agreement or the performance of its obligations hereunder. (h) Financials. Any financial statement, document, book, record or report requested or required to be furnished by Dell to the Trustee in connection with this Agreement is or was prepared in accordance with generally accepted accounting principles and fairly presents or presented the financial condition of Dell as of its date or (except as otherwise disclosed to the Trustee at such time) as of the date so furnished. (i) Ownership. As of the date hereof, Dell is the registered and beneficial owner of all of the issued and outstanding shares of the capital stock of Dell International Incorporated, which is in turn the registered and beneficial owner of all of the issued and outstanding shares of the capital stock of Dell Gen. P. Corp and Dell USA Corporation; Dell Gen. P. Corp is the sole general partner of Dell 4 5 Marketing L.P., Dell Direct Sales L.P. and the Servicer; Dell USA Corporation is the sole limited partner of the Servicer and the registered and beneficial owner of all of the issued and outstanding shares of the capital stock of Dell Marketing Corporation and Dell Direct Sales Corporation.; and Dell Marketing Corp. is the sole limited partner of Dell Marketing L.P and Dell Direct Sales Corporation is the sole limited partner of Dell Direct Sales L.P. SECTION 6. Covenants. Dell covenants and agrees that, until the termination of the Trust, Dell will, unless the Trustee shall otherwise consent in writing: (a) Ownership. Be the direct or indirect owner of all of the issued and outstanding shares of the capital stock, partnership interests or other equity interests of Dell Marketing L.P. and Dell Direct Sales L.P., the Servicer and the Transferor and of any successor of any of the aforementioned (other than a successor servicer if the Servicer is terminated pursuant to the Pooling and Servicing Agreement) which may become a party to any of the Transaction Documents. (b) No Petition. Not commence or institute any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or other proceedings under any federal or state bankruptcy or similar law, against the Transferor or any successor to the Transferor which becomes a party to any of the Transaction Documents. SECTION 7. Amendments, Etc. (a) This Agreement may be amended from time to time by Dell and the Trustee without the consent of any of the Investor Certificateholders, (i) to cure any ambiguity, (ii) to correct or supplement any provision herein which may be inconsistent with any other provision herein or (iii) to add any other provisions with respect to matters or questions arising under this Agreement which are not inconsistent with the provisions of this Agreement; provided that any amendment pursuant to this clause (a) shall not, as evidenced by an Opinion of Counsel, adversely affect in any material respect the interests of any Investor Certificateholders. (b) This Agreement may be amended from time to time by Dell and the Trustee, with the consent of a Majority in Interest of each adversely affected Series, for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement or of modifying in any manner the rights of the Certificateholders. The Trustee may request an Officer's Certificate and Opinion of Counsel with respect to an amendment entered into pursuant to this clause (b) concerning compliance with the requirements of this Agreement. Any amendment to be effected pursuant to this clause (b) shall be deemed to 5 6 adversely affect all outstanding Series, other than any Series with respect to which such action shall not, as evidenced by an Opinion of Counsel (which counsel shall not be an employee of, or counsel for, Dell, the Servicer or the Transferor), addressed and delivered to the Trustee, adversely affect the interests of any Investor Certificateholder of such Series. (c) Promptly after the execution of any such amendment or consent (other than an amendment pursuant to clause (a)), the Trustee shall furnish written notification of the substance of such amendment to each Investor Certificateholder. (d) It shall not be necessary for the consent of Investor Certificateholders to approve the particular form of any proposed amendment, but it shall be sufficient if such consent shall approve the substance thereof. The manner of obtaining such consents and of evidencing the authorization of the execution thereof by Investor Certificateholders shall be subject to such reasonable requirements as the Trustee may prescribe. SECTION 8. Addresses for Notices. All notices and other communications provided for hereunder shall, unless otherwise stated herein, be in writing (including telex and facsimile communication) and shall be personally delivered or sent by certified mail, postage prepaid, or overnight courier or facsimile, to the intended party at the address or facsimile number of such party set forth below or at such other address or facsimile number as shall be designated by such party in a written notice to the other parties hereto. All such notices and communications shall be effective (a) if personally delivered, when received, (b) if sent by certified mail, four Business Days after having been deposited in the mail, postage prepaid, (c) if sent by overnight courier, two Business Days after having been given to such courier, unless sooner received by the addressee and (d) if transmitted by facsimile, when sent, upon receipt confirmed by telephone or electronic means. Notices and communications sent hereunder on a day that is not a Business Day shall be deemed to have been sent on the following Business Day. If to Dell, Dell Computer Corporation 2214 West Braker Lane, Suite D Austin, Texas 78758 Tel: (512) 728-3343 Fax: (512) 728-0043 Attn: Treasurer 6 7 If to the Trustee, Norwest Bank Minnesota, National Association Sixth Street and Marquette Avenue Minneapolis, Minnesota 55479 Tel: (612) 667-4610 Fax: (612) 667-9825 Attn: Corporate Trust Department - Tom Wraalstad SECTION 9. No Waiver; Remedies. No failure on the part of the Trustee to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. SECTION 10. Continuing Agreement. This Agreement shall (a) remain in full force and effect until the later of (i) the payment of all other amounts payable under this Agreement and the Pooling and Servicing Agreement and (ii) termination of the Trust, (b) be binding upon Dell, its successors and assigns, and (c) inure to the benefit of, and be enforceable by, the Trustee and its respective successors and permitted transferees and assigns. SECTION 11. Governing Law. THIS AGREEMENT, INCLUDING THE RIGHTS AND DUTIES OF THE PARTIES HERETO, SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS. SECTION 12. Submission to Jurisdiction. Each of the parties hereto hereby irrevocably and unconditionally submits to the nonexclusive jurisdiction of any New York State court or federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement, and each of the parties hereto hereby irrevocably and unconditionally (i) agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, such federal court and (ii) waives the defense of an inconvenient forum. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. SECTION 13. Waiver of Jury Trial. Each party hereto waives any right to a trial by jury in any action or proceeding to enforce or defend any rights under or relating to this Agreement, any other Transaction Document, or any amendment, instrument, document or agreement delivered or which may in the future be delivered in connection herewith or therewith or arising from any course of conduct, course of dealing, statements (whether verbal of written), 7 8 actions of any of the parties hereto or any other relationship existing in connection with this Agreement or any other Transaction Document, and agrees that any such action or proceeding shall be tried before a court and not before a jury. SECTION 14. Consent to Service of Process. Each party to this Agreement irrevocably consents to service of process by personal delivery, certified mail, postage prepaid or overnight courier. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law. SECTION 15. Execution in Counterparts. This Agreement may be executed in any number of counterparts and by the different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same Agreement. 8 9 IN WITNESS WHEREOF, Dell has caused this Parent Undertaking Agreement to be duly executed by its officer thereunto duly authorized as of the day and year first above written. DELL COMPUTER CORPORATION By /s/ Thomas J. Meredith ------------------------------ Name: THOMAS J. MEREDITH Title: SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER ACCEPTED: NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Trustee By /s/ Michael G. Lugar ----------------------------- Name: MICHAEL G. LUGAR Title: CORPORATE TRUST OFFICE EX-10.26 13 CROSS-GUARANTEE AGREEMENT 1 EXHIBIT 10.26 EXECUTION COPY CROSS-GUARANTEE AGREEMENT CROSS-GUARANTEE AGREEMENT, dated as of November 21, 1995, made by DELL MARKETING L.P., a Texas limited partnership ("Dell Marketing"), DELL DIRECT SALES L.P., a Texas limited partnership ("Dell Direct") and DELL USA L.P., a Texas limited partnership (together with any successors pursuant to a merger or consolidation permitted under Section 8.02 of the Pooling and Servicing Agreement (as hereinafter defined), the "Servicer"), in favor of Norwest Bank Minnesota, National Association, as Trustee (the "Trustee") on behalf of the Certificateholders. WHEREAS, Dell Marketing and Dell Receivables L.P., as Purchaser (the "Transferor"), have entered into a Receivables Purchase Agreement dated as of November 21, 1995; and WHEREAS, Dell Direct and the Transferor have entered into a Receivables Purchase Agreement dated as of November 21, 1995; and WHEREAS, the Servicer, the Transferor and the Trustee have entered into a Pooling and Servicing Agreement dated as of November 21, 1995 (said Agreement, as it may hereafter be modified from time to time, the "Pooling and Servicing Agreement"); and WHEREAS, it is a condition precedent to the transfer of the Receivables to the Trust and the issuance of the Certificates under the Pooling and Servicing Agreement that Dell Marketing, Dell Direct and the Servicer shall have executed and delivered this Agreement and that any future Originator shall be deemed to enter into this Agreement and agree to the terms hereof (Dell Marketing, Dell Direct and any future Originators are each referred to herein as an "Originator"); NOW, THEREFORE, in consideration of the premises and in order to induce Investor Certificateholders to make purchases of Certificates and to fund Increases, each Originator and the Servicer hereby agree as follows: SECTION 1. Definitions. Capitalized terms used herein but not otherwise defined herein shall have the meanings set forth in the Pooling and Servicing Agreement. In addition, the term "Agreement" shall mean this Cross-Guarantee Agreement, as the same may from time to time be amended, supplemented or otherwise modified. 2 SECTION 2. Unconditional Undertaking. Each Originator and the Servicer each hereby unconditionally and irrevocably undertakes and agrees with and for the benefit of the Trustee to cause the due and punctual performance and observance by the other parties hereto, and their respective successors and assigns, of all of the terms, covenants, conditions, agreements and undertakings on the part of each such party to be performed or observed by it under the Transaction Documents in accordance with the terms thereof, including the punctual payment when due of all obligations now or hereafter existing under the Transaction Documents, whether for indemnification payments, fees, expenses or otherwise (such terms, covenants, conditions, agreement, undertakings and other obligations under the Transaction Documents being the "Undertakings"). Each Originator and the Servicer agrees to pay any and all expenses (including reasonable counsel fees and expenses) incurred by the Trustee in enforcing any rights under this Agreement. In the event that any Originator or the Servicer shall fail in any manner whatsoever to perform or observe any of the Undertakings when the same shall be required to be performed or observed under the Transaction Documents then any other Originator or the Servicer, as applicable, will itself duly and punctually perform or observe, or cause to be duly and punctually performed and observed, such Undertaking, and it shall not be a condition to the accrual of the obligation of any Originator or the Servicer, as applicable, hereunder to perform or observe any Undertaking (or to cause the same to be performed or observed) that the Trustee shall have first made any request of or demand upon or given any notice to any Originator or the Servicer, as applicable, or their respective successors or assigns, or have instituted any action or proceedings against any Originator or the Servicer, as applicable, or their respective successors or assigns in respect thereof; provided, however, that nothing contained herein shall affect any requirement set forth in any Transaction Document that notice be given or time elapse prior to the occurrence of a Termination Event or a Trust Early Amortization Event. SECTION 3. Obligation Absolute. Each Originator and the Servicer undertakes that the Undertakings will be performed or paid strictly in accordance with the terms of the Transaction Documents or any other document delivered in connection therewith. This Agreement shall continue to be effective or be reinstated, as the case may be, if at any time any payment in connection with any of the Undertakings is rescinded or must otherwise be returned by the Trustee upon the insolvency, bankruptcy or reorganization of any Originator or the Servicer, all as though payment had not been made. SECTION 4. Subrogation. Each Originator and the Servicer each agrees that, during the Amortization Period or any Early Amortization Period, Partial Amortization Period or Cure Period, or if it has knowledge of any event that, with the giving of notice or 2 3 passage of time or both, would become an Early Amortization Event or Cure Period, it will not exercise any rights which it may acquire by way of subrogation under this Agreement, by any payment made hereunder or otherwise, until all the Undertakings and all other amounts payable under this Agreement shall have been paid in full and the Trust shall have been terminated. If any amount shall be paid to any Originator or the Servicer on account of such subrogation rights at any time prior to the later of (i) the payment in full of the Undertakings and all other amounts payable under this Agreement and (ii) termination of the Trust, such amount shall be held in trust for the benefit of the Trustee and shall forthwith be paid to the Trustee to be credited and applied upon the Undertakings, whether matured or unmatured, in accordance with the terms of the Transaction Documents or to be held by the Trustee as collateral security for any Undertakings thereafter existing. SECTION 5. Amendments, Etc. (a) This Agreement may be amended from time to time by each Originator and the Servicer without the consent of any of the Investor Certificateholders, (i) to cure any ambiguity, (ii) to correct or supplement any provision herein which may be inconsistent with any other provision herein or (iii) to add any other provisions with respect to matters or questions arising under this Agreement which are not inconsistent with the provisions of this Agreement; provided that any amendment pursuant to this clause (a) shall not, as evidenced by an Opinion of Counsel, adversely affect in any material respect the interests of any Investor Certificateholders. (b) This Agreement may be amended from time to time by each Originator and the Servicer, with the consent of a Majority in Interest of each adversely affected Series, for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement or of modifying in any manner the rights of the Certificateholders. The Trustee may request an Officer's Certificate and Opinion of Counsel with respect to an amendment entered into pursuant to this clause (b) concerning compliance with the requirements of this Agreement. Any amendment to be effected pursuant to this clause (b) shall be deemed to adversely affect all outstanding Series, other than any Series with respect to which such action shall not, as evidenced by an Opinion of Counsel (which counsel shall not be an employee of, or counsel for, Dell, the Servicer or the Transferor), addressed and delivered to the Trustee, adversely affect the interests of any Investor Certificateholder of such Series. (c) Promptly after the execution of any such amendment or consent (other than an amendment pursuant to clause (a)), the Trustee shall furnish written notification of the substance of such amendment to each Investor Certificateholder. (d) It shall not be necessary for the consent of Investor Certificateholders to approve the particular form of any 3 4 proposed amendment, but it shall be sufficient if such consent shall approve the substance thereof. The manner of obtaining such consents and of evidencing the authorization of the execution thereof by Investor Certificateholders shall be subject to such reasonable requirements as the Trustee may prescribe. SECTION 6. Addresses for Notices. All notices and other communications provided for hereunder shall, unless otherwise stated herein, be in writing (including telex and facsimile communication) and shall be personally delivered or sent by certified mail, postage prepaid, or overnight courier or facsimile, to the intended party at the address or facsimile number of such party set forth below or at such other address or facsimile number as shall be designated by such party in a written notice to the other parties hereto. All such notices and communications shall be effective (a) if personally delivered, when received, (b) if sent by certified mail, four Business Days after having been deposited in the mail, postage prepaid, (c) if sent by overnight courier, two Business Days after having been given to such courier, unless sooner received by the addressee and (d) if transmitted by facsimile, when sent, upon receipt confirmed by telephone or electronic means. Notices and communications sent hereunder on a day that is not a Business Day shall be deemed to have been sent on the following Business Day. If to Dell Marketing, Dell Marketing L.P. 2214 West Braker Lane, Suite D Austin, Texas 78758 Tel: (512) 728-3343 Fax: (512) 728-0043 Attn: Treasurer If to Dell Direct, Dell Direct Sales L.P. 2214 West Braker Lane, Suite D Austin, Texas 78758 Tel: (512) 728-3343 Fax: (512) 728-0043 Attn: Treasurer If to the Servicer, Dell USA L.P. 2214 West Braker Lane, Suite D Austin, Texas 78758 Tel: (512) 728-3343 Fax: (512) 728-0043 Attn: Treasurer 4 5 If to the Trustee, Norwest Bank Minnesota, National Association Sixth Street and Marquette Avenue Minneapolis, Minnesota 55479 Tel: (612) 667-4610 Fax: (612) 667-9825 Attn: Corporate Trust Department - Tom Wraalstad SECTION 7. No Waiver; Remedies. No failure on the part of the Trustee to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. SECTION 8. Continuing Agreement. This Agreement shall (a) remain in full force and effect until the later of (i) the payment of all amounts payable under this Agreement and the Pooling and Servicing Agreement and (ii) termination of the Trust, (b) be binding upon each Originator and the Servicer and their respective successors and assigns, and (c) inure to the benefit of, and be enforceable by, the Trustee and its respective successors and permitted transferees and assigns. SECTION 9. Governing Law. THIS AGREEMENT, INCLUDING THE RIGHTS AND DUTIES OF THE PARTIES HERETO, SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS. SECTION 10. Submission to Jurisdiction. Each of the parties hereto hereby irrevocably and unconditionally submits to the nonexclusive jurisdiction of any New York State court or federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement, and each of the parties hereto hereby irrevocably and unconditionally (i) agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, such federal court and (ii) waives the defense of an inconvenient forum. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. SECTION 11. Waiver of Jury Trial. Each party hereto waives any right to a trial by jury in any action or proceeding to enforce or defend any rights under or relating to this Agreement, any other Transaction Document, or any amendment, instrument, document or agreement delivered or which may in the future be delivered in connection herewith or therewith or arising from any course of 5 6 conduct, course of dealing, statements (whether verbal of written), actions of any of the parties hereto existing in connection with this Agreement or any other Transaction Document, and agrees that any such action or proceeding shall be tried before a court and not before a jury. SECTION 12. Consent to Service of Process. Each party to this Agreement irrevocably consents to service of process by personal delivery, certified mail, postage prepaid or overnight courier. Nothing in this Agreement will affect the right of any party to this Agreement to serve process in any other manner permitted by law. SECTION 13. Execution in Counterparts. This Agreement may be executed in any number of counterparts and by the different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same Agreement. 6 7 IN WITNESS WHEREOF, each of Dell Marketing, Dell Direct and the Servicer has caused this Cross-Guarantee Agreement to be duly executed by its officer thereunto duly authorized as of the day and year first above written. DELL MARKETING L.P. By DELL GEN. P. CORP., as its general partner By /s/ Thomas J. Meredith ------------------------------- Name: THOMAS J. MEREDITH Title: CHIEF FINANCIAL OFFICER DELL DIRECT SALES L.P. By DELL GEN. P. CORP., as its general partner By /s/ Thomas J. Meredith ------------------------------- Name: THOMAS J. MEREDITH Title: CHIEF FINANCIAL OFFICER DELL USA L.P. By DELL GEN. P. CORP., as its general partner By /s/ Thomas J. Meredith ------------------------------- Name: THOMAS J. MEREDITH Title: CHIEF FINANCIAL OFFICER ACCEPTED: NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION as Trustee By /s/ Michael G. Lugar ------------------------------ Name: MICHAEL G. LUGAR Title: CORPORATE TRUST OFFICER EX-11 14 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS 1 EXHIBIT 11 DELL COMPUTER CORPORATION STATEMENT RE COMPUTATION OF PER SHARE EARNINGS (IN MILLIONS, EXCEPT PER SHARE DATA)
FISCAL YEAR ENDED ------------------------------------- JANUARY 28, JANUARY 29, JANUARY 30, 1996 1995 1994 ----------- ----------- ----------- Primary earnings per common share: Calculation of weighted average shares(a): Weighted average shares of Common Stock outstanding 90.0 77.3 74.7 Weighted average shares of common stock equivalents, utilizing the treasury stock method 7.1 5.8 -- ----- ----- ------ Weighted average shares outstanding 97.1 83.1 74.7 ===== ===== ====== Earnings: Net income (loss) available to common stockholders $ 260 $ 140 $ (40) ===== ===== ====== Earnings (loss) per common share (a)(b) $2.67 $1.69 $(0.53) ===== ===== ====== Fully diluted earnings per common share: Calculation of weighted average shares(a): Weighted average shares of Common Stock outstanding 90.0 77.3 -- Weighted average shares of common stock equivalents, utilizing the treasury stock method 6.8 6.8 -- Assumed conversion of preferred stock 1.9(c) 10.5 -- ----- ----- ------ Weighted average shares outstanding 98.7 94.6 -- ===== ===== ====== Earnings: Net income (loss) available to common stockholders $ 260 $ 140 $ -- Add: preferred dividends 1(d) 9 -- ----- ----- ------ Adjusted net income (loss) available to common stockholders $ 261 $ 149 $ -- ===== ===== ====== Earnings (loss) per common share (a)(b) $2.65 $1.58 $ --(e) ===== ===== ======
(a) All share and per share inormation has been retroactively restated to reflect the two-for-one split of the Common Stock in October 1995. See Note 8 of Notes to Consolidated Financial Statements. (b) Earnings (loss) per common share was calculated using the underlying data in thousands. (c) Assumes conversion, at the beginning of fiscal 1996, of the 60,000 shares of outstanding Convertible Preferred Stock and assumes conversion of the remaining Convertible Preferred Stock (those shares which were converted in March 1995) for the period from the beginning of fiscal 1996 to the actual conversion date. (d) Preferred dividends are exclusive of the conversion premium and expenses of the conversion offer. (e) Computation of fully diluted earnings per share is not shown since the effect of certain potentially dilutive securities would be antidilutive. EX-21 15 SUBSIDIARIES OF REGISTRANT 1 EXHIBIT 21 DELL COMPUTER CORPORATION List of Subsidiaries
Jurisdiction of Name Organization - ---- ------------ Computer Direct Sdn. Maylaysia Dell Catalog Sales Corporation Delaware Dell Catalog Sales L.P. Texas Dell Computadores do Brasil LTDA. Brazil Dell Computer (Pty) Ltd South Africa Dell Computer AB Sweden Dell Computer AS Denmark Dell Computer Asia LTD. Hong Kong Dell Computer Asia Pte. Ltd. Singapore Dell Computer BV Netherlands Dell Computer BV Norway Dell Computer Corporation Canada Dell Computer Corporation Japan Dell Computer Corporation South Korea Dell Computer Corporation Limited United Kingdom Dell Computer Corporation Ltd. Thailand Dell Computer de Mexico, S.A. de C.V. Mexico Dell Computer Ges.m.b.H. Germany Dell Computer GmbH Austria Dell Computer Holdings (Europe) B.V. Netherlands Dell Computer Holdings Corp. Delaware Dell Computer Holdings L.P. Texas Dell Computer Limited New Zealand Dell Computer NV Belgium Dell Computer OY Finland Dell Computer Poland, Sp. Z.O.O. Poland Dell Computer PTY. LTD. Australia Dell Computer S.A. France Dell Computer SA Switzerland Dell Computer Spain, S.A. Spain Dell Computer sro Czech Republic Dell Computer, Limited Ireland Dell Direct Ireland Dell Direct Sales Corporation Delaware Dell Direct Sales L.P. Texas Dell Eastern Europe Corporation Delaware Dell Export Sales Corporation Barbados
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Jurisidiction of Name Organization - ---- ---------------- Dell Funding Corporation Delaware Dell Gen. P. Corp Delaware Dell International Incorporated Delaware Dell Marketing Corporation Delaware Dell Marketing L.P. Texas Dell Products (Asia) BV Netherlands Dell Products (Europe) B.V. Netherlands Dell Products Ireland Dell Products Corporation Delaware Dell Products L.P. Texas Dell Quebec Inc. Quebec Dell Receivables Gen. P. Corp Delaware Dell Receivables L.P. Texas Dell Research Ireland Dell Trade Receivables 1993 Corporation Delaware Dell USA Corporation Delaware Dell USA L.P. Texas Dell World Trade L.P. Texas DellWare Direct L.P. Texas
EX-23 16 CONSENT OF PRICE WATERHOUSE 1 EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 33-24621, 33-54577, 33-31812 and 33-63273) of Dell Computer Corporation of our report dated February 19, 1996 appearing on page 25 of this Form 10-K. PRICE WATERHOUSE LLP Austin, Texas March 25, 1996 EX-27 17 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM DELL COMPUTER CORPORATION FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED JANUARY 28, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000,000 12-MOS JAN-28-1996 JAN-28-1996 55 591 755 29 429 1,957 292 113 2,148 939 113 0 6 430 537 2,148 5,296 5,296 4,229 4,229 95 13 15 383 111 272 0 0 0 272 2.67 2.65
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