DELL » Topics » Certain Relationships and Related Transactions

This excerpt taken from the DELL DEF 14A filed Jun 1, 2009.

Certain Relationships and Related Transactions

We purchase services, supplies, and equipment in the normal course of business from many suppliers and sell or lease products and services to many customers. In some instances, these transactions occur with companies with which members of our Board have relationships as directors or executive officers. For Fiscal 2009, none of these transactions was material, either individually or collectively.

Aircraft Reimbursement

Prior to July 2008, certain of our executive officers owned private aircraft, either outright or through fractional share ownership arrangements. Under our executive travel policy, which was approved by the Leadership Development and Compensation Committee of the Board, Dell reimbursed certain executive officers for the cost of using their private aircraft while traveling on Dell business. The reimbursement covered variable costs, plus a pro rata portion of the management fees, attributable to the executive’s Dell business travel, but did not cover any depreciation or other reimbursement for capital costs or purchase price. Mr. Dell continues to own his own private aircraft and the company will continue to reimburse him for the covered variable costs, plus a pro rata portion of the management fees attributable to his business travel. As of, July 2008, all other executive officers authorized for use of private aircraft for business travel must use the Dell contracted aircraft service. During Fiscal 2009, we reimbursed the following executive officers (or wholly-owned entities through which they own their aircraft) the following amounts:

 

Named Executive Officer

   Reimbursement Amount

Mr. Dell

   $   4,078,574

Mr. Clarke

     55,620

Acquisition of MessageOne Inc.

On April 22, 2008, Dell acquired MessageOne Inc. pursuant to an Agreement and Plan of Merger, dated February 11, 2008, for approximately $164 million in cash plus an additional $10 million to be used for management retention. MessageOne, which provided Software-as-a-Service enabled, enterprise-class email business continuity, compliance, archiving and disaster recovery services, was co-founded by Adam Dell, the brother of Michael Dell, the company’s Chairman and Chief Executive Officer and the beneficial owner of approximately 11% of the outstanding Dell common stock. Adam Dell served as MessageOne’s non-executive chairman of the board, but was not a member of MessageOne management.

Related Party Interests — The following information about the relationships between Dell family members and MessageOne was provided to Dell by MessageOne and representatives of the Dell family.

Adam Dell is the sole owner and member of Impact Venture Advisors, LLC, which is the sole general partner of Impact Venture Partners, L.P. and Impact Entrepreneurs Fund, L.P. Michael Dell, Susan Dell and a trust for the Dell’s minor children collectively own a 25% limited partner interest in Impact Venture Partners and a 43% limited partner interest in Impact Entrepreneurs Fund. Alexander and Lorraine Dell, Mr. Dell’s parents, own a 14% limited partner interest in Impact Entrepreneurs Fund. These investments in Impact Venture Partners and Impact Entrepreneurs Fund were made in December 1999, and January 2000, respectively.

 

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Both Impact Venture Partners and Impact Entrepreneurs Fund were investors in MessageOne and held shares of capital stock in MessageOne (and options or warrants to acquire shares of capital stock) that represented 22.31% and 1.73%, respectively, of MessageOne’s total capital stock outstanding on a fully diluted and as-converted basis.

As a result of their investments in MessageOne, Impact Venture Partners and Impact Entrepreneurs Fund received approximately $40.56 million and $2.93 million, respectively, of acquisition consideration. Of that consideration, the following amounts were distributed to Dell family members:

 

   

Impact Venture Advisors (wholly owned by Adam Dell) received approximately $966,000 ($904,000 attributable to its interest in Impact Venture Partners and $62,000 attributable to its interest in Impact Entrepreneurs Fund).

   

Michael Dell, Susan Dell and their children’s trust received collectively approximately $9.79 million (approximately $9.04 million attributable to their interest in Impact Venture Partners and approximately $750,000 attributable to their interest in Impact Entrepreneurs Fund).

   

Mr. Dell’s parents received approximately $450,000 (all attributable to their interest in Impact Entrepreneurs Fund).

Michael and Susan Dell have donated the proceeds which they and their children’s trust received from the acquisition to charity.

Board Governance Processes — The acquisition of MessageOne was identified and acknowledged by our Board from the outset as a potential related party transaction. Consequently, our Board directed that management implement a series of measures designed to ensure that the transaction was considered, analyzed, negotiated and approved objectively and independent of any control or influence from the related parties. Those measures included the following:

 

   

Michael Dell was excluded from the negotiations and all aspects of the decision-making process.

   

The independent members of our Board (i.e., the members of our Board other than Michael Dell and Don Carty) explored and analyzed in detail the process by which management identified, proposed, analyzed and negotiated the acquisition to ensure that management was acting independently and in the best interests of Dell Inc. and its stockholders. In addition, in accordance with their respective charters, the Finance Committee of the Board (made up entirely of independent directors) reviewed and analyzed all aspects of the transaction and recommended that the transaction be approved by the full Board and the Audit Committee (also made up entirely of independent directors), the committee charged with approval at the time, reviewed and analyzed the related-party aspects of the transaction and recommended that the transaction be approved by the full Board

   

Our Board sought, received and relied upon an opinion from Morgan Stanley & Co. Incorporated to the effect that, as of February 11, 2008, and based upon and subject to the matters stated in its opinion, the consideration to be paid by Dell pursuant to the merger agreement was fair, from a financial point of view, to Dell Inc.

With those measures and after consideration and discussion of the relationships and the interests of Michael Dell and members of the Dell family, our independent directors concluded that the transaction was fair to, and in the best interests of, Dell Inc. and its stockholders and, on that basis, approved the transaction.

Review and Approval of Transactions with Related Persons

The Governance and Nominating Committee of the Board, pursuant to its written charter, is charged with the responsibility of reviewing and approving or ratifying any transaction required to be disclosed as a “related party” transaction under applicable law, rules, or regulations, including the rules and regulations of the Securities and Exchange Commission. The Governance and Nominating Committee has not adopted any specific procedures for conducting such reviews and considers each transaction in light of the specific facts and circumstances presented. The Governance and Nominating Committee reviewed each of the transactions described above.

 

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This excerpt taken from the DELL DEF 14A filed Jun 2, 2008.
Certain Relationships and Related Transactions
 
We purchase services, supplies, and equipment in the normal course of business from many suppliers and sell or lease products and services to many customers. In some instances, these transactions occur with companies with which members of our Board of Directors have relationships as directors or executive officers. For Fiscal 2008, none of these transactions was material, either individually or collectively.
 
Aircraft Reimbursement
 
Certain of our executive officers own private aircraft, either outright or through fractional share ownership arrangements. Under our executive travel policy, which has been approved by the Leadership Development and Compensation Committee of the Board of Directors, we reimburse certain executive officers for the cost of using their private aircraft while traveling on Dell business. Our reimbursement covers variable costs, plus a pro rata portion of the management fees, attributable to the executive’s Dell business travel, but does not cover any depreciation or other reimbursement for capital costs or purchase price. During Fiscal 2008, we reimbursed the following executive officers (or wholly-owned entities through which they own their aircraft) the following amounts:
 
         
Named Executive Officer
  Reimbursement Amount
 
Mr. Dell
  $  2,853,444  
Mr. Carty
    44,033  
Mr. Cannon
    74,640  
Mr. Garriques
    8,660  
 
Acquisition of MessageOne Inc.
 
On April 22, 2008, we acquired MessageOne Inc. pursuant to an Agreement and Plan of Merger, dated February 11, 2008, for approximately $155 million in cash plus an additional $10 million to be used for management retention. MessageOne, which provides Software-as-a-Service enabled, enterprise-class email business continuity, compliance, archiving and disaster recovery services, was co-founded by Adam Dell, the brother of Michael Dell, our Chairman and Chief Executive Officer and the beneficial owner of approximately 10% of the outstanding Dell common stock. Adam Dell served as MessageOne’s non-executive chairman of the board, but was not a member of MessageOne management.


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The acquisition of MessageOne was identified and acknowledged by our Board of Directors as a related party transaction because Michael Dell and his family hold indirect ownership interests in MessageOne. Consequently, our Board directed management to implement a series of measures designed to ensure that the transaction was considered, analyzed, negotiated and approved objectively and independent of any control or influence from the related parties.
 
Related Party Interests — The following information about the relationships between Dell family members and MessageOne was provided to us by MessageOne and representatives of the Dell family.
 
Adam Dell is the sole owner and member of Impact Venture Advisors, LLC, which is the sole general partner of Impact Venture Partners, L.P. and Impact Entrepreneurs Fund, L.P. Michael Dell, Susan Dell and a trust for the Dell’s minor children collectively own a 25% limited partner interest in Impact Venture Partners and a 43% limited partner interest in Impact Entrepreneurs Fund. Alexander and Lorraine Dell, Mr. Dell’s parents, own a 14% limited partner interest in Impact Entrepreneurs Fund. These investments in Impact Venture Partners and Impact Entrepreneurs Fund were made in December 1999 and January 2000, respectively.
 
Both Impact Venture Partners and Impact Entrepreneurs Fund were investors in MessageOne and held shares of capital stock in MessageOne (and options or warrants to acquire shares of capital stock) that represented 22.31% and 1.73%, respectively, of MessageOne’s total capital stock outstanding on a fully diluted and as-converted basis.
 
As a result of their investments in MessageOne, assuming that no indemnification payments are required under the acquisition agreement, Impact Venture Partners and Impact Entrepreneurs Fund will receive approximately $40.56 million and $2.93 million, respectively, of acquisition consideration. Of that consideration, the following amounts will be distributed to Dell family members:
 
  •     Impact Venture Advisors (wholly owned by Adam Dell) will receive approximately $966,000 ($904,000 attributable to its interest in Impact Venture Partners and $62,000 attributable to its interest in Impact Entrepreneurs Fund).
 
  •     Michael Dell, Susan Dell and their children’s will receive collectively approximately $9.79 million (approximately $9.04 million attributable to their interest in Impact Venture Partners and approximately $750,000 attributable to their interest in Impact Entrepreneurs Fund).
 
  •     Mr. Dell’s parents will receive approximately $450,000 (all attributable to their interest in Impact Entrepreneurs Fund).
 
Michael and Susan Dell indicated that the proceeds which they and their children’s trust received from the acquisition will be donated to charity.
 
Board Governance Processes — Our acquisition of MessageOne was identified and acknowledged by our Board of Directors from the outset as a potential related party transaction. Consequently, our Board directed that management implement a series of measures designed to ensure that the transaction was considered, analyzed, negotiated and approved objectively and independent of any control or influence from the related parties. Those measures included the following:
 
  •     Michael Dell was excluded from the negotiations and all aspects of the decision-making process.
 
  •     The independent members of our Board of Directors (i.e., the members of our Board other than Michael Dell and Don Carty) explored and analyzed in detail the process by which management identified, proposed, analyzed and negotiated the acquisition to ensure that management was acting independently and in the best interests of Dell Inc. and its stockholders. In addition, in accordance with their respective charters, the Finance Committee of the Board (made up entirely of independent directors) reviewed and analyzed all aspects of the transaction and recommended that the transaction be approved by the full Board and the


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  Audit Committee (also made up entirely of independent directors), the committee charged with approval at the time, reviewed and analyzed the related-party aspects of the transaction and recommended that the transaction be approved by the full Board.
 
  •     Our Board of Directors sought, received and relied upon an opinion from Morgan Stanley & Co. Incorporated to the effect that, as of February 11, 2008, and based upon and subject to the matters stated in its opinion, the consideration to be paid by Dell pursuant to the merger agreement was fair, from a financial point of view, to Dell Inc.
 
With those measures and after consideration and discussion of the relationships and the interests of Michael Dell and members of the Dell family, our independent directors concluded that the transaction was fair to, and in the best interests of, Dell Inc. and its stockholders and, on that basis, approved the transaction.
 
Review and Approval of Transactions with Related Persons
 
The Governance and Nominating Committee of the Board of Directors, pursuant to its written charter, is charged with the responsibility of reviewing and approving or ratifying any transaction required to be disclosed as a “related party” transaction under applicable law, rules, or regulations, including the rules and regulations of the Securities and Exchange Commission. The Governance and Nominating Committee has not adopted any specific procedures for conducting such reviews and considers each transaction in light of the specific facts and circumstances presented. The Governance and Nominating Committee reviewed each of the transactions described above.
 
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