SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 4)
America Online, Inc.
(Name of Issuer)
Common Stock, $.01 par value
(Title of Class of Securities)
00002364Jl
(CUSIP Number of Class of Securities)
Edward B. Stead
Vice President, General Counsel and Secretary
Apple Computer, Inc.
1 Infinite Loop
Cupertino, California 95014
408-996-1010
(Name, Address and Telephone Number of Person Authorized
to Receive Notice and Communications)
December 1, 1995
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Statement because of
Rule 13d-1(b)(3) or (4), check the following box: [ ]
Check the following box if a fee is being paid with this Statement: [ ]
(A fee is not required only if the reporting person: (1) has a previous
statement on filed reporting beneficial ownership of more than five
percent of a class of securities described in Item 1; and (2) has filed
no amendment subsequent thereto reporting beneficial ownership of less
than five percent of such class. See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits, should be
filed with the Commission. See Rule 13d-1(a) for other parties to whom
copies are to be sent.
1
<PAGE>
CUSIP No. 00002364Jl
1. Name of Reporting Persons
S.S. or I.R.S. Identification No. of Above Persons:
Apple Computer, Inc. 94-2404110
2. Check the Appropriate Box if a Member of a Group:
(a) [ ]
(b) [ ]
3. SEC Use Only:
4. Source of Funds:
OO
5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e)
[ ]
6. Citizenship or Place of Organization]:
California, USA
7. Sole Voting Power: 4,000,000
Number of Shares
Beneficially Owned 8. Shared Voting Power: 0
by Each Reporting
Person with 9. Sole Dispositive Power: 4,000,000
10. Shared Dispositive Power: 0
11. Aggregate Amount Beneficially Owned by Each Reporting Person:
4,000,000
12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares:
[ ]
13. Percent of Class Represented by Amount in Row 9.:
X.XX%
14. Type of Reporting Person:
CO
2
<PAGE>
The following items are amendments to the information included in
the Schedule 13D dated February 8, 1994, as amended (the "Prior Schedule
13D"), filed by Apple Computer, Inc. with respect to the Common Stock of
America Online, Inc. Certain capitalized terms used below and not
defined have the meanings given them in the Prior Schedule 13D.
Item 5. Interest in Securities of the Issuer.
As a result of a stock split by the Company with a record date of
[ ], Apple beneficially owns 4,000,000 Shares, representing
approximately X.XX% of the shares of outstanding Common Stock (based on
the X,XXX,XXX shares of Common Stock reported by the Company as
outstanding in its Form 10-Q dated XXXXXX XX, XXXX).
Apple has sole power to dispose or direct disposition of the Shares
and sole power to vote the Shares, except that the directors of Apple,
solely by reason of their positions as such, may be deemed to have
shared power to dispose of and to vote the Shares, and except that the
power to vote or dispose of the Shares may be acquired by Goldman Sachs
International under the terms of the Security Agreement described in
Item 6 below in the event of a default by Apple as defined thereunder.
Item 6. Contracts, Arrangements, Understanding or
Relationships With Respect to the Issuer.
On December 1, 1995 Apple pledged the Shares to Goldman Sachs
International to satisfy margin and security requirements under the Call
Option pursuant to a Security Agreement (the "Security Agreement")
between Apple and Goldman Sachs International. Apple retains beneficial
ownership of the Shares.
The description of the Security Agreement set forth in this Item 6
is qualified in its entirety by reference to Exhibit 7, which contains
the text of the Security Agreement.
Item 7. Material to be Filed as Exhibits.
Exhibit 7 -- Security Agreement dated as of [ ] between Apple
Computer, Inc. and Goldman Sachs International
3
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief,
I certify that the information set forth in this statement is true,
complete and correct.
APPLE COMPUTER, INC.
By:___/s/ Gary Wipfler___________
Name: Gary Wipfler
Title: Assistant Treasurer
Date: December 13, 1995
4
<PAGE>
SECURITY AGREEMENT
Security Agreement (the "Agreement") dated as of February 6, 1995
between Apple Computer, Inc., a corporation organized under the law of
California (the "Counterparty"), and Goldman Sachs International, a company
organized under the laws of England ("Goldman");
WITNESSETH:
WHEREAS, the Counterparty and Goldman have entered into an ISDA
Master Agreement dated as of the date hereof, including the Schedules
thereto (the "Swap Agreement"); and
WHEREAS, in consideration of the agreements contained in the Swap
Agreement and the Swap Transactions, each party hereto is willing to secure
the performance of its obligations thereunder pursuant to the terms of this
Agreement;
NOW, THEREFORE, the Counterparty and Goldman hereby agree as
follows:
1. Definitions.
(a) Unless otherwise defined in this Agreement, capitalized
terms used but not defined herein shall have the meanings specified in the
Swap Agreement, the Confirmation confirming the relevant Swap Transaction,
or the 1991 ISDA Definitions (the "Definitions"), as published by the
International Swap Dealers Association, Inc., as the case may be.
(b) The following terms have the meanings indicated when used
herein or in a Confirmation relating to a Swap Transaction, unless defined
otherwise in such Confirmation:
"Aggregate Collateral Requirement" on any day means, with respect
to the Pledgor, the Aggregate Market-Related Amount on such day;
"Aggregate Market-Related Amount" on any day means, with respect
to the Pledgor, the aggregate of the Market-Related Amounts applicable for
all Swap Transactions on such day;
"Business Day" means a day on which Goldman and commercial banks
and foreign exchange markets are open for business London, England, and on
which Counterparty and commercial banks and foreign exchange markets are
open for business in the State of California;
"Clearing Organization" means a Federal Reserve Bank or, if
agreed to by the parties hereto, such other clearing agency at which the
parties hereto or their respective agents maintain accounts;
5
<PAGE>
"Cash Collateral" means (i) the amount of cash if any Paid to the
Secured Party pursuant to Sections 2(c), 3, or 8(b) of this Agreement, plus
(ii) the amount of any cash Proceeds of any Collateral;
"Collateral" refers individually and collectively to all Cash
Collateral and Non Cash Collateral together with all Proceeds of,
substitutions for, and additions to, the foregoing. For purposes of this
Agreement, the value of all Collateral shall be determined pursuant to the
definition of "Value" herein;
"Deliver," "Delivery," or "Delivered" to a person means delivery
of Collateral to such person (the "Receiving Party"), (i) with respect to
any Collateral the ownership of which is recorded in book-entry form by a
Clearing Organization, by (A) delivery to the Receiving Party (or, if the
Receiving Party is an agent for safekeeping designated by the Pledgor or
the Secured Party, to the Pledgor or the Secured Party) of a listing of
such Collateral by title (and, if applicable, series and pool number),
original unpaid principal amount, and maturity date, (B) book-entry
transfer of such Collateral to an account with a Clearing Organization in
the name of a member bank designated by or on behalf of the Receiving Party
or in the name of another financial institution designated by or on behalf
of the Receiving Party that maintains an account with such Clearing
Organization, and (C) delivery to the Receiving Party of a written
notification from such member bank or other financial institution that it
holds such Collateral for the account of the Receiving Party, or (ii) with
respect to any other Collateral other than Cash Collateral and Letters of
Credit, by (A) delivery to the Receiving Party of such Collateral in
suitable form for delivery and transfer, accompanied by duly executed
instruments of transfer or assignments in blank or other documentation as
the Receiving Party (or, if the Receiving Party is an agent for safekeeping
designated by the Pledgor or the Secured Party, as the Pledgor or the
Secured Party) may reasonably request, or (B) delivery through another
clearing mechanism mutually acceptable to the Pledgor and the Secured
Party, in each case free and clear of all liens, mortgages, pledges,
charges, security interests, or other encumbrances, except the Security
Interest; any Delivery required to be made on a day on which the Federal
Reserve Bank, member bank, or other financial institution or clearing
mechanism through which such Delivery is to be effected is not open for
business shall instead be required to be made on the first following day
that such institution or mechanism is open for business; and any Delivery
required to be made to the Pledgor or the Secured Party shall, if the
Pledgor or the Secured Party so designates, be made instead to the agent
for safekeeping designated by the Pledgor or the Secured Party;
"Excess Collateral" has the meaning specified in Section 5 of
this Agreement;
"Government Obligations" means securities of a type mutually
satisfactory to the Secured Party and the Pledgor which are (i) direct
obligations of the United States of America, (ii) notes which are issued
and guaranteed by the Federal Home Loan Mortgage Corporation ("FHLMC"), the
Federal National Mortgage Association ("FNMA"), or the Government National
Mortgage Association ("GNMA"), and (iii) FHLMC, FNMA, or GNMA mortgage-
backed securities and REMICs, excluding Ios, Pos, and residual interests.
All Government Obligations are or shall be Collateral of a type customarily
sold on a recognized market within the meaning of UCC Section 9-504(3), and
an
6
<PAGE>
over-the-counter market shall constitute such a recognized market;
"Letter of Credit" means an irrevocable direct letter of credit,
in a form and on terms mutually acceptable to the Secured Party and the
Pledgor, issued in favor of the Secured Party pursuant to Sections 2(c), 3,
or 8(b) by a bank mutually acceptable to the Secured Party and the Pledgor;
"Market-Related Amount" on any day means, with respect to the
Pledgor and any Swap Transaction (including any Put and Call Option
Transaction pursuant to Schedule 2 of the Master Agreement) in respect of
which a Security Event has occurred, the Market Quotation (as defined in
the Swap Agreement) obtained by the Calculation Agent with respect to such
Swap Transaction on such date determined as though (i) a Termination Event
had occurred, (ii) the Swap Transaction was an Affected Transaction and a
Termination Transaction, (iii) the Counterparty was an Affected Party, (iv)
such day was an Early Termination Day and (v) the requirement for four
Reference Market-makers was met by having the Calculation Agent make a
quotation as if the Calculation Agent were the sole Reference Market-maker
with respect thereto, provided, however, that (X) if at any time while
Options are outstanding a Pledgor (or The Goldman Sachs Group, L.P. with
respect to GSI as Pledgor) has outstanding long-term, unsecured,
unsubordinated debt securities which are rated below Baa3 or BBB- by either
Moody's or S&P, respectively, the Market-related Amount with respect to a
Pledgor's short Option(s) will be the Option Margin Requirement, or (Y)
while Goldman is a Holder of Short Call Options under Schedule 2 to the
Swap Agreement, if Counterparty does not own the Warrant or if, having
exercised the Warrant, Counterparty does not Deliver the shares of AMER, in
an amount equal to the number of shares underlying the Short Call Options,
to the Calculation Agent (on behalf of Goldman) as Collateral to secure
performance of the Short Call Options, the Counterparty's Market-Related
Amount with respect to outstanding Short Call Options will be the
Counterparty's Option Margin Requirement, but if, as and when Counterparty
Delivers shares of AMER as Collateral, the Calculation Agent shall
disregard the Short Calls to the extent covered by such shares in
calculating the Market-Related Amounts of both parties.
[INFORMATION OMITTED -- CONFIDENTIAL TREATMENT REQUESTED]
"Non-Cash Collateral" means Government Obligations, Letters of
Credit, U.S. commercial paper rated at least A1 by Standard and Poor's
Corporation ("S&P") and P1 by Moody's Investors Service, Inc. ("Moody's"),
U.S. corporate and foreign sovereign debt rated at least A- (S&P) and A3
(Moody's), the Option Securities so long as Goldman is the Holder of a
Short Call Option under Schedule 2 of the Master Agreement and other non-
cash collateral mutually acceptable to the Secured Party and the Pledgor.
In lieu of returning to the Pledgor pursuant hereto particular "securities"
(as defined in the UCC) constituting Collateral, the Secured Party may
return "securities" that are "fungible" (as defined in the UCC) therewith;
"Option Margin Requirement" means with respect to a Party's short
Options outstanding at any time the greater of (X) the amount determined
using the Market Quotation method for determining a Party's Market-Related
Amount or (Y) an amount equal to 30% of the aggregate Market Price of the
Option Securities covering all such Party's outstanding short Options plus
the aggregate in-the-money amount of such short Options, less the aggregate
7
<PAGE>
out of-the-money amount of such short Options but in no case shall the
Option Margin Requirement be less than 10% of the aggregate Market Price of
the Option Securities covered by such Party's outstanding short Options.
"Pay," "Payment," or "Paid" to the Pledgor or the Secured Party
means payment in same day funds in the same manner provided for payments to
be made to it under the Swap Agreement;
"Pledgor" means the Counterparty or Goldman as the case may be,
it being expressly understood that each of the Counterparty and Goldman may
be a Pledgor hereunder;
[INFORMATION OMITTED -- CONFIDENTIAL TREATMENT REQUESTED]
"Potential Event of Default" means any condition or event which
with the giving of notice or lapse of time or both would, unless cured or
waived, become an Event of Default;
"Principal Market Maker" means a dealer in Government Obligations
or other securities Collateral of recognized national standing;
"Proceeds" has the meaning specified in Section 8(c) of this
Agreement;
"Repayment Amount" has the meaning specified in Section 5(b) of
this Agreement;
"Secured Party" means the Counterparty or Goldman as the case may
be, it being expressly understood that each of the Counterparty and Goldman
may be a Secured Party hereunder;
"Security Event" means that, with respect to a Swap Transaction,
the date of the Transaction specified in the Confirmation.
"Security Interest" has the meaning specified in Section 4 of
this Agreement;
"UCC" means the Uniform Commercial Code in force in the State of
New York; and
"Value" on any date means:
(i) with respect to any Government Obligations, the sum of
(A) (1) the last sale price on such date of such Government Obligations on
the principal national securities exchange on which such Government
Obligations are listed, or (2) where any Government Obligations are not
listed on a national securities exchange, the mean of the high bid and low
asked prices quoted on such date by any Principal Market Maker for such
Government Obligations selected by Goldman, or (3) if there is no sale or
if no quotations are available from a Principal Market Maker (in the case
of unlisted Government Obligations) for such date, the last such sale price
or the mean of such high bid and low asked prices, as the case may be, as
of the day immediately preceding such date on which such a sale took place
or such quotations were available, plus (B) the accrued interest on such
Government Obligations (except to the extent Paid to the Pledgor pursuant
to Section
8
<PAGE>
8(c) or included in the applicable price referred to in clause (A) above)
as of such date. The term "Value" as used herein refers to the Value of
individual Government Obligations or the aggregate Value of Government
Obligations, as the case may be, in the context in which such term is used;
(ii) with respect to any Cash Collateral, the amount of such
cash;
(iii) with respect to any Letter of Credit, the maximum
stated amount remaining available for payment to the beneficiary thereunder
on such date; and
(iv) with respect to all Non-Cash Collateral, other than
Government Obligations and Letters of Credit, the amount determined by
Goldman in a manner substantially similar to the determination of "Value"
in this Agreement; provided that each of (i) U.S. commercial paper and (ii)
U.S. corporate and foreign sovereign debt shall be valued at 98% and 90%,
respectively, of its "Value" as determined above; and
(v) with respect to Non-Cash Collateral consisting of
securities traded on an organized exchange or securities market, the Market
Price thereof, as such term is defined in Schedule 2 to the Swap Agreement
and as though such security were the Option Security.
2. Demand for Collateral.
(a) Notwithstanding anything herein to the contrary, the Pledgor
may only Pay or Deliver Collateral to the Secured Party or cause the
issuance of Letters of Credit in favor of the Secured Party with respect to
a Swap Transaction to the extent so provided herein or in the related
Confirmation. On any Business Day, the Calculation Agent shall, upon
written request from Counterparty, provide Counterparty with its
calculation of the Aggregate Collateral Requirement and the aggregate Value
of Collateral.
(b) Unless provided otherwise in the Confirmation confirming a
Swap Transaction, by written notice to the Pledgor, the Secured Party may
as of the first Business Day of each calendar week after a Security Event
has occurred with respect to a Swap Transaction when the Aggregate
Collateral Requirement exceeds an amount equal to or greater than the
Pledgor Threshold Amount, require the Pledgor to comply with the provisions
of Section 2(c) of this Agreement; provided, however, that if at any time
(X) a Pledgor (or The Goldman Sachs Group, L.P. with respect to Goldman as
Pledgor) has outstanding long-term, unsecured, unsubordinated debt
securities which are rated below Baa3 or BBB- by either Moody's or S&P,
respectively, or (b) after a Pledger has Delivered or Paid Collateral
pursuant to Section 2(c), the Aggregate Collateral Requirement exceeds by
US $1,000,000 or more the Value of Collateral held by the Secured Party (a
Subsequent Threshold Event") then the Secured Party can require the Pledgor
to comply with Section 2(c) on any Business Day after a Security Event has
occurred or of any Subsequent Threshold Event, as the case may be. Such
notice shall specify the Aggregate Collateral Requirement, shall provide
details of the manner in which the Aggregate Collateral Requirement was
determined, and shall (unless previously notified to the Pledgor) specify
any account or other information necessary for the issuance of, Delivery,
or Payment of Collateral.
9
<PAGE>
(c) Unless provided otherwise in the Confirmation confirming a
Swap Transaction, the Pledgor shall, within two Business Days of receipt of
such notice (if received by 11:00 a.m. New York time on a Business Day),
cause one or more Letters of Credit to be issued in favor of the Secured
Party or Pay or Deliver other Collateral to the Secured Party having an
aggregate Value of not less than an amount equal to (i) the Aggregate
Collateral Requirement on the date of and as specified in such notice,
minus (ii) the Pledgor Threshold Amount plus the aggregate Value of
Collateral, if any, then issued in favor of and/or held by or for the
Secured Party or any agent for safekeeping designated by the Secured Party;
provided, however, that the Pledgor shall not be required to cause one or
more Letters of Credit to be issued in favor of the Secured Party or Pay or
Deliver other Collateral to the Secured Party if (i) such amount to be
issued, Paid or Delivered is less than the Minimum Amount or (ii) an Event
of Default, Potential Event of Default, or Credit Event Upon Merger in
respect of the Secured Party has occurred and is continuing. The Secured
Party shall deliver a written acknowledgment of receipt showing the
Letter(s) of Credit issued to it or the other Collateral Paid or Delivered
to it.
(d) For purposes of Section 2(c), the Value of any Letter of
Credit or other Collateral shall be determined as of the Business Day
immediately preceding the relevant date for issuance or Payment and/or
Delivery.
(e) If Goldman is the Secured Party and holds Cash Collateral for
360 consecutive calendar days, Counterparty shall, prior to the close of
business on the 365th consecutive calendar day, Deliver to Goldman Non-Cash
Collateral in substitution for all Cash Collateral and Goldman will return
all Cash Collateral to Counterparty. The Value of Non-Cash Collateral will
be at least equal to the amount of Cash Collateral being returned to
Counterparty.
3. [Intentionally Omitted].
4. Grant of Security Interest.
The Pledgor hereby grants to the Secured Party a security
interest (the "Security Interest") in all Collateral Paid or Delivered to
the Secured Party and/or to any agent for safekeeping of the Secured Party
to secure all obligations of the Pledgor to the Secured Party under the
Swap Agreement and each Swap Transaction, including without limitation the
obligations of the Pledgor with respect to each Swap Transaction under
Sections 2 and 6 of the Swap Agreement and under this Agreement, including
without limitation the obligations of the Pledgor under Sections 12 and 13
hereof. Unless provided otherwise in the Confirmation confirming a Swap
Transaction and unless an Event of Default, Potential Event of Default or a
Credit Event Upon Merger, in each case, with respect to the Secured Party
has occurred and is continuing, the rights of the Secured Party with
respect to any Collateral so Paid or Delivered shall include, without
limitation to any other rights provided for in this Agreement, the right on
any terms to sell pursuant to a repurchase transaction, pledge, repledge,
hypothecate, or further assign such Collateral; provided, however, that no
such transaction shall relieve the Secured Party of its obligations to
return such Collateral or Proceeds therefrom pursuant to Sections 5, 8(c),
and 9 of this Agreement. Except when a Potential Event of Default or an
Event of Default with respect to the
10
<PAGE>
Pledgor shall have occurred and be continuing, the Secured Party shall not
cause any Government Obligations constituting Collateral to be registered
in the name of the Secured Party or any other person except with respect to
such securities maintained in book-entry form the pledge of which require
such registration.
5. Return of Excess Collateral.
(a) If on any date the aggregate Value of the Collateral then
issued in favor of and/or held by or for the Secured Party and any agent
for safekeeping of the Secured Party exceeds the Aggregate Collateral
Requirement less the Pledgor Threshold Amount on such date (such excess
Value being hereinafter referred to as the "Excess Collateral"), the
Pledgor may give written notice thereof to the Secured Party. Such notice
shall certify the Value of the Excess Collateral, all determined as of the
Business Day immediately preceding the date of such notice and shall
provide details of the manner in which the Excess Collateral was
determined.
(b) If any Excess Collateral exists, the Secured Party shall,
within two Business Days of receipt of such notice, as directed by the
Pledgor (i) to the extent it has been furnished with the necessary
documents and instructions, cooperate fully with the Pledgor in causing the
Value of one or more Letters of Credit issued in favor of the Secured Party
to be reduced, (ii) Pay or procure the Payment to the Pledgor of Cash
Collateral, and/or (iii) Deliver or procure the Delivery to the Pledgor of
Non-Cash Collateral, in any and all such cases only to the extent that the
sum of such reduction, Payment, and/or Delivery does not exceed the amount
of Excess Collateral (the "Repayment Amount"); provided, however, that,
notwithstanding the foregoing, the Secured Party shall not be required to
cooperate in reducing the Value of Letters of Credit or to Pay or Deliver
or procure the Payment or Delivery of any other Collateral to the Pledgor
pursuant to this Section 5 if (i) the amount to be returned is less than
the Minimum Amount or (ii) a Potential Event of Default or an Event of
Default with respect to the Pledgor shall have occurred and be continuing.
For purposes of this Section 5(b), the Value of any Collateral and the
Aggregate Collateral Requirement shall be determined as of the relevant
date of reduction, Payment, and/or Delivery.
(c) Payment or Delivery by or on behalf of the Secured Party to
the Pledgor of any Collateral in accordance with this Section 5 shall be
deemed a release by the Secured Party of its Security Interest in such
Collateral granted pursuant to this Agreement.
6. Representations and Warranties.
The Pledgor represents and warrants to the Secured Party that on
each occasion that the Pledgor Pays or Delivers Collateral to the Secured
Party or to any agent for safekeeping of the Secured Party that: (a) the
Secured Party either will be deemed to own or will have a valid, perfected
and enforceable security interest in, and lien on, any Collateral Paid or
Delivered to the Secured Party or to any agent for safekeeping of the
Secured Party; (b) the Pledgor is the sole owner of the Collateral (or, in
the case of after acquired Collateral, at the time the Pledgor acquires
rights in the Collateral, will be the sole owner thereof); and (c) except
for interests in favor of the Secured Party created hereunder, no person
has (or, in the case
11
<PAGE>
of after-acquired Collateral, at the time the Pledgor acquires rights
therein, will have) any right, title, claim or interest (by way of lien,
mortgage, pledge, charge, security interest or other encumbrance, or
otherwise) in, against, or to the Collateral. The Pledgor further
represents and warrants to the Secured Party that: (a) on each occasion
that the Pledgor causes the issuance of a Letter or Letters of Credit to
the Secured Party, such Letter or Letters of Credit will be the valid and
legally binding obligation of the issuer thereof, enforceable in accordance
with its terms; and (b) the representations set forth in Section 3 of the
Swap Agreement are accurate and complete as of the date hereof and shall
continue to be accurate and complete during the term of this Agreement.
7. Covenants of the Pledgor.
So long as this Agreement is in effect, the Pledgor covenants
that it: (a) shall defend the Collateral against the claims and demands of
all other parties except the interests of the Secured Party created
hereunder, shall not create any security interests or other encumbrances in
such Collateral except the interests in favor of the Secured Party created
hereunder, and shall not sell, transfer, assign, deliver, or otherwise
dispose of any such Collateral or any interest therein without the prior
written consent of the Secured Party; (b) shall notify the Secured Party
promptly in writing of any change in the Pledgor's address specified in the
Schedule to the Swap Agreement; (c) shall execute and deliver to the
Secured Party such financing statements, assignments, and other documents
and do such other things relating to the Collateral and the Security
Interest as the Secured Party may reasonably request, and pay all
reasonable costs of title searches and filing financing statements,
assignments, and other documents in all public offices reasonably requested
by the Secured Party; and (d) shall pay all taxes, assessments, and other
charges of every nature which may be imposed, levied, or assessed against
or with respect to the Collateral (other than taxes imposed on the net
income of the Secured Party).
8. Administration of Collateral.
The Collateral shall be administered in accordance with the
following provisions:
(a) Investment of Cash Collateral. The Secured Party shall
invest and reinvest or procure the investment and reinvestment of any Cash
Collateral as mutually agreed upon by the Secured Party and the Pledgor.
(b) Substitution of Collateral. Except when a Potential Event of
Default or an Event of Default with respect to the Pledgor shall have
occurred and be continuing, the Pledgor may substitute for any Collateral,
Cash Collateral or Non-Cash Collateral of equal or greater Value (as
mutually agreed upon by the Pledgor and the Secured Party) upon one
Business Days' notice to the Secured Party.
In connection with each substitution of Collateral hereunder, the
Pledgor shall, upon request of the Secured Party, execute a receipt showing
the Collateral surrendered, Paid, or Delivered to it.
Each substitution of Collateral shall constitute a reaffirmation
12
<PAGE>
by the Pledgor that the substituted Collateral shall be subject to, and
governed by, the terms of this Agreement.
(c) Proceeds of Collateral. All Collateral and all principal,
interest, and other payments and distributions of cash or other property
with respect thereto, and all rights, privileges and other securities of
every kind distributed with respect thereto or in exchange therefor
("Proceeds") shall be and remain the property of the Pledgor. The Secured
Party shall Pay to the Pledgor on the date payable to the Secured Party (or
shall procure the Payment of) any cash Proceeds attributable to payments of
principal or interest on Collateral consisting of Cash or Government
Obligations to the extent the aggregate Value of Collateral then issued in
favor of and/or held by or for the Secured Party or any agent for
safekeeping designated by the Secured Party (including such cash Proceeds)
exceeds the Aggregate Collateral Requirement less the Pledgor Threshold
Amount on the Business Day immediately preceding the date of such Payment;
provided, however, that the Secured Party shall not be required to Pay or
procure the Payment of any such cash Proceeds to the Pledgor if a Potential
Event of Default or an Event of Default with respect to the Pledgor shall
have occurred and be continuing. With respect to Collateral consisting of
Government Obligations the ownership of which is registered to the Pledgor
or any person designated by or on behalf of the Pledgor, the Secured Party
shall be deemed to have caused the Payment to the Pledgor of all cash
Proceeds from such Collateral not retained by or on account of the Secured
Party. All cash Proceeds not so Paid and all other Proceeds shall become
additional Collateral subject to the Security Interest and lien created by
this Agreement in favor of the Secured Party. Upon request of the Pledgor,
the Secured Party shall advise the Pledgor of the Value of any Proceeds
then held by the Secured Party.
(d) Segregated Accounts. The Secured Party shall, and shall
cause any agent for safekeeping designated by the Secured Party to, open
and/or maintain one or more safekeeping or segregated accounts (the
"Segregated Accounts"). The Secured Party and any such agent shall hold,
record, and/or identify in the Segregated Accounts all Collateral (other
than Letters of Credit) provided by the Pledgor, and, except as provided
otherwise herein, such Collateral shall at all times be and remain the
property of the Pledgor and segregated from the property of the Secured
Party and any such agent and shall at no time constitute the property of,
or be commingled with the property of, the Secured Party or any such agent.
9. Return of Collateral Following Early Termination.
Promptly following the later of (a) the earlier of the last
Termination Date of all Swap Transactions and the Early Termination Date if
any in respect of all Swap Transactions and the Swap Agreement and (b) the
date upon which the Pledgor has paid all amounts if any due from it under
the Swap Agreement and all Swap Transactions, the Secured Party (i) shall
surrender to the Pledgor each Letter of Credit issued in its favor and then
in effect together with any documents furnished to it as may be necessary
to extinguish its rights thereunder, unless the Secured Party has the right
to draw under such Letter of Credit pursuant to Section 10 of this
Agreement, (ii) shall Pay or Deliver or procure the Payment or Delivery to
the Pledgor of all the other Collateral then held by or for the Secured
Party and any agent for safekeeping of the Secured Party (except for such
of the Collateral as may be required to satisfy the rights of the Secured
Party against such
13
<PAGE>
Collateral arising pursuant to Section 10 of this Agreement)and (iii) shall
execute such documents and take such actions as Pledgor may reasonable
request to effect the transfer of Collateral and release of the Security
Interest therein. In connection with each such surrender, Payment, or
Delivery, the Pledgor, upon request of the Secured Party, shall execute a
receipt showing the Collateral surrendered, Paid, or Delivered to it.
10. Exercise of Rights Against Collateral.
On or after an Early Termination Date resulting from an Event of
Default or a Credit Event upon Merger with respect to Pledgor, the Secured
Party: (i) may exercise, (A) as to any Letter of Credit, the right to draw
an amount under such Letter of Credit up to the sum of such unpaid amounts
and to apply the amount so drawn to the payment of such unpaid amounts, and
(B) as to all other Collateral then held by or for the Secured Party and
any agent for safekeeping of the Secured Party and as to all other
obligations of the Pledgor to the Secured Party under the Swap Agreement
and all Swap Transactions, the rights and remedies of a secured party under
the UCC and as otherwise provided by law; and (ii) to the extent permitted
by applicable law, may at its sole option with prior written notice to or
demand upon the Pledgor exercise either or both of the following remedies
(i) liquidate all or any part of the Collateral in a commercially
reasonable manner with the proceeds of such liquidation constituting
additional Collateral hereunder, or
(ii) set-off the Value of such Collateral against amounts due to
the Secured Party and not yet paid under the Swap Agreement and any Swap
Transaction and against amounts paid thereunder but recovered by or on
behalf of the Pledgor.
11. No Counterclaim.
The Secured Party's rights against the Collateral as provided
hereunder shall be absolute and subject to no counterclaim, set-off,
deduction, or defense in favor of the Pledgor except as contemplated in
Sections 2 and 6 of the Swap Agreement.
12. Costs of Transfer.
The Pledgor shall be responsible for all costs involved in
obtaining and maintaining in effect any Letter of Credit. The Pledgor
shall be responsible for, and shall reimburse the Secured Party for, all
transfer taxes and other costs involved in the transfer of other Collateral
from the Pledgor to the Secured Party or any agent for safekeeping of the
Secured Party. If the Secured Party shall incur any loss by reason of the
Pledgor's failure to pay all such taxes and costs, the Secured Party shall
have the right to apply and liquidate Collateral having a Value sufficient
to satisfy its claim against the Pledgor for such taxes and costs. Each
party shall be responsible for all costs of an agent for safekeeping
designated by it.
13. Expenses.
The Pledgor agrees to pay the Secured Party, and agrees that the
Secured Party may apply the proceeds of any drawing under any Letter of
14
<PAGE>
Credit, the proceeds of any liquidation of any Collateral, and/or set-off
the Value of any Collateral against, the reasonable costs and expenses
(including without limitation attorneys' fees and disbursements) incurred
by the Secured Party in making any drawing under any Letter of Credit, in
collecting or liquidating any other Collateral, or in otherwise enforcing
any of the Secured Party's rights hereunder; provided, however, that the
Pledgor's obligations under this Section 13 shall not extend to the costs
and expenses of the Secured Party incurred in the ordinary administration
of the provisions of this Agreement.
14. Cumulative Rights.
The rights, powers, and remedies of the Secured Party under this
Agreement shall be in addition to all rights, powers, and remedies given to
the Secured Party under the Swap Agreement or by virtue of any statute or
rule of law, all of which rights, powers, and remedies shall be cumulative
and may be exercised successively or concurrently without impairing the
Secured Party's rights under any Letter of Credit or the Security Interest
of the Secured Party in the other Collateral.
15. Credit Support Default under Swap Agreement.
With respect to an Event of Default described under Section
5(a)(iii) of the Swap Agreement and a failure by the Pledgor to provide
Collateral to the Secured Party or a failure by the Secured Party to return
Collateral to the Pledger in accordance with this Agreement, the grace
period relating to such failure shall be five Business Days after receipt
by the Pledgor of written notice from the Secured Party of such failure.
16. Miscellaneous.
(a) Amendments, Etc. Any amendment, modification, or waiver of
any provision of this Agreement shall be in writing and signed by both
parties hereto, and any such waiver shall be effective only for the
specific purpose for which given and for the specific time period if any
contemplated therein.
(b) Notices. All notices and other communications required or
permitted under this Agreement shall be delivered in the manner and shall
become effective at the times set forth in the Swap Agreement.
(c) Waivers. No failure or delay by either party hereto in
exercising any right, power, or privilege hereunder shall operate as a
waiver thereof.
(d) Transfer. Any transfer or delegation by either party to
this Agreement of its rights, obligations, or interests hereunder shall be
effected, if at all, to the extent permitted, and in accordance with the
procedures specified in, the transfer provisions of the Swap Agreement.
(e) Jurisdiction. With respect to any suit, action, claim, or
proceedings relating to this Agreement ("Proceedings"), each party
irrevocably:
(i) submits to the non-exclusive jurisdiction of the courts of the State
of
15
<PAGE>
New York and the United States District Court located in the Borough of
Manhattan in New York City; and
(ii) waives any objection which it may have at any time to the laying of
venue of any Proceedings brought in any such court, waives any claim that
such Proceedings have been brought in an inconvenient forum, and further
waives the right to object, with respect to such Proceedings, that such
court does not have jurisdiction over such party.
(f) Governing Law. This Agreement shall be governed by,
construed and enforced in accordance with, the law of the State of New
York, without reference to choice of law doctrine.
(g) Headings. The headings of this Agreement are for
convenience of reference only and shall not affect the meaning or
construction of any provision hereof.
(h) Entire Agreement. This Agreement together with the Swap
Agreement contain the entire agreement between the parties hereto relating
to the subject matter hereof and supersedes all oral statements and prior
writings with respect thereto; provided, however, that each Confirmation
confirming a Swap Transaction shall survive and be deemed a part hereof as
if set forth herein; and provided, further, that in the case of any
conflict between the provisions of this Agreement, the Definitions, and/or
any Confirmation confirming a Swap Transaction, the provisions of such
Confirmation shall control.
(i) Counterparts. This Agreement may be executed in any number
of counterparts, each of which when so executed and delivered shall be
deemed an original, but all such counterparts together shall constitute but
one and the same instrument.
(j) Partial Invalidity. In the event that any provision of this
Agreement is declared to be illegal, invalid, or otherwise unenforceable by
a court of competent jurisdiction or regulatory authority, the remainder of
this Agreement shall not be affected except to the extent necessary to
delete such illegal, invalid or unenforceable provision unless the deletion
of such provision would substantially impair the respective benefits of the
remaining portions of this Agreement.
(k) Client Money Regulations. For the avoidance of doubt,
Counterparty is advised that any Collateral Paid or Delivered to the
Secured Party or to any agent for the safekeeping of the Secured Party will
not be treated as a safe custody investment nor as client money within the
terms of the Client Money and Other Asset Rules of SFA or The Financial
Services (Client Money) Regulations 1991 and the Financial Services (Client
Money) (Supplementary) Regulations 1991. It is understood and agreed that
Cash, any instruments in which such Cash may be invested pursuant to
Section 8(a) hereof and any Non-Cash Collateral Delivered or Paid by
Counterparty as Pledger to Goldman as Secured Party shall be held in
Counterparty's account No. 950-021261 at Goldman.
(l) Arbitration.
(i) Arbitration is final and binding on Counterparty and
Goldman.
16
<PAGE>
(ii) Counterparty and Goldman are waiving their right to seek
remedies in court, including the right to a jury trial.
(iii) Pre-arbitration discovery is generally more limited than
and different from court proceedings.
(iv) The arbitrator's aware is not required to include factual
findings or legal reasoning and any party's right to appear or to seek
modification of rulings by the arbitrators is strictly limited.
(v) The panel of arbitrators will typically include a minority
of arbitrators who were or are affiliated with the securities industry.
Any controversy between or among Goldman or any of its partners
or employees, on the one hand, and Counterparty, on the other hand, arising
out of or relating to this Agreement or any Option entered into hereunder,
shall be settled by arbitration, in accordance with the ten current rules
of, at Counterparty's election, the Securities Arbitration Rules of the
American Arbitration Association or the Board of Arbitration of the
National Association of Securities Dealers, Inc., New York Stock Exchange.
If Counterparty does not make such election by registered mail addressed to
Goldman within ten (10) Business Days after receipt of notification from
Goldman requesting such election, then Counterparty irrevocably authorizes
Goldman to make such election on behalf of Counterparty. Notwithstanding
the foregoing, any arbitration hereunder shall be before at least three
arbitrators and the aware of the arbitrators, or a majority of them shall
be final, and judgment upon the aware rendered may be entered in any court,
state or Federal, having jurisdiction."
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed and delivered by their respective officers or
representatives thereunto duly authorized as of the date first above
written.
APPLE COMPUTER, INC.
By:___/s/ David A. Rogan___________
Name: David A. Rogan
Title: Assistant Treasurer
GOLDMAN SACHS INTERNATIONAL
By:___/s/ Gabrielle Petrie___________
Name: Gabrielle Petrie
Title: Associate Equity Derivatives
17
<PAGE>
