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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 29, 1996
REGISTRATION NO. 333-10961
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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APPLE COMPUTER, INC.
(Exact Name of Registrant as Specified in its Charter)
CALIFORNIA
(State or Other Jurisdiction of Incorporation or Organization)
94-2404110
(I.R.S. Employer Identification No.)
1 INFINITE LOOP
CUPERTINO, CALIFORNIA 95014
(408) 996-1010
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
SUSAN L. THORNER
DIRECTOR, CORPORATE LAW AND ASSISTANT SECRETARY
APPLE COMPUTER, INC.
1 INFINITE LOOP
CUPERTINO, CALIFORNIA 95014
(408) 996-1010
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
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COPY TO:
WILLIAM H. HINMAN, JR.
Shearman & Sterling
555 California Street
San Francisco, California 94104
(415) 616-1100
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
From time to time after this Registration Statement becomes effective.
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If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
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If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
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If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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PROSPECTUS
$568,575,000
APPLE COMPUTER, INC.
6% CONVERTIBLE SUBORDINATED NOTES DUE JUNE 1, 2001
This Prospectus relates to the 6% Convertible Subordinated Notes due June 1,
2001 (the "Notes") of Apple Computer, Inc. ("Apple" or the "Company") sold
otherwise than in reliance on Regulation S (the "Registrable Notes") under the
Securities Act of 1933, as amended (the "Securities Act"), and the shares of the
Company's common stock, no par value ("Common Stock"), issuable upon conversion
of the Registrable Notes. The Registrable Notes registered hereby were issued
and sold on June 7, 1996 (the "Original Offering") in transactions exempt from
the registration requirements of the Securities Act, to persons reasonably
believed by Goldman, Sachs & Co. and Morgan Stanley & Co. Incorporated, as the
initial purchasers (the "Initial Purchasers") of the Registrable Notes, to be
"qualified institutional buyers" (as defined by Rule 144A under the Securities
Act) or other institutional "accredited investors" (as defined in Rule
501(a)(1), (2), (3) or (7) under Regulation D of the Securities Act). An
additional $92,675,000 aggregate amount of Notes was issued by the Company in
the Original Offering and sold by the Initial Purchasers in compliance with the
provisions of Regulation S under the Securities Act. The Registrable Notes and
the Common Stock issuable upon conversion thereof may be offered and sold from
time to time by the holders named herein (collectively, the "Selling Holders")
pursuant to this Prospectus. The Registration Statement of which this Prospectus
is a part has been filed with the Securities and Exchange Commission pursuant to
a registration rights agreement dated as of June 7, 1996 (the "Registration
Agreement") between the Company and the Initial Purchasers, entered into in
connection with the Original Offering.
The Registrable Notes are convertible into shares of Common Stock at any
time prior to the close of business on the maturity date, unless previously
redeemed or repurchased, at a conversion price of $29.205 per share (equivalent
to a conversion rate of 34.2407 shares per $1,000 principal amount of
Registrable Notes), subject to adjustment in certain events. On October 28,
1996, the closing price of the Common Stock, which is quoted on the Nasdaq
National Market under the symbol "AAPL", was $24 1/2 per share.
Interest on the Registrable Notes is payable on June 1 and December 1 of
each year, commencing on December 1, 1996. Principal and interest payments will
be made without any deduction for U.S. withholding taxes, except to the extent
described under "Description of Registrable Notes -- Payment of Additional
Amounts". The Registrable Notes are redeemable (a) in the event of certain
developments involving U.S. withholding taxes or certification requirements (as
described under "Description of Registrable Notes -- Redemption -- Redemption
for Taxation Reasons"), at a redemption price of 100% of the principal amount of
the Registrable Notes to be redeemed, plus accrued interest to the redemption
date, and (b) at the option of the Company, on or after June 1, 1999, in whole
or in part, at the redemption prices set forth herein, plus accrued interest to
the redemption date. See "Description of Registrable Notes -- Redemption". The
Registrable Notes are not entitled to any sinking fund. The Registrable Notes
will mature on June 1, 2001. The Registrable Notes issued and sold in the
Original Offering in reliance on 144A have been designated for trading on the
PORTAL System of the National Association of Securities Dealers, Inc.
Registrable Notes sold pursuant to the Registration Statement of which this
Prospectus forms a part are not expected to remain eligible for trading on the
PORTAL System.
In the event of a Change in Control, subject to certain limitations, each
holder of Registrable Notes may require the Company to repurchase its
Registrable Notes, in whole or in part, for cash or, at the Company's option,
Common Stock (valued at 95% of the average closing prices for the five trading
days ending on and including the third trading day prior to the repurchase
date), at a repurchase price of 100% of the principal amount of Registrable
Notes to be repurchased, plus accrued interest to the repurchase date.
The Registrable Notes are unsecured obligations, subordinated in right of
payment to all existing and future Senior Indebtedness (as defined) of the
Company and are effectively subordinated in right of payment to all indebtedness
and other liabilities of the Company's subsidiaries. As of June 28, 1996, the
aggregate amount of outstanding Senior Indebtedness of the Company was
approximately $490 million. As of June 28, 1996, the aggregate amount of
indebtedness and other liabilities of the Company's subsidiaries was
approximately $1,030 million. The Indenture will not restrict the Company or its
subsidiaries from incurring additional Senior Indebtedness or other
indebtedness. See "Description of Registrable Notes -- Subordination".
The Registrable Notes and the Common Stock issuable upon conversion of the
Registrable Notes may be sold by the Selling Holders from time to time directly
to purchasers or through agents, underwriters or dealers. See "Selling
Stockholders" and "Plan of Distribution". If required, the names of any such
agents or underwriters involved in the sale of the Registrable Notes and the
Common Stock issuable upon conversion of the Registrable Notes in respect of
which this Prospectus is being delivered and the applicable agent's commission,
dealer's purchase price or underwriter's discount, if any, will be set forth in
an accompanying supplement to this prospectus (the "Prospectus Supplement").
The Selling Holders will receive all of the net proceeds from the sale of
the Registrable Notes and the Common Stock issuable upon conversion of the
Registrable Notes and will pay all underwriting discounts and selling
commissions, if any, applicable to the sale of the Registrable Notes and the
Common Stock issuable upon conversion of the Registrable Notes. The Company is
responsible for payment of all other expenses incident to the offer and sale of
the Registrable Notes and the Common Stock issuable upon conversion of the
Registrable Notes.
The Selling Holders and any broker-dealers, agents or underwriters which
participate in the distribution of the Registrable Notes and the Common Stock
issuable upon conversion of the Registrable Notes may be deemed to be
"underwriters" within the meaning of the Securities Act, and any commission
received by them and any profit on the resale of the Registrable Notes and
Common Stock issuable upon conversion of the Registrable Note purchased by them
may be deemed to be underwriting commissions or discounts under the Securities
Act. See "Plan of Distribution" for a description of indemnification
arrangements.
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY INVESTORS
IN EVALUATING AN INVESTMENT IN THE SECURITIES OFFERED HEREBY, SEE "RISK FACTORS"
ON PAGE 7.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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THE DATE OF THIS PROSPECTUS IS OCTOBER 29, 1996.
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AVAILABLE INFORMATION
Apple is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements, and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed with the Commission can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's
Regional Offices at Seven World Trade Center, 13th Floor, New York, New York
10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material also can be obtained from the Public
Reference Section of the Commission, 450 Fifth Street, Washington, D.C. 20549 at
prescribed rates. Such reports, proxy statements and other information can also
be inspected at the offices of the National Association of Securities Dealers,
Inc. at 1735 K Street, N.W., Washington, D.C. 20006. The Commision maintains a
World Wide Web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission. The address of the site is http://www.sec.gov.
The Company has filed with the Commission a registration statement on Form
S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act") with respect to the offering of the Securities made hereby.
This Prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. For further information with
respect to the Company and the Securities, reference is hereby made to the
Registration Statement.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents are incorporated by reference in this Prospectus:
1. Apple's Annual Report on Form 10-K for the fiscal year ended September
29, 1995.
2. Apple's Quarterly Report on Form 10-Q for the fiscal quarter ended
December 27, 1995.
3. Apple's Quarterly Report on Form 10-Q for the fiscal quarter ended March
29, 1996.
4. Apple's Current Report on Form 8-K filed on June 14, 1996.
5. Apple's Quarterly Report on Form 10-Q for the fiscal quarter ended June
28, 1996.
6. Apple's Current Report on Form 8-K filed on October 28, 1996.
7. The description of Apple's capital stock contained in Apple's
Registration Statement filed on Form 8-A, dated October 30, 1981 and the
description of the Common Share Purchase Rights contained in its
Registration Statement on Form 8-A, dated May 15, 1989.
All documents filed by Apple pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Exchange Act after the date of the filing of the Registration Statement
of which this Prospectus forms a part and prior to three years following the
date on which such Registration Statement is declared effective shall be deemed
to be incorporated by reference in this Prospectus and to be a part hereof from
the dates of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document that also
is or is deemed to be incorporated by reference herein modifies or supersedes
such statement. Any such statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
THIS PROSPECTUS INCORPORATES BY REFERENCE DOCUMENTS WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS (WITHOUT EXHIBITS, UNLESS SUCH
EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE) ARE AVAILABLE WITHOUT
CHARGE UPON REQUEST. REQUESTS FOR DOCUMENTS SHOULD BE DIRECTED TO APPLE
COMPUTER, INC., 1 INFINITE LOOP, CUPERTINO, CALIFORNIA 95014, ATTENTION:
DIRECTOR, INVESTOR RELATIONS, (TELEPHONE: (408) 996-1010).
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SUMMARY
THE FOLLOWING SUMMARY INFORMATION IS QUALIFIED IN ITS ENTIRETY BY THE
DETAILED INFORMATION AND FINANCIAL STATEMENTS (INCLUDING THE NOTES THERETO)
APPEARING ELSEWHERE IN THIS PROSPECTUS OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS. WHEN USED IN THIS PROSPECTUS, THE WORDS "BELIEVES" AND "ANTICIPATES"
AND SIMILAR EXPRESSIONS, INCLUDING, BUT NOT LIMITED TO, THE COMPANY'S STATEMENTS
REGARDING ITS OBJECTIVE TO RETURN ITS BUSINESS TO PROFITABILITY, ARE INTENDED TO
IDENTIFY FORWARD-LOOKING STATEMENTS. SUCH STATEMENTS ARE SUBJECT TO CERTAIN
RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY
FROM THOSE PROJECTED. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE
MATTERS DISCUSSED UNDER THE CAPTION "RISK FACTORS".
THE COMPANY
Apple Computer, Inc. ("Apple" or the "Company") has long been recognized as
a pioneer and innovator in the information technology industry, providing
easy-to-use, powerful, quality information products to people who want to
create, communicate and learn. The Company develops, manufactures, licenses and
markets products and technologies for the education, home, business and
government markets, in more than 140 countries.
In the second quarter of fiscal 1996, in light of declining demand for the
Company's products and disappointing operating results, the Company, led by a
new management team, announced a new strategic direction and began restructuring
its operations. The Company's plan has three key elements: (i) return the
Company to profitability by reducing costs and streamlining operations; (ii)
realign resources to more effectively focus on core market segments and
opportunities where the Company believes it has competitive advantages and (iii)
capitalize on emerging trends in the information technology industry.
The new management team's first priority has been to develop a broad
restructuring program designed to lower operating costs and return the Company
to profitability within approximately twelve months' time of its inception,
although there can be no assurance that the plan will be successful in this
regard. Among other steps, to date the Company has announced a headcount
reduction of approximately 1,500 (as adjusted) full-time employees, incurred a
write-down of inventories and associated charges in the second quarter to
reflect lower than anticipated demand for the Company's products, sold a
manufacturing facility to a third-party supplier, sold its domestic data center
operations to a third-party provider, and restructured its operations around
four hardware product divisions. In addition, the Company has announced that it
is taking steps to reduce its costs by significantly streamlining its product
offerings, standardizing hardware components, increasing outsourcing of
manufacturing operations, and divesting certain non-core assets.
In order to leverage Apple's key strengths, the management team intends to
focus the Company's resources on core market segments and opportunities. The
Company plans to emphasize Apple's key strengths, such as its global brand name,
the large installed base of Macintosh systems, the ease-of-use of its products,
its multimedia and connectivity capabilities, and the tight integration and
reliability of its hardware and software. Management believes that by shifting
its focus away from the commodity segment of the personal computer market and
towards more distinctive value-added products, the Company will be able to
maximize profitability and enhance its position within the computer industry.
The Company has initially targeted four core markets where it believes that its
products provide substantial added value: Learning, Publishing, Digital Media
Authoring and Scientific/Technical. The Company believes that these market
segments represent attractive growth opportunities and that users in these
segments place a premium value on the distinctive features of the Apple
platform.
In support of these initiatives, the Company is realigning its
organizational structure in an effort to increase accountability, improve
customer responsiveness, and strengthen the competitiveness of its products. For
example, the Company will continue to reorganize its business around a small
group of divisions and core hardware platforms. Hardware and software
development will be separated in an
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effort to achieve best-of-class competitiveness independently, while retaining a
high level of integration at the core level. The Company intends to
significantly reduce the number of SKUs in its product line and to increase the
use of standardized components. In addition, the Company intends to work more
closely with software developers and licensees in order to achieve the broadest
possible acceptance and penetration of the Macintosh platform.
The Company believes that, in the long term, emerging industry trends
towards pervasive multimedia and connectivity present new opportunities for
Apple to capitalize on its distinctive competitive advantages. The Company
believes that demand for highly functional, graphically-oriented, networked
computing products, together with the proliferation of multimedia technologies
such as desktop video, audio and high-end graphics, aligns well with the
Company's traditional strengths. As one of the world's leading providers of
servers on the World Wide Web and a leading supplier of tools for desktop
publishing and multimedia authoring, the Company is well-positioned to take
advantage of growth in these areas. Apple's Internet strategy is focused on
delivering seamless integration with and access to the Internet throughout its
product line and developing and supporting "open" standards for the Internet. In
addition, management believes that the platform-independent nature of the
Internet will, over time, provide an important benefit to the Company in its
efforts to compete with the Microsoft Windows platform.
Apple Computer, Inc. was incorporated under the laws of the State of
California on January 3, 1977. The Company's principal executive offices are
located at 1 Infinite Loop, Cupertino, California 95014 and its telephone number
is (408) 996-1010.
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THE OFFERING
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Securities Offered........... $568,575,000 aggregate principal amount of 6% Convertible
Subordinated Notes due June 1, 2001, issued under an
indenture (the "Indenture") between Apple and Marine
Midland Bank, as trustee ("Trustee") and Common Stock
issuable upon conversion thereof.
Interest Payment Dates....... June 1 and December 1 of each year, commencing on December
1, 1996.
Maturity..................... June 1, 2001.
Issuer....................... Apple Computer, Inc., a California corporation.
Conversion Price............. The Registrable Notes are convertible into Common Stock at
a conversion price of $29.205 per share (equivalent to a
conversion rate of 34.2407 shares per $1,000 principal
amount of Registrable Notes), subject to adjustment.
Conversion Rights............ The Registrable Notes are convertible into shares of
Common Stock of the Company at any time prior to the close
of business on the maturity date, unless previously
redeemed or repurchased, at the conversion price set forth
above, subject to adjustment. Holders of Registrable Notes
called for redemption will be entitled to convert the
Registrable Notes up to the close of business on the date
fixed for redemption. The right to convert a Registrable
Note delivered for repurchase will terminate on the close
of business on the repurchase date.
Subordination................ The Registrable Notes are subordinated in right of payment
to present and future Senior Indebtedness (as defined) of
the Company. The Registrable Notes are also effectively
subordinated to all indebtedness and other liabilities of
the Company's subsidiaries. As of June 28, 1996, the
aggregate amount of outstanding Senior Indebtedness was
approximately $490 million. As of June 28, 1996, the
aggregate amount of outstanding indebtedness and other
liabilities of the Company's subsidiaries was
approximately $1,030 million. The Indenture does not
restrict the incurrence of additional Senior Indebtedness
or other indebtedness by the Company or any of its
subsidiaries.
Optional Redemption.......... The Registrable Notes are redeemable at the option of the
Company, on or after June 1, 1999, in whole or in part, at
the redemption prices set forth herein, plus accrued
interest to the redemption date. In addition, certain
Registrable Notes may be subject to redemption as
described immediately below under "Additional Amounts and
Redemption for Taxation Reasons".
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Additional Amounts and The Company will pay Additional Amounts (as defined in
Redemption for Taxation "Description of Registrable Notes -- Payment of Additional
Reasons..................... Amounts"), subject to certain exceptions, in order that
the non-U.S. Holders of Registrable Notes receive the full
amount of the principal, premium, if any, and interest
specified therein (including any amount payable under a
repurchase of the Registrable Notes as described
immediately below under "Repurchase at Option of Holders
Upon Change in Control") without deduction for or on
account of U.S. withholding taxes. In the event that the
Company must pay such Additional Amounts as a result of a
change in law, the Tax Affected Notes (as defined) will be
redeemable at the option of the Company, as a whole but
not in part, at 100% of the principal amount thereof, plus
any accrued interest to the redemption date (but without
reduction for U.S. withholding taxes).
Repurchase at Option of Upon a Change in Control (as defined under "Description of
Holders Upon Change in Registrable Notes -- Repurchase at Option of Holders Upon
Control..................... a Change in Control") holders of the Registrable Notes
will have the right, subject to certain conditions and
restrictions, to require the Company to purchase all or
part of their Registrable Notes at 100% of the principal
amount thereof, plus accrued interest to the repurchase
date. Subject to certain limitations, the repurchase price
is payable in cash or, at the option of the Company, in
Common Stock (valued at 95% of the average last reported
sale prices of the Common Stock for the five trading days
ending on and including the third trading day prior to the
repurchase date).
Use of Proceeds.............. The Company will not receive any of the proceeds from the
sale of any of the Registrable Notes or the Common Stock
issuable upon conversion thereof.
Events of Default............ Events of Default include: (a) failure to pay principal of
or premium, if any, on any Note when due; (b) failure to
pay any interest on any Note when due, continuing for 30
days; (c) failure to perform any other covenant of the
Company in the Indenture, continuing for 60 days after
written notices as provided in the Indenture; (d) any
indebtedness for money borrowed by the Company in an
aggregate outstanding principal amount in excess of
$50,000,000 is not paid at final maturity or upon
acceleration thereof and such default in payment or
acceleration is not cured or rescinded within 30 days
after written notice as provided in the Indenture; and (e)
certain events of bankruptcy, insolvency or
reorganization.
Registration Rights.......... Upon any failure by the Company to comply with certain of
its obligations under the Registration Agreement (as
defined herein), additional interest will be payable on
the Registrable Notes.
</TABLE>
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RISK FACTORS
RECENT FINANCIAL RESULTS
The Company reported a net loss of $32 million, or $0.26 per share, for the
quarter ended June 28, 1996, and $841 million, or $6.81 per share, for the nine
months ended June 28, 1996. These results include second quarter charges
comprised of a $207 million restructuring charge and a $616 million charge
principally for the write-down of certain inventory, as well as for the cost to
cancel excess component orders. These charges were necessitated by lower than
expected demand for many of the Company's products, primarily its entry level
products, aggressive pricing policies within the personal computer industry, and
the Company's decision to alter its strategic direction in order to focus more
closely on key strategic markets, reduce costs, and increase its
competitiveness. Also, the Company separately incurred $77 million in charges in
the second and third quarters that reflect the estimated cost to correct certain
quality problems in certain entry level Performa and Powerbook products,
covering both goods held in inventory and shipped goods. Although the Company's
restructuring plan is designed to return the Company to sustainable
profitability within approximately twelve months' time of its inception, there
can be no assurance that the plan will be successful in this regard or that
similar charges will not be required in the future.
LIQUIDITY
The Company's financial position with respect to cash, cash equivalents, and
short-term investments, net of short-term borrowings, was $1,172 million at June
28, 1996, $240 million at March 29, 1996, and $491 million at September 29,
1995. The Company's financial position with respect to cash, cash equivalents,
and short-term investments was $1,359 million at June 28, 1996, $592 million at
March 29, 1996, and $952 million at September 29, 1995. The Company experienced
positive cash flow from operations of $289 million for the quarter ended June
28, 1996 and positive cash flow from operations of $112 million for nine months
ended June 28, 1996. Cash generated by operations was primarily the result of
decreases in accounts receivable and inventories, partially offset by a decrease
in accounts payable. Cash generated during the first nine months of fiscal 1996
from the sale of certain equity investments and the sale of a manufacturing
facility totaled $120 million. Cash generated by financing activities during the
first nine months of fiscal 1996 was $383 million, primarily as a result of the
receipt of the net proceeds from the Original Offering, partially offset by
repayments of short-term borrowings. The goals of the Company's restructuring
plan include returning the Company to profitability and improving cash flow from
operations. To the extent the plan is unsuccessful or takes longer to implement
than expected, the Company may need to seek additional sources of financing.
There can be no assurance that such financing will be available.
As of June 28, 1996, the Company had short-term borrowings of $187 million,
with maturity dates ranging from September 1996 to December 1996. The Company
intends to refinance, extend or pay down the outstanding borrowings. There can
be no assurance that the Company will succeed in refinancing or extending these
obligations on terms acceptable to the Company, if at all. If the Company is
unable to refinance or extend these short-term obligations, the Company's
liquidity and financial position may be adversely affected.
DECLINING SALES; LOSS OF MARKET SHARE; INDUSTRY TRENDS
Over the six months ended June 28, 1996, the Company experienced a
significant decline in both its unit shipments and its market share in the
overall personal computer industry. For the third fiscal quarter of 1996, the
number of the Company's Macintosh computers shipped worldwide declined by 16%
when compared with the corresponding quarter of 1995. Moreover, according to an
industry source, in the third fiscal quarter of 1996 as compared to the same
period in 1995, the Company's share of the worldwide and U.S. personal computer
markets declined to 5.3% from 7.4%, and to 7.4% from 10.6%, respectively. As
part of its new strategic direction, the Company intends, among other things, to
streamline its product line, which could result in a further decline in the
number of units shipped and in the Company's share of the overall personal
computer market.
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A consumer's decision to invest in a new computer product is often
influenced by the level of ongoing support he or she believes will be provided
by the manufacturer and third parties, including software developers. The
Company believes that extensive media coverage of the Company's financial losses
and speculation regarding the Company's financial position have raised concerns
with consumers and third-party resellers with respect to ongoing hardware and
software support for the Company's products. This in turn may have further
contributed to the decline in the Company's sales. Although the Company believes
that the actions it is taking under its restructuring plan, including the
Original Offering, should help restore confidence in the Company and the
Macintosh platform, there can be no assurance that such actions will succeed or
that further erosion in confidence will not take place.
In addition to its own declining sales, the Company believes that the rate
of growth in overall worldwide personal computer unit sales has declined and may
remain below prior years' growth rates for the foreseeable future. This decline
in the rate of growth could further increase the competitive nature of the
environment in which the Company operates and negatively affect the Company's
unit shipments and, accordingly, its results of operations and financial
condition.
RISKS ASSOCIATED WITH RESTRUCTURING AND NEW STRATEGIC DIRECTION
In the second quarter of fiscal 1996, the Company formulated a new strategic
direction and announced certain restructuring actions aimed at reducing its cost
structure, improving its competitiveness and restoring profitability. There are
several risks inherent in the Company's efforts to transition to a new cost
structure. These include the risk that the Company will not be able to reduce
expenditures quickly enough to restore profitability and the risk that
cost-cutting initiatives will impair its ability to innovate and remain
competitive in the computer industry.
As part of its restructuring effort, the Company has begun to implement a
new business model. Implementation of the new business model involves several
risks, including the risk that by simplifying its product line the Company will
increase its dependence on fewer products, potentially reduce overall sales and
increase its reliance on unproven products and technology. Another risk of the
new business model is that by increasing the proportion of the Company's
products to be produced under outsourcing arrangements, the Company could lose
control of the quality of the products manufactured and lose the flexibility to
make timely changes in production schedules in order to respond to changing
market conditions. In addition, the new business model could adversely affect
employee morale, thereby damaging the Company's ability to retain and motivate
employees. Also, because the new business model contemplates that the Company
will rely to a larger extent on collaboration and licensing arrangements with
third parties, the Company will have less direct control over its research and
development efforts and its ability to create innovative products may be
reduced. Finally, even if the new business model is successfully implemented,
there can be no assurance that it will effectively resolve the various issues
currently facing the Company. In addition, although the Company believes that
the actions it is taking under its restructuring plan should help restore
marketplace confidence in the Macintosh platform, there can be no assurance that
such actions will succeed.
For the foregoing reasons, there can be no assurance that the current
restructuring actions will achieve their goals or that similar actions will not
be required in the future. The Company's future operating results and financial
condition could be adversely affected should it encounter difficulty in
effectively managing the transition to the new business model and cost
structure. To the extent the restructuring is unsuccessful or takes longer to
implement than expected, the Company may need to seek additional sources of
financing. There can be no assurance that such financing will be available.
COMPETITION
The personal computer industry is highly competitive and is characterized by
aggressive pricing practices, downward pressure on gross margins, frequent
introduction of new products, short product life cycles, continual improvement
in product price/performance characteristics, price sensitivity on the part of
customers, and a large number of competitors. In the first nine months of fiscal
1996, the Company's results of operations and financial condition were, and in
the near future are expected to
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be, adversely affected by industrywide pricing pressures and downward pressures
on gross margins. The industry has also been characterized by rapid
technological advances in software functionality and hardware performance and
features based on existing or emerging industry standards. Some of the Company's
competitors have greater financial, marketing, manufacturing and technological
resources, broader product lines, and larger installed customer bases than those
of the Company. There can be no assurance that the Company will be able to
compete successfully in this environment.
The Company is currently the primary maker of hardware that uses the
Macintosh operating system (the "Mac OS"). The Mac OS has a minority market
share in the personal computer market, which is dominated by makers of computers
that run the MS-DOS and Microsoft Windows operating systems. The Company
believes that the Mac OS, with its perceived advantages over MS-DOS and Windows,
has been a driving force behind sales of the Company's personal computer
hardware for the past several years. Recent innovations in the Windows platform,
including those introduced by Windows 95, have added features to the Windows
platform similar to those offered by the Mac OS. The Company is currently taking
and will continue to take steps to respond to the competitive pressures being
placed on its personal computer sales as a result of the recent innovations in
the Windows platform. The Company recently announced a new strategy with respect
to updating its current operating system while redesigning its plan for a
next-generation operating system. To extend the life of its current operating
system, the Company intends to issue periodic releases consisting of discrete
operating system components. The Company expects that this will enable it to
introduce some new functionality for the operating system sooner than it would
be able to introduce a complete new operating system. Concurrently, the Company
intends to continue development of a next-generation operating system with
increased focus on functionality and decreased emphasis on backward
compatibility. Failure to provide backward compatibility in its new operating
system could result in a loss of existing customers. The Company's future
operating results and financial condition could be adversely affected should the
development and introduction of new operating system components or the
next-generation operation system be delayed or fail to meet users' expectations
or should users fail to embrace the periodic release strategy.
In order to better compete, the Company has taken steps to increase the
installed base for the Macintosh platform. As part of these efforts, the Company
announced the licensing of the Mac OS to other personal computer vendors in
January 1995 and additional licensing initiatives in fiscal year 1996, and
several vendors currently sell products that utilize the Mac OS. The Company
believes that licensing the Mac OS will result in a broader installed base on
which software vendors can develop and provide technical innovations for the
Macintosh platform. However, there can be no assurance that the installed base
will be broadened by the licensing of the operating system or that licensing
will result in an increase in the number of application software titles or the
rate at which vendors will bring to market application software based on the Mac
OS. In addition, as a result of licensing its operating system, the Company's
products will be forced to compete with those of other companies producing Mac
OS-based computer systems and the Company will be forced to compete with other
producers for personnel and other resources. The benefits to the Company from
licensing the Mac OS to third parties may be more than offset by the
disadvantages of being required to compete with such third parties.
As a supplemental means of addressing the competition from MS-DOS and
Windows, the Company has devoted substantial resources toward developing
personal computer products capable of running application software designed for
the MS-DOS or Windows operating systems ("Cross-Platform Products"). These
products contain both the RISC-based Power PC 601 microprocessor and the 486
DX2/66 microprocessor, which enable users to concurrently run applications that
require the Macintosh, MS-DOS, Windows 3.1 or Windows 95 operating systems.
During the third quarter of fiscal 1996, the Company began shipment of
Cross-Platform Products that include the Pentium or 586-class chip, or in which
a Pentium or 586-class microprocessor can be installed through the use of an
add-on card. Depending on customer demand, the Company may supply customers who
purchase Cross-Platform Products with Windows operating system software under
licensing agreements with
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Microsoft Corporation ("Microsoft"). However, in order to do so, the Company
will need to enter into one or more agreements with certain Microsoft
distributors. There can be no assurance that the Company will be able to enter
into such agreements on terms acceptable to the Company, if at all. If the
Company is unable to enter into agreements with Microsoft distributors or renew
the Microsoft licenses upon their expiration, the Company's sales of
Cross-Platform Products could be adversely affected.
On November 7, 1994, the Company reached an agreement with International
Business Machines Corporation ("IBM") and Motorola, Inc. ("Motorola") on a new
hardware reference platform for the PowerPC microprocessor that is intended to
deliver a much wider range of operating system and application choices for
computer customers. As a result of this agreement, the Company is moving forward
with its efforts to make the Macintosh operating system available on the common
platform. In line with its efforts, on November 13, 1995, the Company, IBM, and
Motorola announced the availability of the "PowerPC Platform" specifications,
which define a "unified" personal computer architecture in order to give access
to both the Power Macintosh platform and the PC environment. The Company's
future operating results and financial condition may be affected by its ability
to continue to implement this agreement and to manage the risk associated with
the transition to this new hardware reference platform.
Recently, several competitors of the Company, including Compaq Computer
Corporation ("Compaq"), IBM and Microsoft, have either targeted or announced
their intention to target certain of the Company's key market segments,
including education and desktop publishing. Some of these companies have greater
financial, marketing, manufacturing and technological resources than the
Company. There can be no assurance that the Company will be able to maintain its
leadership in these segments or that this added competition will not have a
material adverse effect on the Company's results of operations or financial
condition.
NO ASSURANCE OF SUPPORT FROM THIRD-PARTY SOFTWARE DEVELOPERS;
MICROSOFT POTENTIAL CONFLICT OF INTEREST
Decisions by customers to purchase the Company's personal computers, as
opposed to MS-DOS or Windows-based systems, are often based on the availability
of third-party software for particular applications. The Company believes that
the availability of third-party application software for the Company's hardware
products depends in part on the third-party developers' perception and analysis
of the relative benefits of developing, maintaining and upgrading such software
for the Company's products versus software for the larger MS-DOS and Windows
market. This analysis is based on factors such as the perceived strength of the
Company and its products, the anticipated potential revenue that may be
generated by the developers, and the costs of developing such software products.
The Company's recent and any future operating losses may cause software
developers to question the Company's position in the personal computer market.
In addition, the recent decline in the Company's market share of the overall
personal computer market and any future decline in such market share as a result
of the Company's new strategic direction or for any other reason, could
adversely affect software developers' perception of the relative benefits of
developing software for the Company's products. Such factors could cause
software developers to be less inclined to develop new application software or
upgrade existing software for the Company's products and more inclined to devote
their resources toward developing and upgrading software for the larger MS-DOS
and Windows market. There can be no assurance that third-party developers will
continue to develop sufficient application software for the Company's personal
computers to induce consumers to purchase the Company's products.
Microsoft is an important developer of application software for the
Company's products. Microsoft's interest in producing application software for
the Company's products may be influenced by Microsoft's perception of its
interests as the vendor of the Windows operating system. There can be no
assurance that Microsoft will continue to produce application software for the
Macintosh platform. If Microsoft were to discontinue such production, the
Company's results of operations and financial condition could be adversely
affected.
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DEPENDENCE ON THIRD-PARTY SUPPLIERS; IBM POTENTIAL CONFLICT OF INTEREST
Although certain raw materials, processes and components essential to the
Company's business are generally available from multiple sources, other
processes and key components (including microprocessors and application-specific
integrated circuits ("ASICs")) are currently obtained by the Company from single
sources. If the supply of a key single-sourced material, process, or component
to the Company were to be delayed or curtailed, the Company's ability to ship
the related product utilizing such material, process, or component in desired
quantities and in a timely manner could be adversely affected. The Company's
business and financial performance could also be adversely affected, depending
on the time required to obtain sufficient quantities from the original source,
or to identify and obtain sufficient quantities from an alternate source.
The Company believes that the availability of microprocessors and ASICs
presents significant potential for constraining the Company's ability to produce
products. The Company and other producers in the personal computer industry
compete for semiconductor products with other industries that have experienced
increased demand for such products. In addition, the Company uses some
components that are not common to the rest of the personal computer industry
(including certain ASICs). Continued availability of these components may be
affected if producers were to decide to concentrate on the production of common
components instead of components customized to meet the Company's requirements.
Such product supply constraints and corresponding increased costs could decrease
the Company's market share and adversely affect the Company's future operating
results and financial condition.
In particular, the Company's ability to produce and market competitive
products is dependent on the ability and willingness of IBM and Motorola, the
suppliers of the PowerPC RISC microprocessor for certain of the Company's
products, to continue to supply to the Company microprocessors that produce
superior price/performance results. There can be no assurance that IBM or
Motorola will be able or willing to continue supplying such microprocessors on
terms acceptable to the Company, if at all. Specifically, IBM's incentive to
supply such microprocessors to the Company may be limited by the fact that it
produces personal computers based on Intel microprocessors as well as on the
PowerPC microprocessor and that it is also the developer of OS/2, a competing
operating system to the Company's Mac OS. IBM's perception of its interests as a
competing manufacturer of personal computers and as a competing operating system
vendor may influence its decision to supply the Company with microprocessors.
As a result of the Company's restructuring plan, which included the sale of
the Company's Fountain, Colorado manufacturing facility to SCI Systems, Inc.
("SCI") and a related manufacturing outsourcing arrangement with SCI, the
proportion of the Company's products produced under outsourcing arrangements
will increase. While outsourcing arrangements may lower the fixed cost of
operations, they may also reduce the direct control the Company currently has
over production, and it is uncertain what effect such lessened control will have
on the quality of the products manufactured, the Company's ability to ship such
products on a timely basis or the flexibility of the Company to respond to
changing market conditions. Furthermore, any efforts by the Company to manage
its inventory under outsourcing arrangements could subject the Company to
liquidated damages or cancellation of the arrangement. In addition, the Company
will now be forced to directly compete with these manufacturers for personnel
and other resources. Moreover, although arrangements with such manufacturers may
contain provisions for warranty expense reimbursement, the Company remains at
least initially responsible to the ultimate consumer for warranty service.
Accordingly, in the event of product defects or warranty liability, the Company
may remain primarily liable. Any unanticipated product defect or warranty
liability, whether pursuant to arrangements with contract manufacturers or
otherwise, could adversely affect the Company's future operating results and
financial condition.
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PRODUCT RECALLS AND WARRANTIES
The integration of functions and complexity of operations of the Company's
products increases the risk that latent defects or subtle faults could be
discovered by customers or end users after volumes of product have been produced
or shipped. If such defects were significant, the Company could incur material
recall and replacement costs under product warranties.
On May 9, 1996, the Company notified certain Apple resellers that it was
voluntarily recalling certain shipped Power Macintosh and Performa models that
had experienced system freezes and shifting monitor colors. At the same time,
the Company voluntarily recalled certain PowerBook models that had exhibited
defects, including flaws in the plastic casing and problems with their AC power
connectors. Although the Company currently believes that it has adequately
reserved for the expected future costs associated with these recalls, there can
be no assurance that the Company will not incur additional inventory charges or
that these recalls will not significantly affect market confidence in the
Company's products or have a material adverse effect on the Company's future
operating results and financial condition.
The Company is implementing a rework program for recalled PowerBook models.
If the rework program does not proceed on schedule, the Company's ability to
supply PowerBooks into the sales channels could be affected and could have an
adverse impact on the Company's future operating results and financial
condition.
LEVERAGE AND SUBORDINATION
In connection with the Original Offering, the Company incurred approximately
$661 million in additional indebtedness. This resulted in an increase in the
Company's ratio of debt to total capitalization, including short-term
borrowings, from approximately 24% at March 29, 1996 to approximately 36% at
June 28, 1996. As a result of this additional indebtedness, the Company's
principal and interest obligations will increase substantially. The degree to
which the Company will be leveraged could adversely affect the Company's ability
to obtain additional financing for working capital or other purposes and could
make it more vulnerable to industry downturns and competitive pressures. The
Company's ability to meet its debt service and other obligations will be
dependent upon the Company's future performance, which will be subject to
financial, business and other factors affecting the operations of the Company,
many of which are beyond its control.
The Registrable Notes are unsecured and subordinated in right of payment in
full to all existing and future Senior Indebtedness of the Company. As a result
of such subordination, in the event of a payment default with respect to Senior
Indebtedness, a covenant default with respect to Designated Senior Indebtedness
(as defined), liquidation or insolvency, or upon acceleration of the Registrable
Notes due to an event of default, the assets of the Company would be available
to pay obligations on the Registrable Notes only after all Senior Indebtedness
has been paid in full, and there may not be sufficient assets remaining to pay
amounts due on any or all of the Registrable Notes then outstanding. The
Registrable Notes also are structurally subordinated to the liabilities,
including trade payables, of the Company's subsidiaries. The Indenture does not
prohibit or limit the incurrence of Senior Indebtedness or the incurrence of
other indebtedness and other liabilities by the Company or its subsidiaries. The
incurrence of additional indebtedness and other liabilities by the Company or
its subsidiaries could adversely affect the Company's ability to pay its
obligations on the Registrable Notes. As of June 28, 1996, the Company had
approximately $490 million of Senior Indebtedness outstanding. In addition, as
of June 28, 1996, subsidiaries of the Company had outstanding an aggregate of
$1,030 million of indebtedness and other liabilities (excluding intercompany
liabilities and liabilities of a type not required to be reflected as a
liability on the balance sheet of such subsidiaries in accordance with generally
accepted accounting principles). See "Description of Registrable Notes --
Subordination".
INVENTORY RISK
The Company must order components for its products and build inventory well
in advance of product shipments. Because the Company's markets are volatile and
subject to rapid technology and
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<PAGE>
price changes, there is a risk that the Company will forecast incorrectly and
acquire or produce excess or insufficient inventories of particular components
or products. The Company's operating results and financial condition have been
and may in the future be materially adversely affected by the Company's ability
to manage inventory levels and respond to short-term shifts in customer demand
patterns. The management of the Company's inventory levels is further
complicated by the fact that some components used by the Company are not common
to the rest of the personal computer industry. Accordingly, these components
cannot be easily resold to third parties in the event of inventory surplus or
obtained from third parties in the event of inventory shortage.
As the Company increases its reliance on outsourcing arrangements pursuant
to its restructuring plan, the flexibility of the Company to respond to changing
market conditions may diminish and the Company may become subject to even
greater risk of inventory shortage or surplus. Furthermore, any efforts by the
Company to manage its inventory under these new outsourcing arrangements could
subject the Company to liquidated damages or cancellation of the arrangement,
either of which could have a material adverse effect on the Company's results of
operations or financial condition.
DEPENDENCE ON KEY PERSONNEL
The Company's success depends to a significant extent upon the continued
service of its key engineering, marketing, sales, manufacturing, support and
executive personnel, and on its ability to continue to attract, retain and
motivate qualified personnel. The competition for such employees is intense, and
the loss of the services of one or more of these key personnel could adversely
affect the Company. The Company believes that extensive media coverage of the
Company's financial losses and speculation regarding the Company's financial
position have encouraged its competitors and other technology companies to
actively recruit the Company's personnel. There can be no assurance that the
restructuring will not cause the Company to experience additional difficulty in
attracting, retaining and motivating the personnel needed to implement the
Company's new strategic direction. The Company does not maintain key man life
insurance on any of its key executives.
RAPID TECHNOLOGICAL CHANGE; DEPENDENCE ON NEW PRODUCTS;
UNCERTAINTIES ASSOCIATED WITH THE INTERNET
The markets in which the Company operates are characterized by rapid
technological change and frequent introduction of new technology, which results
in short product life cycles, price erosion and greater inventory risk.
Substantial research and development investment is required for products and
processes to keep up with the rapid pace of technological change.
The Company's products are in various stages of their product life cycles.
The Company's success is highly dependent upon its ability to develop complex
new products and to introduce them to the marketplace ahead of the competition.
The success of new product introductions is dependent on a number of factors,
including market acceptance, the Company's ability to manage the risks
associated with product transitions, the availability of application software
for new products, the effective management of inventory levels in line with
anticipated product demand, the manufacturing of products in appropriate
quantities to meet anticipated demand, and the risk that new products may have
quality or other defects in the early stages of introduction that were not
anticipated in the design of those products. Accordingly, the Company cannot
determine the ultimate effect that new products will have on its sales or
results of operations. In addition, the uncertainties and risks associated with
new product introductions may be increased as a result of the Company's new
business model which will, in part, emphasize a refocusing of product offerings
and the introduction of new products for core market segments.
In accordance with the Company's new strategic direction, the Company
intends to integrate Internet capabilities into its new and existing hardware
and software platforms. There can be no assurance that the Company will be able
to successfully integrate Internet capabilities into its products. In addition,
the Internet market is rapidly evolving and is characterized by an increasing
number of market entrants who have introduced or developed products addressing
access to, or authoring or communication over, the Internet. Some of these
competitors have a significant lead over
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<PAGE>
the Company in developing products for the Internet or have significantly
greater financial, marketing, manufacturing and technological resources than the
Company, or both. Finally, the hardware and software industries addressing the
accessing, authoring and electronic publishing requirements of the Internet are
young and have few proven products. Critical issues concerning the commercial
use of the Internet (including security, reliability, cost, ease of use and
access, and quality of service) remain unresolved and may affect the growth of
Internet use, together with the hardware and software standards and electronic
media employed in such markets. The Company is devoting significant resources
toward developing its Internet strategy. There can be no assurance that such
strategy will prove successful or financially benefit the Company.
INTERNATIONAL SALES AND OPERATIONS
Net sales outside the United States represented approximately 48% and 53% of
the Company's consolidated net sales in fiscal 1995 and the first nine months of
fiscal 1996, respectively. During these same periods, approximately 40% and 46%
of the Company's central processing units were manufactured outside of the
United States. The Company currently sells its products in more than 140
countries. The success and profitability of international operations may be
adversely affected by risks associated with international activities, including
economic and labor conditions, political instability, tax laws (including U.S.
taxes on foreign subsidiaries), and changes in the value of the United States
dollar versus the local currency in which products are sold. Changes in exchange
rates may adversely affect the Company's net consolidated sales (as expressed in
United States dollars) and gross profit margins from international operations.
Although the Company attempts to mitigate this exposure through hedging
transactions, the Company also enters into foreign exchange currency
transactions for the purpose of reducing its hedging costs, which exposes the
Company to further currency fluctuation risk. The Company's current financial
condition may have an impact on the costs of its hedging transactions, as well
as the willingness of its trading partners to enter into hedging transactions
with the Company.
INTELLECTUAL PROPERTY RIGHTS
From time to time, other companies and individuals assert exclusive patent,
copyright, trademark and other intellectual property rights to technologies or
marks that are important to the personal computer industry or the Company's
business. The Company evaluates each claim relating to its products and, if
appropriate, seeks a license to use the protected technology. There can be no
assurance that the Company will be able to obtain licenses to intellectual
property of third parties on commercially reasonable terms, if at all. 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 the foregoing could have a material adverse effect on
the results of operations and financial position of the Company.
ABSENCE OF PUBLIC MARKET FOR THE REGISTRABLE NOTES
The Registrable Notes were issued in June 1996 to a small number of
institutional buyers. The Registrable Notes issued in reliance on 144A have been
designated for trading on the PORTAL System of the National Association of
Securities Dealers, Inc. Registrable Notes sold pursuant to the Registration
Statement of which this Prospectus forms a part are not expected to remain
eligible for trading on the PORTAL System. The Registration Statement of which
this Prospectus forms a part is filed pursuant to the Registration Agreement,
which does not obligate the Company to keep the Registration Statement effective
after the third anniversary of the date when the Registration Statement is
declared effective or, if earlier, the date when all the Registrable Notes and
the Common Stock issuable on conversion thereof covered by the Registration
Statement have been sold pursuant to the Registration Statement or may be resold
without registration by persons that are not affiliates of Apple
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pursuant to Rule 144(k) under the Securities Act. The Company does not intend to
apply for listing of the Registrable Notes on any securities exchange or to seek
approval for quotation through any automated quotation system. The Initial
Purchasers have advised the Company that they intend to make a market in the
Registrable Notes. The Initial Purchasers are not obligated, however, to make a
market in the Registrable Notes and any such market making may be discontinued
at any time in the sole discretion of the Initial Purchasers without notice.
Accordingly, there can be no assurance as to the development or liquidity of any
market for the Registrable Notes.
POSSIBLE VOLATILITY OF REGISTRABLE NOTES AND STOCK PRICE
The market price of the Company's Common Stock has been, and may continue to
be, extremely volatile. Factors such as new product announcements by the Company
or its competitors, the implementation of the Company's restructuring plan,
quarterly fluctuations in the operating results of the Company, its competitors
and other technology companies and general conditions in the computer market may
have a significant impact on the market price of the Registrable Notes and the
Common Stock into which the Registrable Notes are convertible. In particular, if
the Company were to report operating results or restructuring progress that did
not meet the expectations of research analysts, the market price of the
Registrable Notes and Common Stock could be materially adversely affected. The
Company's stock has recently experienced sharp declines in price and there can
be no assurance that such reductions in price will not recur. In addition, from
time to time the stock market has experienced extreme price and volume
fluctuations, which have particularly affected the market prices for many high
technology companies and which have often been unrelated to the operating
performance of specific companies.
LIMITATIONS ON REPURCHASE OF REGISTRABLE NOTES
Upon a Change in Control (as defined), each holder of Registrable Notes will
have certain rights, at the holder's option, subject to certain limitations, to
require the Company to repurchase all or a portion of such holder's Registrable
Notes. If a Change in Control were to occur, there can be no assurance that the
Company would have sufficient funds to pay the repurchase price for all
Registrable Notes tendered by the holders thereof. In addition, the Company's
repurchase of Registrable Notes as a result of the occurrence of a Change in
Control may be prohibited or limited by, or create an event of default under,
the terms of agreements related to borrowings which the Company may enter into
from time to time, including agreements relating to Senior Indebtedness. See
"Description of Registrable Notes -- Repurchase at Option of Holders Upon a
Change in Control".
IMPEDIMENTS TO CHANGES IN CONTROL
Certain provisions in the Certificate of Incorporation and Bylaws of the
Company and the shareholder rights plan, adopted by the Company's Board of
Directors in April 1989, may make more difficult or discourage attempts to
change the composition of the Board of Directors, may make more difficult or
discourage takeovers of the Company, including those in which holders of the
Company's Common Stock might receive a substantial premium for some or all of
their shares, and could potentially depress the market price of shares of Common
Stock. In addition, the ability of the Board of Directors to issue shares of
preferred stock or rights to purchase preferred stock and to fix the voting,
redemption, conversion and other rights thereof without shareholder approval
could hinder any proposed tender offer, merger or other attempt to gain control
of the Company. See "Description of Capital Stock".
FACTORS AFFECTING QUARTERLY OPERATING RESULTS
The Company's quarterly operating results are affected by a wide variety of
factors, many of which are outside the Company's control, including but not
limited to the Company's ability to introduce new products and technologies on a
timely basis, changes in product mix or fluctuations in manufacturing costs
which affect the Company's gross margins, market acceptance of the Company's
products, sales timing, the level of orders which are received and can be
shipped in a quarter, the seasonal nature of the markets addressed by the
Company's products, product obsolescence, price erosion, foreign currency
exchange rates, foreign currency and interest rate hedging, and competitive
15
<PAGE>
factors. The Company's future operating results also will depend in part on
economic conditions in the United States and the worldwide markets that the
Company serves. Any unfavorable changes in the above or other factors could
adversely affect the Company's operating results.
OTHER FACTORS
The majority of the Company's research and development activities, its
corporate headquarters, and other critical business operations are located near
major seismic faults. The Company's operating results and financial condition
could be materially adversely affected in the event of a major earthquake.
Production and marketing of products in certain states and countries may
subject the Company to environmental and other regulations which include, in
some instances, the requirement that the Company provide consumers with the
ability to return to the Company product at the end of its useful life, and
leave responsibility for environmentally safe disposal or recycling with the
Company. It is unclear what the effect of such regulation will have on the
Company's future operating results and financial condition.
The Company is currently in the process of replacing its existing
transaction systems (which include order management, distribution, and finance)
with a single integrated system as part of its ongoing effort to increase
operational efficiency. The Company's future operating results and financial
condition could be adversely affected if the Company is unable to implement and
effectively manage the transition to this new integrated system.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------------------------------------------------------------- NINE MONTHS
SEPTEMBER 27, SEPTEMBER 25, SEPTEMBER 24, SEPTEMBER 30, SEPTEMBER 29, ENDED
1991 1992 1993 1994 1995 JUNE 28, 1996
--------------- --------------- --------------- --------------- --------------- ---------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to
Fixed Charges........ 11.4x 22.9x 3.9x 8.0x 10.5x (A)
----- ----- ----- ----- ----- ---
----- ----- ----- ----- ----- ---
</TABLE>
- ------------------------
(A) The ratio of earnings to fixed charges is computed by dividing the earnings
before taxes and fixed charges by fixed charges. Fixed charges consist of
interest expense and the estimated interest component of rent expenses.
Earnings were not sufficient to cover fixed charges for the nine months
ended June 28, 1996 by $1.335 billion.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Registrable
Notes or the Common Stock issuable upon conversion thereof by the Selling
Holders.
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DESCRIPTION OF REGISTRABLE NOTES
The Registrable Notes were issued under an Indenture, dated as of June 1,
1996 (the "Indenture"), between the Company and Marine Midland Bank, as Trustee
(the "Trustee"), copies of which are available for inspection at the Corporate
Trust Office of the Trustee in the Borough of Manhattan, The City of New York,
and at the offices of the Paying Agents, Midland Bank plc, Mariner House, Pepys
Street, London EC3N 4DA and Banque Internationale Luxembourg 69, route d'Esch
L-1470 Luxembourg. Wherever particular defined terms of the Indenture (including
the Registrable Notes and the various forms thereof) are referred to, such
defined terms are incorporated herein by reference (the Registrable Notes and
various terms relating to the Registrable Notes being referred to in the
Indenture as "Securities"). References in this section to the "Company" are
solely to Apple Computer, Inc. and not its subsidiaries. The following summaries
of certain provisions of the Indenture do not purport to be complete and are
subject to, and are qualified in their entirety by reference to, the detailed
provisions of the Registrable Notes and the Indenture, including the definitions
therein of certain terms.
GENERAL
The Registrable Notes are unsecured subordinated obligations of the Company,
mature on June 1, 2001 and are payable at a price of 100% of the principal
amount thereof. The Registrable Notes bear interest at the rate of 6% per annum
from June 7, 1996, payable semiannually on June 1 and December 1 of each year,
commencing on December 1, 1996. Interest payable per $1,000 principal amount of
Registrable Notes for the period from June 7, 1996 to December 1, 1996 will be
$29.00. (SectionSection 3.1 and 3.7)
The Registrable Notes are convertible into Common Stock initially at the
conversion price of $29.205 per share, subject to adjustment upon the occurrence
of certain events described under "-- Conversion Rights", at any time prior to
the close of business on the maturity date, unless previously redeemed or
repurchased. (Section 12.1)
The Registrable Notes are redeemable (a) in the event of certain
developments involving U.S. withholding taxes or certification requirements as
defined below under "-- Redemption -- Redemption for Taxation Reasons", at a
redemption price of 100% of the principal amount of the Registrable Notes to be
redeemed, plus accrued interest to the redemption date and (b) at the option of
the Company under the circumstances and at the redemption prices set forth below
under "-- Redemption -- Optional Redemption", plus accrued interest to the
redemption date. (Section 2.2)
CONVERSION RIGHTS
The Holder of any Registrable Note has the right at the Holder's option to
convert any portion of the principal amount of a Registrable Note that is an
integral multiple of $1,000 into shares of Common Stock at any time prior to the
close of business on the maturity date, unless previously redeemed or
repurchased, at a conversion price of $29.205 per share. The conversion price is
subject to adjustment from time to time as described below. The right to convert
a Registrable Note called for redemption or delivered for repurchase will
terminate at the close of business on the Redemption Date for such Registrable
Note or the Repurchase Date, as the case may be. (Section 12.1).
The right of conversion attaching to any Registrable Note may be exercised
by the Holder thereof by delivering the Registrable Note at the Corporate Trust
Office of the Trustee or at the specified office of a Conversion Agent,
accompanied by a duly signed and completed notice of conversion. Beneficial
owners of interests in a registered global Registrable Note may exercise their
right of conversion by delivering to DTC the appropriate instruction form for
conversion pursuant to DTC's conversion program. Such notice of conversion can
be obtained at the office of any Conversion Agent. The conversion date will be
the date on which the Registrable Note and the duly signed and completed notice
of conversion are so delivered. As promptly as practicable on or after the
conversion date, the Company will issue and deliver to the Trustee a certificate
or certificates for the number of full shares of Common Stock issuable upon
conversion, together with payment in lieu of any fraction of a share;
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such certificate will be sent by the Trustee to the appropriate Conversion Agent
for delivery to the Holder. Such shares of Common Stock issuable upon conversion
of the Registrable Notes will be fully paid and nonassessable and will rank PARI
PASSU with the other shares of Common Stock of the Company outstanding from time
to time. Any Registrable Note surrendered for conversion during the period from
the close of business on any Regular Record Date to the opening of business on
the next succeeding Interest Payment Date (except Registrable Notes called for
redemption on a Redemption Date or to be repurchased on a Repurchase Date during
such period) must be accompanied by payment of an amount equal to the interest
payable on such Interest Payment Date on the principal amount of Registrable
Notes being surrendered for conversion. In the case of any Registrable Note
which has been converted after any Regular Record Date, but before the next
Interest Payment Date, interest the Stated Maturity of which is on such Interest
Payment Date shall be payable on such Interest Payment Date notwithstanding such
conversion. Such interest shall be paid to the Holder of such Registrable Note
on such Regular Record Date. As a result, a Holder that surrenders Registrable
Notes for conversion on a date that is not an Interest Payment Date will not
receive any interest for the period from the Interest Payment Date next
preceding the date of conversion to the date of conversion or for any later
period, even if the Registrable Notes are surrendered after a notice of
redemption (except for the payment of interest on Registrable Notes called for
redemption on a Redemption Date or to be repurchased on a Repurchase Date
between a Regular Record Date and the Interest Payment Date to which it
relates). No other payment or adjustment for interest, or for any dividends in
respect of Common Stock, will be made upon conversion. Holders of Common Stock
issued upon conversion will not be entitled to receive any dividends payable to
holders of Common Stock as of any record time before the close of business on
the conversion date. No fractional shares will be issued upon conversion but, in
lieu thereof, an appropriate amount will be paid in cash by the Company based on
the market price of Common Stock at the close of business on the day of
conversion. (SectionSection 2.2, 3.7, 12.2 and 12.3)
A Holder delivering a Registrable Note for conversion will not be required
to pay any taxes or duties in respect of the issue or delivery of Common Stock
on conversion but will be required to pay any tax or duty which may be payable
in respect of any transfer involved in the issue or delivery of the Common Stock
in a name other than that of the Holder of the Registrable Note. Certificates
representing shares of Common Stock will not be issued or delivered unless all
taxes and duties, if any, payable by the Holder have been paid. (Section 12.8)
The conversion price is subject to adjustment in certain events, including:
(a) dividends (and other distributions) payable in Common Stock on shares of
capital stock of the Company, (b) the issuance to all holders of Common Stock of
rights, options or warrants entitling them to subscribe for or purchase Common
Stock at less than the then current market price (determined as provided for in
the Indenture) of Common Stock (provided that the conversion price will be
readjusted to the extent any such rights, options or warrants are not exercised
prior to the expiration thereof), (c) subdivisions, combinations and
reclassifications of Common Stock, (d) distributions to all holders of Common
Stock of evidences of indebtedness of the Company, shares of capital stock, cash
or assets (including securities, but excluding those dividends, rights, options,
warrants and distributions referred to above, dividends and distributions paid
exclusively in cash and distributions upon mergers and consolidations to which
the next succeeding paragraph applies), (e) distributions consisting exclusively
of cash (excluding any cash portion of distributions referred to in (d) above,
or cash distributed upon a merger or consolidation to which the next succeeding
paragraph applies) to all holders of Common Stock in an aggregate amount that,
combined together with (i) other such all-cash distributions made within the
preceding 12 months in respect of which no adjustment has been made and (ii) any
cash and the fair market value of other consideration payable in respect of any
tender offer by the Company or any of its subsidiaries for Common Stock
concluded within the preceding 12 months in respect of which no adjustment has
been made, exceeds 12.5% of the Company's market capitalization (for this
purpose being the product of the current market price per share of the Common
Stock on the record date for such distribution times the number of shares of
Common Stock outstanding) on such date and (f) the successful completion of a
tender offer made by the Company or any of its subsidiaries for Common
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Stock which involves an aggregate consideration that, together with (i) any cash
and other consideration payable in a tender offer by the Company or any of its
subsidiaries for Common Stock expiring within the 12 months preceding the
expiration of such tender offer in respect of which no adjustment has been made
and (ii) the aggregate amount of any such all-cash distributions referred to in
(e) above to all holders of Common Stock within the 12 months preceding the
expiration of such tender offer in respect of which no adjustments have been
made, exceeds 12.5 % of the Company's market capitalization on the expiration of
such tender offer. With respect to Rights (as defined below) issued pursuant to
the Rights Agreement (as defined below), if Holders of the Registrable Notes
exercising the right of conversion attaching thereto after the Distribution Date
(as defined below) are not entitled to receive the Rights that would otherwise
be attributable (but for the date of conversion) to the shares of Common Stock
received upon such conversion, the conversion price will be adjusted as though
the Rights were being distributed to holders of the Common Stock on the
Distribution Date. If such an adjustment is made and the Rights are later
redeemed, invalidated or terminated, then a corresponding reversing adjustment
will be made to the conversion price on an equitable basis. The Company reserves
the right to make such reductions in the conversion price in addition to those
required in the foregoing provisions as it considers to be advisable in order
that any event treated for federal income tax purposes as a dividend of stock or
stock rights will not be taxable to the recipients. No adjustment of the
conversion price will be required to be made until the cumulative adjustments
amount to 1.0% or more of the conversion price. No adjustment of the conversion
price will result in zero or in a negative number or will reduce the conversion
price below the then par value of the Common Stock (in which case the conversion
price would be reduced to such par value), unless the Common Stock has no par
value at such time (in which case the conversion price would be reduced to $.01
per share). (Section 12.4)
In case of any consolidation or merger of the Company with or into another
Person or any merger of another Person into the Company (other than a merger
which does not result in any reclassification, conversion, exchange or
cancellation of the Common Stock), or in case of any sale or transfer of all or
substantially all of the assets of the Company, each Registrable Note then
outstanding will, without the consent of the Holder of any Note, become
convertible only into the kind and amount of securities, cash and other property
receivable upon such consolidation, merger, sale or transfer by a holder of the
number of shares of Common Stock into which such Registrable Note was
convertible immediately prior thereto (assuming such holder of Common Stock
failed to exercise any rights of election and that such Registrable Note was
then convertible). (Section 12.11)
The Company from time to time may reduce the conversion price by any amount
for any period of at least 20 days, in which case the Company shall give at
least 15 days' notice of such reduction, if the Board of Directors has made a
determination that such reduction would be in the best interests of the Company,
which determination shall be conclusive. No such reduction shall be taken into
account for purposes of determining whether the closing price of the Common
Stock exceeds the conversion price by 105% in connection with an event which
otherwise would be a Change in Control.
If at any time the Company makes a distribution of property to its
shareholders which would be taxable to such shareholders as a dividend for
federal income tax purposes (e.g., distributions of evidences of indebtedness or
assets of the Company, but generally not stock dividends on common stock or
rights to subscribe for common stock) and, pursuant to the anti-dilution
provisions of the Indenture, the number of shares into which Registrable Notes
are convertible is increased, such increase may be deemed for federal income tax
purposes to be the payment of a taxable dividend to Holders of Registrable
Notes. See "United States Taxation -- United States Holders -- Adjustment of
Conversion Price".
SUBORDINATION
The payment of the principal of, premium, if any, and interest on, and the
redemption or repurchase of, the Registrable Notes is subordinated in right of
payment to the extent set forth in the Indenture to the prior payment in full of
the principal of, premium, if any, interest and other amounts in respect of all
Senior Indebtedness of the Company. The principal amount of outstanding Senior
Indebtedness was approximately $490 million at June 28, 1996. Senior
Indebtedness includes (i) the
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principal, premium, if any, interest and other amounts in respect of (A)
indebtedness of the Company for money borrowed and (B) indebtedness evidenced by
securities, debentures, bonds or other similar instruments issued by the
Company, (ii) all capital lease obligations of the Company, (iii) all
obligations of the Company issued or assumed as the deferred purchase price of
property, all conditional sale obligations of the Company and all obligations of
the Company under any title retention agreement (but excluding trade accounts
payable arising in the ordinary course of business), (iv) all obligations of the
Company for the reimbursement on any letter of credit, bankers acceptance,
security purchase facility or similar credit transaction, (v) all obligations of
the Company then due and owing with respect to an interest rate or other swap,
cap or collar agreement or other similar instrument or agreement or foreign
currency hedge, exchange, purchase or similar instrument or agreement, (vi) all
obligations of the type referred to in clauses (i) through (v) above of other
persons for the payment of which the Company is responsible or liable as
obligor, guarantor or otherwise, and (vii) all obligations of the type referred
to in clauses (i) through (vi) above of other persons secured by any lien on any
property or asset of the Company (whether or not such obligation is assumed by
the Company), except for any such indebtedness or other obligation that is by
its terms subordinated to or PARI PASSU with the Registrable Notes. Such Senior
Indebtedness shall continue to be Senior Indebtedness and be entitled to the
benefits of the subordination provisions irrespective of any amendment,
modification or waiver of any term of such Senior Indebtedness. (Section 13.1)
No payment on account of principal of, premium, if any, or interest on, or
redemption or repurchase of, the Registrable Notes may be made by the Company if
(i) a default in the payment of principal, premium, if any, or interest
(including a default under any repurchase or redemption obligation) or other
amounts with respect to any Senior Indebtedness occurs and is continuing beyond
the applicable grace period or (ii) any other event of default occurs and is
continuing with respect to Designated Senior Indebtedness (as defined below)
that permits the holders thereof to accelerate the maturity thereof, and the
Trustee receives a notice of such default (a "Payment Blockage Notice") from the
Company or other person permitted to give such notice under the Indenture.
Payments on the Registrable Notes may and shall be resumed (a) in the case of a
payment default, upon the date on which such default is cured or waived and (b)
in case of a nonpayment default, the earlier of the date on which such
nonpayment default is cured or waived or 179 days after the date on which the
applicable Payment Blockage Notice is received. No new period of payment
blockage may be commenced unless and until (i) 365 days have elapsed since the
effectiveness of the immediately prior Payment Blockage Notice and (ii) all
scheduled payments of principal, premium, if any, and interest on the Notes that
have come due have been paid in full in cash. No nonpayment default that existed
or was continuing on the date of delivery of any Payment Blockage Notice to the
Trustee shall be, or be made, the basis for a subsequent Payment Blockage
Notice. "Designated Senior Indebtedness" means any particular Senior
Indebtedness in which the instrument creating or evidencing the same or the
assumption or guarantee thereof (or related agreements or documents to which the
Company is a party) expressly provides that such Indebtedness shall be
"Designated Senior Indebtedness" for purposes of the Indenture (provided that
such instrument, agreement or other document may place limitations and
conditions on the right of such Senior Indebtedness to exercise the rights of
Designated Senior Indebtedness). (SectionSection 1.1 and 13.2)
Upon any acceleration of the principal due on the Notes or payment or
distribution of assets of the Company to creditors upon any dissolution, winding
up, liquidation or reorganization, whether voluntary or involuntary, or in
bankruptcy, insolvency, receivership or other proceedings, all principal,
premium, if any, and interest or other amounts due on all Senior Indebtedness
must be paid in full before the Holders of the Registrable Notes are entitled to
receive any payment. (Section 13.2) By reason of such subordination, in the
event of insolvency, creditors of the Company who are holders of Senior
Indebtedness may recover more, ratably, than the Holders of the Registrable
Notes, and such subordination may result in a reduction or elimination of the
payments to the Holders of the Registrable Notes.
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In addition, the Registrable Notes are structurally subordinated to all
indebtedness and other liabilities (including trade payables and lease
obligations) of the Company's subsidiaries, as any right of the Company to
receive any assets of its subsidiaries upon their liquidation or reorganization
(and the consequent right of the Holders of the Registrable Notes to participate
in those assets) will be effectively subordinated to the claims of that
subsidiary's creditors (including trade creditors), except to the extent that
the Company itself is recognized as a creditor of such subsidiary, in which case
the claims of the Company would still be subordinate to any security interest in
the assets of such subsidiary and any indebtedness of such subsidiary senior to
that held by the Company. As of June 28, 1996, there was outstanding
approximately $1,030 million of indebtedness of subsidiaries of the Company
(excluding intercompany indebtedness); this amount was not included in the
principal amount of Apple's outstanding Senior Indebtedness at June 28, 1996, as
set forth above.
The Indenture does not limit the Company's ability to incur additional
Senior Indebtedness or any other indebtedness.
REDEMPTION
OPTIONAL REDEMPTION
Subject to the discussion under "-- Redemption for Taxation Reasons" below,
the Registrable Notes may not be redeemed at the option of the Company prior to
June 1, 1999. Thereafter, the Registrable Notes may be redeemed, in whole or in
part, at the option of the Company, at the redemption prices specified below,
upon not less than 20 nor more than 60 days' prior notice as provided under "--
Notices" below.
The redemption prices (expressed as a percentage of principal amount) are as
follows for the 12 month period beginning on June 1 of the following years:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- --------------------------------------------------- -----------
<S> <C>
1999............................................... 102.400
2000............................................... 101.200
</TABLE>
and thereafter at a Redemption Price equal to 100% of the principal amount,
in each case together with accrued interest to the date of redemption.
(SectionSection 2.2, 11.1, 11.5, 11.7)
REDEMPTION FOR TAXATION REASONS
If the Company has or will become obligated to pay Additional Amounts (as
described below under "-- Payment of Additional Amounts") as a result of any
change in, or amendment to, the laws (including any regulations or rulings
promulgated thereunder) of the United States or any political subdivision or
taxing authority thereof or therein affecting taxation, or any change in, or
amendment to, the application or official interpretation of such laws,
regulations or rulings (any such change or amendment being herein referred to as
a "Tax Law Change"), and such obligation cannot be avoided by the Company taking
reasonable measures available to it, the Tax Affected Notes (as defined below)
may be redeemed, at the option of the Company, in whole but not in part. With
respect to any Tax Law Change, "Tax Affected Notes" shall include any
Registrable Note that, on or before the 20th day after the date on which the
Company publishes a notice of redemption pursuant to this paragraph, is
delivered to the Trustee together with a written statement from or on behalf of
the beneficial owner of such Registrable Note to the effect that such beneficial
owner has or will become entitled to receive Additional Amounts as a result of
such Tax Law Change. Such redemption shall be upon not less than 20 nor more
than 60 days' prior notice as provided under "-- Notices" below, at a redemption
price equal to 100% of the principal amount of the Registrable Notes, plus
accrued interest to the redemption date and any Additional Amounts then payable;
PROVIDED, HOWEVER, that (1) no such notice of redemption shall be given earlier
than 90 days prior to the earliest date on which the Company would be obligated
to pay any such Additional Amounts were a payment in respect of the Registrable
Notes then due and (2) at the time such notice of redemption is given, the
obligation to pay such Additional Amounts remains in effect; PROVIDED FURTHER,
HOWEVER, that such redemption by the Company shall
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apply only to a Registrable Note (or any portion of a Registrable Note that is a
global registered Registrable Note) the Holder of which within 20 days of the
publication of such notice of redemption provides a written statement from or on
behalf of the beneficial owner of such Registrable Note (or such portion, in the
case of a Registrable Note that is a global registered Registrable Note) to the
Trustee or any Paying Agent to the effect that such beneficial owner is entitled
or will be entitled to receive Additional Amounts. Prior to the publication of
any notice of redemption pursuant to this paragraph, the Company shall deliver
to the Trustee (a) a certificate stating that the Company is entitled to effect
such redemption and setting forth a statement of facts showing that the
conditions precedent to the right of the Company so to redeem have occurred and
(b) an opinion of counsel selected by the Company and reasonably acceptable to
the Trustee, to the effect that the Company has or will become obligated to pay
such Additional Amounts as a result of a Tax Law Change. The Company's right to
redeem Tax Affected Notes shall continue as long as the Company is obligated to
pay Additional Amounts, notwithstanding that the Company shall have theretofore
made payments of Additional Amounts.
PAYMENT AND CONVERSION
The principal of Registrable Notes will be payable in U.S. dollars, against
surrender thereof at the Corporate Trust Office of the Trustee in the Borough of
Manhattan, The City of New York, or, subject to any applicable laws and
regulations, at the office of any Paying Agent, by dollar check drawn on, or by
transfer to a dollar account (such transfer to be made only to Holders of an
aggregate principal amount of Registrable Notes in excess of $2,000,000)
maintained by the Holder with, a bank in New York City. Payment of any
installment of interest on Registrable Notes will be made to the Person in whose
name such Registrable Notes (or any predecessor Registrable Note) is registered
at the close of business on May 15 or November 15 (whether or not a Business
Day) immediately preceding the relevant Interest Payment Date (a "Regular Record
Date"). Payments of such interest will be made by a dollar check drawn on a bank
in New York City mailed to the Holder at such Holder's registered address or,
upon application by the Holder thereof to the Trustee not later than the
applicable Regular Record Date, by transfer to a dollar account (such transfer
to be made only to Holders of an aggregate principal amount of Registrable Notes
in excess of $2,000,000) maintained by the Holder with a bank in New York City.
No transfer to a dollar account will be made unless the Trustee has received
written wire instructions not less than 15 days prior to the relevant payment
date. (Section 2.2)
Any payment on the Registrable Notes due on any day which is not a Business
Day need not be made on such day, but may be made on the next succeeding
Business Day with the same force and effect as if made on such due date, and no
interest shall accrue on such payment for the period from and after such date.
"Business Day", when used with respect to any place of payment, place of
conversion or any other place, as the case may be, means each Monday, Tuesday,
Wednesday, Thursday and Friday which is not a day on which banking institutions
in such place of payment, place of conversion or other place, as the case may
be, are authorized or obligated by law or executive order to close; provided,
however, that a day on which banking institutions in New York, New York or
London, England are authorized or obligated by law or executive order to close
shall not be a Business Day for certain purposes. (SectionSection 1.1 and 2.2)
Registrable Notes may be surrendered for conversion, subject to any
applicable laws and regulations, at the office of any Conversion Agent outside
the United States and at the Corporate Trust Office of the Trustee in the
Borough of Manhattan, The City of New York. Registrable Notes surrendered for
conversion must be accompanied by appropriate notices, and any payments in
respect of interest or taxes, as applicable, as described above under "--
Conversion Rights". (SectionSection 2.2 and 12.2)
The Company has initially appointed as Paying Agents and Conversion Agents
the Trustee at its Corporate Trust Office and Midland Bank plc and Banque
Internationale Luxembourg S.A. as set forth in the Indenture. The Company may at
any time terminate the appointment of any Paying Agent or Conversion Agent and
appoint additional or other Paying Agents and Conversion Agents, provided that
until the Registrable Notes have been delivered to the Trustee for cancellation,
or moneys sufficient to pay the principal of, premium, if any, and interest on
the Notes have been made available
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for payment and either paid or returned to the Company as provided in the
Indenture, it will maintain an office or agency in the Borough of Manhattan, The
City of New York, for surrender of Registrable Notes for conversion, and in a
Western European city for payments with respect to the Registrable Notes and for
the surrender of Registrable Notes for conversion. Notice of any such
termination or appointment and of any change in the office through which any
Paying Agent or Conversion Agent will act will be given in accordance with "--
Notices" below. (Section 10.2)
All moneys deposited with the Trustee or any Paying Agent, or then held by
the Company, in trust for the payment of principal of, premium, if any, or
interest on any Registrable Notes which remain unclaimed at the end of two years
after such payment has become due and payable will be repaid to the Company, and
the Holder of such Registrable Note will thereafter look only to the Company for
payment thereof. (Section 10.3)
PAYMENT OF ADDITIONAL AMOUNTS
The Company will pay to the Holder of any Registrable Note who is a
Non-United States Holder such additional amounts ("Additional Amounts") as may
be necessary in order that every net payment of the principal of, premium, if
any, and interest on such Registrable Note, after deduction or withholding for
or on account of any present or future tax, assessment or governmental charge
imposed upon or as a result of such payment by the United States or any
political subdivision or taxing authority thereof or therein, will not be less
than the amount provided for in such Registrable Note to be then due and
payable; PROVIDED HOWEVER, that the foregoing obligation to pay Additional
Amounts will not apply to:
(a) any tax, assessment or other governmental charge which would not
have been so imposed but for (i) the existence of any present or former
connection between such Holder (or between a fiduciary, settlor,
beneficiary, member, shareholder of or possessor of a power over such
Holder, if such Holder is an estate, a partnership or a corporation) and the
United States or any political subdivision or taxing authority thereof or
therein, including, without limitation, such Holder (or such fiduciary,
settlor, beneficiary, member, shareholder or possessor) being or having been
a citizen or resident of the United States or treated as a resident thereof,
or being or having been engaged in trade or business or present therein, or
having or having had a permanent establishment therein, or (ii) such
Holder's present or former status as a personal holding company, a foreign
personal holding company with respect to the United States, or a foreign
private foundation or foreign tax exempt entity for United States federal
tax purposes, or a corporation which accumulates earnings to avoid United
States federal income tax;
(b) any tax, assessment or other governmental charge which would not
have been so imposed but for the presentation by the Holder of such
Registrable Notes appertaining thereto for payment on a date more than 15
days after the date on which such payment became due and payable or the date
on which payment thereof is duly provided for, whichever occurs later;
(c) any estate, inheritance, gift, sales, transfer, personal property or
similar tax, assessment or governmental charge;
(d) any tax, assessment or other governmental charge which would not
have been imposed but for the failure to comply with any certification,
identification or other reporting requirements concerning the nationality,
residence, identity or connection with the United States of the Holder or
beneficial owner of such Registrable Note, if compliance is required by
statute or by regulation of the United States as a precondition to relief or
exemption from such tax, assessment or other governmental charge;
(e) any tax, assessment or other governmental charge which is payable
otherwise than by deduction or withholding from payments of principal of,
premium, if any, or interest on such Registrable Note;
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<PAGE>
(f) any tax, assessment or other governmental charge imposed on a Holder
that actually or constructively owns 10% or more of the total combined
voting power of all classes of stock of the Company entitled to vote or that
is a controlled foreign corporation related to the Company through stock
ownership;
(g) any tax, assessment or other governmental charge required to be
withheld by any Paying Agent from any payment of the principal of, premium,
if any, or interest on any Registrable Note, if such payment can be made
without such withholding by any other Paying Agent in Western Europe;
(h) any tax, assessment or other governmental charge imposed on a Holder
that is a partnership or a fiduciary or other than the sole beneficial owner
of such payment, but only to the extent that any beneficial owner or member
of the partnership or beneficiary or settlor with respect to the fiduciary
would not have been entitled to the payment of Additional Amounts had the
beneficial owner, member, beneficiary or settlor directly been the Holder of
the Registrable Note; or
(i) any combination of items (a), (b), (c), (d), (e), (f), (g) and (h).
(Section 2.2)
Notwithstanding the foregoing, the Company shall not be obligated to pay
Additional Amounts in respect of payments becoming due on the Registrable Notes
more than 15 days after the Redemption Date with respect to any redemption of
Tax Affected Notes described under "Redemption -- Redemption for Taxation
Reasons" to the extent that the Company's obligation to pay such Additional
Amounts arises from the Tax Law Change that resulted in such redemption.
For the purposes of this Prospectus, "United States" means the United States
of America (including the States and the District of Columbia), its territories,
its possessions and other areas subject to its jurisdiction and a "Non-United
States Holder" is any person who, for United States federal income tax purposes,
is a foreign corporation, a nonresident alien individual, a nonresident alien
fiduciary of a foreign estate or trust, or a foreign partnership one or more of
the members of which is for United States federal income tax purposes, a foreign
corporation, a nonresident alien individual or a nonresident alien fiduciary of
a foreign estate or trust. Solely for purposes of the foregoing definition of
"Non-United States Holder," the term "United States" shall include, when used in
the geographical sense, only the States and the District of Columbia. (Section
2.2)
REPURCHASE AT OPTION OF HOLDERS UPON A CHANGE IN CONTROL
If a Change in Control (as defined) occurs, each Holder of Registrable Notes
shall have the right, at the Holder's option, to require the Company to
repurchase all of such Holder's Registrable Notes, or any portion of a
Registrable Note that is $5,000 or an integral multiple of $1,000 in excess
thereof, on the date (the "Repurchase Date") that is 45 days after the date of
the Company Notice (as defined), at a price equal to 100% of the principal
amount of the Registrable Notes to be repurchased (the "Repurchase Price"),
together with interest accrued to, but excluding, the Repurchase Date. (Section
14.1)
The Company may, at its option, in lieu of paying the Repurchase Price in
cash, pay the Repurchase Price in Common Stock valued at 95% of the average of
the closing prices of the Common Stock for the five trading days ending on and
including the third trading day preceding the Repurchase Date; provided that
payment not be made in Common Stock unless such stock is listed on a national
securities exchange or traded on the Nasdaq National Market at the time of
payment. (Section 14.1)
Within 30 days after the occurrence of a Change in Control, the Company is
obligated to give to all Holders of the Registrable Notes notice, as provided in
the Indenture (the "Company Notice"), of the occurrence of such Change in
Control and of the repurchase right arising as a result thereof. The Company
must also deliver a copy of the Company Notice to the Trustee. To exercise the
repurchase right, a Holder of Registrable Notes must deliver on or before the
30th day after the date of the Company Notice irrevocable written notice to the
Trustee or any Paying Agent of the Holder's exercise of such right, together
with the Registrable Notes. Beneficial owners of an interest in a registered
global Registrable Note may exercise the repurchase right by delivering the
appropriate
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instruction form for repurchases at the election of Holders pursuant to the DTC
book-entry repurchase program. At least two trading days prior to the Repurchase
Date, the Company must provide notice in the manner described above specifying
whether the Company will pay the Repurchase Price in cash or in Common Stock.
(Section 14.2)
A Change in Control shall be deemed to have occurred at such time after the
original issuance of the Registrable Notes as there shall occur:
(i) the acquisition by any Person (including any syndicate or group
deemed to be a "person" under Section 13(d)(3) of the Exchange Act) of
beneficial ownership, directly or indirectly, through a purchase, merger or
other acquisition transaction or series of transactions, of shares of
capital stock of the Company entitling such Person to exercise 50% or more
of the total voting power of all shares of capital stock of the Company
entitled to vote generally in elections of directors, other than any such
acquisition by the Company, any subsidiary of the Company or any employee
benefit plan of the Company; or
(ii) any consolidation of the Company with, or merger of the Company
into, any other Person, any merger of another Person into the Company, or
any sale or transfer of all or substantially all of the assets of the
Company to another Person (other than (a) any such transaction pursuant to
which the holders of 50% or more of the total voting power of all shares of
capital stock of the Company entitled to vote generally in elections of
directors immediately prior to such transaction have, directly or
indirectly, at least 50% or more of the total voting power of all shares of
capital stock of the continuing or surviving corporation entitled to vote
generally in elections of directors of the continuing or surviving
corporation immediately after such transaction and (b) a merger (x) which
does not result in any reclassification, conversion, exchange or
cancellation of outstanding shares of capital stock of the Company or (y)
which is effected solely to change the jurisdiction of incorporation of the
Company and results in a reclassification, conversion or exchange of
outstanding shares of Common Stock into solely shares of common stock);
PROVIDED, HOWEVER, that a Change in Control shall not be deemed to have
occurred if either (a) the closing price per share of the Common Stock for any
five trading days within the period of 10 consecutive trading days ending
immediately after the later of the Change in Control or the public announcement
of the Change in Control (in the case of a Change in Control under clause (i)
above) or ending immediately before the Change in Control (in the case of a
Change in Control under clause (ii) above) shall equal or exceed 105% of the
conversion price of the Registrable Notes in effect on each such trading day, or
(b) all of the consideration (excluding cash payments for fractional shares) in
a transaction or transactions constituting the Change in Control described in
clause (ii) above consists of shares of common stock traded on a national
securities exchange or quoted on the Nasdaq National Market and as a result of
such transaction or transactions the Registrable Notes become convertible solely
into such common stock. "Beneficial owner" shall be determined in accordance
with Rule 13d-3 promulgated by the Commission under the Exchange Act. (Section
14.3)
Rule 13e-4 under the Exchange Act requires the dissemination of certain
information to security holders in the event of an issuer tender offer and may
apply in the event that the repurchase option becomes available to Holders of
the Registrable Notes. The Company will comply with this rule to the extent
applicable at that time.
The Company may, to the extent permitted by applicable law, at any time
purchase Registrable Notes in the open market or by tender at any price or by
private agreement. Any Registrable Note so purchased by the Company may, to the
extent permitted by applicable law and subject to restrictions contained in the
purchase agreement relating to the Original Offering, be re-issued or resold or
may, at the Company's option, be surrendered to the Trustee for cancellation.
Any Registrable Notes surrendered as aforesaid may not be re-issued or resold
and will be cancelled promptly.
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The foregoing provisions would not necessarily afford Holders of the
Registrable Notes protection in the event of highly leveraged or other
transactions involving the Company that may adversely affect Holders.
The Company's ability to repurchase Notes upon the occurrence of a Change in
Control is subject to limitations. There can be no assurance that the Company
would have the financial resources, or would be able to arrange financing, to
pay the Repurchase Price for all the Notes that might be delivered by Holders of
Notes seeking to exercise the purchase right. In addition, the Company's ability
to purchase Notes may be limited or prohibited by the terms of its then-existing
borrowing arrangements, including Senior Indebtedness. The Company's ability to
purchase Notes with cash may also be limited by the terms of its subsidiaries'
then-existing borrowing arrangements due to dividend restrictions. Any failure
by the Company to repurchase the Notes when required following a Change in
Control would result in an Event of Default under the Indenture whether or not
such repurchase is permitted by the subordination provisions of the Indenture.
(Section 5.1) Any such default may, in turn, cause a default under Senior
Indebtedness of the Company. Moreover, the occurrence of a Change in Control may
cause an event of default under Senior Indebtedness of the Company. As a result,
in each case, any repurchase of the Notes would, absent a waiver, be prohibited
under the subordination provisions of the Indenture until the Senior
Indebtedness is paid in full. See "-- Subordination" and "Risk Factors --
Leverage and Subordination".
MERGERS AND SALES OF ASSETS BY THE COMPANY
The Company may not consolidate with or merge into any other Person or
transfer or lease its properties and assets substantially as an entirety to any
Person unless (a) the Person formed by such consolidation or into which the
Company is merged or the Person to which the properties and assets of the
Company are so transferred or leased shall be a corporation, limited liability
company, partnership or trust organized and existing under the laws of the
United States, any State thereof or the District of Columbia and shall expressly
assume the payment of the principal of, premium, if any, and interest on the
Notes and the performance of the other covenants of the Company under the
Indenture, and (b) immediately after giving effect to such transaction, no Event
of Default and no event that, after notice or lapse of time or both, would
become an Event of Default, shall have occurred and be continuing. (Section 7.1)
EVENTS OF DEFAULT
The following are Events of Default under the Indenture: (a) failure to pay
principal of or premium, if any, on any Note when due; (b) failure to pay any
interest on any Note when due, continuing for 30 days; (c) failure to perform
any other covenant of the Company in the Indenture, continuing for 60 days after
written notice as provided in the Indenture; (d) any indebtedness for money
borrowed by the Company in an aggregate outstanding principal amount in excess
of $50,000,000 is not paid at final maturity or upon acceleration thereof and
such default in payment or acceleration is not cured or rescinded within 30 days
after written notice as provided in the Indenture; and (e) certain events of
bankruptcy, insolvency or reorganization. (Section 5.1) Subject to the
provisions of the Indenture relating to the duties of the Trustee in case an
Event of Default shall occur and be continuing, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request or direction of any of the Holders, unless such Holders shall have
offered to the Trustee reasonable indemnity. (Section 6.3) Subject to such
provisions for the indemnification of the Trustee, the Holders of a majority in
aggregate principal amount of the Outstanding Notes will have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on the
Trustee. (Section 5.12)
If an Event of Default (other than as specified in clause (e) above) shall
occur and be continuing, either the Trustee or the Holders of at least 25%
principal amount of the Outstanding Notes may accelerate the maturity of all
Notes; provided, however, that after such acceleration, but before a judgment or
decree based on acceleration, the Holders of a majority in aggregate principal
amount of Outstanding Notes may, under certain circumstances, rescind and annul
such acceleration if all
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Events of Default, other than the non-payment of accelerated principal, have
been cured or waived as provided in the Indenture. If an Event of Default as
specified in clause (e) above occurs and is continuing, then the principal of,
and accrued interest on, all the Notes shall IPSO FACTO become immediately due
and payable without any declaration or other act on the part of the Holders of
the Notes or the Trustee. (Section 5.2) For information as to waiver of
defaults, see "-- Meetings, Modification and Waiver".
No Holder of any Registrable Note will have any right to institute any
proceeding with respect to the Indenture or for any remedy thereunder, unless
such Holder shall have previously given to the Trustee written notice of a
continuing Event of Default and the Holders of at least 25% in aggregate
principal amount of the Outstanding Notes shall have made written request, and
offered reasonable indemnity, to the Trustee to institute such proceeding as
trustee, and the Trustee shall not have received from the Holders of a majority
in aggregate principal amount of the Outstanding Notes a direction inconsistent
with such request and shall have failed to institute such proceeding within 60
days. (Section 5.7) However, such limitations do not apply to a suit instituted
by a Holder of a Registrable Note for the enforcement of payment of the
principal of, premium, if any, or interest on such Registrable Note on or after
the respective due dates expressed in such Registrable Note or of the right to
convert such Registrable Note in accordance with the Indenture. (Section 5.8)
The Company will be required to furnish to the Trustee annually a statement
as to the performance by the Company of certain of its obligations under the
Indenture and as to any default in such performance. (Section 10.9)
MEETINGS, MODIFICATION AND WAIVER
The Indenture contains provisions for convening meetings of the Holders of
Notes to consider matters affecting their interests. (Article Nine)
Modifications and amendments of the Indenture may be made, and certain past
defaults by the Company may be waived, either (i) with the written consent of
the Holders of not less than a majority in aggregate principal amount of the
Notes at the time Outstanding or (ii) by the adoption of a resolution, at a
meeting of Holders of the Notes at which a quorum is present, by the Holders of
at least 66 2/3% in aggregate principal amount of the Notes represented and
entitled to vote at such meeting. However, no such modification or amendment
may, without the consent of the Holder of each Outstanding Note affected
thereby, (a) change the Stated Maturity of the principal of, or any installment
of interest on, any Note, (b) reduce the principal amount of, or the premium, if
any, or interest on, any Note, (c) reduce the amount payable upon a redemption
or mandatory repurchase, (d) modify the provisions with respect to the
repurchase right of the Holders in a manner adverse to the Holders, (e) change
the obligation of the Company to pay Additional Amounts described above in a
manner adverse to the Holders, (f) change the place or currency of payment of
principal of, premium, if any, or interest on, any Note, (g) impair the right to
institute suit for the enforcement of any payment on or with respect to any
Note, (h) modify the obligation of the Company to maintain an office or agency
in New York City and in a Western European city, (i) adversely affect the right
to convert Notes, (j) modify the subordination provisions in a manner adverse to
the Holders of the Notes, (k) reduce the above-stated percentage of Outstanding
Notes necessary to modify or amend the Indenture, (l) reduce the percentage of
aggregate principal amount of Outstanding Notes necessary for waiver of
compliance with certain provisions of the Indenture or for waiver of certain
defaults, (m) reduce the percentage in aggregate principal amount of Outstanding
Notes required for the adoption of a resolution or the quorum required at any
meeting of Holders of Notes at which a resolution is adopted, or (n) modify the
obligation of the Company to deliver information required under rule 144A to
permit resales of Notes and Common Stock issuable upon conversion thereof in the
event the Company ceases to be subject to certain reporting requirements under
the United States securities laws. (SectionSection 8.2 and 5.13) The quorum at
any meeting called to adopt a resolution will be persons holding or representing
a majority in aggregate principal amount of the Notes at the time Outstanding
and, at any reconvened meeting adjourned for lack of a quorum, 25% of such
aggregate principal amount. (Section 9.4)
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The Holders of a majority in aggregate principal amount of the Outstanding
Notes may waive compliance by the Company with certain restrictive provisions of
the Indenture by written consent. (Section 10.13) The Holders of a majority in
aggregate principal amount of the Outstanding Notes also may waive any past
default under the Indenture, except a default in the payment of principal,
premium, if any, or interest, by written consent. (Section 5.13)
REGISTRATION RIGHTS
In connection with the Original Offering, the Company entered into the
Registration Agreement, pursuant to which the Company agreed to, at the
Company's expense for the benefit of the holders of the Registrable Notes and
the shares of Common Stock issuable upon conversion thereof, (i) file with the
Commission within 90 days after the date of original issuance of the Registrable
Notes, a registration statement (the "Shelf Registration Statement") covering
resales of the Registrable Notes and the Common Stock issuable upon conversion
thereof, (ii) use its best efforts to cause the Shelf Registration Statement to
be declared effective under the Securities Act within 180 days after the date of
original issuance of the Registrable Notes and (iii) use its best efforts to
keep effective the Shelf Registration Statement until three years after the date
it is declared effective or such earlier date as all Registrable Notes and the
Common Stock issuable upon conversion thereof shall have been disposed of or on
which all Registrable Notes and the Common Stock issuable upon conversion
thereof held by persons that are not affiliates of Apple may be resold without
registration pursuant to Rule 144(k) under the Securities Act (the
"Effectiveness Period").
In the event that during the Effectiveness Period the Shelf Registration
Statement ceases to be effective for more than 90 days or the Company suspends
the use of this Prospectus which is a part thereof for more than 90 days,
whether or not consecutive, during any 12-month period then the interest rate
borne by Registrable Notes will increase by an additional one-half of one
percent (0.50%) per annum from the 91st day of the applicable 12-month period
such Shelf Registration Statement ceases to be effective or the Company suspends
the use of this Prospectus which is a part thereof, as the case may be, until
the earlier of such time as (i) the Shelf Registration Statement again becomes
effective, (ii) the use of this Prospectus ceases to be suspended or (iii) the
Effectiveness Period expires.
BOOK-ENTRY; DELIVERY AND FORM; GLOBAL CERTIFICATES
Upon the initial sale of Registrable Notes offered hereby, each Selling
Holder will be required to deliver a notice ("Notice") of such sale to the
Trustee and the Company. The Notice will, among other things, identify the sale
as a transfer pursuant to the Registration Statement of which this Prospectus
forms a part, certify that the prospectus delivery requirements, if any, of the
Securities Act have been satisfied, and certify that the Selling Holder and the
aggregate principal amount of Notes owned by such holder are identified in the
Prospectus in accordance with the applicable rules and regulations under the
Securities Act. Copies may be requested from the Company, One Infinite Loop,
Cupertino, California 95014, Attention: Director, Investor Relations, telephone:
(408) 996-1010.
Upon the initial transfer pursuant to the Registration Statement of which
this Prospectus forms a part, the Registrable Notes will be represented by one
or more global notes (the "Global Note") in definitive, fully registered form,
without coupons. Each such Global Note will be deposited upon issuance with, or
on behalf of, DTC and registered in the name of DTC or its nominee (the "Global
Note Registered Owner") or will remain in the custody of the Trustee pursuant to
a FAST Balance Certificate Agreement between DTC and the Trustee. Except as set
forth below, the Global Note may be transferred, in whole and not in part, only
to another nominee of DTC or to a successor of DTC or its nominee.
DTC is a limited purpose trust company organized under the New York Banking
Law, a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
was created to hold securities for its participant organizations (collectively,
the "Participants") and to facilitate the clearance and settlement of
transactions in those securities between Participants through electronic
book-entry changes in accounts of its Participants. The
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Participants include securities brokers and dealers, banks, trust companies,
clearing corporations and certain other organizations. Access to DTC's system is
also available to other entities such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly (collectively, the "Indirect
Participants"). Persons who are not Participants may beneficially own securities
held by or on behalf of DTC only through the Participants or the Indirect
Participants. The ownership interest and transfer of ownership interest of each
actual purchaser of each security held by or on behalf of DTC are recorded on
the records of the Participants and Indirect Participants.
Pursuant to procedures established by DTC, (i) upon deposit of the Global
Note, DTC will credit the accounts of Participants with portions of the
principal amount of the Global Note and (ii) ownership of such interests in the
Global Note will be shown on, and the transfer of ownership thereof will be
effected only through, records maintained by DTC (with respect to the
Participants) or by the Participants and the Indirect Participants (with respect
to other owners of beneficial interests in the Global Note). The laws of some
states require that certain persons take physical delivery in definitive form of
securities that they own. Consequently, the ability to transfer Registrable
Notes will be limited to that extent.
Except as described below, owners of interests in the Global Note will not
have Registrable Notes registered in their names, will not receive physical
delivery of Registrable Notes in definitive form and will not be considered the
registered owners thereof under the Indenture for any purpose.
None of the Company, the Trustee, nor any agent of the Company or the
Trustee will have any responsibility or liability for (i) any aspect of DTC's
records or any Participant's records relating to or payments made on account of
beneficial ownership interests in the Global Note, or for maintaining,
supervising or reviewing any of DTC's records or any Participant's records
relating to the beneficial ownership interests in the Global Note or (ii) any
other matter relating to the actions and practices of DTC's or any of its
Participants.
Payments in respect of the principal of, premium, if any, and interest on
any Registrable Notes registered in the name of the Global Note Registered Owner
on any relevant record date will be payable by the Trustee to the Global Note
Registered Owner in its capacity as the registered holder under the Indenture.
Under the terms of the Indenture, the Company and the Trustee will treat the
person in whose names the Registrable Notes, including the Global Note, are
registered as the owners thereof for the purpose of receiving such payments and
for any and all other purposes whatsoever. Consequently, neither the Company,
the Trustee, nor any agent of the Company or the Trustee has nor will have any
responsibility or liability for the payment of such amounts to beneficial owners
of the Registrable Notes or for any other matter relating to actions or
practices of DTC or any of its Participants. The Company understands that DTC's
current practice, upon receipt of any payment in respect of securities such as
the Registrable Notes (including principal and interest), is to credit the
accounts of the relevant Participants with the payment on the payment date, in
amounts proportionate to their respective holdings in principal amount of
beneficial interests in the relevant security as shown on the records of DTC
(unless DTC has reason to believe it will not receive payment on such payment
date). Payments by the Participants and the Indirect Participants to the
beneficial owners of Registrable Notes will be governed by standing instructions
and customary practices and will be the responsibility of Participants or the
Indirect Participant, and the beneficial owners and not the responsibility of
the DTC, the Trustee or the Company. Neither the Company nor the Trustee will be
liable for any delay by DTC or any of its Participants in identifying the
beneficial owners of the Registrable Notes, and the Company and the Trustee may
conclusively rely on and will be protected in relying on instructions from the
Global Note Registered Owner for all purposes.
So long as DTC, or its nominee, is the registered owner or holder of a
Global Note, DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the Registrable Notes represented by such Global Note
for all purposes under the Indenture and the Registrable Notes. No beneficial
owner of an interest in a Global Note will be able to transfer the interest
except in
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accordance with DTC's applicable procedures, in addition to those provided for
under the Indenture. Transfers between Participants in DTC will be effected in
the ordinary way in accordance with DTC rules.
The Company expects that DTC will take any action permitted to be taken by a
holder of Registrable Notes (including the presentation of Registrable Notes for
exchange as described below) only at the direction of one or more Participants
to whose account the DTC interests in a Global Note is credited and only in
respect of such portion of the aggregate principal amount of the Registrable
Notes as to which such Participant or Participants has or have given such
direction.
Although the Company expects that DTC will agree to the foregoing procedures
in order to facilitate transfers of interests in a Global Note among
Participants of DTC, it is under no obligation to perform or continue to perform
such procedures, and such procedures may be discontinued at any time. Neither
the Company nor the Trustee will have any responsibility for the performance by
DTC or its Participants or Indirect Participants of their respective obligations
under the rules and procedures governing their operations.
If DTC is at any time unwilling or unable to continue as a depositary for a
Global Note and a successor depositary is not obtained, the Company will issue
definitive certificated Registrable Notes in exchange for a Global Note. Such
definitive certificated Registrable Notes shall be registered in names of the
owners of the beneficial interests in the Global Note as provided by the
Participants. Notes issued in definitive certificated form will be fully
registered, without coupons, in minimum denominations of $1,000 and integral
multiples of $1,000 above that amount. Upon issuance of Registrable Notes in
definitive certificated form, the Trustee is required to register the
Registrable Notes in the name of, and cause the Registrable Notes to be
delivered to, the person or persons (or the nominee thereof) identified as the
beneficial owner as DTC shall direct.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Company believes to be reliable, but the
Company takes no responsibility for the accuracy thereof.
TRANSFER AND EXCHANGE
A holder may transfer or exchange Registrable Notes in accordance with the
Indenture. The Registrar and the Trustee may require a holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company is not required to transfer or exchange
any Registrable Note selected for redemption. Also, the Company is not required
to transfer or exchange any Registrable Note for a period of 15 days before a
selection of Registrable Notes to be redeemed.
The registered holder of a Registrable Note will be treated as the owner of
it for all purposes.
GOVERNING LAW
The Indenture and the Notes will be governed by and construed in accordance
with the laws of the State of New York, United States of America. (Section 1.1)
THE TRUSTEE
In case an Event of Default shall occur (and shall not be cured), the
Trustee will be required to use the degree of care of a prudent person in the
conduct of his own affairs in the exercise of its powers. Subject to such
provisions, the Trustee will be under no obligation to exercise any of its
rights or powers under the Indenture at the request of any of the Holders of
Registrable Notes, unless they shall have offered to the Trustee reasonable
security or indemnity. (SectionSection 6.1 and 6.3)
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NOTES ISSUED IN RELIANCE UPON REGULATION S
The Notes issued in the Original Offering in reliance upon Regulation S (the
"Regulation S Notes") are not being registered pursuant to the Registration
Statement of which this Prospectus forms a part. The Regulation S Notes issued
under the Indenture are governed by substantially similar terms as the
Registrable Notes, except with respect to certain mechanical provisions relating
to form and denomination, payment and conversion, redemption for taxation
reasons and payments of additional amounts. For a complete description of the
terms and conditions of the Regulation S Notes, see the detailed provisions of
the Indenture.
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UNITED STATES TAXATION
The following is a summary of certain United States federal income and
estate tax considerations relating to the purchase, ownership and disposition of
the Registrable Notes and of the Common Stock into which the Registrable Notes
may be converted, but does not purport to be a complete analysis of all the
potential tax considerations relating thereto. This summary is based on the
provisions of the Internal Revenue Code of 1986, as amended (the "Code"),
regulations, rulings and decisions now in effect (or in the case of certain
regulations, now in proposed form), all of which are subject to change. This
summary deals only with holders that will hold Registrable Notes and Common
Stock as capital assets and does not address tax considerations applicable to
investors that may be subject to special tax rules, such as banks, tax-exempt
organizations, insurance companies, dealers in securities or currencies, persons
that will hold Registrable Notes or Common Stock as a part of an integrated
investment (including a "straddle") comprised of a Registrable Note or shares of
Common Stock and one or more other positions, persons that have a "functional
currency" other than the U.S. dollar or holders of Registrable Notes that did
not acquire the Registrable Notes in the initial distribution thereof. This
summary does not address any state or local tax considerations, nor does it
address the U.S. tax consequences to holders of a Registrable Note that is not a
United States Holder (as defined below).
INVESTORS CONSIDERING THE PURCHASE OF REGISTRABLE NOTES SHOULD CONSULT THEIR
OWN TAX ADVISORS WITH RESPECT TO THE APPLICATION OF THE UNITED STATES FEDERAL
INCOME AND ESTATE TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX
CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING
JURISDICTION OR UNDER ANY APPLICABLE TAX TREATY.
UNITED STATES HOLDERS
As used herein, the term "United States Holder" means a holder of a
Registrable Note or Common Stock that for United States federal income tax
purposes is (i) a citizen or resident of the United States, (ii) a corporation,
partnership or other entity created or organized in or under the laws of the
United States or any political subdivision thereof, (iii) any estate or trust
the income of which is subject to United States federal income taxation
regardless of its source or (iv) otherwise subject to United State federal
income taxation on a net income basis in respect of a Registrable Note or a
share of Common Stock.
PAYMENT OF INTEREST
Interest on a Registrable Note generally will be includible in the income of
a United States Holder as ordinary income at the time such interest is received
or accrued, in accordance with such Holder's method of accounting for United
States federal income tax purposes.
SALE, EXCHANGE OR REDEMPTION OF THE REGISTRABLE NOTES
Upon the sale, exchange or redemption of a Registrable Note, a United States
Holder generally will recognize capital gain or loss equal to the difference
between (i) the amount of cash proceeds and the fair market value of any
property received on the sale, exchange or redemption (except to the extent such
amount is attributable to accrued interest income which is taxable as ordinary
income) and (ii) such Holder's adjusted tax basis in the Registrable Notes. A
United States Holder's adjusted tax basis in a Registrable Note generally will
equal the cost of the Registrable Note to such holder. Such capital gain or loss
will be long-term capital gain or loss if the Registrable Note was held for more
than one year at the time of sale, exchange or redemption.
CONVERSION OF THE REGISTRABLE NOTES
A United States Holder generally will not recognize any income, gain or loss
upon conversion of a Registrable Note into Common Stock except with respect to
cash received in lieu of a fractional Share of Common Stock. Such Holder's tax
basis in the Common Stock received on conversion of a Registrable Note will be
the same as such Holder's adjusted tax basis in the Registrable Note at the time
of
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conversion (reduced by any basis allocable to a fractional share interest), and
the holding period for the Common Stock received on conversion will generally
include the holding period of the Registrable Note converted.
Cash received in lieu of a fractional share of Common Stock upon conversion
will be treated as a payment in exchange for the fractional share of Common
Stock. Accordingly, the receipt of cash in lieu of a fractional share of Common
Stock generally will result in capital gain or loss (measured by the difference
between the cash received for the fractional share and the United States
Holder's adjusted tax basis in the fractional share).
ADJUSTMENT OF CONVERSION PRICE
The conversion price of the Registrable Notes is subject to adjustment in
certain circumstances. Under Section 305(c) of the Code, adjustments that have
the effect of increasing the proportionate interest of holders of the
Registrable Notes in the assets or earnings of the Company (for example, an
adjustment following a distribution of property by the Company to its
shareholders) may in some circumstances give rise to deemed dividend income to
United States Holders; similarly, a failure to adjust the conversion price of
the Registrable Notes to reflect a stock dividend or other event increasing the
proportionate interest of the holders of outstanding stock can in some
circumstances give rise to deemed dividend income to United States Holders of
such stock.
DIVIDENDS
Dividends paid on the Common Stock generally will be includible in the
income of a United States Holder as ordinary income to the extent of the
Company's current or accumulated earnings and profits.
SALE OR OTHER DISPOSITION OF COMMON STOCK
Upon the sale, exchange, redemption or other disposition of shares of Common
Stock, a United States Holder generally will recognize capital gain or loss
equal to the difference between (i) the cash proceeds and the fair market value
of any property received and (ii) such Holder's adjusted tax basis in the Common
Stock. Such gain will be capital gain, and will be long-term capital gain if the
shares of Common Stock were held for more than one year (including the holding
period before the Registrable Notes were converted into Common Stock).
INFORMATION REPORTING AND BACKUP WITHHOLDING TAX
In general, information reporting requirements will apply to payments of
principal, premium, if any, and of interest on a Registrable Note, payments of
dividends on Common Stock and payments of the proceeds of the sale of a
Registrable Note or Common Stock to certain non-corporate United States Holders,
and a 31% backup withholding tax may apply to such payments if the United States
Holder (i) fails to furnish or certify his correct taxpayer identification
number to the payor in the manner required, (ii) is notified by the Internal
Revenue Service (the "IRS") that such Holder has failed to report payments of
interest and dividends properly, or (iii) under certain circumstances, fails to
certify that such holder has not been notified by the IRS that he is subject to
backup withholding for failure to report interest and dividend payments. Any
amounts withheld under the backup withholding rules from a payment to a United
States Holder will be allowed as a credit against such Holder's United States
federal income tax liability and may entitle the holder to a refund.
33
<PAGE>
SELLING HOLDERS
The Registrable Notes offered hereby were originally issued by the Company
and sold by the Initial Purchasers, in a transaction exempt from the
registration requirements of the Securities Act, to persons reasonably believed
by the Initial Purchasers to be "qualified institutional buyers" (as defined in
Rule 144A under the Securities Act), or other institutional "accredited
investors" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities
Act). An additional $92,675,000 aggregate principal amount of Notes were issued
in the Original Offering by the Company and sold by the Initial Purchasers in
compliance with the provisions of Regulation S under the Securities Act. The
Selling Holders may from time to time offer and sell pursuant to this Prospectus
any or all of the Registrable Notes and Common Stock issued upon conversion of
the Registrable Notes.
The following table sets forth information, as of October 21, 1996 with
respect to the Selling Holders and the respective principal amounts of
Registrable Notes beneficially owned by each Selling Holder that may be offered
pursuant to this Prospectus. Such information has been obtained from the Selling
Holders. None of the Selling Holders has, or within the past three years has
had, any position, office or other material relationship with the Company or any
of its predecessors or affiliates, except as noted below. Because the Selling
Holders may offer all or some portion of the Registrable Notes or the Common
Stock issuable upon conversion thereof pursuant to this Prospectus, no estimate
can be given as to the amount of the Registrable Notes or the Common Stock
issuable upon conversion thereof that will be held by the Selling Holders upon
termination of any such sales. In addition, the Selling Holders identified below
may have sold, transferred or otherwise disposed of all or a portion of their
Registrable Notes since the date on which they provided the information
regarding their Registrable Notes in transactions exempt from the registration
requirements of the Securities Act.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
OF REGISTRABLE NUMBER OF SHARES OF
NOTES COMMON STOCK
BENEFICIALLY ----------------------------
OWNED AND BENEFICIALLY OFFERED
SELLING HOLDER OFFERED HEREBY OWNED (1)(2) HEREBY (2)
- ----------------------------------------------------------------- ---------------- ------------- -------------
<S> <C> <C> <C>
IDS Life Capital Resource Fund (3)............................... $ 50,000,000 12,712,035 1,712,035
C.S. First Boston Corporation.................................... 25,270,000 865,262 865,262
Merrill Lynch, Pierce, Fenner & Smith Incorporated............... 19,575,000 670,261 670,261
Fidelity Devonshire Trust: Fidelity Equity-Income Fund (4)....... 17,780,000 608,799 608,799
UBS Securities LLC............................................... 17,500,000 599,212 599,212
Mainstay Convertible Fund........................................ 16,750,000 573,531 573,531
The TCW Group, Inc............................................... 15,865,000 543,228 543,228
HSBC James Capel................................................. 12,100,000 414,312 414,312
J.P. Morgan & Co. Incorporated................................... 12,000,000 920,483 410,888
Hamilton Partners Limited........................................ 12,000,000 410,888 410,888
BNP Arbitrage SNC................................................ 10,990,000 376,305 376,305
Alpine Associates................................................ 10,000,000 342,407 342,407
Froley, Revy Investment Co., Inc................................. 7,800,000 267,077 267,077
Allstate Insurance Company....................................... 7,000,000 239,684 239,684
SBC Warburg Inc.................................................. 6,750,000 231,124 231,124
President & Fellows of Harvard College........................... 6,500,000 280,164 222,564
BT Securities Corp............................................... 5,875,000 201,164 201,164
RBC Dominion Securities Inc...................................... 5,500,000 480,626 188,323
NatWest Securities Corp.......................................... 5,185,000 177,538 177,538
Pimco Equity Income Fund......................................... 5,000,000 171,203 171,203
SoGen International Fund, Inc.................................... 4,500,000 154,083 154,083
Reliance Insurance Company....................................... 4,500,000 154,083 154,083
Nomura Securities (Bermuda) Ltd. (5)............................. 4,450,000 152,371 152,371
Lord Abbett & Co. Bond Debenture Fund............................ 4,000,000 136,962 136,962
Tenret & Co...................................................... 4,000,000 136,962 136,962
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
OF REGISTRABLE NUMBER OF SHARES OF
NOTES COMMON STOCK
BENEFICIALLY ----------------------------
OWNED AND BENEFICIALLY OFFERED
SELLING HOLDER OFFERED HEREBY OWNED (1)(2) HEREBY (2)
- ----------------------------------------------------------------- ---------------- ------------- -------------
<S> <C> <C> <C>
Lipco Partners, L.P.............................................. $ 4,000,000 136,962 136,962
Societe Generale Securities Corp................................. 3,600,000 123,266 123,266
Hughes Retirement Plan Trust..................................... 3,500,000 119,842 119,842
J.P. Morgan Securities Inc....................................... 3,000,000 102,722 102,722
Credit Lyonnais Securities (USA) Inc............................. 3,000,000 102,722 102,722
Commonwealth Life Insurance Co.
(Teamsters Camden Non-Enhanced)................................. 3,000,000 102,722 102,722
Paul Berkman & Company........................................... 3,000,000 102,722 102,722
Forest Fulcrum Fund, L.P......................................... 3,000,000 102,722 102,722
Pacific Horizon Capital Income Fund.............................. 2,750,000 94,161 94,161
New York Life Separate Account #7................................ 2,500,000 85,601 85,601
Millennium Trading Co............................................ 2,500,000 137,601 85,601
State of Connecticut Combined Investment Funds................... 2,175,000 74,473 74,473
Robertson Stephens & Company LLC................................. 1,850,000 64,543 64,543
Convertible Holdings, Inc........................................ 1,750,000 59,921 59,921
Forest Fulcrum Fund Ltd.......................................... 1,500,000 51,361 51,361
Sage Capital..................................................... 1,500,000 51,361 51,361
Oppenheimer Variable Account Funds for the account of:
Oppenheimer Growth & Income Fund................................ 1,250,000 42,800 42,800
Swiss Bank Corporation, London Branch (6)........................ 1,225,000 166,066 41,944
Fidelity Management Trust Company on behalf of accounts managed
by it (7)....................................................... 1,220,000 41,773 41,773
AIM Fund Group................................................... 1,200,000 41,088 41,088
Indosuez Capital Asset Advisors.................................. 1,000,000 34,240 34,240
The Northwestern Mutual Life Insurance Company................... 1,000,000 76,540 34,240
Husic Capital Management (8)..................................... 1,000,000 34,240 34,240
Lipco Offshore Partners, L.P..................................... 1,000,000 34,240 34,240
Susquehanna Investment Group..................................... 1,000,000 34,240 34,240
Pacific Mutual Life Ins. Co...................................... 1,000,000 34,240 34,240
Commonwealth Life Insurance Co.-StockTRAC
(Teamsters I)................................................... 1,000,000 34,240 34,240
Colonial Penn Insurance Co....................................... 950,000 32,528 32,528
Zazove Convertible Fund, L.P..................................... 950,000 32,528 32,528
Franklin Investors Securities Trust Convertible Securities
Fund............................................................ 750,000 25,680 25,680
OCM Convertible Trust............................................ 740,000 25,338 25,338
Catholic Mutual Series........................................... 550,000 18,832 18,832
Delta Airlines Master Trust...................................... 535,000 18,318 18,318
CFW-C, L.P....................................................... 500,000 17,120 17,120
Bankers Trust New York Corp...................................... 500,000 17,120 17,120
Smith Barney Convertibles Portfolio.............................. 500,000 17,120 17,120
State Employees' Retirement Fund of the State of Delaware........ 500,000 17,120 17,120
Forest Fulcrum Fund Minnesota.................................... 300,000 10,272 10,272
Bank of America Convertible Securities Fund...................... 250,000 8,560 8,560
First Hawaiian Bank Custodian Kapiolani Medical Center for Women
& Children...................................................... 200,000 6,848 6,848
OCM Convertible Limited Partnership.............................. 175,000 5,992 5,992
Financial Institutions Retirement Fund........................... 150,000 14,136 5,136
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
OF REGISTRABLE NUMBER OF SHARES OF
NOTES COMMON STOCK
BENEFICIALLY ----------------------------
OWNED AND BENEFICIALLY OFFERED
SELLING HOLDER OFFERED HEREBY OWNED (1)(2) HEREBY (2)
- ----------------------------------------------------------------- ---------------- ------------- -------------
<S> <C> <C> <C>
Credit Suisse London............................................. 128,000 5,182 4,382
Forest Performance Fund.......................................... 100,000 3,424 3,424
Donald George Scheidt............................................ 60,000 2,054 2,054
Patricia Pazdry.................................................. $ 60,000 2,054 2,054
Margaret B. Blinn................................................ 40,000 1,369 1,369
J. Keith Johnstone and Kathleen L. Johnstone..................... 40,000 1,369 1,369
Arthur E. Watt................................................... 40,000 1,369 1,369
Earl Robinson and Benita Robinson................................ 40,000 1,369 1,369
K-Ridge Farms.................................................... 30,000 1,027 1,027
Penny Werle...................................................... 30,000 1,027 1,027
John Werle....................................................... 20,000 684 684
Norman Enns and Marnie Enns...................................... 20,000 684 684
Glen Frehlich.................................................... 20,000 684 684
Ross R. Pinder................................................... 20,000 684 684
Margaret Pinder.................................................. 20,000 684 684
Fred Weeks....................................................... 20,000 684 684
Peter Rempel..................................................... 10,000 342 342
Fred Grant and/or Holly Grant.................................... 10,000 342 342
Edward Napper.................................................... 10,000 342 342
Ken Fleury....................................................... 10,000 342 342
Any other holder of Registrable Notes or future transferee from
any such holder (9)(10)......................................... 214,887,000 7,357,883 7,357,883
---------------- ------------- -------------
Total........................................................ $ 568,575,000 31,557,584 19,432,114
---------------- ------------- -------------
---------------- ------------- -------------
</TABLE>
- ------------------------
(1) Includes shares of Common Stock issuable upon conversion of the Registrable
Notes.
(2) Assumes a conversion price of $29.205 per share, and a cash payment in lieu
of any fractional share interest.
(3) IDS Life Capital Resource Fund is a fund in the IDS Life Investment Series,
Inc., a series mutual fund in the IDS Mutual Fund Group (collectively, the
"IDS Funds"), and is an investment company registered under the Investment
Company Act of 1940, as amended. American Express Financial Corporation
("AEFC"), formerly known as IDS Financial Corporation, an investment adviser
registered under the Investment Advisers Act of 1940, as amended, provides
investment advisory services to each of the IDS Funds and to certain other
registered investment companies. AEFC is a wholly-owned subsidiary of
American Express Company. The information set forth in the table with
respect to IDS Life Capital Resource Fund and the information set forth in
this footnote was provided by AEFC.
(4) Fidelity Devonshire Trust is an investment company registered under Section
8 of the Investment Company Act of 1940, as amended. Fidelity Management &
Research Company ("FMR Co.") is a Massachusetts corporation and an
investment advisor registered under Section 203 of the Investment Advisers
Act of 1940, as amended, and provides investment advisory services to such
entity mentioned above, and to other registered investment companies and to
certain other funds which are generally offered to a limited group if
investors. FMR Co. is a wholly-owned subsidiary of FMR Corp. ("FMR"), a
Massachusetts corporation.
36
<PAGE>
(5) Reported beneficial ownership is based solely on a review of the relevant
records of Nomura Holding America Inc., a Delaware corporation, and its
majority-owned subsidiaries, including, without limitation, Nomura
Securities (Bermuda) Ltd. ("NSB"), as of August 8, 1996, and does not
encompass any other affiliates of NSB.
(6) SBC Warburg Inc., a subsidiary of Swiss Bank Corporation, acts as investment
advisor to Swiss Bank Corporation, London Branch with respect to $625,000 of
the $1,225,000 aggregate principal amount of the Registrable Notes being
offered hereby. Swiss Bank Corporation, London Branch also beneficially owns
$3,625,000 aggregate principal amount of the Company's 6% Convertible
Subordinated Notes due June 1, 2001, which it purchased in reliance on
Regulation S under the Securities Act.
(7) Shares indicated as owned by Fidelity Management Trust Company are owned
directly by various private investment accounts, primarily employee benefit
plans for which Fidelity Management Trust Company ("FMTC") serves as trustee
or managing agent. FMTC is a wholly-owned subsidiary of FMR and a bank as
defined in Section 3(a)(6) of the Securities Exchange Act of 1934, as
amended.
(8) Held in its capacity as a discretionary asset manager for the Ameritech
Pension Plan under an investment management agreement dated December 22,
1995.
(9) Information concerning other Registrable Note Selling Holders will be set
forth in Prospectus Supplements from time to time, if required.
(10) Assumes that any other holders of Registrable Notes do not beneficially own
any Common Stock other than the Common Stock issuable upon conversion of the
Notes at the initial conversion rate.
Information concerning the Selling Holders may change from time to time and
any such changed information will be set forth in supplements to this Prospectus
if and when necessary. In addition, the per share conversion price, and therefor
the number of shares issuable upon conversion of the Registrable Notes, is
subject to adjustment under certain circumstances. Accordingly, the aggregate
principal amount of Registrable Notes and the number of shares of Common Stock
issuable upon conversion thereof offered hereby may increase or decrease.
PLAN OF DISTRIBUTION
The Registrable Notes and Common Stock offered hereby may be sold from time
to time to purchasers directly by the Selling Holders. Alternatively, the
Selling Holders may from time to time offer the Registrable Notes and Common
Stock to or through underwriters, broker/dealers or agents, who may receive
compensation in the form of underwriting discounts, concessions or commissions
from the Selling Holders or the purchasers of Registrable Notes and Common Stock
for whom they may act as agents. The Selling Holders and any underwriters,
broker/dealers or agents that participate in the distribution of Registrable
Notes and Common Stock may be deemed to be "underwriters" within the meaning of
the Securities Act and any profit on the sale of Registrable Notes and Common
Stock by them and any discounts, commissions, concessions or other compensation
received by any such underwriter, broker/dealer or agent may be deemed to be
underwriting discounts and commissions under the Securities Act.
The Registrable Notes and Common Stock offered hereby may be sold from time
to time in one or more transactions at fixed prices, at prevailing market prices
at the time of sale, any varying prices determined at the time of sale or at
negotiated prices. The sale of the Registrable Notes and the Common Stock
issuable upon conversion thereof may be effected in transactions (which may
involve crosses or block transactions) (i) on any national securities exchange
or quotation service on which the Registrable Notes or the Common Stock may be
listed or quoted at the time of sale, (ii) in the over-the-counter market, (iii)
in transactions otherwise than on such exchanges or in the over-the-counter
market or (iv) through the writing of options. At the time a particular offering
of the Registrable Notes
37
<PAGE>
and the Common Stock is made, a Prospectus Supplement, if required, will be
distributed which will set forth the aggregate amount and type of Registrable
Notes and Common Stock being offered and the terms of the offering, including
the name or names of any underwriters, broker/dealers or agents, any discounts,
commissions and other terms constituting compensation from the Selling Holders
and any discounts, commissions or concessions allowed or reallowed or paid to
broker/dealers.
To comply with the securities laws of certain jurisdictions, if applicable,
the Registrable Notes and Common Stock will be offered or sold in such
jurisdictions only through registered or licensed brokers or dealers. In
addition, in certain jurisdictions the Registrable Notes and Common Stock may
not be offered or sold unless they have been registered or qualified for sale in
such jurisdictions or any exemption from registration or qualification is
available and is complied with.
The Selling Holders will be subject to applicable provisions of the Exchange
Act and the rules and regulations thereunder, which provisions may limit the
timing of purchases and sales of any of the Registrable Notes and Common Stock
by the Selling Holders. The foregoing may affect the marketability of the
Registrable Notes and the Common Stock.
Pursuant to the Registration Agreement, all expenses of the registration of
the Registrable Notes and Common Stock will be paid by the Company, including,
without limitation, Commission filing fees and expenses of compliance with state
securities or "blue sky" laws; provided, however, that the Selling Holders will
pay all underwriting discounts and selling commissions, if any. The Selling
Holders will be indemnified by the Company against certain civil liabilities,
including certain liabilities under the Securities Act, or will be entitled to
contribution in connection therewith.
LEGAL MATTERS
The validity of the Registrable Notes and the Common Stock being offered
hereby will be passed upon for the Company by Shearman & Sterling, San
Francisco, California.
EXPERTS
The consolidated financial statements and schedule of Apple Computer, Inc.
included and/or incorporated by reference in Apple Computer, Inc.'s Annual
Report (Form 10-K) for the year ended September 29, 1995, have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
included therein and incorporated herein by reference. Such consolidated
financial statements and schedule have been incorporated herein by reference in
reliance upon such reports given upon the authority of such firm as experts in
accounting and auditing.
38
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE CORPORATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE CORPORATION SINCE THE DATE
HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE
IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED TO DO SO OR
TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH
JURISDICTION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Available Information............................... 2
Incorporation of Certain Documents by Reference..... 2
Summary............................................. 3
Risk Factors........................................ 7
Use of Proceeds..................................... 16
Description of Registrable Notes.................... 17
United States Taxation.............................. 32
Selling Holders..................................... 34
Plan of Distribution................................ 37
Legal Matters....................................... 38
Experts............................................. 38
</TABLE>
U.S. $568,575,000
APPLE COMPUTER, INC.
6% CONVERTIBLE SUBORDINATED
NOTES DUE JUNE 1, 2001
-------------
PROSPECTUS
-------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF REGISTRATION AND DISTRIBUTION.
The following table sets forth the estimated expenses of the Registrant in
connection with the offering described in this Registration Statement.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee.............. $ 196,061
Accountants' fees and expenses................................... 12,000
Legal fees and expenses.......................................... 80,000
Printing and engraving expenses.................................. 10,000
Blue Sky fees and expenses....................................... 17,500
Trustee's fees and expenses...................................... 2,500
Miscellaneous.................................................... 939
---------
Total........................................................ $ 319,000
---------
---------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 317 of the California General Corporation Law authorizes a court to
award, or a corporation's Board of Directors to grant, indemnity to directors
and officers who are parties or are threatened to be made parties to any
proceeding (with certain exceptions) by reason of the fact that the person is or
was an agent of the corporation, against expenses, judgments, fines, settlements
and other amounts actually and reasonably incurred in connection with the
proceeding if that person acted in good faith and in a manner the person
reasonably believed to be in the best interests of the corporation. This
limitation on liability has no effect on a director's liability (i) for acts or
omissions that involve intentional misconduct or a knowing and culpable
violation of law, (ii) for acts or omissions that a director believes to be
contrary to the best interests of the corporation or its shareholders or that
involve the absence of good faith on the part of the director, (iii) relating to
any transaction from which a director derived an improper personal benefit, (iv)
for acts or omissions that show a reckless disregard for the director's duty to
the corporation or its shareholders in circumstances in which the director was
aware, or should have been aware, in the ordinary course of performing a
director's duties, of a risk of a serious injury to the corporation or its
shareholders, (v) for acts or omissions that constitute an unexcused pattern of
inattention that amounts to an abdication of the director's duty to the
corporation or its shareholders, (vi) under Section 310 of the California
General Corporation Law (concerning contracts or transactions between the
corporation and a director) or (vii) under Section 316 of the California General
Corporation Law (directors' liability for improper dividends, loans and
guarantees). The provision does not extend to acts or omissions of a director in
his capacity as an officer. Further, the provision has no effect on claims
arising under federal or state securities laws and does not affect the
availability of injunctions and other equitable remedies available to the
Company's shareholders for any violation of a director's fiduciary duty to the
Company or its shareholders. Although the validity and scope of the legislation
underlying the provision have not yet been interpreted to any significant extent
by the California courts, the provision may relieve directors of monetary
liability to the Company for grossly negligent conduct, including conduct in
situations involving attempted takeovers of the Company.
In accordance with Section 317, the Restated Articles of Incorporation, as
amended (the "Articles"), of the Company limits the liability of a director to
the Company or its shareholders for monetary damages to the fullest extent
permissible under California law, and authorizes the Company to provide
indemnification to its agents (including officers and directors), subject to the
limitations set forth above. The Company's By-Laws further provide for
indemnification of corporate agents to the maximum extent permitted by the
California General Corporation Law.
II-1
<PAGE>
Pursuant to the authority provided in the Articles, the Company has entered
into indemnification agreements with each of its officers and directors,
indemnifying them against certain potential liabilities that may arise as a
result of their service to the Company, and providing for certain other
protection.
The Company also maintains insurance policies which insure its officers and
directors against certain liabilities.
The foregoing summaries are necessarily subject to the complete text of the
statute, the Articles, the By-Laws and the agreements referred to above and are
qualified in their entirety by reference thereto.
Reference is made to the Underwriting Agreements included herein as exhibits
to the Registration Statement for provisions regarding indemnification of the
Company's officers, directors and controlling persons against liabilities,
including liabilities under the Securities Act.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- --------------------------------------------------------------------------------------------------------
<S> <C>
4.1* Indenture, dated as of June 1, 1996, between the Company and Marine Midland Bank, as Trustee, relating
to the Notes.
4.2* Form of Notes included in Exhibit 4.1.
4.3 Specimen Certificate of Common Stock of Apple Computer, Inc. (Incorporated by reference to Exhibit 4.5
to the Company's Registration Statement on Form S-3 (file no. 33-62310) filed with the Securities and
Exchange Commission on May 6, 1993.)
4.4 Restated Articles of Incorporation, filed with the Secretary of State of the State of California on
January 27, 1988. (Incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on
Form S-3 (file no. 33-23317) filed July 27, 1988.)
4.5 Amendment to Restated Articles of Incorporation, filed with the Secretary of State of the State of
California on February 1, 1990. (Incorporated by reference to Exhibit 4.6 to the Company's Registration
Statement on Form S-3 (file no. 33-62310) filed with the Securities and Exchange Commission on May 6,
1993.)
4.6 By-Laws of the Company, as amended and restated as of November 2, 1994. (Incorporated by reference to
Exhibit 3.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended December 30, 1994.)
4.7 Common Shares Rights Agreement dated as of May 15, 1989, between the Company and The First National Bank
of Boston, as Rights Agent, including the form of Rights Certificate attached hereto. (Incorporated by
reference to Exhibit 1 to the Company's Registration Statement on Form 8-A filed with the Securities
and Exchange Commission on May 26, 1989.)
4.8* Registration Rights Agreement, dated June 7, 1996 among the Company and Goldman, Sachs & Co. and Morgan
Stanley & Co. Incorporated.
5.1* Opinion of Shearman & Sterling.
12.1** Statement Regarding Computation of Ratios.
23.1** Consent of Ernst & Young, LLP independent auditors.
23.2* Consent of Counsel (contained in Exhibit 5.1 hereto).
24.1* Power of Attorney (contained on Page II-4 - II-5).
25.1* Form T-1 Statement of Eligibility and Qualification of Trustee (bound separately from other exhibits).
</TABLE>
- ------------------------
*Previously filed with initial Registration Statement.
**Filed herewith.
II-2
<PAGE>
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the Registration Statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high and of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than 20 percent change in the maximum
aggregate offering price, set forth in the "Calculation of Registration
Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement.
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the registration statement is on Form S-3, Form S-8 or Form F-3, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference into the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial BONA FIDE offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the Registration Statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial BONA FIDE offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that such a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in Act and will be
governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
CUPERTINO, STATE OF CALIFORNIA, ON THE 29TH DAY OF OCTOBER 1996.
APPLE COMPUTER, INC.
By /s/ GILBERT F. AMELIO
-----------------------------------
Gilbert F. Amelio
CHAIRMAN AND CHIEF EXECUTIVE
OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED THIS
AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING
PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<C> <S> <C>
SIGNATURE TITLE DATE
- ------------------------------------------------ ----------------------------------------- --------------------
/s/ GILBERT F. AMELIO
-------------------------------------- Chairman, Chief Executive Officer and October 29, 1996
Gilbert F. Amelio Director (Principal Executive Officer)
/s/ FRED D. ANDERSON Executive Vice President and Chief
-------------------------------------- Financial Officer (Principal Financial October 29, 1996
Fred D. Anderson Officer)
*
-------------------------------------- Vice President and Financial Controller October 29, 1996
Robert Promm (Principal Accounting Officer)
*
-------------------------------------- Director October 29, 1996
Bernard Goldstein
-------------------------------------- Director
B. Jurgen Hintz
-------------------------------------- Director
Katherine M. Hudson
*
-------------------------------------- Director October 29, 1996
Delano E. Lewis
</TABLE>
II-4
<PAGE>
<TABLE>
<C> <S> <C>
SIGNATURE TITLE DATE
- ------------------------------------------------ ----------------------------------------- --------------------
-------------------------------------- Director
A.C. Markkula, Jr.
*
-------------------------------------- Director October 29, 1996
Edgar S. Woolard, Jr.
</TABLE>
*By: Fred D. Anderson, Attorney-in-Fact
II-5
<PAGE>
APPLE COMPUTER, INC.
REGISTRATION STATEMENT ON FORM S-3
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
- --------- ------------------------------------------------------------------------------------------- ---------------
<S> <C> <C>
4.1* Indenture, dated as of June 1, 1996, between the Company and Marine Midland Bank, as
Trustee, relating to the Notes............................................................
4.2* Form of Notes included in Exhibit 4.1......................................................
4.3 Specimen Certificate of Common Stock of Apple Computer, Inc. (Incorporated by reference to
Exhibit 4.5 to the Company's Registration Statement on Form S-3 (file no. 33-62310) filed
with the Securities and Exchange Commission on May 6, 1993.)..............................
4.4 Restated Articles of Incorporation, filed with the Secretary of State of the State of
California on January 27, 1988. (Incorporated by reference to Exhibit 4.1 to the Company's
Registration Statement on Form S-3 (file no. 33-23317) filed July 27, 1988.)..............
4.5 Amendment to Restated Articles of Incorporation, filed with the Secretary of State of the
State of California on February 1, 1990. (Incorporated by reference to Exhibit 4.6 to the
Company's Registration Statement on Form S-3 (file no. 33-62310) filed with the Securities
and Exchange Commission on May 6, 1993.)..................................................
4.6 By-Laws of the Company, as amended and restated as of November 2, 1994. (Incorporated by
reference to Exhibit 3.3 to the Company's Quarterly Report on Form 10-Q for the quarter
ended December 30, 1994.).................................................................
4.7 Common Shares Rights Agreement dated as of May 15, 1989, between the Company and The First
National Bank of Boston, as Rights Agent, including the form of Rights Certificate
attached hereto. (Incorporated by reference to Exhibit 1 to the Company's Registration
Statement on Form 8-A filed with the Securities and Exchange Commission on May 26,
1989.)....................................................................................
4.8* Registration Rights Agreement, dated June 7, 1996 among the Company and Goldman, Sachs &
Co. and Morgan Stanley & Co. Incorporated.................................................
5.1* Opinion of Shearman & Sterling.............................................................
12.1** Statement Regarding Computation of Ratios..................................................
23.1** Consent of Ernst & Young, LLP independent auditors.........................................
23.2* Consent of Counsel (contained in Exhibit 5.1 hereto).......................................
24.1* Power of Attorney (contained on Page II-4 - II-5)..........................................
25.1* Form T-1 Statement of Eligibility and Qualification of Trustee (bound separately from other
exhibits).................................................................................
</TABLE>
- ------------------------
*Previously filed with initial Registration Statement.
**Filed herewith.
<PAGE>
EXHIBIT 12.1
STATEMENT RE: COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------------------------------------------------------------
SEPTEMBER 27, SEPTEMBER 25, SEPTEMBER 24, SEPTEMBER 30, SEPTEMBER 29,
1991 1992 1993 1994 1995
----------------- ----------------- ----------------- ----------------- -----------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Income (loss) before provision
(benefit) for income taxes.... $ 500 $ 855 $ 140 $ 500 $ 574
Interest expense, including
amortization of debt discount
and issuance costs............ 9 9 12 40 48
Interest portion of rental
expense....................... 39 30 36 31 22
----- ----- ----- ----- -----
Earnings, as adjusted...... $ 548 $ 894 $ 188 $ 571 $ 744
----- ----- ----- ----- -----
----- ----- ----- ----- -----
Fixed charges:
Interest expense, including
amortization of debt discount
and issuance costs............ $ 9 $ 9 $ 12 $ 40 $ 48
Interest portion of rental
expense....................... 39 30 36 31 22
----- ----- ----- ----- -----
Total fixed charges........ $ 48 $ 39 $ 48 $ 71 $ 70
----- ----- ----- ----- -----
----- ----- ----- ----- -----
Ratio of Earnings to Fixed
Charges................... 11.4x 22.9 x 3.9 x 8.0 x 10.5 x
----- ----- ----- ----- -----
----- ----- ----- ----- -----
<CAPTION>
NINE MONTHS
ENDED
JUNE 28, 1996
-------------
<S> <C>
Income (loss) before provision
(benefit) for income taxes.... $ (1,335)
Interest expense, including
amortization of debt discount
and issuance costs............ 42
Interest portion of rental
expense....................... 14
-------------
Earnings, as adjusted...... $ (1,279)
-------------
-------------
Fixed charges:
Interest expense, including
amortization of debt discount
and issuance costs............ $ 42
Interest portion of rental
expense....................... 14
-------------
Total fixed charges........ $ 56
-------------
-------------
Ratio of Earnings to Fixed
Charges................... (A)
-------------
-------------
</TABLE>
(A) The ratio of earnings to fixed charges is computed by dividing the earnings
before taxes and fixed charges by fixed charges. Fixed charges consist of
interest expense and the estimated interest component of rent expenses.
Earnings were not sufficient to cover fixed charges for the nine months
ended June 28, 1996 by $1.335 billion.
<PAGE>
EXHIBIT 23.1
CONSENT
We consent to the reference to our firm under the caption "Experts" in
Amendment No. 1 to the Registration Statement (File No. 333-10961) on Form S-3
and related Prospectus of Apple Computer, Inc. for the registration of
$568,575,000 principal amount of its 6% Convertible Subordinated Notes due June
1, 2001 and 19,468,412 shares of its common stock and to the incorporation by
reference therein of our report dated October 16, 1995, with respect to the
consolidated financial statements and schedule of Apple Computer, Inc. included
in its Annual Report (Form 10-K) for the year ended September 29, 1995, filed
with the Securities and Exchange Commission.
Ernst & Young LLP
San Jose, California
October 25, 1996
